1980 PLP 924 (SCMR)

DORAB PATEL J‑‑The Fauji Foundation to which we will refer as the appellant, has filed a Certificated Appeal as well as a petition for leave against a judgment of the Sind High Court dated 9‑4‑1980. The dispute in the case relates to a Sugar Mill in Khoski in the Badin District of Sind. We were informed that it is now the biggest Sugar Mill in the country with a crushing capacity of 3,500 tons per day. In 1969, this mill was owned by a company known as the Rehmania Sugar Mills Limited, and the respondent Mr. Shamimur Rehman, in this appeal and in the petition, was the promoter of the company. The paid‑up capital of the company was Rs. 125 lacs and Mr. Rehman and his family held paid‑up shares of the value of Rs: 1 crore, whilst the balance of the shares were held by the Directorate of Welfare and Rehabilitation, G. H. Q., to which we will refer as D. W. R. Now, although the D. W. R. was a minority shareholder in the company, according to its books, even Mr. Muhammad Ali Saeed, the learned counsel for the respondent, was compelled to admit that substantial loans, including a loan of Rs. 90 lacs, had been advanced by the D, W. R., to Mr. Rehman, and it would appear that Mr. Rehman had adjusted this loan of Rs.90 lacs against the price of the paid‑up shares issued by the Rehmania Sugar ‑Mills Limited to him and to his family. It would also appear that the capital actually invested by the D. W. R. in the Rehmania Sugar Mills in 1969 exceeded Rs. 2 crore and Mr. Syed A. Shaikh's con tention, which did not find favour with the High Court, was that the loan agreements thus executed between the D. W. R., and the respondent were extremely unconscionable and Mr. Rehman had procured them through his connections with a General, whom it is not necessary to name in this order. The situation, therefore, on the 22nd of December 1971, was that the D. W. R. was very dissatisfied with the agreements between it and the respondent, and, by Martial Law Regulation. No. 103 (hereinafter called the said Regulation) promulgated on 31‑12‑1971 the Rehmania Sugar Mills Limited was dissolved and the Sugar Mill at Khoski with all its liabilities, assets, obligations, etc., was transferred to the appellant. The said Regulation contained a direction that provision should be made for the payment of compensation to the shareholders of the Rehmania Sugar Mills Limited, and, according to both the learned counsel, this provision was contained in a Presidential Order 22, notified on the 22nd of April 1972; therefore, on the basis of a report submitted by Messrs Ferguson & Company, a well‑known firm of Chartered Accountants, compensation was offered to the share holders of the Rehmania Sugar Mills Limited at Rs. 8.65 per share. A very substantial amount thus became due to the respondent and his family as compensation, but as the respondent was heavily in debt to the D. W: R., he and/or his family had executed an irrevocable power of attorney in favour of the D. W. R. authorising them-- to collect the amount of compensation in respect of shares

and adjust it", towards the loan of Rs. 96 lacs received by them from the D. W. R. The appellant, therefore, informed the respondent that it would adjust the com pensation due to him and his family at the aforesaid rate against the loan of Rs.90 lacs. By his reply dated 21‑6‑1972, Mr. Muhammad Ali Saeed informed the appellant on behalf of the respondent‑‑ "my clients do not accept the assessment of compensation unilaterally worked out. Martial Law Regulation 103 no doubt visualises the payment of compensation; but any determination made in this behalf without notice to my clients . . . (is) not binding on my clients." We would pause to stress here that the only objection taken to the nationali zation of the mill was the quantum of compensation. And, according to Mr. Sayeed A. Sheikh, as the acquisition of the mill and its transfer to the appellant was not challenged, the appellant proceeded to develop the mill and in due course invested crores of rupees in the mill. However, on 11‑8‑1973, more than a year and a half after the promul gation of the said Regulation, the respondent filed a writ petition in the Sind Baluchistan High Court in which it challenged the vires of the said Regula tion and of President's order 22 of 1972, and what is important to this appeal the said Regulation was challenged as mala fide not on the basis of any personal mala fides on the part of the author of the said Regulation (namely, the then President and the Chief Martial Law Administrator), but solely on the ground that the said Regulation was a colour-able exercise of power, and, it would appear that the respondent's plea on this point was that no case had been made out for acquiring the Rehmania Sugar Mills Limited in the public interest. The appellant contested the writ petition and submitted on the basis of a succession of judgments of this Court that a law could not be struck down as mala fide. The appellant relied in the alternative on Article 281 of the constitution, and also submitted that the acquisition of Rehmania Sugar Mills Limited was in the public interest. But, all these objections were rejected by the learned Judges, who allowed the writ with the following observations. "In view of the foregoing discussion . . . the petition allowed, and as a consequence of the declaration that the impugned Regulation and the Order are void ab initio, the Company, Rehmania Fauji Sugar Mills Limited forthwith stands restored to its incorporated status from the date of the promulgation of the impugned Regulation, . . . As a further consequence to the above, all rights, properties asssets, debts, liabilities and obligations of the company, so reinstated, shall automati cally Stand Vested in the Company and/or its promoters and share holders who shall not be deemed to have been divested of their interest by virtue of the impugned Regulation and the order, subject, however, to just and independent accounting by or on behalf of the second respondent." The learned Judges have held that the appellant had failed to show that acquisition of the Rehmania Sugar Mills Limited was in the public interest. But, the construction placed on the words "public interest" by the learned Judges requires fuller examination. However, in all fairness to the learned Judges, we have to point out that the main ground on which the writ was allowed was that the said Regulation was mala fide, because it had been promulgated because of the enmity harboured by Mr. Bhutto, the then President and Chief Martial Law Administrator against the respondent. And, according to Mr. Muhammad Ali Saeed, this enmity began in 1970 when the respondent and his family had refused to subscribe to the election funds of the Pakistan People's Party (P.P.P.) for its election campaign in 1970. Learned counsel gave us elaborate details of the mala fides thus alleged, but although the writ petition was filed after a delay of a year, it did not contain any allegation of personal mala fides. Therefore, in November 1977, the respondent filed an application to amend the writ petition in order to raise this plea of personal mala fides on the part of Mr. Bhutto. This very belated application was allowed and the learned Judges have allowed the writ petition, because of their finding that the said Regulation was vitiated by personal mala fides, and was, therefore, void. Now, even on the footing that Mr. Bhutto's enmity against the respon dent and his family was proved, the question before the learned Judges was whether Legislation can be struck down on the ground of the mala fides of the author of the Legislation. Mr. Muhammad Ali Saeed stated that the view of the learned Judges was supported by the view of a learned Judge of Lahore. High Court. Unfortunately, we have not been given the correct citation of this judgment, but we will assume that a learned Judge of the, High Court had held that even Legislation can be struck down as mala fide However, this view appears, prima facie, to be inconsistent with the law declared by the Federal Court in Punjab Province v. Malik Khizar Haya Tiwana (P L D 1956 F C 200) and by this Court in. Federation of Pakistan v Saeed Ahmed Khan (P L D 1974 S C 151), and in M. Yamin Qureshi v. Islamic Republic of Pakistan and another (P L D 1980 S C 22) The attention of the learned Judges was drawn to the judgments of this Court, and they distinguished them on the ground that the impugned Legislation had been passed by a dictator, and as they were of the view that Legislation enacted by a dictator did not stand on the same footing as Legislation passed by Parliament, they struck down the said Regulation as mala fide. Mr. Saeed A. Sheikh submitted that the distinction thus drawn by the learned Judges was inconsistent with the observations of this Court in the case cited. This submission requires examination. However, even on the assumption, (which he denied) that the sail Regulation was void, Mr. Saeed A. Sheikh submitted that the learned Judges had erred in allowing the writ petition on a cause of action which had been pleaded almost seven years after its accrual. Mr. Muhammad Ali Saeed attempted to explain away the laches of the respondent on the plea that it was not possible to allege mala fides against Mr. Bhutto before his fall from power, We are not impressed by this explanation, and Mr. Saeed Sheikh's submission that the writ petition was barred by laches requires examination, the more so, as according to learned counsel, the facts of this case fall under the rule laid down by this Court in Yousaf Ali v Muhammad Aslam Zia (P L D 1958 S C (Pak.) 104) in S. Sharif Ahmad Hashmi v. Chairman, Screening Committee, Lahore and; another (1978 S C M R 367). The petition raises other questions of law also, therefore, although the appeal is certificated, we grant leave as prayed in the petition for leave, and both these appeals will be heard together. Security in the sum of Rs 5,000 The appeals will be made ready on the present record with liberty to the parties to file additional documents and shall be put up for hearing at an early date. Pending the hearing of the appeal, the operation of the impugned judg ment is suspended; the appellant will remain in possession and management of the mill. However, in order to protect the interest of the respondent, we restrain the appellant from using the income of the mill for any purpose other than the business of the mill or for its expansion, development and modernization, and we clarify that development would include the develop ment of cane fields. The appellant shall also prepare quarterly accounts with details of its expansion and modernization plans, if any, and a copy of these quarterly accounts shall be sent to the respondent. Leave granted.