' UMAR ATA BANDIAL, J.---The petitioner No,2 entered into an agreement of Morabaha finance dated 29-12-2005 with the respondent No,1 bank for an amount of Rs,747,150.00 to purchase a motor vehicle. The repayment schedule of the said finance was spread over 60 'monthly installments starting from 30-12-2005 @14% mark-up. After payment of 41 installments by the petitioner and without service of a notice for repossession on him, the motor vehicle was, however, snatched by the respondent-bank from the petitioner No,1 on 7-4-2009 on the allegation of default in repayment of 4 installments.
2. By order dated 15-4-2009 passed in this petition an interim injunction was granted against auction of the financed vehicle. The amount alleged by the respondent-bank to be short paid was deposited by the petitioners on 21-4-2009. However, at the hearing on 26-5-2009 the learned counsel for the respondent-bank informed that the petitioner's vehicle had been auctioned on 16- 4-2009. The petitioner's learned counsel contends that snatching of the vehicle by the respondent- bank on 7-4-2009 is illegal under the Prudential Regulations for Consumer Finance of the State Bank of Pakistan ("SBP"). Regulation 0-6 requires a financing banking institution to specify the default period after which repossession is to be resorted. The petitioner's Morabaha agreement does not contain any such stipulation. Also the regulation requires a financing bank to frame a repossession policy and then to follow it strictly. Under clause 8(2) of the Repossession Policy of the respondent-bank the petitioner was entitled to but was not served a final notice of repossession of the vehicle. Allegedly the respondent-bank thereby deprived the petitioner of an opportunity to avoid repossession of his vehicle or to otherwise regularize the loan account.
3. The learned counsel for respondent-bank has referred to legal notice dated 19-2-2009 as the final notice issued under the Bank's Repossession Policy. This notice alleging default of the "CAR4U LOAN SCHEME" by the petitioner declares that the finance given to the petitioner is recalled and demands payment of an amount of Rs,385,364 within 14 days. Neither the default amount nor threat of repossession of the vehicle is mentioned in the notice. The statement of account filed in court by the respondent-bank shows that on the date of repossession of the vehicle, Rs,77,155.00 was overdue from the petitioner who claims, without denial by the respondent bank, to have deposited the same on 21-4-2009.
4. The submissions made by the learned counsel for the parties have been heard and considered.
Prudential Regulations for Consumer Financing are framed by the SBP to ensure fair treatment by a financing bank with its customeRs, These are supplemented on the present subject by BPRD Circular No,13 of the 2008 of the SBP issued in December 2008 which requires a bank to give 14 days prior written notice before undertaking the repossession of a leased vehicle. Prior notice has the utility of providing an opportunity to a customer to avoid repossession of his leased asset. The claimed final notice dated 19-2-2009 given by the respondent-bank has been perused. It notifies, termination of the finance by demanding the entire balance amount of finance of Rs,385,364 from the petitioner and threatens legal action. The notice neither warns of repossession of the vehicle nor indicates an outstanding amount for payment to avoid adverse action thus excluding an opportunity for the petitioner to regularize the car finance.
5. Nevertheless, the respondent-bank did not act upon its said final notice for 45 days during which period it also accepted receipt of a loan installment from the petitioner on 6-3-2009; thereby suggesting contrary to the notice that the repayment terms of the loan were alive. However suddenly on 7-4-2009 the respondent-bank proceeded to repossess the vehicle and to auction it on 16-4-2009 . The action was made one day after an injunction against such auction was granted by this court. The auction is a controversial act because it demonstrates indifference by the respondent-bank to a court. Order. From the repossession of a financed asset without notice, to its auction in violation of a court order and collection thereafter, as it transpires, of additional payments from the petitioner although refund was due him, exhibits a callous attitude in the bank's conduct. Assuming that the interim order dated 15-4-2009 by the court may not have been conveyed in time to the respondent-bank in writing therefore contempt of court is not presently alleged. However, the other facts depict its arbitrariness. In this regard, the auction sale account submitted by the bank shows that after 16-4-2009 an amount of Rs,462,162 was lying with the bank for refund to the petitioner. Yet on 21-4-2009 the respondent-bank collected Rs,78,000 from the petitioner as the balance amount of installments due under the CAR4U LOAN. The acceptance of that payment by the bank suggests either that the vehicle was not auctioned on 16-4-2009 as represented to the court or demonstrates blatant caprice of the respondent-bank to exploit its customer who is actually entitled to a refund from the bank. In either event the bank's conduct is unlawful.
6. The foregoing observations were confronted to the respondent-bank in the order of the court dated 21-1-2010 and an opportunity granted to rebut the same. The explanation by the respondent-bank claims that other notices dated 3-1-2009 and 4-2-2009 for repossession of the vehicle had also been sent to the petitioner. Surprisingly these are tailored precisely to rebut the objections noted in the order dated 21-1-2010. No explanation is given for the earlier non- production of the said notices by the respondent-bank. Evidently these notices did not form part of the bank's file on the petitioner's loan. In any case, a repossession notice should precede its threatened action and not be superseded by subsequent conflicting conduct and a legal notice that merely threatens legal action contrary to the SBP regulations and the bank's own policy. The explanation given is not impressive.
7. Quite apart from the remedies that the petitioner may have available under the Financial Institutions (Recovery of Finances) Ordinance, 2001, this court finds that financial institutions and banks doing business under Banking Companies Ordinance, 1962 ("Ordinance") must follow the regulatory framework established by the SBP to control the grant of auto-finance. Such a framework is represented by the Prudential Regulations for Consumer Financing and BPRD No,13 of 2008 of the SBP which are binding on banks and financial institutions licensed under the Ordinance.
Reliance is placed on Hashwani Hotels Limited v. Federation of Pakistan and others PLD 1997 SC 315.
The SBP's regulatory framework imposes legal obligations upon banks and financial institutions in the public interest that are enforceable by the SBP, respondent No,3. Correspondingly, the Prudential Regulations and BPRD No,13 of '2008 confer/create rights for customers of banks and financial institutions, the violation of which may be complained to the SBP. The petitioner applied to the SBP for relief in the present matter but in vain.
8. The legal duties/obligations of the SBP are enforceable by this court in its constitutional jurisdiction. A perusal of the facts of the present case reveal grounds for inquiry and relief by SBP.
Therefore, on the foregoing grounds of failure to satisfy the Prudential Regulations and BPRD No,13 of 2008 and also the respondent-bank's own Repossession Policy in relation to the B impugned action including the arbitrariness evident on face of the impugned repossession, the respondent- bank has failed to discharge its duties under the regulatory framework of the SBP.
9. This court accordingly considers it appropriate to refer the present matter to the SBP for taking action and granting relief against the respondent-bank in accordance with law for the violation of the bank's duties under the SBP's regulatory framework in relation to the bank's commercial dealings with the petitioner, its customer. Writ petition is disposed of with the foregoing direction.