Al Wakeelo
Your Digital Lawyer, Always on Duty
Initializing Secure Chambers
Your Digital Lawyer, Always on Duty
Initializing Secure Chambers
Petitioner: Muhammad Roshan Essani, J MUSHTAQ ALI VS Respondent: GOVERNMENT OF SINDH JUDGMENT
Court Name: Sindh High Court Judge(s): Wajihuddin Ahmed Title:Muhammad Roshan Essani, J MUSHTAQ ALI vs GOVERNMENT OF SINDH
JUDGMENT
Reported As: PLD 1998 Karachi 416 Result: Order accordingly Judgment JUDGMENT ' WAJIHUDDIN AHMED, C J.---The petitioner is a freelance journalist. He has filed this petition on 25- 9-1997. The petitioner, as a concerned citizen of Pakistan, has pointed out that the Qasim International Containers Terminal (QICT) at Port Muhammad Bin Qasim (PQA-Port Qasim Authority) stands completed and since 10-8-1997 there has been a perceptible increase in the movement of ships to and from PQA with 14 renowned shipping lines having commenced the work of cargo handling. The petitioner says that, earlier on, there was only one port in Karachi, the Karachi Port Trust (KPT), and the yearly income of octroi from the KPT source to the Karachi Metropolitan Corporation (KMC), also termed as sea dues, used to be around Rs,2.5 billion per annum. The petitioner complains that the Government of Sindh, in its Local Government Department, has neither auctioned the sea dues contract for the PQA outlet nor has even established an octroi post for such collection. Taking advantage of the situation, according to the petitioner, M/s. Bolan Enterprises which was the KMC contractor for the road and rail side octroi collection, has illegally started collecting of sea dues as octroi on imported goods emanating from the PQA. The right to do this, according to the petitioner, has neither been given to Bolan Enterprises by the Government of Sindh nor by the KMC nor by the District Council, Karachi nor by the Union Council, Darsano Channo. Thus huge losses of Government revenue were being caused, in the process the KMC was allegedly likely to go bankrupt and the citizens wealth continues to go to unauthorised pockets. The petitioner maintains that according to one estimate octroi on cargo, coming through QICT at PQA and moving into the city of Karachi from the octroi post at Bhains
---
## Page 2
Colony from 16-8-1997 to 31-8-1997 amounted to about Rs,4.8 million and from 1-9-1997 to 8-9- 1997 approximately Rs,5.51 million. The petitioner points out that the Government of Sindh has not yet even determined the relevant municipal or union council limits.' He draws our attention to an article in daily Dawn dated 9-9-1997 recording that the KMC had demanded extension of its limits up to Port Muhammad Bin Qasim but there the matter tarried. In the process, according to the petitioner, 30% of the cargo entering the city of Karachi through the KPT stood diverted to the PQA source, thereby providing a windfall to octroi contractor Bolan Enterprises. It is added that the 1997- 98 octori contract for the road and rail side had been given to the said contractor only for Rs,560 million when the likely income from the QICT-PQA source alone, according to the petitioner, would be in the range of Rs,1.00 billion. The petitioner has recounted that the QICT and the PQA, for all practical purposes, fall within the KMC municipal limits because the customs personnel, roads, sewerage facilities, electricity, water, gas, telephone connections and even transporters, importers, ship owners, shipping lines, cargo agents come from Karachi, what to say of the administration including the law enforcement agencies. He questions as to why the QICT has not been included in the Karachi Division and within the KMC municipal limits. The petitioner claims that if the sea dues contract was to be auctioned under the supervision of the Court, such should result in realisation of huge public revenues. The petitioner reports that while everybody knew of the activation of the QICT on 10-8-1997, the KMC paid no heed to the same and on the contrary allowed the road and rail side contractor, Bolan Enterprises, to illegally collect the sea dues in relation to goods entering from the PQA outlet. The petitioner alleges that the road and rail side contract has been given to a favourite because for the preceding year the reserve price for such contract was Rs,530 million but was actually given only for Rs,480 million. That matter, according to the petitioner, was taken note of by the learned Chief Ehtesab Commissioner and such a reference is pending before the Ehtesab Bench of this Court. In spite of this the contract for the current year was manoeuvred not to be auctioned and auction proceedings purportedly failing a negotiated contract for only Rs,560 million was awarded to the firm of Bolan Enterprises, which is also known by the other name of Chawla & Company against whose partners Ehtesab proceedings are pending. During the course of progress of this petition it has been conceded by the learned counsel representing the octroi contractor that the partners of these two concerns, even though not absolutely common, are near relatives. In fact there appear to be several such sister concerns, one other relevant to our purposes being the firm of Ziarat Enterprises, whose role would be dilated upon below. We have since verified that the Ehtesab Reference is pending against one such previous contract to Ziarat Enterprises. The petitioner goes on to assert that convenient terms were provided to the contractor and what is more even such terms were not honoured in letter and spirit, resulting in perpetuation of loss of public revenue. Several reliefs are sought, all, in essentials, to safeguard recovery and protection of public revenues. ' Replies have been submitted by several respondents. The contractor and the Corporation have questioned the maintainability of the petition. The contractor says that the negotiated contract was given when all else failed. It says that instructions permit even a 12% increase on the contract for the preceding year when the instant contract is far more. This is obviously equivocal because Ziarat Enterprises is the contractor's sister concern and negotiated contracts with such for the two earlier years have scuttled all projections and routine increases of percentages cannot reflect the true picture. Besides, and this appears -to be crucial, the instructions given through auctions are reported to provide furnishing of bank guarantees, when none is taken against negotiated ones, thus, possibly scaring away competitors and allowing smooth sailing to the favoured ones. The KMC and the Local Government Department, anyway, have denied wrongdoing. The KMC has added that the activation of the QICT was not anticipated by it and the moment things came to the fore, the Government was moved to extend the municipal limits of the KMC so as to cover the
---
## Page 3
PQA source of sea dues but that did not come about. The Secretary, Local Government was called by us in Court. He conceded loss of public revenue and even manipulation of the contract. He said that the then In charge Officer in the Local Government Department, who also happened to be the Additional Chief Secretary, Sindh, was first made OSD and then had been proceeded against, an inquiry being on. According to his estimation an approximate loss of Rs,400 million would have come about. The Union Council, Darsano Channo and its own octroi contractor have also entered defence and say that the extension of municipal limits of the KMC was not at all conducive to public good and besides had the potential to impinge upon the union council rights which is situated in the vicinity of PQA. On the factual plane we have been able to verify that the PQA had been carved out largely from the lands comprised in the areas of Union Council Darsano Channo and the Landhi segment of the Karachi Division. It has also come on record that for the small entity of Union Council Darsano Channo the octroi contract has been assigned in the sum of Rs,120 million in comparison to which the contract awarded to Bolan Enterprises of Rs,560 million for the entire city of Karachi provides a poor match. There is no other real contest in these proceedings, the remaining respondents, amongst others, being the PQA and the QICT. ' In order to understand the controversy in all its dimensions and complexities, let it be stated here that there are in all five inlets for collection of octroi, that is to say, in so far as the KMC is concerned. One is the air cargo route and that caters to entry of imports and unaccompanied baggage from the Quaid-e-Azam International Airport. Such contract, a very sensitive one from the security point of view, is currently with the above referred Chawla & Co. Another concerns the octroi from the KPT source. That, again sensitive from the national angle. Nick-named the sea dues contract, does not ever seem to have been awarded, the KMC staff manning it having been shown to be making hay. The third and fourth are the road and rail inlets, given usually as a single contract, catering to the goods principally coming from upcountry. This contract currently is with Bolan Enterprises. The present dispute concerns the fifth source, which has lately been evolved and such pertains to sea dues/octroi from the PQA source. Bolan Enterprises lays claim on such but that really has been a mere diversion of the sea dues of KPT origin to the PQA route. ' During the course of hearings we appointed the Official Assignee (OA) as the Commissioner for achieving two distinct purposes. First, to auction the sea dues contract of goods entering Karachi from the KPT source. Such dues, we had discovered, were being collected by the KMC directly and this practice had continued from year to year. It was established before us, and no one has since questioned, that whenever and wherever a local authority has chosen to collect octroi on its own, it has landed with lesser recoveries of revenues than when for the same a contract of recovery had been accorded. The petitioner, at the time, had pointed out that auction of the sea dues contract for the remaining half of the fiscal year though limited to the KPT source was about to be held and it was on the cards that manipulations and manoeuvrings would be resorted to, which needed to be taken care of. The reserved price for such contract we were informed was Rs,3.13 billion on an annual basis. Acting on the principle that safeguarding against waste, and above all public waste, in appropriate cases necessarily invited the appointment of a receiver as rule I of Order XL, C.P.C. Seems to postulate, we appointed the OA not so much a receiver but a commissioner and a supervisor to observe and control the grant of such contract as above. That auction did not come through. There were several factors involved, as would be presently adverted to below. Then a question arose of identifying and segregating the collection of sea dues from the PQA source, so that the ultimate relief such as could arise in the petition, did not dissipate, while the proceedings remained pending. The OA was, therefore, directed to establish requisite posts to identify goods issuing from the PQA and supervise and account for collections by the contractor. That was found to be an insufficient safeguard and an inadequate measure, since recovery of as much as Rs,2.1 million was found unaccounted for. The OA was, therefore, directed to collect but only sea dues
---
## Page 4
leaving the undisputed portion of the contract untouched in the contractor's hands. Things still did not improve. There was non-cooperation from all sides. We, therefore, appointed the former OA (Mr. Bashir A. Memon) and a former Judge, Mr. Abdul Ghafoor Shaikh to coordinate with the OA. They have performed effectively. This is where the functions and duties of a commission got transformed into receivership. Collections have been duly made and loop-holes plugged. The collected amounts have been appropriately invested. Full accounts have been maintained and the learned .Counsel for the KMC has conceded that more has been learnt in the process than in years of KMC operations. Above all, waste has been avoided and this petition, which ultimately should either have borne no fruit or a very distant one, does not at least suffer with that detriment. It has, however, since been complained before us and elsewhere that we had yet not even admitted this petition to regular hearing and quite unwarrantedly resorted to such extreme measures. We have made it clear, from the outset, in this petition and put all concerned on notice that in order to ensure expeditious disposal and with a view to avoid the petition to go to the bottom of the list, on account of the urgency involved because the contract was only for a year's duration, the petition would be heard, admitted and disposed of at the same time. This is nothing peculiar and such procedural measures are often adopted in this Court as would be patent from the case reported as Hameedullah Khan v. Director, Customs Intelligence 1992 CLC 57. Resides, the admission stage of a Constitutional petition in the High Court is very much similar to the hearing of a leave petition in the Supreme Court of Pakistan where often enough a petition is converted into an appeal and disposed of quite frequently at that very stage. What is more interim orders are often passed by the Supreme Court at the (pre-hearing) petition stage itself. Thus, there is ample authority and justification for passing of such interim orders and adopting measures at the pre-admission stage of a Constitutional petition. All that is necessary is that there should be circumstances, factual as well as legal, justifying the passing of such orders or adoption of such measures. Be that as it may, and reverting the auction of the sea dues contract for the KPT origin did not materialise for several reasons. It is fruitless to go into those reasons because the same are on record which already runs into some 1500 pages. The most patent of these reasons, however, is the fact that the market of octroi contracts and particularly the big ones is a small market. There is little or no competition. The contracts can be and are often manipulated. The KMC, particularly and the Local Government Department generally should take heed of the realities on the ground. If the dimension of a contract is large, steps should be taken that such contract is not awarded for the whole fiscal year at one time. Instead, such contracts can be bifurcated into quarterly, four monthly or even biannual contracts. Such would open the way for a fair competition in a restricted market. None of this, however, can be achieved unless the contracts to be given are widely publicised in advance and realistic terms are introduced. There should be a process of checks and balances but such ought not to be time consuming. If approval of the Government is necessary, the contracts should be auctioned sufficiently in advance of the dates of operation and approvals should be accorded or refused with sufficient time in hand, necessary either for execution thereof or for holding a fresh auction or otherwise arriving at a beneficial contract, which must always, besides being just, fair and lawful, be transparent and capable of standing to public scrutiny. We may add here that the auction of the sea dues contract from the KPT source having failed we even permitted the Local Government Department and the KMC to negotiate one so as to ensure that better recoveries are made through a contract than were feasible by direct deployment of the KMC staff at the KPT octroi post. It is a matter of no small regret and a sad commentary on KMC functionaries, as the OA, who has been supervising collections at the KPT, has reported, that recoveries before his induction averaged lower than after the introduction of supervision through him. How and why this happened defies logic and understanding. Goods emanating from the KPT source are to be subjected to in the first place customs and other duties, then octroi and lastly wharf age.
---
## Page 5
Everything is thus documented. How and why, therefore, the collections cannot be as good without supervision as under supervision is a matter for anyone's guess. Another aspect, which the OA has pointed out, is that the contractor is in a position to pay more for the same contract than the officials making the relevant recoveries, and such arises because the contractor is able to squeeze more money from those taking out the goods than the prescribed rates. If this is so, such has to be discouraged. No one can be made to pay more than is due from him and any system which encourages or condones extraction of moneys, not permissible by law, needs to be corrected. We remain confident that the loopholes in this direction would be plugged sooner than later. ' This brings us to the second aspect of why we had to resort to the artifice of appointing, in the ultimate analysis, a Receiver pertaining to the goods which flowed, from the PQA-QICT source. There was a prima facie case, as would be seen below, for drawing an inference that the contractor did not have a lawful right to collect octroi or sea dues in respect of goods which issued from the referred source. It was not our intention, at any stage of the proceedings, to deprive the contractor of any of its lawful rights. All that was intended to be ensured was that the revenue collected from the PQA-QICT source stood clearly and definitely identified and besides a mechanism had to be devised whereby if, in the final reckoning. It was found that such recoveries did not lawfully belong to the contractor, the same were protected for such a one as was found to be entitled to the same. These being the relevant ingredients of irreparable loss and balance of convenience, we decided to authorise the OA to post his staff though for the limited purpose of supervision only that the octroi or sea dues from the last-mentioned source were collected and placed with him so as to be disbursed to the person ultimately found entitled. This purpose has been achieved. The moneys collected from time to time were placed with the Nazir and directed to be invested, to be taken away by him who was found the rightful claimant to the same. Certain things have been revealed in the process. At times the contractor has issued receipts, which did not tally with the record being maintained. There are allegations, by no means unsubstantiated, that the contractor had been maintaining a duplicate record, one for official purposes and the other for his own. Arguably, if not for tax purposes, the ploy may have been devised by way of providing a cover to meet the situation if and when the contractor was not found entitled to keep all that he collects. It needs to be stated here that all collections made by the contractor are through the staff in the actual and physical employment of the KMC. The contractor is to issue printed receipts carrying the KMC name on the face thereof. The object is not difficult to find. Such is to ensure that a proper record of recoveries is maintained so that the contracts which are to follow from year to year can be based and assessed on past recoveries because it is public dues which are being recovered through a contractor and the public bodies concerned have a vital interest in recoveries being made so that the future can be guarded against. Confronted with the above contradictions we appointed, as already stated, Mr. Abdul Ghafoor Shaikh, a former Judge, to look into the deviations, if any. The task though heavy, was technically not difficult. Upon emergence of a consensus between the OA, the PQA, the QICT and the other agencies the methodology followed and worked out was the same, as prevalent at the KPT source. In other words, at the PQA as well, the three consecutive exercises of payments of customs and other tax dues, followed by collection of octroi or sea dues and then they were ensured in that order. This guaranteed a trustworthy method of ensuring the collection of all that was due from the PQA outlet. Because the OA as a corresponding measure was also required to and deputed his staff to supervise the other collections of the contractor in the context of the road and rail link, the two separate segments of collections from the PQA source and the remaining source undisputedly belonging to the contractor, have been identified, on per day basis, from which annual figures are worked out. We may point out here that, not surprisingly in the background above discussed, the figures drawn on the basis of working days when the contractor was on his own are perceptibly
---
## Page 6
lower. Such, not being reliable, are shown within brackets. The figures are Rs,37,29,98,240 (Rs,10,32,72,602) in the way of octroi or sea dues collection from the PQA and Rs,64,68,38,090 (Rs,53,56,18,885) in the way of octroi for the remainder. From this it is obvious that even if the contract awarded to Bolan Enterprises was restricted to collection of octroi from the road -and rail side alone and other than to the PQA-QICT origin, the contractor would still make a very substantial profit on the contracted amount. While conceding this, Mr.Jhamat Jethanand for the contractor has maintained that if luck would have it that the contractor should have more and in fact much more than that he had bargained for such should not be denied to him. This aspect would meet our attention below. ' We may now take up the main dispute and the petition itself. This would involve questions firstly, whether the contract in dispute was awarded otherwise than in due course and then as to what are the terms of the said contract, inclusive of the manner in which the same interact with the controversies raised in this petition. ' It is not disputed that the contract in the petition was awarded through negotiations. This, according to the contractor, the KMC and the Local Government Department, transpired because the auction proceedings did not succeed in bearing fruit. It is also not disputed that the two preceding contracts for the years 1995-96 and 1996-97 were also given in the same manner. What is more, the same were granted to the contractor's 'sister concern of Ziarat Enterprises, the partners of the two firms being not only inter-related but, in effect, members of the same family, as would be discussed below. It hardly needs mention that such is a year to year collection and the amounts involved are so substantial that bulk of the KMC revenue is dependent on the same. See editorial of Daily Jang, dated November 16, 1997 (page 951). The difficulties and the problems encountered in finding the highest and best bidder are, therefore, well known and can be anticipated in advance. The first thing in such matters is to ensure that the auction is scheduled well ahead of the commencing dates of the contract, in each case the beginning of the financial year, viz. July 1 of the calendar. If one auction proceeding fails to yield result, the other can be undertaken. This element, we expect, would be kept in view and acted upon in relation to all year to year contracts to be hereafter awarded under the aegis of the Government of Sindh. Needless to add that omission in this behalf proved detrimental for the revenue in relation of the current financial year and arguably for the preceding ones. Another aspect, already dilated upon, consists of the fact that in so far as big octroi contracts are concerned an apparent monopoly has evolved in relation thereto. It is the policy of law and indeed a mandate of the Constitution that monopolies are to be discouraged and free competition is to be generated. See Articles 18 and 38 of the Constitution of Pakistan. One of the measures to achieve that end can be, as pointed out, by ensuring a timely publication and holding of auction proceedings which we would expect to be at least a period of three months ahead of the commencing date. Another, in so far as bigger contracts are concerned, should be to apportion the grants on six monthly, four monthly or even quarterly basis, each being published well before the due date, as above observed. None of these seems to have been attended to. Yet another aspect to be noted here, as hinted above, brought out in the press and banked upon by the petitioner, is that the ostensibly influential and manifestly moneyed family of former M.N.A. Bhagwandas Chawla seems to be ruling the roast. Inter alia, daily Ummat issues of November. 7, 1997 (page-365) and March 31, 1998 suggest that there are serious allegations against the Provincial Minister, Local Government, Dr. Farooq Sattar of being in league with the referred family. The issue of March 31, 1998 of daily Ummat maintains that 6192 hours have gone by for the said minister to clarify his position regarding the alleged Rs,480 million cut on such contract and he had failed to refer the matter to the Ehtesab Commission. In order to test the petitioner's allegations of collusion and mala fides between the functionaries of the department and the KMC on one hand and the contractor on the other.…
Read the unabridged text and precedent citation network on Al Wakeelo Legal Research Platform.