Full Judgment Text & Judicial Ruling

2025 C L D 1398 [Lahore] Before Abid Hussain Chattha, J Syed ALI JAVAID HAMDANI---Petitioner Versus The FEDERATION OF PAKISTAN through Cabinet Secretary and 5 others---Respondents Writ Petition No.12660 of 2023, decided on 26th June, 2023. (a) Companies Act (XIX of 2017)--- ----Ss. 186 & 187---Chief Executive Officer (CEO) of a company---Role---CEO of a company is the most important person in the sense that law confers responsibility of administration and management of company to CEO---This is full time role and responsibility as executive head of a company. (b) Companies Act (XIX of 2017)--- ----Ss. 186, 187 & 190---State-Owned Enterprises (Governance and Operations) Act (VII of 2023), Ss.18 & 22---Public Sector Companies (Corporate Governance) Rules, 2013, R. 5 (2)---Constitution of Pakistan, Art. 199---Constitutional petition---Appointment of Chief Executive Officer (CEO) of State owned company---Curtailing of powers---Acting CEO, appointment of---Petitioner was appointed as CEO of respondent / Sui Northern Gas Pipelines Company Limited, (SNGPL) by Federal Government for a period of three years---Petitioner / CEO was aggrieved of withdrawal of power of attorney issued in his favour by the Company and also appointment of an Acting CEO---Petitioner / CEO contended that he was not appointed by Board of directors, instead was nominated by Federal Government---Validity---Power of nomination of CEO vested with Federal Government under S.187(4) of Companies Act, 2017---Federal Government did not exercise power of nomination regarding petitioner / CEO of SNGPL and followed the process of appointment of CEO prescribed under S.187(1) of Companies Act, 2017 read with Public Sector Companies Guidelines and Public Sector Companies (Corporate Governance) Rules, 2013---Board of SNGPL followed an advertised competitive process through which petitioner / CEO was shortlisted and his name was included in a panel of three shortlisted candidates recommended by the Board to Federal Government seeking its concurrence to one of the three candidates---Federal Government concurred with the name of petitioner whose name was second in priority, whereafter, notification was issued by Federal Government---Board, thereafter, issued letter of appointment to petitioner / CEO and upon its acceptance, the service contract was duly executed between SNGPL and petitioner / CEO---Procedure adopted by the Board in appointment of petitioner / CEO was in conformity with S. 18(1) of State Owned Enterprises (Governance and Operations) Act, 2023 which dealt with appointment of petitioner / CEO and ordained that the Board, in the case of a company would appoint the CEO of the state-owned enterprise under a performance contract for a specified period---High Court repelled contention of petitioner / CEO that he was not appointed by the Board but nominated by Federal Government---Process of appointment and removal of petitioner / CEO was regulated by specific mandatory legal provisions which preempted general role of oversight, supervision and control of the Board over petitioner / CEO---Notwithstanding that power of nomination of CEO vested with Federal Government under S. 187(4) of Companies Act, 2017 the Federal Government did not exercise the power of nomination regarding petitioner as CEO of SNGPL and followed the process of appointment prescribed under S. 187(1) of Companies Act, 2017 read with Public Sector Companies Guidelines and Public Sector Companies (Corporate Governance) Rules, 2013---Petitioner / CEO was also a Director of SNGPL and as a member of the Board had the same powers, functions and responsibilities as any other member of the Board---Processes of appointment and removal of the CEO were separate and distinct and did not have any co-relation with each other---There was no role of Federal Government in removal of petitioner / CEO of SNGPL as Federal Government did not hold more than 75% shares in SNGPL as ordained by S. 190(2) of Companies Act, 2017---Petitioner / CEO of SNGPL could only be removed in accordance with mandatory provisions of section 190 of Companies Act, 2017 requiring three fourth of total membership of the Board and it was not inconsistent with S. 22 of State Owned Enterprises (Governance and Operations) Act, 2023---Board was obligated to delegate such powers to petitioner / CEO as were necessary to enable him to perform statutory duty of administration and management of the Company---Such powers could be withdrawn and petitioner / CEO could be removed even without inquiry under S. 190 of Companies Act, 2017---If Board deemed appropriate, it could initiate an inquiry against petitioner / CEO before removing him from office but without seizure of his powers---If immediate measures were required to be taken against petitioner / CEO, the only course available was to follow procedure of removal of CEO under S. 190 of Companies Act, 2017---There was no provision in law for appointment of Acting CEO in the presence of existing CEO---High Court declared that acts of Board of SNGPL of suspending petitioner / CEO and / or withdrawing his powers, and appointing Acting CEO and conferring him powers of CEO were unlawful, illegal and void-ab-initio as the same were in violation of S.190 of Companies Act, 2017---High Court further declared that manner and conduct of emergent meeting of Board of SNGPL with less than one day notice under a vague and generalized agenda infringed various principles of good governance under the applicable law and as such the same was unlawful and not held in accordance with law---Constitutional petition was allowed accordingly. Qazi Tehmid Ahmed v. Secretary Ministry of Petroleum and 3 others 2015 PLC (C.S.) 449; Muhammad Naeem Akhtar v. Federation of Pakistan through Secretary, Cabinet Division and others (Writ Petition No. 3879 / 2022); Syed Nazir Gillani v. Pakistan Red Crescent Society and another 2014 SCMR 982; Abdul Wahab and others v. HBL and others 2013 SCMR 1383; Habib Bank Ltd. v. The State 2013 SCMR 840; Sui Southern Gas Company Limited and others v. Saeed Ahmed Khoso and another 2022 SCMR 1256; Pakistan Telecommunication Company Ltd. v. Muhammad Samiullah 2021 SCMR 998; Pakistan Airline Pilots Association and others v. Pakistan International Airline and another 2019 SCMR 278; Habib Bank Limited and others v. Syed Zia-ul-Hassan Kazmi 1998 SCMR 60; Abdul Malik v. Government of Punjab and others 2019 PLC (C.S.) 764; Naweed Akhtar Cheema v. Chairperson, TEVTA and others 2011 PLC (C.S.) 803; Ms. Serwat Azim v. Sindh Bank Limited through President / CEO and 7 others 2019 PLC (C.S.) 975; Commissioner of Income Tax and others v. Messrs Media Network and others 2006 PTD 2502; Mughal-e-Azam Banquet Complex through Managing Partner v. Federation of Pakistan through Secretary and 4 others 2011 PTD 2260; Reliance Commodities (Private) Ltd. v. Federation of Pakistan and others PLD 2020 Lah. 632; Muhammad Hammad ur Rehman Zafar v. Director, Federal Investigation Agency, Lahore and another PLD 2022 Lah. 177; Aman Ullah Khan and others v. The Federal Government of Pakistan through Secretary, Ministry of Finance, Islamabad and others PLD 1990 SC 1092; Syed Husnain Aamer v. Tehsil Municipal Officer, Narowal 2007 PLC (C.S.) 348; The Federation of Pakistan through the Secretary, Establishment Division, Government of Pakistan Rawalpindi v. Saeed Ahmad Khan and others PLD 1974 SC 151; Dr. Akhtar Hassan Khan and others v. Federation of Pakistan and others 2012 SCMR 455; Tabassum Shahzad v. I.S.I. and others 2011 SCMR 1886; Baz Muhammad Kakar and others v. Federation of Pakistan through Ministry of Law and Justice and others PLD 2012 SC 923; Waseem Majid Malik v. Federation of Pakistan through Cabinet Secretary and 23 others 2020 CLD 1207; Engr. Ghazanfar Ali Khan and others v. F.O.P. and others PLD 2014 Lah. 375; Babar Sattar v. Federation of Pakistan through Secretary Ministry of Water and Power and 4 others 2016 CLD 134; Nadeem Mumtaz Qureshi v. Pakistan Petroleum Limited and others 2019 CLD 1374; Muhammad Suleman Kanjiani and 3 others v. Dadex Eternit Ltd. through Chief Executive and 4 others 2009 CLD 1687; Bentley-Stevens v. Jones and others 1974 2 All ER 653; Muhammad Yousuf Ahmed and 5 others v. Artistic Denim Mills Limited 2021 CLD 134 and Syed Hasan Masroor Zaidi and others v. Syed Ghayoor Zaidi and others 1988 CLC 1347 ref. (c) Companies Act (XIX of 2017)--- ----Ss. 2(14), 183, 188 & 192---Offices of a Company---Status---Offices of Chief Executive Officer (CEO), Chairman and member of Board are separate and independent in terms of appointment, removal, role, powers and functions which are regulated by mandatory provisions of law and the same cannot be circumvented or made redundant by exercise of discretionary and general powers vested in any of such offices. Shah Khawar, Barrister Ahmed Qayyum, Barrister Syed Ali Nouman Shah and Barrister Hassan Safdar Khan for Petitioners. Ali Jaffar Khan, Assistant Attorney General for Pakistan for Respondents Nos.1 to 3. Uzair Karamat Bhandari, Mian Sami ud Din, Imran Iqbal, Awaiz Asif Ali along with Ahmed Arslan, Incharge Law SNGPL, Amjad Ikram, Chief Officer, Media Affairs SNGPL and Imran Javed and Ahmed Sohail, Deputy Chief Officers Law SNGPL for Respondents Nos.4 to 6. Date of hearing: 5th June, 2023. JUDGMENT ABID HUSSAIN CHATTHA, J.---The controversy pertains to confrontation regarding exercise of powers between the Managing Director / Chief Executive Officer (the "CEO") and Board of Directors (the "Board") of Sui Northern Gas Pipelines Limited (the "SNGPL") which is a public sector listed company as the Federal Government directly or indirectly holds 57.76 % shares of SNGPL. The Petitioner as the CEO of SNGPL has impugned the decisions taken by the Board with respect to seizure of his powers as the CEO by appointing an Acting CEO and initiation of inquiry against him with other consequential measures in the 600th emergent meeting of the Board held on 18.02.2023. 2. Briefly, the Board of SNGPL on 08.09.2019 advertised the position of the CEO on contract basis for a period of 03 years. Five candidates after due process were shortlisted and eventually the Board unanimously recommended top three candidates for appointment as the CEO including the Petitioner to the Ministry of Energy (Petroleum Division) for its concurrence. The Federal Government on 23.12.2020 accorded the sought concurrence and issued the notification regarding appointment of the Petitioner as the CEO of SNGPL on contract basis for a period of 03 years. On 31.12.2020, the Board also approved the appointment of the Petitioner as the CEO. The Petitioner duly accepted his appointment letter. Accordingly, the Board executed service contract and power of attorney in favor of the Petitioner to enable him to exercise the statutory powers of the CEO. 3. During the course of service, certain allegations and complaints arose against the CEO. The Chairperson of the Board on 17.02.2023 required the company Secretary to call an emergent meeting of the Board to discuss critical human resource issues with transparency and governance implications. The meeting of the Board was held on 18.02.2023. It is alleged by Respondents Nos. 4 to 6 that the Petitioner attempted to cancel or illegally disrupt the meeting of the Board and consequently, the meeting was conducted via Zoom. The Board after thorough deliberation resolved that the Petitioner shall seize to exercise any of his powers as the CEO of SNGPL with immediate effect till the Board or a Committee appointed by it, expeditiously completes its review of the matters discussed in the Board meeting and the Board finally takes a decision with respect to the future of the CEO. In this respect, the Board also revoked the power of attorney in favour of the Petitioner till further orders and delegated the powers to Mr. Amer Tufail, DMD(S) being the senior most officer of SNGPL with immediate effect. It was further resolved that a new power of attorney will be executed in due course of time in favour of the Acting CEO to enable him to exercise all powers and functions germane to the office of the CEO in accordance with law in his capacity as Acting CEO. The Board also constituted a special Sub-Committee of the Board comprising of two members to investigate the conduct of the CEO including any of the purported instances of financial irregularities and transgression, particularly relating to Uch Compression Project with direction to submit the report within 15 working days. Other consequential measures were also adopted in the said meeting of the Board considered necessary for the smooth running and operations of SNGPL. 4. The Board statedly consists of 11 members. The impugned meeting of the Board was attended by 8 Directors out of which one abstained while 7 Directors passed the aforesaid resolutions. The Ministry of Energy vide letter dated 20.02.2023 communicated the decision of the Board to various officers including the Principal Secretary to the Prime Minister and the Secretaries of the Cabinet and Establishment Divisions, Islamabad. 5. Thereafter, the Petitioner instituted Writ Petition No. 641 / 2023 before the Islamabad High Court but withdrew the same for filing the same before this Court on the ground that Head Office of SNGPL is located at Lahore and Respondents Nos. 4 to 6 being the real contesting parties are also based in Lahore. Hence, this Petition. 6. The case of the Petitioner is that he was nominated as the CEO of SNGPL by the Federal Government in terms of Section 187(4) read with Section 188(2) of the Companies Act, 2017 (the "Companies Act") and can only be removed by the Federal Government. As such, he cannot be proceeded against in the manner contemplated by the Board as the position of the CEO as well as the Board are statutory stipulations with separate and distinct role especially in the context of a public sector company. The impugned meeting of the Board was called in a hasty manner in violation of stipulated procedure and is, therefore, unlawful not only in terms of procedural irregularity but also for the reason that the Board does not have any power for suspension of the CEO who can only be removed by three fourth majority of the Board as ordained by law. 7. It was further stated that act of the Board of seizing the powers of the CEO by suspending him and appointing an Acting CEO in his place is an indirect way of circumventing the express provisions of the Companies Act and if the same is allowed, the Board of any company would effectively and legitimately be empowered to bypass the mandatory statutory stipulations and would be able to remove the CEO from his post merely on the strength of a simple resolution of the Board. Such a methodology would render the applicable statutory provisions as redundant and will have serious consequences for the efficient and transparent operations of the company, particularly in the context of a public sector company. Learned counsel for the Petitioner also highlighted several instances of irregularities of the members of the Board to contend that the act of the Board was in fact based on mala fide to prevent the CEO from proceeding against the members of the Board and the impugned action is a counter blast by the Board. 8. Conversely, learned counsel for Respondents Nos. 4 to 6 at the very outset raised a number of preliminary objections regarding the maintainability of this Petition. It was submitted that SNGPL as a public sector listed company is governed by its Board and has no statutory rules of service. Moreover, the relationship between the Petitioner and SNGPL is contractual in nature as the CEO is employed under a contract of service. Hence, no constitutional Petition is competent in the absence of statutory rules and in view of the principle of 'master and servant'. Reliance was placed on cases titled, "Qazi Tehmid Ahmed v. Secretary Ministry of Petroleum and 3 others" (2015 PLC (C.S.) 449); "Muhammad Naeem Akhtar v. Federation of Pakistan through Secretary, Cabinet Division and others" decided on 30.01.2023 by the Islamabad High Court in Writ Petition No. 3879 / 2022; "Syed Nazir Gillani v. Pakistan Red Crescent Society and another" (2014 SCMR 982); "Abdul Wahab and others v. HBL and others" (2013 SCMR 1383); "Habib Bank Ltd. v. The State" (2013 SCMR 840); "Sui Southern Gas Company Limited and others v. Saeed Ahmed Khoso and another" (2022 SCMR 1256); "Pakistan Telecommunication Company Ltd. v. Muhammad Samiullah" (2021 SCMR 998) and "Pakistan Airline Pilots Association and others v. Pakistan International Airline and another" (2019 SCMR 278).

9. The second objection was taken to the effect that the Board has only temporarily revoked or withdrawn the delegated powers of the CEO pending an inquiry and as such, the discretionary jurisdiction of this Court cannot be invoked to interfere in the pending inquiry proceedings. Reliance was placed on cases titled, "Habib Bank Limited and others v. Syed Zia-ul-Hassan Kazmi" (1998 SCMR 60); "Abdul Malik v. Government of Punjab and others" (2019 PLC (C.S.) 764); "Naweed Akhtar Cheema v. Chairperson, TEVTA and others" (2011 PLC (C.S.) 803); "Ms. Serwat Azim v. Sindh Bank Limited through President / CEO and 7 others" (2019 PLC (C.S.) 975); and "Commissioner of Income Tax and others v. Messrs Media Network and others" (2006 PTD 2502). 10. The third objection was raised by contending that the Petition is premature under the doctrine of ripeness. Reliance was placed upon Naweed Akhtar Cheema, Abdul Malik and Ms. Seerwat Azim cases (supra) and cases titled, "Mughal-e-Azam Banquet Complex through Managing Partner v. Federation of Pakistan through Secretary and 4 others" (2011 PTD 2260); "Reliance Commodities (Private) Ltd. v. Federation of Pakistan and others" (PLD 2020 Lahore 632); and "Muhammad Hammad ur Rehman Zafar v. Director, Federal Investigation Agency, Lahore and another" (PLD 2022 Lahore 177). 11. As fourth objection, it was stated that proper parties were not impleaded in the Petition. The Board has been impleaded though it is not a legal person, whereas, the allegation of mala fide was raised by the Petitioner against the Chairperson of SNGPL but she was not impleaded as a party in her independent right. Reliance was placed on case titled, "Aman Ullah Khan and others v. The Federal Government of Pakistan through Secretary, Ministry of Finance, Islamabad and others" (PLD 1990 Supreme Court 1092). 12. Another objection was levelled to contend that the Petitioner has also made allegation of bias but no particulars of the same were specifically pleaded and as such, this Petition was not maintainable in view of law laid down in cases titled, "Syed Husnain Aamer v. Tehsil Municipal Officer, Narowal" (2007 PLC (C.S.) 348); "The Federation of Pakistan through the Secretary, Establishment Division, Government of Pakistan Rawalpindi v. Saeed Ahmad Khan and others" (PLD 1974 Supreme Court 151); "Dr. Akhtar Hassan Khan and others v. Federation of Pakistan and others" (2012 SCMR 455); and "Tabassum Shahzad v. I.S.I. and others" (2011 SCMR 1886). 13. Finally, it was submitted that the Committee members of the Board were fully empowered to conduct an inquiry against the CEO who are not disqualified simply on the basis that they participated in the impugned meeting of the Board in which decision to conduct an inquiry was taken. Reliance was placed on case titled, "Baz Muhammad Kakar and others v. Federation of Pakistan through Ministry of Law and Justice and others" (PLD 2012 Supreme Court 923). 14. On merits, it was submitted that appointment of the Petitioner as the CEO of SNGPL was made under Section 187(1) of the Companies Act read with Rule 5(2) of Public Sector Companies (Corporate Governance) Rules, 2013 (the "PSC Rules") and not under Sections 187(4) and 188(2) of the Companies Act as stated by the Petitioner. As such, the Petitioner was not nominated by the Federal Government but the latter merely accorded its concurrence to the recommendations put forward by the Board through a competitive process. In this context, it was stated that 'nomination' and 'appointment' have different nomenclature. Sections 186(4) and 187(4) of the Companies Act empower the Federal Government to 'nominate' the CEO, whereas, Section 187(1) of the Companies Act empowers the Board to 'appoint' the CEO. This distinction is evidently made out by conjunctively reading the provisions of Section 188 of the Companies Act and is fortified by Rule 5(2) of the PSC Rules. Further, Clause 7 of the Public Sector Companies (Appointment of Chief Executive) Guidelines, 2015 (the "PSC Guidelines") stipulates that the Board has the power to appoint the CEO and issue him an appointment contract embodying the requisite terms and conditions of appointment. Learned Counsel relied upon case titled, "Waseem Majid Malik v. Federation of Pakistan through Cabinet Secretary and 23 others" (2020 CLD 1207) to contend that the Federal Government has the option to either nominate the Directors or to put them up for election and by analogy, the same principle applied with respect to appointment of the CEO. Hence, the Federal Government has the power to nominate the CEO and where it exercises this power, it can also determine his terms and conditions of appointment but in the present case, the Petitioner was appointed as the CEO by the Board which also determined the terms and conditions of his appointment under Sections 187(1) and 188(2) of the Companies Act read with Rule 5(2) of the PSC Rules. It was emphasized that the Petitioner was appointed by the Board and the appointment letter was also issued by the Board. The Federal Government merely provided its concurrence to such appointment. Even otherwise, SNGPL being a public sector company is governed and run independently by its Board and the Federal Government has no jurisdiction in micro managing its affairs especially with regard to appointment and removal of the CEO. Reliance was placed on cases titled, "Engr. Ghazanfar Ali Khan and others v. F.O.P. and others" (PLD 2014 Lahore 375) and "Babar Sattar v. Federation of Pakistan through Secretary Ministry of Water and Power and 4 others" (2016 CLD 134). 15. Without prejudice to the above, even if the submission of the Petitioner is accepted that he was appointed as the CEO by the Federal Government, the approval is only required for appointment of the CEO and not for his removal since there is no provision which requires that only the Federal Government can proceed against the CEO or that its approval is required by the Board for removing him. Reliance was placed on case titled "Pyare Lal Gupta and another v. D. P. Agarwal and others" decided by Allahabad High Court on 23.07.1980. Further, the Federal Government has accepted the decision of the Board as depicted vide letter dated 20.02.2023 referred above and Respondents Nos. 1 to 3 in their respective reply to this Petition have fully supported the stance of the Board of SNGPL with respect to maintainability of this Petition as well as on merits. 16. It was also contended that the meeting of the Board was called in accordance with the specified procedure since under Rule 6(2) of the PSC Rules, the requirement of issuance of 07 days of notice for holding a meeting of the Board may be reduced or waived in case of an emergent meeting. Further, Article 106 of the Articles of Association of SNGPL empowers the Board to regulate their meetings, as the Board thinks fit and the Directors may meet together for the dispatch of business, adjourn and otherwise regulate their meetings, as they deem appropriate. A Director may, and the Secretary on the requisition of a Director shall at any time summon a meeting of Directors. As such, 07 days period was duly waived by the Board in exercise of powers vested with it. Hence, the objection of holding the meeting without the notice of 07 days is baseless especially when no member of the Board has raised an objection either to the lack of notice or absence of agenda. Reliance was placed on case titled, "Nadeem Mumtaz Qureshi v. Pakistan Petroleum Limited and others" (2019 CLD 1374). Therefore, this Court should exercise restraint in interfering in the internal management of the company. Reliance was further placed on case titled, "Muhammad Suleman Kanjiani and 3 others v. Dadex Eternit Ltd. through Chief Executive and 4 others" (2009 CLD 1687). Without prejudice to the above, even if there is any irregularity in terms of inadequacy of time in the holding of the meeting of the Board, the Court should not interfere where the irregularity can be cured through proper course. Reliance was placed on cases titled, "Bentley-Stevens v. Jones and others" (1974 2 All ER 653); "Muhammad Yousuf Ahmed and 5 others v. Artistic Denim Mills Limited" (2021 CLD 134); and "Syed Hasan Masroor Zaidi and others v. Syed Ghayoor Zaidi and others" (1988 CLC…

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