MIAN SAQIB NISAR, J.---F.A.Os, Nos.358 and 359 of 2000 are being decided together, as both these involve the common questions of law and facts.
2. Through these FAOs, the appellants have assailed the order dated 20-11-2000 passed by the Monopoly Control Authority (MCA), whereby the following direction has been issued to them:-- "The Authority accordingly, hereby orders the undertakings CJPL and CGSL to submit to the Authority a time frame within three months of the issuance of this Order and modus operandi as to how the CGSL shall pay to CJPL, which should not go beyond December 31, 2002, the principal amount of these loans and advances along with mark-up thereon at market rate. Mark-up must be paid by CGSL/recovered by CJPL at the prevailing market rate computation of which should be submitted to the MCA within three months of the issuance of this Order. Transactions in compliance of this Order must be prominently shown by both the undertakings in their books of accounts and copy of the annual audited accounts be submitted to MCA with reference to this Order by the close of year 2001 and 2002."
3. The factual backdrop of the cases are that Messrs Crescent Jute Products Limited (CJPL), the appellant in F.A.O. No.358 of 2000, had given a mark-up bearing loan of an amount of Rs.285.867 Million to its associated company i.e. Messrs Crescent Group Services Pvt. Ltd. (CGSL), in the year 1995. According to the appellant's case, the loan amount was invested by the CGSL in some contractual work undertaken for the WAPDA, which, amount could not be recovered in time and, therefore, the loan could not be repaid to the CJPL. However, the CJPL continued charging the mark-up upon the said loan till the year 1996, whereafter a decision was taken by the Board of Directors of the CJPL that the mark-up since onward should be frozen, whereas only the principal amount along with markup occurring till then shall be recovered from the CGSL. The Monopoly Control Authority, constituted under the provisions of the Monopolies and Restrictive Trade Practices (Control and Prevention), Ordinance, 1970 (the Ordinance), while considering it to be a case of undue concentration of economic powers, by invoking section 4(b) read with section 3 and while exercising its powers under sections 11 and 12 of the Ordinance, after issuing the show-cause notice, passed an order that the loan amount should be recovered from the CGSL with mark-up for the entire period. The said order was challenged by both the lender and the loanee companies through F.A.O. No.315 and F.A.O. No.339 of 1999,. Which were accepted by this Court vide judgment dated 10-10-2000 on the ground that the CGSL was not given any show-cause notice and thus, has been condemned unheard. After the above decision, show cause has been repeated to all the concerned, and the final order has been passed by the MCA, the operative part whereof has been reproduced above.
4. The appellants are aggrieved of the above order and impugn the same on the grounds that the MCA had no jurisdiction to pass the order because the loan was advanced to CGSL in terms of section 208 of the Companies Ordinance and the said provision provides a complete remedy and a mechanism to cater for the breach of the section and for the recovery of the investment made thereunder; thus no direction could be issued under the Ordinance for the return of the loan; under section 12 of the Ordinance, the MCA has no power to give direction to the lender to charge and the loanee to pay the mark-up; the mark-up was frozen by the Board of Directors of CJPL which had full authority under its Articles of Association, with bona fide intention as the loanee was not able to recover the amount from WAPDA where it was invested by it; the grant of loan or freezing of the mark-up does not constitute "dealings" in terms of section 4(b) of the Ordinance: besides, both the companies are not the "associated undertakings" within the meaning of the above section; furthermore, section 4(b) is contingent on two important conditions "unfair benefit" and "Public interest", which are conspicuously missing in the matter, therefore, as the requisite conditions of the section are not met, resultantly it has no application to the facts and circumstances of this case; the show-cause notice is only confined to seek an explanation for the appellants as to why mark- up has been frozen, but the impugned order has travelled beyond that, directing the return of the loan amount and also the mark-up to the lender; it is lastly submitted that the impugned order is not covered by the provisions of section 12(ii) of the Ordinance. In support of his propositions, Mr. Ahmer Bilal Soofi, learned counsel for the appellants, has relied upon the judgment reported as Rafhan Maize Products Company Ltd. v. Monopoly Control Authority and 9 others PLD 1986 Lahore 346.
5. On the contrary, Mr. Asad Munir, the learned Deputy Attorney General, submits that section 208 of the Companies Ordinance belongs to a separate regime, which altogether cater for a different situation; the theme of the Ordinance is remedial and corrective, whereas section 208 is penal in nature. He has read before the Court the preamble of the Ordinance to highlight the purpose of the law and how the impugned action by the MCA is legally justified. It is also submitted that the two companies are associated undertakings within the meaning of section 4(b) of the Ordinance.
6. I have heard the learned counsel for the parties and find that the facts of the case are not much in issue, rather are admitted. It is only on the basis of interpretation of the rolevant law that it has to be determined, whether the appellants are guilty of undue concentration of economic power and the action by the MCA against them is legally tenable within the purview, of sections 3, 4(b), 11 and 12 of the Ordinance, besides the effect of section 208 of the Companies Ordinance upon the case, needs examination.
7. I shall first deal with the proposition about the application and the effect of section 208 of the Companies Ordinance on the matter in hand. The section from its clear wording is a prohibitory provision, which prevents a company from making any investment in its associated company or associated undertaking except under the special resolution of the investor company, which shall indicate the nature and the amount of the investment and the terms and conditions thereof. It is not the case of either party that while providing the loan, the aforementioned conditions were not followed by CJPL. I do agree with the learned Deputy Attorney General that section 208 pertains to a separate regime altogether, and is meant to cater for a different situation, but it is not well founded to argue that the section is remedial or corrective in its nature, rather according to the plaint and simple language of subsection (5), it is a penal provision whereby in case of the violation of the conditions of section 208(1), the directors of the investor company shall be penalized, and shall be saddled with the penalty of fine, besides they shall also make good the loss suffered by the company for the breach of the conditions. This law by no means provides any remedy to the company making the investment for the recovery of the amount of investment, which has been made in violation of the section. Besides, the section has nothing to do with the purpose and the object of the Ordinance which has been promulgated with the primary intent to curb and remove the vice of "undue concentration of economic power" by such associations which have the common management but have the semblance of separate management. Reference in this behalf can be made to Habib Bank Ltd. v. Monopoly Control Authority 1986 CLC 2489. Such a vice, which if admittedly found in a case, could only be dealt with under the Ordinance.
8. In my considered view, section 208 of the Companies Ordinance is not applicable and in no way either expressly or by necessary implication, bars the jurisdiction of the MCA to take action against the appellants under the provisions of the Ordinance, when a case of "undue concentration of economic power" has been made out.
9. Now in order to dilate if the appellants are guilty of undue concentration of economic power, reference should be made to section 4(b) of the Ordinance, which reads as:--
10. "Undue concentration of economic power shall be deemed to have been brought about, maintained or continued if:--
(a) (1) (ii)
(b) there are any dealings between associated undertakings which have or are likely to have the effect or unfairly benefiting the owners or shareholders of one such undertaking to the prejudice of the owners or shareholders of any other of its, associated undertakings."
The plain and simple language of the Section envisages two broad conditions for its application;
(1) dealings between two associated undertakings (2) affecting or, unfairly benefiting owners or shareholders of one such undertaking to the prejudice of the owner or shareholder of its other associated undertaking. The word "dealings" has been used in the provision in its ordinary meaning, which contemplates any transaction between the two parties. Obviously, the grant of loan by one to another person is a dealing. As regards, whether the appellants are associated undertakings, the expression has been defined in section 2(b) of the Ordinance and when read along with section 2(2) thereof, it is clear that an individual shall be deemed to own, hold or control a thing if it is owned, held or controlled by the individual or his spouse, or by a brother or sister of the individual or by any of the lineal ascendants or descendants of the individual. In the present case, the `CJPL' is a public limited company having nine Directors, whereas `CGSL' has three, Directors and all the three Directors namely Khalid Bashir, Nasir Shafi and Humayun Mazher are related to Shaukat Shafi and Mazher Karim, the Directors of `CJPL' falling within the purview of subsection (2) of section 2 of the Ordinance, therefore, both the appellants are undertakings under a common management and thus, are associated undertakings. Reliance in this behalf can be placed upon the judgments reported as Messrs (Colony) Sarhad Textile Mills Ltd. (File No.6/R/IND/MCA of 1972 1986 CLC 2764 and Habib Bank (Overseas) 1986 CLC 2867.
10. As regards the question whether any unfair benefit etc. Shall be attained by the owners and the shareholders of the CGSL and/or shall be to the prejudice of the shareholders etc. Of CJPL, suffice it to say that if the recovery of the loan amount is deferred for an indefinite period and the mark-up is frozen and not recovered from the CGSL, it undoubtedly shall give unfair advantage and benefit to the owners and shareholders of the CGSL and would be disadvantageous and shall prejudice the shareholders of the CJPL, who shall be deprived of the benefits of the capital and the mark-up payable to CJPL, which ultimately shall be for their benefit. I am not convinced if the judgment PLD 1986 Lahore 346 cited by the learned counsel for the appellants has any application to the facts of this case.
11. The submission of Mr. Ahmer Bilal Soofi, learned counsel for the appellants, that show-cause notice was only confined to the freezing of the mark-up, but in the impugned order, direction has been given to the CGSL not only to return the mark-up but also the actual amount, suffice it to say that there is no prohibition under the law that the direction for the purposes of passing an appropriate order should be confined to the contents of the show-cause notice. Ample power has been given by the Ordinance to the MCA under section 12 (1)(a)(iii) read with section 11 of the Ordinance to pass an order prescribing the circumstances in which and the conditions on which the associated undertakings concerned may deal with each other. Thus, the return of the loan amount along with the mark-up is strictly covered by the above authority. In the light of above, these appeals have no merits and are hereby dismissed.