A full bench of the Lahore High Court (LHC) while striking down section 15 of Financial Institutions (Recovery of Finances) Ordinance 2001 after declaring it repugnant to the constitution, barred financial institutions from disposing of mortgaged properties of defaulters without obtaining court order.
The bench, comprising Chief Justice of the Lahore High Court Justice Sayed Zahid Hussain, Justice Hamid Ali Shah and Justice Syed Asghar Haider, ruled that this provision of law was in conflict with fundamental rights enshrined in articles 2-A, 3,4,9,23,24 & 25 of the Constitution.
The bench while accepting the petitions settled the issue of already disposed of properties through direct auction by ruling that as far as the properties about which sale had attained finality, possession had been delivered to auction purchasers, sale process stood adjusted towards outstanding amount and sale deeds had been registered, they would be considered as past and closed transactions.
But those properties about which the sale had not attained finality, the auction price would be returned to auction purchasers within a period of one month after he approached the financial institution concerned.
More than 800 companies including Khyber Agro have approached the LHC against the financial institutions to stop them from disposing of their mortgaged properties under the section in question.
They argued that the introduction of section 15 was abuse of law as the banks were given immense power to dispose of mortgaged properties by holding auctions without approaching the court of law. They said it was a laid down principle of law that no one could be judge of his own cause but this principle was overlooked by the legislature by introducing this provision of law.
They pleaded that under the article 2-A of the constitution no law contrary to Islamic injunctions could be introduced in the country. They said article 4 says that no every individual should be dealt with in accordance with law. They also pointed out that article 24 said no person shall be compulsorily deprived of his property.