The Supreme Court (SC) on Monday directed the State Bank to publish its suggestions regarding the constitution of a commission for examining the cases pertaining to persons who got their bank loans written off in the print media. A two-member bench of the apex court, comprising Chief Justice Iftikhar Muhammad Chaudhry and Justice Ghulam Rabbbani, was hearing a suo motu case of over Rs256 billion that has been waived.
The court directed that publication of the suggestions in widely circulated/read newspapers, both in English and Urdu at the cost of the banks, which shall be deposited by them through Iqbal Haider, counsel appearing for the State Bank, to the registrar of this Court within a period of four days and after publication, if any one amongst the borrowers/customers, who succeeded in getting their loans written off, have some reservations about the hearing of these cases or about the formation of the commission and its Terms of Reference may make appearance on the next date of hearing personally or through counsel, so after hearing them we may proceed with the matter.
The court directed to incorporate suggestions in the publication, given by KK Agha, Additional Attorney General, may make appearance on the next date of hearing personally or through counsel so that after hearing them the court may proceed with the matter and adjourned the case till April 11.
The State Bank of Pakistan and other banks suggested to the Supreme Court that a commission be constituted to examine different aspects of the cases pertaining to the people who got their bank loans written off.
Syed Iqbal Haider, the counsel for the State Bank of Pakistan, and counsel for other banks suggested that a commission be constituted to examine different aspects of the case, which will later on submit a report before the apex court.
The court was informed that Justice (retd) Salim Akhtar of the apex court has agreed to be the head of the commission, along with other members. Additional Attorney General KK Agha while appearing before the court submitted that in the Terms of Reference, it was also necessary to incorporate as to whether the bankers responsible for providing the facility of short-term and long-term loans on accepting inadequate securities are not responsible and if so, what measures are required to be taken in this behalf either by getting an order by this court or persuading the government to legislate the law for this particular purpose.
He further stated that as to what measures are required to be adopted to safeguard the amount of loans in future as in most of the cases the concession of written off loans has been extended arbitrarily or on the basis of political consideration or other influences, etc.
KK Agha further contended that as to whether a person who had written off the loans contrary to Circular 29 or any other provision in exercise of his power was also responsible for criminal negligence and action under the law.
He further stated that as to whether forced sale value of the property given in securities by the borrowers were correctly evaluated and what was the role of valuators in this behalf and whether the loans written off were in consonance with the provisions of Section 33(b) and other relevant provisions of the Banking Companies Ordinance, 1962.
“We have noted that despite hearing of the case for the last many months, no borrower has come forward except Redco, Indus Sugar Mills, Asif Saigal for Mohib Textile and Sadaruddin Ganjhi for West Pakistan Limited to participate in the proceedings; therefore, although media, both print and electronic, has reported the proceedings of this case extensively and we believe that everyone is in the knowledge of pendency of this case of loans in this Court. However, in the interest of justice, we consider it appropriate to direct publication of the above suggestions in the widely circulated/read newspapers, both in English and Urdu, at the cost of the banks which shall be deposited by them through Iqbal Haider, learned counsel appearing for the State Bank of Pakistan to the Registrar of this Court within a period of four days and after publication if any one amongst the borrowers/customers, who succeeded in getting their loans etc written off have some reservations about the hearing of this case or about the formation of the Commission and its Terms of Reference, which have been incorporated herein above, including what has been suggested by KK Agha, learned Additional Attorney General, may make appearance on the next date of hearing personally or through counsel so after hearing them we may proceed with the matter,” the court said in its order.
The court further ruled, “We have heard this case at considerable length in view of its importance as allegedly the borrowers and customers of the various banks got their loans obtained by them for short-term and long-term written off/waived, etc. contrary to the law prevailing on the subject.”
The court noted that the governor of the State Bank has also shown concern about the issue, pending before this court and has suggested that a commission be constituted to examine different aspects of the case and then to make a report before this court. It has been suggested that Justice Saleem Akhtar, the retired Judge of this Court, has agreed to be the head of the Commission with two other members. Terms of Reference of the Commission have also been incorporated in the detailed synopsis placed before us by way of their application (CMA No158/2010) relevant paras there from, for convenience sake, are reproduced herein below:
“(i) To examine and confirm validity and justification of the amount written off by the banks from 1997 in the sum exceeding rupees hundred million in the first instance. The Commission shall, however, examine the validity and justification of the loans written off exceeding Rs.10 billion by the 10 banks named in the Annexure-B. Only thereafter, the loan written off by other banks shall be examined.
(ii) To examine and determine a list of cases, where in the opinion of the Commission, write-offs were granted for political reasons or considerations other than bona fide business considerations.
(iii) In any case identified by the Commission in (ii) above, the Commission may direct the concerned bank, subject to the removal of the latches, impediments and legal objections, if any, by the competent authority, to enable the bank to institute appropriate proceedings in courts of competent jurisdiction for recovery of the written off amounts, including the proceedings under the Financial Institutions (Recovery of Finances) Ordinance, 2001, and/or the NAB Ordinance as may be deemed necessary by the concerned bank. In cases where fresh financing was allowed to defaulters under BPD Circular No13, where the Commission is of the view that such finances were granted/availed for purposes other than the revival of sick units and was a misuse of the said Circular, the Commission may direct the SBP/concerned bank to recall such finances and require the borrowers to return the written off loans within not more than three years.
(iv) To seek orders from the Hon’ble Supreme Court necessary for removal of latches, impediment and legal objections, the concerned banks are likely to face in recovering the written off amounts in the cases identified by the Commission, in (ii) above.
(v) To submit its interim report within 180 days and its final report within 360 days of its first convening.
c) The powers of the Commission, conferred by the SBP under the Banking Companies Ordinance, 1962, or enabled by the Government of Pakistan under the Pakistan Commission to Inquiries Act, 1956, to look into any definite matter of public importance and to perform such functions within the stipulated time period, shall include:
(i) Summoning and enforcing the attendance of a person and to examine them on oath; (ii) Requiring the discovery and production of any document; (iii) Receiving evidence on affidavits; and (iv) Issuing commissions for examination of witnesses or documents.”
Earlier, counsel for Redco Textiles Mills Salman Butt submitted that the State Bank had accepted the last three years losses made by the mills. He stated that his client had taken a loan of Rs407 million and returned the loan with mark up of Rs483 million at an agreed rate of 45 paisa per thousand. He contended that it was not a case of willful default. “I was making losses for the last three years,” Salman added.
Mansurl Arfin, counsel for Habib Bank, National Bank, Standard Chartered Bank and NIB Bank, submitted that they may be commercial or political decisions, but all the laws were made in good faith. He submitted that there were 1,300 cases with the committee, set up by the State Bank, investigating cases pertaining to loans of 100 million, adding that the committee had been made under a law.
The chief justice asked the learned counsel as to whether the borrowers would accept the decisions of this committee. At this Iqbal Haider, counsel for the SBP, told the court that the committee would also hear the borrowers.
Dr Pervez Hassan, counsel for the Allied Bank, while appearing before the court, submitted that Circular BPD-29 was a valid regulation under Section 33-B and Section 25 of the Banking Companies Ordinance. He further contended that it’s a good piece of legislation, which was welcome in the country as it picked up the morale of industrialisation.
“The Circular 29 accords with banking practices internationally and regionally and provides a sense of direction to all the communities globally and regionally,” he added.
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