P L D 1988 Karachi 28 (PLP)

AJMAL MIAN, J.‑‑ Since the above three appeals are directed against a common order dated 24‑4‑1983 passed upon C.M.A. No. 104 of 1970 and C.M.A. No. 105 of 1970 in J. Misc. Application No.35 of 1968, declaring that the respondent is entitled to repayment of Rs.10,00,000 advanced on 10‑4‑1968 and a sum of Rs.5,00,000 out of sum of Rs.14,82,492.72 advanced' on 14‑4‑1968 under section 18(2) of the State Bank of Pakistan Act, 1956, (hereinafter referred to as the Act), as first charge on the assets of M/s National Commercial Bank Ltd. a Bank in liquidation (hereinafter referred to as the Bank in liquidation). The appellants being aggrieved by the above order have filed the above appeals. It may be observed that in High Court Appeal No.29 of 1983, Pakistan Agricultural Research Council, Government of Pakistan is the appellant, which had lodged a claim of Rs.74,61,156.32 on 29‑6‑1968 in respect of fixed deposits against bank in liquidation through the Official Liquidator and had opposed the respondent's aforesaid Civil Misc. Applications, in pursuance of which the order' under appeal has been passed, the appellant in High Court Appeal No.34 of 1983 is the Bank in liquidation through the Official Liquidator and the appellant in High Court Appeal No.56 of 1983 is the State Bank of Pakistan (hereinafter referred to as the State Bank), which is the respondent in above first two appeals and which had claimed first charge against the assets of the bank in liquidation in respect of the total amount of Rs.24,82,492.72 but were allowed the first charge of the amount of Rs.15,00,000 only and, therefore, it is aggrieved by the portion of the order disallowing 'the first charge of a sum of Rs.9,82,492.72.

2. In support of H.C.A. No.29 of 1983, Mr. A.R. Akhtar, learned counsel for the appellant has urged as follows: (i) That since the State Bank had granted the alleged advances in breach of the provisions of the Act, it could not have claimed first charge in respect thereof under section 18 of the Act. (ii) That since the alleged first charge was not registered in terms of section 109 of the Companies Act, 1913, the learned Single Judge should not have accepted the above first charge. (iii) That since the above advances were given within three months prior to the filing of the petition for winding up of the bank in liquidation, the State Bank could not have claimed the first charge. (ii) That though resolution for grant of advances was passed on 2‑1‑1967 but the advances were given after 14 months without adverting to the question whether circumstances existed to warrant the above grant of the advances after the expiry of 14 months. (iii) That under section 18 the State Bank could not have advanced loan to the bank in liquidation unless the circumstances so warranted and as the circumstances did not warrant, the same should not have been advanced. (iv) That the burden of proof was on the State Bank to have proved that the circumstances of the bank in liquidation warranted the grant of the above advances which it had failed to discharge, particularly in view of the fact that ‑the State Bank refused to produce the record by claiming privilege.

4. Mr. Abdul Majeed Khan, learned counsel for the State Bank in reply to the above submissions and in support of his Appeal No.56 of 1983 has submitted as under: (i) That section 18 of the Act overrides the other provisions of the Act and other laws and, therefore, there was no violation of any provision of the Act or any other law. (ii) That under section 18 of the Act the question that if circumstances so warrant is to be determined by the Central Board of the State Bank or by the Governor of the State Bank subjectively and in the absence of any mala fide, the Court will not interfere with the above subjective satisfaction. (iii) That under section 46‑A of the Act the State Bank in entitled to refuse to produce any unpublished record of the State Bank before a Court or Tribunal or other authority and, therefore, by doing so, it has not acted illegally. (iv) That since the factum that the State Bank had given the aforesaid advances was not even denied, the learned Single Judge in view of the Certificates of the Governor of State Bank should have allowed the first charge in respect of the entire amount and not in respect of a portion thereof. That the High Court Appeal No.34 of 1983 is not competent as bank in liquidation cannot file an appeal after having utilised the two advances in question.

5. Mr. A.R. Akhtar in furtherance of his above submissions has referred to section 17 of the Act in order to re‑enforce his submission that the advances in question were given in violation of the above provisions inasmuch as the above section does not provide for grant of advances against the securities of the nature accepted by the State Bank against the advances in question, it may be observed that subsection (1) of section 18 of the Act expressly excludes the application of the provisions of section 17 containing the restrictions relied upon by the learned counsel for the appellants by providing notwithstanding any limitation contained in sub‑clauses (a) and (b) of subsection (2) or sub‑clauses (a) and (b) of clause (3) or clause (4) of section

17. Additionally, clause (b) of subsection (1) of section 18 expressly provides that the State Bank may advance loan to a banking company against such other form of security as the Bank may consider sufficient. The other two submissions of Mr. A.R. Akhtar namely the non ‑ registration of the charge in terms of section 109 of the Companies Act, 1913 and the giving of the advances within 3 months prior to the filing of the petition for liquidation, it may be observed that the above provisions are not attracted to as the first charge has been created by virtue of subsection (2) of section 18 of the Act and the application of section 230 of the Companies Act has been expressly excluded by subsection (1) of section 18 of the Act.

6. Adverting to the above first three submissions of Mr. J.H. Rahimtoola, it may be pertinent to reproduce section 18 of the Act which reads as follows:‑ "Section

18. Power of direct discount.‑‑ (1) Notwithstanding the provisions of section 230 of the Companies Act, 1913 (VII of 1913), and section 58 of the Banking Companies Ordinance, 1962 (LVII of 1962) where in the opinion of the Central Board or of the Governor, circumstances so warrant, the Bank may, notwithstanding any limitation contained in sub‑clauses (a) and (b) of subsection (2) or sub‑clauses (a) and (b) of clause (3) or clause (4) of section 17:‑ (a) purchase, sell or discount any of the bills of exchange or promissory note specified in sub‑clauses (a) or sub‑clause (b) of (clause) (2) or (sub‑clause) (b) of (clause) (3) of section 17, though such bill or promissory note does not bear the signature of a scheduled bank; or (b) make advances of loans repayable on demand or on expiry of fixed periods not exceeding (one hundred and eighty days) against the various forms of security specified in (clause) (4) of section 17 or against the Security of goods or when the advance loan is made to a banking company against such other form of security as the Bank may consider sufficient. (2) Where a banking company, to which an advance or loan has been made under the provisions of (clause) (b) of subsection (1) of this section is wound up, any sums due to the Bank in respect of such advance. or loan shall subject only to the claims, if any, of any other banking company in respect of any period claim or advance made by such banking company against any security, be a first charge on the assets of the banking company." A persual of the above quoted section, indicates that notwith standing the provisions of section 230 of the Companies Act, 1913 and section 58 of the Banking Companies Ordinance, 1962 where in the opinion of the Central Board or of the Governor, circumstances so warrant, the State Bank may notwithstanding any limitation contained in sub‑clauses (a) and (b) of subsection (2) or sub‑clauses (a) and (b) of clause (3) or clause (4) of section 17 inter alia give advances or loans repayable on demand or on the expiry of fixed period not exceeding 180 days against various forms of securities specified in clause (4) of section 17 or against the security of goods or when the advance loan is made to a Banking Company against such other form of security as the bank may consider sufficient. It may also be noticed that under subsection (2) of above quoted section 18 it has been provided where a banking company, to which an advance or loan has been made under the provision of (clause) (b) of subsection (1) of this section is wound up, any sums due to the Bank in respect of such advance or loan shall subject only to the claims, if any, any other banking company in respect of any prior claim or advance made by such banking company against any security, be first charge on the assets of the banking company.

7. In our view the question whether circumstances so warranted as to justify the grant of advance or loan in terms of subsection (1), of section 18 is a matter of subjective satisfaction of the Central Board or of the Governor of the State Bank and in the absence of any material as to show lack of good faith, the Court will not be justified in constituting itself as an appellate authority to enquire into the sufficiency of the circumstances while deciding the question of first charge under subsection (2) of section 18 of the Act. In the instant case none has brought any material, on record to indicate that the above advances were given by the State Bank for any mala fide reason. On the contrary, it is an admitted position that the above advances were given as per para 15 of the winding up petition, as the bank in liquidation failed to pay its clearing houses dues on 10‑4‑1968 of Rs.10,00,000 and again on 12‑4‑1968 of Rs. 14,82,492.72. The submissions made by the learned counsel for the two appellants in the first two appeals are in fact based on surmises and conjectures and not founded on material on record.

8. This leads us to the question, whether the State Bank has discharged the burden of proving that factually the above two advances were given under section 18 of the Act by producing the evidence on record. Mr. Rahimtoola has vehemently urged that the State Bank could not have claimed privilege against the production of the record as they were the claimants and were claiming first charge on the asset of the bank in liquidation and since they had claimed the privilege against the production of the record, their claim should have been dismissed, whereas Mr. Abdul Majeed Khan has relied upon section 46‑A of the Act which reads as follows:‑ S. 46‑ A." Production of unpublished record of Bank, etc.‑‑(l) No Court, Tribunal or other authority shall be entitled to compel the Bank or any person in the service of the Bank to produce, or, as the case may be give any unpublished record of the Bank. (2) No. Court, tribunal or other authority shall permit any one to produce or give evidence derived from, any unpublished record of the bank, except with the prior permission in writing of the Governor who may give or withhold such permission as he thinks fit. (3) Notwithstanding anything, contained in this Act or any other law for the time being in force, a report prepared by the Bank on a banking company under section 40 of the Banking Companies Ordinance, 1962 (LVII of 1962), shall be deemed to be unpublished for the purposes of subsections (1) and (2) even if a copy of such report has been supplied to the banking company to which' the report pertains or to the Federal Government or to the Pakistan Banking Council constituted under section 9 of the Banks (Nationalisation) Act, 1974 (Act XIX of 1974).11 A plain reading of the above section indicates that no Court, Tribunal or other authority is entitled to compel the Bank or and person in the service of the Bank to produce, or as the case may be, give any unpublished record of the Bank, nor any Court, tribunal or other authority shall permit anyone to produce or give evidence derived from, any 'unpublished record of the Bank, except with the prior permission in writing of the Governor who may give or withhold such permission as he thinks fit. It may further be noticed that a report prepared by the bank on a banking‑ company under section 401 of the Banking Companies Ordinance, 1962 is to be deemed to be unpublished for the purposes of subsections (1) and (2) of the above quoted section even if a copy of such report has been supplied to the banking company to which the report pertains or to the Federal Government or to the Pakistan Banking Council under section 9 of the Banks (Nationalisation) Act, 1974, notwithstanding anything. contained in the Act or in any other law.

9. Mr. J.H. Rahimtoola has relied upon following observations from the well known book, namely, "Principles and Digest of the Law of Evidence" by M. Monir, Volume 11 page 1384: "Privileged State documents cannot be proved by secondary evidence.‑ As unpublished official records are protected from disclosure, it follows that secondary evidence of their contents also is inadmissible. Where therefore a complaint, or an action, is founded on a privileged document, the complaint or action must fail, as the document, being privileged, cannot be proved either by primary evidence or by secondary evidence." He has also referred to the following cases: (i) Abdul Razak v. Gauri Nath, Indian Cases, Vol. V, 1910, page 714, in which a Division Bench held that where a complaint is based on some official communication, oral or in writing, failing within the scope of section 123, section 124 or section 125 of the Evidence Act, and there is no likelihood of proving the communication by primary or direct evidence, the Magistrate is Justified in dismissing the complaint under section 203, Criminal Procedure Code. 0i) Jehangir M. Cursetji v. The Secretary of State for India In Council, reported in The Indian Law Reports Bombay, Volume 27, 1903 at page

189. In the above case a learned Single Judge of the Bombay High Court held that the resolution complained of by the plaintiff being an official communication was absolutely privileged. It could not be put in evidence or produced in Court and no secondary evidence of it could be given and, therefore, no action could be based on any libel, however malicious, contained in the resolution. Whereas Mr. Abdul Majeed Khan has referred to the case of The Premier Bank Ltd. Karachi v. Mohammad Abdul Qasim and another, reported in PLD 1973 Karachi 509, in which a Division Bench of the erstwhile High Court of Sind and Baluchistan while construing section 123 of the Evidence Act and section 46 (2) of the State Bank of Pakistan Act (XXXIII of 1956) held that the expression "affairs of the State Bank" means in its ordinary sense, all matters relating to business of the State Bank under the Act and that the said expression cannot be extended to include all matters relating to affairs of other banking companies.

10. We may observe that the above quoted section 46‑A was added in the Act by Ordinance No.16 of 1981. The object of the above section seems to be to provide protection from the production off unpublished record as defined in the above section in order to maintain the secrecy of the financial matters and to avert the harassment and embarrassment to the State Bank and to the other banking companies to which the unpublished record may relate in terms of the above section. However, the above quoted section does not absolve the State Bank from proving a fact which it is supposed to prove in a legal proceeding as a claimant or plaintiff. The effect of the above quoted section will be that the State Bank instead of producing the original of the unpublished record will have to produce a certificate or attested copy of the relevant portion of the record, which will prove the fact in issue. In the instant case the State Bank had not produced any document to indicate that the two advances were given under section 18 of the Act and had claimed privilege but upon the direction of the learned Single Judge has produced two certificates dated 26‑2‑1983 and 17‑4‑1983 which read as follows: "State Bank of Pakistan GOVERNOR KARACHI 26th February, 1983, CERTIFICATE I have personally examined the minutes of the meetings of the Executive Committee of the Central Board of State Bank of Pakistan and hereby certify that at its meeting held at Karachi on the 2nd January 1967, the Executive Committee approved of an advance of Rs.15 lacs being made to National Commercial Bank Ltd. under section 18 of the State Bank of Pakistan Act, 1956. A copy‑ of the Resolution passed by the Committee in this behalf is reproduced below: RESOLVED: That Rs.15 lacs be advanced to the National Commercial Bank Ltd. under section 18 of the State Bank of Pakistan Act against satisfactory title deeds. Sd/- (A.G.N,. KAZI) GOVERNOR" State Bank of Pakistan A. G. N. KAZI GOVERNOR KARACHI April 17, 1983. CERTIFICATE It is certified that the Governor State Bank of Pakistan had confirmed under his signature in his own hand on 18‑8‑1969 the grant of the advance of Rs.14,82,492 to National Commercial Bank Ltd. under section 18 (i) (b) of the State Bank of Pakistan Act, 1956. Sd/‑ (A.G.N. Kazi) Governor

11. It has been contended by M/s J.M. Rahimtoola as well as A.R. Akhtar that the learned Single Judge should not have accepted the above certificates as the State Bank had refused to produce the record and, therefore, the State Bank's application for claiming first. charge and the other application for restraining the official liquidator from making payment to any other person of the amount in respect of which first charge was claimed, should have been dismissed. We may observe that the question of burden of proof remains alive till the time the evidence is recorded. However, once the evidence comes on record, whether through a plaintiff or a defendant or through the court‑witness, the question of burden of proof is whittled down. F In the present case though the above two certificates were brought on record in pursuance of the order of the learned Single Judge but they had become part of the evidence on record and, therefore, I could have been referred to by the parties. The above quoted first certificate indicates that there was a resolution of the Central Board of the State Bank according approval for grant of an advance of Rs.15 lacs. The resolution has been reproduced by the Governor in his above quoted certificate dated 26‑2‑1983, whereas the second certificate does not reproduce any resolution of the Central Board of the State Bank but certifies the factum that the Governor in his own hand on 18‑8‑1969 approved the grant of advance of Rs.14,82,492 under section 18 (1) (b). The learned Single Judge has discarded the second certificate inter alia on the ground that the alleged approval was given after the filing of the petition for winding up which was filed on 24‑5‑1968. As observed herein above that the first certificate has reproduced the resolution of the Central Board of the State Bank in verbatim, the correctness of which has been certified by the Governor. It is also supported by an affidavit of one Mohammad Muniruddin, an official of the State Bank. Thus the learned Single Judge could have relied upon the above pieces of evidence and could have allowed the first charge to the extent of Rs.15 lacs. The order under appeal is, therefore, in consonance with law.

12. We may now take up the submission of Mr. Abdul Majeed Khan that the bank in liquidation through official liquidator has no locus standi to file the above H.C.A. No. 34 of 1983. It may be observed that Mr. Abdul Majeed Khan in furtherance of his above submission has pointed opt that the question, whether the State Bank is entitled to the first charge of its above two advances is a dispute inter se between the creditors and to which dispute the bank in liquidation of the official liquidator has nothing to do. Whereas Mr. J.H. Rahimtoola has contended that the official liquidator in fact also represents the interest of the creditors and hence he could have filed the above appeal in the name of the bank in liquidation. In our view, since the, official liquidator also represents the interest of creditors till the time of the distribution of the assets of a company under liquidation, he could have filed the above appeal.

13. For the aforesaid reasons, we are of the view, that the order under appeal seems to be in consonance with law and, therefore, the above three appeals, are dismissed, but there will be no order as to, costs. A. A /P 37/K Appeal dismissed