State Bank of Pakistan Circular No. 29

2007 YLR 3148 KARACHI-HIGH-COURT-SINDH Judicial Precedent

Forced sale [value (FSV) of borrowers' assets over which the Bank had a charge and manner in which the same was to be decided by the Committee

Guidelines as per State Bank of Pakistan BPD Circular No.29 of 2002 detailed.

2007 YLR 3148 KARACHI-HIGH-COURT-SINDH Judicial Precedent

Banking Companies Ordinance (LVII of 1962), S. 33-BDeliberations of the Committee

Nature.

2006 CLD 73 LAHORE-HIGH-COURT-LAHORE Judicial Precedent

State Bank of Pakistan BPD Circular No.7 dated 4-3-2003Constitution of Pakistan (1973), Art.199Constitutional petitionDefault

Due to the Bank's apportionment of the payments made by the petitioner, default was shown in the petitioner's statement of accounts, in fact the overall obligations of the petitioner under the repayment schedule had been fully met and there was no default by the petitioner that would qualify it for classification in the loss category under BPD Circular No.29 of 2002

Dispute involved a question of fact and it was inappropriate for enquiry in Constitutional jurisdiction

Constitutional petition was dismissed.

2005 CLD 987 LAHORE-HIGH-COURT-LAHORE Judicial Precedent

Para. 17State Bank of Pakistan BPD Circular No.8 of 2003 dated 12-3-2003Constitution of Pakistan (1973), Art.199Constitutional petitionValuation of securities provided for the outstanding amount to the creditor Bank

Valuation had been made by professional approved valuators engaged by the Bank which valuation was affirmed by the State Bank of Pakistan Committee formed under para. 17 of the BPD Circular No.29 of 2002

Validity- -Decision of State Bank of Pakistan Committee was binding on the parties under BPD Circular No.8 of 2003 and the Committee had acted strictly in accordance with BPD Circular No.29 of 2002 and there was nothing on record to dislodge the view taken by the Committee.

2005 CLD 987 LAHORE-HIGH-COURT-LAHORE Judicial Precedent

Paras.10 & 17Constitution of Pakistan (1973), Art. 199­Constitutional petitionValuation of securities provided for the outstanding amount to the creditor Bank

Contention of the petitioner was to the effect that terms of Circular No.29 of 2002 set out in para.10 were unreasonable anal arbitrary and it was urged that classification operated to the petitioner's prejudice, because its FSV was marginally less than the outstanding amount which disentitled the petitioner to pay 75% of the outstanding amount in settlement

Contention of the petitioner had come as a surprise to the Court because the same was not set out in the petition

Nevertheless, the argument was facile

­Where the forced sale value (FSV) of the security was less than the outstanding amount, then to effect settlement a sum equal to FSV was to be recovered from the customer in cash

If FSV was higher than the outstanding amount then the customer would have to pay 75% or more of the outstanding amount to reach settlement

Where, however, the FSV was higher than the outstanding amount, the SBP Committee had discretion to order settlement at higher than 75% of the outstanding amount

In fact the floor percentage would come into active consideration where the disparity of FSV over the outstanding amount was substantial, rather than marginal as in the present case

In all cases of classification it was common that difficulty, was experienced in cases on borderline between separate classes, but that did not mean that the classification was illegal

So long as rational criteria distinguished the classes that were formed with nexus to the object of the law, the classification so made was valid

So too was the classification done by BPD Circular No.29

Present dispute was lingering for more than one year after the SBP Committee decision whereas the object of BPD Circular No.29 was to conclude settlements speedily rather than drag matters

Petitioner was directed by the High Court to pay the amount of FSV less the disputed valuation amount of pledged stock to the Bank within two weeks

Failing settlement for the petitioner's default, Bank shall be entitled to also recover the disputed amount from the petitioner in accordance with law.

2005 CLD 953 LAHORE-HIGH-COURT-LAHORE Judicial Precedent

Ss. 9 & 21State Bank of Pakistan SBP Circular No.29 of 2002Civil Procedure Code (V of 1908), O.IX, R.8 & S.151­Limitation Act (IX of 1908), Art. 181Suit for recovery of outstanding loan

Pending petition for leave to defend the suit by the defendants, they applied for amicable settlement of repayment of their outstanding loan by availing State Bank of Pakistan Circular No.29 of 2002, re-structuring package with concurrence with the parties whereunder a specific amount was paid by the defendants

High Court (Banking Court) had been adjourning the suit awaiting settlement between the parties out of Court and ultimately the suit was dismissed on account of lack of instructions to its counsel regarding settlement of repayment of the loan

Banking Court while dismissing the suit had observed that in case of restoration of the suit, all the applications filed by the defendants shall be deemed to be pending and shall be reactivated automatically

Bank moved petition for revival of the suit on account of default of defendants and to stick to repayment Schedule, as settled

Contentions of the Bank were that with the concurrence of the parties, the

2005 CLD 518 KARACHI-HIGH-COURT-SINDH Judicial Precedent

Civil Procedure Code (V of 1908), S.151

Judgment­debtors had moved an application under S.151, C.P.C. praying therein that they be allowed to sell/dispose of their property/commercial building and a portion of another property and decree-holder be directed to release the original documents of the said properties for the said purpose, and consider the amount deposited by the buyer with the decree-holder bank directly, as payment against the instalments

Validity

Record showed the material as a result whereof a settlement was arrived at between the parties and according to said agreement relief under BPD Circular No.29 of State Bank of Pakistan dated 15-10-2002 was granted to the judgment-debtors, and as against Rs.117 million they were asked to pay only Rs.49.327 million for which all the judgment-debtors jointly and severally agreed to pay

Terms and conditions as agreed upon by the parties clearly showed that the properties as mentioned in the Schedule including the present properties stood duly mortgaged with the decree-holder bank and title deeds were to be released in respect of all the properties together only if the instalment payments had been made as per terms of the contract

Decree-holder bank having declined to accept the proposal made on behalf of the judgment-debtors, did not want to deviate from the terms and conditions of the agreement between the parties, appli­cation by the judgment-debtors was dismissed.

2005 CLD 114 KARACHI-HIGH-COURT-SINDH Judicial Precedent

Ss.15(11) & 27Corporate and Industrial Restructuring Corporation Ordinance (L of 2000), Ss.10(1) & 19State Bank of Pakistan BPD Circular No.29, dated 15-10-2002, Cls. 7 & 9(iii)Suit by borrower against Bank

Reference of dispute by Banking Court to Corporate and Industrial Restructuring Corporation (CIRC) for its settlement in terms of State Bank Circular No.29 dated 15-10-2002

Expiry of time for approaching and availing benefit under "CIRC Settlement Scheme"

Effect

CIRC through such Scheme had invited f6r settlement against non-performance assets in line with State Bank Circular No.25

Once policy was announced and advertised through public notice, then all subsequent matters would have to be dealt with in line with such Circular

2004 CLD 435 LAHORE-HIGH-COURT-LAHORE Judicial Precedent

Constitution of Pakistan (1973), Art 199Constitutional petition

Application of borrower to the Bank to avail incentive scheme, offered under State Bank of Pakistan Circular No.29, dated 15-10-2002 was declined and matter was thus referred to the State Bank of Pakistan Committee for Resolution of Dispute established under the said circular which was also refused by the Committee to be considered

Borrower had contended that neither the Bank nor the State Bank Committee had specified the reason for their decision against it

Counsel of the parties jointly requested the High Court to declare the impugned order of State Bank of Pakistan Committee as without lawful authority and of no legal effect with direction to the State Bank of Pakistan Committee for Resolution of Disputes by stating specific reasons for borrower's purported ineligibility or otherwise in their decision

High Court, in circumstances, treated the Constitutional petition as an admitted/pacca case and accepted the same in the terms of first request of the parties

Impugned decision of the Committee was declared to be without lawful authority and of no legal effect with the direction by the High Court that the Committee should reconsider the matter after hearing representatives of the parties and state the reasons for any decision that they may arrive at.