h1

1999 CLC 607

Per Mian Allah Nawaz, J.

(a) Constitution of Pakistan, 1973 Articles 232, 233, 4 & 199
r/w Foreign Exchange (Temporary Restrictions) Act (IV of 1998)

Applying above rules, the facts and circumstances of the case in hand it is quite clear that the appellants/petitioners are owner of foreign currenc’/deposits in accounts with various Back/Authorised Dealers; that they have been effected by section 2 of Act IV of 1998 and Circular No. 23 issued by State Bank of Pakistan. From above it is clear that this Court had jurisdiction to examine the grievances of the appellants/petitioners in the context of Article 4 of he Constitution which obliges even, during the emergency, the functionaries of the Federal/Provincial Government to treat every one in accordance with law and not otherwise. This being the position, we find no merit in the preliminary objection which accordingly is repelled. [p. 628]A

(b) Constitution of Pakistan, 1973 Article 4

A bare reading of this Article will show that it incorporate the doctrine of equality before law or equal protection of law. This Article occurs in Part I of the Constitution titled as “Introductory”. This is highly important provision and reminds of fifth and fourteenth amendment in American Constitution. This jurisprudential concept is the fruit of ceaseless efforts of citizens to have supremacy of rule of law. It is even available as shield against tyranny and excesses in emergency. It ensures the rule of law and rule of equality as against the rule of arbitrariness, whims and caprice. This Article is actually supplementary and complementary to Article 2 and Articles 8 to 26 in our Constitution. It cast obligation upon functionaries of Federation of Federating Units/Legislatures to ensure the doctrine of rule of law/embody the principle of equality. Conceptionally speaking, these golden principles emanated from Muslim Jurisprudence, travelled to Spain in Muslims era and from there filtered across Atlantic ocean. [p. 629]B

(c) Constitution of Pakistan, 1973 Article 4
r/w Foreign Exchange (Temporary Restrictions) Act (IV of 1998)

The stage is now set to examine the vires of Act IV of 1998. Whether this Act suffers from the doctrine of equality as guaranteed by Article 4 of the Constitution? Whether this Act confers naked arbitrary powers on State Bank and so it is bad in law. We will first examine the contention of equality clause. We have already analysed this Act. From a bare reading of its section 2, it is quite clear that it singles out only foreign currency accounts held by their owners on 28th of My, 1998. The restriction, so imposed, is not even applicable to any foreign currency account to be opened by any person resident/non-resident, Pakistani citizen or non-Pakistani citizen on 28th May, 1998. Practically, speaking any person who held foreign currency on 28th May, 1998 was causalty of this Act. It cannot be said that foreign currency accounts which were opened after target date, were dissimilar. No classification on the basis of 28th May, 1998 and 29th May, 1998 was made in impugned Act on the basis of any rational and intelligent differentia. The F.C.A. holders of 28th May, 1998, holder of such accounts after that date were treated quite differently and so the doctrine of equality protection clause was manifestly violated. We are, thus, very clear in our mind that section 2 of the Act in patent violation of the doctrine of equality of law as enshrined in Article 4 read with Article 2A of the Constitution. There is yet another angle of section 2 of the Act. Section 2 (ibid) confers naked, unstructured arbitrary power on the functionaries of the State Bank to permit any one of the F.C.A. holders to hold, sell, withdraw, transfer, pay, or take out the foreign exchange held by any such person. It is true that section 4 (ibid) provides that Federal Government will frame rules. However, no rules had been framed at all. This was the case of State Bank. On this analysis, we have no hesitation in reaching the conclusion that section 2 of the Act IV of 1998 equips the functionaries of State Bank with manifestly arbitrary, unstructed power and is bad in law. Very clearly, the functionaries of State Bank has power to select any person from F.C.A. holders, permit him to hold, sell, withdraw, transfer, pay or take out foreign exchange held by any person in Pakistan. This is not warranted by any rule of fairness and structured discretion as noted and enunciated in para. (sic) of the our judgment. Seen from these perspectives, we have no option but to hold that the section 2 of the Act IV of 1998 is repugnant to the doctrine of equality and the principle of fairness delegations as incorporated in Article 4 and Article 2A of the Constitution. As regards Circular No. 23, it is sufficient to say that this, according to Bank is an executive directive issued under section 23 of the State Bank of Pakistan Act. Clearly, it is apparent from the foregoing discussion that section 9 of the Act IV of 1947, is in filed. Although, it is true that State Back has a power to issue circular in pursuance of its trade/credit policy with the collateral, yet it cannot ask the authorised dealers/ lending institutions to liquidate the liabilities of F.C.A. holders, who had obtained the facility of rupee loan and ask them to liquidate their liability by converting collateral at the fixed rate of 46 rupees qua dollar and asked for fresh securities in respect of the remaining amount. This directive has practically interfered with the terms of loan agreed between F.C.A. holders and the lenders. We do not find any provision of law which can support this course. The conversion/liquidation of liability of F.C.A. holders who had obtained loan tantamount to deprivation of their valuable property without payment of fair compensation according to section 9 of Act of 1947. Add to it, this circular, which is manifestly executive fiat cannot act retroactively. Contemporaneously, we find that all those circumstances, which we have pointed out earlier and which, according to our opinion, had vitiating effect on the vires of the Act IV of 1998, are applicable to Circular No. 23. We accordingly hold that Circular No. 23 suffers from the reasons already given above. Additionally it cannot act retrospectively and so cannot be sustained. For the aforesaid reasons, we have option but to declare that the section 2 of the Act of 1998 and Circular No. 23 are without jurisdiction, without any lawful authority and of no lawful consequences upon the rights of the petitioners/appellants/ as acquired under section 4 of he Economic Reforms Act (XII of 1992). [p. 645, 646 & 647]F

(d) Constitution of Pakistan, 1973 Articles 4 & 2A
r/w Foreign Exchange (Temporary Restrictions) Act (IV of 1998)

As a result of our foregoing conclusions, the above-noted causes/comprising 67 Intra-Court Appeals and writ petitions noted in para. No. 3 of this judgment, are bound to succeed. In the light of our conclusions and having regard to all the circumstances of litigation in hand, we hereby allow the afore-noted I.C.As. and Constitutional petitioners in following terms:–

(1) Declaration is granted that section 2 of Foreign Exchange (Temporary Restrictions) Act (IV of 1998) is ultra vires of Article 4 and Article 2A of the Constitution being repugnant to equality protection clause as well as on account of conferment of naked, arbitrary, unstructured power on the functionaries of the State Bank. This section so is declared as of no lawful consequences.
(2) Declaration is granted to the effect that Circular No. 23 is confiscatory in nature and is violative of equality protection clause and that the same is so repugnant to Article 4 and Article 2A of the Constitution. The State Bank of Pakistan, however, will be well within its right to direct the lending institutions to call for fresh securities from borrowers if they find that the securities/collaterals of their foreign currency deposits as furnished by the petitioners/appellants are not satisfactory or contrary to its credit policy.
(3) The Circular No. 23 is, so, declared contrary to law to the extent of directing the lending institutions to liquidate the foreign currency deposits of borrowers/petitioners/appellants at the rate of 46 rupees for a dollar and then get fresh securities, is so needed.
(4) Having regard to economic indicators as given in the report of State Bank and having regard to suggestion of Mr. Javed Shaukat/one of the petitioners; and having not been objected by any one of appellants/petitioners, we are persuaded to direct State Bank to treat the foreign currency account held by petitioners on 28th May, 1998 under section 4 of Protection of Economic Reforms Act (XII of 1992) as fixed account for a period of 3 years and frame rules with regard to that type of fixed deposits/permitting account-holders to withdraw any amount, so permitted, from these accounts to be utilized for their necessary expenses to be incurred by account-holders on the education of their issues outside the country, on medical expenditures and so on and so forth. The State Bank shall frame rules in line with the policy of such fixed accounts within a period of three weeks commencing from this order so as to clear the mist of uncertainty.
(5) We are also inclined to direct the Federal Government and to get the Act XII of 1992 so amended by the Federal Legislature that it may eliminate the two classes of economy as permitted by it and subject foreign currency accounts to payment of income-tax, wealth tax and compulsory deduction of Zakat and so as to eliminate the manipulative power of dollars/sterling pounds or any other foreign currency over rupee. [p. 652]I

(e) Constitution of Pakistan, 1973 Article 4

What transpires after the survey of the case-law on the subject is that the question whether the Legislature abdicated its basic function is not a very easy question to answer. No hard and fast rule is laid down. Facts and circumstances of each case will have to be considered. The Courts will be reluctant to strike down the law on this ground. In some of the judgments reference has been made to classical literature on the subject, which need not be reproduced, for the sake of brevity. Suffice it to say that the doctrine of excessive/impermissible delegation is the product of written constitution, which provides for three separate organs of the State and also provides for the functions and power of each. In theory each organ has to remain within its own limits. The Legislature has only to make laws, the Executive has to enforce the same and the Judiciary has to interpret the law and also see that the other two organs function within the spheres allotted to each of them by the Constitution. Our Constitution, which is Parliamentary and Federal in nature acknowledges that bifurcation of the functions of the State into legislative, executive and judicial and duly describes the functions of the 3 organs viz. Legislature, Executive and Judiciary. It is inherent in the scheme of the Constitution that each organ will work within its own sphere. Articles 141 and 142 read with Articles 70 to 76 of Constitution prescribe that law making is the function of the Malis-e-Shoora. Since the Legislature is representative of the people and it is they who send them to the Assemblies for making laws, therefore, the Assemblies cannot pass on this function to any other person/organ and whenever it is found that the Legislature has entrusted its basic function to another organ, it is said that the Legislation suffers from the vice of delegation, excessive or impermissible.

However, it also transpires that with the growth of complexities in furring a modern State particularly with the advent of the idea of welfare State, some room/laxity is provided to the Legislature to allow legislation by other organs/persons. This is so because the Legislature may not comprehend all possible eventualities faced in enforcing the law. While it is absolutely necessary that basic policy of law be laid down by the Legislature, the details may be allowed to be filled in by other functionaries including executive, for efficient administration of law. The difficulty, however, arises in ascertaining in a given case as to whether the Legislature has laid down the basic policy of law or whether it has left even such function to the Executive or any other organ. [p. 659, 660]A

(f) Constitution of Pakistan, 1973 Articles 4 & 25
r/w Foreign Exchange (Temporary Restrictions) Act (IV of 1998)

Under section 2 it has been provided that the right to hold, sell, withdraw or take out foreign exchange held by any person in Pakistan as on 28th May, 1998 without the prior permission of the State Bank of Pakistan shall remain suspended. Admittedly no rules under section 4 of the 1998 Act have been framed. The provision does not lay down any guidelines whatsoever as to in what cases the State Bank should give permission and in what cases it should not give permission. There is no clue at all muchless any definite criteria, which the State Bank is required to follow while deciding to give or to refuse permission. The Legislature in fact in asking the State Bank to act in its complete, absolute unqualified, unguided and uncontrolled discretion, as effaced itself and this is not permitted by the Constitution. As noted above Articles 141 and 142 exclusively enjoin the Majlis-e-Shoora to make laws. Majlis-e-Shoora has passed on this exercise to State Bank of Pakistan inasmuch as suspension of right to hold/withdraw etc. is not instant and automatic but dependent upon permission of an external agency (State Bank) which discretion is unguided. There is a case of self-effacement by Parliament and therefore, unconstitutional.

Mr. Minto, Advocate in his elaborate address has submitted that no guidelines or criteria is needed as the same is provided under the provisions of Foreign Exchange Regulation Act. In fact he want to the extent of saying that section 2 of 1998 Act impliedly revived the provision of Foreign Exchange Regulation Act.

The examination of Foreign Exchange Regulation Act shows that even that Act does not throw any light as to how to deal with foreign exchange deposits held on specified date, i.e. 28th May, 1998. The Foreign Exchange Regulation Act deals with the regulation of Foreign Exchange/Currency generally and naturally does not talk of the foreign currency/ exchange deposits held on 28th May, 1998, having been famed in 1947. Therefore, it the State Bank was to search those provisions of Foreign Exchange Regulation Act to decide the question of granting permission in respect of the deposits held on specified date, it will find no guidance or policy or criteria. Through Mr. Minto made the submission but he could not show as to how any provision of Foreign Exchange Regulation Act guided the State Bank in carrying out the mandate of section 2 of 1998 Act, in respect of grant or refusal of permission of deposits to withdraw held on specified date i.e. 28-5-1998. Learned Deputy Attorney General, of course only adopted the submission of Mr. Minto. I, therefore, conclude that section 2 of the 1998 Act is a case of excessive delegation and, therefore, violative of our Constitution, and therefore, of no legal effect. The principles of law laid down in cases Waris Meah, Kh. Muhammad Safdar, Ch. Manzoor Elahi and Miss Benazir Bhutto (supra) are clearly attracted.
I further hold that the provision of section 2 (ibid) conferring unguided powers on State Bank is ex facie discriminatory and, therefore, violative of Article 4/25 of the Constitution, which guarantee equal treatment before law. It is not only discriminatory on the face of it but it has the potential of being used in a highly discriminatory manner, inasmuch as the State Bank can grant permission without giving reasons and can withhold permission also without giving reasons.[p. 662]B

The above finding that the law contained in section 2 of the 1998 Act is discriminatory is further fortified from the peculiar facts obtaining in these cases. It is admitted by Mr. Minto, Advocate that after 28th May, 1998, the foreign currency accounts can be opened and operated and there is no restriction from bringing foreign exchange into Pakistan and from holding the same and operating accounts in the authorized commercial banks. Both Mr. Minto as well as the learned Deputy Attorney-General failed to show as to how the foreign currency/exchange held on 28th May, 1998 is bad/impure while the foreign currency/exchange brought in and held on 29-5-1998 and, thereafter, is good/pure and is entitled to the protection available under the Act, 1992. This discrimination and classification is irrational and is clearly violative of Article 4/25 of the Constitution, both of which remain unaffected by the Proclamation of Emergency. [p. 663]C

The 1992 Act gave the depositors/citizens a clear guarantee that the foreign exchange can be freely brought into the country, accounts can be opened maintained and duly operated. That Act in fact gave incentives for bringing in such money and for keeping it in Pakistan. I do not agree with the argument of Mr. Salman Raja, Advocate that the so called sovereign guarantee in respect of such deposits could not have been withdrawn under any circumstance. If the 1992 Act gave such deposits the protection, the same law-giver, at least in theory could withdraw the protection, of course in accordance with Constitution and law. However, the withdrawal of protection and suspension of right to hold and withdraw did not mean automatic extension of ownership rights of depositor/holders and their vesting in the respondent Government. For this purpose, a separate legal formality, may be by way of Notification in the official Gazette under section 9 of Foreign Exchange Regulation Act or otherwise, was required to be completed. [p. 664]D
Utilization of foreign exchange of petitioners and other depositors which has taken place as asserted by learned Deputy Attorney-General and Mr. Minto (and as is even clear from the article of Mr. Sartaj Aziz, the then Finance Minister appearing in Daily Dawh dated 5th of August, 1998) would be entirely illegal, and if I may add or immoral. The ground reality should not and cannot deter the Court from declaring the actual legal position. [p. 665]E

(g) Constitution of Pakistan, 1973 Articles 199, 232(2) & 233(1)

Article 199 of the Constitution remains intact even during the subsistence of Proclamation of Emergency and this Court can exercise jurisdiction conferred by that Article. The only effect upon the exercise of jurisdiction in view of Emergency is that this Court will honour the mandate contained in Article 233(1) and will not interfere even if the law/action is found to be derogatory to Articles 15 to 19 and 24. In this petition no argument on the strength of the abovementioned Fundamental Rights has been raised and even if raised, I have taken no notice of the same. [p. 669]G

(h) Constitution of Pakistan, 1973 Articles 4 & 25
r/w Foreign Exchange (Temporary Restrictions) Act (IV of 1998)

For the above noted reasons I answer the questions noted in para. of the judgment as follows:–
(f) And (ii) section 2 and section 4(2) of he 1998 Act in unconstitutional and the consequential suspension of the right of the petitioners/depositors to withdraw and operate their foreign currency accounts is without lawful authority. The action is violative of Article 4/25 of the Constitution. The provision is further discriminatory in nature and has the inherent mischief of being used in highly arbitrary and whimsical manner.
(iii) Circular No. 23 cannot operate to undo the existing contracts. Circular No. 23 can have only prospective effect. It is valid to the extent that the banks will not, in future, accept foreign currency deposits as collateral for advancing rupees loans.
(iv) In any case the direction to convert the collateral at the rate of Rs. 46 per US Dollar and liquidate the rupee liability is absolutely without jurisdiction. I declare the same to be without lawful authority and therefore, of no legal effect.
(v) The conversion rate Rs. 46 shown to have been fixed by the State Bank on 27th June, 1998 under section 4(2) of the Foreign Exchange Regulation Act, 1947 is valid for purposes mentioned in section 4 but cannot be said to be the rate which is required to be fixed by the Federal Government under section 9 of the Foreign Exchange Regulation Act, the only section under which the foreign exchange belonging to a citizen can be acquired by the Federal Government. [p. 670] H

I am clear that after declarations of illegality of impugned law and action, the petitioners/appellants/depositors cannot be compelled to keep their foreign exchange either in fixed accounts or in Bonds. I, therefore, respectfully disagree with above directions.
Similarly, I further do not subscribe to the direction to Federal Government contained in para. (5) at page 653 of my learned brother’s judgment. The underlying motive of my honourable brother is laudable (and I may agree with it on personal plane) but because provisions of Act (XII of 1992 have not been challenged in these cases, no occasion rises for the Court to rule on its legality, muchless appropriateness. [p. 671]J

(i) Constitution of Pakistan, 1973 Article 199

Once again with utmost respect to Mian Allah Nawaz, J., I am of the view that in these cases, this Court is and should concern itself with the constitutionality of law and the legality of action impugned. This Courts should stop after making considered declarations, even if further consequential directions may not be outside the purview of Article 199. As the Constitution recognises the trichotomy of sovereign power, this Court may leave the situation created by the judgment of this Court, to be dealt with by Executive and Legislature, in accordance with law and their respective wisdom. [p. 670]I

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