After a day-long hearing of the appellants’ arguments, Justices Sajjad Ali Shah and Nadeem Azhar Siddiqui, who constituted the bench, upheld the impugned order of Justice Gulzar Ahmed. The order allowed the NCCPL to square up continuous-funding-system transactions and liquidate the securities furnished by the plaintiff brokers. For the differential sum, which amounted to Rs7 billion according to the defendant financier banks, the plaintiffs were asked to submit bank guarantees within court hours on Monday.

The plaintiff brokerage houses failed to furnish the guarantees and the stay order was passed in their favour on Dec 13 by restraining the defendants from taking any action against them for default stood vacated. Unless the plaintiffs approach the Supreme Court, the NCCPL would raise the demands early Tuesday morning and if the demands were not met within 30 minutes or so, the brokerage houses would become liable to suspension from trading, ultimately resulting in expulsion from the Karachi Stock Exchange.
The plaintiffs, M/s Al Hoqani Securities and Investment Corporation (Pvt) Limited and M/s Creative Capital Securities (Pvt) Limited, sought rescission of the CFS contracts as they had been rendered void by ‘force majeure’ declared by the Securities and Exchange Commission of Pakistan. Their counsel said on Monday that a state of emergency still prevailed in the market and trading is closed if depreciation in share value exceeds five per cent. Because of the liquidity crunch, the banks were not prepared to issue guarantees except against 125 per cent cash deposits and due processing that might take 15 days. The modified court order, they said, was impossible to comply with.
The defendant banks, United Bank Limited and IGI Investment Bank, have, meanwhile, moved a petition against the SECP directives to extend the period of maturity of the CFS loans from 22 days and 44 days. The commission has undertaken not to issue any fresh directive in respect of the CFS contracts till Dec 24, the date of hearing. The brokers’ suit and interlocutory applications are due to proceed on Tuesday before Justice Gulzar Ahmed, who has ordered that the CFS transactions would be resumed under the NCCPL regulations.
Another financier bank, Meezan Bank Lts, has, meanwhile, instituted a suit through Advocates Kazim Hasan and Abdul Qayyum Abbasi for recovery of over Rs200 million from a brokerage house. It said the bank purchased shares through the defendant broker. The defendant executed an undertaking to repurchase the shares as the principal and not a broker with the loan extended by the plaintiff. On the settlement date of Sept 30, 2008, however, the payment made by the defendant broker was over Rs200 million short and no further payment had since been made.