Comment
By Mansoor Ahmad
LAHORE: There is a need to ensure that monetary fines or compensations are subject to either penal interest or linked to the value of gold or dollar when these fines were imposed so that delays in court decisions do not benefit the culprits.
For instance, if a bank wants to recover its loan by auctioning the mortgaged property of the defaulter it has to pass through a lengthy judicial process that could take even decades to decide. According to the law, the interest on the defaulted amount is suspended when the case goes to courts.
The defaulter uses every tactic to delay the case as much as possible. In the meantime, the value of the mortgaged property keeps increasing.
By the time the final auction is ordered, the value far exceeds the defaulted amount. The excess amount after deducting some charges and adjusting the defaulted amount is then given back to the defaulter.
This way, the bank is deprived of the income that it could have generated had the defaulted amount been paid in time; however, the defaulter benefits immensely.
A glaring example in this regard is the Ittefaq Steel Mill, spread over acres of land in the Kot Lakhpat industrial area. It was handed over to the banks to cover the default by the Sharif family.
The then prime minister in 1998 had announced this family decision. But the banks could not auction the land as many members of the Sharif family, including cousins of Nawaz Sharif systematically challenged the unilateral offer given by the prime minister.
The case lingered on for almost two decades. By that time the value of Ittefaq Steel Mill land increased manifold.
The defaulted amount was approximately Rs2.5 billion, while the land suitable for real estate development was worth much more. So after auction, the banks recovered their defaulted amount without any interest after 17-18 years, while the defaulters got many times more than the banks.
There are numerous cases against bank defaulters, tax demands against under filers, and fines imposed by regulators on various companies and associations that are pending in the courts for years. Those cases, even if decided immediately, would have much lower value than the date on which the fines were imposed.
When a case for recovery is filed, the courts should note the value of default or demand on the basis of the value of that amount in dollars or gold. After that, even if the interest payment remains suspended, the litigant would get at least the actual value of the default.
In 1998 for instance, the rupee was valued Rs54 against the US dollar. Today it is valued Rs124 against the greenback.
A fine of Rs54 in 1998 is equivalent to Rs124 in 2018. If this methodology is adopted the defaulters would never go for adjournments.
In 2003, the Competition Commission of Pakistan fined over Rs6 billion to the All Pakistan Cement Manufacturers Association for operating a cartel. The case is still pending in courts.
In 2003, the dollar was Rs58 and today it is Rs124. The value of fine today is Rs12.82 billion. Delays in decisions are depriving the exchequer of the real value of the penalty.
Speedy decisions on financial irregularities be it cartelisation, tax evasion or bank default would be deterrent for future misdeeds and a boon to the government finances.
An image from an Engro Connect meeting and the Jazz building seen in this image. — Engro webstie/X@Jazz/fileKARACHI:...
A group photo from the a Golden Jubilee event organised in honour of the 50 year partnership between Dr Reckeweg...
A woman picks a gold earring at a jewellery shop on May 24, 2023. — ReutersKARACHI: Gold prices rose by Rs500 per...
Seagulls sit on a lamppost beside shipping containers stacked at the Paul W Conley Container Terminal in Boston,...
A man dressed as Santa Claus stands in front of an illuminated Christmas tree at the all-inclusive Christmas market at...
Chairman CCP, Dr Kabir Ahmed Sidhu seen during the media workshop organised by the Competition Commission of...