ISLAMABAD, March 30: The Supreme Court on Tuesday issued notices to the federal government, the Privatization Commission, and Aga Khan Fund, on a petition challenging the privatization of Habib Bank Limited.

The court asked the respondents to explain their position with regard to allegations that the whole privatization process of the bank smacked of non-transparency.

The Supreme Court bench comprising Justice Iftikhar Muhammad Chaudhry, Justice Rana Baghwandas and Justice Raza Khan on Tuesday conducted preliminary hearing of the constitutional petition filed by Dr Akhtar Hassan Khan, a former secretary of Planning Commission.

The SC, in its short order, said it had been persuaded by Advocate Ikram Chaudhry, counsel for the petitioner, to issue notice to the respondents - Federation of Pakistan through Cabinet Committee for Privatization, Chairman Privatization Commission, Habib Bank Limited, Aga Khan Fund for Development, and Central Insurance Company Limited to submit their concise statement answering questions raised in the petition in two weeks.

The SC office will fix the case for next hearing after receiving reply from the respondents within two weeks. The court also held that the issue of maintainability of the petition, which has been filed under the original jurisdiction of the court (Article 184-3), shall be taken up on the next date along with the issues raised in the petition.

A petition seeking stay of handing over of the HBL to the Aga Khan Fund was withdrawn by the petitioner. The petitioner's counsel said the privatization of HBL "is neither transparent nor in the national interest."

After short-listing of three bidders, the government gave benefits of Rs18.84 billion to the HBL. If the same benefits had been announced before asking for Expression of Interest, the response would have been much greater and multinational banks would have expressed interest.

To make the HBL attractive for privatization, the ECC approved issuance of bonds amounting to Rs9.84 billion against income tax refund due to HBL. The ministry of finance also authorized transfer of Rs9 billion of HBL bad debts to the Corporate and Industrial Restructuring Corporation (CIRC).

"The timing of the announcement of the benefit of Rs18.84 billion to the HBL made the whole exercise non-transparent and suspicious." The government had earlier sunk Rs18 billion into the bank to make it viable. Hence the government had poured in Rs36.8 billion in HBL and sold it for Rs22.4 billion at a loss of Rs14.4 billion, he stated.

The petitioner held that the decision to sell the bank on December 29, 2003, before waiting for the balance sheet for the year 2003, which appeared on January 31, 2004, showed that the transaction was not transparent.

The net assets of the HBL increased from Rs12.8 billion in 2001 to Rs23.7 in 2003. "Hence the highest bid price is less than the current value of the net assets."

Moreover, the bidders have been asked to pay only 50 per cent up front in cash and the remaining amount in two instalments in the next two years. "This favour was not shown in the case of UBL and other privatizations. Obviously, the remaining Rs11 billion will be paid out of tax bonds of Rs9.8 billion given to the bank.

The entire transaction from the meeting of the ECC to conveying acceptance to the bidder was completed in two weeks. He prayed the court to declare the acceptance of bids and its approval as illegal, void and without legal authority.

The petitioner has prayed the court to give direction to the respondent No 1 and 3 to make arrangements for assessing the value of total assets of Habib Bank, including its goodwill, and submit a detailed and comprehensive report with documents before the apex court for the scrutiny and appraisal in accordance with the law and for the safeguard of rights of the public at large.