LAHORE, Feb 24: The privatization of Habib Bank has been challenged in the Lahore High Court on the grounds that it was sold at a throwaway price and the proceeds received were drastically below its assets.

Through an auction on Dec 29, 2003, Habib Bank's 51 per cent shares were given to the Aga Khan Fund for Economic Development (AGFED) on a bid of Rs22.4 billion.

A resident of Gulberg, Tasneem Shaukat Khan submitted in his petition that the sale was collusive and mala fide in view of the fact that the previous government rejected an offer by a Canadian group as high as Rs60 billion.

The privatization of the bank should have fetched an amount ranging between Rs80 and Rs100 million because of its network - more than 1,425 branches in Pakistan and 26 other countries - and deposits amounting to Rs400 billion.

Mr Khan sought a court injunction against the bank's sale which he pleaded was illegal, unconstitutional and lacked transparency. He also prayed for staying the transfer of the bank to the AGFED.

The bank was sold without a foreign pressure for retirement of debts. Besides, a better option was available to the government for its poverty alleviation programme and retirement of expensive foreign loans in the form of floating the bank's shares in the capital market like the successful experience in the cases of the National Bank, the Oil and Gas Development Corporation and the Sui Southern Gas Pipelines Ltd.

Opposing the sale, the petitioner submitted that a fresh financial assistance of Rs18 billion was pumped in HBL's capital by the State Bank in December 2003. The government authorized the transfer of the bank's bad debts worth Rs9 billion to the Corporate and Industrial Restructuring Corporation a week before the sale.

Similarly, the government also floated the Euro Bond and issued another Rs9 billion to cover the tax liability of the Central Board of Revenue. The sale of the bank was part of a conspiracy to weaken Pakistan internally and externally and had a connotation similar to the destruction of the BCCI, the petitioner submitted.