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[Lahore]
Before Muhammad Afzal Lone, J
HAIDERI INTERNATIONAL FINANCE LTD.--Petitioner
versus
THE STATE BANK--Respondent
Writ Petition No. 4883 of 1981, decided on 9th July, 1985.
--Ss. 27(1) & 43-A--Business transaction, in contravention of--State Bank can requisition from a company or person requisite information and documents if such company or person in its view was transacting business in contravention of S. 27(1) of Banking Companies Ordinance, 1962--If State Bank after making enquiry found such transaction of business to be in contravention thereof, it could. held, issue declaration to that effect, after giving such company or person opportunity of showing cause against proposed action.
--Ss. 43-A & 43-B--Notice, issuance of--Requirements--Only after perusal of material State Bank, held, could make up its mind tentativel3 as to whether or not action under S. 43-B of Ordinance 1962, would be called for--In point of time it could be claimed that proceedings regarding declaration could be commenced on issuance of show-cause notice thereof.
S.A. de Smith's "Judicial Review Administrative Action"; Skaleeo (P) Ltd. v. The State of West Bengal A I R 1974 Cal. 306; Ghulam Mohy-ud-Din v. Chief Settlement Commissioner and others P L D 1964 S C 829; Fazal Dad and others v. Member Board of Revenue P L D 1977 Lah. 264; Madiyal Prem Chandra v. Commercial Tax Officer A I R 1958 S C 667; S.B. Industries v. The District Registrar, Trade Marks P L D 1969 Dacca 451; R. v. New Market Assessment Committee (1945) 2 All E R 370; R. v. Deputy Industrial Enjuries Commission (1962) 2 All E R 430; Haji Rehman-ud-Din v. Government of West Pakistan PLO 1958 Lah. 86; Abdul Saboor Khan v. Karachi University and another P L D 1966 S C 537; University of Dacca v. Zakir Ahmad P L D 1965 S C 90 and Lahore Improvement Trust v. Custodian of Evacuee Property PLD1971SC811ref.
---S. 43-B--Legal opinion--Utilization of--In enquiry under S. 43-B of Ordinance, 1962, utilization of legal opinion by Governor State Bank of Pakistan, held, would not legitimately be open to any valid objection.
Lord Tomlin in Louis Dreyfus & Co. v. R.A. Arunachala Ayya A I R 1931 P C 389 ref.
--Rules of natural justice, held, would guarantee only a minimum standard of hearing--Such rules are not fettered by any rigidity but vary with circumstances of each case--Only after appraisal of totality of facts, in a given case, proceeding could be annulled for want of observance of rules of natural justice--Rules of natural justice would not blossom whole of multi-dimensional notion of justice but merely command that in certain situations rule of fair hearing has to be followed.
---Preamble & S. 43-B--Enquiry by State Bank--Requirements--Such enquiry, held would have to be conducted in accordance with requirements of substantial justice--Right of hearing granted to petitioner is not accompanied by recognition of right to examine witnesses--While exercising powers of judicial review, Court could examine whether Tribunal had exercised jurisdiction in accordance with dictates of Statute and in conformity with rules of natural justice.
---S. 5(b)--Word "Banking", concept of--Definition of word "banking" given in S. 5(b), held, was fairly wide--Acceptance of deposits for purposes of investing or lending but repayable on demand or otherwise would fall within mischief of such definition.--[Words and phrases].
The Commissioners of the State Savings Bank of Victoria v. Permewan Wright & Co. Ltd. (1915) 19 C L R 457 and Sheild Estate Bank of Ireland (Governor & Co.) (1901) 1 I R 172ref.
---Ss. 27 & 41-A--Prohibition--Imposition of--Acceptance of deposits with promise to repay on some future date, would be enough to bring the act of company within prohibition imposed by S. 27 of 1962 Ordinance--Section 41-A of Ordinance 1962 was introduced in order to maintain purity of banking institution--Action, held, could be taken under S. 41-A of 1962 Ordinance even for mismanagement or irregularities prior to date of its enactment.
--If there is jurisdiction to decide a particular matter, merely because decision was incorrect, held, would not render same to be without jurisdiction.
Woods v. Martins Bank Limited (1959) 1 QB 55 and Bonbury v. Bank of Montreal 1918 A C 626 ref.
--S. 41-A--Successive notices, validity of--During course of enquiry further material coming to knowledge of Tribunal--Issuance of subsequent notices in continuation of previous notice, held, would not suffer from any illegality.
---S. 41-A--Prohibition of double jeopardy, principle of--Plea of such principle, held, would be misconceived because of criminal case having been registered against directors of Company whereas notices were issued for taking action against company, which is a separate legal entity as distinct from its directors.
--Art. 199--Banking Companies Ordinance (LVII of 1962), Ss. 27 & 41-A--Constitutional jurisdiction, exercise of--Enquiry by Tribunal being within four corners of legal provisions, held, would not justify interference in constitutional jurisdiction of High Court.
Noor--ul-Arifin with Kh. Akhtar Ali for Petitioners.
M.A. Rahman with M.A. Zafar for Respondent.
Dates of hearing: 3rd and 4th May, 1983; 4th, 5th December, 1983; 6th, 8th. and 9th July, 1985.
This writ petition has been dismissed, for the reasons to be recorded separately. The reasons which led me to pass the dismissal order and the fact from which these reasons emanate are as under:
2. The writ petition calls in question the validity of the declaration dated 30th July 1981, made by the State Bank o&., Pakistan, published in the Daily Pakistan Times, Lahore, dated 9th August, 1981, under section 43-B of the Banking Companies Ordinance, 1962, and the three notices, dated 17th November, 1979, 6th January, 1980 and 6th January, 1981, served on the petitioner on the basis whereof the Governor State Bank held an inquiry, followed by the declaration aforesaid. Further, the Governor State Bank is sought to be restrained from taking all consequential steps against the petitioner under Part II-A of the Banking Companies Ordinance, 1962.
3. Briefly put, the necessary facts giving rise to the controversial issue falling for adjudication, in this case, are, that on 8th October, 1979 by means of the Banking Companies (Amendment) Ordinance, 1979 the Banking Companies Ordinance, 1962, was amended and Part II-A, added therein. This part amongst others includes sections 43-A and 43-B, Under section 43-A, if it appears to the State Bank, that any Company or person is transacting business in contravention of section 27(1) of the Banking Companies Ordinance, 1962, it can requisition from such company or person, the requisite information and documents, in this behalf. If the State Bank after making such inquiry as deemed fit by it, comes to the conclusion that a company or person from whom requisition has been made under section 43-A is transacting business in contravention of section 27 ibid, it can issue a declaration to that effect, after giving such Company or person, an opportunity of showing cause against the proposed action.
4. The State Bank proceeded under section 43-A and by a letter, dated 13-10-1979 (Annexures 'F and G) requisitioned from the petitioner company, certain record mentioned therein. This was followed by notice, dated 17-11-1979 (Annexure 'H') to the effect that after perusal of the necessary material, the State Bank prima facie, was of the view that the petitioner was doing banking business in violation of section 27(1) and that a declaration under section 43-B was proposed to be issued. The petitioner was asked to show cause as to why such declaration be not issued. The notice was accompanied by an enclosure in which a number of documents such as account opening forms, statement of accounts and vouchers showing acceptance and withdrawals of deposit etc. were mentioned. The petitioner replied this notice on 25-11-1979 (Annexure 'I') and simultaneously brought it under challenge, through Writ Petition No. 7618 of 1979. During its pendency the State Bank issued another notice, dated 6-1-1980 (Annexure 'L'), whereby the petitioner, was informed:-
"Since the issuance of the show-cause notice, dated 17-11-1979 to you further material appearing on your own record, and having a bearing on the question, has been brought to notice which is detailed in the Schedule appended hereto. This has already been brought to your notice by the State Bank of Pakistan through its written statement filed in the aforesaid case in the Lahore High Court, Lahore, to which you have filed a re-joinder."
and given as opportunity to file its reply to the additional material described in the Schedule appended to the said notice.
5. In order to throw a challenge to the second notice as well, the petitioner filed an amended writ petition. It was dismissed by a learned Single Judge on 14-5-1980, inter alia on the ground that the State Bank was well within its powers to determine as to whether or not the petitioner was carrying on the business of banking in contravention of law. The petitioners Intra-Court Appeal No. 314 of 1980, against this dismissal failed and the leave to appeal was also refused by the Supreme Court.
6. After the dismissal of the writ petition, the Governor State Bank, issued another notice, dated 6-1-1981 (Annexure 'P') purportedly in continuation of the two earlier notices, dated 17-11-1979 and 6-1-1980. the petitioner was informed that since the issuance of the two notices, further material forming part of the Company's record came to the notice of the State Bank and that it might file reply thereto, if so desired. The material referred to in the notice, was detailed in the Annexures thereto. In its reply, dated 20-1-1981 (Annexure 'R-7'), the petitioner sought permission to inspect the original Annexures appended to the notice and also prayed for enlargement of time to answer the same. In response, the State Bank, intimated the petitioner Annexure 'R/8' that the originals of. the Annexure were available in its Karachi office which might be inspected on 5-1-1981. Seemingly, the record was inspected by the Company. It is so disclosed in the letter, dated 16-2-1981 Annexure 'R/9' addressed to the State Bank by Kh. Akhtar Ali, Advocate, who represents the petitioner. It appears that notwithstanding the inspection of the record, the petitioner again approached the Governor for grant of time to procure the record from its Peshawar Zone and also asked for an opportunity of personal hearing Annexure 'R/12'. The State Bank vide its communication, dated 21-3-1981. extended the time by 30 days for filing the reply to the notice and further by its letter dated 7-6-1981 fixed 18-6-1981 as the date for personal hearing. It is evident from the record that thereafter Kh. Akhtar Ali, sent letter dated 15-6-1981 Annexure 'R/15' to the Governor State Bank praying for an adjournment on the plea that the Company's Senior Counsel had gone abroad. This request was acceded to and the date of hearing changed to 11th July, 1981. This opportunity was availed of by the petitioner. However, 5 days before this date of hearing, the petitioner moved an application Annexure 'R/17' before the Governor for summoning 13 witnesses for 11-7-1981; who were the Account Holders of the Company. The reasons assigned for their examination, was that the company wanted to verify the genuineness o1 the documents and the signatures.
7. It is discernible from the order of the Governor that during the course of personal hearing and in its earlier communication to the State Bank, the petitioner raised number of contentions, to assail the validity of the proposed action. But upon the material before him, the Governor by a detailed order dated 30-7-1981 rejected all the points urged by the petitioner, signed the declaration and ordered its publication.
8. One of the contentions raised before the Governor, was, that the Company did not transact any business after the promulgation Q1 the amending Ordinance; as the Ordinance is not retrospective it operation, whatever may be the nature of its business, before the enforcement of this Ordinance, it could not be proceeded against under sections 43-A and 43-B ibid. This argument was rejected by the Governor. In his opinion the Ordinance applied to the Companies which held deposits before the enactment of the Ordinance but as regard: the petitioner be specifically found that it accepted deposits even after the enactment. In arriving at this conclusion, as is manifest from hi. order,, dated 30-7-1981, the Governor kept in view the legal opinion; dated 10-11-1979 and 13-11-1979 tendered by Messrs Fazeel & Co. Advocates Karachi, and the Director legal department of the State Bank of Pakistan, respectively. It also transpires that the petitioners reques to summon the witnesses was turned down by the Governor on the advice of the legal department of the Bank.
9. Mr. Noor-ul-Arifin, has very seriously questioned the propriety of the Governors reliance on the legal opinions. He argued that the point urged before the Governor, was, that the Company did not transact any banking business and thus, there was, no violation of any banking law, particularly, when the Ordinance was not enforced retrospectively. But he failed to exercise his personal judgment and instead of disposing of this issue with an open and independent mind, he relied upon the advice of outside counsel which was never disclosed to the petitioner Likewise, it was submitted, that in rejecting the application for summoning the witnesses he acted upon the noting of the legal department /director legal of the State Bank, who was again an outsider. In these circumstances, the learned counsel argued, the Governor did not act conscientiously and thus, his order stood vitiated. He then drew my attention to certain passages from S.A. de Smith's "Judcial Review Administrative Action" to point out that if any Authority is entrusted to exercise discretionary powers, it must not surrender its power to decide, to others and act under the dictates of an external authority.
10. In his endeavour to emphasise, that the Governor could not have the latitude to take upon himself the consultation of legal advice, not disclosed to the petitioner, the learned counsel equated the inquiry under section 43-B, with the proceedings before an arbitrator and referred to me an Indian decision in the case of Skalee (P) Ltd. v. The State of West Bengal A I R 1974 Cal. 306, which provides that seeking of independent legal advice, by an arbitrator, behind the back of the parties, is mi wonduct. To argument the proposition that where a Tribunal empowered to take a decision, fails to apply its mind, to the matter brought before it for adjudication, its order is rendered liable to be removed through judicial review, the learned counsel cited Ghulam Mohy-ud-Din v. Chief Settlement Commissioner and others PLD 1964 S C 829. In this case, the Chief Settlement Commissioner rejected a second revision merely by counter-signing the noting of the Settlement Commissioner (Policy) without recording any reasons of his own. The Supreme Court maintained that he should have applied his independent mind to the questions raised before him. Reliance was also placed on Fazal Dad and others v. Member Board of Revenue P L D 1977 Lah. 264 wherein, in passing a resumption order the collector simply affixed his signatures on an office noting. It was held that there was no conscientious application of mind and he failed to dispose of the case properly.
11. It was next submitted that the legal opinions constituted a vital material relevant to the controversy debated before the Governor, who was a judicial Tribunal; if not certainly he acted as quasi-judicial Tribunal. On the authority of Madiyal Prem Chandra v. Commercial Tax Officer A I R 1958 S C 67 and S.B. Industries v. The District Registrar Trade Marks P L D 1969 Dacca 451, it was submitted that the Governor should not have allowed himself to be influenced by such legal opinions, which were never communicated to the petitioner- These precedents simply lay down that where a statute confers certain duty on an officer, then he has to exercise his discretion in accordance with law, uninfluenced by the opinion given by his superior.
12. As a corollary to the reasoning aforesaid it was stated that the collection of legal opinions behind the back of the Company amounted to receiving evidence in the petitioner's absence. The course adopted by the Governor, was said to be analogous to a case in which a Tribunal rests its order on the material mustered in the absence of the affected party. In such an eventuality, the counsel argued, that the Tribunal acts without lawful authority and its order becomes wholly void. In this respect he placed reliance on two decisions from English jurisdiction, reported as R.V. New Market Assessment Committee (1945) 2 All E.R. 370 and R.V. Deputy Industrial Enquires Commission 1962 (2) All E R 430. In the first judgment, certiorari was issued to quash the decision of an Assessment Committee, founded upon the evidence heard in the absence of the interested party. As regards the second precedent, a Deputy Commissioner in disposing of the appeal of an Insurance Officer, from a Local Appellate Tribunal under the National Insurance (Industrial) Injuries Act, found against the applicant. But in doing so, he procured the aid of a specialist on the controversial issue arising in the case. Lord Parker, C.J. observed that a quasi-judicial Tribunal in deciding a case, for the parties, is not entitled to obtain evidence, without passing on them the information, so obtained so that they may have an opportunity of commenting upon it.
13. Connected with his these submissions, Mr. Noor-ul-Arifin next urged, that under section 43-B before issuing the declaration, the Governor was under a statutory obligation to allow an opportunity to the petitioner of showing cause against the proposed action so that I might establish that it did not indulge in any illegal banking activity. This, in the estimation of the learned counsel, conferred on the petitioner a right of fair hearing. He argued that where a party does not know the case, it has to meet or is not confronted with the material used against him or denied adequate opportunity to correct and controvert the same, a fair opportunity to defend himself cannot be said to have been afforded. The learned counsel then reverted to the facts of the case and, stated that had the opinion of the outside counsel and the Director Legal of the State Bank, revealed to the petitioner, it would have succeeded in persuading the Governor that the views expressed therein i ., re incorrect.
14. The petitioner's other grievance, is, that the Company closed its business before the promulgation of the amending Ordinance, which is not retrospective, therefore, the documents reacting transactions before 8-10-1979 have no bearing on the issue, that banking business, in contravention of the banking laws, was carried on. As regards the entries, dated 8-10-1979 and those pertaining to the period thereafter discussed in the Governor's order, the learned counsel disputed their genuineness and complained that the petitioner was not given opportunity to examine the witnesses and establish its defence. In nutshell his contention, was, that a fair opportunity, as required by law and ordained by the principles of natural justice, was not extended to the petitioner. He brought to my notice the rule enunciated in Haji Rehman-ud-Din v. Government of West Pakistan P L D 1958 Lah. 86 to the effect that if charges involving questions of facts are levied against a person, which he challenges, it becomes the bounded duty of the concerned authority to hold an inquiry into such charges and give a fair opportunity to the affected person to defend himsef. In the other precedent Abdul Saboor Khan v. Karachi University and another P L D 1966 S C 537 cited for the petitioner, on the rectitude of the., enunciation made in University of Dacca v. Zakir Ahmad P L D 1965 S C 90, it has been observed that whenever a decision is taken against a person after investigation of facts, affecting his right, then in the absence of express words in the enactment, excluding the application of the principles of natural justice, the Courts have got to proceed on the assumption that the exercise of powers is coupled wit the duty to set in accordance with the rules of natural justice.
15. The legal opinions which gave rise to these controversial issues, were not placed by the respondent on this file, but following the dictum laid down in Lahore Improvement Trust v. Custodian of Evacuee Property P L D 1971 S C 811, that before striking down the orders of a public authority, the Court must find out every field of the powers granted to such authority and in this direction also examine the record and the proceedings conducted, concerning the impugned order, I requisitioned the relevant files from the State Bank of Pakistan. Those opinions have been shown to the learned counsel for the petitioner and photostat copies thereof placed on this file. First I shall take up the opinions, dated 10-11-1979 and 13-11-1979. Mr. M.A. Rehman forcefully controverted the petitioners contention that these opinions were procured by the Governor, in the course of the enquiry commenced against the petitioner on the disputed question that the company conducted banking business, and with the object of facilitating the passing of the order on which the impugned declaration is rested. He submitted, that there was a lot of criticism in the Press against the Finance Companies, which were set up in fairly a large number, almost all over the country and people were allured to make their deposits with them, without any safeguard. After the enforcement of the amending Ordinance, the State Bank though it fit to obtain advice from Messrs Fazeel & Co., on the scope of the amending provisions inter alia on the point whether action under it, could be taken against the Finance Companies, in relation to their business of banking, carried on either wholly before the commencement of the Ordinance, or partly after its commencement, or wholly after its enactment. The Director Legal who is a functionary of the State Bank of Pakistan, was also asked to look into this issue. The advice sought, was merely, general in character confined to abstract legal propositions, having no nexus with any particular case and certainly, not the case of the petitioner Company. That the opinion of the Director Legal was merely a contribution by the internal working of the State Bank and not an aid from an outside agency. It was emphatically asserted, that after the issuance of the first notice to the petitioner, its case was never referred to by the Governor for advice to any one.
16. The petitioners argument that the Governor made his order wholly and solely on the strength of the legal opinions, was vehemently refuted and it was urged that he simply noticed these opinions but formulated his own views and recorded independent findings after assimilation of the record of the company placed before him. The learned counsel for State Bank invited my attention to various documents on the file of this case as well W.P. No. 7618 of 1979 to controvert to the petitioner's argument that a fair opportunity was denied to it and vigorously asserted that the Company was given enough opportunity to project its views and defend itself; rather in his anxiety to do substantial justice, despite the petitioners delaying tactics the Governor showed indulgence to the petitioner.
17. In order to evaluate the conflicting contentions of the parties, I have perused both the opinions. It is discernible from the advice tendered by Messrs Fazeel & Co that the question referred to them for their opinion, were:-
"Is it permissible for State Bank to exercise powers available to it under section 43-A and section 43-B of the Banking Companies Ordinance, 1962 as amended by Ordinance No. LVI of 1979 against a company or any other person on the basis of business of banking carried on by it or him as the case may be, either wholly before' the commencement of Ordinance No. LVI of 1979 or partly before and partly after the commencement of the said Ordinance or only after the commencement of the said Ordinance
In the event of the opinion that the aforesaid powers can be exercised only if the business of banking is carried on after the commencement of the said Ordinance
"(a) is it essential that the said business as carried on upto (i.e. including) the date of declaration.
(b) how should the said Ordinance be amended to permit the exercise of the aforesaid powers on the basis of business of banking partly or wholly carried on before the commencement of the Ordinance by the competent authority without any risk of the amendment to be' so suggested by the learned Advocate being struck down by any Court
(c) if a Company or any other person has received deposits from the members of the public before the commencement of the said Ordinance and after the commencement of the Ordinance.
(i) continues to retain it, or
(ii) retains it wholly or partly, or
(iii) receives amounts in liquidation wholly or partly, of loans, made out of such deposits, will such acts amount to the carrying on of the business of banking by such Company or other and be hit by the provisions of section 43-A and section 43-B(1) "
The advice is entirely confined to the legal issues, aforesaid and there is not even a far-fetched reference in it to the case of the petitioner and possibly it could not be as by then the inquiry under section 43-B had not been commenced. From the narration of the facts already given it is obvious that though on 13-10-1979 certain information was demanded from the petitioner, but the actual show-cause notice under section 43-B for the first time was issued on 17-11-1979. It may be added that it is only after the perusal of material requisitioned under section 43-A that the State Bank, has to make up its mind tentatively as to whether or not action under section 43-B is called for. In point of time, therefore, it can well be claimed that the proceedings regarding the declaration, are commenced on the issue of a show-cause notice envisaged by section 43-B. Evidently, the opinion of Messrs Fazeel & Co. is of a date prior to the first notice. But, to my mind it is wholly idle to determine the precise time when the proceedings could be said to have been started against the petitioner, for, as already noticed the advice deals with l the question of law only and does not at all refer to the petitioner's case. Similarly in the opinion dated 10-11-1979 of the Chief Legal Division of the State Bank of Pakistan, there is no mention of the petitioner anywhere and is entirely aimed at construing certain provisions of the Banking Companies Ordinance, 1962 and the amending Ordinance, 1979.
18. It needs to be seen as to whether the Governor's reliance on these opinions, renders his order as without lawful authority. My answer is in the negative. The reasons being that these opinions are purely on questions of law, making no reference to the case of the petitioner. It is just the same way as if on a disputed legal, issue under its consideration, a Tribunal may consult the views of the some jurist or an author on the subject. If the inquiry under section 43-B can undoubtedly be compared, with the proceedings before an Arbitrator or an Umpire, as the petitioners learned counsel himself canvassed, the utilization of the legal opinion by the Governor, would not legitimately be, open to any valid objection. Reference in this connection may be made to the following observations of Lord Tomlin in Louis Dreyfus Co. v. R.A. Arunchala Ayya A I R 1931 P C 389:-
"... the language of the award does no more than indicate that the umpire took advice upon the general rules of law bearing upon the case and does not mean that he left to an outsider the burden of deciding any issue in the case instead of exercising his own judgment thereon ...."
18-A. After perusal of the well-reasoned order of the Governor it becomes difficult to accept that he did not act with a conscientious mind. It is quite clear to me, that he properly weighed the material on the record and exercised his independent judgment. Neither the two opinions embodying the interpretation of the provisions of the Banking Companies Ordinance supported by certain legal principles, by the authors thereof, can be treated as an evidence, nor their non-revelation to the petitioner, is visited by any illegality, nor by their consideration, the Governor fettered his discretion or surrendered his power to decide, in favour of any-one else. It shall be indeed, a travesty of facts t hold that the Governor acted under the dictates of some external authority. The cases cited at the Bar, on behalf of the petitioner turn on their peculiar facts. There can hardly be any quarrel with the propositions of law enunciated therein but these have no application to the instant case.
20. I shall now address myself to the arguments that a fair opportunity to place its case before the Governor, as ordained by rules of natural justice, was denied, to the petitioner. In the same equal, falls the question as to whether the Governor, acted as administrative body or as a quasi-judicial Tribunal and whether the application for summoning the witnesses was justifiably rejected by the Governor on the footing of office noting. It may be observed that the rules of natural justice guarantee only a minimum standard of hearing and are not fettered by any rigidity but vary with the circumstances of each case. In Zakir Ahmad's case the Supreme Court quoted with approval the following observations of Turker L.J. in Russal v. Duke Norfolk (1949) 1 All ER 109: -
"Requirements of natural justice must depend on the circumstances of the case, the nature of enquiry rules under which the tribunal is acting, the subject-matter i.e. being dealt with and so forth."
Thus, it is only after appraisal of the totality of facts, in a given case, that any proceeding may be annulled for want of observance of rule of natural justice. It may be stated that the rules of natural justice do not embossom the whole of the multi-dimensional notion of justice but merely command that in certain situation, the rule of fair hearing must essentially be followed. It is merely for claiming the right of fair hearing, that the petitioner's learned counsel preferred to characterise the Governor as a quasi-judicial Tribunal and not an administrative tribunal, I do not feel the necessity of embarking upon the determination of the Tribunal's status, because it is now well-settled that right of a reasonable opportunity of being heard, is not limited to the proceedings before the Courts only, but is available to the proceedings before anybody or tribunal which might affect the person or property of an individual, unless such right is excluded from the enactment, under which such tribunal functions.
20. I am unhesitatingly prepared to accept that in the proceedings under section 43-B, implicit in the power to issue a show-cause notice is the condition to give a fair hearing to the petitioner. A question arises that what are the limits of the right of fair hearing and how this right is to be regulated. There is no definite standard by which a fair hearing may be tested and it is difficult to define with exactitude that what is meant by fair hearing. One thing is, however, indisputable that it must ensure, the essentials of fairness. Section 43-B does not lay down the procedure to be followed by the State Bank or for that matter the Governor in holding an inquiry. There is nothing in the statute in relation to the State Bank's powers, requiring it to regulate its actions, by analogy to the judicial rules. The nature of the inquiry has been left to the State Bank "as it may deem fit". Though apparently, this power is wide but it can fairly be implied, that the recipient of this power has to act in accordance with the rule of reason and justice and not according to his whim and personal notion. In the light of these principles, 1 feel, that in the contest of section 43-B a party to whom a show-cause notice is issued, is entitled to be informed of the evidence discovered by the State Bank as a result of its investigation and allowed to contradict such evidence and state his case.
21. The argument of the petitioners side, however, is that refusal of the application for summoning the witnesses, resulted in its deprivation of fair hearing. Kh. Akhtar Ali who appeared for the petitioner during the re-hearing of the argument, was asked to particularise the entries classified by the Company as fictitious. He referred to the entries, dated 8-10-1979, 9-10-1979 and 10-10-1979 appearing in the copies of ledger Annexures R/4, R/5 and R/6 of the Peshawar Branch of the Company. The first two entries signify that the two account-holders namely Muhammad Ashraf and Haji Qurban deposited amounts in their respective accounts. The third entry indicates withdrawal from another account, standing in the name of one Nazir Ahmad. In this connection on behalf of the State Bank, it is submitted that these entries were authenticated by the Manager of the Company; further its counsel inspected the original ledgers, in which these entries are incorporated. The argument that these entries are false, has been forcefully controverted. According to Mr. M.A. Rehman, the record was inspected at an early stage of the inquiry, but the application was moved at very belated stage, just five days before the petitioners personal hearing, fixed for 11-7-1981. Upon these facts, he dubbed the application a merely a rouse, to delay the finalization of the action commenced against the petitioner. I feel, that the attending, circumstances of the case and some weight to these submissions. It is also noteworthy, that in Para. 5(iii) of his order the Governor has referred to a number of other transactions made on and after 8-10-1979 but the learned counsel for the petitioner, has said nothing about the same.
22. It remains to be considered whether the application could have been allowed by the Governor. There should be no doubt, that though he had to give a fair hearing to the petitioner but was not required to follow the procedure of a Court of law. He has no power to administer oath or to summon the witnesses much less to enforce their attendance It, therefore cannot be suggested that the proceedings before him are akin to a trial. The inquiry by the State Bank, was wholly entered around the business of the company, portrayed by its record. Such an inquiry has to be conducted according to the requirements of substantial justice. Keeping in view, the Scheme of the Ordinance, it is reasonable to presume that the right of hearing granted to the petitioner, is not accompanied by the recognition of the right to examine witnesses. It is not for the Court to examine the soundness of the policy behind the legislatures omission to incorporate in the Ordinance, the provisions for summoning the witnesses. While exercising the power of judicial review, what is to be seen is that the Tribunal has exercised its jurisdiction in accordance with the dictates of the statute and in conformity with the rules of natural justice. In this respect, I do not find any flaw ire the order of the Governor. The application merited rejection. The fact that the application was processed in the hierarchy of the State Bank and found incompetent, with which the governor at the apex did not differ, does not militate against the validity of its rejection and the manner of disposal.
23. From the facts already narrated and the record before me, it is quite conspicuous, that the petitioner was adequately apprised of the case it had to answer; fully confronted with the material which promoted the Governor to issue the impugned declaration allowed to meet the allegations and controvert the information gathered by the State Bank and explain its position to the Tribunal below. Thus, the contention that a fair hearing was denied to the petitioner has absolutely no basis.
24. Section 27 of the Banking Companies Ordinance, regulates the banking business in Pakistan and prohibits carrying on all such business without the licence issued by the State Bank in that behalf. The term "banking" has heen defined in clause (b) of section 5, as under:
"(b) 'banking' means the accepting for the purpose of lending or investment, of deposit of money from the public, repayable on demand or otherwise, and withdraw able by cheque, draft, order or otherwise;
(c) ........................
Explanation.--Any company which is engaged in the manufacture of goods or carries on any trade and which accepts deposits of money from the public merely for the purpose of financing its business. as such manufacturer or trader shall not be deemed to transact the business of banking within the meaning of this clause; "
The petitioner's stand is that the company was floated with the object ,,,; of usefully participating in the economic development of the country. It planned to set up industries in various fields and actually made investment in certain trading and industrial ventures. It is pleaded that the activities of the company squarely fell within the ambit of the Explanation. That the acceptance and repayment of deposits only combinedly constitute banking; in the instant case the deposits were accepted before 8-10-1979 and that too for the purposes of ploughing the same in the trading and manufacturing enterprises; there was no reliable evidence of repayment of deposits and thus, it could not validly be inferred that banking business was transacted by the petitioner. The argument that the amending Ordinance, is not retrospective, had been reiterated to seek immunity from scrutiny, of the transction before 8-10-1979. The issue of the declaration by the State Bank thus, has been recounted as without jurisdiction.""'
25. The definition of the term "banking" given in section 5(b) ibid is fairly wide. The acceptance of deposits for the purposes of investing or lending but repayable on demand or otherwise, falls within the mischief of this definition. The repayment may be made through any mode and not necessarily by cheque or defat as usually practised in the recognized banks. I find that on the factual plan, the Governor has exhaustively dealt with the activities carried on by the petitioner, in the light of the material is support thereof. I have no hesitation in holding that the transactions enumerated in the order of the Governor, are fully covered by the interpretation clause. The acceptance of the deposits on the condition of repayment is enough to attract the definition clause; the actual payability of such deposits may or may not be there. At any rate, the State Bank has collected evidence which establishes the payments to the account-holders. The acceptance of the deposits is not even denied by the petitioner, but it is professed, that the company engaged itself in trade and manufacture of goods and received the deposit for investment therein. This assertion of the Company, has been held to be incorrect by the Governor who found that the deposit were received like banks. He has referred to various transactions of withdrawals and grant of credit to others and further discovered that the company followed the p -1cedure and maintained the record, in vogue in the banks, its pay-in-sups were designed like that of banks and for re-payments, instead of cheques it availed of withdrawal slips. The withdrawal slips drawn on the company by its account-holders, were also in favour of third parties, which showed that payments were made even to the order of the customers. The view taken up by Governor that such activities of the company constituted banking business, finds support from the reported case law.
In Re Bottomgate Industrial Co-operative Society (1891), L.T. Smith J., said:-
"....the business embarked on by the society alien it took loans on deposits was in reality a banking business prohibited by the statute. It is not necessary, in our judgment, in order to constitute a banking business prohibited by the statute, that. the society should carry on every part of a business carried on by some bankers; it is sufficient to bring the business within the prohibition, if the society carried on what is a principal part of the business of a bankar, viz., receiving money on deposit, allowing the same to be drawn against as and when the depositor desires, and paying interest on the amounts standing on deposit." '
Issacs, J. in the High Court of Australia in the Commissioners of the State Savings Bank of Victoria v . Permewan Wright & Co. Ltd. (1915) 19 CLR 457 maintained:-
.....The essential characteristics of the business of banking may be described as the collection of money by receiving deposits on loan, repayable when and as expressly or impliedly agreed upon, and the utilisation of the money so collected by lending it again in such sums as are required."
Further, In re: Shield Estage, Bank of Ireland (Governor & Co. ) (1901) I R 172, a Company which issued only deposit receipt payable on notice and neither used cheques nor maintained current account was held to be a banker.
26. It is correct that in our present day system of banking the transactions of payments and withdrawals of money are so largely affected by cheques that unless there is free handling of cheques, no banking can be said to have been carried on. But according to the criterion laid down in the definition clause, user of the cheques. is not essential to constitute banking. Anyhow, as a finding of fact the Governor has come to the, conclusion that the petitioner made use of withdrawal slips analogous to the cheques. It is obvious, that the petitioner has been accepting deposits of money from its customers, with the understanding to repay the same wholly or from time to time any part thereof, when demanded by such customers and also providing credit to others. These receipts, repayments and other transactions of money took place at different branches of the company during specified working hours. The manner in which the petitioner conducted its business is like the ordinary way of bank. Indeed, the transactions recorded in the books of the company, to which copious reference has been made in the order of the Governor, leave no room for doubt that the petitioner was notoriously involved in the banking business. Even if the petitioner was engaged in its own business of manufacture and trade and diverted some deposits, to that undertaking. Such calling as held by the Governor was merely a disguise. It is to be remembered that where a person conducts two businesses concurrently, one of which is banking, regulated by law, then he must comply with -the requirements of such law. In Edgelow v. Mac Elwee (1918) I K B 205 Me Cardie, J. said:-
"A man may follow concurrent callings. If one of such callings be the trade of a money-lender, then the act must be complied with."
27. The banking is a continuous process; it starts with the receipts of deposits and remains in force till their repayment to the depositors. As already held the deposits were received by the petitioner on the understanding to repay the same on the customer's demand. In most of the cases, the repayments to the account-holders, were, yet to be made, that the new legislation came into existence. The acceptance of the deposits with the promise to repay on some future date, is enough to bring the act of the company within the prohibition, imposed by section 27. It is to be noticed that the amending Ordinance was enacted to check up the growth and functioning of the' unauthorised banking business, which was being handled by the Finance Companies on a large scale. It was enacted in the public interest and designed to remedy the existing mischief for which Ordinance of 1962 did not provide. To effectuate the remedy, it applies to the companies doing banking business illegally even before the promulgation of the Ordinance. In a similar situation, on the interpretation of section 41-A of the Banking Companies Ordinance, 1962 repelling the argument that the section was not retrospective, a Division Bench of the Karachi High Court, in its judgment dated 11-6-1973, delivered in Writ Petition No. 627 of 1973 took the view:-
...As the section was introduced in order to maintain the purity of banking institutions, we are of opinion that action can be taken under it even for mismanagement or irregularities prior to the date of enactment of the section, the more so as a banking irregularity would itself constitute a continuing irregularity it banking business "
I see no reason to differ with this connotation, which fully applies t the present case. The argument of the petitioner that no action can be taken against it, under the Ordinance, is, therefore, rejected.
28. The finding recorded by the Governor that the petitioner carried on the banking business, is, a finding of fact. In Woods v. Martin: Banks Limited (1959) 1 Q B 55 Salmon, J., in examining the scope of bank's business held:--
..The limits of a banker's business cannot be laid down as a matter of law. The nature of such business must in each case be a matter of fact and,, accordingly cannot be treated a: if it were a matter of pure law."
Similar is the statement of law by Lord Finlay, L. C. in House o: Lords, in Bombay v. Bank of Montreal 1918 A C 626:
"The nature of such a business must in each case be a matte of fact and accordingly, cannot be treated as if it were a matte of pure law."
The Governor had the jurisdiction to determine the nature of the petitioner's business. The finding given by him in this behalf, after appraisal of the material gathered from the company's record, cannot be subjected to review in exercise of constitutional jurisdiction. A distinction has to be drawn in the error of judgment and usurpation o: jurisdiction. It is well-established that if there is jurisdiction to decide a particular matter, merely because the decision is incorrect, does no render it as without jurisdiction.
29. Towards the close of his argument, Mr. Akhtar Ali, questioned the validity of 2nd and 3rd notices. He compared these notices with a charge-sheet and contended that once a charge-sheet has been issue( to a person any addition to the magnitude of the commission of the illegality attributed to him, is not permissible in law. It was argued that the 2nd and 3rd notices were prejudicial to the defence of the company and the proceedings commenced on the basis thereof, therefore, were entirely illegal.
30. There is hardly any force in these submissions. It was in the course of inquiry, that further material came to the knowledge of the State Bank, of which the petitioner had to be informed. Accordingly, notices in continuation of the earlier one were issued. The subsequent two notices thus, do not suffer from any illegality. This is not a case of enlarging the dimensions of the illegality. The commission of the illegality of doing banking business without licence, was already there, but the supporting material, from the petitioner s own record, was due out in the course of the inquiry later on. It is not without significance that the High Court in its judgment in W.P. No. 7618 of 1979 declined to interfere with the 1st and 2nd notices and that order attained finality,
31. Before the issuance of the first notice, on the allegation that the company had been doing banking business illegally, at the instance of the State Bank, First Information Report No. 38, dated 16-3-1979 was lodged with the Federal Investigating Agency, and this case was sub judice before a Special Magistrate. Half-heartedly the show-cause notice, was also assailed on the plea that it was hit by the principle of prohibition of double jeopardy. But this plea is misconceived, because the criminal case was registered against the directors of the company and whereas notices were issued for taking action against the company, which is a ,separate legal entity distinct from its Directors.
For all these reasons I do not find any merit in this writ petition. Accordingly, it has been dismissed.
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