This writ petition calls into question order dated 21.06.2018 passed by the learned Appellate Tribunal whereby the election appeal filed by the petitioner against rejection of his nomination papers was dismissed.
2. In order to contest the upcoming general elections, the petitioner filed his nomination papers for the constituency NA-92, Sargodha-V. On the basis of information received from the State Bank of Pakistan reflecting the petitioner to be in default in the sum of Rs,3.951 Million and Rs,14.60 Million in respect of finances obtained from MCB Bank Limited and the Bank of Punjab respectively, the nomination papers filed by the petitioners were rejected. The election appeal filed by the petitioner was also dismissed by the learned Appellate Tribunal by relying on Article 63(1)(n) of Constitution of the Islamic Republic of Pakistan, 1973.
3. It is an admitted fact that the suit filed by MCB Bank Limited against the petitioner is pending adjudication before the banking court whereas the Bank of ,Punjab has opted not to file any suit against the petitioner.
4. Since the petitioner was held ineligible for contesting the election on the basis of his alleged default in repayment of amounts of finances obtained from two financial institutions, it would be useful to look at various provisions of the Financial Institutions (Recovery of Finances) Ordinance, 2001 (the Ordinance). It may be emphasized that the petitioner does not deny availing of finances from the two financial institutions. He, however, disputes that any amount is as yet due towards him. Section 9 of the Ordinance stipulates that a Financial Institution may file a recovery suit against the customer in case of default in fulfilling the obligation as defined in the Ordinance.
Although MCB Bank Limited has filed a recovery suit against the petitioner, judgment and decree has not been passed therein. Section 3(3) of the Ordinance reads as under:- For purposes of this section a judgment against a customer under this Ordinance shall mean that he is in default of his duty under subsection (1), and the ensuing decree shall provide for payment of the cost of funds as determined under subsection (2).
It is thus clear that a declaration of default under the Ordinance is only made when judgment and decree is passed against the customer.
5. In the present case, the information regarding the overdue has been supplied to the Returning officer by State Bank of Pakistan from the database maintained by its Credit Information Bureau. It may be stated that State Bank of Pakistan collects data and information of the customers of the financial institutions in terms of the power conferred on it by 25-A of the Banking Companies Ordinance, 1962, which provision reads as under: 25A. Power of the State Bank to collect and furnish Credit information.-
(1) Every banking company shall furnish to the State Bank credit information in such manner as the State Bank may specify, and the State Bank may, either of its own motion or at the request of any banking company, make such information available to any banking company on payment of such fee as the State Bank may fix from time to time: Provided that, while making such information available to a banking company, the State Bank shall not disclose the names of the banking companies which supplied such information to the State Bank: Provided further that; a banking company which proposes to enter into any financial arrangement which is in excess of the limit laid down in this behalf by the State Bank from time to time shall, before entering into such financial arrangement, obtain credit information on the borrower from the State Bank.
(2)Any credit information furnished by the State Bank to a banking company under subsection (1) shall be treated as confidential and shall not, except for the purposes of this section or with the prior permission of the State Bank, be published or otherwise disclosed.
(3)No court, tribunal or other authority, including an officer of Government shall require the State Bank or any banking company to disclose any information furnished to, or supplied by, the State Bank under this section.
State Bank of Pakistan has set up Central Information Bureau (CIB) and the information collected by it is aggregated in the system and the said information (in the form of credit reports) is made available to the financial institutions at their request for the purposes of credit assessment, credit scoring and credit risk management of customers desirous of obtaining finance facilities. This database enables the financial institutions to know the credit history of their prospective customers thus enabling them to make more prudent decisions.
6. In judgment reported as Shahibzada Faisal Ali Khan v. Federation of Pakistan and others 2017 CLD 463, one of us (Shams Mehmood Mirza, J.) stated the rational and the purpose of Prudential Regulations framed by State Bank of. Pakistan as under: It has been noted that the State Bank of Pakistan brought about fundamental changes in the scope of financial system in the year 1992 by putting in place a prudent regulatory framework by introducing Prudential Regulations. Over the years, these Regulations have been reviewed and the latest version covers the areas of Corporate, Small and Medium Enterprises (SME's) and Consumers financing. The purpose of the Prudential Regulations is to ensure safety and soundness of the financial system and they are applicable to banks and Development Financial Institutions.
Securities and Exchange Commission of Pakistan has also introduced its own Prudential Regulations for NBFC's. The Prudential Regulations, apart from others, provide classification of loans based on time periods at which the repayments have not been made by the borrowers. Apart from objective criteria (based on timeframe of the default), subjective criteria is also used for classification of a loan, which may include inadequate cash flow patterns of the borrower, inadequacy of the security and other market conditions relevant for the particular business of the borrower etc. The criterion of classification for different loans (both short term and long term) is similar in case of corporate and SME lending but in case of consumer lending the criteria is somewhat different. The short term loans, under the corporate and SME financing, are classified into "loss" category after a default period of 1 year whereas a consumer loan is classified as "loss" after a default period of 6 months only, It has been taken note of that relaxations from the rigors of Prudential Regulations are given by the State Bank of Pakistan to the customers of the financial institutions and development financial institutions when a specific request is made by them.
It was furthermore held in the said judgment that:- The assertion that by placing the name of the petitioner in CIB makes him a defaulter whereas this is the prerogative of the banking court constituted under Financial Institutions Ordinance has no valid basis. The information provided to CIB database by the financial institutions in respect of a customer does not ipso facto make him a defaulter in the eyes of law. The determination of liability of a customer by a court of competent jurisdiction and placing of his name in CIB database have no nexus with each other and, therefore, ought not to be equated. The reporting requirements by the financial institutions is mandated by section 25-A of the Ordinance and has to be based on the record of the financial institution. This was so held by a learned Division bench of the learned Sindh High Court in a judgment reported as Messrs Abdul Aziz Nawab Khan and Company v. Federation of Pakistan, Ministry of Finance and others 2006 CLD 55. (Emphasis supplied)
It was also held in the said judgment that the entries contained in these credit reports have no evidentiary value which only serve the purpose of informing the other financial institutions about the credit history of a particular customer who intends to borrow loans/finances from the said other financial institutions.
8. The amounts mentioned in the credit report supplied by the financial institutions to. State Bank of Pakistan which in turn is supplied to the Returning Officers is thus not sufficient to saddle the candidate with liability in absolute terms. This amount merely represents a claim against the candidate by a financial institution. In the present case, as noted above, MCB Bank Limited has filed a suit against the petitioner in which judgment and decree is yet to be passed determining the amount that is due from the petitioner, if any.
9. In the nomination form, the petitioner acknowledged the finance facilities. It was, however, stated therein that there is dispute with regard to the liabilities of MCB Bank Limited and that suit in this regard is pending. The finance facility from the Bank of Punjab was shown to be regular. The petitioner thus made full disclosure of the liabilities and also stated that there is a dispute between him and the MCB Bank Limited regarding the liability claim put forth by it which is subject matter of a pending suit.
10.Section 60(2)(a) of the Act reads as under:
(2) Every nomination shall be made by a separate nomination paper on Form A signed both by the proposer and the seconder and shall, on solemn affirmation made and signed by the candidate, be accompanied by--
(a) a declaration that he has consented to the nomination and that he fulfils the qualifications specified in Article 62 and is not subject to any of the disqualifications specified in Article 63 for being elected as a Member; The proceedings before the Returning officer and indeed before the learned Appellate Tribunal are summary in nature as is apparent from section 62(9) of the Act, which is reproduced hereunder:
(9) Subject to this section, the Returning Officer may, on either of his own motion or upon an objection, conduct a summary enquiry and may reject a nomination paper if he is satisfied that--
(a) the candidate is not qualified to be elected as a Member;
(b) the proposer or the seconder is not qualified to subscribe to the nomination paper;
(c) any provision of section 60 or section 61 has not been complied with or the candidate has submitted a declaration or statement which is false or incorrect in any material particular; or
(d) the signature of the proposer or the seconder is not genuine: 11.Article 63(1)(n) of the Constitution is the relevant provision which stipulates that a person shall be disqualified from being elected or chosen as a member of the Majlis-e-Shoora (Parliament) if he has obtained a loan for an amount of two million rupees or more from any bank, financial institution, cooperative society or cooperative body in his own name or in the name of his spouse or any of his dependents, which remains unpaid for more than one year from the due date, or has got such loan written off.
12.Article 63 provides for disqualifications for a person aspiring to contest the election to the Parliament and being penal in nature must be strictly construed. The expression "remains unpaid for more than one year from due date" in the context of loan obtained by a person cannot be interpreted to mean that the record provided to State Bank of Pakistan is binding and conclusive on the Returning Officer in the scrutiny proceedings. It remains ipse dixit. The outstanding amount mentioned therein is at best an un-liquidated claim by the financial institution particularly when the candidate disputes the same and the matter is pending adjudication before a court of competent jurisdiction. The scrutiny proceedings of nomination forms before the Returning Officer being summary in nature, findings on disqualification of a candidate merely on the basis of un- liquidated claim of a financial institution ought not to be made. Determination of default in financial obligation of a customer is the sole prerogative of the banking court, which function and power is not available to a Returning Officer in summary proceedings. In cases where judgment and decree has been passed against the candidate by the banking court or any other court of competent jurisdiction, no doubt the matter would fall within the mischief of Article 63(1)(n) of the Constitution.
13.In the result, this writ petition is allowed and order dated 21.06.2018 passed by the learned Appellate Tribunal and order dated 19.06.2018 are set aside. The nomination papers of the petitioner are accepted and the Returning Officer is directed to include the name of the petitioner in the list of eligible candidates. The petitioner is thus allowed to contest the election for the constituency NA-92, Sargodha-V.