Full Judgment Text & Judicial Ruling

2025 C L D 1323 [Islamabad] Before Inaam Ameen Minhas, J Hafiz MUHAMMAD AMIR HUSSAIN ---Petitioner Versus SECURITIES AND EXCHANGE COMMISSION OF PAKISTAN and others ---Respondents Writ Petition No. 2337 of 2025, decided on 30th June, 2025. (a) Companies Act (XIX of 2017)--- ----Ss. 147, 158 & 159---Constitution of Pakistan, Art. 199---Election of directors of a public listed company, holding of---Term/tenure of directors, expiry of---Constitutional petition seeking direction against SECP to perform its statutory duty of conducting elections---Maintainability---Under the Constitutional jurisdiction the SECP can be directed to discharge its regulatory duties---Facts of the case, in brevity, were that the petitioner was a shareholder of the respondent company and he invoked the constitutional jurisdiction of the High Court under Art. 199 of the Constitution challenging the inaction of the Securities and Exchange Commission of Pakistan (SECP) in discharging its statutory duties under the Companies Act, 2017---It was contended that last election of directors was held on 14.01.2022, and as per Ss. 158 and 159 of the Companies Act, 2017 the next election was due by 15.01.2025,however, the respondent company failed to initiate the election process---Despite repeated approaches by the petitioner, SECP did not exercise its powers under Ss. 147 and 158 of the Companies Act, 2017 to ensure timely elections or to prevent retired directors from unlawfully continuing in office---Consequently, the petitioner sought High Court's intervention for enforcement of statutory obligations by SECP---The core issue for determination by the High Court was as to "whether the SECP was legally bound under the Companies Act, 2017 to ensure that elections of directors were conducted within the prescribed period, and whether its (SECP's) failure to take regulatory action against a respondent company for not holding timely elections amounted to a violation of its statutory duties, warranting the exercise of Constitutional jurisdiction by the High Court under Art. 199 of the Constitution?"---Held: The SECP despite having knowledge of the non-compliance of the respondent company failed to issue any direction or initiate action under Ss. 147, 158 and 159 of the Companies Act, 2017, thus, could not justify the failure to comply with the mandatory statutory requirement to hold elections within the prescribed statutory period after expiry of the terms of directions---The record and correspondence submitted by SECP reflected that SECP was well aware of the expiry of tenure of respondent company's directors, however, no action was initiated---The powers that flew out of S. 147 of the Companies Act 2017 were entirely different and it empowered SECP with not only the authority to direct the calling of meetings but also to call such meetings itself when there was a default in holding statutory, annual, or extraordinary general meetings which powers were independent of company articles and were legislated to ensure that a company could not paralyze its corporate governance compliance and infringe the rights of shareholders---Section 147 of the Act, 2017 provided an alternate solution to be applied only when the normal machinery of the company failed which was patently evident in the present case---The SECP being the regulator had not ensured compliance with the statutory provisions and the stance taken by the SECP that it was only empowered to direct the company to hold the meeting and not to call the meeting itself was misconceived---Securities and Exchange Commission of Pakistan was directed to invoke its powers under S. 147 and call EOGM of the respondent company to conduct elections in accordance with the relevant provisions of the Companies Act, 2017 and follow the procedure provided under S. 159 of the Companies Act, 2017---Constitutional petition was held to be maintainable since the petitioner merely sought enforcement of SECP's statutory duties and no relief was sought against the respondent company or the registrar concerned---Constitutional petition was disposed of, in circumstances. (b) Companies Act (XIX of 2017)--- ----Ss.147 & 158(2)---Constitution of Pakistan, Art. 199---Election of directors of a public listed company, holding of---Securities and Exchange Commission of Pakistan's duty to conduct elections---Inaction---Effect---Interference by the High Court under its Constitutional jurisdiction---Scope---Where statutory period of ninety days provided under S. 158(2) of the Companies Act, 2017 for holding elections has lapsed and SECP failed to exercise its powers under S. 147 of the Companies Act, 2017, such inaction of SECP to ensure compliance from a public listed company creates regulatory vacuum affecting shareholder rights and public interest alike, hence, warrants Constitutional intervention of the High Court despite availability of certain statutory remedies before the SECP. (c) Companies Act (XIX of 2017)--- ----Ss. 147 & 158---Constitution of Pakistan, Art. 199---Election of directors---Constitutional petition seeking direction to SECP to perform its statutory duty to conduct election---Maintainability---Territorial jurisdiction of the High Court---Registered office of the respondent company situated in another province---Effect---Where the registered office of respondent company and the concerned Registrar were situated in another province then question of compliance under S. 158 of the Companies Act, 2017 would ordinary fall within jurisdiction of the concerned High Court of that province---However, where the petitioner does not seek any relief against the company or the concerned Registrar and the mainstay of the petitioner lies against the inactions of SECP, a statutory body, to ensure compliance of statutory provisions of law, the Constitutional petition before the High Court of another province would be maintainable provided SECP is located within territorial jurisdiction of that High Court, territorial jurisdiction of which is invoked. (d) Companies Act (XIX of 2017)--- ----Ss. 147 & 158---Securities and Exchange Commission of Pakistan Act (XLII of 1997), Ss. 3 & 20---Elections of board of directors of public listed company, holding of---Roles and functions of SECP---Scope---Securities and Exchange Commission of Pakistan is established under S. 3 of the SECP Act, 1997 and the powers and functions of the SECP are mentioned under S. 20 of the Act 1997 including the powers of the Commission to be responsible for the performance of the Companies Act 2017---The Preamble of the Companies Act, 2017 states that the mission of SECP is to promote an efficient and transparent capital market, develop the corporate sector and protect the investor through responsive policy measures, effective regulation and enforcement of best governance practices---The Preamble clearly demonstrates to reform company law with the objective of facilitating corporatization and promoting development of corporate sector, regulating corporate entities for protecting interests of shareholders, creditors, other stakeholders and general public, inculcating principles of good governance and safeguarding minority interests in corporate entities---Where statutory period of ninety days under S. 158(2) of Companies Act, 2017 for holding elections has lapsed, as per the mandate of S. 147 of Companies Act, 2017 the SECP is mandated to exercise its powers. Director General FIA and others v. Kamran Iqbal and others 2016 SCMR 447 and The Additional Registrar Company v. Al-Qaim Textile Mills Limited 2021 CLD 931 rel. (e) Interpretation of statutes--- ----Preamble to a statute---Object, purpose and scope---Though the Preamble to a statute is not an operational part of the enactment yet it defines the purpose and intent of the legislature, which necessitated the legislation on the subject and also sheds light on the goals which the legislature aimed to secure through the introduction of such law---The Preamble of a statute though not a substantive and enforceable part of the enactment, yet it provides primary guidelines about the object and scope of the legislation. (f) Constitution of Pakistan--- ----Art. 199---Constitutional jurisdiction of the High Court, invoking of---Adequate remedy, availability of---Scope---Constitutional petition under Art. 199 of the Constitution is maintainable where no adequate or efficacious alternative remedy exists, or where a statutory body acts in derogation of its legal obligations or fails to act in circumstances warranting its intervention, despite availability of certain statutory remedies under the law---Where inaction or inefficiency of a statutory regulator results in a continuous breach of legal duty affecting public interest or fundamental rights, the High Court may intervene under Art. 199 of the Constitution and the public bodies cannot shield behind procedural barriers where public interest and rule of law are at stake---In such circumstances, Constitutional petition would be maintainable. Brig. Muhammad Bashir v. Abdul Karim and others PLD 2004 SC 271 rel. Barrister Haris Azmat, Barrister Faiza Asad, Husnain Ali Khan and Qasim Sheikh for Petitioner. Shehzad Ali Rana, Hasnain Raza and Kehar Khan, SPP SECP for Respondents. M. Ahsan Bhoon Advocate Supreme Court, Mustafa Ramday Advocate Supreme Court, Sheharyar Tariq and Ahmad Junaid for Respondent No. 3/Company. ORDER INAAM AMEEN MINHAS, J.---Through the instant writ petition, the petitioner has invoked the constitutional jurisdiction of this Court under Article 199 of the Constitution of Islamic Republic of Pakistan, 1973 ("the Constitution"), seeking a direction to the respondent No.1 i.e. Securities and Exchange Commission of Pakistan ("SECP") to comply with the mandatory requirements of Companies Act, 2017 ("the Act, 2017") to hold elections of directors of the respondent No. 3/company i.e. TRG Pakistan Limited, in accordance with statutory provisions of the Act, 2017. The relief as prayed for is reproduced hereunder:- "In view of the foregoing facts and circumstances, it is most respectfully prayed before this Honourable Court that: i) Instant Writ Petition may graciously be allowed; ii) Direction be issued to the Respondents to comply with the mandatory requirements of Act and immediately hold elections of the directors of the Respondent No. 3 Company; iii) Immediate action be taken on the Final Notice served by the Petitioner; iv) Direction be issued to the SECP to disqualify all the existing directors of the Respondent No: 3 Company; and v) Any other relief deemed appropriate may kindly also be granted." 2. Brief facts are that the petitioner, a shareholder of respondent Company, holding 55,000 shares, invoked the constitutional jurisdiction of this Court, alleging inaction and failure of SECP to discharge its statutory duties being the regulator of the companies incorporated under the companies laws. The respondent Company's last election of the Company directors was held on 14.01.2022 and subsequent election was required to be held by 15.01.2025 upon expiry of the terms of office of directors on 14.01.2025 as per sections 158 and 159 of the Act, 2017, however election of directors was not held within prescribed time. The respondent Company failed to issue any notice for election or initiate the election process as required under sections 158 and 159 of the Act, 2017. In this regard the petitioner, being a shareholder of the respondent Company, repeatedly approached the respondents to perform their statutory duties of conducting elections. Subsequently, the petitioner sent notice dated 10.06.2025, requesting the SECP to exercise its statutory powers under sections 147, 158, and 172 of the Act, 2017 to ensure the conduct of timely elections and to restrain the continued unlawful functioning of the retired directors. However, SECP failed to initiate regulatory measures against the respondent Company, hence, the petitioner seeks the intervention of this Court. 3. The learned counsel for the petitioner further contended that the instant petition is maintainable under Article 199 of the Constitution, and SECP despite being the regulator under the SECP Act, 1997 ("Act, 1997") and the Act, 2017, has failed to perform its mandatory statutory duties of ensuring compliance with the statutes; moreover, SECP under sections 147 and 158 of the Act, 2017 is empowered to direct any company to convene an Annual General Meeting ("AGM") or Extraordinary General Meeting ("EOGM") for the purpose of election of directors. The learned counsel further contended that SECP has ancillary and consequential powers to facilitate the election process and to take action against defaulting directors under section 172 of the Act, 2017. Despite clear violation of the statutory compliance by the respondent Company and the petitioner's formal request to SECP, the SECP still failed to exercise its regulatory authority, thereby enabling the unlawful and unauthorized continuation of the board of directors. The petitioner submitted that the SECP's inaction constitutes a gross violation of its public duty and undermines the integrity of the corporate regulatory framework. It is, therefore, prayed that this Court may direct the SECP to exercise its statutory powers to ensure the conduct of elections of directors, and take disciplinary action against the directors of the respondent Company to safeguard the interests of shareholders and protect the investors. 4. Conversely, the learned counsel for respondent Company, contended that the writ petition is not maintainable on multiple legal and factual grounds, and asserted that the petition is premature, mala fide, and an attempt to prejudice proceedings already pending before the SECP. The learned counsel further submitted that the petitioner had already filed a formal notice before SECP dated 10.06.2025 on identical grounds, which is still pending adjudication, and till the final outcome of the said application, the petitioner has no locus standi to invoke jurisdiction of this Court under Article 199 of the Constitution. Moreover, the learned counsel submitted that various litigation proceedings are pending before civil courts and Sindh High Court, whereby the respondent Company has been expressly restrained from conducting the elections, and the existing directors are lawfully permitted to continue performing their functions until their successors are duly elected under section 158 of the Act, 2017. The learned counsel for the petitioner also submitted that this Court in Writ Petition No. 731 of 2025 has already dismissed similar proceedings, particularly in paragraph 13 of that order, on the ground that the registered office of the Company is situated in Karachi, thereby rendering the petition not maintainable for want of territorial jurisdiction. Lastly, the learned counsel submitted that the respondent Company has remained compliant with the statutory provisions of law and has acted in good faith, maintaining transparency with the SECP regarding regulatory compliance, therefore, the instant petition may graciously be dismissed for want of jurisdiction and merit. 5. The learned counsel for SECP submitted that it is performing its statutory duties and obligations, that the allegations of the petitioner are denied in this regard and several letters were issued to the respondent company regarding delay in holding elections of directors. The learned counsel for SECP further submitted that, after examining the annual audited accounts of respondent Company, the SECP, through its letter dated 12.02.2025, sought clarification regarding non-compliance with Section 158 of the Act, 2017, whereby respondent Company replied on 14.03.2025, asserting that the delay in elections is due various restraining orders passed by different civil courts, including the Civil Judge, Lahore and Civil Judge, Islamabad, which restrained the respondent Company from conducting the elections of directors. In addition, SECP continued to actively monitor compliance by seeking further documentary confirmation of the legal status of the said court orders and called for regular updates, including through emails dated 12.06.2025 and letters issued subsequently. Moreover, learned counsel for SECP highlighted that the matter concerning elections remained sub judice in multiple proceedings before the Sindh High Court ("SHC"), and SECP has already taken cognizance of the SHC's detailed judgment dated 20.06.2025 in JCM No. 12/2025, and in the said judgment, the SHC clarified that the stay order dated 24.01.2022 issued in Suit No. 1599/2022 only restrained the AGM and did not extend to elections due on 14.01.2025. The SHC further held that reliance by respondent Company on the Islamabad and Lahore civil courts orders amounted to an unjustified delay in conducting mandatory elections under section 158 of the Act, 2017. Consequently, SECP issued further correspondence, including letters dated 24.06.2025 and 25.06.2025, to various stakeholders such as respondent Company, Central Depository Company, and AKD Securities, directing compliance with the SHC's judgment, including the immediate convening of an EOGM for election of directors. Furthermore, the learned counsel for SECP submits that it has acted diligently, within its legal mandate, and stated that SECP can only direct the respondent Company to conduct elections and there is no provision of law where SECP can hold elections for companies, and its role is limited to regulatory oversight and issuance of appropriate directions where necessary. Lastly, prayed that this Court may decide the instant petition in the interest of justice. 6. I have heard the contentions of the learned counsel for the parties and perused the record with their able assistance. 7. Before delving into the merits of the case, it is imperative to consider the maintainability of this petition. The purpose of filing the instant petition by the petitioner in this Court is that the directors of the respondent Company stands retired, and SECP has failed to perform its statutory duties to ensure compliance of the respondent Company. The petitioner sent notice to SECP who failed to take any action after the expiry of term of office of directors from 14.01.2025 till date. Since SECP is located within the territorial jurisdiction of this Court and it is reiterated that the petition has been filed to judicially review inaction of SECP to perform its regulatory function and role against the respondent Company, which is situated within the territorial jurisdiction of this , court. Although the registered office of respondent Company and the concerned Registrar are situated in Karachi, and questions of compliance under section 158 of the Act, 2017 would ordinarily fall within the jurisdiction of the Honourable Sindh High Court, however the present petition is not seeking any relief against the Company or the concerned Registrar. Rather, the mainstay of the petitioner's grievance lies against the inaction of the SECP, a statutory body within the territorial jurisdiction of this Court, since the Petitioner invokes the Commission's failure to exercise its powers under Section 147 of the Act, 2017, a provision that empowers the SECP itself to call or direct the calling of meetings in case of default. 8. Furthermore, the learned counsel for respondent Company as well as the SECP have placed on record the judgments of the Sindh High Court in JCM No. 12 of 2025 and the judgment of this Court in Writ Petition No. 731 of 2025 titled as Sign Source Limited and another v. Securities and Exchange Commission of Pakistan, etc., which was dismissed on the ground of lack of territorial and writ jurisdiction, asserting that such matters fall exclusively within the domain of the Company Bench and the concerned Registrar at Karachi; however, perusal of the record reflects that the judgment of this Court in the Writ Petition No. 731 of 2025 pertained to the funds sent to M/s. Greentree Holdings Limited and to restrain the same so that they may not be used for purchase of shares, a matter which clearly related to the territorial jurisdiction of the concerned registrar in Karachi and which was subsequently adjudicated in JCM No. 12 of 2025. It is further noted that while the restraining order of the Sindh High Court, pertained to the holding of the AGM, the said Court in Direction No. 4 of the operative part of its judgment has specifically directed the Company to convene EOGM for the purpose of conducting elections. Whereas, the present writ petition does not seek a direction to the Company for holding elections under section 158 of the Act, 2017, but rather seeks a direction to the SECP to perform its statutory obligations under section 147 of the Act. This distinction is material and renders the present petition entirely distinct in nature and substance from the earlier proceedings. The prayer as reproduced above is only confined to direct the SECP to discharge its lawful regulatory duties, which clearly fall within the writ jurisdiction of this Court under Article 199 of the Constitution. 9. The superior Courts have settled that a constitutional petition under article 199 of the Constitution is maintainable where no adequate or efficacious alternative remedy exists, or where a statutory body acts in derogation of its legal obligations or fails to act in circumstances warranting its intervention. Even though certain statutory remedies were available to the petitioner before the SECP, and the petitioner, through notice dated 10.06.2025, called upon the SECP to discharge its regulatory obligations and enforce compliance with the applicable provisions of the Act, 2017. This is not merely a case of delay in responding to said notice but rather a persistent and unjustifiable failure on part of the SECP to act from the date of expiry of the term of the directors of respondent Company on 14.01.2025. Moreover, statutory period of ninety (90) days provided under section 158(2) of the Act, 2017, for holding elections has long been lapsed. Despite the lapse of this mandatory period SECP failed to exercise its powers under Section 147 of the Act, 2017. This inaction/failure of SECP to ensure compliance from a public listed company, has created a regulatory vacuum, affecting shareholder rights and public interest alike, and warrants the constitutional intervention of this Court. It is a trite principle that where the inaction or inefficiency of a statutory regulator results in a continuous breach of legal duty affecting public interest or fundamental rights, the High Court may intervene under Article 199 of the Constitution, the public bodies cannot shield behind procedural barriers where public interest and rule of law are at stake. In such circumstances, this Court feels no hesitation to hold that the petition is maintainable and this court has the jurisdiction. In the case of Brig. Muhammad Bashir v. Abdul Karim and others (PLD 2004 Supreme Court 271) the Honourable Supreme Court held that:- "It is well settled by now that "Article 199 casts an obligation on the High Court to act in aid of law, protect the rights or the citizens within the framework of the Constitution against the infringement of law and Constitution by the executive authorities, strike a rational compromise and a fair balance between the rights of the citizens and the actions of the State functionaries, claimed to be in the larger interest of Society. This power is conferred on the High Court under the Constitution and is to be exercised subject to Constitutional limitations. The Article is intended to enable the High Court to control executive action so as to bring it in conformity with the law. Whenever the executive acts in violation of the law, an appropriate order can be granted which will relieve the citizen of the effects of illegal action. It is an omnibus Article under which relief can be granted to the citizens of the country against infringement of any provision of law or of the Constitution. If the citizens of this country are deprived of the guarantee given to them under the Constitution, illegally or, not in accordance with. law, then Article 199 can always be invoked for redress". (Ghulam Mustafa Khar v. Pakistan and others PLD 1988 Lah. 49, Muhammad Hussain Khan v. Federation of Pakistan PLD 1956 Kar. 538(FB), S.M. Yousuf v. Collector of Customs PLD 1968 Kar.599 (FB). It is to be noted that "paramount consideration in exercise of Constitutional jurisdiction is to foster justice and right a wrong". (Rehmatullah v. Hameeda Begum 1986 SCMR 1561, Raunaq Ali v. Chief Settlement Commissioner PLD 1973 SC 236). There is no cavil with the proposition that "so long as statutory bodies and executive authorities act without fraud and bona fide within the powers conferred on them by the Statute the judiciary cannot interfere with them. There is ample power vested…

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