Mst. MEERAN BIBI (AMEER BIBI) and 4 others vs MANAGER, ZARAI TARAQIATI
This constitutional petition challenges notices issued by the respondent bank directing the sale of the petitioners' mortgaged property under Section 15 of the Financial Institutions (Recovery of Finances) Ordinance, 2001. The core legal question concerns the validity of invoking Section 15, given that a Full Bench of the Lahore High Court had previously declared this provision unconstitutional in Muhammad Umer Rathore v. Federation of Pakistan (2009 CLD 257). Although the Supreme Court had suspended the operation of that judgment, the petitioners argued that such suspension operates only inter partes. The Court held that the respondent bank's attempt to recover dues via the sale of mortgaged property under Section 15 was illegal. The Court clarified that while the declaration of illegality was made in personam, it did not preclude the bank from pursuing recovery through lawful processes, specifically by filing a suit for recovery before a competent banking court. The judgment reinforces that until the constitutionality of the provision is finally settled, the bank must resort to standard judicial recovery mechanisms rather than the summary procedure under Section 15.
- Does the suspension of a judgment declaring a law unconstitutional operate in rem or inter partes?
- Can a financial institution proceed with the sale of mortgaged property under Section 15 of the Financial Institutions (Recovery of Finances) Ordinance, 2001, following a High Court declaration of its unconstitutionality?
- Does a declaration of illegality regarding the sale of mortgaged property under Section 15 prevent a bank from filing a recovery suit in a competent banking court?
- Section 15, Financial Institutions (Recovery of Finances) Ordinance, 2001
ORDER
' UMAR ATA BANDIAL, J.---The respondent bank has filed parawise comments that address the factual points but not the legal question raised in the petition. The impugned notices dated 5-2- 2007 and 9-5-2009 direct the sale of petitioners' mortgaged property under section 15 of the Financial Institution (Recovery of Finances) Ordinance, 2001. The impugned action of sale of mortgaged property is challenged presently for being contrary to the rule laid down by the Full Bench of this Court in Muhammad timer Rathore v. Federation of Pakistan (2009 CLD 257) which has declared section 15 ibid to be unconstitutional. That is a declaratory judgment with respect to the validity of a law and therefore, its effect operates in rem. Learned counsel informs that the Hon'ble Supreme Court has in one CPLA suspended the judgment of the learned Full Bench.
However, that A suspensory order is claimed to have effect inter partes only and not as a judgment in rem. Such an effect is established by the rule laid down in Gen. (Recd.) Ghulam Jilani v. The Federal Government through the Secretaru, Government of Pakistan, Interior Division, Islamabad (PLD 1975 Lahore 65).
2. In a number of other cases involving the same dispute, the respondent banks therein have filed recovery suits before the competent learned banking courts and thereby abandoned recovery under section 15 ibid which was impugned in such cases.
3. On the basis of the law discussed above, this petition is allowed and the respondent bank's purport to recover its dues by the sale of the mortgaged property under section 15 ibid is declared to be illegal. This declaration which is made in person am does not however impair the respondent bank's right to obtain recovery through lawful process including the filing of a suit for recovery before the competent banking court.
4. In the foregoing terms.
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