' SARDAR MUHAMMAD SHAMIM KHAN, J.---This reference has been entrusted to me by Hon'ble Chief Justice as a result of difference of opinion between my learned brothers (Kh. Imtiaz Ahmad and Muhammad Farrukh Irfan Khan, JJ.) under Clause 26 of Letters Patent in order to render opinion, as per Rule (5), Part-H, Chapter-4 f Vol.V f the Rules and Orders of the Lahore High Court, Lahore.
2. The point of difference, referred to this Bench for an opinion is as under:- "Whether this Court should quash the Reference and subsequent proceedings thereon on the ground that the petitioners were not joined in investigation; that civil litigation and proceedings under section 284(2) of the Companies Ordinance, 1984 on the subject were already pending between the parties and that the Reference is outcome of mala fide or whether the petition should be dismissed on the basis that wilful default was committed by the petitioners which was an offence under the N.A.B. Ordinance and no ground for quashment of Reference was made out and the petitioners should be directed to approach the learned trial court and to make their pleas before the said Court".
3. The contents f impugned Reference No.11 of 2001 filed by NAB authorities on 14-2-2000 against the petitioners before the Accountability Court are reproduced as under for ready reference:- "The facts are that Messrs Ittefaq Foundry (Pvt.) Ltd. Lahore had obtained cash finance of Rs. 100 million from National Bank of Pakistan, WAPDA House Branch Lahore. The company also obtained Rs.
288.177 million and established two LCs worth Rs.155 million each, and also got guarantees from the bank. The Company willfully defaulted to pay back a sum of Rs. 1,0631,62,937.81 in 1994. The family of Nawaz Sharif, the then Prime Minister being beneficiary of the loan, he was accordingly informed of the situation by the bank. Mian Nawaz Sharif, Prime Minister in his address on 11-6-1998 announced the handing over of his assets to the creditor Bank to realize the loan of Sharif family by selling them. Thereafter, family of Sharif handed over three units namely Messrs Ittefaq Foundry (Pvt.) Ltd. Lahore, Messrs Brothers Steel Ltd. And Messrs Ittefaq Foundry (Pvt.) Ltd. Lahore. A petition under section 284(2) of the Companies Ordinance 1984 was accordingly filed for sanction of the proposed arrangements. During the hearing of this petition in the Lahore High Court Lahore it was noted that the Company was not serious in returning of its debts with mala fide intention. They willfully defaulted to pay back the loan.
' National Bank of Pakistan, WAPDA House Branch, Lahore, sent a complaint to the National Accountability Bureau, which was referred to FIA for inquiry. I have carefully gone through the report of inquiry. I have appraised the material on record. I have gone through the evidence collected during inquiry and placed before me. Mian Abbas Sharif and others were managing the affairs of Messrs Ittefaq Foundry (Pvt.) Ltd. Lahore. The accounts were being operated by Mr. Kamal Qureshi accused and finances were being managed by Mian Abbas Sharif and other accused. In my view the accused are guilty of an offence under section 10 read with section 9(vi) (viii) read with para 1(a) and para 7 of the schedule of offences appended with National Accountability Bureau Ordinance 1999. I therefore consider it proper and just to proceed further against the accused and refer the matter to the Accountability Court Lahore for trial and decision according to law against the accused".
4. After hearing the arguments f learned counsel for the parties and perusal of record, it has been noticed that original NAB Ordinance, 1999 did not contain the term of 'willful default' which was added subsequently by virtue of an amendment dated 3-2-2000 whereby term 'willful default' was introduced in NAB Ordinance for the first time. Mian Muhammad Nawaz Sharif, petitioner No.2, in the year, 1999, was elected as Prime Minster of Pakistan. On 12-10-1999, his Government was toppled by the then Army Chief and, consequently, he was arrested and was involved in some criminal cases.
Instant Reference was filed on 14-2-2000, 12 days after the said amendment, therefore, possibility cannot be ruled out that aforesaid amendment was introduced in NAB Ordinance in order to involve the petitioners in the instant Reference on the basis of mala fides. The manner whereby instant Reference was filed before the Accountability Court leads to the conclusion that prosecution was in extreme hurry to politically victimize the petitioners because on 14-2-2000 Muhammad Basharat Shehzad, Assistant Director FIA, prepared report under section 173, Cr.P.C.
Against the petitioners and on the same day said report was produced before some official of NAB who was acting on behalf of Chairman NAB at Lahore and Reference was submitted before Accountability Court forthwith on the same day which speaks volume.
5. The impugned Reference was filed against the petitioners by NAB Authorities before Accountability Court on 14-2-2000. Subsection (a) of section 16 f National Accountability Bureau Ordinance, 1999 provides that an accused shall be prosecuted for an offence under this Ordinance in the Court and the case shall be heard day to day and shall be disposed f within 30-days, therefore, impugned Reference should have been decided within the stipulated period of 30-days as it was a mandatory provision of law. Unfortunately, proceedings in the instant Reference were not initiated by Accountability Court despite lapse of many years which is totally contrary to the spirit f aforesaid law. The proceedings in the impugned Reference were adjourned sine die till 2-8- 2007 when an application was submitted by the then Deputy Prosecutor General NAB for commencement of the Reference despite the fact that at that time petitioners were still in exile but they were in preparation for coming back to Pakistan. On 10-9-2007 the petitioners along with others returned from exile but they were denied entry in the country and were deported to Jeddah, Saudi Arabia within no time. On 25-11-2007 they, however, finally managed to return to Pakistan.
The impugned Reference continued to be taken up by the Accountability Court after its revival from 17-8-2007 up to 21-8-2008 but it was adjourned from time to time on the request of NAB authorities despite the availability of the petitioners in Pakistan. It is pertinent to mention here that after arrival f the petitioners in Pakistan neither they were required to appear before the Accountability Court, nor any reason was advanced by Accountability Court for frequently adjourning the matter sine die and for abrupt revival of the same after such a long period.
6. It has been observed that impugned Reference was filed before the Accountability Court without joining the petitioners in the investigation which is a basic principle f natural justice. Neither the petitioners were joined in the investigation by FIA nor they were provided an opportunity to defend their case, therefore, this Reference was filed against the petitioners at the whims of the prosecution. Prime responsibility of the Investigating Officer is to collect the incriminating evidence against the accused so that the Court f law should arrive at a just and fair conclusion pertaining to guilt or innocence of the accused. Of course, associating the accused in every investigation is a sine qua non. Reliance is placed on case of Nadeem Sarwar v. Station House Officer Saddar Hafizabad and others, (2000 YLR 756), wherein it was held that "it is statutory duty of every Investigating Officer of a criminal case to associate the accused person with the investigation and also to record his version of incident in question". Record reveals that no effort was made on behalf f the prosecution to ensure the presence/attendance of the petitioners despite the fact that they remained in confinement in Pakistan w.e.f. 12-10-1999 to 10-12-2000 and thereafter were available here after 25-11-2007. The petitioners were neither confronted with the allegation of "willful default" nor their version is available on the record. Surprisingly, the Investigating Officer submitted report under section 173, Cr.P.C. Against the petitioners by holding that the version of Sharif's family available in their reply to the suit for recovery as well as other petitions pending in different Courts have been examined in detail and found unsatisfactory. The involvement of petitioners in the instant reference on the basis of aforesaid conclusion is a mockery in the eyes of law.
7. It would not be out of place to mention here that Investigating Officer of instant case belonged to Immigration Department, therefore, he did not have the requisite know how, training and acumen for carrying out investigation in the matters of financial institutions, steel industry/business and knowledge of business transactions and financial laws as well as Court procedures. In the case of Bank of Punjab and another v. Haris Steel Industries (Pvt.) Ltd. And others (PLD 2010 SC 1109), august Supreme Court of Pakistan observed that "there should be highly transparent inquiry/investigation to ensure that every one involved in the case is dealt with according to law and no injustice is done to anyone". It was further observed that Article 10-A of the Constitution ensures fair trial of the accused as a fundamental right.
8. The most important aspect of the instant case is that as to whether keeping in view the facts and circumstances of this case the petitioners can be termed as 'willful defaulters'?. It has been noticed that complainant bank along with other creditor banks prior to the institution of instant Reference had invoked pecuniary jurisdiction of this Court for recovery of the outstanding amount against the petitioners, whereas petitioner No.1 had also brought a COS for damages against creditor banks and in both the aforesaid cases, proceedings were pending adjudication before learned Company Judge of this Court. The complainant bank along with other creditor banks filed C.O. No.63/1998 before this Court in terms of Article 284(2) of the Companies Ordinance 1984, the contents of which read as follows:- "(1) National Bank of Pakistan Ltd., Regional Office, Lahore. Habib Bank Limited, Regional Office, Lahore. United Bank Limited, Regional Office, Lahore. Agricultural Development Bank Ltd., '
Islamabad. Muslim Commercial Bank Ltd. Regional Office, Lahore.
' Pakistan Industrial Credit and Investment Corporation Davis Road, Lahore.
(7) The Bank of Punjab, Egerton Road, Lahore.
(8) First Punjab Modarba, Egerton Road, Lahore ............ Petitioners ' Versus ' Messrs Ittefaq Foundries (Pvt.) Limited, Ist. Floor, Simla.Tower, 5-Davis Road, Lahore. ...... Respondent ' PETITION UNDER SECTION 284(2) OFTHE COMPANIES ORDINANCE 1984 ' Respectfully Sheweth:- "That the petitioner banks are the creditors of the respondent company to whom financial facilities were provided and loans/credits advanced by them from time to time. After adjusting the part payment made by respondent, it is still heavily under debt to the petitioners. In fact, petitioners constitute majority in number representing three fourth in value f the creditors of the Company.
That as the respondent company failed to discharge its liabilities, the petitioners Nos.1 to 3 filed winding up petitions as well as recovery suits under the Banking Companies (Recovery of Loans, Advances, Credits and Advances) Act, 1997 particularized below which are still sub judice: ' Petition No.1 ' CO No.109 of 1991-Recovery Suit COS 390-1991 Petition No.2.
' CO No.111 of 1991-Recovery Suit COS 388-1991 Petition No.3 ' CO No.120 of 1991-Recovery Suit COS 382-1991 Petition No.4 ' CO No.23 f 1995-Recovery Suit COS 359-1991 ' That due to financial difficulties faced by the respondent company, it is not in a position to discharge its liabilities and proposes to enter into an agreement with the respondent banks, whereunder the company's assets are to be handed over to the banks for recovery of the outstanding dues. These assets consists of entire factory premises including land, building, plant and machinery, stock in trade, receivable, raw material and finished goods etc. These assets shall also include the total assets and liabilities of another dormant company namely Ilyas Enterprises (Pvt.) Ltd. Which were taken over by the Ittefaq Foundries (Pvt.) Ltd. The deed embodying the terms of the proposed arrangement, is annexed herewith which may kindly be read as part of this petition.
' It is therefore prayed that the proposed arrangement may kindly be sanctioned and got implemented."
9. This Court vide order dated 8-7-1998 issued notices to the respondents for holding meeting with creditors in order to give effect to the aforesaid arrangement and vide order of even date in C.M.
No.1059-L/1998, direction was issued by this Court that during pendency of said petition and in the light of the arrangement arrived at inter se between the creditors and the petitioners, company shall be run by a committee with the assignment of 3/4 functions namely.
(a) to assume and take over the possession and preserve properties;
(b) to make a complete inventory of the properties of the company; and,
(c) to explore the possibilities of the disposal of assets of the company which shall of course, be subject to orders by this Court.
' Direction was also issued by this Court to the effect that creditor banks should file their respective claim and also, passed an injunctive order to the effect that "IN THE MEANTIME NO COERCIVE MEASURES BE TAKEN AGAINST THE PETITIONERS." The instant Reference was filed when the matter was sub judice before this Court and aforesaid injunctive order had already been passed in the said proceedings. In pursuance of order of this Court ibid the assets/property f the petitioners valuing subject matter of impugned Reference was handed over to the committee, hence, filing of impugned Reference seems to be tainted with malice to malign the petitioners and to tarnish their political image.
10. Keeping in view the aforesaid settlement arrived at between the parties, this Court is of the view that petitioners never denied their financial liability rather, their bona fide is established on account f submission of their assets towards discharge/fulfillment of their financial obligation to the said institutions which act has been undertaken with permission of the learned Company Judge of this Court. The terms 'd' and 'e' f the arrangement agreed upon between the parties are reproduced as under:-
(d) That the sale proceeds f the property, and the receivables on recovery thereof shall be distributed among the Creditors-Banks, in such ratio and in such manner, as mutually agreed upon by them. The Court shall be moved and requested to enforce the recovery of the receivables.
(e) If the sale proceeds of the Assets coupled with the realization of the receivables, are more than the liability of the Company, the balance shall be paid to the Company. On the other hand if such sale proceeds and the recovery of receivables, is less than the liability of the Company, the Court will be requested to:
(a) determine such short fall.
(b) Fix the responsibility to make good such short fall, and
(c) Enforce the recovery in this behalf, against the persons concerned.
11. In view of the above arrangements, it is crystal clear that the creditors were sure that the assets tendered by the petitioners would be higher than their claim, therefore, they agreed to pay back to the petitioners, such additional amount, if sale proceeds were in excess f the liability of the petitioners. The petitioners also agreed that if sale proceeds were less than the liability they would make good such shortfall in their personal capacity through the process f Court. In these circumstances, petitioners can not be considered or termed as 'willful defaulters' within the meaning of section 5(q) of NAB Ordinance which runs asunder: "Wilful default" a person (or a holder of public office) is said to commit an offence of willful default under this Ordinance if he does not pay (or continues not to pay) or return or repay the amount (due, from him) to any bank, financial institution, cooperative society, (* *) Government department (,) statutory body or an authority established or controlled by a Government on the date that it became due (as per agreement containing the obligation to pay, return or repay or) according to the laws, rules, regulations, instructions, issued or notified by (the State Bank of Pakistan or the bank), financial institution, cooperative society, Government department, statutory body or an authority established or controlled by a Government, as the case may be, and a (thirty days notice has been given to (such person or holder of public office)): ' Provided that it is not willful default under this Ordinance if (such person or holder of public office) was unable to pay return or repay the amount as aforesaid on account of any willful breach f agreement or obligation or failure to perform statutory duty on the part of any bank, financial institution, cooperative society (,) Government department (,) statutory body or an authority established or controlled by Government (:)
' Provided further that in the case f default concerning a bank or a financial institution a seven days notice has also been given to such person or holder of public offence, by the Governor, State Bank f Pakistan: ' Provided further that (the) aforesaid thirty days or seven days notice shall not apply to cases pending trial at the time of promulgation of the National Accountability Bureau (Amendment)
Ordinance, 2001.)"
12. The outcome of aforesaid arrangement between the creditors and the petitioner's company was in fact a novation of the original contract under section 62 of the Contract Act, 1872. A subsequent contract based on mutual agreement f the parties was novation f the original contract between the petitioners and the creditors bank and other institutions. It is a settled principle f law that once the original contract had been novated, rights and obligations thereunder stood extinguished and were replaced by rights and obligations under the novated contract. Novation of contract in fact creates a new contractual obligation and variation in terms f the original contract, therefore, if there was any default simplicitor or willful stood extinguished by virtue f the subsequent agreement between the parties which came under judicial consideration f this Court in C.O. No.63 f 1998. As aforesaid arrangement was already pending between the parties before the competent court of law, therefore, there was no occasion or cause of action available with the financial institution to file a complaint with NAB or NAB authorities to proceed against the petitioners under the NAB Ordinance.
13. For what has been discussed above, I agree with the view taken by my learned brother Muhammad Farrukh Irfan Khan, J., wherein it was held by his lordship that "For the foregoing facts and circumstances and for reasons enumerated above, I am of the considered opinion that Writ Petition No. 2618/2011 must succeed which is accordingly allowed with an irresistible conclusion that impugned Reference No.11 of 2001 is ordered to be quashed being void ab initio and of no legal effect.
14. It is pertinent to mention here that during pendency of instant writ petition, an application (C.M.
No.1 of 2014) was filed on behalf of the petitioners under Order VI, Rule 17 read with section 151 of C.P.C., 1908 seeking disposal of main writ petition (W.P. No.2618 of 2011) and impugned Reference in terms of order passed by this Court on 27-5-2014 in C.O. No.63/1998 which has been reported as National Bank of Pakistan v. Ittefaq Foundries and others (2014 CLD 1068).
15. Perusal f order passed by this Court in C.O. No. 63/1998 reveals that all liabilities which were outstanding against the petitioners have already been satisfied by virtue of order of sale which has been confirmed by this Court in pursuance f order dated 27-5-2014 passed in aforementioned C.O.
Ch. Riaz Ahmed, Additional Prosecutor-General for NAB, Mr. Naseer Ahmad Bhutta, Additional Attorney General for Pakistan, Mr. Muhammad Mehmood Khan, Deputy Attorney General for Pakistan, Mr. Waqas Qadeer Dar, Prosecutor General for NAB and Mr. Qamar Ul Haq Bhatti, learned Standing Counsel, appearing on behalf of respondents have categorically stated before me that petitioners have made payment of all outstanding amount to the credited bank along with mark up and that no write off or concession was extended to petitioners in this regard, therefore, they have no objection if instant petition is accepted and Reference in hand is quashed.
16. The respondents have produced before me photo copies of. Letter, issued by National Bank of Pakistan, Habib Bank Limited, United Bank Limited, Zarai Taraqiati Bank Limited, Muslim Commercial Bank, Industrial Development Bank, Limited, NIB Bank, The Bank of Punjab and First Punjab Modarba which are their respective clearance letters on account of Ittefaq Group f Companies (respondent No.1) and same have been placed on the record as Mark "A to I".
17. Keeping in view the fact that petitioners have paid all outstanding amount to creditor banks along with mark up and that all the respondents have no objection if instant petition is accepted; this petition is accepted and reference in hand is hereby quashed.
18. Seeking guidance from the case laws reported as:- (1) The State v. Salehoon (PLD 1971 Lahore 292) (2) Muhammad Sharif v. The State (PLD 1971 Lahore 708)
(3) State v. Salehoon (PLD 1971 Lah. 292).
(4) The State of Orissa v. Minaketan Patnaik (AIR 1953 Orissa 160), it has been observed that this petition is not to be referred again to the aforesaid learned Bench which' originally heard the same as the decision would not be that of majority, rather, it would be the opinion f this Court (Referee Judge) which would have decisive effect and would be of binding nature and the judgment will follow such opinion.
' Disposed f.