The Lahore High Court (LHC) has observed that the courts are guardian of the public, hence could not allow enforcement of penalties against the citizens under contractual terms.
The court observed this while dismissing an appeal filed by Mashreq Bank against its defaulters for recovery of defaulted amount with penalty.
The court also observed that it is a well-established principle of law and legal philosophy that courts refuse to enforce contractual terms prejudice to the borrower, especially in the matters of mortgage.
The steps taken in the process of scrutiny by the banks would be watched by the superior courts closely to ensure that public authority is properly used and is not misused.
The court held that historically equity would not impose harsh conditions on a borrower by the modalities of enforcement chosen by a lender, which could have been avoided, by open enforcement of the contractual rights available to such a lender.
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