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Petitioner: Syed Ali Javaid Hamdani VS Respondent: The Federation of Pakistan through its Cabinet JUDGMENT
Court Name: Lahore High Court Judge(s): Abid Hussain Chattha Title:Syed Ali Javaid Hamdani vs The Federation of Pakistan through its Cabinet
JUDGMENT
Reported As: 2023 LHC 3681 Result: Order Accordingly Judgment 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 No. 4 to
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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 No. 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 counsels 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 counsels for Respondents No. 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.
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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
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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 No. 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,
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"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 1347). 17. It was next contended that the Petitioner has neither been suspended nor removed by the Board, rather, only delegated powers have been temporarily withdrawn during the pendency of an inquiry against the CEO which had been conferred upon him by the Board itself since the power to manage the company is vested with the Board and the CEO only exercises delegated powers as is evident from the conjunctive reading of Sections 2(14), 183, 188(1), 192(2) of the Companies Act. It was stressed that applicable law makes it abundantly clear that the position of the CEO is always subordinate to the Board and the latter is empowered under the law to define the respective role and responsibility of the CEO. As such, the Board can validly delegate powers to the CEO and conversely can also vary, reverse, alter or withdraw such powers from the CEO. Reliance was placed on case titled, "Major-General Shanta Shamsher Jung Bahadur Rana v. Kamani Brothers Private Ltd. and others" decided on 06.01.1958 by Bombay High Court. To emphasize the point, it was specifically stated that under the Companies Act, there are no specific powers reserved to be exercised by the CEO except to certify the Statutory Meeting under Section 131, to sign Director's Report under Section 227, to approve and authenticate the Financial Statement under Section 232, to issue notice of meeting of creditors under Section 281 and to appear before the Commission or Courts under Section 484. 18. The HR Manual of SNGPL was also quoted to substantiate the point that the management has the power to suspend an employee temporarily for any of the reasons mentioned in Clauses 113.1 to 113.4 thereof, which are fully applicable to the Petitioner as the CEO of SNGPL in terms of Clause 4 of his appointment letter. Thus, the Petitioner as the CEO of SNGPL is merely a delegate of the Board who can curtail his powers to carry out his accountability. 19. Elaborating the scope of Section 190 of the Companies Act, it was submitted that the Petitioner has not been removed from office but some of his powers had been curtailed temporarily in a pending inquiry and as such, no question of removal arises in this case in terms of Section 190 of the Companies Act which requires removal of the CEO by three fourth majority by total number of members of the Board. Further, Article 95 of the Articles of Association of SNGPL empowers the Board to vary or alter any power of the CEO which has been invoked by the Board requiring a resolution to be adopted by a simple majority. This is in line with Section 22(2) of the State-Owned Enterprises (Governance and Operations) Act, 2023 (the "SOE Act") which stipulates that the decisions of the Board shall be taken by majority and only the appointment and removal of the CEO require three fourth majority of those present and voting and not by the total members of the Board. The impugned decisions were taken by 7 out of total 11 Directors and as such, the requirement of Section 22(2) of the SOE Act was also fulfilled particularly when the SOE Act applies notwithstanding anything contained in any other law for the time being in force and as such, it overrides Section 190 of the Companies Act. 20. Finally, it was urged that the allegation of mala fide levelled by the CEO against some members of the Board and the Chairperson are unsubstantiated and even otherwise, the Board is not subject to any accountability by the CEO. Hence, the Petition is liable to be dismissed. 21. Arguments heard. Record perused. 22. At the very outset, it is imperative to address the objections qua maintainability of this Petition raised by the Respondents. It is noted that SNGPL is a public sector listed company as 57.76 % of its
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shares are directly or indirectly held by the Federal Government. It is also a public utility company providing gas to two provinces of Pakistan and as such, rendering essential services to the people of Pakistan. The controversy raised in this Petition, in essence, relates to the operation and governance of SNGPL which directly affects the people of Pakistan. The property and assets of any public sector company ultimately belongs to the people of Pakistan who have a fundamental right to ensure and expect that public sector companies are run and operated in accordance with law so that their interests and rights are adequately safeguarded. It must always be remembered that in case of public sector companies, the members of the Board appointed, nominated or elected on the strength of shares held by the Federal Government and its entities are always acting as trustees and custodians of the people of Pakistan since public property of the Federal Government and its entities in the last resort belongs to the people of Pakistan. In this respect, the Board of a company consisting of members who are also direct owners is different than the Board of a public sector company who are not direct owners but exercise their powers as custodian of public property. Although, there is no such distinction in terms of law but to cater the peculiar nature of public sector companies, multiple laws prescribing stringent requirements have been put in place to regulate the procedure qua appointment, removal, role and functions of the members of the Board and the CEO of public sector companies to achieve the objective of transparency, accountability and efficiency in corporate governance. 23. There is no cavil to the proposition that SNGPL has no statutory rules of service as a public sector listed company and as such, constitutional Petitions with respect to the terms and conditions of service of its employees based on service contracts are not maintainable in terms of jurisdiction vested in this Court under Article 199 of the Constitution of the Islamic Republic of Pakistan. However, the said rule is not applicable in this case as the issues raised in this Petition do not pertain to the terms and conditions of service of the Petitioner within the scope of his service contract. Rather, the instant Petition involves interpretation of statutory provisions regarding the appointment, responsibilities, functions, powers and removal of the CEO vis--vis and the responsibilities, functions and powers of the Board in order to determine the scope and mandate of the applicable law germane to a public sector company which is required to be run and operated in accordance with the highest standards of good governance prescribed by law. The Petition does not call upon this Court to interpret any term and condition of employment of the Petitioner regarding his service benefits in lieu of services being rendered by the Petitioner as the CEO of SNGPL. As such, the principles of non-existence of any statutory rules of service and 'master and servant' are not applicable in the instant case. Further, the Petitioner does not contend that as the CEO of SNGPL, he is not subject to accountability or due process with respect to his responsibilities and obligations. Therefore, the objection that the discretionary jurisdiction of this Court should not be invoked to interfere in the inquiry proceedings against the Petitioner is misplaced since this Court is not called upon to opine that no accountability regarding the conduct or powers of the CEO can take place. The objection to the effect that this Petition is premature under the doctrine of ripeness is also not made out as interpretation of statutory provisions is the basis of this Petition which is the sole prerogative of this Court and is not a function of the Board. The objections that the Board should not have been impleaded as party to this Petition as it is not a distinct juristic person or that Chairperson of the Board should have been impleaded independently on account of assertions casted by the Petitioner against her are insignificant and inconsequential. This is for the reason that SNGPL is a party to this Petition through its Chairperson who is also the head of the Board and as such, each member of the Board has due notice of the same. Though, each member of the Board should have ideally be impleaded as party to this Petition as the meeting of the Board and decisions taken by the Board were impugned yet no member of the Board or the Chairperson filed any application to become a party to this Petition. Needless to state that this Court has ample
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powers to add or delete any party as deemed necessary. However, as SNGPL is duly represented through its Chairperson and this Court does not intend to adjudicate any factual matter relating to any personal right of any member of the Board including its Chairperson being beyond the scope of constitutional jurisdiction vested in this Court, therefore, the objections qua proper parties to this Petition are discarded as immaterial. It is also noted that original jurisdiction under the Companies Act also vests in this Court. Learned counsel of Respondents No. 4 to 6 quoted extensive case law regarding non-maintainability of this…
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