2009 SCMR 1392 (PLP)

NAZIM HUSSAIN SIDDIQUI, J.

This judgment will dispose of Petitions Nos.2502, 2503 and 2504 of 2001 in which common questions of facts and law are involved.

2. Writ petition filed by Mian Nisar Sheikh respondent bearing No.1220 of 2001, was disposed of by a learned Judge in Chamber, Lahore High Court vide judgment dated 7-8-2001 with certain observations made therein. The petitions of Tanveer Malik and Iftikhar Shafi respondents, bearing Nos.1221 of 2001 and 1222 of 2001 respectively, were disposed of by the same Judge in terms of the judgment dated 7-8-2001 passed in the petition No.1220 of 2001. The facts relevant for decision of these petitions are as follows.

3. The petitioner namely, the Securities and Exchange Commission of Pakistan (SECP), was established under the Securities and Exchange Commission of Pakistan Act, 1997, hereinafter referred to as "the Act". The object of establishing the Commission was, inter alia creation of an Authority to beneficially regulate capital markets and supervise and control corporate entities. The Commission was also conferred powers to implement other laws in particular the Companies Ordinance, 1984 and the Securities and Exchange Ordinance, 1969. The Commission has the responsibility to protect the interest of investors, regulate markets and dealing in securities and matter ancillary thereto.

4. It is alleged that in May, 2000 the Stock Markets in Pakistan faced a major crisis resulting in loss of nearly Rs.200 billion to the investors. As a result thereof the Karachi Stock Exchange (KSE) and the Lahore Stock Exchange (LSE) had to be closed down for a few days. It is case of the petitioner that above crisis arose because of failure of Iftikhar Shafi and Mian Nisar Ilahi respondents to honour their obligations. It is also the case of the petitioner that above named two respondents had purchased shares in extremely large numbers and thereafter, manipulated their prices through fake transactions. For this purpose, they used a number of brokers and artificially raised prices for private benefits. The petitioner has claimed that the prices so raised were not based on performance of the companies concerned, as such, the same could not be sustained and became the cause of crisis mentioned earlier. The petitioner took all possible steps to control said crisis and also appointed an independent Inquiry Committee to investigate the matter under section 21 of the Securities and Exchange Ordinance, 1969, which submitted its report on 31-8-2000. The Commission had passed some interim orders, which were challenged before High Court. Show-cause notices were issued on 29-3-2001 to Mian Nisar Illahi, Iftikhar Shafi and Muhammad Tanveer Malik respondents. They were asked to explain by 6-4-2001 that as to why they should not be prosecuted under the Ordinance, 1969 for violation of section 17 thereof.

5. Learned High Court in the impugned judgment (passed in Writ Petition No.1220 of 2001) in paras.4 and 5 observed as follows:

"(4) The Member, SECP shall now decide the matter afresh after giving adequate opportunity to the petitioner to oppose the show-cause notice issued to him. The Member should also bear in mind that he shall be performing a judicial function, which shall be subject to scrutiny by two Members of the SECP in first appeal and also by this Court in second appeal. As such, the fundamental forms of natural justice, including a reasonable opportunity to the petitioner to adduce evidence and to cross-examine witnesses relied upon by the SECP, shall be afforded to the petitioner. Furthermore, such documents, which have formed the basis of the show-cause notice will also to be made available to the petitioner in the proceedings before the member, SECP. (5) On 2nd, 3rd and 6th August, I had requested learned counsel for the parties to try and suggest an order which this Court could pass with the consent of all parties to provide for certain interim arrangements which should be put in place during the pendency of the proceedings before the SECP. Despite efforts all around, it has not been possible for learned counsel for the parties to agree upon for the aforesaid purpose. The necessity for providing an interim arrangement had arisen because of the assertion made by learned counsel for the petitioner that the share portfolio of the petitioner had eroded in value from the date of which the account of the petitioner was frozen as a result of such freezing. According to figures presented in Court by the petitioner, the loss in value .of the portfolio to date is Rs.12 crore approximately, which is to the detriment of all concerned. It will be in the interest of all parties including SECP if any further erosion in the value of the frozen accounts can be avoided."

6. According to section 33 of the Act an appeal shall lie to an Appellate Bench of the Commission in respect of an order of the Commission made by once Commissioner within 30 days of passing of the order and it is to be heard by an Appellate Bench of the Commission comprising not less than two Commissioners. The order passed by Appellate Bench can further be challenged, as provided under section 34 of the Act.

7. Mr. Waseem Sajjad learned Advocate Supreme Court for the petitioner contends that High Court by passing the impugned judgment not only nullified the spirit of Article 199 of the Constitution but also rendered the sections 33 and 34 of the Act totally ineffective and nonexistent. He also argued that the matter in dispute is highly technical and requires special expertise for its decision in the light of the provisions of the Act. He submitted that the above named respondents were responsible for the crisis and of subsequent loss of billions of rupees to the investors. It is also urged that this was not the function of High Court to substitute its own findings for that of Statutory Authorities.

8. As against above Mr. Aitzaz Ahsan, learned Advocate Supreme Court for Mian Nisar Illahi and Tanvir Malik respondents contended that entire action of the petitioner was based upon bias, fraud and the respondents had no efficacious remedy except to approach High Court for immediate reliefs. He also argued that enquiry report dated 31-8-2000 was incorrect and misconstrued by the Commission and without any justification show-cause notices were served upon the respondents.

9. Iftikhar Sheikh respondent has adopted the above arguments.

10. With the assistance of learned counsel for the parties we have gone through the record and are of the view that before approaching High Court the respondents should have exercised alternate remedies available under sections 33 and 34 of the Act. The dispute is highly technical in nature and can amicably be resolved only through special expertise, High Court itself observed that "the SECP would be more appropriate forum, to pass such interim order". The very object of the Act would be frustrated, if for one reason or the other, the initial orders of the SECP are directly challenged before High Court where the law provides alternate remedy, as a rule, it shall be followed unless cogent reasons are shown for proceedings otherwise in these matter no such reason has been shown and controversy relating to the crisis can more appropriately be appreciated before the hierarchy provide under the Act.

11. Accordingly, these petitions are converted into appeals and the same are allowed. The impugned judgments are set aside. The respondents may, if so advised, approach the proper forum, as provided in the Act for redressing their grievances. If the respondents prefer appeal all points raised by them shall be decided on their own merits. Mr. Aitzaz Ahsan states that 30 days time be granted to the respondents for preferring appeal before proper forum for which Mr. Waseem Sajjad has no objection. The point of limitation is to be decided by the Appellate Bench of the Commission before whom the appeal is to be preferred. Under the circumstances, a lenient view may be taken for condonation of delay for doing complete justice between the parties. H.B.T./S-37/SC Petition/appeal allowed.