Financial institution

2023 CLD 655 LAHORE-HIGH-COURT-LAHORE Judicial Precedent

S. 2(a)Financial institutionScope

Word "branches" mentioned in S. 2(a) means a branch from where the suit is to be filed before the Banking Court having jurisdiction to entertain it.

2023 CLD 655 LAHORE-HIGH-COURT-LAHORE Judicial Precedent

Ss. 2(a) & 9Financial institutionProcedure of Banking CourtsLeave to defendScope

As S. 2(a) read with S. 9(5) mentions branch offices, the amount of finance availed, carrying on or transaction of business, therefore, the statement of account being sent to the defendant at his address would also be taken into consideration while deciding the leave to defend.

2023 CLD 655 LAHORE-HIGH-COURT-LAHORE Judicial Precedent

Ss. 2(a), 5 & 9Financial institutionEstablishment of Banking CourtProcedure of Banking CourtsScope

Section 9(1) stipulates the term 'Branch Manager', which, when read in conjunction with S. 2(a), implies that the suit is to be filed by the aforementioned Branch Manager in accordance with Ss. 9(2) & 9(3)

Suit should demonstrate the amount availed by the defendant, the amount paid by the defendant to the financial institution, and other finance-related amounts payable by the defendant

If the wording of S. 9 is read in conjunction with S. 5, it becomes clear that the Banking Court is established to exercise its jurisdiction under the Financial Institutions (Recovery of Finances) Ordinance, 2001.

2023 CLD 655 LAHORE-HIGH-COURT-LAHORE Judicial Precedent

Ss. 2(a), 2(b), 2(c), 2(d), 4, 5, 7 & 9Financial institutionBanking CourtCustomerFinanceOrdinance to override other lawsPowers of Banking CourtProcedure of Banking CourtsScope

Section 2(b) defines the Banking Court, in respect of a case; (i) in which the claim does not exceed hundred million rupees, and for the trial of offences under the Ordinance, in terms of S. 2(b)(i); (ii) means, a court established under section 5, and in respect of any other case, the High Court

While S. 5 enables the Federal Government to establish Banking Courts to exercise jurisdiction under the Ordinance

Being creature of the statute, the Banking Courts drive powers/jurisdiction under S. 7

Banking Courts, in exercise of its civil jurisdiction, shall have all powers otherwise available to a Civil Court under the Code of Civil Procedure, 1908

By virtue of the said provision, the Banking Court is bound to follow the procedure as provided in the Financial Institutions (Recovery of Finances) Ordinance, 2001, however where it is silent, the procedure provided in the C.P.C. shall apply

Pertinently, the Banking Courts are creatures of statute and they derive their powers/jurisdiction from S. 7(4) read with Ss. 9(1), 2(a), 2(c), 2(d), 2(e) & 4 of the Financial Institutions (Recovery of Finances) Ordinance, 2001 and where the Ordinance does not prescribe a particular procedure with respect to a matter, the proceedings under the Ordinance are to be governed by the C.P.C.

2017 PCrLJ 428 PESHAWAR-HIGH-COURT Judicial Precedent

S. 3Criminal Procedure Code (V of 1898), Ss. 561-A, 523 & 550Finance facility extended to customer by Financial InstitutionDefaultSeizure of vehicle by Financial InstitutionValidityCriminal and civil proceedings against the defaulter

Financial institution may proceed against the defaulter/customer in competent court of law for civil or criminal proceeding subject to any civil or criminal liability that the customer may incur under the contract or rules or any other law for the time being in force

Petitioner/Financial institution instead of invoking the jurisdiction of Banking Court opted to initiate criminal proceeding in term of Ss. 523/550 of Cr.P.C.

Quashment petition was disposed of by handing over the vehicle to the customer accordingly.

2015 PLD 249 LAHORE-HIGH-COURT-LAHORE Judicial Precedent

S. 489-FFinancial Institutions (Recovery of Finances) Ordinance (XLVI of 2001) S.2(a)Constitution of Pakistan, Art. 199Constitutional petition"Financial institution"Scope

Petitioner's NGO availed loan from Punjab Health Foundation, and subsequently, on dishonoring of cheque's issued by petitioner, order for registration of F.I.R. against petitioner under S.489-F was issued

Held, that although the Punjab Health Foundation did not come within the purview of the "financial institution" as provided in the Financial Institutions (Recovery of Finances) Ordinance 2001, but being an organization empowered to extend loans, it could be equated with the status of a "Financial Institution"

Provisions of S.489-F of the Penal Code, 1860 could not be attracted where loans were protected by mortgage, warranties, and covenants with regard to ownership, mortgage, pledge, hypothecation or in terms of other purchase on assets of property and financial institutions could only recover the amount by adopting a proper process under any such mode

Loan issued by the respondent in favour of the petitioner, in the present case, had been secured through a mortgage deed and in case of default by the petitioner, mode of recovery had been provided in the agreement between the parties, whereby respondent may issue show-cause notice to the borrower/petitioner to pay the loan along with penalty including sale of mortgaged property and recovery of arrears of land revenue

In presence of said agreement, the respondent was not competent to resort to provisions of S.489-F of the Penal Code, 1860

Order for registration of F.I.R. against petitioner was set aside

Constitutional petition was allowed, accordingly.

2014 CLD 390 LAHORE-HIGH-COURT-LAHORE Judicial Precedent

S. 7(2) & PreambleProcedure to be followed by the Banking CourtScope

Financial Institutions (Recovery of Finances) Ordinance, 2001 was a special law enacted for the resolution of disputes between the customer and Financial Institution

Courts established under the Ordinance were having the jurisdiction of civil and criminal courts

Banking Court would follow the procedure as laid down in the Civil Procedure Code, 1908 where same had not been provided in the Financial Institutions (Recovery of Finances) Ordinance, 2001

Provisions of Criminal Procedure Code, 1898 would be applicable in criminal jurisdiction if special procedure was not available under the Ordinance.

2013 CLD 439 KARACHI-HIGH-COURT-SINDH Judicial Precedent

Ss 2(a), 2(c), 10Suit for recovery"Provider of finance"Financial InstitutionScopePlaintiff had acquired "Sukuk" certificates issued by the defendants

Said "Sukuk" certificates had been originally allotted to another institution and were subsequently traded in the financial market and the plaintiff acquired the said "Sukuk" certificates in good faith

When the original allottee did not receive the "rental payment" against said certificates; it contacted the defendants and contended that it had never transferred said "Sukuk" certificates

Plaintiff's title to the certificates, therefore, led back to an elaborate swindle

Plaintiff contended that the transaction embodied in the "Sukuk" certificates was "finance" within meaning of the Financial Institutions (Recovery of Finances) Ordinance, 2001 and the defendants, who had issued the said certificates, were "customers" within the meaning of the Ordinance, and therefore the suit for recovery was maintainable

Validity

Question to be determined was whether the plaintiff on acquisition of said "Sukuk" certificates became a financial institution that had provided finance to the defendants within the meaning of the Financial Institutions (Recovery of Finances) Ordinance, 2001; there was a distinction to be drawn between a person who was a provider of finance and someone who was a holder of debt

Provider of finance, if it was financial institution, as defined in S.2(a) of the Ordinance, was entitled to bring a suit under the Ordinance but a mere holder of debt, however, even if the same was a financial institution, may or may not be able to do so

Every provider of finance within the meaning of the Ordinance was also a holder of debt, but every holder of debt was not necessarily a provider of finance within the meaning of the Ordinance

For the Financial Institutions (Recovery of Finances) Ordinance, 2001 to apply it was crucial that the finance should originally have been provided by the financial institution

Crucial element in the definition of "customer" was the origination of the finance that was being sued upon and whether or not it was extended by a financial institution

Even if the finance was held at the time of default by a financial institution, it was merely a holder of debt and was therefore, in such capacity, not entitled to bring a suit under the Financial Institutions (Recovery of Finances) Ordinance, 2001

Suit being not maintainable, was dismissed, in circumstances.

2012 PTD 1593 INLAND REVENUE APPELLATE TRIBUNAL OF PAKISTAN Judicial Precedent

S.122 (5A)Amendment of assessmentFinancial institutionFinancial assistance or qarz-e-hasana was treated as "income from other sources" instead of business incomeAmendment of assessment on the basis of contentious pointsValidity

Taxation Officer, after examining the statements of accounts filed with the return, had entered into a futile exercise based on whims and wishful thinking, without studying the legal basis of his actions

Taxation Officer resorted to action under S.122(5A) of the Income Tax Ordinance, 2001 on the basis of contentious points; and wanted to fish out (evolve) some basis to justify his intended action; and failed to take guidance from various judgments of higher judiciary

First Appellate Authority also failed to thoroughly go through the facts and the case-law brought to his notice by the taxpayer and had passed a stereotyped order based on the wisdom of the Taxation Officer

Taxpayer for tax year 2006 had filed a revised return showing income

Although Taxation Officer had mentioned this fact in notice under S.122(9) of the Income Tax Ordinance, 2001 as well as in opening paragraph of amended order, yet he finalized the order determining loss as declared by the tax payer in his original return and First Appellate Authority had affixed stamp of his approval to such a factually mistaken order seen from whatever angle, neither the receipts categorized as "financial assistance" or 'qarz-e-hasana constituted income from other sources nor the taxpayer could be denied the benefit of set off of brought forward business loss against such income

Neither the amended order nor the order of First Appellate Authority could be approved

Notices for intimation of proceedings under S.122(5A) of the Income Tax Ordinance, 2001 for all the years were void ab-initio and of no legal effect

Proceedings initiated on the basis of illegal notices and the superstructure raised thereon was nullity in law

Order of First Appellate Authority was vacated and amended order passed by the Taxation Officer were annulled by the Appellate Tribunal.