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Petitioner: TRADE SERVE INTERNATIONAL (PRIVATE) LIMITED and otherss VS Respondent: PAKISTAN JUDGMENT
Court Name: Lahore High Court Judge(s): Ayesha A. Malik Title:TRADE SERVE INTERNATIONAL (PRIVATE) LIMITED and otherss vs PAKISTAN
JUDGMENT
Reported As: PLD 2017 Lahore 563 Result: Order accordingly Judgment JUDGMENT AYESHA A. MALIK J.---This common judgment decides upon the issues raised in the Writ Petitions detailed in Schedule "A" appended with the judgment as all the Petitions raise common questions of law and facts. 2. The Petitioners are all aggrieved by the excessive renewal fees charged by the Respondent Pakistan Electronic Media Regulatory Authority, Islamabad ("PEMRA") for renewal of their respective FM Radio licences. The Petitioners have impugned order dated 3.1.2013 issued by the General Manager (Licensing), PEMRA whereby the quantum of the renewal fees was upheld by Respondent No,1, PEMRA and it was decided that the Petitioners are required to pay the renewal fees as demanded by PEMRA in order to renew their FM Radio Station Licences. 3. The facts of these cases are that the Petitioners are private limited companies engaged in the business of broadcast media which includes establishing, running, operating and maintaining FM Radio Channels. Petitioners Nos,1 and 2 participated in the open bidding for grant of FM Radio Broadcast Station Licences and were granted the said Licence for 10 years on 18.10.2002 to establish and operate a radio station in the name of "Mast FM 103" in Karachi, Lahore, Faisalabad and Multan for Petitioner No,1 and FM Radio Station in the name of "Power FM 99" in Islamabad, Abbottabad and Vehari for Petitioner No,2. The Petitioner No,1 paid Rs,3.5 million for Karachi, Rs,2.5 million for Lahore, Rs,2.00 million for Faisalabad and Rs,1.25 million for Multan whereas Petitioner No,2 paid Rs,2.5 million for Islamabad, Rs,100,000/- each for Abbottabad and Vehari as licence fee in the year 2002.
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In July 2010 the Petitioners Nos,1 and 2 applied for renewal of their licences before the end of the stipulated 10 year period and Respondent No,1 provided them with the renewal fees such that an amount of Rs,45.3378 million for Karachi, Rs,57.178 million for Lahore, Rs,32.969 million for Multan and Rs,6.003 million for Faisalabad to Petitioner No,l. Whereas Rs,44.404 million for Islamabad, Rs,10.462 million for Abbotabad and Rs,1.000 million for Vehari to Petitioner No,2 for renewal of their licences. The Petitioners sought a personal hearing from Respondent No,1 to discuss the quantum of the renewal fees. The hearing was granted and on 3.1.2013, the Petitioners received the decision of Respondent No,1, being the impugned order, whereby they were required to pay the renewal fees as demanded, such that 25% of the renewal fee be paid in two installments within 30 days and 75% to be paid in five equal annual installments each of 15% of the total renewal fee. 4. The same set of facts exist in the other petitions except W.Ps. Nos,12908/2013 and 12909/13. The demand for renewal fee may be seen from the table below:- WP No. FM Station Licence fee Renewal Fee 2446/13 Mast FM 103 Power FM 99Rs.3.5 million for Karachi, Rs.2.5 million for Lahore, Rs.2.00 million for Faisalabad and Rs.1.25 million for Multan (Petitioner No.1) Rs.2.5 million for Islamabad, Rs. 1.00 million each for Abbottabad and Vehari (Petitioner No,2)Rs.45.378 million for Karachi, Rs.57.178 million for Lahore, Rs.32.969 million for Multan and Rs.6.003 million for Faisalabad (For Petitioner No.1). Rs.44.404 million for Islamabad, Rs.10.462 million for Abbottabad and Rs.1.000 million Vehari (For Petitioner No.2). 4366/13 HUM FM 106.2 Rs.3.8 million for Karachi, Rs.3 million for Lahore and. Rs.0.575 for Sukkur.Rs.45.378 million for Karachi, Rs.57.178 million for Lahore and Rs.3.893 million for Sukkur. 4367/13 FM 107 Rs.2.549 million 45.378 million. 4368/13 FM 91 Rs.3.850 million for Karachi, Rs.3.3 miVion for Lahore and Rs.2.75 million for Islamabad.Rs.45.378 million: for Karachi, Rs.57.178 million for Lahore and Rs.44.404 million for Islamabad and Rs.1.00 million for Gawadar. 4369/13 FM 89 Rs.2.5 million as licence fee for Islamabad, Rs.3.5- million for Karachi, Rs.3 million for Lahore andRs.45.378 million for Karachi, Rs.57.178 million for Lahore and Rs.44.404 million for Islamabad and
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Rs.1 million for Faisalabad.Rs.6.603 million for Faisalabad. 4370/13 FM 105 Rs.0.105 million as base price.Rs.6.4 million. 4371/13 FM 96 Rs.0.35 million Rs.45.378 million 29949/14Not mentioned Not mentioned Rs.1.445 million for Sialkot and Rs.65,145 million for Petitioner 5. In W.Ps. Nos,12908/13 and 12909/13, both the Petitioners are aggrieved by orders dated 9.4.2013 issued by PEMRA whereby they cancelled the bid offered by the Petitioner in W.P. No,12908/13 for Islamabad, Lahore and Hassanabdal and PEMRA has forfeited the deposited amounts of the stated Petitioner. Vide the same order PEMRA has cancelled the bid offered by the Petitioner in W.P. No,12909/13 for Karachi, Murree and Sheikhupura and forfeited the deposited amounts of the stated Petitioner. 6. In W.P. No,29949/14 the Petitioner participated in the open bidding for grant of FM Radio Broadcast Station Licence and was granted five FM Radio Broadcasting Licences for 10 years on 18.2.2002 to establish and operate Radio Stations in Sialkot, Peshawar, Mardan Bannu and Mansehra. On 26.3.2012 the Petitioner requested the Respondents for renewal of its licence for Peshawar. On 23.5.2012 Respondent PEMRA notified that the Petitioner's licence would be considered for renewal. Through letter dated 7.9.2013 PEMRA asked the Petitioner to withdraw one of the five licences on account of the fact that the maximum numbers of licences it can have are four as per rules. On 18.9.2012 the Petitioner explained to PEMRA that the rules came into force in 2009 while the Petitioner was rightfully given five radio broadcasting licences in 2002, therefore, the rules cannot be given retrospective application. On 11.9.2012 the Petitioner received a letter from PEMRA to deposit Rs,1.445 million as renewal fee for licence to establish in Sialkot and also to provide documents showing no foreign funding to be delivered by 18.9.2012. On 3.1.2013 the Respondent conveyed to the Petitioner that the payment amount for Peshawar is Rs,65.145 million. The Petitioner was also directed to intimate which four licences it will have to renew and which one will be withdrawn. Further directed that if the Petitioner failed to comply with the payments the Respondent would hold rebidding. Hence the Petitioners have challenged the vires of Section 14 of the Ordinance. 7. The common grievance of the Petitioners is that they have invested huge amounts of money in their businesses and there is no justifiable reason for demanding such excessive renewal fees as no services are being rendered by PEMRA against the fees imposed. Also there is no connection between the cost of administrating the sector and the renewal fees charged which can justify the excessive renewal fees. Learned counsel for the Petitioners argued that there is no set formula or mathematical calculation on the basis of which the renewal tee is being fixed. It is an arbitrary exercise of power by the regulator without any justification simply to generate revenue. Hence the renewal tee tantamounts to a tax. Learned counsel argued that the FM Radio Broadcast Stations use the air for transmitting FM frequency and that air is not the property of the Government. The Petitioners generate their own frequency and are required to essentially pay for the spectrum and bandwidth allocation. Learned counsel further argued that there is no criteria in the rules setting the parameters on the basis of which the renewal fee can be charged. Since there is no substantive difference in the market area or the way of doing business, there appears to be no justification for increasing the renewal fees one hundred times for larger cities and multiple time for smaller cities. In furtherance of their arguments, the Petitioners. Have challenged the vires of Section 14 of the Pakistan Electronic Media Regulatory Authority Ordinance, 2002 ("Ordinance") being ultritkes to Article 73(3)(a) read with Item No,54 of the Federal Legislative List of the
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Constitution of Islamic Republic of Pakistan, 1973 ("Constitution 'and also for being in violation of Articles 18, 19 and 19A of the Constitution. The Petitioners have also challenged the process or rebidding for renewal of licences for being arbitrary and discriminatory in violation of Article 25 of the Constitution, In this ratite, it. Is their case that once granted licences in the year 2002, there is he justification or reason to call for bidding for the purposes of renewal of the licences. 8. Report and parawise comments have been filed by the Respondenti. Learned counsel for Respondent PEMRA argued that the contentions of the Petitioners that Section 14 of the Ordinance is ultra vires to Article 73(3)(a) read with Item No,54 of the Federal Legislative List of the Constitution On the touchstone of Articles 18, 19 and 19A of the Constitution is incorrect as 'the Respondent PEMRA is demanding enhanced rates for renewal of licences as compared to licence fee charged over 10 years ago. Learned counsel further argued that such an assertion is vindicated from a bare reading of Paras 11-16 and the Grounds of the petition. Learned counsel stated that the law enunciated by the competent legislature cannot be declared ultra vires of the constitutional provisions merely because the renewal fees demanded from the Petitioners does not suit them. Learned counsel further stated that the renewal fee has been calculated in accordance with PEMRA laws that is last bid price plus inflation rate. For facilitation of the licence holders for payment of the renewal fees, installments were allowed. Learned counsel argued that the bidding process for renewal of licences is being called arbitrary exercise of power and allegedly based on consideration of revenue collection. However he argued that firstly, the bidding process for grant of licence for the cities is not alien to PEMRA law and is provided in the Ordinance, Rules and Regulations. Secondly the bidding process shuts the door for undue influence and arbitrariness in issuance of such licences and renewal. Thirdly, the grant of radio licence through bidding cannot be compared with TV licences on the touchstone of Article 25 of the Constitution as the two sets of licences are different and in no way belong to same classification. Lastly bidding is always open, excludes arbitrariness and ensures transparency. Learned counsel argued that PEMRA is working within the legal frame enunciated by the legislature and it cannot conceive of any detrimental step or negative action against any of the licensee including the Petitioners. 9. In terms of what has been argued, the issues before the Court are firstly with respect to the vires of Section 14 of the Ordinance and the vires of Pakistan Electronic Media Regulatory Authority (Radio Broadcast Station Operations) Regulations, 2012 ("Regulations"). Secondly the bidding process under Section 19 of the Ordinance with reference to the renewal process and finally the quantum of fees charged for renewal of radio licences. 10. The first issue before the Court is the vires of Section 14 of the Ordinance which is reproduced below:- 14 Fund.- (1) There shall be established a fund to be known as "PEMRA Fund" which shall vest in the Authority and shall be utilized by the Authority to meet charges in connection with its functions including payment of salaries and other remunerations to the Chairman, members, employees, experts and consultants of the Authority. (2) The Fund shall consist of.- (i) Seed money by the Federal Government; (ii) fees for issuance and renewal of licences for establishing and operating broadcast or CTV stations; (iii) loans obtained with the special or general sanction of the Federal Government; (iv) foreign aid obtained with sanction of and on such terms and conditions as may be approved by the Federal Government; and (v) all other sums received by the Authority from any other source. (3) The Authority may open and operate one or more accounts in local, or foreign currency, in any scheduled bank.
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(4) The Authority may invest its funds in such investments as it may, from time to time, determine. 11. The basic argument of the Petitioners is that the impugned renewal fee is a tax and not a fee, therefore is violative of the requirements of Article 73(3)(a) read with Item No,54 of the Constitution. That Section 14 of the Ordinance is ultra vires to Article 73(3)(a) as it was not passed as a Money Bill within the meaning of Article 73 of the Constitution. It is also their case that the impugned renewal fee has no connection with the cost of regulating the Petitioners under the licence or the Ordinance and that all amounts collected under the garb of licence fee, annual fee and renewal fee are maintained in a Fund created wider Section 14 of the Ordinance which is not maintained as per the requirements of the Constitution. In this regard the argument is that the amounts in the Fund are not made public nor is it subject to the control of the Auditor General of Pakistan as required under Article 169 of the Constitution. It was also argued that all amounts collected under the garb of fees go into the Fund but instead are required to be deposited in the Federal Consolidated Fund as required under Article 78 of the Constitution. Therefore, the impugned renewal fee is a tax and its quantum cannot be justified against the cost of administrating the Petitioners under the Ordinance. The arguments raised by the Petitioners are premised on the ground that the impugned renewal fee is in the nature of a tax because there is no quid pro quo for the fees charged meaning that PEMRA does not provide any service to the Petitioners against the renewal fee. It is the case of the Petitioners that PEMRA merely regulates the content and conduct of the Petitioners and does not provide any service for the purposes of radio broadcasting. It is also their case that fees for services rendered may be imposed under Article 73(3)(a) of the Constitution of Islamic Republic of Pakistan, 1973, however where the fee charged has no correlation to the regulatory cost or when there is no quid pro quo then it is in the nature of a tax and not a fee. 12. Article 73(3)(a) of the Constitution reads as follows: ' A Bill shall not be deemed to be a Money Bill by reason only that it provides: (a) for the imposition or alteration of any fine or other pecuniary penalty, or for the demand or payment of a licence fee or a fee or charge for any service rendered; or A bare reading of this Article makes it clear that a licence fee or fee is not a tax and that a licence fee is distinct from a fee or a charge for services rendered. Hence it is not necessary that every licence have a quid pro quo. It is also not necessary that the licence fee or renewal fee be passed through a Money Bill. This question was considered by the Indian Supreme Court where similar provisions of the constitution were under discussion. In the case titled Secunderabad Hyderabad Hotel v. Hyderabad Municipal (AIR 1999 SC 635) it was held that: ' It is, by now, well settled that a licence fee may be either regulatory or compensatory. When a fee is charged for rendering specific services a certain element of quid pro quo must be there between the service rendered and the fee charged so that the licence fee is commensurate with the cost of rendering the service although exact arithmetical equivalence is not expected. However, this is not the only kind of fee which can be charged. Licence fees can also be regulatory when the activities for which a licence is given require to be regulated or controlled. The fee which is charged for regulation for such activity would be validly classifiable as a fee and not a tax although no service is rendered. An element of quid pro quo for the levy of such fees is not required although such fees cannot be excessive. It was also held in the case titled A.P. Paper Mills Ltd. v. Govt. Of A.P. And another (2000) 8 Supreme Court Cases 167) that Licence fee can be a regulatory fee and not a fee for any special services rendered. The purpose of the licence is to enable the authorities to supervise, regulate and monitor the activities relating to factories in that case with a view to secure proper enforcement of the provisions of the law. In such cases the element of quid pro quo is not required. Three Judges of the Indian Supreme Court in the case titled Sreenivasa General Traders v. State of A.P. (1983) 4 SCC 353: (1983) 3 SCR 843) held that: The traditional view that there must be actual quid pro quo for a fee has undergone a sea change. The distinction between a tax and a fee
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lies primarily in the fact that a tax is levied as part of a common burden, while a fee is for payment of a specific benefit or privilege although the special advantage is secondary to the primary motive of regulation in public interest. If the element of revenue or general purpose of the State predominates, the levy become a tax. In regard to fees there is, and must always be, correlation between the fee collected and the service intended to be rendered. In the case titled Corpn. Of Calcutta v. Liberty Cinema (AIR 1965 SC 1107: (1965) 2 SCR 477) where the matter was again considered by the Indian Supreme Court as under: There is a distinction between the licence fee and fee for services rendered. While former is not intended to be a fee for services rendered, the latter will require an element of quid pro quo. 13. Article 73(3)(a) of the Constitution clearly distinguishes between licence fee and a fee for services rendered which means that a licence fee does not require any quid pro quo but there must be correlation between the fee charged and the cost of administration under the relevant law. Essentially the licence fee must commensurate with the cost of regulating although exact arithmetical equivalence is not expected. The licence confers a right on the licence holder to do something which it otherwise could not do and in this case PEMRA is required to regulate the licence bolder to ensure compliance of the law and the terms of the licence. 'Therefore in terms of the Constitution a licence fee can be regulatory in nature where the regulator imposes a fee for regulating the activities of the licence holder. In such cases there is no quid pro quo. In the instant cases the Petitioners have challenged the impugned renewal fee on the ground that it is excessive and that the excessive quantum cannot be justified as there is no quid pro quo and because the cost of regulating the Petitioners cannot be so high. Further that PEMRA provides no service or facility to the licence holders to justify the excessive demand. In this context, with reference to the vires of Section 14 of the Ordinance the arguments made before this Court are totally misconceived as the Constitution itself draws a distinction between tax an licence fee or a fee charged for services rendered. Furthermore the Petitioners have challenged the renewal fee which is an extension, of the licence fee for a renewal period. The licence fee is a regulatory fee as is the renewal fee. Hence the licence fee and the renewal fee do not need to be passed through a Money Bill nor does it require any quid pro quo. Hence the challenge to the vires of the Section on these grounds has no merit. Furthermore since it is not a tax the licence fee or the renewal fee does not need to go into the Federal Consolidated Fund. So far as the arguments with respect to the requirements of Article 169 of the Constitution are concerned meaning that the Fund under Section 14 should be subjected to the control and monitoring of the Auditor General of Pakistan, there is merit. Article 169 provides that the Auditor General shall in relation to the accounts of any authority or body established by the Federation or a Province perform such functions and exercise such powers as may be determined by or under an Act of Parliament or by an order of the President. Section 3 of the Ordinance provides for the establishment of the Authority by notification of the Federal Government meaning thereby that it is an Authority established by the Federation. Therefore the accounts and the Fund of PEMRA have to be maintained in terms of the requirements provided for under Articles 169, 170 and 171 of the Constitution. 14. The next issue is the challenge to the rebidding process for renewal of the licences issued to the Petitioners and.The quantum of the renewal fee determined by PEMRA on the basis of the rebidding process. In order to appreciate the arguments raised the basic scheme of the law must be understood. Scheme of Law 15. The relevant law is the PEMRA Ordinance. The Ordinance was promulgated to regulate broadcast media in Pakistan. In terms of the preamble, it is the duty of PEMRA to enlarge the choice of information, education and entertainment available to the people through the media. The primary role of PEMRA is to improve access to mass media and ensure accountability,
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transparency and good governance by optimizing the free flow of information. Section 4 of the Ordinance provides that PEMRA shall be responsible for regulating the establishment and operation of all broadcast media and distribution services in Pakistan. Further that PEMRA shall regulate the distribution of radio channels and that PEMRA can make regulations for carrying out the purposes of the Ordinance. Section 19 of the Ordinance authorizes PEMRA to issue licences for broadcast media and, distribution services through an open and transparent bidding process. Section 20 of the Ordinance provides for the terms and conditions of the licence and in terms of both Sections 19 and 20 for the purposes of issuance of a licence, PEMRA can charge licence fee and an application process fee. Section 39 of the Ordinance is the rule making section which requires PEMRA to make rules for issuance of licences, its terms and conditions including any fees to be charged in connection with licences and related matters. In terms of Section 39 of the Ordinance, PEMRA issued the Pakistan Electronic Media Regulatory Authority Rules, 2009 ("Rules"). The Rules prescribe the licence criteria and the process for issuance of the licence, its terms and conditions and the terms on which a licence can be renewed. The relevant provisions of the Rules for the purposes of renewal of licences are Rules, 5 and 8 which are reproduced below: 5. Duration and renewal of licences: (1) The licence shall be granted for a period of five, ten or fifteen years subject to payment of fee as set out in Schedule-B. (2) The licence shall be valid for the term for which it is granted subject to the payment of annual fee or any other charges as set out in the Schedule-B. (3) The fee relating to the grant of licence, renewal thereof, late payment surcharge and fine, if any, shall be deposited in the account of the Authority. 8. Fees and security deposits: (1) Each successful applicant shall, within time prescribed by the Authority and before the issue of the licence, deposit the applicable licence fee and make a security deposit, if applicable, as set out in the Schedule-B. The security deposit shall be refundable after the expiry of one year of operation of the station to the satisfaction of the Authority. (2) Every licencee shall follow the specified time line relating to the payment of any dues of the Authority. ' In terms of these Rules PEMRA charges the applicable licence fee, an annual fee and a renewal fee. The process of renewal is provided under Rule 12 of the Rules which is reproduced below:- 12. Renewal of licence on expiry of the licence term: (1) A licencee may, at least six months prior to the expiry of the licence, apply to the Authority for renewal of its licence and the Authority may renew the licence subject to: (a) satisfactory past performance of the licencee; (b) the opinion of the concerned Council if the Authority so requires; (c) payment of the prescribed fee prevalent at the time of renewal and payment of outstanding dues, if any, and (d) fulfillment of any other terms and conditions as prescribed, or varied in the public interest, by the Authority from time to time. (2) In case of refusal to renew a licence the Authority shall record reasons in writing. (3) The Authority may renew a licence for such term as the original term of the licence bringing from the date of expiry of the licence. 16. In terms of Section 4(3) of the Ordinance, PEMRA notified the Regulations on 31.1.2012. The Regulations further detail the processes for grant of licence and its renewal. The relevant provisions of these Regulations are as…
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