PROCEDURE TO BE FOLLOWED

The procedure to be followed in cases pertaining to willful default, in view of the recent judgment of the Supreme Court, would be as follows:-

1.      That the banks and financial institutions must ensure that 30-day notice of demand has been issued in respect of every defaulted loan or finance. Such notice must be issued after date of the default affording an opportunity for re-payment to the defaulters. Such notice must be issued not only in the names of the company or corporate body but also the persons stated in section 5(0) of the Ordinance i.e. sponsors, Chairman, Chief Executives, Managing Director, Elected Directors, Guarantors or any other person who to the knowledge of the bank or financial institution has control over or is or has derived benefit there from.

 

In case of partnership or sole proprietorship the notice must be issued to the partner or proprietor   alongwith the names of guarantors, mortgagors or any other person who the knowledge of the bank or financial institution exercise control or has derived benefit therefrom be included.

 

 

2.      In the eventuality of the failure to make the re-payment as demanded a complaint alongwith the copies of the notices and response, if any thereto, may be referred to the Governor, SBP.

 

3.      On receipt of such complaint, Governor, SBP shall issue 07 days notice to all persons mentioned in Para (1) above requiring them to show cause as to why the alleged defaulters May not be proceeded under the NAB Ordinance as willful defaulters.

 

4.      The response. If any, must be decided by the Governor, SBP in terms of the first proviso of section 5(r) i.e. either no amount is due or has not been defaulted or the default has taken place and the same was a consequence of any act or omission of bank, financial institution constituting a willful breach of agreement or obligation or failure to perform statuary duty. Any other defense for default would be beyond the scope of the NAB Ordinance.

 

5.      If the alleged defaulters fail to respond or the explanation offered are either beyond the ambit of section 5(r) detailed above or unacceptable, the Governor, SBP may reject the said explanation and refer the matter to NAB for filing of a Reference.

 

6.      The order of the Governor , SBP must be speaking order and must disclose reason as the requirement of the General Clauses Act. In the absence of a speaking order or disclosure of reasons further action under the NAB Ordinance would jeopardize.

Annexure A

Draft Notice I

(To be served by the Banks/DFIs/Financial Institutions to the defaulter)

By Courier and Registered Post AD

To                                                                                            Date:___________________

(Name of Borrower)

 

Address

_________________________.

_________________________.

 

Re:      Legal Notice

 

We, ______________(Name of the Bank / financial institution / cooperative body)

(Hereinafter referred to as the “bank”) are hereby instructed and directed to serve this notice upon you as follows:

 

  1. That no request and guarantee (where applicable) we allowed a finance facility of Rs.________________ to you (hereinafter referred to as the “finance facility”).

 

  1. That in consideration of the aforesaid and to sure the repayment of the aforementioned facility, following documents were executed by you:

 

    1. _______ (Title of the finance agreement and the date of execution)
    2. _______ (Other documents, i.e., Letter of Hypothecation, Guarantee, etc.)
    3. _______.

 

  1. That you have willfully not performed the obligations in accordance with the Agreement inspite of various demands and reminders issued to you from time to time.

  2. That in view of the above persistent and willful default we, in the exercise of our contractual rights, have recalled the whole facility and all amounts payable under the Agreement have become immediately due and payable by you.

 

In view of the above, you are hereby called upon to pay a sum of Rs. __________ within a period of 30 days from the date of this notice failing which the bank shall be constrained to refer the matter to the Governor, State Bank of Pakistan for initiating proceedings against you under the provisions of NAB Ordinance, 1999 for you having committed willful default.

 

THIS IS WITHOUT PREJUDICE TO THE RIGHTS AND REMEDIES AVAILABLE TO THE BANK UNDER ANY OTHER LAW.

 

 

Yours faithfully,