MIAN ALLAH NAWAZ, J.- On 11th May, 1998, hostile neighbourly Country/india carried three nuclear tests. Still uncontented, it exploded two more nuclear devices on 13th May, 1998. These nuclear blasts posed a serious threats to the security of Pakistan. Confronted with aggressive designs of neighbour, Government of Pakistan conducted five nuclear tests on 28th May, 1998, with the proclamation of emergency under Article 233 of the Constitution of Pakistan (1973). On the same date, Foreign Exchange (Temporary Restriction) Ordinance VII of 1998, was promulgated with immediate. Effect. State Bank of Pakistan issued Circular No.12 on 29th May, 1998. Soon thereafter, the said Ordinance was passed as Foreign Exchange (Temporary Restriction) Act IV of 1998 on 25.9.1998 by Majlis Shoora as Money-Bill and was made effective from 28th May, 1998. These legislative measures suspended the rights of holders of foreign currency account to hold, sell, withdraw, transfer, pay or take out foreign exchange held by them as on 28th May, 1998. This was however, made subject to prior permission of State Bank of Pakistan. Pursuant to this Act, State Bank of Pakistan, issued on 2nd July, 1998 impugned Circular No.23 which is as follows: "Please refer to Section A(III) of BCD Circular No.5 dated the 5th July, 1987 read with Section (2) of BCD Circular Letter No.7/121 -00-92, dated 4th June, 1992 and Rule 10(iii) of Rules of Business for NBFIs regarding margin requirement prescribed for advances against bank deposits and deposit certificates, it has been decided that encumbrance of lien of any kind upon any foreign currency deposit/foreign currency certificate as a cover against any direct or indirect liability of the depositors must be removed by July 31, 1998 through set off or direct liquidation of the liabilities so covered by the borrowers.
Now new encumbrance of lien should thereafter be created against foreign currency deposit/certificates held on May 28, 1998.
All Banks/NBFIs are further directed to give a compliance report to the State Bank within 3 days of the expiry of the deadline.
"
2. Feeling aggrieved, account holders preferred 76 Constitutional Petitions which were fixed for hearing before our brother Faqir Muhammad Khokhar, J. Still more such petitions came which were listed before one of us (Karamat Nazir Bhandari, J.). On 30th July, 1998, aforesaid petitions were dismissed by Single Judge (Faqir Muhammad Khokhar, J.) upholding the vires of Circular No.23.
Feeling aggrieved 65 Intra Court Appeals were preferred by aggrieved Foreign Currency Account holders, Intra Court Appeal No.679 of 1998 was admitted to regular hearing by Division Bench of this Court comprising one of us (Karamat Nazir Bhandari, J.) and Rao Iqbal Ahmad Khan, J. On 6.8.1998.
On the same date, Intra Court Appeal No.689/98 was also admitted to regular hearing. Since these cases raised question of legal importance, Hon'ble Chief Justice of this Court was pleased to constitute a larger Bench to hear Intra Court Appeal No.689 of 1998 and all connected Intra Court Appeals and Writ Petitions. This occurred on 11.8.1998. in compliance with that order, all these causes were listed before the Full Bench comprising Mr. Justice Ehsan- ul-Haq Chaudhry, Mr. Justice Amir Alam Khan and Mr. Justice Karamat Nazir Bhandari. On 26.11.1998, his Lordship Mr. Justice Ehsan-ul-Haq Chaudhry made a request to Hon'ble Chief Justice that he may be excluded from the Full Bench on the ground of his multifarious engagements. Wish of his lordship was acceded to and on 27.11.1998 and a Full Bench was reconstituted by including one of us (Mian Allah Nawaz, J.) in it. This is, how, 67 Intra Court Appeals and fifty Constitutional Petitions were laid before the so-constituted Bench.
3. Sixty seven (67) Intra Court Appeals intended to be disposed of by this order bear ICA No.679/98, 689/98, 741/98, 744/98, 710/98, 708/98, 694/98, 766/98, 767/98, 746/98, 755/98, 663/98, 828/98, 827/98, 802/98, 826/98, 722/98, 825/98, 824/98, 823/98, 822/98, 749/98, 747/98, 711/98, 714/98, 754/98, 705/98, 751/98, 750/98, 691/98, 725/98, 96/98, 797/98, 795/98, 777/98, 716/98, 732/98, 733/98, 734/98, 735/98, 736/98, 798/98, 799/98, 800/98, 801/98, 925/98, 1309/98, 1310/98, 770/98, 709/98, 748/98, 743/98,742/98, 745/98, 737/98, 724/98, 723/98, 720/98, 719/98, 695/98, 693/98, 692/98, 776/98, 772/98, 757/98, 758/98, 690/98 and 739/98. Writ Petitions, being dealt with this order, are Petitions No.17482/98, 14635/98, 14498/98, 14719/98, 14720/98, 14918/98, 14919/98, 14760/98, 14954/98, 15027/98, 15054/98, 15065/98, 15225/98, 15393/98, 15394/98, 15464/98, 15468/98, 15469/98, 15470/98, 15471/98, 15471/98, 15472/98, 15603/98, 15627/98, 15642/98, 15643/98, 15941/98, 15942/98, 15943/98, 15944/98, 16451/98, 17454/98, 17393/98, 17595/98, 17564/98, 17577/98, 17578/98, 14937/98, 14938/98, 23986/98, 24577/98, 25478/98, 24596/98, 24088/98, 16624/98, 15547/98, 16878/98, 18798/98, 19765/98, 15406/98, 18780/98, 17103/98, 16017/98, 25901/98 and 17459/98.
4. Facts, leading to instant litigation, need not be stated in detail. Suffice it to note that the appellants/petitioner are holders of Foreign Currency Accounts in various banks/authorised dealers. The aggrieved parties are divisible into three categories. Firstly, the F.C.A, holders who opened foreign currency accounts with various scheduled/foreign banks and availed of finance facility in rupees against the collateral of their accounts. Secondly, those who, purchased foreign currencies/Dollars/Sterling and opened their accounts, in various scheduled/foreign banks under Protection of Economic Reforms Act, 1992 (XII of 1992). Thirdly, those who remitted their foreign exchange from outside the country and opened accounts in banks located in Pakistan. The commonalty of all these petitions is that they seek to call in question the validity of Circular No.23 dated 2nd July, 1998/issued by the State Bank of Pakistan and validity of Section 2 of Foreign Exchange (Temporary Restriction) Act IV, 1998.
5. M/s. Salman Akram Raja, Shahzad Jahangir, Mansoor Ali Shah, Javed Shaukat, Imtiaz Rashid Siddiqui, Asad Ullah Siddiqui and Mr. Mahmood A. Sheikh, Advocates appeared on behalf of aggrieved persons. State Bank of Pakistan/respondent was represented by Mr. Abid Hassan Minto, Advocate, Mr. Sher Zaman Deputy Attorney General argued on behalf of the Federation. The learned counsel for all the sides agreed that vires of Act No. IV of 1998 and Circular No.23 dated 2.7.1998 were main issues in this litigation; that factual background of it, was not in dispute and need not be recapitulated. Mr. Salman Akram Raja, Advocate opened argument on behalf of effected F.C.A, holders. His contentions are, briefly, as follows:- Firstly: that neither Section 25 nor 41 of Banking Companies Ordinance 1962 (Ordinance No.LVII) authorised the State Bank of Pakistan to acquire/purpose the foreign currency deposits of the appellants/petitioners without payment of the fair compensation. According to him, the single Judge erred in law in relying upon aforesaid provision to say that these provisions were source of authority of the State Bank to purchase foreign exchange deposits of the appellants/petitioners.
Secondly: that appellants/petitioners had deposited their foreign currency/foreign exchange in foreign currency accounts with various banks under Section 4 of Protection of Economic Reforms Act (Act XII of 1992), that the appellants/petitioners were owners of these deposits and their titles in these deposits could not be extinguished, interfered with, acquired by the State Bank of Pakistan without payment of fair compensation. On the strength of the above rule it was suggested that Circular No.23 was confiscatory in nature and was in defiance of the Fundamental Right of property as guaranteed in Articles No.23/24 of the Constitution. Reliance has been placed on Swadesh Ranjan Sinha v. Haradeb Banerjee (1991) 4 SCC 572 at page 576/577), United States Trust Company of New York etc. v. State of New Jusey. Et al. (52 L Ed. 2d 92), and Bureau of Economic Analysis, United States Department of Commerce v. Susan B.Long and Philip H. Long (67 L. Ed. 322 Headnote 3, P.325).
Thirdly: that the impugned circular was issued by the State Bank of Pakistan in malicious exercise of its authority, that neither it had any link with the explosion of nuclear device nor with the proclamation of emergency; that is was a pure and simple strategy devised by Federal Government to appropriate the forex of appellants/petitioners. Substantiating his contention, the learned counsel referred to the statement of Mr. Sartaj Aziz (the then Finance Minister) dated '8th August, 1998 wherein he had stated that the successive Government have utilized deposits in foreign currency accounts amounting to $ 11 billion Dollars in debt-servicing/financing of import bill of oil and so on and to forth. This statement clearly proved that the State Bank of Pakistan had issued circular in deference to wishes of Federal Government to deprive the appellants/petitioners of their foreign currency deposits, in support of his contention the learned counsel referred to Rai Mazhar Iqbal and another v. The University of the Punjab, Lahore through Vice-Chancellor and 2 others (1992 C.L.C. 1158), M/s. Maniar Industries (Pvt.) Ltd. v. Sindh Industrial Trading Estate Ltd. & another (1992 C.L.C. 2329), Islamia University, Bahawalpur through Vice-Chancellor v. Dr. Muhammad Khan Malik (PLD 1993 Lah. 141 at P. 154 (Para 15 & 6), Ch. Manzoor Elahi v. Federation of Pakistan etc. (PLD 1975 S.C. 66 at page 125-126), Government of West Pakistan and another v.
Begum Agha Abdul Karim Shorish Kashmiri (PLD 1969 SC 14 at P. 16), Olga Tellis and others v.
Bombay Municipal Corporation and others (AIR 1986 S.C. 180 paras 39, 42, 44), Zaheer-ud-Din and others v. The State and others (1993 SCMR 1718), Human Rights Cases in the matter of Human Rights (1993 SCMR 2001) Mohtarma Benazir Bhutto and another v. President of Pakistan and others (PLD 1998 S.C. 388).
Fourthly: that the object of the impugned circular was not to curb manipulation of money market by the foreign currency accounts-holders or to save the economy from dollarisation. Continuing, he stated that the protection/immunities to foreign currency accounts under Sections 4, 5 of Act of 1992 were kept in field and were extended to new foreign currency accounts to be opened after 28th May, 1998, and was extended also to new dollar scheme. Even Recording to learned counsel, the new dollar bonds were allowed to be used as collateral, in the context of the above scenario, it was urged that Circular No.23 was naked confiscatory measure and was totally discriminatory. The strength was sought from Attorney General for Alberta and Attorney General for Canada and others (1939) AC 117 at 130). Mian Manzoor Ahmed Wattoo v. Federation of Pakistan and 3 others (PLD 1997 Lah. 38), Mohtarma Benazir Bhutto and another v. President of Pakistan and others (PLD 1998 S.C. 388), Islamia Republic of Pakistan through Secretary, Ministry of Interior and Kashmir Affairs, Islamabad v. Abdul Wali Khan, MNA former President of Defunct National Awami Party (PLD 1976 S.C. 57).
Fifthly: that impugned circular was executive fiat and so could not operate retrospectively. On this rule, it was suggested that this circular was not applicable to foreign currency accounts of the appellants/petitioners. The reference was made to Hashwani Hotels Limited v. Federation of Pakistan and others (PLD 1997 SC 315) M/s. M.Y.Electronics Industries (PVT) Ltd. Through Manager and others v. Government of Pakistan through Secretary Finance Islamabad and others (1998 SCMR 1404), Molasses Trading and Export (Pvt.) Limited v. Federation of Pakistan and others (1993 SCMR 1905), Shiva Rao and another v. Cecilia Pereira and others (AIR 1987 S.C. 248), Bennett Coleman and Co. Ltd. And others v. Union of India and others (AIR 1973 S.C. 106).
Sixthly: that appellants/petitioners had opened foreign currency accounts with different scheduled/foreign Banks; had obtained finance facilities in lieu of these accounts as collaterals; that there was a relationship of Borrower and Lender between lending institutions and borrowers; that Circular No.23 could not interfere with aforesaid suggested that neither Act of 1998 nor the Circular No.23 could snap relationship of lender and borrower. The reference was made to Construction of Statute by G.P. Sindh on page 524.
Seventhly: that Section 9 of Foreign Currency Regulation Act, 1998 empowered the Federal.
Government to purchase the foreign exchange from its owners at the market rate of the foreign exchange; that neither the Federal Government nor the State Bank of Pakistan can acquire the foreign exchange from its owners/holders at an arbitrary rate fixed by it. Banking upon Section 9, learned counsel contended that Circular No.23 had fixed an arbitrary rate that all these foreign currency accounts had to be liquidated at the rate of Rs.46/-. This, according to learned counsel, was clearly in violation of the mandatory rule as embodied in Section 9 of Act No.VII of 1947.
Eighthly: that right to property was basic right which was guarantee by Articles 23 and 24 of the Constitution and could not be interfered with by subordinate legislation. The learned counsel cited Qazalbash Waqt and others v. Chief Land Commissioner, Punjab, Lahore and others (PLD 1990 SC.
99), Jibendra Kishore Achharyya Chowdhury and 58 others v. The Province of Eash Pakistan and Secretary, Finance and Revenue (Revenue) Department, Govt, of East Pakistan (PLD 1957 S.C. (Pak.)
9). Learned counsel also referred M/s. Wak Orient Power and Light Limited Gulberg-III, Lahore v.
Govt, of Pakistan Ministry of Water and Power through its Secretary, Islamabad and 2 others (PLJ 1998 Lah. 665)(F.B.).
M/s. Shahzad Jahangir, Mansoor Ali Shah, Javed Shaukat, Imtiaz Rashid Siddiqui, Asad Ullah Siddiqui and Mahmood A. Sheikh, Advocates adopted the line of above arguments. Mr. Mansoor Ali Shah referred to number of precedents to support above submission, W.P. No.14720/98, W.P.
No.14760/98, W.P. No. 15225/98, W.P. No.15470/98, W.P. No.15471/98, W.P. No. 16472/98, W.P. No. 15603/98, and ICA No.766/98. He also cited to submit that Circular No.23 had no nexus with the emergency law, Shyam Behari Tewari and others v. Union of India and another (AIR 1963 Assam 94), Jaichand Lai Sethia v. The State of West Bengal and others (AIR 1967 S.C. 483), Sadr-ud-din Suleman Jhaveri v. J.H. Patwardhan and others (AIR 1965 Bombay 224) and Bennett Coleman and Co. Ltd. v. Union of India and others (AIR 1973 S.C. 106). The measure taken in pursuance of emergency declared under Article 233 (1) of the Constitution. He also cited M/s. Motilal Padampat Sugar Mills C. Ltd. v. The State of Uttar Pradesh and others (AIR 1979 SC 621) and Pakistan through Secretary, Ministry of Commerce and 2 others v. Salahuddin and 3 others (PLD 1991 SC 546) to urge that the Government was bound by Principle Promissory estoppel and could not/cannot recall its assurances/commitments given in Act XII of 1992. He also stated that Circular No.23 was neither in public interest nor was reasonable. Reference was made to it. Col. Farzand AH and others v.
Province of West Pakistan through the Secretary, Department of Agriculture, Government of West Pakistan, Lahore, (PLD 1970 SC 98), Haji Hashmatullah and others v. Karachi Municipal Corporation and others (1975 SCMR 359), Oliga Tellis and others v. Bombay Municipal Corporation and others (AIR 1986 S.C. 180), Qazalbash Waqf and others v. Chief Land Commissioner, Punjab, Lahore and others (PLD 1990 S.C. 99). He also cited Pakistan v. Salah-ud-Din (PLD 1991 SC 546).
7. Mr. Javed Shaukat, Advocate, fiercely submitted that the protection and immunities granted under Act XII of 1992. Could be taken away by Act of 1998 which was temporary in nature. He further submitted that the Federal Government had issued dollar-bonds and offered huge profits: that these bonds were/are an additional burden on our State which was already under a heavy debt- trap, in the context of the above situation, the learned counsel suggested that foreign currency accounts be treated as a fixed accounts for a specific period and thereafter, be allowed to be operated within the frame-work of Section 4 of the Act XII of 1992; that the foreign currency accounts-holders were prepared to assure the Federal Government that they will not withdraw from their deposits so as to help the State in the time of distress. He further submitted that Section 3 of the Act 1998 permitted State Bank of Pakistan to allow any one of account holder to operate his account without providing any guide-line, in the context of above, it was submitted that Act 1998 was arbitrary law and suffered from any lack of statutory guideline. So it was a bad law. He relied upon Ahmed Hassan and 2 others v. Punjab University, Lahore, through its Vice Chancellor (PLJ 1996 Lah. 701 (D.B), Central Board of Revenue and 3 others v. Seven up Bottling Co. (Pvt.) Ltd. (1996 S.C.M.R. 700(d), Zoohra and 5 others v. Govt, of Sindh (PLD 1996 Kar. 1(b), I.A.Sherwani v. Govt, of Pakistan (1991 SCMR 1041), Dr. M. Shaukar Iqbal v. Muhammad Luqman Arshad (1991 MLD 1919), Rasbehari Panda v. State of Orissa (AIR 1969 SC 1081) Saghir Ahmad v. State of U.P. (AIR 1954 S.C.
728). Mr. Asad Ullah, Siddiqui, Advocate submitted that Majlis-i-Shoora, under Constitution, was not as sovereign as their counter-parts in secular countries. He relied on Section 2-A to contend that the Federal Government/State Bank of Pakistan had no power whatsoever to resile from assurances given in Section 4 of Act XII of 1992. Continuing, he further submitted that Act No. IV of 1998 was a money bill which was not put before the Senate and was approved by the Majlis-e- Shoora. This being the position, the law had not been validly enacted by the first House of Parliament.
8. Mr. Abid Hassan Minto, Advocate, while defending Circular No.23, raised following points: Firstly: that on 28th May. 1998, the State Bank of Pakistan had no adequate foreign exchange to make repayments to account-holders; that foreign currency deposits had been utilized in the payment of debt-servicing, purchase of defence equipments and other necessary expenditures of the State, in the context of the above circumstances, it was suggested that issuance of a Writ will be an exercise in futility.
Secondly: that with the dawn of independence, Pakistan pursued rule of mixed economy; that Foreign Exchange Regulation Act 1947, was adopted by the State which provided restriction on dealings in foreign exchange and on its payment; that Section 4 of Act expressly stated that no person other than an authorised dealer and no person resident in Pakistan other than an authorised dealer shall buy or borrow or sell or lend or exchange with any person not being an authorised dealer of any foreign exchange. Section 5 laid down restrictions on the payment of foreign exchange. These restrictions continued till 1992 when Act XII of 1992 was passed by the Parliament and was made effective from 28th July, 1992. This Act introduced the mechanics of a free market. This Act, however, did not repeal the Act of 1947, but the same time restriction were lifted upon bringing, holdings, selling or taking out foreign currency. The object of this legislation was to bring foreign exchange from outside and to boost economy. However, the petitioners/other foreign currency account-holders started to open foreign currency accounts, obtained loans, again purchased dollars with the loan so obtained then deposit it in the Banks. This mechanism actually started the dollarisation of our economy; that the needs/demands of the dollars was increased and demand for rupees in the market decreased. This led to unprecedented depreciation of our currency. According to the learned counsel, the protection and immunities granted to foreign currency account holders were totally discriminatory and operated against holders of accounts in rupees; that these foreign currency accounts were free from income tax, wealth tax, Zakat, which were payable by the holders of rupees accounts. This totally divided the holders of accounts in Banks in two classes foreign currency account holders and rupee account holders; that foreign currency accounts holders had visible edge over- money/accounts holders.
On the strength of the above circumstances, it was submitted that State Bank of Pakistan became conscious of the above situation and gave its opinion to the Federal Government in time.
Thirdly: that Circular No.23 was not issued in consequences of proclamation of emergency; that SBP was created by Statute; that it was bound by the Act of 1998; that Circular No.23 was not issued in pursuance of proclamation of emergency. The learned counsel strenuously asserted that Circular No.23 was issued by the SBP in exercise of its authority under Section 23 of State Bank of Pakistan Act 1956 read with Section 25 of the Banking Companies Ordinance (BCO) 1962; that the circular shall continue even after the cessation of emergency.
Fourthly: that neither the appellants nor the petitioners had locus standi to come to this Court; that Circular No.23 was directed to Banks/lending institutions; that under Section 2 of Act of 1998 the FCA holders had no right to hold, sell, withdraw, transfer, pay, or take out FCAs held by them on 28th May, 1998 and so the collaterals given by FCA holders had become inefficacious; that under these circumstances SBP was fully competent to direct lending institution to call for fresh secularities-in case they do not liquidate their collaterals on a rate fixed by Government of Pakistan. On the strength of the above submissions, it was submitted that Circular No.23, was a valid directive issued by SBP.
Fifthly: that the FCA holders have been given the facility/right to purchase Special U.S. Dollars Bonds issued under Special U.S. Dollar Bonds Rules, 1998; that such bonds shall serve as a collaterals for their loans. On the line of this arguments, it was suggested that the FCA holders/petitioners/appellants have no legal grievance to continue this litigation.
Sixthly: that the learned counsel relied upon Section 91-A of BCO 1962 to contend that the agreement between lender and loan had come to an end by virtue of Circular No.23 and that the affects had no authority to insist upon continuing with the collaterals of FCA any longer.
Seventhly: that the conversion rate, of 46 rupees equivalent to dollar, was fixed by State Bank of Pakistan in consultation with the Federal Government; that the SBP had special expertise and fixed the conversion rate after due deliberation. This Court had no jurisdiction to substitute the rate fixed by the Government.
Eighthly: that the Federal Legislature has power to make law which may interfere with the existing contracts.
Lastly: Mr. Sher Zaman Deputy Attorney General argued the cause of Federation. He stated that the learned Attorney General was not able to enter appearance on account of his engagement before apex Court. At the very outset he, submitted that he did not share the perception of State Bank of Pakistan. According to him, Act of 1998 was made by the Parliament during the period of emergency as proclaimed by the President of Pakistan; that the executive Circular No.23 was issued by State Bank of Pakistan in pursuance of the emergency; that both the Act as well as Circular No.23 will automatically come to an end at the time of termination of emergency. On the above line, learned Deputy Attorney General strenuously contended that both the Act as well as Circular No.23 were not amenable to jurisdiction of this Court in view of Article 232 and Article 233 of the Constitution. Reference was made to Syed Akbar Ali Bokhari v. State Bank of Pakistan and 7 others (PLD 1977 Lah. 234), Govt, of N.W.F.P, v. Yousaf Khan and 4 others (PLD 1995 S.C. 282), Mrs. Habiba Jilani v. The Federation of Pakistan (PLD 1974 Lah. 153) and M/s. Iqbal and Co. Jhang v. Govt, of Punjab and 2 others (PLD 1977 Lah. 1426). in the second place it was submitted that power of Legislature to make laws is absolute and is not subject to any challenge before the judiciary. He further maintained that no malice or colourful exercise of jurisdiction can be imputed to legislation.
Strength was sought from M/s. Sh. Abdur Rahim, Allah Ditta v. Federation of Pakistan and others (PLD 1988 S.C. 670), Pir Sabir Shah v. Shad Muhammad Khan, Member Provincial Assembly, N.W.F.P, and another (PLD 1995 S.C. 66), Fauji Foundation and another v. Shamimur Rehman (PLD 1983 S.C.
457), M/s. Elahi Cotton Mills Ltd. And others v. Federation of Pakistan (PLD 1997 S.C. 582), Mahmood Khan Achakzai v. Federation of Pakistan and others (PLD 1997 S.C. 426) and Multiline Association v.
Ardeshir Cowasjee and 2 others (PLD 1995 S.C. 423). in the third place it was submitted that Act of 1998 was a money bill, it was certified as so by the Speaker of National Assembly and this Court has no jurisdiction to inquire into the certificate of the Speaker of the National Assembly.
9. As regards the first point/question, suffice it to say that this stems from Article 232 and Article 233 of the Constitution. These articles occur in Part X of the Constitution/titled as Emergency Provisions There are five Articles, in all, in this Chapter. These Articles provide constitutional mechanism to deal with circumstances arising out of extra ordinary events/posing threat to solidarity of State.
These provide for deviation from the Constitutional governance. No doubt, our state is run by written constitution which is based on distribution of powers amongst various organs of State; Legislature is allocated the task of making law; the judiciary to interpret the law while executive carries the task of implementing them. Constitutionally, the State is Federal Parliamentary Republic which is wedded to golden rules of Islam as enshrined in Holy Quran and Sunnah. Constitution specifically distribute the power between federation and federating units and ensure Provincial Autonomy with defined sphere. Reference may be made to Massu and 22 others v. United Bank Limited and another (1990 M LD. 2304).
10. Chapter X, as already noted, deals with emergency situations. There are three types of emergencies as given in Articles 232 to 237. Article 232 pertains to a National Emergency; Article 234 arises out of circumstances when Government of Provincial/Federating Units cannot be carried within accordance with Constitution and so the emergency measures are required to deal with pervading erosion of Constitutional Authorities Article 234, deals with situation when the country is on the verge of financial break-down. Briefly speaking, these provisions are applied when the constitutional machinery is broken down and cannot function. Under Article 232, the President may make a proclamation/declaring that he is satisfied that there is imminent danger to security of the country from external and internal threats; that proclamation is to be laid before a joint sitting of two Houses which is to be summoned by the President to meet within 30 days of the proclamation and it shall cease to be in force at the expiration of two months unless before the expiration of that period, it has to be approved by resolution of joint sitting. Under this, the Federal Legislature and Federal executive get extra-ordinary powers to make laws with regard to those subjects which are exclusively within the competence of Provincial Legislature; that emergency proclamation so suspend the distribution of powers/Legislature/executive between Federation and Federating Units, it can be safely said that the nature of our Constitution is so changed from Federal to Unitary form during the course of emergency. Contemporaneously, the President has a power to declare that the right to move any Court or enforcement of fundamental rights shall remain suspended.
Unfortunately, since creation, our cherished State has remained under long spells of emergency proclamations. This was the circumstance on which the proclamation of emergency issued by the President on 28th July, 1998 was examined by the Supreme Court under Article 184(2) of the Constitution, in these petitions, Federal Government took an objection to maintainability of the petitions on the premises that Articles 232 and 233 barred the above petitions. After hearing learned counsel for all the sides, the Supreme Court did not up-hold the objections in Sardar Faruq Ahmad Khan Leghari and others v. Federation of Pakistan and others (1998 S.C.M.R. 1616) and held as under:- "1. That the petitions are maintainable.
2. That the materials placed before this Court and shown to us in the Chamber, prima facie indicate that the President was justified in issuing the Proclamation under clause(1) of Article 232 of the Constitution of the Islamic Republic of Pakistan, 1973, (hereinafter referred to as the Constitution).
3. That keeping in view the effect of the Proclamation provided for in clause (1) of Article 233 of the Constitution, which authorises the State to make any law or to take any executive action in deviation of Articles 15, 16, 17, 18, 19 and 24 of the Constitution and also keeping in view the language of Articles 10, 23 and 25 (which are hedged with qualifications, we are of the view that an order under clause(1) Article 233 of the Constitution for suspending the enforcement of Fundamental Rights was not justified and therefore, the original order dated 28.5.1998 and the order dated 13.7.1998 varying the above earlier order are declared as without lawful authority and of no legal effect 4 That this Court has jurisdiction to review/re-examine the Constitution of Emergency at any subsequent stage, if the circumstances so warrant."
Thereafter, detailed reasons were released. His Lordship Mr. Justice Amal Mian. Chief Justice of Pakistan delivered the leading opinion His Lordship examined the objection in his usual lucid and comprehensive style. Having dealt with material on emergency available from the whole globe. His Lordship found that the Court had a jurisdiction to examine the proclamation of emergency issued by the President of Pakistan in exercise of its powers known as "Judicial Review". We are tempted to quote paras Nos.45, 45 and 53 of the judgment.
"M/s. Shahzad Jehangir and Muhammad Ikram Chaudhry, learned counsel appearing in two of the afore-mentioned Constitutional Petitions, had also candidly submitted that in the situation obtaining prior to the successful detonation of nuclear devices by Pakistan, one could urge that there was imminent danger of external aggression. If that was so, it cannot be contended that the above danger was eliminated in the evening of 28th May, 1998, as was urged by the above learned counsel, in any case, this Court cannot sit as a Court of appeal for the purpose of deciding whether the material which was available before the Federation and the President was sufficient to justify the issuance of proclamation as the sufficiency of the material cannot be gone into by this Court in these proceedings as held by my learned brother Saiduzzaman Siddiqui, J., in Sabir Shah's case {supra), it is sufficient to hold that prima facie there was some material on the basis of which the President could issue the impugned proclamation of emergency on account of imminent danger of external aggression. However, the same did not warrant passing of an order under clause (2) of Article 233 of the Constitution superseding the enforcement of the Fundamental Rights for the reasons record hereinafter while with the above issue."
His Lordship went on to observe: "in my view, the validity of the impugned Proclamation of Emergency prima facie is to be examined on the basis of what has been stated therein, and not what was stated by the Prime Minister and some of the Ministers of his Cabinet, though their statements may have some relevancy in order to appreciate the situation obtaining at the time of imposition of the Emergency and the same may also reflect bona fide or mala fide.
I fully subscribe to Mr. Hamid Khan's submission that simpliciter statements of the political leaders of Inia-Pak cannot furnish a sound basis for imposition of Emergency which has far-reaching consequences. However, in the case in hand, besides the statements of some of the political leaders of India, there is material to demonstrate that at the relevant time there was "animus Belligerandi" on the part of the Indian Government."
Dealing with application of Latin Maxim his Lordship went on to observe in para 46.
"Lord Atkinson in the case of King v. Holiday (supra) would be applicable. But in the latter case the rule of proportionality is to be followed as propounded by some of the eminent authors and adopted under above Article 4 of the International Covenants of Civil and Political Rights. Article 15 of the European Convention of Human Rights 1967 i.e. a public emergency permits a State to take derogatory measures in derogation of the convenants subject to the condition that the rule of proportionality is observed meaning thereby that the derogatory steps/actions should be to the extent required by the exigencies of the situation provided such measures are not inconsistent with their other obligations under the international law. The above view is re-inforced by the report of International Law Association 1986 referred to hereinabove in para 36(xix) that while imposing emergency following factors should be considered:
(i) severity of cause defined generally as threatening the life of the nation;
(ii) good faith on the part of the imposing Government;
(iii) Proportionality (relating to geographic scope, duration, and choice of measures strictly required by the exigencies of the situation);
(iv) proclamation on notification;
(v) non-derogability or certain rights;
(vi) respect for other international obligations;
(vii) non-discrimination."
The learned Judge went on to say in para 48;
(iv) That even in spite of suspension of the enforcement of certain Fundamental Rights under clause (2) of Article 233, of the Constitution, Article 4 thereof remains fully operative which lays down that "to enjoy the protection of law and to be treated in accordance with law is the inalienable right of every citizen, whatever he may be, and of every other person for the time being within Pakistan, in particular
(a) no action detrimental to the life, liberty, body, reputation or property of any person shall be taken except in accordance with law;
(b) no person shall be prevented from or be hindered in doing that which is not prohibited by law; and
(c) no person shall be compelled to do that which the law does not require him to do.
As held by Salahuddin Ahmad J. Of this Court in the case of Manzoor Illahi (supra). I am. Therefore, of the view that the suspension of enforcement of the above fundamental rights when under clause 1) of Article 233 the State had already acquired power to make any law or to take any executive action in deviation of Articles 15, 16, 17, 18, 19 and 24 of the Constitution, was not justified and warranted by law and, thus the same was of no legal effect."
His Lordship went on the observe in para 53, of the judgment as follows: "Before concluding the above discussion, it may be pertinent to observe that the factum that the joint session of the Parliament had approved the above President's Proclamation of Emergency under claus (1) of Article 232 and the order under clause (2) of Article 233 does not change the character of the above Original Proclamation of Emergency and/or orders; if they were invalid, they remain as such and vice versa. The effect of approval is that the Proclamation is sanctified as held by the Delhi High Court in the case of Prem Nath Lekhi (supra) and by the India Supreme Court in the case of S.R Bommai (supra)."
11. Applying above rules, the facts and circumstances of the case in hand it is quote clear that the appellants/petitioners are owners of foreign currency deposits in accounts with various Banks/Authorised Dealers; that they have been effected by Section 2 of Act IV of 1998 and Circular No.23 issued by State Bank of Pakistan. From above it is clear that this Court had jurisdiction to examine the grievances of the appellants/petitioners in the context of Article 4 of the Constitution which obliges even, during the emergency, the functionaries of the Federal/Provincial Government to treat every one in accordance with law and not otherwise. This being the position, we find no merit in the preliminary objection which accordingly is repelled.
12. Questions Nos.2, 3, and 4 are inter-connected. All of these are various facet of the same coin.
Subsequently the case of the appellants/petitioners is that they are owners of Foreign Currency Deposits in various Banks; that Act IV of 1998 was/is arbitrary, discriminatory and so offensive to Article 4 of the Constitution; that Circular No.23 was/is confiscatory in nature; that the foreign currency deposits of the petitioners cannot be acquired/purchases/liquidated by the State Bank of Pakistan without making the payment at market rate, in brief, the case of State Bank of Pakistan is that it has competently issued Circular No.23 in consonance with the trade/credit policy; that the appellants/petitioners had/have been grossly mis-used/mis- using the concessions/protections immunities granted to them by the State Bank under Act VII of 1992; that the appellants/petitioners.
Availed of finance facilities against their deposits as collateral; purchases foreign currency/dollars and deposited it in various banks and thereafter got their Rupee/loan facility and had been given compensation at the rate of 46%, which was a market rate on 28th May, 1998. No doubt, both sides do rely upon Article 4 of the Constitution which is as follows: "4. Right of individuals to be dealt with law etc.-(1) to enjoy the protection of law and to be treated in accordance with law is the inalienable right of every citizen, where ever he may be, and of every other person for the time being within Pakistan.
(2) in particular-
(a) no action detrimental to the life, liberty, body, reputation or property of any person shall be taken except in accordance with law;
(b) no person shall be prevented from or be hindered in doing that which is not prohibited by law; and
(c) no person shall be compelled to do that which the law does not require him to do."
A bare reading of this Article will show that is incorporates the doctrine of equality before law of equal protection of law. This Article occurs in Part I, of the Constitution titled as 'Introductory'. This is highly important provision and reminds of fifth and fourteenth amendment in American Constitution. This jurisprudential concept is the fruit of ceaseless efforts of citizens to have supremacy of rule of law. it is even available as shield against tyranny and excesses in emergency, it ensures the rule of law and rule of equality as against the rule of arbitrariness, whims and caprice. This Article is actually supplementary and complementary to Article 2 and Articles 8 to 26 in our Constitution, it cast obligation upon functionaries of Federation and Federating Units/Legislatures to ensure the doctrine of rule of law/embody the principle of equality.
Conceptionally speaking, these principles emanated from Muslim Jurisprudence, travelled to Spain in Muslims era and from there filtered across Atlantic ocean. Briefly speaking, this Article embodies the concept of dignity, equality of law and sae citizens from Arbitrary/discriminatory laws and actions by the Governmental Authorities, in order to appreciate the effect of this Article qua the Act IV of 1998 and Circular No.23, we find it necessary to examine the relevant case-law on the subject.
The first case to be noticed is Jibendra Kishore Achharyya Chowdhury and 58 others v. The Province of East Pakistan and others (PLD 1957 Supreme Court (Pak) 9). in this case certain provisions of East Bengal State Acquisition and Tenancy Act 1950, were examined. His Lordship Muhammad Munir, C.J. Dilated upon Article 2-A which was analogous of Article 4 of the Constitution of 1973 and held that any legislature/executive action can be tested on the touch- stone of equality, fairness and excessive delegation. His Lordship declared that the aforesaid certain provisions were contrary to law of Waqfs.
13. in second case, Waris Meah v. The State and another (PLD 1957 Supreme Court (Pak) 157) so may provisions of Foreign Exchange Regulation Act (VII of 1947) which were amended by Foreign Exchange Regulation (Amendment) Act (XXXII of 1956) were scrutinized. These provisions delegated to Central Govt. State Bank of Pakistan, authority to determine as to whether the offenders should be tried under ordinary law Court or by adjudication schedule. The provisions were challenged on the basis of doctrine of equality and protection as embodied in Constitution of 1956. The Supreme Court unanimously held that the impugned provisions were ex-facie discrimnatory. it will be useful to quote relevant portion of the celebrated case.
The Constitution declares in Article 5(1) that "all citizens equal before law and are entitled to equal protection of law" and Article 4(1) provides that "Any existing law.... In so far as it is inconsistent with the provisions of this Part, shall to the extent of such inconsistency, be void". That duty of declaring that a law is void, for violating a fundamental rights defined in Part II rests on the Courts. The duty cannot be performed, so as to ensure that a law operates equally in relation to all persons within its mischief, if the law itself provided for differential operation in relation to such provisions, not in accordance with any principle expressed or implicit in the law, not on the basis of any classification made by or under the law but according to the unfettered discretion of one or more Statutory Authorities.
Here, not only is there discretion in the specified authorities whether they will proceed at all against any member of the class concern viz., offenders against the Act, but there is also an unfettered choice to pursue the offence in any one of three different modes which vary greatly in relation to the opportunity allowed to the alleged offender to clear himself, as well as quantum and nature of the penalty which he may incur. The scope of the underguided discretion so allowed is too great to permit of application of the principle that equality is not infringed by the more conferment of unguided power, but only by its arbitrary exercise. For, in the absence of any discernible principle guiding the choice of forum, among the three provided by the law, the choice must always be, in the judicial view point, arbitrary to a creater or less degree. The Act, as it is framed, makes provision for discrimination between persons falling qua its terms, in the same class, and it does so in such manner as to render it impossible for the Courts to determine, in a particular case, whether it is being applied with strict regard to the requirements of Article 5(1) of the Constitution. ' in our view such a law has the effect of doing indirectly i.e., by leaving the discrimination within the unguided and unfettered discretion of Statutory Authorities, what it could not do directly i.e. To treat unequally persons falling within the same class, upon a basis which bears no reasonable relation to the purpose of the law. The Act is, therefore, in our opinion in relation to its discriminatory provisions, inconsistent with the declaration of equality in Article 5(1) of the Constitution." in Pakistan Barbers Association's case (PLD 1976 Lah. 769). His Lordship Mr. Justice Nasim Hassan Shah found that the Notification under Section 5(4) of the West Pakistan Shops and Establishment Ordinance (VIII of 1969) were offensive to equality protection clause in following terms: "The foregoing discussion shows that no reasonable basis has been shown to exist for including the areas actually chosen for the enforcement of the provisions of Sections 6 and 7 of the Shops and Establishments Ordinance and for excluding other areas from its application. As the restrictive provisions of the law have been applied in an arbitrary, unreasonable and discriminatory manner, the impugned Notification dated 15.9.1973 cannot be sustained, it is hereby declared to be unlawful and had been issued without lawful authority."
14. We now come to PLD 1957 Pesh. 100, Khan Abdul Akbar Khan's case. The Full Bench of Erstwhile West Pakistan High Court was required to deal with the vires of Section 8 of Frontier Crime Regulation (III of 1901). in this case, Khan Abdul Akbar Khan/petitioner was the elder son of Khan Fazl-i-Qadir Khan, who donated some pieces of land to him, in the year 1936. in 1953, the donor applied to the Deputy Commissioner Peshawar for review of mutation of gift but the Deputy Commissioner but in vain, in the same year, the father again moved application for reference of dispute to Council of Elders under Section 8 of Frontier Crimes Regulation (III of 1901), but the same was rejected by Government of Punjab. On 15.9. The Revenue Commissioner Charsada sent the matter for reconsideration of the application of donor and thereafter recommended that the matter be referred to Council of Elders. Feeling aggrieved, the petitioner filed Writ Petition which was accepted by the Full Bench of Peshawar High Court on the touch-stone of Principle Arbitrariness and discriminations. His Lordship Mr. Justice M.R. Kayani, who was the then Judge of West Pakistan High Court, held as follows "For this repulsive judicial procedure in Pathans and Biluchis have been especially selected, it is true that the Notification under Section 1(4), by which the Regulation has been made applicable all the ordinary residence may have caused to them the satisfaction that other tribes are equally criminal, but this Notification can always be withdrawn, and the discrimination patent on the face of the enactment is not thereby affacted. Next. Mr. Muhammad Ali contended that since the choice of selecting suitable cases for reference lies with the Deputy Commissioner, the regulation makes it possible for him to discriminate. If his discretion had been subject to judicial review, one might say for him that his "satisfaction" will be a reasonable satisfaction, but in the matter of reference his conduct is not open even to revision for the Commissioner comes into the picture only after there has been a decision, and he cannot interfere on the ground that this was not a fit case for reference.
Whatever, may be said about the repugnancy of this procedure to the equality-before-law provision of the Constitution, there can be no doubt that the trial itself can by no means be called a fair and impartial trial. We were introduced by both parties to the interest in literature on the subject of equality before the law and what equal protection of law means. Although the Supreme Court of India has dealt with the subject on the several occasions since 1950, I have found The State of West Bengal v. Anwar Ali (AIR 1952 SC 75) particularly instructive. This was a case in which Patani Sastri C.J. Found himself alone against six other Judges in holding that the provision in Section 5(1) of the West Bengal Special Courts Act 1950 making it possible for the Government to refer for trial to Special Courts with Summary Procedure "any offences or classes, of offences or cases or classes of case", was not "discriminatory". The object of the Act, as declared in preamble was "to provide for the speedier trial of certain offences", and Section 5(1), according to the Chief Justice vested in the Government a discretion to refer to a Special Court such offences as may, in its opinion, require a speedier trial. Such discretion the Government was expected to exercise honestly and reasonably, and the mere fact that it was not made subject to judicial review could not mean that it was intended to be exercised in an arbitrary manner without reference to the declared object of the Act.
The other Judges, however, thought that an enactment which gave to the executive Government an unregulated, official discretion to select in any way it likes the particular cases or offences which should go to a Special Tribunal and withdraw in such cases the protection which the accused normally enjoy under the Criminal Law of the country, was on the face/ of its discretionary. The Supreme Court of Pakistan has so far decided only one case with reference to Article 5-- Jubindra Kishore v. The Province of East Pakistan (PLD 1957 SC 9). The principles which can be deduced from these cases, and the American cases on the Fourteenth Amendment of the American Constitution, are not in dispute. The phrase "equal protection of law" is understood to be "pledge of the protection of equal laws", Yick Wo v. Hopkins (1886) 118 US 356 at p.369) and Patani Sastri, C.J.
Interprets "equal laws", to mean laws that operate alike on all persons under like circumstances", it is, however, recognised that a Government "encounters and must deal with problems which come from persons in an infinite variety of relation", that "classification is the recognition of those relations and in making it a Legislature must be allowed a wide latitude of discretion and judgment"------ "Classification based on those relations need not be constituted by an exact of scientific exclusion or inclusion of persons or things. Therefore, it has been repeatedly declared that classification is justified if it is not puppably arbitrary". McKenna, J. In Connolly v. Union Sewer Pipe Company (1902) 184 US 540).
Thus the "equal protection clause reduces itself to the problem of classifying people who are placed in "equal" or similar circumstances in respect of some object which the legislature finds necessary to accomplish with reference to the needs of a particular situation, it is, therefore, said that classification must have a rational basis, that there must be some real and substantial distinction between the classes, that such discretion should bear a reasonable relation to the object sought to be attained, that there should be no arbitrary "herding together" of certain persons or classes.
The situation which the Government has to meet in the present case requires a measure "further to provide for suppression of crime". Assuming that the Preamble can be used to influence Section 8, the object is stated too broadly to escape the charge of vagueness. All criminal law is intended to suppress crime, and the safeguard to a fair trial can be withdrawn one by one, each time in the name of a further effort to suppress crime, it is obvious that we reach the furtherest limit of the efforts when we apply criminal law to civil disputes also. Under ordinary law, if a civil dispute is likely to result in a breach of the peace, we take preventive action and leave the parties to resort to the Civil Court. The Crime Court in fact makes an effort to avoid adjudication in such matters. But here the ordinary law is perverted for a reason which by the very provisions of Section 8 is made to appear non-emergent. The Deputy Commissioner refers a civil dispute to a Council on the assumption that a blood-feud or murder will be averted, but if one party has already gone to the Civil Court the Deputy Commissioner assumes that there is now no chance of the dispute leading to the consequences originally anticipated. If resort to a Civil Court can bring about such effective changes of heart, why is not a person allowed the same resort after reference to the Council?"
Clearly Section 8 of Frontier Crimes Regulations (III of 1901) was adjudged to be repugnant to the theory of discrimination and conferment of Arbitrary power in Government authorities.
15. Similar question again came up before Division Bench of Punjab in (PLD 1979 Lah. 1298). in this case, two Notifications of Government of Punjab were assailed. Briefly, Freemason Society was set up in India and established its office on Lodge Road. Subsequently it purchased the property in Lahore on 17th June, 1917. On 17th August, 1973 the Provincial Government issued a notice to the Society to show cause as to why the Society should not be banned under Section 16 of the Criminal Law. Meanwhile the property in dispute was requisitioned on 6th October, 1973 under rule 121 of the Defence of Pakistan Rules 1971 and was given to the Director Relief on rent of Rs.1000/- per month.
This requisition was withdrawn on 16.10.1973. The second requisition order was made on 22nd November, 1973. This Notification was also withdrawn on 21.3.1974. Consequently, by impugned notifications, Government of Punjab declared Society to be an unlawful association and took over its properties. As stated above, these notifications were challenged, it is to be remembered when these notifications were issued, there was an Emergency under Article 232 of the Constitution. The learned Single Judge found that the impugned notifications were violative being issued under those provisions of Criminal Law (Amendment) Act, 1908 which had been declared void by the Supreme Court in Abul Ala Maudoodi's case. Feeling aggrieved the Province of Punjab filed Intra Court Appeal No.118 of 1975, which was dismissed by the Division Bench of this Court, it was found that the impugned Notifications were void, and were violative of Article 4 of the Constitution, it will be useful to reproduce paras 54, 55 and 61 of the judgment: "54. Admittedly the impugned action has been taken on the basis of any law made under Article 233(1). The two Notifications were expressly issued under Section 16 and 17-A of the Criminal Law Amendment Act, 1908. it was an existing law and had been continued in force as void law under the present Constitution, as discussed above. The other proposition arising in the case thus is whether any executive action can be taken without the support of backing of a valid law? The Emergency provisions do Not arm the Executive Authority to ignore the rights of the citizens and others guaranteed by the Constitution, on the plea that it is acting in the aid of Emergency requirements.
The additional guarantee provided to every citizen and other persons in Article 4 of the Constitution is in the following terms "4.-(1) To enjoy the protection of law and to be treated in accordance with law is the inalienable right of every citizen, wherever he may be, and of every other person for the time being within Pakistan.
(2) in particular-
(a) no action detrimental to the life, liberty, body, reputation or property of any person shall be taken except in accordance with law;
(b) no person shall be prevented from or be hindered in doing that which is not prohibited by law; and
(c) no person shall be compelled to do that which the law does not require him to do."
"55. According to Salahuddin, J. In Manzoor Elahi's case at page 101; "...Pakistan is based on the rule of law, which is embodied in Article 4 of the Constitution. The same position is reflected in some of the Fundamental Rights enshrined in the Constitution. The Constitution is framed to be followed, it creates no right and imposes no duty in vain. Article 5 of the Constitution specifically provides that obedience to the Constitution and law is the basic obligation of every citizen wherever he may be and of every other person for the time being within Pakistan. The commitment is clear and unambiguous, and nobody can get away from or be relieved of this obligation under any circumstance...."
"61. The present case is placed at a better footing. The so- called executive notice in the form of Notifications had been published in this case on a date when no order under Article 233(2) was in the field. As discussed above, there was no law in operation authorising the respondents to have issued those notifications either. The law under which those two Notifications were issued is admittedly inconsistent with the Fundamental Rights No.17 and was void and so unenforceable, it, therefore was not available for any executive action in the light of the discussion already made, it was never revived so as to be operative once again on the issuance of the Proclamation Emergency. The two notifications, therefore, could be scrutinized by the High Court and we respectfully agree with the learned Single Judge that they were issued without lawful authority and of no legal effect."
16. in this survey we reach, Inamur Rehman's case (1992 S.C.M.R. 563). in this case Section 6-A as amended by Foreign Exchange (Prevention of Payments)(Amendment) Act (VI of 1974) was considered on touch-stone of above noted principles. As the relevant time, country was under Martial Law. The Chief Martial Law Administrator promulgated the Foreign Exchange Repatriation Regulation, 1973 (MLR 104). This happened on 13.1.1972. Under this dispensation, the petitioner/appellant declared and repatriated Foreign Exchange amounting to $ 1,70,000/- through the Standard Bank Limited/respondent No.4 of which the appellant was the Managing Director at that time. Resultantly, Standard Bank, received an amount of Rs.20,90,486.77 as principal amount, in addition, Standard Bank received a further amount on behalf of Inamur Rehman appellant equivalent to Rs.19,55,157.49, as bonus amount. Later amount was transferred under instruction of the appellant by two separate entries. The principal amount was also withdrawn from the Standard Bank and transferred to National and Grindlays Bank. The appellant then drew some cheques on his Bank but the same were not cashed on account of instructions of State Bank of Pakistan.
Thereafter, the President of Pakistan promulgated Foreign Exchange (Prevention of Payments)
Ordinance (XXX of 1972) which empowers the State Bank to direct any authorised dealer in Foreign Exchange through whom any person had repatriated any foreign exchange under MLR 104 to deposit with the State Bank the rupee equivalent of the amount so repatriated and any other amount payable on account of such repatriation. Resultantly, the State Bank asked Grindlays Bank on 28th August, 1972 to deposit the principal amount with the State Bank. On 25th September, 1972, Ordinance (XXX of 1972) was repealed and replaced by the Foreign Exchange (Prevention of Payments) Act (XXII of 1972) whereby State Bank was invested with powers to direct not only to an authorised dealer through whom such repatriated amount or any part thereof. Subsequently under Statute, namely, Foreign Exchange (Prevention of Payments) (Amendment) Ordinance, 1973, was promulgated on 10th October, 1973. This act was later passed on 10th March, 1972 with retrospective effect. This was even not sufficient. The Foreign Exchange (Prevention and Payments)(Amendment)
Act 1974 was passed which contained the provision/validating the all directions and instructions issued by the State Bank of Pakistan. This happened on 25th September, 1972.
17. Feeling aggrieved, the appellant Inamur Rehman preferred a Writ Petition questioning the actions of State Bank of Pakistan. Meanwhile Act (XXII of 1972) was amended by Ordinance 1972, so amended petition was filed. This petition was dismissed by a Division Bench of the High Court of Sindh.
Against that decision, the appellant preferred Civil Petition No.8- K of 1978 which was converted as appeal and allowed by the Supreme Court in the following terms: "in view of the foregoing discussion, it is held that the impugned legislation being violative of Article 25 is void and un-Constitutional. it may be clarified that as we have mainly dealt with Section 2(2) for the purpose of testing the validity of the provisions, it does not mean that the provisions not expressly mentioned are free from illegality. Sub-Section (2) of Section 2 is an integral part of the entire Section 2 and therefore, if that is struck down, the rest of the Sub-Section (2) which are mainly ancillary cannot stand and operate independently. Similarly, Sections 6 and 6-A are interconnected with action taken under Section 2 and would similarly suffer from the same Constitutional infirmities."
From the foregoing discussion the propositions of law are clearly deducteable:-
1. That this Court has power even during emergency, Articles 4 and 2-A of the Constitution are in the field to determine vires of legislative measures/executive fiat of Federal Government/Provincial Government, and Statutory instrumentality of State Bank, on the touchstone of doctrine of equality before law and equality protection of law and conferment of naked, unrestricted arbitrary powers on Government Authorities or officials of Statutory instrumentalities of State Bank.
18. in order to weigh the merits of the contentions of the parties noted above, it is imperative to have a rapid survey of pertinent laws/namely Foreign Exchange Regulation Act (VII of 1947), the Protection of Economic Reforms Act (XII of 1992) and Foreign. Exchange (Temporary Restrictions)
Act, 1998 (Act No. IV of 1998). The first Act (VII of 1947) owes its origin to British Masters, in 1939, the World War, in the shape of unprecedented human calamity, hit the universe, in order to conserve deposits of foreign exchange and restricted out flow, the Defence of India Rules were framed under the Defence of india Act, 1939. These Rules restricted the outflow of the foreign exchange. These rules were followed by Act 1947 when Emergency came to an end on 30th September, 1946. With the advent of Pakistan this Act was continued and adopted. These, however, became operational when in year 1956 State Bank of Pakistan Act (Act XXXIII of 1956) was promulgated. Thus, our land, which had become independent/sovereign Islamic Republic on 14th August, 1947, had its own Bank designated as State Bank of Pakistan.-The task of structuring monetary system was allocated to it.
This Act has 27 Sections out of which, for the present controversy three Sections namely Sections No. 4, 5 and 9 are relevant. Before we proceed further, we are inclined to reproduce the statement of reasons and object of the aforesaid Act to understand its underlying objective. The same read as under:- "A system of exchange control was set up in India on the out break of war in September, 1939 for the purpose of conserving and directing to the best uses the limited supplies of foreign exchange available. The control was made effective to a series of rules under the Defence of india Act 1939.
These rules expired on 30th September, 1946, but have been retained in force for another six months under the Emergency Provisions (Continuance) Ordinance 1946. The shortage of foreign exchange is likely 'to continue in view of the disruption of the internal economy of so many nations, and the interruption of established channels of trade, it is, therefore, necessary that the system of exchange control should be continued in the general interest of the country. Also, the adherence of the country. In the International Monetary Fund required her to take certain measures to regulate transactions in foreign exchange in order to fulfil the obligations of membership. Legislation is, therefore, necessary to give Central Government powers to continue to control transactions in foreign exchange, securities and gold.
The provisions of the Act have been drafted in such a manner that the degree of restriction on foreign exchange transactions can be relaxed or increased by executive orders, either generally or for particular foreign currencies in accordance with the need of the trade and finance or international agreements thus ensuring that flight of capital or wild speculation which proved so injurious, to foreign trade in the period between the two wars, can be immediately controlled."
(Gazette of India, 9th November, 1946 Part V).
Manifestly, the basic object of this Act was to conserve foreign exchange deposits and to control deposits outflow. Section 4 placed restrictions on dealings of the foreign exchange, it enacted that except with the previous permission of SBP, no person resident in Pakistan other than an authorised dealer shall, outside Pakistan, buy, or borrow or sell or lend to, or exchange with any person not being an authorised dealer, any amount of foreign exchange. This Section has four Sub-Sections which embody restrictive edicts. Its Sub-Section(3) postulated that when any foreign exchange is acquired by any person other than an authorised dealer for any particular purpose, or where any person has been permitted conditionally to acquire foreign exchange, the said person shall have to use the foreign exchange so acquired for that purpose alone and not otherwise. If he fails to do so, the said person shall without delay sell the foreign exchange to an authorised dealer. Sub-Section
(4) is also in the same vein. The reading of these Articles clearly demonstrate that Pakistan started its life with a mixed economy as opposed to free-market and the Act placed restrictions on the out flow of foreign exchange. Naturally, under this Act, there were no mercantile transactions of foreign exchange in market. Mr. Minto was right to say that Pakistan had started its journey with a mixed economy and that was necessitated due to socioeconomic conditions of newly born State, it, therefore, follows that this Act of 1947, completely prohibited commercial operations of foreign exchange in what is now known of Kerb market. The objective of the Act, so, was to conserve the deposit of foreign exchange and prohibit its flight. Section 4 also provides restrictions on the aforesaid business activities. The important Section, that matters in this litigation, is Section 9. it reads as under:- "9. Central Board of Directors.-(1) The general Superintendence and direction of the affairs and business of the Bank shall be entrusted to the Central Board or Directors which may exercise all the powers and do all acts and things that may be exercised or done by the Bank and are not by this Act expressly directed or required to be done by the Bank in general meeting in annual general meeting.
(2) The Central Board shall consist of--
(a) the Governor;
(b) Secretary, Finance Division, Government of Pakistan; and
(c) seven Directors, including one director from each Province, to be nominated by the Federal Government ensuring representation to agriculture, banking and industrial sectors.
(3) The Governor shall be the Chairman of the Central Board.
(4) All decisions of the Central Board shall be taken by majority of members present and voting and in the event of equality of the votes, the Governor may exercise a casting vote."
A plain look at this Section will show that the Federal Government was empowered to issue a Notification/commanding any person resident of Pakistan or who comes to Pakistan and who owns or holds foreign exchange as may be specified in Notification, shall offer it to or cause it to be offered for sale to State Bank of Pakistan or such person as may be specified in Notification. This, however, was subject to a further condition that Federal Government will not purchase/acquire the said foreign exchange except on the market rate which was available at the time of its offer for sale, it will be very pertinent to note that on the strength of Section 9, the appellants/petitioner contended, that the State Bank of Pakistan was entitled to purchase, acquire foreign exchange/mostly dollars at market rate and Circular No.23 was repugnant to this statutory mandate. This Act was followed by Foreign Exchange Loans (Rate of Exchange) Order (III of 1982). in this order, vide para No.3, it was stated that notwithstanding anything contained in any other law, the judgment of any Court or any agreement, contract or other instrument, the rate of exchange, for the purpose of conversion into Pak Currency for repayment, shall be the rate of exchange in force fixed by State Bank of Pakistan under Section 23 of the State Bank of Pakistan Act, 1956. This was MLR 102. This Act was repealed and replaced by Foreign Exchange (Prevention of Payment)
Ordinance 1972 (XXXIII of 1972). This did not end the matter. The mixed economy, as ordained in Act of 1947, was done away and free market was allowed in year 1992, when Act XII of 1992 was enforced. This Act actually laid the foundation of open market instead of restricted economy. This was radical legislative measure of considerable significance which altered the blue print or out economy. This was promulgated on 28th July, 1992 Statedly, this Act was passed on the initiative of International Organisations like the World Bank, I.M.F. And so on and so forth. Its Section 4 permitted all citizens of Pakistan/residents or non-residents and all other persons to bring, hold, sell, transfer and take out any foreign exchange within or out of Pakistan in any form. This Section gave sovereign commitment that such citizens shall not be required to make a foreign currency declaration at any stage nor the source, of so brought foreign exchange, shall be called in question in any manner. Section 5 conferred immunities on foreign currency accounts so opened, held by residents, nonresidents and any other person in Pakistan. These accounts were made immune from any inquiry from Income Tax Department or any other Taxation Authority with regard to source of financing of foreign currency accounts. The balance of these accounts and income derived therefrom was also exempted from wealth tax, income tax and compulsory deduction of Zakat. Under Sub-Section (3) of Section 5 of this Act, the Banks were required to maintain complete secrecy in respect of transactions in foreign currency accounts. Sub- Section (4) of Section 5 even restrained the State Bank or any other bank to impose any restrictions on inflow and outflow of foreign exchange and restrictions upon such movement were withdrawn forthwith. All those restrictions, which had been imposed by the Act of 1947 and various circular of SBP came to an end immediately. Sections 6,7 and 8 also embodied the immunity/protection to the foreign currency accounts. Under Section 10 of this Act, all the financial obligations incurred under any instrument or any financial or contractual commitment made by or on behalf of Government were protected and it was specified that this shall not be altered to disadvantage of the beneficiaries. Although, the Act XII of 1992, was very brief statute, yet it brought radical changes and opened our market to world with regard to inflow and outflow of foreign exchange.
19. As a result of the above statutory incentives, which, in our view, were not congruent with the fundamental conditions of our developing country. Statedly more than nine billion dollars allowed in State from 1992, till the proclamation of emergency i.e. 28th May, 1998. it is painful to state that remittances i.e. Hard earned foreign exchange of expatriate was not more than one bill dollars at the relevant time. These figures speak for themselves and are convincing testimony of dollarisation. We also find it necessary to note that in 1992, the price of dollar was equal to 23 rupees while in 1998 it was 46 rupees while in Kerb market it was more than 62 rupees. We are inclined to agree with the Governor of State Bank of Pakistan, who stated that the holders of foreign currency accounts started to dollarise our economy at the costs of rupee; that they opened foreign currency accounts with ' authorised dealers/various banks, obtained facility on Rupee loan against the securities of those deposits, again purchased dollars from so acquired loan from open market or nearby Dubail and deposited it again in Bank to secure more loan in Rupees. Manifestly, this vicious process led to unprecedented rush for dollars and corrosion of our currency. Even Governor State Bank brought this alarming trends in our economy and pernicious effect of Act XII 1992 to Government of Pakistan.
20. Having analysed Act VII of 1992 and Act XII of 1992, we now reach the assailed statute and Circular No.23, dated 2.7.1998. On 28th May, 1998, the nuclear device was detonated, it was a red- letter day in our history. Our State joined the nuclear club and so our security was made impregnable. However, this was also black day in our economy. From the statement of State Bank, it is a very clear that huge amounts were withdrawn from the foreign currency accounts on 11.5.1998, 14.5.1998 and 28th May, 1998. This statement shall form the part of our order Appendix A.
Consciously, we did not enquire about the names of account holders who were involved in that nefarious unpatriotic activities. We did not undertake that exercise by following rule of judicial restraint. This outflow of foreign currency, at that occasion, led to promulgation of Ordinance VII of 1998. Its Section 3 reads as under: "2. Notwithstanding anything contained in the Protection of Economic Reforms Act, 1992 (All of 1992) but subject to Section 3 it is hereby provided that during the period in which a Proclamation of Emergency under Article 232 of the Constitution of the Islamic Republic of Pakistan is in force, the various protections contained in the said Act, or in any other law for the time being in force, or in any agreement or contract, for or in relation to foreign exchange, or the right to bring, hold, sell, withdrawn, transfer, pay or take out foreign exchange, shall remain suspended.
(1) The Federal Government may by rules make provision for regulating dealings and payments in foreign exchange and such rules may, without prejudice to the generality of the foregoing, empower the State Bank of Pakistan to grant permissions to make or receive payments in foreign exchange, or to permit the conversion of foreign exchange into rupees, either on a case to case basis or on the basis of a classification of various types and categories.
(2) Pending the framing of rules under sub-section (1) withdrawals, remittances or payments in foreign exchange shall be made with the prior permission of the State Bank of Pakistan."
Subsequently, a draft bill, as recommended by the Standing Committee was introduced and was passed by the Majlis Shoora on 26th September, 1998. The most significant feature of the draft bill was/is that its Section 2 was couched mathematically in the same language of Section 2 of the Ordinance. However, the Act, that was passed by Majlis Shoora after parliamentary deliberations did not retain that language and eliminated any reference to Emergency Proclamation dated 28th May, 1998. The Act, so passed by the Majlis Shoora, comprises of five Sections. The first Section relates to title and commencement, it says that it shall be deemed to have come into force on 28th day of May, 1998. Clearly, the Act was made retroaction with the above specified date. Section 2 is the most crucial and important provision, it suspended the rights of Foreign Currency Accounts holders to hold, sell, withdrawn, transfer, pay, take out the foreign exchange held by any such person on 28th May, 1998 without the permission of State Bank. However, State Bank was is empowered to allow/permit any one of FCA holders to hold, sell, withdrawn, transfer pay or take out foreign exchange from his account. This Section postulates that the right shall remain suspended notwithstanding that of (Act XII of 1992). The same Section says that there shall be no legal restraint on any person converting his foreign exchange as held above, into rupees on officially notified rate of exchange the next Section 3 re-assures that protections/immunities/conferred under Economic Reforms Act 1992 shall remain unaffected and it further invest power on the Federal Government in following terms "(1) Subject to the provisions of this Act all the protections and immunities conferred in terms of the Protection of Economic Reforms Act, 1992, (XII of 1992) shall remain unaffected.
2. (a) make provisions for the grant of further concessions for, or in relation to amounts converted from the foreign exchange referred to in Section 2 held as on the specified date into rupees, or assets acquired therefrom and.
(b) issue financial instruments including bonds of varying maturities against the aforesaid foreign exchange which shall carry with them not less than the same entitlements, protection and immunities as the foreign exchange held on the aforesaid date save and except for the rights to immediate repayment in foreign exchange.
Section 4 authorised the Government to make rules which empowers the State Bank to -
(a) pass general orders suspending the right of persons to repayment except in rupees in relation to the foreign exchange referred to in Section 2 as on the specified date.
(b) make provision for the payment of profit to persons holding foreign exchange referred to in Section 2 as on the specified date in foreign exchange or in rupees; and
(c) classify citizen of Pakistan on the basis of their status being resident or non-resident of Pakistan or other persons on the basis of residence or nationality or otherwise for the purpose aforesaid.
Sub-Section (2) of Section 4 gives powers to State Bank to permit, withdrawn, remittance or payment of foreign exchange. Section 5 is repealing and saving provisions. On the strength of Section 2, ibid, it was contended on behalf of bank that right of FCA holders ceased to exist and so the collateral offered by them lost their efficacy; that the bank was, so, fully competent to issue Circular No.23 under Section 25 of State Bank Act, 1956. The case of other side/FCA holders was/is that Section 2 of the Act confers nakedly arbitrary power on the bank to permit any FCA holders to hold, withdraw, and send his foreign exchange outside; that this powers was clearly whimsical and further-more the banks were directed to liquidate the foreign deposits against their loans and demand for fresh security by a particular date. According to FCA holders, this was totally discriminatory with a confiscatory purpose, it was further stated by them that this restriction was not even applied to the new foreign currency accounts to be opened by any person.
21. Before we proceed further we find it necessary to examine inter-action and inter-relation amongst three statutes namely, Foreign Exchange Regulation Act (VII of 1947), protection of economic reforms Act (XII of 1992) and Foreign Exchange (Temporary Restriction) Act (IV of 1998).
Clearly, the Act VII of 1947 provided/provides curbs on holding, purchase, sale of foreign exchange and it envisages/envisaged restricted economy as opposed to free economy on the theory of laizzee fairee. Sections 3&4 1992 fully did away restrictive mechanism and opened our market to rules of free market, it is well settled rule of construction of statute that if two positive acts are in field, that the latter will be having repealed that provisions of earlier Act which inconsistent. Caries says at page 365 that:- "Where two Acts are inconsistent or repugnant, the latter will be read as having impliedly repealed the earlier. The Court leans against implying a repeal, unless two Acts are so plainly repugnant to each other that effect cannot be given to both at the same time; a repeal will not be implied Special Acts are not repealed by general Acts unless there is some express reference to the previous legislation or unless there is a necessary inconsistency in the two Acts standing together.
"The latest expression of the. Writ of Parliament must always prevail, it does not personal, or private, or is penal or dealts with civil rights only, and the rule is equally applicable to Orders in Council or Rules of Court if they have statutory force and are made under authority empowering the rule- makers to supersede prior enactments as to procedure."
He further says at page 367: "Where a new Act is couched in general affirmative language and the previous law can well-stand with it, and if the language used in the latter Act is all. In the affirmative, and therefore, the old and the new laws may stand together."
He also says at page 368:- "in R.V. Judge of Essex County (1887) 18 Q.B.D. 704, 707), Esher M.R. Laid it down as an ordinary rule of construction, that "where the Legislature has passed a new statute giving a new remedy, that remedy along can be followed. But the phrase "new" as applied to a statute is either needless or ambiguous. The old distinction between vetera and nova statuta is obsolete; and 'new' is insensible unless applied to statutes creating rights or remedies unknown to the common law or to previous enactments. And the rule could perhaps be more accurately laid down, thus, in the case of an Act which creates a new jurisdiction, a new procedure, new forma, or new remedies, the procedure, forms, or remedies there prescribed, and no others, must be followed until altered by subsequent legislation." in the later treaties-Crawfor also deals with above rules in following terms "Repeals of this type are those which take place when a subsequently enacted law contains provisions contrary to those of an existing law but not provisions expressly repealing them. Such repeals have been divided into two general classes, those which occur where an act is so inconsistent or irreconcilable with an existing prior set that only one of the two can remain in force, and those which occur when an act covers the whole subject of an earlier act and is intended to be a substitute therefor. As has been suggested, a repeal takes place under these circumstances, even though the new act contains no repealing clause, and in face of the fact that there may be Constitutional provision prohibiting the repeal of any law simply by reference to its title or Section.
Number. The validity of such a repeal is sustained on the ground that the last expression of the legislative will/should prevail. Technically, there is perhaps a violation of the Constitutional provision but from a practical stand-point the circumvention can be easily justified."
The reasons, for the rule that implied repeal will take place in the event of clear inconsistency are well settled in a famous case of Crosby v. Patch (18 Calif. 438).
"As laws are presumed to be passed with deliberation and with full knowledge of all existing ones on the same subject, it is but reasonable to conclude that the Legislature, in passing a statute, did not intend to interfere with or abrogate any former law relating to the same matter, unless the repugnancy between the two is irreconcilably. Brown v. Lease, 5 Hill 226. it is a rule, says Sedwick that a General statute without negative words will not repeal the particular provisions of a former one, unless, the two acts are irreconcilably inconsistent. "The reason and philosophy of the rule," says the author, is, the when the mind of the legislator has been turned to the details of a subject, and he has acted upon it, a subsequent statute in nenprai terms or treating the subject in a general manner, and not expressly contradicting the original act, shall not be considered as intended to affect the more particular or positive previous provisions, unless it is absolute necessary to give the later act such a construction, in order that its words shall have any meaning at all."
The above noted rules of construction of Statute, were followed by superior judiciary in Sub- continent in reference by the President of Pakistan under Article 162 of the Constitution of Islamic Republic of Pakistan PLD 1957 S.C. 219 Mst. Maryam v. Dost Muhammad PLD 1956 Lahore 229, Abu Aaala Maudoodi v. Govt, of West Pakistan PLD 1964 SC 673, Abdul Samad v. Iqbal Ahmad Khan PLD 1972 Lah. 41, Mehtab Khan v. Rehabilitation Authority PLD 1973 SC 451, Kohinoor Sugar Mills Ltd. v.
Market Committee. Jauharabad PLD 1976 Lah. 1284, Allah Wasaya v. Federal Land Commission PLD 1979 SC 44, Dharangadhra Chemicals Works v. Charangadhra Municipality AIR 1983 SC 1729.
Mehboob Ahmad v. First Additional District Judge, Karachi PLD 1976 Kar. 978, Emperor v.
Ranchbodial AIR 1948 Bombay 370, Western Coalifield Ltd. v. Special Area Development Authority AIR 1982 SC 697, JK Steel Limited v. Union of India AIR 1970 SC 1173, Dollani Ores v. State of Orisa AIR 1975 SC 17 and Mithan Lai v. State of Delhi AIR 1958 SC 682."
22. Applying the above doctrine of implied repeal to the facts and circumstance of the case in hand, it is quite clear that Act XII of 1992 and Act VII of 1947 relate to same subject; that Act of 1992 is a latter Act; that Section 4 and 5 of the Act of 1947 are inconsistent and in patent conflict with the parameters of Section 4 and 5 of the Act XII of 1992. Section 4 and 5 of Protection of Economic Reforms Act of 1992 completely do away with the curbs put down by Section 4 and 5 of the Act of 1947. This being the position, we have no difficulty in saying that on relevant date Section 4 and 5 Act VII of 1947 had already stood repealed and were replaced by Section 4 and 5 of Act XII of 1992.
As regards, Act IV of 1998, its Section 4, according to preamble of the Act, temporarily suspends the right of foreign currency account holders to bring, hold, sell, transfer, take out foreign exchange within or out of Pakistan in any form as held on 28th May, 1998. The expression "suspend", according to Balock's Law Dictionary, means:- "to interrupt; to cause to cease for a time; to postpone, to stay, delay, or hinder; to discontinue temporarily, but with an expectation or purpose of resumption. As a form of censure or discipline, to forbid a public officer, other employee, or ecclesiastical person from performing his duties or exercising his functions for a more or less definite interval of time. To postpone, as a judicial sentence. To cause a temporary cessation, as of work by an employed; to cause a temporary cessation, as of work by an employed; to lay off." Clearly, this expression embraces two concepts: Firstly, discontinuance temporarily; secondly: expectation of resumption of what has ceased temporarily under law. Naturally, suspension connotes a temporary phase and does not pertain to state of permanency. Irrespective of the vires of this Act, it is thus clear that certain curbs were put on the. Rights of currency account to hold, sell any amount of their foreign exchange or send it to outside the country, under Section 2 of the Act of 1998. This Section even does not put any curb on the right of any person whether resident/non-resident, Pakistanis or non- Pakistanis to bring foreign exchange in the country and open fresh account. This being the position, it is crystal clear that the rights of F.C.A, holders acquired under Section 4 of Act XII of 1992 were put under a temporary eclipse. The contention of the learned counsel for State Bank that the conditions, set down in Section 2 of the Act of 1-998 may be taken to be permanent, did not impresses. The learned counsel for the Federation was correct to say that this was a temporary legislation with temporary curbs. However, it is very difficult to discover the true nature of this statutory instrument. No specific date has been given for the ceasation of temporary curbs.
Moreover, this Act has been delinked from emergency proclamation. However, we are not inclined to examine the nature of the Act of 1998 as it is not much germance to the controversies in issue, in sum and substance, we find that Act IV of 1992 was in field with a temporary eclipse on the right of F.C.A, holders of deposits of 28th May, 1998 to operate their accounts. The theory of doctrine of their partial eclipse is thus the anchor-sheet of Act IV of 1998.
23. The stage is now set to examine-the vires of Act IV of 1998. Whether this Act suffers from the doctrine of equality as guaranteed by Article 4 of the Constitution? Whether this Act confers naked arbitrary powers on State Bank and so it is bad in law. We will first examine the contention of equality-clause. We have already analysed this Act. From a bare reading of its Section 2, it is quote clear that it singles out only foreign currency accounts held by their owners on 28th May, 1998. The restriction, so imposed, is not even applicable to any foreign currency account to be opened by an person resident/non- resident, Pakistani citizen or non-Pakistani citizen on 28th May, 1998.
Practically; speaking any person who held foreign currency on 28th May, 1998 was causality of this Act. it cannot be said that foreign currency accounts which were opened after target date, were dissimilar No classification on the basis of 28th May, 1998 and 29th May, 1998 was made in impugned act on the basis of any rational and intelligent differentia. The F.C.A, holders of 28th May.
1998, holder of. Such accounts after that date were treated quote differently and so the doctrine of equality-protection was manifestly violated. We are, thus, very clear in our kind that Section 2 of the Act is in patent violation of the doctrine of equality of law as enshrined in Article 4 read with Article 2-A of the Constitution. There is yet another angle of Section 2 of the Act. Section 2 ibid confers naked, unstructured arbitrary power on the functionaries of the State Bank to permit any one of the F.C.A, holders to hold, sell, withdraw, transfer, pay, or take out the foreign exchange held by any such person. it is true that Section 4 ibid provides that Federal Government will frame rules However, no rules had been framed at all This was the case of State Bank. On this analysis, we have no hesitation in reaching the conclusion that Section 2 of the Act IV of 1998 equips the functionaries of State Bank has power to select any person from F.C.A, holders, permit him to hold, sell, withdraw, transfer, pay or take out foreign exchange held by any person in Pakistan. This is not warranted by any rule of fairness and structured discretion as noted and enunciated in para of our judgment.
Seen from these perspectives, we have no option but to hold that the Section 2 of the Act IV of 1998 is repugnant to the doctrine of equality and the principle of fairness delegations as incorporated in Article 4 and Article 2-A of the Constitution. As regards Circular No.23, it is sufficient to say that this, according to Bank is an executive directive issued under Section 23 of the State Bank of Pakistan Act. Clearly, it is apparent from the foregoing discussion that Section 9 of Act IV of 1947, is in field.
Although, it is true that State Bank has a power to issue circular in pursuance of its trade/credit policy with the collateral, yet it cannot ask the authorised dealers/lending institutions to liquidate the liabilities of F.C.A, holders, who had obtained the facility of rupee loan and ask them to liquidate their liability by converting collateral at the fixed rate of 46 rupees qua dollar and asked for fresh securities in respect of the remaining amount. This directive has practically interfered with the terms of loan agreed between F.C.A, holders and the lenders. We do not find any provision of law which can support this course. The conversion/liquidation of liability of F.C.A, holders who had obtained loan tantamounts to deprivation of their valuable property without payment of fair compensation according to Section. 9 of Act of 1947. Add to it, this circular, which is manifestly executive fiat cannot act retroactively. Contemporaneously, we find that all those circumstances, which we have pointed out earlier and which, according to our opinion, had vitiating effect on the vires of the Act IV of 1998, are applicable to Circular No.23. We accordingly hold that Circular No.23 suffers from the reasons already given above. Additionally it cannot act retrospectively and so cannot be sustained. For the' aforesaid reasons, we have no option but to declare that the Section 2 of the Act of 1998 and Circular No.23 are without jurisdiction, without any lawful authority and of no lawful consequences upon the rights of the petitioners/appellants as acquired under Section 4 of the Economic Reforms Act (XII of 1992).
24. Now this brings us as to what relief the petitioners/appellants are entitled. This is not free from difficulties. The learned counsel for the bank as well as learned Deputy Attorney General for the Federation took up unanxious stand that foreign currency deposits of F.C.A, holders had been utilized by successive Govts, of Pakistan for the purposes of debit-servicing and purchase of defence equipments and so an and so fourth. Neither the Banks nor the Federal Govt, was so in position to repay these deposits to their owners, immediately. This stand was totally amazing.
Substantially speaking this tantamounted to plea of insolvency before Court of law. However, we do not share their perception. Our State is possessed of huge home as well as material resources and can rise up to the occasion provided course of simplicity and austerity and is followed. No doubt, we are under vicious debit trap. The economy indicators have comprehensively painted the annual report of 1997-98 by Governor State Bank of Pakistan under Section 40(2) of the State Bank of Pakistan Act, 1995. We are inclined to reproduce extract from this report. The relevant passages, according to our views are as follows: INTRODUCTORY "As of 30th June, 1998, total national debt stood at Rs.2518.3 billion compared with Rs.2169.2 billion as of 30th June, 1997. As a ratio to GDP, the national debit also rose to 91.2 percent of GDP at the end of June, 1998 as compared to 90.2 percent a year earlier. Of the total outstanding national debit, domestic debt stood at Rs. 1151.4 billion and external debt at Rs. 1366.0 billion ($29.7 billion as on 30th June, 1998. The domestic debt has been by 10.5 percent while external debit by 21.3 percent (.66 percent in dollar terms) over last year. Consequently, the share of external debt has gone upto 54.3 percent in total debit outstanding. The domestic debt as a ratio to GDP declined from 43.3 percent in the preceding year to 41.7 percent at the end of June, 1998 while the external debit has increased to 49.5 percent from 46.9 percent in last year. The larger growth of external debt during 1997-98 could be attributed to increase in foreign and, lower amortization and downward adjustment of Pak rupee against US dollar. The total debt servicing stood at increase of 7.5 percent.
Total debit servicing accounted for 61.5 percent of revenue receipts and 46.4 percent of total expenditure."
EXTERNAL DEBTS Financing of persistent large current account deficit through external borrowings over the years, in the face of low reserves, resulted. Similarly debit service ratio at the level of 14.8 percent was also higher when compared with 17.0% of developing countries and 21.5 percent of South Asia. Pakistan's external debit and debt service ratio also exceeded the prescribed debit sustainability normal limits of 225.250 percent and 20.25 percent respectively.
A comparison of nominal interest rate on outstanding external debt and growth rate of exports of goods and services, which measures debit servicing sustainability, reveals that average annual interest rate was much higher than growth rate of exports of goods and during this period stood at 4.1 percent as against negative growth of 0.4 percent recorded in export of goods services. The break up of interest rate on external debit reveals that annual interest rate on short/medium term debt averaged 5.6 percent and 3.6 percent on long terms debt.
Growth in Foreign Currency Deposits (FCDs)
Foreign currency deposits rose at a rapid rate after their introduction, to stand at 1/3 1 billion in 1986. in 1991, when residents were allowed to participate in the scheme, the total outstanding deposits came to $ 2.6 billion, in the five years since the liberalisation in 1991, foreign currency deposits have risen at a rate of 26 percent per year to dollar 8.4 billion in July, 1996. Growth in resident accounts accounted for two thirds of the increase, while non-bank financial institutions, which were allowed to accept such deposits starting in 1992, accounted for 20 percent of the increase. The amounts held by non-residents outside of those held with the non-bank financial institution rose only slightly over this period."
Currency Composition of Foreign Currency Deposits.
Dollar accounts have by far been the most popular, never falling below 75 percent of the total and in heavy accumulation of external debit. Pakistan total external debit stood at $ 29.7 billion at the end of June, 1998, indicating rise of 1/3 1.9 billion on 6.6?"
External Debit Servicing.
Pakistan debit servicing liability has increased in recent year as a combined result of large accumulation of external debt, decline in the share of concessional loans and increasing resources to short/medium-term borrowings from the international market. That service payments (principal repayments and interest payment) at $ 4.7 billion during 1997-98 stood lower by 6.8 percent as compared to 1/3 5.1 billion which had registered a sharp rise of 16.9 percent in the previous years.
The decline was due to lower repayment of principal, particularly of short/medium terms debit which declined by 23.1 percent repayments of principal which represented 76.5 percent of the total debt service payments, decline by 10.2 percent to dollar 3.6 billion during 1997-98 in contrast to US $ 4 billion which registered an increase of 23.8 percent over 1995-96. Interest payments browwers rose by 6.5 percent to 1/3 1.1 billion and constituted 23.5 percent of the total debit service payments of external debt. Ratios of debt service, payments to export earnings and foreign exchange earnings declined from 62.8 percent and 39.3 percent respectively in 1996-7 to 56.3 percent and 35.5 percent in 1997-98, Major indicators of external debt during 1993-94 through 1997-98 are given in Table VII.3.
Seen in the context of standard debit ratios. Pakistan has become highly indebted developing country. Pakistan's ratio of external debit to export of goods and services (including workers' remittances) at 256.1 percent during 1997-98 was much higher than 135.8 percent of developing countries and 186.7 percent of South Asia, as a group standing at 87 sent in June. 1996. Deposits in pounds sterling have been the next most popular, accounting for 7 to 9 percent of the total in recent year. These have been followed by markets, currently at 4.56 percent of the total and yet, currently at 2.72 percent.
12. The liberalization of the foreign exchange markets in 1991, especially the introduction of foreign currency accounts for residents, has been a key factor behind dollarization, which had started to become a matter of serious concern by 1995 Resident holdings of foreign currency accounts rose from a negligible amount in 1991 to over $ 4.3 billion or over 17 percent of money supply."
26. "The foreign currency deposits also hamper the conduct of a flexible exchange rate policy.
Although there are many determinants of the movement of foreign currency deposits, exchange rate expectation play an important role. The large build up of FCDs can be a problem in terms of self fulfilling expectations and the creation of an artificial foreign exchange shortage. There are times when even though the fundamental determinants of exchange rate are pointing to an equilibrium rate but the private sector may have concerns for various non economic reasons that the domestic currency might be depreciated. Alternatively, sometimes after a realignment of the exchange rate and even though it has been brought to the equilibrium level, the private sector forms its expectations about further depreciations not on the basis of the equilibrium rate but the most recent past behaviour of the exchange rate, it has happened several times in the free market rate has instead of narrowing actually widened. Since FCDs have made it easier to move from domestic currency denominated assets into foreign assets, the substitution of foreign cash for domestic cash during the time of perceived shortages in the foreign exchange market can worsen the problem of exchange rate management.
27. The sharp increase in FCDs can have potentially destablizing effects on domestic borrowing costs, International reserves and exchange rate management. A shift from FCDs into foreign cash or capital cut flow create a shortage of liquidity in the domestic banking system and thus raise the cost of borrowing in the economy. This shift also creates foreign exchange market measures, and leads either to a drawdown of international reserves or rupee depreciation. Since FCDs make it earlier to transfer funds abroad, or to substitute foreign cash for saving held in the banking system, in the event of a shortage of foreign exchange, the difficulties are compounded because of the very time when the country wishes to preserves its foreign exchange resources, there are leakages of foreign exchange from the banking system. When there is a balance of payments crisis, owners of resident and non-resident foreign currency, accounts become concerned about country risk, then they would convert their holdings into foreign cash or shift them abroad, which would accelerate the depletion of international reserves.
28. As is the case with other forms of short-term capital inflows, foreign currency deposits held by none residents not only caused the stock of foreign debit to increase relative to GDP but also create additional difficulties in terms of the need to roll over maturing deposits on a continuing basis. The average interest rate on foreign currency deposits is more than twice that on Pakistan's medium and huge terms external debit. With the volume of such debit being about double that of short terms deposits, debit servicing on foreign currency deposits is of the same magnitude as on medium and long terms foreign debit. Thus, the increase in foreign currency deposits may pose burden for the country. Experience in many developing countries suggests an upper bound on the potential magnitude and sustainability of short term capital inflows. A key factor that influences the sustainability of those inflows in the degree to which external resources add to overall investment in the economy and whether the profitability of these investments is higher than the cost of external borrowing. Furthermore, the form' of the Capital inflow foreign direct investment, portfolio capital, a short term bank lending has a bearing on the sustainability of capital inflows. With regard to sustainability two issues need to be stressed about the rising levels of FCDs in Pakistan. First if would be a case of mis-management of materities if Pakistan has and continue to incur short term financial liabilities to finance long terms investments in physical capital. Second foreign capital inflows such as non resident FCDs can substitute for domestic savings and the date for Pakistan show that at least a part of the foreign physical investment."
The evaluation of report has also suggested certain remedial measures to be taken by the Government of Pakistan in order to resurrect economy. We find these as of considerable worth as they come from Bank of Government. We are unable to give any opinion with regard to these. Let the Parliament/Federal Government take all necessary steps to correct the fundamental of economy.
25. Needless to State that Pakistan was achieved by ceaseless efforts of Muslims of undivided India and at the loss of colossal Muslim lives and destruction of their properties. That country, though broken into two pieces, yet this part of that State/Pakistan is possessed of colossal human as well as material resources like agricultural land, plenty of irrigational water and mineral resources, it has all seasons suitable for productive activities. Briefly speaking it is a beautiful country with rich resources and is in position to pay not only holders of foreign currency accounts but also external lenders. We were informed, credible supportive documents, that almost 30 Billion dollars were lying with the Banks of so called civilised States. We are confident that Federal Government will take all possible measures to seek repatriation of that amount if so lying with the foreign banks and will make the names of holders of amount public. Be that as it may, the economic plight of the State was well responded by the petitioners/appellants. Mr. Salman Akram Raja, Advocate, who represented (mostly the foreign currency accounts holders who had availed of facility of rupees loan collateral of FCDs.) stated that the petitioner/appellants were not in a hurry to withdraw their forex and put the country into a embarrassing condition. Mr. Javed Shaukat, Advocate, in highly patriotic spirit suggested that the foreign currency deposits of holders of these accounts kept as fixed accounts and rules be -framed permitting them to withdraw such amounts which were/are necessary for the payment of educational expenses of their issues outside the country and for medical care and so on so forth. This suggestion was put by him in Court as well as in his written note. None opposed it. We were/are impressed by the high sense of patriotism on the part of Mr. Shaukat Javed and other appellants/petitioners. At this juncture, we find it our duty to remind every one may be in office or not, that our economy is in bad shape; that our only solution lies in the path of austerity and simplicity. At this occasion, we are reminded of late Muhammad Khan Junejo, the then Prime Minister of Pakistan who had decided to abandon big luxury cars and himself decided to travel in Toyota Corola (1600 CC) car. Let the all who matter, resurrect that decision and follow that path in every walk of life. No doubt spectacle of Pajeero, Land Cruisers, Mercedes and B.M.W.
And huge cosmetics in departmental stores are not in line with indicators of our economy. At the same time we are clear in our mind that para-meters of Act XII of 1992 are not conducive to our economy. Suffice it to note that dollar was equivalent to rupees twenty in year 1992, and now is equivalent to above fifty rupees in curb market. This act encouraged speculators, take black- marketeers and tax evaders to purchase dollar from open market or from nearby free parts and this vicious mechanism started to dollarise our economy at the costs of our currency. This Act has actually introduced two economics in our State. One who is possessed of dollar and other who has rupees. Account holders of dollars/Sterling Pound enjoy immunities from payment of income tax, wealth tax even compulsory deduction of Zakat. This act so crates/created a climate in which our own currency was humiliated and dollars were prided. This has caused collosal damage to our economic growth and living condition of our peoples. We should not close our eyes at these aspects of Act XII of 1992. The vires of Act XII of 1992 was not subject-matter of instant litigation, so we are not in a position to dilate upon it more than what we have said.
26. it is well settled proposition that judiciary always act within the sphere of powers completely enumerated in the Constitution. The task of judiciary is to interpret law; the legislature makes the law; the task is given to executive administer laws as interpreted by judiciary, it is established that judiciary finds some omission or defect in law, it has a duty to point out them to legislature so that this defect/omission can be removed by Parliament after deliberation. Our above findings are in line with the above settled role of judiciary
27. in view of the afore-noted discussion, we are not inclined to agree with the conclusions rendered by learned single Judge in Writ Petition No.14364/98 by which he dismissed the said petition alongwith all connected writ petitions pertaining to validity of impugned Circular No.23, dated 2.7.1998. This happened by a consolidated judgment. The equality protection clause and principle of excessive delegation was not considered (with due respect by our learned brother).
The precedents from superior judiciary of India are on dissimilar facts and are not applicable to the points raised in the instant litigation. We have already found that perception of State Bank and Federation was very different. As regard the Act IV of 1998 and Circular No.23, we have agreed with the perception of State Bank that neither Act IV of 1998 nor Circular No.23 was issued in the wake of Emergency proclamation nor they had any nexus with it. These being our conclusions, we accordingly set aside, the decision of learned single Judge dated 30.7.1998 rendered in writ petition No. 14364/98 and all connected writ petitions.
28. As a result of our foregoing conclusions, the above noted causes/comprising 67 Intra-Court Appeals and writ petitions noted in para No. 3 of this judgment, are bound to succeed, in the light of our conclusions and having regard to all the circumstances of litigation in hand, we hereby allow the afore-noted ICAs and Constitutional petitions in following terms:-
(1) Declaration is granted that Section 2 of Foreign Exchange (Temporary restriction) Act (IV of 1998) is ultra vires of Article 4 and Article 2-A of the Constitution being repugnant to equality protection- clause as well as on account of conferment of naked, arbitrary, unstructured power on the functionaries of the State Bank. This Section so is declared as of no lawful consequences.
(2) Declaration is granted to the effect that Circular No.23 is confiscatory in nature and is violative of equality protection clause and that the same is so repugnant to Article 4 and Article 2-A of the Constitution. The State Bank of Pakistan, however, will be well within its right to direct the lending institutions to call for fresh securities from borrowers if they find that the securities/collaterals of their foreign currency deposits as furnished by the petitioners/appellants are not satisfactory or contrary to its"credit policy.
(3) The Circular No.23 is, so, declared contrary to law to the extent of directing the lending institutions to liquidate the foreign currency deposits of borrowers/petitioners/appellants at the rate of 46 rupees for a dollar and then get fresh securities, if so needed.
(4) Having regard to economic indicators as given in the report of State Bank and having regard to suggestion of Mr. Javed Shaukat/one of the- petitioners; and having not been objected by any one of appellants/petitioner we are persuaded to direct State Bank to treat the foreign currency account held by petitioners on 28th May, 1998, under Section 4 of Protection of Economic-Reforms Act (XII of 1992) as fixed account for a period of 3 years and frame rules with regard to that type of fixed deposits/permitting account-holders to withdraw any amount, so permitted, from these accounts to be utilized for their necessary expenses to be incurred by account holders on the education of their issues outside the country, on medical expenditures and so on and so forth. The State Bank shall frame rules in line with the policy of such fixed accounts within a period of three weeks commencing from this order so as to clear the mist of uncertainty.
(5) We are also inclined to direct the Federal Government and to get the Act XII of 1992 so amended by the Federal Legislature that it may eliminate the two classes of economy as permitted by it and subject foreign currency accounts to payment of income tax, wealth tax and compulsory deduction of Zakat and so as to eliminate the manipulative ' power of dollars/sterling pounds or any other foreign currency over rupees.
All these causes are so allowed with the grant of the above reliefs.
KARAMAT NAZIR BHANDARI, J.- I have the advantage of going through the very elaborate and lucid judgment prepared by my learned brother Mian Allah Nawaz, J. I am in respectful agreement with the conclusions/findings on the basic issues. However, and with utmost respect, I have reservations in respect of the directions to State Bank/Federal Government contained in paras (4) and (v) at pages 82/83 of his lordship's judgment. Also in view of importance of legal issues, I have considered it advisable to append my own note on all the issues.
2. Number of Constitutional petitions were filed for calling in question the validity of Circular No.23 dated 2nd of July, 1998, issued by the State Bank of Pakistan and addressed to all Banks/NBFIs.
Under the Circular, Bank/NBFIs were required to change the foreign currency collateral by 31st July, 1998 and further desist from accepting such deposits/certificates held on 28th May, 1998 as collateral for advancing rupee loans. While such petitions were being heard, number of other petitions were filed for calling in question the so called "freezing" of the Foreign Currency accounts under Foreign Currency (Temporary Restrictions) Ordinance, 1998. A learned Single Judge of this Court vide judgment dated 30.7.1998, dismissed the petitions directed against Circular No.23.
Number of Intra Court Appeals were preferred against the dismissal of the petitions. Some of the petitions concerning Circular No.23 were also pending before another Single Bench when the judgment of dismissal dated 30th July, 1998 was delivered. Such petitions were directed to be heard alongwith the Intra Court Appeals, since it was felt that this would be a more appropriate way of decision of petitions. Later on all the I.C.As and Constitutional petitions were entrusted for disposal to a Full Bench. The cases were heard on number of occasions when the learned Senior Judge of the Full Bench excused himself on the ground of preoccupation with Ehtisab cases. This Full Bench was, therefore, constituted, which commenced hearing of all these cases w.e.f. 3rd of December, 1998, afresh.
3. The factual background may be noted before proceedings further. Until the enforcement of Protection of Economic Reforms Act, 1992 (XII of 1992), the holding and use of foreign currency/foreign exchange was regulated under the provisions of Foreign Exchange Regulation Act, 1947 (VII of 1947) enacted on 11.3.1947 and adopted in Pakistan. This Act will be referred to hereinafter as "FER Act". Under this Act inter alia, no citizen, could hold any foreign currency/foreign exchange without the permission of the State Bank and holding of such currency was made a penal offence. With the enforcement of Protection of Economic Reforms Act, 1992, hereinafter referred to as "1992 Act" a complete departure from previous policy was made. Under 1992 Act, holding and selling of foreign currency/exchange was made permissible, the Authorised commercial Banks were permitted to open foreign currency accounts and these accounts could be freely operated like other accounts in Pakistani Currency, in fact under 1992, Act certain incentives were advanced for opening and maintaining foreign currency deposits. This was done to increase the flow of foreign currency into Pakistan. Incentives included exemption from payment of income tax, Zakat and absolute immunity from scrutiny of source of acquisition of the foreign currency. Under the directive of the State Bank, foreign currency deposits/accounts were accepted as collateral for advancing rupee loans. The uncontested claim of the appellants/petitioner challenging Circular No.23 is that under arrangements with their bankers, they had enjoyed rupee loans on the strength of the security of foreign currency deposits and that for all this period, they had absolutely no problem with their bankers. The loan agreements are being worked well and that maturity dates have not yet arrived.
4. This State of affairs prevailed until 28th of May, 1998 when the Foreign Currency (Temporary Restriction) Ordinance, 1998 (VII of 1998), hereinafter referred to as "the Ordinance" was promulgated, it may be noticed that in the afternoon of 28th of May, 1998, Pakistan exploded its Nuclear Bomb. By the evening the President had issued a Proclamation of Emergency under Article 232 of the Constitution. The Ordinance was issued in the wake of Emergency and it provided that during the period for which the Proclamation of Emergency remained in force and notwithstanding anything contained in 1992 Act or any agreement or contract for or in relation to foreign exchange, the right to bring, hold, sell, withdraw, transfer, pay or take out. Foreign exchange shall remain suspended. Under Section 3 of the Ordinance, the Federal Government was authorised to make rules for regulating and dealing and payments in foreign exchange, it was further provided that pending the framing of rules withdrawals etc., will be made with the prior permission of the State Bank of Pakistan. Later on, regular Act namely Foreign Exchange (Temporary Restriction) Act, 1998, (IV of 1998) was passed by National Assembly as a Money Bill as certified by the Speaker of the Assembly. This Act repealed the Ordinance and gave permanence to the embargo placed upon holding etc., of the foreign exchange deposits as held on 28th of May. 1998. This Act hereinafter will be referred to as "1998 Act". Since it is the provisions of this Act, which are seriously challenged, the same will be noticed in extensive at the appropriate place, it may, however, be noted at this juncture that 1998, Act is making some departure from the provisions of the Ordinance inasmuch as while the provisions of the Ordinance were to remain in force during the subsistence of Proclamation of Emergency, no such restriction is laid down in 1998 Act. it may further be noticed here that the Proclamation of Emergency has since been upheld as valid by the Supreme Court of Pakistan vide its short order dated 28.7.1998, although the order of the President under clause 2 of Article 233 of the Constitution, dated 28.5.1998 and modified order dated 13.7.1998, suspending the enforcement of fundamental rights has been declared as without lawful authority.
5. Although the points of law have not been formally referred to this Bench for decision, for the sake of convenience I would formulate such questions as fol lows:-
(i) Whether the provisions of Section 2 of 1998 Act enabling "Freezing" of the Foreign Currency Accounts is valid and it does not suffer from the vice of impermissible delegation of legislative authority?
(ii) Whether the same is violative of principle equal protection of law as enshrined in Article 4 of the Constitution?
(iii) Whether Circular No.23 can validly and lawfully undo the contracts/existing arrangements between the appellants/petitioners/foreign currency account holders and their bankers, in other words whether Circular No.23 can operate retrospectively so as to undo the existing contracts and thus take away vested-rights?
(iv) If Circular No.23 is valid, the direction that in the event the appellants/petitioner failing to substitute the collateral, the deposits/collaterals be converted into Pak Rupees at the rate of Rs.46/- US D liar and utilised for clearing the rupee liability/loans obtained against the same, is lawful?
(v) If direction noted in question No. IV ibid is valid, whether fixation of conversion rate of US Dollar at Rs.46/- is valid? If not what is the legal rate?
Apart from the above major questions there may be some subsidiary questions, which will be dealt with during the course of this judgment.
6. in support of the appeals, major arguments were addressed by M/s. Sulman Raja and Mr. Manzoor Ali Shah, Advocates. These two learned advocates mostly attacked Circular No.23.
Freezing of accounts/deposits was challenged by M/s. Asad Ullah Siddiqui and Malik Javid Shaukat, Advocates, who were incidently themselves the petitioners in their respective Constitutional petitions. Mr. Abid Hassan Minto, Advocate defended the impugned Circular while Mr. Sher Zaman Khan, Deputy Attorney General presented the case of the Federal Government, it is relevant to state here that the Bench was informed that learned Attorney General himself would like to appear and assist the Court, if a convenient date was fixed. The Bench did fix such a date but the learned Attorney General did not come to address the Court and the learned Deputy Attorney General proceeded to do so after having full authority from the learned Attorney General, as per his claim.
7. Mr. Asad Ullah Siddiqui, Advocate challenged the validity of Section 2 of 1998 Act on the ground that this provision confers un-guided power on the State Bank of Pakistan, which is not permissible.
By relying on Kh. Muhammad Safdar, MPA, Lahore v. Province of West Pakistan through Secretary, Government of West Pakistan and others (PLD 1964 Lahore 718), he asserted that this Section confers the unguided powers on the State Bank to permit or to withhold permission for withdrawal, which according to the learned counsel, cannot be done under the present Constitutional dispensation, in the reported case Section 2 of the West Pakistan Use of Loudspeaker (Prohibition)
Ordinance (XXXI of 1963) was held to be bad piece of law as it did not guide the Deputy Commissioner on the question of grant and withholding of the permission to use the loud-speaker.
Mr. Abid Hassan Minto, Advocate while maintaining that he was mainly engaged to defend Circular No.23, rebutted this argument by asserting that the guidelines have already been provided in the FER Act and therefore, no fresh guidance was required to be provided, in this submissions the State Bank was well aware of the problems and it knew when to grant permission or to withhold the same. He elaborated that Section 2 of the 1998 Act read with provisions of FER Act makes complete law on the subject and therefore, it cannot be said that it is a case of excessive delegation or impermissible delegation.
8. The provisions of 1998 Act, which consists of only 5 Sections are reproduced below:- "(1)_Short title, Extent and commencement:-
(1) This Act may be called the Foreign Exchange (Temporary Restrictions) Act, 1998.
(ii) it extends to the whole of Pakistan.
(iii) it shall be deemed to have come into force on the twenty-eighth day of May, 1998.
(2) Restriction on withdrawal of foreign exchange etc. Notwithstanding anything contained in the Protection of Economic Reforms Act, 1992 (XII of 1992) or in any other law for the time being in force, or in any agreement or contract, it is hereby provided that the right to hold, sell, withdraw, transfer, pay or take out foreign exchange held by any person in Pakistan as on the twenty-eight day of May, 1998, (the "specified date") without the prior permission of the State Bank of Pakistan shall remain suspended.
Provided that there shall be no legal restriction on any person converting his foreign exchange held as above into rupees at the officially notified rate of exchange.
Explanation:- For the purpose of this Section "foreign exchange" means foreign exchange held in a foreign currency account or in such other form as the Federal Government may specify.
(3) Certain protection to remain unaffected:-
(i) Subject to the provisions of this Act all the protections and immunities conferred in terms of the Protection of Economic Reforms Act, 1992, (XII of 1992) shall remain unaffected.
(ii) The Federal Government May-
(a) make provision for the grant of further concessions for, or in relation to, amounts converted from the foreign exchange referred to in Section 2 held as on the specified date into rupees, or assets acquired therefrom: and
(b) issue financial instruments including bonds of varying maturities against the aforesaid foreign exchange which shall carry with them not less than the same entitlements, protections and immunities, as the foreign exchange held on the aforesaid date save and except for the right to immediate repayment in foreign exchange.
(4) Power to make rules:-
(i) The Federal Government may be rules empower the State Bank of Pakistan to~
(a) pass general orders suspending the right of persons to repayment except in rupees in relation to the foreign exchange referred to in Section 2 as on the specified date:
(b) make provision for the payment of profit to persons holding foreign exchange referred to in Section 2 as on the specified date in foreign exchange or in rupees; and
(c) classify citizen of Pakistan on the basis of their status being resident or non-resident of Pakistan or other persons on the basis of residence or nationality or otherwise for the purpose aforesaid.
(ii) Pending the framing of rules under Sub-Section (1) withdrawals, remittances or payments in foreign exchange shall be made with the prior permission of the State Bank of Pakistan.
(5) Repeal and saving:-
(i) The Foreign Exchange (Temporary Restrictions) Ordinance, 1998 (VII of 1998) is hereby repealed.
(ii) Any rules, orders or instructions regarding foreign exchange made or issued by the Federal Government or the State Bank of Pakistan and in force before the commencement of this Act shall, in so far as such rules, orders or instructions are not inconsistent with the provisions of this Act, be deemed to have been made or issued Act."
9. The perusal of the 1998 Act shows that Section 2, is the most material. Section 2 suspends the right to hold, sell withdraw, transfer, pay or take out foreign exchange held by any person in Pakistan as on 28th May, 1998, without the prior permission of the State Bank of Pakistan, in other words the suspension/freezing (the expression freezing is not used in the statutory provisions but has been frequently used during the addresses of the learned counsel and as such there is no harm in using it, since it clarifies the situation more appropriately), is not straight way under the command of the law giver but is tagged with the prior permission of the State Bank, in other words the State Bank can permit withdrawal and holding of foreign exchange and in its discretion can also refuse the permission and upon such refusal the right to hold/withdraw foreign exchange as held by any person in Pakistan on 28th of May, 1998 shall remain suspended, it is clear that the Section its self nor for that matter any other provision in the 1998 Act offers any guidelines to the State Bank much less lay down any principle by following which the State Bank should or should not grant permission. Even no rules under Section 4 have been framed. The question therefore, as to whether the provision of Section 2 suffers from the vice of impermissible/excessive delegation, is not only extremely pertinent but critical to the decision of petitions/appeals.
10. Unfortunately none of the learned counsel provided the Bench with detailed assistance on this aspect of the case. My own research shows that the question has been examined frequently by our own Courts in number of cases including Sobho Gyanchandani v. Crown (PLD 1952 FC 29), Jibendra Kishore Achharyya Chowdhury and 58 others v. The Province of East Pakistan (PLD 1957 SC 9), Waris Meah v. The State etc. (PLD 1957 SC 157), M/s. East and West Steamship Company v. Pakistan through Secretary to Government of Pakistan, Ministry of Commerce, Karachi and others (PLD 1958 SC 41), District Magistrate & Commissioner Lahore Division v. Syed Raza Kazim (PLD 1961 SC 178), Haji Ghulam Zamin & others v. A.B. Khondkar (PLD 1965 Dacca 156) (FB), Sh. Muhammad Ismail & Co.
Ltd., Lahore v. The Chief Cotton Inspector, Multan Division Multan and others (PLD 1966 SC 388), Province of East Pakistan & others v. Siraj-ul-Haq Patwari and others (PLD 1966 SC 854), Ch. Manzoor Elahi v. Federation of Pakistan etc. (PLD 1975 SC 66),' Zaibtun Textile Mills Ltd. v. Central Board of Revenue and others (PLD 1983 SC 358), Miss Benazir Bhutto v. Federation of Pakistan & others (PLD 1988 SC 416, Shaukar Ali v. Government of Punjab and 8 others (PLD 1997 Lahore 617) and Province of the Punjab and others v. Mian Manzoor Ahmad Wattoo (1998 CLC 1585). The above question will have to be answered in the light of the principles as laid down and applied in the above judgments.
11. What transpires after the survey of the case law on the subject is that the question whether the Legislature abdicated its basic function is not a very easy question to answer. No hard and fast rule is laid down. Facts and circumstances of each case will have to be considered. The Courts will be reluctant to strike down the law on this ground, in some of the judgments reference has been made to classical literature on the subject, which need not be reproduced, for the sake of brevity.
Suffice it to say that the doctrine of excessive/impermissible delegation is the product of written constitution, which provides for three separate organs of the State and also provides for the functions and powers of each, in theory each organ has to remain within its own limits. The Legislature has only to make laws, the Executive has to enforce the same and the Judiciary has to interpret the law and also see that the other two organs function within the spheres allotted to each of them by the Constitution. Our Constitution, which is Parliamentary and Federal in nature acknowledges the bifurcation of the functions of the State into legislative, executive and judicial and duly describes the functions of the 3 organs viz Legislature, Executive and Judiciary, it is inherent in the scheme of the Constitution that each organ will work within its own sphere. Articles 141 and 142 read with Articles 70 to 76 of Constitution prescribe that law making is the function of the Majlis-e-Shoora. Since the Legislature is representative of the people and it is they who send them to the Assemblies for making laws, therefore, the Assemblies cannot pass 0n this function to any other person/organ and whenever it is found that the Legislature has entrusted its basic function to another organ, it is said that the legislation suffers from the vice of delegation, excessive or impermissible.
12. However, it also transpires that with the growth of Complexities in running a modern State particularly with the advent of the idea of welfare State, some room/laxity is provided to the Legislature to allow legislation by other organs/persons. This is so because the Legislature may not comprehend all possible eventualities faced in enforcing the law. While it is absolutely necessary that basic policy of law be laid down by the Legislature, the details may be allowed to be filled in by othter functionaries including executive, for efficient administration of law. The difficulty, however, arises in ascertaining in a given case as to whether the Legislature has laid down the basic policy of law or whether it has left even such function to the Executive or any other organ. If in the given case the Court finds that the Legislature has transgressed the limits of permissible delegation, the Court intervenes so that the Constitutional provision is upheld and deviation from the same is forbidden. Before proceedings to answer the question in this case, I would briefly like to refer to- some of the cases noted above, which will help in answering the question.
13. in the case of Sobho Gyanchandani (PLD 1952 Federal Court 29) the proviso to Section 1(3) of Pakistan Public Safety Ordinance (XIV of 1949), authorising Central Government to extend life of Ordinance was held as ultra vires as this provision amounted to delegation of legislative function, which cannot be done. Abdul Rashid Chief Justice held that "A legislature cannot delegate its powers of making, modifying or repealing any law to an external authority. If it does so, it would be creating a parallel legislature. The power of extending the duration of an enactment which would have terminated but for the interference of the external authority, is the exercise of legislative power by an external authority and invalid......". in the case of Waris Meah (PLD 1957 SC (Pak) 157 Section 22-A inserted in Foreign Exchange Regulation Act, 1947 came Under examination. This provision delegated the powers to Central Government or the State Bank to determine whether an offender should be tried under ordinary law (Section 23) or by an Adjudication Officer (Section 23-A) or by a Tribunal (Section 23-B). The Court took the view that although provision did not amount to unconstitutional delegation of legislative function, however, it held the provision to be ex facie discriminatory and violative of equal protection of law guaranteed by Article 5 of the Constitution (1956 Constitution, now Article 4 of 1973 Constitution).
In the case of M/s. East and West Steamship Company (PLD 1957 SC (Pak) 41) the Court considered the provision of Control of Shipping Act (XXVI of 1947) in the light of the objection that conferment of vast unguided powers violated Article 5 of 1956 Constitution which guaranteed equality before law. it was held by majority ".................... Of course, unauthorised delegation of legislative powers is as bad under our Constitution as under the American Constitution.............. in this respect the generally accepted position is that no provision of the law can fall within the rule against the delegated legislation if it is based on policy discoverable from that provision itself, which has to be implemented by the person against whom the charge of unauthorised legislation is made " in the case of Khawaja Muhammad Sardar. MPA (PLD 1964 Lahore 718), a case relied upon by Mr. Siddiqui, Advocate, a Full Bench of this Court held Section 2 of the West Pakistan use of Loud Speaker (Prohibition) Ordinance (XXXI of 1963) as violative of Fundamental Right No.9 of 1962 Constitution. Section 2 provided that "no person shall use or cause to be used a loud speaker in a public place for any purpose except with the permission of the Deputy Commissioner, and subject to such terms and conditions as the Deputy Commissioner may impose......................... "it was further held (at page 725) that "Section 2 of the Ordinance places a previous restraint on the right to public speaking and to be heard, it not only places a previous restraint on the right, but also an arbitrary and an uncontrolled discretion in an executive authority to refuse a licence or the permission for any reason or no reason at all. The Section is also capable of being used discriminately, as the Deputy Commissioner may grant permission to one person or party and refuse it to another, there being no guiding principles laid down by the legislature, no check and no objective standard or, control on the exercise of the power".
14. Similarly in the case of Ch. Manzoor Elahi (PLD 1975 SC 66), the Court held the provision of Section 11 of the Frontier Crimes Regulation, 1901 to be discriminately and therefore, violative of Articles 4 and 5 of the 1973 Constitution. in the case of Miss Benazir Bhutto (PLD 1988 SC 416), the Court examined some provisions of Political Parties Act, 1962, and concluded that Section 3-B of the Act requiring compulsory registration was violative of the Article 17(2) of the Constitution. it further held that an act can be challenged if its provision are ex facie discriminatory, in which case actual proof of discriminatory treatment is not required to be shown, it further held that where the act is not ex facie discriminatory but is capable of being administered discriminately then the party challenging it has to show that it has actually been administered in a partial, unjust and oppressive manner, it also declared that "when the impugned legislation by reference to its provisions is ex facie violative of Fundamental Rights of an individual........., proceedings lie for the enforcement of those rights irrespective of the fact whether any prejudicial order has been passed by the Executive under the law as the Constitution treats the Fundamental Rights as superior to ordinary legislation.................................................... " in 1998 CLC 1585, A Division Bench of this Court held the provisions of Sections 12-B and 12(2) of Punjab Local Government Ordinance VI of 1979, as introduced by Punjab Local Government Ordinance, I of 1998, which provided for nomination of members of the Punchiat by the Government and Constitution of Union Councils by nomination, as discriminatory and violative of Article 25. Of the Constitution.
15. I now proceed to apply the above principles of law to the provision (Section 2 of 1998 Act) in question. The provisions have been reproduced in extend in Para No.7 above. Under Section 2 it has been provided that the right to hold sell, withdraw or take out foreign exchange held by any person in Pakistan as on 28th of May, 1998 without the prior permission of the State Bank of Pakistan shall remain suspended. Admittedly no rules under Section 4 of the 1998, Acts have been framed.
The provision does not lay down any guidelines whatsoever as to in what cases the State Bank should give permission and in what cases it should not give permission. There is no clue at all much less any definite criteria, which the State Bank is required to follow while deciding to give or to refuse permission. The Legislature in fact in asking the State Bank to act in its complete, absolute unqualified, unguided and uncontrolled discretion, has effaced itself and this is not permitted by the Constitution. As noted above Articles 141 and 142 exclusively enjoin the Majlis-e-Shoora to make laws. Majlis-e-Shoora has passed on this exercise to State Bank of Pakistan inasmuch as suspension of right to hold/withdraw etc. Is not in stand and automatic but dependant upon permission of an external agency State Bank) which discretion is unguided. There is a case of self effacement by Parliament and therefore unconstitutional.
16. Mr. Minto, Advocate in his elaborate address has submitted that no guidelines or criteria is needed as the same is provided under the provisions of FER Act. in fact he went to the extent of saying that Section 2 of 1998 Act impliedly revived the provisions of FER Act.
17. The examination of FER Act shows that even that Act does not throw any light as to how to deal with the foreign exchange deposits held on specified date, i.e. 28th May, 1998. The FER Act deals with the Regulation of Foreign Exchange/Currency generally and naturally does not talk of the foreign currency/exchange deposits held on 28th May, 1998, having been framed in 1947- Therefore, if the State Bank was to search those provisions of FER Act to decide the question of granting permission in respect of the deposits held on specified date, it will find no guidance or.
Policy or criteria. Though Mr. Minto made the submission but he could not show as to how any provision of FER Act guided the State Bank in carrying out the mandate of Section 2 of 1998, Act, in respect of grant or refusal of permission of deposits to withdraw held on specified date i.e. 28.5.1998. Learned Deputy Attorney General, of course only adopted the submission of Mr. Minto. I, therefore, conclude that Section 2 of the 1998, Act is a case of excessive delegation and therefore, violative of our Constitution and therefore, of no- legal effect. The principles of law laid down in cases Waris Meah. Kh. Muhammad Safdar, Ch. Manzoor Elahi and Miss Benazir Bhutto (Supra) are clearly attracted.
18. I further hold that the provision of Section 2 ibid conferring unguided powers on State Bank is ex facie discriminatory and, therefore, violative of Articles 4/25 of the Constitution, which guarantee equal treatment before law. it is not only discriminatory on the face of it but it has the potential of being used in a highly discriminatory manner, inasmuch as the State Bank can. Grant permission without giving reasons and can withhold permission also without giving reasons. The power is further capable of being used in arbitrary manner and therefore, invalid on this ground also, as in the case of Section 2 of West Pakistan Use of Loud Speakers (Prohibition) Ordinance, 1963 which confessed unguided power on Deputy Commissioner to grant or refuse, the permission.
19. The above finding that the law contained in Section 2 of the 1998 Act is discriminatory is further fortified from the peculiar facts obtaining in these cases, it is admitted by Mr. Minto, Advocate that after 28th May, 1998, the foreign currency accounts can be opened and operated and there is no restriction from bringing foreign exchange into Pakistan and from holding the same and operating accounts in the authorised commercial banks. Both Mr. Minto as well as the learned Deputy Attorney General failed to show as to how the foreign currency/exchange held on 28th May, 1998 is bad/impure while the foreign currency/exchange brought in and held on 29.5.1998 and thereafter is good/pure and is entitled to the protection available under the Act, 1992. This discrimination and classification is irrational and is clearly violative of Articles 4/25 of the Constitution, both of which remain unaffected by the Proclamation of Emergency.
20. ' Both however, is state that the restraint against holding and withdrawal was necessitated on account of what was described as "ground reality", that there was no foreign exchange, in the kitty since such deposits had already been consumed and utilised. They therefore, further pleaded that while deciding the cases, this Court should keep the above "ground reality" in view. Both in fact pleaded that as because of "ground reality", there was no-chance of the writ of the Court being honoured, the same should not be issued, it is difficult to agree with this submission although the "ground reality" in fact may be as has been stated. If there is no foreign exchange in the kitty and all the amounts accumulated between 1992, to 28.5.1998, amounting to something like 11 billions U.S. Dollars have already been utilised, it only lends support to the argument of Mr. Salman Raja, Advocate that the provision in the Ordinance/Act is meant for confiscation/appropriation of the foreign exchange belonging to appellants/petitioners and the same is being done in a mala fide manner, under the cover of Emergency, it is not for this Court to determine whether the amount of 11 billions Dollars has been properly utilised or not. But it need be stated that the foreign currency/exchange lying in bank deposits, belonged to depositors and did not belong to the Government. The 1992 Act gave the depositors/citizens a clear guarantee that the foreign exchange can be freely brought into the country, accounts can be opened maintained and duly operated. That Act in fact gave incentives for bringing in such money and for keeping it in Pakistan.
I do not agree with the argument of Mr. Salman Raja, Advocate that the so called sovereign guarantee in respect of such deposits could not have been withdrawn under any circumstances. If the 1992, Act gave such deposits the protection, the same law giver, at least in theory could withdraw the protection, of course in accordance with Constitution and law. However, the withdrawal of protection and suspension of right to hold and withdraw did not mean automatic extension of ownership rights of depositors/holders and their vesting in the respondent Government. For this purpose, a separate legal formality, may be by way of Notification in the official Gazette under Section 9 of FER Act or otherwise, was required to be completed.
21. Mr. Minto relied on Notification SRO No.1016 (1)/79, dated 17th October, 1979, as amended upto 10th April, 1991, to claim that this Notification issued under Section 9 of the FER Act. Obliged every citizen to sell foreign exchange to the State Bank on the rates determined by the State Bank under Section 4(2) of the FER Act. He, therefore, argued that the State Bank rightly purchased the foreign exchange deposits from authorised dealers and allowed the Government to utilise the same. The argument cannot be accepted for the reasons that the Notification itself exempts the foreign exchange held by authorised' dealers within the scope of their authority, from the operation of the Notification. But, by far the most important reason to reject this argument is the enforcement of the provision of Act. XII of 1992. Section 3 of 1992 Act gave overriding effect to the provisions of the Act and thus excluded the application of FER Act, 1947. The Notification dated 27th October, 1979 being contrary to Section 4 of the 1992 Act cannot prevail over the same, in my judgment, the acquisition of foreign exchange held in bank accounts on specified date i.e. 28.5.1998 will have to take place, if at all, through a fresh legislative measure and not on the strength of 1979 Notification. No such measure has been referred to by Mr. Minto or for that matter Mr. Sher Zaman Khan. Section 2 of 1998 Act only suspends the right............... But does not and cannot operate to "vest" the deposits in the State Bank of the Federal Government, so as to enable it to consume the foreign exchange, in any case, Undisputedly consumption of foreign exchange had taken place earlier to the enforcement of the Ordinance and the 1998 Act. Under what authority? As noted it could not have been under 1979 Notification, the same having been over-riden by 1992 Act. No other law was cited either by Mr. Minto or by Deputy Attorney General. Utilization of foreign exchange of petitioners and other depositors which has taken place as asserted by learned Deputy Attorney General and Mr. Minto (and as is even clear from the Article of Mr. Sartaj Aziz, the then Finance Minister appearing in 'Daily Dawn' dated 5th of August. 1998) would be entirely illegal, and if I may add, immoral. The 'ground reality' should not be cannot deter the Court from declaring the actual legal position.
22. Under proviso to Section 2 of the 1998 Act, there is no legal restriction on any person converting his foreign exchange into rupees at the officially notified rate of exchange. During the course of lengthy hearing, learned counsel on both sides were repeatedly asked to explain as to what is officially notified rate of exchange and further as to how rate of exchange at Rs.46/- per Dollar came to be determined. This rate finds mention in the Circular No.12 dated 29th May, 1998, issued by the State Bank of Pakistan. At one stage Mr. Minto, Advocate stated that this rate has been fixed by the Federal Government and State Bank has nothing to do with it. He, however, also placed on file an order/decision of the State Bank dated 27th June, 1998, which shows the rate of exchange to be at Rs.46/- per US Dollar. According to Mr. Minto, Advocate this has been done under Section 4(2) of the FER Act The aforesaid provision does authorise the State Bank to fix the rate of exchange at which a person can enter into a transaction of conversion of Pakistan Currency into foreign currency or foreign currency into Pakistan Currency and if this was done on 27th June, 1998, it still does not answer the question as to how Circular No.12 of the State Bank authorised withdrawal of the frozen dollars at the rate of Rs.46/- per dollar from 29th May, 1998 to 27th June, 1998. Under the proviso to Section 2 of 1998 Act, this rate has to be a rate officially notified, but the Act does not define the expression "officially notified", it can mean fixed by Federal Government and it could equally mean by State Bank, why has the law giver kept this ambiguity, is not discernable nor explained by learned Deputy Attorney General.
23. Mr. Salman Raja, Advocate strenuously argued that this rate has to be 'not less than market rate' and for this purpose relied on Section 9 of the FER Act and some judgments from Indian Jurisdiction. He argued that if at all the "Freezing" is valid, the rate has to be the rate prevailing in open currency market (presently around Rs.54/- per U.S. Dollar). This argument need be determined viz-a-viz proviso to Section 2 of the 1998 Act, which talks of 'officially notified rate' and certain other provisions of FER Act but I would not decide this question as I have already reached the conclusion that Section 2 itself is discriminatory and suffers from vice of delegation.
24. Now I take up the question of Circular No.23. The major attack launched by Mr. Salman Raja, Advocate against the validity of the Circular is that it being an executive order can only have prospective effect and cannot undo the transactions already entered into nor take away the vested rights of the parties, it is urged that under the legal dispensation prevailing, the appellants/petitioners duly entered into the contracts of obtaining rupees loan with their bankers- respondents on the security of the foreign exchange deposits held by them. The agreements are being duly worked by both the contracting parties and the dates of repayment of the rupees loan has not yet reached, it is stated that acting under the impugned Circular, the bankers of the appellants/petitioners are compelling the appellants/petitioners to give fresh security, failing which they have threatened that the security of foreign exchange will be utilised for liquidating the rupee liability at the rate of Rs.46/- per US Dollar, it is vehemently urged that the foreign exchange deposits of the appellants/petitioner is property in full juristic sense and this property cannot be appropriated in the threatened manner under the force of the Circular, it is contended that this purpose, if at all, can only be achieved by a legislative measure and not through an executive fiat like the Circular, it is argued that the foreign exchange deposits have already been consumed by the Government/State Bank and this device of forced conversion is being resorted to legalise the consumption already taken place. Some of the learned counsel during the course of their addresses described the situation as a State decolty and urged that this Court should declare it so an further condemn the various Governments responsibles for consuming the property of the citizens, in an illegal, immoral and sinful manner, it was also urged that if at all substituted security is necessary, the respondents-banks have to return the original security to the appellants/petitioner while demanding substituted security, it has been claimed that because the foreign exchange deposits have been consumed and the banks are unable to return the original security, the device of forced conversion has been resorted to. Some of the learned counsel described the exercise as highly motivated and ill intentioned and were particularly aggrieved that as per press reports, persons enjoying close links with relevant quarters, managed to withdraw their deposits and take them out of country before 'freezing', in this connection reference was also invited to Section 9 of the FER Act to show that whenever, the foreign exchange is acquired, it is done by paying at the market rate, it is claimed that market rate of Dollar is much more in the open market than Rs.46/- being offered to the depositors and on which rate the security of foreign exchange deposits is threatened to be adjusted/liquidated. Some of the learned counsel also challenged this exercise by describing it as un- islamic. Large number of cases including Mian Manzoor Ahmad Wattoo v. Federation of Pakistan and 3 others (PLD 1997 Lahore 38), M/s. Wak Orient Power & Light Ltd. v. Government of Pakistan, Ministry of Water and Power Islamabad, and 2 others (PLD 1998 Lahore 665), Qazalbash Waqf v. Chief Land Commissioner. Punjab & Others (PLD 1990 SC 99) and Hashwani Hotels Limited v. Federation of Pakistan & others (PLD 1997 SC 315). Mr Salman Raja, Advocate also referred to the case law from Indian and American jurisdiction.
25. The validity of impugned Circular has been canvassed by Mr. Minto, Advocate by urging that the issuance of Circular has nothing to do either with the Proclamation of Emergency or with the enforcement of the Ordinance or 1998 Act. He has maintained that under the State Bank of Pakistan Act, 1956, and the Banking Companies Ordinance, 1962, the State Bank has not only the powers but also obligation to regulate monitory and credit policy and in this connection to issue directions to the Banking Companies, which directions are binding on these companies. He has argued that the impugned Circular has been issued under Section 25 read with Section 41, of the Banking Companies Ordinance, 1962. To the arguments that the impugned Circular cannot apply retrospectively nor can it take away or adversely affect the vested rights, Mr. Minto has relied on Section 91-A of the Banking Companies Ordinance, 1962 and according to him on account of Section 91-A the provisions of Section 25 will prevail notwithstanding any law or contract to the contrary. He, therefore, claimed that the impugned Circular can validly destroy the existing contracts and can also take away the vested rights. He relied on PLD 1998 Karachi 22 for the proposition that in such matters the Court will not sit in appeal nor substitute its own view for that of the State Bank. He referred to AIR 1962 SC 1371 and AIR 1992 SC 1033 for the proposition that the opinion of the Reserve Bank in such matters is respected and not interfered within judicial review.
He also relied on M/s. China Pain Industries Ltd. v. Industrial Development Bank of Pakistan (1990 CLC 1865) and standard proforma of agreement to contend that if circumstances change fresh security can be called upon, in this connection he also urged that because the right of the depositors to hold the foreign exchange has been suspended, the deposits were no longer good security in the eye of law and the State Bank, therefore, has acted prudently in calling upon the commercial banks to ask for removal of lien of the foreign exchange deposits.
26. Mr. Sher Zaman Khan, learned Deputy Attorney General urged that because there was a Proclamation of Emergency, which has been upheld by the Supreme Court, Fundamental Rights 15 to 19 and 24 are not available in view of Article 233(1) of the Constitution and the State as defined in Article 7 could pass any law or take any executive action in violation of the above noted fundamental rights. He maintained that State Bank fell within the expression, "State" and therefore, the 1998 Act as well as the impugned Circular are valid and legal and all these appeals and petitions are to be dismissed as not maintainable. He further adopted the line that the Court may not interfere in policy decision. He refuted the arguments of mala fide by relying an Article 150, of the Constitution, which says that full faith and credit has to be extended to official acts.
27. While I have noted above the elaborate contentions, in my view all of them need not be examined in detail because the question of the retrospectivity of Circular has already been decided and this determination suffices to dispose of all the cases, in Hashwani Hotels Ltd. v.
Federation of Pakistan (PLD 1997 SC 315) question whether the circular issued by the State Bank of Pakistan under Section 25 can apply retrospectively, has been examined and answered in the negative. The appellants in the Supreme Court were claiming the benefit of reduced rate of interest on the strength of Circular Noebcd-6 dated 15.2.1981. The appellants had obtained advances in the years 1977/78, much before the issue of Circular. The argument was that the loan agreement were subsisting and as such the appellants were entitled to the benefit of the Circular, it was held at pages 333/334 as follows:- "It may also be observed that the authority i.e. The State Bank of Pakistan which had issued the above Circulars including of 15.2.1981, has taken the stand that the same were not intended to cover the loan agreements which were entered into prior to the date of the above Circular, in presence of the above written clarification by the authority which has the power under Section 25, of the Ordinance to issue direction as to the rate of interest and to vary or to withdraw the same, it would not be legal for a Court to hold that the above Circular of 15.2.1981 would be applicable to the loan agreements already concluded and wholly or partly acted upon prior to the date of the above Circular by the parties on the ground that certain amounts pursuant thereof were disbursed by the banks to the party concerned subsequent to the date of the Circular, it must, therefore, follow that no writ could be issued against respondent No.4 and/or the remaining banks/financial institutions directing them to charge interest at the rescued rate of interest in breach of the terms of the loan agreements". in para 22 of the judgment their lordships reproduced, with approval, the view of Division Bench of Mysore Nigh Court to the effect that'
(1) The directions, if any, issued by the Reserve Bank of India under Section 21(2) must operate prospectively and it will not affect the existing contracts or advances made by the Banking Companies with their customers. The direction issued by the Executive Directors of the Reserve Bank to operate retrospectively will be clearly in excess of the authority given to the Reserve Bank by Section 21(2). (1967 10 Law Rep 767 (772) (Mys.) (DB)."
28. in the light of above declaration of law, there is hardly anything for me to add except to state that I have to respectfully follow the same, it is correct that the above judgment does not notice the effect of Section 91-A as argued by Mr. Minto. However, it is not for this Court to avoid the application of declared law of Supreme Court on this ground. Doctrine of 'per incuriam' can only be canvassed in the Supreme Court, in this case. Besides, in my view, the submission of Mr. Minto is open to serious objections. Section 91-A only gives primacy to Section 25, over other laws, contracts and agreements. For instance, a Commercial Bank would not be able to avoid directive issued under Section 25 on the ground that it is violative of its own Articles of Association, or resolutions of Board of Directors of its contracts or agreement with third parties, in my view, this primacy cannot extend to authorising State Bank to issue directions which can destroy existing rights or undo existing contracts/transactions. Language of Section 25 itself belies the contention of Mr. Minto.
"Whenever the State Bank is satisfied that is necessary or expedient in the public interest so to do, it may determine the policy in relation to advances to be followed by banking companies generally......................................................................... "
The use of words to be followed clearly indicates that the policy/directions will apply prospectively.
Similarly Section 41 of Banking Companies Ordinance, 1962, cannot confer legality to the retrospective operation of Circular No.23, assuming that the provisions of above Section are otherwise attracted to the present situation.
29. While learned Deputy Attorney General did object to the maintainability of the petitions but he failed to substantiate the objection, it is correct that Proclamation of Emergency has been issued and this Proclamation has been upheld by the Supreme Court vide short order dated 28.7.1998. As a result of Proclamation and by virtue of Article 233(1), the State can make laws and take action in derogation to Fundamental Rights No.15, 16, 17, 18, 19 and 24. The Proclamation of the President under Article 233(2) suspending some other fundamental rights, has been set aside by the Supreme Court vide the same order. Article 199 of the Constitution remains intact even during the subsistence of Proclamation of Emergency and this Court can exercise jurisdiction conferred by that Article. The only effect upon the exercise of jurisdiction in view of Emergency is that this Court will honour the mandate contained in Article 233(1) and will not interfere even if the law/action is found to be derogatory to Articles 15 to 19 and 24. in this petition no argument on the strength of the above-mentioned Fundamental Rights has been raised and even if raised, I have taken no notice of the same. The petitions/appeals have been determined independent of Fundamental Rights 15 to 19 and 24. I, therefore, over-rule the objection of the learned Deputy Attorney General and hold the petitions to be maintainable.
30. Some of the learned counsel argued that the provisions of 1998 Act and the action of "freezing" is un-islamic and, therefore, should be struck down by this Court The submissions on merits need not be examined as it is only the Federal Shariat Court constituted under Chapter 3-A of the Constitution, which has the exclusive jurisdiction, under Article 203-D to determine the validity of law on the touch-stone of Injunction of Quran and Sunnah. Article 203-G bars the jurisdiction of a High Court and the Supreme Court to entertain any proceedings or exercise any power or jurisdiction in respect of any matter within the power or jurisdiction of the Federal Shariat Court.
31. For the above noted reasons I answer the questions noted in para No.4 of the judgment as follows:-
(i) & (ii) Section 2 and Section 4(2) of the 1998 Act is unconstitutional and the consequential suspension of the right of the petitioners/depositors to withdraw and operate their foreign currency accounts is without lawful authority. The action is violative of Articles 4/25 of the Constitution. The provision is further discriminatory in nature and has the inherent mischief of being used in a highly arbitrary and whimsical manner.
(iii) Circular No.23 cannot operate to undo the existing contracts. Circular No.23 can have only prospective effect, it is valid to the extent that the banks will not, in future, accept foreign currency deposits as collateral for advancing rupee loans.
(iv) in any case the direction to convert the collateral at the rate of Rs.46/- per US Dollars and liquidate the rupee liability is absolutely without jurisdiction. I declare the same to be without lawful authority and therefore, of no legal effect.
(v) The conversion rate Rs.46/- shown to have been fixed by the State Bank on 27th June, 1998 under Section 4(2) of the Foreign Exchange Regulation Act, 1947 is valid for purposes mentioned in Section 4 but cannot be said to be the rate which is required to be fixed by the Federal Government under Section 9 of the FER Act, the only Section under which the foreign exchange belonging to a citizen can be acquired by the Federal Government.
32. Only again with utmost respect to Mian Allah Nawaz, J., lam of the view that in these cases, this Court is and should concern itself with the constitutionality of law and the legality of action impugned. This Court should stop after making considered declarations, even if further consequential directions may not be outside; the purview of Article 199. As the Constitution recognises the trichotomy of sovereign power, this Court may leave the situation created by the judgment of this Court, to be dealt with by Executive and Legislature, in accordance with law and their respective wisdom, in my humble view the directive to State Bank to treat the foreign currency account held by petitioner on 28th May, 1998 under Section 4 of Protection of Economic Reforms Act (XII of 1992) as fixed account for a period of 3 years and frame rules................. ............... As contained in para 4 at page 82 of my learned brother's judgment, is not required to be issued by the Court. Besides, already there is a US Dollar Saving Bonds Scheme, (under the Special US Dollar Bonds Rules, 1998) in the field and as informed, some of the depositors have already converted their deposits into the Bonds. The Bonds are for the tenure of 5, 7 and 10 years and fetch reasonably good profits. These also enjoy some other immunities and exemptions as contained in F.E. Circular No.42 dated July 21, 1998 as amended by F.E. Circular No.44 dated 4th August, 1998.
Depending upon their need, outlook and patriotic sende, depositors can opt for Dollar Bonds. I am clear that after declarations of illegality of impugned law and action, the petitioners/appellants/depositors cannot be compelled to keep their foreign exchange either in fixed accounts or in Bonds. I, therefore, respectfully disagree with the above directions.
33. Similarly, I further do not subscribe to the direction to Federal Government contained in para (v) at Page 83, of my learned brother's judgment. The underlying motive of my honourable brother is laudable (and I may agree with it on a personal plane) but because provisions of Act XII of 1992 have not been challenged in these cases, no occasion rises for the Court to rule on its legality, much less appropriateness.
34. I, therefore, allow all the appeals and the Constitutional Petitions in the above terms. The order of learned Single Bench dated 30.7.1998 is set aside. I would leave the parties to bear their own costs.
35. in the end, I acknowledge the industry and commitment with which all the learned counsel, in particular M/s. Salman Raja and Mr. Mansoor Ali Shah, Advocates, conducted their respective cases.