NAB cannot challenge State Bank’s loan restructuring powers, says SC – Pakistan

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ISLAMABAD: The Supreme Court has ruled that the authority of the State Bank of Pakistan (SBP) would be undermined if the National Accountability Bureau (NAB) begins to question arrangements for bank loan restructuring and restructuring.

This would render any financial settlement meaningless, create distrust and undermine business confidence in the SBP, the Supreme Court said in a ruling on Wednesday. Judge Syed Mansoor Ali Shah wrote the verdict.

Such distrust could be devastating, leading to destabilization of the economy and would violate the fundamental right to trade and enterprise, the ruling said.

Judge Shah was a member of a panel of three judges that had lodged a number of appeals against a July 9, 2019 decision of the Sindh Supreme Court (SHC). The Chief Justice of Pakistan, Justice Umar Atta Bandial, presided over the court.

Judgment of a company that has entered into debt swap deals worth Rs. 10.5 crore with 22 institutions

In one of the appeals, petitioners Abid Amin and Ahmed Humayun challenged the SHC’s decision to overturn a 2017 reference against the National Accountability Ordinance (NAO) 1999.

The petitioners were directors and shareholders of Azgard Nine Limited (ANL), a public company. The ANL had received loans from various financial institutions.

When the loans defaulted, the ANL entered into a debt swap agreement with 22 financial institutions and a Rs.10.5 crore restructuring agreement.

The National Bank of Pakistan (NBP) played a leading role by buying the shares of Messrs Agritech Ltd, a subsidiary of ANL, at a price of Rs35 per share, comparing this to ANL’s outstanding debt. The co-defendants – senior NBP officials – oversaw the process of restructuring and restructuring the ANL’s loans.

Several complaints have been filed by Transparency International (TI) on the grounds that National Bank staff have abused their powers and bought M/s Agritech Ltd shares at a higher price of Rs.35 versus the original Rs.13.47 per share. In so doing, they caused the treasury to lose 3 billion rupees, the TI claimed.

Judge Shah found that the legislative intention, purpose and aim behind the passage of Sections 31-C and 31-D of the NAO was to ensure that banking and tax matters are conducted in accordance with the SBP’s guidelines.

The ruling says the conversion of the default into a viable financial arrangement between the parties, with the blessing of SBP, cannot be questioned, disputed or ignored unless the central bank allows it.

No financial institution came forward to contradict the petitioner’s allegation, the court found. “It is an accepted position that these agreements have been properly implemented and liabilities between the parties have been settled.”

The NAB prosecutor conceded that the SBP was never asked for permission and the central bank governor made no such reference, the ruling said.

The court ruled that no investigation, investigation or proceeding could have been instituted against the petitioners without an opinion from the Central Bank Governor under Section 31-D of the NAO.

Thus, the proceedings instituted by the NAB against the petitioners violated the provisions of Section 31-D and the filing of the citation against the petitioners was also without lawful authority, the judgment said.

It overturned all actions of the NAB, including the investigation, inquiry and referral, as well as the proceedings pending before the Accountability Court.

However, the court allowed the NAB to open a new trial against the petitioners and the co-defendants.

Published in Dawn, April 14, 2022

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