ISLAMABAD: The Supreme Court has held that if the National Accountability Bureau (NAB) starts questioning arrangements for restructuring and rescheduling bank loans, it would undermine the State Bank of Pakistan’s (SBP) authority.

This would render any financial settlement meaningless, generate mistrust and erode the business community’s faith in the SBP, the Supreme Court said in a judgement on Wednesday. Justice Syed Mansoor Ali Shah wrote the judgement.

Such mistrust could be disastrous and result in destabilising the economy and would violate the fundamental right to trade and business, the judgement explained.

Justice Shah was a member of a three-judge bench which had taken up a number of appeals against an order given by the Sindh High Court (SHC) on July 9, 2019. Chief Justice of Pakistan Justice Umar Atta Bandial headed the bench.

Verdict issued on plea by a firm which reached debt swap deals worth Rs10.5bn with 22 institutions

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

The petitioners were the directors and shareholders of Messrs Azgard Nine Limited (ANL), a public limited company. The ANL had obtained loans from different financial institutions.

Upon default on the loans, the ANL entered into a debt swap agreement with 22 financial institutions and a restructuring agreement for Rs10.5 billion.

The National Bank of Pakistan (NBP) played a lead role by purchasing the shares of Messrs Agritech Ltd, a subsidiary of the ANL, at a price of Rs35 per share and adjusting the same against the outstanding ANL debt. The co-accused — senior NBP employees — oversaw the process of restructuring and rescheduling the ANL’s loans.

Multiple complaints were filed by Transparency International (TI) on the ground that the National Bank employees had misused their authority and bought the shares of M/s Agritech Ltd at a higher price of Rs35 against the original Rs13.47 per share. Thus they caused a loss of Rs3 billion to the national exchequer, the TI alleged.

Justice Shah observed that the legislative intent, purpose and objective behind enacting Sections 31-C and 31-D of the NAO was to ensure that banking and fiscal matters were conducted in line with the SBP’s directives.

The judgement said since conversion of the default into a viable financial arrangement between the parties was arrived at with the SBP’s blessing, it cannot be questioned, doubted or ignored unless the central bank so permitted.

No financial institution has come forward to oppose the petitioner’s contention, the court observed. “It is an admitted position that these agreements have been duly implemented, and liabilities settled, between the parties.”

The NAB’s prosecutor conceded that no permission of the SBP was ever sought and no such reference was made by the central bank’s governor, the judgement said.

The court held that no inquiry, investigation or proceedings could have been initiated against the petitioners without a reference from the central bank’s governor under Section 31-D of NAO.

Thus the proceedings initiated by NAB against the petitioners violate the provisions of Section 31-D and that filing of the reference against the petitioners was also without lawful authority, the judgement said.

It quashed all actions taken by NAB, including the inquiry, investigation and reference, as well as the proceedings pending before the accountability court.

However, the court allowed NAB to initiate fresh proceedings against the petitioners and the co-accused.

Published in Dawn, April 14th, 2022