INDUSTRIAL DEVELOPMENT BANK OF PAKISTAN Versus ABDUL LATIF CHANNA Ainuddin , Dur Muhammad Shah
This criminal acquittal appeal arises from an order passed by the Banking Court acquitting the respondents under Section 265-K, Code of Criminal Procedure 1898 in criminal proceedings initiated under Section 19 of the Banking Companies (Recovery of Loans, Advances, Credits and Finances) Act 1997. The core legal question was whether the mere default in the repayment of a loan or inability to pay constitutes a criminal offence, and whether the respondents were liable for the removal of mortgaged machinery. The court held that obtaining a loan and failing to repay it creates a civil liability rather than a criminal offence, and since the allegations regarding the removal of machinery were specifically directed against another respondent, the acquittal of the remaining respondents was justified. The key principle laid down is that default in loan repayment does not automatically give birth to criminal liability in the absence of specific criminal acts attributable to the accused.
- Does the mere default in the repayment of a bank loan constitute a criminal offence?
- Can criminal proceedings continue against principal borrowers and guarantors without specific allegations of criminal acts?
- What is the scope of an acquittal application under Section 265-K of the Code of Criminal Procedure 1898 in banking recovery matters?
- Section 19, Banking Companies (Recovery of Loans, Advances, Credits and Finances) Act 1997
- Section 265-K, Code of Criminal Procedure 1898
ORDER
1. Appellant filed criminal proceedings against the respondents under section 19 of Banking Companies (Recovery of Loans, Advances, Credits and Finances) Act 1997 on the allegation that the machinery/plant, for which loan was provided, has been missing and the mortgaged property has been handed over to some one else on lease. Respondents No.1, 2 and 7 moved application under section 265-K, Cr.P.C., on the ground that there is no substance in the allegations against them and prayed for their acquittal, which was allowed and the said respondents were acquitted by the Banking Court vide order dated 5-3-2010 and against the said order this Criminal Acquittal Appeal has been filed.
2. Apparently there was a consent given by the counsel for the appellant which has been denied by him today. Counsel for the appellant states that since the respondents, who moved application under section 265-K, Cr.P.C., are the principal borrowers and guarantors, therefore, they are liable for criminal offence.
3. Counsel for the respondents Nos.1, 2 and 7, on the other hand, has referred to the contents of memo of appeal wherein the whole allegation of misutilization of the finance facility and the removal of machinery/plant is directed against the respondent No. 5, which reads as follow's:--
4. Revenue records shows that the land bearing S. No.283, Deh: Bolaki, Thul where the project was actually installed, was the property of Mr. Nazir Ahmed son of Haji Muhammad Rahim Khoso who is guarantor in the loan and is accused/respondent No.5. The. said Nazir Ahmed has sold out the above said project to Mr. Muhammad Ali Jamali and Mr. Abdul Ghafar Jamali in 1993, it is worth-mentioning that the accused/respondents cheated the Bank and mortgaged the Plot No. S. No.538, Deh: Maloi, Tapo Misripur, Taluka Thul but did not install the machinery/plant on the same instead they installed plant on S. No.283, Deh Bolaki, Tapo Old Thul, Taluka Thul.
5. From the contents of memo of appeal itself it appears that the criminal offence is directed against the respondent No.5 i.e. Nazir Ahmed. Counsel for the appellant contends that it is an admitted position that loan was obtained by the respondents Nos.1, 2 and 3 and therefore they are liable for the criminal offence as well.
6. Under the law obtaining loan and inability to pay back the same is not a criminal offence. It may be a civil liability to be proceeded in civil forum provided under the law but the commission of default in repayment of loan does not give birth to a criminal offence. However, from the memo of appeal it appears that the machinery/plant has been removed which allegation is directed against the respondent No.5, therefore, criminal proceedings against the respondent No.5 shall continue, whereas no useful purpose will be served if remaining respondents are proceeded against as there is no likelihood of their conviction in view of hereinabove facts.
7. With the above directions this Criminal Acquittal Appeal is disposed of.
8. H.B.T./I-40/K Order accordingly.