THE
Establishment of the
Federal Bank for Cooperatives and Regulation of Cooperative Banking Act, 1977
Act No. IX of 1977
[9th
January, 1977]
An Act to provide for the establishment of a Federal Bank for
Cooperatives and
Whereas it is expedient to provide for
the establishment of a Federal Bank for Cooperatives and Regulation of
Cooperative Banking, and for matters ancillary thereto;
And whereas the Provincial Assemblies
of the North-West Frontier Province, the Punjab and Sind and Parliament,
exercising the powers of the Provincial Assembly of Baluchistan under Article
234 of the Constitution of the Islamic Republic of Pakistan, have passed
resolutions under Article 144 of the Constitution to the effect that Parliament
may be law regulate the matter of cooperative banking;
It
is hereby enacted as follows: ---
1. Short
title extent and commencement. --- (1)
This Act may be called the Establishment of the Federal Bank for
Cooperatives and Regulation of Cooperative Banking Act, 1977.
(2) It extends to the whole of Pakistan and also applies to the business of the
Bank transacted outside Pakistan
and to persons conducting such business.
(3) It shall come into force at once and
shall be deemed to have taken effect on the 9th day of October,
1976.
2, Definitions.
--- In this Act, unless there is
anything repugnant in the subject or context, ---
(a) “approved securities”
means securities in which a trustee may invest money under clause (a), clause
(b), clause (bb), clause (c) or clause (d) of section 20 of the Trusts Act,
1882 and such other securities as the Federal Government may, by notification
in the official Gazette, declare to be approved securities for purposes of this
Act;
(b) “Bank” means the Federal
Bank for Cooperatives established under section 5;
(c) “Board” means the Board
of Directors constituted under section 9;
(d) “Chairman” means the
Chairman of the Board;
(e) “Cooperative Bank” means
a ‘banking society’ as defined in the Explanation to sub-section (2) of section
7 of the Cooperative Societies Act, 1925 other than a Provincial Cooperative
Bank.
(f) “Cooperative Society”
means a society registered in Pakistan under any law for the time being in
force relating to registration of cooperative societies and a “primary
cooperative society” means such a society of which no other society is a
member;
(g) “borrower” means a person
who has obtained a loan from the Bank or a Provincial Cooperative Bank and
includes a surety or an indemnifier, but does not include the Federal
Government or a provincial Government;
(h) “demand liabilities”
means liabilities which are to be met on demand and “time liabilities”” means
liabilities which are not demand liabilities;
(i) “Director” means a
Director for the time being of the Board;
(j) “District judge”
includes, in respect of areas where a District Judge does not have unlimited
pecuniary jurisdiction in original civil suits, a High Court exercising
original civil jurisdiction;
(k) “family members” in
relation to a person means his spouse, dependent lineal ascendants and
descendents and dependent brothers and sisters;
(l) “loan” include an
advance, a cash credit, an overdraft, a packing credit, a bill discounted and
purchased, letter of credit or any other financial accommodation or engagement
provided by the Bank or a Provincial Cooperative Bank to a borrower;
(m) “Managing Director” means
Managing Director of the Bank and includes any person for the time being
discharging the functions of the Managing Director;
(n) “multi-unit cooperative
society” means a cooperative society to which the Multi-Unit Cooperative
Societies Act, 1942 applies and which ---
(i) is not a banking society
as defined in the Explanation to sub-section (2) of section 7 of the
Cooperative Societies Act, 1925; and
(ii) does not use as a part
of its name the word “Bank” or “Banking” or any of its derivatives;
(o)
“prescribed” means prescribed by rules;
(p)
“Provincial Cooperative Bank” means a cooperative
society the primary object of which is to make loans to the cooperative
societies which are its members and which is notified, for the purposes of this
Act, to the Bank by the Provincial Government of the Province within which the
cooperative society is registered or, until cooperative society is so notified,
any one of the following, namely: ---
(i)
the Baluchistan Provincial Cooperative Bank Ltd;
(ii)
the Frontier Provincial Cooperative Bank Ltd;
(iii)
the Punjab Provincial Cooperative Bank Ltd;
(iv)
the Sind Provincial Cooperative Bank Ltd;
(q)
“regulation” means a regulation made under this Act;
(r)
“rule” means a rule made under this Act;
(s)
“scheduled bank” has the same meaning as in the State
Bank of Pakistan Act, 1956;
(t)
“State Bank” means the State Bank of Pakistan established under the
State Bank of Pakistan Act, 1956.
3. Act
to override other laws. --- (1) Except
as provided in sub-section (2), this Act shall have effect notwithstanding
anything contained in the Banks (Nationalization) Act, 1974, or any other law,
excepting the State Bank of Pakistan Act, 1956, and the Banking Companies
Ordinance 1962, as amended by this Act, for the time being in force or any
instrument having effect by virtue of any law or any agreement, contract, award
or memorandum or articles of association or other instrument.
(2) Nothing in ---
(a) section 36 of the State
Bank of Pakistan Act, 1956, shall apply to the Chairman or a Director, other
than the Managing Director;
(b) clause (iv) of
sub-section (1) of section 14 of the Banking Companies Ordinance, 1962 shall
apply to shares of the Bank held by the State Bank.
(c) section 27, section 28,
clause (b) of sub-section (6) of section 40, clause (c) of sub-section (1) of
section 42, Parts III and IV, or section 89 of the Banking Companies Ordinance,
1962 shall apply to the Bank;
(d) clause (c) of sub-section
(1), or sub-section (2), (3), (4) and (5) of section 11, sub-section (3) of
section 14, sections 15, 15-A, 15-B, 15-C or 20 sub-section (3) or (6) of
section 25, sub-section (4) or (5) of section 40, or section 41-A, 41-B, 41-C,
or 83 of the Banking Companies Ordinance, 1962 shall apply to the Chairman or a
Director other than the Managing Director.
4. Power
to exempt, and suspend operation of Act, in certain cases. --- The Federal Government may, by
notification in the official Gazette, and subject to such conditions as may be
specified in the notification, exempt the Bank from, or suspend the application
to the Bank of, all or any of the provisions of this Act, either generally or
for such period as may be so specified.
5. Establishment
of the Bank. --- (1) As soon as may
be after the coming into force of this Act, the Federal Government shall take
steps to establish, in accordance with the provisions of this Act, a bank to be
called “The Federal Bank for Cooperatives” to carry out the purposes of this
Act.
(2) The Bank shall be a body corporate having
perpetual succession and a common seal, with Powers to acquire, own, hold and
dispose of any Property, and shall be the name assigned to it by sub-section
(1) sue and be sued.
(3) The Bank shall be deemed to be a banking
company for the purposes of the State Bank of Pakistan Act, 1956 the Banking
Companies Ordinance, 1962 and any other law for the time being in force
relating to banking companies, excepting the Banks (Nationalization) Act, 1974.
6. Share
capital. --- (1) The initial
share capital of the Bank shall be twenty crores of rupees divided into two
thousand fully paid up shares of the nominal value of one hundred thousand
rupees each and shall be fully subscribed by the Federal Government, the
Provincial Government and the State Bank of Pakistan in the following manner:
---
(a) Federal Government. Rs. 2.00 crores.
(b) State Bank. Rs.15.00 crores.
(c) Government of the Punjab .
Rs. 1.00 crores.
(d) Government of Sind .
Rs. 1.00 crores.
(e) Government of N.W.F.P. Rs. 0.50 crores.
(f) Government of Baluchistan .
Rs. 0.50 crores
(2) The share capital may be increased from
time to time by a resolution of the Board with the approval of the Federal
Government, and the capital so increased shall be fully subscribed by the
Federal Government, the Provincial Governments and the State Bank of Pakistan .
7. Offices
and branches. --- (1) The head
office of the Bank shall be at Islamabad .
(2) The Bank shall establish one Regional
Office in each Province and may establish Offices, Branches and Agencies at
such places as the Board may think fit.
8. Direction
and superintendence. --- The general direction and superintendence of
the affairs and business of the Bank shall vest in a Board of Directors
constituted in accordance with section 9, which may exercise all such powers
and do all such acts and things as may be exercised or done by the Bank,
subject to the provisions of this Act.
9. Board.
--- (1) The Board shall consist of ---
(a) the
Chairman;
(b) all
the directors for the time being of the Central Board of Directors of the State
Bank;
(c) the
Managing Director;
(d) two directors to be
nominated by the Federal Government of whom one shall be an officer of the
Ministry of the Government of Pakistan concerned with the subject of
cooperatives and the other a non-official; and
(e) two directors from each
Province to be nominated by the Federal Government on the recommendation of each
Provincial Government, of whom one shall be a non-official.
(2) The Governor for the time being of the
State Bank shall be the Chairman of the Board.
(3) Unless the Federal Government otherwise
directs in any case, a non-official Director referred to in clause (d) or
clause (c) of sub-section (1) shall hold office for a period of three years and
shall, subject to the provisions of this Act be eligible for re-appointment:
Provided that such a Director shall not
hold office for more than six consecutive years, and in computing the period of
six years, any break of less than three years in continuity of office shall be
disregarded.
(4) A Director referred to in clause (b) of
sub-section (1) and an officer who is nominated Director under clause (d) or
clause (e) of that sub-section, shall hold office during the pleasure of the
Federal Government.
(5) No act or proceeding of the Board shall
be invalid by reason only of the existence of any vacancy in, or defect in the
constitution of the Board.
10. Managing
Director. --- (1) The Managing Director shall be appointed by
the Federal Government on such terms and conditions as the Federal Government
may determine and shall hold office during the pleasure of the Federal
Government.
(2) Subject to sub-section (1), the Managing
Director may, by writing under his hand addressed to the Federal Government,
resign his office.
(3) The Managing Director shall be the
whole-time Chief executive of the Bank and shall perform such functions as are
assigned to him by or under this Act.
(4) If at any time the Managing Director is
absent or is unable to perform his functions due to any cause, the Federal
Government may authorise any other person not disqualified under section 11 to
discharge for the time being the functions of the Managing Director on such
terms and conditions as the Federal Government may think fit.
11. Disqualifications
of Managing Director and Directors. --- No person shall be or shall continue to
be the Managing Director or a Director who ---
(a) is or becomes a member of Parliament or a
Provincial Assembly; or
(b) is or at any time has
been adjudicated an insolvent or suspends or has suspended payment or compounds
or has compounded with his creditors; or
(c) is a minor; or
(d) is or is found to be a
lunatic or becomes of unsound mind; or
(e) is or has at any time
been convicted for any offence which in the opinion of the Federal Government
is an offence involving moral turpitude; or
(f) was at any time in the
service of the Federal Government or a Provincial Government or a Corpora- tion or body owned or controlled by any such
government or in the service of any bank and was dism-issed or disqualified for
employment; or
(g) is not a citizen of Pakistan or ceases to be a citizen of Pakistan ;
or
(h) is a person against whom
action has been taken or any proceedings are pending under section 235 of the
companies Act, 1913, or section 83 of the Banking companies ordinances 1962.
12. Meetings
of the Board. --- (1) Seven Directors
shall form a quorum for a meeting of the Board.
(2) Subject to sub-section (1), the meetings
of the Board shall be held in such a manner as may be prescribed:
Provided that until rules are made in
this behalf, such meetings shall be convened by the Chairman.
(3) At the meetings of the Board, each
Director shall have one vote and, in the event of equality of votes, the
Chairman shall have a second or casting vote.
(4) All meetings of the Board shall be
prescribed at by the Chairman and, in his absence, by a Director chosen for the
purpose by the Directors present from amongst their number.
13. Fees
for attending meeting. --- A
non-official Director shall be paid such fees, travel costs and other expenses
for attending the meetings of the Board as the Board may determine.
14. Indemnity
of Directors. --- (1) A
Director shall not be personally responsible for the acts of any other Director
or of any other officer or servant of the Bank or for any loss or expense
resulting to the Bank by reason of insufficiency or deficiency in value of or
title to any property or security acquired or taken on behalf of the Bank, or
by wrongful act of any person under a liability to the Bank, or for anything
done by him in good faith in the discharge of his duties.
(2) Every Director shall be indemnified by
the Bank against all losses and expenses reasonably incurred by him n the
discharge of his duties except such as are caused by his willful act or
default.
15. Advisory
Committee. --- (1) The
Bank may constitute an Advisory Committee consisting of ---
(a) the Managing Director, who shall be the
Chairman thereof;
(b) one representative each
of the Ministries of the Government of Pakistan concerned with the subjects of
finance and cooperatives;
(c) two representatives each
of the Provincial governments, of whom one shall be a non-official;
(d) the chief executive of
each of the Provincial cooperative Banks; and
(e) the Executive Director incharge of the
Agricultural Credit Department in the State Bank.
(2) All meetings of the Advisory Committee
shall be presided at by the Chairman thereof and, in his absence, by a Member
chosen for the purpose by the Members present from amongst their number.
(3) The Advisory committee shall advise the Bank
on such matters as may be referred to it by the Board from time to time and may
make recommendations on its own motion to identify areas of improvement in
service, facilities to customers of co-operative societies, including measures
for meeting regional credit requirements.
(4) The meetings of the Advisory Committee
shall be convened by the Chairman thereof at such time and place as he may deem
fit, and the non-official members of the Advisory committee shall be paid such
fees, travel cost and other expenses for attending the meetings as may be
determined by the Board.
16. Officers
and Servants. --- (1) The Bank may appoint or employ such
officers and servants as it considers necessary for the efficient performance
of its functions on such terms and conditions as may be laid down by
regulations;
Provided that, until regulations are
made in this behalf, the conditions may be determined by the Board or by the
Managing Director, to the extent he is authorised by the Board.
(2) The Managing Director and every officer
and employee of the Bank shall be deemed to be a public servant with in the
meaning of section 21 of the Pakistan Penal Code.
(3) For the purpose of section 124 of the
Evidence Act, 1872 the provisions of Part IV of the Code of Civil Procedure,
1908 and the provisions of rule 27 of Order V, and rule 52 of Order XXI of the
said Code, the Bank and any officer and employee of the Bank acting in his
official capacity as such shall be deemed to be a public officer.
(4) The provisions of section 123 of the
Evidence Act, 1872 shall apply to the unpublished records relating to the
affairs of the Bank and the Managing Director shall be deemed to be the officer
or head of the department concerned.
17. Business
and functions. --- (1) The Bank shall be the principal financing
institution for meeting the credit needs of Provincial Cooperative Banks and
multi-unit cooperative societies.
(2) The Bank may carry on, transact or do the
several kinds of business and acts hereinafter specified, namely: ---
(i) accept money on deposit;
(ii) borrow funds from the
Federal Government, financial institutions as defined in clause (f) of section
2 of the National Development Finance Corporation Act, 1973 and such other
financing institutions in or outside Pakistan as are approved in this behalf by
the Federal government, against the security of its assets or otherwise;
(iii)
raise funds for the purpose of the Bank’s operation
through issue and sale of bonds and debentures;
(iv)
make secured loans and advances to Provincial
cooperative Banks, multi-unit cooperative societies and, subject to the
regulations framed for the purpose, to the officers and staff of the Bank;
(v)
for the purpose of securing its loans and advances,
accept pledge, mortgage, hypothecation or assignment of any kind of movable or
immovable properly or documents of title or guarantee of the Federal Government
or a Provincial government and such other securities as the bank may deem fit’
(vi)
draw, accept, discount, buy or sell or rediscount bills
of exchange or promissory notes bearing two or more good signatures, one of
which shall be that of a scheduled bank or a Provincial Cooperative Bank’
(vii)
issue guarantees and give indemnities in relation to
its business;
(viii)
subscribe to the debentures, being debentures repayable
within a period not exceeding ten years, of any body corporate specially
established for the promotion of business of cooperative societies;
(ix)
deliver, receive, collect and remit any securities;
(x)
acquire, maintain and transfer all movable or immovable
properties, including residential premises, for carrying on business;
(xi)
open accounts or enter into any agency arrangement with
any bank or financial institution in or outside Pakistan .
(xii)
Invest its funds in Government Securities and other
approved securities and if so directed by the Board and with the approval of
the Federal Government, in the share capital of ---
(a) a Provincial Cooperative
Bank upto an amount not exceeding twenty-five per cent of the fresh capital
contributed by the Provincial Government of the Province with which that
Provincial Cooperative Bank is registered; and
(b) a multi-unit cooperative
society upto an amount not exceeding twenty-five per cent of its paid-up
capital;
(xiii) sell and realize
property, movable or immovable which may in any way come into the ownership,
possession or control of the Bank in the satisfaction or part satisfaction of
any of its claims and the acquisition and the holding of, and generally the
dealing with, any right, title or interest in any property, movable of
immovable, which may be the Bank’s security for any advance or loan or
connected with any such security;
(xiv) assist the Federal
Government and the Provincial Governments in formulating schemes for the
development and revitalization of the cooperative movement in the country in
general and the provincial Cooperative Banks in particular.
(xv) assist Provincial
Cooperative Banks in preparing their seasonal and developmental loaning
programmes and conduct appraisal and undertake feasibility study of projects
covered by such loaning programmes;
(xvi)
encourage the development of special cooperative
projects the objects or area of operation of which may extend to more than one
Province;
(xvii)
organize training in cooperation and cooperative
banking for the employees of the Provincial Cooperative Banks and other
cooperative societies;
(xviii)
ensure proper utilization of loans obtained from the
Bank;
(xix)
carry out research on problems of rural credit and on
such other matters as have a bearing on the develop-
ment of the cooperative
movement in the country;
(xx)
lend money in the inter-bank call money market;
(xxi)
issue letters of credit;
(xxii)
appoint attorneys and agents;
(xxiii)
subject to regulations framed for the purpose, maintain
and operate the provident fund and other funds created for the benefit of its
employee;
(xxiv)
perform such functions and exercise such powers as may
be entrusted to or conferred upon it by or under any law; and
(xxv)
generally do all such matters and things as may be
necessary, incidental to or consequential upon exercise of its powers or the
discharge of its duties or functions under this Act or any other law.
18. Prohibited
business. --- The Bank shall
not undertake any kind of business other than that authorised by or under this
Act, and in particular it shall not---
(i) engage in any trade or
otherwise have a direct interest in any commercial, industrial or other
undertaking except such interest as it may any way acquire in the course of
satisfaction of any of its claims, but all such interest shall be disposed of
at the earliest possible moment;
(ii) purchase its own shares
or purchase or subscribe to the shares of any bank other than a Provincial
cooperative Bank or of any company or make any advance or loan or open any
credit or give any financial accommodation upon the securities of its own
shares or allow any debtor to set off his debts or part of his debts to the
Bank against such shares;
(iii)
accept, buy, discount or advance, lend or open any
credit or give accommodation or rediscount a bill of exchange or promissory note
bearing two or more good signatures, one of which is not that of a scheduled
bank or of a Provincial Cooperative Bank; or
(iv)
make unsecured advances and loans.
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