Monday, 28 May 2012

Execution can be adjourned sine die

PLJ 2011 Karachi 75 (DB)

Present: Shahid Anwar Bajwa and Irfan Sadat Khan, JJ.

MUHAMMAD AFAQ SHAMSI and 8 others--Petitioners


NATIONAL ACCOUNTABILITY BUREAU through Chairman NAB and 4 others--Respondents

C.P. No. D-1683 of 2010, decided on 1.10.2010.

Constitution of Pakistan, 1973--

----Art. 199--National Accountability Ordinance, (XVIII of 1999), Ss. 5(r) & 25--Criminal Procedure Code, (V of 1898), S.265-K--Contract Act, (IX of 1872), S.62--Constitutional petition--Wilful default--Execution Court allowed judgment debtor company to pay outstanding amount in instalments to decree holder bank by restructuring the original agreement while adjourning execution sine die--During pendency of reference filed by NAB against company for wilful default, application filed under S. 265-K, Cr.P.C. in Accountability Court was dismissed notwithstanding the certificate issued by decree-holder bank to the effect that instalments were being paid by the company in accordance with the new agreement regularly--NAB contended that once investigation was initiated and accused person offered to return the assets, it was the discretion of the Chairman, NAB to refer the case to Court for approval or not, and that payment had to be made to the NAB and that payment to the bank would not absolve the company from its criminal liability--Validity--NAB's plea that payment made by the company directly to the bank would not constitute a valid discharge of obligation was not maintainable--New agreement restructuring the loan was accepted by the Court adjourning the execution application sine die--Quarterly instalments were being paid in accordance with the new agreement, company therefore, could not be said to have committed wilful default as defined in S.5(r) of National Accountability Ordinance, 1999--New agreement was novation of the original contract between the company and the bank and once an agreement had been novated, rights and obligations under the original agreement stood extinguished under S.62 of Contract Act, 1872 and were replaced by rights and obligations under the novated contract--`Novation' amounted to supplanting of a contract and not variation of its terms--Occurrence of default, wilful or otherwise, would flow from the new agreement and not from any prior instrument--Proceedings in Accountability Court were stayed by the High Court and were ordered to stand quashed if entire payment had been made in accordance with new agreement failing which the NAB could apply the Accountability Court to revive proceedings for wilful default.          [Pp. 81 & 82] A, B & C

2008 SCMR 1012; 2008 MLD 1734; PLD 2002 Kar. 464 & PLD 1987 Kar. 132 rel.

PLD 1978 SC 220 ref.

Mr. Khalid Imran, Advocate for Petitioners.

Mr. M. Ramzan, Deputy Director, State Bank of Pakistan for Respondent No. 2.

Mr. Behzad Haider and Muhammad Riaz, Senior Prosecutor NAB for Respondent No. 3.

Date of hearing: 19.7.2010.


Shahid Anwar Bajwa, J.--Messrs Quice Food Industries Limited, a company incorporated under the Companies Ordinance, 1984 obtained some financial facilities from the Respondent No. 3 Bank. The Petitioners Nos. 1 to 6 are Directors of the Quice Food Industries Ltd., (hereinafter referred to as the Company) and Petitioners Nos. 7 to 9 stood guarantee for the purpose of financial facility allowed to the company (hereinafter referred to as the bank). Since the company defaulted, the Bank filed Suit No. B-70/2001 before this Court and that suit was decreed vide decree dated 31-3-2001. After the suit was decreed execution application was filed. In the execution application an application was filed by the Judgment-Debtor for direction to the Decree-Holder to receive the outstanding payment in terms of restructuring, agreement dated 18-5-2007 till entire outstanding payment is paid to the Decree Holder in terms of the above said agreement. Consequently on 23-1-2009 the following order was passed:--

"An application under Order XXIII, Rules 1 and 3 read with Section 151 of C.P.C. has been filed by the learned counsel for the Decree-Holder, which is signed by the counsel for the Decree-Holder and counsel for the Judgment-debtor. Attorneys of the Decree-Holder Bank are also present. Contents of the compromise appear to be lawful, the same are accepted and the application is allowed. This execution is adjourned sine die. Office is directed to number this application.

The property, which is located in Hataar, N.-W.F.P. was sealed by the Nazir under the order of this Court shall be de- sealed by the Nazir and the possession of the same would be handed over to the authorized representative of the Judgment debtor in presence of the authorized representative of the Decree holder."

2.  Agreement was dated 31-12-2008 and it was stated in the agreement that purchaser shall pay a total amount of Rupees 46 million out of which the purchaser paid Rupees 9 million up front and the balance amount Rupees 37 million is to be paid in quarterly instalments of Rupees 3 million each starting from 3 months of the date of execution of the agreement. This agreement it is contended by the learned counsel was faithfully followed. He referred to the letter issued by die Bank on 9.2.2010 which letter says that a total of Rupees 21 million has been paid up on 31-12-2009 and that the account is now regular. Learned counsel further submitted that next instalment of Rupees 3 million was paid in March, 2010 and yet another instalment for Rupees 3 million was paid in June, 2010. Learned counsel for the bank confirmed that instalment was paid in March but did not have any instructions regarding instalment paid in June.

3.  In the meanwhile Accountability Reference No. 4 of 2008 had been filed in the Accountability Court. In that reference application under Section 265-K, Cr.P.C. was filed pleading essentially that the Bank and the company have settled their dispute and entered into agreement for repayment and that agreement is now being faithfully followed and moreover the civil dispute has been determined by the High Court and execution application in view of the agreement between the parties has been adjourned sine die. This application was dismissed by the Accountability Court No. 3 vide order dated 23-4-2010. The reasons recorded by the Court are as under:--

"Case against accused requires evidence whether they have defaulted to pay Rs. 57.50 of the decrial amount of Rs. 14.51 million towards cost of funds etc. The arguments of defence counsel are that ABL issued the NOC on 9-4-2009 and according to settlement agreement dated 31-12-2008, accused has paid Rs. 21 million up to 31-12-2009 out of settled amount of Rs. 46 million and now the account is regular, however a matter for the withdrawal of the case from NAB and their concurrence on the settlement is taken up with the NAB by the bank authority which is under process at their end. The question is if the position was so then why not the bank was withdrawing the case from the NAB. This dispute also requires evidence so I am of the view that after recording material evidences of the complainant and some witnesses the accused shall be at liberty to resubmit this application."

4.  Learned counsel for the petitioner made the following submissions:--

(1)        After the matter has been compromised between the Bank and the parties, unless the company defaults in payment under the agreement it cannot be said to be wilfully in default.

(2)        Learned counsel further submitted that the Bank has itself given a certificate that the account is regular and therefore such a certificate by the Bank should be duly honoured by the Accountability Authorities. He relied upon Chairman, National Accountability Bureau and another v. Muhammad Irshad Khan, 2008 SCMR 1012, Muhammad Asif Margoob Siddiqui v. Pakistan through Secretary of Law and Parliamentary Affairs Islamabad and 3 others 2008 MLD 1734, Syed Murad Ali Shah and others v. Government of Sindh through Home Secretary and 7 others, PLD 2002 Kar. 464.

5.  Learned counsel for the Bank submitted that the payment is being duly received by the Bank and he admitted that letter has been written by the Bank to NAB Authorities calling upon them to give their concurrence to the revised settlement between the Bank and the Company.

6.  Learned senior Prosecutor NAB referred to Section 25 and contended that after investigation has been initiated, whether the trial has commenced or not if the accused persons offer to return to NAB the assets, then Chairman NAB in his discretion can refer the case for the approval of the Court. He submitted that in such a situation the amount has to be deposited with NAB and therefore, payment by the Company to the Bank would not absolve accused persons from their criminal liability.

7.  While exercising his right to reply, learned counsel for the petitioner submitted that the changed circumstances must be taken into, consideration by the Court. In this regard learned counsel relied upon PLD 1978 SC 220.

8.  We have considered the submissions made by the learned counsel and have also gone through the record as well as case law cited at the bar.

9.  In Muhammad Irshad Khan's case (Supra) three investigations had exonerated the respondent and three different legal opinions had concurred with the views of the Investigating Officers but Deputy Prosecutor General NAB again referred the matter for investigation. High Court quashed the investigation holding that it was ordered in colourable exercise of power. The matter was taken to the Supreme Court and the Supreme Court held that since no sufficient evidence was collected and futile exercise of re-investigation had continued for six years, it caused undue harassment to the respondent and concurred with the order passed by the High Court. In Muhammad Asif Margoob Siddiqui's case (Supra), the petitioner was an officer of customs department who had earlier been posted as Commissioner, Sindh Employees Social Security Institution. It was alleged that during his such earlier posting he was involved in accumulation of assets beyond his known sources of income. Twice after conducting investigation Investigating Officer recommended closure of proceedings. Thereafter fresh investigation was ordered which was challenged in the High Court and High Court held that continuation of inquiry proceedings by the NAB authorities against the petitioner would be a mala fide exercise of power. Syed Murad Ali Shah's case (Supra) was a case where corruption was alleged and an F.I.R. was lodged at a Police Station alleging irregularities and misappropriation causing loss to the exchequer. The High Court firstly held that it is only Anti-Corruption establishment which can inquire into the matter and therefore, action by police amounted to violation of provisions of law and therefore, the High Court was competent to quash the proceedings and it did so accordingly. Learned counsel also referred to case of Darayus Cyrus Mirmala v. National Accountability Bureau, C.P. No. D-259 of 2010, decided by a Division Bench of this Court on 21-5-2010. The facts in that petition were that petitioner acted as agent of a foreign airline which leased aircrafts to Pakistan International Airlines. Ex-wife of the petitioner filed proceedings before a Court in U.K. and therein she alleged that the amount of petitioner lying in a bank there was earned through money laundering. Consequently, Attorney-General of Jersey on police report had approached Federal Government of Pakistan to join the proceedings. Certain additional evidence was filed and after such evidence was filed and NAB had represented the Federal Government, it abandoned the proceedings. The Court in U.K. rejected claim of the Government of Pakistan holding that amount was earned as consequence of criminal act. Thereafter NAB made a reference whose reference was quashed through Constitutional Petition. The bench who decided the matter held as under:--

"(19)    We have gone through the judgment of the Royal Court of Jersey, which has taken note of the fact that the Islamic Republic of Pakistan has joined the proceedings before the said foreign Court on their own. It has also taken note that the Federal Government has authorized the NAB to engage Counsel to represent its viewpoint. The NAB has also jointly investigated the case with the Jersey Police against the petitioner both within Pakistan and abroad. The NAB has placed material against the petitioner and other co-accused before the Royal Court of Jersey in order to establish that the amount lying with the Respondent No. 4 Bank were the proceeds of criminal acts of the petitioner. Thereafter, when the matter was at the stage of draft judgment, the counsel representing the Federal Government sought leave of the Royal Court to file additional evidence. The Court granted such leave and the counsel filed a statement that the NAB has filed a separate reference against the petitioner and other co-accused before the Accountability Court in Pakistan and had obtained orders of seizure of the properties of the petitioner.

(20)      After filing of the additional evidence/statement the Respondent No. 7 abandoned the proceedings whereafter the judgment was announced by the foreign Court. In this regard, paragraphs Nos. 66, 67, 68, 69 and 73 of the judgment of the Royal Court of Jersey are relevant in which it has been held that the assets with which the Court was concerned were not the proceeds of criminal conduct and, therefore, be paid to the wife in order to satisfy the judgment of the U.K. These findings of the Royal Court of Jersey were neither challenged by the Federal Government nor any suit to challenge the said foreign judgment in terms of Section 13, C.P.C. was filed before any Court in Pakistan. Therefore, the said foreign judgment of the Jersey Court, being passed by the Court of competent jurisdiction, has attained finality and is conclusive, binding the parties.

(21)      We, therefore, hold that the issue raised in the reference by the NAB has been settled by the judgment of Royal Court of Jersey holding therein that the amount lying in Respondent No. 4 Bank were not the proceeds of criminal conduct of the petitioner. We further hold that the petitioner, applicant and or the private person, namely, Pervaiz Hussain, cannot be tried nor prosecuted before the Accountability Court on the basis of the NAB reference, wherein allegation against the petitioner is that he on receipt of the amount of Commission, which amount was subject matter of the Royal Court of Jersey, had passed it on to the applicant and the private person having protection guaranteed under Article 13(a) of the Constitution. In this regard the provision of Article 13(a) of the Constitution provides that no person shall be prosecuted nor punished for the same offence more than once. The petitioner having been prosecuted and found not guilty of the charge of earning amount by corrupt means is entitled to the protection guaranteed under Article 13(a) of the Constitution."

10.  Learned counsel for Respondent No. 3 Bank placed on record letter dated June 7, 2010 written by Respondent No. 1 to Respondent No. 3 demanding from it its share of the amount paid to the Bank by the petitioner company in consequence of agreement dated 31.12.2008 and the order passed by this Court on Execution Application dated 23-1-2009. In view of such a position it really is not available to the NAB to plead that since the amount has not been deposited with them therefore payment directly to the bank does not constitute a valid discharge of the obligation on part of the petitioner. Agreement dated 31.12.2008 has been more or less accepted by this Court in the execution application and the execution application was adjourned sine die. Through this agreement the loan has been restructured and the parties have agreed that Rupees 9 million were to be paid at the time of execution of agreement (and they were paid) and balance amount of Rupees 37 million was to be paid in quarterly instalments of three million each and there is no statement whatsoever that petitioner had defaulted in any such payment. The word wilful default is defined in Section 5(r) of the National Accountability Bureau Ordinance, of 1999. The said section is in the following words:

"(r)       "Wilful default" a person or a holder of public office is said to commit an offence of wilful default under this Ordinance, if he does not pay, or continues not to pay, or return or repay the amount due from him to any bank, financial institution, cooperative society, Government department, statutory body or an authority established or controlled by Government on the date that it became due as per agreement containing the obligation to pay return or repay or according to the laws, rules, regulations, instructions issued or notified by the State Bank of Pakistan or the bank, financial institution, cooperative society, Government of Pakistan, statutory body or an authority established or controlled by a Government, as the case may be, and a thirty days notice has been given to such person or holder of public office." (Emphasis added).

11.  Reading, of the above definition indicates that default occurs when the amount due as per agreement containing obligation to pay is not paid. The agreement dated 31-12-2008 evidences that the parties agreed that liability was 46 million and then they agreed to a particular schedule of payments. Section 62 of the Contract Act, provides as under:

"(62)    Effect of novation, rescission and alteration of contract.--If the parties to a contract agree to substitute a new contract for it, or to rescind or alter it, the original contract need not be performed."

Agreement dated 31-12-2008 amounts to novation of original contract between Bank and the petitioner and it is settled law that once agreement had been novated rights and obligations under the original contract stands extinguished and are replaced by rights and obligations under the novated contract. Novation amounts to supplanting of a contract and not variation of its terms. Therefore when a contract is novated a fresh contract comes into existence directly or by implication in place of the original contract. If any authority is needed one may refer to Mst. Khatoon Begum v. Mst.Barkatunnisa Begum and 6 others, PLD 1987 Karachi 132. Therefore once agreement dated 31-12-2008 is executed between the Bank and its client rights of the parties are to be determined in the light of that agreement and occurrence of default, wilful or otherwise, is to flow from that agreement and not from any prior instrument.

12.  However, since the agreement requires payments in quarterly instalments, as long as the entire payment is not made it cannot be said that the first agreement died its death. Consequently the proceedings in the Accountability Court are ordered to be adjourned sine die. If the entire payment in satisfaction of the contract dated 31-12-2008 is made in accordance with what is agreed in agreement dated 31.12.2008 the proceedings before Accountability Court would stand quashed. On the other hand, if the agreement dated 31-12-2008 is not followed and wilful default is made it shall be available to the NAB to apply to the Accountability Court to revive the proceedings.

This Constitutional Petition is disposed of in the above terms.

(R.A.)  Order accordingly.

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