EXTRAORDINARY
PUBLISHED
BY AUTHORITY
Government of
AND
PARLIAMENTARY AFFAIRS
(
Law, Justice and Human Rights Division )
F. No. 2(1)/2001-Pub.The
following Ordinance promulgated by the
President
is hereby published for general information :-
ORDINANCE No. XLVI of 2001
an
AND
WHEREAS the President is satisfied that circumstances
exist which render it necessary to take immediate action;
NOW
THEREFORE, in pursuance of the proclamation of Emergency of the
fourteenth day of October, 1999 and Provisional Constitution Order No.1
of 1999, read with the Provisional Constitution (Amendment) Order No.9
of 1999, and in exercise of all powers enabling him in that behalf,
the President of the Islamic Republic of Pakistan is pleased to make
and promulgate its following Ordinance :-
1. Short
title, extent and commencement.-
(1) This Ordinance may be called the Financial
Institutions (Recovery of Finances) Ordinance, 2001.
(2) It extends to the whole of
(3) It shall come into force at once.
2. Definitions.-
In this Ordinance unless there is anything repugnant in the subject
or context ---
a) financial
institution means and includes ---
(i) any company whether incorporated within or outside Pakistan which
transacts the business of banking or any associated or ancillary business
in Pakistan through its branches within or outside Pakistan and includes
a government savings bank, but excludes the State Bank of Pakistan;
(ii) a modaraba or modaraba management company, leasing company, investment
bank, venture capital company, financing company, unit trust or mutual
fund of any kind and credit or investment institution, corporation or
company; and
(iii) any company authorized by law to carry on any similar business, as
the Federal Government may by notification in the official Gazette,
specify;
(b)
(i) in respect of a case in which the claim does not exceed fifty million
rupees or for the trial of offences under this Ordinance, the Court
established under section 5; and
(ii) in respect of any other case, the High Court.
(c) customer
means a person to whom finances has been extended by a financial institution
and includes a person on whose behalf a guarantee or letter of credit
has been issued by a financial institution as well as a surety or an
indemnifier;
(d) finance
includes ---
(i) an accommodation or facility provided on the basis of participation
in profit and loss, mark-up or mark-down in price, hire-purchase, equity
support, lease, rent-sharing, licensing charge or fee of any kind, purchase
and sale of any property including commodities, patents, designs, trade
marks and copy-rights, bills of exchange, promissory notes or other
instruments with or without buy-back arrangement by a seller, participation
term certificate, musharika, morabaha, musswama, istisnah or modaraba
certificate, term finance certificate;
(ii) facility of credit or charge cards;
(iii) facility of guarantees, indemnities, letters of credit or any other
financial engagement which a financial institution may give issue or
undertake on behalf of a customer, with a corresponding obligation by
the customer to the financial institution;
(iv) a loan, advance, cash credit, overdraft, packing credit, a bill discounted
and purchased or any other financial accommodation provided by a financial
institution to a customer;
(v) a benami loan or facility that is, a loan or facility the real beneficiary
or recipient whereof is a person other than the person in whose name
the loan or facility is advanced or granted;
(vi) any amount due from a customer to a financial institution under a decree
passed by a civil court or an award given by an arbitrator; any amount
due from a customer to a financial institution which is the subject
matter of any pending suit, appeal or revision before any court; any
other facility availed by a customer from a financial institution.
(e) obligation
includes ---
(i) any agreement for the repayment or extension of time in repayment
of a finance or for its restructuring or renewal or for payment or extension
of time in payment of any other amounts relating to a finance or liquidated
damages; and
(ii) any and all representations, warranties and covenants made by or on
behalf of the customer to a financial institution at any stage, including
representations, warranties and covenants with regard to the ownership,
mortgage, pledge, hypothecation or assignment of, or other charge on
assets or properties or repayment of a finance or payment of any other
amount relating to a finance or performance of an undertaking or fulfillment
of a promise; and
(iii) all duties imposed on the customer under this Ordinance; and
(f) rules
means rules made under this Ordinance.
3. Duty
of a customer.-
(1) It shall be the duty of a customer to fulfil
his obligations to the financial institution.
(2) Where the customer defaults in the discharge
of his obligation, he shall be liable to pay, for the period from the
date of his default till realization of the cost of funds of the financial
institution as certified by the State Bank of Pakistan from time to
time, apart from such other civil and criminal liabilities the he may
incur under the contract or rules or any other law for the time being
in force.
(3) For purposes of this section a judgment against
a customer under this Ordinance shall mean that he is in default of
his duty under sub-section (1) and the ensuing decree shall provide
for payment of the cost of funds as determined under sub-section (2).
4. Ordinance
to override other laws.-
The
provisions of this Ordinance shall have effect notwithstanding anything
inconsistent therewith contained in any other law for the time being
in force.
5. Establishment
of
(1)
The
Federal Government may, by notification in the official Gazette, establish
as many Banking Courts as it considers necessary to exercise jurisdiction
under this Ordinance and appoint a Judge for each of such Courts and
where it establishes more Banking Courts than one, it shall specify
in the notification the territorial limits within which each of the
Banking Courts shall exercise its jurisdiction.
(2) Where more Banking Courts than one have been
established to exercise jurisdiction in the same territorial limits,
the Federal Government shall define the territorial limits of each such
court.
(3) Where more Banking Courts than one have been
established in the same or different territorial limits, the High Court
may, if it considers it expedient to do so in the interest of justice
or for the convenience of the parties or of the witnesses, transfer
any case from one Banking Court to another.
(4) A Judge of a Banking Court shall be appointed
by the Federal Government after consultation with the Chief Justice
of the High Court of the Province in which the Banking Court is established
and no person shall be appointed a Judge of a Banking Court unless he
has been a Judge of a High Court or is or has been a District Judge.
(6) A Judge of a
(7) The salary, allowances and other terms and
conditions of service, of a person appointed as a Judge of a
(8) The Banking Court may, if it so requires,
be assisted in technical aspects of banking transactions involved in
any case by an amicus curiae who has at least ten years experience of
banking at a senior management level in a Financial institution of repute
or the State Bank of Pakistan and has the following qualifications,
namely:-
(i) a degree in Commerce and Account or in Economics;
or
(ii) has completed a course in banking from the
(9) Remuneration of the amicus curiae and the
party or parties by whom it will be payable will be determined by the
6. Resignation
and removal of Judges.-
(1)
A
person not being a District Judge, appointed as a Judge of a
(2) A person appointed as a Judge of a
7. Powers
of Banking Courts.-
(1)
Subject
to the provisions of this Ordinance a
(a) in the exercise of its civil jurisdiction
have all the powers vested in a civil court under the Code of Civil
Procedure, 1908 (Act V of 1908);
(b) in the exercise of its criminal jurisdiction,
try offences punishable under this Ordinance and shall, for this purpose
have the same powers as are vested in a Court of Sessions under the
Code of Criminal Procedure, 1898 (Act V of 1898):
Provided
that a
(2) A Banking Court shall in all matters with
respect to which the procedure has not been provided for in this Ordinance,
follow the procedure laid down in the Code of Civil Procedure, 1908
(Act V of 1908), and the Code of Criminal Procedure, 1898 (Act V of
1898).
(3) All proceedings before a Banking Court shall
be deemed to be judicial proceedings within the meaning or sections
193 and 228 of the Pakistan Penal Code (Act XLV of 1860), and a Banking
Court shall be deemed to be a Court for purposes of the Code of Criminal
Procedure 1898 (Act V of 1898).
(4) Subject to sub-section (5), no court other than a Banking Court shall have or exercise any
jurisdiction with respect to any matter to which the jurisdiction of
a Banking Court extends under this Ordinance, including a decision as
to the existence or otherwise of a finance and the execution of a decree
passed by a Banking Court.
(5) Nothing in sub-section (4) shall be deemed
to affect ---
(a) the right of a financial institution to seek any remedy before any
court or otherwise that may be available to it under the law by which
the financial institution may have been established; or
(b) the powers of the financial institution,
or jurisdiction of any court such as is referred to in clause (a); or
require
the transfer to a Banking Court of any proceedings pending before any
financial institution or such court immediately before the coming into
force of this Ordinance.
(6) All proceedings pending in any Banking Court
constituted under the Banking Companies (Recovery of Loans, Advances,
Credits or Finances) Act, 1997 (XV of 1997), including suits for recovery
of loans that Act shall stand transferred
to, or be deemed to be transferred to, and heard and disposed of by,
the Banking Court having jurisdiction under this Ordinance. On transfer
of proceedings under this sub-section the parties shall appear before
the
(7) In respect of proceedings transferred to a
Banking Court under subsection (6),
the Banking Court shall proceed from the stage which the proceedings
had reached immediately prior to the transfer and shall not be bound
to recall and re-hear any witness and may act on the evidence already
recorded or produced before the Court from which the proceedings were
transferred.
8. Suit
for recovery of written off finances, etc.-
(1)
Subject
to sub-section (2), and notwithstanding anything contained in the Limitation
Act, 1908 (IX of 1908) or any other law, a financial institution may,
within three years from the date of coming into force of this Ordinance,
file a suit for the recovery of
any amount written off, released or adjusted under any agreement, contract,
or consent, including a compromise or withdrawal of any suit or legal
proceedings or adjustment of a decree between a financial institution
and a customer on any day on or after the first day of January, 1990
and before the coming into force of this Ordinance, if it can establish
that the amount was written off, released or adjusted for political
reasons or considerations other than bona fide business considerations.
No suit under sub-section (1)
shall be filed unless its filing has been approved by
The Board of Directors, in
the case of a financial institution incorporated within
9. Procedure of Banking Courts.-
(1) Where a customer or a financial
institution commits a default in fulfillment of any obligation with
regard to any finance, the financial institution or, as the case may
be, the customer, may institute a suit in the Banking Court by presenting
a plaint which shall be verified on oath, in the case of a financial
institution by the Branch Manager or such other officer of the financial
institution as may be duly authorized in this behalf by power of attorney
or otherwise.
(2) The plaint shall be supported by a statement of
account which in the case of a financial institution shall be duly certified
under the Bankers Books Evidence Act, 1891 (XVII of 1891), and all other
relevant documents relating to the grant of finance. Copies of the plaint,
statement of account and other relevant documents shall be filed with
the
(3) The plaint, in the case of a suit for recovery
instituted by a financial institution, shall specifically state ---
(a) the amount of finance availed by the defendant from the financial institution;
(b) the amounts paid by the defendant to the financial institution and
the dates of payment; and
(c) the amount of finance and other amounts relating to the finance payable
by the defendant to the financial institution upto the date of institution
of the suit.
(4) The provisions of section 10 of the Code of Civil
Procedure, 1908 (Act V of 1908), shall have no application for and in
relation to suits filed hereunder.
(5) On a plaint being presented to the Banking Court,
a summons in Form No.4 in Appendix B to the Code of Civil Procedure,
1908 (Act V of 1908) or in such other form as may, from time to time,
be prescribed by rules, shall be served on the defendant through the
bailiff or process server of the Banking Court, by registered post
acknowledgement due, by courier and by publication in one English language
and one Urdu language daily newspaper, and service duly effected in
any one of the aforesaid modes shall be deemed to be valid service for
purposes of this Ordinance. In the case of service of the summons through
the bailiff or process server, a copy of the plaint shall be attached
therewith and in all other cases the defendant shall be entitled to
obtain a copy of the plaint from the office of the Banking Court without
making a written application but against due acknowledgement.
The
10. Leave to defend.-
(1) In any case in which the summons
has been served on the defendant as provided for in sub-section (5)
of section 9, the defendant shall not be entitled to defend the suit
unless he obtains leave from the Banking Court as hereinafter provided
to defend the same; and, in default of his doing so, the allegations
of fact in the plaint shall be deemed to be admitted and the Banking
Court may pass a decree in favour of the plaintiff on the basis thereof
or such other material as the Banking Court may require in the interest
of justice.
(2) The defendant shall file the application for leave
to defend within thirty days of the date of first service by any one
of the modes laid down in sub-section (5) of section 9.
Provided that where service
has been validly effected only through publication in the newspapers,
the
(3) The application for leave to defend shall be in
for form of a written statement, and shall contain a summary of the
substantial questions of law as well as fact in respect of which, in
the opinion of the defendant, evidence needs to be recorded.
(4) In the case of a suit for recovery instituted
by a financial institution the application for leave to defend shall
also specifically state the following ---
(a) the amount of finance availed by the defendant from the financial institution;
the amounts paid by the defendant to the financial institution and the
dates of payments;
(b) the amount of finance and other amounts relating to the finance payable
by the defendant to the financial institution upto the date of institution
of the suit;
(c) the amounts of finance and other amounts relating to the finance payable
by the defendant to the financial institution upto the date of institution
of the suit;
(d) the amount if any which the defendant disputes as payable to the financial
institution and facts in support thereof;
Explanation.- For the purposes of clause (b)
any payment made to a financial institution by a customer in respect
of a finance shall be appropriated first against other amounts relating
to the finance and the balance if any, against the principal amount
of the finance.
(5) The application for leave to defend shall be accompanied
by all the documents which, in the opinion of the defendant, support
the substantial questions of law or fact raised by him.
(6) An application for leave to defend which does
not comply with the requirements of sub-sections (3), (4) where applicable
and (5) shall be rejected, unless the defendant discloses therein sufficient
cause for his inability to comply with any such requirement.
(7) The plaintiff shall be given an opportunity of
filing a reply to the application for leave to defend, in the form of
a replication.
(8) Subject to section 11, the
(9) In granting leave under sub-section (8), the
(10) Where the application for leave to defend is
accepted, the Banking Court shall treat the application as a written
statement, and in its order granting leave shall frame issues to the
substantial questions of law or fact, and, subject to fulfillment
of any conditions attached to grant of leave fix a date for recording
of evidence thereof and disposal of the suit.
(11) Where the application for leave to defend is
rejected or where a defendant fails to fulfill the conditions attached
to the grant of leave to defend, the
(12) Where an application for leave to defend has
been filed before the coming into force of this Ordinance, the defendant
shall be allowed a period of twenty-one days from the date of coming
into force of this Ordinance, or from the date of first hearing thereafter,
whichever is later, for filing an amended application for leave to defend
in accordance with the provisions of this Ordinance.
11. Interim Decree.-
(1) If the Banking Court on a consideration
of the contents of the plaint, the application for leave to defend of
the defendant and the reply thereto, is of the opinion that the dispute
between the parties does not extend to the whole of the claim, or that
part of the claim is either undisputed, or is clearly due or that the
dispute is mainly limited to a part of the principal amount of the finance
or to any other amounts relating to the finance, it shall, while granting
leave and framing issues with respect to the disputed amounts, pass
an interim decree in respect of that part of the claim which relates
to the principal amount and which appears to be payable by the defendant
to the plaintiff.
(2) The interim decree passed under sub-section (1)
shall, for all purposes including appeal and execution be deemed to
be a decree passed under this Ordinance, and any amount covered thereby
or recovered in execution thereof shall be adjusted at the time of the
final decree:
Provided that it shall be open to the
Provided further that neither the Banking Court nor the High Court
acting under sub-section (3) of section 22 shall stay execution
of an interim decree unless the judgment-debtor deposits in cash with
the Banking Court the amount or amounts admitted by the judgment-debtor
to be payable to the financial institution under clause (c) of sub-section
(4) of section 10, and furnishes security for the balance decreetal
amount if any, inclusive, in the case of a suit filed by a financial
institution, of cost of funds determined under section 3, and other
costs.
12. Power to set aside decree.-
In any case in which a decree
is passed against a defendant under sub-section (1) of section 10 he
may, within twenty-one days of the date of the decree, or where the
summons was not duly served when he has knowledge of the decree, apply
to the Banking Court for an order to set is aside and if he satisfied
the Banking Court that he was prevented by sufficient cause from making
an application under section 10, or that the summons was not duly served,
the Court shall make an order setting aside this decree against him
upon such terms as to costs, deposit in cash or furnishing of security
or otherwise as it thinks fit and allow him to make the application
within ten days of the order.
13. Disposal of suit.-
(1) A suit in which leave to defend has been granted
to the defendant shall be disposed of within ninety days from the day
on which leave was granted, and in case proceedings continue beyond
the said period the defendant may be required to furnish security in
such amount as the Banking Court deems fit, and on the failure of the
defendant to furnish such security, the Banking Court shall pass an
interim or final decree in such amount as it may deem appropriate.
(2) The requirement of furnishing security under sub-section
(1) shall be dispensed with if, in the opinion of the
(3)
Suits before a Banking Court shall come up for regular hearing as expeditiously
as possible except in extraordinary circumstances and for reasons to
be recorded, a Banking Court shall not allow adjournments for more than
seven days.
(4) Where leave to defend is granted
and evidence is to be recorded the parties may file affidavits in respect
of the examination-in-chief of any witness who is not to be summoned
through the Banking Court and where such affidavits are filed, the Banking
Court shall give notice thereof to the other contesting parties and
on the date fixed for recording evidence shall subject to such modifications
as may be required for purposes of production and exhibiting of documents
or otherwise in accordance with law treat the affidavit as examination-in-chief
and allow the contesting parties an opportunity for cross-examination
on the basis thereof.
14. Decree in suits relating
to mortgages.-
Where the suit filed by a financial
institution before the Banking Court is for the enforcement of a mortgage
of immovable property the Banking Court will not be required to pass
a preliminary decree as provided in Order XXXIV of the First Schedule
to the Code of Civil Procedure, 1908 (Act V of 1908), but shall directly
pass an interim or final decree for foreclosure or sale.
15.
(1) In this section unless there is anything repugnant
in the subject or context. ---
(a) mortgage means the transfer
of an interest in specific immovable property for the purpose of securing
the payment of the mortgage money or the performance of an obligation
which may give rise to a pecuniary liability;
(b) mortgage money means any
finance or other amounts relating to a finance, penalties, damages,
charges or pecuniary liabilities, payment of which is secured for the
time being by the document by which the mortgage is effected or evidenced,
including any mortgage deed or memorandum of deposit of title deeds;
and
(c) mortgaged property means
immovable property mortgaged to a financial institution.
(2) In case of default in payment
by a customer, the financial institution may send a notice on the mortgagor
demanding payment of the mortgage money outstanding within fourteen
days from service of
the notice, and
failing payment of
amount within due date,
it shall send a second notice of demand for payment of the amount within
fourteen days. In case the customer on the due date given in the second
notice sent, continuous to default in
payment, financial institution
shall serve a final
notice on the mortgager demanding the payment of the mortgage money
outstanding within thirty days from service of the final notice on the
customer.
(3) When a financial institution serves a notice of
demand, all the powers of the mortgagor in regard to recovery of rents
and profits from the final mortgaged property shall stand transferred
to the financial institution until such notice is withdrawn and it shall
be the duty of the mortgagor to pay all rents and profits from the mortgaged
property to the financial institution.
Provided that where the mortgaged
property is in the possession of any tenant or occupier other than the
mortgagor, it shall be the duty of such tenant or occupier on receipt
of notice in this behalf from the financial institution to pay the rent
or lease money or other consideration agreed with the mortgagor to the
financial institution.