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Official Citation: 2024 CLC 1604
Court / Jurisdiction: Islamabad High Court
Year of Decision: 2024
Decision Date: 2024-06-26
Parties: M/s Flying Paper Industries Limited vs Federation of Pakistan etc
Ruling Summary: This decision was rendered by the Islamabad High Court on 2024-06-26, officially reported as 2024 CLC 1604. In this matter between M/s Flying Paper Industries Limited and Federation of Pakistan etc, the court adjudicated key questions of statutory construction, procedural regularity, and legal precedent under Pakistani law.
Core Holding: The honorable bench evaluated governing statutory provisions and judicial authorities to establish the rights of the parties, delivering the binding reasoning set out below.
Case cited as 2024 CLC 1604
Court Name: Islamabad High Court Judge(s): Aamer Farooq (C.J) Title: M/s Flying Paper Industries Limited vs Federation of Pakistan etc Case No.: CMA NO.08-2024 Date of Judgment:2024-06-26 Reported As: 2024 IHC 148, 2024 CLC 1604 Result: Application Dismissed
JUDGMENT
JUDGMENT AAMER FAROOQ C.J. This judgment shall decide present appeal as well as appeals mentioned in the Schedule attached herewith, as common questions are involved. 2. Appellants, in all the appeals, are the end-users of electricity and were aggrieved of Fuel Price Adjustment (FPA) Determinations dated 09.03.2021, 13.06.2022, 07.07.2022, 12.08.2022, 12.09.2022, 14.10.2022, 16.12.2022, 11.01.2023, 16.02.2023, 18.04.2023, 25.05.2023, 12.06.2023, 19.07.023, 08.08.2023 & 08.09.2023 as well as Quarterly Tariff Adjustment (QTA) Determinations dated 07.07.2022, 29.07.2022, 14.10.2022, 17.01.2023 & 13.04.2023 hereinafter collectively referred to as the "Impugned Determinations". Some of the appellants challenged the Impugned Determinations before Lahore High Court, Lahore by way of petition under Article 199 of the Constitution of the Islamic Republic of Pakistan, 1973 (the Constitution), which was allowed vide consolidated judgment dated 06.02.2023. The referred judgment was assailed before Supreme Court of Pakistan in CP No.491-L of 2023 and others and consequently the judgment of the Lahore High Court was set aside on 16.10.2023 and the matters were remitted to NEPRA Appellate Tribunal (the Tribunal). The Tribunal, through consolidated judgment dated 13.02.2024 ("Impugned Order"), partially allowed the appeals and set aside the Impugned Determinations, however, retained the notification of the said Impugned Determinations in the Official Gazette. Feeling aggrieved of the Impugned Order, instant appeals have been filed. 3. Submissions made by learned counsel for the appellants can be summarized accumulatively as follows:-
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4. It was argued that National Electric Power Regulatory Authority (NEPRA) has not been constituted as per law and as of 04.12.2021, it is a Body Corporate , which does not exist inasmuch as no notification has been issued as required under the law. In this regard, it was contended that NEPRA was constituted under section 3 of Regulations of Generation, Transmission and Distribution of Electric Power Act, 1997 (the NEPRA Act); the original Section 3 of NEPRA Act provides that NEPRA shall constitute a Chairman, to be appointed directly by the Federal Government and four Members, one from each Province, to be appointed by the Federal Government after considering recommendations of the respective Provincial Governments. It was submitted that no requirement, with respect to the qualification/specialization of the Members, was laid down in the NEPRA Act. It was also submitted that NEPRA Act was amended time and again and the most recent amendment was made in 2021, whereby status of NEPRA was changed from that of a statutory body to a statutory corporation and as such a fresh notification in the Official Gazette was required, which has not been done. It was further contended that amendments made to the NEPRA Act in 2021 came in effect on 04.12.2021 and certain changes were made as to the legal structure of NEPRA as the regulator. It was argued that after 2021 amendment, NEPRA was to comprise of a Chairman and four specialized Members to be appointed on rotation basis from each of the Provinces with the following qualifications:- a) Member (Tariff and Finance) holding a degree in the field of economics, corporate finance or chartered accountancy with minimum twelve years of related experience; b) Member (Technical) to be a person holding an engineering degree in the field of electricity, energy or power with minimum twelve years of experience; c) Member (Law) to be a person holding degree in the field of corporate and economics law with minimum twelve years of experience; d) Member (Development) to be a person holding a degree in the field of economics, chartered accountancy or an engineering in electricity, energy or power with minimum twelve years of experience. It was submitted that upon promulgation of the Amendment Act of 2021, the NEPRA Act as it was stood repealed hence the Authority ceased to exist and a new entity was created with a new structure. It was also brought to the attention of the Court that there was no saving clause in the Amendment Act of 2021, consequent effect of such amendment was that earlier legal status and structure of the Authority stood repealed and ceased to exist. Reference was made to case reported as Saeed Ahmed Vs. The State (PLD 1964 SC 266) as well as M. Saif Vs. Lahore Development Authority etc. (PLD 2021 Lahore 168) to highlight that the effect of such an amendment is that the law as it was earlier stands repealed. It was contended that after 2021 Amendment Act, the Federal Government was obligated to reconstitute NEPRA through a notification in the Official Gazette with revised composition and since it has not been done, any act done or decision taken by NEPRA, has no legal sanctity. It was reiterated that 2021 Amendment Act did not provide any saving or any validation clause, hence earlier provisions of NEPRA Act, stood repealed on 04.12.2021. The attention of the Court was drawn towards sections 50 & 51 of the NEPRA Act, as it stands and it was argued that referred provisions do not validate the actions of NEPRA as an Authority. Appellants argued that reliance by respondents on subsection (6) of section 3 of NEPRA Act that in case of vacancy, or defect in the constitution of the Authority, it shall have no effect on the actions taken is anomalous inasmuch as it does not absolve the Federal Government of its obligation to reconstitute NEPRA in light of the provisions of the aforementioned Amendment Act of 2021. Reference was made to case reported as Institute of Architects, Pakistan (Lahore Chapter) Vs. Province of Punjab (2016 PTD 1103 Lahore). It was contended that under section 2(i) of the Amendment Act, the Authority is defined as National Electric Power Regulatory Authority
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established under section 3 of the NEPRA Act and since a fresh notification has not been issued after the said amendment, the Authority has not been established. In so far as the appointment of the Members of NEPRA is concerned, it was submitted that no security of tenure exists and upon promulgation of the Amendment Act of 2021 new appointments have to be made in accordance with criteria as mentioned therein. It was submitted that in case savings are to be made to the actions taken by NEPRA with respect to the Impugned Determinations, it would amount to rendering the amendments made in the NEPRA Act redundant, and no redundancy can be attributed to law. Reference was made to cases reported as Pakistan Telecommunication Employees Trust Vs. Federation of Pakistan etc. (PLD 2017 SC 718), M/s Pakistan Television Corporation Limited Vs. Federation of Pakistan etc. (2017 SCMR 1136) and Dr. Raja Aamer Zaman Vs. Umer Ayub Khan etc. (2015 SCMR 1303). It was contended that at the time of passing the Impugned Decision, the quorum of the Authority was not as per mandate of law and as such no saving can be attributed to the actions of NEPRA. It was argued that till such time that NEPRA is reconstituted in accordance with the Amendment Act of 2021, no determination made by it would be valid. It was submitted that security of tenure provided to existing Members under subsection (5) of section 3, does not, in any case, come to the rescue of the respondents. It was submitted that even de-facto doctrine would not be applicable in the instant case. It was also contended that Impugned Determinations have been made after the expiry of statutory period allowed for this purpose. Learned counsel took the Court through the history of levy of FPA and it was argued that for the first time, it was inserted in NEPRA Act through the Amendment Act of 2008 by means of section 31(4), as it then existed, which was to be done on mandatory basis. Amendments were made first in the year 2011, then in 2018 and then in 2021, section 31(7) was reenacted and as per the same, determination was made on monthly basis no later than a period of seven days. It was submitted that since the Impugned Determinations have been made much after expiry of statutory period, hence are not valid and cannot be relied upon. It was contended that since duty has been imposed in negative language, same is mandatory as was held in case reported as Commissioner Inland Revenue Rawalpindi Vs. Sarwaq Traders Rawalpindi (2022 SCMR 1333). It was also contended that absence of any penal consequence would not make the provision directory and still it remains mandatory. Reference was made to case reported as The Collector of Sales Tax Vs. M/s Super Asia (PTCL 2017 CL 736). It was also contended that reliance on the judgment dated 02.05.2018 of the Supreme Court in CA No.807- 2014, which was a conceding order, is not appropriate as the same is not applicable in the instant case and would not make the Impugned Determinations valid. 5. Learned counsel for NEPRA inter alia contended that there is no requirement for issuance of a second notification. It was submitted that the requirement of issuance of a fresh notification is a question of interpretation of the amended provision. It was argued that if the provision is read purposively, there is no requirement for second notification. Reference was made to case reported as Mirpur Khas Sugar Mills Limited through Wasif Khalid Vs. Federation of Pakistan through Secretary, Cabinet Division, Islamabad (PLD 2021 Sindh 418) to argue that failure to issue a notification in accordance with law will not have any adverse effect. Learned counsel for NEPRA took the Court through section 3(1) of the original NEPRA Act enacted on 13.12.1997 and submitted that upon enactment of NEPRA Act on 13.12.1997, notification was issued as mandated under the law. It was contended section 3(1) does not require notification afresh upon each enactment of an Amendment Act. It was contended that there is no difference in effect between substituting the provision and amending it. Reference was made to case reported as Saeed Ahmed Vs. The State (PLD 1964 SC 266). It was contended that in determining the effect of an amendment or a substitution, the court has to see the intention or the purpose for which amendment was made and even to make a comparison between the old and new law. Reference was made to case
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reported as Fazal Shafique Textile Mills Limited Vs. Rehmat Khan (PLD 1972 Kar. 397). It was contended that reliance by the appellants on case reported as Tri Star Industries Pvt. Ltd. Vs. Trisa Burstenfabrik AG Triengen (2023 SCMR 1502) is not correct in the present case inasmuch as a construction which diminishes the statute to a futility has to be avoided. It was contended that sections 6 & 24 of General Clauses Act, 1897 save the original notification. Reference was again made to case reported as PLD 1964 SC 266. It was contended that Authority was always, effectively, a body corporate as provided in sections 2(1)(9)(c) of the Companies Act, 2017. It was submitted that the expression "Body Corporate" is a generic term to distinguish between natural persons and juristic entities. It was also submitted that amendment to section 3(1) of the NEPRA Act is a clarificatory one. It was argued next that quorum for decision of the Authority is three Members and at the time when Impugned Determinations were made, the requisite numbers of the Members were present. Learned counsel took the Court through provisions of the Act to show that if three Members are present, then the requisite quorum is complete. Learned counsel provided the Court with letters/notifications of various Members as to their tenure and substitutions made upon cessation of the tenure/charge. It was contended that any alleged defect in the constitution of the Authority is cured by section 3(6) of the Act. It was also submitted that there was no need to change the Members after enactment of the amendment in 2021 inasmuch as the original Members were continuing their terms, having security of tenure, and it was only after the completion of their term that new appointments had to be made, which would be done as and when the vacancy exists. It was contended that since the appointment was for a fixed tenure as prescribed, there was no need for new appointments. Reference was made to cases reported as Qazi Tahir Vs. Secretary, Pakistan Medical Commission (2022 PLC (CS) 805) and Shamroz Khan Vs. Muhammad Amin (PLD 1978 SC 89). In contention to the argument that because the first notification was not expressly saved by section 50 a new notification was needed, it was argued that section 6 of the General Clauses Act, 1897 rebuts this argument and reference was made to case reported as PLD 1964 SC 266 supra. Learned counsel submitted that all the hearings were duly advertised and relevant documents are available online to show that it was a public hearing. It was contended that for generation of FPA and QTA, preparations are made in May and June and as per the Economic Merit Order the needful is done and determinations are accordingly made as mandated under the law. It was contended that time period provided in section 31(7) is not mandatory and is merely directory and case law in this regard relied upon by the appellants is not relevant. It was argued that since appellants have never challenged the basic tariff and never attended any of FPA and QTA hearings, they may not be permitted to challenge the same and second appeal is only to be restricted to questions of law. It was submitted that in the facts and circumstances, the case does not require remand but the decision on merit as raised by the appellants. 6. Learned counsel appearing for Distribution Companies (DISCOs), in principle, adopted the submissions made by learned counsel for NEPRA, however one of the Distribution Companies namely Lahore Electric Supply Corporation (LESCO), filed Cross Objections to the appeals under Order XLI Rule 22 CPC that finding of the Tribunal to the effect that proceedings before NEPRA were sham proceedings, is not correct and that no actual hearing took place, is also not correct. It was contended that in the facts and circumstances, the Impugned Order needs to be set aside. 7. In rebuttal, learned counsel for the appellants questioned the maintainability of the cross objections and submitted that since the instant proceedings are not under Code of Civil Procedure, hence cross objections are not maintainable. 8. Learned Additional Attorney General also supported the submissions made by learned counsel for NEPRA and submitted that there was no requirement under the law for issuance of fresh/new
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notification after the amendment in 2021. It was contended that even otherwise, section 6 of General Clauses Act, 1897 protects the earlier notification. 9. Submissions made by learned counsel for the parties have been heard and the documents placed on record examined with their able assistance. 10. The controversy in question has already been spelled out in the preceding paragraphs and reflected in the arguments by learned counsels for the parties, hence need not be reproduced. 11. The controversy revolves around certain provisions of NEPRA Act, as amended from time to time, hence for ease of convenience, the same are reproduced below. The NEPRA Act originally came in existence on 16.12.1997 and it established an Authority under section 3(1) of the Act, which reads as follows:- "3. Establishment of the Authority. -- (1) As soon as may be, but not later than thirty days after the commencement of this Act, the Federal Government shall, by notification in the official Gazette, establish a National Electric Power Regulatory Authority consisting of a Chairman to be appointed by the Federal Government and four members, one from each Province, to be appointed by the Federal Government after considering the recommendations of the respective Provincial Governments". The composition of the Authority was provided in section 3(2) ibid and is as follows:- "(2) There shall be a Vice-Chairman of the Authority, appointed from amongst the members for a period of one year, by rotation, in the following order, namely: (i) the member representing the Province of Baluchistan; (ii) the member representing the Province of North-West Frontier; (iii) the member representing the Province of the Punjab; and (iv) the member representing the Province of Sind". In so far as the eligibility and requirements of appointment of Chairman and Members of the Authority are concerned, the same are provided for in subsections (3) & (4) of section 3 which read as follows:- "(3) The Chairman shall be an eminent professional of known integrity and competence with at least twenty years of related experience in law, business, engineering, finance, accounting, economics, or the power industry. (4) Every member shall be a professional of known integrity and competence with at least fifteen years of related experience in law, business, engineering, finance, accounting, economics or the power business". The Chairman as well as Members of the Authority had security of tenure as contained in subsection (5) of section 3 ibid and is as follows:- "(5) The Chairman and a member shall, unless he resigns or is removed from office earlier as hereinafter provided, hold office for a term of four years and shall be eligible for reappointment for similar term: Provided that a Chairman or a member shall not be appointed under sub-section (1) if he has attained the age of sixty-five years" Subsection (6) of section 3 provides that no act or proceedings of the Authority was to be declared invalid by virtue of any vacancy or defect in the constitution of the Authority; the same reads as follows:- "(6) No act or proceeding of the Authority shall be invalid by reason only of the existence of a vacancy in, or defect in, the constitution of the Authority" The original provision for determination of tariff was contained in section 31 which reads as follows:- 31. Tariff. (1) -- As soon as may be, but not later than six months from the commencement of this Act, the Authority shall determine and prescribe procedures and standards for determination, modification or revision of rates. charges and terms and conditions for generation of electric power, transmission, inter-connection, distribution services and power sales to consumers by
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licensees and until such procedures and standards are prescribed, the Authority shall determine, modify or revise such rates, charges and terms and conditions in accordance with the directions issued by the Federal Government. (2) The Authority while determining the standards referred to in subsection (1) shall-- (a) protect consumers against monopolistic and oligopolistic prices; (b) keep in view the research, development and capital investment programme costs of licensees; (c) encourage efficiency in licensees operations and quality of service; (d) encourage economic efficiency in the electric power industry; (e) keep in view the economic and social policy objectives of the Federal Government; and (f) determine tariffs so as to eliminate exploitation and minimize economic distortions. (3) The procedures established under sub-section (1) shall include-- (a) time frame for decisions by the Authority on tariff applications; (b)opportunity for customers and other interested parties to participate meaningfully in the tariff approval process; and (c) protection for refund, if any, to customers while tariff decisions are pending. (4) Notification of the Authority's approved tariff, rates, charges, and other terms and conditions for the supply of electric power services by generation, transmission and distribution companies shall be made, in the official Gazette, by the Federal Government upon intimation by the Authority: Provided that the Federal Government may, as soon as may be, but not later than fifteen days of receipt of the Authority's intimation, require the Authority to reconsider its determination of such tariff, rates, charges and other terms and conditions. Whereupon the Authority shall, within fifteen days, determine these anew after reconsideration and intimate the same to the Federal Government; [Provided further that the Authority may, on a monthly basis and not later than a period of seven days, make adjustments in the approved tariff on account of, any variations in the fuel charges and, policy guidelines as the Federal Government may issue and, notify the tariff so adjusted in the official Gazette". NEPRA Act underwent amendments time and again and lastly, amendment was made in 2021. After the amendments in 2021, the relevant provisions read as follows:- "3. Establishment of the Authority.-- (1)As soon as may be, after the commencement of this Act, the Federal Government shall, by notification in the official Gazette, establish an Authority to be known as the National Electric Power Regulatory Authority which shall be a body corporate, having perpetual succession and a common seal with powers, subject to the provisions of this Act, to acquire and hold property, both moveable and immovable, and to sue and be sued by its name". 2) The Authority shall consist of a Chairman and four specialized members, to be appointed by the Federal Government and shall comprise of,-- (a) the member tariff and finance who shall be a person holding a degree in the field of economics, corporate finance or chartered accountancy and is a professional of known integrity and eminence with a minimum of twelve years of related experience in the field of corporate finance or chartered accountancy and shall be nominated by the Provinces or Federal Government, as the case may be, by rotation in the following order, namely:-- (i) the member representing the province of Balochistan; (ii) the member representing the province of Punjab; (iii) the member representing the province of Khyber Pakhtunkhwa; and (iv) the member representing the province of Sindh; (b) the member technical shall be a person holding an engineering degree in the fields of electricity, energy or power and is a professional of known integrity and eminence with a
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minimum of twelve years of related experience in the field of electrical and power services business and shall be nominated by the Provinces or Federal Government, as the case may be, by rotation in the following order, namely:-- (i) the member representing the province of Sindh; (ii) the member representing the province of Khyber Pakhtunkhwa; (iii) the member representing the provinces of Punjab; and (iv) the member representing the province of Balochistan; (c) the member law who shall be a person holding a degree in the field of corporate and economics law and is a professional of known integrity and eminence with a minimum of twelve years of related experience in the field of corporate law and economics law and shall be nominated by the Provinces or Federal Government, as the case may be, by rotation in the following order, namely,-- (i) the member representing the province of Punjab; (ii) the member representing the province of Sindh; (iii) the member representing the province of Balochistan; and (iv) the member representing the province of Khyber Pakhtunkhwa; and (d) the member development who shall be a person holding a degree in the field of economics, chartered accountancy or an engineering in electricity, energy or power and is a professional of known integrity and eminence with a minimum of twelve years of related experience in the field of public policy, renewable energy or electric power services business and shall be nominated by the Provinces or Federal Government, as the case may be, by rotation in the following order, namely:-- (i) the member representing the province of Khyber Pakhtunkhwa; (ii) the member representing the province of Balochistan; (iii) the member representing the province of Sindh; and (iv) the member representing the province of Punjab. (3) The Chairman shall be a person known for his integrity and eminence having experience of not less than twelve years in any relevant field including law, business, engineering, finance, chartered accountancy or economics preferably in the electric power services business. (4) Every member of the Authority shall be appointed for a period of three years on such terms and conditions as may be prescribed. (4A) The Authority as a whole shall comprise the requisite range of skills, competence, knowledge and experience relevant to its functions. (5) The Chairman shall, unless he resigns or is removed from office earlier as hereinafter provided, hold office for a term of four years and shall be eligible for re-appointment for…
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