P L D 1973 Karachi 509 (PLP)

3. When the suit was posted for heating of evidence, the respondent No. 1/plaintiff moved an application under Order XVI, rule 1, C. P. C. to summon one Mr. Hassan Mustafa, Senior Deputy Chief Officer, Banking Control Department, State Bank of Pakistan to produce the said Inspection Report. The witness brought the Report to the Court and then objected to its production. He produced a certificate signed by the Governor of the State Bank of Pakistan withholding permission for its production in the Court under section 123 of the Evidence Act read with section 46 (2) of the State Bank of Pakistan Act, 1956, on the ground that the report forms part of the "unpub lished records elating to the affairs of the State Bank or Pakistan" and disclosure of its contents would be injurious to the interest of the Premier Bank. Farooqi, J. rejected the objection and 10 In observed that in his opinion there can be no reasonable objection to the production of that part of the report which relates to the respondent No. 1/plaintiff: The witness was therefore, directed to produce that part of the report, which Farooqi, J. himself marked for identification. On the following day, Mr. Shah Jamil Alam, Deputy Attorney‑General, appearing on behalf of the State Bank of Pakistan prayed for review of the order directing Mr. Mustafa to produce the relevant part of the report. Mr. Farooqi, J. observed:‑ "I have now heard Mr. Jamil Alam and Mr. Khalid Ishaque and they have both primarily relied upon two judgments of the High Court at Lahore, one D. B. judgment Ghulam Ali v. Abdul Hafiz P L D 1962 Lah. 765, and the other a Full Bench judgment Nasim Fatima v. Government of West Pakistan P L D 1967 Lah.

103. The contention was that once a privilege is claimed in proper form by the Head of the Department the matter is concluded." He then directed Mr. Shah Jamil Alam to find out whether the Governor of the State Bank would insist on claiming privilege with regard to the production of that part of the report which was relevant and which according to Farooqi, J. could not possibly fall within the mischief of section 123, Evidence Act. When the case came on for hearing on a later date, Mr. Shah Jamil Alam submitted an affidavit of Mr. Hassan Mustafa ex hibiting a certificate signed by the Governor of the State Bank claiming privilege from production of the entire report. The Certificate in question is dated 17h May 1968 and reads as follows:‑ "17th May 1968. Certificate under section 46 (2) of the State Bank of Pakistan Act, 1956 read with section 123 of the Evidence Act, 1872. Certified that I have fully examined the Inspection Report dated 25‑2‑1964 prepared by the Banking Control Department of the State Bank of Pakistan on the working of the Premier Bank Ltd., and have considered and reconsidered the position of the said report marked by the Court for production, which relates to the plaintiff in Suit No. 8/66. Hs stated earlier in my certificate dated 24‑1‑1968, the entire report forms part of the unpublished record relating to the affairs of the State Bank of Pakistan. The portion marked by the Court is a secret and privileged communication made by the inspectors of the State Bank of Pakistan in the discharge of official duties under the Banking Companies Ordinance, 1962 and its disclosure would be injurious to the Banking business and against the public interest. I, therefore, withhold permission for its production in the Court under section 123 of the Evidence Act, 1872, read with section 46 (2) of the State Bank of Pakis tan Act, 1956 and direct Mr. Hassan Mustafa, officer on the State Bank of Pakistan to raise this objection in the Court. (Sd). M. Rashid, Governor, State Bank of Pakistan."' Farooqi. J. treated the oral request of Mr. Shah Jamil Alam as a review application, heard arguments and reserved his order. However, before he could decide the review application, he retired from the Court and the matter came up for hearing before our brother Mr. Justice Dorab Patel, on the question whether the order of Farooqi, J. directing the State Bank to produce the relevant part of the report in dispute should be set aside in review.

4. By his order under appeal dated 16th April 1970, Mr. Justice Dorab Patel, upheld the claim of privilege from production of the entire report and allowed the review application. The learned Judge discussed the conflict of views expressed In certain cases decided by the High Court of West Pakistan and felt compelled, to follow the Division Bench decision of that High Court in Ghulam Ali v. Abdul Hafiz (P L D 1962 Lah. 765), which was approved in the Full Bench decision of the High Court in Nasim Fatima v. Government of West Pakistan (P L D 1967 Lah. 103). These cases held that when a claim for privilege from production of a document is made by the Head of the Department concerned under section 123, Evidence Act on the ground that it relates to the affairs of the State, the Court cannot enquire into the validity of the claim for privilege but must accept it as conclusive. He observed that the Division Bench in Ghulam Ali v. Abdul Hafiz had followed the House of Lords case of Duncan and another v. Cammel Laird & Co. Ltd. (1942 A C 624), but as House of Lords has now altered its view in Conway v. Rimmer (1968 A C 910), he felt that the learned counsel might have been justified in requesting that the question be referred to a larger Bench. But he declined to do so, as he thought that he was bound to follow Ghulam Ali's case, which has been approved by the Full Bench as stated earlier, in Nasim Fatima v. Government of West Pakistan. Accordingly relying solely on the Full Bench decision in Wasim Fatima's case, he held that he could not examine the validity of the claim for privilege from production of tie Inspection Report, raised by the Governor of the State Bank of Pakistan under section 46 (2) of the State Bank of Pakistan Act, 1956.

5. Nasim Fatima's case along with similar other connected cases went up in appeal against the Full Bench decision to the Supreme Court. In the Supreme Court in Malik Ghulam Jilani v. The Government of West Pakistan (P L D 1967 S C 373), the plea of privilege claimed by Government was disallowed and the decision by the Full Bench in this respect was reversed, on an altogether different ground, to the effect that the documents in question were already exhibited on the file of a different pending case and were there fore published and that there could be no question of their being treated as privileged from production in Court for the second time in another case. The question whether a Court can inspect a document for which privilege is claimed was mooted in Government of West Pakistan v. Begum Agha Abdul Karim Shorish Kashmiri (P L D 1969 S C 14). Their Lordships observed that it is lawful for the Court to inspect the document for the purpose of deciding that the privilege is not being claimed unadvisedly or lightly or as a matter of routine. They said: "The contention that the detaining authority may avoid doing so by claiming privilege under section 123 of the Evi dence Act omits to take into account that even where such a claim is preferred section 162 of the Evidence Act gives to the Court abundant power to inspect the document in order to determine the validity of the claim of privilege. The privilege is indeed a narrow one, as pointed out by Lord Blanesburgh in the case of Henry Greer Robinson v. State of South Australia A I R 1931 P C 254 and it is lawful for the Court to inspect the document for the purpose of deciding that the privilege is not being claimed unadvisedly or lightly or as a matter of routine." Finally it is appropriate to mention here that Ghulam Ali v. Abdul Hafiz which was approved without discussion in Nasim Fatima's case, was disapproved by a Division Bench in Abut A'ala Maududi v. The State Bank of Pakistan and others (P L D 1969 Lah. 908), by Akram, J. and at p. 951 by Muhammad Gut, J. (as he then was) who said that it required reconsideration even though approved in Nasim Fatima's case.

6. In the light of the above observations, the view of the learned Single Judge that the certificate of the Governor of the State Bank of Pakistan is conclusive, cannot stand. In my view, before the claim for privilege can be granted, it is for the Court to decide whether the Inspection report dated 25‑2‑1964 pre pared by the Banking Control Department of the State Bank of Pakistan on the working of the Premier Bank, forms part of the "unpublished records relating to the affairs of the State Bank of Pakistan." Under the Banking Companies Ordinance, 1962, the State Bank of Pakistan exercises very wide powers and control over all banking companies in Pakistan. It has statutory powers to issue directions to banking companies with regard to carrying on of their business, to call for various kinds of returns and obtain information. In particular, under section 40(1) of the Banking Companies Ordinance, 1962, the State Bank may at anytime and on being directed to do so by the Central Government, inspect any banking company and its books and accounts. The inspecting officers carrying out the inspection are authorised to examine on oath any Director or other officer of the banging company in relation to its business, and it is the duty of such officers of the Banking Company to produce to the inspecting officer all books, accounts and other documents in their custody and power and furnish such statements and in formation relating to the affairs of the banking company as the inspecting officers may require. A report on the inspection is then prepared by the State Bank, a copy, of which is required to be supplied to the banking company under section 40 (3) of that Act. If the inspection has been directed by the Central govern ment, the report on the inspection is required to be submitted to the Central Government. The latter, if it is of opinion after considering the report that the affairs of the banking company are being conducted to the detriment of the interest of its depositors and after giving such opportunity to the banking company to make a representation in connection with the report, may by order in writing prohibit the banking company from receiving fresh deposits or direct the State Bank to apply for winding up of the banking company. The State Bank also has powers after the completion of the inspection, by order in writing to require the banking company to do or to comply with certain directions of the kind mentioned in section 42 (1) (d) (i) to (iv), including requiring the banking company to make such changes in its Management as the State Bank may consider necessary in consequences of the state of affairs disclosed during or by the inspection. The Central Government is also authorised under section 40 (7) of the said Ordinance after giving reasonable notice to the banking company to publish, on the advice of the State Bank, the report submitted by the State Bank or such portion thereof as may appear necessary to the Central Government.

7. The question then is whether the inspection report which relates to the affairs of the Premier Bank is also to be considered as "relating to the affairs of the State Bank of Pakistan". The expression "affairs of the State Bank of Pakistan" used in section 46 (2) of the State Bank of Pakistan Act, 1956 has been used in several other places in that Act. Thug, section 9 (1) of that Act entrusts to the Central Board of Direc tors of the Bank, the general superintendence and direction of the "affairs and business" of the Bank; section 19 (1) defines the Governor of the Bank as Chief Executive Officer who shall direct and control the whole "affairs of the Bank"; section 10 (2) says the Governor shall have authority to conduct the business, control the functions and manage "the affairs of the Bank" in certain matters not specifically required by the Act or regulations made thereunder to be done by the Central Board or by the Bank in general meeting; section 10 (7) requires the Governor and the Deputy Governor to devote their whole time to "the affairs of the Bank", etc. The business and functions of the Bank are specified in Chapter Iv of that Act, but the inspection of the affairs of a banking company is not stated therein to be part of its business or functions. The power to carry out the inspection in question is given to the State Bank under a different statute, namely under section 40 of the Banking Companies Ordinance, 1962. In my opinion the expression "affairs of the State Bank" means in its ordinary sense, all matters relating to the business of the State Bank under that Act Itself. The preposition) "of" in the expression "affairs of the Bank" is also significant. That expression cannot be extended to include all matters relating to the affairs of the banking companies themselves, merely because certain statutory powers are given to the State Bank over banking companies under the Banking Companies Ordinance, 1962. Otherwise, if this is carried to its extreme, it would include all manner of communications exchanged between the State Bank and the banking companies, all statutory returns, directions, balance‑sheets of the banking companies and other periodical routine returns required to be submitted by them to the State Bank under that Ordinance. In that event, all the affairs of the banking companies would become "the affairs" of the State Bank of Pakistan. It must be remembered that the inspection report which has been prepared by the State Bank pursuant to the statutory power may entail serious legal con sequences such as those mentioned above and may prejudicially affect the banking company in carrying on its business and it may even lead to its winding up. If such report is inadmissible in evidence, great injustice may result to a banking company, against whom say, an adverse order under section 40 (6) of the Banking Companies Ordinance, 1962 has been passed by the Central Government for prohibiting it from recovering fresh deposits or directing the State Bank to apply for its winding up. The banking company would be unable to call up the ins pection report in Court to be quashed if it is without lawful authority.

8. In this connection it should be noted that the power to inspect the affairs of a banking company which has been given to the State Bank under section 40 (1) of the Banking Companies Ordinance, 1962, is in addition to the power already possessed by the Central Government to order an investigation into the affairs of banking company under section 138 of the Companies Act, 1913. However, the power possessed by the Central Govern ment is limited, unlike that given to the State Bank under the Banking Companies Ordinance, 1962 and further it can be exer cised only upon an application by members of the banking company holding not less than one‑fifth of its issued shares. The inspectors appointed to carry out the investigation have the powers and duties prescribed in sections 140, 141 of the Com panies Act, 1913 and are similar to those conferred on the inspectors appointed under section 40, of the Banking Companies Ordinance, 1962, including the power to order production of all books and documents in the power or custody of ail persons who are or have been officers of the banking company and to examine on oath such persons. The inspectors are required to submit a report of their opinion on the investigation to the Central Government who have powers to take further action thereon. A copy of the report is required to be sent to the banking company as well as to the Registrar. It is significant to observe that under section 143 of the Companies Act, a copy of the report of the inspectors is made admissible In any legal proceeding as evidence of the opinion of the inspectors in relation to any matter contained in the report, It would seem strange, therefore, to say the least, that whereas a report (in the Investigation of the affairs of a banking company prepared under section 138 of the lo Companies Act is made admissible in any legal proceeding as evidence, a similar report on the inspection of the affairs of the same banking company prepared by the State Bank of Pakistan under section 40 of the Banking Companies Ordi nance, 1962 were not to be admissible in Court In era appropriate case.

9. Mr. Shah Tamil Alain on behalf of the State Bank referred to R. v. Lewes Justices ex parse the Gaming Board of Gt. Britain ((1971) 2 All E R 1126). That case related to a confidential report for which privilege was successfully claimed. The report was submitted to a police officer on the request of the Gaming Board on the character, reputation and financial standing of a person who had applied for a licence to set up bingo clubs (gaming clubs), under the Gaming Act, 1968. I have considered this case and, In my opinion, it can be distinguished on the ground that the report in question in that case was not only a confidential report, but also that it was not a statutory report. The police officer who made that report was under no statutory duty to make it; nor had the Gaming Board any statutory right to call for such a report. It was information voluntarily supplied by the police officer on the request of the Gaming Board. The learned counsel then submitted that if the report is disclosed, it would embarrass the inspectors who would decline in future to give frank and candid information. The House of Lords in Conway v. Rimmer ((1968) A C 910), thought little of the claim for privilege based on this type of "candour" cases. Again, I think that this is not relevant to the consideration of the question under discussion relating to an interpretation of the expression "affairs of the State Bank of Pakistan."

10. Mr. Valiani for the Premier Bank submitted that eve if it is held that the Inspection Report relates to the affairs of the State Bank it is no longer an "unpublished record" since a copy of it has been supplied to the Premier Bank and is avail able to the Board of Directors. I am inclined to accept this submission. Moreover, the fact that under section 40 (7) of the Banking Companies Ordinance, 1962, a banking company is entitled to reasonable notice before the Central Government decides to publish the report, further shows that the report cannot be said to relate to the "affairs of the State Bank of Pakistan."

11. My conclusion, therefore, is that the Inspection Report dated 25‑2‑1964 in question does not relate to the "affairs of the State Bank of Pakistan" and its production cannot be withheld from the Court under section 123 of the Evidence Act read with section 46 (2), State Bank of Pakistan Act, 1956. I would there fore allow this appeal and restore the order of Farooqi, J. In view of the conflict of views involved, I would leave the parties to bear their own costs. In view of this judgment, Civil Misc. Application No. 656/71 stands disposed of. MUHAMMAD HALEEM, J.‑

I agree. S. A. H. Appeal allowed.