Lahore High Court Quashes FIR in Financial Dispute: Affirms Banking Courts’ Exclusive Jurisdiction  

Islamabad 28-02-2025: The Lahore High Court (LHC) has issued a landmark ruling in [Writ Petition No. 48137/2024], quashing an FIR filed under Section 489-F of the Pakistan Penal Code (PPC) for a dishonored cheque issued in repayment of a financial obligation. The Court held that such matters fall exclusively within the jurisdiction of Banking Courts under the Financial Institutions (Recovery of Finances) Ordinance, 2001 (FIO) and cannot be prosecuted under general criminal law.  

The dispute arose when Finja Lending Services Limited (FLSL), a Non-Banking Finance Company (NBFC), lodged [FIR No. 1127/2024] against accused under Section 489-F PPC at Police Station Race Course, Lahore. The complaint alleged that accused had issued a cheque for Rs. 15 million to repay a financial obligation, which was dishonored upon presentation.  

The Petitioner challenged the criminal proceedings under Article 199 of the Constitution, arguing that FLSL, being an NBFC, falls under the FIO’s regulatory framework. Therefore, any prosecution for dishonoring a cheque related to loan repayment should be initiated before a Banking Court under Section 7 of the FIO, rather than through an FIR under Section 154 of the Code of Criminal Procedure (Cr.P.C.).  

Presiding over the case, Mr. Justice Tariq Saleem Sheikh examined the regulatory framework governing NBFCs and Banking Courts and concluded that:  

1. The FIO, 2001, under Section 7, vests exclusive authority in Banking Courts to adjudicate matters involving dishonored cheques related to loan repayments.  
2. Section 20(4) of the FIO criminalizes dishonored cheques issued in connection with financial obligations, and such cases cannot be prosecuted under Section 489-F PPC.   
3. The Court observed that not every dishonored cheque constitutes a criminal offense under Section 489-F PPC. If the cheque was issued towards the repayment of finance extended by an NBFC, then the provisions of the FIO apply, not the PPC.  
4. As a result, the FIR against the petitioner was quashed as it was improperly registered.  
5. While quashing the FIR, the Court clarified that FLSL is not precluded from seeking legal recourse. It may file a complaint under Section 7 of the FIO before the appropriate Banking Court for prosecution under Section 20(4) FIO.  

The judgment aligns with established case law affirming the exclusive jurisdiction of Banking Courts in financial matters:  

1. Hafiz Muhammad Amir Vs. Banking Court-II, Lahore (PLD 2020 Lahore 228): Held that cases involving financial obligations must be tried in Banking Courts, not general criminal Courts.  
2. Asif Javed Vs. The State (2021 SCMR 179): Ruled that criminal prosecution under Section 489-F PPC is not applicable in disputes covered by the FIO.   
3. Messrs MCB Bank Ltd. Vs. Raja Muhammad Iqbal (PLD 2017 SC 622): Confirmed that Banking Courts have exclusive jurisdiction over financial recovery disputes.  

This ruling is a significant legal precedent that prevents the misuse of Section 489-F PPC in financial disputes where the FIO applies. By reaffirming the exclusive jurisdiction of Banking Courts, the decision ensures that borrowers cannot be subjected to wrongful criminal prosecution and that financial institutions must follow the proper legal channels for recovery of finances.  

Legal experts believe this judgment will:  

1. Reduce frivolous FIRs against borrowers in financial transactions.  
2. Ensure adherence to the Banking Courts’ procedural framework under the FIO, 2001.  
3. Provide clarity on the legal classification of NBFCs and their role in Pakistan’s financial sector.  

The Lahore High Court’s decision serves as a cautionary ruling against circumventing the Banking Court’s jurisdiction and upholds the legal sanctity of financial laws governing lending institutions.  

The judgment in Safeer Hussain Vs. Capital City Police Officer reinforces a crucial legal principle. When a dishonored cheque is issued towards the repayment of finance extended by a financial institution, the matter falls under the jurisdiction of Banking Courts and must be dealt with under the FIO, not general criminal law.

Powered by Froala Editor