Transfer of the majority shares and management control to JS Group put on hold as one entity cannot own two banks under the Pakistani law
KARACHI: The minority shareholders of the BankIslami Pakistan Limited (BIPL), opposed to the sale of its majority stakes to the JS Bank, managed to secure a status-quo decision from the Sindh High Court (SHC), lawyers said on Monday.
The SHC in its orders issued on Friday, May 12, 2023 said that till the next hearing set for June 2, 2023, “parties shall maintain status-quo in respect of the shareholding and management of the” BankIslami.
Lawyers say that the “status-quo” order usually extends till the court decides the case in one way or the other. This means that the sale of BankIslami will remain on the hold till the SHC gives its final decision in this case or specifically orders scrapping the status-quo, which does not happen in such litigations.
The BIPL’s minority shareholders – Osama Yunus, Madiha Osama Sarwar and Jawed Karim – have filed a lawsuit challenging the sale of 51% of the voting shares of the BIPL and its management control to the JS Bank, saying that one set of owners cannot own two banks under the Pakistani law.
JS Bank Limited, Jahangir Siddiqui & Company Ltd, BIPL, Jahangir Siddiqui, the State Bank of Pakistan, the SECP, and the Next Capital Management are the defendants in this case.
The minority shareholders say that the JS Group’s attempt to acquire the majority shareholding and control of the BIPL through the JS Bank — which is in the banking business since December 31, 2006 — stand in violation of the Section 23 of the Banking Companies Ordinance 1962 and the IBD circulars No. 02 of 2004 and 04 of 2020.
“The ‘Guidelines and Criteria for setting up a Commercial Bank’ issued by the SBP states that a group, as defined in the Prudential Regulations, shall not be eligible to own more than one commercial bank.”
Lawyers say that under the Pakistani law, the JS Group and the JS Bank cannot acquire 51% of the BIPL shares. Therefore, the shareholders of the BIPL challenged the move before the Sindh High Court, which on March 6, 2023 restrained the JS Group, particularly JS Bank and JSCL, from acquiring the majority shares and the management control of the BIPL.
The JS Group challenged this decision before the SHC Division bench which on May 5, 2023 sent back the case to the single bench without setting aside the earlier ad-interim order barring the JS Group from acquiring the majority stake in the BIPL.