THE FINANCIAL INSTITUTIONS (RECOVERY OF FINANCES)

ORDINANCE, 2001
ORDINANCE NO. XLVI OF 2001
AN ORDINANCE

to repeal, and, with certain modifications, re-enact, the Banking

Companies (Recovery of Loans, Advances, Credits and Finances)
Act, 1997.

WHEREAS it is expedient to repeal and with certain modifications,

re-enact the Banking Companies (Recovery of Loans, Advances,
Credits and Finances) Act, 1997, for the purposes hereinafter
appearing;

AND WHEREAS the President is satisfied that circumstances exist

which render it necessary to take immediate action;

NOW, THEREFORE, in pursuance of the Proclamation of

Emergency of the fourteenth day of October, 1999 and Provisional
Constitution Order No. 1 of 1999, read with the Provisional
Constitution (Amendment) Order No. 9 of 1999, and in exercise of
all powers enabling him in that behalf, the President of the Islamic
Republic of Pakistan is pleased to make and promulgate the
following Ordinance:-
Short title, extent and commencement.- (1) This Ordinance
may be called the Financial Institutions (Recovery of Finances)
Ordinance, 2001.
(2) It extends to the whole of Pakistan.
(3) It shall come into force at once.

2. Definitions.- In this Ordinance, unless there is anything

repugnant in the subject or context

a) "financial institution" means and includes 

(i) any company whether incorporated within or outside
Pakistan which transacts the business of banking or any associated
or ancillary business in Pakistan through its branches within or
outside Pakistan and includes a government savings bank, but
excludes the State Bank of Pakistan;
(ii) a modaraba or modaraba management company, leasing
company, investment bank, venture capital company, financing
company, unit trust or mutual fund of any kind and credit or
investment institution, corporation or company; and
(iii) any company authorised by law to carry on any similar
business, as the Federal Government may by notification in the
official Gazette, specify;

b) "Banking Court" means 

(i) in respect of a case in which the claim does not exceed fifty
million rupees or for the trial of offences under this Ordinance, the
Court established under section 5; and
(ii) in respect of any other case, the High Court.

(c) "customer" means a person to whom finance has been

extended by a financial institution and includes a person on
whose behalf a guarantee or letter of credit has been issued by a
financial institution as well as a surety or an indemnifier;

(d) "finance" includes 

(i) an accommodation or facility provided on the basis of
participation in profit and loss, mark-up or mark-down in price,
hire-purchase, equity support, lease, rent-sharing, licensing charge
or fee of any kind, purchase and sale of any property including
commodities, patents, designs, trade marks and copy-rights, bills
of exchange, promissory notes or other instruments with or
without buy-back arrangement by a seller, participation term
certificate, musharika, morabaha, musawama, istisnah or
modaraba certificate, term finance certificate;
(ii) facility of credit or charge cards;
(iii) facility of guarantees, indemnities, letters of credit or any
other financial engagement which a financial institution may give,
issue or undertake on behalf of a customer, with a corresponding
obligation by the customer to the financial institution;
(iv) a loan, advance, cash credit, overdraft, packing credit, a bill
discounted and purchased or any other financial accommodation
provided by a financial institution to a customer;
(v) a benami loan or facility that is, a loan or facility the real
beneficiary or recipient whereof is a person other than the person
in whose name the loan or facility is advanced or granted;
(vi) any amount due from a customer to a financial institution
under a decree passed by a Civil Court or an award given by an
arbitrator;
(vii) any amount due from a customer to a financial institution
which is the subject matter of any pending suit, appeal or revision
before any Court;
(viii) any other facility availed by a customer from a financial
institution.
(e) “obligation” includes 
(i) any agreement for the repayment or extension of time in
repayment of a finance or for its restructuring or renewal or for
payment or extension of time in payment of any other amounts
relating to a finance or liquidated damages; and
(ii) any and all representations, warranties and covenants
made by or on behalf of the customer to a financial institution at
any stage, including representations, warranties and covenants
with regard to the ownership, mortgage, pledge, hypothecation or
assignment of, or other charge on, assets or properties or
repayment of a finance or payment of any other amounts relating
to a finance or performance of an undertaking or fulfillment of a
promise; and
(iii) all duties imposed on the customer under this Ordinance;
and
(f) "rules" means rules made under this Ordinance.

3. Duty of a customer.-
(1) It shall be the duty of a customer to fulfil his obligations to
the financial institution.
(2) Where the customer defaults in the discharge of his
obligation, he shall be liable to pay, for the period from the date
of his default till realization of the cost of funds of the financial
institution as certified by the State Bank of Pakistan from time to
time, apart from such other civil and criminal liabilities that he
may incur under the contract or rules or any other law for the
time being in force.
(3) For purposes of this section a judgment against a customer
under this Ordinance shall mean that he is in default of his duty
under sub-section (1), and the ensuing decree shall provide for
payment of the cost of funds as determined under sub-section
(2).

4. Ordinance to override other laws.- The provisions of this

Ordinance shall have effect notwithstanding anything inconsistent
therewith contained in any other law for the time being in force.

5. Establishment of Banking Court.-

(1) The Federal Government may, by notification in the Official
Gazette, establish as many Banking Courts as it considers
necessary to exercise jurisdiction under this Ordinance and appoint
a Judge for each of such Courts and where it establishes more
Banking Courts than one, it shall specify in the notification the
territorial limits within which each of the Banking Courts shall
exercise its jurisdiction.
(2) Where more Banking Courts than one have been established
to exercise jurisdiction in the same territorial limits, the Federal
Government shall define the territorial limits of each such Court.
(3) Where more Banking Courts than one have been established
in the same or different territorial limits, the High Court may, if it
considers it expedient to do so in the interest of justice or for the
convenience of the parties or of the witnesses, transfer any case
from one Banking Court to another.
(4) A Judge of a Banking Court shall be appointed by the Federal
Government after consultation with the Chief Justice of the High
Court of the Province in which the Banking Court is established and
no person shall be appointed a Judge of a Banking Court unless he
has been a Judge of a High Court or is or has been a District
Judge.
(5) A Banking Court shall hold its sitting at such places within its
territorial jurisdiction as may be determined by the Federal
Government.
(6) A Judge of a Banking Court, not being a District Judge, shall
be appointed for a term of three years from the date on which he
enters upon his office.
(7) The salary, allowances and other terms and conditions of
service of a person appointed as a Judge of a Banking Court shall
ϕ
be such as the Federal Government may determine
(8) The Banking Court may, if it so requires, be assisted in
technical aspects of banking transactions involved in any case by
an amicus curiae who has at least ten years experience of banking
at a senior management level in a financial institution of repute or
the State Bank of Pakistan and has the following qualifications,
namely:-
(i) a degree in Commerce and Account or in Economics; or
(ii) a degree in Business Administration; or
(iii) has completed a course in banking from the Institute of
Bankers, Pakistan.
(9) Remuneration of the amicus curiae, and the party or parties
by whom it will be payable, will be determined by the Banking
Court, keeping in view the circumstances of each case.

6. Resignation and removal of Judges.-

(1) A person, not being a District Judge, appointed as a Judge of a
Banking Court under section 5 may, by notice in writing under his
hand addressed to the Federal Government, resign from his office.
(2) A person appointed as a Judge of a Banking Court under
section 5 may be removed from office in consultation with the
Chief Justice of the High Court.

7. Powers of Banking Courts.-

j
(1) Subject to the provisions of this Ordinance, a Banking Court
shall
(a) in the exercise of its civil jurisdiction have all the powers
vested in a civil Court under the Code of Civil Procedure, 1908 (Act
V of 1908);
(b) in the exercise of its criminal jurisdiction, try offences
punishable under this Ordinance and shall, for this purpose have
the same powers as are vested in a Court of Sessions under the
Code of Criminal Procedure, 1898 (Act V of 1898):

Provided that a Banking Court shall not take cognizance of any

offence punishable under this Ordinance except upon a complaint
in writing made by a person authorized in this behalf by the
financial institution in respect of which the offence was committed.

(2) A Banking Court shall in all matters with respect to which the
procedure has not been provided for in this Ordinance, follow the
procedure laid down in the Code of Civil Procedure, 1908 (Act V of
1908), and the Code of Criminal Procedure, 1898 (Act V of 1898).
(3) All proceedings before a Banking Court shall be deemed to be
judicial proceedings within the meaning or sections 193 and 228 of
the Pakistan Penal Code (Act XLV of 1860), and a Banking Court
shall be deemed to be a Court for purposes of the Code of Criminal
Procedure, 1898 (Act V of 1898).
(4) Subject to sub-section (5), no Court other than a Banking
Court shall have or exercise any jurisdiction with respect to any
matter to which the jurisdiction of a Banking Court extends under
this Ordinance, including a decision as to the existence or
otherwise of a finance and the execution of a decree passed by a
Banking Court.
(5) Nothing in sub-section (4) shall be deemed to affect 
(a) the right of a financial institution to seek any remedy before
any Court or otherwise that may be available to it under the law
by which the financial institution may have been established; or
(b) the powers of the financial institution, or jurisdiction of any
Court such as is referred to in clause (a); or
require the transfer to a Banking Court of any proceedings pending
before any financial institution or such Court immediately before
the coming into force of this Ordinance.
(6) All proceedings pending in any Banking Court constituted
under the Banking Companies (Recovery of Loans, Advances,
Credits or Finances) Act, 1997 (XV of 1997), including suits for
recovery of “loans” as defined under that Act shall stand
transferred to, or be deemed to be transferred to, and heard and
disposed of by, the Banking Court having jurisdiction under this
Ordinance. On transfer of proceedings under this sub-section, the
parties shall appear before the Banking Court concerned on the
date previously fixed.
(7) In respect of proceedings transferred to a Banking Court
under subsection (6), the Banking Court shall proceed from the
stage which the proceedings had reached immediately prior to the
transfer and shall not be bound to recall and re-hear any witness
and may act on the evidence already recorded or produced before
the Court from which the proceedings were transferred.
8. Suit for recovery of written off finances, etc.-
(1) Subject to sub-section (2), and notwithstanding anything
contained in the Limitation Act, 1908 (IX of 1908) or any other
law, a financial institution may, within three years from the date of
coming into force of this Ordinance, file a suit for the recovery of
any amount written off, released or adjusted under any
agreement, contract, or consent, including a compromise or
withdrawal of any suit or legal proceedings or adjustment of a
decree between a financial institution and a customer on any day
on or after the first day of January, 1990 and before the coming
into force of this Ordinance, if it can establish that the amount was
written off, released or adjusted for political reasons or
considerations other than bona fide business considerations.
(2) No suit under sub section (1) shall be filed unless its filing has
been approved by
(a) the Board of Directors, in the case of a financial institution
incorporated within Pakistan,
(b) or the chief executive (by whatever name called or
designated) of the financial institution in Pakistan, in the case of a
financial institution incorporated outside Pakistan.

9. Procedure of Banking Courts.-

(1) Where a customer or a financial institution commits a default in
fulfillment of any obligation with regard to any finance, the
financial institution or, as the case may be, the customer, may
institute a suit in the Banking Court by presenting a plaint which
shall be verified on oath, in the case of a financial institution by the
Branch Manager or such other officer of the financial institution as
may be duly authorized in this behalf by power of attorney or
otherwise.
(2) The plaint shall be supported by a statement of account
which in the case of a financial institution shall be duly certified
under the Bankers Books Evidence Act, 1891 (XVII of 1891), and
all other relevant documents relating to the grant of finance.
Copies of the plaint, statement of account and other relevant
documents shall be filed with the Banking Court in sufficient
numbers so that there is one set of copies for each defendant and
one extra copy.
(3) The plaint, in the case of a suit for recovery instituted by a
financial institution, shall specifically state 
(a) the amount of finance availed by the defendant from the
financial institution;
(b) the amounts paid by the defendant to the financial institution
and the dates of payment; and
(c) the amount of finance and other amounts relating to the
finance payable by the defendant to the financial institution upto
the date of institution of the suit.
(4) The provisions of section 10 of the Code of Civil Procedure,
1908 (Act V of 1908), shall have no application for and in relation
to suits filed hereunder.
(5) On a plaint being presented to the Banking Court, a summons
in Form No. 4 in Appendix 'B' to the Code of Civil Procedure, 1908
(Act V of 1908) or in such other form as may, from time to time,
be prescribed by rules, shall be served on the defendant through
the bailiff or process-server of the Banking Court, by registered
post acknowledgement due, by courier and by publication in one
English language and one Urdu language daily newspaper, and
service duly effected in any one of the aforesaid modes shall be
deemed to be valid service for purposes of this Ordinance. In the
case of service of the summons through the bailiff or process-
server, a copy of the plaint shall be attached therewith and in all
other cases the defendant shall be entitled to obtain a copy of the
plaint from the office of the Banking Court without making a
written application but against due acknowledgement. The Banking
Court shall ensure that the publication of summons takes place in
newspapers with a wide circulation within its territorial limits.

10. Leave to defend.-

(1) In any case in which the summons has been served on the
defendant as provided for in sub-section (5) of section 9, the
defendant shall not be entitled to defend the suit unless he obtains
leave from the Banking Court as hereinafter provided to defend
the same; and, in default of his doing so, the allegations of fact in
the plaint shall be deemed to be admitted and the Banking Court
may pass a decree in favour of the plaintiff on the basis thereof or
such other material as the Banking Court may require in the
interests of justice.
(2) The defendant shall file the application for leave to defend
within thirty days of the date of first service by any one of the
modes laid down in sub-section (5) of section 9:-
Provided that where service has been validly effected only through
publication in the newspapers, the Banking Court may extend the
time for filing an application for leave to defend if satisfied that the
defendant did not have knowledge thereof.
(3) The application for leave to defend shall be in the form of a
written statement, and shall contain a summary of the
substantial questions of law as well as fact in respect of which, in
the opinion of the defendant, evidence needs to be recorded.
(4) In the case of a suit for recovery instituted by a financial
institution the application for leave to defend shall also
specifically state the following 
(a) the amount of finance availed by the defendant from the
financial institution; the amounts paid by the defendant to the
financial institution and the dates of payments;
(b) the amount of finance and other amounts relating to the
finance payable by the defendant to the financial institution upto
the date of institution of the suit;
(c) the amount if any which the defendant disputes as payable
to the financial institution and facts in support thereof:

Explanation.- For the purposes of clause (b) any payment made

to a financial institution by a customer in respect of a finance shall
be appropriated first against other amounts relating to the finance
and the balance, if any, against the principal amount of the
finance.
(5) The application for leave to defend shall be accompanied by
all the documents which, in the opinion of the defendant, support
the substantial questions of law or fact raised by him.
(6) An application for leave to defend which does not comply
with the requirements of sub-sections (3), (4) where applicable
and (5) shall be rejected, unless the defendant discloses therein
sufficient cause for his inability to comply with any such
requirement.
(7) The plaintiff shall be given an opportunity of filing a reply to
the application for leave to defend, in the form of a replication.
(8) Subject to section 11, the Banking Court shall grant the
defendant leave to defend the suit if on consideration of the
contents of the plaint, the application for leave to defend and the
reply thereto it is of the view that substantial questions of law or
fact have been raised in respect of which evidence needs to be
recorded.
(9) In granting leave under sub-section (8), the Banking Court
may impose such conditions as it may deem appropriate in the
circumstances of the case, including conditions as to deposit of
cash or furnishing of security.
(10) Where the application for leave to defend is accepted, the
Banking Court shall treat the application as a written statement,
and in its order granting leave shall frame issues relating to the
substantial questions of law or fact, and, subject to fulfillment of
any conditions attached to grant of leave, fix a date for recording
of evidence thereon and disposal of the suit.
(11) Where the application for leave to defend is rejected or
where a defendant fails to fulfill the conditions attached to the
grant of leave to defend, the Banking Court shall forthwith
proceed to pass judgment and decree in favour of the plaintiff
against the defendant.
(12) Where an application for leave to defend has been filed
before the coming into force of this Ordinance, the defendant
shall be allowed a period of twenty-one days from the date of
coming into force of this Ordinance, or from the date of first
hearing thereafter, whichever is later, for filing an amended
application for leave to defend in accordance with the provisions
of this Ordinance.

11. Interim Decree.-

(1) If the Banking Court on a consideration of the contents of the
plaint, the application for leave to defend of the defendant and the
reply thereto, is of the opinion that the dispute between the
parties does not extend to the whole of the claim, or that part of
the claim is either undisputed, or is clearly due, or that the dispute
is mainly limited to a part of the principal amount of the finance or
to any other amounts relating to the finance, it shall, while
granting leave and framing issues with respect to the disputed
amounts, pass an interim decree in respect of that part of the
claim which relates to the principal amount and which appears to
be payable by the defendant to the plaintiff.
(2) The interim decree passed under sub-section (1) shall, for
all purposes including appeal and execution, be deemed to be a
decree passed under this Ordinance, and any amount covered
thereby or recovered in execution thereof shall be adjusted at the
time of the final decree:

Provided that it shall be open to the Banking Court

notwithstanding the pendency of any appeal, to modify, in part or
in whole, or reverse, the terms of the interim decree at the time of
the final disposal of the suit and pass such order as it may deem
just and proper:
Provided further that neither the Banking Court nor the High Court
acting under sub-section (3) of section 22 shall stay execution of
an interim decree unless the judgment-debtor deposits in cash
with the Banking Court the amount or amounts admitted by the
judgment-debtor to be payable to the financial institution under
clause (c) of sub-section (4) of section 10, and furnishes security
for the balance decretal amount if any, inclusive, in the case of a
suit filed by a financial institution, of cost of funds determined
under section 3, and other costs.

12.Power to set aside decree.- In any case in which a decree is

passed against a defendant under sub-section (1) of section 10 he
may, within twenty-one days of the date of the decree, or where
the summons was not duly served when he has knowledge of the
decree, apply to the Banking Court for an order to set it aside; and
if he satisfies the Banking Court that he was prevented by
sufficient cause from making an application under section 10, or
that the summons was not duly served, the Court shall make an
order setting aside the decree against him upon such terms as to
costs, deposit in cash or furnishing of security or otherwise as it
thinks fit and allow him to make the application within ten days of
the order.

13. Disposal of suit.- (1) A suit in which leave to defend has

been granted to the defendant shall be disposed of within ninety
days from the day on which leave was granted, and in case
proceedings continue beyond the said period the defendant may
be required to furnish security in such amount as the Banking
Court deems fit, and on the failure of the defendant to furnish such
security, the Banking Court shall pass an interim or final decree in
such amount as it may deem appropriate.
(2) The requirement of furnishing security under sub-section (1)
shall be dispensed with if, in the opinion of the Banking Court,
the delay is not attributable to the conduct of the defendant.
(3) Suits before a Banking Court shall come up for regular
hearing as expeditiously as possible and except in extraordinary
circumstances and for reasons to be recorded, a Banking Court
shall not allow adjournments for more than seven days.
(4) Where leave to defend is granted and evidence is to be
recorded, the parties may file affidavits in respect of the
examination-in-chief of any witness who is not to be summoned
through the Banking Court, and where such affidavits are filed,
the Banking Court shall give notice thereof to the other
contesting parties and on the date fixed for recording evidence,
shall, subject to such modification as may be required for
purposes of production and exhibiting of documents, or otherwise
in accordance with law, treat the affidavit as examination-in-chief
and allow the contesting parties an opportunity for cross-
examination on the basis thereof.

14.Decree in suits relating to mortgages.- Where the suit

filed by a financial institution before the Banking Court is for the
enforcement of a mortgage of immovable property the Banking
Court will not be required to pass a preliminary decree as
provided in Order XXXIV of the First Schedule to the Code of Civil
Procedure, 1908 (Act V of 1908), but shall directly pass an
interim or final decree for foreclosure or sale.

15. Sale of mortgaged property.- (1) In this section, unless

there is anything repugnant in the subject or context 
(a) “mortgage” means the transfer of an interest in specific
immovable property for the purpose of securing the payment of
the mortgage money or the performance of an obligation which
may give rise to a pecuniary liability;
(b) “mortgage money” means any finance or other amounts
relating to a finance, penalties, damages, charges or pecuniary
liabilities, payment of which is secured for the time being by the
document by which the mortgage is effected or evidenced,
including any mortgage deed or memorandum of deposit of title
deeds; and
(c) “mortgaged property” means immovable property
mortgaged to a financial institution.
(2) In case of default in payment by a customer, the financial
institution may send a notice on the mortgagor demanding
payment of the mortgage money outstanding within fourteen
days from service of the notice, and failing payment of the
amount within due date, it shall send a second notice of demand
for payment of the amount within fourteen days. In case the
customer on the due date given in the second notice sent,
continues to default in payment, financial institution shall serve a
final notice on the mortgager demanding the payment of the
mortgage money outstanding within thirty days from service of
the final notice on the customer.
(3) When a financial institution serves a notice of demand, all
the powers of the mortgagor in regard to recovery of rents and
profits from the final mortgaged property shall stand transferred
to the financial institution until such notice is withdrawn and it
shall be the duty of the mortgagor to pay all rents and profits
from the mortgaged property to the financial institution.
Provided that where the mortgaged property is in the possession
of any tenant or occupier other than the mortgagor, it shall be
the duty of such tenant or occupier, on receipt of notice in this
behalf from the financial institution, to pay the rent or lease
money or other consideration agreed with the mortgagor to the
financial institution.
(4) Where a mortgagor fails to pay the amount as demanded
within the period prescribed under sub-section (2), and after the
due date given in the final notice has expired, the financial
institution may, without the intervention of any Court, sell the
mortgaged property or any part thereof by public auction and
appropriate the proceeds thereof towards total or partial
satisfaction of the outstanding mortgage money:

Provided that before exercise of its powers under this sub-

section, the financial institution shall cause to be published a
notice in one reputable English daily newspaper with wide
circulation and one Urdu daily newspaper in the Province in which
the mortgaged property is situated, specifying particulars of the
mortgaged property, including name and address of the
mortgagor, details of the mortgaged property, amount of
outstanding mortgage money, and indicating the intention of the
financial institution to sell the mortgaged property. The financial
institution shall also send such notices to all persons who, to the
knowledge of the financial institution, have an interest in the
mortgaged property as mortgagees.
(5) The financial institution shall be entitled, in its discretion, to
participate in the public auction, and to purchase the mortgaged
property at the highest bid obtained in the public auction.
(6) Where the mortgagor or his agent or servant or any person
put in possession by the mortgagor or on account of the
mortgagor does not voluntarily give possession of the mortgaged
property sought to be sold or sought to be purchased or
purchased by the financial institution, a Banking Court on
application of the financial institution or purchaser shall put the
financial institution or purchaser, as the case may be, in
possession of the mortgaged property in any manner deemed fit
by it:

Provided that the Banking Court may not order eviction of a

person who is in occupation of the mortgaged property or any
part thereof under a bona fide lease, except on expiry of the
period of the lease, or on payment of such compensation as may
be agreed between the parties or as may be determined to be
reasonable by the Banking Court.

Explanation.- (1) Where the lease is created after the date of

the mortgage and it appears to the Banking Court that the lease
was created so as to adversely affect the value of the mortgaged
property or to prejudice the rights and remedies of the financial
institution, it shall be presumed that the lease is not bona fide,
unless proved otherwise.

(7) For purposes of execution and registration of the sale deed

in respect of the mortgaged property, the financial institution
shall be deemed to be the duly authorized attorney of the
mortgagor and a sale deed executed and presented for
registration by duly authorized attorneys of the financial
institution shall be accepted for such purposes by the Registrar
and Sub-Registrar under the Registration Act, 1908 (XVI of
1908).
(8) Upon execution and registration of the sale deed of the
mortgaged property in favor of the purchaser all rights in such
mortgaged property shall vest in the purchaser free from all
encumbrances and the mortgagor shall be divested of any right,
title and interest in the mortgaged property.
(9) Net sale proceeds of the mortgaged property, after
deducting all expenses of sale or expenses incurred in any
attempted sale, shall be distributed ratably amongst all
mortgagees in accordance with their respective rights and
priorities in the mortgaged property. Any surplus left, after
paying in full all the dues of mortgagees, shall be paid to the
mortgagor.
(10) A financial institution which has sold mortgaged property in
exercise of powers conferred herein shall file proper accounts of
the sale proceeds in a Banking Court within thirty days of the
sale.
(11) All disputes relating to the sale of the mortgaged property
under this section including disputes amongst mortgagees in
respect of distribution of the sale proceeds, shall be decided by
the Banking Court.
(12) Neither the Banking Court nor the High Court shall grant an
injunction restraining the sale or proposed sale of mortgaged
property unless 
(a) it is satisfied that no mortgage in respect of the immovable
property has been created; or
(b) all moneys secured by mortgage of the mortgaged property
have been paid; or
(c) the mortgagor or objector deposits in the Banking Court in
cash the outstanding mortgage money.
(13) The rights and remedies provided under this section are in
addition to, and not in lieu of, any other rights or remedies a
financial institution may have under this Ordinance.
(14) The provisions contained in this section shall have effect
notwithstanding anything contained in this Ordinance.

16. Attachment before judgment, injunction and

appointment of Receivers.- (1) Where the suit filed by
a financial institution is for the recovery of any amount through
the sale of any property which is mortgaged, pledged,
hypothecated, assigned, or otherwise charged or which is the
subject of any obligation in favour of the financial institution as
security for finance or for or in relation to a finance lease, the
Banking Court may, on application by the financial institution,
with a view to preventing such property from being transferred,
alienated, encumbered, wasted or otherwise dealt with in a
manner which is likely to impair or prejudice the security in
favour of the financial institution, or otherwise in the interest of
justice 
(a) restrain the customer and any other concerned person from
transferring, alienating, parting with possession or otherwise
encumbering, charging, disposing or dealing with the property in
any manner;
(b) attach such property;
(c) transfer possession of such property to the financial
institution; or
(d) appoint one or more Receivers of such property on such
terms and conditions as it may deem fit.
(2) An order under sub-section (1) may also be passed by the
Banking Court in respect of any property held benami in the
name of an ostensible owner whether acquired before or after
the grant of finance by the financial institution.
(3) In cases where a customer has obtained property or
financing through a finance lease, or has executed an agreement
in connection with a mortgage, charge or pledge in terms
whereof the financial institution is authorized to recover or take
over possession of the property without filing a suit, the financial
institution may, at its option:
(a) directly recover the same if the property is movable; or
(b) file a suit hereunder and the Banking Court may pass an
order at any time, either authorising the financial institution to
recover the property directly or with the assistance of the Court:
Provided that in the event the financial institution wrongly or
unjustifiably exercises the direct power of recovery hereunder it
shall be liable to pay such compensation to the customer as may
be adjudged by the Banking Court in summary proceedings to be
initiated on the application of the customer and concluded in
thirty days.
(4) Nothing in sub-sections (1) to (3) shall affect the powers of
the Banking Court under Order XXXVIII Rules 5 and 6 of the
Code of Civil Procedure, 1908 (Act V of 1908) to attach before
judgment any property other than property mentioned in sub-
section (1).
17. Final Decree.- (1) The final decree passed by a Banking
Court shall provide for payment from the date of default of the
amounts found to be payable on account of the default in
fulfillment of the obligation, and for costs including, in the case of
a suit filed by a financial institution cost of funds determined
under section 3.
(2) The Banking Court may, at the time of passing a final decree,
also pass an order of the nature contemplated by sub-section (1)
of section 16 to the extent of the decretal amount.

18. Banking Documents.-(1) No financial institution shall

obtain the signature of a customer on banking document which
contains blanks in respect of important particulars including the
date, the amount, the property or the period of time in question;
(2) Finance agreements executed by or on behalf of a financial
institution and a customer shall be duly attested in the manner
laid down in Article 17 of the Qanun-e-Shahadat Order, 1984
(P.O. 10 of 1984);
(3) Nothing contained in sub-section (1) and (2) shall affect the
validity of any document executed prior to the date of
enforcement of this Ordinance;
(4) Notwithstanding any thing contained in this section or any
other law, the Banking Court shall not refuse to accept in
evidence any document creating or purporting to create or
indicating the creation of a mortgage, charge, pledge or
hypothecation in relation to any property or assumption of any
obligation by a customer, guarantor, mortgagor or otherwise
merely because it is not duly stamped or is not registered as
required by any law or is not attested or witnessed as required
by Article 17 of the Qanun-e-Shahadat Ordinance, 1984 (P.O. 10
of 1984) and no such document shall be impoundable by the
Banking Court or any other Court or authority:

Provided that nothing contained in this sub-section shall operate

to defeat the legal rights of a bona fide purchaser for value
without notice of a document which ought to have been
registered.

19. Execution of decree and sale with or without

intervention of Banking Court.-
(1) Upon pronouncement of judgment and decree by a Banking
Court, the suit shall automatically stand converted into execution
proceedings without the need to file a separate application and
no fresh notice need be issued to the judgment-debtor in this
regard. Particulars of the mortgaged, pledged or hypothecated
property and other assets of the judgment-debtor shall be filed
by the decree-holder for consideration of the Banking Court and
the case will be heard by the Banking Court for execution of its
decree on the expiry of 30 days from the date of pronouncement
of judgment and decree:
Provided that if the record of the suit is summoned at any stage
by the High Court for purposes of hearing an appeal under
section 22 or otherwise, copies of the decree and other property
documents shall be retained by the Banking Court for purposes of
continuing the execution proceedings.
(2) The decree of the Banking Court shall be executed in
accordance with the provisions of the Code of Civil Procedure,
1908 (Act V of 1908) or any other law for the time being in force
or in such manner as the Banking Court may at the request of
the decree-holder consider appropriate, including recovery as
arrears of land revenue.

Explanation.- The term assets or properties in sub-section (2)

shall include any assets and properties acquired benami in the
name of an ostensible owner.
(3) In cases of mortgaged, pledged or hypothecated property,
the financial institution may sell or cause the same to be sold
with or without the intervention of the Banking Court either by
public auction or by inviting sealed tenders and appropriate the
proceeds towards total or partial satisfaction of the decree. The
decree passed by a Banking Court shall constitute and confer
sufficient power and authority for the financial institution to sell
or cause the sale of the mortgaged, pledged or hypothecated
property together with transfer of marketable title and no further
order of the Banking Court shall be required for this purpose.
(4) Where a financial institution wishes to sell mortgaged,
pledged or hypothecated property by inviting sealed tenders, it
shall invite offers through advertisement in one English and one
Urdu newspaper which are circulated widely in the city in which
the sale is to take place giving not less than thirty days time for
submitting offers. The sealed tenders shall be opened in the
presence of the tenderers or their representatives or such of
them as attend:
Provided that the financial institution shall be entitled in its
discretion, to purchase the property at the highest bid received.
(5) The provisions of sub-sections (5), (6), (7), (8), (9), (10),
(11) and (12) of section 15 shall, mutatis mutandis, apply to
sales of mortgaged, pledged or hypothecated property by a
financial institution in exercise of its powers conferred by sub-
section (3).
(6) The Banking Court and the financial institution shall be
entitled to seek the services and assistance of the police or
security agency in the exercise of powers conferred by this
section.
(7) Notwithstanding anything contained in the Code of Civil
Procedure 1908 (Act V of 1908), or any other law for the time
being in force 
(a) the Banking Court shall follow the summary procedure for
purposes of investigation of claims and objections in respect of
attachment or sale of any property, whether or not mortgaged,
pledged or hypothecated, and shall complete such investigation
within 30 days of filing of the claims or objections;
(b) if the claims or objections are found by the Banking Court
to be malafide or filed merely to delay the sale of the property, it
shall impose a penalty upto twenty percent of the sale price of
the property.
(c) the Banking Court may, in its discretion, proceed with the
sale of the mortgaged, or pledged or hypothecated property if, in
its opinion the interest of justice so require:
Provided that the financial institution gives a written undertaking
that in the event the objections are found to be valid, or are
sustained, it shall in addition to compensating the aggrieved
party by the payment of such amount as may be adjudged by the
Banking Court also pay a penalty upto twenty percent of the sale
proceeds and such amounts shall be recoverable from the
financial institution in the same manner as in execution of
decrees passed hereunder.
20. Provisions relating to certain offences.- (1) Whoever 
(a) dishonestly commits a breach of the terms of a letter of
hypothecation, trust receipt or any other instrument or document
executed by him whereby possession of the assets or properties
offered as security for the re-payment of finance or fulfillment of
any obligation are not with the financial institution but are
retained by or entrusted to him for the purposes of dealing with
the same in the ordinary course of business subject to the terms
of the letter of hypothecation or trust receipt or other instrument
or document or for the purpose of effecting their sale and
depositing the sale proceeds with the financial institution; or
(b) makes fraudulent mis-representation or commits a breach
of an obligation or representation made to a financial institution
on the basis of which the financial institution has granted a
finance; or
(c) subsequent to the creation of a mortgage in favour of a
financial institution, dishonestly alienates or parts with the
possession of the mortgaged property whether by creation of a
lease or otherwise contrary to the terms thereof, without the
written permission of the financial institution; or
(d) subsequent to the passing of a decree under section 10 or
11, sells, transfers or otherwise alienates, or parts with
possession of his assets or properties acquired after the grant of
finance by the financial institution, including assets or properties
acquired benami in the name of an ostensible owner shall,
without prejudice to any other action which may be taken against
him under this Ordinance or any other law for the time being in
force, be punishable with imprisonment of either description for a
term which may extend to three years and shall also be liable to
a fine which may extend to the value of the property or security
as decreed or the market value whichever is higher and shall be
ordered by the Banking Court trying the offence to deliver up or
refund to the financial institution, within a time to be fixed by the
Banking Court, the property or the value of the property or
security.

Explanation - Dishonesty may be presumed where a customer

has not deposited the sale proceeds of the property with the
financial institution in violation of the terms of the agreement
between the financial institution and the customer.
(2) Whoever knowingly makes a statement which is false in
material respects in an application for finance and obtains a
finance on the basis thereof, or applies the amount of the finance
towards a purpose other than that for which the finance was
obtained by him, or furnishes a false statement of stocks in
violation of the terms of the agreement with the financial
institution or falsely denies his signatures on any banking
document before the Banking Court, shall be guilty of an offence
punishable with imprisonment of either description for a term
which may extend to three years, or with fine, or with both.
(3) Whoever resists or obstructs, either by himself or on behalf
of the judgment debtor, through the use of force, the execution
of a decree, shall be punishable with imprisonment, which may
extend to one year, or with fine, or with both.
(4) Whoever dishonestly issues a cheque towards re-payment
of a finance or fulfillment of an obligation which is dishonoured
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 honoured and that the bank was at fault in not
honouring the cheque.
(5) Where the person guilty of an offence under this Ordinance
is a company or other body corporate, the chief executive by
whatever name called, and any director or officer involved shall
be deemed to be guilty of the offence and shall be liable to be
prosecuted against and punished accordingly.
(6) All offences under this Ordinance shall be bailable, non-
cognizable and compoundable.
21. Application of fines and costs.- (1) A Banking Court may
direct that the whole or part of any fine or costs imposed under
this Ordinance shall be applied in or towards
(a) payment of costs of all or any proceedings under this
Ordinance; and
(b) payment of compensation to an aggrieved party.
(2) An order under sub-section (1) shall be deemed to be a
decree passed under this Ordinance for purposes of execution.

22. Appeal.- (1) Subject to sub-section (2), any person

aggrieved by any judgment, decree, sentence, or final order
passed by a Banking Court may, within thirty days of such
judgment, decree, sentence or final order prefer an appeal to the
High Court.
(2) The appellant shall give notice of the filing of the appeal in
accordance with the provisions of Order XLIII Rule 3 of the Code
of Civil Procedure (Act V of 1908) to the respondent who may
appear before the Banking Court to contest admission of the
appeal on the date fixed for hearing.
(3) The High Court shall at the stage of admission of the
appeal, or at any time thereafter either suo motu or on the
application of the decree holder, decide by means of a reasoned
order whether the appeal is to be admitted in part or in whole
depending on the facts and circumstances of the case, and as to
the security to be furnished by the appellant:
Provided that the admission of the appeal shall not per se
operate as a stay, and nor shall any stay be granted therein
unless the decree-holder has been given an opportunity of being
heard and unless the appellant deposits in cash with the High
Court an amount equivalent to the decretal amount inclusive of
costs, or in the case of an appeal other than an appeal against an
interim decree, at the discretion of the High Court furnishes
security equal in value to such amount; and in the event of a
stay being granted for a part of the decretal amount only, the
requirement for a deposit in cash or furnishing of security shall
stand reduced accordingly.
(4) An appeal under sub-section (1) shall be heard by a bench
of not less than two Judges of the High Court and, in case the
appeal is admitted, it shall be decided within 90 days from the
date of admission.
(5) An appeal may be preferred under this section from a
decree passed ex-parte.
(6) No appeal, review or revision shall lie against an order
accepting or rejecting an application for leave to defend, or any
interlocutory order of the Banking Court which does not dispose
of the entire case before the Banking Court other than an order
passed under sub-section (11) of section 15 or sub-section (7) of
section 19.
(7) Any order of stay of execution of a decree passed under
sub-section (2) shall automatically lapse on the expiry of six
months from the date of the order whereupon the amount
deposited in Court shall be paid over to the decree-holder or the
decree-holder may enforce the security furnished by the
judgment-debtor.

23. Restriction on transfer of assets & properties.-

(1) After publication of summons under sub-section (5) of section
9, no customer shall, without the prior written permission of the
Banking Court transfer, alienate, encumber, remove or part with
possession of any of his asset or property furnished to the
financial institution as security by way of mortgage, pledge,
hypothecation, charge, lien or otherwise pending final decision of
the suit filed by the financial institution under this Ordinance, and
any such transfer, alienation, encumbrance or other disposition
by the customer in violation of this sub-section shall be void and
of no legal effect:
Provided that the customer may sell any such asset or property
which has been retained by or entrusted to him for purposes of
dealing with the same in the ordinary course of business subject
to the terms of the letter of hypothecation or trust receipt or
other instrument or document executed by him, or for purposes
of effecting their sale and depositing the sale proceeds with the
financial institution:
Provided further that the customer before making the sale shall
file in the Banking Court a statement supported by affidavit,
containing full particulars of such asset or property, and within
three days after the sale shall submit a full account thereof to the
Banking Court and the financial institution.
(2) After pronouncement of judgment and decree by the
Banking Court, including an interim decree under section 11, no
judgment-debtor shall without the prior written permission of the
Banking Court transfer, alienate, encumber or part with
possession of any assets or properties and any such transfer,
alienation, encumbrance or other disposition by a judgment-
debtor in violation of this sub-section shall be void and of no
legal effect.
(3) The provisions of sub-section (1) shall also apply to a
person who has furnished any security on behalf of a customer to
the financial institution on the basis of which finance was
granted, provided such person is a defendant in the suit filed
under section 9 or is added as a defendant thereafter.

24. Application of the Limitation Act, 1908 (Act IX of

1908).-
(1) Save as otherwise provided in this Ordinance, the provisions
of the Limitation Act, 1908 (Act IX of 1908) shall apply to all
cases instituted or filed in a Banking Court after the coming into
force of this Ordinance.
(2) A suit under section 9 may be entertained by a Banking Court
after the period of limitation prescribed therefor, if the plaintiff
satisfies the Banking Court that he had sufficient cause for not
filing the suit within such period.
25. Power to make rules.-The Federal Government may, by
notification in the Official Gazette, make rules for carrying out
the purposes of this Ordinance.

26. Removal of difficulties.- If any difficulty arises in giving

effect to any of the provisions of this Ordinance, the Federal
Government may, by notification in the Official Gazette, make
such provisions as it thinks fit for removing such difficulties.

27. Finality of order.- Subject to the provisions of section 22,

no Court or other authority shall revise or review or call, or
permit to be called, into question any proceeding, judgment,
decree, sentence or order of a Banking Court or the legality or
propriety of anything done or intended to be done by the Banking
Court in exercise of jurisdiction under this Ordinance:
Provided that the Banking Court may, on its own accord or on
application of any party, and with notice to the other party or, as
the case may be, to both the parties, correct any clerical or
typographical mistake in any judgment, decree, sentence or
order passed by it.

28. Indemnity.- No suit, prosecution or other legal proceeding

shall lie against the Federal Government or a Banking Court or a
financial institution or any person for anything which is in good
faith done or intended to be done under this Ordinance or any
rule made there under.
29. Repeal.-The Banking Companies (Recovery of Loans,
Advances, Credits and Finances) Act, 1997 (Act XV of 1997) is
hereby repealed.
(2) Notwithstanding the repeal of the (Recovery of Loans,
Advances, Credits and Finances) Act, 1997 (Act XV of 1997) and
the provisions of this Ordinance, decrees in cases relating to
interest-bearing loans which have not been converted into
finance shall be passed in accordance with the provisions of
section 15 of the said Act.
ϕ
Amended vide the Financial Institutions (Recovery of Finances)
(Amendment) Ordinance, 2001 dated 30-09-2001