Writ Petition No. 5591 of 2018 (Courts will not throw Arrows in the Dark)

Date of hearing: 12.06.2018
Court: Lahore High Court, Bahawalpur Bench, Bahawalpur.
Judges Present: Jawad Hassan, J.
Name: Writ Petition No. 5591 of 2018 (Muhammad Tuseef and 4 others vs. The State Bank of Pakistan and 30 others)
In this case the Honourable High Court disposed of two similar writ petitions (5591 of 2018 and 5639 of 2018) that were filed to restrain the respondents from recovering loans, obtained by the petitioners from two different Microfinance Banks, by adopting coercive measures in violation of the due course of law.
The cases revolved around the procedure to be followed for recovery of the loans obtained from the Microfinance Banks: the petitioners maintained that the procedure provided in the Financial Institutions (Recovery of Finances) Ordinance, 2001 (hereinafter the “Recovery Ordinance”) is to be applied in the present case, whereas the respondents claimed that a summary suit under Order XXXVII of the Code of Civil Procedure, 1908 (“CPC”) is the relevant legal avenue for recovery.
The Honorable Court, compared the definitions of ‘customer’ and ‘financial institution’ contained in the Recovery Ordinance with the definitions of ‘customer’, ‘microfinance services’ and ‘microfinance institutions’ contained in the Microfinance Institution Ordinance, 2001 (the “Microfinance Ordinance”).
In the light of this, the court found that the petitioners, having obtained “microfinance services” from “microfinance institutions” or “microfinance banks” do not fall under the definitions of “customer” provided in the Recovery Ordinance and the respondents being Microfinance Banks established under the Microfinance Ordinance 2001 do not fall under the scope of the Recovery Ordinance 2001.
The judgment went on to explain that, even if the definitions had not been so clearly worded, the case of the Petitioners would not have anyway fallen within the domain of the Recovery Ordinance as Section 3 of the Microfinance Ordinance explicitly bars the applicability of any law relating to the banking companies or financial institutions to microfinance institutions licensed under the Microfinance Ordinance. Section 3 further clarifies that microfinance institutions shall not be deemed to be banking companies.
Justice Jawad Hassan relied upon Syed Itrat Hussain Rizvi v. Tameer Micro Finance Bank Limited through Attorney and another (2018 CLD 116 [Sindh]), in which the Honourable Sindh High Court restrained the recovery of the loans obtained from the Microfinance Banks under the Recovery Ordinance and allowed such recovery through summary suit under Order XXXVII of CPC.
In the light of the above, it was held that the recoveries from the Petitioners of the loans obtained from the Microfinance Institutions cannot be made under the Recovery Ordinance through Banking Court. The proper legal avenue for recovery of the said loans is through summary suit under Order XXXVII of CPC.
Before dismissing both petitions Justice Hassan remarked that he was under the impression that they had been filed on the basis of mere apprehensions about any possible future action by the respondents, who had so far taken none. He said that “the issuance of directions to the Respondents as prayed for by the Petitioners would, at this stage, tantamount to throw arrows in the dark”.