Supreme Court upholds privatisation of HBL * Court declares privatisation of the bank was conducted in accordance with law and in a transparent manner

Supreme Court upholds privatisation of HBL

* Court declares privatisation of the bank was conducted in accordance with law and in a transparent manner

Via Daily Times - By Hasnaat Malik

ISLAMABAD: The Supreme Court has rejected the different petitions against the privatisation of Habib Bank Limited (HBL) and declared that the privatisation of the bank was conducted in accordance with law and in a transparent manner.

A three-member Supreme Court bench comprising Justice Tassaduq Hussain Jillani, Justice Mian Saqib Nisar and Justice Ejaz Afzal Khan dismissed the pleas filed by Dr Akhtar Hassan Khan, a former secretary of the Planning Commission, Watan Party and others challenging the HBL’s privatisation.

SM Zafar and Barrister Syed Ali Zafar, counsels for Aga Khan Fund for Economic Development (AKFED) submitted that the Privatisation Commission had, after full scrutiny, qualified AKFED as the eligible party on account of its banking and related business experience and approved the sale of 51 percent shares of the HBL after conducting thorough and proper procedure in which nothing was hidden and all laws were followed and applied.

They further submitted that the best bid was made by AKFED, which was much above the reserve price set by the Privatisation Board.

Aitzaz Ahsen, counsel for the Privatisation Commission argued that the decision to privatise HBL was taken keeping in mind the best interests of the nation and the whole process of the HBL privatisation was transparent.

After hearing the parties, the court dismissed the pleas holding that the privatisation was done after fulfilling the requirements of law and no illegality had taken place.

The petitioners had contended that the whole privatisation process of the bank that had taken place in 2003 smacked of non-transparency. After short-listing of three bidders, the government had given benefits of Rs 18.84 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, the petitioners stated.

According to the petitioners, to make the HBL attractive for privatisation, the ECC had approved issuance of bonds amounting to Rs 9.84 billion against income tax refund due to HBL. The Ministry of Finance also had authorised transfer of Rs 9 billion of the HBL bad debts to the Corporate and Industrial Restructuring Corporation (CIRC).

“The timing of the announcement of the benefit of Rs 18.84 billion to the HBL made the whole exercise non-transparent and suspicious,” they had contended.

They had submitted that the government had earlier sunk Rs 18 billion into the bank to make it viable. Hence the government had poured in Rs 36.8 billion in the HBL and sold it for Rs 22.4 billion at a loss of Rs 14.4 billion, they had stated.

The petitioners 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 Rs 12.8 billion in 2001 to Rs 23.7 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 percent upfront in cash and the remaining amount in two installments in the next two years. “This favour was not shown in the case of the UBL and other privatisations. Obviously, the remaining Rs 11 billion will be paid out of tax bonds of Rs 9.8 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, the petitioners submitted, and asked the court to declare the acceptance of bids and its approval as illegal, void and without legal authority.

The petitioners had also asked the court to give direction to the respondents to make arrangements for assessing the value of total assets of the bank, including its goodwill, and submit a detailed and comprehensive report with documents before the apex court for scrutiny and appraisal in accordance with the law.

Posted in: Aga Khan Development Network