MUHAMMAD IQBAL KALHORO, J.---This single judgment shall dispose of all the captioned petitions which are connected and have been filed mainly against an enquiry by the Federal Investigation Agency (FIA), which later on culminated in registration of FIR against the petitioner who are either CEO/directors of Messrs ZHV Securities (Pvt.) Limited, a brokerage house, or Bank officials of Muslim Commercial Bank (MCB), on a complaint in writing made by respondent No,4 namely Khawaja Saeed Hai alleging unauthorized pledge and illegal sale of his book-entry securities/shares by the petitioners in league with each other by committing forgery in the relevant documents. For the sake of convenience C.P. No D-3989/2013 is treated as the leading petition and petitioner No,1/ZHV Securities (Pvt.) Limited there as petitioner No,1.
2. Brief facts of the case are that petitioner No,1 is a private limited company incorporated under the laws of Pakistan and engaged in the business of trading and brokerage for equities and securities/shares on various Stock Exchanges of the country and maintains an account with Central Depository Company (CDC) as per provisions of Central Depository Act, 1997 (CDC Act).
Respondent No,4 held a trading account No,1484 with petitioner No,1 through which he actively traded in shares and securities listed on the stock exchange and CDC. It is alleged that respondent No, 4 through the contract documents, particularly vide clause 12 of the Account Opening Form and clause 8 of the Letter of Authorization, had given an unconditional authorization to petitioner No,1 to pledge any of his securities/shares available in his account in favour of any eligible pledgee, and such authorization was explicitly sufficient for the purpose of section 24 of the CDC Act and the regulations made thereunder. At some point of time it was found from the statement of account of respondent No,4 being mainfained by petitioner No,1 that he owed a huge amount to petitioner No,
1. In order to make good of said loss/margin, petitioner No,1 while acting on the basis of unconditional authorization as mentioned in clause 12 of the contract documents and in line with rules and regulations pledged his certain shares with MCB in favour of an eligible pledgee on 25.09.2008. The shares were subsequently sold by the eligible pledgee in order to fulfill the shortfall in the drawing power of petitioner No,1. However, respondent No,4 as soon as came to know of this fact filed a complaint with respondent No,2/FIA which took cognizance of the matter and started an enquiry under Federal Investigation Agency Act, 1974 (FIA Act) against all the petitioners and others for committing an offence, among others, under Section 406 of the Pakistan Penal Code, 1860 (P.P.C.). The petitioners against such an inquiry filed a C.P. No,D-2821/2012 before this Court against FIA and respondent No,4 wherein through an ad-interim order dated 03.08.2012 the respondents were restrained from taking any coercive actions against the petitioners without due process of law. Directions were also issued therein to not harass and arrest the petitioners, and at the same time the petitioners were directed to join the investigation. Pursuant to which the petitioners joined the investigation and supplied the required contract documents to the Investigating Officer (TO), who, however, allegedly refused to receive the same and asked for the original ones. It is further stated that since the attitude of the Investigating Officer was intimidating to the petitioners, they filed a C.M.A. No,33628/2012 along with the original documents in the court and made a request to the court to hand over said documents to the Investigating Officer because they were apprehending some possibility of tampering with the signatures on the original account opening form and authority letter by the I.O. However, during pendency of the said application and the constitution petition, respondent No,4 lodged an FIR bearing Crime No,22/2013, under sections 409, 420, 468, 471, 109, 34, P.P.C., registered at Police Station FIA CBC, Karachi against the petitioners.
3. In C.P. No, D-3989/2013, the petitioners have prayed for quashment of said FIR and directions to the respondents/FIA to not take any proceedings against them under the said FIR; and further to not take any coercive action against them or cause them any harassment. In C.P. No,D-3989/2017, C.P. No,D-3990/2013, C.P. No,D-4047/2013 and C.P. No,D-4131/2013, the petitioners have made the same prayers as stated above. Whereas in C.P. No, D-2821/2012 and C.P. No,D-2822/2012, the petitioners have impugned said inquiry No,29/2011 and the subsequent proceedings initiated thereon by the respondents.
4. Respondent No,3 has filed Para-wise comments alleging that the petitioners being CEO/directors of Messrs ZHV dishonestly and fraudulently pledged shares of respondent No,4 worth Rs,4,412,311/- with MCB and succeeded to obtain a financial facility by forging the signature of the complainant (respondent No,4) on some documents and used them as genuine for the said purpose, which amounted to committing a criminal breach of trust, a scheduled offence under FIA Act. It is also alleged that the petitioners despite directions did not provide the original documents for the purpose of further investigation. Respondent No,4 has also filed counter affidavit stating therein that Messrs ZHV/petitioner Nol by forging some documents has sold his shares by pledging them with MCB through an account that petitioner No,1 opened in its name. Neither MCB nor petitioner No,1 informed him of pledge or sale of his shares.
5. Learned counsel for the petitioner contended that respondents had infringed fundamental rights of the petitioners enshrined under Articles 3, 4, 5, 9, 14 and 25 of the Constitution of the Islamic Republic of Pakistan by commencing an unlawful and illegal enquiry, and then lodging the impugned FIR pursuant to such an enquiry; that FIA has no jurisdiction to entertain any complaint of the nature lodged by respondent No,4 against the petitioners in that it is a dispute between two private persons i,e, a broker and his client in which FIA has no authority to intervene and conduct an inquiry or to lodge an FIR; that FIA has been setup to investigate the offences in connection with the matters concerning the Federal Government, therefore, the cognizance taken by FIA and registering the impugned FIR against the petitioners is without jurisdiction, illegal and unlawful and thus the same is liable to be quashed: that the alleged offences are specifically enumerated in CDC Act which is a special law and has an over ridding effect over the general law i,e, P.P.C.; that all the offences in respect of illegal and unauthorized dealings in the book-entry securities, which is precisely what has been alleged by respondent No,4 in the FIR, are exclusively triable and punishable under the provisions of CDC, Act and therefore, FIA has no jurisdiction to intervene and lodge FIR against the petitioners; that the offences dealt with in CDC, Act, are not mentioned in the schedule to the FIA Act, as such the FIA as per section 3 of the FIA Act has no jurisdiction to investigate such offences; that the client and broker relationship is governed by the regulations of respective exchanges, hence .respondent No,4 has a remedy before the relevant exchange in the form of a neutral arbitration; that the petitioner has distorted the facts in FIR against the petitioners and has tried to convert a civil dispute into a criminal one: that the pledge over the book-entry securities of respondent No,4 was created by petitioner No,1 in accordance with the applicable laws, rules and regulations and on the basis of contractual agreement between the parties to fulfill margin/loss in his account, as such the same action of petitioner No,1 cannot be made a basis of FIR against it; that the offences mentioned in CDC Act carry lesser punishment than the one conveyed by P.P.C. and it is a settled principle of law that the statute carrying lesser punishment must be given precedence over the statute which provides for harsher penalties and procedure for the same offence. He in support of his contentions has relied upon unreported judgments passed by Division Benches of this Court in C.P. No,D-2668/2012 and C.P. No,D-5137/2017, and a case law reported in 2017 SCM R 1218.
6. On the other hand, learned counsel for respondent No,4 submitted that he had been cheated and defrauded by the petitioners in connivance with each other; that the signature of respondent No,4 on all the documents was forged and fabricated and on the basis of such forgery his shares were pledged and illegally sold; that respondent No,4 had not given any authorization to the petitioners to pledge his shares for any purpose without informing him; that petitioner No,1 and rest of the petitioners, who are Bank officials in league with each other deprived respondent No,4 of his valuable shares by playing fraud and committing forgery, as such the F1A has the authority to investigate the case. Learned counsel further contended that the case of respondent No,4 does not fall within clause 12 of the Account Opening Form, which even otherwise does not envisage disposing of his shares by the brokerage house for availing a finance facility for its own benefit; that there was no margin/shortfall in the sub-account of respondent No,4, yet his shares were pledged by petitioner No,1; that thereafter petitioner No,1 knowingly and fraudulently did not pay the loan which resulted in selling off the shares by the Bank officials. According to him, this was a criminal breach of trust committed by petitioner No,1 in collaboration with Bank officials which is a scheduled offense under FIA Act and FIA has the jurisdiction to investigate such offense. Learned counsel in support of his contentions has relied upon an unreported judgment dated 12.04.2012 passed by a Division Bench of this Court in C.P. No,D-3298/2011 (Bank Alfalah Limited and others v.
Federation of Pakistan and others).
7. We have considered submissions of the parties and perused the material available on record and have taken guidance from the case law cited at the bar. There is no cavil to the proposition that when a special law and a general law deal with the same offence, the former shall prevail over the latter and the subject shall be dealt with under the special law. When there is a conflict or inconsistency between the two laws in respect of punishment and procedure for the same offence, the one granting greater punishment must yield in favour of the law carrying a lesser punishment.
However, if there is a conflict or inconsistency in respect of the same offence between two special laws having overriding clauses, the later in time being the latest intention of the legislator shall prevail over the one prior in time but such presumption is not automatic and would be subject to determination of many other factors such as the object, purpose and policy of both the statutes and the legislature's intention as expressed by the language used therein. It is not irrelevant to emphasize here that the rule that the special law shall prevail over the general law is attracted ordinarily when the two laws i,e, a special law and a general law concurrently apply to and permit of parallel platforms for the adjudication of the same offences undqr both the laws. However-, if the scope of a general law or for that matter any special law-(prior in time) is wider than the special law (later in time) dealing with the same offences, the former would yield to the latter to the extent of acts and omissions which constitute an offense thereunder. If the special law (may be later in time) does not directly and specifically deal with or apply to a particular act which constitutes an offence under the general law or for that matter under any special law (prior in time), no presumption of latter ceding in favour of former would be read. So legally it would be only when the two laws, be a general law Vs. a special law or a special law prior in time Vs. a special law later in time with overriding clauses dealing with a particular act constituting an offense under both the laws, provide for distinct punishments and permit of different procedures, the presumption that the law harsher in punishment and procedure shall cede to the law less onerous would come into being.
8. In this matter, the case of petitioner No,1 is that it pledged shares of respondent No,4 on the basis of an unconditional authorization given to it by him under clause 12 of account opening form and in line with the applicable laws in order to fulfill shortfall in its drawing power, which is not an offense at all under any law. But if it is presumed that petitioner has committed an act that constitutes an offense, it would be under CDC Act which is a special law dealing exclusively with book-entry system for transfer of securities by central depository companies which has an overriding clause and provides for lesser punishment and an easy procedure, as such the same will prevail over P.P.C. and FIA Act or any other law for the time being in force in respect of allegations against the petitioners. We would like to take up the issue of unconditional authorization first which petitioner No,1 claims has been given to it by respondent No,4 vide clause 12 of account opening form and while invoking the same it had pledged his securities. The title of clause 12 reads as "OTHER SPECIAL TERMS AND CONDITIONS FOR BOOK ENTRY SECURITIES", it has in all (v) sub-clauses which read as under:- The following special terms and conditions shall apply to all transactions relating to book entry:- i) The Client hereby irrevocably and unconditionally authorize ZHVSL to move the client's Securities from the Client's sub-account/from time to time with an unfettered right to dispose them off at any time without any notice to the Client and to apply the net proceeds thereof towards the adjustment of the client's outstanding dues, dirictly or indirectly to ZHVSL, including under normal settlement as well as against all Client's losses and the Client shall continue to be liable for any shortfalls. ii) The Client further undertakes unconditionally and irrevocably authorizes ZHVSL to freeze the sub-account/of the client and/or to move the Client's Securities in the sub-account/of the client for any of the above purposes without any notice to Client. iii) In case the Client is trading in Securities through ZHVSL, then the Client further undertakes not to move or issue any instruction to the CDC for the movement of any shares/securities in his subaccount/without the prior written/Email/Email consent of ZHVSL. iv) ZHVSL is further authorized to issue requisite instructions to the CDC/issuers from time to time, if it is considered necessary, to implement the Client's above understanding with ZHVSL. v) The foregoing conditions also constitute the Client's Irrevocable authorization to ZHVSL for the purposes of section 24 of the Central Depositories Act, 1997 and the Central Depository Company of Pakistan Limited Regulations.
An attentive reading of above sub-points would clearly show that no authorization in favour of petitioner No,1 has been conferred other than to move securities from sub-account of respondent No,4 to dispose them for covering up his losses or to make adjustments to outstanding liabilities which he may owe directly or indirectly to petitioner No,
1. There is no word in the aforesaid clause that petitioner No,1 can pledge or dispose of shares of respondent No,4 for its own benefit in the manner as it has done. It does not seem to bestow either any right to petitioner No,1 to pledge shares of respondent No,4 without first intimating him about the grounds justifying pledging of his shares, and/or without seeking from him a necessary mandate in this connection. This clause ostensibly at the most seems to convey that petitioner No,1 can move or dispose of the shares of respondent No,4 when there is some liability outstanding against him, which requires urgent attention or there are some losses in his sub-account which need to be compensated immediately in order to save him from further loss. However, it would not imply that in the event of any such situation, petitioner No,1 can automatically dispose of shares of respondent No,4, without first informing him of any such losses or outstanding liabilities whichever the case may be. Such a meaning is easily deducible from the language of said clause when it expressly says petitioner No,1 can dispose of shares (but only) for applying its net proceeds to the adjustment of outstanding dues against respondent No 4 or to cover up losses in his sub-account. Meaning thereby this arrangement can only be resorted to for the benefit of the client to take him out of the crisis and that too only when both parties agree to the fact that there is a crisis i,e, losses in the sub-account or some outstanding liabilities, which requires to be immediately taken care of. Any situation contrary to it where losses or liabilities are disputed by the sub-account holder, the participant/the brokerage would not be presumed to have any authority to proceed unilaterally and dispose of shares of his client. It will not only be against well expressed intention enunciated in the said clause but also against the natural justice. Additionally, it may be stressed that such an action by the participant, but only in a situation as discussed above, without a formal notice to sub-account holder is justified because the shares are not in the form of paper script but are entered or transactions thereto are affected through electronic book entry in a central depository system maintained by CDC.
9. A perusal of record here does not show that any of the above justifications was available to petitioner No,1 to move and pledge shares of his client i,e, respondent No,4. No material has been placed before us by it either to establish that respondent No,4's transactions were recording any losses or there were some liabilities against him which prompted it to get going and pledge his shares without even intimating him. On the contrary the record shows that petitioner No,1 proceeded to pledge shares of respondent No,4 with MOB for availing a financial facility not for adjustment of any losses or dues against respondent No,4 but for its own benefit and then defaulted which led MCB to selling off the shares to recover loan amount. As such, there is no question of petitioner No,1 invoking any so-called authority in terms of clause 12 for taking its client out of some crisis. The relevant bank officials who are the petitioners in some of the petitions at the time of pledging the shares did not exercise necessary caution as required of them under a circular (which is reproduced at the end of this paragraph) issued by State Bank of Pakistan advising the banks/DFIs to ensure while accepting shares as security that the beneficiary of the facility is absolute owner of the shares so pledged or has the necessary mandate to pledge the shares as security for availing finance facility from the Bank. Petitioner No,1 was neither the owner of the shares so pledged nor had it a necessary mandate to pledge the shares of respondent No,4 for availing a finance facility for its own benefit, yet the bank officials willingly proceeded to grant it such a facility and then on account of its failure to pay back the loan sold off the shares which they knew were property of someone else. This whole episode, prima facie smacks of an element of a conspiracy or connivance between petitioner No,1 and the bank officials to deprive respondent No,4 of his shares fraudulently and dishonestly.
BPRD Circular Letter No, 15 of 2008 June 24, 2008 The Presidents/Chief Executives, All Banks/DFIs, Dear Sir / Madam, Pledge of Third Party Share against Financing to Brokers Banks/DFIs are advised that while accepting shares as security, they must ensure that the beneficiary of the facility is absolute owner of the shares so pledged or has the necessary mandate to pledge the shares as security for availing financing facility from the bank/DFI.
Yours truly, Sd/- (SYED IRFAN ALI)
Director 9.(sic.) In any case regardless of any authority given to a broker through the contract documents to handle his client's shares that we have discussed in the preceding paragraph, section 12 of CDC Act lays down in specific terms that book-entry securities shall be pledged only in favour of an eligible pledgee to secure the payment of a debt or liability or performance of any obligation by any account holder directly or by any sub-account holder through instructions given to a participant when the book-entry securities are blocked in the manner, which is set out in subsection (2) of the said section. According to which, the book-entry securities to be pledged shall be blocked when an account holder or a participant gives instructions to the central depository system in a manner that the pledgor or the relevant participant when the pledgor is a sub-account holder ceases to handle the pledged book-entry securities and notice of the blocking is available through the central depository, system to the eligible pledgee. This provision of law not only strengthens our opinion articulated above detailing under what circumstances petitioner No,1 was permitted to invoke its authority to pledge shares of respondent No,4 but it also specifies in clear terms that such step was to be taken only under the instructions given in this regard by the sub-account holder. Surreptitiously availing a finance facility by the participant for its own benefit is not in the letter of above provision of law, nor does it recognize default in repaying the loan by the participant at the peril of its client as an offense punishable under CDC Act.
10. When we confronted the above position to learned counsel for the petitioners, he argued that handling of book-entry securities has been taken care of under section 24 of CDC Act whereby a participant has been prevented from handling or authorizing any handling of book-entry securities entered in the sub-account maintained under his account without authority of the sub-account holder, but said offence is non cognizable and no court is authorized to take cognizance of it unless a complaint is made by Corporate Law Authority (the Authority) as provided by law. He also emphasized that contravention of section 24 of CDC Act has been made punishable under section 28(2) of CDC Act which stipulates a fine up-to a million rupees and further fine of rupees twenty thousand every day after the first contravention or with imprisonment for a term which may extend to five years or with both, such punishment on the one hand is lesser than the one provided for the offenses under P.P.C. mentioned in the impugned FIR and on the other since it has been ordained by special law, the same has to prevail over P.P.C. and, therefore, the FIR against the petitioners is invalid, illegal, void ab initio and without legal authority. We are mindful of such legal position and have discussed it in some detail in paragraph of 7 of this judgment in the light of judgment of honourable Supreme Court in the case of Syed Mushahid Shah and others v. Federal Investigation Agency and others (supra). But it is quite obvious to us that a special law shall prevail over a general law when both are dealing with an act which constitutes an offence under both the laws and there is a conflict or inconsistency between them in respect of punishment and procedure for the same offence. However, if the scope of a general law is wider than the special law, the former would yield to the latter to the extent of acts and omissions which constitute an offense under the latter. If the special .law does not directly and specifically deal with or apply to an act or omission which constitutes an offence under general law, no presumption of latter ceding in favour of former would be available to the courts to read. Under section 24 of CDC Act, handling of book-entry securities without authority has been made an offence, the punishment of which is provided in section 28(2) which is a fine up-to a million rupees and rupees twenty 'thousand every day after the first contravention or with imprisonment for a term up-to five years or with both. By section 28 of CDC Act the courts have been debarred from taking cognizance of any offence under the Act, save on a complaint made in writing by the Authority. Section 30 of ibid Act starts with non obstante clause and reads that notwithstanding anything contained in the Criminal Procedure Code, every offence under this Act shall for the purpose of said code be deemed to be non- cognizable. Punishment and adjudication of fine and penalty is provided under section 31, according to which if for any offence an imprisonment is provided, it shall be adjudicated by a court not inferior to that of a court of session. in any other case the proceedings would be held by a member of the Authority. The word 'handling' appearing in section 24 has been defined in clause 12 of CDC Act, which in relation to book-entry security means transfer of a book-entry security by electronic or similar means, pledging of a book-entry security in accordance with section 12 or the withdrawal from central depository system of the security represented by the book-entry security. Section 12 as we have discussed above stipulates pledging of shares to secure the payment of debt or liability or performance of any obligation by any account-holder directly or by any sub-account-holder through instructions given to a participant. So if a participant pledges the shares of sub-account holder that too only as per terms provided under section 12 of ibid Act, but he does so without explicit authority in this regard by sub-account holder, he would be deemed to have committed an offence under section 24 of CDC Act and therefore would be tried and punished in accordance with the relevant provisions as above of CDC Act.
11. The CDC Act does not envisage any procedure of detention, arrest, investigation, trial, punishment, etc. for a participant who is accused of committing forgery in the documents of a sub-account of his client maintained by him and then on the basis of such forged documents pledging his shares for availing a financial facility not for the purpose as stipulated under section 12 of CDC Act but for his own benefit, and then (purposefully) defaulting leading to selling off shares by the Bank to recover the loan amount. The said law i,e, CDC Act has no provision either to deal with the Bank officials who are either in active connivance with the participant in committing the said offence or do not exercise the due diligence as required of them under the circular of the State Bank of Pakistan reproduced above, which always results in a person/sub-account. holder being deprived of his valuable property. In the present case precisely the allegations of such nature have been levelled in the impugned FIR against the petitioners some of whom are bank officials and which in view of preceding discussion do not seem to attract any penal provision of CDC Act. The offence enumerated in CDC Act in this respect is quite distinctive and different in character and implication to the one reported in the impugned FIR and therefore the rule that the said law being special law 'will override the general law i,e, P.P.C. is not attracted to the peculiar facts and circumstances of the present case. We. therefore, are of the humble view that the impugned FIR has been properly and lawfully registered by the FIA and the allegations therein require investigation. 11 (sic.) The question of jurisdiction of the FIA to investigate the offenses taking place in private Banks has already been settled by this court in an unreported judgment dated 12.04.2012 passed by a Division Bench of this Court in the case of Bank Alfalah Limited and others v. Federation of Pakistan and others (supra). In paragraph No, 13, it has been held as under:- "...........It is not disputed by learned counsel of the petitioners that banking is a subject allocated by the Constitution, to the Federation. Article 87 of the Constitution read with Federal Legislative List, Fourth Schedule, Part 1, Item No,28 to the Constitution clearly provides so. Currency, whether local or foreign, is also a Federal subject. The Banks deal in money/currency. Nobody can transact Banking business in Pakistan without being registered as a Banking Company. The State Bank of Pakistan registers Banks and also confers the status of a Scheduled Bank. The State Bank is required to supervise the banking business in Pakistan under the State Bank Act, 1956. Directions issued by the State Bank within the scope of law are binding on all Banks and have to be complied with. State Bank fixes the rate and also determines and controls the credit policies of the Banks.
The banking, therefore, is a matter that concerns the Federal Government. Just to emphasize, if God forbid Banks fail in this country or for lack of confidence, there is run on the banks, the whole economy may crumble. Can it be said that if criminal offences are committed in private banks, it does not concern the Federal Government or such crimes are not connected with a matter concerning the Federal Government? To us the answer is clear 'No'. Therefore, from this point of view as well the Federal Investigation Agency is competent to inquire into and investigate offences taking place in private Scheduled Banks, provided the offence is cognizable under the items listed in the Schedule to the Federal Investigation Act."
12. For the foregoing discussion, we are of the view the petitions in hand are meritless and are accordingly dismissed with no order as to costs. Needless to mention that the findings made herein above are relevant and confined to the petitions in hand and shall not prejudice the case of either party on merits before any forum.