DRAFTING & VETTING OF

CONTRACTS
IN
BANKS & FINANCIAL INSTITUTIONS
By
ADNAN ADIL HUSSAIN
HUSSAIN ( NBP)
 CONTRACT & AGREEMENT
(CONTRACT ACT 1872)
• An agreement enforceable by law is a contract (Sec 2 g).
• Every promise and every set of promises, forming the consideration for each
other, is an agreement (Sec 2e)
• When the person to whom the proposal is made signifies his assent thereto,
the proposal is said to be accepted. A proposal, when accepted becomes a
promise.
• All agreements are contracts if they are made by the free consent of parties
competent to contract, for a lawful consideration and with a lawful object,
and are not hereby expressly declared to be void.
Nothing herein contained shall affect any law in force in Pakistan, and
not hereby expressly repealed, by which any contract is required to be
made in writing or in the presence of witnesses, or any law relating to the
registration of documents. (Sec 10).
 REASONS FOR THE WRITTEN CONTRACTS:
• To confirm the meeting of minds (offer and acceptance)
• Clarity – to avoid later disputes and save costs.
• To ensure all essential and material issues are covered.
• Lack of Trust – Evidence of agreement and the terms – which
facilitates enforcement
• Contracts attempt to articulate:
• The right and obligation of the parties.
• Provisions for events or contingencies that while not expected, may occur.
• Provisions that avoid any undesired default provisions of any applicable
law.
• Remedies and means of enforcing or avoiding the rights and obligations.
 BASIC PRINCIPLES OF CONTRACT LAW
• Mutual assent – intent of Contract. There must be a “meeting
of minds.”
• Offer and acceptance.
• Consideration – bargain for exchange.
• Conditions – Precedent and Subsequent.
• Representations, warranties, covenants and conditions.
• Conclusion of a Contract – expiration, termination, recission.
 Pakistan Legal System

• Law means a Rule or set of rules, enforceable by the courts, regulating

the government of a state, the relationship between the organs of
government and the subjects of the state, and the relationship or conduct
of subjects towards each other. a rule or body of rules made by the
legislature
• Laws in General:
• Intra-state laws
• Treaties include international agreement, protocol, covenant, convention, pact,
or exchange of letters, among other terms. Regardless of terminology, only instruments that
are legally binding upon the parties are considered treaties pursuant to, and governed by,
international law
• Inter-state laws
• Civil
• Criminal
 BROADER TYPES OF LAWS IN PAKISTAN

• There are about 108 Federal Acts and Ordinances in Pakistan. Punjab has more than 606 Acts
and Ordinances, Sindh has more than 574, KPK has more than 287, Baluchistan has about 46.
• http://pakistancode.gov.pk/urdu/index
• Criminal Laws
• Criminal offence
• the intentional commission of an act usually deemed socially harmful or dangerous and
specifically defined, prohibited, and punishable under criminal law.
• Civil Laws
• The system of law concerned with private relations between members of a community rather than
criminal, military, or religious affairs.
• Civil Wrong: an infringement of a person's rights, especially a tort, defamation (including libel
and slander), breach of contract, negligence resulting in injury or death, and property damage
• Civil Breach:
• Breach of contract is a legal cause of action and a type of civil wrong, in which a binding
agreement or bargained-for exchange is not honored by one or more of the parties to the contract
by non-performance or interference with the other party's performance.
 INSTRUMENTS OF COMMANDMENTS
Constitution A Constitution refers to the basic principles and laws of a nation or
State that determine the powers and duties of the government and also
provides the platform or base for determining the fundamental rights
and duties of the people in it a written/ unwritten form embodying the
rules of a political or social

Acts Legally, an ordinance is equal to Act. It can be seen as a temporary law

till its expiry or till it is repealed or it is approved by the legislature.
Ordinance
Ordinance has to be ratified from Parliament in 120 days. One time
extension of 120 days is allowed under Article 89 of Constitution.

SRO/ Gazette Notification Statutory Regulatory Order

The Gazette of Pakistan (Urdu: ‫تان‬EE‫دَہ پاکس‬EE‫رکاری جری‬EE‫ )س‬is the official
newspaper of the Government of Pakistan. This Gazette provides
information about government acts, ordinances, regulations, orders,
S.R. Os, notifications, appointments, promotions, leaves, and awards.
Rules Rules are guidelines and instructions for doing something right. It is
created to manage behavior in an organization or country. They are
Regulations written principles. On the other hand, regulations are directives
Letters by Ministries Conveying the Directives of respective ministry to its sub-ordinate
departments, corporations
 CRIMINAL LAWS IN PAKISTAN
• For general society (Personal Rights)
• CRPC, PPC Through Police
• Penal Code states various crimes and classifies them into multiple categories. The
Code also prescribes the penalties and the punishment for the respective offences.
The Criminal Procedure Code, provides for the courts and Magistrate's powers, while
the Penal Code does not.
• For While Collar Crimes
• FIA Act 1974
• FIA Act to provide for the more effective prevention of certain anti-national and
treasonable activities of individuals and associations and for matters connected
therewith.
• NAB ACT 1999
• NAB is to provide for effective measures for the detection, investigation, prosecution
and speedy disposal of cases involving corruption, corrupt practices, misuse/abuse of
power, misappropriation of property, kickbacks, commissions and for matters
connected and ancillary or incidental thereto
• Financial Institution (Recovery of Finance) Ordinance 2001
 CIVIL LAWS
For Business i. Companies Act
ii.LLP Act
iii.Partnership Act
iv.Income Tax Ordinance
v. Sales Tax Act 1990

For inter-personal i. Contract Act

dealing No separate law for Tort exists in Pakistan. However Intentional torts,
Property torts. Dignitary torts, Economic torts, Nuisance, Negligence,
Duty to visitors, Strict liability torts exist in different laws

For Banking i. Recovery Ordinance 2001

ii.Recovery Rules 2018
iii.Banking Companies Ordinance 1962
iv.Loan for Agricultural Purposes (Passbook) Act 1974

For Consumers i. Consumer Protection Act

ii.Islamabad (1995), Sindh (2015), KPK, Punjab, Baluchistan
 CIVIL LAWS
For Properties i. Transfer of Properties Act 1882
ii. Stamp Acts
iii.Registration Act 1908 & Registration Rules 1929
iv.Land Revenue Acts and Rules
v. Cooperative Societies Act
vi.Cantonment Rules

For Inheritance probate etc i. Inheritance Act

ii. Wills
iii.Succession Act
iv.Declaration/ Succession

For Marriage, Divorce etc i. Family Courts Act, 1964

ii. Dowry Act
iii.Guardians and Wards Act, 1890

For Digital i. Electronic Transaction Ordinance (ETO) 2001

ii. Payment Systems and Electronic Fund Transfers
Act, 2007
iii.Prevention of Electronic Crimes Act 2016
 TYPES OF COURTS & JUDICIAL FORUMS
• Quasi Legal Forums
• Legal Forums
• Supreme Court
• High Courts
• WP Jurisdiction
• Appellate Jurisdiction
• Companies Bench
• Banking Bench
• District Courts
• Civil Courts
• Banking Courts
• NAB Courts
• ADR
• Justice of Peace
 TYPES OF LITIGATION FORMATS
• Civil Petition for Leave to Appeal (CPLA) SC
• Appeal SC
• Reviews SC
• WP High Courts
• Appeals District Court
• Plaint/Suit Banking Court
• Plaint/Suit Civil Court
• Miscellaneous/ Civil Miscellaneous Applications
• First Information Report (FIR)
• Application for Justice of Peace
 STAMP DUTY &
REGISTRATION OF
CONTRACTS
PROVINCIAL STAMP ACT 1899 WITH FINANCE BILLS
PROVINCIAL REGISTRATION ACT 1908
 DEFINITIONS & CONCEPTS
• Lease, includes a counterpart, kabuliyat and an undertaking to cultivate or occupy. {section 2 (7) of Registration
Act 1908}
• “lease” means a lease of immovable property, and includes also– ({Section 2 (16) of Stamp Act 1899}.
• (a) a patta;
• (b) a kabuliyat or other undertaking in writing, not being a counter-part of a lease, to cultivate, occupy or pay
or deliver rent for, immovable property;
• (c) any instrument by which tolls of any description are let;
• (d) any writing on an application for a lease intended to signify that the application is granted;
• Conveyance” includes a conveyance on sale and every instrument by which property, whether movable or
immovable, is transferred inter vivos (between living people) and which is not otherwise specifically provided for
by Schedule {Section 2 (10) of Stamp Act 1899}.
• e-stamp” means a paper printed or partially printed containing a bar code or having any of its unique
identification code and such other information, as may be specified by the rules, to be generated and printed, on
deposit of money equivalent to chargeable stamp duty in the account of the Government {Section 2 (11-B) of
Stamp Act 1899}.
“impressed stamp” includes–
(a) the label affixed and impressed by the proper officer;
(b) the stamp embossed or engraved on a stamp paper; and
(c) an e-stamp;
{Section 2 (13) of Stamp Act 1899}.
 DEFINITIONS & CONCEPTS
• “instrument” includes every document by which any right or liability is, or purports to be,
created, transferred, limited, extended, extinguished or recorded and includes any instrument
executed in electronic form {Section 2 (14) of Stamp Act 1899}.
• “electronic” includes electrical, digital, magnetic, optical, biometric, electrochemical, wireless
or electromagnetic technology;
• (m) “electronic document” inclues documents, records, information, communications or
transactions in electronic form;
• (n) “electronic signature” means any letters, numbers, symbols, images, characters or any
combination thereof in electronic form, applied to, incorporated in or associated with an
electronic document, with the intention of authenticating or approving the same, in order to
establish authenticity or integrity, or both;
{Section 2 (1) (l,m,n) of Electronic Transaction Ordinance 2001}
• “certificate” means a certificate issued by a Certification Service Provider for the purpose of
confirming the authenticity or integrity or both, of the information contained therein, of an
electronic document or of an electronic signature in respect of which it is issued;
{Section 2 (1) (i) of Electronic Transaction Ordinance 2001}
 DEFINITIONS & CONCEPTS
• “advanced electronic signature” means an electronic signature which is either—
• (i) unique to the person signing it, capable of ident ifying such person, created in a manner or using a means under the sole
control of the person using it, and attached to the electronic document to which it relates in a manner that any subsequent
change in the electronic document is detectable ; or
• (ii) provided by an accredited certification service provider and accredited by the Certification Council as being capable of
establishing authenticity and integrity of an electronic document;
{Section 2 (1) (e) of Electronic Transaction Ordinance
2001}
• No document, record, information, communication or transaction shall be denied legal recognition,
admissibility, effect, validity, proof or enforceability on the ground that it is in electronic form and has
not been attested by any witness.
{Section 3 of Electronic Transaction Ordinance 2001}
• The requirement under any law for any document, record, information, communication or transaction
to be in written form shall be deemed satisfied where the document, record, information,
communication or transaction is in electronic form, if the same is accessible so as to be usable for
subsequent reference.
{Section 4 of Electronic Transaction Ordinance 2001}
• The requirement under any law for affixation of signatures shall be deemed satisfied where electronic
signatures or advanced electronic signature are applied. {Section 7 of Electronic Transaction
Ordinance 2001}
 DEFINITIONS & CONCEPTS
• Stamp Duty of electronic documents.—Notwithstanding anything contained in the
Stamp Act, 1899 (II of 1899), for a period of two years from the date of commencement
of this Ordinance or till the time the Provincial Governments devise and implement
appropriate measures for payment and recovery of stamp duty through electronic means,
whichever is later, stamp duty shall not be payable in respect of any instrument executed
in electronic form. {Section 10 of Electronic Transaction Ordinance 2001}
• Attestation and notarization of electronic document—Notwithstanding anything
contained in any law for the time being in force, no electronic document shall require
attestation and notarization for a period of two years from the date of commencement of
this Ordinance or till the time the appropriate authority devise and implement measures
for attestation and notarization of electronic documents, whichever is later. {Section 11 of
Electronic Transaction Ordinance 2001}
• “mortgage-deed” includes every instrument whereby for the purpose of securing money
advanced, or to be advanced, by way of loan, or an existing or future debt, or the
performance of an engagement, one person transfers, or creates, to, or in favor of, another, a
right over or in respect of specified property; {Section 2 (17) of Stamp Act 1899}.
NOTARY PUBLIC, OATH COMMISSIONER
• Notary Public means a procedure of authentication of any documents.
A notary public is appointed by the government as a public official in
non-continuous matters to help deter fraud. The notary public can
witness the signing of any important documents and verify the identity
of the signer(s) and their awareness of the contents of the document or
transaction. Notary Public is registered under Notary Public Rules 1965
and it witnesses the document under Notary Public Ordinance 1961.
• An oath commissioner is that person who is appointed by CHIEF
JUSTICE of the country who is legally authorized to verify affidavits.
He is also legally certified to endorse affirmations, declarations of any
person according to law. Before attesting any affidavit he would make
sure that evidence in question form (the draft affidavit).
 STAMP PAPER-TYPES-TIME LIMIT-E STAMPING
• Stamp paper is a paper issued by the Government of Pakistan. Under
section 3 of the Stamp Act, 1899 stamp duty is officially charged on
various types of documents for which stamp papers of different
denominations are issued. Documents requiring payment of stamp duty are
not considered effective without payment and cannot be enforced by a
court
• Judicial stamp papers are used for court cases etc. while non-judicial
stamp papers are used for non-judicial documents such as various types
of contracts etc.
• There is no time limit for stamp paper but under section 54 of the Stamp
Act, 1899 if the stamp paper is not used within six months from the date of
its issuance, it can be returned and the Collector may make the repayment
of the sum actually paid subject to conditions stipulated in the said section.
INSTRUMENTS CHARGEABLE WITH DUTY
(SEC 3- STAMP ACT 1899)

Following instruments shall be chargeable with duty of the amount

indicated in that schedule;
• Bill of exchange or Promissory Note, endorsed, transferred or
otherwise negotiated, in Pakistan;
• Every instrument (other than a bill of exchange or promissory note)
mentioned in Schedule, which, relates to any property situate, or to
any matter or thing done or to be done:
DOCUMENTS OF WHICH REGISTRATION
IS COMPULSORY SECTION 17-REGISTRATION ACT 1908

• (a) instruments of gift of immovable property ;

• (b) other non-testamentary instruments which purport or operate to create declare,
assign, limit or extinguish, whether in present or in future, any right, title or
interest, whether vested or contingent of the value of one hundred rupees and
upwards, to or in immovable property.
• Explanation: In the case of an assignment of a mortgage the consideration for the deed of
assignment shall be deemed to be the value for Registration ;
• (c) non-testamentary instruments (other than the acknowledgement of a receipt or payment made in respect of any transaction to which an
instrument registered under clause (a) relates ) which acknowledge the receipt or payment of any

consideration on account of the creation, declaration, assignment, limitation or

extinction of any such right, title or interest ;
DOCUMENTS OF WHICH REGISTRATION
IS COMPULSORY SECTION 17-REGISTRATION ACT 1908

• (d) leases of immovable property from year to year, or for any term
exceeding one year, or reserving a yearly rent
• (e) non-testamentary instruments transferring or assigning any decree
or order of a Court or any award when such decree or order or award
purports or operates to create, declare, assign, limit or extinguish,
whether in present or in future, any right, title or interest, whether
vested or contingent, of the value of one hundred rupees and upwards,
to or in immovable property.
 EXEMPTION OF REGISTRATION
• Any document not itself creating, declaring, assigning, limit or
extinguishing any right, title or interest of the value of one hundred
rupees and upwards to or in immovable property, but merely creating a
right to obtain another document which will, when executed, create,
declare, assign, limit or extinguish any such right, title or interest; or
• Any decree or order of a Court except a decree or order expressed to
be made on a compromise and comprising immovable property other
than that which is the subject-matter of the suit or proceeding
• Any instrument of partition made by a Revenue-officer
• Any order granting a loan or instrument of collateral security granted
under the Land Improvement Loans Act, 1883
 EXEMPTION OF REGISTRATION

• Agriculturists Act, 1958 ,the Agricultural Development Bank

Ordinance, 1961 or under any other law for the time being in
force relating to the advancement of loans for agricultural
purpose, or any instrument under which a loan is granted by a
cooperative society for any such purpose, or any instrument,
or any instrument made for securing the repayment of a loan
so granted
• Any certificate of sale granted to the purchaser of any
property sold by public auction by a Civil or Revenue officer
 REGISTRATION PLACE & TIME
• The registration Place: if the principal at the time of
executing the power-of-attorney resides in any part of
Pakistan in which this Act is for the time being in force, a
power-of-attorney executed before and authenticated by the
Registrar or Sub-Registrar within whose district or sub-
district the principal resides. (section 33)
• Where there are several persons executing a document at
different times, registration and re-registration within four
months* from the date of each execution (section 24)
 PERSON EXEMPTED FROM APPEARANCE AT
REGISTRATION OFFICE
Section 38- REGISTRATION ACT 1908

• A person who by reason of bodily infirmity is unable without risk or

serious inconvenience to appear at the registration-office, or
• A person in jail under civil or criminal process, or
• Persons exempt by law from personal appearance in Court, and who
would but for the provision next hereinafter contained be required to
appear in person at the registration office, shall not be required so to
appear.
In the case of every such person the registering officer shall either
himself go to the house of such person, or to the jail in which he is
confined, and examine him or issue a commission for his examination.
 TIME FROM WHICH REGISTERED
DOCUMENT OPERATES
• A registered document shall operate from the time from
which it would have commenced to operate if no registration
thereof had been required or made, and not from the time of
its registration
• (section 47-Registration Act 1908)
 ANOMALY -MORTGAGE
• A mortgage by deposit of title-deeds as defined in Section 58 of the
Transfer of Property Act, 1882, shall take effect against any mortgage-
deed subsequently executed and registered which relates to the same
property (Section 48 Registration Act 1908)
• Where a person in any other town which the Provincial Government
concerned may by notification in the official Gazette, specify in this
behalf, delivers to a creditor or his agent documents of title to
immovable property, with intent to create a security thereon, the
transaction is called a mortgage by deposit of title deeds. (Section 58
of Transfer of Property Act 1882).
 EFFECT OF NON-REGISTRATION OF DOCUMENTS
REQUIRED TO BE REGISTERED

• No document required to be registered under this Act or

under any earlier law providing for or relating to
registration of documents shall-
• (a) operate to create, declare, assign, limit or extinguish,
whether in present or in future, any right, title or interest,
whether vested or contingent, to or in immovable property, or
• (b) confer any power to adopt, unless it has been registered.
(Section 49-Registration Act)
 BOOKS OF REGISTRATION
(SECTION 51 OF REGISTRATION ACT 1908)

• Book 1, Register of non-testamentary documents relating to

immovable property.
• Book 2, Record of reasons for refusal to register’;
• Book 3, 'Register of wills and authorities to adopt'; and
• Book4, 'Miscellaneous Register'.
• Book 5. 'Register of deposits of wills. '-
 PUBLIC RECORD & CERTIFIED
COPIES
• Registering Officers to allow inspection of certain Books
and indexes, and to give certified copies of entries:
(Section 57 of Registration Act 1908)

• Subject to the previous payment of the fees payable in that behalf the
Books Nos. 1 and 2 and the Index relating to Book No. 1 shall be at all
times open to inspection by any person applying to inspect the same,
copies of entries ins such books shall be given to all persons applying
for such copies
PHOTO REGISTRARS UNDER SECTION
70 OF REGISTRATION ACT 1908
• In any district or sub-district in respect of which a notification has been issued under Section 70-D
Every document admitted to registration shall on every page be signed in the presence of the
registering officer
• be carefully marked with an identification stamp and the serial number of the document
• shall be then transmitted by the registering officer to the Photo-Registrar, and the registering
officer or the Photo- Registrar, as the case may be, shall cause each side of each page of such
document together with all stamps, endorsements, seals, signatures,
• There shall then be prepared and preserved the negative and at least one Photographic print and to
each such negative and print the Photo-Registrar shall fix his signature and seal in token of the
exact correspondence of the copy to the original document, as admitted for registration
• One set of such prints arranged in the order of their serial numbers shall be made up into books
and sewn or bound together. To each such book the Registrar or Sub-Registrar shall prefix a
certificate of the serial numbers it contains, and the books shall then be preserved in the records of
the Sub-Registrar.
 NOT ALL REGISTERED DEED ARE
TITLE DEEDS
• There is no law for land titling in Pakistan- We are using revenue gathering systems for land
titling

• Registration Provides “Presumption Of Truth Attached To Document”

• All Registered Documents are Public Documents fulfilling the condition of “Notice to
General Public”
REGISTERING OFFICER NOT LIABLE
• No registering officer shall be liable to any suit, claim or demand by reason of anything in good
faith done or refused in his official capacity (section 86 Registration Act 1908)
Registering officers not concerned with validity of document.---
• “Registering officers should bear in mind that they are in no way concerned with the validity of
documents brought to them for registration, and that it would be wrong for them to refuse to
register on any such grounds as the following, e.g., that the executant was dealing with property not
belonging to him, or that the instrument infringed that rights of third persons not parties to the
transaction, or that the transaction was fraudulent or opposed to public policy. These and similar
matters are for decision, if necessary, by competent Courts of law and registering officers, as such,
have nothing to do with them. If the document is presented in a proper manner by a competent
person at the proper office within the time allowed by law and if the registering officer is satisfied
that the alleged executant is the person he represents himself to be, and if such person admits
execution, the registering officer is bound to register the document without regard to its
possible effects”
• (Rule 135 of Registration Rules 1929)
 SEVERAL INSTRUMENTS USED IN SINGLE TRANSACTION
OF SALE, MORTGAGE OR SETTLEMENT
STAMP ACT SECTION 4

• Where, in the case of any sale, mortgage or settlement, several instruments are
employed for completing the transaction, the principal instrument only shall be
chargeable with the duty prescribed in Schedule , for the conveyance, mortgage or
settlement, and each of the other instruments shall be chargeable with a duty
of value defined in schedule.

The parties may determine for themselves which of the instruments so employed
shall, for the purposes of sub-section (1), be deemed to be the principal instrument:
Provided that the duty chargeable on the instrument so determined shall be the
highest duty which would be chargeable in respect of any of the said instruments
employed.
 USE OF ADHESIVE STAMPS
STAMP ACT SECTION 11

Following instruments may be stamped with adhesive stamps,

namely:
• instruments chargeable with a duty not exceeding one hundred
rupees,
• bills of exchange, and promissory notes
• entry as an advocate, vakil or attorney on the roll of a High Court;
• notarial acts;
• transfers by endorsement of shares in any incorporated company or
other body corporate.
CANCELLATION OF ADHESIVE STAMPS STAMP ACT SECTION 11

• Whoever affixes any adhesive stamp to any instrument chargeable with

duty which has been executed by any person shall, when affixing such
stamp, cancel the same so that it cannot be used again;
• (2) Any instrument bearing an adhesive stamp which has not been
cancelled so that it cannot be used again, shall, so far as such stamp is
concerned, be deemed to be unstamped.
• (3) The person required by sub-section (1) to cancel an adhesive stamp
may cancel it by writing on or across the stamp his name or initials or the
name or initials of his firm with the true date of his so writing, or in any
other effectual manner.
 VALUE OF IMMOVABLE PROPERTY FOR STAMP
(SEC 27-A- STAMP ACT 1899)

• Where any instrument chargeable relates to an immovable property, the value of the
immovable property shall be calculated according to the valuation table notified by the
District Collector in respect of immovable property situated in the locality.
• Where such instrument mentioned relates to an immovable property consisting of land and
structure including a multi-storey building, such instrument shall state the value of the land
and structure separately, and stamp duty on the structure shall be calculated as per the
covered area or the area of the structure mentioned in the instrument whichever is higher,
and in case there is no approved building plan, two percent duty of the value of land in
addition to payable duty shall be charged.
• Where the value of immovable property stated in an instrument applies is more than the
value fixed according to the valuation table, the value declared in the instrument shall be
accepted as value for the purposes of stamp duty.
 INSTRUMENTS NOT DULY STAMPED
INADMISSIBLE IN EVIDENCE, ETC
(SEC 35- STAMP ACT 1899)

• No instrument chargeable with duty shall be admitted in

evidence for any purpose by any person having by law or
consent of parties authority to receive evidence, or shall be
acted upon, registered or authenticated by any such person or
by any public officer, unless such instrument is duly stamped.
• in the case of an instrument insufficiently stamped, of the
amount required to make up such duty, together with a
penalty. Section 33 and 38 deal with the penalty and who can
impound it.
 TRANSFER OF A RIGHT OR INTEREST RELATING
TO AN IMMOVABLE PROPERTY
• An instrument of transfer of a right or interest relating to an immovable property
or an acknowledgement of such transfer, by a development authority, housing
authority or a statutory body.
• Explanation-I: In cases where allotment is to be made consequent upon payment of the installments or
transfer of a right or interest is made by original allottee before the payment of the last installment,
stamp duty shall be charged at the time of transfer whichever is earlier
• Explanation-II: Transfer or allotment made through auction by a development authority is not entitled to
an exemption from the payment of stamp duty
• An instrument of transfer of right or interest relating to an immovable property or
an acknowledgment of such transfer by a cooperative housing society
• Explanation-I.- First time allotment is exempted from the payment of stamp duty. However, transfer/
allotment made through open auction is not entitled to the exemption from the payment of stamp duty
• Explanation-II.- Transfer of a right or interest includes transfer made through electronic form and open
transfer letter
KPK FUTURE PLANS
 E-STAMPS
(Sindh Stamp Rules 2020)

• Banks (currently NBP in Sindh) made ex-officio vendor (Rule3) to issue Challan
• UIN (unique identity number) bar code, date time & issuance place (Rule 4). UIN
or bar code unreadable, instrument should be considered unstamped. (Rule 15)
• System Generated Challan online payment (Rule 5)
• E-Challan to be issued with 2 continuing sheets or as many as required (Rule 9) to
be subjoined with plain paper.
• Registration authority to verify through e-stamping system before registration
(Rule 10)
• Mandatory to fix Challan on the e-stamp paper in case of transfer by Cooperative
Housing Society or Housing Authority (Rule 20)
• Duplicate of e-Stamp cannot be issued (Rule 21)
DRAFTING OF CONTENTS OF AGREEMENTS/ CONTRACTS

• List both parties’ obligations.

• Make checklist for recurring obligations (like sharing financials,
change in shareholding pattern, change in ownership/
constitution/Senior Management, major accidents, etc.,
• Accept what is possible;
• Consult business head/senior management.
• Take confirmation from all stakeholders.
• Setup a system of reporting deviations from the commitment made.
 NAMING CLAUSE
• Legal name as per legal document of incorporation
• Incorporation number/ CNIC number
• Full name written
• Short name for contract defined
• Full address
• In case of company/entity authorised person name and authority
reference
• CNIC number of the authorized person.
• Both parties jointly called parties and individually a party
 RECITALS
• A recital provides the reader with a general idea about the purpose of the contract, the parties involved,
and why they are signing it. It is not mandatory for a contract to have recitals, although most do.
• The content of the recitals is generally linked to:
• Factual background
• Expression of the intention of the parties
• Purpose of why the contract is signed
• Recitals can be considered as the preamble to the contract. They can be placed as the first paragraph of the
contract to reference information and state that it is true and correct.
• Starting from “WHEREAS”, continuing with “AND WHEREAS”.
• What to write in Recitals:
• Provide additional details as to the business operations of the parties and their expertise
• Provide context as to the circumstances leading the parties to enter into a contract with one another
• Refer to other contracts or legal background relevant to why this contract is being signed
• Provide details as to where this specific contract sits within a series of different contracts
• Refer to past recitals
• Refer to a previous contractual obligation
• Provide a compliance-related background about the contract
 DEFINITIONS
• Define all the Terms, words and phrases, words of usage, words that
can have different connotation. (for example, collateral, effective date,
immoveable and moveable property different connotation in laws)
• Avoid any assumption
• Clarify the terminologies.
• Technical terms
• Abbreviations.
• Add saving clause relating to referral to relevant laws of Pakistan for
the definitions as defined in different legislations.
 REPRESENTATION AND WARRANTIES
• Representation is a statement of fact which is relied on by the
receiving party and induces them to enter into the contract. It is
normally before the contract, but may be repeated in the contract as
well.
• A representation is an assertion as to a fact, true on the date the
representation is made, that is given to induce another party to enter
into a contract or take some other action.
• A warranty is a promise of indemnity if the assertion is false. A
warranty is a contractual assurance from a party to another. It is a
subsidiary or collateral provision to the main purpose of the
agreement.
• A breach of warranty claim is an action for breach of contract and is
subject to the normal legal requirements of proving loss
 REPRESENTATION AND WARRANTIES

• Powers to execute the contract/Have all authorization.

• Ability to perform the contract/ability to deliver
• No violation of law.
• No additional duties/taxes
• No suits/proceedings
• Condition Precedent
• Condition Subsequent
• Exclusion of implied warranties.
SCOPE OF WORK/SERVICE
(Vendor Contracts)

• Understand the business requirement

• List the detailed work scope and Attach the same as annexure
• Mention the gist in the chapter of scope of services and refer to
annexures
• Take confirmation from operations/business/ RFP (for vendor
contracts)
• Core of the Contract to be explained
COMMERCIAL LIABILITY
• Limit the liability incase of Service Provider/Seller.
• Should not cover consequential damages.
• Not to exceed the compensation received for providing the
services.
• Insurance on the liability covered for damages.
• Service Receiver – Look for the damages to be covered in
case of deficiency in the service.
 DOCUMENTATION & MONETARY COMPENSATION

• List the documentation requirement.

• Frequency of invoicing
• Mode of collection of data required for invoicing.
• Due date for payment
• Penal Interest for delayed payment
• Deduction of Withholding tax, Sales Tax, levies and other taxes
• Regulatory Controls on payment transfer (if any) conditionalities
 INDEMNITY
• Important Legal Clause
• General Indemnity
• Tax Indemnity
• Cover Directors and Senior Management
• Arising out of Defect or Malfunction.
• Usage against the Manufacture's Specification
Termination
• Notice period
• Method of servicing notice (i.e. by hand, e-mail)
• Address for correspondence
• Lock-in period
• Event of default
• Expiry of time
• Compensation to other party
• Payment for service or goods supplied till date.
 VALIDITY
• Period of the Contract
• Notice period for renewal.
• Method of renewal (including auto-renewal)
• Cap on annual increase
• Mutual consent
 WAIVER

• Provision for waiver of defaults

• Option to enforce the provision on need basis.
INTELLECTUAL PROPERTY RIGHTS (IPR)

• Should have provision to protect the IPR

• Clear definition on the IPR
• Consequence in case of breach
• Who can patent the innovations arising
out of the process?
 EVENTS OF DEFAULTS
• Cover of Legal and Regulatory events provided in Law V/S Defined
events.
• Crux of the Contract
• Should be clearly defined.
• Time to rectify the default (Cure Period)
• Method of intimation of default
• Sequence of action if default continuous.
• Compensation
 Force majeure
• Consult Business
• Should be clearly defined
• Should apply to both the parties
• Strike, lock outs of the supplier’s vendors?
• Maximum period
• Consequence
• Remedies available to both the parties.
 Dispute & Settlement
• Method of rising the dispute
• Clause for discussion with Senior Management
• Conciliation Process
• Choice of Forum national & International
• Arbitration Process
 ARBITRATION
• Arbitration Act
• Method of appointment of arbitrator
• Place of Arbitration
• Language of Arbitration
• Period to complete the arbitration
• Implementation of arbitration award
 DIRECT, INDIRECT DAMAGES & PENAL CLAUSES

 Penalty allowed in Shariah Principles?

 Direct & Indirect Damages-Liquidated damages
 Clearly define the reason like time is the essence of awarding the contract.
 % of Liquidated damages applicable
 Value on which damages will get calculated
 Scope for waiver incase of valid reasons
 Invocation of Bank Guarantee/ Security deposit.
 Adjustment on Balance amount payable.
 CHOICE OF FORUM & APPLICABILE LAW

• Interpretation as per which country law?

• Jurisdiction
• Process of serving summons
• Appointment of Process Agent
• Neutral Country law and Jurisdiction
 SURVIVAL CUM PROTECTION CLAUSES

• What is survival and how it works

• List of Clauses which will survive on termination of the
Contract.
• Period of Survival
 BUSINESS SECRETS & CONFIDENTIALITY

• Define the Business Secrecy

• Who needs to know what?
• What should be made public?
• Prior approval required before releasing information
• Period of confidentiality
• NDA from the user of the information.
• Return of the information on termination of the contract
• Period
 AMENDMENTS

• Method of making an amendment

• Refer the original contract
• Precise in making the amendment
 SIGNATURE REQUIREMENT
• Authority to sign
• Execution date
• Address, CNIC and position to sign
• Where to sign?
• Which Signature?
• Initials?
• Cutting, filling in blanks, mutilation?
• Punching of documents/ stamp papers
• Thumb impressions?
 WITNESS
• 2 witness. Qanoon-e Shahadat Act
• Male and Female Witness
• Which Signature
• CNIC, Address, references
• Which are good witnesses?
• Role of Witness in a contract
 ANNEXURES, APPENDIX & SCHEDULES
• Contract attachments are added to a contract after it has been drafted and in most cases,
attachments don't change the original contract. Attachments may be known by different terms
depending on your jurisdiction, such as the following:
• Schedule.
• Exhibit.
• Annex.
• Supplement.
• Appendix.
• A schedule isn't integral to a contract because it details the terms referred to in the agreement.
• An appendix is part of the agreement and supplements it. It's a critical attachment that adds
validity to the agreement.
• An annexure, or annex, may be considered a report, or a separate document from the contract.
Based on these definitions, the following apply:
• If an attachment is vital to the validity of the contract, it should be called an appendix.
• If the attachment has information that one or more parties can change without needing to
change the whole agreement or affecting the validity of the contract, it should be called an
annexure.
 TYPES OF CONTRACTS
IN
BANKING INDUSTRY
Account Opening related Agreements.
Charge/Control documents/ Agreements for Financing
Collateral/ Property related agreements.
Premises Lease Agreements
HR related Contracts
Vendors Agreement
Outsourcing Contracts
 OUTSOURCING AGREEMENTS & SBP INSTRUCTIONS
Framework for Risk Management in Outsourcing Arrangements by
Financial Institutions
BPRD Circular No. 06 of 2019

• Outsourcing agreement: — A written agreement setting out the contractual terms and
conditions governing relationships, obligations, responsibilities, rights and expectations of the
contracting parties in an outsourcing arrangement.
• Outsourcing: — Use of a third party (affiliated entity or un-affiliated) to perform activities,
functions or processes normally to save money, time and/or use the skills/technology of
another entity on a continuing basis that would normally be undertaken by FIs, now or in the
future. However, it will not cover consultancy services, purchase contracts for
tangible/intangible items, for example, contracts to purchase standardized products such as
furniture, Software/IT solutions, Automated Teller Machines (ATM) etc.
• Material outsourcing: — An outsourcing arrangement which, if disrupted, has the potential
to significantly impact an institution’s business operations, reputation or profitability. Material
functions are those that are fundamental to the carryout the business of the Fis.
 OUTSOURCING AGREEMENT

• All outsourcing arrangements shall be undertaken using a legally

binding written agreement(s). The contract, at a minimum, shall
include the following areas:
• (a) Service levels and performance requirements;
• (b) Audit and monitoring procedures;
• (c) Business continuity plans;
• (d) Default arrangements and termination provisions;
• (e) Pricing and fee structure;
• (f) Dispute resolution arrangements;
• (g) Complaint handling procedures;
• (h) Liability and indemnity;
• (i) Confidentiality, privacy and security of information.
 FIs TO ENSURE
• a) The agreement defines the rights and responsibilities of both parties and contains adequate and
measurable service levels.
• (b) The agreement with related parties reflects an arms-length relationship. Further entire process
from start of engagement till end shall be properly documented.
• (c) Service provider's physical and data security standards meet or exceed the FI's standards.
• (d) The agreement contains the minimum provisions required under existing laws and SBP rules
and regulations including but not limited to timely access to all sorts of information, records, data
applications, databases, networks/ network devices and systems is available to internal/external
auditors and SBP inspection teams as and when required.
• (e) The agreement allows for renegotiation and renewal to enable the FI(s) to retain an appropriate
level of control over the outsourcing arrangement.
• (f) The agreements with third parties do not include the services, which are not allowed in this
guideline.
 FIs TO ENSURE
• (g) The agreements have clauses setting out the rules and limitation/prohibition on
subcontracting.
• (h) An annual review of the outsourcing agreements is performed to assess that
terms of the agreement are in line with current market practices and standards.
• (i) The service provider delivers a level of service that meets the needs of the FIs.
• (j) Penalty clause in the agreement in case service provider fails to provide
services as per mutually agreed timelines and service availability.
• (k) The agreement binds the service providers to report any change in their
ownership structure, key management/partners/directors immediately to the FI.
• (l) The agreement sets out the procedures to enable FIs to effectively monitor the
performance of the service provider.
 FIs TO ENSURE
• The FIs shall increase the cost of outsourced activity only after conducting comparative analysis
of the rising cost.
• No outsourcing arrangement shall be made with the party having relationship with the
management/employees of the FI, which may create a conflict of interest.
• Each agreement shall also address issues arising from country risks and potential obstacles in
exercising oversight and management of the outsourcing arrangements by FIs made with a service
provider outside Pakistan.
• The FIs shall have the right to terminate an outsourcing agreement in the event of default, or
under circumstances where:
I. service provider undergoes a change in ownership;
II. service provider becomes insolvent or goes into liquidation;
III. service provider goes into receivership or judicial management whether in country or elsewhere;
IV. there has been a breach of security or confidentiality;
V. breach of any relevant legal requirement and/or regulatory directive and
VI. there is a demonstrable deterioration in the ability of the service provider to perform the contracted service.
 HR RELATED AGREEMENTS
Employment Contracts
• Permanent Employment (Statutory Rules/ laws)
• Contractual Employment (Master Servant Rule)
• “Probation is the period of testing or observing the character or abilities of a person who is
new to a role or a job” (2017 PLC CS1080)
Deputation, Secondment, Attachment
• In Secondment and Deputation, no particular employer-employee relation exists with
persons so deputed, attached or engaged on secondment. It is borrowing of certain staff
from other organization for some specific purpose or reasons.
• Secondment is the temporary assignment of an employee from one organization to another
for a specified period of time, usually to carry out a particular project.
• Under deputation, the economic benefits are provided by the company where an employee
is posted and in case of secondment, the economic employer is the parent company.
• Attachment is another shade of secondment and is considered for shorter assignments or
projects.
PERMANENT, TEMPORARY AND OUTSOURCED

• If appointment on temporary post has been made despite the availability of permanent post, the
person so appointed should be considered against the permanent post with effect from the date of
appointment
• In absence of any justifiable reasons, services could not be terminated
• “there was no equilibrium of bargaining strength between the employer and the employee.
• “Employer being placed in the position of authority and strength could always coerce employee
to waive their legal protection and accept contractual terms at the pains of losing his job”.
• It is the statutory or otherwise nature of institution and its service rules against which the relief is
sought in a writ jurisdiction. The status of employee being contractual or daily wager has no
relevance in it.
• The nature of post must be analysed.
• A person appointed on Government notified Contractual post with specific tenure cannot seek for
regularization through writ petition.
• Manner of discharge from the service should be in accordance with law.
• No discrimination or violation of fundamental rights can be made by a statutory organization
having statutory service rules.
TYPES OF CONTRACTS GENERALLY USED IN BANKING
INDUSTRY

• Account Opening related Agreements.

• Charge/Control documents/ Agreements for Financing
• Collateral/ Property related agreements.
• Premises Lease Agreements
• HR related Contracts
• Vendors Agreement
• Outsourcing Contracts
 DOCUMENTATION

CONVENTIONAL ISLAMIC
AGREEMENT FOR AGREEMENT FOR
FINANCING FINANCING

Encumbrance Creation Encumbrance Creation

Moveable Securities Immovables

Mortgage Deed/
Standard Charge Creation of Equitable
Documents/Agreements Mortgage

Encumbrance Creation
Specific agreements through act of parties
(pass book)
 AGREEMENT TO FINANCE-CONVENTIONAL
.
BUY BACK AGREEMENT
SELLS
GOODS

SALE
PRICE
BANK CUSTOMER
BUYS BACK GOODS
DEFERRED PAYMENT PURCHASE PRICE (IN LUMP SUM OR
INSTALMENT)

PRIMARY
IMMOVEAB SECURITY
MOVEABLE
LE
Guarantee
&
Indemnity
CHARGE
SEC 100
MORTGAGE HYPOTHECATION
PLEDGE
 BANKING DOCUMENTATION-
REGISTRATION & STAMPING
• Agreement to finance
• Letter of Hypothecation
• Letter of Pledge
• Mortgage Deed
• Equitable Mortgage (MODTD)
• Affidavits
• Declaration
• Undertakings
HYPOTHECATION
• ”Hypothecation” means a charge created by a customer, on all or any
present or after-acquired movable property, in favour of a secured
creditor without delivery of possession of the movable property to
such secured creditor; (Section 2 sub-section 24 of STA 2016)
 PLEDGE
• “The bailment of goods as security for payment of a debt or
performance of a promise is called pledge”. (section 172).
• “A bailment is the delivery of goods by one person to another for
some purpose, upon a contract that they shall, when the purpose is
accomplished, be returned or otherwise disposed off according to
the direction of the person delivering them” (Section 148).
 PLEDGE DOCUMENTATION-GOLD
• Agreement to Finance
• Personal Guarantee
• Letter of Pledge
• Schroffs/ Goldsmith Assessment
• Delivery and sealing the bag in presence of Customer
• Undertaking of Genuineness
• Indemnification
 PLEDGE DOCUMENTATION-STOCKS
• IB-12
• IB-6/7
• (IB-24/22/23) In case of collateral
• IB-29(not used for Agri Credit)
• IB-26
• No liability/charge certificate
• Letter of Disclaimer.
• Letter of request from borrower to take delivery
• Letter of entrustment from bank to Muccaddum.
• Godown Certificate from Muccaddum.
• Delivery receipt Report by Muccaddum.
• Stock Report.
• Delivery Order.
FLOATING, FIXED & PARI PASSU CHARGE
• Floating Charge means a charge created by a customer, on all present and after-
acquired movable property or a certain class of present and after-acquired movable
property (including receivables or inventory), in favour of a secured creditor and
pursuant to which the customer is free to deal with the movable property in the
ordinary course of its business until the crystallization, in terms of the security
agreement, of such charge into a fixed charge; (Section 2 sub-section 21 of STA 2016)
• Fixed charge is a charge on a definite property which can be ascertained and the
company cannot dispose of the property without the consent of the charge holder.
However the company is allowed to use it for business purpose. Generally fixed
charge is created on fixed assets such as plant and machinery.
• Pari-passu charge shall be considered on proportionate basis of outstanding amount
(PR- ANNEX VI) Under this, the charge is shared by more than one lender in the ratio
of their outstanding amount. The prior consent of the existing charge holder(s) is
required by the company
FIRST, EXCLUSIVE, RANKING, FURTHER CHARGE
• First Charge: A legal right under which the Creditor has the right to decide on what
to do with a property if the borrower fails to maintain the repayments
• Second Charge: Where a second loan is backed by the same assets on which a first
charge already exists, the subsequent charge holder is called "second charge". This
comes into effect once the holder of the first charge has sold the assets and received
their dues. The second charge holder is entitled to receive the residual value of assets
once the first charge holder has been satisfied.
• Ranking Charge: If no priority is given to charge, the charge as per “priority in
time” is called ranking charge
• Exclusive charge – The security under the exclusive charge is provided to a
particular lender only.
• Further charge – With the consent of the first charge holder, the particular assets on
which charge is already created may be provided to other lenders as second charge.
In case of liquidation of assets, the first charge holder has the right to recover his
dues and the balance is recovered by the second charge holder followed by others
 RECEIVABLES & SECURITY
AGREEMENT
• “Receivables” means a contractual or non-contractual right to receive
money, whether such right is existing, future, accruing, conditional or
contingent and includes rents; profits; dues; a money award by an
arbitrator; monies payable as salaries of employees; dividends; tolls,
user-fees or any sum, by whatever name called; monies payable under
decrees; monies payable under guarantees; actionable claims and all
kinds of actual or contingent monetary obligations; and excludes a right
to payment of funds credited in a deposit account and right to payment
under a negotiable instrument; (Section 2 sub-section 39 of STA 2016)
• ”Security agreement” means an agreement, instrument or any other
document in writing that creates or provides for a security interest in
favour of a secured creditor;
 SECURITY INTEREST & TITLE DOCUMENT
• “Security interest” means a right, title, encumbrance or interest of any kind upon
movable property created or provided for by a security agreement in relation to a
transaction that in substance secures the payment or performance of a customer’s
obligation under a finance without regard to the form of the transaction or the
terminology used by the parties or the identity of the person who has title to the
movable property, and includes any charge, mortgage, hypothecation, fixed charge,
floating charge, assignment, lien, pledge, assignment of receivables by way of security
and transactions under which a secured creditor retains title such as a finance lease,
hire purchase agreement, sale and lease back arrangement, conditional sale agreement
and retention of title arrangement, having similar effect; (Section 2 sub-section 48 of
STA 2016)
• “Title document” means a document in writing evidencing title to goods which is, by
law or custom, negotiable, and includes a bill of lading, dock warrant, warehouse
receipt, railway receipt, airway bill, truck receipts or similar record issued by a person
in the business of transporting or storing goods; (Section 2 sub-section 51 of STA 2016)
 EFFECTIVENESS OF A SECURITY INTEREST
(Section 5 of STA 2016)

• A security interest created in favour of a secured creditor shall be

effective against the customer only if.---
• (a) the customer and the secured creditor have agreed to create a security
interest in favour of the secured creditor;
• (b) in the case of a pledge and security interests created pursuant to the fact
that customer has also given possession of the collateral to the secured
creditor;
• (c) the secured creditor has given value to the customer; and
• (d) the customer has rights in the collateral or the power to transfer rights in
the collateral.
 SECURITY AGREEMENT
(Section 6 of STA 2016)

• The secured creditor and the customer shall enter into a security
agreement in terms of sub-section (2) for all security interests other
than security interests created pursuant to sections 11 and 12.
• (2) A security agreement shall state,---
• (a) the name and address of the secured creditor and customer;
• (b) the obligations secured by the security interest;
• (c) a description of the collateral in a manner that reasonably allows its
identification; and
• (d) the date of its execution.
 PERFECTION OF SECURITIES
A security interest may be perfected,---
(a) in the case of a pledge created by a company, by possession of the collateral by the secured
creditor;
(b) in the case of a pledge created by an entity, by registration as provided under this Act; or
(c) in the case of any other security interest, by registration as provided under this Act.
• (2) Notwithstanding sub-section (1) and subject to sub-section (3),---
(a) a security interest in a right to payment of funds credited in a deposit account may be perfected
only by control;
(b) a security interest in collateral covered by a title document may be perfected only by possession
of the title document by the secured creditor; and
(c) a security interest in a negotiable instrument may be perfected only by possession of the
negotiable instrument by the secured creditor.
• Explanation.—Perfection of security interests under clauses (a), (b) and (c) shall not require
registration as provided under this Act.
• (3) Sub-section (2) shall not be applicable where a security interest in a right to payment of funds
credited in a deposit account or a security interest in collateral covered by title document or a security
interest in a negotiable instrument is—
(a) created as part of a hypothecation or floating charge that may otherwise be perfected by
registration under clause (c) of sub-section (1); or
(b) in the nature of proceeds of collateral that is otherwise perfected in accordance with section 15.
 SPECIAL PRIORITY RULES AS PER STA 2016
(SECTION 42 TO 49)

Priority of security interest based on retention of title arrangement.—

• A security interest based on retention of title arrangement and
perfected by registration as provided under this Act within ten
days of the date of the security agreement shall have priority over
all other competing security interests in the same collateral
irrespective of the time of perfection of such competing security
interests.
 SPECIAL PRIORITY RULES

Priority between secured creditor and bailee providing services in respect of

the collateral.
• A secured creditor shall have priority over a bailee having a lien in respect of
the collateral under section 170 of the Contract Act, 1872 (IX of 1872),
provided the security interest was perfected before the bailment was created.
Priority between secured creditor and unpaid seller.
• An unpaid seller having a lien in respect of the collateral under the Sale of
Goods Act, 1930 (III of 1930) shall have priority over a secured creditor.
Priority between secured creditor and a bank having a bankers’ lien.
A bank having a bankers ‘lien under section 171 of the Contract Act, 1872 (DC
of 1872) shall have priority over a secured creditor unless such bank has in
writing waived of its bankers’ lien.
 SPECIAL PRIORITY RULES
Priority of security interest in collateral covered by title document.
A security interest in collateral covered by title document that is
perfected by possession has priority as against a security interest in
collateral covered by title document that is perfected other than by
possession
 SPECIAL PRIORITY RULES
Priority between a perfected floating charge and fixed charge
over the same collateral.
• A fixed charge perfected after an earlier perfected floating charge
over the same collateral shall have priority so long as such floating
charge has not crystallized into a fixed charge.
• An earlier perfected floating charge shall have priority over a
subsequently perfected fixed charge over the same collateral, where
—
• The security agreement creating such floating charge contains a
provision prohibiting the creation of any further security interest
over the same collateral; and
 SPECIAL PRIORITY RULES
Priority of security interest in a negotiable instrument
• A security interest in a negotiable instrument that is perfected by
possession has priority as against a security interest in a negotiable
instrument that is perfected other than by possession.
• A security interest in a negotiable instrument is sub-ordinate to the
rights of a holder in due course
ENFORCEMENT OF SECURITY INTEREST
A secured creditor may enforce the following security interests without the intervention of the courts:
•(a) a pledge;
•(b) an assignment of receivables by way of security;
•(c) a security interest in a negotiable instrument that is perfected by possession;
•(d) a security interest in a right to payment offunds credited in a deposit account that is perfected by control;
•(e) a security interest in a motor vehicle based on retention of title arrangement; and
•(f) a security interest in a title document that is perfected by possession.

At any time after a secured creditor decides to enforce a pledge after an occurrence of an event of default- the
secured creditor may give a written notice of demand to the customer in writing and require the customer to
satisfy his obligation within fourteen days from the date of receipt of the notice. The notice shall give details of
the amount payable by the customer and specify, the collateral that may be enforced in the event ofthe customer
failing to satisry his obligation:

Provided that the secured creditor may dispense with such notice if in the reasonable opinion of the secured
creditor, the collateral is in danger of being wasted, misappropriated or is perishable; or the amount of finance
exceeds ten million rupees and the security agreement provides for such dispensation.
 PERSONAL GUARANTEE
• By virtue of personal guarantee the borrower or other person giving
guarantee for the repayment of “purchase price” binds himself
personally to adjust the bank finance in case of default.
• The person furnishing personal guarantee shall be taken as wearing the
same shoe as that of borrower.
 LEGAL POSITION OF
PERSONAL GUARANTEE
• The said person shall be treated as “customer”, meaning thereby
the claim/suit shall be filed at the same time against him and the
borrower. The general perception that the guarantor shall be
contacted after the recovery efforts from borrower have failed,
does not carry any legal standing after promulgation of
Financial Institution (Recovery of Finances) Ordinance 2001.
• Section 2 (c) of The Financial Institution (Recovery of
Finances) Ordinance 2001 defines customer as “a person to
whom finance has been extended by a financial institution and
includes a person on whose behalf a guarantee or letter of credit
has been issued by a financial institution as well as A SURETY
OR AN INDEMNIFIER”
 PROPERTY OF THE PERSONAL GUARANTOR
• Section 16 of the Financial Institution (Recovery of Finances) Ordinance 2001 deals with the
issue.
• “Attachment before judgment, injunction and appointment of Receivers.- (1) Where
the suit filed by a financial institution is for the recovery of any amount through the sale of any
property which is mortgaged, pledged, hypothecated, assigned, or otherwise charged or
which is the subject of any obligation in favor of the financial institution as security for
finance or for or in relation to a finance lease, the Banking Court may, on application by the
financial institution, with a view to preventing such property from being transferred, alienated,
encumbered, wasted or otherwise dealt with in a manner which is likely to impair or prejudice
the security in favor of the financial institution, or otherwise in the interest of justice 
• (a) restrain the customer and any other concerned person from transferring, alienating,
parting with possession or otherwise encumbering, charging, disposing or dealing with the
property in any manner;
• (b) Attach such property;
• (c) Transfer possession of such property to the financial institution; or
• (d) Appoint one or more Receivers of such property on such terms and conditions as it
may deem fit. “
 DP note why Redundant Now?
(For Commercial Banks)
• Contract never dies.
• Limitation?
• History of Banking Recovery Jurisdictions
• Civil Court Speedy Trials of Negotiatble Instruments.
• Banking Tribunal Act 1979
• Banking Tribunal Act 1984
• Banking Recovery Act 1997
• FIO 2001
 IB -8 AGREEMENT TO FINANCE
• Under the Non-Interest based system, the importer has to enter into an agreement
with the Bank to meet his obligation to purchase the import documents at the
marked-up price (Sales Price). The documents, as per mark-up agreement, would
be purchased by the Bank and sold to the importer at the marked-up price. When
an import Bill is received and lodged, two types of transactions shall be deemed
to have taken place i.e. purchase and sale of documents
• Purchase - the documents pertaining to the import Bill will be purchased by the importer’s
bank at Bill amount, plus negotiating bank’s charges, (converted into Pak. Rupees at the
ruling rate or the booked rate as the case may be) less margin, if any. This shall be the
Purchase Price of the import Bill by the bank.
• Sale - after the import Bill is so purchased at the above price, it shall be sold by the Bank
to the importer after applying the mark-up and Bank Commission, where applicable. This
marked-up amount shall be the selling price of the import bill by the Bank. The sale price
of the bill shall be payable by the borrower upon receipt of shipment
FOREIGN TRADE CYCLE AT A GLANCE
 EXPORT RELATED FACILITIES
• FATR
• EFS PART 1
• EFS PART 2
• EFS GENERAL A post shipment facility called Finance Against
Export Bill (conventionally “Export Bills Purchased Limit EBP”)
• Bills
• Negotiation
• Discounting
• Financing against Foreign Bill purchased.
 IMPORT RELATED FACILITIES
• LC sight Limit
• LC DA limit
• FIM
• Forced FIM
• Forced PAD
• TR/FATR
 Breach of Contract & Fraud
• Breach of contract occurs when one party fails to
uphold their end of a contractual agreement
• To prove fraud, two things must exist:
• One party was knowingly misrepresenting material
facts
• One party was intentionally attempting to defraud or
deceive the other party
 REMEDIAL FORUMS
Nature of Dispute Forum

Property related issues, Breach of Agreement to sell, Civil Court

Inheritance, succession
Marriage Contracts, Dowery, Child Custody Family Court in Civil Court

Inter-personal civil breach of contractual obligation Civil Court

(business related)
Banking related breach of Contract Banking Court & High Court of Banking Jurisdiction.

Companies related winding up, shareholders and Companies Bench at High Court
directors issues
Breach of Human Rights Writ Petition High Court

Any matter of Public Importance Supreme Court

TYPES OF WRIT PETITION
Type Description
Habeas Corpus To have the body of.’ This writ is used to enforce the fundamental right of individual liberty against
unlawful detention.
Mandamus The literal meaning of this writ is ‘We command.’ This writ is used by the court to order the public
official who has failed to perform his duty or refused to do his duty, to resume his work. Besides
public officials, Mandamus can be issued against any public body, a corporation, an inferior court, a
tribunal, or government for the same purpose.

Prohibition ‘To forbid.’ A court that is higher in position issues a Prohibition writ against a court that is lower in
position to prevent the latter from exceeding its jurisdiction or usurping a jurisdiction that it does not
possess. It directs inactivity.

Certiorari The literal meaning of the writ of ‘Certiorari’ is ‘To be certified’ or ‘To be informed.’ This writ is
issued by a court higher in authority to a lower court or tribunal ordering them either to transfer a
case pending with them to itself or quash their order in a case.

It is issued on the grounds of an excess of jurisdiction or lack of jurisdiction or error of law. It not
only prevents but also cures for the mistakes in the judiciary.
Quo-Warranto The literal meaning of the writ of ‘Quo-Warranto’ is ‘By what authority or warrant.’ Supreme Court
or High Court issue this writ to prevent illegal usurpation of a public office by a person. Through this
writ, the court enquires into the legality of a claim of a person to a public office
 BANKING-STEP IN RECOVERY AND APPLICABLE LAW
STEP
Illegal possession/sale/ alienation of Mortgaged Property
Sale of moveable (pledged) property
Sale of Moveable (other than pledged) property
Sale of Immoveable Property
Filing of civil banking suit
Filing of criminal complaint in case of dishonored
cheque
Sale of immoveable property
Auctions and objection
LAW
Section 20 FIO 2001.
Section 176 of Contract Act
Section 19 of FIO 2001 read with FIO Rules 2018
after decree
 Section 15 of FIO 2001 read with FIo rules 2018
(before decree- from banking Court)
 Collector/ Tehsildar/ Mukhtiarkar under Land
revenue Act 1967
 Section 9 FIO 2001
 For NAPHDA related properties- With Adjudicator.
FIO 2001 (section 20)
 FIO 2001 (section 19) after decree
 Collector/ Tehsildar/ Mukhtiarkar under Land
revenue Act 1967
FIO 2001, objections to be filed under Order 21 Rule 67,
68, 90
 BANKING COURT PROCEEDINGS
• Plaint (section 9) with applications under section 16 and section 151 of CPC
• Permission to Leave & Appear to Defend (PLA). (section 10)
• Interim Decree under Section 11/ Interim or Final Decree under section 14 (mortgage based)/PLA
allowed
• If PLA allowed then following steps will be observed. If decree is issued it will convert into
execution.
• Framing of Issues
• Questions of Fact
• Questions of Law
• Arguments
• Witnesses
• Decree
• Appeal
• Single Bench High Court
• DB High Court (Intra Court Apeal)
• Supreme Court
• Execution. (section 19) with or without intervention of court.
• Criminal Complaint under section 20
.

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