SC restrains banks from filing FIRs against customers

Apex court rules customers who breach terms of financial agreements can only be tried by banking courts

ISLAMABAD: The Supreme Court (SC) on Monday barred banks from registering FIRs against their customers for selling hypothecated or pledged goods and mortgaged properties or in any other way breaching the terms of financial agreements and instruments.

A three-member judge bench of the apex court, headed by Chief Justice of Pakistan Mian Saqib Nisar, observed that whenever an offence was committed by a customer of a financial institution within the contemplation of the Financial Institutions (Recovery of Finances) Ordinance 2001, it could only be tried by the banking courts and no other forum.

“The Special Courts under the Offences in Respect of Banks (Special Courts) Ordinance, 1984 (the ORBO), the ordinary criminal courts under the Code and the Agency under the Act, 1974, read with the Ordinance, 1962 would have no jurisdiction in the matter,” the court observed in its 39-page verdict.



Bank customers had approached the apex court against the Lahore High Court’s orders. The customers were divided into two categories. The first category comprised of customers who had allegedly removed hypothecated or pledged goods, disposed of mortgaged properties, or breached the terms of finance agreements. Banks had filed complaints against them before the special courts formed under the ORBO and the agency under the 1974 act.

The second category included customers whose cheques had bounced and they were booked under the provisions of Section 489-F of the PPC. The customers had approached the high court by filing constitutional  or revision petitions, or under Section 561-A of the Code, claiming that action could only be taken against them under the Financial Institutions (Recovery of Finances) Ordinance, 2001 and no other law, and the exclusive jurisdiction vests with the banking courts formed under the ordinance.  However, the high court had dismissed their petition. Later, they approached the apex court through senior lawyer Salman Aslam Butt and their appeals were allowed.

The SC in its judgement observed, “A comparative analysis shows that generally, proceedings before the Special Courts under the ORBO are more onerous and relatively disadvantageous to the accused.”

If further noted that under the ORBO, proceedings could be initiated on the basis of a complaint by any person or a report by a police officer (as opposed to only a complaint by a financial institution under the Ordinance, 2001), and accused was not to be released on bail if there appeared to be reasonable grounds of guilt (whereas all offences apart from willful default were bailable under the Ordinance, 2001).



Furthermore, most offences were non-compoundable, punishment of the offences was generally of greater severity, the accused and persons acting on his behalf were barred from dealing with moveable and immovable property without the permission of the special court, the accused could neither leave Pakistan nor be employed for any service without the permission of the special court, there was presumption of guilt and the burden of proof was on the accused.

The chief justice while authoring the verdict observed that such an interpretation would give banks the unbridled power to choose the forum before which trial of offences should take place, and they would obviously choose the special courts under the ORBO being more burdensome and prejudicial to the accused. A natural corollary is that in such circumstances the 2001 ordinance would, in effect, be rendered redundant.

“This is not permissible under any principle of interpretation of the law when the courts are trying to reconcile two potentially conflicting laws. Our duty is to bridge the gap between what is and what was intended to be. We are not willing to attribute redundancy to the legislature,” the court noted.

“We do not wish to give financial institutions the unrestricted power to choose, when there has been an alleged dishonour of a cheque, between Section 20(4) of the Ordinance, 2001 and Section 489-F of the PPC, as they would of a certainty opt to initiate proceedings under the latter which offence carries a greater punishment than the former.”



The court observed that if banks availed both options concurrently then it would offend the provisions of Article 25 of the Constitution, which provided that all citizens were equal before the law and are entitled to equal protection of the law; there being no defined guidelines on the basis of which cases may be tried under either law, it would tantamount to conferring unfettered discretion on financial institutions to pick and choose the forum as per their free will.

“Allowing them (banks) to do so would be in violation of the rule against discrimination, therefore, we deem it best to restrict the applicability of the ORBO and hold that the Ordinance, 2001 is to have an overriding effect on the former,” the SC noted.

The court further held that Article 4 of the Constitution conferred upon citizens the inalienable right to enjoy the protection of the law and to be treated in accordance with law. This provision is reflective of the seminal concept of the rule of law, one of the elements of which is, as identified by Tom Bingham, that the law must be accessible and so far as possible intelligible, clear and predictable.

“If both the Ordinance, 2001 and the ORBO were to enjoy concurrent jurisdiction, citizens alleged to have committed an offence in respect of finance would be left wondering which offence they would be charged with, which Court they would be tried in and under what procedure. Thus, to our minds, such a situation would also be an affront to the provisions of Article 4 of the Constitution.”

The judgement held that the Ordinance, 2001 would have an overriding effect on all those cases which are covered by it. Concomitantly, offences not covered by the Ordinance, 2001 would be triable under the ORBO.