SYED HAMID ALI SHAH, J.- This single order will dispose of four writ petitions i.e. Writ Petition No. 2916- 2005 titled "Yousaf Sugar Mills Ltd. Versus Trust Leasing Corporation Ltd. And two others", Writ Petition No. 2917- 2005 titled "Abdullah Sugar Mills Ltd. Versus Leasing Corporation Ltd. And two others" Writ Petition No. 2918-2005 titled "Haseeb Waqas Sugar Mills Ltd. Versus Leasing Corporation Ltd. And two others" Writ Petition No. 2918-2005 titled "Haseeb Waqas Engineering Mills Ltd. Versus Leasing Corporation Ltd. And two others" as common questions of law and facts are involved in all these petitions.
2. The background giving rise to the institution of these petitions is that petitioners are public companies limited by shares, incorporated under the Companies Ordinance, 1984 and form part of Haseeb Waqas Group of Companies. These companies are mainly involved in the business of sugar production. The relationship between the petitioners and respondent No. 1 is that one of the hire grantor and the lessee, created under various Lease Finance agreements. A dispute arose between the petitioners and respondent No. 1, which was referred to the sole arbitrator, appointed by the mutual consent of the parties. Sole arbitrator, gave/announced his award on 22.12.2003. As a result thereof, the petitioners were held liable to pay a sum of Rs. 140 million, which sum-was paid through various cheques, Respondent No, 1 was to release security documents on clearance of these Cheques. Respondent No. 1 accepted award vide letter No. TLCL/CF/2004/1307, dated 8.4.2004. Petitioners after encashment of the cheques, requested respondent No. 1 for clearance of the name of the petitioners from- CIB list, reported on 30.11.2003 to the respondent No. 2. Name of the petitioners despite settlement of the dues as per the terms of-the award, was not removed from the CIB list, which gave cause to the petitioners to call in question the act of omission of the respondents through these petitions.
3. Learned counsel for the petitioners has submitted that the respondent No. 1 has accepted award and conveyed the acceptance through letter dated 8.4.2004. Payments through various cheques, in terms of the award, had already been made, therefore, there is no justification for keeping the name of the petitioners on the list of defaulters. Further, the encashment of cheques, issued on the basis of award, amounts to the acceptance of award. Learned counsel, in this respect, has referred to the case of "Syed Paper Mills (Pvt.) Ltd. And 2 others versus Trust Investment Bank Ltd." (2005 CLD 1830). in was contended that as per the decision of the sole arbitrator name, of the petitioners was to be removed from the CIB list, on encashment of the cheques. The terms of award are binding on respondent No. 1, thus respondent No. 1 is under an-obligation to remove the name of the petitioners from CIB list. The petitioners are facing difficulty in availing the financial assistance from other banks due to placement to their name in CIB Data base, maintained by respondent No. 3.
Learned counsel has then submitted that respondent No. 2 has the powers to collect and furnish credit information with regard to the Banking Companies. Respondent No. 1 is registered and incorporated as a leasing company and not a banking company, therefore, respondent No.2 has no control over it. Provisions of Section 25 of Banking Companies Ordinance, 1962 restrict the furnishing of information, by a banking company to State Bank. Learned counsel while referring to the case of "Badshah Begum and others versus The Additional Commissioner (R) Lahore Division and others" (2003 SCM R 629) contended that if an authority has no power or jurisdiction in the matter under law, such jurisdiction cannot be conferred. The actions taken by an authority or quasi-judicial forum, is to ensure the command of law and in cases Of patent illegality and lack of jurisdiction, the Court can interfere in its Constitutional jurisdiction to protect rights and to ,undo a wrong done. Learned counsel while placing reliance on the case of "New Jubilee Insurance Company, Karachi versus National Bank of Pakistan, Karachi" (PLD 1999 SC 1126) has contended that the. Act of blacklisting or preventing a company from the privilege and . Advantages of entering into a lawful relationship with the Bank for the purpose of gain, is violative of Article 18 of the Constitution. The consequences of blacklisting a person, are of great magnitude and warrant that before taking such action there should. Be a fair and proper trial, through an impartial Court or Tribunal by providing such person reasonable opportunity to defend the allegations made against him. Learned counsel has submitted with vehemence that unless a dispute is settled through proper ' adjudication before a competent forum, a 'party cannot be penalized. Learned counsel in this respect has found support from law laid down in the case of "Agricultural Development Bank of Pakistan and others versus Ahid Akhtar and others" (2003 SGMR 1547)
4. Learned counsel for respondent No. 1, on the other hand, has argued that the object of collecting information from all banks/NBFIs, pertaining to their customers and their financial status, is a mechanism adopted to save the financial institutions, falling prey to the defaulters and to provide financial assistance it only those customers, who possess credit worthiness. The CIB list is prepared to equip the financers with opportunity "to look before they leap". Learned counsel has submitted that the placement of a customer on CIB List is mere an information. The Banks or DFIs, if feel satisfied, can grant loan despite the placement of a customer on the list. Learned counsel in support of his contentions has referred to the case of Abdul Aziz Nawab Khan and Company versus Federation of Pakistan, Minister of Finance and others" (2006 CLD 55) in was submitted that the dispute with the petitioners has not : so far been finally resolved, the matter is sub judice before o Court and the respondent No. 1, has rightly provided the information of default, to respondent No. 2.
Respondent No. 1 is bound to furnish such information, in response to circular dated 09.12.2004 and CIB Circular No. 1, dated 12.01.1992," in a specified manner through quarterly statements.
Noncompliance of these circulars, entails penal consequences of imposition of penalty under Banking Companies Ordinance, 1962. Reference to Circular No. 2 of 2004, dated 21.01.2004 pertaining to "Prudential Regulations for Non-banking Finance Companies (NBFCs)'1 was made to contend that Securities and Exchange Commission of Pakistan, has directed all NBFCs, to submit all information, returns and statements etc. To Credit Information Bureau (CIB) of Sate Bank of Pakistan in the same manner as previously prescribed. Learned counsel then referred to prudential regulations for Non-Banking Finance Companies as well as the prudential regulations for corporate/commercial banking. in has been provided in part-l in clause 2(1) that if the credit reports indicate defaults the facility shall be extended only after recording reasons to do so.
Learned counsel contended that it means that according to the prudential regulations, there is no impediment in granting loan to a borrower who is placed on GIB list except that lending institution has to record reason for granting loan. Learned counsel has lastly contended that the power to convey to State Bank of Pakistan the information of defaulters, vests with respondent No. 1. By virtue of Section 3-A of the Banking Companies Ordinance, 1962.
5. Learned counsel for respondents Nos. 2 and 3 has submitted that State Bank only collects data which is received from various Banks/DFIs. The name of a defaulter is placed in the database on the information, which is provided to it. The State Bank is merely registering authority. The State Bank divests itself with the takes to scrutinize the information received by it. The CIB list is prepared on the information received from Banks and DFIs and preparation of database is for a limited purpose, to enable a lending institution to know about the factum of default, in was submitted that the State Bank does not involve itself in determination of correctness or genuineness of default.
6. Heard learned counsel for the parties and examined the record.
7. Credit Information Bureau is a project of State Bank of Pakistan for collecting data. The primary purpose of collecting information is to equip all Banks and NBFIs, about their customers and their financial status, available with them. The object is to enable Banks/DFIs to decide the course of their business transaction with their customers so that financial institution may not be deceived by the defaulters. Placement of the name of a company/customer is to caution the lending institutions about default. The lending institution, however, is at liberty to extend financial assistance to a borrower despite the placement of name of a customer on CIB list. Learned counsel for the State Bank has frankly conceded that the list of defaulters is maintained on the information which is received from the lending institutions and State Bank of Pakistan while placing a defaulter on the list neither examines the correctness of the information nor seeks explanation from the defaulter/borrower. .
8. The power to call for information and collect data vests with the State Bank of Pakistan under Section 25- A of the Banking Companies Ordinance, 1962. Section 25-A is reproduced for ready reference:- "25-A Power of the State Bank to collect and furnish credit information:-
(1) Every Banking Company shall furnish - to the State Bank credit information in such manner as the State Bank may specify, and the State Bank may, either of its own motion or at the request of any banking company, make such information available to any banking company of payment of such fee as the State bank may fix from time t o time: Provided that, while making such information available to a banking company, the State Bank shall not disclose the names of the banking companies which supplied such information to the State Bank: Provided further that, banking company which proposes to entering into any financial arrangements which is in excess of the limit laid down in this behalf by the State Bank from time to time shall, before entering into such financial arrangement, obtain credit information on the borrower from the State Bank.
(2) Any credit information furnished by the State Bank to a Banking Company under sub-section (1) shall be treated as confidential and shall not, except for the purposes of this section of with the prior permission of the State Bank, be published or otherwise disclosed.
(3) No Court, Tribunal or other authority, including an officer of Government, shall require the State Bank pr any Banking Company to disclose any information furnished to, or supplied by, the State Bank under this section."
9. From the bare perusal of Section 25 (ibid) it is evident that State Bank of Pakistan can collect credit information from the Banking Company only. A Leasing Company does not fall within the definition of Banking Company. A Banking Company is under the control of State Bank of Pakistan while Leasing Company, as against a Banking Company, is under the control of Securities and Exchange Commission of Pakistan. The Securities and Exchange Commission of Pakistan has control overall companies including the Leasing Company and any direction by SECP is binding on the Leasing Companies exactly in the same manner, as the direction of State Bank of Pakistan is binding oh the Banking Company. The SECP cancel for information and statements from the Leasing Companies and can collect and maintain such date either with itself or with any other organization. The prudential regulations for NBFCs were issued was Circular No. 2 of 2004, bearing No. SE/NBFC/PR-2004, dated 21:01.2004 wherein it was clarified that all NBFCs, Flouse Building Finance Corporation and Investment Corporation of Pakistan shall continue to submit the return and statements etc. To SECP and Credit Information Bureau (CIB) of State Bank of Pakistan in the same manner and format as previously prescribed. The regulating authority of a Leasing Company i.e. SECP is empowered to direct for the submission of information through prescribed returns and statements, to State Bank of Pakistan, so as to introduce a uniform set of regulations to Improve effective management capabilities. The information called by SECP and submitted to State Bank of Pakistan at the instance of SECP cannot be avoided. The State Bank of Pakistan collects credit information from all the Banks under Section 25 (ibid) while from NBFIs on the direction of SECP and by virtue of provisions of Section 3-A of the Banking Companies Ordinance, 1962. The directions of SECP are binding in the nature and there is no illegality of furnishing information by a Leasing Company to the State Bank of Pakistan.
10. The act of blacklisting or preventing a company from the privilege and advantages of entering into a lawful relationship with the Bank for the purpose of gain, is violative of Article 18 of the Constitution. The consequences of blacklisting a person, are of great magnitude and warrant that before taking such action there should be a fair and proper trial, through an impartial Court or Tribunal by providing such person reasonable opportunity to defend the allegations made against him. The effect of placement of a person's name on the list that facility of finance is extended to such person, only after recording the reasons, according to para. 2 (a)(ii) of the Prudential Regulations. It has the effect of negating the facility to a borrower in the ordinary course: If the name of a person is brought on the list without any verification, it will adversely affect the reputation as well - as the business of such borrower. The Hlon'ble Supreme Court of Pakistan in the case of "New Jubilee Insurance Corporation versus National Bank of Pakistan, Karachi" (PLD 1999 SC 1126) held that when an act or order inflicts civil consequences on a person in respect of his reputation or property which is harmful to his interest, he is entitled to be heard before such an action or order is taken or passed. It will be appropriate to produce relevant part of the judgment:- It may be pointed out thus the fall-out of the blacklisting of the appellant is to prevent it from the privilege and advantage of entering -into lawful relationship with the respondent for the purpose of gains which is violative of Article 18 of the Constitution, which lays down that subject to such qualifications, if any, as may be prescribed by law, every citizen shall have the right to enter upon any lawful profession or occupation, and to conduct any lawful trade or business. The blacklisting of a company/firm/person, also tarnishes the reputation of it/has, as to its/his credibility to honour its/his commitments which may dissuade other parties from entering into contracts with the former. Thus the consequences of blacklisting of a company/ firm/person are of great magnitude, which warrant that before taking such an action, there should be material on record prima facie to indicate that the delinquent Insurance Company's refusal to pay claim was not warranted in the circumstances of the case."
11. The placement of a person on CIB List of defaulters places a restraint on his business to enter freely into a contract with Banks etc., therefore, before such placement, the Concerned individual is entitled to a notice. State Bank of Pakistan which, regulates the affairs of Banks etc has the responsibility at least to see the genuineness and truthfulness of claim of a Banking Company or NBFI qua the default of a borrower. The stance taken by the State Bank of Pakistan in the reply that it places the name of a defaulter on the list without any verification or notice to such person is not in accord with the law laid down by the Hon'ble Supreme Court of Pakistan in the case of New Jubilee Insurance Corporation (supra). The petitioners as per award dated have paid off their liabilities while respondents No. 1 has conveyed its acceptance of the award which is further affirmed by encashment of the cheques presented by the petitioners to the arbitrator. Respondent No. 3 is under an obligation as per award-to release the security documents, Prima facie there is justification for placement of the petitioners on CIB list. The action of respondent No. 3 regarding placement of the petitioners on the CIB List without notice and without ascertaining the genuineness of the information is, therefore, violative of Articles 4, 18 and 25 of the Constitution of Islamic Republic of Pakistan. Impugned placement of the petitioners, on CIB List, is declared without lawful authority and with no legal effect. The impugned order is thus set aside.
20. It is still open to respondent No. 2, to verify the genuineness and correctness of information.
Respondent No. 2, after due notice to petitioners, if feels satisfied that information received is correct, can place the name of the petitioners on CIB List.
21. For the foregoing, the Constitutional petition is allowed in the above terms.