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Official Citation: 2025 IHC 536
Court / Jurisdiction: Islamabad High Court
Year of Decision: 2024
Decision Date: 2024-12-31
Parties: Engro Fertilizers Limited and others vs Competition Commission of JUDGMENT
Ruling Summary: This decision was rendered by the Islamabad High Court on 2024-12-31, officially reported as 2025 IHC 536. In this matter between Engro Fertilizers Limited and others and Competition Commission of JUDGMENT, the court adjudicated key questions of statutory construction, procedural regularity, and legal precedent under Pakistani law.
Core Holding: The honorable bench evaluated governing statutory provisions and judicial authorities to establish the rights of the parties, delivering the binding reasoning set out below.
Case cited as 2025IHC536
Court Name: Islamabad High Court Judge(s): Saman Rafat Imtiaz Title:Engro Fertilizers Limited and others vs Competition Commission of
JUDGMENT
Reported As: 2025 IHC 536 Result: Petition Allowed Judgment
JUDGMENT SAMAN RAFAT IMTIAZ, J.- 1. The aforementioned Petitions involving common questions of facts and law are being decided vide this consolidated judgment. 2. The Petitions have been filed assailing the (i) Letters dated 11-12-2019 ("Impugned Letters") issued to each of the Petitioners seeking certain information; and (ii) the Order dated 24-2-2020 ("Impugned Order") passed pursuant to Section 36 of the Competition Commission Act, 2010 ("Competition Act") directing the Petitioners to comply with the Impugned Letters. The Petitioners allege that the Impugned Letters and the Impugned Order have been issued/passed in contravention of the Competition Act and constitute fishing and roving inquiry which is not permitted by law. In addition, the Petitioner in W.P. No. 755 of 2022 has also challenged the Notification dated 19-06-2019 ("Impugned Notification") whereby certain powers have been delegated by the Commission as being in contravention of the Competition Commission Act. 3. The brief facts, as per the Memoranda of Petitions, are that the Competition Commission of Pakistan ("Commission") (impleaded as the Respondent No. 1 in W.P. Nos. 755, 841 and 842 of 2020 and as Respondent No. 2 in W.P. Nos. 705 and 765 of 2020) issued the Impugned Notification pursuant to Section 28(2) delegating inter alia its powers under Sections 36 and 37 to various officers of the Commission. The Impugned Letters were issued by Mr. Qasim Khan, [Joint Director] (impleaded as the Respondent No. 2 in W.P. No. 755 of 2020, the Respondent No. 3 in 841 and 842 of
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2020 and as Respondent No. 4 in W.P. Nos. 705 and 765 of 2020) to each of the Petitioners directing them to provide certain information without mentioning any provision of law entitling the Commission to demand the same and without showing why such information is necessary or useful for the purposes of the Competition Act and which information the Petitioners in W.P. Nos. 755, 841, and 842 of 2020 describe as confidential. The Petitioners responded in writing contending that the Commission is not permitted under the law to seek information outside the scope of the Competition Act. 4. However, Mr. Qasim Khan, Mr. Shahzad Hussain, and Ms. Aqsa Suleman (impleaded as the Respondent Nos. 2, 3, and 4 in W.P.s No. 755 of 2020, 841 and 842 of 2020 and as Respondent No. 3, 4 and 5, in W.P.s No. 705 and 765 of 2020), in purported exercise of delegated authority, passed the Impugned Order under Section 36 of the Competition Act, directing the Petitioners, once again, to provide the information sought by way of the Impugned Letters. The Impugned Order states that the information is being collected in order to conduct enquiry into the affairs of the undertakings for the purpose of the Competition Act and that in case the Petitioners fail to comply, penalties will be imposed on them. The Impugned Letters and the Impugned Order have been challenged by the Petitioners as being illegal, ultra vires, and void ab initio. The Petitioners assert that they have no alternate adequate remedy available, hence these Petitions. 5. The Federation has been impleaded as Respondent No. 1 in W.P. Nos. 705 and 765 of 2020. During the proceedings, W.P. No. 755 of 2020 was treated as the leading case and as such hereinafter the parties will be referred to by the same party numbers as assigned thereto in the said Petition for the sake of convenience. Arguments on behalf of the Petitioners: 6. The learned counsel for the Petitioner in W.P. No. 755 of 2022 read out the Impugned Letter to highlight that it does not refer to any provision of law under which it has been issued. Subsequently, the Respondents issued the Impugned Order wherein Section 36 of the Competition Act was referred to for the first time. The learned counsel for the Petitioners emphasized that Section 36 of the Competition Act may be invoked by the Commission only through issuance of a general or special order whereas the Impugned Letter has been issued by the Respondent No. 2 unilaterally. The learned counsel for the Petitioners referred to a Resolution dated 5-11 2019 ("Resolution") (appended with the Commission's comments in W.P. No. 765 of 2020) whereby it was resolved that a three member committee is constituted to review the fertilizer industry in terms of Section 28(1) (c) read with Section 37 of the Competition Act to ascertain the state of competition in the sector. The learned counsel for the Petitioners pointed out that the contents of the Impugned Letter and the contents of such Resolution are not in consonance with each other. The learned counsel for the Petitioner submitted that even otherwise the direction to provide details and reasons of each instance of price increase/decrease of fertilizers from July, 2018 till 11.12.2019 under serial No. 1 of the Impugned Letter is vague and generalized which shows that the Commission is not even aware if there is an increase or decrease in price of fertilizers during the relevant period lending credence to the objection that the same constituted fishing and roving exercise. He relied upon the case of National Feeds Limited vs. Competition Commission of Pakistan and others, 2016 CLD 1688 to argue that a notice under Section 36 cannot be issued on the basis of vague and indefinite allegations. He submitted that the information regarding cost required under serial No. 2 of the Impugned Letter as per proforma attached thereto is not connected with any purpose under the Competition Act and constitutes fishing and roving exercise whereas serial No. 3 of the Impugned Letter calls for audited financial statements for the years 2016- 17, 2017-18 and 2018-19 which the Commission does not need to ask the Petitioners for as they are public documents. He explained that the scheme of the Competition Act is such that the Commission must first initiate an enquiry
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under Section 37 of the Competition Act and then seek information under Section 36 ibid, if so required. 7. In respect of maintainability, the learned counsel for the Petitioners relied upon National Feeds Limited (Supra) whereby notices issued by the Commission under Section 37 of the Competition Act were set aside. He submitted that the said Judgment also pertained to notices under Section 36 ibid. Thus he argued that the Constitutional petitions are maintainable to challenge notices issued under Section 36 of the Competition Act. The learned counsel for the Petitioners further submitted that the Petitioners are indeed 'aggrieved persons' as the Impugned Letters and Order purportedly issued under Section 36 ibid are beyond the jurisdiction of the Commission. He argued that the Commission's arguments regarding maintainability are self-contradictory as on one hand the Commission is arguing that the Petitioners are not aggrieved persons under Article 199 of the Constitution but on the other hand they are asserting that an alternate remedy was available in terms of Section 42 of the Competition Act which too is available to aggrieved persons. 8. The learned counsel for the Petitioners in W.P. No. 841 of 2020 and 842 of 2020 submitted that the entire process adopted by the Commission is non-transparent which is unbecoming of a regulator. He referred to the Resolution dated 5-11.2019 submitted by the Commission as part of their comments and highlighted that there is no clarity as to whether an enquiry has already been initiated or whether it is to be initiated. In this regard he highlighted that the subject of the Resolution dated 5-11-2019 indicates that enquiry is to be initiated whereas the concluding paragraph according to the learned counsel for the Petitioners indicates that it has already been initiated. He submitted that in case of the latter situation the Petitioners have not received any information of initiation of enquiry. He also referred to the use of the word 'review' in such Resolution and contended that no power of review vests in the Commission under the Competition Act. He submitted that the Commission does have power to conduct 'studies' for promoting competition under sub-section (1)(b) of Section 28 but the Impugned Order refers to sub-section (1)(c) of Section 28 of the Act which pertains to enquiry. He argued that National Feeds Limited (Supra) holds that the Commission would be justified in seeking information from an undertaking under Section 36 of the Competition Act if it is in relation to abuse of dominant position, prohibited agreements, approval of mergers or for promoting competition through advocacy. He submitted that such information must be sought in relation to the functions and powers of the Commission under Section 28 of the Competition Act whereas, for the reasons aforesaid the Resolution neither specifies what function the Commission is resolving to exercise vide the Resolution nor for what purpose. He also pointed out that in Competition Commission of Pakistan and others vs. Dalda Foods Limited 2023 SCMR 1991 and National Feeds Limited (Supra) the enquiries were initiated pursuant to complaints received by the Commission whereas no such complaint has been filed against the Petitioners in these cases to the best of their knowledge. 9. The learned counsel for the Petitioners in W.P. Nos. 765 of 2020 and 705 of 2020 referred to the comments filed by the Commission whereby they have themselves attributed alternate reasons for the increase in price and argued that the comments are speculative which shows that the entire exercise is fishing and roving. He also highlighted that the Commission vide its comments relies upon National Feeds Limited (Supra) yet no reasoning has been provided in the Impugned Letters or Order for the information sought therein as held in such judgment. Last but not least he pointed out the additional note appended with the Judgment in Dalda Foods Limited (Supra) wherein it has been explained that power of the Commission under Section 36 is not a 'proceeding' within the meaning of term as used in Section 33 and that such powers cannot be added to the powers of the Commission under Section 36 as it would impact the constitutionally guaranteed rights to conduct lawful trade of the citizens of Pakistan. Arguments on behalf of the Commission:
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10. The learned counsel for the Commission commenced his arguments by objecting to the maintainability of the Petition. He argued that the Petitioners are not 'aggrieved persons' within the meaning ascribed to the said term under Article 199 of the Constitution as the Impugned Letters and the Impugned Order simply seek certain information. He contended that as such the Impugned Letters and Order do not even constitute show-cause notices which as per settled law are not considered adverse action that can be challenged in writ jurisdiction while bypassing departmental remedies. Without prejudice to the argument that the Petitioners are not aggrieved persons the learned counsel for the Commission submitted that if at all the Petitioners felt aggrieved by the Impugned Letters and Order being orders under Section 36, an appeal could have been filed against the same under Section 41 of the Competition Act whereby an order made by any Member or authorized officer of the Commission can be assailed before an Appellate Bench of the Commission. He submitted that under Sections 42 of the Competition Act any order passed by two Members of the Commission or the Appellate Bench may be assailed before the Appellate Tribunal and under Section 44 an order passed by such Appellate Tribunal can be challenged before the Supreme Court of Pakistan. As such, he emphasized that the Legislature, in its wisdom, did not include the High Court at any stage. He argued the Petitioners have not given any explanation as to why such remedies are not adequate. 11. On merits, the learned counsel for the Commission relied upon Section 36 of the Competition Act to show that the Commission is empowered to call for information relating to an undertaking where it considers it necessary or useful for the purposes of the Competition Act by general or special order. He clarified that the terms 'general order' and 'special order' are not defined in the Competition Act. He explained that the term 'useful' as used in Section 36 of the Competition Act is of wider connotation than 'necessary'. According to him such requirement is fully met as the information sought was due to increase in price that was noted which could be as a result of an agreement fixing the purchase or selling price of the Petitioners' goods in violation of Section 4 and also a contravention of Section 3. The learned counsel also relied upon Dalda Foods Limited (Supra) to emphasize that the Commission is a regulator and Section 36 of the Competition Act enables the Commission to collect and gather information the exercise of which does not fall within the ambit of 'proceedings' under Section 30 of the Competition Act and does not trigger any penal consequences. It was also held that the Commission bears the responsibility to collect the market information to ensure effective enforcement of the Competition Act. He contended that it is undisputed that the Petitioners before this Court collectively constitute 93% of the market of fertilizer and as such fall within the definition of 'dominant position'. In this regard he emphasized that the Impugned Letters and Order simply ask for certain information which is necessary and useful to ascertain whether there is any abuse of dominant position as per Section 3 which the Commission not only has the power to do but is its duty to ensure. He submitted that under Section 4 of the Competition Act no undertaking or association of undertakings shall enter into an agreement etc., fixing the purchase or selling price of any goods or services and as such the Petitioners may have violated sub-section (4) as well. 12. He submitted that under Section 28(2) the Commission has the power to delegate any of its functions or powers to its Members or Officers as it deems fit. He highlighted that the Impugned Letter has been issued by Mr. Qasim Khan, Joint Director and the Impugned Order has been issued by Mr. Shahzad Hussain, Director General, Mr. Qasim Khan, Joint Director and Ms. Aqsa Suleman, Assistant Director, who were authorized by the Commission by way of Resolution dated 5-11-2019 and as such argued that the Impugned Letters and Orders were not without jurisdiction. He denied that the Impugned Letters were issued or that the Resolution was passed to initiate an enquiry notwithstanding the reference to Section 37 therein. He categorically submitted that the officers who issued the Impugned Letters were not authorized to initiate an enquiry under Section 37 of the
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Competition Act. He argued that the Petitioners' reliance upon the National Feeds Limited (Supra) is misconceived as it was not in respect of any notice issued under Section 36 nor was any objection raised by the Commission on maintainability in such case. 13. The learned counsel for the Commission emphasized that the information sought by way of the Impugned Orders is not secret. He submitted that under Section 246 of the Companies Ordinance, 1984 ("Companies Ordinance") such information could have been sought by the Securities and Exchange Commission of Pakistan ("SECP") and in default of compliance the company would have been liable to payment of fine. He submitted that that since such provision is no longer in the Companies Act, 2017 ("Companies Act") it is the Commission who can ask for the same. In addition he argued that the Petitioners have not disputed that the information sought for is necessary and useful. Cost is an important factor in determination of price which becomes all the more important in case of the Petitioners as they are part of a heavily subsidized industry wherein the cost varies between companies yet there appears to be price parallelism and as such it is a cause of concern for the Commission whose function it is to ensure that there is no abuse of dominant position which directly affects consumers. 14. Mr. Shahzad Hussain, Registrar of the Commission emphasized that fertilizer is an essential raw material for the farmer and combined with the fact that it is a subsidized industry it is all the more important for the Commission to be vigilant. He has also submitted that there is a history of price parallelism in this industry and heavy fines have previously been imposed upon some of the Petitioners notwithstanding the fact that they are under litigation. He explained that in any other sector, businesses would be fully entitled to reap even hundred percent of profit but in a subsidized industry it does raise concerns and therefore, the Impugned Letters are not unjustified or illegal. Last but not least, he submitted that prior to the Impugned Letters the Commission had sent other notices/letters asking for various information including explanations for the price hike observed in the relevant period. In response the Petitioners were able to explain the price hike partly but not fully hence, the Impugned Letters. Arguments by the Additional Attorney General: 15. Given the subject matter of the Petitions and the submissions made by the learned counsels it was considered necessary to issue notice under Order XXVIIA, CPC to the Attorney General for Pakistan. The learned Additional Attorney General adopted the arguments advanced by the learned counsel for the Commission in respect of maintainability of the Petitions. In addition, the learned Additional Attorney General referred to Dalda Foods Limited (Supra) in which the Supreme Court differentiated between 'enquiry' and 'proceedings' as defined in the Competition Act. He relied upon various provisions of the Competition Act to argue that the Commission is not only empowered to call for information but that it is their function to ask for such information in order to ensure that no violation of the Competition Act takes place. He has specifically highlighted the non-obstante clause included in Section 56 of the Competition Act and that there is no discrimination as all fertilizer companies have been asked the same exact information which is in line with the functions and the raison d'etre of the Commission as enshrined in the preamble and Section 3 of the Competition Act. He has also highlighted Section 51 of the Competition Act which provides for confidentiality and submitted that first of all the Petitioners cannot invoke confidentiality against a regulator especially considering that the information sought is essential for the Commission to perform its functions; and secondly, such information is not to be released by the officers and members of the Commission on account of their statutory duty to maintain confidentiality. 16. Next he refers to Companies (Maintenance and Audit of Cost Accounts) Regulations, 2020 ("Companies Regulations, 2020") which also includes the fertilizers companies as per its schedule and requires such companies to submit to the Securities and Exchange Commission of Pakistan
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("SECP") audited cost statements periodically and in case of violation authorizes the SECP to impose penalty. He therefore argues that since the Petitioners are mandated to provide such information to the SECP it cannot be described as confidential. Moreover, the learned counsel for the Commission relied upon Section 50 of the Competition Act to submit that the information sought can even otherwise be obtained by the Commission from the SECP. Petitioners' arguments in rebuttal: 17. The Petitioners' counsel in W.P. No.705 and 765 of 2020 in rebuttal submitted that Section 51 of the Competition Act does not protect the confidentiality of the Petitioners' information as once such information falls in the hands of the Commission it may end up with the public in case any member of the public invokes the provisions of the Right of Access to Information Act, 2017. He relied upon Section 2(33) and Section 223 of the Companies Act which delineate the scope of financial statements. 18. The learned counsel for the Petitioners in W.P. No. 841 and 842 of 2020 adopted the arguments made in rebuttal by the learned counsel for the Petitioners in W.P. Nos. 705 and 765 of 2020 and in the alternative submitted that even if the Commission justifies the Impugned Letter and Resolution as part of an enquiry the pre-conditions of an enquiry have not been satisfied as laid down in Dalda Foods Limited, Karachi (Supra). He highlighted that the Impugned Resolution makes no mention of "study" therefore, in case the Commission tries to justify it as "study" such study would be a case of non-delegation and as such illegal. He referred to the information sought by the Commission vide Annexure-A to the Impugned Letter dated 11-12-2019 whereby information regarding raw material has been sought and submitted that the same constitutes proprietary information which if reverse engineered by the competitors can result in substantial detriment to the Petitioners. He relied upon Hydri Ship Breaking Industries Limited vs. Sindh Government and others, 2007 MLD 770 to assert that no effective alternate remedy is available to the Petitioners. 19. The learned counsel for the Petitioners in W.P. No. 755 of 2020 submitted that the reply submitted by the Commission in respect of challenge to the maintainability of the instant Petitions is self- contradictory as on one hand they have described the Petitions as premature by alleging that there is no adverse order against the Petitioners and on the other hand stated that in case of any grievance and alternate remedy is available under the Competition Act which is available only against orders. He contended that the Impugned Resolution is not an order as per Section 24 of the General Clauses Act, 1897 ("General Clauses Act") as in order to constitute such an order it must contain reasons. He relied upon Muhammad Amin Muhammad Bashir Limited vs. Government of Pakistan and others, 2015 SCMR 630 to submit that such requirements have to be met by statutory bodies as well. He argued that no time period has been given in the said Resolution and the Impugned Letters and Order seek information for the years 2016 till 2019 despite the fact that admittedly information regarding previous years has already been sought by the Commission previously. He relied upon Evacuee Trust Property Board vs. Mst. Sakina Bibi, 2007 SCMR 262; Almas Ahmed Fiaz vs. Secretary, Government of the Punjab Housing and Physical Planning Development, Lahore and another, 2006 SCMR 783; Haji Abdullah Khan and others vs. Nisar Muhammad Khan and others, PLD 1965 SC 690 to argue that points of law can be raised at any stage before the Court and as such even though none of the Petitioners have challenged the vires of the Companies Regulations, 2020 this Court is empowered to consider the vires of Regulations 4 and 6(3) of the said Regulations to determine that the same is beyond the scope of the parent law. In this regard the learned counsel for the Petitioners in W.P. No. 841 and 842 of 2020 relied upon Marbury vs. Madison, 5 U.S. 137 (1803) to argue that it is the inherent powers of the Constitutional Court to look into the illegality of law even in the absence of any prayer challenging such law. 20. The learned counsel for the Commission submitted that it is trite law that presumption of validity is attached to every provision of law and also that the Petitioners have been submitting the
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costs statements in compliance of the Companies Regulations, 2020 without challenging the same before any forum at any point of time and are merely challenging the authority of SECP and vires of the said Regulations during oral arguments in the instant case. He relied upon Lahore Development Authority vs. Ms. Imrana Tiwana and others, 2015 SCMR 1739; Federation of Pakistan vs. Aitzaz Ahsan and another, PLD 1989 SC 61. 21. I have head the learned counsel for the parties and have also perused the record and the applicable law with their able assistance. Scheme of Law and Background: 22. The freedom of trade, business or profession is a fundamental right guaranteed by the Constitution however, such right is subject to regulation as per Article 18(b) of the Constitution. The instant case involves the determination of the limits of the Petitioners' Constitutionally guaranteed freedom to conduct trade and business and the extent to which such freedom can be regulated by the Commission in the interest of free competition as permitted by the Constitution. 23. It is a given fact that every business is motivated to increase profits and to minimize…
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