JUDGMENT KARAMAT NAZIR BHANDARI, J.- The case of the petitioner in nutshell is that he started his life in modest circumstances, worked extremely hard in Pakistan and abroad and managed to save some money. He went to Kinshasa, Zaire in 1982 but was thrown out in 1991 due to anti Asian riots. He has five children from 7 to 11 years of age. In October, 1994 he transferred his savings from United Kingdom to Pakistan and kept the same with respondent No. 2. On 16.1.1995, out of his saving, the petitioner purchased following Foreign Currency Bearer Certificates (hereinafter referred to as the certificates") of the value of @10000/- each.
"PE-000598, PE-0005999, PE-000600, PE-000601, PE-000602, PE-002770, PE-002771, PE-002772, PE- 002773, and PE-002774". (Photo-stat copies of the certificates are attached as Annexures C/1 to C/10)
2. According to his assertion these lost certificates were purchased for a period of five years and a profit of 11% per annum is paid on. the same, twice a year. The petitioner received profit in the sum of Pounds Sterling 5,500/- on 16.7.1995 and 16.1.1996. The petitioner further avers that after receiving, the last profit on 16.1.1996, the petitioner wrapped the certificated in a Khaki paper envelope and placed it underneath his bed room wardrobe (wooden almirah) on the right hand side under a piece of red carpet and covered it with unwashed offseason clothes for the purpose of security, lt is this place where the certificates were always kept. On 16.7.1996, the petitioner recovered the certificates for claiming the next installment of profit but was horrified to find that the clothes, piece of red carpet, Khaki envelope and the certificates were all eaten up by termite which was spreading all over. All that was left of the certificates was small pieces of paper. The petitioner reported the matter on 20.7.1996 to the police and an FIR was duly registered. The petitioner also got conducted the survey at the site and the surveyors took photographs of the site and other allied things.
3. lt is claimed that on 15.8.1996 the petitioner submitted an application along with all the annexures (FIR, report of the exerts, etc.) to respondent No. 1 for the issue of duplicate certificates and for payment of profit, then due. On 22.8.1996, the respondent No. 1 declined the claim on the ground "the certificates in question are bearer in character and that the Rules governing the scheme of Foreign Currency Bearer Certificates do not permit entertainment of claim of any nature in case any Certificate is lost, destroyed, mutilated or burnt." This reply is Annexure-N and it is this denial which is being subjected to challenge in this Constitutional petition. The prayer made is that "the refusal of the respondent No. 1 to issue duplicate FCBCs and to pay profit accrued as contained in the letter dated 22.8.1996 (Annexure-N) may kindly be declared to be illegal, without lawful authority and of no legal effect." Consequential direction for issue of duplicate certificate has also been made. The petitioner also prays that Rule 11 and other rules in this behalf in Five Years, Foreign Currency Bearer Certificates Rules, 1992 be declared as illegal.
4. In the report and para wise comments submitted under the signatures of Chief Manager, State Bank of Pakistan, Lahore dated 17.11.1996 it is stated that as the certificates are bearer in character, its duplicate cannot be issued like other Government bearer instruments and Prize Bonds, lt is asserted that physical presentation of the certificates as well as coupons is essential for receiving profit as well as the value of the certificate. Reliance is placed on Rule 11 of the Five Years Foreign Currency Bearer Certificates Rules, 1992 which is claimed to be intra vires.
5. The respondent No. 2 also submitted report and para wise comments in which the stand taken is that the petitioner has no claim against this respondent and it is for respondent No. 1 to acecpt/reject the claim of the petitioner. On facts, it is, however, admitted that the petitioner did purchase the certificates through this respondent. On an application, the Federation of Pakistan through Secretary Ministry of Finance was impleaded as respondent No. 3. This respondent was represented through the Deputy Attorney General for Pakistan.
6. In support of the petitioner's case, Mr. Hamid Khan, Advocate, relied on Section 11 of the Public Debt Act, 1944 (hereinafter referred to as the Act) to contend that the denial to issue the duplicate of the lost certificates is illegal and in this regard it is asserted that Rule 11 of the Five Years Foreign Currency Bearer Certificates Rules, 1992 (hereinafter referred to as the Rules, 1992)" is ultra vires of Section 11 of the Act. He has further relied on Rule 11 of the Public Debt Rules, 1946 (hereinafter referred to as the Rules, 1946) to show that an elaborate procedure has been laid down for issue of duplicate of lost certificates, lt is stressed that Section 11 of the Act and Rule 11 of the Rules, 1946 create a right in favour of the petitioner and its denial on the strength of Rule 11 of the Rules, 1992 is absolutely illegal. Both Khawaja Saeed-uz-Zafar, Deputy Attorney General for Pakistan and Mr. Rehan Nawaz, Advocate, learned counsel for the State Bank of Pakistan have maintained that Rule 11 of the Rules, 1992 is intra vires of the Act. lt is also argued that Section 11 in terms does not apply to the bearer certificates inasmuch as these are covered by Section 2 (2) (a) (iv) of the Act and as such stand excluded from Section 11. According to these learned counsel, the petitioner has no remedy and he must suffer the ill-luck which he has suffered in the circumstances narrated by him in the petition, In reply, Mr. Hamid Khan, Advocate, stressed that a bond and a certificate are essentially instruments of same nature and the petitioner's certificates in this case fall within Section 2 (2) (a) (iii) of the Act and as such are covered by Section 11 of the Act.
7. With a view to correctly appreciate the controversy it is essentia! to reproduce the relevant statutory provisions. Section 2 of the Act reads.
Definitions- In this Act, unless there is anything repugnant in the subject or context:-
(1) "the Bank" means the State Bank of Pakistan; (1A) "Government", in relation to Government security means the Federal or Provincial Government by whom the security is created and issued; Added vide Ex. Ordinance Gazette dated 3.5.61 Ordinance No. VI! of 1961.
(2) "Government security" means:-
(a) a security, created and issued, whether before or after the commencement of this Act, by the Government for the purpose of raising a public loan, and having one of the following forms, namely:- v
(i) stock transferable by registration in the books of the Ban; or
(ii) a promissory note payable to order; or
(iii) a bearer bond payable to bearer; or
(iv) a form prescribed in this behalf; or notified by Government from time to time.
(b) any other security created and issued by the Government in such form and for such of the purposes of this Act as may be prescribed; Section 11 of the Act reads:- Issue of duplicate securities and of new securities on conversion, consolidation, sub-division or renewal:-
(1) If the person entitled tb a Government security applies [not being Security in a form notified in pursuance of paragraph (iv) of sub- clause (a) of clause (2) of section 2] to the Bank alleging that the security has been lost, stolen or destroyed, or has been defaced or mutilated, the Bank may, on proof to its satisfaction of the loss, theft, destruction, defacement or mutilation of the security, subject to such conditions and on payment of such fees as may be prescribed, order the issue of a duplicate security payable to the ' applicant.
[(1-A) If a Government Security in any of the forms notified in pursuance of paragraph (iv) of sub- clause (a) of clause (2) of section 2 has been defaced or mutilated, the holder thereof may, in such manner, and subject to such conditions and on payment of such fees, if any, as may be notified by Government apply for the issue of a duplicate security or for the refund of its value]: (Provided that where such Government Security Rule 11 of the Rules, 1946 reads as below:- Procedure when a Government security is lost, etc.
(1) When a Government security is lost, stolen, destroyed, mutilated or defaced, the person entitled thereto shall apply for the issue of a duplicate security in the manner laid down in Rules 12,13,14,15,16 or 17, as the case may be, to the Public Debt Office at which the security is domiciled or registered with a statement showing particulars, such as number, amount and loan of the security.
(2) The Bank may by its payment of interest on or the maturity value of the security or postpone the making of any order under section 11 of the Act or the registration of any transfer of the security until the vesting order has been made.
Rule 11 of the Rules, 1992 reads as follow: No claim of any nature will be entertained in case of any certificate is lost, stolen, destroyed, mutilated or burnt.
8. The question arising for determination in this case can be formulated as:-
(i) Whether the certificates in this case are in the nature of a bond and, therefore, covered under Section 2 (2) (a) (iii) of the Act?
(ii) If the certificates are not covered as above and they fall within section 2 (2) (a) (iv) of the Act as contended by respondents, are these not covered by Section 11 of the Act and, therefore, there is no right to obtain duplicate security?
(iii) If the certificates in question fall or are covered by Section 11 of the Act, whether Rule 11 of the Rules, 1992 is ultra vires of the Section.
(iv) If it is held that Rule 11 of Rules, 1992 is not ultra vires, whether the petitioner loss his valuable rights for all times to come and this Court is unable to give him any relief keeping in view the statutory position.
9. The purpose of the Act is to consolidate and amend the law relating to Government Securities issued by the Federal Government and to the management by the State Bank of Pakistan of the Public Debt of the Federal Government. The issue of Government Securities was earlier dealt with under the Securities Act, 1920 but with the promulgation of the Act, provisions of the earlier Act ceased to apply to Government Securities to which the Act was applicable. The purpose of the Act seems to be to regulate the issue of public debt and raising of public loan by the Federal Government which it does by issuing bonds, Promissory Notes, Certificates and other Instruments by whatever name called. Such instruments are known as Government Security as defined in Section 2 (2) of the Act.
10. lt has not been denied that the certificates in this case are Government Security; whether they fall under Section 2 (2) (a) (iii) of the Act or Section 2 (2) (a) (iv) of the Act as contended by the learned respondent counsel. If it is a security as is not disputed, then without answering question No. 1 above, it can be safely held that the lost certificates in this case are covered by Section 11 of the Act. To my mind whether they fall within sub-section (1) of Section 11 or sub-section (1-A) of Section 11, is immaterial \o the final out come. Under sub section (1-A) of Section' 11, if a Government Security covered by Clause (iv) is defaced or mutilated, the holder has a right to apply for issue of duplicate security or for the refund of its value. The proviso to this Sub-Section, however, lays down that if the security is in the form of a Prize Bond, the holder can only apply for refund of its value and not for duplicate. Both the learned Deputy Attorney General for Pakistan as well as Mr. Rehan Nawaz, Advocate, / ' were of the view that the lost certificates would fall under Clause (iv) @@ and on the strength of this argument alone, rule 11 of the Rules, 1992 has to be declared ultra vires of Section 11 (1- A). While sub-section (1-A) is creating a right to obtain a duplicate or refund, the rule in question denies this right. Clearly the rule is restricting the provision of the parent Act. lt being a subordinate legislation cannot conflict with the parent legislation nor it can deny a right created by the parent Act. For this reason Rule 11 of the Rules, 1992 is hereby declared as ultra vires of Section 11 (1-A) of the Act. Consequential denial of the respondent-Bank to entertain and adjudicate the claim of the petitioner on he strength of Rule 11 of the Rules, 1992 will have to be declared as without lawful authority.
11. In view of the conclusion reached above, the other question whether the lost certificates is a Bond within the meaning of Clause III or instrument of a special nature falling within the Clause IV loses importance. Since, however, it has been repeatedly and strenuously submitted by Mr. Hamid Khan, Advocate, that the lost certificates remain Bonds falling within the Clause ill, I proceed to examine the arguments.
12. Neither the expression certificate nor bond is defined in the Act or the Rules of 1946 or 1992. One has, therefore, to go to the ordinary dictionary meaning of the words, In Black's Law Dictionary (1979) at Page No. 161 bond means:- Bond. A certificate or evidence of a debt on which the issuing company or governmental body promises to pay the bond-holders a specified amount of interest for a specified length of time and to repay the does on the expiration date, In every case a bond represents debt- its holder is a creditor of the corporation and not a part owner as is the share-holder. Commonly, bonds are secured by a mortgage.
A written obligation, made by owner of real property, to repay a loan under specific terms, usually accompanied by a mortgage placed on land as i security.
A deed whereby the obligor obliges himself his heirs, executors and administrators, to pay a certain sum of money to another at a day appointed.
Similarly bearer bond mean according to the same dictionary as:- Bearer bond. Bonds payable to the person having possession of them. Such bonds do not require endorsement to transfer ownership but only the transfer of possession.
The expression is also defined in Stamp Act, 1899. Section 2 (5) defines the bond as under:-
(a) any instrument whereby a person obliges himself to pay money to another, on condition that the obligation shall be void if a specified act is performed, or is not performed, as the case may be; The definition of the word bond as given under section 2(3) of the Limitation Act reads as follows- "bond" includes any instrument whereby a person obliges himself to pay money to another, on condition that the obligation shall be void if a specified act is performed, or is not performed, as the case may be.
According to the Concise Oxford Dictionary. The New Edition, 1990 word "certificate" means a formal document, attesting a fact, ownership of share.
13. The language of lost certificates as indicated in Annexure-C/1, photostat copy is given below: Government of Pakistan Five Years Pounds Sterling Bearer Certificate @. 10,000 @. 10,000 Np.PE 000598 Np.PE 000598 The bearer of this certificate is entitled to receive payment of Pound Sterling TEN THOUSANDS ONLY five years after the date of issue and the profit at 11% per annum payable half Bearer Certificate Rules, 1992 on presentation at the Office of Issue.
By order of the President of Pakistan Date of issue Manager Sub-Manager Main Branch Lahore Governor State Bank of Pakistan Date and Stamp of Office of issue.
14. The above in depth analysis shows that in essence and spirit a bond and a certificate is one and the same thing. Both evidence a debt and a promise made by the Government or issuing Company to pay a fixed sum on a fixed date as also the interest on the said fixed sum. The word bearer, as noted would mean that no endorsement is needed to transfer the bond and certificate and ownership of the value of bond and certificate can be transferred by simple delivery of possession. I, therefore, hold that the lost certificates in this case would also be covered by Section 2 (2) (a) (iii) of the Act. The objection, therefore, on behalf of the respondent that the petitioner is not entitled to duplicate of the certificate under Section 11 as the certificate is not provided for therein is repelled. I may, however, add that this distinction is not material for the purposes of disposal of this petition as sub-section (1-A) of Section 11 added through Act XIII of 1963, would cover the case of the certificates, even if the contention of the learned counsel for the respondent that bond is different from certificate is held to be correct, lt has not been denied in fact it is admitted that the lost certificates would fall within. Section 2 (2) (a) (iv) of the Act.
15. The case of the petitioner is further fortified from the examination of Rules, 1946. These rules define mutilated security, lost security, defaced security and not mutilated certificate or bond or lost certificate or bond or defaced certificate or bond The security is a term of larger import under aims only talks of Government security, lt has not been the case of the respondent before me that the lost certificates are not Government security. The denial of the claim, therefore, is again invalid on this ground as well.
16. The argument of discre mination raised by Mr. Hamid Khan, Advocate, is also relevant and valid.
I pointedly put it to Mr. Rehan Nawaz, Advocate, as well as the official of the State Bank" who specially flew from Karachi to participate in the hearing, to indicate the reason whereby the State Bank of Pakistan accepts to process the case for issue of duplicate bonds in case they are lost, destroyed, mutilated or defaced but refuses the same in case of certificates. Both a certificate as well as a bond can be bearer and while respondent accepts claim in respect of bearer bond, denies it in respect of a certificate. No. reason was given justifying different treatment in case of bond and certificate, lt was, however, argued that as the certificates are bearer and in case of loss etc., the Bank can always be confronted with bogus claim. But this is equally true of the bearer bond. Learned counsel and the representative of the Bank could only fall back upon the Rules, 1992 to contend that since the rule does not provide for the issue of duplicate or the cash value of the bearer certificate, therefore, the impugned denial of the Bank is valid. I have already held the above rule as ultra vires of the Act and consequently this argument has no force.
17. The argument that because they certificates are bearer, therefore, the claim for duplicate has not been provided for to avoid false claims, has no force in view of the elaborate and inherent safeguards laid down in the Act as well as the Rules, 1946'. For instance, Rule 14 of the Rules, 1946 deals with the procedure of processing the claim of issue of duplicates in case of loss etc. of bearer bonds. The rule is spread over more than three pages and deals with every conceivable aspect which has to be taken care of in assessing the claim. Even after adjudication and vesting of the duplicate, the claim is not paid for six months to avoid the emergence of any other claim. The orders are published in the Gazette so that public at large comes to know of the claim. The same procedure will be applied to assess the case of a lost etc. certificate and the same safeguards will be available to the State Bank.
18. This plea is further not valid for the reason that the learned representative of the State Bank of Pakistan admitted that each of the certificates is numbered and record maintained in the State Bank of Pakistan regarding its issue to the other Bank/issuing office, In this case respondent No. 2 also admitted to be maintaining the record of the certificates with reference to the number of each of the certificate. The future false claim, if any, can only be made with reference to the number and after issuing the duplicates for instance, to the petitioner, the Bank will make necessary entry in its records and this will ward of any other false claim. There is no substance at all in the plea that absence of provision with regard to issue of duplicates in respect of lost certificates is for ensuring safety against false claims.
19. The judgment Prof. Muhammad Sharif v.
1. Government of Pakistan 2. State Bank of Pakistan (N.L.R. 1996 U.C. 205) relied upon by Mr. Hamid Khan, Advocate, does not directly decide the questions involved in this petition, In cited judgment, the claim for issue of duplicates/refund of bearer bonds stolen in 1991 was denied by the State Bank of Pakistan on the strength of Rule 3(A) of the Special National Fund Bonds Rules, 1985 added in 1992. The Court did not decide the validity of the added rule but held that the rule could not be applied retrospectively as the claim for duplicate arose in 1991, before the enforcement of Rule 3 (A) excluding claims for issue of duplicates etc. However, the judgment is not altogether irrelevant.
20. For the above-noted reasons, this petition is allowed. The refusal of the respondent-Bank as contained in its letter dated 22.8.1996 (Annexure-N), to consider the case for issue of duplicate/value of the certificates is hereby declared as without lawful authority and of no legal effect. The respondent-Bank is directed to process the claim in accordance with the provisions of the Act and relevant rules. Since a difficult question of law is involved, the parties are left to bear their own costs.