1994 P Cr (PLP)

Accused Naseer Turabi in his statement admitted that he was Director of Messrs Overseas Pak Credit and Investment Corporation (Pvt.) Limited till 19th September, 1984. He denied having any knowledge of advertisement particularly, dated 10-7-1987 published in Daily "Jang", Karachi inviting deposits of money from the public in contravention of section 27-A of the Banking Companies Ordinance, 1962. He further stated that because his resignation was not forwarded by the company to the Registrar till 1987, and his name continued in the list of Directors, he was involved in this case. Accused Nusrat Azeem and Muhammad Iqbal stated that they had resigned from Directorship and their resignations were accepted much before the alleged publication in the newspaper and their involvement in the case was malicious. Accused Mrs. Farhat Najam and Mrs. Asifa Perwez in their statements, stated that they were housewives and did not participate in the business of company and they were involved because their names were shown as Directors. They also stated that they agreed to become the Directors because of their father-in-law Mr. Inam Durani but otherwise they had no concern with the company. None of the accused examined themselves under section 340(2), Cr.P.C. nor they had any defence. The points for my determination are as follows: -- (a) Whether the State Bank of Pakistan had reason to believe that the accused were indulging in illegal business of banking? (b) What offence if any is committed by each or all accused? My findings on the points with reasons are as follows:-- in N.1 P.W.2 Saeed Haider Bhatti, Deputy Director, Banking Control Department, produced certificate of incorporation of accused company Exh.11, Memorandum of Association Exh.12 and copies of Forms XII and XXIX Exh.13 and Exh.14, copy of notice served by State Bank of Pakistan on accused No.l Exh.15, reply notice received from Company Exh.16, copy of letter issued by Deputy Registrar, Corporate Law Authority, dated 2-8-1984 addressed to the accused Exh.17 and two letters, dated 6-4-1987 and 18-6-1987 sent by the accused to the State Bank of Pakistan Exhs.18 and

19. Exh.11 is the certificate of incorporation issued by the Assistant Registrar, Joint Stock Companies, Karachi certifying that Overseas Pak Credit and Investment Corporation (Pvt.) Limited was registered under the Companies Act, 1913 and that the company is limited by shares as a private Modaraba Company. Exh.12 is the Memorandum of Association of Overseas Pak Credit and Investment Corporation (Pvt.) Limited wherein the objects for which the company is established are given. The Object No.23 of said Company was: -- "To borrow money arid to secure re-payment of any money borrowed or owing, by mortgage, charge or lien upon all or any of the property or assets of the company (both present and future), including the uncalled capital and also by similar mortgage, charge or lien to secure and guarantee the performance by the company or any other person or company or any obligation undertaken by the company or any other person or company as the case may be." Exhs.13 and 14 are Form XU and XXIX, giving the names of Directors, their addresses and other particulars. All accused are named as the Directors and full particulars of the accused are shown in such forms. Exh.15 is the show-cause notice, dated 31-7-1987 issued by the State Bank of Pakistan to accused Company calling upon it to show-cause why the accused be not prosecuted under section 84 read with section 27-A and subsection (1-D) of section 83 of the Banking Companies Ordinance, 1962, as the accused had invited deposits of money from the public through advertisement in daily "fang", Karachi, dated 10-7-1987. Through Exh.16, the accused No.2 Inam K. Durani replied the above show-cause notice and stated that they were "A company duly authorised in this behalf by Controller of Capital Issue and Corporate Law Authority" but since the matter is sub judice and not decided in favour of either side, they had stopped advertisement which could be objected to, earlier than publication of the public notice, dated 17-7-1987 in daily "Dawn" and "Jang". It was also stated in the reply by accused Inam Durani "that pending your favour of granting us "A No-Objection Certificate" as applied for vide our letter dated 13th July, 1987". Exh.17 is the letter, dated 2nd August, 1984 of the Deputy Registrar signed on behalf of the Government of Pakistan Corporate Law Authority wherein regrets were shown that the company could not be registered as a Modaraba Company. This intimation to the accused was sent in response to application made by the accused on 7-5-1984 for registration of Overseas Pak Credit and Investment Corporation (Pvt.) Limited under the Modaraba Companies and Modaraba (Floatation and Control) Ordinance, 1980. It was also stated that satisfactory evidence for holding that it would be in the public interest to grant registration to the company had not been forthcoming. Exh.18 is a letter, dated 6th April, 1987, addressed by accused Inam Durani to the Senior Deputy Director, Central Directorate, State Bank of Pakistan, Karachi, wherein it was mentioned that the company of the accused was a private Modaraba Company and had not only paid regular profits to their investors, but also guarded their interest by making solid and sound investments. It was also stated that the accused had financed business of an Advertising Agency to earn 7-1/2% commission of monthly billings. Exh.19 is the letter addressed by accused Inam Durani, Managing Director to the Governor, State Bank of Pakistan, Karachi, which is a reply to the show-cause notice and the concluding para. of the said letter reads as under:-- "We would submit that our company is not hit by the provisions of section 27 of the Banking Companies Ordinance, 1962 and any step taken by the State Bank under section 43-B(1) of the Ordinance would be illegal, unlawful and void ab initio." P.W.1 Jamil Ahmad, Senior Assistant in Daily "Jang" stated that "Shape Advertising" was the authorised agency of Daily "Jang" and it had sent classified advertisement for publication through letter Exh.2. Said advertisement was published up to 11-7-1987 and thereafter it was got cancelled. He also produced copy of Daily "Jang", dated 9-7-1987 and original Daily "Jang", dated 10-7-1987 Exhs.7 and 8 which clearly indicate that the accused Overseas Pak Credit and Investment Corporation (Pvt.) Limited invited investments from the public and in particular retired persons and housewives. Exh.7 is an advertisement, dated 9-7-1987 and Exh.8 is also an advertisement, dated 10-7-1987, both of which appeared in Daily "Jang", Karachi. The evidence brought on record by the prosecution is covered by the provisions of sections 27 and 27-A of the Banking Companies Ordinance, 1962, which read as under: - "

27. Licensing of Banking Companies.

(1) No individual or association or body of individuals, not being a company, shall carry on banking business in Pakistan and, save as hereinafter provided, no company shall carry on banking business in Pakistan unless it holds a licence issued in that behalf by the State Bank; and any such licence may be issued subject to such conditions as the State Bank may think fit to impose. 27-A. Prohibition of advertising for deposits and collection.-- Notwithstanding anything contained in any other law for the time being in force, no company, firm or person not being a banking company or a corporation or authority established by the Federal Government or a company duly authorised in this behalf by the Controller of Capital issues or the Corporate Law Authority or the Registrar, Cooperative Societies, shall solicit or invited deposits of money from the public through advertisements in the public media or by postal circulars, handbills, displays in public places or by any other means, or collect or receive any deposits of money in pursuance thereof." Explanation to section 27-A of the Ordinance reads as under:-- "Explanation.

For the purposes of this section, "deposits of money" shall be deemed to include money called invited or collected for the purpose, or declared object of investment or borrowing in any business carried on, or proposed to be carried on, by the company, firm or person by whom, or on, whose behalf, such money is called, invited, collected or received irrespective of the nature of the relationship, arrangement or terms offered or provided by such company, firm or person to the person making the investment, deposits of money or payment of the basis or understanding on which the money is so-called, invited, collected or received." The reply Exh.16 sent by the accused Inam Durani to the Governor, State Bank of Pakistan mentions, "we have stopped advertisement which could be objected to, earlier than publication of your public notice on the 17th July, 1987 in daily "Dawn" and "Jang", pending your favour of granting us "A No Objection Certificate" as applied for vide our letter, dated 13th July, 1987". The letter, dated 2nd August, 1984 was addressed on behalf of the Government of Pakistan Corporate Law Authority to the accused Inam Durani refusing to register the accused company as a Modaraba Company. The admission of accused Inam Durani in his letter Exh.18 that the company had financed business of an advertising agency to earn 7-1/2% commission on monthly billings, fully proves that the accused No.l were transacting banking business in violation of section 27-A of the Banking Companies Ordinance, 1962, which is punishable under section 83(1-C) of the Ordinance. The State Bank of Pakistan had, as such, a reason to believe that the accused were indulging in illegal business of Banking. Point No.l is, therefore, answered in affirmative. For determining Point No.2, it would be necessary to find out as to which of the accused named in the complaint were transacting banking business and inviting investments from public. Accused M.M. Bakhshi had died during the pendency of the case and order, dated 29-9-1991 about him was passed. Although Nusrat Azeem and Muhammad Iqbal are shown as accused Nos.5 and 8, it has come on record that the former resigned on 2nd September, 1986 and latter resigned on 28th April, 1986 and their resignations were duly accepted. This fact is admitted by accused Inam Durani in his statement under section 342 of Cr.P.C. during his cross-examination by the Counsel for accused Muhammad lqbal and Nusrat Azeem. Such letter was filed on behalf of accused Nusrat Azeem as Annexure "A" alongwith an application No.533/88 and Annexure~ "B"" alongwith an application 835/88 moved on behalf of accused Muhammad Iqbal. Both these accused had since resigned before the publication appeared in Daily "Jang", dated 9-7-1987 and 10-7-1987, they would not be liable for the acts of co-accused Inam Durani and case against these two accused is not proved. Accused Nos.6 and 7 Mrs. Farhat Najam and Mrs. Asifa Perwez are the daughters-in-law of accused Inam Durani and the mens rea or awareness for the wrongfulness of an act is not proved against them. Their being shown as the Directors of the company was the act of wicked mind of accused Inam Durani who did not spare even the ladies of his family to be shown as the Directors of the company although I am clear in my mind that no share out of the earnings by illegal means was to go to these two lady accused. It was nothing less than a farce and he floated the company to rob innocent investors who could be tempted to invest money for high returns. Accused Naseer Turabi has, although claimed that he had resigned as a Director of the Company, nothing has been brought on record to show that his resignation was duly accepted. Mr. Akmal Waseem, learned Advocate appearing on his behalf, during the course of arguments placed on record a photostat copy of an application moved by accused Naseer Turabi showing that he had tendered his resignation. No question in this behalf was put to accused Inam Duram when his statement under section 342 of Cr.P.C. was recorded and during which other accused were allowed to cross-examine him. He continued as a Director of the Company till the end. The case against accused Inam Durani and accused Naseer Turabi is proved beyond all reasonable doubt and they are found guilty of the offence under section 27-A of Banking Companies Ordinance, 1962, which is punishable under section 83(1-C) of the said Ordinance. As a result of discussion on Point Nos.1 and 2, I hold accused Nusrat Azeem, Muhammad Iqbal, Mrs. Farhat Najam and Mrs. Asifa Perwez as not guilty of the offence with which they are charged and acquit them. They are discharged of their bail bonds. Since the case against accused Inam K. Durani I and Naseer Turabi is duly proved I convict both of them as under:-- (a) Accused Inam K. Durani is convicted and sentenced to rising of the Court and fine of Rs.2,00,000 (Rupees two lac) or in default to undergo R.I. for one year. His being a paralytic and invalid, is taken as a mitigating circumstances, while awarding such sentence. Fine shall be paid within a period of two weeks and in case of failure to pay the fine he shall surrender before this Court to be sent to Central. Jail, Karachi. (b) Accused Naseer Turabi is sentenced to R.I. for one year and fine of Rs.1,00,000 (Rupees on lac) and in default to undergo further R.I. for six months. No orders are required to be passed in respect of M.A. Nos.1855 of 1991, 533 of 1988, 535 of 1988, 1668 of 1992 and 1444 of 1993. N.H.Q./S-1051/K Order accordingly.