KARACHI: JS Bank Ltd said on Monday it was extending the timeline for making a public announcement to buy more than 51 per cent shares and control of BankIslami Pakistan Ltd by 90 days.

The JS Group consisting of 20-odd companies, including JS Bank Ltd, is looking to acquire a controlling stake in the Sharia-compliant bank. The acquirer has already signed a share purchase agreement, but is awaiting certain regulatory approvals to proceed further.

It made a public announcement of its intention to buy the majority shareholding of BankIslami Pakistan on Nov 17, 2022. However, it hasn’t been able to make the mandatory public announcement of the offer within the 180 days ending on May 16.

SHC orders status quo

The transaction has faced multiple legal challenges, with the latest roadblock emerging last Friday (May 12) when the Sindh High Court once again directed the acquirer to maintain the status quo with respect to the shareholding and management of the target entity.

The interim order is in Suit 674 of 2023, which is separate from another stay order that a different set of BankIslami Pakistan shareholders received as part of Suit 318/2023 on March 6.

The latter suit was challenged by JS Bank and Jahangir Siddiqui and Company Ltd in HCA 72/2023, which was subsequently disposed of through a consent order on May 5 requiring that the parties concerned should “argue the stay application” afresh before a single judge on June 2.

The same consent order observed that the status before March 6 would prevail until the decision of the application.

However, a new set of shareholders of BankIslami Pakistan went to court and alleged that JS Bank was acting against the consent order. According to the plaintiffs, JS Bank announced in violation of the consent order that it would hold an extraordinary general meeting on May 19 for approving the impugned acquisition of shares and control of BankIslami Pakistan.

The impugned acquisition cannot be proposed, approved or acted upon as the parties are obliged under the consent order to maintain the status existing before May 6, according to the plaintiffs.

JS Bank “ought to have waited” until June 2 when the matter will be heard by the single judge in view of the order passed by the Division Bench, they maintained.

The shareholders of BankIslami who filed the latest suit against seven parties, including the regulators, hold that one business group cannot control more than one bank in view of the State Bank of Pakistan (SBP)-issued IBD Circular 2 dated April 29, 2004. They also maintain the restriction on a business group owning more than one bank is also present in the SBP-issued Prudential Regulations for Corporate/Commercial Banking.

Published in Dawn, May 16th, 2023