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Banking Companies Ordinance, 1962

 

LVII OF 1962 

7th June, 1962

 

Part I

Preliminary

 

1.     Short title, extent and commencement.–  

 (1)        This Ordinance may be called the Banking Companies Ordinance, 1962.

 

(2)        It extends to the whole of Pakistan.

 

(3)        It shall come into force at once.

 

2.         Application of other laws not barred.-

 The provisions of this Ordinance shall be in addition to, and not, save as hereinafter expressly provided, in derogation of, the Companies Act, 1913 (VII of 1913), and any other law for the time being in force.

 

3.         Limited Application of the Ordinance to co-operative Banks.    Omitted

 

3A.    Limited application of Ordinance to certain financial institutions._

 (1)        The provisions of sections 6, 13,25A, 25AA, 29,31,32,33,40, 41,41A, 41B, 41C, 41D, 42, 47, 48, 83, 84, and 94 of this Ordinance shall, with such modifications as the State Bank may determined from time to time in relation to activities which have implications for the monetary or credit policies of the State Bank, apply to the Investment Corporation of Pakistan, the National Investment Unit Trust, the Pakistan Industrial Credit and Investment Corporation, the House Building Finance Corporation, the National Development Finance Corporation, the Bankers Equity Limited, the Pak-Libya Holding Company Limited, the Pakistan Kuwait Investment Company Limited, the Saudi-Pak Industrial and Agricultural Investment Company Limited, the Small Business Finance Corporation, the Regional Development Finance Corporation, Investment Finance Companies, Venture Capital Companies, Housing Finance Companies, Corporations or Institutions which carry on one or more of the businesses enumerated in section 7 of this Ordinance, save and except for leasing companies and modaraba companies, as the Federal Government may from time to time, by notification in the Official Gazette, specify in this behalf.

 

(2)        All notifications issued by the Federal Government which are inconsistent with the provisions of sub-section (1) including such notifications in respect of the National Development Leasing Corporations, Leasing Companies and Modaraba Companies shall stand rescinded with immediate effect.

 

4.         Power to suspend operation of Ordinance.–   

 (1)       The  Federal Government, if on a representation made by the State Bank in this behalf is satisfied that it is expedient so to do, may by notification in the Official Gazette suspend for such period, not exceeding sixty days, as may be specified in the notification, the operation of all or any of the provisions of this Ordinance, either generally or in relation to any specified banking company.

 

(2)       The Federal Government may, notification in the official Gazette, extend from time to time, the period of any suspension under sub-section (1) for such period or periods, not exceeding sixty days at any one time, as it thinks fit so however that the total period does not exceed one year.

 

(3)      A copy of any notification issued under this section shall be laid on the table of the Federal Legislature–

 

(i)         if it is in session, within three days of the issue of the notification; and

 

(ii)        if it is not in session, as soon as it meets after the issue of the notification.

  

5. Definitions.–        

In this Ordinance, unless there is anything repugnant in the subject or context,–

 

(a)      “approved securities” means the shares of the Bankers Equity Limited or securities in which a trustee may invest money under clause (a), clause (b), clause (bb), clause (c) or clause (d) of section 20 of the Trust Act, 1882 (II of 1882), and for the purpose of–

(i)         sub-section (2) of section 13, includes such other securities as the Federal Government may, by notification in the official Gazette, declare to be approved securities for the purpose of that subsection; and

(ii)        sub-section (1) of section 29, includes such types of Pakistan rupee obligations of the Federal Government or a Provincial Government or of a Corporation wholly owned or controlled, directly or indirectly, by the Federal Government or a Provincial Government and guaranteed by the Federal Government as the Federal Government may, by notification in the official gazette, declare, to the extent determined from time to time, to be approved securities for the purpose of that sub-section;

(b)       “banking means the accepting, for the purpose of lending or investment, of deposits of money from the public, repayable on demand or otherwise, and withdrawable by cheque, draft, order or otherwise;

 

(c)        “banking company” means any company which transacts the business of banking in Pakistan;

 

Explanation.–

Any company which is engaged in the manufacture of goods or carrieson any trade and which accepts deposits of money from the merely for the purpose of financing its business as such manufacturer or trader shall not be deemed to transact the business of banking within the meaning of this clause;

 

(d)       “branch” or “branch office”, in relation to a banking company, means any branch or branch office, whether called a pay office or sub-pay office or by any other name, at which deposits are received, cheques cashed or moneys lent, and for the purposes of section 40 includes any place of business where any other form of business referred to in sub-section (1) of section 7 is transacted;

 

(dd)     “creditor” includes persons from whom deposits have been received on the basis of participation in profit and loss and a banking company or financial institution from which financial accommodation or facility has been received on the basis of participation in profit and loss, mark-up in price, hire-purchase, lease, or otherwise;

 

(e)       “company” means any company which may be wound up under the Companies Act, 1913 (VII of 1913);

 

(ee)      “debtor” includes a person to whom, or a banking company or financial institution to which, finance as defined in the Banking Tribunals Ordinance 1984, has been provided;

 

(f)        “demand liabilities” means liabilities which must be met on demand, and “time liabilities” means liabilities which are not demand liabilities;

 

(ff)   “family members” in relation to a person means his spouse, dependent lineal ascendants and descendants and dependent brothers and sisters;

 

(g)       “gold” includes gold in the form of coin, whether legal tender or not, or in the form of bullion or ingot, whether refined or not;

 

(gg)     “loans, advances, and credit” includes “finance” as defined in the Banking Tribunals Ordinance, 1984;

 

(h)      “managing director”, in relation to a banking company, means a director who, by virtue of an agreement with the banking company or of a resolution passed by the banking company in general meeting or by its Board of Directors or, by virtue of its memorandum or articles of association, is entrusted with the management of the whole, or substantially the whole of the affairs of the company, and includes a director occupying the position of a managing director, by whatever name called;

 

(i)        “prescribed” means prescribed by rules made under this Ordinance;

 

(j)        “private company” has the same meaning as in the Companies Act, 1913 (VII of 1913);

 

(k)       “registrar” has the same meaning as in the Companies Act, 1913 (VII of 1913);

 

(l)        “scheduled bank” has the same meaning as in the State Bank of Pakistan Act, 1956 (XXXIII of 1956);

 

(m)      “secured loan or advance” means a loan or advance made on the security of assets the market value of which is not at any time less than the amount of such loan or advance, and “unsecured loan or advance” means a loan or advance not so secured, or that part of it which is not so secured;

 

(mm) “securities” includes securities as defined in the Capital Issues (Continuance of Control) Act, 1947 (XXIX of 1947);

 

(n)        “State Bank” means the State Bank of Pakistan.

 

o)    “substantial interest” in an undertaking shall be deemed to be possessed by a person if he or any of his family members is the owner, director or officer of or has control over the undertaking or if he or any of his family members holds shares carrying not less than twenty per cent of the voting power in such undertaking ;

 

Explanation.– For the purpose of this clause,–

(i)        “control” in relation to an undertaking, means the power to exercise a controlling influence over the management or the policies of the undertaking, and, in relation to shares, means the power to exercise a controlling influence over the voting power attached to such shares;

(ii)        “person” includes a Hindu undivided family, a firm, an association or body of individuals, whether incorporated or not, a company and every other juridical person; and

(iii)      “undertaking” means any concern, institution, establishment or enterprise engaged in the production, supply or distribution of goods, or in the provision or control of any services relating to the provision of board, lodging, transport, entertainment or amusement, or of facilities in connection with the supply of electrical or other energy, or to the purveying of news, insurance or investment.

 

6.         Ordinance to override memorandum, articles, etc.–  

 Save as other-wise expressly provided in this Ordinance,

 

(a)       the provisions of this Ordinance shall have effect notwithstanding anything to the contrary contained in the memorandum or articles of a banking company, or in any agreement executed by it, or in any resolution passed by the banking company in general meeting or by its Board of Directors, whether the same be registered, executed or passed, as the case may be, before or after the commencement of this Ordinance; and

 

(b)       any provision contained in the memorandum, articles, agreement or resolution aforesaid shall, to the extent to which it is repugnant to the provisions of this Ordinance, become or be void, as the case may be.

Part II

Business Of Banking Companies

 

7.     Form of business in which banking companies may engage.–

 (1)        In addition to the business of banking, a banking company may engage in any one or more of the following forms of business, namely:-

(a)        The borrowing, raising, or taking up of money; the lending or advancing of money either upon or without security; the drawing, making, accepting, discounting, buying, selling, collecting and dealing in bills of exchange, hundies, promissory notes, coupons, drafts, bills of lading, railway receipts, warrants, debentures, certificates, scrips participation term certificates, term finance certificates, musharika certificates, modaraba certificates and such other instruments as may be approved by the State Bank] and other instruments, and securities whether transferable or negotiable or not; the granting and issuing of letters of credit, traveler’s cheques and circular notes; the buying, selling and dealing in bullion spices the buying and selling of foreign exchange including foreign bank notes; the acquiring, holding, issuing on commission, underwriting and dealing in stock, funds, shares, debentures, debenture stock, bonds, obligations, securities participation term certificates, term finance certificates, musharika certificates, modaraba certificates and such other instruments as may be approved by the State Bank and investment of all kinds; the purchasing and selling of bonds, scrips or other forms of securities participation terms certificates, term finance certificates, musharika certificates, modaraba certificates and such other instruments as may be approved by the State Banks on behalf of constituents or others, the negotiating of loans and advances; the receiving of all kinds of bonds, scrips of valuables on deposit or for safe custody or otherwise; the providing of safe deposit vaults; the collecting and transmitting of money and securities;

(aa)  the providing of finance as defined in the Banking Tribunals Ordinance, 1984;

(b)      acting agents for any Government or local authority or any other person or persons; the carrying on of agency business of any description including the clearing and forwarding of goods, giving of receipts and discharges and otherwise acting as an attorney on behalf of customers, but excluding the business of a managing agent or treasurer of a company;

(bb)      acting as “modaraba company” under the provision of the Modaraba Companies and Modaraba (Floatation and Control) Ordinance, 1980 (XXXI of 1980);

(c)        contracting for public and private loans and negotiation and issuing the same;

(d)        the effecting, insuring, guaranteeing, underwriting, participating in managing and carrying out of any issue public or private, Government, municipal or other loans or of shares, stock debentures, debenture stock or other securities of any company, corporation or association and the lending of money for the purpose of any such issue;

(e)        carrying on and transacting every kind of guarantee and indemnity business;

(ee)      purchase or acquisition in the normal course of its banking business of any property, including commodities, patents, designs, trade-marks and copyrights with or without buy-back arrangements by the seller, or for sale in the form of hire-purchase or on deferred payment basis with mark-up or for leaning or licensing or for rush-sharing or for any other mode of financing;

(f)         managing, selling and realizing any property which may come into the possession of the company in satisfaction or part satisfaction of any of its claims;

(g)        acquiring and holding and generally dealing with any property or any right, title or interest in any such property which may form security or part of the security for any loans or advances or which may be connected with any such security; for any loans or advances or which may be connected with any such security;

(h)        undertaking and executing trusts;

(i)         undertaking the administration of estates as executor, trustee or otherwise;

(j)         establishing and supporting or aiding in the establishment and support of associations, institutions, funds, trusts and conveniences calculated to benefit employees or ex-employees of the company or the dependents or connections of such persons; granting pensions and allowances and making payments towards insurance; subscribing to or guaranteeing moneys for charitable or benevolent objects or for any exhibition or for any public, general or useful object;

(k)        the acquisition, construction, maintenance and alteration of any building or works necessary or convenient for the purpose of the company;

(l)         selling, improving, managing, developing, exchanging, leasing, mortgaging, disposing of or turning into account or otherwise dealing with all or any part of the property and rights of the company;

(m)       acquiring and undertaking the whole or any part of the business of any person or company, when such business is of a nature enumerated or described in this sub-section;

(n)        doing all such other things as are incidental or conducive to the promotion or advancement of the business of the company;

(o)        any other form of business which the Federal Government may, by notification in the official Gazette, specify as a form of business in which it is lawful for a banking company to engage.

 

(2)        No banking company shall engage in any form of business other than those referred to in sub-section (1).

 

 

8.         Use of the word “Bank” or any of its derivatives

 Every company carrying on the business of banking in Pakistan shall use the word “bank”, or any of its derivatives as part of its name and no company other than a banking company shall use in its name any word calculated to indicate that it is a banking company:

 

Provided that nothing in this section shall apply to-

 

(a)        subsidiary of a banking company formed for one or more of the purpose mentioned in sub-section (1) of Section 23 whose name indicates that it is a subsidiary of that banking company; and

 

(b)       any association of banks formed for the protection of their mutual interests and registered under section 42 of the Companies Ordinance 1984(XLVII of 1984):

 

Provided further that the State Bank may, subject to such conditions, if any, as it may deem fit, by notification in the Official Gazette, authorise a company not being a banking company to use in its name the word ‘bank’ or any of its derivatives.

 

9.         Prohibition of trading.– 

 Except as authorised under section 7, no banking company shall directly or indirectly deal in the buying or selling or bartering of goods or engage in any trade or buy, sell or barter goods for others, otherwise than in connection with bills of exchange received for collection or negotiation.

 

Explanation._ For the purpose of this section, “goods” means every kind of movable property, other than actionable claims, stocks, shares, money, bullion and species, and all instruments referred to in clause (a) of sub-section (1) of Section 7.

 

 

10.       Disposal of non-banking assets.– 

Notwithstanding anything contained in section 7, no banking company shall hold except as may be permitted by the State Bank from time to time or as is required. for any period exceeding seven years from the acquisition thereof or from the commencement of this Ordinance, whichever is later or any extension of such period as in this section provided, and such property shall be disposed of within such period or extended period, as the case may be:

 

Provided that the banking company may, within the period of seven years as aforesaid, deal or trade in any such property for the purpose of facilitating the disposal thereof:

 

Provided further that the State Bank may in any particular case extend the aforesaid period of seven years by such period not exceeding five years where it is satisfied that such extension would be in the interests of the depositors of the banking company.

 

Explanation.–For the purpose of this section property, a substantial portion of which is in use by banking company for its own genuine requirements shall be deemed to be property for its own use.

 

 

11.       Prohibition of employment of managing agents and restrictions on certain forms of employment.– 

 (1)        No banking company–

 

(a)     shall employ or be managed by a managing agent; or

 

(b)     shall employ or continue the employment of any person–

 

(i)      who is, or at any time has been, adjudicated insolvent or has suspended payment, or has compounded with his creditors, or who is, or has been, convicted by a criminal court of an offence involving moral turpitude; and

 

(ii)     whose remuneration or part of whose remuneration takes the form of commission or a share in the profits of the company:

 

Provided that nothing contained in sub-clause (ii) shall apply to the payment by a banking company of–

 

(a)     any bonus in pursuance of a settlement or award arrived at or made under any law relating to industrial disputes or in accordance with any scheme framed by such banking company or in accordance with the usual-practice prevailing in banking business; or

 

(b)     any commission to any broker (including guarantee broker), cashier-contractor, clearing and forwarding agent, auctioneer or any other person, employed by the banking company under a contract otherwise than as a regular member of the staff of the company;

 

(c)     shall be managed by any person–

 

(i)      who is a director of any other company not being a subsidiary company of the banking company or a company registered under section 26 of the Companies Act, 1913 (VII of 1913), except with the previous approval of the State Bank; or

 

(ii)     who is engaged in any other business or vocation; or

 

(iii)    who has a contract with the company for its management for a period exceeding five years at any one time:

 

Provide that any contract with the company for its management may be renewed or extended for a further period not exceeding five years at a time if and so often as the directors so decide:

 

Provided further that nothing in this clause shall apply to a director, other than the managing director, of a banking company by reason only of his being such director.

 

(2)        Where a person holding the office of a chairman or director or manager or chief executive officer (by whatever name called) of a banking company is, or has been found any tribunal or other authority (other than a criminal court) to have contravened the by provision of any law and the State Bank is satisfied that the contravention is of such a nature that the association of such person with the banking company is or will be detrimental to the interest of the banking company or its depositors or otherwise undesirable, the State Bank may.22 make an order that person shall cease to hold the office with effect from such date as may be specified therein and thereupon, that office shall, with effect from the said date, become vacant.

 

(3)        Any order made under sub-section (2) in respect of any person may also provide that he shall not, without the pervious permission of the State Bank in writing, in any way, directly or indirectly, be concerned with, or take part in the management of, the banking company or any other banking company for such period not exceeding five years as may be specified in the order.

 

(4)        No order under sub-section (2) shall be made in respect of any person unless he has been given an opportunity of making a representation to the State Bank against the proposed order:

 

Provided that it shall not be necessary to give any such opportunity if, in the opinion of the State Bank, any delay would be detrimental to the interests of the banking company or its depositors.

 

(5)        Any decision or order of the State Bank made under this section shall be final for all purposes.

  

12.       Restrictions on removal of records and documents.–  

 No banking company shall remove from Pakistan to a place outside Pakistan any of its records and documents relating to its business at is branches, whether they are functioning or not, without the prior permission in writing of the State Bank.

 

Explanation.– In this section the term “records” means ledgers day books, cash books, accounts books and all other books used in the business of a banking company and the term “documents” means vouchers, cheques, bills, pay orders, securities for advances and any other documents supporting entries in the books of, or claims by or against, a banking company.

 

 

13.       Requirement as to minimum paid-up capital and reserves.–

 (1)        Subject  to sub-section (2) no banking company shall:-

 

(a)    commence business unless it has such minimum paid-up capital as may be determined by the State Bank; or

 

(b)    carry on business unless the aggregate of its paid-up capital and unencumbered general reserves is of such minimum value within such period as may be determined and notified by the State Bank from time to time for banking companies in general or for a banking company in particular.

 

(2)      No banking company incorporated outside Pakistan shall be deemed to have complied with the provisions of sub-section (1) unless it deposits, and keep deposits, with the state bank an amount by transfer of funds from outside Pakistan or in the form of assets acquired out of remittable profits made by it from deposits in Pakistan which is not less than what is required to be maintained under sub-section (1), in any one or more of the following forms, namely:-

 

(i)      interest-free deposit in cash in Pakistan rupees;

 

(ii)     interest-free deposit in a freely convertible approved foreign exchange within the meaning of the STATE BANK OF PAKISTAN ACT, 1956 (XXXIII of 1956), specified by the STATE BANK in respect of such banking company; and

 

(iii)         deposit of un-encumbered approved securities:

 

(3)          Without prejudice to the provisions of section 83, the State Bank may, by order in writing, require any banking company which has failed to comply with the provisions of clause (b) of sub-section (1) within the period determined and notified under that clause to deposit with the State Bank such amount not exceeding the amount by which the aggregate value of the capital and accumulated general reserves of such banking company falls short of the minimum amount of the aggregate of the capital and unencumbered  general reserves required to be maintained  by such banking company pursuant to clause (b) of sub-section (1) on such terms and conditions as the State Bank may determine and every banking company which is so required shall be bound to comply with the order.

 

(4)              Any amount deposited and keep deposited with the State Bank under sub-section (2) by any banking company incorporated outside Pakistan shall, in the event of the banking company ceasing for any reason to carry on banking business in Pakistan, be an asset of the banking company on which the claim of all the creditors of the banking company in Pakistan shall be the first charge.

 

(5)               If any deposit arises in computing the aggregate value of the capital and unencumbered general reserves of any banking company, a determination thereof by the State Bank shall be final.

 

Explanation.–  For the purposes of this section, (a) the expression “value” means the real or exchangeable value or, if the real or exchangeable value; and (b) the expression “Capital and unencumbered general reserves” means paid-up capital and such other items as may be notified in this regard by the State Bank from time to time.

  

14.       Regulation of paid-up capital, subscribed capital and authorized capital and voting rights of share-holders.–

 

(1)        No banking company incorporated in Pakistan shall carry on business in Pakistan unless it satisfies the following conditions, namely:-

 

(i)         that the subscribed capital of the company is not less than one half of the authorized capital and paid-up capital is not less than one half of the subscribed capital and that if the capital is increased it complies with the conditions prescribed in this clause within such period not exceeding two years as the State Bank may allow;

 

(ii)        that the capital of the company consists of ordinary shares only;

 

(iii)       that, subject to the provisions contained in clause

 

(iv)       the voting rights of any one shareholder are strictly proportionate to the contribution made by him to the paid-up capital of the company;

 

(iv)       that the voting rights of any one shareholder, except those of the Federal Government or a Provincial Government do not exceed five per cent of the total voting rights of all the shareholders.

 

(2)        Notwithstanding anything contained in any law for the time being in force or in any contract or instrument no suit or other proceeding shall be maintained against any person registered as the holder of a share in a banking company on the ground that the title to the said share vests in a person other than the registered holder:

 

Provided that nothing contained in this sub-section shall bar a suit or other Proceeding–

 

(a)     by a transferee of the share on the ground that he has obtained from the registered holder a transfer of the share in accordance with any law relating to such transfer; or

 

(b)     on behalf of a minor or a lunatic on the ground that the registered holder holds the share on behalf of the minor or lunatic..26

 

(3)        Every chairman, managing director or chief executive officer by whatever name called of a banking company shall furnish to the State Bank through that banking company returns containing full particulars of the extent and value of his holding of shares, whether directly or indirectly, in the banking company and of any change in the extent of such holding or any variation in the rights attaching thereto and such other information relating to those shares as the State Bank may, by order, require and in such form and at such time as may be specified in the order.

 

15.       Election of new directors.

 

(1)        The State Bank may, by order, require any banking company to call a general meeting of the shareholders of the company within such time, not less than two months from the date of the order, as may be specified therein or within such further time as the State Bank may allow in this behalf, to elect in accordance with the voting rights permissible under this Ordinance fresh directors, and the banking company shall be bound to comply with the order.

 

(2)        Every director elected under sub-section (1) shall hold office until the date up to which his predecessor would have held office, if the election had not been held.

 

(3)        Any election duly held under this section shall not be called in question in any court.

 

15A.     Appointment of director by the State Bank.–

 

Notwithstanding anything contained in the Companies Act, 1913 (VII of 1913), or in the memorandum or articles of association of any banking company, the State Bank may appoint not more than one person to be a director of a banking company, whether or not he holds any qualification shares.

 

 

15B.    Restriction on term of office of directors.–

 (1)        A director of a banking company, not being its chief executive, by whatever name called, or a director nominated under section 15A, shall not hold office for more than six consecutive years.

 

Explanation.–In computing the period of six consecutive years for the purpose of this sub-section, any break of less than three years in the continuity of office shall be disregarded.

 

(2)        A director of a banking company vacating office in pursuance of sub-section (1) shall not be eligible for re-election as a director of that banking company unless a period of three years has elapsed since the date on which he so vacated his office:

 

Provided that a director who has to so vacate his office may continue in his office for a period of not more than six months from the commencement of the Banking Companies (Amendment) Act, 1972, or until a new director is elected or co-opted in his place whichever is earlier.

 

 

15C.     Vacation of Office.–

 A director of a banking company shall vacate his office if in relation to the banking company he has failed to pay any advance or loan or any instalment thereof or interest thereon or any amount due on any guarantee, or to do or perform any act agreed to or undertaken in writing to be done or performed by him, and such failure continues for a period of one month after notice in writing has been served on him by the banking company calling upon him to make the payment or to do or perform the act.

 

16.       Restriction on commission, brokerage, discount, etc. on sale of shares.–

 Notwithstanding anything to the contrary in sections 105 and 105A of the Companies Act, 1913 (VII of 1913), no banking company shall pay out directly or indirectly by way of commission, brokerage, discount or remuneration in any form in respect of any shares issued by it, any amount exceeding in the aggregate two and one-half per cent of the paid-up value of the said shares.

  

17.       Prohibition of charge on unpaid capital.–

 No banking company shall create any charge upon any unpaid capital of the company and such charge, if created, shall be invalid.

 

18.       Prohibition of floating charge on assets.

 

(1)        Notwithstanding anything contained in section 7 no banking company shall create a floating charge on the undertaking or any property of the company or any part thereof, unless the creation of such floating charge is certified in writing by the State Bank as not being detrimental to the interest of the depositors of such company.

 

(2)        Any such charge created without obtaining the certificate of the State Bank shall be invalid.

 

(3)        Any banking company aggrieved by the refusal of a certificate under sub-section (1) may, within ninety days from the date on which such refusal is communicated to it, appeal to the Federal Government.

 

(4)        The decision of the Government where an appeal has been preferred to it under sub-section (3) or of the State Bank where no such appeal has been preferred shall be final.

 

 

19.       Restrictions as to payment of dividend.–

 (1)      No banking company shall pay any dividend on its shares until all its capitalized expense (including preliminary expenses, organization expenses, share-selling commission, brokerage, amounts of losses incurred and any other item of expenditure not represented by tangible assets) have been completely written off.

 

(2)       Notwithstanding anything to the contrary contained in sub-section (1) or in the Companies Act, 1913 (VII of 1913), a banking company may pay dividends on its shares without writing off–

 

(i)         the depreciation, if any, in the value of its investment in approved securities in any case where such depreciation has not actually been capitalized or otherwise accounted for as a loss;

 

(ii)        the depreciation, if any, in the value of its investments in shares, debentures or bonds (others than approved securities) in any case where adequate provision for such depreciation has been made to the satisfaction of the auditor of the banking company;

 

(iii)       the bad debts, if any, in any case where adequate provision for such debts had been made to the satisfaction of the auditor of the banking company.

 

20.       Prohibition of common directors.

 (1)        Except with the permission of the State Bank, no banking company incorporated in Pakistan shall have as a director any person who is a director–

 

(i)         of any other banking company; or

 

(ii)        of companies which among themselves are entitled to exercise voting rights in excess of twenty per cent of the total voting rights of all the shareholders of the banking company.

 

(IA)      No banking company incorporated in Pakistan shall have as a director any person who is–

 

(a)        a Federal Minister, a Minister of State or a Provincial Minister; or

 

(b)        a person in the service of Pakistan who is not appointed or nominated by Government as a director by virtue of his office.

 

(2)        If immediately before the commencement of this Ordinance any person holding office as a director of a banking company is also a director of companies which among themselves are entitled to exercise voting rights in excess of twenty per cent of the total voting rights of all the shareholders of the banking company he shall, within such period from such commencement as the State Bank may specify in this behalf–

 

(a)        either resign his office as a director of the banking company; or

 

(b)        choose such number of companies as among themselves are not entitled to exercise voting rights in excess of twenty per cent of the total voting rights of all the shareholder of the banking companies as companies in which he wishes to continue to hold the office of a director and resign his office as a director in the other companies.

  

21.       Reserve Fund.–

 (1)      Every banking company incorporated in Pakistan shall create a reserve fund to which shall be credited–

(a)        if the amount in such fund together with the amount in the share premium account is less than the paid-up capital of the banking company, a sum equivalent to not less than twenty per cent of the balance of profit of each year as disclosed in the profit and loss account prepared under section 34 and before any dividend is declared; and

(b)        if the amount in such fund together with the amount in the share premium account is equal to or exceeds the paid-up capital of the banking company, a sum equivalent to not less than ten per cent of the balance of profit disclosed as aforesaid and before any dividend is declared.

 

(2)        Where a banking company appropriates any sum or sums from the reserve fund or the share premium account, it shall, within twenty-one days from the date of such appropriation, report the fact to the State Bank explaining the circumstances relating to such appropriation:

 

            Provided that the State Bank may, in any particular case, extend the said period of twenty-one days by such period as it thinks fit or condone any delay in the making of such report.

 

22.       Cash Reserve.–

 Every banking company, not being a schedule bank, shall maintain by way of cash reserve in cash with itself, or in current account opened with the State Bank or its agent or partly in cash with itself and partly in such account or accounts a sum equivalent to at least two per cent of its time liabilities in Pakistan and five per cent of its demand liabilities in Pakistan and shall submit to the State Bank before the fifteenth day of every month a return showing the amount so held on Thursday of each week of the preceding month with particulars of its time and demand liabilities in Pakistan on each such Thursday or if any such Thursday is a public holiday under the Negotiable Instruments Act, 1881 (XXVI of 1881), at the close of business on the preceding working day.

 

23.       Restriction on the nature of subsidiary companies.

 (1)        A banking company shall not form any subsidiary company except a subsidiary company formed for one or more of the following purposes, namely:–

 

(a)        the undertaking and executing of trusts,

 

(b)        the undertaking of the administration of estates as executor, trustee or otherwise,

 

(bb)  the carrying on of business of modaraba under the provisions of the Modaraba Companies and Modaraba (Floatation and Control) Ordinance 1980 (XXXXI of 1980).

 

(c)        the providing of safe deposit vaults,

 

(d.)      with the previous permission in writing of the State Bank, the carrying on of the business of banking exclusively outside Pakistan.

 

(dd)   the conduct of any from of business permitted by section 7; or.

 

(e)        such other purposes as are incidental to the business of banking.

 

(2)        Save as provided in sub-section (1), no banking company shall hold shares in any company whether as pledgee, mortgagee or absolute owner, of an amount exceeding thirty per cent of the paid-up share capital of that company or thirty per cent of its own paid-up share capital and reserves, whichever is less:

 

Provided that any banking company which is on the date of commencement of this Ordinance holding any shares in contravention of the provisions of this sub-section shall not be liable to any penalty therefore if it reports the matter without delay, to the State Bank and if it brings its holding of shares into conformity with the said provision within such period, not exceeding two years, as the State Bank may think fit to allow.

 

(3)        Save as provided in sub-section (1) and notwithstanding anything contained in sub-section (2), a banking company shall not, after the expiry of one year from the date of commencement of this Ordinance hold shares, whether as pledgee, mortgagee or absolute owner, in any company in the management of which any managing director or manager of the banking company is in any manner concerned or interested.

 

24.       Restrictions on loans and advance.–

 (1)        No banking company shall–

 

(a)        make any loans or advances against the security of its own shares; or

 

(b)        grant unsecured loans or advances to, or make loans and advances on the guarantee of .–

 

(i)      any of its directors;

 

(ii)     any of the family members of any of its directors;

 

(iii)    any firm or private company in which the banking company or any of the persons referred to in sub-clause (i) or sub-clause (ii) is interested as director, proprietor or partner; or

 

(iv)    any public limited company in which the banking company or any of the persons as aforesaid is substantially interested.

 

(2)        No banking company shall make loans or advances to any of its directors or to individuals, firms or companies in which it or any of its directors is interested as partner, director or guarantor, as the case may be, without the approval of the majority of the directors of that banking company, excluding the director concerned.

 

25. Power of State Bank to control advances by banking companies.–

 (1)        Whenever the State Bank is satisfied that it is necessary or expedient in the public interest so to do, it may determine the policy in relation to advances to be followed by banking companies generally or by any banking company in particular, and, when the policy has been so determined, all banking companies or the banking company concerned, as the case may be, shall be bound to follow the policy as so determined.

 

(2)    Without prejudice to the generality of the power conferred by sub-section (1), the State Bank may give directions to banking companies either generally or to any banking company or group of banking companies in particular.–

 

(a)        as to the credit ceilings to be maintained, credit targets to be achieved for different purposes, sectors and regions, the purposes for which advances may or may not be made, the margins to be maintained in respect of advances, the rates of interest, charges or mark-up to be applied on advances and the maximum or minimum profit sharing ratios; and

 

(b)        prohibiting the giving of loans, advances and credit to any borrower or group of borrowers on the basis of interest, either for a specific purpose or for any purpose whatsoever; and each banking company shall be bound to comply with any direction so given.

 

(3)        If any default is made by a banking company in complying with the policy determined under sub-section (1) or direction given under sub-section (2), every director and other officer of the banking company and every other person who is knowingly a party to such default shall, by order of the State Bank, be liable to a penalty of an amount which may extend to twenty thousand rupees and, where the default is a continuing one, of a further amount which may extend to one thousand rupees for every day after the first during which the default continues.

 

(4)   Without prejudice to the provisions of sub-section (3), the State Bank may, for the purposes of securing implementation of any special credit schemes or monetary policy or observance of credit ceilings by a banking company, by order in writing require banking companies generally, or any banking company in particular, to make special deposits with it for such amount and on such terms and conditions as may be laid down by the State Bank in this behalf.

 

(5)        The amount deposited with the State Bank under sub-section (4) or any part thereof may, at the discretion of the State Bank, be released by it to the banking company which deposited it as and when the State Bank deems fit either unconditionally or on such terms and subject to such conditions as the State Bank may, by order in writing, determine from time to time.

 

(6)        Any penalty imposed under sub-section (3) shall be payable on demand made by the State Bank and, in the event of refusal or failure by the director, officer or other person concerned to pay on such demand, shall be recoverable as arrear of land revenue.

 

25A. Power of the State Bank to collect and furnish credit information.

 (1)        Every banking company shall furnish to the State Bank credit information in such manner as the State Bank may specify, and the State Bank may, either of its own motion or at the request of any banking company, make such information available to any banking company on payment, of such fee as the State Bank may fix from time to time:

 

            Provided that, while making such information available to a banking company, the State Bank shall not disclose the names of the banking companies which supplied such information to the State Bank:

 

            Provided further that, a banking company which proposes to enter into any financial arrangement which is in excess of the limit laid down in this behalf by the State Bank from time to time shall, before entering into such financial arrangement, obtain credit information on the borrower from the State Bank.

 

(2)        Any credit information furnished by the State Bank to a banking company under sub-section (1) shall be treated as confidential and shall not, except for the purposes of this section or with the prior permission of the State Bank, be published or otherwise disclosed.

 

(3)        No court, tribunal or other authority, including an officer of Government shall require the State Bank or any banking company to disclose any information furnished to, or supplied by, the State Bank under this section.

 

Explanation.–For the purpose of this section,–

 

(a)        “borrower” means any person to whom any credit limit has been sanctioned by any banking company, whether availed of or not, and includes–

 

(i)         in the case of a company or corporation, its subsidiaries;

 

(ii)        in the case of a Hindu undivided family, any member thereof or any firm in which such member is a partner;

 

(iii)       in the case of a firm, any partner thereof or any other firm in which such partner is a partner; and

 

(iv)       in the case of an individual, any firm in which such individual is a partner; and

 

(b)        “credit information” means any information relating to–

(i)         the amounts and the nature of loans or advances or other credit facilities, including bills purchased or discounted, letters of credit and guarantees, indemnities and other engagements extended by a banking company to any borrower or class of borrowers;

 

(ii)        the nature of security taken from any borrower for credit  facilities granted to him;

 

(iii)       the guarantees, indemnities or other engagements furnished to a banking company by any of its customers; and

 

(iv)       operations or accounts in respect of loans, advances and other credit facilities referred to in this clause.

 

 

25AA.  Preparation of special reports.–

 The State Bank shall prepare, and submit to the Federal Government, a special report every year on cases of write off of loans, mark-up and other dues, or financial relief through rescheduling and restructuring of loans and subsidized loans provided by the banking companies, in which established banking practices or authorised procedures have been departed from with a view to causing wrongful loss to the bank or conferring wrongful loss to the bank or conferred wrongful gain on any constituent.

 

If the matters raised in the report relate to public interest, the Federal Government may submit the report, or such part of it as relates to public interest, to Parliament or to the Standing Committee of a House of Parliament dealing with Finance.

 

25B. Recovery of certain dues of banking companies as arrears of land revenue.-

 Loans and advances made by a banking company for agricultural and other purposes “and any other amounts decreed by any court in favour of a banking company or a financial institution specified in section 3A”  shall be recoverable as an arrear of land revenue as if the banking company were a local authority for the purposes of Section 5 of the Revenue Recovery Act, 1890 (1 of 1890):

 

Provided that no sum shall be so recoverable unless the banking company has, by notice in writing, informed the debtor, not less than fifteen days before proceeding to have it so recovered, that he may repay by such instalment as may be fixed in the notice and that action to have the debt recovered as an arrear of land revenue will be taken if he fails to pay any instalment on or before the due date.

 

 

26.       Power of  State Bank to prohibit acceptance of deposits by banking companies incorporated outside Pakistan.-

The State Bank may, by notification in the Official Gazette, order that any banking company or any class of banking companies incorporated outside Pakistan shall from a date to be specified in the notification-

 

(1)        discontinue to accept any interest bearing deposits or accept such deposits only upon such terms and under such conditions as may be specified in the notification:

 

Provided that no such notification shall be made earlier than three years after the commencement of this Ordinance and the date specified in the notification shall not be earlier than six months after the date of the notification; or

 

(2)        discontinue to accept any deposits or accept deposits only upon such terms and under such conditions as may be specified in the notification:

 

Provided that no such notification shall be made earlier than three years after the commencement of this Ordinance and the date specified in the notification shall not be earlier than one year from the date of the notification.

 

26A. Deposits.

 (1)        Deposits of money may be accepted by a banking company on the following basis:-

(i)         on participation in profit and loss of the banking company;

(ii)        free of interest or return in any form, and

(iii)       until such time as the Federal Government determines and notifies by publication in the official Gazette, that the domestic operations of the banking companies have become free of interest, effective on and from the first of July, 1985

 

(2.)       Every banking company receiving deposits on the basis of participation in profit and loss shall maintain separate account in respect thereof as also of investments made, finances provided out of the amount of such deposits, cash reserves and liquid assets maintained there against and all income and expenditure relating thereto.

 

(3)        Deposits received on the basis of participation in profit and loss shall be invested or employed, at the absolute discretion of the banking company, only in transactions or business the return on which does not accrue to the banking company by way of interest.

 

(4)        A person depositing money with a banking company on the basis of participation in profit and loss shall be entitled, subject to such general directions as the State Bank may give from time to time in the interest of monetary stability, to receive periodically such share of the profit of the banking company arising out of such transactions as may be determined by it and, in the event of loss incurred by the banking company, shall be liable to bear proportionate loss.

 

 

27.       Licensing of banking companies.

 (1)        No individual or association or body of individuals, not being a company, shall carry on banking business in Pakistan and, save as hereinafter provided, no company shall carry on banking business in Pakistan unless it holds a licence issued in that behalf by the State Bank; and any such licence may be issued subject to such conditions as the State Bank may think fit to impose.

 

(2)        Every banking company in existence on the commencement of this Ordinance, before the expiry of six months from such commencement, and every other company before commencing banking business in Pakistan, shall apply in writing to the State Bank for a licence under this section:

 

Provided that nothing in sub-section (1) shall be deemed to prohibit a banking company in existence on the commencement of this Ordinance from carrying on banking business until it is granted a licence in pursuance of this section or is by notice in writing informed by the State Bank that a licence cannot be granted to it:

 

Provided further that the State Bank shall not give a notice as aforesaid to a banking company in existence on the commencement of this Ordinance before the expiry of the period of two years in the case of banking companies incorporated in Pakistan and of six months in the case of banking companies incorporated outside Pakistan referred to in sub-section (1) of section 13 or of such further period as the State Bank may under the proviso to that sub-section think fit to allow.

 

(3)        Before granting any licence under this section, the State Bank may require to be satisfied by an inspection of the books of the company or otherwise that all or any of the following conditions are fulfilled, namely:-

(a)        that the company is or will be in a position to pay its present or future depositors in full as their claims accrue;

(b)        that the affairs of the company are not being or are not likely to be conducted in a manner detrimental to the interests of its present or future depositors;

(c)        that in the case of a company incorporated outside Pakistan, the Government or law of the country in which it is incorporated provides the same facilities to banking companies registered in Pakistan as the Government or law of Pakistan grants to banking companies incorporated outside Pakistan and that the company complies with all the provisions of this Ordinance applicable to banking companies incorporated outside Pakistan.

 

(4)        The State Bank may cancel a licence granted to a banking company under this section,–

 

(i)         if the company ceases to carry on banking business in Pakistan; or

 

(ii)        if the company at any time fails to comply with any of the conditions imposed upon it under sub-section (1); or

 

(iii)       if at any time, any of the conditions referred to in sub-section (3) ceases to be fulfilled:

 

Provided that before cancelling a licence under clause (ii) or clause (iii) of this sub-section on the ground that the banking company has failed to comply with or has failed or ceased to fulfill any of the conditions referred to therein, the State Bank, unless it is of opinion that the delay will be prejudicial to the interest of the company’s depositors or the public, shall grant to the company on such terms as it may specify, an opportunity of taking the necessary steps for complying with or fulfilling such condition.

 

(5)        Any banking company aggrieved by the decision of the State Bank cancelling a licence under this section may, within thirty days from the date on which such decision is communicated to it apply for review to the Central Board of the State Bank.

 

(6)    The decision of the State Bank subject to the result of review under sub-section (5), if any, shall be final.

 

27A.    Prohibition of advertising for deposits and collection.–

Notwithstanding anything contained in any other law for the time being in force, no company, firm or person, not being a banking company or a corporation or authority established by the Federal Government or a company duly authorised in this behalf by the Controller of Capital Issues or the Corporate law Authority or the Registrar Co-operative Societies, shall solicit or invite deposits of money from the public through advertisements in the public media or by postal circulars, handbills, displays in public places or by any other means, or collect or receive any deposits of money in pursuance thereof.

 

Explanation.–For the purposes of this section, “deposits of money” shall be deemed to include money called, invited or collected for the purpose, or declared object, of investment or borrowing in any business carried on, or proposed to be carried on, by the company, firm or person by whom, or on whose behalf, such money is called, invited, collected or received irrespective or the nature of the relationship, arrangement or terms offered or provided by such company, firm or person to the person making the investment, deposits of money or payment or of the basis or understanding or which the money is so called, invited, collected or received.

 

27B.    Disruptive union activities.– 

 (1)        No officer or member of a trade union in a banking company shall use any bank facilities including a car or telephone to promote trade union activities, or carry weapons into bank premises unless so authorized by the management, or carry on trade union activities during office hours, or subject bank officials to physical harassment or abuse and nor shall he be a person who is not an employee of the banking company in question.

 

(2)        Any person violating any of new, and transfer of sub-section (1) shall be guilty of an offence punishable with imprisonment of either description which may extend to three years, or with fine, or with both.

 

28.       Restrictions on opening of new, and transfer of existing place of business.–

 (1)        No banking company shall open a new place of business in any part of Pakistan or change, otherwise than within the same city, town or village the location of an existing place of business situated in any part of Pakistan and no banking company incorporated in Pakistan shall open a new place of business outside Pakistan or change, otherwise than within the same city, town or village in any country or area outside Pakistan, the location of an existing place of business situated in that country area without first obtaining the prior permission in writing of the State Bank.

 

(2)        Nothing in this section shall apply to the opening for a period not exceeding one month of a temporary place of business within a city, town or village or the environs thereof within which the banking company already has a place of business, for the purpose of affording banking facilities to the public on the occasion of an exhibition, a conference or a mela or any other like occasion:

 

            Provided intimation of such opening is given to the State Bank within one week of the date of opening.

 

Explanation.–For the purpose of this section–

 

(a)        “place of business” includes any sub-office, pay-office, sub-pay office and any place of business at which deposits are received, cheques cashed or moneys lent;

 

(b)        “new place of business” includes a place of business which is reopened after being temporarily closed.

 

(3)        The State Bank may, before giving the permission referred to in sub-section (1) of this section to any banking company, require to be satisfied by an inspection under section 40 or otherwise regarding such aspects of the company’s affairs as the State Bank may deem necessary.

 

29.  Maintenance of liquid assets.-

 (1)       Every banking company and every financial institution specified in section 3A shall maintain in Pakistan in cash, gold or unencumbered approved securities valued at a price not exceeding the lower of the cost or]  the current market price an amount which shall not at the close of business on any day be less than such percentage  of the total of its time and demand liabilities in Pakistan, as may be notified by the State Bank from time to time.

 

            Provided that the State Bank may separately specify for banking companies or financial institutions the applicable percentage either in general or in relation to any class of banking companies or any class of financial institutions or to any bank or financial institution in particular] and ;

 

            Explanation.–For the purpose of this section, “unencumbered approved securities” of a banking company or financial institution  shall include its approved securities lodged with another institution for an advance or any other credit arrangement to the extent to which such securities have not been drawn against or availed of and the liabilities shall not include the paid up capital or the reserves or any credit balance in the profit and loss account of the Banking company or, as the case may be, the financial institution or any such liabilities as may be notified by the State Bank for the purposes of this section.

 

(2)        In computing the amount provided for in sub-section (1), any deposit required under sub-section (2) of section 13 to be made with the State Bank by a banking company incorporated outside Pakistan and any balances maintained in Pakistan by a banking company in current account with the State Bank or its agent or both, or in profit and loss sharing term deposit account with the State Bank, including in the case of a scheduled bank the balance required to be so maintained under sub-section (1) of section 36 of the State Bank of Pakistan Act, 1956 (XXXIII of 1956), shall be deemed to be cash maintained.

 

(3)        Every banking company shall, before the close of the month succeeding the month to which the return relates, furnish to the State Bank a monthly return in the prescribed form and manner showing particulars of the company’s assets maintained in accordance with this section and its time and demand liabilities in Pakistan at the close of business on each Thursday during the month, or if any Thursday is a public holiday under the Negotiable Instruments Act, 1881 (XXVI of 1881), at the close of business on the preceding working day.

  

30.       Assets in Pakistan.–  

 (1)        At the close of business on any day the assets in Pakistan of every banking company shall not be less in value than an amount representing such percentage of its time and demand liabilities in Pakistan as may be prescribed by the status Bank from time to time provided that the percentage so prescribed shall not exceed eighty five per cent.

 

(2)        Every banking company shall, before the close of the month succeeding that to which the return relates, furnish to the State Bank, in the prescribed form and manner a monthly return showing particulars of the company’s assets maintained in accordance with this section and its time and demand liabilities in Pakistan at the close of business in every Thursday or if any Thursday is a public holiday under the Negotiable Instruments Act, 1881 (XXVI of 1881), at the close of business, on the preceding working day.

 

(3)        For the purposes of this section–

 

(a)        “assets in Pakistan” shall be deemed to include export bills drawn in, and import bills drawn on and payable in Pakistan and expressed in such currencies as the State Bank may from time to time approve in this behalf and also such securities as the State Bank may approve in this behalf notwithstanding that all or any of the said bills or securities are held outside Pakistan, but shall exclude such assets as in the opinion of the State Bank cannot properly be regarded as assets;

 

(b)        “liabilities in Pakistan” shall not include the paid-up capital or the reserves or any credit balance in the profit and loss account of the banking company.

 

31. Unclaimed deposits and articles of value.–

 (1)        Where–

 

(a)        a debt payable in Pakistan currency is owing by a banking company by reason of a deposit, not being a deposit in the name of a minor or a Government or a court of law, at a branch of the banking company in Pakistan in respect of which no transaction has taken place and no statement of account has been requested or acknowledged by the creditor during a period of ten years reckoned–

 

(i)         in the case of a deposit made for a fixed period, from the day on which the fixed period terminated, and

 

(ii)        in the case of any other deposit, from the day on which the last transaction took place or a statement of account was last requested or acknowledged by the creditor, whichever is later; or

 

(b)        a dividend, bonus, profit or other sum of money whatsoever which has become due on a deposit and remained unpaid or unacknowledged by the creditor for period of ten years reckoned from the date on which the dividend, bonus, profit or other sum of money, as the case may be, became due and payable; or

 

(c)        a cheques, draft or bill of exchange including an instrument drawn by one branch of the banking company upon another such branch payable in Pakistan currency has been issued, certified or accepted by a banking company at a branch of the banking company in Pakistan and no payment has been made in respect thereof for a period of ten years from the date of issue, certification or acceptance; or

 

(d)        a security share, goods or any valuable article, hereinafter collectively and individually called article, lying in safe custody with a banking company  has not been inspected or acknowledged by the person who deposited the article with the banking company for a period of ten years from the day on which it was last inspected or acknowledged by such person; the banking company shall give forthwith a three months’ notice in writing by registered post acknowledgement due to the creditor or the beneficiary of the cheque, draft or bill of exchange or the person in whose name the article stands in the books of the banking company on his address last made known by him to the banking company, and if on the expiry of the three months’ period no acknowledgement or reply is received from the addressee, the banking company shall pay or deliver, as the case may be, to the State Bank an amount equal to the amount, owing by the banking company in respect of the debt or to the amount that would be owing if the instrument had been presented for payment, including interest, if any, or the article, in accordance with the terms of the debt or instrument or of the arrangement under which the article is lying in the safe custody of the banking company, an payment or delivery accordingly shall discharge the banking company from all liabilities in respect of the debt. instrument or to the amount that would be owing if the instrument had been presented for payment, including interest, if any or the article, in accordance with the terms of the debt or instrument or of the banking company, and payment or delivery accordingly shall discharge the banking company from all liabilities in respect of the debt or instrument or article, as the case may be.

 

(2)        A notice required to be given by sub-section (1)–

 

(a)        may, in the case of a firm or a Hindu undivided family be addressed to any member of the firm or the manager or any adult male member of the family and, in the case of any other association of persons, to the principal officer thereof;

 

(b)        may be given to a duly authorised agent of the person whom it is required to be given or, where he has died, to his legal representative or where he has been declared an insolvent, to his assignee, provided the banking company has had notice of appointment of the agent or of the death or insolvency of the person to whom it is required to be given;

 

(c)      shall, in the case of joint creditor or more than one beneficiaries of a cheque, draft or bill of exchange or article standing in the names of more than one person, be deemed to be sufficient notice to all such persons if given to any one of them; and

 

(d)      shall, notwithstanding the fact that it is miscarried or the addressee is dead or insane or has become insolvent or the envelope or wrapper is returned with the postal endorsement “addressee is untraceable” or any other like endorsement, be deemed to have been served on the fifteenth day following the day on which the envelope or wrapper in which it is contained is posted, if it is properly addressed, prepaid and posted, provided the banking company has had no notice of the death, insanity or insolvency of the person to whom it is required to be given.

 

(3)       A certificate in writing under the signature of an employee of the banking company whose duty it is to address, prepay and post letters on behalf of the banking company to the effect that the envelope or wrapper containing a notice required to be given by sub-section (1) was addressed, prepaid and posted shall be conclusive evidence of its having been so addressed, prepaid and posted..

 

(4)      As soon as an amount is paid by a banking company to the State Bank under sub-section (1), it shall cease to bear interest 2[or rank for a share of profit or loss] notwithstanding anything to the contrary contained in the terms of the debt or instrument or any law for the time being in force.

 

(5)        Where any banking company has paid an amount or delivered an article to the State Bank under sub-section (1), the banking company shall preserve and continue to preserve all signature cards and signing authorities and other documents relating to the debt or instrument or article, as the case may be, until it is informed by the State Bank in writing that they need not be preserved any longer.

 

(6)        Nothing in the Limitation Act, 1908 (IX of 1908), or in any other law for the time being in force shall affect the liability of a banking company toward the State Bank under sub-section (1).

 

(7)        Every banking company shall, within thirty days after the close of each calendar year, submit to the State Bank a return in the prescribed form and manner of all unclaimed amounts and articles remaining unpaid or undelivered, as the case may be, in the books of the banking company, after the expiry of ten years as reckoned under sub-section (1).

 

(8)        The State Bank shall publish in the Gazette of Pakistan and not less than two newspapers once each quarter for a period of one year a list of the amounts and articles received by the State Bank under sub-section (1) and not claimed by any person:

 

            Provided that it shall not be necessary to include in a list so published such amounts and articles of such value as the Federal Government may from time to time determine.

 

(9)        Any banking company which has paid any amount or delivered any article to the State Bank in accordance with sub-section (1) may, within thirty days from the date of such payment or delivery, as the case may be, submit to the State Bank its claim as regards lien, counter-claim or right of set-off in relation to the amount so paid or article so delivered.

 

(10)      Any person who claims to be entitled to any money or article paid or delivered to the State Bank under sub-section (1) may submit his claim to the State Bank.

 

(11)      Subject to sub-sections (9), (12) and (14), the State Bank may pass such order on a claim submitted to it under sub-section (9) or sub section (10) as it may deem fit, and, where the State Bank makes any payment or delivers any article to any person submitting a  claim under sub-section (10) a receipt given by him shall be a good discharge to the State Bank.

 

(12)      If any action involving a dispute about the ownership of any amount or article paid or delivered to the State Bank under sub-section (1) is pending in any court before the expiry of one year following the year in which the amount or article is so paid or delivered to the State Bank and the State Bank receives an intimation from the court or otherwise about such dispute, it shall retain the amount or article in the custody and dispose of it in accordance with the decision of the court.

 

(13)      Subject to sub-sections (9), (12) and (14), any amount or article in respect of which no claim is preferred or about the disposal of which no information is received from any person before the expiry of one year following the year in which the amount or article is received by the State Bank shall, on the expiry of the said period of the said period of one year, cease to be climbable and shall, become the absolute property of and vest.–

 

(a)        in the Government of the Province in the territory of which the debt or instrument was payable or, as the case may be the article was to be delivered, and

 

(b)        in the Federal Government in any other case.

 

(14)      Notwithstanding anything contained in sub-section (1) about the giving of a notice by a banking company to any creditor or beneficiary of any cheque, draft or in sub-section (8) about the publication by the State Bank of the list of unclaimed amounts or articles, the procedure to be followed and the manner of disposal of debts, instruments and articles in a case where the person concerned is not for the time being residing in Pakistan shall be such as may be determined by the Federal Government from time to time.

 

(15)      Any decision of the State Bank under sub-section (11) about the acceptance, satisfaction or otherwise of the lien, right of set-off or counter-claim of a banking company or, as the case may be, the entitlement of any person to any money or article received by the State Bank under sub-section (1) shall be final and shall not, except as provided in sub-section (16), be called in question in any manner by or before any court, tribunal or other authority.

 

(16)      Any person aggrieved by a decision of the State Bank under sub-section (11) may, within one month from the date of the decision, prefer an appeal to such officer of the State Bank superior in rank to the officer by whom the decision appealed against was given as may be authorised in this behalf by the Governor or the State Bank.

 

(17)      For the purpose of adjudicating and determining any claim under sub-section (9) or sub-section (10) or deciding any appeal under sub-section (16) the State Bank shall follow such procedure as may be prescribed and shall have the same powers as are vested in a court under the Code of Civil Procedure, 1908 (Act V of 1908), when trying a suit in respect of the following matters, namely:-

 

(a)        enforcing the attendance of any person and examining him on oath;

 

(b)        compelling the production of documents and materials objects; and

 

(c)        issuing commissions for the examination of witnesses.

 

(18)      Any proceeding before the State Bank under this section shall be deemed to be a “judicial proceeding” within the meaning of section 228 of the Pakistan Penal Code (Act XLV of 1860), and the State Bank shall, for the purposes of any such proceeding, be deemed to be a “Civil Court” within the meaning of section 480 of the Code of Criminal Procedure, 1898(Act V of 1898).

 

(19)      No court fee shall be payable for filing, exhibiting or recording any document in, or obtaining any document from, the State Bank in any proceeding under this section.

 

32.       Half-yearly returns and power to call for other returns and information.-

(1)        Every banking company shall, before the close of the month succeeding the half-year to which the return relates submit to the State Bank a half-yearly return in the prescribed form and manner showing its assets and liabilities in Pakistan as they stood at the close of business on the thirtieth day of June in the first half and the thirty-first day of December in the second half of the year.

 

(2)        The State Bank may, at any time, by notice in writing, require banking companies generally, or any banking company in particular to furnish it within the time specified therein or such further time as the State Bank may allow, with any statement or information relating to the business or affairs of such banking company or companies (including any business or affairs with which such banking company or companies is or are concerned) and, without prejudice to the generality of the foregoing power, may call for information, at such intervals as the State Bank may deem necessary, regarding the investment of banking companies and the classification of their advances in respect of industry, commerce and agriculture.

  

33.       Power to publish information.–  

The State Bank, if it considers it in the public interest so to do, may publish any information obtained by it under this Ordinance in such consolidated form as it thinks fit.

 

33A.    Fidelity and secrecy.

(1)       Subject to sub-section (4), every bank and financial institution shall, except as otherwise required by law, observe the practices and usage customary among bankers and, in particular, shall not divulge any information relating to the affairs of its customers except in circumstances in which it is , in accordance with law, practice and usage customary among bankers, necessary or appropriate for a bank to divulge such information.

 

(2)       Every president, chairman, member of the Board, administrator, auditor, advise, officer or other employee of any bank and financial institution shall, before entering upon his office, make a declaration of fidelity and secrecy in such form as may be prescribed.

 

(3)       Notwithstanding anything contained in sub-section (1) and (2), every balance sheet and profit and loss account statement prepared by a bank and financial institution shall include statements prepared in such form and manner as the State Bank may specify in respect of written off loans or any other financial relief of five hundred thousand repress or above allowed to a person as well as the provision, if any, made for bad or doubtful debts.

 

(4)       The State Bank of Pakistan may, if satisfied that it is necessary so to do at the time of holding general elections under any law relating thereto, publish a list of persons to whom any loans, advances or credits were extended by a bank or financial institution, either in their own names or in the manes of their spouses or dependents or of their business concerns (if mainly owned and managed by them) which were due and payable and had not been paid back for more than one year from the due date, or whose loans were unjustifiably written off in violation of banking practices, rules or regulations on or after such date as may be determined by the Government:

 

Provided the before publishing the name of any person in any such list he shall be given prior notice and, if he so requests, an opportunity of hearing.

  

33B     Guidelines by the State Bank.–

 The Bank may at any time either on the request of any one or more banking companies or the Federal Government or suo motu, lay down general guidelines for facilitating recovery of bad or doubtful loans, advances or finance by giving incentives to borrowers or customers to make repayments within a specified time frame by making adjustments or remissions in relation to interest or mark-up or part of the principal amount in cases in which all full recovery is not possible by reason of inadequacy of security or as part of a general scheme for there habilitation of sick units.

 

34.       Accounts and balance-sheet.–

(1)        At the expiration of each calendar year every banking company incorporated in Pakistan, in respect of all business transacted by it, and every banking company incorporated outside Pakistan, in respect of all business transact through its branches in Pakistan, shall prepare with reference to that year a balance-sheet and profit and loss account as on the last working day of the year in the forms set out in the Second Schedule or as near thereto as circumstances admit.

 

(2)        The balance sheet and profit and loss account shall be signed.–

 

(a)        in the case of a banking company incorporated in Pakistan, by the manager or the principal officer of the company and where there are more than three directors of the company, by at least three of those directors, or where there are not more than three directors, by all the directors, and

 

(b)        in the case of a banking company incorporated outside Pakistan by the manager or agent of the principal office of the company in Pakistan and by another officer next in seniority to the manager or agent.

 

(3)      Notwithstanding that the balance sheet of a banking company is under sub-section (1) required to be prepared in a form other than the form marked ‘F’ in the Third Schedule to the Companies Act, 1913 (VII of 1913), the requirements of that Act relating to the balance sheet and profit and loss account of a company shall, in so far as they are not inconsistent with this Ordinance, apply to the balance-sheet of profit and loss account, as the case may be, of a banking company.

 

(4)   The State Bank may, after giving not less than fifteen days notice of its intention so to do, form time to time by a notification in the official Gazette, amend the forms set out in the Second Schedule.

  

35.       Audit.

 (1)        The balance sheet and profit and loss account prepared in accordance with section 34 shall be audited by a person who is duly qualified, under the Chartered Accountants Ordinance, 1961 (X of 1961), or any other law for the time being in force, to be an auditor of companies and is borne on the panel of auditors maintained by the State Bank for the purposes of audit of banking companies.

 

(2)        An auditor shall hold office for a period of three years and shall not be removed from office before the expiry of that period except with the prior approval of the State Bank.

 

(3)        The State Bank may, from time to time, lay down guidelines for the audit of banking companies and the auditors shall be bound to follow those guidelines.

 

(4)        Subject to the provisions of sub-section (2), the auditor shall have the powers of, exercise the functions vested in, and discharge the duties and be subject to the liabilities and penalties imposed on, auditors of companies by section 145 of the Companies Act, 1913 (VII of 1913).

 

(5)        In addition to the matters which, under the aforesaid Act and the guidelines laid down by the State Bank under sub-section (3), the auditor is required to state in his report, he shall also state–

 

(a)        whether or not the information and explanations required by him have been found to be satisfactory;

 

(b)        whether or not the transactions of the banking company which have come to his notice have been with in the powers of the banking company;

 

(c)        whether or not the returns received from branch offices of the banking company have been found adequate for the purposes of his audit;

 

(d)        whether the profit and loss account shows a true balance of profit and loss for the period covered by such account; and

 

(e)        any other matter which he considers should be brought to the notice of the shareholders of the banking company.

 

36.       Submission of returns.– 

 The accounts and balance-sheet referred to in section 34 together with the auditor’s report as passed in the Annual General Meeting shall be furnished as returns to the State Bank within three months of the close of the period to which they relate:

 

Provided that the State Bank may in special circumstances extend the said period of three months for the furnishing of such returns by a further period not exceeding three months.

  

37.       Copies of Balance Sheet and Accounts to be sent to Registrar.–

 Where a banking company in any year furnishes its balance sheet and accounts in accordance with the provisions of section 36 it may, or when it is a private company, shall, at the same time send to the registrar three copies of such balance sheet and accounts and of the auditor’s report, and where such copies are so sent, it shall not be necessary for the company, to file copies of the balance sheet an accounts with the registrar as required by sub-section (1) of section 134 of the Companies Act. 1913 (VII of 1913), and such copies so sent shall be chargeable with the same fees and shall be dealt with in all respects as if they were filed in accordance with that section.

  

38.       Display of audited balance sheet by banking companies incorporated outside Pakistan.–

 Every banking company incorporated outside Pakistan shall, not later than the first Monday in August of any year in which it carries on business, display in a conspicuous place in its principal office and in every branch office in Pakistan, a copy of its last audited balance sheet and profit and loss account prepared under section 34 and shall keep it so displayed until replaced by a copy of the subsequent balance sheet and profit and loss account so prepared and every such banking company shall in addition display in like manner copies of its complete audited balance sheet and profit and loss account relating to its banking business as soon as they are available and shall keep the copies so displayed until copies of such subsequent accounts are available.

 

39.       Accounting  provisions of this Ordinance not retrospective.–

 Nothing in this Ordinance shall apply to the preparation of accounts by a banking company and the audit and submission thereof in respect of any accounting year which has expired prior to the commencement of this Ordinance, and notwithstanding the other provision of this Ordinance such accounts shall be prepared, audited and submitted in accordance with the law in force immediately before the commencement of this Ordinance.

  

40. Inspection.–  

 (1)        Notwithstanding anything to the contrary contained in section 138 of the Companies Act, 1913 (VII of 1913), the State Bank may, at any time, and, on being directed so to do by the Federal Government, shall, inspect any banking company and its books and accounts.

 

(2)        The inspection shall be carried out by such officer of the State Bank as the State Bank may direct.

 

(3)        The State Bank shall supply to the banking company a copy of its report on the inspection made under this section.

 

(4)        It shall be the duty of every director or other officer of the banking company or any company or firm or person referred to in section 27A to produce to any officer, hereafter in this called the inspecting officer, making an inspection under this section, all such books, accounts and other documents in his section custody or power and to furnish him with such statements and information relating to the affairs of the banking company or any company or firm or person referred to in section 27A and within such time as the inspecting officer may require,

 

(5)      The inspecting officer may examine on oath any director or other officer of the banking comp-any in relation to its business and may administer an oath accordingly.

 

(6)      The State Bank shall, if it has been directed by the Federal Government to make an inspection, and, in any other case, may, submit a report to the Federal Government on any inspection made under this section.

  

40A.    Responsibility of State Bank–  

 

(1)        Without prejudice to the powers conferred on the State Bank under Section 40 and notwithstanding anything contained therein, it shall be the responsibility and duty of the State Bank to systematically monitor the performance of every banking company so as to ensure that it is complying with the applicable statutory criteria and banking rules and regulations.

 

(2)        In every case in which the management of a banking company is failing to discharge its responsibility in accordance with the applicable statutory criteria and banking rules or regulations, or is failing to protect the interests of depositors, or is advancing loans or finances without due regard for the best interests of the banking company or for reasons other than the merits, it shall be the duty of the State Bank, in addition to taking such remedial steps as may be required in accordance with law, to report the shortcomings and violations on the part of the banking company’s management to the Federal Government the every quarter, or more frequently, if so deemed necessary, so as to prevent any grave or irreparable loss from being caused to the banking company or its depositors, along with its recommendations and the action, if any, taken by it.

 

 

41.       Power of the State Bank to give directions.–

 

(1)        Where the State Bank is satisfied that–

 

(a)        in the public interest; or

 

(b)        to prevent the affairs of any banking company being conducted in a manner detrimental to the interests of the depositors or in a manner prejudicial to the interests of the banking company; or

 

(c)        to secure the proper management of any banking company generally; it is necessary to issue directions to banking companies generally or to any banking company in particular, it may, from time to time, issue such directions as it deems fit, and the banking companies or the banking company, as the case may be, shall be bound to comply with such directions.

 

(2)        The State Bank may, in representation made to it or on its own motion, modify or cancel any direction issued under sub-section (1), and in so modifying or cancelling any direction may impose such conditions as it thinks fit, subject to which the modification or cancellation shall have effect.

 

 41A.    Power of the State Bank to remove directors or other managerial persons from office–.

 

(1)        where the State Bank is satisfied that–

 

(a)        the association of any chairman or director or chief executive e(by whatever name called )or other officer of a banking company, not being lower in rank than a branch manager, is or is likely to be detrimental to the interests of the banking company or its depositors or otherwise undesirable; or

 

(b)        in the public interest; or

 

(c)        to prevent the affairs of a banking company being conducted in a manner detrimental to the interest of its depositors or in a manner prejudicial to the interests of the banking company; or

 

(d)        to secure the proper management of any banking company; it is necessary so to do, the State Bank may, for reasons to be recorded in writing, by order, remove from office, with effect from such date as may be specified in the order, any chairman or director or chief executive (by whatever name called) or other officer of the banking company .

 

(2)        No order under sub-section (1) shall be made unless the chairman or director or chief executive or other officer has been given a reasonable opportunity of making a representation to the State Bank against the proposed order:

 

            Provided at if, in the opinion of the State Bank, any delay would be detrimental to the public interest or the interest of the banking company or its depositors, the State Bank may, at the time of giving the opportunity aforesaid or at any time thereafter and pending the consideration of the representation aforesaid, if any, by order direct that–

 

(i)         the chairman or, as the case may be, director or chief executive or other officer shall not, with effect from the date of the order,–

 

(a)        act as such chairman or director or chief executive or other officer of the banking company; or

 

(b)        in any way, whether directly or indirectly, be concerned with, or take part in the management of the banking company; and

 

(ii)        any person authorised by the State Bank in this behalf shall act as such chairman or director or chief executive of the banking company; and

 

(3)        Where any order under sub-section (1) is made in respect of a chairman or director or chief executive or other officer of a banking company, he shall cease to be a chairman or, as the case may be, a director or chief executive or other officer of the banking company and shall not in any way, whether directly or indirectly, be concerned with, or take part in, the management of the banking company or any other banking company for such period not exceeding three years as may be specified in the order.

 

(4)        Any person appointed as chairman or director or chief executive under sub-section (2) shall–

 

(a)        hold office during the pleasure of the State Bank subject to such conditions as may be specified in the order of his appointment and, subject thereto, for such period, not exceeding three years as the State Bank specify; and

 

(b)        not incur any obligation or liability for anything which is done or intended to be done in his capacity as such chairman or director or chief executive.

 

(5)        No person removed from office under-section (1) shall be entitled to claim any compensation for the loss or termination of office.

 

 

41B.    Power of the State Bank to supersede Board of Directors of banking company.–

 

(1)      where the State Bank is satisfied that –

 

(a)        the association of the Board of Directors (by whatever name called) of a banking company is or is likely to be detrimental to the interests of the banking company or its depositors or otherwise undesirable; or

 

(b)        for all any of the reasons mentioned in sub-section (1)of section 41A; it is necessary so to do, the State Bank may, for reasons to be recorded in writing, by order, supersede the Board of Directors of a banking company with effect from such date and for such period as may be specified in the order.

 

(2)      The period of supersession specified in an order under sub-section (1) may from time to time be extended by the State Bank so, however, that the total period of supersession does not exceed three years.

 

(3)       All orders and duties of the Board of Directors shall, during the period of supersession, be exercised and performed by such person as the State Bank may from time to time appoint in this behalf.

 

(4)       The provisions of sub-sections (2), (3), (4), and (5) of section 41A shall, with the necessary modification, apply to an order made under sub-section (1) or sub-section (3).

 

41C.    Limitations.–

 

(1)        No order under section 41A or section 41B shall be made except by the Governor of the State Bank on a report by a standing committee set up by the State Bank for the purpose.

 

(2)        Any person or banking company aggrieved by an order made by the Governor of the State Bank under section 41A or section 41B may make an appeal to the Central Board of Directors of the State Bank whose decision shall be final.

 

(3)        No action taken under section 41A or section 41B or sub-section (2) shall be called in question by or before any court, tribunal or other authority.

  

41D.    Prosecution of directors, chief executives or other officers.–

 

Notwithstanding anything contained in section 41A, the State Bank may direct prosecution of a director or chief executive by whatever name called or other officer who, in its opinion, has knowingly acted in manner causing loss of depositors’ money or of the income of the banking company.

 

Explanation:- For the purpose of this section a director or chief executive or other officer shall be deemed to have acted knowingly if he has departed from established banking practices and procedures or circumvented the regulations or related credit restrictions laid down by the State Bank of Pakistan from time to time.

 

 

42. Further powers and functions of the Bank.–  

 

(1)        The State Bank may–

 

(a)        caution or prohibit banking companies generally or any banking company in particular against entering into any particular transaction or class of transactions and generally give advice to any banking company;

 

(b)        require bank companies generally, or any banking company in particular, to refrain from taking such actions as it may specify in relation to any matter relating to the business of such banking company or companies, or to take such action in relation thereto as the State Bank thinks fit;

 

(c)        on a request from the banking companies concerned and subject to the provisions of section 59 assist as intermediary or otherwise, in proposals for the amalgamation of such banking companies;

 

(d)        during the course, or after the completion, of any inspection of a banking company under section 40, by order in writing and on such terms and conditions as may be specified therein–

 

(i)         require the banking company to call a meeting of its directors for the purpose of considering any matter relating to or arising out of the affairs of the banking company, or require an officer of the banking company to discuss any such matter with an officer of the State Bank;

 

(ii)        depute one or more of its officers to watch the proceedings at any meeting of the Board of Directors of the banking company or of any committee or of any other body constituted by it; require the banking company to give an opportunity to the officers so deputed to be heard at such meetings and also require such officers to send a report of such proceedings to the State Bank;

 

(iii)       require the Board of Directors of the banking company or any committee or any other body constituted by it to give in writing to any officer specified by the State Bank in this behalf at his usual address all notices of, and other communications relating to, any meeting of the Board, committee or other body constituted by it;

 

(iv)       appoint one or more of its officers to observe the manner in which the affairs of the banking company or of its offices or branches are being conducted and make a report thereon;

 

(v)        require the banking company to make, within such time as may be specified in the order, such changes in the management as the State Bank may consider necessary in consequence of the state of affairs disclosed during or by the inspection.

 

(2)        The State Bank shall make an annual report to the Federal Government on the rend and progress of banking in the country, with particular reference to its activities under sub-section (2) of section 17 of the State Bank of Pakistan Act, 1956 (XXXIII of 1956), including in such report its suggestions if any, for the strengthening of banking business throughout the country.

 

43.       Certain provision of the Ordinance not to apply certain banking companies.–

 

(1)        The provisions of section 13, sub-section (1) of section 14, and sections 21, 22, 29 and 30 shall not apply to a banking company–

 

(a)        which has been refused a licence under section 27, or prohibited from accepting fresh deposits by a compromise, arrangement or scheme sanctioned by a Court or by any order made in any proceeding relating to such compromise, arrangement or scheme, or prohibited from accepting deposits by virtue of any alteration made in its memorandum, or

 

(b)        whose licence has been cancelled under section 27.

 

(2)       Where the State Bank is satisfied that any such banking company as is referred to in sub-section (1) has repaid, or has made adequate provision for repaying all deposits accepted by the banking company, either in full or to the maximum extent possible, the State Bank may, by notice published in the official Gazette, notify that the banking company has ceased to be a banking company within the meaning of this Ordinance, and thereupon all the provisions of this Ordinance applicable to such banking company shall cease to apply to it, except as respects things done or omitted to be done before such notice.

Sections 43 A — 43 F

 

Part-II-A    

Transactions Of Banking Business Illegally By

Companies, Etc.

 

43A.    Power to call for certain information, etc.–  

 

Where it appears to the State Bank that a company, firm  or any other person is transacting in any manner or form whatsoever the business of banking in contravention of sub-section (1) of section 27, or is receiving or has received deposits of money in contravention of section 27A the State Bank may–

 

(a)       direct the company, firm or such other person, or any person who is, or has at any time been, dealing, doing business or associated in any manner with the company, firm or such other person, to give or furnish to the State Bank, within such time as the State Bank may specify in its requisition, such information, documents or records respecting any business carried on by the company, firm or such other person as may be within its or his knowledge or in or under its or his possession, custody or control;

 

(b)       authorise any person to enter and search any premises and seize books, accounts or other documents or records respecting any business carried on by the company, firm or such other person as may be in or under the possession, custody or control of the company, firm or such other person or a person who is, or has at any time been, dealing, doing business or associated in any manner with the company, firm or such other person, or any officer or employee of the company, firm or such other person or of the person dealing, doing business or associated with the company, firm or such other person.

 

(c)        inspect or examine, or cause to be inspected or examined, the company, firm or such other person, or a person who is, or has at any time been, dealing, doing business or associated with it or him as aforesaid or any officer or employee of the company, firm or such other person or of the person dealing, doing business or associated with the company, firm or such other person, and any of its or his books, accounts or other documents or records referred to in clause (b); and

 

(d)       exercise, as far as may be applicable, in relation to the company, firm or such other person, or any person who is, or has at any time been, dealing, doing business or associated with it or him as aforesaid, the powers conferred on the State Bank by sub-sections (1), (2), (4) and (5) of section 40.

  

43AA. Special provisions.– 

 

(1)        Where the State Bank has called for information under section 43A from a company, firm or person and it appears to the State Bank that, in the interest of the person for whom the deposits of moneys were received, it is necessary that the moneys received and other assets of the company, firm or person, whether held in the name of that company, firm or person or of any other persons, are protected and preserved, the State Bank may, without prejudice to any other action or proceeding which may be taken against such company, firm or person under any other provisions of this Ordinance or any other law for the time being in force, make an order in writing–

 

(a)        appointing one or more persons as interim receiver or receivers authorizing him or, as the case may be, each one of them to–

 

(i)         enter and search any premises and seize books of accounts or other documents or records of such deposits of money; and

 

(ii)        take in his custody, on behalf of the State Bank, all moneys, cash securities, title deeds, properties, whether moveable or immovable, belonging to such company, firm or person, including those being held on behalf, or in the name, of any director, manager, officer, partner, employee, agent, beneficiary or transferee of such company, firm or person or their dependants;

 

(b)        directing any bank, financial institution or person to freeze all moneys deposited with it or him on behalf of the company, firm or person or of any director, manager, officer, partner or employee, agent, beneficiary or transferee of such company, firm or person appointed by it under clause (a);

 

(c)        authorizing a person appointed under clause (a) to take all necessary steps and measures for identifying the assets and properties of the company, firm or person and for realization, protection and preservation thereof;

 

(d)        restraining any company, firm or person or any director, manager, officer, partner or employee or agent, beneficiary or transferee of such company, firm or person or their dependants or any other person deriving or claiming title through any of them from alienating, transferring, selling, assigning, disposing of or parting with possession of any property, movable or immovable, or deriving any benefit, rent or income there from; and

 

(e)        making such orders for realization, protection and preservation of deposits of money and other assets and properties of the company, firm or person as it may deem fit.

 

(2)        An order made under sub-section (1) shall, unless it is earlier withdrawn in pursuance of the proviso to sub-section (1) of section 43B, remain in force until possession of the moneys, cash securities, title deeds, properties, book of account, documents or records to which the order relates is taken over by the official liquidator or, as the case may be, the High Court, in pursuance of an order of the High Court under section 43F:

 

            Provided that any order made under sub-section (1) shall not prevent the High Court from determining the right of a person claiming to have acquired the property or asset from the company, firm or person, bonafide and for valuable and adequate consideration which such person shall be required to prove as paid from his own resources.

 

(3)        An order made under sub-section (1) may be served on the Registrar of Joint Stock Companies or such other officer or authority or person as the State Bank may deem proper.

 

(4)        If any person authorised under sub-section (1) require assistance of the police or any other civil authority in the exercise of his powers or discharge of his functions thereunder, he may send a requisition to the officer in charge of a police station or to such authority who shall on such requisition render the assistance required.

 

43B.    Power to make declaration.–

 

(1)        Where the State Bank, after making such inquiries as it may deem fit, is of opinion that a company, firm  or person referred to in section 43A is transacting in any manner or form whatsoever the business of banking in contravention of sub-section (1) of section 27 or is receiving or has received deposits of money in contravention of section 27A the State Bank may, after giving the company, firm or such person an opportunity of showing cause against the proposed action being taken, make a declaration to that effect:

 

Provided that, in a case in which the State Bank has made an order under sub-section (1) of section 43AA in respect of company, firm or person, the State Bank shall make a declaration under this sub-section in respect of such company, firm or person within three months of the making of such order or within such further time, not exceeding three months in the aggregate, as the High Court may allow, or withdraw such order.

 

(2)   The State bank shall publish, or cause to be published, a declaration made under sub-section (1) in two newspapers having wide circulation in the area in which the registered office of the company or firm, or the principal office of the person, to which or to whom the declaration relates is situated; and upon such publication, the company, firm or such person or the chief executive, by whatever name called, or directors, managers, officers, employees or agents of the firm, or such person, or any other person referred to in sub-section (1), (3) or (4) of section 43D or section 43E, shall not be heard to plead ignorance of the making of the declaration.

 

(3)        A declaration under sub-section (1) shall, for the purposes of this Part, be conclusive proof of the fact stated therein.

 

 

43.C    Consequences of a declaration under section 43B.–

 

(1)        A company, firm or other person in respect of which or whom a declaration has been made under sub-section (1) of section 43B shall, on the publication of such declaration in pursuance of sub-section (2) of that section, cease to function or to transact business and any transaction with such company, firm or person, or with any person acting or purporting to act for and on behalf of such company, firm or person, on or after the publication of the declaration as aforesaid, shall be void.

 

(2)        The provisions of sub-section (1) and sections 43D, 43E and 43F shall, as far as may be, apply to company or undertaking which is an associated undertaking of a company, firm or person in respect of which or whom a declaration under sub-section (1) of section 43B is made.

 

Explanation.–In this sub-section, “undertaking” and “associated undertaking” have the same meaning as in the Monopolies and Restrictive Trade Practices (Control and Prevention) Ordinance, 1970 (V of 1970).

 

 

43D.    Deposit of cash and preservation of assets, etc.

 

(1)        Notwithstanding anything contained in section 43C, where a declaration under sub-section (1) of section 43B has been made in respect of a company, 1[firm] or other person, every person who has in his possession or custody, or under his control, any moneys, movable properties, shares, securities of any description or title deeds relating to property which belong to the company, 1[firm] or such other person shall forthwith deposit, or cause to be deposited, such moneys, movable properties, shares, securities and title deeds with any of the banks referred to in the Schedule to the Banks (Nationalization) Act, 1974 (XIX of 1974), or the State Bank or any person authorised by the State Bank in this behalf.

 

(2)        If any person who is required by sub-section (1) to deposit, or to cause to be deposited, any moneys, movable properties, shares, securities or title deeds fails to do so within two days of the publication of the declaration under sub-section (1) of section 43B, any person authorised by the State Bank in this behalf may enter and search any premises and seize such moneys, movable properties, shares, securities or title deeds and deposit, or cause to be deposited, the same in accordance with sub-section(1).

 

(3)        Until such time as an official liquidator, official assignee, interim receiver, receiver or official receiver, as the case may be appointed by the Court on an application made under section 43F takes over the possession, custody or control of any books, documents, records and assets of a company, firm or person in respect of which or whom a declaration under sub-section (1) of section 43B has been made, including any actionable claims to which such company, firm or person is, or appears to be, entitled, the chief executive, by whatever name called, and a director, manager, officer, employee and agent of such firm or person, and every other person who may have in or under his possession, custody or control of such books, documents, records, assets or claims, shall preserve and aid in preserving, such books, documents, records, assets and claims and shall, without prejudice to any other liability that he may incur, be jointly and severally liable for any loss or damage.

 

(4)        Every person who is, or becomes, indebted in any manner to a company, firm or person in respect of which or whom a declaration under sub-section (1) of section 43B has been made shall, during the period between the date on which such declaration is published and the date on which an order for winding up or, as the case may be an order of adjudication is made by the Court, repay the amount of the debt by depositing in the manner provided for in sub-section (1) and inform the State Bank in writing of his having done so.

 

(5)        In computing the period prescribed by the Limitation Act, 1908 (IX of 1908), for any suit, appeal or application in respect of anything arising from actions which, immediately before the commencement of the Banking Companies (Amendment) Ordinance, 1979, were pending against a company or person in respect of which or whom a declaration under sub-section (1) of section 43B has been made, or in respect of any action to the filing of which the company or person may be entitled, the period commencing on the publication of such declaration and ending on the day on which an order for winding up or, as the case may be, an order of adjudication is made by the Court shall be excluded.

 

 

43E.     Statement of assets and liabilities to be submitted to State Bank.–

 

Within three days of the publication of a declaration under sub-section (1) of section 43B in respect of a company, firm or other person, or within such further time as the State Bank may, by order in writing, allow, the chief executive, by whatever name called, and every director, manager, officer, and agent of the company, and every partner of the firm and the manager, officer and agent of the firm or such person, and every other person having a claim or liability against or towards the company, firm or such person shall submit to the State Bank as statement showing the assets and liabilities of the company, firm or such person so far as may be known to him.

 

43F.     Consequential provisions for winding up, etc.–

 

(1)      Where the declaration made under sub-section (1) of section 43B is in respect of a person other than an individual or a company, such person shall, irrespective of the number of members of which it consists, be deemed to be an unregistered company which may be wound up under Part IX of the Companies Act, 1913 (VII of 1913).

 

(2)       Where the person in respect of which a declaration has been made under sub-section (1) of section 43B is a company or an unregistered company, the High Court shall, upon an application made by the State Bank within seven days of the publication of the declaration in pursuance of sub-section (2) of Section 43B, or within such further time as the Federal Government may allow, make an order for the winding up of the company or the unregistered company.

 

(3)       The provisions of Part III, other than those of sections 45 to 49 and 59, and Part IV shall, in so far as they relate to winding up of a banking company apply to an application made under sub-section (2) and to the winding up proceedings following such application.

 

(4)      Notwithstanding anything contained in the Provincial Insolvency Act, 1920 (V of 1920), and the Insolvency (Karachi Division) Act (III of 1909), a declaration made under sub-section (1) of section 43B in respect of an individual shall constitute an effective ground for adjudging the individual an insolvent and the court competent to adjudge him an insolvent shall, upon an application made by the State Bank within seven days of the publication of the declaration in pursuance of sub-section (2) of section 43B, or such further time as the Federal Government may allow, pass an order of adjudication against such individual without further proof and follow thereafter the provisions of the Provincial Insolvency Act, 1920 (V of 1920) or, as the case may be, the Insolvency (Karachi Division) Act (III of 1909), for the administration and distribution of the property of the insolvent:

 

Provided that the court shall not have the power to subsequently annul the adjudication or accept any composition or scheme or arrangement

Sections 44 — 59

 

 

 

 

Part III    

Suspension Of Business And Winding Up Of Banking

Companies

 

44.       High Court defined.–

 

In this Part and in Part IV “High Court”, in relation to a banking company, means the High Court exercising jurisdiction in the place where the registered office of the banking company is situated or, in the case of a banking company incorporated outside Pakistan, where its principal place of business in Pakistan is situated.

 

45.       Restriction on stay order.

 

(1)        The High Court may, on the application of a banking company which is temporarily unable to meet its obligations make an order staying for a fixed period on such terms and conditions as it may think fit the commencement or continuance of all proceedings against the company and may from time to time extend the period so however that the total period including the period of any stay order granted under the proviso to sub-section (2), shall not exceed six months.

 

(2)        Except as hereinafter provided no order of stay shall be granted upon such application unless it is accompanied by a report of the State Bank showing that in the opinion of the State Bank the banking company will be able to pay its debts if the application is granted.

 

Provided that in the case of an application not so accompanied the High Court may, if it thinks fit, grant stay for a period of not more than thirty days in aggregate, and, if such stay is granted, shall call for a report from the State Bank on the affairs of the banking company, on receipt of which it may either rescind an order already passed or pass such further orders as it may consider just and proper in the circumstances.

 

(3)        The High Court shall forward to the State Bank a copy of every stay order made under this section.

 

(4)        Where an application is made under sub-section (1), the High Court may appoint a special officer who shall forthwith take into his custody or under his control all the assets, books, documents, effects and actionable claims to which the banking company is or appears to be entitled and shall also exercise such other powers as the interests of the depositors of the banking company.

 

(5)        Where the State Bank is satisfied that the affairs of a banking company in respect of which an order under sub-section (1) has been made, are being conducted in a manner detrimental to the interests of the depositors, it may make an application to the High Court for the winding up of the company, and where any such application is made, the High Court shall not make any order extending the period for which the commencement or continuance of all actions and proceedings against the company were stayed under that sub-section.

 

(6)        The special officer appointed by the High Court under sub-section (4) of this section shall continue to hold office until he is removed from office, or until the bank resumes business, or until a liquidator is duly appointed to wind up the business of the bank.

 

 

46.       Restriction on compromise or arrangement between banking companies and creditors.–

 

(1)        Notwithstanding anything contained in any law for the time being in force, no High Court shall sanction a compromise or arrangement between a banking company and its creditors or any class of them or between such company and its members or any class of them unless the compromise or arrangement is certified by the State Bank in writing as not being incapable of being worked and as not being detrimental to the interests of the depositors of such banking company.

 

(2)        Where an application under section 153 of the Companies Act, 1913 (VII of 1913), is made in respect of a banking company, the High Court may direct the State Bank to make an inquiry in relation to the affairs of the banking company and the conduct of its directors and when such a direction is given, the State Bank shall make such inquiry and submit its report to the High Court.

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By |2017-07-24T07:07:17+05:00July 21st, 2017|Laws|Comments Off on Banking Companies Ordinance, 1962