' ZAHID HAMID, J.---By this Order the present Constitutional Petition whereby the refusal of the House Building Finance Corporation (hereinafter referred to as HBFC) to grant loan to the Petitioner for house building has been assailed, shall stand disposed of.
2. The facts are that the petitioner, who is a retired Engineer, applied for loan from HBFC for construction of his house on a leased Plot of land bearing No, B-173 in Block 12, Gulistan-e-Johar, Karachi measuring 400 square yards. Some construction up to the bottom of lintel level was already completed when the funds available with the petitioner were exhausted. He, therefore, approached HBFC to secure House Building Loan under their "Ghar Aasan Scheme" (GAS) firstly through his letters dated 3-10-2008 and 9-7-2009. All the formalities to secure the loan by way of submission of transfer order, lease deed, approved building plan, letter of approval, declaration of income of the petitioner's guarantor, income per last income tax return of the petitioner, copy of Bank certificate and statement were fulfilled and provided whereas the permission to assign from Defunct KDA (CDGK) KDA Wing was applied for and "non-encumbrance" certificate was promised to be given on approval of the loan; according to brochure and its policy HBFC was under obligation to facilitate the extension of loan but the same was being denied though the construction was going on at an accelerated pace and immediate investment through the needed loan from HBFC was required.
3. The eligibility criterion of the HBFC of submission of a guarantee was restricted to be offered by a sanguine relation of the borrower having an inheritable right. The maximum loan facility could rise to Rs,75,00,000 yet the petitioner applied for only Rs,30,00,000 and such demand too was further reduced to Rs,1500,000 by the petitioner during his arguments.
4. It is stated that the market value of the plot with existing construction was Rs,9 million. The equity participation of HBFC and the petitioner was in ratio of 70% : 30% respectively under the Rules of Ghar Asan Scheme (GAS) and the petitioner could be entitled to a loan of Rs,6 million yet he had originally applied for a loan of Rs,3 million and that though House Building Finance Corporation Limited was keen to provide loans to the property developers, it was ironical that the largest number of defaulters were also the developers as depicted by an advertisement in the newspaper giving their list for auction of properties on 9-9-2009 and since it is for the HBFC to approach and negotiate with developers therefore undue preference was given to them in providing loans which amounted to discrimination.
4. It is stated that HBFC is carrying risk free business by mortgaging the property of borrowers, obtaining post-dated cheques and a guarantee, lodging registration of F.I.Rs, if such cheques were dishonoured and proceedings were also being instituted under the Financial Institutions (Recovery of Finances) Ordinance, 2001 and by such available stratagems loans were fully secured yet the HBFC it is claimed was denying loan to the petitioner by not adhering to the conditions of investment as laid down under section 24 of the House Building Finance Corporation Act, 1952. It was submitted that the loans offered by HBFC are supposed to be Shariahcompliant pursuant to the Federal Shariat Court's Order, but despite that HBFC had switched to "Flexi loan" at the highest 17.5% rate of markup per annum with the moratorium of 12 months and payment of markup even on the portion of a loan advanced was to be made from the very next month of its release and the petitioner being hard pressed was constrained to accept all such painful conditions.
5. . It is stated that the Branch Manager of HBFC objected to the grant of loan on the ground that investment of Rs,12,00,000 had already been made to the wife of petitioner, a different person on "GAS" on the guarantee of her son through Account No, 847000450-4. The said loan was however being paid back by the petitioner's wife regularly every month since past 4 years without a single default and further when it was the policy of HBFC to provide loan up to Rs,75,00,000 on a single property, such objection of HBFC Branch was not tenable for the simple reason that the loan asked for was for a different person and property.
6. The guarantee by the petitioner's daughter was not considered as platable on the ground that she had inadequate income. The petitioner submitted that his proposed guarantor daughter was only 35 years old whereas under GAS (Flexi) the loan was recoverable within 21 years and if such period is added to the age of guarantor she would in any case repay the loan before reaching the age of 60 years as prescribed. The guarantee of the petitioner's son who had already guaranteed repayment of loan secured by the petitioner's wife .Was also not acceptable and he was left with no other alternative but to offer guarantee through his daughter having inheritable right vide letter dated 30-7-2009. She was having her Account No, 5485-7-1 and had a balance of Rs,885,857 at the relevant time. She was also owning a plot of 10 marla is Ahbab Housing Society (Pvt.) Limited, in Shadab. Colony, Phase 3, Ferozabad Road, Lahore, worth Rs,1.2 million per allotment letter filed by her and that she also had a regular monthly rental income of Rs,100,000 and she owned property having value of Rs,2 million and being a housewife did not require NTN and had also income from her household savings and gifts from parents and in-laws yet her guarantee was not acceptable.
The petitioner submitted that he himself is self-employed as Site Engineer of S.S. Corporation (Pvt.)
Limited and according to his certificate placed by him on record he had income of Rs, 390,000 in the year, 2008 and was in possession of Income Tax returns for two years with effect from 2007 to 2009 which showed his yearly income having touched the figure of Rs, 2,80,000 and Rs,400,000 respectively.
7. On the other hand HBFC contended that the petitioner was more than 65 years old and he, therefore, did not qualify for demanding investment of Rs,30,00,000 and under Ghar Asan Scheme (Flexi) he did not have requisite repayment period left at his disposal due to advance age and his guarantor daughter was only a housewife who had not shown any verifiable adequate means of income which was stated to be Rs,1 lac nor was she an income tax assessee and there was no assurance of regular repayment of loan by way of instalments. The petitioner could not as such be granted the loan and penal action by HBFC could, on the contrary be taken against him for misrepresentation and concealment under the provisions of House Building Finance Corporation Act, 1952.
8. On behalf of the respondent, State Bank of Pakistan, it was stated that the State Bank had no policy to issue any instruction to HBFC with regard to its business transactions and decisions and the question of grant of loan was purely a matter of mutual concern of the petitioner and HBFC.
9. We have heard the learned counsel and the learned DAG.
10. The learned counsel for HBFC stressed upon the contentions of HBFC already dealt with above and submitted that HBFC had been wound-up by the Federal Government and all of its assets, rights, liabilities, contracts, proceedings, business and undertakings would stand dissolved on the sixtieth (60th) day from the "effective date". Attention of this Court was drawn to S.R.O. 988(1)/2009 dated 10-11-2009 issued by the Government of Pakistan Finance Division where under the powers conferred by section 3-A of the Banking Companies Ordinance, 1962 the Federal Government on the recommendation of the State Bank of Pakistan specified HBFC Limited as a Financial Institution for the application of the provisions of said section. This notification was made effective retrospectively from 25-7-2007.
11. The learned counsel for House Building Finance Corporation Limited was provided with several opportunities and consequently the matter was adjourned from time to time; all the same he could not satisfy this Court as to when the conditions of investment under section 24 of the House Building Finance Corporation Act, 1952 were fulfilled why HBFC could not grant the loan asked for. It may be advantageous in this context to reproduce section 24 of the House Building Finance Corporation Act, 1952 as follows:-- "24.Conditions for Investment.---(1) No investment shall be made unless it is fully secured by assignment of the land, the land and the house constructed or to be constructed thereon or by such guarantee as may be prescribed:"
12. From the words emphasized by underlining in section 24 (ibid) it is pertinent that the investment can be made by House Building Finance Corporation if the assignment of the land, the land and the house constructed or to be constructed thereon is fully secured by such assignment. The petitioner is ready to mortgage and assign his right, title and interest in the land and the construction raised thereon in favour of HBFC. The investment sought from HBFC is a petty sum of Rs,15,00,000 which would be fully secured as indicated above. Consequently the loan cannot be withheld by HBFC on the ground that guarantee being submitted was lacking in any aspect as the word "or" before the words, "by such guarantee as may be prescribed" supra is to be interpreted disjunctively and therefore no guarantee may be required at all, though in this case the petitioner's daughter having inheritable right in the subject property and who has sufficient means has come forward to give the guarantee for repayment of the loan. Other requisite instructions laid down under "Asan Ghar Scheme" (Flexi) launched on 1-10-2007 for beefing up the credibility of the guarantor such as fixing age limit, and the capacity of the guarantor as to his sufficient income being only in the nature of subordinate instructions would hardly matter when the condition of proper assignment of land with the construction A as envisaged by the main statute has been met.
The loan was applied on or about 30-6-2009 i,e, much before the publication of gazette notification dated 10-11-2009 of S.R.O. 988(1)/2009 whereby HBFC was notified to have become a Financial Institution under section 3-A of the Banking Companies Ordinance, 1862 effective from 25-7-2007 which would most probably imply that HBFC held its original status of being a Corporation uptil 10-11-2009. Furthermore the Federal Government and the State Bank of Pakistan now hold 50% of its shares as reflected by Order dated 25th July, 2007 of the Government of Pakistan Finance Division (Internal Finance Wing) on record. So even if the factor of existence or otherwise of the undisclosed effective date of devolution of all assets, rights, liabilities, contracts, proceedings, business and undertakings of the HBFC Limited on the company after HBFC was wound up, as claimed is ignored the State Bank and the Federation of Pakistan jointly having 100% share holding in the successor company of HBFC if any at any time have conceded to the claim of the petitioner by showing their disinterestedness in matter of grant or otherwise of loan in question.
In the said order it is mentioned that the House Building Finance Corporation shall be wound up by transferring and vesting in House Building Finance Corporation Limited ("Company") all the assets, contracts, liabilities, proceedings, business and undertaking of HBFC as provided in Schedule 1 of this ("Order") on said date as set out therein below" and further it is mentioned that HBFC shall stand dissolved on the sixtieth (60th) day from the Effective Date and on the Effective Date the entire undertaking and all the assets of HBFC shall immediately and without any conveyance or transfer and without any further act or deed be vested in and become the undertaking and assets of the Company, which shall have, hold and enjoy the same in its own right as fully as the same were possessed, held and enjoyed by HBFC prior to the Effective Date. All the same as already disclosed the effective date has not been specified in this order and it is stated in the order that such effective date shall be notified by the Federal Government in the official Gazette. Under section 36 of the House Building Finance Corporation Act, 1952 the Corporation could be wound up by the order of the Federal Government and in such manner as it may direct. However no material has been placed on record to show that the winding up by virtue of the order of Federal Government in the manner directed by it under the order has been completed in all material respects. From the reading of the order of the Federal Government it appears that in consideration of vesting in the company all the undertakings assets and liabilities of HBFC shall be that of the Company.
13. But it is important to note that it has been further provided under the order as follows:-- "Subject to the proviso contained in paragraph 2(b) above, every agreement, contract or other instrument to which HBFC is a party shall have effect on and from the Effective Date as if:
(a) the Company had been a party thereto instead of HBFC; and On the effective Date:-- (a)
(b) all the Liabilities of HBFC shall immediately and without any further act or deed to be assumed by and become the Liabilities of the Company, which shall pay, undertake, satisfy, discharge and perform, when due, all of the obligations of HBFC in respect of the Existing Liabilities of HBFC; provided that where the Company and/or HBFC may not have incurred/undertaken Liabilities or obligations bona fide claimant in respect of such Liabilities has proved in a competent court of law that such Liability was incurred and/or in accordance with law, such Liability will vest in the Company only after the claimant in respect of such Liability has proved in a competent Court of law that such Liability was incurred and undertaken bona fide and strictly in accordance with the law.
14. From the above quotations from the order it would follow that liability which HBFC incurred under section 24 of HBFC Act for the loan applied for has to be carried out be it the HBFC or the "Company". Change of name in the instant proceedings from HBFC to the Company under the facts and circumstances would therefore recede in inconsequential back ground.
15. Learned counsel for respondent No, 2 who filed his Vakalatnama on behalf of House Building Finance Corporation Limited and not the Company did not at any stage argue that by virtue of virtual winding up of the Corporation in terms of section 36 of House Building Finance Corporation Act, the Corporation which itself is an entity given birth to and created by the Act ceased to exist and was replaced by House Building Finance Corporation Limited, a Company, with 50% even share holding of the State Bank of Pakistan and the Federal Government, is now left with its own rules of governance which too have neither been claimed to exist nor placed on record.
Furthermore no application for impleading the Company if any was made. The learned Counsel for HBFC on the contrary argued that the petitioner is liable for the penalties as laid down under the Act implying that the Act of 1952 is still applicable to HBFC. Learned counsel for HBFC argued that upon the proper construction of section 24 of the House Building Finance Corporation Act, 1952 it would appear that not only the investment is to be fully secured by assignment of the land, the land and the house constructed thereon but also by furnishing a guarantee. However the Learned Counsel failed to justify as to why the word "or" before words "such guarantee" in section 24 could not be given a disjunctive meaning so as to enable the borrower from getting the loan against mortgage of his land with construction or otherwise.
16. The Government Institutions have to act with transparency HBFC in whatever form it may be now is controlled to the extent of 50% even share holding by the Federal Government and State Bank of Pakistan. The Federal Government and the State Bank of Pakistan have not opposed the plea of the petitioner by saying that S.B.P. Is least concerned. In circumstances, the petitioner who has reduced his demand for the loan from Rs,30,00,000 to Rs,15,00,000 against mortgage of the subject land with construction thereon which is worth more than Rs,9 million as stated can surely provide due security to HBFC for repayment of the loan as the loan would not only be secured by mortgage but guarantee as well which the petitioner is prepared to give through his daughter having an inheritable interest in his estate.
17. Accordingly in the facts and circumstances narrated above we conclude that the House Building Finance Corporation Act, 1952 in, absence of notification specifying effective date continued to apply to the respondent No, 1 and the Company both of which would be same on the lifted veil of incorporation.
18. In the facts and circumstances by a short order dated 11-5-2010 the Respondent Corporation was directed to process the application of the petitioner for a loan amount of Rs,1500,000 and the petition was allowed to that extent and these are the reasons for the same.