FAQIR MUHAMMAD KHOKHAR, J. --- This appeal under Article 185 of the Constitution of Islamic Republic of Pakistan, by leave of the. Court, is directed against judgment dated 11.7.2002, passed by a learned Division Bench 'of the High Court of Sindh, Karachi, whereby Constitutional Petition No. D- 1506 of 2000, of the respondents was allowed and the order dated 21.9.2000 of cancellation of the banking licence of the Indus Bank Limited, by the Governor, State Bank of Pakistan, was declared to be without lawful authority.
2. The Government of Pakistan, Finance Division, Islamabad, on the application of Mr. S.K. Sohail, Mr. Muhammad A.I Sohail and , 5 others granted permission for establishment of a commercial bank by the name of Franklin Commercial Bank Limited, vide letter dated 26.8,1991, issued under sub-section '(2) of Section 4 'of the Banks (Nationalization) Act No. (XIX of 1974). Subsequently, another application was made seeking grant of a licence to carryon banking business in Pakistan in the name of Indus Bank Limited. Accordingly, the State' Bank of Pakistan issued a licence dated 13.1.1992, under sub-section (1) of Section 27 of the Banking Companies Ordinance, 1962.
3. The State Bank of Pakistan issued a show- cause notice dated 18.5.2000, to the Indus Bank. Limited containing certain charges, violations of law and instructions/directives of the State Bank. The Bank submitted its detailed reply to the same.
There after, the Governor of the State Bank, at the request of Mr. Khurshid Sohail, the then Chairman of the Board of Directors and. President of the Bank, asked Mr. Khalid Siraj, Advisor State Bank and Messrs Taseer Hadi Khalid and Company, a firm of Chartered Accountants, to hold an inquiry into the charges contained in the show-cause notice and reply of the Bank thereto. The Governor State Bank of Pakistan, after examining the show-cause notice, the reply and the inquiry report together with other records, proceeded to cancel the licence of the Indus Bank Limited under sub-section
(4) of Section 27 of the Banking Companies Ordinance, 1962, vide order dated 21.9.2000, by giving the following reasons in support thereof: "6. Although not required under the law to give reasons for my satisfaction as stated above, I deem it appropriate to briefly set out the same, albeit without prejudice to the legal position:
(a) Relevant conditions of the Licence read as under :---
2. The appointment of the chief executive of the bank shall be subject to the prior written approval of the State Bank of Pakistan."
"4. The bank shall comply with all relevant requirements of Banking Companies Ordinance, 1962, the State Bank of Pakistan Act, 1656, prudential regulations issued by the State Bank of Pakistan, from time to time, and any other directives/orders issued by the State Bank of Pakistan from time to time."
(b) Indus Bank has breached the conditions of the Licence as would, inter alia, be evident from the
(i) From the manual of delegation of authority submitted by Indus Bank, it is clear that all substantive powers rested with the Chairman, being Mr: Sohail. Inspite of SBP requiring Indus Bank to review powers delegated to the Chairman, no concrete steps in this regard were taken. It is true that Mr. Sohail was designated as the Chairman and ' not as the Chief Executive, but it is he who was entrusted and exercised the powers of the Chief Executive. In this regard sub-section (6) of Section 2 of the Companies Ordinance, 1984, makes it clear that the chief executive means "an individual who, subject to the control and directions of the directors, is entrusted with the whole, or substantially the whole, of the powers of management of the affairs of the company, and includes a director or any other person occupying the position of a chief executive, by whatever name called, ....... Mr. Sohail, acted as the de facto Chief Executive, although his appointment as the Chief Executive was never approved by SBP. Further, from the correspondence exchanged, it is clear that Indus Bank's intention has been to defeat or frustrate the condition that the appointment of the Chief Executive "shall be subject to prior approval of the State .Bank of Pakistan."
(ii) Indus Bank management had failed to provide information, when required, for the purpose of inspection by SBPs's inspectors. It appears that a substantial portion of information was sent after the issuance of the Show-Cause Notice but such information too has been incomplete: It is clear that Indus Bank management has been complying with the requirements of SBP Inspection Team in providing information to the SBP Inspection inspite of being required to do so from time to time."
(iii) From the report of the Accountants, it appears that till August .15, 1999, Indus Bank had failed to comply with the directive of SBP regarding obtaining a subordinated loan till its paid-up capital was raised to the required level of Rs. 500,000,000k It, however,. Appears that Indus Bank's paid up capital has subsequently been increased to the required level.
(iv) From the papers, including the report of the Accountants, I am satisfied that placement of funds by Indus Bank with Franklin Credit and Investment Corporation under the portfolio management, scheme, amounted to mismanagement of the affairs of Indus Bank. And misuse of position by the concerned directors for their own benefit.
(c) Indus Bank has been given .Sufficient opportunity by the State Bank to take necessary steps to comply with conditions of the Licence and directions of the State Bank, but has failed to do so.
(d) Personal allegations of mala fides made against Mr. Rashid, Akhtar Chughtai, Deputy Governor, by Indus Bank management have. Been found to be unwarranted and unjustified. It is a matter of regret that Indus Bank management made such allegations.
(e) On facts and information available before me, I am clearly of the opinion that the affairs of Indus Bank are and also likely to be conducted in the manner detrimental to the interest of, its present and future depositors."
3. The very next day, the State Bank, moved, before the Peshawar High Court; company application No. 8 of 2000, under Section 49 of 1962 Ordinance, for winding-up of the Indus Bank Limited.
Simultaneously, another application was filed for appointment of a Provisional Manager for the purpose of taking control of the assets of the Indus Bank Limited, which was allowed, by way of an interim injunctive order. On the other hand, the respondents filed a Constitutional Petition No.. D- 1506 of 2000, under Article 199 of the Constitution before the High Court of Sindh at Karachi, thereby calling in question the validity of order dated 21.9.2000 of cancellation of banking licence of the Indus Bank Limited. The Company Application No. 8 of 2000 for winding-up the Indus ,Bank Limited was allowed by the Peshawar High Court, by judgment dated 29.1.2001 , (reported as State Bank of Pakistan v. Indus Bank Limited through Chairman (2001 CLC 1833). Therefore, the Indus Bank filed Civil Appeal No. 293 of 2001, under Section 10 of .. The Companies Ordinance, 1984, before this Court against the winding-up order dated 29.1.2001 of the Peshawar High Court. The same was disposed of, by this Court, by judgment dated 27.3.2002, with the direction that the proceedings before the High Court of Sindh against cancellation of licence of the Bank be concluded within a period of one month. The Civil Review Petition No. 65 of 2002 of the Indus Bank was also dismissed on 10.11.2006, on the statement of the learned counsel of the Indus Bank Ltd. A learned. Division Bench of thy High Court of Sindh at Karachi, by the impugned judgment dated 11.7.2002, allowed the Constitutional petition and declared the order dated 21.9.2000 of cancellation of licence by the State Bank of Pakistan to be without lawful authority.
4. Mr. Khalid Anwar, Sr. ASC, the learned counsel for the appellant State Bank of Pakistan submitted that the High Court had misconstrued, misinterpreted and misapplied the provisions of Section 27 of the Banking Companies Ordinance vis-a-vis their interaction with Sections 41-A, 41-B and 41-C.
The High Court fell into error in holding that the action of cancellation of licence of the Indus Bank Limited was disproportionate and transgression of power. In the facts and circumstances of the case and in the presence of proof of serious. Charges against the Indus Bank, it was neither necessary nor appropriate for the State Bank of Pakistan to have first exhausted the powers available under Sections 41-A and 41-B of the Ordinance, 1962, for the removal of Directors and other managerial personnel of the Indus Bank and/or the supersession of Board of Directors of the Bank. The State Bank was not only to see the viability of functions of an individual bank but the financial health and stability of the structure and the economy as a whole were also to be taken into consideration. In some cases, the evil may be effectively suppressed by the Governor by taking recourse to the provisions of Section 41-A or Section 41-B of the Banking Ordinance. But in the present case, the cancellation of licence of the Indus Bank Ltd. Was the only proper option left to the State Bank of Pakistan. The administrative and financial management of the Indus Bank was concentrated in the hands of Mr. Khurshid Sohail, his family members and cronies. The High Court while exercising its Constitutional jurisdiction was not supposed to substitute its judgment for that of a statutory authority. It was further submitted that the situation contemplated by Section 27(4) of the Ordinance was quite different from the one visualized by Section 41-A or 41-B. The operation of Section 27(4) was not intended to be neutralized by Sections 41-A and 41-B of the Ordinance.
5. He contended that the licence of the Bank was cancelled after issuance of show-cause notice and a regular inquiry as requested by the Chairman of the Board of Directors of the Indus "Bank.
According to its own showing, the High Court found that no effective relief could be granted to the.
Respondent. Therefore it ought not have entered into further discussion of questioning the legality of cancellation of licence. He further argued that in the matter of winding-up and appointment of a liquidator, of a banking company, the provisions of Section 318 or 319 of the Companies Ordinance were not attracted.
6. He submitted that the High court had dilated upon only on ground No. (i) of order dated 21.9.2000 of the Governor, State Bank and had drawn incorrect conclusions with regard thereto. The record clearly showed that practically all substantive powers were vested with Mr. Khurshid Sohail, Chairman of the Board of Directors of the Indus Bank who was its de facto Chief Executive within the meaning of Section 2(6) of the Companies Ordinance, 1984. He was an industrialist by profession and not a banker. After retirement of Mr. Rahat H. Khan and vacation of office of Chief Executive Officer by him with effect from 31.7.1998, the Indus Bank did not bother to seek prior approval of the State Bank, for a period of almost one year till 29.5.1999, for the appointment of a new Chief Executive. He made a reference to letter dated 20.8.1999, and a chart of organizational structure from the Indus Bank to the State Bank of Pakistan to show' that, functions and powers of Chairman of Board of Directors, the President, Chief Executive and Managing Director of the Indus Bank were combined in one person. The letter dated 11.1.2007, from the Deputy General Manager, Export Processing Authority, Ministry of Industries, Production and Special Initiatives, Government' of Pakistan to the Joint Official Liquidator of Indus Bank Ltd. Clearly indicated that Mr. S. Khurshid Sohail, B Gloucestar Square, London, was also the. Chairman of the Messrs Franklin Development S.A 19 Rassu Industrial Estate, EBBW Vale, Gwent, South Wales, Great Britain. Subsequently, Mr. Amanullah Khan was appointed by the Indus Bank as Chief Executive Officer without prior approval of the State Bank. Thus one of the essential conditions of licence of the Indus Bank of obtaining prior approval of the State Bank for the appointment of Chief Executive was violated.
7. . He next argued that the licence of the Indus Bank was also validly cancelled on another ground No. (iv) to the effect that the placement of fuds by the Bank with petitioner No. 1 under. Portfolio Management Scheme amounted to mismanagement of the a airs Of the Bank and misuse of position by the concerned directors for their own benefit. The High Court did not dispute the finding of the Governor in that regard. It was proved on record that huge funds of the Indus Bank were drained away through Mr. Khurshid Sohail and the Franklin Credit and Investment Company, the respondent No. 1, which owned major shares of the Indus Bank. The Annual Eighth Report of 1999 made it clear that advances of Rs. 642.874 million being 72% of the total loans were the non- performing loans. The Bank had defaulted in meeting the minimum threshold of capital deposit of Rupees -500 million as required by B.P.R.D circular No. 36, dated 4.11.1997 of the State Bank of Pakistan despite availing a moratorium from the State Bank. The Indus Bank had blatantly violated the circular letter ,dated 19.4.1999 and also the provisions of Prudential Regulation No. XXI (Fund Management Services) of Prudential Regulations.
8. The learned counsel stated that where an order passed by an executive authority -was based on several grounds, it could not be struck' down merely for the reason that one'or more such grounds were invalid, vague or irrelevant or non-existent. In support of his arguments,. He relied on the cases of Mr. Rafique Ahmed Sheikh v. The Crown (PLD 1951 Lahore 1722),,Maher Alvi v. Pakistan and 5 others (PLD 1980 Karachi 609) (650), Khaiid Malik v. Federation of Pakistan (PLD 1991 Karachi 1) (99) and Mohtarma Benazir Bhutto and another v. President of Pakistan and others (PLD 1998 SC 388)
(541- 542)).
9. He contended that after winding-up of the Indus Bank, it was only the official, liquidator who might have sought for restoration of the banking licence. He made a reference to paragraphs 5 and 6 certificate submitted by the learned counsel for the respondents, alongwith C.R.P. No. 65 of 2002. The learned counsel argued that the Civil Appeal No. 293 of 2,001 by Indus Bank or Mr. Khurshid Sohail was not competent as it was the official liquidator who could have filed the appeal.
Moreover, the respondents with 75% share had not filed any appeal against the winding-up of the bank by the Peshawar High Court.
10 On the other hand, Mr. Anwar Mansoor Khan, Sr. ASC, learned counsel for the respondents submitted that, it was the Central Board of the State Bank and not its Governor alone which alone could pass an order of - cancellation of the licence under Section 27(4) of the Banking Companies Ordinance. The terms "Governor" and "State Bank" were not inter-changeable. He referred to provisions of Section 41-C of the Ordinance where the.
Governor, State Bank was specifically empowered to take action under Sections 41-A and 41-B.
Therefore, the exercise of power of cancellation of licence by the Governor, State Bank, was without jurisdiction.
11. He further argued that assuming some irregularity was committed by the Indus Bank Ltd. Even then there was no justification for taking extreme measure of cancellation of licence or winding-up of the Bank. By virtue of Sections 41-A and 41-B of the Banking Companies. Ordinance, the Governor State Bank was empowered to order the removal of Directors and other managerial staff or supersession of Board of Directors of the Indus Bank Ltd. Rather than cancellation of its licence. The grounds mentioned by the State Bank in its order dated 21.9.2000 were invalid. Non-existent and insufficient to warrant an action under Section 27(4) of the Ordinance. He relied on the case of Independent Newspapers Corporation (Pvt.) Limited v. Chairman Fourth. Wage Board (1993 SCMR 1533), wherein it was held as follows:--- "When expressed statutory power is conferred on a public functionary, it should not be pushed too far; for such conferment implies a restraint in operating that power as 46 exercise it justly and reasonably. In the words of Scarman, L.J. Excessive use of lawful power is itself unlawful."
He also .Referred to the case of one Kumar v. Union of India (AIR 2000 SC 3689) = (2001) 2 S.C.0 386 = 2000 SOL Case No. 636, in support of his submission that doctrine of proportionality of action ought to have been applied to see whether or not the extreme steps of cancellation of licence and winding-up of the Indus Bank were called for on the basis of minor changes. He contended that jurisdiction of the Court to pass a winding-up order being discretionary, it would be open to the Court to decline to pass such an order and every possible effort was to be made to avoid winding- up of the company. Reference was made to the cases of Habib Bank Ltd. v. Hamza Board Mills (PLD 1996 Lahore 651), Taj Company Ltd in re (NLR 1996 Un-reported Cases 799), Alliance Motors (Pvt.)
Ltd. In re: (1997' M.L.D 1966 (Karachi), New Swadeshi Mills of Ahmedabad Ltd. v. Dye-Chen Corporation (1986) 59 Corn. Cases 183 (186-187), In re: M/s. Pakland Cement Limited (2002 C.L.D 1392) Sudersan Chits (India) Ltd. v. Sukumaren Pillai (1985) 57 Corn. Cases 85).
12. It was next contended that the Indus Bank Ltd. had not yet been practically wound-up. A mere winding-up order passed by the High Court would not finally wind-up a Banking Company. In terms of Section 319 of the Companies Ordinance, the Court was empowered, on the application of any creditor or contributory, made within three years of a winding-up order, to stay, withdraw cancel or revoke all proceedings in relation to the winding- up. An order under Section 328 had not so far been made.. A banking company would be dissolved by an order under Section 350 of Companies Ordinance, when the affairs of a company had been completely wound-up, or when the ,Court was of the opinion that the official liquidator could not proceed with the winding up of the company for want of funds and assets. According to him, the limitation period of three years provided by Section 319 for making an application thereunder would start from the date of dismissal of review petition No. 65/2002 by this Court on 10.11.2006.
Therefore, the application dated 6.9.2007, by Mr S. Khurshid Sohail, under Section 319 made and pending before the Peshawar High Court was very much within time as a review petition, like an appeal, were also a continuation of the winding-up proceedings. He referred to the case of Collector Land Acquisition, Abbottabad and 2 others v. Lal Khan .(PLD 2002 SC 277) that the appellate proceedings being continuation of the original suit, the limitation was to be reckoned from the date of appellate order. He further argued that the limitation in making an application by Mr. S. Khurshid Sohail under Section 319 would not commence until the appeal in hand was decided by this Court. The three respondents held 75% shares of the Bank and possessed locus standi to challenge the cancellation of licence of the Bank before the High Court.
13. He argued that Mr. S. Khurshid Sohail was not a share-holder of a foreign company as alleged by the petitioner. The criminal proceedings instituted at the behest of the Governor, State Bank, against the directors of the Indus Bank, including Mr. S. Khurshid Sohail had resulted in their acquittal. The so-called lapses on the part of the Indus Bank were rectifiable and would not call for drastic action of cancellation of licence. The executive power was required to be exercised justly, fairly and reasonably for the advancing and not defeating the purpose of the relevant statute. The action against the Indus Bank was male fide, abuse of position and without justification. The cancellation of licence was, therefore, rightly held, by the High Court, to be without lawful authority.
Reliance was placed on the cases of Syed A.I Abbas v. Vishan Singh (PLD 1967 S.0 294), S. Vankatachalam lyyer v. State of Madras (AIR 1957 Madras 623) (626), Manak Lal v, Dr. Prem Chand Singhri (PLD 1957)
S.0 (India) 346) (351-352), Jamil Ahmed v. Province of Sindh.(S.B.L.R 2001 Sukkur 277); Reserve Book of India v. Pahala Central Bank-Ltd. (AIR 1961 Kerala 268) (at P. 275), District Magistrate Lahore versus Faqeer Sayyed Fayyazuddin (PLD 1965 S.0 371 (377-378), Associated Provincial Pictures House Ltd. v. Wednesbury Corporation (1947 2 All.E.R 680), The Presiding Officer v. Sadaruddin Ansari and others (PLD 1967 S.0 569) (579), Krishna Muran Aggerwala v. The Union of India (AIR 1975 S.0 1877 (1882- 1883), H. Lavender and Sons Ltd. v. Minister of Housing and Local Government (1970 3 All E.R 871 (872) and Muhammad Jamil Asghar v. The Improvement Trust (PLD 1965 SC 698).
14. He stated that in the meantime, Messrs Rehman lqbal, Umar lftikhar, a firm of Chartered Accountants, had also submitted report dated 13.7.2006; to the effect that the Financial Health of the. Bank and availability of cash and liquid securities guaranteed full payment to all the depositors within 30 days. It was further opined that the Financial Health did not warrant Bank's liquidation particularly when so much support for the Bank had been demonstrated by its share- holders, depositors and directors over the last 6 years. The joint liquidators had also finally, submitted their report to the-effect that after making payments to all the public depositors and after meeting all other liabilities of the Bank there still remained a surplus of 394 million rupees. As per audited balance sheet of the Bank, as it stood on 30th January, 2004, the surplus funds amounted to Rs. 661 million were available. Neither the liquidators nor the auditors had pointed out any .Incident of misappropriation or fraud in the accounts prepared and audited by them.
Therefore, there was no occasion for cancellation of licence and winding up of the Indus Bank Ltd.
15. As regards the non-appointment of Chief Executive, he argued that Indus Bank was not at fault in any manner. By letter dated 30th July, 1999 the Bank had requested the State Bank to approve any of the three Pakistan.
(4) The State Bank may cancel a licence granted to a banking company under this Section---
(i) if the company ceases to carry on banking business in Pakistan; or
(ii) if the company at any time fails to comply with any of the conditions imposed upon it under sub-section (1); or
(iii) if at any time, any of the conditions referred to in sub-section (3) ceases to be fulfilled: Provided that before cancelling a licence under clause (ii) or clause (iii) of this sub-section on the ground that the banking company has failed to comply with or had failed or ceased to fulfil, any of the conditions referred to- therein, the State Bank, unless it is of opinion that the delay will be prejudcial to the interest of the company's depositors or the public, shall grant to the company on such terms as it may specify, an opportunity of taking the necessary steps for complying with or fulfilling such conditions.
(5) Any banking company aggrieved by the decision of the State Bank cancelling a licence under this Section may, within thirty days from the date of which such decision is communicated to it apply for review to the Central Board of the State Bank.
(6) The decision of the State Bank subject to the result of review under sub-section (5), if any, shall be final.
17. We find that a similar objection was earlier taken by the Indus Bank Ltd. Before the Peshawar High Court, which was repelled. See the case of State Bank of Pakistan v. Indus Bank Limited through Chairman (2001 CLC 1833). It was held by the High Court that since the Governor, State Bank of Pakistan, would control the affairs of the Bank in exercise of powers under Section 10 of the State Bank of Pakistan Act, 1956, the licence could be cancelled by him.
Consequently, the winding-up of the company was ordered. The said judgment of winding-up the Indus Bank Limited was assailed through Civil Appeal. No 293/2001, which was disposed of on 27.3.2002, by this Court. The Civil Review Petition No. 65 of 2001, filed by the Indus Bank there-against was also dismissed by this Court on the statement of the learned counsel for the respondents that in view of judgment of the Sindh High Court, Karachi, dated 16.07.2002, the review petition had become infructuous. Thus the judgment of the-Peshawar High Court in the case attained finality as the same was not interfered with by this Court.
18. The State Bank of Pakistan, a body corporate, was established under the provisions of Section 3 of the State Bank of Pakistan Act (No. XXXIII) of 1956. Section 10 of the Act clearly provides that the 'Governor of the Bank shall be the chief executive officer and shall, on behalf of the Central Board, direct and control the whole affairs of the Bank. In the matters not specifically required by this Act or by regulations made thereunder, to be done by the Central Board or by the Bank in general meeting, the Governor shall have authority to conduct the business, control the functions and manage the affairs of the bank. By virtue of Section 9 of the Act, the Central Board of Directors of the State Bank consists of the Governor as its Chairman, the Secretary, Finance Division, Government of Pakistan and, 7 directors. In case of an emergency, the Governor is empowered to take such measures as may be necessary in the circumstances in matters specified in clause (a) of Section 9-A of the Act falling within the domain of the Central Board of Directors of the State Bank. By Section 46 of the Act, the Governor, State Bank of Pakistan is deemed to be the head of the department albeit for the limited purpose of Artiste 6 of the Qanoon-e-Shahadat Order, 1984 (old Section 124 of the .
Evidence Act). As such, the Governor being the Chief Executive Officer and Chairman of the Central Board, seems to be the kingpin of the State Bank vested with the powers of directing and controlling the whole affairs of the Bank. It appears to us that it was the Governor State Bank of Pakistan and not the Central Board of the State Bank, to whom an application for grant of a banking licence of the Indus Bank Limited was made and it was he who had granted the licence.
Therefore, no exception could be taken to the availability of power of revocation of a banking licence by the Governor. The provisions of sub-sections (5) and (6) of Section 27 of the Ordinance also lend support to this conclusion where-under any banking company aggrieved by the decision of the State Bank of cancellation of a licence may apply for review to the Central Board of the State Bank, and that the decision of the State Bank subject to the result of review, if any, shall be final. As a matter of consistent departmental practice, the banking licenses were invariably granted or cancelled by the Governor, State Bank of Pakistan, and not by the Central Board. It was always understood by all and sundry that the Governor, State Bank of Pakistan, was the licensing authority for the banking companies. In the case of Hyderi International Finances Limited v. The State Bank of Pakistan (PLD 1980 Lahore 658), the Lahore High Court also took the view that the Governor. State Bank of Pakistan, possessed the lawful authority to take action against a banking company under Section 43-B, which was required to be taken by the Stale Bank.
19. We may observe that previous departmental practice and construction of a statute by the executive authorities concerned is normally given due weightage by the Courts in order to remove any ambiguity: or doubt in a statute. In Saghir Ahmed through L. Rs. v. Province of Punjab through Secretary, Housing and Physical Planning, Lahore and others (PLD 2004 SC 261 at p.268), it was held that departmental construction of a statute, although not binding on the Court, could be taken into consideration. In the case of Nazir Ahmed v. Pakistan (PLD 1970 SC 453), this Court took the view that where the departmental practice had followed a course in the implementation of the relevant rule, whether right or wrong, it would be extremely unfair to make a departure from it after a lapse of many years and to disturb the- rights that had been settled by a long and consistent practice.
Ln Ram Labhaya v. Dhani Raam (AIR 1947 Lahore 296), it was held that:--- "as a general rule, the executive or administrative officers would be called to interpret certain statutes long before the Court may have an occasion to construe them ... Where a certain contemporaneous construction- has been placed upon an ambiguous statute by the executive or administrative officers, who are charged with executing the statute, and especially if,such construction has been observed and acted upon for a long period of time, and generally or uniformly acquiesced in, it will not be disregarded by the Courts except for the most satisfactory, cogent or impelling reasons. In other words, the administrative construction generally should be clearly wrong before it is overturned.
The Supreme Court of India in the case of K.P. Veghaese v.- The Income Tax Officer (AIR 1981 SC 1922), expressed the view that it was a weH-settled principle of interpretation that the Courts in construing a statute had given much weightage to the interpretation by those whose duty it had been to construe, execute and apply that statute. A some-what similar view was taken in the cases of Radha Corporation and others v. Collector of Customs (1989 SCMR 353), Asian Food Industries Limited v. Pakistan (1985 SCMR 1753 at p.1756), Mrs. Allman Arshad v. Miss Naeem Khan (PLD 1990 SC 612), Koro v. The State (PLD 1963 Karachi 256). The same opinion has been expressed by eminent textbook write in dales On Statute Law, Sixth Edition by S.G.G. Edgar at page 150, Crawford Statutory Construction in Sections 219 and 221 at pages 393 & 399 and N.B. Bindra's Interpretation of Statutes, 10th Edition 2007, in Chapter 16 at pages 859-861.
20. It is also well-settled that the acts performed by public authorities deserve due regard by the Courts and every possible explanation for their validity should be explored and the whole gamut of powers in pursuance to which they act or perform their functions and discharge their duties should be examined. A presumption of regularity is attached to the official acts. Reference may usefully be made to the cases of Saghir Ahmel(supra), Federation of Pakistan through Secretary, Law, J. And Parliamentary Affairs and others v. Aftab Ahmed Khan Sherpao and others (PLD 1992 SC 723), Government of Sindh through Chief Secretary and others v. Khalil Ahmed and others 0994 SCMR 782), Syed Muhammad Khurshid Abbas Gardezi and others v. Multan Development Authority and others (PLD 1983 SC 151), Lahore Improvement Trust v. Custodian, Evacuee Property (PLD 1971 SC 811), Chairman Pakistan Railway Board, Chittagong and others v. Abdul Majid Sardar (FLD 1966 SC 725) and Federation of Pakistan and others v. Ch. Muhammad Aslam and others (1986 SCMR 916).
21. Now, we need to examine whether an order based on several reasons should or should not be struck down if one or some of them are found to be bad in law. In our view, if the bad reasons are severable from the good ones and are not intertwined or inter-linked, an order passed by an administrative authority may not be quashed if otherwise sustainable on remaining valid grounds.
However, the cases involving detention or liberty of citizens fall in a different category as was held in the cases of Government of West Pakistan v. Haider Bakhsh Jatoi and another (PLD 1969 SC 210) and Rafiq Ahmed Sheikh v. The Crown (PLD 1951 Lahore 17). In the case of Kh. Ahmed Tariq Rahim v.
Federation of Pakistan through the Secretary, Ministry of Law, Justice and Parliamentary Affairs, Islamabad (PLD 1992 SC 646 at p.666) involving dissolution of National Assembly, it was observed that it was true that. Some of the grounds like (c), (ii) and (e) (iii) might not' have been independently sufficient to warrant such an action. They could, however, be invoked, referred to and made use of alongwith other grounds more relevant like grounds (a) and (b), which by, themselves were sufficient to justify the action. In Mohtarama Benazir Bhutto v. The president' of Pakistan and others (PLD 1998 SC 388' at pages 541 and 542), one of the grounds for dissolution of National Assembly was the appointment of a person as Cabinet Minister against whom criminal cases were pending. It was held that the said ground alone as such might not be sufficient to invoke Article 58(2)(b) of the Constitution to dismiss the government and dissolve the National Assembly .... However, the material produced on that ground could be considered by the President in conjunction with other grounds to arrive at a general finding that the situation had arisen in which government of federation could not be carried on in accordance with provisions of the Constitution. In Commissioner Sargodha Division v. Khizar Heyat (PLD 1996 SC 793), the order of the Commissioner was upheld by applying the doctrine of severability. In Brig. (Retd) F.B. A.I-v. The State (PLD 1975 SC 706), the charge of conspiracy was found to be wholly irrelevant and inadmissible. Nevertheless, it was held that the whole criminal trial was not vitiated on that account. Only the conviction in respect of offence under Section 122-A, PPC stood vitiated for want of jurisdiction and not the conviction on the charge of attempt to seduce, . Because, that was within the jurisdiction of the Court Martial to try and there was relevant evidence on which the decision of Court Martial could be based. In Swarm Singh,v. State of Punjab and others (AIR 1976 SC 232), the Supreme Court of India took the view that where the order of a domestic Tribunal might refer to the several grounds-some of which more relevant and existent and the others irrelevant and non -existent, the order would be sustained if the Court was satisfied that the authority would have based the order on the relevant and existent ground and the exclusion of irrelevant or non existent grounds could not have affected the ultimate decision In the case of State of Orissa and others v. Bidyabhusan Mohapatra (AIR 1963 SC 779 at pages 785 and 786), it was observed that since the order of dismissal of a government servant was not based on charges 1(a) and 1(e) alone, and the other charges were found to be valid, therefore, the same was to be maintained. A , similar view was taken in the case of State of Maharashtera v. B.K Takkamore (AIR 1967 S.0 1353). In Royal Bank of Canada v. I.R.C. (1972) 1 All E.R 225 at page 239), a notice was divided into numbered paragraphs dealing with different matters and the attack was made on one or more of such paragraphs, it was observed that such paragraphs should not affect the other paragraphs and that the notice should be good as to the good paragraphs. In Breen v.
Amalgamated Engineering Union and others (1971) 2 Q.B 175), the Court of Appeal took the view that even if one of the reasons for an action was erroneous, nevertheless, the decision could be upheld on other two grounds. Reference may also be made to the cases of Mehar Alvi and Khalid Malik (supra). Similar opinion was expressed in Halsbury's Laws of England, Fourth Edition, Volume I, paragraph 26 at page 29 and Administrative Law by H.WR. Wade, Sixth Edition at page 338. Even if it was shown that some of the grounds forming basis of the order of cancellation of licence of the Indus Bank were irrelevant or non-existent, the same by themselves would not be sufficient to strike down the order.
22. The non-appointment of Chief Executive of the Indus Bank, was one of the grounds of cancellation of licende. We find that the office of Chief Executive fell vacant on 31/.1998, consequent upon the retirement of Mr. Rahat H. Khan. On 29.5.1999, the Indus Bank for the first time, felt the necessity of seeking the prior approval of the State Bank of Pakistan for the appointment of Chief Executive. The record shows that during this interregn it Mr. Khurshid Sohail, Chairman of the Board of Governors as well as the President of the Indus Bank acted a de facto Chief Executive without the approval of the State bank. There was a clear breach of one of the conditions of the banking licence which required that the appointment of the Chief Executive would. Be subject to the prior written approval of the State Bank. No explanation whatsoever was forthcoming from respondents as to the unconscionable delay of about one year in seeking prior written approval of the State Bank for appointment of the Chief Executive of the. Indus Bank.
23. In the Inquiry Report dated 12th August, 2000 M. Khalid Siraj, Senior Adivser, State Bank of pakistan and Taseer Hadi. Khalid and Company, Chartered Accountants, recorded their findings as under:--- "Minimum Capital Requirement - Conclusions:--- We have reviewed the relevant records and correspondence with SBP and confirmed that by 15th August, 1999 the bank had not complied with the instructions of SBP regarding obtaining a subordinated loan till its paid up capital is raised to the required level. However, an interest bearing loan was obtained before the deadline of 15th August, 1999 to cover the underwriting commitment. Subsequently, on 1st May, 2000, right shares have been issued and capital was raised to. Rs. 500/- million. The interest bearing loan was created through transfer Of funds from foreign currency deposit in account of FCIC and BCML (Rs.
150,995) million and rupee funds of FIBL Rs. 22 and transfer of old interest free subordinated loan of Rs. 27,005 million from FBIC there was a delay of about six months between the last date of subscription of the share issue of right shares. SBP approved for issued of right shares of foreign interest currency has not been obtained. The share were underwritten and taken up by FIBL despite restriction notified by SBP in BPRD (RU-43) 512-098/X/1085/99, dated 23rd January, 1999. The terms of loan did not SBP was taken for conversion of old interest free subordinated loan of Rs. 27,005 million into bearing loan. However the bank had been written off or made required provision from profits, this loan stood unencumbered available for utilization in minimum capital requirement.
Therefore, the charge mentioned in the Show-cause notice is correct.
Portfolio Management Scheme - Conclusions:---The bank had entered into an agreement in 1994 with FCIC to mange funds of IBL to the extent of Rs. 750 million and a deposit of USD 20 million was provided by FCIC to fund the transaction. The agreement was terminated in February, 1997 following BPRD Circular 36/96. At that time it was contended that FCC has suffered certain loss on its forward deals due to pre mature termination of the agreement. Accordingly, it was agreed that FCIC would not charge the loss to the bank and the bank will defer the receipt of accrued capital gain on that date. The payment of this capital gain is to be made in half yearly instalments of Rs. 5 million each commencing from 31st December, 1997. No mark-up is being charged on the outstanding amount. We have been unable to assailing the nature of forward deals on which the loss was incurred, as these details have not been provided. The agreement specifically contained clauses where FCIC was to invest in shares of blue chip listed companies and no forward deals were mentioned in the agreement. Therefore, there is no credible basis for deferment of amounts receivable from FCIC. Further, it is not clear whether the bank was allowed to invest a portfolio management scheme (referred to as fund management scheme in the agreement) with a non- resident company having its branch office in Export Processing Zone, as it is not clearly laid down in Section 7 of the Banking Companies ordinance, 1962.
32. Therefore, it cannot be stated that the transaction was in the interest of depositors. It is also questionable if the structure of the arrangement, whereby IBL borrowed Rs. 750 million from FCIC at a fixed rate to give the same amount back to FCIC for portfolio management without a minimum guaranteed return, was prudent banking."
24. Therefore, the Governor, State Bank of Pakistan, could legitimately draw the conclusion that placement of funds by the Indus Bank with respondent No. 1 under the Portfolio Scheme would tantamount to mismanagement of the affairs of the Bank and misuse of position by the Directors of the Bank for their own benefit and that the charge regarding minimum capital requirement was also not without substance. Prima facie, huge amount of the Bank was siphoned off to the detriment of the interests and rights of the depositors in collusion with a foreign company in which Mr. Khurshid- Sohail had allegedly substantial interests.
25. The Annual Eighth. Report of 1999 indicated that advances of Rs. 642.874 million being 72% of the total loans of the Indus Bank were non-performing loans. Naturally, the Governor could not be expected to wait until nothing was left in the bank and it was all over,. While dealing with a matter of Cancellation of licence, he was not required to hold a full dressed trial like a Court of law. In, our opinion, the charges against the Indus Bank Ltd. Were serious enough to warrant cancellation of licence. In this case, the - Governor of the State Bank had acted fairly and reasonably by observing the principles of natural justice and statutory requirements on the basis of relevant material. The High Court was not expected to substitute its judgment for that of the State Bank as if it was exercising an appellate jurisdiction. In the presence of the relevant material Including the inquiry report of the chartered accountants, the Governor, State Bank of Pakistan, was perfectly justified in forming an opinion that the affairs of the Indus Bank were being conducted in a manner detrimental to the interest of the depositors. He having necessary expertise in the relevant field, arrived at a conclusion which a reasonable man in his place would do. We are conscious that once a licence is granted, it becomes a matter of serious concern to cancel the same. The impugned judgment of the High Court is not sustainable at law and moreso when the matter of winding-up of the Indus Bank has already attained finality with the dismissal of the appeal and review petition by this Court. The fact of acquittal of the Directors of the Indus Bank from charges of criminal misconduct would not per se nullify the order of cancellation of licence passed by the Governor, State Bank of Pakistan in exercise of his statutory powers conferred under Section 27(4) of the State Bank of Pakistan Act, 1956.
26. For the foregoing reasons, this appeal is- allowed and the impugned judgment of the Singh High Court dated 11.7.2002 passed by a learned Division Bench in Constitutional Petition No. D-1506 of 2000 is set aside. However, there shall be no order as to costs.
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