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Petitioner: CALICON (PVT.) LTD. VS Respondent: FEDERAL GOVERNMENT OF PAKISTAN And Other
Court Name: Lahore High Court Judge(s): Mian Allah Nawaz, Mian Nazir Akhtar Title: CALICON (PVT.) LTD. vs FEDERAL GOVERNMENT OF PAKISTAN And Other Case No.: Writ Petition No.679 of 1992 Date of Judgment:1992-05-06 Reported As: 1996 MLD 705 Result: Order accordingly
JUDGMENT
JUDGMENT MIAN ALLAH NAWAZ, J.---This Constitutional petition by M/s. Calicon (Pvt.) Ltd., herein petitioner, raises an important question relating to interpretation of Article 173(1) of the Constitution of Islamic Republic of Pakistan, 1973, as to whether an Act of appropriate legislature is sine qua non for the exercise of executive authority for the purpose of sale, disposal of properties, owned by the Federal Government or Provincial Government and whether the Federal Government had framed Rules providing for structuring of discretionary jurisdiction in matters of privatisation. 2. The facts giving rise to this Constitutional petition are, fortunately, not much in dispute. These are; that the petitioner is a private limited company incorporated under the provisions of Companies Ordinance, 1984 (hereinafter shortly stated as Ordinance). It was incorporated in 1995 with a paid- up share capital of Rs.5 lacs. Respondent No. l is Federal Government while respondent No.2 is Privatisation Commission. Respondent No.2 are State Cement Corporation of Pakistan Ltd. (hereinafter stated as S.C.C.P.) and D.G. Khan Cement Company Ltd. (hereinafter referred to as the "DGKCL"), respectively. Both these companies i.e. Respondents Nos.3 and 4 are also incorporated under the "Ordinance". It will not be out of place to mention over here that the "DGKCL" was set up by the Federal Government of Pakistan. Its shares are wholly owned by the SCCP, which is also a State-owned, managed and controlled Corporation being run through the Federal Ministry of Production. The dispute in this petition relates to the sale of controlling shares of the ' DGKCL' by the Federal Government, through Privatisation Commission (hereinafter referred to as 'Commission'). Respondent No.5 Pak Land Cement is one of the tenderers/companies. 3. The case of the petitioner, shortly stated, is that respondent No.4 was set up by the Federal Government. It was wholly owned by the Federal Government through instrumentality of S.C.C.P.
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Which was also a State-owned agency. Neither the S.C.C.P. Nor the D.G.K.C.L. Were listed Companies for the purposes of Stock Exchange. 4. By notification dated 22-1-1991 the President of Pakistan constituted Commission with following terms of reference:--- (i)To invite application for the total or partial privatisation of public sector industries and enterprises and ensure widest possible participation; (ii)To evaluate bids received according to criteria prescribed by Government and formulate recommendations for consideration by Government; (iii)To recommend to the Government such labour/manpower rehabilitation programme as may be necessary whilst privatising units and to develop a roster of such employees who may need rehabilitation or develop plans which can enable employees to adopt self employment on the basis of small financing; (iv)To advise the Government for implementing a development programme for improvement of public sector units till their privatisation; (v)To assist in the implementation of Government policies on deregulation and privatisation and advise the Government on deregulating the economy to the maximum possible extent; and (vi) To review and recommend measures for the revival and rehabilitation of those industries which are shut down and are under the control of the N.C.Bs. And D.Fs. This Commission issued an invitation through advertisement in daily 'DAWN' dated 14-10-1991, inviting individuals,- groups, Companies, Corporations and Firms to make their offers for the purchase of shares/net-assets of the DGKCL. Pursuant to this notification, the petitioner as well as other bidders obtained necessary documents on 10-10-1991. The petitioner submitted his tender. The tenders received by the Commission were opened in the presence of petitioner and eight other bidders. Offer made by the petitioner was the highest, which will be amply reflected by the chart of offers which is as follows:---
RANKING NAME PERSHARE VALVETOTAL AMOUNT First Calicon (Pvt.) Ltd. Rs. 359 1,799,677,000 SecondPakland Cement Ltd. Rs.269 1,348,497,000 Third First Interfund Mod. Rs.250 1,253,250,000 FourthTariq Saigol & AssociatesRs.229.5 1,150,517,925 Fifth Dr. Gaith Pharon. Rs.225 1,127,925,000 Sixth Karan Khan & AssociatesRs.150 751,950,000 SeventhRainbow Rs.130 751,690,000 Eight Fauji Foundation Rs.114 571,482,000 NinethDera Management GroupRs.109 546,417,000
5. In pursuance of this exercise, the Commission accepted the offer and issued letter of intent dated 26-10-1991. This letter, was withdrawn and subsequently was followed by another letter, dated 3-11-1991 making some minor clarification therein. The petitioner was communicated to deposit 26 % of the offer within 30 days of the receipt of the letter, and then to deposit further 14 % at the time of execution of agreement and had to furnish security for remaining 60% of the offered amount. Since then erupted some serious differences between the Commission and the petitioner with respect to certain terms of letter of intent received by the petitioner who did not deposit 26% and instead asked the Commission to remove the Managing Director of respondent No.4 in order to ensure the smooth finalisation of sale transaction. It was complained that the petitioner had
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purchased the share of respondent No.4 on "as is where is" basis as an on-going concern and the Managing Director was making an attempt to diminish the assets of respondent No.4. It was further alleged that the Managing Director of respondent No.4 had transferred Rs.8,35,50,000 as dividends of respondent No.3. It was quite contrary to the letter and spirit of letter of intent. A letter was addressed to the Commission on 30-11-1991 but without any fruit. On 1-12-1991, there was a meeting between the petitioner and respondent No.2, which failed to yield any result. Letter after letter was sent to the Commission which failed to give any attention to them. On 11-12-1991, the Commission sent a memorandum of rejecting the offer of the petitioner. The earnest money deposited by the petitioner amounting to Rs.1 million, was also forfeited. The petitioner was informed that the bid of second tenderer was accepted. The Court was further informed that even the offer of the second- bidder i.e. The Pak Land Cement, had also been rejected on account of default of payment of 26% of the offered amount within the prescribed period. 6. The arguments put forth by the learned counsel for the petitioner can be conveniently summerised as follows: -- Firstly (a) that respondent ~o.4 (DGKCL) was wholly owned, managed and controlled by respondent No.3, who was also wholly controlled, managed and owned by the Federal Government. On the strength of this uncontradicted circumstance, it was argued that the Federal Government under Article 173 'of the Constitution had no power to make the sale of the property in the absence of appropriate legislation by the Parliament. According to him the act of legislation is prerequisite for the exercise of executive authority by Federal Government for the purpose of sale/disposal of public property. Since admittedly there was no legislation by appropriate legislature, the Federal Government had no authority whatsoever to initiate the process of sale of its property. According to the learned counsel the exercise from commencement to finish was wholly invalid. Elaborating this contention further, the learned counsel' placed reliance upon Brochure titled "'Privatisation Policy and Implementation" (Annexure E'.) According to the learned counsel on this Brochure it was specifically stated that the Government had the necessary legal frame-work in support of Privatisation Policy. Furthermore the learned counsel sought help from various legislative instruments namely; WPIDC Ordinance, 1962 read with Act XXVIII of 1974 and section 3 of Evacuee Property and Displaced Persons Laws (Repeal) Act, 1975 (Act XIV of 1975), Banks Nationalisation Act, 1974, Economic Reforms Ordinance, 1972 read with Transfer of Managing Establishment Order, 1978, Hydrogenated Vegetable Oil Industry (Control and Development) Act, 1973 read with Ordinance XXXV of 1991 and Pakistan Maritime (Shipping and Control) Act, 1974. These Acts showed that the Federal Government had been making the sale/disposal of its properties under the law, which demonstrated that under Article 173 an Act of appropriate Legislature was a must. (b) The learned counsel also placed emphasis on the words used 'subject to any' to show that the Act of Legislature was necessary for the exercise of executive authority by the Federal Government under Article 173 ibid. It was stated that 'any' means 'one or some' but manifestly not none'. Relying upon the meaning given the word 'any' in Muhammad Sharif and 41 others v. Government of West Pakistan and 92 others PLD 1972 Lah. 858 it was canvassed that the use of word 'any' in Article 173(1) showed that the framer of the Constitution intended that the property of Federal Government should not be disposed of at the whims or caprice of the Federal Government and without any appropriate legislation. Help was sought from the meaning of the word 'subject' given in K.R.C.S. Balakrishna Chetty and Sons & Co. v. The State of Madras AIR 1961 SC 1152, to support the submission noted above: Secondly; that the Commission had no authority under the law to reject the offer of the petitioner. According to the learned counsel the Commission was constituted most probably under the provisions of Pakistan Commission of Inquiry Act, 1956. This institution was constituted in order to
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make preliminary inquiry. As such the Commission had illegally and incorrectly rejected the offer of the petitioner. According to the learned counsel, in the light of these submissions, it should be declared that the offer of the petitioner was still pending decision. Thirdly; that the total shares of respondent No.4, were owned by respondent No.3 which was a State-owned Corporation. According to the learned counsel respondents Nos.3 and 4 were, therefore, the sole proprietorship and not a Corporation/Company incorporated under the provisions of the Ordinance on the doctrine of lifting of veil of incorporation. Reliance was placed on the rule laid down in Ramana Dayaram Shetty v. The International Airport Authority of India and others AIR 1979 SC 1628 and Fauji Foundation and another v. Shamimur Rehman PLD 1983 SC 457. According to the learned counsel the sale, in fact, was not of the shares of respondent No.4 but of its net assets. Fourthly; it was suggested without conceding that if under Article 173(1) ibid, no legislation was required then even the Federal Government will be required to frame necessary Rules/Instructions in order to structure its discretion in order to ensure the confidence of the public at large where the owner of the property was the Federal Government. Reliance was placed on Ittefaq Foundry v. Federation of Pakistan PLD 1990 Lah. 121 and Chairman, Regional Transport Authority, Rawalpindi v. Pakistan Mutual Insurance Co. Ltd., Rawalpindi PLD 1991 SC 14. Fifthly; it was lastly contended that even the Act of the Commission in rejecting the offer of the petitioner suffered from the principle of unfaigiess. According to the learned counsel the offers were called for by the Commission through Advertisement dated 14-10-1991. This was totally devoid of details regarding valuation of shares, curtail of net--assets of the project, the prospective terms of agreement, the mode of the payment. All these details were left to whims of the Federal Government/Commission. Before the execution of the agreement, the Managing Director of respondent No. 1, transferred Rs.8,35,50,000 to the account of respondent No.3 which was contrary to letter of intent as the petitioner had made an offer for the project on "as is and where is" basis. In short, the petitioner's offer was dealt with capriciously, whimsically, and unreasonably. In view of this conduct, the action of the Commission could not be sustained. Reliance was placed on Rashid A. Khan v. West Pakistan Railway Board, Lahore through its Chairman and another PLD 1973 Lah. 733 and Ramana Dayaram Shetty v. The International Airport Authority of India and others AIR 1979 SC 1628. 7. On the contrary, the arguments on behalf of respondent No.2 were led by Raja Muhammad Akram, Advocate. The Attorney-General of Pakistan, despite intimation/notice, did not enter appearance on account of reasons unknown to us and we could not have the benefit of his assistance. Mr. Muhammad Khalid Alvi, the learned Standing Counsel, for the Federal Government at Multan, communicated to the Court that he will argue on behalf of the Federal Government on the instructions of the learned Attorney-General. He further stated that he would adopt the submissions made by the learned counsel for respondent No.2. 8. The arguments advanced by Raja Muhammad Akram, Advocate in reply to the learned counsel for the petitioner, can also be briefly described as follows: (i)It was stated without any reservation that respondent No.4 was set up by the Federal Government and its, shares were owned by the SCCP which is a Public Ltd. Company whose shares are owned by the Federal Government of Pakistan. It was further pointed out that the Commission was constituted by the President of Pakistan not under the Pakistan Commission of Inquiry Act, 1956 but under Article 173 of the Constitution. The function of the Commission was specifically described in the notification of its Constitution. The Federal Cabinet had decided to sell the shares of respondent No.4 by inviting tenders. Pursuant to this decision, the Commission invited offers from the persons described in the advertisement. The offers were opened in the presence of all the tenderers including the petitioner on 17-10-1991. The offer of the petitioner being the highest was
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accepted and the letter of intent was issued to him on 26-10-1991/3-11-1991, requiring him to pay 26% of the amount within 30 days in accordance with the decision of the Federal Cabinet. The petitioner defaulted, therefore, in accordance with the decision of the Cabinet the Commission communicated to the petitioner rejection of his offer and negotiations were commenced with respondent No.5, which was next bidder. He was asked to raise his offer to the highest offer. Respondent No.5 accepted the offer but failed to pay 26% in accordance with the terms of the offer and so the Federal Cabinet decided to reject the offer by the second highest bidder as well. Negotiations are -being carried with third highest bidder. After giving this factual background the learned- counsel contended that the executive authority of the Federal Cabinet to make sale of its property was not dependent upon any legislation. Reliance was placed on R.I Sahib Ram Jawaya Kapur and others v. The State of Punjab AIR 1955 SC 549 and Haji T.M. Hassan Rawther v. Kerala Financial Corporation AIR 1988 SC 157. On the basis of the rule laid down in the aforenoted authorities,, it was emphasised that the Federal Government, needed no legislative sanction for exercise of the executive power of making sale of its properties under Article 173(1) ibid. (ii)That even otherwise if it was assumed tha t the legislation was necessary then the Income Tax Ordinance, 1984 was in the field. The Commission receives the offers and after due inquiry, it processes the offers to the Privatisation Committee of Cabinet (hereinafter stated to be PCC), who is entitled to accept or reject an offer and then ultimately the agreement is executed by the owner/company. (iii)That the doctrine of lifting the veil of incorporation was hardly applicable to the facts and circumstances of this case. Similarly the Economic Reforms Order as well as the other Acts relied upon by the learned counsel for the petitioner had no bearing on this case. Reliance was placed on an unreported judgment of the Division Bench of this Court titled Cement Industries Employees' Union v. The Federation of Pakistan (W.P. 11445 of 1991). (iv) As regards the status of the Commission, it was admitted with candour that the Commission had no power to accept or reject the offers made by the tenderers. Its duty was to forward the offers to PCC which had the sole authority to accept or reject the offers. (v) It was further contended that the PCC had evolved a mathematical, fool-proof procedure for the purposes of transfer/disposal of its property to the private Sector. No loop-hole is left and no room is left for any discriminatory treatment to any prospective bidder wishing to participate in the process of Privatisation. According to the learned counsel the P.C.C. Decided to make sale of respondent No.4 through invitation of tenders which were to be opened in the presence of tenderers in order to ensure the fairness and transparency in this ,process, if the offer of the highest bidder fails on account of default, then the offer is made to- the second highest bidder and so on and so forth, if they are prepared to purchase the project in consonance with the highest offer received. (vi) It was contended with vehemence that the petitioner had come to the Court with soiled hands and had filed this petition for the benefit of respondent No.5. From the facts noted above, it is crystal clear that the petitioner was incorporated in 1990 with a limited paid-up capital of five lac rupees; had participated in the process of offering tenders for 3 projects worth Billions of rupees. The offers of the petitioner were highest in all the 3 projects. In none of the projects, the petitioner had deposited the initial amount of 26% in consonance with the letter of intent. The petitioner- Company had even no telephone connection and used the telephone of respondent No.5. On the basis of this circumstance, it was suggested that the petition be dismissed on this ground alone. (vii) Apart from the above arguments, the learned 'counsel for respondent No.2, raised a preliminary objection to the maintainability of the petition by saying that the petitioner had not deposited 26% as required under the letter of intent, so had no locus standi to file this Constitution
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petition and furthermore the grievance in the petition related to the domain of contract. As such the petition was not competent. 9. In rebuttal the learned counsel for the petitioner submitted that this Constitutional petition related to structuring of exercise of discretionary jurisdiction by the Federal Government and so was not relatable to contractual obligation. It was submitted that the petition was, so, competent. As regards the question of locus standi it was urged that the petitioner had been treated with discrimination and was entitled to invoke the Constitutional jurisdiction on the basis of violation of Article 4 of the Constitution. 10. Before we proceed to examine the contentions of the parties on merits, we consider it proper to take the preliminary objection of respondent No.2 regarding the maintainability of petition on the premise of locus standi. This objection, in short, is that no one can invoke Constitutional jurisdiction of this Court until he can show that he has suffered some personal injury to his property, body, mind or reputation. This flows from the word "aggrieved party" used in Article 199 of the Constitution. This question has not been entirely free from difficulty. The problem, of locus standi/aggrieved party/standing has been dealt with by Courts in the context of variety of the circumstances. A.K.M. Fazlul Quader Chowdhury v. Government of Pakistan PLD 1957' Dacca 342, Saeed Khan v. Chairman, District Council of Bannu and others PLD 1967 Pesh. 347, Standard Vacuum Oil Company v. Trustees of the Port of Chittagong PLI) 1961 Dacca 289; Miss Asima Jillani v. Government of the Punjab and others PLD 1972 SC 139, Muhammad Boota and 77 others v. Commissioner, Sargodha Division PLD 1973 Lah. 580, Ramamoorthi AIR 1953 Mad. 94, Abonindra Kumar v. A.K. Mujumdar AIR 1956 Cal. 273, Charanjit Lal v. Union of India AIR 1951 SC 41 and M/s. Associated Cement Co. Ltd. v. Pakistan through the Commissioner of Income Tax and 7 others PLD 1978 SC 151 are the authorities in support of the preposition that Article 199 does not confer any substantive right in a party but provides a party only an additional remedy under the extraordinary jurisdiction of this Court conferred by the Constitution provided he is able to show that any of his personal or proprietary rights as recognised by law has been invaded or denied to him. 11. However with the passage of time the superior judiciary has not adhered to this rigid view but has accorded liberal construction to the word "aggrieved party". In Mian Fazal Din v. Lahore Improvement Trust, Lahore and another PLD 1969 SC 223, it was held that right considered sufficient for maintaining a proceeding is not necessarily a right in the strict juristic sense but it is enough if the applicant discloses that he had a personal interest in the performance of the legal duty which if not performed or performed in a manner not permitted by law would result in the loss of some personal benefit or advantage or the curtailment of a privilege or liberty or franchise. 12. Even the superior Courts in foreign countries have been interpreting the principle of focus standi in the context of changing dynamics of socio-economic circumstances operating on humanity. In the words of Chief Justice Earl Warren (of Supreme Court of America) "Our Judges are not monks or scientists but participants in the living steam of national life.... Our system faces no theoretical dilemma, but a single continuous problem; how to apply to Never-changing conditions the never changing principle of freedom. " 13. These principles seem to be entirely applicable to the changing facts and circumstances of socio-economic life of each country. With each day, there is enormous increase in the activities of Executive Authority of Federation or Provinces in our country. The society is being transformed from totally under--developed one to semi-developed society with the object of making it egalitarian society on the golden principles of Islam. With this task, the functions of Executive Department in our State are growing rapidly and so need increased or greater judicial review of acts of subordinate authorities by the superior judiciary in order to check and keep these functionaries within the spheres allotted to them by law. We consider appropriate at this very juncture to quote a
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passage from law of Economic Development in Sub-Saharan Africa by Prof. Robert which is ''as follows: -- "If there are to be some reasonable norms for administrative behaviour in Africa, the formulation of codes of administrative law is desirable. But such codes are not self-enforcing. Without institutional devices to support them they become meaningless. "Wisconsin Law Review, VI. 1966, 999 at p.1064. Continuing, he further said:--- "If the tone of public life is sufficiently honest and fair-minded, formal norms are relatively unneeded. This is not the position in Africa; on the contrary, there is a notable lack of restraints on the exercise of State power. This betrays itself most blatantly in the widespread West Africa. When corruption permeates the entire fabric of Government, legality is the first sufferer, for State power is exercised on ground unrelated to its nominal purpose." In English-speaking Africa, the devices for enforcement of the few standards of administrative probity that exist are in the common law tradition. In some cases there are internal administrative appeals. Resort to the Courts for relief is theoretically available if any ascertainable norm has been violated. Relief can be sought in a civil action brought by the extreme cases, in a criminal action brought by the director of public prosecutions. The civil remedies for administrative wrongdoing thus depend upon the action of individual citizens. In such an action, the individual is pitted against the State always an unequal contest. The individual does not have even the few procedural devices that the common law imports into criminal actions to try to redress the balance. At his own expense, he must challenge the vast monopoly of State power, with all its resources in personnel, money, and legal talent, by a civil action for a declaratory judgment or for an extraordinary remedy.. Injunction, writ of mandamus, or writ of prohibition. Aside from the manifold technical insufficiencies of these forms of action, the…
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