Jurisdictional Boundaries in Banking Disputes

The Supreme Court of Pakistan in Syed Mushahid Shah vs. Federal Investment Agency (2017 SCMR 1218) provided a critical examination of the overlapping jurisdictions of Banking Courts established under the Financial Institutions (Recovery of Finances) Ordinance, 2001 ("FIO 2001") and the Special Courts constituted under the Offences in Respect of Banks (Special Courts) Ordinance, 1984 ("ORBO"). The decision offers guidance on how these courts operate in relation to each other and the limits of their respective jurisdictions.

Background:

The appeals arose from situations where the appellants were customers of various financial institutions and were alleged to have committed offenses, such as dishonoring cheques, removing hypothecated goods, or breaching finance agreements. The financial institutions initiated proceedings against the appellants in Special Courts under ORBO and ordinary criminal courts, invoking sections of the Pakistan Penal Code (PPC). The appellants contested these actions, asserting that the Banking Courts under FIO 2001 had exclusive jurisdiction over such matters.

Key Issues:

Jurisdiction of Banking Courts vs. Special Courts: The core issue was whether Banking Courts under FIO 2001 held exclusive jurisdiction over all banking-related offenses to the exclusion of Special Courts and ordinary criminal courts under the PPC. The appellants argued that Sections 4 and 20 of FIO 2001 vested exclusive jurisdiction in Banking Courts for trying offenses related to finance agreements.

Overriding Effect of FIO 2001: The Supreme Court analyzed the non-obstante clauses in FIO 2001, which provide that the provisions of this Ordinance shall prevail over any other inconsistent laws. This raised the question of whether FIO 2001 could override the ORBO and the PPC, particularly regarding the prosecution of offenses such as cheque dishonoring under Section 489-F of the PPC.

Concurrent Jurisdiction: The Court also explored whether the concurrent jurisdiction could exist, allowing financial institutions to choose between prosecuting under FIO 2001 or ORBO/PPC. This issue was critical in determining whether financial institutions could opt for more stringent forums under ORBO or the PPC.

Case Law: The judgment referenced various principles from earlier case law, including Waris Meah vs. The State (PLD 1957 SC 157), where the Court stressed the need to avoid granting arbitrary power to choose prosecution forums, emphasizing fairness and equality before the law. Mian Iftikhar-ud-Din vs. Muhammad Sarfraz (PLD 1961 SC 585), where the Court held that the general laws must give way to special laws if they cover the same subject matter, reinforcing the non-obstante clause’s application.

Court’s Conclusion: The Supreme Court concluded that FIO 2001 does indeed have an overriding effect over ORBO and the PPC in matters explicitly covered by its provisions, including offenses relating to finance agreements between customers and financial institutions. The Court held that the Banking Courts have exclusive jurisdiction over such offenses, effectively barring concurrent jurisdiction by Special Courts or ordinary criminal courts under the PPC. The ruling thus restricted the ability of financial institutions to prosecute under alternative, potentially more burdensome laws, ensuring that FIO 2001's protective framework remains intact.

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