SC questions SBP's jurisdiction to write off Rs256 bn loans -Pakistan Press Foundation (PPF)

Paksitan Press Foundtion

SC questions SBP’s jurisdiction to write off Rs256 bn loans

ISLAMABAD: The Supreme Court on Tuesday questioned the authority and jurisdiction of State Bank of Pakistan (SBP) to waive off Rs256 billion bank loans during the period from 1971 to 2009 under Banking Companies Ordinance.

A three-member bench of the Supreme Court comprising Chief Justice Iftikhar Muhammad Chaudhry, Justice Tariq Parvez and Justice Ghulam Rabbani while hearing a suo motu case, directed SBP Counsel Syed Iqbal Haider to submit today (Wednesday) details of at least 10 cases from each year which met two conditions set in section 33B Banking Companies Ordinance and which were pre-requisites for writing off loans.
The chief justice said in his remarks that national wealth should be saved even if relations with any country are affected. He told the SBP counsel that eh SC would check the bank’s authority and examine the circulars while keeping in view Article 25 of the constitution.

He said under section 33B of the Banking Companies Ordinance, the SBP could write off loans of borrowers under two conditions, i.e., security and rehabilitation of sick units. He said the SBP powers depended upon these two conditionalities. The court would examine constitutionality of the Circular 29 of the 2002 under which banks waived off loans out of public money, he added. Justice Iftikhar Chaudhry observed that the SBP policy appeared open ended with everybody explaining it to his or her own interests.

Justice Tariq Parvez remarked that the section 33B did not give you a blanket power. At the outset of proceedings, Abdul Hafeez Pirzada, appearing as amicus curae, stated that few days back a report was presented by the finance minister before a National Assembly committee showing another amount of Rs50 billion loans written off during last two years. He said they were aware that the apex court was already seized with the matter but another huge amount was written off by the private banks. He said these banks were making tremendous profits but were not paying taxes to the government.

Iqbal Haider replied that private banks had done it and the SBP had not instructed them. The chief justice said that no bank could operate without obtaining license from the SBP.
An SBP official apprised the court that the names of beneficiaries who got their loans written off during last two years from the private banks had been included in the lists already submitted with the court. He said the banks decided the loan issues on their own under the mechanism and regulations of the SBP.

Iqbal Haider told that they had submitted 49 volumes of books containing details besides all circulars from the year 1971 to December 2009. To a bench’s question, he replied that loans were waived off under an amendment to Banking Companies Ordinance in 1997 and SBP Circular 29 of 2002. He said the subsequent instructions were regarded as guidelines.

Citing certain judicial verdicts like 1997 SC, he said the courts had declared these circulars as force of law.The chief justice said that prima facie, it could be observed after going through the judgement that these had stationary value. But the verdict did not deal with the constitutionality of the issue, he added.

Pirzada stood up and cited CLD 2009 case of SHC. He said the said judgement had dealt with the constitutionality of the matter and declared it discriminatory. He said the people who got their loans written off were again benefited from the facility.

Justice Iftikhar Chaudhry observed that the citation would have direct bearing upon the case.Salman Akram Raja also apprised the bench that he would be appearing as counsel for five private banks presidents. The hearing would resume today (Wednesday).The bench is seized with a matter of Rs54 billion written off loan. A suo motu notice was taken on press reports in 2007 by the apex court.
Source: The News