SYED HAMID ALI SHAH, J. - These constitutional petitions covering common questions of law, filed by the borrowers/customers various banks, assail the constitutionality, vires, validity and legality of the provisions of Section 15 of the Financial Institutions (Recovery of Finances) Ordinance, 2001 (the Ordinance). The questions raised, involve Interpretation of the Constitution and other laws, therefore, on reference, a Full Bench of this Court was constituted to hear these petitions. A notice to the Attorney General was issued, as required under Order XXVI A of Code of Civil Procedure, 1908.
2. The following questions/propositions were raised, for our consideration and determination:-
(i) Whether Section 15 of the Ordinance is ultra vires the Constitution being discriminatory, oppressive, unjust, providing parallel system of justice and violative of fundamental rights especially denying the access to justice to the citizens and violative of rules of law and due process of law?
(ii) Whether the scheme and, mechanism of recovery provided by the provided by the provisions of Section 15 of the Financial Institutions (Recovery of Finances) Ordinance, 2001, empowers Financial Institution to usurp judicial powers and amounts to a parallel legislative judgment?
(iii) Whether provisions of Section 15 of the Ordinance are in conflict with Sections 3 and 9 of the.
Ordinance? Whether principles of "Reading Down" of statutory provisions would be applicable in the instant case?
(iv) Whether the provisions of Section 15 abridge the fundamental rights of the customers and the laws?
3. Mr. Shahid Ikram Siddiqui, Advocate representing various petitioners, has taken us through Section 15 to submit that sub-section (2) of Section 15, provides for issuance of notice in the event of default to mortgagor for the payment of outstanding mortgage money. He submitted that mortgagee/Financial Institution can proceed against a mortgagor, under the impugned provisions, without recourse to the Court and without determining the factum of default or a valid mortgage.
The sale under Section 15 of the Ordinance, 2001 is finalized without ascertaining the liability of principal borrower. Reference to Section 9 was made, where, in case of default, in fulfillment of an obligation, the lender (Financial Institution), has to institute a suit for recovery of outstanding loan, against it's customer, It is contended that two provisions, referred above, are in conflict with each other. While one provides for recovery of bank loan, by filing of suit through due process of law, the other empowers the ban to sell the mortgage property and recover the mortgage money, by issuing three notices. Learned counsel went on to argue that by virtue of sub-section (5), the lender banks can sell the mortgage property and can also purchase the mortgage property. Additionally, the Financial Institutions, under this sub-section can execute a sale-deed, on behalf of mortgagor and can present it for registration. According to learned counsel, under sub-sections (5) and (7), the Financial Institution assumes the powers of buyer as well as a seller and becomes a Judge of it's own cause. The mortgage property is put to sale by the Financial Institution without discharging the primary responsibility of proving that the mortgage relates to existing loan or it was executed for some other loan. Learned counsel emphasized that mortgage deed merely reflects the purchase price. Thus if the borrower approaches the Banking Court and proves that the sanctioned amount was not disbursed, or partially disbursed, the Financial Institution is not entitled to recover the mortgage money. Learned counsel urged that if mortgagor proves his claim before the Court, yet he is deprived of his mortgage property as in the meanwhile the property stands transferred to the auction-purchaser and it cannot be returned to the mortgagor. Learned counsel referred to the case of Sh. Abdul Sattar Lasi v. Federation of Pakistan through Secretary, Ministry of Law, Justice and Parliamentary Affairs, Islamabad and 6 others (2006 CLD 18). He submitted that Honourable Baluchistan. High Court found provisions of Section 15 in pari materia to Section 69 of the Transfer of Property Act, 1882. He added that both the provision are void as they are in conflict with Article 4 of the Constitution of Islamic Republic of Pakistan and thus are derogatory and violative of fundamental rights of the subject. Case of A. Batcha Saheb v. Nariman K. Irani and others (AIR 1955 Madras 491) was referred, wherein the amendment in Section 69 of the Transfer of Property Act, 1882 was suggested. Learned counsel submitted that conflict between two provisions of law namely Sections 9 and 15, .Requires its resolution through interpretation on the basis of "Reading Down". When principle of "Reading Down" is applied to the instant proposition, the provisions of Section 15 ought to be .Struck down being ultra vires of the supreme law. Cases of Mst. Ameer Khatun v. Faiz Ahmed and others (PLD 1991 S.C. 787), M/s. Elahi Cotton Mills Ltd. And others v.
Federation of Pakistan through Secretary Ministry of Finance, Islamabad and 6 others (PLD 1997 S.C.
582), Sunil Batra v. Delhi Administration and others (AIR 1978 S.C. 1675), Wajahat Ikram and others v.
The State (1999 SCMR 1255) and Rauf Bukhsh Qadri v. The State and others (2003 MLD 777), were referred to support this contention, It was then submitted that impugned provision offends Articles 4 & 9 of the Constitution and the petitioners are deprived of their right of access to justice and being treated in accordance with due process of law. The essential requirements of due process of law namely notice of proceeding reasonable opportunity to defend and adjudication of dispute through process of Court of competent jurisdiction with reasonable assurance of honesty and impartiality, are lacking in the impugned provision of law. Further reliance in this regard was placed on the case of Aftab Shahban Mirani v. President of Pakistan and others (1998 SCMR 1663), Al- Jehad Trust v. Federation of Pakistan (PLD 1996 S.C. 324), Sharaf Faridi and 3 others v. The Federation of Islamic Republic of Pakistan and others (PLD 1989 Karachi 404) and Government of Baluchistan through Additional Chief Secretary v. Azizullah and others (1993 PLD S.C. 341). Learned counsel contended that it is the duty of the Legislature to legislate laws, which are just, non- oppressive and balanced. The law if enacted, contrary to these . Parameters, can be struck down by the Courts in exercise of power of judicial review. The petitioner, in support of this contention found help from the law laid down in the cases of "Province of Punjab and others v. National Industrial Cooperative Credit Corporation and others (2000, SCMR ' 567) , National Industrial Cooperative Credit Corporation Ltd. v. Province of Punjab/Government of Punjab through Secretary (PLD 1992 Lah. 462) and Pakistan through Secretary v. Muhammad Umar Khan and others (1992 SCMR. 2460). On this question of equality among the citizens and equal protection of law, learned counsel referred to the following precedents Government of Baluchistan through Additional Chief Secretary v. Azizullah Memon and others (1993 PLD S.C. 341), Province of Punjab and others v.
National Industrial Cooperative Credit Corporation and others (2000 SCMR 567), Naseem Mehmand v. Principal, King Edward Medical College, Lahore and others (1965 PLD (W.P.) Lah. 272), Mehran Ali and others v. Federation of Pakistan and others (PLD 1998 SC 1445), and Gul Khan v.
Government of Baluchistan through Secretary (PLD 1989 Quetta) 8). Learned counsel supported his other contentions by making reference to the cases of Abdul Hareem and 2 others v. M/s. United Bank Limited of Pakistan (PLD 1997 Karachi 62), M/s. Chenab Cement Product (Pvt.) Ltd. v. Tribunal Lahore and others (PLD 1996 Lah. 672), Khan Asfand Yar Wali v. Federation of Pakistan through Cabinet Division (PLD 200I S.C. 607), Mehram Ali and others v. Federation of Pakistan and others (PLD 1998 S.C. 1445), Asif Ali Zardari and others v. The State (PLD 2001 S.C. 568) , Nek Muhammad v.
Roda (PLD 198Q S.C. (AJ&K) 23), M/s. Faridsons Ltd. v. Government of Pakistan through its Secretary (PLD 1961 S.C. 537), Abdus Saboor Khan v. Karachi University and others (PLD 1996 S.C. 536), Ghulam Mustafa Jatoi v: Additional District & Sessions Judge/Returning Officer (1994 SCMR 1299), A.D.B.P, and others v. Abid Akhtar (2003 SCMR 1547), The Province of West Pakistan v. Muhammad Ayub Khuhro (PLD 1967 Karachi 673), A.D.B.P, v. Sanaullah Khan (1.988 PLD S.C. 67), Egmore Benefit Society, 3rd Branch Ltd. Through Damodara Mudaliar v. K. Aburupammal [AIR (30) 1943 Madras 301), Muhammad Hassan v. M/s. Muslim Commercial Bank Ltd. And another (2003 CLD 1693), M/s. Nizamuddin & Company and Four others v. The Bank of Khyber (2003 CLD 914), Muhammad Rafiq v.
United Bank Ltd. And another (2005 CLD 1162), Hudabiya Textile Mills Ltd. And others v. Allied Bank of-Pakistan Ltd. And others (PLD 1987 S.C. 512), Mrs. Aziz Fatima and three others v. Rehana Chughtai and three others (2000 CLC 863), Brig. (R) Mazhar-ul-Haq and another v. Muslim Commercial Bank (PLD 1993 Lah. 706), M/s. A.M. Rice Corporation and others v. Bank of Punjab and others (2003 CLD 1783) and Khan Asfand -Yar Wali and others v. Federation of Pakistan through Cabinet Division (PLD 2001 S.C. 607).
4. Barrister Zafarullah Khan, Advocate, representing petitioners in Writ Petition No. 5076 of 2007 contended that transparency is lacking in the sale under the provisions of Section 15 of the Ordinance. He then, contended that sub-section (12), provides that Court cannot issue an injunction, against the sale through auction; which restricts the powers of the High Court. Leamed counsel adverted to sub-sections (4) to (8) and submitted that case provisions make the Bank a Judge of its own cause and the mortgagor is punished without being able to defend his cause.
Learned counsel has placed reliance on the case of Waris Meah v. State Bank of Pakistan (PLD 1957 S.C. 157), whereby State Bank of Pakistan was invested with three pronged powers to deal with violators of Foreign Exchange laws to proceed against offender under ordinary law; complaint before Tribunal or bringing the matter before Foreign Exchange Tribunal. Learned counsel added th&t leaving unfettered and unguided choice in the hands of the State Bank was held to be violative of the fundamental rights of a citizen. He also placed reliance on the cases of Miss Benazir Bhutto v. Federation of Pakistan and another (PLD 1988 S.C. 416), Khan Asfandyar Wali v. Federation of Pakistan (PLD 2001 S.C. 607) and Sh. Abdul Sattar Lasi v. Federation of Pakistan through Secretary, Ministry of Law, Justice and Parliamentary Affairs, Islamabad and 6 others (2006 CLD 18) and submitted that impugned provision Is unconstitutional and invalid.
5. Mr. Gohar; Aslam, Advocate, narrated the history and background of Article 4, as has been stated in the case of Aftab Shahban Mirani v. President of Pakistan and others (1998 SCMR 1863) and submitted that notice of recovery, without determination of amount due and without adopting the process of law, is illegal and unlawful. Learned counsel, in support of his contention, made reference, to the case of Abdul Latif v. Government of West Pakistan* PLD 1962 S.C. 384) to contend that determination of liability must be conducted in accordance with requirement of 'substantial justice'. He further submitted that the Constitutional jurisdiction of this Court can be invoked to challenge the validity of laws, which offend fundamental rights of the citizens, by citing cases ot Syed Ali Shah v. Abdul Saghir Khan Shervani (PLD 1990 S.C. 504), Mehram Ali and others v.
Federation of Pakistan and others (PLD 1998 S.C. 1445) and Al-Jehad Trust (Supra). Mr. Iftikhar Ullah Malik, Advocate submitted that a loan secured by Pledge is the one, where the mortgagor/pawnor and the principle borrower are distinct persons. The bank can proceed against the mortgagor under Section 15 and can ignore the principal security i.e. Pledge. He added that Section 19 speaks of making offer and permission to sell a portion instead of the whole of the mortgaged property, thus loan amount can be satisfied through sale of that . Portion of the mortgage property. These remedies are not available to a customer, after impugned provisions are invoked.
6. Mr. Salman Aslam Butt, Advocate, assisted by Mr. Ali Qureshi, Advocate contended that Section 15 of the Ordinance, 2001, offends Articles 2-A, 3, 4, 9, 18, 23, 24 and 25 of the Constitution of Islamic Republic of Pakistan. He referred to the provisions of sub-sections (4), (5), (11), (12) and (13) and submitted that scheme of the section is sale of mortgage property without determination of the liability of the customer in the first instance. He also referred to similar provisions in the other laws 'i.e. Sections 5(r), 25, 25-A and 31-D of National Accountability Ordinance, 1999, preamble and Section 10 of Corporate and Industrial Restructuring Corporation Ordinance of 2000, Sections 9 and 10 of the Non-Performing Assets and Rehabilitation of Industrial Undertaking (Legal Proceedings)
Ordinance, 2000, the preamble of Banking Tribunal Ordinance, 1984, Sections 3, 6, 9, and 54 of the Transfer of Property Act, 1882, Section 2(6) of the Registration Act, 1908, Section 3(25) of the General Clauses Act, 1897 and Section 9 of the Code of Civil Procedure, 1908 and compared these provisions with impugned provision of the Ordinance. Learned counsel then submitted that all these provisions contemplate the issuance of notice of the affected for fair decision or recommendation on the basis of "satisfaction" of the authority or committee, It is contended that "satisfaction" Is a term of art Which means "legal satisfaction with an unprejudiced mind'. When an "opinion" is formed, it must be based on some material if the Authority's satisfaction thereof is material for a decision, it has to give reasons, while reaching such conclusion. Case of Benazir Bhutto v. President of Pakistan (PLD 1998 S.C. 388) was referred in support of this contention. He went on to argue that National Accountability Ordinance, 1999 provides for Conciliation Committee' comprising two representatives of NAB, two Chartered Accountants to be appointed by NAB and one Chartered Accounts by ICMA. He further submitted that the honourable Supreme Court in the case of "Asfandyar Waif' (Supra) recommended that guilt or innocence of defaulter, shall be to the satisfaction of Governor of the State Bank and same shall be subject to final decision of the Accountability Court, It was explained that laws relating to non-performing loans and the provisions of CIRC Ordinance make the report of Governor State Bank of Pakistan as well as the recommendations of Committee, subject to the security of the High Court.
7. Learned counsel referred to the case of Sh. Abdul Sattar Lasi (Supra) wherein the Honourable Baluchistan High Court, examined the provisions of Section 15 and declined to hold the same as ultra vires the Constitution. He explained that learned Court based its findings on the grounds that presumption of truth is attached to the statement of account and identical provision (Section 69 of Transfer of Property Act) has been validly enforced for over a century. The Honourable Court also relied on the case from Indian Jurisdiction Muthialpet Benefit Fund Limited v. Devarajulu Chetty and others (AIR 1955 Madras 455). He contended that provisions of Section 69 of Transfer of Property Act (Indian) are not in pari material to the Act (ibid) and the judgment from Indian jurisdiction on the subject is not relevant. He then drew our attention to Article 48 of* Qanun-e-Shahadat Order, 1984 and the illustrations thereunder to contend that entries in the statement of account are relevant but in the absence of any corroboration, do not prove the debt. Learned counsel submitted that a mortgage within the meaning of Section 69(1 )(b) of Transfer of Property Act, 1882, where mortgagee is Federal or Provincial Government or a banking company, is subject to the conditions as may be prescribed by a notification in the official Gazette, as per the proviso to Section 69 (ibid), thus in the absence of rules and regulations, Section 69 of Transfer Of Property Act is incomplete.
8. Lt was contended that banking in modern days has become complicated and the provisions of laws relating to banking transaction, can only be interpreted as they exist today and not when the Transfer of Property Act was promulgated. These aspects were not before the Court when the judgment in "Lasi's ease'' (supra) was rendered. Learned counsel went on to argue that independence of the judiciary is the most sacred pillar of three organs of State. No one can transgress or make inroads into it. Any legislation impinging on the judicial powers of the judiciary, is ultra vires the Constitution of Islamic Republic of Pakistan. Cases of Haji Ghulam Zamin and another v. A.B. Khondkar and others ". (PLD 1965 Dacca 165) and Province of Punjab and another v.
National Industrial Cooperative Credit Corporation and another (2000 SGMR 597) were cited to support this contention. Referring to the case of Agricultural Development Bank of Pakistan v.
Sanaullah Khan and others (PLD 1988 S.C. 67), it was contended that existence of mortgage is not the presumption of debt, It has been emphasized that determination of debt is the first step towards its recovery. Further reference was made to the cases of Messrs Grain System (Pvt.) Ltd.
Karachi v. Agricultural Development Bank of Pakistan, Islamabad (1993 MLD 1031) and Asim Textile Mills Ltd. And others v. NAB and others (PLD 2004 Karachi 638). Option in the hands of Financial Institutions, to resort to recovery of the debt, under Sections 9 or 15, without reasonable classification, is violative of Article 25 of the Constitution. Learned counsel has referred to the cases of Waris Meah v. State Bank of Pakistan (PLD 1957 S.C. 157), I.A. Sherwani v. Government of Pakistan through Secretary, Finance Division, Islamabad and others (1991 SCMR 1041). Umer Ahmad Ghuman v. Government of Pakistan and others (PLD 2002 Lah. 521), Miss Shehla Zia and others v. WAPDA (PLD 1994 S.C. 693), New Jubilee Insurance Company Ltd., Karachi (PLD 199 S.C. 1126) and Yousaf Textile Mills v. Trust Leasing Corporation (2006 CLD 1191) to .Contend that the fundamental rights of a citizen as guaranteed in the Constitution are sacred and any infringement thereof justifies judicial review by the superior Courts. Here argued that the impugned provision offends the provisions of Order VIII and Order XXI, Rule 29 of C.P.C., Insolvency Act and Sections 133 and 135 of the Contract Act, 1872. An application was also moved for implemented of Directors of High noon Textile Limited to justify the challenge to the constitutionality of law by the share-holders/directors.
9. Messrs Mian Muhammad Kashif and Uzair Karamat Bhandari,'Advocates,. Who represent National Bank of Pakistan, a respondent in various petitions, including Writ Petition No. 5076 of 2007, have defended the impugned provisions of law. Lt is contended that presumption of constitutionality is attached to every legislation and made reference to the case of Pakistan Muslim League (Q) and others v. Chief Executive of Islamic Republic of Pakistan and others (PLD 2002 S.C. 994). Much stress was laid on the submission that the matters involving legislation relating to fiscal or economic issues, are to be adjudged from the angle of its Constitutional viability, although such legislation may suffer from infirmities or inequities. Reliance in this regard was placed on the case of Messrs Elahi Cotton Mills Ltd. And others v. Federation of Pakistan through Secretary, Ministry of Finance, Islamabad and 6 others (PLD 1997 S.C. 582), R.K. Garg v. Union of India and others (AIR 1981 S.C.
2138), Messrs Master Foam (Pvt.) Ltd. And 7 others v. Government of Pakistan through Secretary, Ministry of Finance and others (PLD 2005 S.C 373) and Marida Chemicals Ltd. And others v. Union of- India and others [(2004) 20 C.C. 373). .Learned counsel submitted that reasonable restrictions on fundamental rights are permissible. The reasonableness depends upon circumstances and nature of the right involved, It is the objective which is the yardstick, and not the provision of law. To achieve the objective in public interest, legislature may enact such laws in prevailing circumstances and if it impose restriction, it will be reasonable. To support his viewpoint, he referred to the dictum of judgments in the cases of Saiyyid Abdul A'la Maudoodi ate. v. The Government of West Pakistan and another (PLD 1964 S.C. 673), Universal Tobacco Company, Par Hoti, Mardan through Manager and 9 of the Pakistan Tobacco Board and 3 others (1998 CLC 16'6t _.
Nd Chitta Ranjan Sutar v. The Secretary, Judicial Department, Government of East Pakistan and 2 others (PLD 1967 Dacca 445). Lt was then contended that provisions of Section 15 are normal reasonable and not arbitrary. Learned counsel added, that there are various provisions of law where the creditor can proceed against the debtor or against the surety, without intervention of the Court and the vires of such laws have been declared valid by the Courts. Reliance in this regard was faced on the cases of Narasimhachariar v. Egmore Benefit Society, 3rd Branch Ltd. (AIR 1955 Maddras 135), Alka Ceramics, Piplodi, Himatnagar v. Gujarat State Financial Corporation, ~Ahmedabad and others (AIR 1990 Gujrat 105), Mardia Chemicals Ltd. And others v. Union of ladin and others [(2004) 120 C.C. .373), Danaharata Urus Sdn Bhd v. Kekatong Sdn Bhd (Bar Council Malaysia, intervener) [(2004) 2 MLJ 257] and Sh. Abdul Sattar Lasiy. Federation of Pakistan through Secretary, Ministry of Law, Justice and Parliamentary Affairs, Islamabad and 6 others (2006 CLD 18).
Learned counsel went on to argue that the principles on which the mortgagor is empowered to proceed against the mortgaged property, have been in existence for more than a century and total departure from such established practice, is not justified. The provisions of Section 15 were enacted to enforce the mortgage according to the agreed terms of the mortgage agreement. The enactment is essential to cure massive loan defaults, It was vehemently argued that the provisions of Section 15 are similar to the provisions of Section 69 of the Transfer of Property Act, 1882, Section 176 of the Contract Act, 1872, Section 40 of Industrial Development Bank of Pakistan Ordinance, 1961, Section 25 of Agricultural Development Bank of Pakistan Ordinance, 1961 and Section 54 of Sale of Goods Act, 1930. These provisions remained valid throughout. Similar principle prevails, in the matters of secured creditor and the bank guarantee or letter of credit. Reference was made to the case of Ocean Industries Limited and another v. Industrial, Development Bank (PLD 1966 S.C. 738), whereby Section of IDBP' Ordinance was held valid. Learned counsel further submitted that provisions o'f Section 69 of the Transfer of Property Act, were held according to the injunctions of Islam, in the case of Messrs Bank of Oman Ltd. v. Messrs East Trading Co. Ltd-and others (PLD 1987 Karachi 404). In the Indian jurisdiction, the provision was held as Constitutional, on the touchstone of Article 19(1 )(f) of the Indian Constitution, in the case of Narasimhachariar v. Egmore Benefit Society, 3rd Branch Ltd. (AIR 1955 Maddras 135). Further reliance was placed on the cases, from Indian jurisdiction i.e. Alka Ceramics, Piplodi, Himatnagar v. Gujarat State Financial Corporation, Ahmedabad, and others (AIR 1990 Gujrat 105), M/s. R.K. Industries Plot No. SPL 35, Industrial Estate, Kallur v. A.P. State Financial Corporation and others (AIR 1991 A.P. 174), Haryana Financial Corporation and another v. Jagdamba Oil Mills and another [(20O2) 3 SCC 496); The Director of Industries, U.P. And others v. Deep Chand Agarwal (AIR 1980 S.C. 801) wherein Section 29*of State.
Financial Corporation Act, 1951 (Indian), Section 3 of U.P. PuRjab Moneys (Recovery of Dues) Act, 1965 and provision of Scrutinization and Restructuring of Financial Assets and Security Interests Act, 2002 (Indian) were held to be valid.
10. Learned Deputy Attorney General submitted that Section 15 of the Ordinance, 2001, is a valid piece of legislation, enacted by the Legislature. The impugned provision of law is neither discriminatory nor arbitrary and the same does not offend any of the fundamental rights of the petitioners, It was contended that the mortgagor, at the time of execution of mortgage, is well aware of the provisions a contemplated in Section 15 of 'the Ordinance. If the mortgagor knowingly enters into a bargain, he cannot subsequently at the time of default stage volte face and resile from such commitment and pl6ad that the impugned provision is ultra vires of his fundamental rights. Learned Law Officer submitted that when there is no procedure, provisions of Code of .Civil Procedure will apply, within the contemplation of Section 7(2) of the Ordinance, 2001. Learned Deputy Attorney General mainly relied on Section 29(1) of the State Financial Co-operation Act, 1951, which is a similar provision of law, wherein the mortgagee is given the right to take over the management and possession of industrial concern as .Well'as. The right to transfer, lease or sell the same for realization of debt of the Financial Corporation, deeming the Corporation to be owner of such concern. Constitutionality of that provision was assailed on a number of occasions and it was held in the cases of S.K. Kamiruddin and others v. Union of ladin and others (AIR 1993 Orissa 238), Alka Ceramics, Pipelodi, Himatnagar v. Gujrat State Finance Corporation Ahmedabad and others (AIR 1990 Guj 105), Messrs Surprise Hotel (Pvt.) Ltd. V. U.P. Financial Corporation and others (AIR 1998 Allahabad 24), Messrs R.K. Industries Plot No. SPL 35, Industrial State, Kallur v. A.P. State Finance Corporation and others (AIR 1991 Andra Paradesh 174) and Messrs Kharavela Industries (Pvt.) Ltd. v.
Orrisa Finance Corporation and others^ (AIR 1985 Orissa 153) that the provision of law is valid and does not offend fundamental rights of a citizen. Learned counsel contended that the Courts in the Indian jurisdiction have laid down that resort to Section 29 (ibid) by the Corporation, is the power which a party to an agreement, bestow upon another, just like a mortgagee is conferred authority under Section 69 of the Transfer of Property Act, whereby he opts to take steps for speedy recovery or in case of difficulty, to make a resort to Court of law. Corporation in such situation acting as trustee, would act reasonably and the option under Section 29 is not arbitrary, unreasonable and violative of Articles 14, 19, 21 and 300-A of Constitution (Indian). Learned Deputy Attorney General went on to argue that the impugned provision provides for issuance of three notices and after examining the replies (if any) the Financial Institution proceeds against such mortgagor under Section 15. Impugned Section is invoked when there is a default and there exists a valid mortgage.
A confident borrower, who is sure that there is no default or there exists no mortgage, can approach a Banking Court, under the provisions of Ordinance, 2001. While referring to sub-section
(11) (ibid), it is contended that a remedy after the sale of mortgage property, is available to the mortgagor. He has submitted that sale of mortgage property is subject to certain conditions and restrictions, which are identical to Indian as well as Pakistani law (Transfer of Property Act). He has submitted that the provisions of Section 69 of Transfer of Property Act are also identical and similar to the provisions of Section 25 of ADBP Ordinance, 1961, Section 176 of the Contract Act, Section 40 of IDBP Act and Sections 46 and 54 of Sales of Goods Act. These provisions are being enforced and the validity thereof has remained unexceptionable. He submitted that challenge to the above provisions was considered in the cases of Muthialpet Benefit Fund Limited (Supra) and Narasimbachariar v. Egmore Benefit Society, 3rd Branch Lt(i. (AIR 1955 Mad 135) and the provisions were declared valid and Constitutional.
The respondents were' also represented by other counsel, who adopted the line of arguments of learned Deputy Attorney General and M/s, Uzair Karamat Bhandari1 and Mian Muhammad Kashir, Advocates.
11. We have considered the oral as well as written submissions and perused the record.
12. For proper appreciation of the controversy involved in these petitions, it would be imperative to reproduce the relevant section, which reads thus:- "15. Sale of Mortgaged property - (1) In this section, unless there is anything repugnant in the subject or context:-
(a) - "mortgage" means the transfer of an interest in specific immovable property for the purpose of securing the payment t of the mortgage money or the performance of an obligation which may give rise to a pecuniary liability;
(b) "mortgage, money" means any finance or other amounts relating to a finance, penalties, damages, charges or pecuniary liabilities, payment of which is secured for the time being by the document by which the mortgage is effected or evidenced,, including any mortgage deed or memorandum of deposit of title deeds, and
(c) "mortgage property" means immovable property .Mortgaged to a financial institution.
(2) In case of default in payment by customer, the financial institution may send a notice on the mortgagor demanding payment of the mortgage money outstanding, within fourteen days from service of the notice, and failing payment of the amount within due date, it shall send a second notice of demand for payment of the amount within fourteen days, In case the customer on the due date given in the second notice sent, continuous to default in payment^ financial institution shall serve a final notice on the mortgagor demanding the payment of the mortgage money outstanding within thirty days from service of the final notice on the customer.
(3) When a Financial institution serves a notice of demand, all the powers of the mortgagor in regard to recovery, of rents and profits from the final mortgaged property shall stand transferred to the financial institution until such notice is withdrawn and it shall be the duty of the mortgagor to pay all rents and profits from the mortgaged property to the financial institution: Provided that where the mortgaged property is in the possession of any tenant or occupier other than the, mortgagor, it shall be the. Duty of such tenant or occupier, on receipt of notice^n this behalf from the financial institution, to pay the rent or lease money or other consideration agreed with the mortgagor to the financial institution.
(4) Where a mortgagor fails to pay the amount as demanded within the period prescribed under subsection (2), and after the due date given In the final notice has expired, the financial institution may, without the intervention of any Court, sell the Mortgaged property or-any part thereof by public; auction, and appropriate the proceeds thereof towards total partial satisfaction of the outstanding mortgage money: Provided that, before, exercise of its powers under this sub-section, the financial institution shall cause to be published a notice in one public English daily newspaper with wide circulation and one Urdu daily newspaper in the Province in which the mortgaged property is situated, specifying particulars of the mortgaged property including name and address of the mortgagor, details of the mortgaged property, amount of outstanding mortgage money and indicating the intention of the financial institution to sell the mortgaged property. The financial institution shall also send such notices-to all persons who, to the knowledge of the financial institution, have an interest ' In the mortgaged property as mortgagees.
(5) The financial institution shall be entitled, in its discretion, to participate in the public auction, and to purchase the mortgaged property at the highest bid obtained in the public auction.
(6) Where the mortgagor or his agent or servant or any person put in possession by .The mortgagor or on account of the mortgagor does not voluntarily give possession of the mortgaged property sought to be sold or sought to be purchased by the financial institution, a Banking Court on application of the financial institution or purchaser shall put the financial institution or purchase, as the case may be in possession of the mortgaged property in any manner deemed fit by it: Provided that the Banking Court may not order eviction of a person who is in occupation of the mortgaged property or any part thereof under a bona fide lease, except one expiry of the period of the lease, or on payment of such compensation as may be agreed between the parties or as may be determined to be reasonable by the Banking Court.
Explanation. - (1) Where the lease is created after the date of the mortgage and it appears to the Banking Court that the lease was created so as to adversely affect the value of the mortgaged property or to prejudice the rights and remedies of the financial institutions, it shall be presumed that the lease is not bona fide, unless proved otherwise.
(7) For purposes of execution and registration of the sale-deed in respect of the mortgaged property, the financial institution shall be deemed to be the duly authorized attorney of the mortgagor and a sale-deed executed and presented for registration by duly authorized attorneys of the financial institution shall be accepted for such purposes by the Registrar and Sub-Registrar under the Registration Act, 1908 (XVI of 1908).
(8) Upon execution and registration of the sale- deed of the mortgaged property in favour of the purchaser all rights in such mortgaged property shall vest in the purchaser free from all encumbrances and the mortgagor shall be divested of any right, title and interest in the mortgage property.
(9) Net sale proceeds of the mortgaged property, after deducting all expenses of sale or expenses incurred in any attempted sale, shall be distributed ratably amongst all mortgagees in accordance with their respective rights and priorities in the mortgaged property. Any surplus left, after paying in full all the dues of mortgagees, shall be paid to the mortgagor.
(10) A financial institution which has sold mortgaged property, in exercise of powers conferred herein shall file proper accounts of the sale proceeds in a Banking Court within thirty days of the sale.
(11) All disputes relating to the sale of the mortgaged property under this section including disputes amongst mortgagees in 'respect of distribution of the sale proceeds, shall be decided by the Banking Court.
(12) Neither the Banking Court nor the High Court, shall grant an . Injunction restraining the sale or proposed sale of mortgaged property unless:-
(a) it is satisfied that no mortgage in respect of the immovable property has been, created; or
(b) All moneys secured by mortgage of the mortgaged property have been paid; or
(c) the mortgagor or objector deposits in the Banking Court in cash the outstanding mortgage money.
(13) The rights and remedies provided under this section are in addition to, and not in lieu of, any other rights or remedies a financial institution may have under this Ordinance.
(14) ,The provisions contained in this section shall have effect notwithstanding anything contained in this Ordinance."
13. An analysis of above provision of the Ordinance, gives clear inference that:-
(i) The provision is invoked against the mortgagor for recovery of mortgage money, which' includes finance, penalties, damages, charges or pecuniary liabilities, in ease of default., in payment by customer/mortgagor. The Financial Institution can proceed for the sale of the mortgage property, after serving three notices upon him (mortgagor).
(ii) By issuance of notice of demand, the power of mortgagor regarding: collection of rents and profits vests with Financial Institution.
(iii) Financial Institution,, after issuance-of notice and in the event of non-payment in response thereto, can proceed to sell the mortgage property without intervention of Court.
(iv) Financial Institution is entitled to:-
(a) participate in auction;
(b) purchase mortgage property;
(c) take its possession;
(d) apply to the Banking Court to he put in possession of mortgage property, if there is resistance by mortgagor;
(e) execute sale-deed and get it registered;
(f) transfer the mortgage property without encumbrance;
(g) adjust all expenses of sale; and
(h) distribute sale proceeds amongst the mortgagees and pay to the mortgagor surplus, if any.
(v) Financial Institution is required to file accounts and disputes relating to mortgage and the detail of distribution of the proceeds amongst the mortgagees are to be resolved by the. Banking Court. An embargo has-been placed on the powers of the Banking Court And also of the High Court, to issue or grant injunction restraining sale, unless the Court is satisfied that ho mortgage has been created or mortgage money has been paid or the same is deposited in the Banking Court.
14. The proposition which is required to be addressed is that whether the impugned provision is intra vires or ultra vires the law. The provision itself, came up for consideration before the High Court. Of Baluchistan and was answered in the affirmative (Lasi's case [supra]) declaring that provisions of Section 15 of the Ordinance, 2001, are intra vires the Constitution. The reasoning given in this context was two-fold that presumption of truth is attached to the statement of accounts and a similar provision in this context had been enacted in Section 69 of the Transfer of Property Act, 1882, which has .Been in vogue for a period of more than hundred years. Additionally it was held that this provision was challenged several times and was found to be intra vires. The Honourable Court in its finding relied upon the case of Alka Ceramics, Piplodi, Himatnagar v.
Gujarati State Financial Corporation, Ahmedabad and others (AIR 1990 Gujrat 105). But the proposition made out before us is distinguishable on facts as well as on law. The first exception in this context is that Section 69 of the Transfer of Property Act, legislated in India and the Transfer of Property Act as legislated in Pakistan are not identical, rather different, thus, reference made to Indian precedents are exceptionable and would not govern the one as incorporated in Section 69 of the Transfer of Property Act of Pakistan. The other exception to the judgment with utmost reverence and regard Is that the statement of account cannot be taken as gospel's truth; the presumption of correctness attached to its entries, is rebutable. We therefore proceed to discuss the matter in detail, hereinafter.
15. Provisions of Section 69 of the Transfer of Property Act (Indian) are different and distinct from our Transfer of Property Act as are shown in the table below:- Transfer of Property Act, 1882(Pakistan) Transfer of Property Act 1882 (Indian
69. Power of sale when valid: (1) A mortgagee, or any person acting on his behalf, shall, subject to the provisions of this section have power to sell or concur in selling the mortgaged property, or any part thereof in default of payment of the mortgage-money, without the intervention of the Court, in the following cases and in no order, namely:----69. Power of sale when valid; A mortgagee, or any person acting on his behalf, shall, subject to the provisions of this section, have power to sell or concur in selling the mortgaged property, or any part thereof, in default of payment of the mortgage-money, without the intervention of the Court. In the following cases and in no other, namely:--- ( a) Where mortgagee is an English mortgage, and neither the mortgagor nor the mortgagee is a Hindu, Muhammadan or Buddhist or a member of any other race, sect, tribe or class from time to time specified in this behalf by the provincial Government in the Official Gazette;( a) Where mortgagee is an English mortgage, and neither the mortgagor nor the mortgagee is a Hindu, Muhammadan or Buddhist or a member of any other race, sect, tribe or class from time to time specified in this behalf by the provincial Government in the Official Gazette;
(b) Where power of sale without the intervention of the Court is expressly(b) Where power of sale without the intervention of the Court is expressly conferred on the mortgagee by the mortgage is the Government [or a scheduled Bank as defined in Section 2 of the State Bank of Pakistan Act, 1956 (XXIII of 1956):]conferred on the mortgagee by the mortgage-deed and the mortgagee is Government; (c ) Where a power of sale without the intervention of the Court is expressly conferred on the mortgagee by the mortgage-deed and the mortgaged property or any part thereof was, on the date of the execution of the mortgage- deed, situate within the town of Karachi or in any other town or area which the Provincial Government may, by notification in the official Gazette, specify in this behalf.(c ) Where a power of sale without the intervention of the Court is expressly conferred on the mortgagee by the mortgage-deed and the mortgaged property or any part thereof was, on the date of the execution of the mortgage- deed, situate within the town of Calcutta, Madras, Bombay, or in any other town or area which the Provincial Government may, by notification in the official Gazette, specify in this behalf.
(2) A power under sub-section (1) shall not be exercised unless and until:-(2) No such power shall be exercised unless and until:-- (a ) notice in writing requiring payment of the principal money has been served on the mortgagor, or on one of several mortgagors, and default has been made in payment of the principal money, or of part thereof, for three months after such service; or(a ) notice in writing requiring payment of the principal money has been served on the mortgagor, or on one of several mortgagors, and default has been made in payment of the principal money, or of part thereof, for three months after such service; or
(b) Some interest under the mortgage amounting at least to five hundred rupees is in arrear and unpaid for three months after becoming due: [Provided that the power of scheduled Bank under clause (b) of sub-section (1) shall further be subject to such conditions as may be prescribed in this behalf by notification in the official Gazette by the Federal Government in consultation with the State Bank of Pakistan.(b) Some interest under the mortgage amounting at least to five hundred rupees is in arrear and unpaid for three months after becoming due:
(3) When a sale has been made in professed exercise of such a power, the title of the purchaser shall not be impeachable on the ground that no case had arisen to authorize the sale, or that due to notice was not given or that the power was otherwise improperly or irregularly exercised, but any person damnified by and unauthorized or improper or irregular exercise of the power shall have his remedy in damages against the person exercising the power.(3) When a sale has been made in professed exercise of such a power, the title of the purchaser shall not be impeachable on the ground that no case had arisen to authorize the sale, or that due to notice was not given or that the power was otherwise improperly or irregularly exercised, but any person damnified by and unauthorized or improper or irregular exercise of the power shall have his remedy in damages against the person exercising the power.
(4) The money which is received by the mortgagee, arising from the sale, after discharge of prior encumbrances, if any, to which the sale is not made subject, or after payment into Court under section 57 of a sum to meet any prior encumbrance, shall, in the absence of a contract to the contrary, be held by him, in trust to be applied by him first, in payment of all costs; charges and expenses properly incurred by him as incident to the sale or any attempted sale; and secondly in discharge of the mortgage-money and costs and other money, if any, due under the mortgage; and the residue of the money so received shall be paid to the person entitled to the mortgaged property, or authorized to give receipts for the proceeds of the sale thereof.(4) The money which is received by the mortgagee, arising from the sale, after discharge of prior encumbrances, if any, to which the sale is not made subject, or after payment into Court under section 57 of a sum to meet any prior encumbrance, shall, in the absence of a contract to the contrary, be held by him, in trust to be applied by him first, in payment of all costs; charges and expenses properly incurred by him as incident to the sale or any attempted sale; and secondly in discharge of the mortgage-money and costs and other money, if any, due under the mortgage; and the residue of the money so received shall be paid to the person entitled to the mortgaged property, or authorized to give receipts for the proceeds of the sale thereof. (5) Nothing is this section or section 69-A applied to powers conferred before the first day of July, 1882.
16. A proviso is added to Section 69(2), which reads as under:- "Provided that the power of Scheduled Bank under clause (b) of sub-section (1), shall further be subject to such conditions as may be prescribed in this behalf by notification in the official Gazette by the Federal Government in consultation with the State Bank of Pakistan-"
Sub-Section (1) of Section 69 of the Transfer of Property Act arms the mortgagee with the power to sell or concur in sale of mortgage property in certain cases. Clause (b) of the sub-section (1) relates to the matters, where mortgagee is the Federal Government or a Provincial Government or a Banking Company. Sale of mortgage land, without, intervention of the Court, where the mortgagee is a Banking Company is permissible only when prescribed conditions, as notified by Federal Government, are met. A Banking Company, therefore, can proceed to the -sale of mortgage property, only when prescribed conditions of sale are notified, as envisaged in proviso to Section 69(2), (ibid).
17. Banking transactions in today's world, are complex and intricate. Thus laws are required to be interpreted according to the prevailing banking system, rather than what it used to be when Transfer of Property Act was promulgated.
The mere fact that the provision of Section 69 of the Transfer of Property Act, is century old law and has not been declared invalid over such a long period, by itself wouId not be a justification for validation of another enactment, empowering the mortgagee with the same powers to deal with the mortgage property as the Acts referred to are strictly not in pari materia and there are .Several exceptions in this context. The Legislature in its wisdom, distinguished banking transactions being complex and intricate in nature, has not equated it with simple transactions of mortgage, inter se two individuals. The provisions of Section 69 of Transfer of property Act, 1882 were therefore, found insufficient to cover the disputes of mortgage in a banking transactions and thus, a change was made by ailing a proviso to sub-section (2). This itself clearly establishes that the legislature itself felt the need to amend the Transfer of Property Act, 1882, consequently, the proviso was incorporated through Presidential Order No. IV of 1975. Therefore, it is clear that transfer. Of Property Act was inadequate to deal with banking matters to harmonize it with the present banking transactions an amendment was incorporated, It is also noteworthy that the Constitution is the supreme law of the land and any law in conflict with any provision of the same cannot hold field.
The rights enacted in the Constitution contain an over-riding effect qua alt other laws, therefore, any provision in any other law, which is in conflict with the supreme law, especially the fundamental rights cannot survive. The provisions of Transfer of Property-Act, no matter how old they are, hardly remain a justification for the validation and constitutionality of Section 15 of Ordinance, 2001. We may go further and say that Transfer of Properly Act was enacted when the Constitutional provisions regarding fundamental rights of the-citizen were not the part of the Constitution and conditional sales were permissible under law. Provisions of Transfer of Property Act, will, therefore, be irrelevant consideration to validate ' impugned , provision of the Ordinance.
9. We have already observed in the earlier part of this judgment that Indian judgment touching the provisions of Section 69, have no application to a controversy arising. Frdm the provision of Section 69 of Transfer of Property Act, as the provisions of both the statutes are not similar. Yet we may refer to two decisions of Madras High Court, where the Court even in absence of provision as contained in proviso to Section 69(2) of our Transfer of Property Act, found the provision of Section 69(2) inadequate and deficient, It was held in the case A. Batcha Saheb v. Nariman K. Irani and others (AIR 1955 Mad 491) that a mortgagee when purports to exercise the power of sale under Section 69 of the Transfer of Property Act, without intervention of Court, deprives the mortgagor of bona fide, and substantial defences, like prematurity of salfiend correctness of amount claimed.
Learned Court further ruled that interference by Court staying the sale is justified until the ascertainment of amount "due". Madras. High Court in another case of Damodara Mudaliar v. K.
Abrupammal (AIR 1943 Mad. 301), observed that the mortgagee exercising power of sale under Section 69, cannot purchase property himself, even if, he is authorized to do so under mortgage deed, on the principle of public policy that equity of redemption should not be destroyed except by a decree of Court.
10. The presumption attached to the statement of account is rebuttable, and entries in the statement of accounts alone are not sufficient to prove-the claim of the plaintiff-Bank and corroboration is necessary. As authority for .This proposition, the reference can be made to the cases of Messrs- Muhammad Siddiq Muhammad Umar v. The Australasia Bank Ltd. (PLD 1966 SC 684), Allied Bank of Pakistan .v. Masood Ahmad Khan (1994 MLD 1557), Citibank'N. A. A. Banking Company through Attorney v. Riaz Ahmad (2000 CLC 847) and M/s. United Dairies Farms (Pvt.)
Limited 4 others v. United Bank Limited (2005 CLD 569).
11. Respondents heavily relied upon certain provisions, which exist and are applied, having similarity with Section _ 15, in number of Statutes namely Section 25 of ADBP Ordinance, 1961, Section 40 of IDBP Ordinance, 1961, Section 54 of Sales of Goods Act, 1930 and Section 176 of the Contract Act, 1872. We may examine these provisions, as well.
Recovery of the loan amount, under Section 25 of ADBP Ordinance, 1961 was assailed and came up for consideration before the Honourable Apex Court !n the case of Abdul Akhtar (Supra). The Honourable Court found that the power of the bank cannot .Be equated with the power of judicial forum for determination of amount due, against the borrower notwithstanding the fact that summary power of recovery of amount due has been conferred on it by law with a view to obviate cumbersome procedure of execution of decree as contained on Order XXI of Code of Civil Procedure, 1908. Honourable ^Court went much further and held that recovery of amount by way of appears to land revenue, would be available only when the amount claimed was found due, ascertained and determined by a Court of competent jurisdiction. A similar view has been expressed in the case of Agricultural Development Bank of Pakistan v. Sanaullah Khan (Supra) where at page 75, it was observed that machinery of realization of amount as arrears of land revenue under Section 25 of the Ordinance, could only be invoked after the procedure for determination of "arrears" due is adopted and duly certified.
12. Section 40 of IDBP Ordinance, 1961, empowers the bank; to take over the management of Concern and proceed to its sale, in case of default in payment or failure to comply with the terms of agreement. The section contains a non-obstante clause that the power is . Subject and subservient to Section 39 of the Ordinance. An action for taking over the concern and it's sale or transfer etc. Is, therefore, subject to Section 39, which means that banking company will have recourse to the proceedings under Section 39, and will get its amount ascertained from Court of competent jurisdiction and thereafter proceed under Section 40.
The provisions of Section 54 of Sales of Goods Act, 1930 and Section 176 of the Contract Act? 1872 relate to unpaid seller and the pawnee respectively, who are already in possession of the goods, encumbered. The goods are delivered back to the buyer or the pawner as soon as the price is paid or encumbrance is removed. The position of mortgagee is not at par with pawnee or with the unpaid Seller.
Considering the validation of provisions of Section 15, on the basis of above-referred provisions in other statutes, will be wholly conjectural inference.
13. There are other alike provisions where action against defaulters, have been prescribed but before initiation of such action, a provision has been incorporated which safeguards the interest of the defaulting customer, before the purported action is taken. The National Accountability Ordinance, 1999 provides in Section 25-A, the remedy of moving application to Governor State Bank of Pakistan by an accused of wilful default of the dues of bank etc. For conciliation. A bona fide dispute relating to liability of obligor in respect of non-performing asset, is referred to liability of obligor in respect of non-performing asset, is referred to a "Verification Committee" for correct determination, calculation, existence or repayment of financial obligation or the outstanding loan.
The Conciliation Committee under National Accountability Ordinance, 1999 consists of one nominee of Governor Stale Bank of Pakistan (Chairman), two nominees of NAB, two Chartered Accountants nominated by Governor and one Chartered Accountant nominated by I CMA. The Governor, State Bank of Pakistan, after considering the recommendation is to pass an appropriate order, with proper reasons, to be recorded. CIRC Ordinance, 2000 also contains a similar provision e.g. Resolution of the, disputes through Conciliation Committee. CIRC Ordinance (Ordinance L of 2000) was promulgated for realization of non-performing loans and other assets of banks etc. Recommendations of Committee and findings of Governor regarding calculation of liability of obligor, within the contemplation of Section 12, have presumption of truth and are final. The recommendations and findings have been made final subject to orders of the High Court.
Provisions of Section 12 of Ordinance of 2000 under the provisions of Non-Performing Assets and Rehabilitation of Industrial Undertaking (Legal Proceeding Ordinance), 2000 arc also made applicable to the proceedings,- .Which have not been transferred and the same are pending in Company Courts or in Banking Courts etc. Again under these provisions, decisions of Reconciliation Committee and findings of Governor, State Bank of Pakistan, are made subject to the orders of High Court. As against these provisions (which are enacted for recovery of outstanding amounts/loans of Financial Institutions), the provision of sub-section (12) of Section 15, purport to take away from the High Court its power of judicial review.
14. We now advert to the question of vires of the impugned Section. Constitutional validity of impugned Section 15 of the Ordinance, is sought to be defended by learned counsel for the respondents on the grounds that complex issues, which people face are to be resolved by the legislature in its own wisdom as the statutory provisions are required to be interpreted in a manner that law should be saved rather than destroyed; there is presumption in favour of constitutionality of the legislative enactment the laws relating to economic activities are to be examined liberally in favour of the enactment than the laws relating to civil rights and that legislature enjoys a wide discretion in the matter of selection of persons/entities and reasonable classification is legally permissible among different classes of the citizens. If any restriction is imposed on the proprietary right of a certain person by a law, which is enacted in public interest, with a view to attain certain objective which otherwise are difficult to achieve, the restriction is reasonable.
15. The Constitution being the supreme law has guaranteed fundamental rights of the citizens. Can these rights be compromised on the above pleas, which the respondents have raised in defending the impugned provision of law, when the provision of law, is clearly in conflict with the fundamental rights and tantamount to shut the door of justice to ordinary individuals by placing a class of persons in a derogatory position while at the same time elevating the status of co-litigant as an adjudicator? To answer this preposition, the reference to the cases of Aftab Stiaban Mirani (Supra), Al-Jehad Trust (Supra) and Sharaf Faridi (Supra): will be pertinent and instructive, where the Apex Court has observed that access to justice is a fundamental right, anything to the contrary is not permissible and the Tribunals of limited jurisdiction are required to follow due process of law. Lt has been enunciated that the phrase "due process of /aw" means that individuals are not required to be only dealt with in accordance with law but it qualifies further that the process adopted in this context is open, fair and transparent, therefore, due determination of the default by an unbiased Tribunal or a Court is sine non qua and anything to the contrary is offensive to the legal parameters settled by the Apex Court.
It is observed, one again that the impugned provision is against the principles of equity and treats one of the parties in a disadvantageous position where the parties are not treated alike both in privileges conferred and liabilities imposed, this discrimination is not only against the principles of equity but also offends the provisions of supreme law (Constitution of Islamic Republic of Pakistan i.e. Articles 2-A, 3,4,9, 18, 23, 24 & 25.
16. The Ordinance 2001 confers upon the Financial Institution arbitrary unbridled and uncontrolled powers to follow either of the two procedures in the matter of recovery of amount of debt/finance, secured through a mortgage. First procedure is the filing of a recovery suit under Section 9 of the Ordinance, where the liability of borrower/customer is determined through Court and, thereafter the process of recovery of the ascertained amount initiated, by adopting the procedure of execution or decree as envisaged in Section 19. Second procedure (resort to Section 5) is the sale of the mortgage property, through its auction, after issuance of three notices and adjustment of sale proceeds towards liability of customer, without intervention of the Court and without ascertainment of liability. The Ordinance furnishes no guidance for the exercise of this discretion.
There is no criteria mentioned in the impugned provision forgoing of suit against one customer and proceeding under Section 15 against the other customer. Leaving choice in the hands of creditor (Financial Institution) of pick and choose, it discriminatory, It results into treating borrowers/customers of a bank, unequally, who are otherwise similarly placed. Financial Institution selects either of two modes of recovery, which is discriminatory and infringes the fundamental rights of a citizen. While observing so, we are fortified by the enunciation of the Honourable Supreme Court laid down in the case of ''Waris Meah" (supra) and followed in the case of Inamur Rehman v. Federation of Pakistan and others (1992 SCMR 563).
17. There is a visible and striking conflict and repugnancy between two provisions of the Ordinance i.e. Section 9 and Section 15 of the Ordinance. The conflict attracts the application of theory of "Reading Down", which is rule of interpretation, resorted to by the Courts, when provision of law is found to be such that it offends fundamental rights or it falls outside the ambit of competence of a particular legislature. Section 9 provides for procedure for ascertainment of liability through proper adjudication keeping in view the principles of natural justice, fair-play and equity. The provisions of Section 15 impugned herein are plainly discriminatory, provides no procedural machinery for ascertainment or determination of amount due and violates fundamental rights of the citizens. The impugned provision does not conform to the paramount law i.e. The Constitution of Islamic, Republic of Pakistan and the same cannot survive or exist in view of former provision of law. There is no cavil with the proposition that when there is conflict between two provisions, the one which obeys to prescription of Natural Justice, reasonableness, equality between citizens and yields to due process of. Law, has to survive as against the one which is unjust, arbitrary and deprives a person of his property without due process of law.
18. After examining in detail the provisions in question as-raised by the contestants, we advert to Section 15(1 )(a) of Ordinance No. XLI of 2001 wherein term "mortgage" reads:- "mortgage" means the transfer or an interest in specific immovable property for the purpose of securing the payment of the mortgage money or the performance of an obligation which may give rise to a pecuniary liability."
Two important words have been incorporated, in this definition namely performance of an "obligation" and "gives rise to a pecuniary liability".
The word "obligation" has been defined in Section 2(e) in the following manner:- "obligation" includes:-
(a) any agreement for the repayment or extension of time in repayment of a finance or for its restricting or renewal or for payment or extension of time in payment of any other amounts relating to a finance or liquidated damages; and
(ii) any-and all representations, warranties and Covenants made by or on behalf of the customer to a financial institution at any stage, including representations, warranties and covenants with regard to the ownership, mortgage, pledge, hypothecations or assigned of, or other charge on, assets or properties or repayment of a finance or payment of any other amounts relating to a finance or performance of an understanding or fulfillment of a promise; and
(Hi) all duties imposed on the customer under this Ordinance."
The word "liability' has not been defined in the Ordinance, In these circumstances the word has to be examined in the ordinary dictionary meaning:- "liability' as per Black's Law Dictionary reads:- ' "The quality or state of being legally obligated or accountable, legal responsibility to another or to society, enforceable by civil remedy or criminal punishment."
The Concise Oxford Dictionary reads:- "the state of being liable, a person or thing that is troublesome as an unwelcome responsibility, a handicap, what a person is liable for, esp~ (in pi.) debts or pecuniary obligations."
Webster's New International Dictionary.
"State or quality of being liable, as, the liability of an insurer, that which one is under obligation to pay, or for which one is liable, specific, in the all, ones pecuniary obligations, or debts, an amount which is' owed, whether payable in money other property, or services, for a liability accused."
From the above, it is dear that "liability" means a legal , responsibility to another or society, enforceable by a "civil remedy' or "criminal punishment'. The word "civil remedy' is very significant and of paramount importance. "Civil liability' is always adjudged in a civilized, manner and, ordinarily by resorting to the Courts through the process of trial, where ample opportunity is granted to the contestants to prove their claims, not only by oral discussion but by documentary evidence as well. Even in case where determination is not possible ,by the Courts of ordinary jurisdiction and matters are referred to Tribunals, the matter is adjudicated upon keeping in view the principle of natural justice, which is right of hearing and defence, therefore, it can safely be assumed that this right granted to the individuals cannot be compromised in any manner, whatsoever, It is in the backdrop that the provisions of Section 15(2) are to be construed and read.
A plain reading of Section 15 of Financial Institutions (Recovery of Finances), Ordinance, 2001 reflects that the parties to the dispute are not equal, in fact, the status of the bank is elevated at par with the Courts of law and it becomes Judge of its own cause. Rather it has been bestowed with even more arbitrary authority than a Court of law. For, Section 19 of the. Ordinance controls the powers of the Banking Court to execute a decree, it adverts to the Code of Civil Procedure especially Order XXI of C.P.C. Necessary compliance of the parameters set in Order XXI, is mandatory requirement if the decree-holder chooses the course of execution under Order XXI.
Impugned provision, bestows upon the Bank the powers to: participate in the auction proceedings, which is a departure from the reles of natural justice and equity, It is an indicator that a right has been bestowed upon the Bank, which compromises the principles of transparency and determination. Thus It is clearly in conflict with the supreme law of the land (The Constitution, In the present scenario the status of a customer is relegated to that of a litigant before a Bank with the rider that he is left defenceless and cannot raise objection in any manner, whatsoever, to the process adopted by the Bank in terms of section 15 {ibid). The impugned provision is thus clear- discrimination against the principles and norms of justice and as such cannot sustain, scrutiny of the Courts.
29. We have examined the impugned provision, compared it with other similar provisions of law and viewed the provision of law, on the touchstone of Articles 2 A. 3, 4, 9, 23, 24, 25 and.175 of the Constitution and analysis yields the clear inference that impugned provision suffers from, various, legal infirmities and vices:- Firstly, no procedure is provided be adopted for public auction.
Secondly, the provision is silent as to the manner of fixing reserve price.
Thirdly, the financial Institution is conferred with the authority to sell and itself purchase the mortgage property, transfer the same and get the sale-deed registered in the name of purchaser.
The omnibus powers of the Financial Institution are also against the public policy. Financial Institution by virtue of impugned provision becomes the buyer, the seller and the registering or transferring' authority. Unbridled powers in the hands of the mortgagee to sell the property, purchase the same and get it transferred in its name, by all means is unequal treatment and the rights of mortgagee are preferred over the interest of mortgagor. The Financial institution in this exercise sits as judge of its own cause.
Fourthly, a loan, which is also secured by, pledge, is to be recovered from sale of the pawner's pledged goods. The pawnee can legally recover its debit only when such pawnee is in a position to deliver back or return the pledged goods. Financial Institution through impugned provision, can recover the debts through sale of mortgage property, even when the Financial Institution is unable to deliver the pledged goods.
Fifthly, the impugned enactment prescribes the mechanism of recovery from mortgagor and principal borrower but is silent about recovery from Financial Institution or its obligation to pay.
Both the parties are not treated equally which is against the spirit of Articles 4 and 25 of the Constitution.
Sixthly, a time-barred debt -can be recovered under the impugned provision and valuable rights of the borrower are snatched, smothered and stymied, which have accused to customer with the flux of time. Snatching away of such rights is against the mandate of Articles 4, 23 and 24 of the Constitution.
Seventhly, the mortgagee can recover the . Penalties, other charges and damages without any proof thereof, which is exploitative on its part and violation of Articles 2-A, 3 and 4 of the Constitution.
Eighthly, the mortgage property is auctioned 1 / for recovery of an amount, which is unascertained and undetermined. Financial Institution can sell the mortgage property without proving that the mortgage was created for the loan sought to be recovered through sale or it relates to some other loan between the same parties. The powers of the Financial Institution are clearly violative of Articles 2-A, 3, 4, 23 and 24 of the Constitution.
Ninthly, the impugned provision has failed to save the borrower from mala fide action of the lender, which offends Articles 2-A, 3, 4 and 9 of the Constitution.
Lastly, the powers of the Courts are curtailed and a bar is imposed on the Court to restrain sale under the impugned provision. The provision is impinging upon the power of the Court, as enshrined in Articles 2-A and 175 of the Constitution.
30. For what has been discussed above, we find that the provisions of Section 15 of the Ordinance are repugnant to the provisions of the Constitution and is in conflict with the fundamental rights.
We, therefore, have no hesitation to hold that such provisions cannot survive on the touchstone of Articles 2-A, 3, 4, 9, 23, 24, 25 and 175 of the Constitution. The impugned provision is declared ultra vires , the Constitution and is of no legal effect.
31. The cases, which have attained finality i.e. Where the possession of the mortgage properties have already been delivered, sale proceeds stood adjusted x towards outstanding amounts and sale-deeds have been registered, under the impugned provision, are past and ' closed transactions and this judgment will not affect such sales. The other sales under the impugned provision, which have not attained finality are declared illegal and are set aside. The auction price received by the Financial Institutions in respect of the sales, which have not attained finality shall be refunded to the auction-purchasers within a period of one month from the date when he approaches the Financial Institution, In view of the above, all such petitions,' which fall within the parameters discussed above, are accepted. However, in view of intricacies involved, parties will bear their own costs.
(SYED HAMID ALI SHAH)
JUDGE I have added a note of concurrence.
(SAYED ZAHID HUSSAIN)
JUDGE agree.
(SYED ASGHAR HAIDER)
JUDGE Petition accepted. ** SAYED ZAHID HUSSAIN, CJ. - On perusal of the proposed judgment prepared by my learned brother Syed Hamid Ali Shah, J. I find nothing useful to be added to the elaborate and .Well- considered judgment as in that undoubtedly all the material aspects of the matter have carefully been dealt with. However, I consider if appropriate to append a brief note of concurrence concerning purely the were of statutory provisions.
2. At the outset it may be mentioned that while construing a law or its provisions, the legislative history and progression of law assumes significant importance. Thus the background of the impugned provisions of law /.e. S. 15, of the Financial Institutions (Recovery of Finances) Ordinance, 2001 need to be kept in view, It was the year 1978, when 'Banking Companies (.Recovery of Loans)
Ordinance, 1978 was promulgated which provided for the special forum and special procedure for the recovery of loan amounts. Before that civil suit used to be the mode of recovery and the procedure provided for by the Code of Civil Procedure, 1908 had to be followed. Under the Ordinance of 1978, Special Courts were established for expeditious and speedy recovery of loan.
The said Ordinance was repealed and reenacted through Ordinance XIX of 1979 with the same nomenclature. This Ordinance also underwent certain changes and eventually Banking Tribunals Ordinance of 1984 was enforced in the year 1984. Under this Ordinance, Banking Tribunals were constituted. The establishment of such Banking Tribunals was assailed through petitions under Article 199 of the Constitution of the Islamic Republic of Pakistan, 1973, which were heard by a learned Full Bench of this Court and the judgment so rendered by the Full Bench on 21.7.1996 is well- known i.e. Messrs Chenab Cement Product (Pvt.) Ltd: and others, v. Banking Tribunal, Lahore and others (PLD 1996 Lahore 672). The crux of the judgment was that certain provisions of the Ordinance (S. 4, S. 6(6) and Proviso to S. 9) were declared unconstitutional as these erode the independence of judiciary and are hit by Article 175 read with Articles 2A, 4, 8 and Article 25 of the Constitution". The appointment of Presiding, Officers of the said Tribunals was also held unconstitutional and without lawful authority. After that judgment, the law was re-enacted, called as the Banking Companies (Recovery, of Loans, Advances, Credits and Finances) Act, 1997. By this law. Banking Courts were established. This law also could not just long and was repealed through the Financial Institutions (Recovery of Finances) Ordinance, 2001. Lt is this law which presently holds the field, It may be noted that object and purpose of the above legislative progression was the speedy and expeditious recovery of the loans/dues of Financial Institutions. The peculiar and special features of the above legislations were named in Muhammad Ayub But v. Allied Bank Ltd., Peshawar and others (PLD 1981 S.C. 359), Hudaybia Textile Mills Ltd. And others v. Allied Bank of Pakistan Lid. And others (PLD 1987 S.C. 512); Pakistan Fisheries Ltd., Karachi and others v. United Bank Ltd. (PLD 1993 S.C. 109), Messrs Chenab Cement Product (Pvt.) Ltd. v. Banking Tribunal, Lahore and others (PLD 1996 Lahore 672) and Agricultural Development Bank of Pakistan and another v. Abid Akhiar and others (2003 SCM 1547). Speedy recovery of dues of the banking companies and financial institutions was the object and purpose of these successive legislative measures.
3. There can be no cavil that if anybody has obtained loan or availed financial facility, it becomes his moral and legal, obligation and duty to return the same in accordance with the terms and conditions, the same was obtained and availed; and in case of failure and default, the Banking Company/institution is entitled to seek the remedy for securing its interest and recover the amount due. Whereas the creditor has the right to recover whatever is due, the borrower/customer is entitled to get the determination made of the-due amount. Both have certain rights and obligations and to be dealt in a just and fair manner. Adequate analysis of the relevant provisions has been undertaken in the judgment of my learned brother, I would, however, venture to add that the term "default' has got special significance in the context of provisions of S. 15 of the Financial Institutions (Recovery of Finances) Ordinance, 200I.. "Default" as commonly understood is a large and loose word 'i.e. Failure to do or pay what one should do. In Irfan Gul Magsi v. Haji Abdul Khaliq Soomro and others (1999 PTD 1302), It was observed that "Every failure on the part o f a person without any ulterior design and mala fide intention would not equate with the expression "default" as used in its strict legal sense. Before a person is declared to be in default, it is absolutely necessary that there should have been a demand to make payment of a determined sum which should have remained un responded and unattended for a period beyond the period prescribed by law." Even under the laws which provide for the recovery through the coercive process i.e. As land revenue, it is necessary to make determination of the amount due and a mere claim by, one party to a particular amount, cannot be made basis for the enforcement of coercive procedure, In Agricultural Development Bank of Pakistan and another v. Abid Akhtar and others {2003 SGMR 1547), it was observed that the "petitioner bank (Agriculture Development Bank of Pakistan) cannot be equated with a proper judicial forum for determination of the amount due against a borrower notwithstanding the fact that summary power of recovery of amount due has been conferred on it by law with a view to obviate cumbersome procedure of execution of decree as contained in Order 21 of the Code of Civil Procedure, 1908 and the Banking Law", It was further observed that in the event of substantial dispute between the parties, the recovery of such procedure would be available "only where the amount claimed was found due, ascertained and determined by a competent judicial forum". The rationale behind was that unbridled, unjust and arbitrary power could, not be attributed to have been conferred on such functionaries. The provisions of S.15 of the Financial Institutions (Recovery of Finances) Ordinance, 2001 indeed vest the Financial Institutions with a vast and, extensive power of selling the properties of mortgagers without intervention of the Court, and without due determination of amount. This unguided, arbitrary and unreasonable power, which is amenable to discretionary and discriminatory exercise is contrary to all norms of justice and need to be tested on the touchstone of the Constitutional, provisions, being the fundamental and basic law of the land. Reference in this context may be made to M/s. Bervzair Bhutto v. Federation of Pakistan and another (PLD 1988 S.C. 416), Mrs. Benazir Bhutto and another v.
Federation of Pakistan and another (PLD 1989 S.C. 66), Inamur Rehman v. Federation of Pakistan and others (1992 SC MR 563), Messrs Chenab Cement Product (Pvt.) and others v. Banking Tribunal, Lahore and others (PLD 1996 Lahore 672) and Mehram Ali and others v. Federation of Pakistan and others (PLD 1993 S.C. 1445). This aspect has accurately been dealt with by S.M: Zafar in "UNDERSTANDING STATUTES - CANONS OF CONSTRUCTION" revised Edition 2008 at Page 832 as follows:- "Interpretation of the Constitution is a prerogative and the duly of the Superior Courts, In cases of conflict between the supreme law of the Constitution and an enactment it is the duty of the Courts as its preservers, protectors and defenders to declare the enactment in question as invalid to the extent of its repugnancy with Constitutional provision in absence of any bar either express or implied. At the same time it is the duty of the Courts to interpret the Constitution as an organic whole giving due effect to its various parts and trying to harmonize them so as to make the statute an effective and efficacious instrument of the government of the said country ...... When an Act- of Parliament (Congress) is appropriately challenged in the Courts as not conforming to the Constitutional mandate the judicial branch of the government has only one duty-to lay the Articles of the Constitution which is invoked besides the Statute which is challenged and to decide whether the latter squares with former.
Under the Pakistan Constitution there is a flat rule of hierarchical priority that the Constitution prevails over a conflict Statute.
Indian position is the same that a Court always has the power to strike down any enactment when tested against the Constitution.
The issue was settled in United States long time ago as Marshell, CJ declared in Marbury v.
Medicine that "an Act repugnant to the Constitution is void .... Courts as well as other departments are not bound by that instrument."
Therefore, if. There is a conflict between any subordinate legislation and the Constitutional provision and the inconsistency cannot be reconciled then the subordinate legislation, insofar as it -is ..Repugnant to the Constitutional provision, cannot be given effect to". These are firmly established norms of interpretation paraphrased by the learned author. Since my learned brother has found the impugned provisions of S. 15 of the Financial Institutions (Recovery-of Finances)
Ordinance, 2001, in conflict with the Constitutional provisions on sound judicial principles, would not dwell on this subject anymore.
4. At this juncture it may be observed that I am not oblivious or my judgment in United Bank Limited v. Defence Housing Authority (PLJ 2004, Lahore 323) and consider it my duty to refer to the same, In that case after the decree by the Banking Court, the decree-holder bank had disposed of the property through auction and issue arose about the implementation of the said sale wherein provisions of*Sections 15 and 19 of the Financial Institutions (Recovery of Finances) Ordinance, 2001 were cited. As the perusal of the judgment would show, issue of vires or validity of provisions of ,S- 15 of the Financial Institutions (Recovery of Finances) Ordinance, 2001 did not arise in that case, It may thus be clarified that the observations appearing in that case cannot be treated as a precedent for the proposition in the instant case. This is what I thought fit to add for amplification and clarification through this note, concurring with the conclusions of my learned brother.