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Petitioner: Haji ISMAIL DOSSA VS Respondent: MONOPOLY CONTROL AUTHORITY
Court Name: Sindh High Court Judge(s): Saleem Akhter Title: Haji ISMAIL DOSSA vs MONOPOLY CONTROL AUTHORITY Case No.: Miscellaneous Appeal No. 39 of 1973 Date of Judgment:1983-06-01 Reported As: PLD 1984 Karachi 315 Result: Cases remanded
JUDGMENT
JUDGMENT ' SALEEM AKHTAR, J.-This judgment will dispose of Miscellaneous Appeal No. 39/1973, 40/77, 2/78 and 12/78 filed against the order of Monopoly Control Authority. The question of law involved in all these appeals is the same. 2. In Appeal No. 39/73 the petitioner is a public limited Company. While scrutinizing the undertaking for the purpose of registration, the Registrar by a letter dated 3-7-1972 called upon Jupiter Textitle Mills to furnish information required for determination whether it should be registered. The Company supplied the information and stated that it was a private limited Company, and request was made that proceeding should be dropped. The respondent Authority finding it to be a public limited Company, probed into the share-holdings by various share-holders and their relationship. The respondent observed that the shares of the Company seem to be owned by two groups of Dossa and Dada. After correspondence the Authority issued notice dated 22-1-1973 to the appellant to show cause why action under Scrim 19 at the Monopolies and Restrictive Trade Practices (Control and Prevention) Ordinances, 1979, hereinafter referred to as the Ordinance, should not be taken against him for failure to register under section 16 (1) (h) of the Ordinance. This show-cause notice was replied in which it was stated that the appellant was in no way in control of 50% of the voting power of the undertaking. It was also pleaded that value of assets of Jupiter Textile Mills was less than Rs. One crore and therefore the provisions of section 16 (i) (h) were not applicable. The Authority repelled both the contentions and by the impugned order held that the appellant holds and controls directly shares carrying not less than 50% of the voting power in Jupiter Textile Mills Limited, which is a public limited Company total value of assets of which is not less than one crore of rupees. The appellant was therefore liable to register under section 16 (i) (h)
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of the Ordinance. The appellant was directed to register with the Authority within 15 days. The Authority also imposed a penalty of Rs. 20,000 payable by 15th of April, 1973 and in case of failure to pay a further penalty of Rs. 20,000 per day after 15th April, 1973. The amount of Rs. 20,000 has been deposited in Court. 3. In M. A. 40/77 the appellant is a private limited Company. According to the finding of the authority the value of assets of this undertaking exceeded Rs. One crore and as it was not a public limited Company it amounted to undue Concentration of Economic Power within the meaning of section 4 (a) of the Ordinance. Accordingly notice under section 11 was issued calling upon the appellant to show cause why it should not convert itself into a public limited Company. The appellant replied that the value of assets has to be considered on the basis of the assets available on 31st March, 1976 which was Rs. 50,62,52104. This contention was not accepted by the Authority and by the impugned order the appellant was ordered under section 12 (1) (a) (i) read with section 11 of the Ordinance to take immediate steps to convert itself into a public limited company by 5-2- 1977 failing which action under section 19 (2) of the Ordinance may be taken. Similar orders were passed in M. A. 2/1978 and M. A. 12/1978. 4. In all these appeals the common question that was agitated before the Authority, as well as in this Court is that the words 'value of assets' as defined by section 2(0) of the Ordinance includes only such assets on which depreciation is calculated for assessing the income-tax. According to the appellants liquid and current assets in any form are excluded from the definition. I have heard Mr. Muhammad Ali Sayeed, Mr. Iqbal Naeem Pasha, Mr. Samiuddin Sami and Mr. Khalid M. Ishaq. ' Mr. Muhammad Ali Sayeed, the learned counsel for the appellant has contended that the circumstances constituting undue Concentration of Economic Power cannot be reduced in the shape of mathematical formula and the guideline provided by the statute has to be interpreted keeping in mind the practice and usage prevalent in trade, commerce, business and industries. He has further contended that considering the definition of 'value of assets' in section 2 (0) only fixed assets on which depreciation is calculated for purpose of assessing income-tax should be taken into consideration. While developing this argument, the learned counsel contended that in arriving at the 'value of assets' the liabilities of the undertaking should be deducted. To appreciate these contentions it is necessary to examine the relevant provisions of the Ordinance : "Section 2 (0).-"Value of assets", in relation to an undertaking, means the value of assets of the undertaking at cost less depreciation at the normal rates at which depreciation is calculated for purpose of assessm ent of income-tax ; ' Section 3.-Undue concentration of economic power etc. Prohibited. ' There shall be no undue concentration of economic power, unreasonable monopoly power or unreasonably restrictive trade practices. ' Section 4.-Circumstances constituting undue concentration of economic" power. ' Undue concentration of economic power shall be deemed to have been brought about, maintained or continued if- (a) There is established, run or continued an undertaking the total value of whose assets is not less than one crore of rupees, or such other amount as the authority may by rule prescribe, and which is- (1) Not owned by a public company, or (2) Is owned by a public Company in which any individual holds or controls shares carrying not less than 50 per cent or such other percentage as the authority may, by rule prescribe, of the voting power in the undertaking. (b) There are any dealings between associated undertakings which have or are likely to have the effect of unfairly benefiting the owners or share-holders of one such undertaking to the prejudice of the owners or share-holders of any other of its associate undertakings.
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' Section 16(I).-Registration. (1) In order that information relevant to the performance of its functions under this ordinance is available to the authority, the following undertakings, individuals and agreement shall be registered with the authority in such manner as may be prescribed by rules, namely :-- . (c) ............................... (d) An undertaking which is not owned by a public Company and the total value of the assets of which is not less than one crore of rupees. (e) (1) ............................... (g) (h) An indvidual who holds or controls whether directly or indirectly, shares carrying not less than 50 per cent. Of the voting power in an undertaking owned by a public Company the total value of the assets of which is not less than one crore of rupees." ' It may be mentioned here that the amount 'one crore' in sections 4 (a) and 16(I)(d) and (h) have been increased from time to time and in 1982 it has been amended to 50 M i.e. Five crores. 5. The scheme of the Ordinance is that after defining certain words, under section 3 it declares 'Undue Concentration of Economic Power, Unreasonable Monopoly Power or Unreasonably Restrictive Trade Practices as prohibited but does not by itself confer any. Power to initiate any action PLD 1981 Kar. 177. Thereafter sections 4, 5 and 6 state the circumstances which constitute "Undue Concentration of Economic Power, 'Unreasonable Monopoly Power" and "Unreasonably Restrictive Trade Practices". Considering the vast, varied and complex nature and subject covered by these provisions with which the Authority has to deal from time to time, the provisions of sections 4, 5 and 6 are by no means exhaustive. Keeping these factors in view section 7 provides that without prejudice to the provisions of section 4, 5 and 6 the Authority may by General Order prescribe circumstance and the conditions under which Undue Concentration of Economic Power or Unreasonable Monopoly Power shall be deemed to exist and the practices which shall be deemed to be Unreasonably Restrictive Trade Practices. This shows that beyond the pale of sections 4, 5 and 6 the Authority may declare circumstances, dealings, or practices amounting to undue Concentration of Economic Power, Unreasonable to Monopoly Power, or unreasonably Restrictive Trade practice. Such declaration can be made by passing a General Order after conducting an inquiry which should be initiated after being satisfied that it is in public interest. All persons likely to be affected should be afforded opportunity of being heard during the inquiry. These conditions and procedure as laid down by section 7 has to be followed before making a General Order. Section 11 provides that where the Authority is satisfied that there is a contravention or likely to be a contravention of the provisions of section 3 and that action is necessary in public interest, it may after show-cause notice and hearing the person or undertaking pass an order as provided by section 12. Section 11 therefore provides a procedure for initiating action for violation of section 3 which has been elaborately spelt out in sections 4, 5 and 6. In the nature of cases I am dealing the Authority can inter alia require firms and companies not being public limited Companies to be converted into public limited companies require the controlling shareholders of public limited Companies concerned to offer such shares as specified to general public, or Government controlled investment institution or trust, require the person or undertaking to divest of ownership bf any stock, share beneficial interest in any undertaking, management or control of any undertaking or prohibit the person or undertaking concerned from acquiring the stock or of any asset of any undertaking or from merging with any under taking. Section 16 provides categories of undertakings agreements and individual which are required to be registered with the Authority.
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6. Before discussing the merit and effect of these provisions, it is necessary to consider the object and intention of the Ordinance. From its very nature the Ordinance imposes restrictions on trade, commerce an business. The object of the Ordinance is to prevent concentration of weak in the hands of a few and to curb monopolistic and expansionist tendencies in trade, commerce, industry and business. It prohibits undue concentration of economic power, unreasonable monopoly power and eliminates unreasonably restrictive trade practices from the market. It also discourages such trade practices which prevent, restrain or lessen competition. The Ordinance is designed to restrict and prohibit, in public interest, dealings, agreements, arrangements and practices which create monopoly and economic power and unreasonably control the business, undertakings and market. These economy evils as specified in the Ordinance have been considered detrimental to public" interest therefore the Ordinance has provided measures to regulate, check to eliminate them. 7. Mr. Muhammad All Sayeed, the learned counsel for the appellant and Mr. S. Samiuddin Semi, the learned counsel for the respondent have agreed on one point that while interpreting the law effort should be made to interpret it so as to achieve the object of the legislation. In this regard reference has been made to PLD 1971 SC, 1975 SCMR 371, 1921 (3) K. B 405, PLD 1975 Lah. 59, 1946 A C 271 and 1982 SCMR SIM It is not necessary to reproduce the principles laid down by these authorities except to reproduce a passage from Kadir Bux's case (1), in which various judgments of the Supreme Court and commentaries by Maxwell and Craise have been discussed. While referring to In re : Reference by the President of Pakistan under Article 162 of the Constitution of Islamic Republic of Pakistan PLD 1957 SC (Pak.) 219 it has been observed as follows:- 'In re : Reference by the President of Pakistan under Article 162 of the Constitution of Islamic Republic of Pakistan (1) an attempt was made to summarize eight wed-known rules of interpretation, namely : the first object of the Court is to discover the intention of the author from the words used ; the intention should also be gathered from reading the statute as a whole in order to arrive at a "consistent plan" the statute should not be extended to meet a case which is "deafly and undoubtedly out of its purview ; whenever a particular and general provision exists in the same statute and the general when taken in its most comprehensive sense, would overrule the particular, the particular "must be operative" and the general would then be confined to other parts to which "it may properly apply" these rules would apply to the interpretation of constitutions also, but with certain modifications so as "to give effect to the intention of the framers of the organic law and of the people adopting it." Court should try to avoid construction which renders any provision meaningless or inoperative and should thus lean in favour of keeping the words operative rather making them idle ; it is the duty of the Courts to have recourse to the whole instrument, if necessary, "but, in case of apparent repugnancy between different provisions, "the Court should harmonize them if possible." 8. The aforestated observation in a nutshell summraizes the time tested principles that are well- recognised and applied while interpreting any statute. For the purpose of the present appeals it is relevant to mention that first intention of the legislature bas to be discovered and it should primarily be gathered from the language of the statute itself. According to Mexwell 'a statute is the will of the legislature, and the fundamental rule of interpretation, to which all other are subordinate, is that a statute is to be. Expounded according to the, intent of them that made it." In re : Reference by President of Pakistan Monir, C. J., observed that "the intention of the legislature in enacting a statute ought to be derived from a consideration of the whole enactment in order to arrive at a consistent plan." 9. In the light of these principles of interpretation I will now consider the arguments of the learned counsel for the parties. Mr. Muhammad Ali Sayeed has contended that while interpreting the definition of "value of asset" the meaning of technical terms as understood in the Companies Act, the Income-tax Laws as well as in trade and business should be adopted. According to the learned
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counsel the only meaning to the definition of these words as provided by the Ordinance is that it refers to fixed assets on which depreciation is allowed under the Income-tax Laws. 10. Now it is to be considered in what manner the technical word 'assets' is understood in 'business, trade, audit and accountancy practice, tax laws and the Companies Act. Ibis is a universal practice which cannot be denied that in every undertaking balance sheet and profit and loss accounts are prepared. These documents reflect the financial position of an organisation. In the balance sheet assets are shown on one side and liabilities on their other side. The assets are such resources that business owns. While liabilities (1) 1982 SCMR 582 ' are obligations owed by that business to a third party. There are two types of assets which are clearly mentioned in the balance sheet. They are known as current assets and fixed asset. The current assets known as liquid and circulating assets are of immediate utility than other assets because they can be converted into cash or other kind of assets quickly and without much loss of time. This includes cash and such assets which can be, sold, converted or consumed reasonably soon. The cash includes bank notes, cheques, money orders and currency. In the category of current assets will fall debtors' accounts or bills receivable stock, merchandise, material and finished goods. The mobility and liquidity of current asset makes it more effective. 11. The fixed assets are permanent in nature which include freehold land, lease-hold land, building, plant, machinery and vehicles. These are tangible assets which are costly and relatively expensive having comparatively a longer life. As the valuation of plant, machinery, building and vehicle has to be spread over a period of its estimated life, a practice has developed in audit and accountancy that every year book value of such assets is mentioned after taking into consideration the wear, tear and depreciation. Therefore normally in every succeeding year the book valuation of such fixed assets is relatively reduced. It may also be mentioned that in the field of accountancy patents, copy rights, good-will and trademarks are treated as intangible assets which by nature and character play an important role in the promotion of business. It is thus clear that in business, trade, commerce and industry word "assets" is used for current and fixed assets both. 12. The meaning of assets as understood in audit and accountancy practice and recognised by the Companies Act for preparation of balance sheet may be a safe guide for ascertaining its meaning. The word "assets" has nowhere been defined in the Companies Act. Section 132 of the Companies Act provides that a balance sheet shall contain a summary of property and assets or capital and liabilities of the Companies. Form 'F' of the HI Schedule of the Companies Act is a specimen Form of the balance sheet which is usually prepared according to the accountancy practice as well. I here are two separate columns. On the left is the column relating to capital and liabilities, whereas on the right is the column entitled 'property and assets'. The assets have been classified as fixed capital expenditure upon land, building lease-holders, railway siding, goods, plant, machinery and furniture. In the same column of assets are Included stores and spare parts, vehicles, stock in trade, bills of exchange, books advances, investments, interests, cash and other balance. This clearly shows that in the balance sheet prescribed by the Companies Act the assets include fixed as well as current assets and are not arrived at after deducting the liabilities. 13. Mr. Samiuddin Sami the learned counsel has referred to Dictionary of Scientific and Technical Terms IInd Edition by McGraw-Hill in which 'assets' has been defined as follows :- "Assets: All the resources, rights and property owned by a person or a Company: the book value of these items as shown on the balance sheet." ' In Webster's Third New International Dictionary meaning of 'Assets' has been given as follows :- "The series of items on a balance sheet representing the book values at a given date of resources, rights, or items of property owned grouped under appropriate headings according to their nature."
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' Assets have been classified as capital assets, cash assets, current assets, fixed asset, net asset, intangible asset and tangible asset. It is only in cases of net assets that a balance is obtained by subtracting liability from gross assets. ' The learned counsel for the appellants have mainly contended that only the fixed assets are to be taken into consideration while assessing the value of assets. In my opinion such an interpretation would restrict the meaning of the 1 "assets" to a very narrow compass. If this would have been the intention of the legislature then instead of the word 'assets words 'fixed assets' would have been used: The assets required to be evaluated include all assets fixed and current. The only concession granted is that where fixed assets are available, value shall be determined by deducting, depreciation from the cost. The formula of deducting the depreciation has been laid down by reference to the rules of depreciation fixed by the Income-tax K Laws. In this regard it is pertinent to note that under the Income-tax Ordinance, 1979 as well as the Income-tax Act, 1922 the word "assets" has nowhere been defined. Only the word "capital asset" has been defined as property of any kind held by an assessee whether or not connected with his business or profession but does not include : (1) any stock in trade, consumable stores or raw-materials held for the purpose of his business or profession, (11) personal effects i.e. Movable property held for personal use and of any land from which the income derived by the assessee is agricultural income. Therefore by implication it can be deduced that stock in trade, consumable stores or raw material, though assets, by operation of law have been excluded from the definition of 'capital assets'. Prior to.1946 there was no definition of 'Capital. Asset' which was later introduced in the Income-tax Act, 1922 and has been retained in the Income-tax Ordinance, 1979 in faintly for the purpose of assessing Capital Grain Tax. The Income-tax Act, 1922 or Income-tax Ordinance, 1979 are different from the Ordinance in this nature and operation. Income-tax Ordinance contemplates imposition of tax on income and not on assets. Therefore the object, operation and thrust of the Income-tax Ordinance and the Monopolies and Restrictive Trade Practices (Control and Prevention Ordinance, are completely different and distinguishable. 14. In business, commerce and industry the current asset is more effective and potential than the fixed asset. The mobility, convertibility and its encashment at the shortest possible time puts it at a much higher plane than the fixed assets. It is not uncommon with the bankers that they unhesitatingly advance loan on the basis of stock in trade. 15. Having considered the meaning of assets and the manner it is understood in audit and accountancy practice, business and Companies, it can I, safely be stated that the word 'asset' means and includes fixed assets and current assets. The Ordinance is an economic legislation intended to crest an economic system which should not result in the concentration of economy Power, monopolization and creating unreasonably restrictive trade practices. To restrict the meaning of assets to fixed assets only will amount to putting artificial barriers to the real meaning while determining the 'value of assets'. If current assets are excluded the effect and operation of the Ordinance shall be reduced to a narrow and limited sphere. This will nullify the object of the Ordinance. The limited meaning, the appellants wish to place, is against the real meaning, true object and economic reality. It will break the claw the Ordinance intends to provide. Instances are common where undertakings with negligible fixed assets but large current assets create monopoly power and concentration of economic power, control the market and develop ,, unreasonably restrictive trade practices but the Authority will not be able to invoke the provisions of the Ordinance only because such undertakings do not have sufficient fixed assets. This is not the intention of the legislature. 16. The learned counsel for the appellant contended that the concept of assets, is co-related with liabilities and therefore while calculating the value of assets the liabilities should be excluded. On the face of it no such provision has been made for calculating the value of assets in such a
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manner. According to the principles of interpretation nothing is to be added or substracted from the statute. If the appellant's interpretation is Accepted it would amount to substituting words which do not find place in the statute. As discussed above in accountancy practice 'Net assets" is arrived at by deducting the liabilities from: the assets. No such formula for assessing the 'value of assets' has been provided by the Ordinance. Therefore the question of R adjusting the liabilities is ruled out. In this regard it may be mentioned that Mr. Lqbal Naim Pasha the learned counsel for one of the appellants has maintained that assets should be restricted to fixed assets but liability cannot be adjusted from it. He has very aptly given example of trading companies which do not possess fixed assets or if at all, of nominal value, buts have vast business and are capable of creating monopoly and unreasonably restrictive trade practices. 17. Mr. Muhammad Ali Sayeed has referred to Words and Phrases Judicially Defined by Roland Burrows 1946 Edition Vol 1, where while illustrating the word 'assets' the following observation of Sterling, J., In re Pyle Works (1), has been reproduced : "But then the question arises what are to be considered 'assets' or property of the Company ? In my opinion. The assets or property of the Company which are referred in those sections (sections 98 and 133 of Companies Act, 1862) (repealed, section now Companies…
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