2025 PLP 1260 (CLD)

SHAHID KARIM, J.

This is an appeal under Section 3 of the Law Reforms Ordinance, 1972. A challenge has been brought to the judgment of a learned Single Judge of this Court dated 26.06.2020. It is contended by learned counsel for the appellant that the entire judgment is not under challenge but a specific portion by which it was held that respondent No.1 had the standing to bring the dispute before the High Court in the exercise of its jurisdiction under Article 199 of the Constitution of Islamic Republic of Pakistan, 1973.

2. The challenge before the learned Single Judge in the constitutional petition was to an election notice dated 02.05.2020 issued by the appellant herein (SNGPL). The precise submission was that the Federal Government could only be represented on the Board of Directors of SNGPL through directors nominated under Section 165 of the Companies Act, 2017 (2017 Act) in proportion to its shareholding in SNGPL. Finally it was stated that the Federal Government was not eligible to contest elections under Section 159 of the 2017 Act and for it be restrained from participating in the elections scheduled for 26.03.2020. While holding that the constitutional petition was competent it was finally dismissed on merits by the learned Single Judge. That portion of the impugned judgment was challenged through I.C.A. No.34737 of 2020 which has been disposed of today as having become infructuous.

3. Learned counsel for the appellant submits that the question is not moot and is a substantial question of law and would impact any elections conducted by SNGPL in respect of its Board of Directors in future and therefore must be resolved. The judgment of the learned Single Judge to that extent would be an impediment in the way of SNGPL to stunt any challenge to the elections of the Board of Directors of SNGPL.

4. The learned Single Judge held that since the Federal Government was an instrumentality within the mischief of Article 199 of the Constitution of Islamic Republic of Pakistan, 1973 (Constitution) it was amenable to the jurisdiction of this Court and hence the petition was competently filed. This was an erroneous view of the entire matter in our opinion.

5. First and foremost the dispute was regarding participation of the Federal Government as a member of SNGPL and thus to contest the elections of office of Director under Section 159(3) of the 2017 Act, which provides that: "

159. Procedure for election of directors.-(1) Subject to the provision of section 154, the existing directors of a company shall fix the number of directors to be elected in the general meeting, not later than thirty-five days before convening of such meeting and the number of directors so fixed shall not be changed except with the prior approval of the general meeting in which election is to be held. (2) The notice of the meeting at which directors are proposed to be elected shall among other matters, expressly state- (a) the number of directors fixed under subsection (1); and (b) the names of the retiring directors. (3) Any member who seeks to contest an election to the office of director shall, whether he is a retiring director or otherwise, file with the company, not later than fourteen days before the date of the meeting at which elections are to be held, a notice of his intention to offer himself for election as a director. Provided that any such person may, at any time before the holding of election, withdraw such notice."

6. Section 159, set out above, relates to the procedure for elections of directors and provides by Subsection (3) that any member who seeks to contest an election to the office of director shall whether he is a retired director or otherwise file with the company a notice of his intention to offer himself for election as a director. Section 160 grants power to High Court to declare elections of directors invalid and provides that:

160. Powers of the Court to declare election of directors invalid.- The Court may, on the application of members holding ten percent of the voting power in the company, made within thirty days of the date of election, declare election of all directors or any one or more of them invalid if it is satisfied that there has been material irregularity in the holding of the elections and matters incidental or relating thereto.

7. We may also refer to section 5 of the 2017 Act which gives jurisdiction under the Act to a High Court having jurisdiction in the place at which the registered office of a company is situated. Therefore, all matters arising out of the 2017 Act will be determined and adjudicated by a High Court having jurisdiction over a company where the registered office is situated. It is evident that there is a remedy provided under the law to declare the elections of directors invalid which remedy is circumscribed by the conditions laid down in section 160.

8. Article 199(1)(a)(i) of the Constitution provides that: "199. (1) Subject to the Constitution, a High Court may, if it is satisfied that no other adequate remedy is provided by law,- (a) on the application of any aggrieved party, make an order- (i) directing a person performing, within the territorial jurisdiction of the Court, functions in connection with the affairs of the Federation, a Province or a local authority, to refrain from doing anything he is not permitted by law to do, or to do anything he is required by law to do.

9. The first condition stipulated in the above provision to engage the jurisdiction of a High Court is that the act must not only be performed by a person within the territorial jurisdiction of that High Court but also must relate to functions in connection with the affairs of the Federation, a Province or a local authority. Only then can the jurisdiction of a High Court be engaged to make an order directing that person to refrain from doing anything he is not permitted by law to do or to do anything he is required by law to do. Thus, the conditions contained therein must be established to exist before any order can be passed under Article 199(1)(a)(i) of the Constitution. It follows indubitably that if a person is not performing functions in connection with the affairs of Federation, a Province or a local authority, that person cannot be subjected to an order by a High Court. The distinction brought forth in Article 199(1)(a)(i) is a distinction between public and private acts of a person though he may otherwise be performing functions in connection with the affairs of Federation, a Province or a local authority. If that person is performing public functions then a High Court has the jurisdiction to make an order under Article

199. On the contrary, if that person is merely performing acts of a private nature and are private functions, then the authority of this Court to make an order is seriously in doubt. The primary purpose of the engagement of Article 199 is to confer powers on a High Court in respect of functions of the State involving some exercise of sovereign or public power and not otherwise.

10. In the above backdrop, the factual context has to be seen. The act in question was of the Federal Government in seeking to contest an election of the Board of Directors of SNGPL. That function is quintessentially a private function being undertaken as an ordinary member of a company incorporated under the 2017 Act. By the mere fact that Federal Government holds a major shareholding in SNGPL does not mean that it becomes amenable to the jurisdiction of this Court under Article 199 of the Constitution while performing its functions as a member of SNGPL. That cannot be the intention of the law and the Constitution. As a shareholder of SNGPL the Federal Government has the same set of rights as other shareholders conferred by the provisions of the 2017 Act. The mere fact that the Federal Government has ventured into corporate enterprises and purchased shares of a company does not mean that in such capacity too the Federal Government is subject to the jurisdiction of a High Court. The reliance of the appellant in this regard on Pakistan International Airlines and others v. Tanveer ur Rehman and others (PLD 2010 SC 676) and Aown Abbas Bhatti v. Forman Christian College and 2 others (PLD 2018 Lahore 435) is proper and apt.

11. It must be borne in mind that the challenge is to the set of exercise of rights, as a member, to contest an election to the office of a director of company. That right flows from the provision of the 2017 Act. It is not a State action issue (as described in America). Simply because the Federal Government is a member of a company will not clothe it with the right to maintain a constitutional petition. Imagine the unpalatable result this argument will ensue. What follows is this: only the Federal Government (and none of the other members) can maintain a constitutional petition. The other members will have to take recourse to remedy under Section

160. Such a result is not countenanced by law or the Constitution. The Federal Government is merely a member of SNGPL and has the same rights and privilege as other members.

12. The words "functions in connection with the affairs of the Federation" have to be read with "to refrain from doing anything he is not permitted by law to do" to ascertain the competence of a constitutional petition. Unless the function under challenge is in connection with the affairs of the Federation, no relief can be granted and this Court's hands are constricted and restrained. Judicial review is concerned with causes of action against public authorities in the performance of their public duties. The meaning of the phrase 'performing function in connection with the affairs of the Federation', were considered at some length in Salahudin v. Frontier Sugar Mills (PLD 19973 SC 49). It was held that the phrase has reference to governmental or State functions involving, in one form or another, an element of exercise of public power.

13. The second reason why the portion of the impugned judgment is unsustainable is premised on the exclusive jurisdiction conferred upon a High Court in respect of matters contained in 2017 Act. This is evident from section 5 which provides that: "

5. Jurisdiction of the Court and creation of Benches.-(1) The Court having jurisdiction under this Act shall be the High Court having jurisdiction in the place at which the registered office of the company is situate. (2) Notwithstanding anything contained in any other law no civil court as provided in the Code of Civil Procedure, 1908 (Act V of 1908) or any other court shall have jurisdiction to entertain any suit or proceeding in respect of any matter which the Court is empowered to determine by or under this Act. (3) For the purposes of jurisdiction to wind up companies, the expression ―registered office‖ means the place which has longest been the registered office of the company during the one hundred and eighty days immediately preceding the presentation of the petition for winding up."

14. From a reading of section 5 above it is evident that the jurisdiction has been conferred on a High Court in respect of all matters arising under the 2017 Act. As adumbrated, the remedy has been provided by section 160 conferring power on the court to declare elections of directors invalid. That power cannot be usurped under Article 199 of the Constitution as efficacious and adequate remedy has been provided by law and this aspect should have been taken consideration while holding that the constitutional petition was competently filed. The superior courts have time and again held that in case there is an adequate and efficacious remedy provided by law, a High Court will not exercise its jurisdiction and collateral challenges have not been allowed to sustain.

15. If a challenge of this nature were allowed to succeed then it would mean that in any case where a Federal Government is a shareholder, a constitutional challenge would be maintainable yet no such challenge would be competent in respect of an ordinary member of a company who is neither a Federal Government, Provincial Government or a local authority. This would be tantamount to setting up a parallel system of challenges which cannot be countenanced. Further, the challenge on the basis of section 160 to declare election of directors invalid may be brought on the application of members holding 10% of the voting power in the company. The petitioner before the learned Single Judge could not argue that since he does not hold 10% of the voting power therefore he has no standing to bring a challenge under Section 160 of the 2017 Act. This argument has no basis in law. If a pre-condition to bring a challenge is conspicuously absent in respect of a particular person that challenge must fail on the basis of lack of pre-condition to exist but cannot confer a right on that person to bring a collateral challenge. This would amount to circumventing the law and nullifying the intent of the legislature.

16. In view of the above, this appeal is allowed. The impugned judgment to the extent that it holds that the subject matter of the constitutional petition was amenable to the jurisdiction of this Court, is set aside. Consequently, it is held that the challenge to the act of Federal Government to contest elections of Board of Directors could not be brought before this Court in its constitutional jurisdiction. The power to do so lies in the High Court exercising jurisdiction under the 2017 Act only. UN/S-32/L Appeal allowed.