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Ordinance to "promote nation's economy and rehabilitation of industrial undertakings, keeping in mind demands of justice and fair play"

Nov 27 - Dec 03, 2000

Perhaps realising that its dismal performance on the front of recovery of defaulted loans, the government has taken a fresh initiative in this regard to pacify the growing public criticism.

Instead of any reduction, the portfolio of defaulted loans, during the last 13 months of present rule, has risen from Rs. 211 billion on 30.6.99 to Rs.240 billion on 30.6.2000. It is despite the fact that National Accountability Bureau (NAB) recovered over Rs.16 billion in the initial few months after which it was asked to be soft on bank defaulters as it was impeding government efforts for revival of economy. Despite this softness, however, the desired results were no-where to be seen but the volume of defaulted loan rose by another Rs.30 billion in the meanwhile.

President Rafiq Tarar has now promulgated an ordinance to provide for expeditious legal remedies for the matters relating to non-performing assets. The ordinance also provides for legal remedies for the recovery of outstanding loans of the banks and other financial institutions to make them attractive for privatization and to promote the revitalization of national economy and rehabilitation and restructuring of industrial undertakings. The ordinance will enable the government to expedite the process of recovery of outstanding loans as it provides for the high courts to set up special tribunals to deal with the loan defaulters.

The ordinance named as the Non-performing Assets and Rehabilitation of Industrial Undertakings (Legal Proceedings) Ordinance has been promulgated by the government to "promote nation's economy and rehabilitation of industrial undertakings, keeping in mind demands of justice and fair play".

Section 4 of the ordinance provides that notwithstanding anything contained in any other law, the High Court of a Province, within its territorial jurisdiction, shall exercise exclusive civil and criminal jurisdiction to adjudicate and decide all claims, legal proceedings, cases for recovery of non-performing assets and outstanding loans in connection with the new ordinance and the CIRC Ordinance, promulgated earlier.

By sub-section 2 of section 4, it is clarified for removal of doubt that subject to the provisions of this ordinance, a High Court or any other court shall continue to exercise jurisdiction as before under the Code of Civil Procedure, the Banking Companies (Recovery of Loans, Advances, Credits and Finances) Act, 1997 the Companies Ordinance and other laws as stated in the ordinance.

Under sub-section 3, the chief justice of the High Court is authorised to constitute one or more benches to adjudicate cases under this ordinance and to assign cases to any bench of the High Court for trial if common questions of claim or controversy are involved.

More significantly, to ensure justice to all parties, it is provided under section 9 of the Ordinance that in all cases and legal proceedings for recovery of non-performing assets and loans, which are pending in any court or tribunal or filed under the various laws and where there is bona fide dispute relating to the liability of the borrowers including cases of fraud, mis-representation or breach of any provision of law, rules, regulations and the circulars of the State Bank, calculation, existence and repayment of the outstanding loans, mark up or interests, the High Court, while so adjudicating, may make such correct calculation by following the procedure of Sections 10 & 11 of earlier promulgated CIRC Ordinance which provides for a reference to the governor State Bank and verification committee to be constituted by the governor of State Bank of expert auditors, if necessary, by constituting such verification committee as the High Court may deem fit in the ends of justice so as to ensure correct determination of the amount of liability of borrowers which is due and payable.

This provision should remove unnecessary apprehensions of all concerned parties but those who are found guilty of committing criminal offences by the courts regarding bank loans will not be spared under the ordinance.

By section 10 a speedy procedure is prescribed for the banks to recover the amount determined by the High Court as payable after a decree is passed. The ordinance also provides for right of appeal before the High Court and Supreme Court of Pakistan.

The present government has certainly failed to keep pace with the popular expectations in a number of areas, but their performance in the defaulted loans recovery drive has been most disappointing. The new Chief Executive of the country Gen. Pervez Musharraf, in his address to the nation made it clear that recovery of the defaulted loans was on the top of his agenda. He asked the loan defaulters to voluntarily return all the borrowed money within 4 weeks otherwise the law of land would deal with them with iron hand and recover every penny with heavy penalty.

Many deadlines in the past were given by previous governments to the bank defaulters but of no use as defaulters were fully aware that these threats were only for a political purpose. With Gen. Pervez Musharraf taking over, people thought that perhaps the day of reckoning for the powerful loan defaulters who were violating the law since long had arrived. They thought that this time the situation is entirely different. There is no ruling class and there is no defaulter in the administrative setup. So the message is loud and clear that there is no political gimmick this time and the General means business. More optimistic analysts believe that amount of voluntary deposits during the 4 weeks may exceed the cautious estimate of Rs.100 billion.

To the utter dismay of the nation, however, there has been no tangible progress in the recovery of defaulted loans of the banks and other financial institutions. Like always, the defaulters have succeeded in implicating the present government in the swampy financial intricacies to defeat its plans for the recovery of the 240 billion rupees of public money that has gone down the drain due to banker-borrower collusion. A fresh bid seems to be on the anvil to salvage the taxpayers money through the promulgation of the fresh Ordinance. The ordinance will hopefully empower the authorities to deal with the defaulters effectively to make them cough out the swallowed national money. It is shameful on the part of those, who are not ready to return the money on one pretext or the other, despite the fact that Finance Minister Shaukat Aziz is compelled to go about with the begging bowl to seek money for nation's sustenance. It has been proven that the defaulters are hard nuts and will not pay back the loans unless treated harshly. Some of them have even resorted to clandestine tactics, by exploiting the technical loopholes in the banking laws, to avoid responsibility for the loans. It is, therefore, hoped that the new ordinance will care for such tactics and pave the way for expeditious recovery of the defaulted loans, besides leading to the award of stringent punishment to those guilty of wilfully avoiding repayments. The country's economic plight has hardly any room for any apathy or laxity. The government's dilemma is that the process of privatization is also hindered due to the undue financial burden of the banks and financial institutions. The defaulters would, therefore, have to be dealt with strictly to achieve the desired results.