HABIB BANK LIMITED vs WRSM Trading Company L.L.C. and others
The petitioner, a banking company registered in Pakistan, initiated a suit in the Banking Court at Lahore to recover debts arising from financial facilities provided to the respondents in Dubai. The respondents challenged the territorial jurisdiction of the Banking Court, which upheld the objection and ordered the return of the plaint. The Lahore High Court affirmed this decision, further opining that the underlying interest-based transaction was void under the Contract Act, 1872. The petitioner sought leave to appeal before the Supreme Court, contending that the Financial Institutions (Recovery of Finances) Ordinance, 2001, applies to financial transactions conducted by Pakistani banking institutions abroad and that the creditor is entitled to follow the debtor. The petitioner further argued that the High Court's observations regarding the validity of the interest-based contract were extraneous and legally misconceived. Finding that the case presented novel legal questions regarding the extraterritorial application of the Ordinance and the jurisdiction of Pakistani courts over foreign financial transactions, the Supreme Court granted leave to appeal and suspended the operation of the impugned judgments pending final adjudication.
- Does the Financial Institutions (Recovery of Finances) Ordinance 2001 apply to financial transactions conducted by a Pakistani banking institution outside of Pakistan?
- Can a court determine the validity of an underlying contract under the Contract Act 1872 when it has already concluded it lacks territorial jurisdiction over the suit?
- Is the principle that a creditor can follow the debtor applicable to confer jurisdiction upon Pakistani courts for financial transactions entered into abroad?
- Section 9, Financial Institutions (Recovery of Finances) Ordinance 2001
- Section 23, Contract Act 1872
- Section 20, Code of Civil Procedure 1908
ORDER
' MIAN SAQIB NISAR, J.---Petitioner is a banking company/financial institution which is registered in Pakistan and has its branches abroad including in Dubai. The respondents availed a financial facility from the petitioner in Dubai against some security provided there. However, they allegedly violated the terms of the agreement/finance and per the case of the petitioner they have come over to Pakistan. In order to recover the amount due, the petitioner brought a suit against the respondents-defendants before the Banking Court at Lahore per the provisions of Financial Institutions (Recovery of Finances) Ordinance, 2001 (the Ordinance). The respondents-defendants appeared in the matters filed the leave application and have contested the territorial jurisdiction of the Banking Court on a number of grounds. A preliminary issue in this context was framed and the Banking Court has allowed the objection and directed the return of the plaint to the petitioner. The petitioner then challenged this verdict/judgment through a regular first appeal before the Lahore High Court, but in vain.
2. Learned counsel for the petitioner has argued that where a financial institution is registered in Pakistan but carries on its business abroad and also makes financial transactions there, the provisions of section 9 of the Ordinance shall still be attracted. It is also argued that the provisions of section 9 of the Ordinance are not restricted to the financial transaction conducted in Pakistan, but would have extraterritorial limits as well. It is further submitted that the view set out by the learned High Court that such financial transaction inter se the petitioner and the respondents is based upon interest and, therefore, is void in terms of section 23 of the Contract Act, 1872 and on account of the same, such money due in the transaction is not recoverable, is based upon misconception of law. Besides as the courts had held that Pakistani courts would have no jurisdiction, therefore, it was absolutely unnecessary to make any comment in this regard which, therefore, is something extraneous and must be declared illegal. It is further submitted that the view set out by the learned High Court that section 20 of the C.P.C. Is procedural in nature, therefore, would not be relevant for the purposes of conferring jurisdiction upon the Pakistani courts is misconceived, because not only the said provisions but the law settled till date is that the creditor can follow the debtor. This principle is duly applicable and attracted to the case in hand. In support of her contentions, reliance has been placed upon Mian Mehmood Ahmad v. Hong Kong and Shanghai Banking Corporation Ltd. Through Manager and 6 others (2010 CLD 293). Further reliance is place upon Valuegold Limited and 2 others v. United Bank Limited (PLD 1999 Karachi 1).
Since this case is one of first impression and there is no pronouncement by this Court in this context, thus leave is granted, inter alia, to consider the above.
C.M.A. No. 2098 of 2015:
3. Notice. In the meantime, the operation of the impugned judgments of the courts below are suspended.
Cited by 1 case
- AMEER HAMZA vs The STATE and others 2017 P Cr. L J 21