Chief Justice Iftikhar Muhammad Chaudhry observed on Monday that after getting their loans written off in billions from different banks, the parties, involved in misuse of public money, establish mega industrial projects but, on the other side, common man's property is auctioned in case of default.
A three-member bench comprising Chief Justice Iftikhar Muhammad Chaudhry, Justice Muhammad Sair Ali and Justice Ghulam Rabbani resumed hearing of a suo motu case pertaining to Rs 256 billion written off loans by various banks from 1971 to 2009. The bench in the daylong hearing primarily focused on the legality and constitutionality of SBP Circulars 29 and 31, which were issued to empower banks to write off loans from 2002 to 2003 but the Circulars are still in vogue.
While delivering argument, SBP counsel Iqbal Haider contended that the commission formed by the apex court on written off loans may examine the facts that loans were recoverable or not, adding that it has been the consistent view of all courts including SC that Circular 29 "has force of law".
The CJP and Justice Muhammad Sair Ali sought exact explanation from the SBP counsel, on which Iqbal Haider submitted that Circular 29 is valid force of law as well as does not cause discrimination in violation of Article 25 of the Constitution of Pakistan besides any other law.
The CJP asked the SBP counsel whether any judgement was passed on Circular 29' on which Iqbal Haider told the bench that Circular 29 was in accordance with the international and regional practices, and added that there was nothing wrong with the concept of Circular 29, but simultaneously he also admitted faults in its implementation.
Iqbal Haider added that the then regime designed three-pronged strategy to address bad debts issue, including issuance of Circular 29, forming a committee for revival of sick units, and to strengthen the corporate sector besides sending the reference of those defaulter to NAB who were ready for plea-bargain.
Justice Sair Ali observed that in many cases there was collusion between banks and the borrowers, as banks' officials themselves told the borrowers to stop payment of instalments. Counsel of Allied Bank, Dr Pervaiz Hassan, said that Circular 29 was valid regulation under Section 33-B of the Banking and Companies Ordinance, and added that the Ordinance gives power to write off loans to all banks under Section 196 of the Banking Companies Act. He further said that the Boards of Directors of the banks had endorsed Circular 29.
Dr Hassan pleaded that writing off loans was essential for good corporate governance and healthy financial environment in the banking sector, otherwise a false picture was to emerge for other shareholders. He told the bench that when Circular 29 was issued the ratio of non-performing loans (NPLs) was 25 percent, which is currently less than 10 percent. He added that Circular 29 had been approved in a series of superior courts cases whereas the court has jurisdiction to strike down the mala fide of Circular 29.
The court adjourned the hearing for Tuesday.
Comments
Comments are closed for this article.