Can a cheque be drawn on any other institution but for a bank? Is the offence contemplated by Section 489-F PPC only applicable in respect of cheques issued by banks? Is Section 489-F PPC applicable in respect of other negotiable instruments? What is the pith and substance of Section 489-F PPC or for that matter what is the dominant object of the said provision? Does Section 489-F PPC qualify as a law that only relates to banking companies and financial institutions or whether it is a law promulgated to govern dealings between private individuals? Whether the offence contemplated by Section 20(4) of the Financial Institutions (Recovery of Finances) Ordinance, 2001 is completely different than the offence envisaged by Section 489-F PPC? Whether the have-nots have a carte blanche to issue cheques that are dishonoured on their presentation?
This judgment seeks to answer the questions raised above.
MUHAMMAD SHAN GUL, J. Through this judgment the titled constitutional petition is sought to be decided.
FACTS:
2. National Rural Support Programme (NRSP) Microfinance Bank/petitioner is a Microfinance bank operating in terms of Section 2(i)(a) of Microfinance Institutions Ordinance, 2001 ("MIO, 2001") and is providing microfinance services in accordance with Section 2(j) and Section 6 of Microfinance Institutions Ordinance, 2001. Such Institutions/banks have been established with the specific purpose i.e."for providing organizational, financial and infrastructural support to poor persons.... " as provided in the preamble of Microfinance Institutions Ordinance, 2001.
3. The petitioner statedly extended various loans to respondents No.3 to 12, the repayment of which was due on 31.03.2018 , however , none of the said facilities were adjusted/re-paid within time and till the final date of repayment. Upon the petitioner 's insistence various cheques with the encashment date of 15.04.2018 were issued by the said respondents No.3 to 12. Each of the cheques issued by each of the respondents was for the specific amount of loan outstanding against them. All the cheques were drawn upon the accounts maintained by the said respondents No.3 to 12 with the petitioner Bank. The cheques, upon presentation for encashment, on 24.04.2018, were dishonoured on account of lack of funds in the accounts upon which those were drawn.
4. The petitioner , on 27.04.2018, approached a Justice of Peace/Additional Sessions Judge, Jatoi/respondent No.1, seeking a direction under Section 22-A/22-B of the Code of Criminal Procedure, 1898 ("Cr.P.C.") for lodging of FIR under Section 489-F of Pakistan Penal Code, 1860 ("PPC"). Respondent No.1 vide order dated 23.05.2018, which is under challenge here, dismissed the application of the petitioner for the following reasons:
(i) As per Section 3(2) of MIO, 2001, the petitioner does not fall within the meaning of a Bank and hence, cannot dishonour a Cheque and therefore, no cognizable offence is made out.
(ii) The petitioner is itself both a comp lainant and the one which has dishonoured the cheque and the said phenomenon "gives reminiscence of inquisitorial system which is against the spirit of adversarial system".
PETITIONER'S CONTENTIONS:
5. The counsel for the petitioner contends that the petitioner operates as a Bank under the regulatory control of State Bank of Pakistan ("SBP") and as per Section 6 of the Microfinance Institutions Ordinance, 2001, is authorized to open bank accounts and issue cheque books to customers, hence, the conclusion reached by respondent No.1 is erroneous. Further submits that dishonest issuance of cheques by respondents No.3 to 12 against their respective outstanding liabilities on account of paucity of funds in their respective accounts complete the ingredients of a cognizable offence envisaged by Section 489-F PPC, leaving no room for denial of recording of petitioner 's statement under Section 154 of Cr .P.C.
6. During the course of proceedings, attention of this Court was drawn by the counsel for the respondent to the fact that the petitioner is not a Schedu led Bank, having not been declared as such by the SBP under State Bank of Pakistan Act, 1956 ("the SBP Act, 1956"). It has also been argued that contents of the petitioner 's application under Section 22-A/22 B of Cr.P.C. show that the cheques under reference were only to be encashed in case of non-payment by respondents No.3 to 12 of their respective liabilities till 15.04.2018 and such statement by the petitioner itself reveals that the said cheques are "Guarantee Cheques".
SUBMISSION OF AMICUS CURIAE:
7. M/s. Isaam Bin Haris, Haji Tariq Aziz Khokhar and Abuzar Salman Niazi, Advocates were appointed as Amicus Curiae to assist this Court on the questio ns: (a) Can Cheques issued by the petiti oner, a non-Scheduled Bank be termed as negotiable instruments and be a cause of initiation of proceedings under Section 489-F PPC? (b) Were the Cheques in question issued as a Guarantee and hence, are outside the ambit of Section 489-F PPC as held by the Hon'ble Supreme Court of Pakistan in "Mian Allah Ditta v. The State and others" (2013 SCMR 51) and "Mian Muhammad Akram v. The State and others" (2014 SCMR 1369 )? and (c) whether the law laid down in "Muhammad Mumtaz Akhtar v. Additional Sessions Judge, etc." (PLJ 2021 Lahore 98) and "NRSP Microfinance Bank Limited v. Additional Sessions Judge/Justice of Peace and 3 others" (PLJ 2021 Lahore 43) sufficiently answers the questions raised in this case and should be applied here?
8. Mr . Isaam Bin Harris, Advocate has stated as follows:
(a) The word "Cheque" has not been defined in PPC and hence, resort has to be made to Negotiable Instruments Act, 1881, the following provisions of which define what instrument would constitute a Cheque, which in turn, could form the subject of application of Section 489-F of PPC:
6. "Cheque" . A "cheque" is a bill of exchange drawn on a specified banker and not expressed payable otherwise than on demand.
3 (b) "banker" means a person transacting the business of accepting, for the purpose of lending or investment, of or deposits of money from the public, repayable on demand otherwise withdrawable by cheque, draft, order, or otherwise, and includes any Post Office Savings Bank;.
The learned Amicus Curiae proposes that since Sections 2(i)(a), 2(j) & 6 of the Microfinance Institutions Ordinance, 2001 sufficiently authorize the petitioner to open and operate bank accounts, accept deposits in such bank accounts and make payments against instruments drawn on such bank account s, it can be safely termed as a "banker" and cheques issued by the same, if dishonoured, can attract the provisions of Section 489-F , PPC.
However , that the purpose and aim of establishment of the petitioner is limited to support persons with meagre means of subsistence and no criminal proceedings against such Customers (for whose alleviation the Petitioner was established) were intended by the Microfinance Institutions Ordinance, 2001. He refers to the Report ("Punishment on bouncing of Cheques") by Law & Justice Commission of Pakistan to assert that Section 489-F was intended to be used in case of dishonouring of Cheques in transactions between private individuals. The only mechanism available under law for criminally prosecuting an issuer of Cheque in favour of a Bank is available under the Financial Institutions (Recovery of Finances) Ordinance, 2001 ("FIO, 2001") and since the FIO, 2001 is not applicable to the petitioner, as held in "Syed Itrat Hussain Rizvi v. Messrs Tameer Micro Finance Bank Limited through Attorney and another" (2018 CLD 116), no criminal prosecution can be initiated by the petitioner against respondents No.3 to 12 since such prosecution is neither contemplated in the Microfinance Institutions Ordinance, 2001 nor fulfills the purpose behind enactment of Section 489-F PPC.
(b) Although a definite obligation to repay loan to the Petitioner existed at the time of issuance of the Cheques in question, yet as per the Petitioner's contention the said Cheques were issued to gain more time for the settlement of the said obligation it can be inferred that the same were issued as a "Guarantee", attracting the law laid down in "Mian Allah Ditta v. The State and others" (2013 SCMR 51) and excluding the possibility of application of Section 489-F PPC to the current case..
(c) That "Muhammad Mumtaz Akhtar v. Additional Sessions Judge, etc." (PLJ 2021 Lahore 98) and "NRSP Microfinance Bank Limited v. Additional Sessions Judge/Justice of Peace and 3 others" (PLJ 2021 Lahore 43) though hold that Section 3(2) of MIO, 2001 excludes the application of FIO, 2001 and hence, Petitioner cannot initiate proceedings under FIO, 2001 for dishonouring of cheque issued in its favour by its Customers are silent and offer no debate or judicial conclusion on the issue whether exclusion contained in Section 3(2) disallows proceedings under Section 489-F of PPC?
9. What Isaam Bin Harris says is indeed quite attractive and inspiring and, therefore, definitely worth consideration.
The argument that the exclusion contem plated by Section 3(2) takes in its sweep Section 489-F PPC is quite ingenious and has provided immense food for thought!
10. Mr. Abuzar Salman Niazi, Advocate made the following submissions in response to queries raised by this Court:-
(a) Relying upon the afore stated provisions of Negotiable Instruments Act, 1881 and MIO, 2001, he submits that irrespective of the fact that the Petitioner is not a Scheduled Bank since the petitioner conducts the business of banking and neither the Microfinance Institutions Ordinance, 2001 or Negotiable Instruments Act, 1881 nor Section 489-F draw any distinction between the issuance of cheque by a scheduled or a non-scheduled bank for the purpose of validity of that cheque as a Negotiable Instrument and, therefore, a cheque issued by the Petitioner would be deemed as a cheque under Section 489-F of the PPC.
He, however, relies upon "Saeed Ghani v. Dr. Shahid Masood and 3 others" (2022 YLR Note 3) and "Sui Northern Gas Pipeline Limited, (SNGPL) through General Manger v. Director (Legal), President Secretariat (Public), Aiwan e-Sadar Islamabad and 2 others" (PLD 2018 Islamabad 51) to submit that there seems no reason for exclusion of application of general law i.e. Section 489-F PPC when the special law i.e. the Microfinance Institutions Ordinance, 2001 specifically and expressly does not exclude such application. Moreso because Section 3(1) of the Microfinance Institutions Ordinance, 2001 states that "the provisions of this Ordinance shall be in addition to, and, save as hereinafter provided, not in derogation of, any other law for the time being in force."
Further states that since the purpose of Section 489-F has never been to recover outstanding loans but rather criminalize dishonest issuance of cheques, there appears no foundation for the inference that only because MIO, 2001 does not contemplate any criminal prosecution against its defaulting custome rs, Section 489-F , by implication, stands non-applicable.
(b) An obligation to exist at the time of issuance of cheques is a crucial element to make out an offence under Section 489-F of PPC. If an issue arises as to the facts of the case and intention/agreement of the parties, this would be a matter for further investigation but an F.I.R would still have to be registered for the said investigation.
He, while leaving determination of the said crucial element to this Court, submits that if cheques in question are admittedly guarantee cheques in the opinion of this Court, they would be missing one of the foundational requirements of Section 489-F of PPC (cheque issued to extinguish an existing obligation) and hence would not attract Section 489-F of PPC (as established by Superior Courts of Pakistan).
(c) The ratio settled in "Muhammad Mumtaz Akhtar v. Additional Sessions Judge, etc." (PLJ 2021 Lahore 98) does apply to the instant case to the extent that Banking Courts have no jurisd iction to deal with business of microfinance institutions such as the Petitioner . However , General law, i.e. Cr.P.C. or PPC will still apply to Microfinance Institutions/petitioner and any application filed under Section 22-A/22-B of Cr.P.C. would be fully competent.
11. Haji Tariq Aziz Khokhar , besides adopting the arguments of Amicus Curiae, Isaam Bin Harris, submits: That an interesting and praise worthy aspect of the Prudential Regulations for Microfinance Banks (Rule 11), issued by the SBP is that it requires that the lending institution develops an internal policy for managing its own risk to borrower indebtedness exposure, provide responsible lending and minimize risk of the borrower for over indebtedness. The Microfinance Bank is required to take a written declaration from the borrower , whereby information may be obtained regarding their total debt exposure to facilities provided by any financial institution (whether bank/MFI/NBFC/ other MFBs etc.). The Microfinance Bank is then required to lend in a prudent manner, keeping in mind the repayment capacity of the borrower. This is an interesting move towards consumer protection, since the Microfinance Bank is now responsible in preventing over indebtedness of the borrower, instead of all reliance being placed upon financial judgment of the possibly illiterate and unaware borrower. Till date, no Microfinance Institution has approached the SBP requesting a clear interpretation of the Ordinance, and requesting for inclusion in its framework. This would perhaps evince the fact that Microfinance Banks are rather content with implementation of their own recovery procedures, and would rather not be regulated in that aspect, or conform to a supervised procedure. He has relied on an article titled 'Pakistan: A Protected Microfinance Borrower written by Arsala Kidwai and published in the Journal of International Development Law Organization (November, 2009).'
WHA T WOULD CONSTITUTE AN OFFENCE UNDER SECTION 489-F OF PPC: 489-F PPC. Dishonestly issuing a cheque:-
12. Whoever dishonestly issues a cheque towards repayment of a loan or fulfilment of an obligation which is dishonoured on presentation, shall be punishable with imprisonment which may extend to three years, or with fine, or with both, unless he can establish, for which the burden of proof shall rest on him, that he had made arrangements with his bank to ensure that the cheque would be honoured and that the bank was at fault in not honouring the cheque.
13. From a literal reading of Section 489-F of PPC it appears that for an offence to be made out, it is essential that all three elements are simultaneously present and discernible from the complainant/petitioner's application i.e. (i) issuance of cheque with a dishonest intention i.e. having knowledge that the recipient of the cheque is entitled to receive proceeds of the cheque and that the account upon which the said cheque is drawn is insufficiently funded, (ii) issued cheque must be for the purpose of repayment of a loan i.e. for shedding off a liability which has already accrued in favour of the recipient and against the drawer of the cheque and (iii) dishonouring of the cheque. The necessity of the presence of all three elements has been stressed upon by the Hon'ble Supreme Court of Pakistan in "Mian Allah Ditta v. The State and others" (2013 SCMR 51): "4...... Every transaction where a cheque is dishonored may not constitute an offence. The foundational elements to constitute an offence under this provision are issuance of a cheque with dishonest intent, the cheque should be towards repayment of a loan or fulfillment of an obligation and lastly that the cheque in question is dishonored."
NRSP MICROFINANCE BANK VS. SCHEDULED BANK
14. The contention that the petitioner is not a Scheduled Bank and hence cheques issued by the petitioner do not pass the test of Section 489-F of PPC supposes albeit wrongly that the cheques drawn on the petitioner are not "cheques" for the purpose of Section 489-F of PPC. What is a cheque is defined in Negotiable Instruments Act, 1881 through Sections 3(b) & 6, reproduced above.
15. The services that the petitioner is allowed to render and functions that it is authorized to perform are provided in Sections 2(i)(a), 2(j) and 6 of the Microfinance Institutions Ordinance, 2001: "2(i)(a) "microfinance bank" means an institution licensed by State Bank under this Ordinance to establish and operate as microfinance bank 2(j) "microfinance services" means the financial and other related services specified in section 6, the value of which does not exceed such amount as the State Bank may , from time to time, determine;
6. Functions and powers:
(1) A microfinance institution shall, in accordance with prudential regulations and subject to the terms and conditions of the license issued by the State bank , render assistance to micro-enterprises and provide microfinance services in a sustainable manner to poor persons, preferably poor women, with a view to alleviating poverty .
(2) Without prejudice to the generality of the foregoing provisions, the powers and functions of microfinance institutions shall be:- a) to provide financing facilities, with or without collateral security , in cash or in kind, for such terms and subject to such conditions as may be prescribed, to poor persons for all types of economic activities including housing, but excluding business in foreign exchange transactions, except to receive remittanc es from abroad payable only in Pakistan Rupees to beneficiaries in Pakistan subject to rules and regulations and authorization issued by State Bank of Pakistan from time to time. b) to accept deposits. c) to accept pledges, mortgages, hypothecations or assignments to it of any kind of movable or immovable property for the purpose of securing loans and advances made by it; g) to provide storage and safe custody facilities; k) to provide services and facilities to customers to hedge various risks relating to microfinance activities; p) to pay , receive, collect and remit money and securities within the country; v) to undertake mobile banking to expedite transactions and reduce costs ; x) to receive grants from the government and any other sources permitted by the State Bank; and y) to generally do and perform all such acts, deeds and things as may be necessary , incidental or conducive to the fulfillment of their functions and the attainment of their objectives;
16. Section 4 of the Microfinance Institutions Ordinance, 2001 lays down that microfinance banks are established only after issuance of a license to opera te as such by the State Bank of Pakistan ("SBP"). The said license is granted by SBP under Sections 12 and 13 of the Microfinance Institutions Ordinance, 2001 and similarly can be cancelled by SBP under Section 13A. The petitioner Bank is recognized by SBP as its member Financial Institution and its name reflects at Serial No.6 among the recognized microfinance banks. It also provides regular banking services like opening and operation of current and savings accounts, issuance of cheque books and debit cards to its members/customers for withdrawal of money from their accounts and hence is covered under the definition of "banker" as given in Section 3(b) of Negotiable Instruments Act, 1881.
17. On the other hand, what is a scheduled bank is defined in Sections 2(m) and 37 of the SBP Act, 1956: "2 (m) "scheduled bank" means a bank for the time being include d in the list of banks maintained under sub- section (1) of Section 37
37. Scheduled banks.
(1). The Bank shall maintain at all its offices and branches an up-todate list of banks declared by it to be scheduled banks under clause (a) of subsection (2).
(2). The Bank shall, by notification, in the official Gazette-- a) declare any bank to be scheduled bank which is carrying on the business of banking in Pakistan and which--
(i) is a banking company as defined in section 227F of the Companies Act, 1913, or a co-operative bank, or a corporation or a company incorporated by or established under any law in force in any place in or outside Pakistan;
(ii) has a paid-up capital and reserves of an aggregate value of not less than five lakhs of rupees: Provided that in the case of a co-operative bank, an exception may be made by the Bank; (iii). satisfies the Bank that its affairs are not being conducted in a manner detrimental to the interest of its depositors;"
18. From a comparison of the provisions of the Microfinance Institutions Ordinance, 2001 and the SBP Act, 1956 it seems that both Scheduled Banks and microfinance banks provide services of acceptance of deposit by their customers and in turn obviously are bound to remit such deposits back to the depositor or any other person as per the direction of the depositor. The distinctive feature of a microfinance bank is that the value of its banking services is limited to the maximum limit defined by SBP [Section 2(j) of MIO, 2001 above) whereas no such limit is defined for the scheduled banks. The reason for such restriction for microfinance banks is apparent from the preamble of the Microfinance Institutions Ordinance, 2001 which states that such banks shall be established for specifically catering to the needs to citizens from lower social and financial strata of the society. For the said protection, the petitioner like all other microfinance banks is under an obligation to maintain depositors' protection fund under Section 19.
19. Depositors protection fund
1. A microfinance institution shall, as required by the State Bank, establish and maintain depositors' protection fund or scheme for the purpose of providing security or guarantee to persons depositing money in such institution.
2. Five per cent of the annual after tax profits of a microfinance institution and profits earned on the investments of the fund shall be credited to the depositors 'protection fund and such fund shall either be invested in Government securities or deposited with State Bank in a remunerative account.
3. The depositors' protection fund shall be used to make payment to the individual depositors with aggregate deposits of up to ten thousand rupees in case of liquidation of the microfinance institution."
The premium upon the deposit by the members/customers of the petitioner is an additional advantage provided to ensure the alleviation of citizens with low income and minimal financial resources. Such premium, however, does not hinder any other services provided under Section 6 by the petitioner i.e. accepting and remitting deposits made by the members/customers.
19. Hence, both Scheduled Banks and microfinance Banks provide services of a banker in terms of Section 3(j) of Negotiable Instruments Act, 1881. Microfinance banks, however , are modelled in a beneficial manner to provide, support for and uplift of, persons with less financial resources and hence, are bound to operate in a manner to ensure some advantage to such persons.
20. There is no legal provision in sight differentiating the status of cheques drawn on microfinance banks and scheduled banks and hence, distinction between two seems insignificant for the purpose of Section 489-F.
Petitioner does conduct regular banking business and Cheques issued by it are as much a Negotiable Instrument as those issued by any other Bank or Scheduled Bank and attract the provisions of Section 489-F.
ARE CHEQUES ISSUED BY RESPONDENTS NO.3 T O 12 GUARANTEE CHEQUES?
21. It has been settled by the Hon'ble Supreme Court of Pakistan that if a cheque is merely issued as "guarantee" for the fulfilment of any future, undetermined and unexisting obligation, the dishonouring of the same would not constitute an of fence under Section 489-F PPC.
22. In "Mian Allah Ditta v . The State and others" ( 2013 SCMR 51 ), it has been held as follows:- "In the instant case, prima facie, the circumstances indicate that the cheque in question was not issued towards repayment of some outstanding loan or fulfillment of an existing obligation but instead it had been issued to meet a possible future obligation if determined as a result of some other exercise. That being so, one of the foundational elements of Section 489-F P.P.C. is prima facie missing. The invocation of penal provision would therefore remain a moot point. The ground that prosecution is motivated by malice may not in these circumstances be ill-founded."
23. Analysis of judicial precedents, on the subject show that it would be facts and circumstances of each case, which will determine if the cheque is issued for fulfilment of an existing obligat ion (attracting the provisions of Section 489-F) or if it was issued mere ly as Guarantee. The observations of the Hon'ble Supreme Court of Pakistan clearly show that if liability of the issuer of the cheque is not determined on the date of issuance of the cheque and is to be finally settled at a later stage, dishonouring of such cheque would not render the issuer liable to be prosecuted under Section 489-F . However , if nothing on the record could reflect that at the time of issuance of the cheque it was not intended to be encashed against a determined and accrued liability , it cannot be assumed that the cheque was issued as Guarantee or Security .
24. In "Muhammad Ishaq v . The State and another" (2021 PCr .LJ 636) , it has been held as follows: "4. The issuance of cheque by the petitioner and his signature thereon are admitted one. The plea of the petitioner is that the disputed cheque was infact issued as a "guarantee" but nothing as such is found mentioned in the said cheque, therefore, at this stage, oral submission of the petitioner cannot be given credence."
25. In "Nazim Hussain v . The State" (2019 PCr .LJ 1759) , it has been held as follows: "7......Here, I would add that issuance of cheque, by itself, carries an implied impression that same is towards repayment of loan or fulfilling an obligation unless there is some other agreed condition whereby encashment of a cheque is made subject to. Needful to add that 'cheque', if unconditional, enjoys the status of 'negotiable instrument' hence normally holder thereof feels guarantee of its encashment on its presentation. Thus, I would say that when a cheque (unconditional one) is bounced the prima facie presumption would be that i.e:- 'cheque was to repay loan or to fulfill some obligations but failed ...I shall also add that mere claim or denial on part of the accused would never be sufficient to disbelieve the implied presumption else the very purpose of insertion of provision of section 489-F , P.P.C. in the book shall fail. It is worth, adding that Criminal Justice delivery system cannot be all exclusively to the benefits of the offender , making it unidirectional exercise rather a proper administration for the criminal justice delivery system requires balancing the rights of the accused as well prosecution. The insertion thereof was never with intent to ensure recovery but to punish those who take benefit of implied guarantee, attached with a cheque, for defrauding innocent people.
8. Having said so, now would revert to merits of the case. The applicant/accused has not denied issuance of the cheque as well bouncing thereof but claimed that it was issued as 'security' but, prima facie, no such proof in shape of document or fact has been placed on record. ........Thus, prima facie, the provision of section 489-F , P.P.C. is squarely attracted in the present case."
26. In "Asad Ali v. The State and another" (201 1 PCr .LJ. 752), it has been held as follows:- "6. Perusal of record shows that petitioner has not denied the issuance of cheques. However he has stated that the cheques were given in a business transaction as a guarantee and major part of amount has been paid but no proof of any payment or any business transaction has been brought on record. The cheques were dishonoured due to lack of funds and petitioner knowingly that he has no balance in the account issued the cheques so has defrauded the complainant".
27. In "Zahid Iqbal v . The State" ( 2011 YLR 1284 ), it has been held as follows: "6. Cheques in question have been admi tted to be issued by the petitioner and no evidence has been shown to indicate that the cheques in question were issued by way of guarantee..."
28. In cases, where the application of Section 489-F is doubtful for the reason of the cheque having been issued by way of Guarantee, the facts clearly show that no clear and determined liability was existing at the time of issuance of such cheque and it was issued in an ongoing transaction to secure the interes t of the recipient of the cheque only.
29. In "Muhammad Iqbal v . The State and another" (2018 YLR (Note) 157), it has been held as follows:- "2......The original cheque in dispute is available on record and the same has been perused by this Court. The words "only for guarantee cheque" are mentioned on the back of the cheque in dispute, which denotes that the cheque has not been issued for fulfillment of any financial obligation rather it is a security cheque."
30. In "Tanveer Hussain v . The State and another" (2018 PCr .LJ (Note) 21) , it has been held as follows:- "The allegation against the petitioner ,......that he issued a cheque of Rs.41,26,089/- to Lt. Col.(R) Bilal Asghar , Manager -Admn., Nishat Textile Mills Ltd., in the backdrop of his admission to have stolen certain articles from the said mills, which was presented for encashment, but it was bounced by the bank due to insufficient funds; he also executed an agreement on 19.6.2015 in favour of the complainant, whereby he recorded his guilt as to stealthily removing 104 imported spark-plugs and two actuating mechanism scanners from the factory .
2...Without entering into the controversy of voluntariness of the agreement-deed, allegedly executed by the petitioner in favour of the complainant, it may be observed from its contents that the disputed cheque had been issued by the petitioner merely as a guarantee and it could be used against him for a future liability, that did not exist on the day of its issuance to the complainant."
31. In "Kamran v . The State" ( 2018 YLR (Note) 279 ), it has been held as follows: "5. The contents of legal notice issued by the complainant to the applicant show that the applicant/accused issued him three post-dated cheques as "guarantee" but this does not show that, act of issuance of the cheque by the applicant/accused was done dishonestly . As such, the essential ingredient of Section 489-F , P.P.C., that a cheque dishonestly issued and dishonored should be towards the satisfaction of a loan or an obligation of the giver is lacking in the instant case. ............ Similarly , no documentary proof was produced to justify that any loan or obligation is owed to the complainant by the applicant/ accused. Moreover , the present FIR is delayed for about 45 days, for which no plausible explanation was furnished by the complainant."
32. In the present case, had the cheques been issued by respondents No.3 to 12 at the time of grant of facility/loan as security to the petitioner, those would obviously have been taken as Guarantee Cheques since the said respondents could have made partial payment of their liability before the final date of re-payment of the whole loan (in this case 31.03.2018) and the petitioner would only have then been entitled to the repayment of the remaining amount. However, in the present case, the Cheques were issued after the date of final payment i.e. after 31.03.2018 and have been issued specifically for the exact amount which remains unpaid in case of each of the respondents. In other words, the amount of each cheque reflects the exact amount of liability owed by each of the respondents to the petitioner. Hence, the liability having already been settled and having accrued prior to the date of issuance of cheque is not in dispute, which would lead to the inference that respondents No.3 to 12, having knowledge of and while admitting the exact liability , issued the cheques in question of the exact amount owed to the petitioner and not as Guarantee for the payment of some future and yet to be determined liability .
33. Although the contents of petitioner 's application under Section 22-A/22-B of Cr.P.C. show that the cheques were only intended to be encashed if the outstanding debt is not paid otherwise till 15.04.2018 (date of encashment), it is obvious that the said cheques were issued towards repayment of a loan existing and determined at the time of issuance. Such being the only test prescribed in Section 489-F , the cheques under reference could not be held to be issued as Guarantee and not meant for repayment of loan or obligation.
EFFECT OF SECTION 3(2) OF MIO, 2001:
34. While adverting to the keen argument raised by Mr. Isaam Bin Harris, it may be noted that the cases of "Muhammad Mumtaz Akhtar v. Additional Sessions Judge, etc." (PLJ 2021 Lahore 98) and "NRSP Microfinance Bank Limited v. Additional Sessions Judge/Justice of Peace and 3 others" (PLJ 2021 Lahore 43) both take note of Section 3(2) of the Microfinance Institutions Ordinance, 2001 to conclude that since FIO, 2001 does not apply to the petitioner/Microfinance Bank, Banking Courts are divested of jurisdiction to initiate proceedings against issuer of a dishonoured Cheque, issued in favour of such Microfinance Banks/petitioner .
"3. Applications of other laws
(2) Save as otherwise provided in this Ordinance, the Banking Companies Ordinance and any other law for the time being in force relating to banking companies or financial institutions shall not apply to microfinance institutions licensed under this Ordinance and microfinance institution shall not be deemed to be a banking company for the purposes of the said Ordinance, the State Bank of Pakistan Act, 1956 (XXXIII of 1956), or any other law for the time being in force relating to banking companies."
35. Section 3(2) of the Microfinance Institutions Ordinance, 2001, on a plain reading shows that it is intended to exclude the petitioner from the laws applicable to other Banking Companies and Financial Institutions and that a special law regulating the affairs of Microfinance Banks is devised in the form of the Microfinance Institutions Ordinance, 2001. It is noteworthy , however , that only the application of Banking Companies Ordinance, 1962 is expressly excluded. The Microfinance Institutions Ordinance, 2001 was promulgated on 16.10.2001 i.e. after the enactment of the Financial Institutions (Recovery of Finances) Ordinance, 2001 on 30.08.2001, yet the exclusion of the Financial Institutions (Recovery of Finances) Ordinance, 2001 has not been expressly made. Section 3(2) also declares that a Microfinance Bank shall not be considered a Banking Compa ny but not that it shall not be considered a Financial Institution for the purpose of the Financial Institutions (Recovery of Finances) Ordinance, 2001.
36. Hence, the judgments cited above ("Muhammad Mumtaz Akhtar v. Additional Sessions Judge, etc." (PLJ 2021 Lahore 98) and "NRSP Microfinance Bank Limited v. Additional Sessions Judge/Justice of Peace and 3 others" (PLJ 2021 Lahore 43) as also "Syed Itrat Hussain Rizvi v. Messers Tameer Micro Finance Bank Limited through Attorney and another" (2018 CLD 116) correctly exclude the application of the Financial Institutions (Recovery of Finances) Ordinance, 2001 basing the decisions upon the interpretation of the words "any other law for the time being in force relating to .......... or financial institutions." But the said judgments do not consider whether provisions of Section 489-F can also be taken as "law relating to financial institutions" following the same rationale applied in case of the Financial Institutions (Recovery of Finances) Ordinance, 2001? The Petitioner, as mentioned above, is recognized by SBP as one of its regulated Financial Institutions. If the Financial Institutions (Recovery of Finances) Ordinance, 2001 can be inferred to be impliedly excluded, should the same treatment be extended to Section 489-F of PPC?
37. Although Section 489-F was inserted in PPC on 25.02.2002 i.e. after the promulgation of the Microfinance Institutions Ordinance, 2001, the Hon'ble Supreme Court of Pakistan in "Syed Mushahid Shah and others v.
Federal Investment Agency and others" (2017 SCMR 1218 ) has interpreted the words "for the time being in force" to mean all the existing and future laws: "10...... The phrase 'for the time being in force' [in Section 1(2) of the Code] has been interpreted by a five members Bench of this Court in the judgment reported as (1) Mian Iftikhar-ud-Din, and (2) Arif Iftikhar v. (1)
Muhammad Sarfraz Administrator, Progressive Papers Ltd. (2) The Government of Pakistan (PLD 1961 SC 585) to mean that it will apply not only to those existing statutes enacted in the past, but also to those which may be enacted in the future. Thus the Code does not affect any special laws including the Ordinance, 2001.
11....... We are not convinced by the argument of the learned counsel for the respondents that the Ordinance, 2001 could not override section 489-F of the P.P.C. as the former law was promulgated on 30.08.2001 whereas the latter was inserted into the P.P.C. by way of amendment on 25.02.2002, because as mentioned above, the phrase "for the time being in force" applies to future enactments as well, thus mere insertion of a provision in a general law after the special law comes into force would not make the general law override the special law .
Hence, irrespective of the time of insertion of Section 489-F in the statute books, the special and hence, prevalent character of MIO, 2001 shall remain intact. More so because Section 5 of PPC itself recognizes that the provisions of PPC shall not effect any special law i.e. no provision of PPC shall be interpreted or applied in a way which hinders giving full effect to any provision of a special law .
5. Certain laws not to be af fected by this Act.
Nothing in this Act is intended to repeal , vary, suspend or affect any of the provisions of any Act for punishing mutiny and desertion of officers, soldiers, sailors or airmen in the service of the State or of any special or local law .
38. Section 3(1) of the Microfinance Institutions Ordinance, 2001 states that "the provisions of this Ordinance shall be in addition to, and, save as hereinafter provided, not in derogation of, any other law for the time being in force." but Section 3(2) itself provides for the exclusion of laws and caters to the words of save as hereinafter provided.
39. The first part of Section 3(2) of the Microfinance Institutions Ordinance, 2001 clearly ousts the application of any other law relating to financial institutions to the Petitioner . Now the question which requires adjudica tion is if the term "relating to .... financial institution "in Section 3(2) above can be deciphered in a way to mean that Section 489-F of PPC is such law relating to a financial institution such as the petitioner? If the answer to the question is in the af firmative, the application of Section 489-F shall stand ousted.
40. It is also noteworthy that the Financial Institutions (Recovery of Finances) Ordinance, 2001 does not provide for the establishment, purpose of establishment, functions or operations of a Finan cial Institution/Bank but merely provides for the remedies available to such Financial Institutions which come within the ambit of it, whereas the Microfinance Institutions Ordinance, 2001 provides for the complete mechanism of formation, operation and the aim and purpose of such formation and operation of Microfinance Banks. Preamble of the Microfinance Institutions Ordinance, 2001 states: "An Ordinance to regulate the establishment, business and operations of microfinance institutions.
WHEREAS it is expedient to promote the establishment of microfinance institutions for providing organizational, financial and infrastructural support to poor persons, particularly poor women, for mitigating poverty and promoting social welfare and economic justice through community building and social mobilization and to provide for matters connected therewith or ancillary thereto; AND WHEREAS it is essential to regulate microfinance institutions to protect the depositors and customers and to safeguard these institutions against political and other outside interference;"
41. However , despite the learned Amicus Curiae having raised an ingenious argument it may be stated that the argument misses the point that Section 489-F PPC is, in its pith and substance , not a law that only or exclusively relates to Banking Companies or Financi al Institutions and rather has been promulgated as a safety valve in loan transactions between private parties. The provision safeguards the right of private persons to whom, by way of repayment of loans, cheques are issued by other private persons with a dishonest intent. It is, therefore, that the argument raised by the learned Amicus that Financial Institutions (Recovery of Finances) Ordinance, 2001 not being applicable and, therefore, Section 489-F PPC also not being applicable cannot be accepted.
42. In the case of banking companies covered in terms of the Financial Institutions (Recovery of Finances)
Ordinance, 2001, there were two competing options available till the time this Court and the Hon'ble Apex Court decided that for such banking companies and financial institutions to commence penal proceedings with respect to dishonouring of a cheque it was only the Financial Institutions (Recovery of Finances) Ordinance, 2001 and not Section 489-F PPC which was the applicable law. It is in this context that the presence of Section 20 of the Financial Institutions (Recovery of Finances) Ordinance, 2001 was held to oust the application of Section 489-F PPC and in the particular context and contours of cases involving banking companies and financial institutions other than microfinance institutions such as the petitioner . It is jurisprudentially trite that both these provisions of law envisage two different situations. While Section 20 deals with a cheque issued for securing repayment of finance to a bank, Section 489-F PPC relates to a cheque, albeit of a bank, but issued between private parties.
43. In the matter before this Court, however , there is no comparison to be made and there are no competing provisions of law available because, as it is, the microfinance institutions have been held to fall outside the ambit of the Financial Institutions (Recovery of Finances) Ordinance, 2001. Since the Financial Institutions (Recovery of Finances) Ordinance, 2001 has already been judicially held to be not applicable to microfinance institutions, there are no competing provisions and a microfinance institution only has the facility contained in Section 489-F PPC to fall back on in case a cheque issued to it for repayment of a loan is dishonoured. The remedy afforded by penal law in the present matter is only one i.e. af forded by Section 489-F PPC.
44. However , most importantly , and of the essence is the fact that the phraseology employed in Section 3(2) of the Microfinance Ordinance, 2001 does not just say 'any other law' but 'any other law relating to financial institutions or banking companies.' While Section 489-F PPC does relate to banking companies and financial institutions inasmuch as cheques issued by such institutions are a subject of such provision but not exclusively at that and not as the only subject or object and in fact the dominant object of Section 489-F PPC is geared towards ensuring protection of private parties (including parties such as the petitioner who does not have any other remedy on the penal side). If the arguments of the learned Amicus Curiae are to be believed then the microfinance institutions or for that matter its customers shall fall outside the sweep and purview of general penal law prevalent in the country. The operation of penal law cannot be ousted completely and the petitioner cannot be deprived of a remedy on the criminal side because that would attract clamours of discrimination by persons similarly situated as the petitioner and shall also fall foul of Articles 4, 10-A and 25 of the Constitution inasmuch as all persons are entitled to equal protection of laws and there cannot be any discrimination, reverse or otherwise, on the basis of financial or social status of a person.
45. The dominant object of Section 489-F PPC is not focused on repayment of finances or loans to a banking company or a financial institution rather the thrust of Section 489-F PPC is aimed at securing interests of a private party including even the petitioner to whom cheques are issued dishonestly and, hence, it follows that it is not a law that in its pith and substance exclusively relates to financial institutions or banking companies so as to attract the ouster contemplated by Section 3(2) of the Microfinance Institutions Ordinance, 2001.
46. Even otherwise, the Pakistan Penal Code seeks to provide a general penal code for the country and has effect throughout it. Section 2 states that every person shall be liable to punishment thereunder for every act or omission contrary to its provisions. And the MIO, 2001 is in addition to and not in derogation of other laws. Similarly, the Code of Criminal Procedure, 1898, sets out the general law relating to procedure for inquiry, investigation and trial of criminal cases and other ancillary matters. Section 5 thereof provides that it shall apply to all offences under the PPC but for offences under other laws its provisions shall be applied subject to any enactment for the time being in force regulating the manner and place of investigation, inquiring into, trying or otherwise dealing with such offence.
47. Section 3(2) of MIO, 2001, reveals that it is intended to exclude the petitioner from the laws applicable to other Banking Companies and Financial Institutions and a special law regulating the affairs of Microfinance Banks is devised in MIO, 2001. There is no other law relating to banking companies application of which is in issue here. The law requiring deliberation here is only Section 489-F PPC. Also section 3(2) does not state that the petitioner cannot conduct business of a bank i.e. (acceptance of deposits and remission of proceeds) since the same is allowed by Section 6 and as long as the cheque issued by respondents No.3 to 12 are valid cheques in terms of Negotiable Instruments Act, 1881 and the petitioner is allowed to and does the business of a banker under the said Act, 1881, dishonouring of the said cheque will attract the provisions of Section 489-F PPC.
48. In "Muhammad Mumtaz Akhtar v. Additional Sessions Judge, etc." (PLJ 2021 Lahore 98), it has been held as follows:- "8. It is again clear that jurisdiction with the Banking Court established under the Financial institutions (Recovery of Finances) Ordinance, 2001 would lie only when the bank/company is covered by the Financial institutions (Recovery of Finances) Ordinances, 2001, whereas in the instant case NRSP Microfinance Bank being only a microfinance institution and not being included in the list of Scheduled Banks, cannot take immunity from applicability of general law i.e Criminal Procedure Code .........
9. In view of the above, this Court has no hesitation to hold that microfinance institutions cannot be termed as financial institutions within the contemplation of the Financial institutions (Recovery of Finances)
Ordinance, 2001 to say that its matters could only be tried by the Banking Court. Thus, Code of Criminal Procedure being fully applicable, the application filed under Section 22-A/22-B CrPC on behalf of the microfinance institution was fully competent and the impugned orders passed by the learned Ex-officio Justice of Peace do not suffer from any jurisdictional or legal error ......."
49. It has been sought to be highlighted in the discourse above that the aim or object of Section 489-F PPC is not recovery of loans but rather penalizing anyone who commits the crime envisaged by the provision. The argument of the learned Amicus Curiae that the rationale behind Ordinance or for that matter the aims and objects of the Microfinance Ordinance is to help the poor and, therefore, even if a person who is poor and socially not well placed commits the crime envisaged in Section 489-F PPC he should not be punished because the said Section is inapplicable tantamouts to give a carte blanche to the poor to commit such a crime. Such a Benthamite interpretation cannot possibly be countenanced in a written constitutional setup which discourages discrimination and provides for equal protection of laws to all without distinguishing persons on the basis of status.
Empathizing with the have-nots is all very well and noble but cannot be allowed to overtake or relegate to the backburner the command of the Constitution.
50. It has already been held by this Court in the case of "Maj. (Retd.) Javed Inayat Khan Kiyani v. The State"
(PLD 2006 Lahore 752) that Section 489-F PPC applies to a case of an individual dishonestly issuing a cheque in favour of another private party and which cheque is subsequently dishonoured. If the private party happens to be a financial institution then, of course, the Financial Institutions (Recovery of Finances) Ordinance, 2001 through Section 20(4) shall take over but in the present case before this Court the operation of the said Ordinance has been ousted and, therefore, the petitioner does not have the benefit of availing the remedy afforded by the said provision of law and rather only has Section 489-F PPC to fall back on.
51. In view of what has been discussed and noted above, this petition is allowed and the order dated 23.5.2018 passed by an Ex-of ficio Justice of Peace is set aside and declared to be of no legal effect. The SHO concerned is directed to proceed with the application filed by the petitioner in accordance with Section 154 Cr .P.C.