ISLAMABAD: Agreeing to a three-member commission to look into the issue of billions of rupees of loans written off by banks over the past four decades, the Supreme Court has, in the pursuit of justice, also reached out to those who defaulted on their loans to hear their points of view.

The commission and its terms of reference have been suggested by the State Bank.

“If anyone among the borrowers or customers of banks has any reservation over the formation of the commission, the terms of reference or the hearing of the case by the apex court, he may enter appearance personally or through a counsel with his objections, otherwise the court will proceed with the matter,” a two-judge bench comprising Chief Justice Iftikhar Mohammad Chaudhry and Justice Ghulam Rabbani said in an order issued on Monday. It put off the hearing till April 11.

The court has taken up a suo motu notice on media reports that the central bank quietly allowed commercial banks to write off non-performing loans of Rs54 billion under a scheme introduced by former president Pervez Musharraf. The amount swelled to Rs256 billion after the period of written-off loans increased till Dec 2009 (from 1971).

Former Supreme Court judge Justice (retd) Saleem Akhtar has consented to head the committee also comprising former SBP director general Rashid A. Chughtai and Associate Chartered Accountant Yousaf Adil.

The commission, when formed under the Banking Companies Ordinance, 1962, will have the power to summon and enforce attendance of a person, examine him on oath, can require the discovery and production of any document, receive evidence on affidavits and examine witnesses or documents.

Opinions of the borrowers who got their loans written off were sought after the court was informed that except for Indus Sugar Mills Limited, Redco Group, Mohib Textiles Mills Limited and West Pakistan Limited none of the business houses had presented their points of view before the court.

The court directed the banks to run advertisements in both English and Urdu newspapers.

The court also incorporated proposals of Deputy Attorney General K.K. Agha in the terms of reference for the commission. He suggested that the bankers who had allowed the write-offs without any justification should also be penalised. The commission, he added, should also hold responsible the bankers who had extended short- or long-term loan facility to borrowers on inadequate securities and recommend what steps the court should take against them and persuade the government to make legislation to discourage such tendency in future.

Similarly, the commission should suggest measures required to be taken to safeguard the amount of loans in future because in most cases arbitrary concessions were extended either on political or other considerations.

Mr Agha sought action for criminal negligence against those who had waived the loans contrary to the SBP’s Circular 29 issued in 2002. The commission should also consider whether the value of properties given as securities to banks by the borrowers was correctly evaluated and what the role of valuators is.

The terms of reference submitted by Advocate Syed Iqbal Haider, the counsel for the SBP, said the commission should examine justification of the amount written off by the banks in the sum exceeding Rs100 million in the first instance and then the loans exceeding Rs10 billion.

After identification of the written-off loans, the commission should direct the bank concerned to institute appropriate proceedings in courts of competent jurisdiction for recovery of the amount, including proceedings under the Financial Institutions Ordinance 2001 or the NAB Ordinance as may be deemed necessary.

“In cases where fresh financing was allowed to defaulters for the purposes other than revival of sick units by misusing relevant banking rules, the SBP should direct the borrowers to return the written-off loans within three years,” the ToR said.