MUHAMMAD AYUB TAREEN vs JS BANK LIMITED S — 2024 CLD 290 KARACHI-HIGH-COURT-SINDH

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MUHAMMAD AYUB TAREEN VS JS BANK LIMITED S. 2(68)---Banking Companies Ordinance (LVII of 1962), S.23(1)---Listed Companies (Substantial Acquisition of Voting Shares and Take-Overs) Regulation, 2017---Civil Procedure Code (V of 1908), O.XXXIX, Rr. 1 & 2---Suit for declaration and injunction---Interim injunction, refusal of---Subsidiary company---Word "form" used in S. 23 of Banking Companies Ordinance, 1962--- Scope--- Plaintiff companies challenged acquisition of decisive percentage of shareholding in Bank Islami Pakistan Limited by defendant Bank---Plaintiffs sought injunctive order to restrain defendant-bank and/or purported JS Group, from acquiring majority shareholding in Bank Islami Pakistan Limited---Validity---Subsidiary as defined in S. 2(68) of Companies Act, 2017, could only exist in relation to a holding company in which holding company either (i) controlled composition of the Board of the subsidiary or (ii) exercised or controlled more than one half of its voting securities---Word "form" used in S. 23 of Banking Companies Ordinance, 1962 envisaged forming of a subsidiary by acquisition either by control of composition of its Board or control of more than half of its shareholding by way of acquisition under Listed Companies (Substantial Acquisition of Voting Shares and Take-over) Regulation, 2017---This was further strengthened by the fact that S. 23(1) of Banking Companies Ordinance, 1962, used term "formed" in past tense in respect of the subsidiary taken over by Banking Company, so envisaged a subsidiary which was to be formed or was already formed---Generally word "form" is a flexible word and takes its meaning from the context in which it is used---Word "form" has to be given a broader rather than a restrictive meaning as has been done by State Bank of Pakistan---Objective behind and mischief sought to be avoided by S. 23(1) of Banking Companies Ordinance, 1962 is to bar more than one commercial banking license within a group save where a subsidiary is engaged in Islamic banking---Whether the subsidiary is a newly formed company or formed by way of acquisition of its majority shareholding, is immaterial to that objective---Provision of S. 23(1) of Banking Companies Ordinance, 1962, places a general restriction on a banking company from forming any subsidiary company except if the essence/subject matter/character of the business of subsidiary company falls within the exceptions provided for in S. 23(1)(a) to (e) of Banking Companies Ordinance, 1962, which exceptions include business of Islamic banking---Regardless and irrespective of whether the word "form" means "to incorporate" and / or "to acquire," if the nature of business of the subsidiary company in question is neither of the kind provided for in S. 23(1)(a) to (e) of Banking Companies Ordinance, 1962, then a banking company is simply prohibited from its incorporation and/or acquisition and that actually is the spirit of the law and not the method of forming one---High Court declined to grant interim injunction as plaintiff companies were not able to make out prima facie case; balance of inconvenience was not in their favour nor would they suffer irreparable loss in case injunction was refused---Application was dismissed, in circumstances.

MUHAMMAD AYUB TAREEN vs JS BANK LIMITED S — 2024 CLD 290 KARACHI-HIGH-COURT-SINDH

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