Sub-section (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, continuous 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".

Sub-section (2) starts with the term "in case of default". The question is what is default? It is question of fact, to be decided. Ex-facie it seems that the determination as to whether there is a default has been given to the Bank, whereby it may at it discretion determine the quantum and the default to proceed under section 15(2). However, this seems to be a controversial position. No person can be a judge in his own right. It customer in reply to first or second or third notice disputes the default or quantum of money due or raise objection in respect of creation of mortgage or agitates / raises any substantial question of law or facts, the powers conferred under this section may not be exercisable, in view of Section 9 Sub-section (1) and Section 10 Sub-section (8) of the Ordinance without filing of suit or "without intervention of any court".

Section 15 Sub-section (4) provides that, if the mortgages fail to pay the amount as demanded "also requires consideration that if the demanded amount is disputed or sub judicial or questioned between customer and bank this provision will not apply. Sub-section (4) of Section 15 provides as under: -

Sub-section (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 institutions may, without the intervention of any court, sell the mortgaged property or any part thereof by pubic auction and appropriate the proceeds thereof towards total or partial satisfaction of the outstanding mortgage money".

Section 15 has an overriding effect upon the other provision(s) of Ordinance, in view of Sub-section (13) and (14) of the Section 15, the provision reads as under: -

Sub-section (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."

Sub-section (14) "The provisions contained in this section shall have effect notwithstanding anything contained in this Ordinance".

If the accounts prepared by the banks accounts constitutes a misuse and/or an abuse of the Ordinance as well as the due process of law as the banks are evidently seeking to avoid a full enquiry into accounts at a regular trial.

It seems that the power conferred by Section 15(4) of the Ordinance was never intended to be used malafidely as a weapon for harassment, coercion and evasion of the due process of law which provides a remedy for recovery of the amount legally due and payable under and in terms of the Ordinance. This process probably would be sued after due and proper determination of the amount actually due, and not for the recovery of the amount as may be determined by the banking company themselves. The Banks on the other hand are using Section 15(4) of the Ordinance as a strategy to avoid disclosure of accounts / documents and to avoid taking recourses to legal proceedings for recovery against the customer and this conduct and action of the defendant is clearly unlawful, discriminatory in nature and constitutes an abuse of the power contained in Section 15(4) of the Ordinance and is otherwise without lawful authority and jurisdiction. The Bank, if it has also claimed, charged and recovered mark-up on a continuous basis, which is also contrary to law, the customer will become entitled to refund of excess amounts recovered as mark-up on a continuous basis when accounts are taken. If there is a dispute of accounts or customers would like to reconcile the accounts, this provision cannot be given effect further this power can be used as shield but not as a sword.

That in a banking suit bearing No. B-19 of 2002 (R.VB. Avari & Co. Ltd. V. AlBaraka Islamic Bank) the High Court of Sindh at Karachi in it's Original Banking jurisdiction granted status-quo in respect of sale of the mortgaged property. In other bulk or bunch of suits the like-wise stay is operating, more so, the same provision or Section 15 is also impugned in the Constitutional Writ Petitions preferred by the customers filed before the Lahore High Court.

In the Lahore High Court, the vires of Section 15 of the Financial Institutions (Recovery of Finances) Ordinance, 2001, has been challenged in Write Petition No. 8868 of 2002 in the case of Sameena Ateeq Vs. Federation of Pakistan and in Writ Petition No. 18169 of 2002 in the case of M. Umer Rathor Vs. Federation of Pakistan and stay is operating in the both Writ Petitions.

In case of non-possession or refusal to tender possession by the customer the instant provision is ambiguous.

The Section 15(6) provides that possession can be taken through Banking Court, but under which proceedings or suit the application will be filed the difficulty for enforcement of powers conferred under Section 15 is that in case the possession is not with the Bank as it is 99 per cent cases or the mortgagor does not voluntary give / surrender the possession to the Bank the remedy provided under Sub-section (6) can be availed. Sub-section (6), Section 15 runs as under: -

Sub-section (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 given possession of the mortgage property sought to be sold or sought to be purchased or purchased by the financial institution, a Bank 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".

The question is that in which proceedings or suit number the bank will file the proper account before the banking court as required under Section 15, Sub-Section (10) which runs as under, which creates also the same difficulty.

Sub-section (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."

Section 15, Sub-section (11) creates also the same problem, which runs as under: -

Sub-section (11) "All disputes relating to the mortgaged property under this section including disputes amongst mortgages in respect of distribution of the sale proceeds, shall be decided by the Banking Court".

The provision(s) of Section 15 Sub-section (4) provides the powers "without intervention of any court" which means "without filing the suit / proceedings(s) but sub-sections (6), (10) and (11) provides the "intervention of the Banking Court(s)".

If a customer files a suit or counter claim agitating the dispute of accounts or dispute regarding creation of mortgage or any reasonable dispute and in pursuance of the suit filed by the customer or pending litigation filed by the Bank or in which counter claim has been filed or not, the recourse of the instant provision or use of the power conferred under the instant section can not be taken.

The power of financial institutions to invoke the Section 15 will be vanished if the Bank has already filed a suit as the words "without intervention of any Court" of the said provision would not allow the bank or act, having filed legal proceedings. The suit therefore would pray for a decree of foreclosure of mortgage or for a mortgage decree. Even otherwise, if customers in reply and/or response to a notice(s) of Bank as provided in Section 15, files a suit for declaration, injunction, rendition of accounts and/or release of mortgage or with identical prayers as the case may be and creates a dispute(s) in respect of mortgage or outstanding amount as claimed by the Bank in respect of sale of mortgage or outstanding amount as claimed by the Bank in respect of sale of mortgage property or hypothecated or pledged goods will not hold unless the dispute is not judicially adjudged.

Section 15, Sub-section (12) says as follows: -

Sub-section (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."

In case of claim of objector or claimant as provided under Section 19(7) of the Financial Institutions (Recovery of Finances) Ordinance, 2001, the above provision(s) can not be treated as effective.

The upshot of the discussions is that the remedy provided under Section 15(4) is contrary to the general principle of Law and/or rules of natural justice, is ambiguous and is in contradiction to the Sub-section (6), (10) and (11) of Section 15 and/or fails to provide the practical mechanism for the fore-closure. The provision is contradictory / repugnant and/or violative to the Articles 23 and 24 of the Constitution of Pakistan, 1973 which provides the basic / fundamental and constitutional right to acquire as well as to hold the property where no person can be compulsorily deprived of his property save in accordance with law.