P L D 1999 Supreme Court 1026 (PLP)

AJMAL MIAN, C.J.

By the following short order dated 18-6-1999, we have disposed of the above appeal, two Constitution petitions and petitions for leave to appeal: ORDER For the reasons to be recorded later, the above appeal, petitions for leave to appeal and Constitution petitions are disposed of, as under: (i) We are perturbed to note that despite the assurance given by the Legislature in subsection (4) of section 5 of the Protection of Economic Reforms Act, 1992 (Act XII of 1992) to the effect that "The State Bank of Pakistan or other banks shall not impose any restrictions on deposits iii and withdrawals from the foreign currency accounts and restrictions, if any, shall stand withdrawn forthwith", the successive Governments improperly utilised the foreign exchange deposits of the Foreign Currency Account holders in breach of the above solemn commitment and the State Bank of Pakistan also failed to perform its statutory duty to protect the interest of the Foreign Currency Account-holders, thereby creating a situation where at present it has become practically impossible to honour the above solemn undertaking given by the Legislature. (ii) Section 2 of the Foreign Exchange (Temporary Restrictions) Act, 1998 (Act IV of 1998) (hereinafter referred to as the Act) is intra vires of the Constitution, subject to the declaration that the same does not confer any power on the Federation or on the State Bank of Pakistan to compel Foreign Currency Account-holders to convert their foreign exchange holdings into Pak Rupees at the officially notified rate of exchange, or to compel the said account-holders to liquidate their above accounts into Pak Rupees which foreign exchange holdings had been accepted by the respective banks as security against any loans or other facilities extended to them. (iii) That B.P.R.D. Circular No.23, dated 2-7-1998 read with B.P.R.D. Circular No.29, dated 17-1L-1998 to the extent of providing that "It has been decided that encumbrance or lien of any kind upon any foreign currency deposit/foreign currency certificate as a cover against any direct or indirect liability of the depositors must be removed by July 31, 1998 through set off or direct liquidation of the liabilities so covered by the borrowers", is illegal and of no legal consequence, besides the above Circular has been withdrawn by the State Bank of Pakistan as stated by the learned Attorney-General in the Court before us on 9-6-1999 and, therefore, it does not hold the field. (iv) That the Foreign Currency Account-holders are entitled to receive interest/profits in foreign exchange on their deposits at rates already agreed as per original arrangements between them and the respective banks. (v) That the non-resident Pakistanis and foreigners maintaining Foreign Currency Accounts as on 28-5-1998 will be entitled to utilise the interest/profits, payable to them under the above arrangements between them and the banks concerned, in any manner, including the right to remit the same abroad. (vi) That in order to restore the confidence of the existing/prospective Foreign Currency Account-holders, the Federation/State Bank of Pakistan shall evolve a scheme within a reasonable period keeping in view the foreign exchange position of the country for gradual removal of restrictions on operation of Foreign Currency Accounts imposed by section 2 of the Act, and that, in any case, in every annual budget a reasonable provision in this regard shall be made.

2. That pursuant to the direction of the Court, the learned Attorney General has furnished on 17-6-1999 particulars of the Foreign Currency Account holders who had withdrawn foreign currency from their respective accounts during the period from 11-5-1998 to 28-5-1998. The same will be examined for initiating suitable action in accordance with law, if so warranted. "

2. Pursuant to the above short order, we intend to record the supporting reasons. The brief facts are that on 11-5-1998 India exploded three nuclear devices. Then on 13-5-1998, it further exploded two more nuclear devices. The above explosions of nuclear devices generated in Pakistan a lot of anxiety, particularly on account of hostile and aggressive postures of the Indian political leaders which they adopted after the above explosions. There was much debate orally as well as in writing through press articles on the question; whether Pakistan should also give a befitting reply to India by carrying out its own nuclear device tests. The international leaders including Bill Clinton, President of U.S.A. Tony Blair, Prime Minister of U.K. and Jacqes Chirac, President of France, impressed upon the Prime Minister of Pakistan not to retaliate India's above unwarranted and uncalled for action of exploding above nuclear devices. However, eventually keeping in view the interest of the country and the demand of the people of Pakistan, the Government of Pakistan conducted five nuclear device tests on 28-5-1998. On the evening of the same day, the Proclamation of Emergency under Article 233 of the Constitution of the Islamic Republic of Pakistan, 1973 (hereinafter referred to as the Constitution) was issued. On the same day the President of Pakistan also issued an Order under clause (2) of Article 233 of the Constitution suspending all the Fundamental Rights.( The above Proclamation of Emergency and the Order of suspension of Fundamental Rights were assailed before this Court through direct Constitution Petitions under Article 184(3) of the Constitution, which culminated in the judgment rendered on 13-10-1998 inter alia in the case of Sardar Farooq Ahmad Khan Leghari and others v. Federation of Pakistan and others PLD 1999 SC 57, whereby it was held that the issuance of Proclamation under clause (1) of Article 232 of the Constitution was valid, ~ but the order of suspending the Fundamental Rights under clause (2) of Article 233 was not valid and warranted under the Constitution/law. It may be observed that on the above same day (i.e. 28-5-1998) the Foreign Exchange (Temporary Restrictions) Ordinance, 1998 was promulgated. Section 2 thereof provided as follows: "

2. Notwithstanding anything contained in the Protection of Economic Reforms Act, 1992 (XII of 1992) but subject to section 3 it is hereby provided that during the period in which a Proclamation of Emergency under Article 232 of the Constitution of the Islamic Republic of Pakistan is in force, the various protections contained in the said Act or in any other law for the time being in force, or in any agreement or contract, for or in relation to foreign exchange, or the. right to bring, hold, sell, withdraw, transfer, pay or take out foreign exchange, shall remain suspended. (1) The Federal Government may by rules make provision for regulating dealings and payment in foreign exchange and such rules may, without prejudice to the generality of the foregoing empower the State Bank of Pakistan to grant permission to make or receive payments in, foreign exchange, or to permit the conversion of foreign exchange into rupees, either on a case to case basis or on the basis of a classification of various types and categories. (2) Pending the framing of rules under subsection (1) withdrawals, remittances or payments in foreign exchange shall be made with the prior permission of the State Bank of Pakistan. "

3. The above Ordinance was followed by F.E. Circular No. 12 dated 29-5-1998 issued by the State Bank of Pakistan, which prohibited the opening of new foreign currency accounts by the resident Pakistani nationals, resident firms and companies including foreign controlled companies functioning in Pakistan. It also prohibited withdrawals from the existing foreign currency accounts except the foreign currency accounts maintained by the diplomatic missions accredited to Pakistan, their non-resident employees, all international organizations in Pakistan, namely, IMF, HBRD, ADB and their non-resident employees. However, it permitted the foreign currency account holders to withdraw their foreign currency deposit in Pakistani Rupee if they so desired at the rate of Rs.46 per U.S. Dollar. The same option was also given to the holders of Foreign Exchange Bearer Certificates/US Dollar Bearer Certificates and Foreign Currency Bearer Certificates. The above F. E: Circular No. 12 was followed by Circular No. 17 dated 6-6-1998 modifying the above FE Circular No. 12 to the extent mentioned therein and providing for a number of new items. It also provided for the withdrawal from the foreign currency accounts by foreign nationals and in any other hardship case. It may be pertinent to reproduce para. 7 thereof, which reads as follows: "7 Applications in respect of withdrawal by foreign nationals, as mentioned in paragraph 3, and any. other hardship case not covered by this circular, may be referred by the Authorised Dealer maintaining the account, or by, their Head Office/Principal Office in Pakistan to the Additional Director, Foreign Exchange Department, State Bank of Pakistan, Central Directorate, Karachi (Fax No.2422083)."

4. The State Bank of Pakistan inter alia also issued BPRD Circular No.23 dated 2-7-1998 providing as under: "BPRD CIRCULAR N0.23 2nd July, 1998 All Banks/NBFIs Dear Sir, SELECTIVE CREDIT CONTROL Please refer to section A(III)2 of BCD Circular No.5 dated the 5th July, 1987 read with section (2) of BCD Circular Letter No.7/121-00-92 dated the 4th June, 1992 and Rule 10(iii) of Rules of Business for NBFIs regarding margin requirement prescribed for advances against bank deposits and deposit certificates. It has been decided that encumbrance or lien of any kind upon any foreign currency deposit/foreign currency certificate as a cover against any direct or indirect liability -of the depositors must be removed by July 31, 1998 through set off or direct liquidation of the liabilities so covered by the borrowers.

2. No new encumbrance or lien should thereafter, be created against foreign currency deposits/certificates held on May 28, 1998. .

3. All banks/NBFIs are further directed to give a compliance report to the State Bank within 3 days of the expiry of the deadline." It may also be stated that FE Circular No.31 was also issued by the State Bank of Pakistan on the above date i.e. 2-7-1998 inter alia providing that all immunities in relation to the foreign exchange referred to in para. 2 of Foreign Exchange (Temporary Restrictions) Ordinance, 1998 stand restored for an indefinite period both for old and new foreign currency accounts as well as for the amounts that have been or will be converted into rupees. It was also stated therein that the Government was in the process of providing the necessary legal cover to this effect. It also provided that the foreign currency deposits as on 28-5-1998 could continue to be converted in rupees at the official exchange rate, but restrictions on their withdrawal in foreign exchange would continue and that amounts of incremental deposits after 1-7-1998 could be withdrawn in foreign exchange, although the Prime Minister has appealed to all such depositors to keep even the incremental amount in their accounts as far as possible. It may further be stated that para.3 of the above Circular No.31 reiterated what was provided in above Circular No.23. The above para.3 reads as follows: "

3. Borrowing facilities against the security of balances held in the foreign currency accounts/ certificates as on 30-6-1998 has been withdrawn. The banks/NBFIs will meek this requirement by July 31, 1998. A separate circular is being issued on the subject." It may be observed that Circular No.29 dated 17-11-1998 extended the period from 31-7-1998 mentioned in Circular No.23 to 30-11-1998 for compliance with the direction contained in the latter circular quoted hereinabove.

5. It seems that 76 Writ Petitions were filed in the Lahore High Court assailing the validity of Circular No.23, which were dismissed in limine by a learned Single Judge of the above High Court through his order dated 30-7-1998. It was held that the above circular did not in any manner violate any provision of the Protection of Economic Reforms Act, 1992 (hereinafter referred to as Act XII of 1992) or Article 2A of the Constitution. It further seems that against the above order of the learned Single Judge, 68 Intra-Court Appeals were filed, namely, I.C.As. Nos. 679/98, 689/98, 741/98, 744/98, 710/98, 708/98, 694/98, 766/98, 767/98, 746/98, 755/98, 663/98, 828/98, 827/98, 826/98, 722/98, 825/98, 824/98, 823/98, 822/98, 749/98, 747/98, 711/98, 714/98, 754/98, 705/98, 751/98, 750/98, 691/98, 725/98, 796/98, 797/98, 795/98, 777/98, 716/98, 732/98, 733/98. 734/98, 735/98, 736/98, 798/98, 799/98, 800/98, 801/98, 925/98, 1309/98, 1310/98, 770/98, 709/98, 748/98, 743/98, 742/98, 745/98, 737/98, 724/98, 723/98, 720/98, 719/98, 695/98, 693/98, 692/98, 776/98, 772/98, 757/98, 758/98, 690/98, and 739/98. It also appears that while the above Intra-Court Appeals were pending some more Writ Petitions were filed, namely, Nos.17482/98 14635/98, 14498/98, 14719/98, 14720/9$, 14918/98, 14919/98, 14760/98, 14954/98,15027/98, 15054/98, 15065/98, 15225/98, 15393/98, 15394/98, 15464/98, 15468/98, 15469/98, 15470/98, 15471/98, 15472/98, 15603/98, 15627/98, 15642/98, 15643/98, 15941/98, 15942/98, 15943/98, 15944/98, 16451/98, 17454/98, 17393/98, 17595/98, 17564/98, 17577/98, 17578/98, 14937/98, 14938/98, 23986/98, 24577/98, 25478/98, 24596/98, 24088/98, 16624/98, 15547/98, 166878/98, 18798/98, 19765/98, 15406/98, 18780/98, 17103/98, 16017/98,25901/98 and 17459/98. The above Intra-Court Appeals and the Writ Petitions were heard together by a Full Bench of the Lahore High Court comprising Mian Allah Nawaz, Amir Alam Khan and Karamat Nazir Bhandari, JJ. .

6. The above Intra-Court Appeals and the Writ Petitions were allowed by a. judgment dated 27-1-1999. Mian Allah Nawaz, J., who rendered the leading opinion granted the following reliefs: "(1) Declaration is granted that section 2 of Foreign Exchange (Temporary Restrictions) Act (IV of 1998) is ultra vires of Article 4 and Article 2A of the Constitution being repugnant to equality protection-clause as well as on account of conferment of naked', arbitrary, unstructured power on the functionaries of the State Bank. This section so is declared as of no lawful consequences. (2) Declaration is granted to the effect that Circular No.23 is confiscatory in nature and is violative of equality protection clause and that the same is so repugnant to Article 4 and Article 2A of the Constitution., The State Bank of Pakistan however, will be well within its right to direct the lending institutions to call for fresh securities from borrowers if they find that the securities/collaterals of their foreign currency deposits as furnished by the petitioners/appellants are not satisfactory or contrary to its credit policy. (3) The Circular No.23 is, so, declared contrary to law to the extent of directing the lending institutions to liquidate the foreign currency deposits of borrowers/petitioners/appellants at the rate of 46 rupees for a dollar and then get fresh securities, if so needed. (4) Having regard to economic indicators as given in the report of State Bank and having regard to suggestion of Mr. Javed Shaukat/one of the petitioners; and having not been objected by any one of appellants/petitioners we are persuaded to direct State Bank to treat the foreign currency account held by petitioners on 23rd May. 1998 under section 4 of Protection of Economic Reforms Act (XII of 1992) as fixed account for a period of 3 years and frame rules with regard to that type of fixed deposits/permitting account-holders to withdraw any amount, so permitted, from these accounts to be utilized for their necessary expenses to be incurred by account holders on the education of their issues outside the country on medical expenditures and so on and so ford: The State Rank shall frame rules in line with the policy of such fixed accounts within a period of three weeks commencing from this order so as to clear the mist of uncertainty. (5) We are also inclined to direct the Federal Government and to get the Act XII of 1992 so amended by the Federal Legislature that it may eliminate the two classes of economy as permitted by it and subject foreign currency accounts to payment of income-tax, wealth tax and compulsory deduction of Zakat and so as to eliminate the manipulative power of dollars/sterling pounds or any other foreign currency over rupees." It may be mentioned that Karamat Nazir Bhandari, J: agreed with Mian Allah Nawaz, J. as to the grant of reliefs mentioned in abovequoted paras. 1 to 3, but dissented from as regards the reliefs mentioned in abovequoted paras. 4 and

5. The learned third Judge, namely, Amir Alain Khan, J. agreed with the opinion of Karamat Nazir Bhandari, J. In other words, the three learned Judges of the Full Bench concurred with the grant of the above reliefs mentioned in paras. 1 to 3, whereas the majority 2:1 declined to grant the relief mentioned in abovequoted paras. 4 and 5.

7. It seems that the Federation of Pakistan filed Civil Petition for Leave to Appeal No.155-L of 1999, which has been now converted into Civil Appeal No.319 of 1999: Alongwith the CPLA, Civil Miscellaneous Application No. 113-L of 1999 for suspension of the operation of the impugned judgment of the Full Bench was also filed, whereon a learned Single Judge passed a Chamber order on 28-1-1999 staying the operation of the impugned judgment. Naseer Ahmad and others filed CPLA No.457 of 1997 (which was converted into Civil Appeal No..320 of 1999) and M/s. Ali Naseer & Company (Pvt.) Ltd. filed CPLA No.458 of 1999 (which was converted into Civil Appeal No.321 of 1999). The above three petitions were taken up together and leave was granted on 25-3-1999 on the points noticed in the leave granting order. In the above leave granting order it was also ordered that the appeals arising from the above petitions should be listed for regular hearing before the summer vacation of the year. It may be stated that in addition to the above CPLA No. 155-L/99 in which leave was granted, the Federation also filed above CPLAs against the same judgment of the Full Bench which were ordered to be listed alongwith the appeals. It may be mentioned that prior to the filing of above CPLAs, the Association of Foreign Currency Account Holders in Pakistan, 19 Belgrave Road, London through its President Masudul Hassan had filed Constitution Petition No.26 of 1998 on 17-9-1998 under Article 184(3) of the Constitution directly in this Court assailing the aforesaid Ordinance and Circular No.

12. It may further be stated that one Saiyid Munirul Huda Chowdhury also presented a Constitution Petition under Article 184(3) of the Constitution directly in this Court on 24-3-1999, which was returned to him on the ground that it was not entertainable as it related to individual grievance. However, upon his application a Bench of this Court on 25-3-1999 ordered that his above Constitution Petition be heard with the connected cases, on the subject. Upon another application filed by him he was allowed to argue the case. It may be stated that aforesaid Civil Appeals Nos. 20 and 321 of 1999 were disposed of by a judgment dated 9-6-1999 at Karachi.

8. It may be pointed out that while above Intra-Court Appeals were pending in the Lahore High Court, on 26-9-1998 the Foreign Exchange (Temporary Restrictions) Act, 1998 (hereinafter referred to as the Act) was gazetted and was made effective retrospectively with effect from 28-5-1998. Section 5 whereof repealed the aforesaid Foreign Exchange (Temporary Restrictions) Ordinance, 1998. Section 2 of the Act provided as under:- "

2. Restriction on withdrawal of foreign exchange etc.-Notwithstanding anything contained in the Protection of Economic Reforms Act, 1992 (XII of 1992) or in any other law for the time being in force, or in any agreement or contract, it is hereby provided that the right to hold, sell, withdraw, transfer, pay or take out foreign exchange held by any person in Pakistan as on the twenty-eighth day of May, 1998 (the 'specified date') without the prior permission of the State Bank of Pakistan shall remain suspended: Provided that there shall be no legal restriction on any person converting his foreign exchange held as above into rupees at the officially notified rate of exchange. Explanation.--For the purpose of this section "foreign exchange" means foreign exchange held in a foreign currency account or in such other form as the Federal Government may specify."

9. In support of the above Civil Appeal and the Petitions for Leave to Appeal, Ch. Muhammad Farooq, learned Attorney-General, has contended as under: (i) That the learned Full Bench was not justified in declaring section 2 of the Act as ultra vires the Articles 4 and 2A of the Constitution being repugnant to equal protection clause as well as on account of alleged conferment of naked, arbitrary and unstructured power on the functionaries of the State Bank of Pakistan. (ii) That even no exception can be taken to Circular No.23 as the State Bank of Pakistan has the requisite power under section 25 of the Banking Companies Ordinance, 1962 (hereinafter referred to as the Ordinance of 1962). (iii) That the Federation in -order to restore confidence among the present /prospective foreign currency account holders have introduced Special US Dollar Bond Scheme on 22-7-1998 of the denomination of $100, $1000, $10000, $100000 for a period of 3 years, 5 years and 7 years from the date of their issue providing six monthly payment of profit thereon in foreign currency and by Circular No.8 of 1999 has abolished multiple exchange rate system and adopted floating inter-bank rate. According to him, the foreign currency account holders are free to either purchase the above Foreign Currency Bonds or to convert their foreign currency into Pak Rupees at the inter bank rate obtaining on dates when they intend to convert the same. Thus according to him now they cannot have any justifiable grievance.

10. On the other hand, Mr. Salman Akram Raja, Advocate, who has appeared with special permission of this Court, representing the respondents in the above appeal and the respondents in some of the above petitions for leave to appeal, urged as under: (i) That Circular No.23 is beyond the power of the State Bank of Pakistan contained in sections 25 and 41 of the Ordinance of 1962 and hence the same is illegal. (ii) That the above impugned Circular has been issued for collateral object and not for the purpose envisaged in the above sections of the Ordinance of 1962 and, therefore, it is colourable exercise of the powers. (iii) That since the above Circular No.23 envisaged the conversion of foreign currency i.e. US Dollar at a rate below the market price, the same is confiscatory in nature. (iv) That since section 2 of the Act confers on the State Bank ungalvanised, unregulated and arbitrary powers, .the same is hit by the doctrine of excessive delegation.

11. Dr. Farooq Hassan, learned Senior Advocate Supreme Court appearing for the petitioners in Constitution Petition No. 26 of 1999, has contended that since the foreign currency account holders had deposited their foreign exchange in Pakistan pursuance to the representations contained in Circular No.12 dated 29-1-1973 and subsection (4) of section 5 and section 10 of Air XII of 1992 (Protection of Economic Reforms Act, 1992), section 2 of the Act is ultra vires the Articles 4, 9 and 24 of the Constitution and so also Circular No. 12 of 1998. His further submission was that Circular No.12 of 1998 was also ultra vires of the power of the State Bank of Pakistan, besides it was also violative of Article 25 being discriminatory between a foreigner of Pakistani origin and a foreigner of foreign origin.

12. Saiyid Munirul Huda Chowdhury, the petitioner in the above Constitution Petition No.-Nil of 1999, has urged that since he had deposited about 1.5 million US Dollars in Pakistan after disposing of all his and his family's assets in Europe on the basis of representation contained in above Circular No. 12 of 1973 and the above provisions of the Act, it was not open to the Federation of Pakistan to plead that it had no foreign exchange which it could allow to be remitted. His further submission was that even now the high Government functionaries are having foreign trips with large delegations and spending lot of foreign exchange. It was also contended by him that a number of influential persons of the Government and of the public managed to withdraw substantial amounts from their foreign currency accounts during the period commencing from 11-5-1998 to 28-5-1998, and that even after the imposition of the above restriction under the Act.

13. We had directed the Governor of State Bank of Pakistan on 9-6-1999 to file a statement indicating names of the persons, accounts numbers and the amounts remitted abroad during the period commencing from 11-5-1998 to 28-5-1999 out of the foreign currency accounts. It was also ordered that we would also like to have a statement indicating whether any permission had been granted to any private persons to remit the foreign exchange abroad after the enforcement of the Act, and if it was granted, it should be stated on what basis and to whom such permission was granted and for what amount. Pursuant to the above order, the learned Attorney-General has submitted on 17-6-1999 a number of folders containing the requisite information. The foreign currency account holders have been divided into A, B and C categories . Category 'A' is reflected in ten volumes of folders containing 1931 pages, which show the withdrawal from 43 bank branches during the above period. Folder of Category 'B' contains 38 pages and includes the withdrawal by foreign nationals specially Chinese working in Pakistan, foreign news agencies staff and foreign N.G.Os. carrying out rehabilitation work in Afghanistan to whom the State Bank of Pakistan had granted permission of withdrawals through Circular No-17. Folder of Category 'C' contains 83 pages and includes those persons (about one thousand l in number) who withdrew US $1,00,000 or more from 37 bank branches. Since the time available to us was not sufficient to examine the above voluminous record as we intended to announce the judgment on the following day i.e. on 18-6-1999, it has been provided in para. 2 of the short order quoted hereinabove that the same will be examined for initiating suitable action in accordance with law, if so warranted.

14. Before touching upon the above contentions of the learned counsel for the parties, we may reproduce the statement reflecting the position of the foreign currency deposits furnished by the learned Attorney-General, which reads as follows:-- "(1) Foreign Exchange Reserves as on Friday the 4th June, 1999: $ 1,744 (M) (2) Debt Service Estimate during net financial year i.e. July, 1999 to June 2000. $ 2,877 (M) (3) Foreign Currency Deposits As on 28-5-1998: Institutional $ 1,426.79 (M) Other Non-residents $ 2,563.69 (M) Residents $ 6.967,50 (-M) Total: $10,957.98 (M) As on 30-4-1999: Institutional . $ 1,385.98 (M) Other Non-residents $ 1,430,18 (M) Residents $ 2,918,92 (M) Total: $ 5,735,08 (M) As on 31-5-1999: Total: $ 5,144,70 (M) (Institutional deposits figure remains unchanged) (Break-up in terms of Residents and Non-Residents not yet received). (4) Foreign Currency deposits under lien as of 30-4-1999 $ 922.83 (M) (5) Special US Dollar Bonds issued against F.C. deposits up to 4th June, 1999. $ 1,182.10 (M) Interest paid on Special U.S. Dollar Bonds up to 8-6-1999 $ 1,860,363 (The first sale of bonds took place on 13-8-1998) (6) Total amounts of Foreign Currency Deposits encashed up to 4th June, 1999 $ 4,993,90 (M) (7) Figures of Home Remittances since July, 1998: Months Amount July, 1998 133,59 (M) August. 1998 96.10 (M) September, 1998 71.13 (M) October, 1998 78.19 (M) November, 1998 109.20 (M) December, 1998 88.31 (M) January, 1999 77.40 (M) February, 1999 67.93 (M) March, 1999 80.74 (M) April, 1999 72.02 (M) (With effect from 22nd July, 1998, Home Remittances were encashed at Composite Rate)." A perusal of the above-quoted statement indicates that on 28-5-1998 the total of foreign currency deposits was US $ 10957.98 million. However, on 30-4-1991-) this was reduced to US $ 5,735.08 million on account of conversion of foreign currency in Pak Rupee. It may further be noticed that the; deposits of US $ 922.8:1 million in foreign currency accounts were under lien as of 30-4-1999. It may also he stated that aforesaid special US Dollar Bonds issued against foreign currency deposits up to 4-6-1999 valued US $ 1,182.10 million, whereas interest paid on Special US $ Bonds up to 8.6-1990 comes to US $ 1,860,

363. The first sale of above bonds took place on 30-8-1998, It may further be stated that foreign currency account holders got US $ 4,993.90 million converted into Pak Rupee up to 4-6-1999. The figures of home remittance since July, 1998 to April, 1999 indicate that a total amount of US $ 874.61 million was received.

15. Against the above liability, the foreign exchange reserve position of Pakistan during the period from 28-5-1998 to 27-1-1999 was as under: FOREIGN EXCHANGE RESERVE POSITION :- Date Amount in Million US $ 28-5-1998 1,282.8 29-6-1998 894.0 30-h0-1998 440.2 31-12-1998 1,057.7 27-1-1999 1,580.2 From the abovequoted figures it is evident that the total foreign reserve sin 28-5-1998 was only US $ 1282.8 million against the total liability of foreign currency deposit of US $ 10,957.98 million. In this view of the matter, it wars not possible for the Federation of Pakistan or the State Bank of Pakistan to allow the remittance of the above foreign currency deposit of US $ 10,957,98 million keeping in view the aforesaid meagre amount of foreign exchange reserve. It tray also be stated that besides the above liability of the Federation in respect of the aforesaid foreign currency deposits it had other liabilities in foreign . exchange i.e. payments which were to be made fear debt servicing and on import etc,

16. With the above factual background, we may now advert to the question, as to whether the restrictions imposed by section 2 of the Act were so warranted. We have already reproduced the above section 2 of the Act, which provides that notwithstanding anything contained in Act XII of 1992 (Protection of Economic Reforms Act, 1992) or in any other law for the time being in force, or in any agreement or contract, it is hereby provided that the right to hold, sell, withdraw, transfer, pay or take out foreign exchange held by any person in Pakistan as on the twenty-eighth day of May, 1998 (the 'specified date') without the prior permission of the State Bank of Pakistan, shall remain suspended. It may also be pointed out that the proviso to the above section lays down that there shall be no legal restriction on any person converting his foreign exchange held as above into rupees at the officially notified rate of exchange. Whereas explanation to the above proviso provides that "for the purpose of this section "foreign exchange" means foreign exchange held in a foreign currency account or in such other form as the Federal Government may specify". It may also be stated that the above Circular No.12 of 1998 (dated 29-5-1998) notified the rate of conversion of US Dollars at Rs.46 per US Dollar. That it will not be out of context at this stage to point out that subsection (1) of section 3 of the Act provides that subject to the provision of this Act all the protections and immunities conferred in terms of the Protection of Economic Reforms Act, 1992 (XII of 1992), shall remain unaffected.

17. We may now advert to the Preamble. sections 5 and 6 of Act XXII of 1992 (Protection of Economic Reforms Act, 1992), which read as follows: "Whereas it is necessary to create a liberal environment for savings-and investments; and other matters relating thereto; And whereas a number of economic reforms have been introduced and are in the process of being introduced to achieve the aforesaid objectives; And whereas it is necessary to provide legal protection to these reforms in order to create confidence in the establishment and continuity of the liberal economic environment created thereby. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

5. Immunities to foreign currency accounts.--(l) All citizens of Pakistan resident in Pakistan or outside Pakistan who hold foreign currency accounts in Pakistan and all other persons who hold such accounts, shall continue to enjoy immunity against any enquiry from the Income Tax Department or any other taxation authority as to the source of financing of the foreign currency accounts. (2) The balances in the foreign currency and income therefrom shall continue to remain exempted from the levy of wealth tax and income tax and compulsory deduction of Zakat at source. (3) The banks shall maintain complete secrecy in respect of transactions in the foreign currency accounts. (4) The State Bank of Pakistan or other banks shall not impose any restrictions on deposits in and withdrawals from the foreign currency accounts and restrictions, if any, shall stand withdrawn forthwith. . . . . . . . . . . . . . . . . . . . . . . . . . . . .

10. Protection of financial obligation.--All financial obligations incurred including those under any instrument, or any financial and contractual commitment made by or on behalf of the Government shall continue to remain in force, and shall not be altered to the disadvantage of the beneficiaries." It may be noticed that the Prey to the above Act described the object of the Act by providing that it is necessary to create a liberal environment for savings- and investments, and other matters relating thereto. It also referred to a number of economic reforms having been introduced and are in the process of being introduced to achieve the aforesaid objective. It also states that it is necessary to provide legal protection to the reforms in order to create confidence in the establishment and continuity of the liberal economic environment created thereby. It may further be noticed that section 5 provides immunities to foreign currency accounts from the payment of income-tax and Zakat, subsection (4) thereof contains a solemn undertaking by providing that the State Bank of Pakistan or other banks shall riot impose any restrictions on deposits in and withdrawals from the foreign currency accounts and restrictions, if any, shall stand withdrawn forthwith. Whereas section -10 expressly lays down that all financial obligations incurred including those under any instrument, or any financial and contractual commitment made by or on behalf of the Government shall continue to remain in force, and shall not be altered to the disadvantage of the beneficiaries.

18. We were perturbed to note that in spite of the above solemn commitment made by the Legislature, the successive Governments improperly utilised the foreign exchange deposits of the foreign, currency account holders in breach of the above solemn commitment and the State Bank of Pakistan also failed to perform its statutory duty inter alia envisaged under section 25 of the Ordinance (Banking Companies Ordinance, 1962) to protect the interests of the foreign currency account holders thereby creating a situation, where at present it has become practically impossible to honour the above solemn undertaking given by the Legislature. Senator Sartaj Aziz, who was the Finance Minister at the relevant time in his Article under the caption "Why Foreign Currency Accounts were Frozen" has given the version of the Federation as to the reasons for freezing the foreign currency accounts. He inter alia stated that as a result of the cumulative current account deficit i.e. the difference between total imports of goods and services between 1-7-1993 and 30-6-1997 was 12.9 billion and at least 87 % of the above deficit was thus financed by these foreign currency accounts (Annex-II). He further stated that in the absence of aforesaid freezing the meagre reserves of 1.2 billion would have disappeared within three to seven days. He also admitted that though the decision to freeze the foreign currency accounts was inevitable but it adversely affected the credibility of the Government.

19. Mr. Salman Akram Raja has candidly conceded that notwithstanding the above solemn commitment given by the Parliament in Act XII of 1992, the Parliament was competent to enact section 2 of the Act imposing temporary F restrictions on the withdrawal of the amounts from the foreign currency accounts. However, his submission was that the State Bank of Pakistan had no power under section 25 or 41 of the Ordinance of 1962 to direct the foreign currency account holders whose foreign currency deposits were accepted as a collateral security against the local loans by the various banks to provide fresh G security in place of foreign currency deposit or to liquidate the liability. The above contention seems to be correct. In this behalf, it may be pertinent to refer to section 25 of the Ordinance of 1962 which reads as under "

25. Power of State Bank to control advances by banking companies.-- (1) Whenever the State Bank is satisfied that it is necessary or expedient in the public interest so to do, it may determine the policy in relation to advances to be followed by banking companies generally or by any banking company in particular, and, when the policy has been so determined, all banking companies or the banking company concerned, as the case may be, shall be bound to follow the policy, as so determined. (2) Without prejudice to the generality of the power conferred by subsection (1), the State Bank may give directions to banking companies either generally or to any banking company or group of banking companies in particular,-- (a) as to the credit ceiling to be maintained, credit targets to be achieved or different purposes, sectors and regions, the purposes for which advances may or may not he made, the margins to be maintained in respect of advances, the rates of interest, charges or mark-up to be applied on advances and the maximum or minimum profit sharing ratios; and (b) prohibiting the giving of loans, advances and credit to any borrower or group of borrowers. on the basis of interest, either for a specific purpose or for any purpose whatsoever; and each banking company shall be bound to comply with any direction so given. (3) If any default is made by a banking company in complying with the policy determined under subsection (1) or direction given under subsection (2), every director and other officer of the banking company and every other person who is knowingly a party to such default shall, by order of the State Bank, be liable to a penalty of any amount which may extend to twenty thousand rupees and, where the default is a continuing one, of a further amount which may extend to one thousand rupees for every day after the first during which the default continues. (4) Without prejudice to the provisions of subsection (3), the State Bank may, for the purposes of securing implementation of any special credit schemes or monetary policy or observance of credit ceilings by a banking company, by order in writing require banking companies generally, or any banking company in particular, to make special deposits with it for such amount and on such terms and conditions as may be laid down by the State Bank in this behalf. (5) The amount deposited with the State Bank under subsection (4) or any part thereof may, at the discretion of the State Bank, be released by it to the-banking company which deposited it as and when the State Bank deems fit either unconditionally or on such terms and subject to such conditions as the State Bank may, by order in writing, determining from time to time. (6) Any penalty imposed under subsection (3) shall be payable on demand made by the State Bank and, in the event of refusal or failure by the Director, officer or other person concerned to pay on such demand, shall be recoverable as arrear of land revenue." The perusal of the abovequoted section indicates that the above section empowers the State Bank of Pakistan to control advances by banking companies by laying down the policy in respect of matters referred to in its subsection (2) i.e. as to the credit ceiling, credit targets, the purposes for which advances may or may not be made, the margins to be maintained in respect of advances, the f rates of interest, charges or mark-up to be applied on advances and the maximum or minimum profit sharing ratios, and prohibiting the giving of loans, advances and credit to any borrower or group of borrowers on the basis of interest, either for a specific purpose or for any purpose whatsoever, but had no power to alter' the terms and conditions of an agreement of loan already entered into and acted upon between a bank and its customers through a circular. It may be stated that it is a well-settled proposition of law that a notification or an executive order which may adversely affect the rights of any person cannot be given retrospective effect. In this regard reference may be made to the case of Hashwani Hotels Limited v. Federation of Pakistan and others PLD 1997 SC 315, in which this Court while construing the State Bank Circular held as under: "

16. Reverting to the question, whether such a direction can affect the loan agreement which were already concluded prior to such direction, it may be observed that it is a well-settled principle of interpretation of a notification and/or an executive order that the same can operate prospectively and not retrospectively. This principle is equally applicable to a statute in the absence of any express or implied intendment contrary to it. It maybe observed that Mr. Mansoor Ahmed Khan, in support of the above proposition, has referred to the following cases:-- (i) Condicalo Hypolito Constancio Moronha v. Damji Devji and others PLD 1954 PC 22; (ii) Adrian Afzal v. Capt. Sher Afzal PLD 1969 SC 187; (iii) The Income Tax Officer (Investigation), Circle I, Dacca and another v. Sulaiman Bhai and another PLD 1970 SC 80; (iv) Mian Rafi-ud-Din and 6 others v. The Chief Settlement and Rehabilitation Commissioner and 2 others PLD 1971 SC 252; (v) Mahmood Shah etc. v. Additional Settlement Commissioner Revenue etc. PLD 1979. Lah. 709. " In the above report the subject-matter was a circular issued under section 25 of the Ordinance of 1962 by the State Bank of Pakistan. Reference may also be made to the case of Messrs Army Welfare Sugar Mills Limited and others v. Federation' of Pakistan and others 1992 SCMR 1652, in which it has been held by this Court that a notification adversely affecting the right of any person cannot operate retrospectively but if the same confers any benefit, it can be made applicable retrospectively. Even otherwise, the impugned portion of the above Circular No 23 cannot be sustained for the reason that it is confiscatory in nature and interferes with contractual rights and obligations under the concluded contracts, inasmuch as it prohibits the use of the foreign currency deposits within Pakistan as a security which was already accepted by the banks against the loans prior to the issuance of the above Circular without acquiring the above foreign currency deposits under appropriate provision of law against the payment of compensation. However, the above Circular has been withdrawn by the State Bank of Pakistan as stated by the learned Attorney-General in the Court before us on 9-6-1999 and, therefore, it does not hold the field,

20. Mr.Salman Akram Raja has also pointed out that by the above Circular No. 23 the State Bank was intended and designed to coerce the foreign currency account holders to convert the foreign currency deposit into rupees at the rate of Rs.46 per US Dollar riotified under FE Circular No 12 dated 29-5-1998, which rate was below the market rate. His further submission was that since the foreign currency account holders whose foreign currency deposits were accepted as a security were directed to substitute the security or to liquidate the liability by 31-7-1998, it amounted to coerce them to convert their foreign currency deposits into rupees or to liquidate the liability. According to him, the foreign currency account holders even otherwise could not have been offered above rate of Rs.46 per US Dollar for conversion into rupees, as the market rate on 31-7-1998, was Rs.54.25 buying rate and Rs.55.25 selling rate per US Dollar as reflected in the statement filed by the State Bank of Pakistan (at page 188 of paper book-I of Civil Appeal No.319/99). In support of his above submission, he has relied upon the cases of Jibendra Kishore Achharyya Chowdhury and 58 others v. The Province of: East Pakistan and Secretary, Finance and Revenue (Revenue) Department, Government of East Pakistan PLD 1957 SC (Pak.) 9 and Qazalbash Waqf and others v. Chief Land Commissioner, Punjab, Lahore and others PLD 1990 SC

99. In the above first case this Court while construing the provisions of East Bengal State Acquisition and Tenancy Act, 1950 held that the above Act is essentially a confiscatory enactment because it takes man's property by paying him, say twice the annual net income of that property and not the market value as the compensation. Whereas in the latter case Shariat Appellate Bench of the Curt had dilated upon the Islamic concept of compulsory acquisition of private property. It would be pertinent to reproduce para.4 from the opinion of Justice Muhammad Taqi Usmani (Member), which reads as follows: The legal position seems to be that no person can be deprived of his property even under any Acquisition Law for public purposes without payment of compensation which should be based on the market rate and not at the rate fixed by the authority, which has acquired or which is instrumental in acquiring the property involved.

21. Ch.Muhammad Farooq, learned Attorney-General has also contended that since the Emergency has been imposed under Article 232 of the Constitution, the impugned Circular and the section 2 of the Act are protected by clause (1) of Article 233 of the Constitution which provides that "Nothing contained in Articles 15, 16, 17, 18, 19 and 24 shall, while a Proclamation o Emergency is in force, restrict the power of the State as defined in Article 7 to make any law or to take any executive action which it would, but for the provisions in the said Articles be competent to make or to take, but any law so made shall, to the extent of the incompetency, cease to have effect, and shall be deemed to have been repealed, at the time when the Proclamation is revoked or has ceased to be in force". The above contention is not well founded as the Circular has been issued by the State Bank of Pakistan which is not covered by the definition of State as given in Article 7 of the Constitution which defines that "the State" means the Federal Government [Majlis-e-Shoora (Parliament)], a Provincial Government, a Provincial Assembly, and such local or other authorities in Pakistan as are by law empowered to impose any tax or cess". The State Bank is the creature of a statute, namely, the State Bank of Pakistan Act, 1956. It has no power to impose a tax or cess as envisaged by above Article 7 of the Constitution. Furthermore, simpliciter the factum that the Proclamation of Emergency holds the field would not justify passing of an executive order contrary to any Constitutional provision under the cover of clause (1) of Article 233, but such executive order or action should have the backing of law which should be enacted after the imposition of Emergency. In this regard, reference may be made to the case of Bennett Coleman & Co. Ltd. and others v. Union of India and others (AIR 1973 SC 106), in which Indian Supreme Court while considering vires of the import policy for newspapers prints held that Article 358, (which corresponds to Article 233(1) of Pakistani Constitution) does not apply to an executive action taken during the emergency if the same is a continuation of the prior executive action or an emanation of the previous law and which prior executive action or previous law would otherwise be violative of Article 19 or be otherwise unconstitutional. It has been further held that the executive action which is unconstitutional is not immune during the proclamation of emergency unless the same is supported by some legislative which is enacted subsequent to the imposition of emergency-. The same view was taken by a Division Bench. of the Lahore High Court in the case of Province of Punjab through its Home Secretary and 3 others v. Gulzar Hussain ; Advocate and 8 others (PLD 1978 Lahore 1298), in which it was held that no executive authority could take any executive action without the support of a valid law and any action taken in violation of the above rule could be struck down by the High Court under Article t9 of the Constitution as being without lawful authority. It was also held that Article 8(2) of the Constitution prohibited making of any legislation in violation of Fundamental Rights except six Fundamental Rights mentioned in clause (1) of Article 233 during the emergency. It was further held that the guarantee under Article 4 is quite separate and distinct from the Fundamental Rights and no inroads could have been permitted even during the emergency. It may be pointed out that after the imposition of emergency in Pakistan no law has been enacted conferring additional power on the State Bank of Pakistan. The impugned Circular was not founded on section 2 of the Act but was issued pursuant to the power conferred on the State Bank under the Banking Companies Ordinance, 1962, namely, section 25 thereof. In this view of the matter, the impugned portion of the Circular cannot be defended on the plea that the Circular was issued after the proclamation of emergency.

22. It may be observed that interference with the right of the account holders to use the above foreign currency deposits even in Pakistan as a security constitutes taking over of the same, without payment of compensation and, therefore, the same is violative, inter alia, of Article 4 of the Constitution. In this behalf, reference may be made to the following passage from the book Treatise on Constitutional Law Substance and Procedure, Second Edition by Ronald D. Rotunda: "The fifth amendment provides that private property may not be 'taken' by the Federal Government without just compensation. The central issue in many eminent domain cases is whether the Governmental interference amounts to a 'taking'. Although the concept of a taking may originally have contemplated only physical appropriation. it is plain today that non-acquisitive Governmental action may amount to a taking in a Constitutional sense. A 'taking', therefore, may be found when Governmental activity results in significant physical damage to property that impairs its use. Although the State, possesses the power to regulate property without payment of compensation, if the regulation goes too fat, a taking may also be found. Furthermore, a taking may occur 'as to an intangible property interest where the owner had a reasonable expectation that such property would not be used by the Government and such expectation was impaired. " Reference may also be made to the case of. Pennsylvania Coal Company plaintiff in Err. v. H.J.Mahon and Margaret Craig Mahon (260 US 322 = 67 Law Edition 393) wherein MrJustice Holmes observed as follows. "It is our opinion that the act cannot be sustained as an exercise of the police power, so far as it affects the mining of coal under streets or cities in places where the right to mine such coal has been reserved. As said in a Pennsylvania case: 'For practical purposes, the right to coal consists in the right to mine it', Com, ex rei. Keator v. Clearview Coal Co. 256 Pa. 328, 331, L.R.A. 1917E, 672 100 At1.820. What makes the right to mine coal valuable is that it can be exercised with profit. To make it commercially impracticable to mine certain coal has very nearly the same effect for Constitutional purposes as appropriating or destroying it. This [415] we think that we are warranted in assuming that the statute does. " The above treatise and the judgment of the US Supreme Court indicate that taking over of property may take place even though there is no physical taking over but the property is damaged or impaired which either prevents its use or reduces its usefulness to a level which may become non-profitable to an extent unbearable as a normal risk of the subject-matter involved.

23. It may also be pertinent to point out that section 2 of the Act would have been ultra vires if it was to deprive the foreign currency account holders the domain over the foreign currency deposits, or if it would have compelled the account holders to convert the foreign currency deposits in Pakistani Rupees against their volition at a notified rate and because of that we have clarified in our short order that section 2 of the Act is intra vires of the Constitution subject to the declaration that the same does not confer any power on the Federation or on the State Bank of Pakistan to compel foreign currency account holders to convert their foreign exchange holdings into Pak Rupee at the officially notified rate of exchange, or to compel the said account holders to liquidate their above accounts into Pak Rupee which foreign exchange holdings had been accepted by the respective banks as security against any loan or other facilities extended to them.' ` We may also point out that notwithstanding the imposition of the Emergency and the suspension of Articles 15, 16, 17, 18, 19 and 24 of the Constitution by virtue of clause (1) of Article 233, Article 199 of the Constitution remains available not only for the enforcement of the Fundamental Rights which remain unsuspended but also enforce the rights and obligations as contained, inter alia, in Article 4 of the Constitution which provides as follows: "

4. Right of individuals to be dealt with in accordance with law, etc.--(1) To enjoy the protection of law and to be treated in accordance with law is the inalienable right of every citizen. wherever he may be, and of every other person for the time being within Pakistan., (2) In particular-- (a) no action detrimental to the life, liberty, body, reputation or property of any person shall be taken except in accordance with law, - (b) no person shall be prevented from or be hindered in doing that which is not prohibited by law; and (c) no person shall be compelled to do that which the law does not require him to do . ' The perusal of the above quoted Article indicates that every citizen and every other person for the time being in Pakistan is guaranteed as his inalienable right to enjoy the protection of law and to be treated in accordance with law wherever he may be and in particular no action detrimental to the life, liberty, body, reputation or property of any person can be taken except in accordance with law The scope of the above Article 4 has been very ably discussed by Salahuddin, J. in his opinion in the case of Ch.Manzoor Elahi v. Federation of Pakistan etc. (PLD 1975 SC 66), which was approved by this very Full Bench in the case of Sardar Farooq Ahmad Khan Leghari and others v. Federation of Pakistan and others (supra). as under: "(xiv) That the Fundamental Rights not suspended under Article 233 of the Constitution remain fully operative and everybody in Pakistan is under an obligation to respect it. The mere fact that an aggrieved person is temporarily prevented from moving any Court for the enforcement of the Fundamental Rights does not relieve an authority of its obligation to comply with it. [Salahuddin Ahmed. J. (Ch Manzoor Elahi's case) (supra)]. (xv) That a High Court has, the jurisdiction, under Article p199 of the Constitution to grant relief to a person arrested illegally within its jurisdiction although he is for the .time being detained outside its jurisdiction. [Salahuddin Ahmed, J. (Ch. Manzoor Elahi's case) (supra)]. (xvi) That Article 199 of the Constitution is available not only for the enforcement of Fundamental Rights but also to enforce the rights and obligations as contained in Articles 4 and 5 of the Constitution. [Salahuddin Ahmed, J. (Ch. Manzoor Elahi's case) (supra)]. (N.B. above paras. (xii) to (xvi) relate to late 1962 Constitution.)" Besides the above Article 4, Article 23 (which is one of the Articles contained under Part II of the Constitution relating to Fundamental Rights) enjoins that every citizen shall have the right to acquire, hold and dispose of property in any part of Pakistan subject to the Constitution and any reasonable restrictions imposed by law in the public interest. The above Article 23 is still in the field as it is not mentioned in clause (1) of Article 233 of the Constitution. However, we are unable to subscribe to the view that section 2 of the Act confers unbridled, naked, arbitrary and unstructured powers on the functionaries of the State Bank of Pakistan and therefore it is hit by the doctrine of excessive delegation or that it is ultra vires the Articles 4 and 2A of the Constitution. No doubt, that no foreign currency account holder could operate foreign currency account without the prior permission of the State Bank of Pakistan, but it is implied and inherent that such permission is to be granted on the basis of reasonable classification which should be based on an intelligible differentia which distinguishes person or companies that are grouped together from those who have been left out and that, the differentia must have retained nexus to the object sought to be achieved by such classification as held by this Court in the case of I.A. Sharwani v. Government of Pakistan through Secretary, Finance Division, Islamabad (1991 SCMR 1041) and the case of Messrs Gadoon Textile Mills and 814 others v. WAPDA and others (1997 SCMR 641). Any circular which may be issued by the State Bank of Pakistan for granting -permission to the foreign currency account holders to operate their foreign currency accounts not founded on the above reasonable classification will not be sustainable. In this regard, it may be pertinent to mention that Dr.Farooq Hassan, Senior Advocate Supreme Court has pointed out that foreigners of Pakistani origin are discriminated from foreigners of foreign origin. In order to eliminate the above discrimination, in our above qouted short order we have held that non-resident Pakistani and foreigners maintaining foreign currency accounts as on 28-5-1998 will be entitled to utilise the ` interest/profits payable to them under the above arrangements between them and the bank concerned in any manner including the right to remit the same abroad. In this view of the matter, the discrimination, if any, has been removed.

24. We may also point out that there is a marked distinction between a provision of a statute which may be ex facie discriminatory and a, provision thereof which may be capable of being pressed into service in discriminatory manner. The former would be liable to be struck down on the ground of violation of Article 25 of the Constitution, but the latter provision cannot be struck down on the ground that it is capable of being used in discriminatory manner. However, any discriminatory action which may be taken pursuant to such provision can be struck down. In this regard, reference may be made to the case of Mehram Ali and others v. Federation of Pakistan and others (PLD 1998 SC 1445), in which it was contended that since section 34 of the Anti-Terrorism Act, 1997 (Act XXVII of 1997) conferred on the Government the power to amend the Schedule to the said Act so as to add any entry thereto or modify or omit any entry therein by a notification, the same was ultra vires the Constitution as it was capable of being misused by the Government. The above contention was repelled as under: "(iv) It may be observed that the learned counsel for the petitioners urged with vehemence that the power given under section 34 of the Act to the Government to amend the Schedule to the Act so as to add any entry thereto or modify or omit any entry therein by a notification is ultra vires the Constitution. It has been further urged by them that the above power has been abused inasmuch as many offences have been included which have no nexus with the object of the Act or with the offences covered by sections 6, 7 and 8 thereof. In this regard, it may be pertinent to mention that delegation of such power to the Government by the Legislature is not an unusual phenomenon. In order to implement the object of a statute or to work out certain detail, such power is normally delegated. In this regard, reference may be made to the case of Zaibtun Textile Mills Ltd. v. Central Board of Revenue and others (PLD 1983 SC 358). In the above case, the Legislature had conferred power on the Central Board of Revenue to formulate guidelines to determine rate of production, capacity tax and even to levy tax under section 3(4), (5), (6), (7) of the Central Excises and Salt Act, 1944, as amended by the Finance Act, 1966. The above provision was assailed but this Court held that the Legislature was competent to employ proper agency to accomplish its legislative purpose. Reference may also be made to the case of Muhammad Hussain Ghulam Muhammad and another v. The State of Bombay and another Ishwarbhai Becharbhai and others, Intervenes (AIR 1962 SC 97), in which also such delegation was upheld by the Indian Supreme Court." The case in hand is squarely covered by the above judgment, as at the most it can be urged that section 2 of the Act is capable of being used in a discriminatory manner, but it cannot be said that the same is ex facie discriminatory. In our short order we have held the above section as intra vires subject to the declaration contained therein.

25. Dr.Farooq Hassan, learned Senior Advocate Supreme Court and Mr. Salman Akram Raja, Advocate have assailed the impugned section 2 on the ground that the same is a colourable legislation. In support of the above submission Mr. Salman Akram Raja has referred to the treatise on Constitutional Law of India, A Critical Commentary (Third Edition) by H.M. Servai, the case of Attorney-General of Alberta v. Attorney-General of Canada and others (AIR 1939 Privy Council 53) and the 'case of The State of Bihar v. Sir Kameshwar Singh (AIR 1952 SC 252). In the above treatise the author has described colourable legislation, as under: "3.15. A Legislature lacking legislative power or subject to a Constitutional prohibition may frame its legislation so as to make it appear to be within its legislative power or to be free from the Constitutional prohibition. Such a law is 'colourable' legislation, meaning thereby that while pretending to be a law in the exercise of undoubted power, it is in fact a law on a prohibited field." In the above first case the question for determination before the privy Council was, whether the taxation which was for raising the revenue for provincial purposes was within the meaning of section 92(2) of the British North America Act, 1867 or whether it was in substance a tax on banks and savings banks which fell within section 91(15)(16) respectively of that Act. It was held that the law is in no sense the one relating to taxation for provincial purposes but was a law designed to prevent the function of banks and savings banks in the Provinces. Both of which subjects were exclusively subjects of the Dominion Legislature and thus the- law was colourable for the reason recorded therein. Whereas in the second case the whole Act relating to acquisition of the estate was challenged but certain provisions thereof were also assailed as colourable legislation or as a fraud on the Constitution. The Indian Supreme Court by a majority of 2:3 held that the provisions contained in sections 4(b) and 23(f) of the Bihar Land Reforms Act, 1950 were colourable legislation and were void. Section 4(b) provided that all arrears of re-- ', whether they had merged into a decree or not. were to vest in Government and fifty per cent. of those rents were to be added to the compensation payable to the land holders. Whereas section 23(f) provided for deduction representing 4 to 12-1/2 per cent of the gross assets as "costs of work for the benefits of Raiyats" in ascertaining the net assets on which compensation was to be based. The. Court held that the above provision was purely arbitrary and had no relation to facts and was merely designed to avoid payment of compensation under the guise of laying down principles of compensation. .,

26. From the above treatise and the case-law, it is evident that a colourable legislation is that which is enacted by a legislature which lacks the legislative power, or is subject to Constitutional prohibition, but it is framed in such a way that it may appear to be within the legislative power or to be free from Constitutional prohibition or where the object of the law is not what is contemplated under the Constitutional provision pursuant whereof it is framed. In the case in hand, it is not correct to urge that the impugned section 2 is hit by the above doctrine of colourable legislation. We have already pointed out hereinabove that the foreign currency reserves of Pakistan on 28-5-1998 were meager and particularly keeping in view the impending restrictions on the foreign currency loans by the World Bank, International Financial Institutions and the foreign countries .as a retaliation against Pakistan's carrying out nuclear device tests despite appeals from the world leaders not to do so, the imposition of the above temporary restrictions subject to the clarification made by us in the short order was justified.

27. We have asked Mr. Salman Akram Raja as well as Dr. Farooq Hassan to cite some case-law or show some treatise in order to demonstrate that in view of the assurance contained in subsection (4) of section 5 and section 10 of the Act XII of 1992 (Protection of Economic Reforms Act, 1992), the Parliament was not competent to enact section 2 of the Act. Mr. Salman Akram Raja has candidly conceded that the Parliament is competent to pass any law in the absence of any constraint contained in the Constitution. He is unable to point out any violation of any Constitutional provision. However, Dr.Farooq Hassan has contended that this Court on the basis of international law can hold that in view of solemn assurance of the legislature contained in above sections 5(4) and 10 of Act XII of 1992, the impugned section 2 is ultra vires the power of the Legislature. To reinforce the above submission, he submitted that the World Court has taken the above view inter alia in the South West Africa Case. According to him, such a legislation in the words of Lord McNair is "It is utterly shocking to mankind's conscience". In Pakistan the Courts apply ` municipal law and not, international laws in order to examine the vires of a provision of a statute. However, if a municipal law and an international law are consistent with each other and there is no conflict or inconsistency, the Court to reinforce its view as to the interpretation of a Constitutional provision or of a provision of statute may press into service international law and/or conventions. The above approach has been adopted by this Court in the case of Sardar Farooq Ahmed Khan Leghari (supra).

28. Then it was contended by Dr Farooq Hassan that in fact impugned section 2 is violative of Article 9 of the Constitution which enjoins that no person shall be deprived of life and liberty save in accordance with law. His `.submission was that denial of the foreign currency deposits and/or the profit therefrom is in fact violative of the above Article as the non-resident foreign currency account holders have deposited the above foreign currency in Pakistan in view of the assurance contained, inter alia, in Circular No. 12 of 1973 and the', above provisions of Act XII of 1992 under the belief that they would be able to withdraw the deposits of foreign currency and/or interests/profits thereon without any let or hindrance to meet their liabilities in their native countries and that because of the above restrictions, they cannot lead life as envisaged by above Article. He has invited our attention to para.6 of his above petition, which' reads as follows: "

6. That the Members of the Association as well as the Association have vigorously pursued this matter in the U.K. where many of the Account Holders of this category are placed. Some press reports and articles written by them are appended. These press accounts reveal the abnormal harm done to the Members of the Association. Most of them had saved their foreign currency in their native country to pay for the education of their children, there marriages and to pay off their loans, a regular feature of life in Western nations in respect of their cars or homes. Non-payment of such obligations can lead to the discontinuation of the studies of their children, the foreclosure of their homes or the repossession of their cars. Not only these are irreparable losses, it will bring bad name to the country as having natives and expatriates who are unable to pay their loans or honour their financial commitments. Already such drastic action is in place against some of them and Pakistan has suffered indignity."

29. The above averments seem to be correct/plausible for the reason that Pakistan had offered higher rate of profit/interest backed by the above legislative protection to the then prospective foreign currency account holders. In the above factual background, it may be correct that non-resident Pakistani and/or the foreign nationals of Pakistani origin may have deposited their entire savings in Pakistan with the object to earn more profit and also to help their motherland. We regret to note that the successive Governments and the State Bank of Pakistan betrayed the above trust reposed by the foreign currency account holders. We would have no hesitation in directing the Federation to honour the above solemn assurance of the Legislature contained in subsection (4) of section 5 and section 10 of Act XII of 1992, but since such a judgment will not be executable for want and paucity of foreign exchange reserves of the country, we have not ordered so. However, we have made every effort to extend maximum benefits to the foreign currency account holders in the present situation. We may point out that at present there are three options available to the foreign currency account holders, namely: (i) Under F.E. Circular No. 8 issued by the State Bank of Pakistan on 19-5-1999, the State Bank has abolished multiple exchange rate system and has introduced the floating inter bank rate the relevant para. of the above Circular reads as follows: "

2. Introduction of a Unitary Rate System.--It has been decided to replace the above system by a market based unified exchange rate system with effect from May 19, 1999. For the purpose, the 'Official' exchange rate has been abolished and the 'floating inter-bank' rate shall apply to all foreign exchange receipts and payments both in public and in private sectors. Thus, effective from the above date, the country has adopted a market based unitary exchange rate system. " The above circular has also brought in a number of other improvements inasmuch as it abolished the system of surrender of foreign exchange by the banking companies to the State Bank and thereby ensuring that the foreign currency deposits of the account holders will not be touched by the State Bank or by the State through the State Bank. It has also provided that the spread between the spot buying and selling rate should not exceed Rs.0.50 per L'S $. In this view of the matter, it is now open to a foreign currency account holder to convert its foreign currency holdings into Pak Rupees at the floating ;-t-r-hank rate. (ii) That the foreign currency account holders can purchase special US Dollar Bonds in the denomination of $100, $1,000, $10,000, $1,00,000 for a period of 3 years, 5 years and 7 years from the date of issue under the special US Dollar Bonds Rules, 1998, in which profit shall be payable on completion of every six months in US Dollars which would be remittable. (iii) That the foreign currency account holders can retain their foreign currency account deposits and may earn interest/profit thereon in foreign currency as per original arrangement between them and their respective banks, which they can utilise in Pakistan or can remit the same abroad as per our short order. We have provided the above relief to the foreign currency account holders as there was no rationale in denial of the above benefit to them when the same was available to those foreign currency account holders, who have converted their deposits into the above Special US Dollar Bonds.

30. Besides the above options available to the foreign currency account holders. we have also directed in our short order reproduced hereinabove that in order to restore the confidence of the existing/prospective foreign currency account holders the Federation/ State Bank of Pakistan shall evolve a scheme within a reasonable period keeping in view the foreign exchange position of the country for gradual removal of restrictions on operation of foreign currency accounts imposed by section 2 of the Act and that in any case in every annual budget a reasonable provision in this regard shall be made. The above direction 5, is issued on the premise that the above legislative assurance contained in section 5(4) of Act XII of 1992 was binding on the State and the State Bank of Pakistan.

31. We may again point out that the directions contained in para. 28(4)(5) 'of Mian Allah Nawaz, J.'s opinion have not been concurred with by the other' two learned Judges and, therefore, the same are not part of the judgment of the High Court. Furthermore, the above directions could not have been granted. It may be observed that the deposits of foreign currency account holders could not have been ordered to be treated as a fixed account for a period of three years without the consent of all the foreign currency account holders. Nor direction could have been issued that two classes of economy envisaged by Act XII of 1992 be eliminated. The latter Act is a device to attract foreign investments, which is in line with the modern concept of economic development. Additionally in Civil Appeals Nos.320 and 321 of 1999, which have been disposed of by us on 9-6-1999 at Karachi, we have nullified the above direction contained in sub-para, (5) of para.28 of the above opinion of Mian Allah Nawaz. J., by holding as follows "

5. Ch. Muhammad Farooq, learned Attorney-General points out that the above declaration is contained in the opinion recorded by one of the learned Judges, namely, Mian Allah Nawaz, J. and that the two other learned Judges have not concurred with the above declaration. Be that as it may, he further submits that the Government has no intention to amend the above Act XII of 1992. In this view of the matter the above appeals acre disposed of with' the clarification that the above declaration is not part of the judgment and is not to be implemented. "

32. The above Civil Appeal, Constitution Petitions and Civil Petitions for Leave to Appeal are disposed of in terms of the short order quoted hereinabove in para. 1, which is to be read as a part of this judgment. M.B.A./F-56/S Order accordingly.