The questions of pubic importance and of law, which arise from the petitions, are about the SECP's authority in law to over-ride, supersede and/or nullify contracts between a citizen and the national clearing house. It was questioned whether the SECP has the authority in law to confiscate property and expropriate funds under the garb of public interest and also if the SECP has authority in law to issue directions to the national clearing house to conduct its affairs in a manner that violate the rights of a citizen as enshrined in Articles 23, 24 and 25 of the Constitution.
They further asked whether any law permits the national clearing house to perform its functions in a manner which constitutes an abuse of its monopoly position and in the absence of specific legal authorisation, does the SECP posses the right to issue directives which would, in effect, retrospectively render past and closed transactions void.
Both the banks ie UBL and IGI Investment Bank moved court as lenders against the directives issued by SECP and NCCPL with regard to CFS Mk-II to petitioners. The petitioners said that the SECP issued a directive to NCCPL on October 14, 2008 to declare all the CFS Mk-II transactions executed by the petitioner on October 10, 13 and 14 void with retrospective effect and extend the twenty-two (22) working days CFS Mk-II contract period for all CFS Mk-II contracts with maturity date or accelerated maturity date occurring on October 10, 13, and 14 to forty-four (44) working days.
They said that another directive issued by SECP on November 11, stated the maturity period of the CFS Mk-II contracts was further extended by NCCPL and declared that the CFS Mk-II contract period for all CFS Mk-II contracts whose maturity date or accelerated maturity date has occurred on October 10, 13 and 14, 2008 may further be extended in a manner that each respective CFS MK-II contract will be matured not earlier than five business days after the date of removal of the floor by the exchange.
They said that SECP and NCCPL circulated two proposals among the financiers, which said that all financiers must elect one of the two proposals. They were asked that the second proposal would be forced upon them by regulation, if they do not opt one of the two proposals.
The petitioners said that certain stock brokers had instituted legal proceedings against SECP and NCCPL with a prayer to the court to declare the contracts between NCCPL and such brokers as void, which in effect would deprive the CFS financiers from effecting any recovery.
The petitioners' counsels Kazim Hasan and Abdul Qayum Abbasi submitted that actions of SECP and NCCPL thus far inspire absolutely no confidence as to whether they would refrain from passing any directives in an effort to compromise with the plaintiffs in the suit which they have filed. As a result of such action, they said, they underwent business disruptions and apprehend that petitioner may incur additional/ extra costs in this regard.
They said that impugned directives and the proposal circulated by the SECP and NCCPL on December 6 have the effect of changing the terms of the agreement to the prejudice of the petitioners. They said actions of the SECP and NCCPL are designed to protect brokers who may default; the petitioners and other financial institutions are being victimised and being forced to accept a situation whereby they will suffer losses, damages and shall face institutional humiliation.
THE PETITIONERS, THEREFORE, SEEKS THE FOLLOWING RELIEF:
a. A declaration that the impugned directives issued by the SECP and the directives/notices issued therein by NCCPL are illegal, void ab initio and have no effect whatsoever.
b. A direction to the respondents that the affairs of the NCCPL with regard to CFS Mk-II be conducted strictly in accordance with relevant legislation, rules and regulations, including but not limited to collection of margins, mark-to-market losses (which collection is the fundamental basis of the CFS Mk-II system and for which time is of the essence) and institution of default proceedings against those brokers who fail to meet their obligations.
c. A permanent injunction restraining the respondents or any one of them, their employees, agents, assigns and/or any other person (s) acting through or under them from giving effect to the Impugned Directives.
d. To restrain the respondents from notifying or attempting to notify or to impose in any manner whatsoever the two proposals circulated by them on December 12, 2008.
e. To restrain the respondent from issuing any notification or directives adversely affecting the petitioner's rights under the agreement.
f. To direct the respondents to act in accordance with the relevant laws, rules and regulations.
g. To grant interim relief in terms of the foregoing. Etc.