LAHORE - A five-judge full bench of the Lahore High Court will hear on September 13 the petitions filed against the reintroduction of Section 15 to the Financial Institutions (Recovery of Finances) Ordinance 2001.

Lahore High Court (LHC) Chief Justice Sardar Muhammad Shamim Khan on Tuesday fixed the case for hearing on a request made by Prime Minister Imran Khan.

Petitioners Muhammad Shoaib Arshad and others had challenged reintroduction of Section 15 of Financial Institutions (Recovery of Finances) Ordinance 2001, which empowers banks to sell mortgaged property in case of default in payment by a customer.

They submitted that Section 15 of Financial Institutions (Recovery of Finances) Ordinance 2001, had been declared ultra vires of the constitution by the Supreme Court and the LHC through two different judgments. However, the section was reintroduced in the Ordinance through Financial Institutions (Recovery of Finances) (Amendment) Act 2016 and it was not sustainable in the light of said judgments.

Section 15 empowers banks to sell mortgaged property

Addressing a ceremony in connection with Naya Pakistan Housing Programme on July 31, the prime minister had made the request to the LHC chief justice to immediately fix the case, pending since long.

The prime minister had stated that an early decision on the issue would enable the banking sector extend loaning facilities and ease mortgage process.

The matter was initially heard in 2016 by then LHC Chief Justice Syed Mansoor Ali Shah who suspended the new section 15.

A LHC full bench heard the matter on May 29, 2019 but it adjourned the hearing till July due to absence of attorney general and counsel for petitioners.

The five-member bench will be headed by Justice Mamoon Rashid Sheikh and consist of Justice Shahid Waheed, Justice Abid Aziz Sheikh, Justice Jawad Hassan and Justice Asim Hafeez.

The Section 15 empowers banks to sell mortgaged property in case of default in payment by a customer. Sub-Section (2) of Section 15 provides, “In case of default in payment by a customer, the financial institution may send a notice to 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, continues 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.”

Section 15(3) says “When a financial institution serves a final notice of demand, all powers of the mortgagor in regard to recovery of rents and profits from the mortgaged property shall stand transferred to the financial institution until such notice is withdrawn and it shall be the duty of the mortgagor to pay all rents and profits from the mortgaged property to the financial institution.”