The elaboration sub-section (4) of section 20 of the Financial Institutions (Recovery and Finances) Ordinance, 2001 and provisions of section 489-F of P.P.C. are placed side by side.

Section 489-F, P.P.C.

Section 20(4) of FI(R&F) Ord.

Whoever dishonestly issues a cheque towards repayment of a loan or fulfilment of an obligation which is dishonored on presentation shall be punishable with imprisonment which may extend to three years or with fine or with both unless he can establish for which the burden of proof shall rest on him that he had made arrangements with his bank to ensure that the cheque would be honored and that the bank was at fault in not honoring the cheque,

Whoever dishonestly issues a cheque towards repayment of a finance or fulfilment of an obligation which is dishonored on presentation shall be punishable with imprisonment which may extend to one year or with fine or with both unless he can establish for which the burden of proof shall rest on him that he had made arrangements with his bank to ensure that the cheque would be honored and that the bank was at fault in not honoring the cheque.

The reading of above two provisions of the above mentioned enactments shows that only two words have been changed in section 489-F. The word “loan” is substituted in the P.P.C. with word “finance”; similarly, punishment of one year is substituted with three years in P.P.C.

The rest of the language in both the enactments is verbatim. However, the objective to legislate section 20(4) of the Financial Institutions (Recovery and Finances) Ordinance, 2001 was different than objective to legislate section 489-F, P.P.C., but section 489-F, P.P.C. has not been legislated/ drafted differently.

The Financial Institutions (Recovery of Finances) Ordinance, 2001 came into existence in 2001 (XLVI 2001). The said Ordinance was enacted to repeal, and, with certain modifications, re-enact, the Banking Companies (Recovery of Loans, Advances, Credits and Finances) Act, 1997.

From the above, it is established that the object and reason for enacting the above laws was to provide the single forum to the Banks for the recovery of’ their loans from their customers and likewise to the customers to approach the same Court if they have any grievance against the banks. It also appears that the purpose of enacting the above mentioned laws was to provide speedy measures for the recovery of outstanding loans and finances. Under section 7 of the Financial Institutions (Recovery of Finances) Ordinance, 2001, a Banking Court is conferred criminal jurisdiction to try offences punishable under the said Ordinance, and for the purpose the same powers are vested as are vested in the Court of Session in the Court of Criminal Procedure, 1898. The Banking Court can take cognizance of any offence under the Ordinance upon a complaint in writing made by a person authorized in this behalf by the concerned Financial Institutions in respect of which the offence was committed. Therefore, whenever an offence is committed under section 20(4) of the Financial Institutions (Recovery of Finances) Ordinance, 2001, Banking Court shall take cognizance on a complaint filed by the authorized person and the complaint shall be tried by the concerned Banking Court. Appeal is provided before two Judges of the High Court under section 22 of the same Ordinance 2001.

On the other hand, under section 489-F, an F.I.R. is lodged with a concerned Police Station and after submission of final report, the jurisdiction of trial is conferred upon Magistrate of the First Class and appeal can be filed before the concerned Sessions Judge. Section 489-F, P.P.C. is attracted where an individual issues a cheque dishonestly in favour of another individual and the same is dishonored on presentation.

Therefore, the purpose of both enactments is different and the procedure for the prosecution is also different.

Banking laws relating to recovery, expressly or impliedly, envisage effect of issuance of cheque “dishonestly” or “inadvertently”. For example in MZ Corporation v. Messrs Sky Lines Printing Press, 1993 MLD 1764, the appellant had purchased some items of computer stationery from the respondent and issued a post-dated Cheque bearing 164673, dated 14-8-1998 drawn on Bank of Credit and Commerce International, for Rs. 14940, in favour of the respondent, thereafter, the date of the post-dated cheque was further extended but when the cheque was presented by the respondent to the Bank, the same was dishonoured with the remarks, “the payment stopped by drawer”. The respondent intimated the same to the appellant but the latter failed to make the payment and under such circumstances, the suit was filed by the respondent against the appellants before the learned trial Court. The trial Court as well as the Appellate Court refused to accept the defence of the appellant as dishonesty on his part was established in the above stated facts. It may be pointed out that the above case/appeal was filed under Banking Companies (Recovery of Loans) Ordinance, 1979 which was substituted by the Banking Companies (Recovery of Loans, Advances, Credits and Finances) Act, 1997 which was further substituted by existing enactment i.e. Financial Institutions (Recovery of Finances) Ordinance, 2001. Therefore, the above mentioned finding of of Karachi High Court is relevant and applicable to the interpretation of section 20(4) of the Financial Institution (Recovery of Finances) Ordinance, 2001.

In another case, relating to recovery of Agricultural Development Bank under the Agricultural Development Bank Ordinance, 1961, the learned Judge observed as under:–

“No doubt, subsection (2) of section 25 supra, empowers the bank to recover all sums due, which include the principal amount of loan and interest accruing thereon, as arrears of land revenue but it cannot straightway resort to the coercive measures of arrest and detention.

The above mentioned two cases indicate that, “the drawer should be given an opportunity to clear his liability or to ensure that the dishonoured cheque was issued dishonestly”. Other means should be resorted to, before application of coercive measures including registration of an F.I.R. etc. Since the language of 489-F has been lifted from the Banking Laws mentioned above, precautions, interpretations and considerations provided and applied in the above laws should also be followed while dealing with cases registered under section 489-F, P.P.C

NOTE

This information provided in the article do not constitute legal advice and are not intended by the author.

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