The Financial Institutions Recovery of Finance Ordinance

8/13/2019 The Financial Institutions Recovery of Finance Ordinance

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THE FINANCIAL INSTITUTIONS (RECOVERY OF FINANCES)

ORDINANCE, 2001

ORDINANCE NO. XLVI OF 2001

AN

ORDINANCE

to repeal, and, with certain modifications, re-enact, the Banking Companies (Recovery of

Loans, Advances, Credits and Finances) Act, !!"#

WHEREASit is e$pedient to repeal and with certain modifications, re-enact the Banking

Companies (Recovery of Loans, Advances, Credits and Finances) Act, !!", for the p%rposes

hereinafter appearing&

AND WHEREASthe 'resident is satisfied that circ%mstances e$ist which render it necessary to

take immediate action&

NOW, THEREFORE,in p%rs%ance of the 'roclamation of mergency of the fo%rteenth day of

cto*er, !!! and 'rovisional Constit%tion rder +o# of !!!, read with the 'rovisional

Constit%tion (Amendment) rder +o# ! of !!!, and in e$ercise of all powers ena*ling him in that

*ehalf, the 'resident of the slamic Rep%*lic of 'akistan is pleased to make and prom%lgate the

following rdinance-

Short tit!, !"t!#t $#% &o''!#&!'!#t.() .his rdinance may *e called the Financial

nstit%tions (Recovery of Finances) rdinance, /00#

(/) t e$tends to the whole of 'akistan#

(1) t shall come into force at once#

2. D!i#itio#*.n this rdinance, %nless there is anything rep%gnant in the s%*2ect or

conte$t

$) 3financial instit%tion3 means and incl%des


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(i) any company whether incorporated within or o%tside 'akistan which transacts the

*%siness of *anking or any associated or ancillary *%siness in 'akistan thro%gh its *ranches

within or o%tside 'akistan and incl%des a government savings *ank, *%t e$cl%des the 4tate Bank

of 'akistan&

(ii) a modara*a or modara*a management company, leasing company, investment *ank,

vent%re capital company, financing company, %nit tr%st or m%t%al f%nd of any kind and credit or

investment instit%tion, corporation or company& and

(iii) any company a%thorised *y law to carry on any similar *%siness, as the Federal

5overnment may *y notification in the official 5a6ette, specify&

+) 3Banking Co%rt3 means

(i) in respect of a case in which the claim does not e$ceed fifty million r%pees or for the trial of

offences %nder this rdinance, the Co%rt esta*lished %nder section 7& and

(ii) in respect of any other case, the 8igh Co%rt#

(&)3c%stomer3 means a person to whom finance has *een e$tended *y a financial instit%tion

and incl%des a person on whose *ehalf a g%arantee or letter of credit has *een iss%ed *y a

financial instit%tion as well as a s%rety or an indemnifier&

(%) 3finance3 incl%des

(i) an accommodation or facility provided on the *asis of participation in profit and loss,

mark-%p or mark-down in price, hire-p%rchase, e9%ity s%pport, lease, rent-sharing, licensing

charge or fee of any kind, p%rchase and sale of any property incl%ding commodities, patents,

designs, trade marks and copy-rights, *ills of e$change, promissory notes or other instr%ments

with or witho%t *%y-*ack arrangement *y a seller, participation term certificate, m%sharika,

mora*aha, m%sawama, istisnah or modara*a certificate, term finance certificate&(ii) facility of credit or charge cards&

(iii) facility of g%arantees, indemnities, letters of credit or any other financial engagement

which a financial instit%tion may give, iss%e or %ndertake on *ehalf of a c%stomer, with a

corresponding o*ligation *y the c%stomer to the financial instit%tion&

(iv) a loan, advance, cash credit, overdraft, packing credit, a *ill disco%nted and p%rchased


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or any other financial accommodation provided *y a financial instit%tion to a c%stomer&

(v) a *enami loan or facility that is, a loan or facility the real *eneficiary or recipient whereof is

a person other than the person in whose name the loan or facility is advanced or granted&

(vi) any amo%nt d%e from a c%stomer to a financial instit%tion %nder a decree passed *y a

Civil Co%rt or an award given *y an ar*itrator&

(vii) any amo%nt d%e from a c%stomer to a financial instit%tion which is the s%*2ect matter of

any pending s%it, appeal or revision *efore any Co%rt&

(viii) any other facility availed *y a c%stomer from a financial instit%tion#

(e) :o*ligation; incl%des

(i) any agreement for the repayment or e$tension of time in repayment of a finance or for

its restr%ct%ring or renewal or for payment or e$tension of time in payment of any other amo%nts

relating to a finance or li9%idated damages& and

(ii) any and all representations, warranties and covenants made *y or on *ehalf of the

c%stomer to a financial instit%tion at any stage, incl%ding representations, warranties and

covenants with regard to the ownership, mortgage, pledge, hypothecation or assignment of, or

other charge on, assets or properties or repayment of a finance or payment of any other

amo%nts relating to a finance or performance of an %ndertaking or f%lfillment of a promise& and

(iii) all d%ties imposed on the c%stomer %nder this rdinance& and

(f) 3r%les3 means r%les made %nder this rdinance#

. D-t o $ &-*to'!r.

() t shall *e the d%ty of a c%stomer to f%lfil his o*ligations to the financial instit%tion#

(/)


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/.Or%i#$#&! to o!rri%! oth!r $*..he provisions of this rdinance shall have effect

notwithstanding anything inconsistent therewith contained in any other law for the time *eing

in force#

. E*t$+i*h'!#t o 3$#4i#5 Co-rt.

() .he Federal 5overnment may, *y notification in the fficial 5a6ette, esta*lish as many

Banking Co%rts as it considers necessary to e$ercise 2%risdiction %nder this rdinance and

appoint a =%dge for each of s%ch Co%rts and where it esta*lishes more Banking Co%rts than

one, it shall specify in the notification the territorial limits within which each of the Banking Co%rts

shall e$ercise its 2%risdiction#

(/)


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'akistan and has the following 9%alifications, namely-

(i) a degree in Commerce and Acco%nt or in conomics& or

(ii) a degree in B%siness Administration& or

(iii) has completed a co%rse in *anking from the nstit%te of Bankers, 'akistan#

(!) Rem%neration of the amic%s c%riae, and the party or parties *y whom it will *e paya*le,

will *e determined *y the Banking Co%rt, keeping in view the circ%mstances of each case#

6. R!*i5#$tio# $#% r!'o$ o 7-%5!*.

() A person, not *eing a ?istrict =%dge, appointed as a =%dge of a Banking Co%rt %nder section

7 may, *y notice in writing %nder his hand addressed to the Federal 5overnment, resign from his

office#

(/) A person appointed as a =%dge of a Banking Co%rt %nder section 7 may *e removed from

office in cons%ltation with the Chief =%stice of the 8igh Co%rt#

8. 9o!r* o 3$#4i#5 Co-rt*.

() 4%*2ect to the provisions of this rdinance, a Banking Co%rt shall

(a) in the e$ercise of its civil 2%risdiction have all the powers vested in a civil Co%rt %nder the

Code of Civil 'roced%re, !0 (Act of !0)&

(*) in the e$ercise of its criminal 2%risdiction, try offences p%nisha*le %nder this rdinance and

shall, for this p%rpose have the same powers as are vested in a Co%rt of 4essions %nder the

Code of Criminal 'roced%re, ! (Act of !)

'rovided that a Banking Co%rt shall not take cogni6ance of any offence p%nisha*le %nder this

rdinance e$cept %pon a complaint in writing made *y a person a%thori6ed in this *ehalf *y the

financial instit%tion in respect of which the offence was committed#

(/) A Banking Co%rt shall in all matters with respect to which the proced%re has not *een

provided for in this rdinance, follow the proced%re laid down in the Code of Civil 'roced%re,

!0 (Act of !0), and the Code of Criminal 'roced%re, ! (Act of !)#

(1) All proceedings *efore a Banking Co%rt shall *e deemed to *e 2%dicial proceedings within

the meaning or sections !1 and // of the 'akistan 'enal Code (Act L of @0), and a


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Banking Co%rt shall *e deemed to *e a Co%rt for p%rposes of the Code of Criminal 'roced%re,

! (Act of !)#

(>) 4%*2ect to s%*-section (7), no Co%rt other than a Banking Co%rt shall have or e$ercise any

2%risdiction with respect to any matter to which the 2%risdiction of a Banking Co%rt e$tends %nder

this rdinance, incl%ding a decision as to the e$istence or otherwise of a finance and the

e$ec%tion of a decree passed *y a Banking Co%rt#

(7) +othing in s%*-section (>) shall *e deemed to affect

(a) the right of a financial instit%tion to seek any remedy *efore any Co%rt or otherwise that

may *e availa*le to it %nder the law *y which the financial instit%tion may have *een esta*lished&

or

(*) the powers of the financial instit%tion, or 2%risdiction of any Co%rt s%ch as is referred to in

cla%se (a)& or

re9%ire the transfer to a Banking Co%rt of any proceedings pending *efore any financial

instit%tion or s%ch Co%rt immediately *efore the coming into force of this rdinance#

(@) All proceedings pending in any Banking Co%rt constit%ted %nder the Banking Companies

(Recovery of Loans, Advances, Credits or Finances) Act, !!" ( of !!"), incl%ding s%its for

recovery of :loans; as defined %nder that Act shall stand transferred to, or *e deemed to *e

transferred to, and heard and disposed of *y, the Banking Co%rt having 2%risdiction %nder this

rdinance# n transfer of proceedings %nder this s%*-section, the parties shall appear *efore the

Banking Co%rt concerned on the date previo%sly fi$ed#

(") n respect of proceedings transferred to a Banking Co%rt %nder s%*section (@), the

Banking Co%rt shall proceed from the stage which the proceedings had reached immediately

prior to the transfer and shall not *e *o%nd to recall and re-hear any witness and may act on the

evidence already recorded or prod%ced *efore the Co%rt from which the proceedings were

transferred#

:. S-it or r!&o!r o ritt!# o i#$#&!*, !t&.

() 4%*2ect to s%*-section (/), and notwithstanding anything contained in the Limitation Act, !0

( of !0) or any other law, a financial instit%tion may, within three years from the date of

coming into force of this rdinance, file a s%it for the recovery of any amo%nt written off, released

or ad2%sted %nder any agreement, contract, or consent, incl%ding a compromise or withdrawal of


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any s%it or legal proceedings or ad2%stment of a decree *etween a financial instit%tion and a

c%stomer on any day on or after the first day of =an%ary, !!0 and *efore the coming into force

of this rdinance, if it can esta*lish that the amo%nt was written off, released or ad2%sted for

political reasons or considerations other than *ona fide *%siness considerations#

(/) +o s%it %nder s%* section () shall *e filed %nless its filing has *een approved *y

(a) the Board of ?irectors, in the case of a financial instit%tion incorporated within 'akistan,

(b) or the chief e$ec%tive (*y whatever name called or designated) of the financial instit%tion in

'akistan, in the case of a financial instit%tion incorporated o%tside 'akistan#

;. 9ro&!%-r! o 3$#4i#5 Co-rt*.

() ) .he provisions of section 0 of the Code of Civil 'roced%re, !0 (Act of !0), shall

have no application for and in relation to s%its filed here%nder#

(7) n a plaint *eing presented to the Banking Co%rt, a s%mmons in Form +o# > in Appendi$ EBE

to the Code of Civil 'roced%re, !0 (Act of !0) or in s%ch other form as may, from time to

time, *e prescri*ed *y r%les, shall *e served on the defendant thro%gh the *ailiff or process-


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server of the Banking Co%rt, *y registered post acknowledgement d%e, *y co%rier and *y

p%*lication in one nglish lang%age and one rd% lang%age daily newspaper, and service d%ly

effected in any one of the aforesaid modes shall *e deemed to *e valid service for p%rposes of

this rdinance# n the case of service of the s%mmons thro%gh the *ailiff or process-server, a

copy of the plaint shall *e attached therewith and in all other cases the defendant shall *e

entitled to o*tain a copy of the plaint from the office of the Banking Co%rt witho%t making a

written application *%t against d%e acknowledgement# .he Banking Co%rt shall ens%re that the

p%*lication of s%mmons takes place in newspapers with a wide circ%lation within its territorial

limits#

10. L!$! to %!!#%.

() n any case in which the s%mmons has *een served on the defendant as provided for in s%*-

section (7) of section !, the defendant shall not *e entitled to defend the s%it %nless he o*tains

leave from the Banking Co%rt as hereinafter provided to defend the same& and, in defa%lt of his

doing so, the allegations of fact in the plaint shall *e deemed to *e admitted and the Banking

Co%rt may pass a decree in favo%r of the plaintiff on the *asis thereof or s%ch other material as

the Banking Co%rt may re9%ire in the interests of 2%stice#

(/) .he defendant shall file the application for leave to defend within thirty days of the date of

first service *y any one of the modes laid down in s%*-section (7) of section !-'rovided that where service has *een validly effected only thro%gh p%*lication in the

newspapers, the Banking Co%rt may e$tend the time for filing an application for leave to defend if

satisfied that the defendant did not have knowledge thereof#

(1) .he application for leave to defend shall *e in the form of a written statement, and shall

contain a s%mmary of the s%*stantial 9%estions of law as well as fact in respect of which, in

the opinion of the defendant, evidence needs to *e recorded#

(>) n the case of a s%it for recovery instit%ted *y a financial instit%tion the application for

leave to defend shall also specifically state the following

(a) the amo%nt of finance availed *y the defendant from the financial instit%tion& the amo%nts

paid *y the defendant to the financial instit%tion and the dates of payments&

(*) the amo%nt of finance and other amo%nts relating to the finance paya*le *y the defendant

to the financial instit%tion %pto the date of instit%tion of the s%it&


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(c) the amo%nt if any which the defendant disp%tes as paya*le to the financial instit%tion and

facts in s%pport thereof

E") where applica*le and (7) shall *e re2ected, %nless the defendant discloses

therein s%fficient ca%se for his ina*ility to comply with any s%ch re9%irement#

(") .he plaintiff shall *e given an opport%nity of filing a reply to the application for leave to

defend, in the form of a replication#

() 4%*2ect to section , the Banking Co%rt shall grant the defendant leave to defend the

s%it if on consideration of the contents of the plaint, the application for leave to defend and the

reply thereto it is of the view that s%*stantial 9%estions of law or fact have *een raised in

respect of which evidence needs to *e recorded#

(!) n granting leave %nder s%*-section (), the Banking Co%rt may impose s%ch conditions

as it may deem appropriate in the circ%mstances of the case, incl%ding conditions as todeposit of cash or f%rnishing of sec%rity#

(0)


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this rdinance#

11.I#t!ri' D!&r!!.

() f the Banking Co%rt on a consideration of the contents of the plaint, the application for leave

to defend of the defendant and the reply thereto, is of the opinion that the disp%te *etween the

parties does not e$tend to the whole of the claim, or that part of the claim is either %ndisp%ted, or

is clearly d%e, or that the disp%te is mainly limited to a part of the principal amo%nt of the finance

or to any other amo%nts relating to the finance, it shall, while granting leave and framing iss%es

with respect to the disp%ted amo%nts, pass an interim decree in respect of that part of the claim

which relates to the principal amo%nt and which appears to *e paya*le *y the defendant to the

plaintiff#

(/) .he interim decree passed %nder s%*-section () shall, for all p%rposes incl%ding

appeal and e$ec%tion, *e deemed to *e a decree passed %nder this rdinance, and any

amo%nt covered there*y or recovered in e$ec%tion thereof shall *e ad2%sted at the time of the

final decree

'rovided that it shall *e open to the Banking Co%rt notwithstanding the pendency of any appeal,

to modify, in part or in whole, or reverse, the terms of the interim decree at the time of the final

disposal of the s%it and pass s%ch order as it may deem 2%st and proper'rovided f%rther that neither the Banking Co%rt nor the 8igh Co%rt acting %nder s%*-section (1) of

section // shall stay e$ec%tion of an interim decree %nless the 2%dgment-de*tor deposits in cash

with the Banking Co%rt the amo%nt or amo%nts admitted *y the 2%dgment-de*tor to *e paya*le to

the financial instit%tion %nder cla%se (c) of s%*-section (>) of section 0, and f%rnishes sec%rity for

the *alance decretal amo%nt if any, incl%sive, in the case of a s%it filed *y a financial instit%tion, of

cost of f%nds determined %nder section 1, and other costs#

12.9o!r to *!t $*i%! %!&r!!.n any case in which a decree is passed against a defendant

%nder s%*-section () of section 0 he may, within twenty-one days of the date of the decree, or

where the s%mmons was not d%ly served when he has knowledge of the decree, apply to the

Banking Co%rt for an order to set it aside& and if he satisfies the Banking Co%rt that he was

prevented *y s%fficient ca%se from making an application %nder section 0, or that the s%mmons


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was not d%ly served, the Co%rt shall make an order setting aside the decree against him %pon

s%ch terms as to costs, deposit in cash or f%rnishing of sec%rity or otherwise as it thinks fit and

allow him to make the application within ten days of the order#

1.Di*)


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the s%*2ect or conte$t

(a) :mortgage; means the transfer of an interest in specific immova*le property for the

p%rpose of sec%ring the payment of the mortgage money or the performance of an o*ligation

which may give rise to a pec%niary lia*ility&(*) :mortgage money; means any finance or other amo%nts relating to a finance, penalties,

damages, charges or pec%niary lia*ilities, payment of which is sec%red for the time *eing *y

the doc%ment *y which the mortgage is effected or evidenced, incl%ding any mortgage deed

or memorand%m of deposit of title deeds& and

(c) :mortgaged property; means immova*le property mortgaged to a financial instit%tion#

(/) n case of defa%lt in payment *y a c%stomer, the financial instit%tion may send a notice on

the mortgagor demanding payment of the mortgage money o%tstanding within fo%rteen days

from service of the notice, and failing payment of the amo%nt within d%e date, it shall send a

second notice of demand for payment of the amo%nt within fo%rteen days# n case the

c%stomer on the d%e date given in the second notice sent, contin%es to defa%lt in payment,

financial instit%tion shall serve a final notice on the mortgager demanding the payment of the

mortgage money o%tstanding within thirty days from service of the final notice on the

c%stomer#

(1)


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'rovided that *efore e$ercise of its powers %nder this s%*-section, the financial instit%tion shall

ca%se to *e p%*lished a notice in one rep%ta*le nglish daily newspaper with wide circ%lation

and one rd% daily newspaper in the 'rovince in which the mortgaged property is sit%ated,

specifying partic%lars of the mortgaged property, incl%ding name and address of the

mortgagor, details of the mortgaged property, amo%nt of o%tstanding mortgage money, and

indicating the intention of the financial instit%tion to sell the mortgaged property# .he financial

instit%tion shall also send s%ch notices to all persons who, to the knowledge of the financial

instit%tion, have an interest in the mortgaged property as mortgagees#

(7) .he financial instit%tion shall *e entitled, in its discretion, to participate in the p%*lic

a%ction, and to p%rchase the mortgaged property at the highest *id o*tained in the p%*lic

a%ction#

(@)


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mortgagor and a sale deed e$ec%ted and presented for registration *y d%ly a%thori6ed

attorneys of the financial instit%tion shall *e accepted for s%ch p%rposes *y the Registrar and

4%*-Registrar %nder the Registration Act, !0 ( of !0)#

() pon e$ec%tion and registration of the sale deed of the mortgaged property in favor of the

p%rchaser all rights in s%ch mortgaged property shall vest in the p%rchaser free from all

enc%m*rances and the mortgagor shall *e divested of any right, title and interest in the

mortgaged property#

(!) +et sale proceeds of the mortgaged property, after ded%cting all e$penses of sale or

e$penses inc%rred in any attempted sale, shall *e distri*%ted rata*ly amongst all mortgagees

in accordance with their respective rights and priorities in the mortgaged property# Any s%rpl%s

left, after paying in f%ll all the d%es of mortgagees, shall *e paid to the mortgagor#

(0) A financial instit%tion which has sold mortgaged property in e$ercise of powers conferred

herein shall file proper acco%nts of the sale proceeds in a Banking Co%rt within thirty days of

the sale#

() All disp%tes relating to the sale of the mortgaged property %nder this section incl%ding

disp%tes amongst mortgagees in respect of distri*%tion of the sale proceeds, shall *e decided

*y the Banking Co%rt#

(/) +either the Banking Co%rt nor the 8igh Co%rt shall grant an in2%nction restraining the sale

or proposed sale of mortgaged property %nless

(a) it is satisfied that no mortgage in respect of the immova*le property has *een created& or

(*) all moneys sec%red *y mortgage of the mortgaged property have *een paid& or

(c) the mortgagor or o*2ector deposits in the Banking Co%rt in cash the o%tstanding mortgage

money#

(1) .he rights and remedies provided %nder this section are in addition to, and not in lie% of,

any other rights or remedies a financial instit%tion may have %nder this rdinance#

(>) .he provisions contained in this section shall have effect notwithstanding anything

contained in this rdinance#

16.Att$&h'!#t +!or! =-%5'!#t, i#=-#&tio# $#% $


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or which is the s%*2ect of any o*ligation in favo%r of the financial instit%tion as sec%rity for

finance or for or in relation to a finance lease, the Banking Co%rt may, on application *y the

financial instit%tion, with a view to preventing s%ch property from *eing transferred, alienated,

enc%m*ered, wasted or otherwise dealt with in a manner which is likely to impair or pre2%dice

the sec%rity in favo%r of the financial instit%tion, or otherwise in the interest of 2%stice

(a) restrain the c%stomer and any other concerned person from transferring, alienating,

parting with possession or otherwise enc%m*ering, charging, disposing or dealing with the

property in any manner&

(*) attach s%ch property&

(c) transfer possession of s%ch property to the financial instit%tion& or

(d) appoint one or more Receivers of s%ch property on s%ch terms and conditions as it may

deem fit#

(/) An order %nder s%*-section () may also *e passed *y the Banking Co%rt in respect of

any property held *enami in the name of an ostensi*le owner whether ac9%ired *efore or after

the grant of finance *y the financial instit%tion#

(1) n cases where a c%stomer has o*tained property or financing thro%gh a finance lease,

or has e$ec%ted an agreement in connection with a mortgage, charge or pledge in terms

whereof the financial instit%tion is a%thori6ed to recover or take over possession of the

property witho%t filing a s%it, the financial instit%tion may, at its option

(a) directly recover the same if the property is mova*le& or

(*) file a s%it here%nder and the Banking Co%rt may pass an order at any time, either

a%thorising the financial instit%tion to recover the property directly or with the assistance of the

Co%rt

'rovided that in the event the financial instit%tion wrongly or %n2%stifia*ly e$ercises the direct

power of recovery here%nder it shall *e lia*le to pay s%ch compensation to the c%stomer as

may *e ad2%dged *y the Banking Co%rt in s%mmary proceedings to *e initiated on the

application of the c%stomer and concl%ded in thirty days#

(>) +othing in s%*-sections () to (1) shall affect the powers of the Banking Co%rt %nder rder

R%les 7 and @ of the Code of Civil 'roced%re, !0 (Act of !0) to attach *efore

2%dgment any property other than property mentioned in s%*-section ()#


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18.Fi#$ D!&r!!.() .he final decree passed *y a Banking Co%rt shall provide for payment

from the date of defa%lt of the amo%nts fo%nd to *e paya*le on acco%nt of the defa%lt in

f%lfillment of the o*ligation, and for costs incl%ding, in the case of a s%it filed *y a financial

instit%tion cost of f%nds determined %nder section 1#

(/) .he Banking Co%rt may, at the time of passing a final decree, also pass an order of the

nat%re contemplated *y s%*-section () of section @ to the e$tent of the decretal amo%nt#

1:.3$#4i#5 Do&-'!#t*.() +o financial instit%tion shall o*tain the signat%re of a c%stomer

on *anking doc%ment which contains *lanks in respect of important partic%lars incl%ding the

date, the amo%nt, the property or the period of time in 9%estion&

(/) Finance agreements e$ec%ted *y or on *ehalf of a financial instit%tion and a c%stomer

shall *e d%ly attested in the manner laid down in Article " of the Gan%n-e-4hahadat rder,

!> ('## 0 of !>)&

(1) +othing contained in s%*-section () and (/) shall affect the validity of any doc%ment

e$ec%ted prior to the date of enforcement of this rdinance&

(>) +otwithstanding any thing contained in this section or any other law, the Banking Co%rt

shall not ref%se to accept in evidence any doc%ment creating or p%rporting to create or

indicating the creation of a mortgage, charge, pledge or hypothecation in relation to any

property or ass%mption of any o*ligation *y a c%stomer, g%arantor, mortgagor or otherwisemerely *eca%se it is not d%ly stamped or is not registered as re9%ired *y any law or is not

attested or witnessed as re9%ired *y Article " of the Gan%n-e-4hahadat rdinance, !>

('## 0 of !>) and no s%ch doc%ment shall *e impo%nda*le *y the Banking Co%rt or any

other Co%rt or a%thority

'rovided that nothing contained in this s%*-section shall operate to defeat the legal rights of a

*ona fide p%rchaser for val%e witho%t notice of a doc%ment which o%ght to have *een

registered#

1;.E"!&-tio# o %!&r!! $#% *$! ith or itho-t i#t!r!#tio# o 3$#4i#5 Co-rt.

() pon prono%ncement of 2%dgment and decree *y a Banking Co%rt, the s%it shall

a%tomatically stand converted into e$ec%tion proceedings witho%t the need to file a separate


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application and no fresh notice need *e iss%ed to the 2%dgment-de*tor in this regard#

'artic%lars of the mortgaged, pledged or hypothecated property and other assets of the

2%dgment-de*tor shall *e filed *y the decree-holder for consideration of the Banking Co%rt and

the case will *e heard *y the Banking Co%rt for e$ec%tion of its decree on the e$piry of 10

days from the date of prono%ncement of 2%dgment and decree

'rovided that if the record of the s%it is s%mmoned at any stage *y the 8igh Co%rt for

p%rposes of hearing an appeal %nder section // or otherwise, copies of the decree and other

property doc%ments shall *e retained *y the Banking Co%rt for p%rposes of contin%ing the

e$ec%tion proceedings#

(/) .he decree of the Banking Co%rt shall *e e$ec%ted in accordance with the provisions of

the Code of Civil 'roced%re, !0 (Act of !0) or any other law for the time *eing in force

or in s%ch manner as the Banking Co%rt may at the re9%est of the decree-holder consider

appropriate, incl%ding recovery as arrears of land reven%e#

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m%tatis m%tandis, apply to sales of mortgaged, pledged or hypothecated property *y a

financial instit%tion in e$ercise of its powers conferred *y s%*-section (1)#

(@) .he Banking Co%rt and the financial instit%tion shall *e entitled to seek the services and

assistance of the police or sec%rity agency in the e$ercise of powers conferred *y this section#

(") +otwithstanding anything contained in the Code of Civil 'roced%re !0 (Act of !0),

or any other law for the time *eing in force

(a) the Banking Co%rt shall follow the s%mmary proced%re for p%rposes of investigation of

claims and o*2ections in respect of attachment or sale of any property, whether or not

mortgaged, pledged or hypothecated, and shall complete s%ch investigation within 10 days

of filing of the claims or o*2ections&

(*) if the claims or o*2ections are fo%nd *y the Banking Co%rt to *e malafide or filed merely

to delay the sale of the property, it shall impose a penalty %pto twenty percent of the sale price

of the property#

(c) the Banking Co%rt may, in its discretion, proceed with the sale of the mortgaged, or

pledged or hypothecated property if, in its opinion the interest of 2%stice so re9%ire

'rovided that the financial instit%tion gives a written %ndertaking that in the event the

o*2ections are fo%nd to *e valid, or are s%stained, it shall in addition to compensating the

aggrieved party *y the payment of s%ch amo%nt as may *e ad2%dged *y the Banking Co%rt

also pay a penalty %pto twenty percent of the sale proceeds and s%ch amo%nts shall *e

recovera*le from the financial instit%tion in the same manner as in e$ec%tion of decrees

passed here%nder#

20. 9roi*io#* r!$ti#5 to &!rt$i# o!#&!*.()


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granted a finance& or

(c) s%*se9%ent to the creation of a mortgage in favo%r of a financial instit%tion, dishonestly

alienates or parts with the possession of the mortgaged property whether *y creation of a

lease or otherwise contrary to the terms thereof, witho%t the written permission of the financial

instit%tion& or

(d) s%*se9%ent to the passing of a decree %nder section 0 or , sells, transfers or otherwise

alienates, or parts with possession of his assets or properties ac9%ired after the grant of

finance *y the financial instit%tion, incl%ding assets or properties ac9%ired *enami in the name

of an ostensi*le owner shall, witho%t pre2%dice to any other action which may *e taken against

him %nder this rdinance or any other law for the time *eing in force, *e p%nisha*le with

imprisonment of either description for a term which may e$tend to three years and shall also

*e lia*le to a fine which may e$tend to the val%e of the property or sec%rity as decreed or the

market val%e whichever is higher and shall *e ordered *y the Banking Co%rt trying the offence

to deliver %p or ref%nd to the financial instit%tion, within a time to *e fi$ed *y the Banking

Co%rt, the property or the val%e of the property or sec%rity#

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which may e$tend to one year, or with fine or with *oth, %nless he can esta*lish, for which the

*%rden of proof shall rest on him, that he had made arrangements with his *ank to ens%re that

the che9%e wo%ld *e hono%red and that the *ank was at fa%lt in not hono%ring the che9%e#

(7)

(/) .he appellant shall give notice of the filing of the appeal in accordance with the provisions

of rder L R%le 1 of the Code of Civil 'roced%re (Act of !0) to the respondent who

may appear *efore the Banking Co%rt to contest admission of the appeal on the date fi$ed for

hearing#

(1) .he 8igh Co%rt shall at the stage of admission of the appeal, or at any time thereafter

either s%o mot% or on the application of the decree holder, decide *y means of a reasoned

order whether the appeal is to *e admitted in part or in whole depending on the facts and

circ%mstances of the case, and as to the sec%rity to *e f%rnished *y the appellant

'rovided that the admission of the appeal shall not per se operate as a stay, and nor shall any

stay *e granted therein %nless the decree-holder has *een given an opport%nity of *eing

heard and %nless the appellant deposits in cash with the 8igh Co%rt an amo%nt e9%ivalent to


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the decretal amo%nt incl%sive of costs, or in the case of an appeal other than an appeal

against an interim decree, at the discretion of the 8igh Co%rt f%rnishes sec%rity e9%al in val%e

to s%ch amo%nt& and in the event of a stay *eing granted for a part of the decretal amo%nt

only, the re9%irement for a deposit in cash or f%rnishing of sec%rity shall stand red%ced

accordingly#

(>) An appeal %nder s%*-section () shall *e heard *y a *ench of not less than two =%dges

of the 8igh Co%rt and, in case the appeal is admitted, it shall *e decided within !0 days from

the date of admission#

(7) An appeal may *e preferred %nder this section from a decree passed e$-parte#

(@) +o appeal, review or revision shall lie against an order accepting or re2ecting an

application for leave to defend, or any interloc%tory order of the Banking Co%rt which does not

dispose of the entire case *efore the Banking Co%rt other than an order passed %nder s%*-

section () of section 7 or s%*-section (") of section !#

(") Any order of stay of e$ec%tion of a decree passed %nder s%*-section (/) shall

a%tomatically lapse on the e$piry of si$ months from the date of the order where%pon the

amo%nt deposited in Co%rt shall *e paid over to the decree-holder or the decree-holder may

enforce the sec%rity f%rnished *y the 2%dgment-de*tor#

2.R!*tri&tio# o# tr$#*!r o $**!t* > the prior written permission of the Banking Co%rt transfer, alienate, enc%m*er, remove or part

with possession of any of his asset or property f%rnished to the financial instit%tion as sec%rity

*y way of mortgage, pledge, hypothecation, charge, lien or otherwise pending final decision of

the s%it filed *y the financial instit%tion %nder this rdinance, and any s%ch transfer, alienation,

enc%m*rance or other disposition *y the c%stomer in violation of this s%*-section shall *e void

and of no legal effect

'rovided that the c%stomer may sell any s%ch asset or property which has *een retained *y or

entr%sted to him for p%rposes of dealing with the same in the ordinary co%rse of *%siness

s%*2ect to the terms of the letter of hypothecation or tr%st receipt or other instr%ment or

doc%ment e$ec%ted *y him, or for p%rposes of effecting their sale and depositing the sale

proceeds with the financial instit%tion


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'rovided f%rther that the c%stomer *efore making the sale shall file in the Banking Co%rt a

statement s%pported *y affidavit, containing f%ll partic%lars of s%ch asset or property, and

within three days after the sale shall s%*mit a f%ll acco%nt thereof to the Banking Co%rt and the

financial instit%tion#

(/) After prono%ncement of 2%dgment and decree *y the Banking Co%rt, incl%ding an

interim decree %nder section , no 2%dgment-de*tor shall witho%t the prior written permission

of the Banking Co%rt transfer, alienate, enc%m*er or part with possession of any assets or

properties and any s%ch transfer, alienation, enc%m*rance or other disposition *y a 2%dgment-

de*tor in violation of this s%*-section shall *e void and of no legal effect#

(1) .he provisions of s%*-section () shall also apply to a person who has f%rnished any

sec%rity on *ehalf of a c%stomer to the financial instit%tion on the *asis of which finance was

granted, provided s%ch person is a defendant in the s%it filed %nder section ! or is added as a

defendant thereafter#

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decree, sentence or order of a Banking Co%rt or the legality or propriety of anything done or

intended to *e done *y the Banking Co%rt in e$ercise of 2%risdiction %nder this rdinance

'rovided that the Banking Co%rt may, on its own accord or on application of any party, and

with notice to the other party or, as the case may *e, to *oth the parties, correct any clerical or

typographical mistake in any 2%dgment, decree, sentence or order passed *y it#

2:.I#%!'#it.+o s%it, prosec%tion or other legal proceeding shall lie against the Federal

5overnment or a Banking Co%rt or a financial instit%tion or any person for anything which is in

good faith done or intended to *e done %nder this rdinance or any r%le made there %nder#

2;.R!

Act, !!" (Act of !!") is here*y repealed#

(/) +otwithstanding the repeal of the (Recovery of Loans, Advances, Credits and Finances)

Act, !!" (Act of !!") and the provisions of this rdinance, decrees in cases relating to

interest-*earing loans which have not *een converted into finance shall *e passed in

accordance with the provisions of section 7 of the said Act#

The Financial Institutions Recovery of Finance Ordinance

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Transcript of The Financial Institutions Recovery of Finance Ordinance