KARACHI, July 21: The Sindh High Court, while disposing of a reference by the Nazir of the court pertaining to encashment of bank guarantees after the stipulated time frame, directed that “Nazir is obliged to encash such bank guarantees.”
A division bench, comprising Justice Sabihuddin Ahmed and Justice Ali Aslam Jaferi, passed the order in the Al-Murtaza Garment Machinery Co Vs the Federation, CBR and a collector of customs.
The petitioner was represented by Saeed, advocate. Shakeel Ahmed, advocate, represented the respondents.
In this petition interim relief was granted to the petitioner by an order dated October 20, 1998, allowing them to obtain delivery of the goods upon payment of the customs duty to the extent of the admitted amount and furnishing bank guarantee for the amount that was disputed.
For some reason, final hearing of the petition could not take place, and Shakeel Ahmad, advocate, moved an application before the Nazir in September 2001 contending that bank guarantee should be enacted after six months of the passing of the interim order.
The Nazir, who was present in the court, apparently felt some doubts as to his obligation to grant the application because, according to him, the encashment of the bank guarantee could have amounted to grant of the petition. He had, therefore, made a detailed reference seeking clarification, wherein the cases cited on behalf of the respondent, ie, Zahoor Textile Mill Vs the Federation of Pakistan (PLD 1999 SC 880) and Agro Pack (Pvt) Limited Vs Collector of Customs (1998 SCMR 2624) were also mentioned.
The Nazir of the court, in his reference, had submitted that Shakeel Ahmed, counsel for the respondent No 3, had filed application for encashment of bank guarantee on the ground that more than six months had expired after the passing of stay order and in terms of article 199-4 (A) of the constitution.
It was contended that in pursuance of the judgment passed by the Supreme Court in case of M/s Zahoor Textile Mills Ltd, Vs the Federation of Pakistan, the stay order should cease to have effect on the expiration of a period of six months following the date on which it was made. Therefore, the bank guarantee should be encashed and the amount thereof be paid to the respondent No 3.
Shakeel Ahmed, counsel for the respondent No 5, also relied upon the judgment in Civil Petition No 660/1998 titled as M/s AGRO Pack Pvt Ltd Vs The Collector of Customs, Peshawar, passed by the Supreme Court, wherein it was held by the apex court that interim relief granted during pendency of a constitutional petition, even otherwise, had ceased to be operative after expiry of six months in terms of article 199 (4-A) of the constitution. No impediment, thus, existed in encashment of bank guarantees for effecting recovery with regards to liabilities secured against such guarantees.
Thus in view of this legal position both the orders granted stay were set aside and the appellants are directed to encash the bank guarantee as per its terms. The petition stood disposed of, the court ordered.
The Nazir, in his reference, had stated that so far the order dated October 20, 1998 was concerned, it was passed on the application of Misc. 4208/98. While disposing the said application it was ordered to remove the disputed consignment by the petitioner on payment of customs duty and furnishing of the bank guarantee. On the application no order for stay was passed.
The court in its order held that “the legal position, in our view, is clear in terms of the provisions of the constitution and the pronouncement of the Honourable Supreme Court in Zahoor Textile Mill’s case, cited above, and interim order relating to assessment of collection of public revenue is only effective for a period of six months from the date it was passed and thereafter ceasing to have effect by afflux of time. The court has no jurisdiction to extend the operation of such interim order.
“In Agro Pack’s case their Lordships specifically held that a bank guarantee furnished pursuant to an order of an interim relief become encashable immediately after the expiry of the six month’s period laid down for duration of interim order,” the court said.
It, therefore, held that the Nazir was obliged to encash such bank guarantees, including the present one.
Athar Saeed, however, complained that the petition could not be heard within six months of the interim order because of frequent adjournments sought by the respondents. He further complained that even if the petition was to be subsequently allowed the petitioner would face innumerable difficulties in recovering the amount withdrawn by the respondents.
The court noticed that on the last date, ie, 11-04-2002 adjournment was granted at the request of learned counsel for the respondent, though on earlier occasion it had been granted either by consent or at the request of Athar Saeed himself. Nevertheless, in the interest of justice the court ordered that “in case this petition is eventually allowed the respondent will return the amount encashed within 30 days of the judgment. The reference was thus disposed of.
By consent the petition was fixed for regular hearing on Aug 13.