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Petitioner: EMPLOYEES' MANAGEMENT GROUP PAKSAUDI FERTILIZERS and otherss VS Respondent: GOVERNMENT OF PAKISTAN and others
Court Name: Sindh High Court Judge(s): Zahid Kurban Alavi Title:EMPLOYEES' MANAGEMENT GROUP PAKSAUDI FERTILIZERS and otherss vs
GOVERNMENT OF PAKISTAN and others Case No.: Suit No,480 of 2002 Date of Judgment:2002-05-24 Reported As: 2002 CLD 1565 Result: Application dismissed Judgment ORDER ' Before dilating upon the facts of the case it would be appropriate to highlight the background of the case. The plaintiff had moved Constitutional Petition No, D-588 of 1996 before the Lahore High Court assailing the legality of the privatisation of the Pak-Saudi Fertilizer Project. The Chief Justice of Lahore High Court by his order dated 7-3-2002 disposed of the petition on the ground that the Project that was to be privatized was situated in the Province of Sindh and, therefore, the plaintiff should file writ petition before the High Court of Sindh, Karachi. Thereafter the plaintiff filed Constitutional Petition No,D-479 of 2002 before this Court. Notices were issued where after a detailed order was passed on 11-4-2002 whereby a Division Bench of this Court observed that the petition should have been withdrawn as not maintainable but then the counsel for the plaintiff acknowledged and conceded that the issues involved could not be agitated in Constitutional petition by virtue of the provisions of the Privatisation Commission Ordinance, 2000 (Ordinance, 2000). The petition was accordingly disposed of by treating it as a suit and the proceedings were to be conducted on the original side under section 28 of the Ordinance, 2000. 2. Accordingly, the petition was converted into a Civil Suit but the council did not change or alter the body of the plaint/petition and/or the prayer clauses. However, at the time of arguments he did concede that declaration No,1 was not being pressed including direction No, 1. He also does not wish to press Direction No,2, therefore, for all practical purposes declarations Nos. 2 and 3 and Directions Nos. 3 and 4 were to be looked and orders to be passed accordingly. 3. The counsel when asked insisted that since it was a suit and the defendants had not filed written statement nor issues had been framed, therefore, the arguments that were to be made should be
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confined and restricted to CMA 2821 of 2002, which is the application under Order XXXIX, rules 1 and 2, C.P.C. 4. The counsel appearing on behalf of the defendants, however, drew my attention to section 28 of the Ordinance, 2000 and left it to the discretion of the Court to proceed with this matter as this Court found fit as section 29 does give the rights to the Courts to exercise its discretion with respect to the facts of the case and if necessary follow summary procedure as nearly as possible as provided under Order XXXVII of the C.P.C. 5. The plaintiff Employees' Management Group, Pak-Saudi Fertilizers Limited, has filed this suit with the following prayers:-- "DECLARATION: (i) Impugned Ordinance may be declared as repugnant to Constitution; (ii) All steps taken by the respondent-Government pursuant to impugned Ordinance be declared without lawful authority and set aside; (iii) Elimination of the petitioner group from the auction arena as per impugned memorandum be declared as an act without lawful authority. DIRECTIONS: (i) Impugned Ordinance be set aside; (ii) Respondent-Government be permanently restrained from attempting any privatisation exercise unless a proper framework has first been set up through permanent legislation by regular Parliament; (iii) Respondent Government be permanently restrained even from setting up a legal framework which does not conform to Article 154 and other provisions which contemplates participation of the provinces in formulation of policies and distribution of assets; (iv) In the alternative, petitioner group beheld entitled to exercise the right of first refusal on the basis of highest bid elicited through any auction process; (v) Any other relief deemed appropriate to the peculiar facts of this case be also afforded." 6. The facts of the case are that the employees Management Group (the plaintiff) has been constituted by virtue of a resolution and represents about 600 workers and 225 Officers of Pak- Saudi Fertilizers Company Limited. The plaintiff represents the employees. The defendant No,4, Pak- Saudi Fertilizers Limited, is a Public Limited Company by shares. It is entirely managed and controlled by defendant No,1, Government of Pakistan. The defendant No,3, National Fertilizers Corporation, has been impleaded as this is administrative mechanism set up by the defendant No,1 to exercise over the defendant No,4. The defendant No,5 is the bidder whose bid of Rs, 7.5 billion has been accepted by defendant No,2. The plaint further shows that a common cause of action has arisen to all the persons as per list attached above when defendant No,1 inserted a public advertisement seeking expression of interest in the sale of defendant No,4, preparatory to soliciting invitations for bid. The defendant No,1 had issued an information memorandum pursuant to the proposed sale of its shares. This memorandum contains all relevant statistics and data about the defendant No,4. The defendant No,1 had thought it fit to adopt the procedure for pre-qualification for sale of shares of the defendant No,4. On 13-7-2000, the plaintiff addressed a memorandum to the Secretary of the Privatisation Committee with the request that a letter of pre-qualification be issued in their favour so as to enable them to participate in the bidding process. There were several correspondence exchanged between the plaintiff and the defendant No,1. It is alleged in the plaint that the defendant No,1 through its Privatisation Commission is conducting the process of sale in such a manner as to ensure that the plaintiff is eliminated effectively from the process of sale. The main reliance of the plaintiff is on an agreement dated 9-9-1991 which according to them has statutory force in terms of Protection of Economic Reforms Act, 1992. The plaintiff asserts that it has the right of first 'refusal in relation to any bid, which may be elicited through auction process. On
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27-7-2002, a memorandum was received by the plaintiff from the defendant No,1 which inter alia, conveyed that the right of first refusal claimed by the plaintiff will depend upon the competitive bid having been received in accordance with the bid documents. It is on this ground that the bid document and the conditions contained therein are challenged as actions without lawful authority. On 13-10-2001, a circular letter was issued to all pre-qualified bidders wherein a pre-bid conference was scheduled for 19-11-2001. The last date for submission of the earnest money together with sale bid and other documents was fixed as 22-11-2001. Earlier, the privatisation process prior to the promulgation of the Ordinance, 2000 had been challenged. 7. Mr. Abdul Mujeeb Pirzada, learned counsel for the plaintiff, at the very outset, contended that his clients had right in the company that was supposed to be denationalised and to that extent they had put forward their claim to run the company once it was privatized. When the company was first advertised for privatisation in the year 1996 they had put forward their view-point with the objective to ensure that the workers would be given their due share in the management and running of the company. They were even prepared to purchase the company. In this respect they had moved a petition in the year 1996 before the Lahore High Court which was numbered as Constitutional Petition No, D-588 of 1996. This petition was heard and disposed of with the following directions :-- (a) That the petitioners (CBA-Union) have every right to negotiate on the highest bid; (b) that the petitioners (CBA-Union) shall submit the management plan including financial plan, acceptable to the concerned respondents, within seven days from tomorrow i,e, 30-5-1996; and (c) that in case, the petitioners (CBA-Union) fail to submit acceptable plan within specified period, they will lose their right of negotiation. 8. The learned counsel claimed that the defendants did not pursue the privatisation and in fact the matter was shelved temporarily. Thereafter, a new law was promulgated which is known as Ordinance LII of 2000, dated 28-9-2000. Through this Ordinance the Government prescribed in detail the ways and means by which privatisation shall be conducted and who shall conduct it including the manner in which it is to be conducted. To that extent learned counsel drew my attention to Part-V, sections 23, 24, 25 and 26 of the Ordinance, 2000. According to him in respect of this Company i,e, Pak-Saudi Fertilizer (Pvt.) Limited (the company), none of the essentials mentioned in the said sections had been followed. Counsel first drew my attention to section 23, which relates to advertisement of privatisation. According to the counsel the Commission was to publish in at least two English newspapers and two Urdu newspapers in between seven days the intent of the Government to privatize an organization. In fact advertisement was also to be placed in a newspaper which has international circulation. Counsel insisted that except for the one and copy of which he had annexed to the plaint, no other adds had appeared in the newspapers and, therefore, there was a violation of section 23. It was his view-point that each and every section mentioned in the Ordinance, 2000 were relevant and had to be adhered to as in doing so transparency would be maintained but also to get maximum involvement of bidders so that ultimately the price that would be obtained would be beneficial to all. 9. Learned counsel then drew my attention to section 24, which dealt with valuation of property. According to him valuation of the property by independent valuer had not been done and to that effect a property that was very valuable was being offered for sale at a very low price. In this respect learned counsel drew my attention to the wordings of the add which according to him was a contradiction as an impression was created through the add that the company that was to be privatized was financially sound and a look at its performance indicated that it was in the green. 10. Learned counsel also drew my attention to section 25 of the Ordinance, 2000, which dealt with method of privatisation. According to him subsection (d) of section 25 relates to privatisation by management or employee by-outs, by management or employees of a State-owned enterprise.
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Since rules had not been framed, therefore, the mode mentioned in section 25 was available and the employees had the right to bid for the company. He once again drew my attention to the observation of Lahore High Court which did envisage the plaintiff's right to negotiate on the highest bid. It also envisaged that the plaintiff shall submit management plan including financial plan acceptable to the concerned defendants within seven days from the date of the petition's disposal i,e, 30-5-1996. It also ended by observing that in case if the plan was not submitted then the employees shall loose their right of negotiation, according to the counsel within seven days they had submitted a full-fledged plan. 11. In effect according to the plaintiff even the processing fees had been paid as prescribed in the advertisement. The defendants in spite of the plaintiffs fulfilling all the requirements imposed a condition of depositing earnest money of Rs,250 million. This Rs,250 million on representation made by the plaintiff was eventually reduced to Rs,150 million. However, this Rs,150 million, the plaintiff was not in a position to pay resulting in a dispute having been created. The counsel drew my attention to a Memorandum of Agreement (MOA), which was agreed upon between the employees of the management way back in 1991. It is this MOA that the employees are relying upon based upon which their claim that they have a right created under the law not only for bidding but also for having the right of first refusal in case of privatisation. 12. The counsel then assailed the whole actions on the ground that there is a violation of the Constitution of Islamic Republic of Pakistan, 1973. According to him all such actions which may directly or indirectly effect all or some of the federating units then the issue has to go through the Council of Common Interest (CCI). In this respect he drew my attention to Article 153 of the Constitution which deals with the CCI and Article 154 of the Constitution which relates to the functions of CCI, especially, in relation to Part-II of the Federal Legislative List. Counsel has relied upon the case of Muhammad Nawaz Sharif v. President of Pakistan (PLD 1993 SC 473) at page 715. In this case amongst the various points that were brought about in connection with the policies of the then Government, which were considered to be not correct, was the privatisation policy. In connection with this aspect a detailed observation has taken place in the relevant judgment but for the purposes of this case it would be enough to state that at paragraph 44, sub-para.4 Mr. Justice Ajmal Mian (as he then was) stated that "in my view the Federal Government should have brought the matter of privatisation in respect of the items covered by the above Constitutional provisions before the CCI. The plaintiffs plea that it was not mandatory is not sustainable". Counsel has also relied on the case of Gadoon Textile Mills v. WAPDA (1997 SCMR 641), where at page 703 Mr. Justice Ajmal Mian (as he then was) observed at paragraphs 28 and 29 held that "the matters referred to in Part II of the Federal Legislative List and Item No, 34 of the Concurrent Legislative List are to be brought before CCI for formulating and regulating policies". 13. The counsel, therefore, urged that not only has the defendants failed to comply with the provisions of the new Ordinance but has also failed to comply with certain essentials as provided by the Constitution of Pakistan, 1973. He further concluded that by imposing a condition of payment of earnest money of Rs,150,000,000 the defendant has tried to stop the plaintiff from successfully participating in the bid. 14. Syed Muhammad Zaki, D.A.-G., drew my attention to the prayer clauses. According to him after the writ was converted into a suit it was incumbent upon the plaintiff to amend the plaint especially the prayers to bring it in conformity with a prayer that could be answered in a suit. According to him the declarations and directions that the plaintiff has sought can only be granted or refused while exercising writ jurisdiction by a Division Bench of this Court. He, thereafter brought before this Court a document which purportedly was supposed to be a secret document and it was the minutes of the CCI which, inter alia, did contain the issue of privatisation and in this list
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contained at the end the name of defendant No,4 has been mentioned. According to him the objection of the plaintiff that the CCI has not taken cognizance of this issue is belied. 15. Learned counsel appearing on behalf of the Federal Government further urged that the bid was made by the plaintiff through a letter dated 27-9-2000. However, the writ was filed first before the Lahore High Court on 7-3-2002. The petition first filed in Lahore and subsequently in Karachi suffered from laches and mala fide. He, further urged that there was total transparency in the entire exercise and complete facility was provided to the plaintiff to bid for the defendant No,4. However, as the plaintiff was not in a position to pay the earnest money therefore, he had filed this petition. He further pointed out that the bona fide of the defendants Nos. 1 and 2 can be seen from the fact that at the request of the plaintiffs the amount of earnest money was reduced to Rs, 150 million so as to enable the plaintiff to participate in the bid. According to him this suit needs to be dismissed as the bid of defendant No,5 has been accepted by the defendant No,1 and progress has been made towards finalisation of the same. 16. Mr. Munir A. Malik, Advocate, appeared on behalf of defendant No, 2. According to him in 1996 when the privatisation was first offered for defendant No,4, 80% of the shares were offered for sale. Now 90% of the shares were offered. First time the face price was fixed at Rs,83 per share, now it is Rs,136 per share. In the year 1996 the plaintiff did submit earnest money. This time round in spite of reduction in the earnest money they failed to provide the same. Learned counsel also relied on section 3 to subsection (4) of the Ordinance, 2000, where in it was stated that all rules, regulations, notifications, orders or instructions in force immediately before the commencement of this Ordinance shall so far as they are not inconsistent with any of the provisions of the Ordinance as continued to be in force until repelled or altered by rules or regulations made under this Ordinance, 2000. To that extent he also drew my attention to S.R.O. 563(1)/01, dated 31-7-2001 and SRO 878 (I) /01, dated 11-12-2001, which dealt with modes and procedures, rules as well as valuation of property rules. 17. Learned counsel drew my attention to a letter of the plaintiff dated 12-11-2001 wherein the plaintiff had sought indulgence of the Privatisation Committee and requested them for reducing the earnest money. They further requested for extension of date for bidding so that they would be prepared. They also wanted the company to be handed over to them and then they would guarantee the payment of the amount within four years. Learned counsel drew my attention to the financial statement enclosed with the plaint under the heading of financial problems and balance- sheet for the year 1998-99. According to the counsel this belies the statement of the plaintiff that the defendant No,4 was making a lot of money and, therefore, it was being "undervalued and undersold with mala fide intention". Counsel also wanted this Court to consider the counter- affidavit that was filed by him in which the defendant No,2 has refuted the allegations of the plaintiff. According to him the procedures mentioned in the new Ordinance were strictly followed. The privatisation of defendant No, 4 was advertised as required under section 23 of the Ordinance, 2000. Counsel undertook to provide all the cuttings of the newspapers which he has done so subsequently to vindicate the position taken by him in the counter-affidavit. Counsel also stated that the provisions of section 24 was strictly followed and independent reputed firms of Chartered Accountants were on the panel. There were a total number of 16 firms. Out of the 16 firms Messrs Sidat Hyder Morghed Associates was involved for the purpose of valuation. The counter-affidavit also shows the methodology adopted for valuation and in fact recommended price that was approved was on the basis of the higher price that could be fetched. The counsel went to a great extent to highlight the fact that the amount demanded as advance was only 1.69% of the offered price. The basis of calculation could not be disclosed as it would not have maintained secrecy. According to the counsel the mode adopted under section 25 was through sale of shares through public auction and or tender i,e, 25-B. Through this mode reputed organizations directly and
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indirectly involved with fertilizer had put in their bid and, therefore, the company which had come up with the best bid were then invited to take over. According to the counsel a great emphasis has been placed by the plaintiff on the right of first refusal. This right of first refusal has arisen from the so-called MOA. However, he has drawn my attention to Packet C in the same MOA which in turn has been discussed at length by the Lahore High Court in their judgment dated 29-5-1996. Counsel wanted to refer to subsection (3) of package C which dealt with all bids made by the employees will have to be competitive and in accordance with the bid documents. According to the counsel right of first refusal is only available when a person participates in the bid. If you did not participate then you have no right of first refusal. Counsel in this respect relied on the case of Millat Tractors Employees' Trust v. Government of Pakistan (PLD 1992 Lahore 68). At page 73 a notified Package C has been mentioned which includes subsection (3) were also it is clearly stipulated that all bids made by the employees will have the bid documents. Whilst disposing of this matter the learned Single Judge observed that "where the shares/assets of the State Management Units are sold through auction the employees will have a right of negotiation on the highest bid only if the bid is competitive and in accordance with the bid documents". 18. Learned counsel also drew my attention to para.3 of the counter-affidavit, filed by the defendant No,2, which also highlighted the fact that no financial plan was submitted by the plaintiff No,1 purely on the grounds that since they already have a right of first refusal, therefore, by using that right they will submit the financial plan accordingly. By letter dated 27-7-2001, the plaintiff was put to notice that in relation to their assertion as to the right of first refusal the plaintiff was obligated to bid competitively and in accordance with the bid documents. 19. Counsel also relied on the case of Amin Ahmad v. Ministry of Production, Government of Pakistan (PLD 1996 Karachi 27). In this case a Division Bench of this Court while disposing of the petition had differentiated between the words "developed" and "dispose". They had referred to the Federal Legislative List, Part-II, and have also dealt with the Council of Common Interest (Articles 153 and 154 of the Constitution). They had come to the conclusion that this Council was created to safeguard the interest of federating units and to establish good relation between the Government, Federation and the Provinces. The Council had two main functions, i,e, to formulate and regulate policies and to exercise supervision and control over related institutions. Part-II of the Federal Legislative List, especially Entry No,3 was relevant for that case which discussed development of industries. They were of the view that the Council would have power to formulate and regulate policies when the basic question of development of industries and its development by the Federal Government was considered to be expedient in the public interest. However, in the case in issue the controversial point was not about development of industries but disposal of property vested in the Government. In the present case similar is the position as it relates to disposal of shares of a factory which is at present moment owned by the Government. 20. The counsel further pointed out that an application for status quo had been filed in the Lahore High Court after this case had been filed. That status quo application was dismissed. 21. Mr. Sajid Zahid, learned counsel appeared on behalf of defendant No,5, identified three main issues that could be discussed and the matter could be disposed of: (a) whether the matter could be referred to CCI, (b) whether procedure mentioned in the Ordinance was followed and (c) whether the plaintiff was given right to participate. 22. Learned counsel also urged that his client had acquired a vested right by virtue of the fact that Letter of Acceptance had been issued to this bid. He drew my attention to letter dated 7-3-2002 in which at the last minute by hand the value of share for which the bidding was to be done was mentioned. He also drew my attention to a letter dated 11-3-2002 which was addressed to the Managing Director of defendant No,4 by the defendant No,2 who stated therein that the Cabinet Committee of Privatisation had made and had approved the bid of the defendant No,5. Letter of
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acceptance was being issued. Counsel, therefore, felt that since this has already been done prima facie he has a case in his favour and since 11-3-2002 lot of progress has been made and as such the balance of convenience now stands in his favour. Irreparable loss and damage would occur to him if at this stage the prayers of the plaintiff is accepted and/or the application for injunction is granted. Learned counsel drew my attention to that was given in the newspapers which has been annexed by the counsel for the plaintiff with his plaint. According to the counsel a plain reading of the preamble would clearly show that the Government of Pakistan invited "Expression of Interest" from prospective investors for pre-qualification to participate in the privatisation process of defendant No,2. Counsel emphasised the fact that this was not a bid for the company. In fact it was an expression of interest to purchase the company and, therefore,…
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