Averting due adjudication: LHC declares SBP’s Circular No 2 as unlawful

LAHORE: The Lahore High Court declared the circular No.2 of 2003 of the State Bank of Pakistan (SBP) which averts the due adjudication and determination process vested in the adjudicating officer by adding paragraph 33A in chapter 12 of Foreign Exchange (FE) manual as ultra vires and without lawful authority.

The court said by issuing the circular No 2, the SBP has arrogated to itself the power vesting in the adjudicating officer regarding recovery of sums due to the government in execution of the orders passed by him.

The court said the SBP was not at all empowered to add anything or impose stricter conditions to the conditions already prescribed by Rules 1988 in the purported exercise of powers under sub-section (3) of section 20 of the Foreign Exchange Regulations Act.

The court allowed the petitions and struck down the show cause notices issued to the petitioners Mumtaz Ghai Textile and others and observed that the SBP may proceed in accordance with law and referred the matters to the adjudicating officer.

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Under the impugned circular No.2, the SBP would retain its charge over the lien marked on a certain percentage of the amount of export proceedings and the exporter cannot use the amount for any purpose until the determination is made by the adjudication department.

The petitioners urged that this affects their rights to deal with the amount lying in their accounts at will and is out with the authority of the SBP to issue such instructions.

They said this was a clog on the right of the authorized dealer/exporters to deal with the amount lying in their bank.

The court said the circular No.2 condemns the authorized dealer unheard and this act of the SBP not only offends the provisions of the Act but also the constitutional rights enshrined in the Constitution and this cannot be allowed, the court added.

The court observed that it further impinges upon the right to freedom of trade and business guaranteed by article 18 of the Constitution.

The court said the constitutional right recognized by article 10A of the Constitution is a fundamental right inhering in a person to fair trial and due process for the determination of his civil rights.

At best, the SBP could have issued a notification for the purpose of securing compliance with the provisions of section 23B but could not have imposed conditions to usurp the powers of adjudicating officers, the court concluded.

Copyright Business Recorder, 2025