Al Wakeelo
Your Digital Lawyer, Always on Duty
Initializing Secure Chambers
Your Digital Lawyer, Always on Duty
Initializing Secure Chambers
Petitioner: AMIN AHMED and 31 others VS Respondent: MINISTRY OF PRODUCTION GOVERNMENT OF JUDGMENT
Court Name: Sindh High Court Judge(s): Nazim Hussain Siddiqui, Abdul Hafeez Memon Title:AMIN AHMED and 31 others vs MINISTRY OF PRODUCTION GOVERNMENT OF
JUDGMENT
Reported As: PLD 1996 Karachi 27 Result: Petitions dismissed Judgment JUDGMENT NAZIM HUSSAIN SIDDIQUI, J.---This judgment will dispose of Constitution Petitions Nos. 756 of 1993, 138 of 1994 and 2326 of 1994. In these petitions, common question of law and facts are involved. The facts necessary for disposal of these petitions are as follows:--- In Petition No, 138 of 1994 Nayadaur Motors Officers Association and their President and General Secretary namely, Shabbir Asghar, and Muhammad Akmal Khan respectively, have challenged the privatization of respondent No,4 (NAYADAUR MOTORS) and the transfer of its share to the respondents Nos. 5 to 7 namely, Fareed Tawakkal, Farooq Tawakkal, and Javed Hussain. It is their case that the transfer of the respondent No,4 to above-named respondents is illegal and of no legal consequence. Further, the petitioners have prayed to declare that the respondents Nos. 5 to 8 have no legal authority to terminate the services of the Officers of respondent No,4 or take any other decision which may ultimately affect their conditions of employment prior to privatization. In the alternative, the petitioners have prayed to declare that the officers of respondent No,4 are entitled to the benefit under package 'Bof the memorandum of agreement dated 15-10-1991, which was arrived at between the three Federal Ministers, the Chairman of the Privatization Commission, and the representatives of the employees of the State-owned Industries. It is said that in the year 1973 the respondent No,4 was primarily engaged in assembling four wheel drive automobile and was functioning under the name "Kandawala Industries Ltd." Consequent upon enforcement of President Order No,1 of 1972, Economic Reform Order 1972, the management of respondent No,4 was taken over by the Central Government. In the year 1973, by virtue of an Act No,LXIV of 1973, Economic Reform (Amendment) Act, 1973, the controlling shares of the previous owners were acquired by the
---
## Page 2
Government and transferred to respondent No,3 Pakistan Automobile Corporation Ltd. On the ground that development of the industry was necessary and it was in the public interest. In the year 1978, President Order No,12 Transfer of Managed Establishment Order 1978, was promulgated, which empowered the Federal Government to transfer the shares of the proprietary interest in respect of managed establishment to the previous owners on the terms set out in the Schedule of this Order. By virtue of Act No,XXII; of 1991, Transfer of Managed Establishment (Amendment) Act, 1991, the Federal Government was empowered, through public advertisement, to invite bids for the transfer of shares and proprietary interest of the managed establishment. In 1992, Protection of Economic Reform Act No,XII of 1992 was passed, which provided protection for transfer of ownership to the private sector. The petitioners have asserted that decision to privatize a large number of industrial concerns operating in the State sector was without concurrence of the Council of Common Interests, as such, the whole privatization was in violation of the Constitution. A legal objection was taken by the respondents about the maintainability of the petition on the grounds, amongst others, that the trade union was not entitled to file petition as no right possessed by it was violated. Thereafter, officers of the respondent No,4, filed Petition No,2326 of 1994 on the same grounds and for the same reliefs. In Petition No,756 of 1993 the petitioners are officers of respondent No,4 (M/s. Metropolitan Steel Corporation). They have sought declaration to the effect that Federal Government could not take policy decision in respect of affairs of respondent No,4, unless such direction was issued by the Council of Common Interests and on this ground they have challenged the privatization. They have sought declaration to the effect that section 4 of Act No,XXII of 1991 in so far as and to the extent it makes in-applicable to the provisions of Article 10 of President Order No,12 of 1978 to the establishment covered by clauses (2) and (3) of said Article, are ultra vires of the Constitution being in violation of fundamental rights under Articles 14 and 18 of the Constitution. Petitioners have also prayed that in the alternative they are also entitled to Golden Handshake Scheme. It is also the case of the petitioners that the unit, in which they were employed, was sold illegally in pursuance to a Privatization Policy to a private party, which has not been joined as respondent in this petition, by the petitioners. It is alleged that the officers working in the Head Office of respondent No,3 (Estate Engineering Corporation, Islamabad) have been given the benefit of Golden Handshake Scheme, while officers working in the units, like the petitioners, the said benefit has not been extended to them, although their services are inter-transferable. The case of the respondents in C.P.No,D-138 of 1994 and 2326 of 1994 is that the relationship between the parties is that of master and servant and any alleged violation of service rules, or contractual obligations, cannot be challenged in the Constitution petition. It is alleged that even before the Privatization the petitioners were governed by the laws of master and servant as they continued to be the employees of a private limited company; according to the respondents, though some employment rules were borrowed and made applicable to the petitioners for good management, yet, they continued to be the employees of a private company and were governed as such. Further, it is said that the sale agreement was executed on 12-1-1993 and, in pursuance thereof, the management and control of the Company was handed ever to the concerned respondents. The case of the respondents in C.P. No,736 of 1993 is that the respondent No,3 (Estate Engineering Corporation Limited), Islamabad does not have statutory rules of service, as such, the petitioners are not entitled to invoke the writ jurisdiction. According to them, like other above two petitions, the relationship between the parties is that of master and servant and on that ground the writ does not lie for alleged violation of obligations, if any. They have claimed that the terms and conditions of service of the petitioners were governed by the rules framed by the private company.
---
## Page 3
Mr. Sabihuddin Ahmad learned counsel for the petitioners contended that Privatization of the respondent No,4 and handing over of absolute power of management and control to the concerned respondents is invalid ultra vires, particularly for the reason that the legislatures had already declared the development of certain type of industries in the State sector as expedient in the Public interest and has also enacted law in terms of Article 253 of the Constitution. Learned counsel also argued that since the subject industries were included in Legislative List, Part II of Fourth Schedule the privatization could not be done without approval of Council of Common Interests (CCI). The Articles 153 and 154 of the Constitution speak about CCI which are as follows: Article 153: (1) There shall be a Council of Common Interests, in this Chapter referred to as the Council, to be appointed by the President. (2) The members of the Council shall be-- (a) the Chief Ministers of the Provinces, and (b) an equal number of members from the Federal Government to be nominated by the Prime Minister from time to time. (3) The Prime Minister, if he is a member of the Council, shall be the Chairman of the Council but, if at any time he is not a member, the President may nominate a Federal Minister who is a member of the Council to be its Chairman. (4) The Council shall be responsible to (Majlis-e-Shoora (Parliament)). Article 154: (1) The Council shall formulate and regulate policies in relation to matters in Part II of the Federal Legislative List and, in so. Far as it is in relation to the affairs of the Federation, the matter in entry 34 (electricity) in the Concurrent Legislative List, and shall exercise supervision and control over related institutions, (2) The decisions of the Council shall be expressed in terms of the opinion of the majority. (3) Until (Majlis-e-Shoora (Parliament)) makes provision by law in this behalf, the Council may make its rules of procedure. (4) Majlis-e-Shoora (Parliament) in joint sitting may from time to time by resolution issue directions through the Federal Government to the Council generally or in a particular matter to take action as (Majlis-eShoora (Parliament)) may deem just and proper and such directions shall be binding on the Council. (5) If the Federal Government or a Provincial Government is dissatisfied with a decision of the Council, it may refer the matter to (Majlis-eShoora (Parliament)) in a joint sitting whose decision in this behalf shall be final. Perusal of these Articles shows that the object of C.C.I. Is to safeguard the interest of Federating units and to establish good relations between the Government of Federation and the Provinces. C.C.I. Is to work as laid down in Article 154 and is responsible to both the Houses of Parliament. C.C.I. Is required to formulate and regulate policies in relation to matters in Part II of the Federal Legislative List. The Council has two main functions to perform. One to formulate and regulate policies as stated above, and second to exercise supervision and control over related institutions. Part II of the Federal Legislative List contains 8 items and entry No,3, which is relevant for these matters, speaks about of "Development of Industries". We are of the view that the Council would have power to formulate and regulate policies when basically the question is of development of industries and the development is declared by the Federal law to be expedient in the public interest. In these cases, the controversial point is not about development of industries but disposal of property vested in the Government. Prima facie, the development and disposal are two different propositions and stand for different legal meanings. Suffice it to say that C.C.I. Has nothing to do so far the disposal of the Government property, is concerned.
---
## Page 4
Mr Sabihuddin Ahmed learned counsel for the petitioners cited the case of Mian Muhammad Nawaz Sharif v. President of Pakistan and others PLD 1993 SC 473 relevant page 656 and relied upon para. 38 which is as follows: "There is substance in the assertion of the learned Attorney-General that the Government ought not to have transferred any units included in Part II of the Federal Legislative List to the private sector in the absence of a policy or policies framed by the Council of Common Interests. But, then perhaps this was a case of unintentional lapse on the part of the petitioner's Government and not an instance of flagrant violation of the Constitution. It was for the first time in December 1992 that the Privatization Commission which had been constituted to examine certain aspects of privatization drew the attention of the Government to this omission. It stated in its report: "...The whole process of privatization, unilaterally initiated by the Federal Government, by passing the Council of Common Interests and the NEC, appears to be ultra vires of the Constitution." Learned counsel argued that from above observations it is evident that the Government ought not to have transferred any units included in Part II of the Federal Legislative List to the private sector in the absence of a policy or policies framed by the Council of Common Interests. This is, however, clear from above observations that the Act of the Government was taken as "unintentional lapse and not an instance of flagrant violation of the Constitution". It was also observed by the Supreme Court in this matter that the Council, in any of its meetings, could have regularised the steps already taken in ignorance of the Constitutional petition and even the joint session of the Parliament where the petitioner's Government enjoyed the majority could have validated the past acts of the Government in this regard. It is significant to note that the Supreme Court never ruled that the transfer of any units to the private sector was illegal, nor it laid down that such transfer was not in public interest. Privatization is a Universal Phenomenon and is being recognised as such. The Dictionary meanings of word ''Develope" are: to unroll: to lay open by degrees: to free from integuments or that which envelops: to bring out what is latent or potential in: to bring to a more advance or more highly organised state: to work out the potentialities of: to elaborate: to cause to grow or advance: to evolve: to contract (a disease): to make more available: to exploit the natural resources of (a region): to build on or prepare for building on (land): to bring into a position useful in attack (Chess): to disclose: to express in expanded form (math): to unroll into a plane surface (geom): to render visible the image on a negative by use of chemicals (phot).--- v.i. To open out: to evolve: to advance through successive stages to a higher, more complex, or more fully grown state. While the word "DISPOSE" means act: to arrange: to distribute: to place: to apply to a particular purpose: to make over by sale, gift, etc. To bestow: to incline.---i,e, to settle things: to ordain what is to be: to make a disposition: (usu. With of) to get rid of. There is no nexus between the two terms/words "DEVELOPE" and "DISPOSE" and that C.C.I. Is only concerned with the development and the disposal of the Government property is a different matter, which is governed by Article 173 of the Constitution. As regards the plea that in view of Article 253 of the Constitution, the industries being in State sector could not be allowed to be owned, controlled, or managed by the private sector, it is noted that said Article lays down that the Parliament may by law declare any trade, business, industry or service specified in such law, shall be carried on or owned by the Federal Government and Provincial Government or by a Corporation controlled by any such Government to the complete or partial exclusion of the others. This Article cannot be invoked where the question of the disposal of Government property is involved, nor the Government can be compelled to run any trade, business, or industry; which it does not want to carry on. Mr. Sabihuddin Ahmed, next, argued that by virtue of subsection (4) of section 4 of the Act No,22 of 1991, the provisions of Article 6 of President's Order 12 of 1978 are not applicable, as such, the Government was not competent to transfer the management, consequently the respondents were
---
## Page 5
not entitled to assume the management of the company. According to learned counsel, under Article 6 of President's Order No,12 of 1978, the management could not be transferred. In order to appreciate the above contention, it is necessary to refer various provisions of law on the subject, beginning from President's Order 1 of 1972 till the Act 12 of 1992 was passed. According to President's Order 1 of 1972, the Central Government was empowered to appoint Managing Director in respect of establishment, defined in the said order. Consequent upon the appointment of a Managing Director in respect of an establishment, the administration of the affairs of that establishment vested in the Managing Director, so appointed. According to Article 6 of this Order, all persons employed in the establishment were to continue in their respective employment on the same remuneration and other conditions of service as were applicable to them immediately before the appointment of the Managing Director of the establishment. In the year 1973 Act LXIV was passed. By this Act, certain amendments were brought in President's Order 1 of 1972 and Articles 7-A to 7-E were inserted, which are as follows: "Article 7-A: Power to prohibit dealings in shares, etc.---(1) The Federal Government may, by notification in the official Gazette, direct that--- (a) no dealings of business relating to the shares of the managed establishment specified in the notification shall be transacted on any stock exchange; and (b) no transfer of the shares of the managed establishment specified in the notification shall be registered in the share register of the establishment except to the extent and in the manner so specified. (2) A notification issued under paragraph (a) of clause (i) shall remain in force for a period of ninety days unless it is earlier rescinded or modified. Article 7-B. Power to acquire shares or business of an establishment.---(1) The Federal Government may, if it considers necessary in the public interest so to do, by an order,--- (a) in the case of an establishment which is a company or an establishment owned by company,- -- (i) acquire the entire shares held in the company by the sponsors and directors of the previous management thereof, the family members of such sponsors and directors and the associated undertakings and managing agents which were the associated undertakings and managing agents of the company at the time at which a Managing Director was appointed in respect thereof and the whole or a portion of the shares from all or any of the shareholders of such company and, as from the date of such order, the shares so acquire shall vest in the Federal Government; or (ii) acquire the whole or a portion of the proprietary interests of such company in such establishment and, as from the date of such order, the interests so acquired shall vest in the Federal Government; and (b) in the case of an establishment owned by a person acquire the whole or a portion of the proprietary interests of such person and, as from the date of such order, the interests so acquired shall vest in the Federal Government: Provided that no order shall be made under the Article for the acquisition of the shares held in an establishment by a foreign investor or an institution owned, managed or controlled by the Federal Government: Provided further that in the case of an establishment which is a company or an establishment owned by a company, the Federal Government may, by notification in the official Gazette, exempt from acquisition shareholdings of any shareholder up to such maximum amount as may be specified in the notification. Explanation.--In this clauses--
---
## Page 6
(a) "associated undertaldngs" has the same meaning as in the Monopolies and Restrictive Trade Practices (Control and Prevention) Ordinance, 1970 (V of 1970); (b) "family members" in relation to a sponsor or director, means the spouse, lineal ascendants and descendants and brothers and sisters of the sponsor or director; and (c) "previous management", in relation to a company, means a person, body or managing agency in whom the management of the company vested immediately before the appointment of a Managing Director in respect of such company or of the establishment owned by it. (2) Where the Federal Government makes an order under clause (1) in respect of the shares of any company, no dealings or business relating to such shares shall be transacted on any stock exchange for a period of ninety days from the date of such order.Article 7-C: Acquisition of shares.---Where, under Article 7-B, the Federal Government acquires the whole or a portion of the shares of the shareholders of any company or of the proprietary interests of a company or other person in an establishment, the Federal Government shall, within a period of ninety days, pay such compensation as may be determined by it on the basis of the principles set out in the Second Schedule. Article 7-D: Reorganisation of establishment---(1) Where, in respect of any managed establishment which is a company or an establishment owned by a company, the Federal Government holds or has acquired the whole or a majority portion of the shares in the company carrying the controlling voting rights, or where the Federal Government has acquired the whole or a controlling portion of the proprietary interests it may at any time re-organize such establishment with a view to increasing its efficiency and rationalising its operation. (2) The re-organization may include provision for amalgamation of a managed establishment with other such establishments or within undertakings owned or managed by the Federal Government or by a corporation set up under the authority of the Government and, in the case of establishments which are companies or establishments owned by companies, may provide for the reconstruction of any such company or companies, or amalgamation of any such two or more companies and for all or any of the matters contained in section 153 or section 153-B of the Companies Act, 1913 (VII of 1913), or for alteration of share capital or loan structure and alternation of existing, or adoption of fresh, articles of association of such companies. (3) The re-organization shall be implemented and take effect in such manner and at such time as the Federal Government may, by notification in the official Gazette, specify. Explanation.--- For the purpose of this Article and Article 7-B, the Federal Government shall be deemed to have a majority portion of the shares in a company carrying controlling voting rights or the controlling proprietary interests in an establishment if the aggregate face value of the shares or proprietary interest in such establishment owned by the Federal Government and by an institution owned or controlled by the Federal Government exceeds 50% of the total voting rights in the issued and paid-up shares capital of the company of 50% of the proprietary interests of that establishment. Article 7-E: Vesting of management, etc., acquired by Federal Government in a corporation.---(1) Where the Federal Government acquires the whole or a majority portion of the shares or proprietary interests of a company or other person under Article 7-B, the Federal Government may transfer the management of, and such shares or proprietary interests in such establishment to any corporation wholly owned or controlled by the Federal Government or a corporation to be set up for the purpose. (2) A corporation to which the management of, or shares or proprietary interests in, an establishment is or are transferred under clause (1) shall, in the exercise of its powers and
---
## Page 7
performance of its functions, by subject to the general supervision and control of such Board or other authority the Federal Government may set up for the purpose." By virtue of Article 7-B quoted above, the Federal Government was empowered to acquire the shares of an establishment. On 10th September, 1978 Transfer of Managed Establishment Order No,12 of 1978 was passed. Article 4 of this Order empowered the Federal Government to transfer shares and proprietary interest to the persons specified, and on the terms set out, in the Schedule. Under Article 5 of this Order, an extraordinary general meeting of the company was to be held for purposes of electing the Board of Directors of the Company. This was for transferring the shares and proprietary interests. Under Article 6 of this Order, the Federal Government was empowered to cancel the orders made by it under clause (1) of Article 4 and Clause (1) of Article 7-E of Order 1 of 1972 quoted above. Thereafter, another Ordinance No,5 of 1988 was passed. Under this Ordinance, the Federal Government was empowered to transfer the shares and proprietary interests, through public advertisement, inviting bids for the transfer of shares to such persons and on such terms and conditions, as was deemed fit. It is noted that by virtue of President's Order 12 of 1978 the shares and proprietary interests were to be transferred to the persons specified in the Schedule, who were the persons from whom the management was taken. Ordinance 5 of 1988 permitted disposal of shares and proprietary interests by inviting bids. Thus, the shares and proprietary interests by virtue of Ordinance 5 of 1988 could also be transferred to the persons, other than those from whom the management was taken. Thereafter, the Act XXII of 1991 was passed. According to it, the shares of proprietary interests were to be transferred to the persons specified in the Schedule on the highest bid so received, and if the persons specified in the Schedule did not accept the offer made under Clause (2), the Federal Government could transfer the same to such persons and, on such terms and conditions, as was deemed necessary. It would be noted that when the shares of the proprietary interests were to be transferred to the persons other than the persons specified in the Schedule, it was laid down in Order No,5 of 1988 and Act No,22 of 1991…
Read the unabridged text and precedent citation network on Al Wakeelo Legal Research Platform.