Jurisdiction of Banking Court

An insurance company is not a customer under S.2(c) of the Ordinance, 2001 and the Banking Court has no jurisdiction to entertain or adjudicate upon claim against insurance company under a finance agreement

In the present case, the appraisal of documents produced in evidence by the respondent (Bank / plaintiff) clearly reflected that appellants (customers / defendants) had availed the facility-in-question

It further established that the insurance policy was duly signed by the appellant nor did the appellant point out towards any clause in such policy which could possibly put the respondent /Bank under obligation to file a claim with the insurance company of any outstanding liability of the appellant in case of default

Even if such a clause did exist, the right of the Bank to claim the outstanding liability against its customer was duly protected under the Ordinance, 2001

The insurance policy was obtained in the name of the company of the appellant No.1 and the entire insurance policy documents were singed and the premium was also paid by the appellants

As per clause of insurance in the sanction advice it was the condition precedent that all the assets of the company and/or personal properties of the partners/directors be charged with the Bank as security for the payment/obligations of company until the facility was fully settled and the assets shall be insured with an insurance company acceptable to the Bank

However, such insurance was meant to cover the risks of fire

Notably, such insurance policy had been assigned in favour of respondent / Bank but nothing had been mentioned in the finance facility about the extinguishment of the liability of the appellants towards Bank on account of any loss, whether it was insured or not

Appellants had also failed to point out any such condition, either in the sanction or in the terms and conditions of the insurance policy which absolved them from discharging their liability of payment of outstanding amount to the respondent / Bank

In the circumstances it appeared that the condition of insurance of hypothecated stock goods was imposed only to doubly secure the liabilities of the Bank in addition to the execution of other security documents including the mortgage deed of the properties against the finance facility provided by the respondent / Bank

Appeal filed by customer / defendants, being merit less, was dismissed, in circumstances.

Appellants/defendants were aggrieved of ex-parte judgment and decree passed by Banking Court during pendency of application for leave to appear in suit due to non-prosecution

Validity

Once leave application was filed then Banking Court was under legal duty to consider the same regardless of non-appearance of appellants/defendants and their counsel

Banking Court under S. 10(8) of Financial Institutions (Recovery of Finances) Ordinance, 2001, was required to read contents of plaint, application for leave to defend the suit, replication and then to determine whether any question of law and fact was raised, which needed recording of evidence

Powers were bestowed upon Banking Court under S. 10(9) of Financial Institutions (Recovery of Finances) Ordinance, 2001, to grant conditional or unconditional leave to appellants/defendants

Banking Court under S. 10(11) of Financial Institutions (Recovery of Finances) Ordinance, 2001, was empowered to reject leave application if it had not fulfilled conditions for grant of leave and thereafter could decreed the suit forthwith

Banking Court was required to consider and decide leave application on merits and there was no other choice left with Banking Court and could not dismiss leave application for non-prosecution

No such power was conferred upon Banking Court under Financial Institutions (Recovery of Finances) Ordinance, 2001

Proceeding otherwise than the Financial Institutions (Recovery of Finances) Ordinance, 2001, would defeat the intent of legislature

Dismissal of leave application due to non-prosecution was without jurisdiction and patently illegal

Inherent jurisdiction of Banking Court was not ousted by S. 27 of Financial Institutions (Recovery of Finances) Ordinance, 2001

There was no specific provision available in Financial Institutions (Recovery of Finances) Ordinance, 2001, debarring application under O. IX, R. 9, C.P.C. or application under S. 12(2), C.P.C.

High Court set aside ex-parte judgment and decree passed against appellants/defendants and remanded the matter to Banking Court for decision on merits

Appeal was allowed accordingly.

Registration of FIR by police was unwarranted and uncalled for as the alleged offence could only be tried by the Banking Court constituted under the provisions of Financial Institutions (Recovery of Finances) Ordinance, 2001

Action could only be taken by an Investigating Agency nominated by Federal Government on a complaint in writing moved by authorised officer of a financial institution

Local police had no authority to register a criminal case in the matters between a Bank and its customers

Constitutional petition was allowed, in circumstances.

Complainant, a company deputed by Bank to safeguard pledged stock, got lodged an FIR against the accused under S. 380, P.P.C., for stealing the stock pledged with the Bank

Validity

Provisions of Financial Institutions (Recovery of Finances) Ordinance, 2001 had an overriding effect on anything inconsistent contained in any other law for the time being in force, including Cr.P.C. read with P.P.C., and whenever an offence was committed by a customer, it could only be tried by the Banking Court constituted thereunder and no other forum or the ordinary criminal court had jurisdiction in the matter

Action of filing a complaint and getting registered a criminal case against the accused despite availability of remedy before the Banking Court was a clear indicator of mala fide on the part of prosecution

Petition for grant of pre-arrest bail was allowed.

Complainant, a company deputed by Bank to safeguard pledged stock, got lodged an FIR against the accused under S. 380, P.P.C., for stealing the stock pledged with the Bank

Validity

Provisions of Financial Institutions (Recovery of Finances) Ordinance, 2001 had an overriding effect on anything inconsistent contained in any other law for the time being in force, including Cr.P.C. read with P.P.C., and whenever an offence was committed by a customer, it could only be tried by the Banking Court constituted thereunder and no other forum or the ordinary criminal court had jurisdiction in the matter

Action of filing a complaint and getting registered a criminal case against the accused despite availability of remedy before the Banking Court was a clear indicator of mala fide on the part of prosecution

Petition for grant of pre-arrest bail was allowed.

Registration of FIR by police was unwarranted and uncalled for as the alleged offence could only be tried by the Banking Court constituted under the provisions of Financial Institutions (Recovery of Finances) Ordinance, 2001

Action could only be taken by an investigating agency nominated by Federal Government on a complaint in writing moved by authorised officer of a financial institution

Local police had no authority to register a criminal case in the matters between a Bank and its customers

Constitutional petition was allowed, in circumstances.

Question before the High Court was whether offence of preparing a forged "fard" for obtaining a finance facility/loan from a Financial Institution/Bank, fell within the exclusive jurisdiction of Financial Institutions (Recovery of Finances) Ordinance, 2001, or could the same be tried under provisions of Offences in Respect of Banks (Special Courts) Ordinance, 1984

Held, that in the present case, allegations of making abetment had also been made against Bank Manger and Revenue Officials, which were examined by the Special Court under Offences in Respect of Banks (Special Courts) Ordinance, 1984 and the same ordered the accused to stand trial for said offences

Suit filed before Banking Court under Financial Institutions (Recovery of Finances) Ordinance, 2001 was different in nature as the issue in the same was default by petitioner/customer and recovery of the same

Complaints before the Special Court, in the present case, were against different parties on different grounds which could not be tried by the Banking Court since it could only try matters covered in S. 9 of the Financial Institutions (Recovery of Finances) Ordinance, 2001

Offences which fell under purview of Financial Institutions (Recovery of Finances) Ordinance, 2001 were to be tried by Banking Court while other offences not covered by the said Ordinance would be triable under Offences in Respect of Banks (Special Courts) Ordinance, 1984

High Court observed that S. 20 of the Financial Institutions (Recovery of Finances) Ordinance, 2001 did not cover allegations made in the present case which fell squarely within jurisdiction of Ss. 4 & 5 of the Offences in Respect of Banks (Special Courts) Ordinance, 1984

Constitutional petition was dismissed, in circumstances.

Order passed by Banking Court dismissing suit for non-prosecution partook character of an intermediate order which related to procedure and not to substance of dispute involved in the case

Such order, by its very nature, could not finally dispose of rights of parties on merits and also did not deal with ancillary and incidental matters

Powers were granted to Court under Civil Procedure Code, 1908 to dismiss for non-prosecution any suit in which plaintiff had not appeared and a remedy was also provided to delinquent plaintiff to approach to court for recall of such order in case he was prevented by sufficient cause from appearing on appointed date

Such order and remedy provided in Civil Procedure Code, 1908 related purely to procedure and did not entail any adjudication by court on rights of parties

Order dismissing suit for non-prosecution was not within definition of 'final order' as contemplated by S. 22 of Financial Institutions (Recovery of Finances) Ordinance, 2001

Bar contained in S. 27 read with S. 22 of Financial Institutions (Recovery of Finances) Ordinance, 2001 could not have any application for excluding powers that inhered in Banking Court to make use of provisions of O. IX, R.9, C.P.C. for recalling of an order dismissing suit for non-prosecution

Term 'final order' appearing in S. 22 of Financial Institutions (Recovery of Finances) Ordinance, 2001 should, therefore, be interpreted in a manner that was consistent with scope, context and principle for which Financial Institutions (Recovery of Finances) Ordinance, 2001 was promulgated

Order through which suit or application for leave to defend was dismissed for non-prosecution did not fall in either of the two categories of orders and such was an intermediate order which fell in between the two

Bar contained in S. 27 of Financial Institutions (Recovery of Finances) Ordinance, 2001 was not applicable to such kind of intermediate orders

Banking Court as defined in Financial Institutions (Recovery of Finances) Ordinance, 2001 had necessary power to allow application to restore suit/application for leave to defend dismissed for non-prosecution on sufficient grounds being shown for non-appearance of counsel/party in terms of O. IX, R. 9, C.P.C.

Constitutional petition was dismissed in circumstances.

Plaintiff Bank, impugned order of Banking Court whereby applications for leave to defend of the defendants were allowed and upon such acceptance of the applications, suit against said defendants was dismissed by the Banking Court

Validity

If the Banking Court was of the view that substantial question(s) of law had been raised in the applications for leave to defend, then it was not proper for the court to have proceeded to dismiss the suit and reject the plaint to the extent of the defendants who filed said applications for leave to defend

Banking Court, could have granted leave to defend and subsequent questions were to be determined through regular process after recording of evidence

Impugned order was therefore not countenanced by law and course adopted by Banking Court was clearly unlawful and beyond the provisions of Financial Institutions (Recovery of Finances) Ordinance, 2001

Impugned order was set aside, and matter was remanded to Banking Court

Appeal was allowed, accordingly.

Section 20(4) of Financial Institutions (Recovery of Finances) Ordinance, 2001 was the provision which dealt with dishonest issuance of a cheque towards repayment of a finance or fulfilment of an obligation which was dishonored on presentation

Matter, where cheque was issued to a financial institution and same was dishonored, jurisdiction would lie only with the Banking Court established under the Financial Institutions (Recovery of Finances) Ordinance, 2001 and not before any other court until and unless provided by law by which the financial institution was established

Section 20(6) of the said Ordinance provided that the offences under the Ordinance would be bailable, non-cognizable and compoundable therefore the registration of a criminal case by the local police was not permitted by the law

Constitutional petition was accepted accordingly.

Section 20(4) of Financial Institutions (Recovery of Finances) Ordinance, 2001 was the provision which dealt with dishonest issuance of a cheque towards repayment of a finance or fulfilment of an obligation which was dishonored on presentation

Matter, where cheque was issued to a financial institution and same was dishonored, jurisdiction would lie only with the Banking Court established under the Financial Institutions (Recovery of Finances) Ordinance, 2001 and not before any other court until and unless provided by law by which the financial institution was established

Section 20(6) of the said Ordinance provided that the offences under the Ordinance would be bailable, non-cognizable and compoundable therefore the registration of a criminal case by the local police was not permitted by the law

Constitutional petition was accepted accordingly.

Chief Court vide the impugned judgment accepted review petitions partially and set aside its judgment, holding that Banking Judge, was appointed in consonance with S. 5 of Financial Institutions (Recovery of Finances) Ordinance, 2001 and proceedings and orders by Banking Judge, were in accordance with prevailing law

Petitioners/judgment-debtors contended that, Banking Court was not vested with jurisdiction under the mandatory provisions of the Financial Institutions (Recovery of Finances) Ordinance, 2001, therefore, order of the Banking Court, was void ab initio and arbitrary in the eyes of law; that Chief Court had not appreciated that District Judge had no jurisdiction in the matter and judgment/decrees passed by said court were coram non judice and that both the District Court and Banking Court were not established in accordance with law, and their Presiding Officers having not been appointed by the Federal Government in pursuance of the mandatory provisions of the Financial Institutions (Recovery of Finances) Ordinance, 2001, therefore, orders/judgments rendered by said courts were coram non judice, not sustainable and were liable to be set aside

Petitioners had prayed that impugned order passed by Chief Court be set aside

Contention of counsel for respondent/Bank was that orders/judgments passed by the Chief Court were well reasoned and according to law and that Banking Court was established in accordance with law and its Presiding Officer was also competently appointed; as after promulgation of the Gilgit-Baltistan (Empowerment and Self-Governance) Order, 2009 authority for the appointment rested with the Gilgit-Baltistan council under serials 5, 13 & 50 of the Third Schedule of the order

No illegality and infirmity had been found in the judgment passed by the Chief Court

Petitions for leave to appeal were converted into appeals and were dismissed, in circumstances.

BCD Circulars are issued by State Bank of Pakistan in exercise of powers under Ss. 3-A, 25 & 41 of Banking Companies Ordinance, 1962, and have force of law

Any contract or agreement executed in violation to BCD circular comes within the mischief of S. 23 of Contract Act, 1872, being contrary to law and therefore, is not enforceable by Banking Court established under section 5 of Financial Institutions (Recovery of Finances) Ordinance, 2001.

Petitioner impugned order of Justice of Peace whereby FIR under S. 489-F, P.P.C. was ordered to be registered against him for dishonouring of cheque issued by him as guarantee to the Financial Institution

Held, that per S. 7 of the Financial Institutions (Recovery of Finances) Ordinance, 2001; no court other than the Banking Court shall have or exercise jurisdiction with respect to any matter to which jurisdiction of the Banking Court was extended to under the said Ordinance

Section 20(4) of the Financial Institutions (Recovery of Finances) Ordinance, 2001 dealt with the dishonest issuance of cheque and punishment of said offence had been provided in this section and therefore it was obvious that in said matter jurisdiction only lay with the Banking Court and not before any other court

Under S. 20(4) of Financial Institutions (Recovery of Finances) Ordinance, 2001, offences under the Ordinance shall be bailable, non-cognizable and compoundable and S. 154, Cr.P.C. came in field where the commission of a cognizable offence was disclosed

When the statute itself made it clear that the offence was not cognizable, then registration for a criminal case/FIR by local police could not be permitted

High Court observed that even though S. 489-F was inserted after promulgation of the Financial Institutions (Recovery of Finances) Ordinance, 2001; but same would not give it an overriding effect over the Financial Institutions (Recovery of Finances) Ordinance, 2001, which was a special law

Impugned order was set aside

Constitutional petition was allowed, in circumstances.

Concept of renewal, rescheduling/ restructuring of financial facilities in light of case-law; examined.

Decree for declaration to the effect that a person be declared a benami owner of the Deposit Growth Certificates cannot be passed by the Banking Court established under S. 5 of the Ordinance

Although S. 7(1)(a) of the Ordinance provides that in exercise of its civil jurisdiction the Banking Court shall have all the powers vested in a Civil Court under the Code of Civil Procedure, 1908, but subsection (1) also provides that the Banking Court shall have these powers subject to the provisions of said Ordinance, meaning thereby, that at the first instance the person was to establish that all other jurisdictional facts exist to invoke the jurisdiction of the Banking Court, and where the Banking Court has jurisdiction to adjudicate upon the matter, it shall, in that case, have all the powers vested in a Civil Court.

Petitioner instituted a suit for declaration and rendition of accounts along with permanent injunction against the respondent/bank in Banking Court

Court passed injunctive order in favour of petitioner, wherein respondent/bank was restrained to adopt any illegal coercive measures for recovery of loan against the petitioner

Bank which did not put in appearance, moved an application before Justice of Peace for registration of criminal case against the petitioner

Cheque in question issued by the petitioner in favour of the bank, was dishonoured on presentation due to insufficient amount

Justice of Peace vide impugned order, ordered registration of criminal case against the petitioner

Contention of the petitioner was that he being a "customer" and bank being 'Financial Institution', bank could adopt recourse to the procedure under Financial Institutions (Recovery of Finances) Ordinance, 2001 for recovery of its defaulted loans by filing proceedings against the delinquent defaulters with the Banking Court having exclusive jurisdiction to adjudicate and decide such matter

Validity

By obtaining impugned order from Justice of Peace, ultimate object of bank was for initiation of proceedings under S.489-F, P.P.C. as cheque issued by the petitioner in favour of the bank was dishonoured

Object of the Financial Institution (Recovery of Finances) Ordinance, 2001, and to initiate proceedings under P.P.C., were entirely different, as both the enactments, could not be amalgamated or confused with each other

Civil liability existed between the parties and diverting the same into criminal offence where a complete recourse for recovery of such liability was provided under Financial Institutions (Recovery of Finances) Ordinance, 2001, seemed to be with mala fide intention and ulterior motive

Section 20(4) of said Ordinance, provided the remedy wherein cheque dishonestly issued and dishonoured because of insufficient funds, would be governed by said section of law, bank could file a direct complaint in the Banking Court

Bank could avail remedies available under said Ordinance for recovery of its debt, as well as for dishonoured cheque

Proceeding further on the basis of impugned order would be abuse of process of the court and without lawful authority

Order accordingly.

Amount claimed in respect of arrears of rent of property did not fall within the definition of "obligation" as defined in the Financial Institutions (Recovery of Finances) Ordinance, 2001, and thus could not be granted by the Banking Court.

Suit for damages against defendant-Bank based on allegations that plaintiff was illegally arrested by the defendant Bank and its employees

Contention of the plaintiff was that he had obtained a loan from the bank but was illegally arrested, and was, as a result, entitled for damages

Plaint was rejected by Trial Court on the ground that as per S.7 of the Financial Institutions (Recovery of Finances) Ordinance 2001, civil court lacked jurisdiction

Validity

Present suit was not with regard to financial liability but was for damages under allegations that plaintiff had been illegally arrested, was sent to jail and suffered loss of reputation, liberty etc.

Provisions of S.7 Financial Institutions (Recovery of Finances) Ordinance, 2001 were therefore, not applicable to the present case

Suit, if it were for simple damages, then only the civil court had jurisdiction

High Court set aside impugned order and remanded the case to Trial Court

Appeal was allowed, accordingly.

Banking Court, in absence of procedure provided in respect of any matter in Financial Institutions (Recovery of Finances) Ordinance, 2001, would have to follow procedure laid down in C.P.C.

Order of dismissal of suit for non-prosecution neither decided rights of parties on merits nor was a judgment, decision or decree liable to be challenged in appeal

Such order could not be considered a decision under O.XVII, R. 3, C.P.C.

Provision of S. 27 of Financial Institutions (Recovery of Finances) Ordinance, 2001 did not bar Banking Court from restoring suit, which had been dismissed for non-prosecution without touching merits of case

Banking Court before restoring suit would be bound to see whether sufficient cause for previous non-appearance had been shown or not and whether such application was barred by limitation, if so, then whether delay of each and every had been explained or not

Principles.

Banking Court, in absence of procedure provided in respect of any matter in Financial Institutions (Recovery of Finances) Ordinance, 2001, would have to follow procedure laid down in C.P.C.

Order of dismissal of suit for non-prosecution neither decided rights of parties on merits nor was a judgment, decision or decree liable to be challenged in appeal

Such order could not be considered a decision under O.XVII, R.3, C.P.C.

Provision of S. 27 of Financial Institutions (Recovery of Finances) Ordinance, 2001 did not bar Banking Court from restoring suit, which had been dismissed for non-prosecution without touching merits of case

Banking Court before restoring suit would be bound to see whether sufficient cause for previous non-appearance had been shown or not and whether such application was barred by limitation, if so, then whether delay of each and every had been explained or not

Principles.