1. SARMAD JALAL OSMANY, J. -- This is an application under Order 7, Rule 11, CPC whereby the defendants seeking dismissal of the Suit on the basis that the plaint does not disclose any cause of action and that the suit is barred under the provisions of, the Specific Relief Act and the Banking Companies Ordinance.
2. The brief facts of the matter are that the plaintiff has a Rupee Deposit Account, as well as US Dollar Account with the defendant No. 2, Bank (hereinafter called as Bank) in the amount of Rs.
3. 72,199,948/- and US4521,330.00 respectively. The Bank is a branch of Trust Bank Limited, Nairobi, Kenya and has been granted a licence to do business in Pakistan vide the State Bank of Pakistan's letter dated 18th September, 1996 copy of which has been filed as Annexure 'A' to the plaint. It is stated in the plaint that the Bank has been conducting its business in a satisfactory manner and has been able to attract deposit of up to Rs.
4. 330,000,000/-. Such statement of fact is supported by the balance sheets of the Bank for the periods ending 31.12.1996.And 31.12.1997 alongwith the statement of affairs of the Bank dated 19.9.1998 copies of which have been filed as Annexures B, B/1 and D. However notwithstanding this satisfactory financial position the State Bank of Pakistan (SBP) issued a letter dated 18.9.1998 (Annexure E/1) addressed to the Chief Executive of the Bank drastically curtailing its operations and also placing the same under the control of Mr. Zafar Hussain Siddiqui, Additional Director Bank Supervision Department, SBP. The restrictions placed upon the Trust Bank include prohibition of any withdrawal by any individual customer from its account in excess of Rs. 25,000/- deposit of all government securities with SBP, surrendering of all foreign exchange balance after retaining US$50,000.00, etc. It is pleaded that in effect the directions contained in the impugned letter has virtually closed down the Bank and it has been specifically pleaded by the plaintiff that such directions violate the fundamental rights of the plaintiff. More so since no reason has been given in the impugned letter for the drastic action taken by the SBP.
5. It is further stated in the plaint that on 18.9.1998 the plaintiff applied to the Bank for the issuance of a pay order Rs. 70,000,000/- which was issued and delivered to him by the Bank during office hours and accordingly the plaintiff's account was debited with this amount. However, later on the same day the Bank also asked the plaintiff to send back the pay order as there was some error in it and after correction of the same it would be returned. Nevertheless, on 19.9.1998 the plaintiff was informed by the Bank that the said pay order has been surrendered to the SBP on the latter's instructions and accordingly the plaintiff's account was credited for Rs. 70,000,000/-. This exercise as per the plaintiff was collusive and fraudulent as the reversal of the entry by crediting the account of the plaintiff which had already been debited was unlawful and without any jurisdiction.
6. Thereafter, the plaintiff alongwith other account holders filed a_ Constitution Petition bearing No. 1786/98 before this Court which inter alia challenged the impugned letter issued by SBP. However, the said petition was dismissed in limine with the observation that since it raised disputed questions of fact the same could not be considered in writ jurisdiction. It has also been alleged in the plaint that certain preferred creditors have been allowed to withdraw their deposits from the Bank which is discriminatory and hence a violation of the fundamental rights of the petitioner viz. Article 25 of the Constitution and hence a suit, with the prayer that declarations be issued by this Court to the effect that directives contained in the impugned letter dated 18.9.1998 issued by SBP and subsequent actions taken pursuant thereto are without jurisdiction, ma/a fide, and of ,no legal effect, that the defendants immediately pay the amounts deposited with them by the plaintiff to it alongwith 21% interest/mark-up and finally that the defendants be directed to encash the pay order in favour of the plaintiff. A permanent injunction has also been prayed for restraining the defendants from releasing any amounts to other depositors of their choice. Additionally it has been prayed that damages in the sum of Rs. 5,00,00,000/- (Rupees Five Crore only) alongwith mark-up be paid from the date of filing of the suit till realisation of this amount to the plaintiff.
7. 1998 CLC 1263) and Value Gold Limited v. UBL (PLD 1999 Karachi 1).
8. Learned counsel's next argument is that as C.P. No. 1786/98 filed by the plaintiff alongwith other account holders against SBP for the same reliefs and upon the same cause of action has been dismissed in limine on, inter alia, the observation that as disputed question of the SBP to act in the matter under Section 41 of the Banking Companies Ordinance, 1962 was not challenged by the petitioner/plaintiff therefore, the same operated as res judicata and consequently the plaintiff could not file the suit based on, the same cause of action with the result that the suit is barred under Section 11, CPC and again should be dismissed under Order 7, Rule 11, CPC.
9. Thirdly learned counsel has contended that under Section 94 of the Banking Companies Ordinance, 1962 no suit could be instituted against the SBP unless there is any prima facie evidence of ma/a fides. According to learned counsel a mere statement regarding such mala fides as contained in the plaint is not sufficient and further evidence should be forthcoming in the matter so as to defeat the ouster clause contained in Section 94 of the Banking Companies Ordinance, 1962.
10. Learned counsel's next contention is that the suit is barred under Section 41 of the Specific Relief Act since the relationship between the Bank and the plaintiff is that of banker and customer and in the present circumstances is akin to that of a debtor and creditor. Thus, in the eyes of law, the plaintiff cannot claim any proprietary rights over his deposits held by the Bank but only the rights of a creditor and consequently a declaratory decree cannot be passed against the defendants in the matter since the plaintiff has not displayed an entitlement to any legal character or to any right a to any property. In support of this contenting learned counsel has relied upon various books including the Law of Banks by Tannen and the Law of Banker and Customer by Thomas and Megrah as well as the case of Foley v. Hill (1848) 11-H.L.C.
27. Consequently as per learned counsel the only right which the plaintiff has is to prove his debt in a winding up of the Bank. Similarly learned counsel has further contended that injunctive relief as prayed for in the suit is also barred under Section 56(d) of Specific Relief Act which prohibits injunctions where these interfere with the public, duties of any department of the Central or Provincial Government or the sovereign acts of a foreign Government. So also as per learned counsel Section 56(f) of the said Act is attracted to the facts of the present matter whereby an injunction cannot be granted to prevent the breach of any contract the performance of which could not be specifically performed. Learned counsel has also cited Section 21 of the Specific Relief Act, for the proposition that where damages is adequate relief no injunction can be granted. Learned counsel has stressed that the Courts should not interfere with economic and financial policies of the Government which is the function of experts and in this regard has submitted that only the SBP can best judge whether it would be the operation of a Banking Company. Learned counsel has relied upon M.A. Naseer v. Chairman, Pakistan Eastern Railways (PLD 1965 S.C. 83), Obaidullah v. Habibullah (PLD 1997 SC 8351, Muhammad Rashid Bhatti v.
11. KDA (PLD 1986 Karachi 130), M/s. Qasimabad Ent. v. Province of Sindh and others (1998 CLC 441) and Peerless General F. & I Co. Ltd. v. Reserve Bank of India (AIR 1992 SC 1033).
12. 1996 SCMR 145), Pakistan Steel Mills Corporation v. Muhammad Ashique (1995 CLC 1000), Haji Ashfaq Ahmed Khan and others v. Custodian of Evacuee Property and others (PLD 1966 (W.P.)
13. Karachi 597) and Additional Commissioner I IK Division v. Shahid Raza (1997 MLD 2444).
14. Next Learned Counsel has contended that Section 94 of the Banking Companies Ordinance, only places an embargo upon filing of civil suits, etc. Against the SBP where good faith is displayed and not in cases like the present one where prima facie the SBP has not followed the provisions of Sections 41, 41-A, 41-B, 41-C, 43-B, C&D and Section 47 of the Banking Companies Ordinance With regard to the Bank's affairs. In this regard learned counsel says that it has been shown in the plaint, prima facie, that the impugned order dated 18.9.1998 has virtually closed down the Bank without following the provisions of the Banking Companies Ordinance referred to above which hardly establishes the SBP's good faith. Illustrating his arguments learned counsel has referred to Section 41(A) of the Banking Companies Ordinance. Learned counsel submits that neither any notice was given to the Bank regarding control of its affairs by the SBP and nor was the Federal Government involved in this exercise and hence the virtual closing down of the Bank based on the impugned latter is prima facie mala fide and of no legal effect. Similarly, learned counsel has contended that Section 41, 41-A and 41-B do not empower SBP to close down the Bank and that too without notice to the Bank. As per learned counsel Section 41 merely empowers the SBP in the public interest or to prevent affairs of any banking company being conducted in a manner detrimental to the interest of the depositors or prejudicial to the interest of the Banking Company generally, to issue such directions as it deems fit which would be complied with by the concerned banking company. These directions/powers have been further illustrated in Section 41-A viz. Removal of any Chairman or Director or Chief Executive of the Banking Company and under Section 41-B to supersede the Board of Directors of a Banking Company. Similarly, the functions of the SBP have been enumerated in this regard viz, where it under Section 41 gives any direction to any banking company. It is further contended that in any event the provisions of Section 41-C of the Ordinance have been totally violated as SBP cannot exercise any powers under Section 41-A and 41-B except where these are done by the Governor of the SBP on a report by a standing committee set up by the SBP for this purpose. Consequently, as per learned counsel the powers under Section 41, 41-A and 41-B given to the SBP are purely of a regulatory nature where, the SBP can only regulate the functioning of any Bank and do not entitle it to close down the Bank as has been done in the present case. Learned counsel further submits that in order to suspend the business of the Bank the provisions of part-3 of the Banking Companies Ordinance, 1962 should have been followed which provides for said suspension, scheme of amalgamation and reconstruction and winding up of Banking Companies. It is, therefore, submitted that since this has not been done in the present case consequently neither could the Bank's business be suspended nor the other impugned actions be taken and hence it could not be said that the same were done in good faith so as to attract the ouster contained in Section 94 of the Banking Companies Ordinance.
15. 1991 SCMR 1229), Muhammad Banaras Khakan v. Rubina Choudhry (1997 CLC 997), Shoukat All Mian and another v. The Federation of Pakistan (1999 CLC 607) and Hudaibiya Engineering (Pvt.) Ltd. v. Pakistan (PLD 1998 Lah. 90).
16. As regards Section 42 of the Specific Relief Act learned counsel contends that under such section the enforcement of any obligation arising under law is always justiciable. Consequently, as per learned counsel what the plaintiff is seeking is the enforcement of SBP's obligation arising under the Banking Companies Ordinance, 1962. Such enforcement of obligations according to learned counsel is the possession of the legal character as provided under Section 42 of the Specific Relief Act. In this regard learned counsel has relied upon Shahid Muhammad v. KESC (1997 CLC 1936) and Additional Commissioner II K Division, Karachi v. Shahid Raza (1994 MLD 2444). Similarly, as regards Section 56(d) of the Specific Relief Act learned counsel submits that prima facie it has been established that SBP has not performed its duties in accordance with law. Consequently, its action courd not be treated as performance of public duties and hence does 'not come within the mischief of Section 56(d) of the Act, which prohibits the grant of injunctions in the case of public officials while in performance of their duties.
17. Finally, learned counsel has contended that the impugned actions of the State Bank of Pakistan cannot by any stretch of imagination be interpreted as being in the interest of the plaintiff and the other depositors since a discriminatory policy was being followed as some preferred depositors were allowed to withdraw their money while the plaintiff was refused which is a manifest violation of Article 25 of the Constitution and hence to that effect also the impugned actions are unlawful and should be struck down.
18. I have heard both the Learned Counsel and my views are as follows.
19. As regards the learned counsel for the defendants first contention that since the suit has been held not to be a Banking Suit Vide order dated 16.7.1999, consequently either the suit should have been renumbered and fresh notice issued or the plaint returned to the plaintiff for filing afresh, suffice it to say that no separate register is being maintained in this Court for Banking Suits and therefore, when the plaint was presented the suit was admitted as a Banking Suit and given its number in normal course. It was only at the behest of the learned counsel for the defendants that the issue whether the suit should be treated as a banking suit or a normal suit was heard and decided by my learned brother Zahid Qurban Alvi, J., on 16.7.1999. In the said order my learned brother had come to the conclusion that the suit was wrongly filed under the Banking jurisdiction of this Court and directed the office to treat the same as an ordinary suit.
20. Regarding the issue of res judicata it would be seen that in the dismissal order of C.P. No. 1786 of 1998 the main ground was the non-inclination of a Learned Division Bench of this Court to enter into factual controversies as partially displayed in the petition. In my opinion the rights and liabilities of the parties as contemplated in the relevant sections of the Banking Companies Ordinance including Section.41 thereof were not adjudicated by the learned Division Bench. It was only observed that both the learned counsel did not controvert that State Bank of Pakistan was not restrained from resorting to Section 41 of the Banking Companies Ordinance whereby power has been given to issue directions to banking companies generally or to any banking company in particular where the same are merited in the public interest of to prevent the affairs of any banking company being conducted in a manner detrimental to the interest of the depositors, etc., or to secure the proper management of any banking company. In my opinion this was a mere observation of the learned Division Bench and being obiter by no stretch of imagination, could amount to adjudication of the rights and liabilities of the parties in terms of Section 11 of CPC as same have not been heard and finally decided by the learned Division Bench. Reference in this regard can be made to Haji Ashfaq Ahmed Khan and others v. Custodian of Evacuee Property and others (supra) wherein a Division Bench of this Court held that if a writ was dismissed in limine the issue of res judicata in a subsequent suit depends on the nature of the order and if the order does not consider all the aspects of the questions raised in the petition and disposes it off on a technical ground, it would not be an order on merits. This as observed above was not done in C.P. 1786/98.
21. The next issue raised in the matter by Mr. Zahid Jamil is regarding the bar of jurisdiction contained in Section 94 of the Banking Companies Ordinance, 1962 whereby no suit could be instituted against the State Bank of Pakistan for any thing which is done in good faith or intended to be done in pursuance of the Ordinance or of any rules and orders made thereunder. In this connection learned counsel has suggested that the action taken by the State Bank of Pakistan vide the impugned letter dated 18th September, 1998 was totally bona fide and in the interest of the depositors as well as of the general public and unless the assets of the Bank had been frozen there would have been a run on the Bank and the depositors would have lost all their money. Learned counsel in this regard submits, albeit rather weakly, that if the statutory provisions contained in the Banking Companies Ordinance would have been followed and the State Bank of Pakistan forced thereby to take the necessary permission before issuing the impugned notice, this would have caused delay and would have made any exercise of power infructuous. Learned counsel has further stated in this regard that the action in fact was not taken against the management of the Trust Bank, but due to the collapse of the Trust Bank's Head Office in Kenya. I am afraid again that I am not able to concur to the views expressed by. Learned counsel as aforesaid. It would be seen that the Banking Companies Ordinance provides a complete and comprehensive remedy and gives concurrent powers to the State Bank of Pakistan for exercising such remedy whenever the affairs of, any bank are not being run in accordance with law or to the detriment of its depositors or the general public. In this connection it would be seen that the State Bank of Pakistan has various powers to regulate the functions of Banks, as provided in part I of the Banking Companies Ordinance which essentially relate to the regulation of banking business transacted by bank licensed under the Ordinance to do so by the State Bank of Pakistan. These include, inter a/ia, Section 41 of the Ordinance whereby the State Bank of Pakistan has been empowered to generally issue direction to Banking Companies in order to prevent the affairs of any such Company from being conducted in a manner detrimental to the interest of the depositors or prejudicial to the interest of the Banking company and/or to the secure the interest of the banking company. Section 41-A to D thereafter provide for the particular manner in which such power is to be exercised viz. By removal of the Board of Directors, prosecution of Directors, etc. However, nothing in Section 41-A to D or for that matter in Section 42 of the Banking Companies Ordinance empowers the State Bank of Pakistan to close down any bank as virtually done .Through the impugned direction. The powers mentioned therein only entitle the State Bank to regulate the affairs of a Banking Company and essentially contemplate that it would be exercised for a going concern.
22. On the other hand part II-A of the Banking Companies Ordinance incorporating ,Section 43-A to 43-F contain provisions whereby the State Bank of Pakistan can, inter alia, declare a Banking Company to be conducting business in contravention of Section 27(A) of the Ordinance which provides that no Banking business shall be conducted by any company unless it is licensed to do so, whereafter such a company would be wound up in accordance with the provision of Sections 44 and 45 of the Ordinance provided the other provisions of Section 43 are owed. It would also be seen that under part 3 of the Ordinance provisions have been made for the suspension of a Banking company's business, its winding up as well as sanctioning of a scheme of compromise or arrangement between Banking Companies and their creditors as per Sections 44 to 59 thereof. In particular it would be noted that under Section 47 of the Ordinance the State Bank of Pakistan is empowered to apply to the Federal Government for the suspensiOn of a Banking Company's business and to prepare a scheme of reconstruction and amalgamation in which a procedure has been provided in Section 48 of the Ordinance. Finally as per Section 49 of the State Bank of Pakistan is also empowered to apply to the High Court for winding up of the Banking Companies. A survey of all the foregoing provisions of law amply illustrates that the State Bank of Pakistan cannot unilaterally close down/suspend the business of a Banking Company unless it abides by the provisions of the Banking Companies Ordinance which, inter alia, provides as per Section 47 that only the Federal Government can authorizes the suspension of a Banking Company's business upon the application of the State Bank of Pakistan. In this view of the matter I am convinced that the action taken by the State Bank of Pakistan in suspending the business of the defendant Bank via the impugned directive was in violation of the legal provisions contained in the Ordinance and hence cannot be termed as a bona fide exercise of power in good faith and consequently the suit would not be barred under Section 94 of the Banking Companies Ordinance. In this connection I can do no better than to reproduce the classic statement of the Hon'ble Supreme Court in Chairman R.T.A. v.
23. Pakistan Mutual Insurance Co. Authored by Shafiur Rahman, J. (as his Lordship then was) regarding the exercise of power by public officials: A public officer is a public agency or trust created in the interest and for the benefit of the people, and since an incumbent of a public officer invested with certain powers and charged with certain duties pertinent to sovereignty, the powers so delegated to the officer are held in' trust for -the people and are to be exercised on behalf of the Government or of all citizens who may need the intervention of the officer. Such trust extends to all matters within the range of the duties pertaining to the office. In other words, public officers are but the servants of the people and not their rulers A public officer is amenable to the rule which forbids an agent or trustee to place himself in such an attitude toward the principal or cestui que trust as to have his interest conflict with respect to the time within which an official act must be performed, the law contemplates that the duty must be performed within a reasonable by time. A public official who undertakes to perform an act, even an act which s completely discretionary, must do so reasonable and in complete good faith without such delay as would frustrate its ultimate. Objective. One who accepts a public office does so cum on ere, or with the burden, and is considered as accepting its burdens and obligations with its benefits. He thereby subjects himself to all Constitutional and legislative provisions relating thereto and undertakes to perform all the duties of the office, and while he remains in such office the public has the right to demand that he performs such duties. The acceptance of every public office implies an agreement on the part of the officer that he will execute his duties with diligence and fidelity. The duty of a public officer to fulfil the obligations of his office should take precedence over all other matters. Every public official is bound to use reasonable skill and diligence in the performance of his official duties, particularly where rights of individuals may be jeopardized by his neglect. In other words, he is bound, virtue official, to bring to discharge of his duties that prudence, caution, and attention which careful men usually exercise in the management of their own affairs.
24. I am also conscious of the repeated phrase that Courts of law should not sit upon economic and financial policies which is best left to the experts; however this does not mean that such discretion by the experts is to be exercised in a vacuum. Whereas in the present case, a procedure has been prescribed for such exercise , it has to be followed failing which the Courts would always interfere as they are very well conversant with legalities and illegalities, ma/a fides and bona fides and the methodology whereby powers given to a public functionary or institution is to be exercised. A learned Full Bench of the Lahore High Court in Shoukat A.I Mian v. Federation of Pakistan (supra) has also not approved of, the conferment of naked arbitrary and unstructured powers upon the State Bank of Pakistan while holding that Section 2 of the Foreign Exchange (Temporary Restrictions) Act, 1998 and State Bank of Pakistan Circular No. 23, dated 2.7.1998 which imposed a freeze on foreign currency accounts in Pakistan to be ultra vires of Articles 2-A and 4 of the Constitution.
25. The next argument of Mr. Zahid Jamil is that no declaratory decree could be passed under Section 42 of the Specific Relief Act. Since the plaintiff has not been able to establish that he is entitled to any legal character or to any right in any property, as he is a mere depositor and thus in the eyes of law only a creditor. Consequently, as per Learned Counsel since the relation between the parties is that of a creditor and debtor, the plaintiff only has a right to his money deposited with the Bank failing which he can prove the debt in winding up of the Bank. In support of his contentions learned counsel has relied on a number of treatises on the law of Banking viz. By Thomas and Megrah, etc. And a number of decisions- from the English and Indian jurisdictions forwarding the above legal propositions (supra). I have no cavil with these propositions of law. However, the matter does not end there in my view although the relationship between the parties is that of a Banker and Customer viz. Debtor and creditor, the plaintiff can always be heard to say that a specific obligation provided under the law could be enforced by him through the grant of a perpetual injunction to prevent the breach of such an obligation existing in favour of the plaintiff. In my view the State Bank of. Pakistan is bound by law to act in good faith and to adhere to the principle of natural justice as well as comply with the law. The plaintiff can always enforce these obligations which are binding upon the State Bank of Pakistan as a matter of law and this is precisely the prayer of the plaintiff that the impugned directive be set aside as being in violation of the law.
26. Consequently, in my view although a declaration may not, prima facie, issue in the circumstances of the case injunctions can always be given by this Court under the provisions of Section 54 of the Specific Relief Act enjoining the State Bank of Pakistan and the Trust Bank to act within the ambit of the law and so also such an injunction may issue restraining the State Bank of Pakistan from acting upon the impugned direction which, as already stated above. I have found prima facie not to be within the four corners of the powers given to the State Bank of Pakistan under the Banking Companies Ordinance. In this regard reference can be made to Shahid Mehmood v. KESC (supra). Similarly in my view the suit is also not barred under Section 56(d) of the Specific Relief Act (as canvassed by Mr. Zahid Jamil) which prohibits the grant of permanent injunctions which may interfere with the public duties of any department of the Central/Provincial Government, etc. For the simply reason that such interference assumes that the public duties and powers thereto were exercised bona fide in good faith and for the public good. Prima facie, this does not appear to be the position since as already observed by myself the impugned directive has been issued without giving any notice to the Trust Bank and the powers exercised thereunder are in violation of the Banking Companies Ordinance, 1962. In Obaidullah v. Habibullah (supra), the Hon'ble Supreme Court refused to grant an injunction as this would account to imposing two employes on the concerned department by virtue of a contract which was held to be in violation of Section 56(d) of the Specific Relief Act. As already adverted to above this is not the case in the present matter since the plaintiff is not trying to enforce any contract between himself and the defendants but only their legal obligations. Similarly, in Muhammad Rashid Bhatti v. KDA (PLD 1986 Kar 130), on facts it was found by a Single Judge of this Court that an injunction was being sought against the exercise of discharge of obligations by a department of KDA and accordingly the same was refused on the basis that this would hamper the smooth working of KDA. On the contrary, I have found in the present case that such exercise of discretion and discharge of obligations by the SBP were violative of the law and consequently the said case can be distinguished.
27. Finally, learned counsel has submitted that an injunction cannot be granted in view of Sections 21 and 56(f) of the Specific Relief Act. Section 21 enumerates the types of contracts which are not specifically enforceable being, inter alia, contracts for personal service and those for the breach of contracts which are not specifically enforceable. Again the short answer to this argument is that although the plaintiff may not be able to enforce any contract with the defendants, there is no embargo under the law for the enforcement of legal obligations ordained by the law itself.
28. For all the foregoing reasons, this application is dismissed.