' This Writ Petition is filed on behalf of Haidari International Finance Ltd., a private limited Company, incorporated under the Companies Act, 1913, to which a notice dated 17-11-1979 was issued by the State Bank of Pakistan under section 43-B of the Banking Companies Ordinance, 1962, informing it that the State Bank were prima facie of the opinion that the petitioner was doing the business of banking in contravention of section 27(1) of the Ordinance, and that the State Bank was proposing to make a declaration to that effect under section 43-B of the Ordinance, and calling upon the petitioner to show cause against the proposed declaration within 7 days of the receipt of the notice. It is prayed in this Writ Petition that the notice be declared to have been issued without lawful authority, and that the State Bank be restrained from taking all consequential steps against the petitioner.
2. Section 27 of the aforesaid Ordinance prohibits a Company from carrying on any business of banking in Pakistan unless it holds a licence issued in that behalf by the State Bank of Pakistan.
Section 43-A of the Ordinance empowers the State Bank to enquire, by various means specified in the section, whether a company is carrying on the business of banking. If the State Bank upon enquiry is satisfied that a company is carrying on the business of banking in contravention of section 27, then under section 43-B it may after giving the Company an opportunity of showing cause against the proposed action being taken, make a declaration to that effect. The consequences of such declaration, which the company must face, are given in sections 43-C to 43-F. One of the consequences, which is mentioned in section 43-F, is that the State Bank becomes authorised to make an application to the High Court for winding up the company.
3. The case of the petitioner is that it is not doing any banking business and the action which is proposed to be taken against it, is therefore without lawful authority.
4. It is contended that even earlier the State Bank had lodged F. I. R. No, 38 dated 16-5-1979 with the Federal Investigation Agency, alleging that the petitioner and 3 other companies were indulging in the business of banking in contravention of section 5(b) of Banking Companies Ordinance, and contrary to sections 8, 27 and 87 of the said Ordinance, read with section 22 of the Banks Nationalization Act, 1974. The case is, stated to be pending before the concerned Magistrate. It is submitted that the Federal Investigation Agency did not make any investigation; that actually the petitioner had been carrying on the business of financing the trade and industry in Pakistan, by borrowing and raising funds from the public; and that doing so does not constitute banking business. It is also submitted that as from 15-9-1979, the petitioner has stopped accepting finance/deposits from its customers, and is concentrating all its efforts on making repayments to its creditors.
' Learned counsel, by making reference to enactments, case-law and books on Banking, has submitted that the receiving of deposits from customers is the crux of banking business. The petitioner's case is that it has never received any deposits. It is argued that even if the acceptance of finance from customers by the petitioner be regarded as receiving deposits, the petitioner having ceased to indulge even in this activity with effect from 15.9-79, at least from this date onwards it could not be regarded as doing any business of banking, and therefore no notice pertaining to activities during this period could be issued to it by the State Bank under section 43-B.
As for the activities during the earlier period, it is contended that no notice was issuable under section 43-B because the section was incorported in the Ordinance at a subsequent date, namely on 8-10-1979. Section 43-B of the Ordinance, under which the State Bank is empowered to make the declaration, and under which it has issued the show cause notice to the petitioner, was incorporated in the Ordinance by virtue of Banking Companies (Amendment) Ordinance LVI of 1979, which was promulgated on 8-10-1979. By this Ordinance subsection (1) of section 27 of the Banking Companies Ordinance, 1962, was substituted, and also a new Part IPA was added, in which part are contained sections 43-A to 43-F. It is argued that Ordinance LVI of 1979, could not be regarded as being retrospective in operation, and as such no action could be taken under its provisions in respect of activities indulged in by the petitioner before 8-10-1979, and therefore the impugned notice is without lawful authority.
6. It is also submitted that the petitioner's records and documents, which the State Bank had examined under section 43-A, were also relating to the period prior to 8-10-1979, and as such the provisions of Part I I-A of the Ordinance were not attracted in the matter.
7. However, during the pendency of this writ petition, the Governor of the State Bank sent a letter dated 6-1-1980 to the petitioner, stating that it may be read in continuation of the notice which had been issued to the petitioner on 17-4-1979. By this letter the petitioner was informed, that since the issuance of the show-cause notice, further material appearing on the record of the petitioner- Company, and having a bearing on the question involved, had been brought to the notice of the Governor, and the petitioner was asked that if he wished to file a rejoinder, he could do so within 7 days from the receipt of the letter. The details of the material were also appended with this letter.
8. The petitioner regarded this letter as being yet another notice under section 43-B of the Ordinance, and sought permission from this Court to amend the prayer clause of the writ petition, so as to add a prayer in respect of the latest show-cause notice. As the prayer for amendment was not opposed by the other side, and it was allowed by the Court to be made, the petitioner filed an amended writ petition on 21-1-1980. The petitioner's prayer as it stands now, is for a declaration that notices dated 17-11-1979 and 6-1-1980, issued by the respondent are both without lawful authority and of no legal consequence, and for a direction restraining the Governor of State Bank from taking all consequential steps and actions against the petitioner under Part 1I-A of the amending Ordinance LVI of 1979.
9. It is contended on behalf of the respondent on the other hand that before the promulgation of Ordinance LVI of 1979, a large number of companies, like the petitioner, had stared doing banking business in contravention of the laws under the colour and gloss of being Finance Companies.
They had been set up in urban as well as rural areas, with a network of branches spread all over the country. Crores of rupees were collected by these companies as deposits by inviting people into opening accounts with them as if they were lawful banking companies. These companies used forms similar to the ones used by banks for opening and operating accounts. Although under the existing laws punishments had been provided for carrying on illegal banking business, but there was no provision for preventing any future breach, nor was any remedial machinery provided therein for redressing the wrongs committed by offenders. It was to fill this gap that the amending Ordinance LVI of 1979, was promulgated. It is also submitted that in exercise of powers conferred on the State Bank by the amending Ordinance, 'the State Bank had scrutinized some of the records applied by the petitioner-Company, and that the scrutiny had prima facie revealed that the petitioner-Company was doing banking business. It is on account of this prima facie view that the State Bank had issued a notice dated 17-11-1979 for affording the petitioner an' opportunity of showing cause against the proposed action. It is further submitted that there is sufficient material on record for the prima facie view that the petitioner was carrying on banking activities. A reference is also made to certain forms, copies of which the respondent has placed on record, from which it could allegedly be inferred that the petitioner was carrying on banking business. It is submitted that banking business does not merely consist in accepting of deposits, though it commences with the accepting of deposits; but the business continues on till the amount is repaid to clients. It is, therefore, asserted that in view of the petitioner's admission, that it is repaying amounts to depositors, the petitioner could well be regarded as conducting the business of banking. Reliance is also placed in this behalf on an unreported judgment of the Karachi High Court in Constitutional Petition No, 627 of 1973 (Inamur Rehman Alvi v. State Bank of Pakistan and others), to submit that the petitioner's activities, carried on prior to the date of the amending Ordinance, could also be looked into for determining whether the petitioner was doing any banking business.
10. However, I do not find it necessary to decide in this Writ Petition the question whether the petitioner is doing any banking business or not. It is for the State Bank to arrive at its own conclusion in this behalf for the purpose of deciding whether a declaration under section 43-B(1) of the Ordinance is to be made against the petitioner or not. The contentions raised in this writ petition by the petitioner, could also be raised before the Governor of the State Bank.
11. Learned counsel for the petitioner however insists that this question should be decided by the High Court is contended that the respondent could only acquire the jurisdiction to issue a show- cause notice to a Company under section 43-B, if it formed the opinion that the Company was carrying on the business of banking. It is urged that by forming a wrong opinion the respondent could not give itself the jurisdiction to issue a show-cause notice. The preliminary finding that the petitioner is doing banking business is a jurisdictional fact, the correctness of which can be examined by the High Court, in order to determine whether or not the respondent had the jurisdiction-to issue the show-cause notice.
12. Section 43-B(1) of the Ordinance is reproduced below for reference: "43-11.-(1) Where the State Bank, after making such inquiries as it may deem fit, is of opinion that a company or person referred to in section 43-A is transacting in any manner or form whatsoever the business of banking in contravention of. Subsection (I) of section 27, the State Bank may, after giving the Company or such person an opportunity of showing cause against the proposed action being taken, make a declaration to that effect.
(2)
(3)
' It is apparent from the language of the section that the preliminary opinion which the State Bank has to form, need not appear to be the absolute 'truth even to the State Bank itself, for otherwise the giving of an opportunity of showing cause would be a mere exercise in futility. It is to be remembered that the State Bank also has the jurisdiction to refuse to give the declaration. It is only after complying with the procedural requirements of section 43-B, that the State Bank has to form a conclusive opinion to which finality attaches. Since the petitioner can have the preliminary opinion reversed by showing cause against it, an adequate alternative remedy can be said to be available to it, which makes this writ petition incompetent.
13. Even otherwise there is no substance in the contention that legally a show-cause notice could not be issued to the petitioner under the circumstance of this case. A show-cause notice never requires an authority for being issued. By itself a show-cause notice cannot do any harm to any one, and one ma even elect to ignore it. A show-cause notice is issued really for the benefit of person to whom it is issued, and he cannot therefore feel aggrieved on account of it. However, what may cause grievance is the pendency of proceedings in which a show-cause notice is issued.
Therefore the prayer made by the petitioner, which is material in this case, is for a direction restraining the Governor of the State Bank from taking consequential steps and action under Part II-A of the amending Ordinance LVI of 1979. However, it is apparent from the language of section 43-B, that the crux of the adjudication which the State Ban has to make under the section, is the finding as to whether or not the petitioner is carrying on the business of banking in Pakistan, in contravention of the laws. There is, therefore, no scope for the view that this adjudication could be regarded as doing something which the State Bank is "not permitted by law to do" so that a restraint order under sub-clause (i) of clause (a) of sub-article (1) of Article 199 of the Constitution could be issued to the respondent. The law clearly requires the State Bank to determine the question. The State Bank cannot therefore be restrained from doing what it is enjoined_ by law to do.
14. It is next contended on behalf of the petitioner, that the respondent is precluded from holding enquiry against the petitioner on account of bias, which is said to have arisen because the respondent has already formed an opinion against the petitioner that it is conducting the business of banking. It is alleged that the opinion was first formed when the State Bank had lodged F. I. R. No, 38 dated 16-5-1978 against the petitioner and its officers, as a result of which a challan under sections 5(b), 8, 27 and 87 of the Banking Companies Ordinance, read with section 22 of the Banks Nationalization Act, 1974, had been filed against the petitioner as well as against its officers. Mr. Nasrullah Cheema, Magistrate, Lahore, is said to have already taken cognizance of the case. The respondent is also alleged_to be biased because before sending the impuned show-cause notice it had again formed the opinion that the petitioner was carrying on the business of banking. It is also contended, that the State Bank having lodged the report, it had become a prosecutor, and it could not therefore sit in judgment over the petitioner in the same cause. In support of his contentions learned counsel has referred to the following case-law : ' Metropolitan Property Co. (F. G. C.) Ltd. v. Lanon and others (1968) 3 All E R 304; ' Gordden: Re (1971) 3 All E R 207; ' Rahim Jan v. Institute of Chartered Accountant and others PLD 1977 Lah. 1450; ' Sardar Ashiq Muhammad Khan Mazari and 3 others v. Chairman, Federal Land Commission, Islamabad and 4 others PLD 1977 Lah. 461; ' Muhammad Saleem v. Sub-Martial Law Administrator, Sargodha and another PLD 1979 Lab.
284.
15. The contention that the respondent was disqualified in this case, on the principle of bias, to proceed against the petitioner is not acceptable to me for more than one reason. The petitioner has not been able to give any reason why the State Bank, as an institution, would be interested in deciding incorrectly that the petitioner was conducting the business of banking. Secondly the principles laid down or recognised in the authorities quoted above, are not applicable to the facts of the present case. In all these cases it was held that a tribunal, which was biased against a party, or was suffering from similar disqualification, or one of its members was suffering, did not have the jurisdiction to decide the matter before it; and in all these cases, the matter in dispute was referable to another tribunal which was free from such disqualifications. In the present case the authority of the State Bank to proceed against the petitioner under section 43-B of the Ordinance is exclusive. In this view of the matter, even if it be presumed that bias could be imputed to the State Bank, its disability to proceed against the petitioner on the principle of bias, must be assumed to have been exempted by the legislation. Under similar circumstances, the Supreme Judicial Council made the following observation in President v. Mr. Justice Shaukat All (1) : "A Judge or an officer exercising judicial functions, may act in a proceeding wherein he is disqualified, even by interest, relationship or the like, if his jurisdiction is exclusive and there is no legal provision for calling a substitute, so that his refusal to act would destroy the only tribunal in which relief could be had, and thus prevent a termination of proceedings."
(1) PLD 1971 SC 585
16. Learned counsel for the respondent has also explained that no case for bias against the State Bank is made out on facts. It is submitted that the F. I. R. Referred to above (Annexure D) had actually been registered by Zahur Ahmad Qureshi, Assistant Director, F. I. A. In his own office, which is notified as Police Station. This report was not lodged by any officer of the State Bank as is alleged by the other side. It is also submitted the challan submitted to the Magistrate is not against the petitioner but against its officers and Directors. It is however, admitted in the written statement that a letter dated 7-6-78 (Annexure R-I) was written by Mr. C. D. Butt, the then Deputy Director of the State Bank, to the F. I. A. In those days Osman Ali was the Government of the State Bank. The F. I. A.
Was informed that a preliminary enquiry had revealed that the activities of the petitioner were of banking nature, and the F. I. A. Was requested "to carry out necessary investigation into the abovesaid offences and submit a full report"
17. In the present case, the action to be taken against the petitioner is proposed to be taken by the present Governor of the State Bank. Mr. Osman Ali is no longer the Governor. The present Governor cannot be said to be biased against the petitioner, merely because at one time, an officer of the, State Bank had written a letter, requiring investigation to be made against the petitioner. There is no allegation that the present Governor had even initiated any enquiry against the petitioner.
18.. As already noted above, it is also the petitioner's case that the present Governor having issued the show-cause notices, was disqualified on account of bias, to be a Judge in this cause. A similar question was also dealt with by the Supreme Judicial Council in the case of Mr. Justice Shaukat Ali, wherein it was observed as follows :- "The mere fact that the Council had scrutinised the declaration of assets is not sufficient to establish such likelihood of bias, for, if it were so, then no Judge, who issues a rule in a motion or issues a notice to show cause in any other proceeding or frame a charge in a trial, can ever hear that matter, or conduct that trial. The reason is, that a preliminary inquiry intended to determine whether a prima fade case has been made out or not is a safeguared against the commencement of wholly unwarranted final proceedings against a person to say that a charge should be framed against a person, amounts to saying nothing more than that the person should be tried in respect- of it. Anybody who knows the difference between a prima fade case and its final trial would reject the objection as misconceived."
19. In this view of the matter I don't find any force in the submission that the State Bank or its Governor is disqualified to proceed against the petitioner under section 43-B of the Ordinance.
20. Learned counsel for the petitioner has next submitted that there is conflict of jurisdiction between the Magistrate and the State Bank, and the State Bank being an administrative tribunal, should await the decision of the Magistrate on the question whether the petitioner is carrying on any banking business. Reliance is placed on the following observation made in Mohammud Akbar v. The State (1): "Normally it is true that criminal proceedings should not be postponed pending the disposal of civil litigation connected with the same
(1) PLD 1968 SC 281 subject-matter. But where it is clear that the criminal liability is dependent upon the result of civil litigation, or is so intimately connected with it that there is a danger of grave injustice being done in the case if there be a conflict of decision between the civil Court and the criminal Court. In such event it is equally clear that the criminal Court has not only the right to but should also stay its hands until the civil litigation is disposed of, for it is not desirable that when the title to the property itself is in dispute, the Criminal Courts should give a finding in respect of the same question."
21. I am afraid the observations are not attracted by the facts of the present case. Under section 43-B of the Ordinance, as already observed, the jurisdiction of the State Bank to make a declaration that a company is carrying on the business of banking, is exclusive. The finding of the Bank is not made dependent by the Ordinance on the findings of any Magistrate. Therefore irrespective of the decision that the learned Magistrate may arrive at, the State Bank has to form its own opinion, and either give or refuse to give a declaration ,.Against a company. No conflict of jurisdiction is, therefore, found.
22. Learned counsel for the petitioner has also submitted though half-heartedly, that the doctrine doubt jeopardy is also attracted. There is however no scope for such a view being taken. The criminal case which is pending is not against the petitioner, but against 5 individuals. In any case issuance of a declaration under section 43-B will not amount to inflicting any punishment by a criminal Court. If such a declaration is given, then a company carrying on banking business in contravention of the laws will be stopped effectively from continuing with its illegal business and the deposits, it had received illegally from creditors, would oe repaid to them. The proceedings in the Criminal Court are independent of the proceedings under section 43-B of the Ordinance.
Therefore the doctrine of double jeopardy is not attracted.
23. It is next contended on behalf of the petitioner that section 43-B of the Banking Companies Ordinance authorises the State. Bank to issue the proposed declaration, and not its Governor. It is urged that action under this section could only be taken by the Central Board of Directors of the State Bank, which is authorised by the State Bank of Pakistan Act, 1956, to perform all acts on behalf of the State Bank, whereas the jurisdiction of the Governor to act on behalf of the Bank is limited.
24. Section 9 of the State Bank of Pakistan Act, 1956 confers powers upon the Central Board of Directors, and section 10 confers powers upon the Governors. The relevant portions of these two sections are reproduced below for reference : "9.-(1) The General Superintendence and direction of the affairs and business, of the Bank shall be entrusted to the Central Board of Directors which may exercise all the powers and do all acts and things that may be exercised or done by the Bank and are not by this Act expressly directed or required to be done by the Bank in general meeting or in annual general meeting."
"10.-(1) The Governor of the Bank shall be the Chief Executive Officer and shall, on behalf of the Central Board, direct and control the whole affairs of the Bank. #TBS (i) PLD 1973 Kar. 509 (2) PLD 1969 Lah. 908 #TBE
(2) In matters not specifically required by this Act or by regulations, made thereunder to be done by the Central Board, or by the Bank in general meeting the Governor shall have authority to conduct the business and control the functions 'and manage the affairs of the Bank."
' It is argued that the "affairs of the Bank" which the Governor is authorised under section 10(1) to direct and control, are really the affairs of the Bank under the State Bank of Pakistan Act, and not the affairs of the Bank as entrusted to it under other enactments, such as the Banking Companies Ordinance, 1962. A reference is also made to section 46(2) of the Act which prescribes that "the provisions of section 123 of the Evidence Act . Shall apply to the unpublished records relating to the affairs of the Bank", and it is submitted that in The Premier Bank Ltd., Karachi v. Muhammad Abdul Qasim and another (1) these words were interpreted to mean the affairs of the Bank under the State Bank of Pakistan Act. It is argued that these words as they appear in section 10(1) must, also have the same meaning, so that the Governor cannot be regarded as, having any authority in respect of affairs of the Bank under section 43-B of the Banking Companies Ordinance. Learned counsel for the respondent on the other hand has contended that the case relied upon by the other side does not lay down the correct law. He refers to Syed Abual A'ala Maududi v. The State Bank of Pakistan and another (2) in this behalf, where a wider interpretation was given to the words "affairs of the Bank".
25. It may be observed that the powers which are available to the Governor under section 9 (1) of the Act, are "on behalf of the Central Board". It is not denied by the petitioner that the power exerciseable under section 43-B of the Ordinance is exercisable by the Board. The authority which subsection (1) of section 10 of the Act gives to the Governor, is to direct and control "the whole affairs of the Bank" on behalf of the Central Board. The expression "whole affairs of the Bank" is of wider significance than the expression "affairs of the Bank". There is, therefore no scope for the view that these words must be regarded as applying to the "affairs of the Bank" under the Act alone.
Section 10(1) is to be read in the context of section 9(1) where the powers of the Central Board are given in every wide terms, and the petitioner -admits that these include the power to proceed under section 43-B of the Ordinance. It is this power of the Board, which is exerciseable by the Governor under section 9(1), because it pertains to "the whole affairs of the Bank".
26. In any case the Governor actually exercises his power in this behalf under subsection (2) of section 10, which has also been reproduced above. Under this subsection, the Governor has the authority to "conduct the business, control the functions and manage the affairs of the Bank", Taking action under section 43-B of the Ordinance, in my view, amount E to conducting the business of the Bank. There is, therefore, no fore in the contention that the Governor has no lawful authority to price against the petitioner under section 43-B of the Ordinance.
27. In view of the above discussion, I do not find any merit in this writ petition, which is, therefore, dismissed with costs.