bankruptcy

Definition

The word bankruptcy is formed from the old Latin word …

bancus (a bench or table), and ruptus (broken). Now a "bank" originally
referred to as a bench, which the first bankers had in the public places, in
markets, fairs, etc. on which they tolled their money, wrote their bills of
exchange, etc. Hence, when a banker failed, he broke his bank, to
advertise to the public that the person to whom the bank belonged was no
longer in a condition to continue his business. As this practice was very
frequent in Italy, it is said the term bankrupt is derived from
the Italian banco rotto, broken bank.

By definition bankruptcy / insolvency is a legal status of a person

or an organization that cannot repay the debts it owes to its creditors.
Creditors may file a bankruptcy petition against a business or
corporate debtor ("involuntary bankruptcy") in an effort to recover a
portion of what they are collect or initiate a restructuring. In the majority
of cases, however, bankruptcy is initiated by the debtor (a "voluntary
bankruptcy" that is filed by the insolvent individual or organization). An
involuntary bankruptcy petition may not be filed against an individual
consumer debtor who is not engaged in business.

Moreover, on the nitid side bankruptcy also offers an individual or

business a chance to start fresh by forgiving debts that simply can't be
paid while offering creditors a chance to obtain some measure of
repayment based on what assets are available. In theory, the ability to file
for bankruptcy can benefit an overall economy by giving persons and
businesses another chance and providing creditors with a measure of debt
repayment.
 Causes of Bankruptcy:

Poor performance.

Loose Management.

Insufficient Working Capital.

Failure of Accounts Receivable.

Marriage Separation or Divorce.

Medical Problems.

Job loss or Reduced Income in general (Unemployment).

Debt over their heads.

Gaming Guess or excess in living.

Failure to pay Taxes.

Bankruptcy law in Pakistan

Bankruptcy are a natural phenomenon of doing business in a

capitalist economy. Our Islamic economic model is also based on the

same principles of private enterprise, trade and sharing of profits and
losses. Thus business will wave, new firms will enter and old firms will
die out. Profit making is the core of capital formation, step-up of
economy, employment generation and export growth.

First, if profits are privatized then the losses should not be

socialized. While the private businessperson in Pakistan gladly
appropriate the profits whether normal or windfall-they are always
unwilling to bear losses. Second, if the businesses make profits then it is
necessary upon them to pay a portion of their profits as taxes. Third,
profits made in Pakistan by utilizing the country’s resources should be
invested with in its economy for maximizing economic activity and
employment rather than keeping them away in foreign bank accounts
overseas. Fourth, profits have to be generated through competition in a
level playing field and not through selective favors, concessions and
favor to a chosen few among the business community.

The taking of control by the trustee of the property of the bankrupt

actually or constructively in his possession at time of filing of petition in
bankruptcy, the distribution of the proceeds received from such property, ,
among bankrupt's creditors whose claims have been filed and allowed,
and the discharge of bankrupt from liability for the unpaid balance of
such claims. Bankruptcy (in the sense of proceedings taken under the
bankruptcy law) is either voluntary or involuntary; the former where the
proceeding is initiated by the debtor's own position to be adjudged a
bankrupt and have the benefit of the law, the latter where he is forced into
bankruptcy on the petition of a sufficient number of his creditors.
Bankruptcy proceedings are governed by the Bankruptcy laws and
official rules and forms.
Bankruptcy Distribution
After payment of administration, priority and other debts and expenses of
bankrupt estate, trustee in bankruptcy makes settle distribution to
creditors.
Bankruptcy Forms
Official forms used in Bankruptcy Court for most matters (e.g. petitions,
schedules).
Bankruptcy Rules
Rules governing proceedings in bankruptcy courts; a great many of which
make the Federal Rules of Civil Procedure applicable.
Bankruptcy Schedules
Official forms for listing of bankrupt's assets, liabilities, and all unsecured
creditors.

Largest Bankruptcies in World

Lehman Brothers

Washington Mutual Bankruptcy

WorldCom Bankruptcy

General Motors Bankruptcy

Enron Bankruptcy

. Conseco Bankruptcy

Chrysler LLC Bankruptcy

Thornburg Mortgage Bankruptcy

Pacific Gas and Electric Co. Bankruptcy

Texaco Bankruptcy

Financial Corp

Refco Bankruptcy

IndyMac Bancorp, Inc. Bankruptcy

Global Crossing, Ltd. Bankruptcy

Bank of New England Corp. Bankruptcy

General Growth Properties, Inc. Bankruptcy

Lyondell Chemical Company Bankruptcy

Calpine Corporation Bankruptcy

New Century Financial Corporation Bankruptcy

UAL / united Corporation Bankruptcy

Delta Air Lines Bankruptcy

LIST OF BANKCRUPT companies in PAKISTAN

Saif Nadeem Kawasaki Motors Limited, Peshawar;

Taxila Engineering Limited, Peshawar;

Bahawalpur Textile Mills Limited, Karachi;

Valika Woolen Mills Limited, Karachi;

Azmat Textile Mills Limited, Karachi;

Pakistan Northern Insurance Company Ltd, Karachi;

Awan Textile Mills Ltd, Lahore;

Annoor Textile Mills Ltd.

Allawasaya Textile & Finishing Mills Ltd.

Asim Textile Mills Ltd.

Ashfaq Textile Mills Ltd.

Elahi Cotton Mills Ltd.

International Knitwear Ltd.

Hajra Textile Mills Ltd

. Al-Qadir Textile Mills Ltd.

Karim Cotton Mills Ltd.

Quetta Textile Mills Ltd.

Nazir Cotton Mills Ltd.

Mukhtar Textile Mills Ltd.

Fateh Sports Wear Ltd.

Aruj Garment Accessories Ltd.

Noor Silk Mills Ltd.

Janana De Malucho Textile Mills Ltd.

 Bawany Sugar Mills Ltd.

Tawakkal Ltd, Karachi;

Tawakkal Polyester Industries Ltd, Peshawar;

Myfip Video Industries Ltd, Karachi;

Norrie Textile Mills Ltd, Karachi;

Pakistan Dairies Ltd, Lahore;

Tawakkal Garments Industries Ltd, Karachi;

Alif Textile Industries Ltd, Karachi;

Schon Textile Mills Ltd, Karachi;

Apex Fabrics Ltd, Karachi;

Kaisar Arts and Krafts Ltd, Karachi;

Sterling Insurance Company Ltd, Lahore;

and Mehran Jute Mills Ltd, Karachi.

Taj company
Mehran bank
Cresent bank

Mehran bank was incorporated in role of the privatization display in

Pakistan on 31st October, 1991 as a public limited company and its
shares were quoted in Karachi and Lahore stock exchanges. The bank
began its formal operations from 22nd January, 1992 in the business of
banking and operated as ”Scheduled Bank” as defined by the Banking
Companies Ordinance, 1962. Mehran banks paid up capital was Rs 300
million (US $ 10 million), assets of Rs 2.9 billion and stock market
capitalization of Rs 500 million.
Branches of mehran bank
It had six branches all over Pakistan located in Karachi, Lahore,
Mirpurkhas, Peshawar, Quetta and Rawalpindi
Mehran bank officer list
Mr. Yunus Habib was the founder and Chief Operating officer of the
Bank. Since its beginning Mehran bank had raised doubts and it was
known as “a good idea but poor action”.
fraud with SBP
The suspect had admitted that out of $36.7 million generated through the
sale of DBCs, a federal government paper that the SBP sold through
commercial banks, he used $20 million to pay back a portion of the
amount owed to the premier intelligence agency of the country and used
the rest to meet some other pressing obligations. According to the SBP
rules, proceeds from the DBCs (Mehran Bank was given $40 million
quality) had to be deposited within 72 hours of the sale. However, he did
not meet this deadline . In fact, he never deposited the money at all. He
was arrested on a complaint by the SBP for committing misappropriation
in the sale proceeds of Dollar Bearer Certificates (DBCs) to the tune of
$36.7 million1995, the Banks COO was awarded years of rigorous
imprisonment and was fined hefty amount in a fraud case by the Special
Court for offences in banks. Consequences Mehran bank scandal exposed
some of the high VIP of Pakistan. It has also casted shade over the
functioning of important financial institution of state such as the SBP and
some sensitive agencies.
Merger of Mehran Bank:
In 1995, SBP allowed the Mehran Bank’s merger with National Bank of
Pakistan (NBP). Consequently Mehran Bank was amalgamated with the
National Bank of Pakistan. In 1996 the NBP had to make full provision
for Mehran's liabilities which resulted in a net loss that year to the bank
of Rs 1.26 billion . The SBP was also required to provide markup free
finance to support the NBP. A petition was also filed in the wake of
amalgamation of Mehran Bank by some of the share holders. The
petitioners submitted that the decision of the merger of the bank was in
violation of the principles of natural justice as no opportunity was
afforded to the shareholders to the object of amalgamation. Sindh High
Court admitted the petition against MBL amalgamation.
Worker of MBL.
The employees of Mehran Bank were demoted and some very
experienced staff was offered clerical levels.
History of Mehran bank scandal
Mehrangate., also known as the Mehran bank scandal, was a major
political scandal in the history of Pakistan in which officers in
the PakistaniArmy and Inter-Services Intelligence conspired to prevent
the re-election of Benazir Bhutto's government in the 1990 and 1993
general elections. The conspirators bribed senior politicians and political
parties to undermine the Pakistan Peoples Party (PPP).
Initiated by Pakistan Army's Chief of Army Staff General Mirza Aslam
Beg with the alleged support of PresidentGhulam Ishaq Khan, payments
of up to PKR 140 million were made by the Inter-Services Intelligence
(ISI) Director-General Lieutenant-General Asad
Durrani and Corps of
Engineers Engineer-in-Chief Lieutenant-General Javed Nasirvia the
owner of Mehran Bank, Yunus Habib. Intelligence funds were deposited
in Mehran bank in 1992 propping up what was an insolvent bank as a
favor to its owner's for help in loaning money to the Inter-Services
Intelligence in 1990 that was used in the creation of the right wing
alliance Islami Jamhoori Ittehad (IJI) and bankrolling the campaigns of
many opponents of the PPP.
Scandal broke
The scandal subsequently broke after the new ISI Director-General
Lieutenant-General Javed Ashraf Qazi decided to transfer the intelligence
fund back to state owned banks as per official rules. Mehran Bank was
unable to return the money due to its poor financial state and collapsed.
Mehran Bank
The National Accountability Bureau (NAB) has recovered Rs1.6 billion
in the famous
Mehran Bank scandal case by selling Benami property of defunct banks
chief Younus Habib in Islamabad. The amount is stated to be the
country biggest-ever single cash recovery in a wilfulloan default case.
In addition, the Younus Habib Group will also pay Rs420
million.According to the NAB, Younus Habib, former chief operating
officer of the defunct bank, had offered to settle his liability through the
sale of his Benami property and accordingly entered in to a settlement
agreement of Rs1.6 billion with the National Bank of Pakistan.The
Mehran Bank had been doing badly since its very beginning in January
1992, and banking experts attributed this poor performance to Younus
Habib's penchant for `extra-curriculam banking activities.

INVESTMENTS
The investments are expected to rise given that government has
announced auction targets both for PIBs and MTBs. However, it may
remain modest given the shift of banks from long maturity high-yielding
bonds towards short maturity low-yielding ones. Moreover, government’s
development outlays are expected to gain momentum towards the end of
the fiscal year.

LIABILITIES
The deposits of the banking sector have gone up while banks’ borrowing
from SBP has also grown owing to liquidity needs to sustain asset growth.
On the funding side, deposit growth was largely determined by both the
anticipated withdrawals due to Eidul Fitr and the growth of advances.
Apart from deposits, borrowings from financial institutions provided the
funding necessary for asset expansion

STRENGTHS
1- Source of employment & GDP growth: There is a consensus among
economists that development of the financial system contributes to
economic growth. Financial development creates enabling conditions for
growth through either a supply-leading (financial development spurs
growth) or a demand-following. It is this industry which continuously
works to secure financial stability, facilitate international trade, promote
employment, & reduce poverty around the world.

2- Hedge from risk: Whether it is natural calamity or man-made

calamity banks mitigate the after effect of the destruction by providing
financial support to the victims to stand –up & lead a peaceful life again.

3- Diversified services: Banking industry offers services from CASA to

insurance, to loan, to investment.
4- Connecting People: With the advent of new age technological
advancement, banks have made the life of the common man easier.
People can transact on real time basis in many places.

5- Changing from mere savings & loan facilitator role: Top priorities
of banks now days include regulatory compliance, improving asset
quality, enhancing customer centricity, focusing on digital convergence,
and tackling competition from non-banks. Banks are therefore making
business and technology investments to change their business models.

WEAKNESSES
1- Lack of coordination: The global banking industry faces short-term
uncertainty due to the debt crises that challenge several major economies.
Volatility in different market/Currencies has created problems for the
banks in order to work properly across the borders.

2- Vulnerable to risk: Since this sector deals with finances, it is the most
risky sector which can change the fate of any business/Industry.

3- High NPA’s: Rise in retail &corporate NPA’s (Non-performing assets)

is the single major issue this sector is going through worldwide.

4- Can’t reach under-penetrated market: Due to several conflicting

objectives of government & banks which goes hand in hand, rural areas
of developing nations are still not in the shadow of banks. Although
efforts are being made for promoting financial inclusion in the country.

5- Structural weaknesses: Such as a fragmented industry structure,

restrictions on capital availability and deployment, lack of institutional
support infrastructure, restrictive labor laws, weak corporate governance,
political pressure and ineffective regulations.

OPPORTUNITIES
1- Expansion: Penetrating to the rural markets & bringing the rural
masses under the purview of organized banking will be the objective of
the banks in decades to come.

2- Changing socio-cultural & demographic factors: Given the

demographic shifts resulting from changes in age profile and household
income, consumers will increasingly demand enhanced institutional
capabilities and service levels from banks.

3- Rise in private sector banking: Banking industry across the world is

highly regulated &lead by their respective central banks. With the advent
of private sector banks this sector is going through structural & functional
changes mainly due to the adaptation of the advanced technologies &
increased competition thereby benefiting the end customers.

THREATS
1- Recession: It is one of the major threats to the financial system of the
nation. Traumatic shock of economic crises & collapse of several
businesses can affect the banks and vice-versa.

2- Stability of the system: Failure of some weak banks has often

threatened the stability of the system.

3- Competition: Competition from NBFC’s (Non-banking financial

companies) like insurance companies & mutual fund companies can
affect the business of banks.

conclusion

bankruptcy is one option that we have in order to take control o over debts and get back on
your feet.