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Constitutional Petition No. D‑1035 of 1982, decided on 29th May, 1986.

‑‑S. 25‑‑Government of Pakistan, Finance Division Letter (Investment and Capital Wing), dated 28‑11‑1977‑‑B . C . D . circulars, dated 5‑9‑1977; No. 13, dated 7‑6‑1977, No. 15, dated 3‑7‑1978 No.6, dated 15‑2‑1981 issued by State Bank of Pakistan‑‑Interest on loans‑‑Expression 'Fixed Industrial investment '‑‑Interpretation‑‑Concessional rate of interest as fixed by circulars, apply only in respect of such fixed investments as were connected with 'additional industrial capacity or modernization or balancing of existing capacity'‑‑Debtor failing to establish that loans obtained by it were meant for financing 'Fixed industrial investment' as interpreted and defined by letter of Government of Pakistan, dated 28‑11‑1977, held, was not entitled to claim benefit of reduced rates of interest under circulars, dated 5‑9‑1977 and 3‑7‑1978.

‑‑‑Art. 199‑‑Constitutional petition‑ ‑Im pleading of parties‑‑Petitioner not impleading all parties concerned as respondents in petition‑‑No effective relief, held, could be granted to petitioner in circumstances.

Muhammad Ali Sayeed for Petitioner.

Abdul Sattar Pingar for Respondent No. 1.

Mansoor Ahmad Khan for Respondents Nos. 2, 3 and 4.

Dates of hearing: 31st March and 2nd April, 1986.

.‑‑ The facts of the case are that the petitioner is owner of chain of hotels known as Holiday Inns which the petitioner has constructed in various cities of Pakistan. The building, and establishment of hotel and its running involves very substantial fixed pecuniary investment, therefore, the petitioner availed of loan facilities provided by a consortium of banks headed by the Investment Corporation of Pakistan (respondent No.4). Such loan was advanced to the petitioner at the rate of 14% per annum which was accepted by the petitioner through agreement of loan executed between the petitioner and the said consortium. In 1977, the State Bank of Pakistan (respondent No.2), realising that the rates of interest were very high in the country, issued a circular on 5th September, 1977 whereby a new clause (iv) was added to B . C . D . Circular No. 13, earlier issued by the Bank on 7th June, 1977. The said clause provided as follows:‑

"(iv) Banks shall not charge interest at a rate higher than 12 % per annum on accommodation provided for financing fixed industrial investment."

Consequent to the circular of the respondent No.2, dated 5th September, 1977, the petitioner took up the issue with Investment Corporation of Pakistan (respondent No.4) and asked for revision of interest rates in consonance with the said circular, but to no avail. Again, on 3rd July, 1978 the respondent No.2 issued another circular (B.C.D. Circular No.25) according to which the Bank rate in respect of fixed industrial investment was further reduced from 121% to 11% per annum. It was, however, clarified that the said circular would be applicable in respect of loans or advances given on or after 1st July, 1978. The petitioner once again represented to the respondent No. 4, but on 15th February, 1981, the respondent No.2 issued yet another circular (B.C.D. Circular No.6) providing that 'fixed investment in hotel industry should with immediate effect be treated as fixed industrial investment'. It was further directed that 'Banks will not charge interest at a rate higher than 11% on accommodation provided for financing fixed investment in hotel industry'. Thereafter, the petitioner wrote a letter, dated 5th March, 1981 to the Governor, State Bank, requesting for issuance of clarification and providing benefit of reduced rates of interest under the earlier circulars to hotel industry as well. However, the respondent No.2 through its letter, dated 19th March, 1981, expressed regrets saying that the reduced rates of interest would be applicable to new cases of loans and advances extended on or after 15th February, 1981. Even further request of the petitioner made in its letter, dated 6th February, 1982, to antedate the applicability of concessional rates of interest on loans advanced to hotel industry was declined by the said respondent. Under such circumstances, the petitioner filed the instant petition.

2. The respondent No.2 in the counter‑affidavit filed on their behalf by Mr. Rafiq Ahmad, their Banking Officer, although have not denied the factual position stated by the petitioner, but have reiterated the same position taken earlier in their letters, dated 19th March, 1981 and 8th March, 1982 respectively, viz. that the concessional rates of interest on fixed investment were not applicable to hotel industry before 15th February, 1981.

3. The respondent No. 4 also filed a counter‑affidavit through their General Attorney, Mr. Kabiruddin Khan, but nothing substantial was said therein, except that the contents of affidavit of respondent No.2 were adopted.

4. We have heard Mr. Muhammad Ali Sayeed, learned counsel for the petitioner and Mr. Mansoor Ahmad Khan, the learned counsel for the respondents Nos. 2, 3 and 4. Mr. Abdul Sattar Pingar, learned counsel appearing on behalf of the Federation of Pakistan (respondent No.l) adopted the arguments advanced by Mr. Mansoor Ahmad Khan.

5. The contention of Mr. Muhammad Ali Sayeed, learned counsel for the petitioner has been that 'industry' included hotel industry as well and, therefore, the same was covered by the two B.C.D. Circulars, dated 5th September, 1977 and 3rd July, 1978 respectively, thus entitling the petitioner to the same concessional rates of interest referred to in the two circulars. It has been further contended by the learned counsel that since these circulars did not identify or categorise any particular industry the same clearly applied to hotel industry which is one of the species of the same genus i.e. industry. Lastly, it was argued by Mr. Muhammad Ali Sayeed that the circular, dated 15‑2‑1981, treating fixed investment in hotel industry at par with other industry, was in fact, redundant, as the respondent No.2 was not competent to put its own meaning on the expression 'fixed industrial investment' used in its earlier circulars.

6. The argument of Mr. Mansoor Ahmad Khan on the other hand, was that the respondent No.2 had a right to interpret its own circulars. It was next argued that the said circulars were issued by respondent No.2 by virtue of powers vesting in the said respondent under section 25 of the Banking Companies Ordinance, 1962 and the said circulars being in the nature of subordinate legislation, could not operate retrospectively. It was further contended that the said circulars could not take away vested rights which the members of consortium had acquired in respect of existing loans under an agreement, and lastly, it was argued that the said circulars could not effect transactions which were past and closed. Reference was also made by the learned counsel to the Government of Pakistan, Finance Division's letter, dated 28th November, 1977, addressed to certain financial institutions, including I.C.P. (respondent No.4) defining fixed investment as meaning 'Additional industrial capacity or moderinization or balancing of existing capacity'. Reference was also made to another letter of the Finance Division, dated 26th February, 1978, wherein a clarification was made that hotels did not fall within the purview of the definition of 'fixed investment'.

7. As far as the contentions of Mr. Muhammad Ali Sayeed are concerned, there appears to be no doubt that circulars issued by the respondent No.2, dated 5th September, 1977 and 3rd July, 1978, respectively, to which we have already referred, do not categorise any particular industry. It was, in fact, when circular, dated 15th February, 1981 was issued that the respondent No.2 for the first time came out with a clarification that 'fixed investment in Hotel Industry should with immediate effect be treated as fixed industrial investment'. Now, the term 'Industry' as ordinarily understood, would include different kinds of industry which may also include hotel industry. Consequently, when circulars, dated 5th September, 1977 and 3rd August, 1978 failed to categorise any particular industry, presumption was that they applied to hotel industry as well. The position, however, changed after issuance of circular, dated 15th February, 1981. Although there can be no doubt, that the respondent No.2 as a subordinate legislative authority can interpret its own circulars or determine the areas of their operation, but in the instant case, the same appears to have been done more than three years after the issuance of the first circular, dated 5th September, 1977 and more than two years after the issuance of the second circular, dated 3rd July, 1978. The question, therefore, arise, could the respondent No.2, after lapse of such a period, issue a clarification through its circular, dated 15h February, 1981 restricting the scope of operation of the earlier circulars. In our view, it could not have done so if the petitioner or any of the members of the consortium from which the petitioner took loans, had acted on such circulars and taken steps which they might have found difficult to retrace. No doubt, according to its averments in the petition the petitioner did represent to the respondent No. 4 to reduce the rate of interest in accordance with the circulars of the respondent No.2, but admittedly, no action was taken by the said respondent. In the meanwhile, the respondent No. 2 issued circular, dated 15th February, 1981 which changed the Position completely. Therefore, in our opinion, clarification issued by the respondent No.2 through it circular, dated 15th February, 1981, cannot be treated as redundant and the respondent No.2 could issue such clarification.

8. The petitioner has also sought support from certain documents filed with the petition and marked as Annexures 'A', 'B' and 'C'. The first annexure is copy of a memorandum issued by the Government of Pakistan, Ministry of Industries, dated 4th March, 1977, which shows that hotel industry had been treated as part of industry. The next one is extract from Industrial Investment Schedule issued by the Government of Pakistan for Fifth Five‑Year Plan (1978 to 1983) which also shows that Hotels and Motels were listed under the head 'Service and Miscellaneous Industries'. The third Annexure is a copy of letter of the Central Board of Revenue, dated 21st May, 1977, also showing that hotels had been declared as industry. All these documents establish that hotels had previously been treated as industry by the Federal Government. However, these documents cannot be of any avail to the petitioner for the reasons just stated by us above.

9. We now advert to the arguments raised by Mr. Mansoor Ahmad Khan, although the first two contentions raised by him can easily be brushed aside. The learned counsel has argued that the said circulars issued by the respondent No.2, being in the nature of subordinate legislation, cannot operate retrospectively. That is, because, the petitioner is seeking reduction in the rate of interest in respect of loans which were obtained by it much before the issuance of the circulars, dated 5th September, 1977 and 3rd July, 1978 respectively. A simple answer to this argument is that the said circulars were intended to take effect from the respective dates of their issue. The circular, dated 3rd July, 1978, in fact, provides that the said circular would be effective from 1st July, 1978. In that case the question of their retrospective operation could hardly arise. The intention of the respondent No.2 clearly seems to be to direct the banks not to charge interest at rates higher than what had been shown in the circulars. The circulars, no doubt, applied in future, as is clear from their language, but no such intention can be gathered therefrom that the same were meant to be applicable only to new loans. The position would, however, have been different if the reduced rates of interest had related back to dates when loans had been granted to the petitioner. In any case, the argument advanced by Mr. Mansoor Ahmad Khan is repelled.

9. Similarly, the next argument of Mr. Mansoor Ahmad Khan, that the said circulars cannot be construed in a manner so as to deprive the banks of their vested right to charge interest at the rate fixed under the Loan Agreements, also does not appear to be convincing as the respondent No.2 appears to be possessing unabridged power under section 25 of the Banking Companies Ordinance, 1962 to fix rates of interest in respect of loans advanced by the banks. Such rates may be fixed in respect of old as well as new loans.

10. However, the third contention of Mr. Mansoor Ahmad Khan cannot be ignored as the letter of the Government of Pakistan, Finance Division (Investment) and Capital Wing), dated 28th November, 1977, a copy of which has been filed alongwith the counter‑affidavit filed on behalf of the respondent No.2, shows that it is not in case of every fixed Industrial Investment that the concessional rates of interest as fixed by the said circulars would apply, but the same apply only in respect of such fixed investments as are connected with 'additional industrial capacity or modernization or balancing of existing capacity'. It has nowhere been the case of the petitioner that the loans obtained by it were meant for financing such Industrial Investment as referred to above. The burden to establish such factual position was clearly on the petitioner which it has failed to discharge. In view of such a situation, how can the petitioner now claim benefit under the circular, dated 5th September, 1977 and 3rd July, 1978 respectively, is only for the petitioner to explain. We are, however, clearly of the view that owing to the petitioner's failure to establish that the loans obtained by it were meant for financing 'Fixed Industrial Investment' as interpreted and defined by the Government of Pakistan, Finance Divisions' letter, dated 28th November, 1977, the petitioner is not entitled to claim benefit of reduced rates of interest under circulars, dated 5th September, 1977 and 3rd July, 1978 respectively. It would not be out of place to mention that the expression 'Fixed Industrial Investment' as used in the said circulars appears to have failed to clearly convey the sense in which it had been used, thus it was though necessary by the Federal Government to explain the same which was done through the Finance Division's letter. Finance Division being a department directly concerned with the subject‑matter, such interpretation, therefore, cannot be ignored as the Federal Government has a right to explain or interpret the meaning of 'Fixed Investment'. In any case, since the petitioner has failed to bring its case within the purview of the said letter of Federal Government, dated 28th November, 1977, it cannot now claim benefit under the circulars in question.

11. Furthermore, Mr. Mansoor Ahmad Khan has filed extracts from two agreements, dated 19th May, 1977 and 17th February, 1982, respectively. The argument, dated 19th May, 1977 shows that loans were taken by the petitioner from a consortium of five companies. Similarly, the other agreement shows that a consortium of seven companies had advanced loan to the petitioner. Except Investment Corporation of Pakistan (respondent No.4), none of the other respondents has been impleaded as a party to this petition. Therefore, without all the concerned parties being before this Court, no effective relief can be granted to the petitioner, in any case.

12. For the aforesaid reasons, this petition is dismissed with costs.

S. Q. Petition dismissed.

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