PESHAWAR: Peshawar High Court has declared illegal and set aside orders of State Bank of Pakistan about revoking licence of a currency exchange company.

A bench consisting of Justice Syed Arshad Ali and Justice Qazi Jawad Ehsanullah accepted a petition filed by M/S Orient Exchange Company-B, which claimed that it had applied to SBP, seeking a no objection certificate (NOC) for conversion of the firm from Category-B to Category-A/full-fledged exchange company, but its application was declined and instead its existing licence was cancelled without citing any valid reason.

The bench directed the respondents including SBP to examine application of the petitioner for issuance of the NOC with regard to conversion of its company from Category-B to Category-A within a month.

“If in case, there are shortcomings and non-fulfilment of requirements, SBP has to specifically point it out to the petitioners and they be provided an opportunity of being heard. Thereafter, the matter shall be dealt with strictly in accordance with law,” the bench ordered.

Bench rules no specific reason given for taking such extreme step

Earlier, on Feb 26, 2025, the court had granted interim relief to the petitioner and suspended three impugned letters sent by the exchange policy department of SBP to the company on Dec 27, 2023, Feb 7 and Nov 29, 2024, regarding revocation of its licence, issued to it in 2004, and directed the company to stop its business activities.

A panel of lawyers comprising Barrister Qasim Wadud, Babar Khan Yousafzai and Walid Ahmad Jadoon appeared for the petitioner. They argued that revocation of licence was in violation of principles of natural justice, as no opportunity of hearing was offered to the petitioner prior to the impugned action.

They said that the petitioner consistently complied with “Fit and Proper Test” criteria prescribed under the exchange companies manual. They contended that SBP’s action was arbitrary, unlawful and lacked legal justification.

They stated that the petitioner, which was the only Category-B company in the province, was issued licence on June 30, 2004.

The bench ruled: “Examination of the record further unfolds that SBP has though declined the request of petitioner for grant of NOC but it has not given any specific reasons for taking such an extreme action against the company. All that it has been stated in the impugned order is that as if the company is not complying with regulatory requirements in terms of ‘Fit and Proper Test’ (FPT) criteria as prescribed in Chapter-3 of Exchange Companies Manual.”

“A perusal of the said manual and its Chapter-3 would reveal that there are multiple points on the basis of which SBP is to make an informed decision with regard to evaluation of a particular exchange company qua FPT criteria and failure of the company to comply with any single requirement as prescribed by the manual would entail either cancellation of its licence or refusal to give a fresh one,” the bench observed.

The bench ruled that the impugned order didn’t pinpoint with particularity as to which of the points or requirements as mentioned in the manual had not been fulfilled by the petitioner.

It said that general mention in the impugned order of the fact that the company was not fulfilling requirements of manual would not be sufficient compliance of law and legal requirement of specific reasons for taking such an extreme action.

The bench, in its 11-page detailed judgement authored by Justice Qazi Jawad, also referred to Section-24A of General Clauses Act observing that the provision made it abundantly clear that before passing any order, the authority, office or person making any such order had to give specific reasons for making the order.

It ruled that the impugned orders were in violation of Section-24A of General Clauses Act and those were liable to be struck down.

“It is also evident from the available record that in the entire episode, no opportunity of hearing has been provided to the petitioners/company and so his right so guaranteed by Article 10-A of the Constitution of Islamic Republic of Pakistan, 1973, has been infringed, therefore, the impugned action of SBP fails to withstand the test of judicial review on this score too,” the bench declared.

Published in Dawn, June 6th, 2025