Illegal settlement of loans: Supreme Court asks SBP to take action against borrowers

The Supreme Court on Thursday directed State Bank of Pakistan (SBP) to go through circular 29 and take action against those borrowers who have illegally settled their loans, violating the provisions of the circular, and submit a report by March 14.
A two-member bench comprising Chief Justice Iftikhar Muhammad Chaudhry and Justice Ghulam Rabbani was hearing a suo motu case regarding the Rs 256 billion written-off loans extended by the banks from 1971 to 2009. The chief justice observed that the period of circular 29 ended on April 14, 2003 but the banks were still writing off huge amount of loans especially of influential borrowers by misusing the lapsed law.
He said that the bank officers, who had waived off loans (mangers or other high officials) were also responsible in case the loanee company defaults. "Everyone is going scot-free after committing the crime...this is beyond comprehension," he remarked.
The CJP said they would direct the courts and banking tribunals where the cases of written-off loans were pending to dispose these within three months and pledged that the apex court would monitor the progress on such cases. Iqbal Haider, counsel for SBP, presented reports on Redco Textile Mills and Indus Sugar Mills. He told the court that SBP governor had contacted former judge, Saleem Akhtar to examine the written-off loan cases.
When the chief justice asked the counsel about recovery, he said according to the SBP information Rs 1.11 billion relief was given to the mills. He also informed the court that in many cases, the banks did not register criminal cases against the borrowers on wilful default.
The company continued its commercial function till the banks filed a reference against the Mills with NAB, as a result its directors Saif-ur-Rehman and Mujeeb-ur-Rehman were arrested. But after getting bail from the courts, he said, Saif-ur-Rehman took refuge in Dubai along with the amount taken as loan.
Meanwhile, counsel for Redco Textile Mills (RTM) Salman Butt informed the court that his client did not owe any money to the banks. Barrister M S Baqir, who had filed application against Indus Sugar Mills, stated that the mills was regularly paying the instalment of their loans, but during the previous government their loans were written-off.
Ali Zafar, counsel for Indus Sugar Mills, contended that they had paid double an amount double than what the mills had received. He said Rs 486 millions were received but his clients paid Rs 780 millions, hence this was not a case of written-off loan but of waiver of the amount. He submitted that under Section 33-B of the Banking Companies Ordinance, 1962, the SBP which is an independent body, has full jurisdiction to lay down guidelines for the banks to waive off the principal, interest and mark up in case where the asset value of the company is eroded.
Justice Chaudhry said that they were sure identical situation prevails in many other cases of written-off loans. He enquired as to why cases had not been registered against the defaulters. The chief justice said the money belonged to the public and it should be recovered at the earliest at any cost.
During the previous hearing, SBP''s counsel had submitted a report according to that various banks had written off Rs 74 billion during 2008 and 2009. The report also mentioned the amount included Rs 36 billion given to 446,049 borrowers under the Rs 500,000 loan category and to 8,698 people under the Rs 1 million category. Khawaja Haris, amicus curiae, briefed the court about suggestions they have prepared and forward to SBP governor. The court directed the governor to give his response on the suggestions. The hearing was adjourned till March 14.