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Petitioner: Al-Arabia Sugar Mills Limited & others VS Respondent: Federal Investigation Agency & others
Court Name: Lahore High Court Judge(s): Shahid Karim, Muhammad Sajid Mehmood Sethi Title: Al-Arabia Sugar Mills Limited & others vs Federal Investigation Agency & others Case No.: W.P No.40585 of 2020 Date of Judgment:2020-11-03 Reported As: 2020 LHC 2619 Result: N/A
JUDGMENT
JUDGMENT Shahid Karim, J:- The Issue: This litigation seeks the judicial review of certain actions taken by the Federal Investigation Agency (FIA) set up by the Federal Investigation Agency Act, 1974 ("the 1974 Act") and the Securities & Exchange Commission of Pakistan (SECP) . In W.P No.40585 of 2020, Al-Arabia Sugar Mills ("Al-Arabia") and some of its officers have sought review of the letter of 27.07.2020 (The Advisor 's Letter) written by Mirza Shehzad Akbar , Advisor to the Prime Minister on Accountability and Interior ("the Advisor") and the call up notices issued by the officer of FIA (although Mr. Salman Aslam Butt, Advocate, addressed oral arguments on the Reference sent by SECP too, yet we do not find that challenge to be part of the composite challenge to Impugned Actions and Decisions in this petition). In W.P No.45338 of 2020 the challenge is to the letter dated 30.07.2020 issued under the hand of Tariq Ahmad, Additional Director of SECP and addressed to the Director General FIA (SECP Letter 1), a letter dated 12.09.2020 issued under the hand of Secretary SECP and addressed to the D.G FIA purporting to be a reference in terms of section 41B of the Securities & Exchange Commission of Pakistan Act, 1997 (1997 Act) (The Reference). This petition has been filed by JDW Sugar Mills Ltd. (JDW) and its officers and seek a further restraint against FIA from enforcing or acting in pursuance of the impugned letters. JDW has also filed W.P No.36787 of 2020 challenging the call up notices addressed to the petitioners No.3 to 7 under Section 160 of the Code of Criminal Procedure (Cr.P.C.) dated 17.8.2020 issued by the officer of FIA. W.P No.38555 of 2020 has been brought by Farooqi Pulp Mills Ltd. ("Farooqi") and seeks to lay a challenge to the Advisor 's Letter and the consequent call up notices served on the petitioner and some of its officers by FIA. During the oral arguments addressed by the learned counsel for the petitioners, they mounted focused challenges to the issuance of call up notices by FIA and to the making of a reference by SECP . These will be dealt with, in seriatim , during the course of the discussion that follows. Facts: 2. On 20.02.2020 the Prime Minister of Pakistan constituted an Inquiry Committee. The convener of the Committee on 09.03.2020 wrote to the Secretary to the Prime Minister for expansion in the Committee so as to include the officers of SECP , Federal Board of Revenue (FBR) and State Bank of Pakistan (SBP). On 10.03.2020 the Ministry of Interior moved a summary to the Cabinet for constitution of a Commission to probe into "increase in sugar prices". Basing on the recommendations of the Inquiry Committee, on 16.03.2020 the Federal Government constituted a Sugar Inquiry Commission ("the Commission") under Section 3 of Pakistan Commission of Inquiry Act, 2017. The Commission was gazetted on 06.05.2020 and a preliminary report was submitted on 21.05.2020. The Federal Cabinet adopted the Inquiry Commission report and decided to publish it for the consumption of public. An Action Matrix was approved by the Federal Cabinet and was brought under challenge before the Islamabad High Court which set aside the Action Matrix in its order dated 20.06.2020. In conclusion, the Islamabad High Court held that:- I. The constitution of the Commission vide notification, dated 16.03.2020, read with notification, dated 25.03.2020 and pursuant thereto its proceedings and report, dated 21.05.2020, have not been found to be ultra vires the Pakistan Commission of Inquiry Act, 2017 nor in
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violation of the fundamental rights of the petitioners. The report, dated 21.05.2020 was, therefore, lawfully considered by the Federal Cabinet in its meeting held on 21.05.2020. II. Keeping in view the principles and law enunciated in the judgment of the august Supreme Court rendered in the case titled "Messrs Mustafa Impex, Karachi and others v The Government of Pakistan through Secretary Finance and others" [PLD 2016 SC 808] and highlighted in the judgment of a Division Bench of this Court, dated 23.04 .2020, handed down in ICA No. 36 of 2020, titled "Federation of Pakistan v. Ms Yadiyya S. Khalil and two others" , the expression "Federal Government" has been explicitly interpreted as "the collective entity descr ibed as the Cabinet constituting the Prime Minister and Federal Ministers". Moreover , it has been held that the functions and powers vested in the Federal Government cannot be delegated. III. The decision of the Federal Cabinet, dated 21.05.2020, to the extent of delegating its functions and powers to respondent no. 4 i.e. Mr Shehzad Akbar , Special Assistant to the Prime Minister on Accountability and Interior and approval of "Action Matrix" is not in consonance with the law laid down by the august Supreme Court. It is noted that the Federal Government is empowered under section 18(b)(i) of the National Accountability Ordinance, 1999 to send a reference to the National Accountability Bureau but such a decision has to be taken in accordance with the aforementioned law expounded by the august Supreme Court. IV. The learned Attorney General, taking a fair stance, has stated that he would advise the competent authority to submit the proposed action(s) for the consideration of the Federal Cabinet. The Federal Cabinet, after considering the proposed action(s), shall be at liberty to take such decisions as it may deem appropriate. This Court expects that the decisions taken shall be in conformity with the provisions of the relevant statutes e.g. the National Accountability Ordinance, 1999, the Income Tax Ordinance, 2001, the Company Act 2017, etc. V. This Court further expects that, while dealing with the matter , the concerned officials/public office holders will have regard to the principles of due process and fair trial and refrain from acting or making statements that could prejudice the right to fair trial or violate the principles highlighted by the august Supreme Court in the case titled "Suo Motu Case No. 28 of 2018" [PLD 2019 S.C. 01] and by this Court in the case titled "The State v . Dr Firdous Ashiq Awan" [PLD 2020 Islamabad 109]." 3. Pursuant to the order of Islamabad High Court, a Revised Action Matrix was issued by the Federal Cabinet on 23.06.2020 in which the Federal Cabinet decided as follows: E. INVESTIGA TION OF CORPORA TE FRAUD (BY FIA/SECP)Report In the light of findings of Inquiry Commission, FIA/SECP may investigate corporate fraud through associated companies, pointed out by the Inquiry Commission fixing responsibility of directors/major shareholders including, but not limited to; FIA/SECP Security & Exchange Commission of Pakistan (sic) Timeline: 90 DAYS from the date of registration of inquiry by FIA/SECP (Report to be submitted to Federal Govt. through Ministry of Finance) Corporate fraud by Al-Arabia sugar mills through GNC undisclosed (gratis) sales and accounting jugglery of reversal of salesRefer Para 481 page 140 of Inquiry Commission Report Inexplicable transfer of Rs.1.195 Billion by Al- Arabia to Ramzan Sugar Mills not disclosed in financial statementsRefer Para 565 page 160 of Inquiry Commission Report Inexplicable transfer of Rs.402 Million by Al-Arabia to Sharif Feeds Mills and Sharif dairy Farms since 2017/18Refer Para 566 page 160 of Inquiry Commission Report Inexplicable cash transfer of Rs.2.25 Billion by Alliance sugar mills to Asad Hussain (Ali Traders Gujrat) through CPVs not disclosed in financial statements (Excess payment of Rs.3.4 Billion By Asad Hussain to the Company)Refer Para 568-571 page 161 of Inquiry Commission Report Corporate fraud of Rs.3.6 Billion by JDW through over-valued purchase of associated company JK Farming Systems Ltd. and booking losses through itRefer Para 558 page 158 of Inquiry Commission Report Corporate fraud of Rs.3.1 Billion by JDW through investment in Faruki Pulp Ltd. and bookingRefer Para 539 to 548 page 154-156 of Inquiry Commission Report
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impairment losses through it. Inexplicable transfer of Rs.2.5 Billion by JDW through non-arm's cash transfers of various sister entitles via Amir W aris cash boyRefer Para 551 to 557 page 157-158 of Inquiry Commission Report Inexplicable transfer of Rs.7 Billion by JDW to Deharki Sugar Mills (non-arm's cash transfers) without true and full disclosure in the financial StatementRefer Para 562/563 page 159 of Inquiry Commission Report Falsification of accounts/double/parallel book keeping by the sugar mills E.INVESTIGA TION OF CORPORA TE FRAUD BY (FIA/SECP)Report SECP/ FIA may also conduct an internal inquiry into failure of its regulatory responsibility by its personal/of ficers in facilitating any sugar mill/company and take action against those found involved SECP to look into the weak/inef fective auditing role external Auditors/Firms of Sugar Mills/Companies identified in the report, fix responsibilities, take Appropriate action accordingly and propose remedial measures. 4. On 27.7.2020 acting pursuant to the Revised Action Matrix, the Advisor issued a letter to D.G FIA as well as the Chairman SECP in the following terms: "The Inquiry Commission to probe the Increase in sugar prices, which was constituted by the Federal Government under the Commission of Inquiry Act, 2017, vide Notification No.F-5/14/2020-FIA dated 16th March, 2020, has submitted its final report to Government on 21st May , 2020 (enclosed f/A). 2. The final report of the Inquiry Commission was presented to the Cabinet on 21st May 2020. The report was reviewed by the Cabinet and an Action Plan was approved on 21st May 2020 in light of findings and recommendations of the Inquiry Commission, comprising actions that are to be undertaken by various departments/ agencies for penal action, recoveries and fixing the regulatory framework. Later on 23rd June, 2020, the Federal Cabinet approved revised Action Plan Matrix (enclosed f/B) for penal action, recoveries and identifies the criminal Investigations to be carried out by various Institutions, as per their legal provisions, in light of the Islamabad High Court Judgment. 3. In its final report to the Government, the Inquiry Commission after having conducted forensic audit of nine (9) sugar mills, has pointed out specific instances of corporate fraud through associated companies through accounting fraud and inexplicable money-transfers leading to money-laundering by these companies. 4. It was observed by the Cabinet and the Prime Minister that as highlighted by the Inquiry Commission, the aforementioned acts, inter- alia are culpable under Companies Act 2017, Anti-money laundering Act 2010 and offences falling under Schedule of offences falling under Federal Investigating Agency , and hence fall within the mandate of SECP and FIA. 5. In view of the aforementioned, you are requested to undertake a comprehensive investigation of these instances of corporate fraud. Additionally , SECP may also in light of findings of the Inquiry Commission inquire, fix responsibilities and take cognizance of the failure of the external auditors/ firms and also its own regulatory oversight mechanisms, as per applicable laws. 6. It will be highly appreciated if a comprehensive report covering the outcomes of actions taken in this regard is submitted by the FIA/SECP for review by the Cabinet within ninety days or initiation of actions or as per timeframe prescribed by the relevant laws. 7. The Government is committed to its vision of fair-play and transparency and assures of any assistance that may be required in the free, fair and transparent conduct of investigations in this regard." 5. The petitioners allege that acting under dictation, D.G FIA approved the constitution of a team to investigate into the matters of corporate fraud as per the revised Action Matrix in his letter addressed to the D.G Punjab Zone-I, Lahore. Simultaneously , on 30.07.2020 a letter was also written to D.G FIA by the Additional Director CSD/ Focal Person for LEAs which read as under: "2. In this regard, I am directed to inform that competent authority has nominated following two offices of the Securities and Exchange Commission of Pakistan (the "Commission") to provide technical assistance on the specific instances of corporative violations falling under Companies Act, 2017 and other laws administered by the Commission, during the subject investigations:
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1. Mr . Sidney Custodio Pereira, Additional Registrar 2. Mr . Tahir Mahmood Kiani, Joint Director" 6. To complete the narration of facts, on 12.09.2020 a purported reference was made to FIA by SECP under Section 41B of 1997 Act which had been approved by SECP in its meeting held on 29.7.2020. The terms of the letter informed the D.G FIA regarding the reference and stated that: "Reference to the Commission meeting dated 27th July, 2020 wherein the Comm ission discussed in detail the Report of the sugar Inquiry Commission constituted under the Commission of Inquiry Act, 2017 to probe the increase in the prices of sugar in the country and our subsequent letter dated July 30, 2020. The analysis of the report, prima facie, revealed that in addition to certain corporate crimes, there are allegations of inexplicable money transfers, money laundering, fraud and loss to the national exchequer and other related offences committed by corporate entities/ regulators persons and individuals connected with the affairs of such entities which are not cognizable by the Commission on its own under the administered legislation of the SECP . In order to ensure that a comprehensive investigation take place and all allegations are probed, the commission decided to refer the aforementioned matter to FIA in exercise of its power under section 41B of the SECP Act, 1997 and other enabling provisions of law and in pursuance thereof th4e Commission deputed a team of senior officers, as experts, to assist the FIA in the investigation referred by the Commission through aforementioned letter . We appreciate that FIA has initiated a thorough probe in the matter and SECP will continue to provide any further assistance that may be required. SECP on its part, has initiated necessary regulatory actions within its domain and also initiated a thorough review of regulatory oversight mechanism. We request FIA to keep the Commission updated on the progress of the ongoing investigation.? 7. The officers of Al-Arabia, JDW and Farooqi received the call up notices from Ruqayya Ambreen D.D/LA W (Co-opted Member) of Investigation Team constituted by the D.G FIA in his letter dated 30.07.2020 under Section 160 Cr.P.C in inquiry No.134/2020 FIA ACC, Lahore. The notices are in the same terms and provide that: "A combined inquiry / investigation team of FIA/ SECP is conducting a criminal inquiry/ investigation of money laundering and financial/ corporate fraud against various sugar mills, relevant entities/ individuals, pursuant to findings of Sugar Inquiry Commission, 2020. 2. As per the information/ evidence available with the Combined Investigation T eam, you are cognizant of facts pertaining to the probe. 3. you are hereby called upon to appear (in person) before the Combined Investigation Team and answer such questions as may be put to you truthfully and honestly , on 1st September 2020, 9:00 AM at FIA Office, 1-T emple Road, Lahore without fail. 4. You are further required to bring your original CNIC along with you. 5. Mr. Adeel Baig (0334-6684916) has been designated as the focal person at FIA Office, 1- Temple Road, Lahore, to facilitate your appearance before the Combined Investigation T eam. 6. A non-compliance of this call-up-notic e will entail that you have nothing to say in your defence and render you liable for legal consequences, including arrest." 8. These call up notices are the provenan ce of the cause of action in these petitions and on the basis of which a challenge has been raised by the petitioners to have these notices declared ultra vires and non est as having been issued without lawful authority . Challenge to Call Up Notices by FIA: 9. The learned counsels for the petitioners primarily submitted that the act of FIA in issuing the show cause notices does not have any basis in law. These were mechanically applied and reflexively treated on the Advisor's Letter and so, the petitioners have attacked the Revised Action Matrix of the Cabinet as well as the Advisor's Letter on the ground of government stonewalling the FIA's independence. According to them jurisdictional facts do not exist so as to clothe FIA with the power to initiate an inquiry into an alleged allegation of money laundering and corporate fraud against the petitioners. They also allege that the decision to issue call up notices has been made under dictation from the Federal Government and FIA as an independent investigating agency has seriously compromised its independence by taking actions on the prompting of the Advisor . Further that FIA could not take cognizance of any matter which related to the remit of SECP or was covered by the various offences mentioned under the Companies Act, 2017 (Act, 2017) as well as the 1997 Act. They also contended that FIA could not assume jurisdiction unless the prior conditions mentioned in 1974 Act were fulfilled viz. that the offence in respect of which the inquiry or investigation was being undertaken was mentioned in the Schedule of 1974 Act as also that these offences had been committed in connection with the matters concerning Federal Government and for matters conne cted therewith. It was urged with vehemence by the learned counsel for the petitioners that none of these two conditions was satisfied and therefore the assumption of jurisdiction by FIA was unlawful. 10. Reduced to its core, the central issue relates to this Court' s power to intervene at this stage and to second-guess the decision- making of the Federal Government, FIA and SECP , on judicially manageable standards. It was said by Chief Justice Earl Warren (of the US Supreme Court) in Miranda v Arizona 384 US 436 , that: "The quality of a nation' s civilization can be largely measured by the methods it uses in the enforcement of its criminal law ." 11. Prior to any discussion regarding the grounds of challenge mounted by the petitioners, we must allude to the principles settled by the Supreme Court of Pakistan with regard to judicial review of investigations undertaken by the investigating agencies which primarily
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is an administrative act. Also this involves the question of exercise of Executive Power by the Federal Government in whom the Constitution of Islamic Republic of Pakist an, 1973 ("the Constitution") vests such a power to be exercised and thereby casts a duty on the Federal Government to take care that the laws be faithfully executed . Further , the questions raised in these petitions relate to the Federal Government' s architecture of power and as stated by Lawrence Tribe and Joshua Matz in their book "Uncertain Justice" that: "For the most part, these debates play out exclusively in politics and between the political branches all in the shadow of the Constitution. Often, the precedents and constitutional interpretations in play come from a centuries-old dialogue between Congress and the President. Thanks to a matrix of rules that control when the Judiciary can involve itself in such affairs, questions about the separation of powers only rarely reach the Court. When they do, the Court treads carefully . It has few duties more delicate than shaping the federal government' s architecture of power . Its decisions can ripple out into hundreds of unforeseen contexts, affecting how Congress and the President address issues that aren't yet on anybody' s radar . They also affect political and party dynamics; telling the President that he must seek approval from Congress has greater impact when Congress is controlled by the opposition party . The justices know this well." 12. Therefore, any intervention by this Court will have to balance against the executive powers of the Federal Government to execute the laws which include the powers to prosecute. Brig. Rtd. Imtiaz Ahmad v. Government of Pakistan through Secretary Interior Division, Islamabad and 2 others (1994 SCMR 2142 ) is the guiding pollstar in which a three-me mber bench of the Supreme Court of Pakistan laid down the periphery for interventions by the High Courts in investigations by the police and other investigating agencies. We have not come across any precedent since then which tended to move the goalposts settled by Brig. Imtiaz Ahmad. 13. According to the Supreme Court of Pakistan, the basic theme underlying such interventions must be based on judicial restraint which, according to the Supreme Court, was so essential to the continuance of rule of law, for the continued public confidence in the political impartiality of the judiciary and the voluntary respect for the law as laid down and applied by the Courts. (At page 2153 relying upon Duport Steels Ltd. v . Sirs (1980) 1 All ER 529 ). The scope of judicial review was explained in the following words: "Judicial review must, therefore, remain strictly judicial and in its exercise, Judges must take care not to intrude upon the domain of the other branches of Government. As was succinctly put by Hamoodur Rahman, J. (as he then was) in Mir Abdul Baqi Baluch v. The Government of Pakistan (PLD 1968 SC 313, 324), under a Constitutional system which provides for judicial review of executive actions:- "It is, in my opinion, a fallacy to think that such a judicial review must be in the nature of an appeal against the decision of the executive authority . It is not the purpose of judicial authority reviewing executive actions to sit on appeal over the executive or to substitute the discretion of the Court for that of the administrative agency ." 14. It was specifically cautioned that Judges must take care not to intrude upon the domain of the other branches of Government and reliance was placed upon the case of Mir Abdul Baqi Baluch v. The Government of Pakistan (PLD 1968 SC 313) which drew a distinction between judicial review and an appeal. The Supreme Court of Pakista n then went on to quote a passage of Lord Reid' s speech which stated that: To quote a passage from Lord Reid's speech in "Wiseman.v . Borneman" ((1971) AC 297., at 308):-- "Every public officer who has to decide whether to prosecute or raise proceedings ought first to decide whether there is a prima facie case, but no one supposes that justice requires that should first seek the comments of the accused of the defendant on the material before him. So there is nothing inherently unjust in reaching such a decision in the absence of the other party ." 15. The important principle of criminal law was reiterated in the above observations with regard to the right of an accused to be heard at the stage of investigation and it was left to the discretion of the police officer to decide whether the prosecution can raise proceedings on the basis that there was a prima facie case. It was then reiterated by the Supreme Court that the jurisdiction in such matters being exercised by the High Court was one under sub-clause (a)(ii) of clause (1) of Article 199 of the Constitution to declare that "any act done or proceeding taken within the territorial jurisdiction of the Court by a person performing functions in connection with the affairs of the Federation, a Province or a local authority has been done or taken without lawful authority and is of no legal effect ". Further the Supreme Court settled the principles which ought to guide the High Court in dealing with such matters: 17. Along the same lines has the law developed in this country . As recently as January, 1994, this Court in "Malik Shaukat Ali Dogar and 12 others v. Ghulam Qasim Khan Khakwani and others" (PLD 1994 SC 281), had the occasion to deal with the question of the "nature of the continued control exercised by the Court over the investigation" in the light of two orders made by a learned Judge in the High Court during the pendency of a writ petition. The first order directed the Investigating Officer to finalize the investigation by a certain date and in the second order which was made on the statement of the Investigating Officer that out of the 21 accused persons, only two had been arrested and that challan was being submitted, the learned Judge observed that if "most of the accused have not been arrested what is the use of submitting the challan", that he was not satisfied with the performance of the Anti-Corruption Department and directed notice to be issued to the…
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