Law: Foreign Exchange Regulation Act, 1947

Section: 12(1),23B,33A,20(3)

Summary of Judgment – Lahore High Court (W.P No. 79375 of 2023 & Connected Petitions)

Background:

• The petitioners challenged show cause notices issued by the State Bank of Pakistan (SBP) regarding delayed realization of export proceeds under Section 12(1) of the Foreign Exchange Regulation Act (FERA) 1947.
• The notices warned of legal action under Section 23B of FERA.
• The primary challenge was to SBP’s Circular No. 2 of 2023 (dated March 31, 2023), which amended Paragraph 33A of the Foreign Exchange (FE) Manual, introducing a lien-based penalty system on delayed export proceeds.

Key Issues:

Authority of SBP:

• SBP claimed power under Section 20(3) of FERA to issue the lien directive.
• The court ruled that SBP exceeded its authority by enforcing a penalty system without due process.

Violation of Legal & Constitutional Rights:

• Circular No. 2 preemptively penalized exporters by marking a lien on their funds before adjudication.
• This violated Articles 9, 10A, 14, and 18 of the Constitution of Pakistan, which ensure due process, dignity, and business freedom.
• The law already provides a proper adjudication mechanism under Section 23B, which SBP bypassed.

Court’s Decision:

• Circular No. 2 of 2023 (Paragraph 33A) is declared unlawful and ultra vires (beyond legal authority).
• The show cause notices issued under this circular are struck down.
• SBP is directed to follow due legal procedures and refer such matters to Adjudicating Officers under Section 23B of FERA.

Conclusion:

The judgment reinforces that SBP cannot unilaterally impose penalties or restrictions without proper adjudication. Any enforcement action must comply with existing legal frameworks and respect constitutional rights.