Background:-

It has come to our knowledge that Mr. Main Samiuddin was induced by the officers of Habib Bank
Limited, Main boulevered Branch, Lahore to avail two (2) Term Deposit financial facilities from the Bank
in the year 2012, both on ninety (90) days basis at a pre-agreed rate of eleven (11) percent per annum
to be calculated on daily basis. The said facilities were renewable at the option of Mr. Main Samiuddin,
on the same terms and conditions as originally offered by the bank.
Mr. Main Samiuddin on the explicit representation of the bank officials opens two (2) accounts with the
Bank with the intention of placing funds in Term Deposits and specifically for the purpose of availing
financial facilities offered by the bank for Term Deposit.
Mr, Mian Samiuddin deposited Rs, 24,600,000 (Rupees Twenty Four Million, Six Hundred Thousands)
and 5,070,000 (Rupees five million seventy thousands) in the Account No, 1 and 2 respectively. The
amount in account no 1 was subsequently increased to Rs 25,000,000(Rupees twenty five million) for
the term deposit facilities.
Perusal of the record reluctantly handed over to Mr Samiuddin by the bank which shows that bank has
been deceiving and cheating Mr Samiuddin as well as the Tax Authorities in as much as, firstly the bank,
for the reasons best known to its officers started deposited the term deposit profits in two(2) separate
tranches in each of account no 1 and account no 2, instead of one bullet payment, as per standard
practice of banking industry; and secondly the bank initially started short depositing part of the profits,
which were subsequently completely stopped.
The bank, without the knowledge or consent of Mr Samiuddin and without any prior intimation, started
randomly changing the Rate of Profit/Interest, which was against the terms of the facilities as the
original interest rate was of 11% and it has been changed to 7.65% which consequently cost a loss of Rs.
1,237,650 to Mr Samiuddin.
Issues:-
1- What is term deposit and how it functions and what are its parameters?
2- Whether suit for recovery of finance and damages can be filled before banking court under
Section 9 of the Recovery of Finances Ordinances, 2001?
3- Under which law a complaint can be launched against a commercial bank and what are the
penalties which can be imposed?
Relevant Laws/statues:-
1- Recovery of Finance Ordinance, 2001
2- Banking Companies Ordinance, 1962
3- Banking Companies Rules, 1963
4- Prudential regulations (State Bank of Pakistan)

Discussion:-
Issue 1:
In deposit terminology, the phrase Term Deposit refers to a savings account or certificate of deposit that
pays a fixed rate of interest until a given maturity date. Funds placed in a Term Deposit usually cannot
be withdrawn prior to maturity or they can perhaps only be withdrawn with advanced notice and/or by
having a penalty assessed. According to USLEGAL.COM Term Deposit refers to a money deposit that
cannot be withdrawn for a specific period of time. A term deposit is also known as a bond deposit, and
fixed deposit. When the term for which the amount is deposited passes, the amount can be withdrawn
or can be held for other purposes. A bank can ask for a penalty in the case of an early withdrawal. The
longer the term the better the yield. Usually a term deposit is withdrawn after giving advance notice.
The minimum term for a time deposit is thirty days.
For example, a Term Deposit will often be used by individuals, businesses and financial institutions
around the world as a means of storing their liquid funds for a fixed period of time for future use. In the
retail market, Term Deposits are relatively safe investments when provided by insured financial
institutions such as banks, savings and loan corporations and credit unions that are duly regulated
within the country in which they operate.
Automatic renewals:
Upon maturity, your deposit is automatically renewed for the same tenor at the prevailing profit rate unless you
instruct otherwise.
Best Term Deposit and Certificate of Deposit Interest Rates in Pakistan
Deposit Account Interest Term Updated
HBL 1 Year Term Deposit 8.50% 1 year May, 2014
HBL 3 Year Term Deposit 8.08% 3 year May, 2014
Standard Chartered Bank Pakistan 1 Year Term Deposit 7.50% 1 year Jun, 2014
Standard Chartered Bank Pakistan 6 Month Term
Deposit
7.36% 6 month Jun, 2014
MCB 1 Year Term Deposit 7.30% 1 year Jul, 2014
Standard Chartered Bank Pakistan 3 Month Term
Deposit
7.20% 3 month Jun, 2014
MCB 6 Month Term Deposit 7.165% 6 month Jul, 2014
MCB 3 Month Term Deposit 7.10% 3 month Jul, 2014
Standard Chartered Bank Pakistan 1 Month Term
Deposit
7.00% 1 month Jun, 2014




Issue 2:
According to Section 9 of the Recovery of Finances Ordinance, 2001, Where a customer or a financial
institution commits a default in fulfillment of any obligation with regard to any finance, the financial
institution or, as the case may be, the customer, may institute a suit in the Banking Court by presenting
a plaint which shall be verified on oath.
In the above section three words are of importance namely "Customer", "Finance" and the "Obligation".
All these words have been defined in section 2(c), (d) and (e) of the Recovery of Finances Ordinance,
2001, as
"Customer" means a person to whom finance has been extended by financial institution and
includes a person on whose behalf a guarantee or letter of credit has been issued by a financial
institution as well as a surety or an indemnifier",
"finance" includes---
(i) An accommodation or facility provided on the basis of participation in profit and loss, mark-
up or mark-down in price, hire -purchase, equity support, lease, rent-sharing, licensing
charge or fee of any kind, purchase and sale of any property including commodities, patents,
designs, trademarks and copy-rights, bills of exchange, promissory notes or other
instruments with or without buy-back arrangement by a seller, participation term
certificate, musharika, morabaha, musswama, istisnah or modaraba certificate, term finance
certificate;
(ii) facility of credit or charge cards;
(iii) facility of guarantees, indemnities, letters of credit or any other financial engagement which
a financial institution may give issue or undertake on behalf of a customer, with a
corresponding obligation by the customer to the financial institution;
(iv) a loan, advance, cash credit, overdraft, packing credit, a bill discounted and purchased or
any other financial accommodation provided by a financial institution to a customer;
(v) a benami loan or facility that is, a loan or facility the real beneficiary or recipient whereof is
a person other than the person in whose name the loan or facility is advance or granted;
(vi) any amount due from a customer to a financial institution under a decree passed by a civil
court or an award given by an arbitrator; any amount due from a customer to a financial
institution which is the subject matter of any pending suit, appeal or revision before any
court; any other facility availed by a customer from a financial institution.
"Obligation' includes:-
(i) any agreement for the repayment or extension of time in repayment of a finance or for its
restricting or renewal or for payment or extension of time in payment of any other amounts
relating to a finance or liquidated damages; and
(ii) any and all representations, warranties and covenants made by or on behalf of the customer
to a financial institution at any stage, including representation, warranties and covenants
with regard to the ownership, mortgage, pledge, hypothecation or assignment of, or other
charge on assets or properties or repayment of a finance or payment of any other amounts
relating to a finance or performance of an undertaking or fulfillment of a promise; and
(iii) all duties imposed on the customer under this Ordinance; and
From the above provisions of law, it is clear that under Recovery of Finances Ordinance, 2001 only those
issues can be solved which are between the customers and the financial institutions in respect of finance
and that too on the ground that any obligation has not been fulfilled.
When the above definitions are read with the facts of the present case it is clear that plaintiff was a
customer of the Habib Bank Limited and finance has also given to the bank and bank was under an
obligation to perform his duty and to give away the interest at the rate of 11%.
In order to institute suit under section 9 only one condition is mentioned i.e.
"Default in fulfillment of any obligation with regard to any finance".
And present facts clearly indicate that there was a default in fulfillment of obligation by bank as bank
has not given the interest at 11% per annum. The default is made during the subsistence of finance
facility and Banking Court has the jurisdiction to adjudicate upon such defects.
The second part of issue is that whether damages can also be claimed under Section 9 of the Recovery
of Finances Ordinances, 2001?
If a claim is based on breach of contract for finance the same will be dealt with under section 9(1) of the
Recovery of Finances Ordinances, 2001, however, if the claim is based on tortuous act then Banking
Court has no jurisdiction. In this regard reliance is placed on The Army Welfare Trust Trading As
Nizampur Cement Plant v. Soneri Bank Limited (2014 C L D 440 Lahore), Abdul Rehman Allana v. Citi
Bank", (2003 CLD 1843). In the case of Messrs M.M.K. RICE MILLS v.GRAYS LEASING (2006 CLD 1147
Lahore) Mr. Justice Umar aTa Bandial clearly states where several reliefs including recovery of tortuous
damages are being claimed from Banking Court under Financial Institutions (Recovery of Finances)
Ordinance, 2001, relief can only be sought up to the extent of recovery of finances and tortuous
damages cannot be claimed claimed from Banking Court under Financial Institutions (Recovery of
Finances) Ordinance, 2001. Even in the cases of Saudi-Pak Industrial And Agricultural Investment
Company (Pvt.) Limited V. Mohib Textile Mills Limited (2002 CLD 1170 Lahore) and Allied Bank Of
Pakistan Limited v. Messrs Asisha Garments (2001 M L D 1955 Lahore) it is clearly established that
the term "Liquidated damages" is not included in the term "finance. Definition of the term "finance" as
given in S.2(a) of Banking Tribunals Ordinance, 1984, does not include and cover the amount of
liquidated damages and the damages are outside the purview and scope of definition of "finance and
Banks cannot even claim, the amount of liquidated damages relying on the definition of term "finance".
Conclusion:
To conclude this can be said that a suit under Section 9 can be filled before Banking court if a financial
institution commits a default in fulfillment of any obligation with regard to any finance and liquidated
damages or tortuous claimed cannot be entertained by Banking Court under Section 9 as banking court
has no jurisdiction.

Issue3:
Section 82B of Banking Companies Ordinance, 1962 states that Banking Mohtasib shall have the power
and responsibility to entertain complaints from customers, borrowers, banks or from any concerned
body or organization. According to Chapter IV-A of Banking Companies Ordinance, 1962 a complaint can
be launched before Banking Mohtasib to:-
(a) enquire into complaints of banking malpractices;
(b) perverse, arbitrary or discriminatory actions;
(c) violations of banking laws, rules, regulations or guidelines;
(d) inordinate delays or inefficiency and
(e) corruption, nepotism or other forms of maladministration.
The Banking Mohtasib is authorized to act if a person/ company fails to act in accordance with banking
laws and regulations including policy directives or guidelines issued by the State bank from time to time.
The Banking Mohtasib is authorized to act in case of fraudulent or unauthorized withdrawals or debit
entries in accounts and on complaints relating to mark-up or interest rates based on the ground of a
violation of an agreement or of State Bank directives as well. Even if at any time during the pendency of
a case, a court trying a case relating to recovery of loan by a banking company is of the opinion that the
management of the banking company has prima facie acted in a malafide manner, or in violation of
banking rules and regulations, it may reference to the Banking Mohtasib for inquiring into the matter
and passing such order in accordance with the provisions as may deem fit.In the case of MUHAMMAD
AAMIR SAEED Versus Messrs UNITED BANK LTD (2008 CLD 1324 Karachi) Mr. Justice KHILJI ARIF
HUSSAIN states that If there is any dispute in respect of charging of mark-up or interest over and above
the agreement entered between the parties, the petitioner's remedy lies before the Banking Court
and/or if there is any malpractice or any violation of banking laws, rules, regulations or guidelines or
perverse, arbitrary or discriminatory actions by respondent-Bank, the efficacious remedy is available to
petitioner before Banking Mohtasib appointed under section 82 of the Banking Companies Ordinance,
who had jurisdiction to look into the complaint of aggrieved person.
In the event the Banking Mohtasib comes to the conclusion that the complaint is justified, in part or in
whole, he shall try and facilitate an amicable resolution or settlement by resort to mediation and failing
that communicate his findings to the concerned bank with the direction.
Section 82-E states that In the event the Banking Mohtasib comes to the conclusion that the complaint
is justified, in part or in whole, he shall try and facilitate an amicable resolution or settlement by resort
to mediation and failing that communicate his findings to the concerned bank with the direction
(a) to reconsider the matter;
(b) to modify or cancel the earlier decision, action or failure to take the appropriate action;
(c) to pay reasonable compensation to the complainant as fixed by the Banking Mohtasib;
(d) to take the requisite steps to improve the functioning or efficiency of the bank; and
(e) to take such other remedial steps or actions as may be specified by the Banking Mohtasib.
(2) The Banking Mohtasib may, in any case, he deems fit or proper, forward a report to the State Bank
recommending
(a) an inquiry, or the taking of the requisite steps or legal proceedings against a bank which has acted in
violation of banking laws, procedure, regulations or directives of the State Bank; and
(b) in the case of a bank in the public sector in cases of banking malpractices or corruption, nepotism or
gross and flagrant dereliction by bank officers of their duties and responsibilities, the initiation of such
action including a criminal prosecution or disciplinary proceedings as the State Bank may deem fit,
either by itself, or through filing a report with the Government of Pakistan.
(3) In no case whatsoever shall be Banking Mohtasib have the power to direct that loans, advances or
finances be given to a complainant.
(4)Any bank, or official of a bank, or a complainant aggrieved by any order passed by the Banking
Mohtasib may, within thirty days of the order, prefer an appeal to the Governor State Bank, who shall
decide the appeal within sixty days.
(5) The findings of Banking Mohtasib shall be implemented by the concerned bank or financial
institution within forty days and compliance thereof shall be submitted accordingly. In case an appeal
against the decision of the Banking Mohtasib is preferred to the Governor State Bank the aforesaid
period of forty days shall be reckoned from the date of decision of appeal.
(6) Any order passed by the Banking Mohtasib which has not been appealed against within a period of
thirty days from the date of order, or any order passed by the State Bank in appeal, as the case may be,
shall become final and operative and if not implemented shall render the bank concerned to such action
including the imposition of a fine or penalty as the State bank may deem fit, and in relation to a bank
officer, to the appropriate disciplinary or other proceedings.
(7) Nothing contained herein shall prevent a complainant from filing a suit against a bank in the event
his complaint is rejected.

Conclusion:
To conclude this can be said that a complaint can be launched against a bank under chapter IV-A of
Banking Companies Ordinance, 1962 before Banking Mohtasib relating to mark-up or interest rates
based on the ground of a violation of an agreement or corruption, nepotism or other forms of
maladministration.