Petition against State Bank of Pakistan IN THE LAHORE HIGH COURT AT LAHORE Writ Petition No. _______/2013 Dr.Humaira Awais Shahid, d/o Abdul Hameed Bhatti, r/o 106-Sarwar Colony, Cantt; Lahore. PETITIONER VERSUS 1. Federation of Pakistan through its Ministry of Finance, Room No.514, Block “Q”, Finance Division, Pak Secretariat, Islamabad. 2. The Monetary & Fiscal Policy Coordination Board, through its Secretary, State Bank of Pakistan, Lahore 3. State Bank of Pakistan and its board of directors through its Governor, Shah Rah-e- Quaid-a- Azam, The Mall Road, Lahore RESPONDENTS WRIT PETITION UNDER ARTICLE 199 READ WITH ARTICLES 3, 8,9, 24 & 25 OF THE CONSTITUTION OF ISLAMIC REPUBLIC OF PAKISTAN , 1973, Respectfully Submit herewith: That thebrief facts leading to the filling of the instant writ petition are: 1. That inflation is rampant in the country and even the official price statistics that understate the actual rise in prices show that during the last decade inflation has remained in double digit. 2. That the government has increased its borrowing from the State bank of Pakistan recently and that the consequent rise in inflation is a cause of immediate concern and that a high inflation puts a burden on the lives of the poor people whose meager earnings in nominal terms are reduced stealthily by high inflation which is an implicit tax collected by the state from the poor without lawful authority. The copy of the news publication is appended here with as ANNEXURE “A”. 3. That the governments, chosen by the people or imposed on them, have been spending more than their tax collection and financing the difference by internal and external borrowing for a long time. Initially borrowing was found to be a solution of the problem of shortage of tax revenue compared with expenditure. With the passage of time, that solution became a part of the problem. The cumulative amount of borrowing has reached a stage where the servicing of the outstanding debt has become the single largest item of expenditure, which in combination with defense expenditure, leaves very little revenue for other purposes. 4. That the main cause of inflation is that the State Bank has been printing notes indiscriminately on the instructions of thegovernment which has also been borrowing excessively from the commercial banks to meet its expenditure rather than imposing direct taxes on the rich according to their ability to pay and/or controlling wasteful expenditure. That the stance of the petitioner is further strengthened from the perusal of the State Bank of Pakistan’s Economy- Third Quarterly report 2012-2013. The copy of the same is appended here with as ANNEXURE “B”. 5. That inflation is a regressive and destructive form of taxation and every country has set up a central bank to follow a monetary policy that keeps money supply under control and thereby keeps inflation incheck and that the State Bank was set up as the central bank of the country to fulfill this responsibility. The copy of the news publication under the title of “Inflation -causes and cure” is appended here with as ANNEXURE “C”. 6. That the State Bankof Pakistan has failed to discharge its statutory duty to control money supply and inflation and to put a prudent limit on government borrowing from the State Bank of Pakistan. The money supply has increased excessively in the last several years due to excessive note printing by the State Bank of Pakistan inviolation of its statutory responsibility and excessive government borrowing from commercial banks. The State Bank board of directors has failed to exercise its legal authority to “determine and enforce” a limit on government borrowing.The copy of the news article with the title of “ Govt. borrows record Rs. 804Billion from SBP” published in daily News in its 23rd September is appended herewith as ANNEXURE “ D”. 7. That Inflationary expectations seem to have taken root creating a momentum for price increases. Now most of the people can barely eat two-square meals a day. They cannot pay the school fees of their children and are unable to afford medical treatment for their aged parents. Millions and millions of people are suffering under the burden of rising costs. Faced with these circumstances they feel their life is not worth living any longer and are committing suicide .The country has entered a vicious circle in which actual price pressures and inflationary expectations have begun to feed each other. The ravages of high inflation are well known and those include deeper income inequality and poverty, falling saving and rising consumption, wide spread speculation, hoarding and black marketing, balance of payment vulnerability, social tensions and political instability. 8. That the central bank continues to print money with consequent inflation to finance the rising government spending. The recent provisional data on the monetary aggregates showed that the government has been printing Rs 5.8 billion per day with Rs. 242 million per hour and Rs 4 million every minute. It is pertinent tobe noted here that containment of money supply within the safe limits is the responsibility of Respondent No. 3 i.e. State Bank of Pakistan. Under the Provisions of Section 9A of the SBP Act, it is the legal obligation of SBP to keep money supply (= liquidity) within safe limit to have a control on inflation. It is further pertinent to be noted here that for the purpose section 9 A gives to the SBP power todetermine and enforce the limit on government borrowing from the SBP but it has failed to do so violating its statutory responsibility, hence resulting in a recent sharp rise in inflation causing gross hardship to the citizens of Pakistan by aggravating inflation. 9. That it is further stated here with respect that, the Respondent No.2 permitted rampant borrowing opportunities to the government, which not only gave exponential rise to inflation but has badly impacted the economic growth and private sectorlending. The unprecedented increase in government borrowing is in stark contrast to the provisions of section 9 C of the State Bank Act . 10. That the double digit inflation created by the ministry of finance and the State Bank of Pakistan in violation of their statutory responsibilities is an abuse of the concept of Fundamental Guarantees enshrined in the Constitution of Pakistan, it is peculiar to be noted here that the Provisions of Article. 3, 8, 9, 24 &25 of the Constitution categorically restrict the deprivation of Property of Citizens except in accordance with law. Whereas the increase in inflation directly results in loss of purchasing power of the citizens hence it is a hidden tax which the subjects are bound to pay despite the fact that it has not been imposed by the Parliament and in fact parliament passed amendments in the State Bank of Pakistan Act to ensure that taxation through inflation does not take place. 11. That the nature, scheme and failure of the State Bank of Pakistan to act in accordance with the provisions of State Bank Act and thereby failing to control inflation rate in the Country is unconstitutional, illegal, confiscatory, coercive and exploitative tools that financially cripple the law abiding tax payer and in so doing blatantly disregard binding dictates of law and the Constitution . the same are therefore liable to be declared unconstitutional , illegal and ultra vires inter alia on the following GROUNDS a. That direct impact of ignoring merit andregulating criteria prescribed by the State Bank Act of 1956 is causing harshly adverse consequences to the life of ordinary citizen including unjustified inflation in retail prices for consumers, thus depriving the people of Pakistan of their incomes, assets , quality of life and dignity save in accordance withthe provisions of Article 14 of the Constitution of Islamic Republic of Pakistan. b. That it is submitted here with respect that developing sound and strong public institutions was a constitutional obligation with its foundations pillared in democracy, equality, tolerance, social, economic and political justice. Institutional design and the configuration of its governance must be sensitive to the Fundamental Rights of the people and its vision aligned with the Principles of Policy. Such broad principles translated into institutional literature required the public institution to be open, equitable, accessible, transparent, rule-based, participatory and inclusive. Public institutions were trustees of the people and worked for the advancement of public interest. c. That it is further stated here with respect that to be inclusive, economic institutions must feature secure private property, an unbiased systemof law, and a provision of public services that provided a level playing field in which people could exchange and contract. Institutions opposed to the properties of an inclusive institution were called extractive institutions -extractive because such institutions were designed to extract incomes and wealth from one subset of society to benefit a different subset. d. That it operates under the State Bank of Pakistan Act, 1956, which has been amended by the parliament several times to strengthen its authority to regulate and control money supply and keep inflation under control. It’s most relevant provisions from the point of view of formulation and conduct of monetary policy are in section 9A, 9B, 9C and 46Bof the State Bank of Pakistan Act. e. That section 9A (b) of the SBP Act of 1956, mandates the board of directors of the State Bank to “determine and enforce, in addition to the overall expansion of liquidity, the limit of credit to be extended by the Bank to the Federal government, provincial governments and other agencies of the federal and provincial governments for all proposes” to keep money supply and inflation under control; it may be understood that expansion of liquidity means the same thing as money supply in economic jargon f. That section 9B constituted a Board for the coordination of fiscal, monetary and exchange rate policies which is mandated to meet every quarter for the purpose. g. That the board is a coordinating board and isprohibited by section 9A (6) from “taking any measures that would affect theautonomy of the State Bank of Pakistan as permitted in this Act”. h. That section 9C was added through an amendment passed bythe parliament on March 13, 2012 mandating that “federal government borrowingfrom the Bank shall be such that at the end of each quarter they shall bebrought to zero” and further that in the case of failure of the government todo so “the Finance Minister shall place before the parliament giving detailedjustifications for the said failure”. i. That the Respondent No.1 has violated the provisions ofsection 9C (1)of the State Bank Act by continuing to borrow from the State Bankof Pakistan without bringing it down to zero each quarter as required bysection 9C of the SBP Act. j. That the Respondent No.1 has violated the provisions ofsection 9C (3) of the State Bank of Pakistan Act by not placing before theparliament justification for its failure to do so. k. That the Respondent No.1 and the Respondent No. 2 have violated section 9B of the State Bank Actby not holding regular meetings of the Monetary and Fiscal PoliciesCoordination Board every quarter. l. That Respondent No.1 has violated section 46 B of theState Bank Act by issuing instructions to commercial banks in contravention ofthe prohibition contained therein. m. That due to the above violations, money supply was allowed to increase much more excessively than the genuine requirements of the economy which has caused a high rate of inflation . n. That it is a settled law that no pecuniary burden can beimposed upon the subjects of this country by whatever name it may be called, whether tax, due, rate or toll except upon clear and distinct legal authority established by those who seek to impose the burden. That it is further significant to be noted here that it is again a cardinal principle of Taxation law that the charge, application and administration of the Tax must be well defined and prescribed so that the payer and the collector both must know whatone has to pay and what the other has to gather, that it is further peculiar tobe noted here that no tax can be imposed on the people of Pakistan without being notified by the Parliament, whereas in actual the people of Pakistan are paying constantly a hidden tax named as Inflation for which law provides no compensation. o. That apart from the glaring legal infirmities inherent in nature, scheme and rise in unjustified Inflation over the couple of years in Pakistan, the same carries draconian and devastating financial ramifications for the law abiding tax payer. The nature, scheme, and im board of directors of the State Bank to “determine and enforce, in addition to the overall expansion of liquidity, the limit of credit to be extended by the Bank to the Federal government, provincial governments and other agencies of the federal and provincial governments for all proposes” to keep money supply and inflation under control; it may be understood that expansion of liquidity means the same thing as money supply in economic jargonf. That section 9B constituted a Board for the coordination of fiscal, monetary and exchange rate policies which is mandated to meet every quarter for the purpose.g. That the board is a coordinating board and isprohibited by section 9A (6) from “taking any measures that would affect the autonomy of the State Bank of Pakistan as permitted in this Act”.h. That section 9C was added through an amendment passed by the parliament on March 13, 2012 mandating that “federal government borrowing from the Bank shall be such that at the end of each quarter they shall bebrought to zero” and further that in the case of failure of the government todo so “the Finance Minister shall place before the parliament giving detailedjustifications for the said failure”.i. That the Respondent No.1 has violated the provisions ofsection 9C (1)of the State Bank Act by continuing to borrow from the State Bankof Pakistan without bringing it down to zero each quarter as required bysection 9C of the SBP Act.j. That the Respondent No.1 has violated the provisions ofsection 9C (3) of the State Bank of Pakistan Act by not placing before theparliament justification for its failure to do so.k. That the Respondent No.1 and the Respondent No. 2 have violated section 9B of the State Bank Actby not holding regular meetings of the Monetary and Fiscal Policies Coordination Board every quarter.l. That Respondent No.1 has violated section 46 B of theState Bank Act by issuing instructions to commercial banks in contravention ofthe prohibition contained therein.m. That due to the above violations, money supply was allowed to increase much more excessively than the genuine requirements of the economy which has caused a high rate of inflation .n. That it is a settled law that no pecuniary burden can beimposed upon the subjects of this country by whatever name it may be called, whether tax, due, rate or toll except upon clear and distinct legal authority established by those who seek to impose the burden. That it is further significant to be noted here that it is again a cardinal principle of Taxation law that the charge, application and administration of the Tax must be well defined and prescribed so that the payer and the collector both must know what one has to pay and what the other has to gather, that it is further peculiar to be noted here that no tax can be imposed on the people of Pakistan without being notified by the Parliament, whereas in actual the people of Pakistan are paying constantly a hidden tax named as Inflation for which law provides no compensation. o. That apart from the glaring legal infirmities inherent in nature, scheme and rise in unjustified Inflation over the couple of years in Pakistan, the same carries draconian and devastating financial ramifications for the law abiding tax payer. The nature, scheme, and imed inflation is therefore, punitive and confiscatory. This is especially so for the law abiding citizenry of Pakistan who, after having duly paid their taxes and contributed to the public welfare their entire lives, are thrust into financial ruin by the loss of purchasing power due to inflation. p. That the failure of the State Bank ofPakistan to act in accordance with the provisions of State Bank Act and therebyfailing to control inflation rate in the country is un-constitutional ,illegal, confiscatory, coercive and exploitative tools that financially cripple the law abiding tax payer and in so doing blatantly disregard binding dictates of law and the Constitution, the same are therefore liable to be declared unconstitutional, illegal and ultra vires. q. That the titled writ petition challenges the vires, validity and constitutionality of the impugned suppression of purchasing power(inflation) in as much as devaluation of Pakistani Rupee, therefore pursuant to law settled by the Honourable Superior Courts of the country, the Constitutional jurisdiction is the only remedy available to the petitioner,hence the titled writ petition. That In view of the above, it is most respectfully prayed that this Honourable Court may kindly be pleased to: a. Declare that the fundamental economic rights of poor people are being trampled by high inflation as a means of financing government expenditure instead of tax reforms to collect taxes from the people according to their ability to pay. It is further most humblyrequested to declare that the impugned (inflation) loss of purchasing power ofcitizens as violative of the principles of Natural Justice and an Extortion onthe part of the Government . b. Declare inflation as a Tax, illegally collected from the poor through price hike without the approval of the National Assembly which is the only authority under the law to impose a tax. It is further prayed that the this Honourable Court may very graciously declare, rampant borrowing by the Government of Pakistan from the State Bank of Pakistanon a frequent basis as ultra vires tothe fundamental rights of the petitioner, illegal and unconstitutional . c. Direct SBP to limit note printing that can ensure that inflation does not exceed low single digit and exercise its lawful authority to refuse to the government excessive lending that causes it to print notes and to direct Respondent No.1 to stop interference in the SBP autonomy and let it fulfill its statutory responsibility of controlling money supply and inflation. d. Direct Respondents No.2 to adhere to the SBP Act, 1956 so as to relieve poor people from the miseries of inflation and to lower government borrowing, and reduce money supply and thereby bring inflation down. It is further most humbly prayed that a direction may very kindly be issued to Respondent No. 2. to act as an autonomous central bank as provided for in the SBP Act and fulfill its statutory responsibility to regulate private liquidity which is a jargon used for money supply. e. Direct Respondent No. 1 & 2 to meet quarterly as required by the SBP Act, 1956 to coordinate monetary, fiscal andexchange rate policy. A further direction may be issued to the Respondent No. 1 to reduce its borrowing from the SBP to zero at the end of each quarter andtake steps to reduce the outstanding amount of debt every year to bring it to zero within the stipulated period. f. Direct Respondent No. 1 to report tothe parliament the reasons for its failure to act in consonance with the provisions of SBP Act, 1956 in the past g. Direct the Respondent No. 1 & 2 tostrictly adhere to the mandate contained in the provisions of Section 9 (A),(B) & (C) read with Section 46 (B) of the State Bank Act. h. That while keeping in view of thepeculiar circumstances of the instant matter, any other relief that this Honourable Court deems just and proper may very graciously be extended in favor of the petitioner. PETITIONER THROUGH Fahad Ahmad Siddiqi Advocate High Court Qadeer Ahmad SiddiquiLaw Associates Ground Floor, Siddiqui Plaza, 7- Turner Road, Lahore Dated: 16.12.2013 Reliance is placed upon Article 3 of the Constitution of Islamic Republic of Pakistan Article 8 of the Constitution of Islamic Republic of Pakistan Article 9 of the Constitution of Islamic Republic of Pakistan Article 14 of the Constitution of Islamic Republic of Pakistan Article 24 of the Constitution of Islamic Republic of Pakistan Article 25 of theConstitution of Islamic Republic of Pakistan Article 199 of the Constitution of Islamic Republic ofPakistan Section 9, 9(A), 9(B) & 9 (C) of State Bank of PakistanAct 1956 Section 46(B) of State Bank Act of 1956 2012 PLD 132 Supreme Court of Pakistan 2013 PLD 343 Lahore High Court
Posted on: Fri, 20 Dec 2013 18:25:22 +0000
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