BANKS (NATIONALIZATION) ACT, 1974
ACT NO. XIX OF 1974
An act to provide for the nationalization of banking business in Pakistan;
WHEREAS it is expedient in the public interest to provide for the nationalization of banking business in Pakistan;
It is hereby enacted as follows:-
1. Short title, extent and commencement. –
(1) This Act may be called the Banks (Nationalization) Act, 1974.
(2) It extends to the whole of Pakistan.
(3) It shall come into force at once and shall be deemed to have taken effect on the 1st day of January, 1974.
2. Act to override other laws.- This Act shall have effect not withstanding anything contained in any other law for the time being in force or in any agreement, contract, award memorandum or articles of association or other instrument.
3. Definition.- In this Act, unless there is anything repugnant in the subject or context,-
(1) "bank" means-
(a) a company registered under the Companies Act, 1913 (VII of 1913), and transacting, in or outside Pakistan, the business of banking as defined in clause (b) of section 5 of the Banking Companies Ordinance, 1962 (LVII of 1962), in respect of which no proceedings under Part III or Part IV of the said Ordinance have been taken or are pending immediately before the commencing day; and
(b) a banking company incorporated by or under any law within the legislative competence of Parliament, including the State Bank, the National Bank of Pakistan, the Industrial Development Bank of Pakistan and the Agricultural Development Bank of Pakistan, but does not include;-
i) a bank which is an enemy firm within the meaning of the Defence of Pakistan Rules, or
ii) a banking company incorporated outside Pakistan and transacting banking business in Pakistan, or
iii) a co-coperative bank registered under the Co-operative Societies Act, 1925 (VII of 1925), or any other law for the time being in force relating to co-operative societies, not being a co-operative bank which is a scheduled bank ;or
iv) a Government Savings Bank to which the Government Savings Bank Act, 1873 (V of 1873), applies, or
v) a corporation or company owned or controlled by a Province and carrying on banking business only within that Province, or
vi) a corporation or company established in Pakistan in pursuance of an agreement between the Government of Pakistan and Foreign Government or institution for transacting banking business in or outside Pakistan;
(1A) " board" means Board of Directors constituted under this Act;
(2) "commencing day" means the Ist day of January, 1974;
(4A) " Loans and advances" means "loans, advances and credit" as defined in the Banking Companies
Ordinance, 1962 (LVII of 1962),
(5) "prescribed" means prescribed by rules made under this Act;
(6) "State Bank" means the State Bank of Pakistan established under the State Bank of Pakistan Act,
1956 (XXXIII of 1956); and
(7) other words and expressions used but not defined in this Act shall have the same meaning as in the Banking Companies Ordinance, 1962 (LVII of 1962).
5. Transfer and vesting of ownership, etc., of banks.-
(1) The ownership, management and control of all banks shall stand transferred to, and vest in, the Federal Government on the commencing day.
(2) All shares in the capital of a bank held by persons other than the Federal Government, a Provincial Government, a corporation owned or controlled by the Federal Government or the State Bank shall stand transferred to, and vest in, the Federal Government on the commencing day, free of all trusts, liabilities and encumbrances.
(2A) If any bank issues any additional share capital after the commencing day, then, without prejudice
to the provisions of sub-section (1), a Provincial Government, a corporation owned or controlled by the Federal Government and the State Bank may contribute to the share capital so issued.
(3) The vesting of any shares in the Federal Government under sub-section (2) shall not affect the right inter se of a shareholder and any other person who may have an interest in such shares and such other person shall be entitled to enforce his interest against the compensation awarded to the shareholder under section 6.
(4) The safety of all deposits in banks shall stand guaranteed by the Federal Government.
(5) The provisions of this Act and the vesting of the shares of the banks in the Federal Government thereunder shall not in any way affect the status of the banks as bodies corporate under the Companies Act, 1913( VII of 1913).
(6) The Federal Government or a corporation owned or controlled by the Federal Government may, from time to time, sell all or any of its shares in the capital of a bank, other than the State Bank, to such persons, and on such terms and conditions, as it may determine.
(5A) Sale of shares.-
(1) Notwithstanding anything contained in this Act or any other law for the time
being in force, the Federal Government or a corporation owned or controlled by the Federal Government may, from time to time, sell or any of its shares in the capital of a bank and transfer management and control of a bank other than the State Bank, to such persons, and on such terms and conditions, as the Federal Government may determine: and
(a) Where not less than twenty six per cent of the shares in the capital of a bank are so sold, the application of the provisions of this Act, other than this sub-section, including provisions relating to ownership of shares and management and control of banks, to such bank shall stand suspended for such period, and on such terms including terms guaranteeing the security of deposits and terms relating to sound management of the bank, as the Federal Government may, by notification in the official Gazette, specify; and
(b) Where not less than fifty one per cent of the shares are so sold, the provisions of this Act shall cease to apply to such bank.
(2) The Federal Government shall have, and be deemed always to have had, the power to determine and lay down the terms and conditions subject to which shares in the capital of a bank are to sold and its management and control is to be transferred to any person under sub-section (1).
(3) The power referred to in sub-section (1) may be exercised by the Federal Government at any time either before or after a decision is taken by the Federal Government to sell the shares and transfer the management of a bank as aforementioned, and the Federal Government shall be competent to vary, modify, review or annual any or all of the terms and conditions referred to in sub-section (2) at any time it deems fit to do so in the public interest, until the sale of the shares and transfer of management and control are completed, and such variation, modification, review or annulment shall not be called in question in any Court, or before any authority, on any ground whatsoever.
5B. Section 5A to have effect notwithstanding any other law, etc.- The provisions of Section 5A shall have effect notwithstanding anything contained in this Act or any other law for the time being in force, any agreement contract or any judgement of any Court.
6. Compensation for transfer of ownership of shares in a bank.-
(1) Every person who stands registered as the holder of any share of a bank the ownership, management and control of which stands transferred to the Federal Government by virtue of section 5 shall be entitled to receive from the Federal Government by way of compensation per share an amount determined in accordance with the provisions of section 7 in the form of bonds of the Federal Government, repayable at par at any time within a period of fifteen years in accordance with a redemption programme formulated by the Federal Government and bearing interest at the rate of one per cent above the bank rate notified by the State Bank from time to time:
Provided that, in formulating the redemption programme, the Federal Government may make provision for preferential redemption of the bonds of such class of persons who are of meagre means such as orphans, widows and pensioners, and the amount of compensation payable to whom does not exceed such maximum amount, as the Federal Government may deem fit:
Provided further that, where the amount so determined is not exact multiple of one hundred rupees, the amount in excess of the nearest lower multiple of one hundred rupees shall be paid in cash.
(2) The bonds shall be negotiable and eligible as security for advances.
6A. Registration of Certain Shares.-
(1) Any person who holds any shares of a bank the ownership, management and control of which stands transferred to the Federal Government by virtue of Section 5 which was
bought by him on recognised Stock Exchange in Pakistan before the first day of January, 1974 but was not registered in his name in the books of the company by that day may make an application for registration to such bank.
(2) An application under sub-section (1) shall be made within such time and in such manner, and shall be accompanied by such documentary evidence, as may be prescribed.
(3) The bank to which an application is made may on being satisfied after such scrutiny or verification by such authority as may be prescribed, that the applicant is the holder of the share, register him as such, and a person so registered shall be entitled to receive the compensation provided for in sub-section (1) of Section 6.
7. Assessment of compensation.- The amount of the compensation shall be the amount equal to the break-up value of the shares as determined by an auditor appointed by the Federal Government from the balance sheet of the bank as on the 31st December, 1973, according to the principles laid down in rule 8 of the Wealth Tax Rules, 1963:
Provided that in case of a share of the State Bank the amount of the compensation shall be the average of the closing quotation during six working days immediately preceding the commencing day on the Karachi Stock Exchange:
Provided further that, in respect of any share obtained at par from the Federal Government by any directors of the Central Board of Directors of the State Bank or a member of the Local Board of that Bank under the Provisions of sub-section (3) of Section 13 of the State Bank of Pakistan Act, 1956 (XXXIII of 1956), the amount of compensation shall be calculated at the rate of one hundred rupees per share.
8. Removal of previous management.-
(1) Every person holding office in any bank as chairman, director or chief executive by what-ever name called, other than a person who holds such office by virtue of his appointment or nomination by the Federal Government or the State Bank, shall stand removed from his office on the commencing day and this removal shall not entitle him to any compensation and no such claim shall be entertained by any court, tribunal or other authority.
(2) The vacation of his office by a Chairman, Director or Chief Executive under subsection (1) or otherwise shall not in any way absolve him of his liability, if any, under any law, contract or otherwise howsoever subsisting immediately before the commencing day or the day on which he ceases to hold such office.
(3) A Chairman, Director or Chief Executive by whatever name called ceasing to hold office under any of the aforesaid provisions shall entrust or cause to be entrusted to the person succeeding him in that office, intact and in as good order as they existed on the day immediately preceding the commencing day all properties, all books of accounts and other records and documents belonging to or in the custody or control or pertaining to the affairs, of the bank.
(4) Central Board of the banks mentioned in the Schedule, and all local bodies, area boards, managing committees, executive committees and similar other bodies for the management of any bank shall stand dissolved, and all members of such bodies shall stand removed from office, on the commencing day.
9. Dissolution of the Pakistan Banking Council.-
(1) The Pakistan Banking Council (hereinafter referred to as the Council) shall stand dissolved forthwith.
(2) All assets, properties and rights of the Council shall stand transferred to and vest in, and all liabilities and other encumbrances of the Council shall stand transferred to and become the liabilities and encumbrances of, the State Bank.
(3) Employees of the Council, including its members,-
(a) who are on deputation or secondment from any public sector financial institution shall revert to, and continue to be employed by, their parent institutions on terms and conditions governing their employment in their parent institutions; and
(b) who do not fall in clause (a) shall become employees of the State Bank on terms and conditions governing their employment with the Council.
(4) Every contract or instrument to which the Council is a party shall continue to be in force and effective as if the State Bank had been a party thereto instead of the Council.
(5) Any legal proceedings or, as the case may be, any application pending before any authority by or against the Council may be continued by or against the State Bank.
(6) Where under any statute or statutory instrument, the Chairman or a member of the Council is nominated for a specified assignment of task, the vacancy caused by operation of this section shall be filled by a person nominated by the State Bank.
10. Transfer and using of funds.- All sums standing to the credit of the Council in the fund constituted heretofore shall stand transferred to, and vest in, the State Bank.
11. General provisions pertaining to management of banks.-
(1) Subject to subsection (2) a bank shall have a Board consisting of-
(a) a President, who shall be its Chief Executive; and
(b) not less than five and not more than seven other members.
(2) The Federal Government may, if it deems necessary, appoint a Chairman of the Board in respect of a bank.