' MIAN NAZIR AKHTAR, J.---By this judgment we propose to decide Criminal Appeals Nos.1682, 1683 as well as Criminal Appeals Nos.1624, 1628 and 1643 of 2000 in which common questions of law and fact are involved.
2. The appellants in Criminal Appeals Nos.1682 and 1683 of 2000 have been convicted for an offence under section 9(a)(viii) read with section 10 of the N.A.B. Ordinance for having committed the offence of wilful default, by the learned Judge Accountability Court No,1, Rawalpindi in Reference No,4 of 2000. They have been sentenced as under.
(i) Air Marshal (Retd.) Waqar Azeem appellant No,1 to undergo R.I. For 7 years with a fine of Rs,2 million and in default of payment to undergo R.I. For 2 years.
(ii) Sajjad Azeem --- appellant No,2 to undergo R.I. For 4 years with a fine of Rs,2 million and in default of payment to undergo R.I. For 2 years.
(iii) Nusrat Azeem -- appellant No,3 to undergo R.I. For 4 years with a fine of Rs,2 million and in default of payment to undergo R.I for 2 years.
(iv) Shaukat Azeem -- appellant No,4: to undergo R.I. For 4 years with a fine of Rs,2 million and in default of payment to undergo R.I. For 2 years.
(v) Sardar Imtiaz Ali Qazilibash --- (appellant in Criminal Appeal No,1683 of 2000 -- accused No,7): fine of Rs,2 million and in default of payment to undergo R.I. For 2 years.
' The appellants in Criminal Appeals Nos-.1643, 1624 and , 1628 of 2000 were convicted and sentenced as, under;-
(i) Khalid Lateef (appellant in Criminal Appeal No,1643 of 2000): fine of Rs,2 lacs and in default of payment to undergo R.I. For one year.
(ii) Hafiz Nazir Ahmad (appellant No,1 in Criminal Appeal No,1628): fine of Rs,2 lacs and in default of payment to undergo R.I. For one year.
(iii) Saleem Hassan (appellant No,2 in Criminal Appeal No,1628 of 2000): fine of Rs,2 lacs and in default of payment to undergo R.I. For one year.
(iv) Malik Muhammad Hameed (appellant in Criminal Appeal 1624 of 2000): fine of Rs,2 lacs and in default of payment to undergo R.I. For one year.
' The appellants were also given benefit of section 382-B of the Cr.P.C.
' Begum Surrayya Waqar Azeem (accused No,5) was acquitted under both the charges. Saulat Azeem (accused No,6) and Abu Saeed Islahi (accused No,9) were declared as proclaimed absconders and were ordered to be tried as and when brought before the Court.
3. The trial Court framed a charge against the appellants on 5-8-2000 which was subsequently amended on 22-8-2000. The amended charge is reproduced below.
"I Rustam Ali Malik, Judge Accountability Court, Rawalpindi/ Islamabad, constituted under National Accountability Bureau Ordinance, 1999, as amended to date, do hereby charge you, (1) Air Marshal (Retd) Wiqar Azim, Managing Director, (2) Sajjad Azim, Director, (3) Nusrat Azeem, Director, (4) Shaukat Azeem, Director, and (5) Begum Surriya Wiqar Azeem w/o Air Marshal (Retd.) Wiqar Azeem, all Directors of Electronic Information and Energy System Limited, and residents of 3rd Gizri Street, Karachi, (6) Mr. Khalid Latif, the then Provincial Chief, (Pb) NBP, (7) Saleem Hassan, Regional Head, NBP, Islamabad, (8) Malik Muhammad Hameed, now Regional Chief Executive, NBP, RHQ, Islamabad and (9) Hafiz Nazir Ahmed, the then AVP, Audit Office, Melody, NBP, Islamabad.
' Firstly, that on 13th, March, 1990, you accused ,Nos.1 to 5 the. Managing Director and Directors of the Company along with accused Nos.6 and 7 (since absconding) applied to National Bank of Pakistan, for availing Export Refinance Facility, in the name of your Company i,e, Electronic Information and Energy System Limited, (EIES) under the State Bank of "Pakistan Refinancing Scheme, although the Company was still in the process of setting up an Electronics Manufacturing Factory; and was not" in production nor did it qualify' for applying for the facility, which was got approved dishonestly and fraudulently, in conspiracy with your co-accused i,e,, the Bank officials, and in a hasty and illegal manner, against inadequate and already encumbered securities, and the facility was hurriedly got sanctioned by corrupt, dishonest and illegal means, and you obtained for yourself a pecuniary advantage to the tune of Rs,18 million and you also furnished fake Letter of Credit and since no exports were actually made, the State sank imposed penalties which had to be paid by the National Bank, and thereafter you committed wilful and intentional default in repayment of outstanding dues and hence you caused wrongful loss to the National Bank of Pakistan to the tune of Rs,29,709,619 and thus you accused Nos.1 to 5 i,e, the Managing Director and Directors of the Company jointly and severally; with common dishonest intent, and in conspiracy with each other and in conspiracy with your other co-accused committed offences of corruption/corrupt practices under sections 9(a)(iv) and (9) (a) (viii) of the N.A.B. Ordinance, punishable under section 10 of the Ordinance aforesaid, within cognizance of this Court.
' Secondly, that in March, 1990 you, Hafiz Nazir Ahmad, accused No,12 were posted as Manager, Model Branch, National Bank of Pakistan, Islamabad, when accused Nos.1 to 7, Managing Director and Directors of Messrs Electronic Information and Energy System Limited (EIES), applied to the Bank, though not its account. Holders, for grant of Export Re-finance Facility,' under the State Bank of Pakistan Refinancing Scheme, although the Company was still in the process of setting up Electronics Manufacturing Factory and was not in production and did not qualify for applying for the facility, which was nevertheless illegally and with dishonest intention, entertained by you, while your branch did not have jurisdiction/competence to entertain such applications and you then processed the application and prepared proposal for financial facility of Rs,18 millions and dishonestly forwarded the same. The Letter of Credit provided by EIES from a German Bank was not valid and the paid up capital was inflated by you with dishonest intention and you thus misused your powers/authority to obtain illegal pecuniary benefits for accused Nos.1 to 7, in conspiracy with your co-accused and by corrupt, dishonest and illegal means and which caused loss to the Bank to the tune of Rs,29,709,619, which could not have taken place but for your corrupt, fraudulent, dishonest and illegal act, conduct and conspiracy and thus you Hafiz Nazir Ahmed accused with dishonest intent, in conspiracy with your co-accused, committed offences of corruption and corrupt practices under sections 9(a)(iv) and 9 (a)(vi) of the N.A.B. Ordinance, punishable under section 10 of the aforesaid Ordinance, within the cognizance of this Court.
' Thirdly, that in March, 1990, you Saleem Hassan, accused No,10 were posted as Regional Head, National Bank of Pakistan, Islamabad, when accused Nos.1 to 7, Managing Director and Directors of Messrs Electronic Information and Energy System Limited (EIES), applied to the Bank, though- not its account holders, for the grant of Export Refinance Facility, under the State Bank of Pakistan Refinancing Scheme, although the company was still in the process of setting up an Electronics Manufacturing Ffactory, and was not in production and did not qualify for applying for the facility, which was nevertheless illegally and with dishonest intention, entertained and processed by accused No,12, and forwarded to accused No,11, who enhanced the recommended amount and forwarded to you but you also acted dishonestly and forwarded the same to the Credit Committee, without examining it as per Banking Rules, practice and State Bank instructions and without scrutinizing the documents, in particular the Letter of Credit furnished by EIES. The proposal could not be forwarded if scrutinized properly and if you had exercised your authority bona fide. You thus misused your authority to gain illegal pecuniary benefits for accused Nos.1 to 7, in conspiracy with your co-accused and by corrupt, dishonest and illegal means and which caused loss to the bank to the tune of Rs,29,709,619, which could not have taken place but for your corrupt, fraudulent, dishonest and illegal act, conduct and conspiracy and thus you Saleem Hassan accused, with dishonest intent in conspiracy with your co-accused committed offences of corruption/ corrupt practices under sections 9(a)(iv) and (a)(vi) of the NAB Ordinance, punishable under section 10 of the aforesaid Ordinance, within the cognizance of this Court.
' Fourthly, that in March, 1990, you Malik Muhammad Hameed, accused No,11 were posted as Zonal Head, National Bank of Pakistan, Islamabad, when accused Nos.1 to 7, Managing Director and Directors of. Messrs Electronic Information and Energy System Limited (EIES), applied to the Bank, though not its account holders, for grant of Export Refinance Facility under the State Bank of Pakistan Refinancing Scheme, although the Company was still in the process of setting up an Electronics Manufacturing Factory and was not in production and did not qualify for applying for the facility, which was nevertheless illegally and 'with dishonest intention, entertained 'and processed by accused No,12, 'and forwarded to you and without appraising or scrutinizing and without any spot verification and without evaluating net finacial worth /Of EIES, you recommended amount of facility as Rs,33 millions, though the assets valuation of the Resident Engineer was Rs,13.8 millions only. Thus you Malik Muhammad Hameed accused misused your authority to gain illegal pecuniary benefit for. Accused Nos.1 to 7, in fraudulent conspiracy with your co-accused and which caused Ioss to the Bank to the tune of Rs,29,709,619, which could not have taken place but for your corrupt, fraudulent, dishonest and illegal .Act, conducted and conspiracy and thus you Malik Muhammad Hameed accused with dishonest intent, in conspiracy with your co-accused, committed offences of corruption/corrupt practices under sections 9(a)(iv) and 9(a)(vi) of the N.A.B. Ordinance, punishable under section 10 of the aforesaid Ordinance, within the cognizance of this Court.
' Fifthly, that in March, 1990, when you Khalid Lateef accused were Chairman Credit Committee, National Bank of Pakistan, accused Nos.1 to 7. The Managing Directors and Directors of Electronic Information and Energy System Limited (EIES), applied to National Bank of Pakistan, for grant of Export Re-finance Facility, under the State Bank of Pakistan Refinancing Scheme, though not eligible to apply under the Scheme, which was nevertheless illegally and with dishonest intention, and in conspiracy with accused Nos.1 to 7, entertained, processed and approved by accused No,12, further enhanced by accused No,11 and forwarded with recommendations by accused No,10, to the Credit Committee, and you sanctioned the facility, acting dishonestly and in misuse of authority as its Chairman and converted the parri passu charge of National Bank of Pakistan on the fixed assets of EIES into second charge on the behest of EIES and Mr. Abu Saeed Islahi, accused No,9 (since absconding) and you Khalid Lateef accused thus misused your authority to gain illegal pecuniary benefit for accused Nos.1 to 7, in conspiracy with your co-accused and by corrupt, dishonest and illegal means and which caused loss to the Bank to the tune of Rs,29,709,619, which could not have taken place but for your corrupt, fraudulent dishonest and illegal act, conduct and conspiracy and thus you Khalid Lateef accused with dishonest intent, in conspiracy with your co-accused, committed offences of corruption/corrupt practices under sections 9(a)(iv) and 9(a)(vi) of the N.A.B. Ordinance, punishable under section 10 of the aforesaid Ordinance, within the cognizance of this Court.
' And I hereby direct you to be tried , by me on the aforesaid charges."
4. The appellants pleaded not guilty to the charge and claimed to be tried. In support of its case the prosecution produced as many as five witnesses. The accused were examined under section 342 of the Cr.P.C. In their defence, the appellants produced documents. Exhs.D.A. To DZ and DAA to DKK.
5. The appellants' learned counsel (in Criminal Appeals Nos.1682 and 1683 of 2000) urged that so far as the irregularities in applying for the financial facility and the alleged collusion with the bank officials is concerned, the appellants have been exonerated under section 9(a)(iv) of the Ordinance; that the State did not challenge their acquittal under the said offence and now it cannot be urged that the appellants had, in any manner, misused their authority and thus managed to obtain the financial facility; that now the appellants are merely answerable for a charge under section 9(a)(vii) of the Ordinance relating to the offence of wilful default; that the evidence on the record does not make out the necessary ingredients of the offence of wilful default; that there was neither any mens rea on the part of the appellants nor any element of deliberate or wilful default in paying the amount; that the facts at the most show the appellants' inability or failure to return the amount but the facts and circumstances of the case show that this was due to the failure of the bank to honour its commitment or obligation under the L.C. Opened for import of raw-material; He places reliance on the judgment in the case of Khan Asfand Yar Wali v.
Federation of Pakistan and others (PLD 2001 SC 607) to urge that only that default is wilful which is contumacious and the defaulter does not intend to pay back dues and that if the default occurs due to circumstances beyond the control of the borrower, then he cannot be held guilty of wilful default; that the appellants had every intention to return the loan by generating funds through their export business but the company floated by the appellants could not go into production to the default of the batik in the matter of providing funds under the import L.C. Lawfully opened with the bank; that the appellants never got their liability waived or written off and are even now ready to pay back the amount through the sale of their property/machinery; that the prosecution had failed to show that the appellants had misappropriated the loan facility and utilized it for the purposes other than those for which it was obtained. He explains that against the appellants' L. C.
Nos. 854-40-021 and 854-40-022, the raw-material was imported and the had to arrange finance for the same; that the bank was holding the cash margin of Rs,1.098 (M) and to meet the demand, it was to be raised to Rs,3.7 million; that for this purpose, letter dated 4-6-1999 (at page 135) was written by Muhammad Hafeez Mirza, P.W. For approval of the Head Office; that the consideration which heavily weighed with the trial Court in convicting appellants is the decree passed by the Banking which at the relevant time held the field but it has now been set aside by the High Court in Regular Firgt Appeal No,929 of 1993 vide judgment, dated 6-12-2001 and the case has been remanded to the Banking Court for fresh trial; that the prosecution was bound to prove that despite having the sources to pay back the amount, the appellants did not deliberately do so with the mens rea to commit the offence; that the appellants had started a High Tech. Industry and imported technology from Denmark; that the appellants had a confirmed order valid upto January, 1991 from a German customer, who had agreed to purchase 3 years' production; that the appellants' industry could not go into production due to default of the bank in providing funds for the raw-material imported from abroad, therefore, the amount of loan financial facility could not be returned; that there was an inbuilt arrangement in clause 6 of Exh.PF/12 and clause 4 of Exh.PF/13 for recovery of the amount through sale of the mortgaged property; that in case of default, the process contemplated in the above-referred clauses should have been resorted to and if the entire amount is not recovered then appellants. Could be called upon to pay the remaining amount and in case of their deliberate failure to return 'the amount they could be held guilty of the offence of wilful default; that in the present case, neither this procedure was adopted nor the amount was correctly determined_ or demanded from the appellants through a written notice. Refers to the agreement Exh.PF/17 which provides as under:
(i) The customer has. Agreed to sell to the bank raw-materials/finished goods/spares/machinery etc. Hereinafter referred to as goods upto a sum of Rs,1,80,00,000 (Rupees eighteen millions only).
(ii) The customer has agreed to purchase the same from the bank on the basis of mark-up on, terms and conditions hereinafter appearing."
' Thus appellants had agreed to sell the goods to the bank for a sum of Rs,18 millions and had to purchase it at the rate of Rs,19 millions plus mark-up; that on the appellants' failure to purchase back the goods the provisions of section 54 subsection (2) of the Sales of Goods Act were attracted; that it provides that the unpaid seller will give a notice to the purchaser to pay the amount, failing which he is entitled to sell the goods and recover the price. If he fails to recover the same then the purchaser is entitled to get the excess amount; that the provisions of section 73 (Explanation) and section 176 of the Contract Act are applicable in this case; that had the bank fulfilled its duty under the agreement, then, there might have been mitigated liability of the appellants, which they might have been able to discharge; that from the material on the record, no offence is made out against the appellants and that they are entitled to acquittal.
6. Raja Muhammad Akram, learned counsel for the appellant in Criminal Appeal No,1624 of 2000 urged that the case was registered on the basis of complaint Exh.PA filed on 22-5-1997 by P.W.2 Shah Nawaz Jafri; that Malik Muhammad Hameed appellant and Hafiz Nazir Ahmad did not figure in Exh.PA; that they had only forwarded the application submitted on behalf of the Electronic Information and Energy System Limited. The application was forwarded to the Regional Chief Mr. Saleem Hassan (appellant in Criminal Appeal No,1628 of 2000); that the Regional Chief re- modelled the proposals and then sent the same to the Provincial Chief; that the competent Authority for sanctioning the loan facility was the Provincial Credit Committee which held its first meeting on 5-4-1990 and after examining the matter thoroughly decided to convert the pari passu/equitable mortgage into second mortgage/charge; that this fact is admitted by P.W.3 Mirza Abdul Hafeez, who stated that in the second meeting of the P.C.C., pari passu charge was changed into second mortgage/charge. He further contends that the appellant had merely recommended the case with certain remarks for securing the bank interest but the sanctioning authority i,e, Provincial Credit Committee accepted the second mortgage in favour of the National Bank instead of pari passu mortgage and then the appellant was directed by a Telex message to accept the second mortgage. He explains that in case of pari passu mortgage the assets of a defaulting company are proportionally divided between the creditors but in case of second mortgage the first mortgagee may take the entire amount and no assets be left for payment to the second mortgagee. The learned counsel urged that the charge framed against the appellants and the other, bank officials suffers from a number of factual errors. Firstly it was wrongly mentioned herein-that the company had no account in the bank; that P.W.3 Muhammad Hafeez Mirza admitted in his cross-examination that the company had its account in the Model Branch Islamabad since the year 1988. Secondly the appellant had made a recommendation qua loan facility of Rs,18 millions and not 33 millions as mentioned in the charge and the excess amount of Rs,14 millions is not relatable to the appellant; that the recommendations made by the Manager as well as the appellant were wholly favourable to the bank, which were arbitrarily changed by the P.C.C.; that under the export refinance Scheme announced by the State Bank of Pakistan application could be entertained by any branch of Scheduled Bank and the case could be sent to the designated Branch at the time of sanctioning of the loan; that the application was accompanied by a confirmed export order and a lawful irrevocable Letter of Credit (Exh.DG); that originally the Consortium of Banks known as the Bankers Equity agreed to advance loan facility to the company; that the Asian Development Bank was also a share holder of the company; that the loan facility availed of by the company was a project loan; that the Export Refinance Scheme was introduced by the State Bank of Pakistan to encourage and promote commercial activities under which commercial banks could advance the commercial lons, which was reimbursed by the State Bank; that after constructing the building and installing the machinery, the company applied for loan facility for import of raw-material needed for production; at that time, the company had in its credit an amount of Rs,70 lacs; that on his part the appellant had recommended the following three securities;
(i) A registered mortgage of all the assets of the company pari passu with other creditors;
(ii) Hypothecation of all the stock and finished goods; and
(iii) Personal - guarantees of all the Directors.
' All the three conditions were changed by the Provincial Credit Committee (P.P.C.) as follows:--
(i) The pari passu mortgage was replaced by a second mortage;
(ii) Hypothecation of only some of the goods was ordered and
(iii) Personal guarantees of the sponsor Director were required.
' He further submits that the appellant had recommended loan amount of Rs,18 millions only but another amount of Rs,15 million was recommended by the Regional Head through letter` Exh.PF/8 and the P.C.C. Sanctioned loan facility of Rs,33 millions. He submits that the Irrevocable. Letter of Credit dated 22-3-1990 was found to be satisfactory by the State Bank of Pakistan; that the appellant had recommended the case against 25% cash margin which was reduced to 15% cash margin by P.W.3 Muhammad Hafeez Mirza the then Regional Chief; that under the Export Refinance Scheme, it is provided in part-I that export finance will be provided on the basis of confirmed Irrevocable Letter of Credit or firm export order; that the company had fulfilled both the conditions whereupon the case was recommended and processed; that any branch of a scheduled bank could entertain the application for grant of facility under the Export Refinance Scheme and ultimately the case was to be forwarded to the designated branch; that the State Bank of Pakistan had designated four branches, one in each. Province, for the said purpose; that under para. 8 of the scheme, accounting procedure has been laid down which provides that all branches will open in their general ledger an account styled as "borrowing from the State Bank of Pakistan under Export Finance Scheme"; that under para.8 (iii) again a reference has been made to all branches including designated branches; that the crux of the allegation against the appellant is that the value of the assets of the company reported by the Engineer is less than Rs,18 millions, which is incorrect for the following reasons;
(i) The value given by the Engineer is only of land and building but does not cover the value of the machinery and other assets installed therein; that the total assets have been valued at Rs,7 crores and 70 lacs; that it was for this reason that the appellant had recommended a pari passu mortgage,
(ii) That for a loan of Rs,18 millions the assets of Rs,77.68 millions were available as security on behalf of the company; that the trial Court had given a finding to the effect that the appellant did not get any benefit by making his recommendation for grant of loan to the company; that P.W.
Hafeez Mirza admitted "during the course of inquiry no evidence had been produced before him that the bank officers in this case had ever received any commission or kickback, relating to this facility."
' Further, the learned counsel refers to the following part from para.48 of the judgment of the trial Court; " It is correct _ that in this case they were not the beneficiaries. It is' also correct that no allegation of receiving bribe, commission or kickbacks have been levelled against them."
' The learned counsel further contends that the reference of this case was made on 22-2-2000; that the trial Court has acquitted appellant under the first part of section 9(a)(vi) of the Ordinance but convicted him under the latter part for having wilfully failed to exercise his authority to prevent the grant of undue benefit/favour in the form of export refinance facility to accused Nos.1 to 7; that the reference against the appellant was made only under. The first part of section 9(a)(vi) of the Ordinance regarding alleged misuses of authority so as to gain any benefit or favour for himself or, any other person; that the latter part of the section was brought on the statute book on 5-7-2000 and does not apply to the appellant's case and the trial Court could not take cognizance of the offence under the latter part as no reference was sent to the Court on the basis of the same.
Referring to the word "authority" the learned counsel submits that it means the legal power to do something or to pass any order but the appellant had no authority to sanction the financial facility; that the appellants' function was ministerial in nature to.Forward the papers to the Competent Authority; that he performed his function honestly and in _ this connection there is absolutely, no element of misuse on his part. Explaining the meaning of word "misuse" the learned counsel submits that it means an improper use of the authority for collateral purposes. He refers to para.48 Of the judgment of the trial Court in which the following finding is recorded: "by making and approving proposal for a change of pari passu charge 'into second charge, they had definitely caused loss to the interest of their own bank."
7. The learned counsel contends that so far as the appellant is concerned he had merely forwarded the case with a recommendation for pari passu charge and was not at all responsible for changing it into second mortgage; that the trial Court has misread the evidence and did not apply his judicial mind to the facts of the -case; So far as accused No,10 Saleem Hassan, accused No,11 Malik Muhammad Hameed and accused No,12 Nazir Ahmad are concerned they had far warded the case with the recommendation for pari passu mortgage and personal guarantee of the Directors with hypothecation of the entire stock but unfortunately these conditions were changed by the Provincial Credit Committee; that no question whatsoever was put to the appellant as well as the other bank officials regarding their alleged failure to exercise the authority to prevent misuse of authority by others. Hence they cannot be convicted under the second part of section 9(a)(vi) of the Ordinance. The learned counsel has referred to the documents Exhs.DCC, DDD, DEE, DGG and DHH to urge that the appellant performance had been appreciated by different Presidents of the banks on different occasions and in Exh.DHH it was noted that in the departmental inquiry conducted against 21 Executives of the Banks, no criminal negligence was found on the part of the appellant. Lastly, he urged that the appellant could not have been convicted without the prior approval of the State Bank of Pakistan as provided under section 31-C of the Ordinance. He submits that section 195 of the Cr.P.C. Embodies comparable provisions, which are mandatory in nature and vitiate the trial if the same are not complied with. He points out that the appellant had raised this objection at the beginning of the trial before the trial Court through a written application which was illegally rejected by the trial Court vide order, dated 28-8-2000. He adds that the appellant had provided an extract from the glossary of Banking in which the word "refinancing" is defined as under:-- "Various types of refinancing schemes, usually sponsored by the Government or the Central Bank to pride financial resources to desirable sectors of activities or refinancing scheme provided by lending institution to their regular clients to allow them to better manage their financing needs."
8. On the other hand, the learned Special Prosecutor urged that from the very beginning the appellants never intended to return the loan facility; that originally they had formed the company by availing of financial facility from the Bankers Equity and set up the industry by constructing the building and installing the machinery but obtained loan facility of Rs,33 millions and never returned it when it became due; that the charge was fully provided by the prosecution evidence and the appellants were rightly convicted for the offence of wilful default. He urged that the case was not argued in its true legal and factual perspective; that the State Bank of Pakistan places certain funds at the disposal of certain banks to promote export; that the banks have to provide the financial facility to its customers. For this purpose, the State Bank has introduced a scheme known as the Export Finance Scheme (Exh.DB). A person or a customer seeking financial facility must go to a designated branch of the bank and satisfy the branch that he is a 'qualified person for availing of the facility; .That he must have a- confirmed export order and irrevocable letter of credit; that. In the year 1977 there were four designated branches at Karachi, Quetta, Lahore and Peshawar. Later on Rawalpindi Cantt. Branch was also added; that the bank providing loan facility, is entitled to receive reimbursement/refinance from the State Bank of Pakistan; that the Directors of the Company cullsively submitted their application in the Model Branch National Bank, Islamabad on 18-3-1990, which was wrongly processed, although the company had not submitted the requisite documents including a confirmed export order and an irrevocable letter of credit; that in the normal course application ought to have been returned as it was not submitted in a designated branch but it was collusively processed to give undue benefit to the Directors of the Company; the ultimately it was allowed due to the influence of the Managing Director Air Marshal (Rtd.) Waqar Azeem; that the events show that he was in league with the high-up's of the National Bank and managed to obtain the financial facility; that no one in the hierarchy of National Bank pointed out that Islamabad Model Branch was not a designated branch. However, subsequently, when the earlier Manager (Nazir Ahmed) appellant in Criminal Appeal No,1628 of 2000) was changed, then the new Manager Naseer Bajwa, P.W.4, for the first time pointed out this fault; that the matter was noticed by the State Bank of Pakistan, which imposed fine of Rs,9 lacs on the National Bank; that the later the matter was sent to the designed branch of National Bank; i,e, Rawalpindi Cantt. That despite a number of short comings, the application alongwith the proposal made by the Bank Manager was farwarded on 4-4-1999. The then Zonal Head Malik Muhammad Hameed (appellant in Criminal Appeal No,1624 of 2000) recommended it on 25-5-1990. The Regional Head forwarded it to the Provincial Credit Committee with his recommendation and the Committee headed by Mr. Khalid Lateef as its Chairnian, approved the financial facility. The learned counsel submits that the bank official did not protect the bank interest; that . Instead of pari passu mortgage, the Provincial Credit Committee accepted second charge; that the Bankers Equity had the first charge over the assets of the company; that the application was originally not accompanied by an irrevocable letter of credit and the one provided on 28-3-1990 was not irrevocable and its terms were detrimental to the bank's interest. So far as the second financial facility for importing raw-material is concerned, learned counsel for the appellant had urged that he had nothing to do with the commission of the offence in respect of the original financial facility under the Export Financing Scheme; that the alleged breach of conditions on the part of the bank regarding the second facility could not exonerate the appellants from penal consequences in respect of their wilful default by the Directors of the Company and misuse of the authority by the bank official arising out of the grant of finance facility under the export financing scheme. Further submits that for purpose of import of raw-material, the Company had opened six, Letters of Credit which were sight L.Cs and they received the raw-material on cash payment but the remaining two were converted in usage L.Cs. That this conversion was illegally allowed due to influence of the Directors; that no production was done, by the Company despite receipt of raw-material against four L.Cs.; that the whole game was played by the Rank in collusion with the bank officials as a result of which huge financial loss has been caused to the bank and the company had not paid a single penny towards loan liability.
9. Mr. M. Saleem Saigol, learned counsel for appellant-Khalid Lateef (in Criminal Appeal No,1643 of 2000) contends that at the relevant time, i,e, 15-7-1990 when pari passu charge was changed into second charge the offence under section 9(a)(vi) of the Ordinance did not exist; that this offence was brought on the statute book on 16-10-1999 when the NAB Ordinance No,XVII of 1999 was promulgated; that, it coukl not be given effect retrospectively in view of the provisions of Article 12 of the Constitution of Pakistan. In this connection, he refers to the judgment in the case of Federation of Pakistan v. Muhammad Nawaz Khokhar (PLD 2000 SC 26) to urge that any act committed prior to 6-11-1990 is not actionable; that at the relevant time, Ehtesab Act, 1997 was in force and even under the said Act, no action could have been taken against the appellant because the matter related to the date prior to 6-11-1990; that the trial Court had not adverted to the element of mens rea which is sine qua non for making out an offence; in para. 48 of the judgment, the trial Court observed that the appellant had acted under some unseen pressure although he had neither received any bribe nor was the beneficiary, that the appellant had performed his duty honestly in the normal course and had not done anything to cause prejudice to the bank's interest; that the Provincial Credit Committee consisted of 18 members, out of whom only Khalid Lateef- appellant and Abu Saeed Islahi have been implicated in the case, though the appellant was not nominated as an accused in the complaint Exh:PA; that the trial Court omitted to consider Exh.PF, the recommendation of Model Branch, which was ultimately accepted by the Provincial Credit Committee unanimously; that no one out of P.Ws.1 to 5 has implicated Khalid Lateef appellant; that the appellant never exerted' any pressure or, misused his authority for getting approval in favour of the Directors of the Company, that the Reference had been filed in violation of the provisions of section 31-C of the N.A.B. Ordinance, which bars cognizance of the offence by a Court without prior permission of the State Bank of Pakistan.
10. Messrs Haq Nawaz Chattha, learned counsel for Hafiz Nazir Ahmed/appellant No,1 (in Criminal Appeal No,1628 of 2000), Irshaclullah Chattha, learned counsel for Saleem Hassan/appellant No,2 (in Criminal Appeal No,1628 of 2000) Advocate, have generally adopted the arguments raised by Messrs Aitzaz Ahsan, Raja Muhammad Akram and Mr. M. Saleem Saigol, Advocates and prayed that the appellants, whom they represent, are. Innocent and be acquitted of the charge against them.
11. First of all we may advert to the argument raised by the learned counsel for the appellants regarding bar contained in section 31-C of the Ordinance for taking cognizance of an offence against an officer or employee of a bank or financial institution without prior approval of the State Bank of Pakistan. Section 31-C of the Ordinance is reproduced below for ready reference: "[Court to take 'cognizance of offence with prior approval of the State Bank---No Court established .Under this Ordinance shall take cogn of an offence against an office! Or any employee of a bank or finank LAI institution for writing off, waivin restructuring or refinancing any financial facility, interest or mark-up without prior approval of the State Bank of Pakistan.] ' The reference against the accused persons/ appellants was filed on 21-2-20.00 and prior to that the above-referred provisions of law was brought on the statute book through Ordinance No, IV of 2000 published on 3-2-2000. Subsequently, the heading of section 31-C was added through the Second Amendment Ordinance No,XXIV of 2000 published on 5-7-2000. It is meant to protect officers or employees of any bank or financial institution, if the offence is relatable to the act of writing off, waiving, restructuring or refinancing any financial facility, interest or mark-up without prior approval of the State Bank of Pakistan. The above referred acts may have nexus with the offences of bribery, misuse of authority or wilful default. The expression "writing off.", "waiving", restructuring" or "refinancing" are verbal in nattke and refer to an act of scoring off, relinquishing or renouncing or abandoning a claim or re-constructing a time schedule, for payment of, or raising funds by creating new liabilities in order to discharge maturing liabilities or to replenish the outflow of finance by the amount of finance obtained. From or made available by an external source. In the present case, no act of striking off, waiving or restructuring a financial facility is involved. The case relates to grant of a "financial facility" under the Export Finance Scheme launched by the State Bank of Pakistan. The act of re-financing contemplated under section 31-C of the Ordinance is relatable to a financial facility already availed of. In that context, if additional finance is obtained to liquidate earlier liabilities or to further strengthen or restore the financial position qua a financial facility, then it is termed as "refinancing". Therefore, the act of refinancing is distinguishable from the initial grant 'of a financial facility. If the act of refinancing is done by any officer or employee of a bank, including the State Bank, then the bar contained in section 31-C of the Ordinance is attracted. The 'bar is not attracted in the present case in which financial facility was granted under the Export Refinance Scheme launched- by the State Bank of Pakistan. The Financial Facility was allowed by the National Bank of Pakistan and the act of refinancing under the scheme was done by the employees of the State Bank of Pakistan, who do not figure as accused in the present case. The accused were, merely involved in the act of processing the case and approving the financial facility under the act of processing the case of approving the financial facility under the Export Refinance Scheme. They have not done any act of refinancing in respect of a financial facility availabled of by the Directors of the Company. Therefore, in our considered view, the bar contained in section 31-C of the Ordinance is not attracted in the case.
12. Now coming to the merits of the case, we would first like to highlight the salient features of the Export Refinance Scheme launched by the State Bank in October, 1977. Its title is "Export Finance Scheme" and provides that the State Bank of Pakistan will provide refinance for export of all commodities except raw-cotton, wool, rice, hides and skins and leather wet-blue at the rate of 8 % per annum to be charged from the exporter and 5% per annum to be charged by the State Bank from the Banks for providing refinance. Para. 4, Part-I of the Scheme relates to export finance to be provided on the basis of a confirmed irrevocable letter of credit or firm export order on case to case basis. An exporter has to attach the following documents with his application:
(a) D.P. Note executed in Bank's favour by the exporter and duly endorsed by the bank in favour of the State Bank of Pakistan.
(b) Photostat Copy of Letter of Credit or firm contract.
(c) Application in form E.B.
(d) Statement of application in Form E . C.;
(e) Undertaking from the exporter that the borrowings will be used exclusively to finance export covered by the relevant L/C for firm export order.
(t) Undertaking from the exporter that finance obtained by him will be repaid immediately on negotiation/ realisation of the relative export bills through the branch or earlier at his option, in which case he shall continue to be liable to submit the relative proof of shipment failing which penalty at the rate of 7% per annum would be payable by him."
' After this has been done, the document, completed in all respect alongwith a certificate of the Branch that the finance provided to the customer is for export of eligible commodities from Pakistan against either a confirmed irrevocable letter of credit or, a firm export order should be forwarded for the purpose of obtaining refinance, to the designated branch. The bank initially announced- four branches, i,e, Main Branch, Karachi Branch, Lahore Cantt. Branch Peshawar, City Branch Quetta and later added Cantt. Branch Rawalpindi as well. Para. 4 (vi) of the Scheme provides that the refinance available of by a customer, must be repaid by the borrowing bank within the maximum period of 180 days. In case the borrower repays the advance earlier than the said period, the bank will be bound to repay to the State Bank the amount of refinance, within three working days of date on which the borrower repays the advance. Para.4(vii) provides that Branches which have allowed facilities under this scheme shall forward a quarterly statement in form ED to the Designated Branch of the Bank Para.4 (viii) provides that Branches allowing export facilities under this scheme will send a monthly statement. In Form GH to the Credit Policy Department, Credit Division, so as to reach Head Office by 10th of following month.
13. A reading of the above salient features of the Scheme makes it abundantly clear that any Branch of a Bank can entertain and process an application and provide finance for export of eligible commodities from Pakistan and forward a quarterly statement in Form ED to the designated Branch of the Bank. The Designated Branch comes in for purposes of claiming refinance from the State Bank of Pakistan. However, all other formalities can be completed by any other Branch of the Bank. Therefore, the entire argument raised by the learned Special Prosecutor N.A.B. That the Model Branch Islamabad not being a Designated Branch, had wrongly, rather collusively entertained the application of the Director of the Company, was built in the air. The learned Special Prosecutor was at pains to demonstrate that submission of application in the Model Branch of National Bank, Islamabad, was tainted with mala fides. According to him, Air Marshal (Rtd.) Waqar Azeem and other Directors of the Company wielded great influence and managed to have their application entertained by an unauthorized branch of the bank and subsequently, it was processed in a manner, which caused prejudice to the bank's interest. It appears that the learned Special Prosecutor N.A.B. Was completely obvious of the express provisions of the Scheme. Before proceedings further, we many note here that the trial Court has not held the Directors of the Company to be guilty under section 9(a)(iv) of the Ordinance regarding use of corrupt, dishonest or illegal means for obtaining or seeking to obtain any property, valuable thing or pecuniary advantage. The, Prosecutor General. N.A.B. Has not challenged their acquittal for the offence under section 9(a)(iv) of the Ordinance. Meaning thereby that no element of corruption, dishonestly or illegal means was involved in obtaining the pecuniary advantage or the financial facility. In this background, the picture which emerges is that in the normal course, the Directors of the Company applied under a lawful scheme to obtain a financial facility for exporting their commodity under the provisions of the Export Finance Scheme. It is not denied that the application was accompanied by a confirmed export order. Therefore, the basic requirement for eligibility, to apply was fulfilled. Additionally, they had also provided an irrevocable letter of credit.
The learned. Special Prosecutor N.A.B. Tried to highlight some infirmities and short-comings in the.
Letter of Credit but even if his arguments is accepted, it makes no difference because the application could be entertained either on the basis of an irrevocable letter of credit or a firm export order. Originally, the application was accompanied by a firm export order. It is true that the L.C. Was provided on 22-3-1990 but once it was accepted by the National Bank and then finally by the State Bank of Pakistan, its validity could not be questioned. It may be mentioned here that on finding the Irrevocable Letter of Credit (Exh.PF/18) dated 22-3-1990 to be satisfactory, the State Bank had refunded/refinanced an amount of Rs,1,05,00,000 to the National Bank of , Model Branch, Islamabad, as is evident from the statement of account (Exh.PF/19). Subsequently, on the request of the company, the amount was transferred to the National Bank of Pakistan, Cantonment Branch, Rawalpindi as is evident from the documents Exhs.PF/20, PF/21 and PF/22. The balance amount of Rs:75,00,000 was also disbursed to the Company/Directors by this Branch. Hence no objection can be raised to its validity on the alone stated ground. As mentioned above, the Directors had attached firm export order. In the present case, even if the Letter of Credit suffered from any infirmity, it would not make the Directors of the Company penalty liable.
14. The Company submitted the application for grant of loan on 18-3-1990 along with the certificate of incorporation, particulars of Director and Officers of the Company. It was written in the application (Exh.PF/4) that the company was setting up an export based High Tech Integrated Electronic Manufacturing Facility; that the project was financed by a Consortium of Banks including National Bank and allowed by Bankers Equity Limited; that the foreign currency loan of US$ 2.2 millions was provided by the Asian Development Bank; that the civil works of the project were complete and erection and installation of plant and equipment was underway; that the company had received a confirmed order of US$ 2 millions from Gerald/GMW backed up by a Irrevocable Letter of Credit through Commerce Bank, West Germany, which was going to be opened in the, Branch of the National Bank; that the company needed to import raw-material in the form of chemicals, claimants and components from Europe; that the initial financing of raw-material was required to the extent of approximately US $ 0.80 million; that the National Bank of Pakistan was the company's banker from the start of the project; that the company had been maintaining Current Account / No,CD1419-4 with substantial deposit with` the Model Branch of the National Bank of Islamabad. It was requirement that the requisite funds be provided against confirmed export L.0 of US $ of the value of 2 millions. Along with the application, the Auditors' report was attached. In this report, the Chartered Accountant expressed the following opinions:
(a) In our opinion proper books of account have been kept by the company as required by the Companies Ordinance, 1984;
(b) The Balance-sheet has been drawn up in conformity with the Companies Ordinance, 1984 and is in agreement with the books of accounts and is further in accordance with the accounting policies consistently applied.
(c) The expenditure incurred during the year was for the purpose of Company's business.
' It may be noted here that the company was originally incorporated as a Private Company on 16- 7-1986 and was later converted into a Public Limited Company on 26-1-1988. The principal object and business of the company was the establishment of an Integrated High Tech Electronic Manufacturing Unit having facility to design and manufacture Printed Circuit Boards (PCB) of various grades, assembly and testing of PCBs and system assembly. The company obtained loan to the tune of US$ 2.2 millions from the Asian Development Bank. For repayment of loan with interest and other dues, the company executed a mortgage by deposit of the title deeds of all its properties and assets in addition to hypothecation of plant and machinery, both imported and locally manufactured spare parts, electrical equipment and all movable and immovable properties, present and future and the benefit of all rights relating thereto. As mentioned above, the estimated value of the company was only Rs,1,38,00,000 (Exh.PF/5). At the relevant time, Hafiz Nazir Ahmed (appellant in Criminal Appeal No,1628 of 2000) was working as Manager. He prepared a pre-shipment report (Exh.PF/6). He mentioned following important facts therein:
(i) Company had banking dealings with the National Bank Zonal Office, Islamabad, for the last one year.
(ii) The company's project is to manufacture Printed Circuit Boards (PCBs).
(iii) The company has received an export order from a German Firm M/s JMW Handles, GMBH, MOLLN, West Germany of supply of various types of PCBs.
(iv) M/s. Comers Bank L-UEBECK Branch has opened with National Bank, Zonal Office an Irrevocable Letter of Credit amounting to US $1.995 million. The first export consignment will be shipped in May, 1990 and will continue on monthly basis till December, 1990.
(v) For the company's business, it needed to import some raw-materials for which the company needed a finance of approximately US$ 8,00,000.
(vi) The import L.Cs. Will be opened through the National Bank of Pakistan, Zonal Office, Islamabad from April, 1990 to July, 1990. During this time, the export proceeds would also start coming in whereby reducing the liability of import L.Cs.
(vii) The company approached the bank for pre-shipment export refinance amounting to Rs,18 millions.
(viii) As security for repayment of loan, the company offered a pari passu charge on their factory building, fixtures, plant and equipment and hypothecation of the imported raw-materials and finished goods, estimated cost of which was Rs,13.80 millions. The worth of the plant and machinery, as per the Company's Books, is Rs,5 millions.
(ix) The first charge on these assets of the company is of Bankers Equity Limited being head of the Banks Consortium of which National Bank is also a member.
' Highlighting the above points, the Manager forwarded the case to the Zonal Head. It may be mentioned here that in the Memo. No,85 to the Provincial Credit Committee, net worth of the company was shown as 24.299 millions but the net worth of Directors/partners was shown as nil. In this memo. The amount of financial facility was increased to 33 millions by adding import letter of Credit worth Rs,15 millions. Against column No,8 regarding liabilities of the company with other banks, it is written N.A., which is obviously wrong. Against column No,13-A relating to net sales and profit etc., the reply is N.A. As the company by not yet started commercial operations. This memo. Is signed by the Manager, the Zonal Head (Malik Muhammad Hameed appellant in Criminal Appeal No,1624 of 2000), Regional Head and Head of the Credit Department. The securities for the financial facility noted in the memo. Were as follows:--
(a) Registered mortgage pari passu charge over the fixed assets of the company.
(b) Hypothecation of exportable goods.
(c) Trust receipts from the borrowers.
(d) Valid export L/C for US $ 1.995 million over which bank's lien has been marked.
(e) Usual letter of undertaking from the clearing agents on bank's approved list.
(f) Personal guarantee of all the Directors of the Company.
(g) Charges on stocks, book, debts and other assets of the company to be registered with the Joint Registrar of the Companies.
' Malik Muhammad Hameed, Zonal Head endorsed recommendations of the Branch Manager and requested the Vice-President of the Bank to accord necessary sanction as per the procedure. Laid down in pre-shipment export refinance facility scheme as referred in his letter dated 4-4-1990 (Exh.PF/7). The matter went before the Regional Head (Saleem Hassan, appellant No,2. In Criminal Appeal No,2 in Criminal Appeal No,1628 of 2000) and he vide his letter, dated 5-4-1990 sent the case to the Senior Executive Vice-President Credit Division, Provincial Headquarters Punjab, Lahore with his recommendation. He noted therein that the company had been dealing with Model Branch of the Bank since 1988' and the Company's dealings were found to be satisfactory. It was also noted that the civil work and installation of the impugned machinery at the premises of the Company was complete and the Company was ready to go into commercial production and further Messrs JMW Handels GMBH had agreed to purchase the entire production of the company during the next three years. The matter was put up before the Provincial Credit Committee in its meeting held on 14-5-1990, which was attended among others by Mr. Khalid Lateef and Mr. Saleem Hassan appellants. The Committee approved Memo. No,47 and sanctioned the financial facility to the extent of Rs,33 millions. The Committee advised the Regional Head, Islamabad to verify before allowing the above facility that there was no clause in the L/C detrimental to the interest of the bank. The memo. Annexed to the minutes of the P.C:C. (Exh.PF/9) shows that, the pari passu mortgage was changed into second mortgage. It is also noteworthy that the matter was put up before the P.C.C. With a recommendation to sanction import L/C limit (sight). Meaning thereby that on receipt of raw-material through the Bank, cash payment was to be made by the importer for receiving the raw- material. The matter went ,before the . Manager, Model Branch, Islamabad through the Zonal Head, who wrote a letter dated 31-5-1990 (Exh.PF/10). It was mentioned therein that sanction was accorded by the P.C.C. For packing finance (Part-I) to the extent of Rs,18 millions and import ,L.C. Limit (sight) of Rs,15 millions. It was further noted that before allowing disbursement of the finance facilities, it should be ensured that all the prescribed documentation/formalities have been completed. He further noted that it should be ensured that there was no clause in the L.C. Detrimental to the interest of the bank. The Vice-President of the bank sent a telex message to the Regional Head stating therein that the Provincial Chief Punjab (Khalid Lateef appellant in Criminal Appeal No,1643 of 2000) has allowed to accept second mortgage charge on fixed assets of the company instead of pari passu charge. The company executed a mortgage deed in favour of the bank (Exh.PF/12) on 29-8-1990. It is also significant to mention that instead of guarantee of all the Directors, the P.C.C. Allowed guarantee by the four sponsor Directors, named Waqar Azeem, Nusrat Azeem, Shaukat Azeem and Sajjad Azeem. In this way the Company availed of the financial facility and then it approached the bank for transfer of account of the company to the Cantt.
Branch of the Bank as is evident from letter Exh. PF/20 dated 14-11-1990 written by , the Regional Head (Mr. Saleem Hassan) to the Manager. National Bank of Pakistan Model Branch, Islamabad.
Accordingly, the account was transferred to the Cantt. Branch of the Bank. The company for a variety of reasons, could not go into production and no shipment for export of goods was made by the company. Therefore, non-shipment, the State Bank imposed a penalty amounting to Rs,1,63,900 on the National Bank as is evident from the letter dated 8-7-1991 (Exh.PF/24). Again a penalty of Rs,6,60,000 was imposed which is evident from letter, dated 15-7-1991 (Exh.PF/25). Since the company could not commence its business, it was unable to liquidate its liability whereupon a Reference was made against the Directors of the firm and some bank officials under the Ehtesab Act, 1997. After the repeal of the said Act, the Reference was forwarded' to the accountability Court under the N.A.B. Ordinance, 1999.
15. The material on the record clearly shows that on 18-3-1990, when the company applied for grant of financial facility under the Export Finance Scheme, its financial worth was negative because its liability far exceeded its assets. Therefore, Hafiz Nazir Ahmed, the Bank Manager should not have even initiated a proposal for grant of financial facility to the company. Anyhow' the proposal was made by the Manager and was processed through the Zonal and the Regional Officer and the financial facility was ultimately sanctioned by the Provincial Credit Committee headed by Mr. Khalid Lateef appellant. The question whether the Bank Manager, the Zonal Head and the Regional Head were in league with the Provincial Credit Committee and had abetted the offence, is not free from doubt. They had primarily performed a ministerial or administrative duty by initiating processing' and forwarding the case, subject to certain conditions, which, to some extent, secured the bank interest but the sanctioning authority, i,e, the Provincial Credti Committee headed by Mr. Khalid Latif as its Chairman, had clearly misused its authority in conferring the benefit or advantage to the Directors of the Company by modifying the original proposal for a pari passu charge into second charge and accepting personal guarantees of only four Directors instead of all the Directors as originally proposed by the. Bank Manager. Even a layman could understand that the Company which was already sunk into heavy financial liabilities and had already mortgaged its property and hypothecated the raw-material, machinery etc., in favour of the Bankers Equity Limited, was hardly a suitable party for claiming another financial facility amounting to Rs,33 millions. The mere fact that by providing a confirmed export order or providing 'an , Irrevocable Letter of Credit, the company fulfilled the eligibility criteria, was hardly sufficient to give such a heavy financial benefit or advantage to it by closing eyes to other realities which vividly showed that the company would not be in a position to liquidate its liabilities. It is strange that the hypothecation of the finished products was accepted as a security for the financial facility. A product, which had not yet conk into being, could hardly be treated to be a sufficient security, in the circumstances of the case. The Provincial Credit Committee, which enjoyed the authority to sanction or approve the financial facility was directly responsible for conferring undue benefit or advantage to the Company/Directors. Therefore, Mr. Khalid Lateef appellant in criminal Appeal No,1643 of 2000 as well as Mr. Saleem Hassan appellant in Criminal Appeal No,1628 of 2000 were guilty of an offence under section 9(a)(vi) of the Ordinance. So far as Hafiz Nazir Ahmed the Bank Manager and Malik Muhammad Hameed, Zonal Head are concerned, they had primarily performed a Ministerial function by initiating and forwarding the case with certain conditions, which were to some extent, beneficial to the bank. Had they acted at the behest of the high-ups -in the Bank hierarchy or under the influence of the co-accused, they would have from the very inception incorporated conditions, which were subsequently introduced by the Provincial Credit Committee. They may be liable for an administrative action under the relevant rules or regulations of the Bank but they do not seem to be penally liable for the offence under section (a)(vi) of the Ordinance. It is also significant to mention. That Hafiz Nazir Ahmed and Malik Muhammad Hameed have been held to be guilty under the second part of section 9(a)(vi) of the Ordinance, which was brought on the statute book after the date of making the Reference. Moreover, no question was put to them when they were examined under section 342 of the Cr.P.C. Regarding their alleged failure to use their authority to prevent conferment of an undue benefit or advantage to the Company. It is settled law that any circumstances figuring in the prosecution evidence, which is sought to be used by a Court of law for basing conviction of an accused thereon, must be put to the accused to obtain his explanation. If this legal requirement is not fulfilled then the conviction is vitiated and the accused is entitled to acquittal.
16. So far as Khalid Lateef and Saleem Hassan, appellants, are concerned, they were members of the Provincial Credit Committee and Khalid Lateef appellant was also Chairman of the Committee.
They alongwith the other members had wrongly exercised their authority by conferring a benefit/advantage on the Company/Directors and were therefore, penally liable under section 9(a)(vi) of the Ordinance. As regards ,the Directors of the Company, i,e, Air Marshal Retd. Waqar Azeern, Mr. Sajjad Azeem, Mr. Nusrat Azeem, Mr. Shaukat Azeem, Mst. Surraya Azeem, Mr. Saulat Azeem and Sardar Imtiaz Ali Qazilbash, they were acquitted of the charge under section 9(a)(vi) of the Ordinance and as mentioned above, the Prosecutor General N.A.B. Did not choose to file an appeal against their acquittal.' They were, however, convicted under section 9(a)(viii) of the Ordinance for having committed wilful default in payment of the loan. In the absence of any collusion, they appear to have applied for grant of a financial facility under the Export Finance Scheme in the normal course. They intended to set up the Company and start production in all seriousness. For this purpose they got the building constructed, imported the machinery and installed it at the company's premises and obtained affirm export order. They completed the formalities required under the Scheme for obtaining financial facility. They hoped that once the company went into production, it would be able to generate funds enabling them to repay the loan. It is not possible to say that from the very beginning the intention of the Company was merely to obtain a financial facility and not to return the amount. The Ditectors are educated persons and one of them i,e, Mr. Waqar Azeem is a retired Air Marshal. All of them are apparent responsible persons and had launched their .Venture genuinely. It is a different matter that their project was more ambitious than realistic. Anyhow, facts on the record show that they opened the L.C. For import of raw-material, which reached the Karachi Port. This was also a real and bona fide step towards the ultimate object of production of the intended commodities. The prosecution asserts that initially L.Cs. Were sight L.Cs. And the Company had received raw-material on four L.Cs. But later were changed into usance L.Cs. By that time, another Manager had taken over, who objected to change of L.Cs. Can the bank did not agree to arrange funds for release of goods. Whatever the position, the fact remains that raw-material against two L.Cs., was not received by the Company.
After having changed the L.Cs. From the sight to usance, the bank was under a legal obligation to honour its commitment and having failed to do the needful the bank had partly contributed to the failure of the company to go into production. We cannot readily accept the argument raised by the Special Prosecutor that after having received raw-material against four L.Cs., the Company must have started production. We have no clear evidence before us to show that the items received against four L.Cs. Were sufficient without the remaining raw-Material to start production. The benefit of doubt inherent in the circumstances, must go to the Company and its Directors. It may be mentioned that at one stage. Mr. Muhammad Hafiz Mirza P.W.3, had written a detailed letter mentioning therein that the Bank must honour its commitment under the L.Cs. And provide funds for release of the goods to enable the Company to go in to production.
17. There is considerable weight in the arguments raised by the learned counsel for the appellants/Directors that they were liable under the civil law for default/repayment of the loan but were not penally liable for the offence of wilful default defined under section 5(r) of the Ordinance.
Mere nonpayment or default cannot be equated with wilful default so as to bring it within the ambit of section 5(r) of the Ordinance. As discussed above, the Company was genuinely formed with an ambitious plan to produce High Tech Printed Circuit Boards and it was reasonably hoped that the Company would go into production in the month of April, 1990. However, their ambitious plan was frustrated due to the failure of the bank to provide finance for two L.Cs., for release of the imported raw-material. The appellants' learned counsel has rightly urged that the prosecution must provide mens rea on the part of the accused before making them penally liable for the offence of wilful default. The offence of wilful default denotes deliberate and calculated refusal to pay the loan amount. If a person is unable to return or pay the amount due to circumstances beyond his control or the failure of the Bank or financial institution to fulfil its contractual liability in the matter of providing financial facility to the accused, then he may be held liable for default alone not amounting to the offence of "wilful default" as defined under section 5(r) of the Ordinance.
18. The argument raised by Mr. Muhammad Saleem Saigol, Advocate that no offence can be created with retrospective effect as provided under Article 12 of the Constitution of Pakistan is correct in its own place. I had expressed the same view in my dissenting note in the case of Mrs. Shahida Faisal v. Federation of Pakistan and 3 others. (PLD 2000 Lahore 508). However, while exercising appellate jurisdiction under section 32 of the N.A.B. Ordinance, we cannot go into the vires of the legislation and examine the question of retrospectivity of the Ordinance. For our purposes, ii is enough that the N.A.B. Ordinance has been given effect from 1-1-1985. The question whether the offence under section 9(a)(vi) of the Ordinance is the same or materially the same as embodied in section 5(d) of the Prevention of Corruption Act, 1947 can be agitated in a Constitutional petition under Article 199 of the Constitution of Pakistan. While hearing the appeal, we are only required to examine whether in the light of the material on the record the offence under section 9(a)(vi) of the Ordinance has been made out against the appellant or not.
19. The trial Court had given weight to the fact that the Banking Court had passed a decree for a sum of Rs,1,05,00,000 against the Directors of the Company. The said decree was set aside by the High Court in Regular Second Appeal No, 292 of 1993 dated 6-12-2001 and the case was remanded to the Banking Court for a fresh decision in accordance with the law. I am not prepared to agree with the arguments raised by Mr. Ozair Karamat Bhandari that before making a person penally liable for the offence of wilful default, the liability must be finally determined by a Court of law. He had drawn analogy from the liability to pay land revenue and urged that a person could not be arrested under the provisions of Land Revenue Act for the recovery of the amount due unless it was determined by the Court. There is no such requirement to constitute the offence of wilful default under section 5(r) of the Ordinance. Therefore, the question whether the Directors of the Company are liable for offence of wilful default under section 9(a)(viii) of the Ordinance cannot be kept pending to await the fresh decision of the Banking Cour. The said decision will determine the, civil liability of the Company/Directors. However, the penal liability can be determined by this Court in :he light of the evidence available on the record.
20. For the foregoing discussion, we accept Criminal Appeal No,1624 of 2000 filed by Malik Muhammad Hameed, Criminal Appeal No, 1628 of 2000 by Hafiz Nazir Ahmad appellant No,1, Criminal Appeal No,1683 of 2000 filed by Sardar Imtiaz Ali Qazlibash, Criminal Appeal No,1682 of 2000 filed by Air Marshal (Retd.) Waqar Azeem, Sajjad Azeem, Nusrat Azeem and Shaukat Azeem and set Aside their convictions and sentences and acquit of the charges against them. The appellants are present in the Court. Their surety/bail bonds shall stand discharged. However, Criminal Appeal No,1643 of 2000 filed by Ithalid Lateef and Criminal Appeal No,1628 of 2000 to the extent of Saleem Hassan appellant No,2 are dismissed.