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Petitioner: Mirpurkhas Sugar Mills & others VS Respondent: Federation of Pakistan & others
Court Name: Sindh High Court Judge(s): Muhammad Iqbal Kalhoro, Shamsuddin Abbasi Title: Mirpurkhas Sugar Mills & others vs Federation of Pakistan & others Case No.:C.P.No.D-110 of 2010, C.P.No.D-149 of 2010, Const. P. 164/2010, C.P.No.D-196 of
2010, C.P.No.D-360 of 2010 Date of Judgment:2022-01-17 Reported As: 2022 SHC 70, 2022 CLD 352 Result: Petition Dismissed Judgment ORDER MUHAMMAD IQBAL KALHORO J. In hand are five petitions filed by Pakistan Sugar Mills Association, and different Sugar Mills Ltd. located in province of Sindh questioning competency of the Competition Ordinance, 2007 (the 2007 Ordinance) , the Competition Ordinance, 2009 (the 2009 Ordinance), the Competition Ordinance, 2010 (the 2010 Ordinance) , and the Competition Act, 2010 (the 2010 Act) on the grounds, among others detailed herein under , of being ultra vires the Constitution, in contravention of a judgment in the case of Sindh High Court Bar Association Vs. Federation of Pakistan (PLD 2009 SC 879) passed by Honorable Supreme Court of Pakistan, and contrary to the letter and spirit of Article 89 of the Constitution of Pakistan 1973. 2. During hearing of the case, learned defense counsel and learned Attorney General of Pakistan forwarded submissions in an elaborative manner for and against constitutionality of the impugned laws. They vociferously stuck to their respective points of view, and supported it with precedents set out by the Honorable Apex Court in different cases. Learned defense counsel were of the view that impugned laws lack constitutional sanction and are void ab initio, while leaned Attorney General maintained that the laws have been promulgated as per scheme of the Constitution and there in no illegality . We have attempted in following paragraphs to reflect their respective opinions as exactly as possible and answer them. 3. Briefly , the case of petitioners, reiterated by learned defense counsel, in arguments and in written synopsis, is that the impugned Ordinances promulgated in the year 2007, in the year 2009 and lastly in the year 2010 are against scheme, object and spirit of Article 89 of the Constitution in addition to being violative of the directives passed by the Supreme Court in the case of Sindh High Court Bar Association (supra) . Parliament was in regular session where a Bill pertaining to the same subject matter had already been tabled, yet the 2009 Ordinance was conceived and promulgated. That the President does not have the power under Article 89 to promulgate an
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Ordinance for regulating free competition and consumer protection as these subjects fall outside of the purview and scope of any entry in the Federal Legisla tive List and the Concurrent Legislative List (as it was then) in the Fourth Schedule to the Constitution. The 2009 Ordinance is void ab initio and liable to be declared as such being in excess of the legislative competence of the President. This subject will perforce come within the residual legislative powers of the provincial assemblies. An Ordinance promulgated under Article 89 of the Constitution is subject to the same restrictions as are applicable to Parliament in exercise of its legislative power in terms of entries in the aforesaid Legislative Lists. Therefore, an Ordinance would be valid only when it is made in respect of a subject itemized in an entry in either of the legislative list by the President. Article 18 of the Constitution confers a fundamental right upon every citizen to conduct any lawful trade or business and also envisages the regulation of trade, commerce or industry in the interest of free competition. However , the regulation of free competition does not fall within and is not otherwise covered by any entry in either of aforesaid list. Hence, neither Parliament nor the President has the legislative authority to legislate on matters relating to regulation of free competition and/or consumer protection, the avowed object of the impugned Ordinance reflected in its preamble. 4. That as per Article 142(c) of the Constitution, the provincial assembly and not Parliament has the exclusive power to make laws with respect to matters pertaining to regulation of free competition and consumer protection. This position is further clear from the fact that the provincial assemblies have already enacted consumer protection legislation, identical to some extent in scope and object of the 2009 Ordinance. For instance, the Balochistan Consumer Protection Act, 2003; the Punjab Consumer Protection Act, 2005; the North West Frontier Consumer Protection Act, 1997 and the Sindh Consumer Protection Ordinance, 2007 . Promulgation of the impugned Ordinances, therefore, is tantamount to usurping the legislative power of the provincial assemblies and contravenes Article 142(c). Hence, the impugned Ordinances are liable to be struck down being void ab initio and consequently , any purported action taken thereunder by the Commission including but not limited to issuance of the impugned Show Cause Notices (SCNs) is also liable to be declared to be without any lawful authority and of no legal ef fect whatsoever . 5. The 2009 Ordinance promulgated on 26.11.2009 takes effect from 2.10.2007 is violative of fundamental right of petitioners to protection against retrospective punishment under Article 12 of the Constitution. Not only it authorizes punishment of persons for an act or omis sion not punishable by law at the time of the alleged act or omission but also sanctions the punishment for an offence by a penalty greater and different than the penalty prescribed by law at the time of commission of such act. SCNs are premised on documents which were procured in violation of the provisions of applicable law and the Constitution. These documents were first used for issuing a SCN to the Pakistan Sugar Mills Association (PSMA) under the 2007 Ordinance. Now, the same documents and Enquiry Report prepared thereunder without due application of mind and specific and separate grounds and allegations have been used for issuing SCNs against petitioners albeit each one of them is an individual sugar mill. 6. Even otherwise, the 2009 Ordinance being identical in substance to the 2007 Ordinance is also liable to be struck down on the ground that the re-promulgation of an Ordinance on the identical subject matter covered by an earlier Ordinance is not permitted by Article 89 of the Constitution which restricts and circumscribes the power of the President to promulgate an Ordinance in such circumstances. The Supreme Court has held that if the National Assembly does not stand dissolved, the President cannot usurp the legislative power of the National Assembly by repeating the same Ordinance. It is also the view of the Apex Court that repeated re-promulgation of Ordinances runs counter to the spirit and scheme of the Constitution. That since a Bill on the subject matter of the impugned Ordinance was pending before Parliament and Parliament was not dissolved and meeting regularly; the President did not have the authority and power to promulgate the 2009 Ordinance. 7. Further , the Enquiry Report dated 21.10.2009 was expressly commissioned under Section 37 of the 2007 Ordinance, which stood expired on 1.2.2008 in terms of Article 89(2)(a)(1) of the Constitution. Therefore, both SCNs and Enquiry Report are a nullity in the eyes of law. There was no valid law in force at the time of preparation of Enquiry Report to authorize the same. The 2009 Ordinance does not cure this fundamental defect as it makes absolutely no reference whatsoever to the 2007 Ordinance repealed on 1.2.2008. That as proceedings before the Commission under the 2009 Ordinance are quasi criminal in nature, proof beyond a reasonable doubt must be
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present against each individual undertaking for taking action and issuing them a SCN. But there is evidently no proof available poised to produce a possibility of a valid and lawful finding of contravention of the 2009 Ordinance by the individual sugar mill. Hence, SCNs are liable to be quashed and declared to be null and void. That the 2009 Ordinance is also liable to be struck down on account of excessive and impermissible delegation and abdication of authority by the legislature and the executive as extremely broad and pervasive powers have been vested in the Competition Commission of Pakistan (the Commission) without the approval of the federal government and in this respect too it is also ultra vires the Constitution. The powers of search and entry and forcible entry vested in the Commission also suffer from excessive delegation and are ex facie even broader and more unilateral than the search and entry powers available to the police under the Criminal Procedure Code. 8. That sections 3, 4 and 38 of 2007 Ordinance created various new offences/punishments/penalties/fines which were not provided for or contemplated in the Monopolies and Restrictive Trade Practices (Control and Prevention) Ordinance, 1970 (the 1970 Ordinance) . Moreover , in terms of Section 38(6) of the 2007 Ordinance failure to comply with an order of the Commission was declared to constitute a criminal offence punishable with imprisonment for a term which may extend to one year or a with fine which may extend to twenty-five million rupees, which offence was also not provided for in the 1970 Ordinance. That Sections 3, 4 and 38 of the 2009 Ordinance are in pari materia and stipulate same punishments. The proceedings against the petitioner sugar mills have been initiated under Section 30 of the 2009 Ordinance which has been given retroactive effect from 2.10.2007 mala fide only to make the back dated material, basis of SCNs and Enquiry Report, relevant. This has resulted into making an act or omission carried out in the past when it was not an offence and punishable, as an offence and punishable. Moreover , the punishments, etc. under section 38 of the 2009 Ordinance are greater and different than those stipulated in, inter alia, Section 19 of the 1970 Ordinance. 9. The petitioners are Companies established and operating under the laws of Pakistan. They are owners and operators of mills engaged in production, manufacture and sale of refined sugar . Each one of the petitioner sugar mills has received a SCN dated 31.12.2009 under Section 30 of the 2009 Ordinance which are identical in content and substance. The Enquiry Report, an integral part of each of SCN, prepared under the 2007 Ordinance, was employed earlier by the Commission to PSMA which is a separate and distinct legal entity . It is evident from a bare perusal of the said Enquiry Report that the allegations therein are focused on and attributed to PSMA and not to the petitioners who are individual shareholders. 10. The Enquiry Report is premised on erroneous assumption that all undertakings as defined in section 2(1) (p) of the 2009 Ordinance have the ability , opportunity , power and legal authority to operate in a totally free market economy where market prices, terms of production etc. for each undertaking is an independent business decision driven by market forces and there is essentially free competition. However , many industries and sectors in Pakistan including sugar mills are heavily regulated, directly and indirectly , by the federal and provincial governments. The impugned Ordinance does not differentiate such industries and sectors, and assumes circumstances and a state of free competition which is patently incons istent with the applicable and prevailing legal, regulatory and practical circumstances. There is a major and material absence of nexus between the underlying basis of the impugned Ordinance and the ground realities within which the petitioner sugar mills actually operate under the direct dictates of the federal and provincial governments. 11. The sugar manufacturing industry has historically been and continues to be heavily and comprehensively regulated by the federal government and relevant provincial government. There are a raft of statutes and statutory rules empowering the provincial governments in particular to regulate and also to take coercive measures against sugar mills to fix price of sugar cane, the ex-factory price of refined sugar and to make territorial allocations etc. These, inter ilia, include: Sugar Factories Control Act, 1950 (the 1950 Act); Sugar Factories Control Rules, 1950; Sugarcane Act, 1934 (the 1934 Act); Industries (Control on Establishme nt & Enlargement) Ordinance, 1963; Price Control and Prevention of Profiteering and Hoarding Act, 1977; and Foodstuffs (Control) Act, 1958 . That any provincial government in most cases in consultation with the federal government notifies and determines minimum purchase price for sugar cane (the support price) pursuant to Section 16 of the Sugar Factories Control Act,1950.
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12. That in the report submitted by the Chairman of the Commission to the Supreme Court it has been accepted that the cost of sugar cane accounts for roughly 70 to 80% of the total cost of production of refined sugar . The federal government itself is also actively involved in deciding, determining, regula ting and enforcing directly and indirectly the ex-factory and retail price of refined sugar . The sugar manufacturers face two key price regulations: the predominant input cost; and the end sale price on account of intervention by the federal and provincial governments. Therefore, the sugar manufacturers who operate in the private sector are entitled to a reasonable return on their investment and efforts. Particularly when they do not and are not permitted to actually operate in a free market and determine purchase price of its inputs as well as the sale price for its end product. That it is clear that the ability of individual sugar mill to collectively fix price or to indulge in any other practice which can or has the object or effect of preventing, restricting or reducing competition is illusory at most as there is no room for sugar mills to influence or affect competition. Moreover , the impugned Ordinance does not define the scope and ambit of the expression competition employed therein. 13. It was contended next that the allege d actions attributed to the petitioner sugar mills in SCNs need to be read and examined in the context in which both the input cost and the sale price for the end product are decided, regulated and controlled by the federal and provincial governments. Even the establishment, enlargement and location of sugar manufacturing facilities are within the discretion and prerogative of the provincial governments. Given the level of direct and indirect meddling and control by both the governments on the price of input (sugar cane) and end product, the sugar manufacturers, essentially established to earn a return on shareholders' equity , have no choice but to conduct business in an environment where the minimum price (floor price) of sugar cane is determined by government, but there is no ceiling on such price. Further , the federal and provincial governments do not take any steps to keep a check on the maximum price of sugar cane, and there is concerted effort to ensure that the ex-factory and retail price of refined sugar is maintained within a band considered acceptable both by the federal and provincial governments. 14. It has also been impressed that all key activities of the sugar manufacturers are regulated by the antiquated scheme of Statues such as the 1950 Act and the 1934 Act, which is removed totally from a free and open market and that is the underlying basis of the 2009 Ordinance. Therefore, it would be inequ itable and contrary to Articles 4, 5(2), 9, 12, 14, 18, 23, 24 and 25 of the Constitution to test the alleged actions of the petitioner sugar mills on the threshold of Section 4 of the said Ordinance contemplating free choice and ability of the undertaking to determine its own price for acquisition of raw material and the price of its end product. 15. Learned defense counsel did not accept allegations leveled in SCNs against the petitioner sugar mills i.e. operating a cartel in the purchase of the raw material (sugar cane), and in the sale of the end product (refined sugar); territorial allocations in the purcha se of sugar cane and the terms of production and supply of refined sugar; and collusive bidding to offer a uniform price for refined sugar to Trading Corporation of Pakistan. And maintained that such allegations do not justify charging the petitioner sugar mills with violation of sections 4(1), 4(2) (a), 4(2) (b), 4(2)(c) and 4(2)(e) of the 2009 Ordinance. The allegations i.e. contravention of said provisions forming the subject matter of SCNs and the Enquiry Report are not sustainable in law and are without any merit. 16. In order to establish maintainability of the petitions in view of alternate remedy in the form of appeal available to the petitioners u/s 41 of the 2010 Act, it was stated, petitioners' fundamental rights under Articles 9, 12, 1.4 18, 23, 24 and 25 read with Articles 2A, 4, 5(2), 8 of the Constitution are involved. Issuance of SCNs by the Commission, itself a creation of a void Ordinance, pursuant to an Ordinance already expired is illegal and highly objectionable. Where serious questions of interpretation of law or the Constitution are involved, only the Superior Courts of Pakistan viz. the High Courts and the Supreme Court have the jurisdiction and there is no need or occasion for availing of any sub-constitutional remedy . Interpretation of statutory and constitutional provisions, even officials need guidance on, is the constitutional prerogative of the Superior Courts only. SCNs have been issued in a mechanical manner without a lawful authority and are of no legal effect on the ground of illegal and unlawful assumption of jurisdiction by the Commi ssion as no valid and constitutionally compliant law was in force on the date of issuance of SCNs. That the 2009 Ordinance, promulgated and notified in the official gazette on 26.11.2009 with retrospective effect from 02.10.2007 is without lawful authority and of no legal effect being ultra vires the
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Constitution. In support of their case the petitioners have relied upon the case law reported in 2007 PTD 2356 SC, PLD 2000 SC 26, 1998 SCMR 1729 , PLD 213 SC 501, PLD 2020 SC 1, PLD 1998 SC 1445 , 2003 P Cr. LJ 277, PLD 1963 SC 486, PLD 2012 SC 923, 1993 SCMR 1589 1601, PLD 1998 Lahore 203, 1978 SCMR 292, PLD 2007 Peshwar 179, 1989 CLC 2103, PLD 2010 SC 265 , PLD 2006 SC 697 , PLD 2009 Supreme Court 879. 17. It is mainly in this backdrop, the petitioner sugar mills have sought following reliefs. A. Hold and declare that the impugned Ordinance (Competition Ordinance, 2009 (Ordinance No.XL VI of 2009) is ultra vires the Constitution, in contraventi on of the judgment of the Supreme Court of Pakistan dated July 31,2009 reported as PLD 2009 SC 879, without lawful authority and of no legal effect; and hence strike down the same by declaring it void ab initio. B. Hold and declare, without prejudice to the foregoing, that the Impugned Show Cause Notices dated December 31,2009 and the related Enquiry Report dated October 21, 2009 are without jurisdiction, void ab initio, without lawful authority and of no legal ef fect and hence set aside the same; C. Hold and declare that the Competition Ordinance, 2007 (No.LII of 2007) and all actions and steps taken thereunder and all orders and decisions issued pursuant thereto by or on behalf of or under the direction of the Commission (including but not limited to the purported decision to raid the premises of PSMA and the preparation of the Enquiry Report which has now also been employed as the basis for the Show Cause Notices) be declared to be ultra vires the Constitution; without lawful authority and of no legal effect; and hence strike down the same by declaring it void ab initio; D. Grant a permanent injunction, prohibiting and restraining the Respondents by themselves and or through any or all of their agents, servants, officers, representatives, subordinates, agencies and instrumentalities from enforcing and or giving effect to any provision of the impugned Ordinance, the Impugned Show Cause Notices dated December 31, 2009 and the related Enquiry Report dated October 21, 2009. E. Grant the costs of this petition. F. Any other relief. 18. Learned Attorney General Mr. Khalid Jawed Khan led the arguments from the side of respondents. He raised strong objection to maintainability of the petitions and submitted that the petitioner sugar mills cannot assail SCNs in constitutional jurisdiction. The 2010 Act provides for a complete hierarchy of forums with final appeal to the Honorable Supreme Court which the petitioners can resort to in the face of any adversity arising out of SCNs. He next stated that departmental proceedings entail adjudication on facts of the cases which exercise cannot be undertaken in writ jurisdiction as it would require recording of the evidence. He also spoke at length over merit of the case. His opinion on the issue is recapped in following paragraphs. Lastly in order to support his case, he relied upon the following case law . 2019 PTD 1774 , 2019 SCMR 924, 1993 SCMR 29, PLD 1992 SC 847, PLD 2011 SC 44 at 107, PLD 2019 Sindh 516, PLD 2006 SC 230 at 241 (Para 41), 2021 CLD 214 at 277 (Para 51), PLD 2018 Lah 762 at 777 (Para 23), 2019 CLC 1761 at 1771 (Para 20), 2019 CLD 626 at 631 (Para 9), 2018 PTD 1966 T 1986 (Para 19), 2018 PTD 2026 at Para 11, 2018 SCMR 802 at Para 16, AIR 2003 SC, 1044, 1046 (Paras 6 to 8), PLD 2017 Lah 230 at 248, 2018 SCMR 802 at 829, PLD 1998 Lah 296 at 303, 1998 SCMR 1729 at 1735, 2018 SCMR 1956 at 1987, PLD 2009 SC 879 at 957, PLD 1998 SC 161, PLD 1997 SC 426 at 517, PLD 2000 SC 26, 2018 SCMR 1856, PLD 2000 SC 26 , and 2005 PTD 122 at 131. 19. We have considered submissions of the parties and perused the record and the case law cited at bar. This discussion proceeds to encompass an effort to fist determine legislative competence of Parliament, if any, which is the core question here, to enact the law(s) on the subject of free competition in trade with a view to achieve purported objective of curtailing cartelization by business entities for the benefit of general public, and second to examine very intent the competition law(s) has been enacted for in the light of doubts expressed by learned defense counsel over its competence plus legality or otherwise of SCNs. A bare perusal of the law(s), aside from question to its constitutionality , is enough to demonstrate that the reason needed by Parliament for its enactment was not less than sacrosanct: to curb anticompetitive practices and to ensure free competition in the market to safeguard consumers' interest throughout Pakistan. Constitutional goal over the subject of business encoded in its
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several provisions, discussed herein under , is also free trade, commerce and intercourse in the whole country . For realizing such goal, and since the geographic stretch of the market surpasses territorial limits of any particular area or a province, the law on competition has to be national in character . At the very onset, we want to clarify that expression of 'Free Trade' etc. used in the Constitution as an idea would not imply absolute freedom from all obligations or regulations, etc. necessary to discipline such freedom. Absolute freedom in any sphere has never been the scheme of any Constitution the world over. This is the reason primarily , why our Constitution stipulates imposing of certain restrictions as may be required in the public interest upon freedom of a business activity , etc. The underlying purpose is to seek evolution of an egalitarian society based on a concept of fair play and social justice. Free from a regulatory regime, freedom would tend to beget chaos and discrimination in the society which is the last thing a democratic people governed by the Constitution would want in their life. 20. It seems that framers of our Constitution had such ideas in mind when they thought out of Article 18 (Freedom of Trade, etc.) and made it a part of Chapter 1 of Part II of the Constitution catering to fundamental rights of the citizens. Entering upon any lawful profession, trade, business or occupation by a citizen was recognized as his fundamental right. But under the same provision this right was made subject to certain regulations in the interest of free competition. It is quite clear therefore that regulating trade and business is not mere a formality but a requirement arising out of the Constitutio n itself. Once it is realized, it would be easy to understand that there has to be some regime with a mandate to supervise a business activity for such purpo se. For a province to have such regime and execute it in respect of a business activity carried out by a trans-provincial set up is next to impossible mainly…
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