' The petitioner assails order dated 13-4-2013 passed by an Election Tribunal of this Court whereby the nomination papers filed by the petitioner for NA-89, Jhang-I and PP-78, Jhang-II were rejected.
2. Learned counsel for the petitioner submits that the learned Election Tribunal erred in law in coming to the conclusion that the petitioner was a defaulter and had concealed material facts from the Returning Officer. As a result he submits that the disqualification visualized in Article 63(1)
(n) of the Constitution of Islamic Republic of Pakistan, 1973 was not attracted to the case of the petitioner.
3. Learned counsel submits that Messrs Ibrahim (Pvt.) Ltd. Of which the petitioner is a majority shareholder, has settled all its liabilities towards Messrs Faysal Bank Ltd.; Trust Investment Bank Limited; Askari Bank Ltd. And Saudi Pak Leasing Company. He further points out that the petitioner had not taken any "loan" in his personal capacity. All the loans have been advanced to Ibrahim (Pvt.) Limited, which is a separate entity besides they have been duly settled with mutual consent of the parties through validly executed agreements or arrangements and the same were duly acted upon. In this regard, he has placed on record letters issued by the afore noted banks and also a settlement agreement executed between the petitioner and the Trust Investment Bank Ltd.
He further submits that the petitioner had not availed any loan facility in his personal capacity and was, therefore, not covered by any of the provisions of Article 63(1)(n) of the Constitution of Islamic Republic of Pakistan, 1973, which clearly envisages that a person in order to be disqualified to contest elections, should have availed a loan in his personal name. He further argues that although the petitioner holds majority interest in Ibrahim (Pvt.) Limited, in view of the fact that all the said loans/liabilities had been settled with the consent and concurrence of the afore noted banks/financial institutions, the learned Election Tribunal erred in law in coming to the conclusion that the petitioner was a defaulter. He finally argues that all the afore noted banks have already issued letters confirming that the liabilities of Ibrahim (Pvt.) Ltd. Have either been settled or rescheduled. In the presence of such letters, Article 63(1)(n) of the Constitution is not attracted.
4. Learned counsel for the respondent, on the other hand, at the very outset, has stated that the provisions of Article 63(1)(n) of the Constitution are clearly attracted to the case of the petitioner.
He submits that admittedly, the petitioner has received a "write-off" from Trust Investment Bank Ltd.
In this regard, he referred to Agreement dated 29-6-2010 executed between the Trust Investment Bank Limited, Ibrahim (Pvt.) Limited, Husnain Cotex Limited and the petitioner in two different capacities namely as Chief Executive Officer (CEO) of M/s Ibrahim (Pvt.) Ltd and as a guarantor.
Learned counsel points out that the petitioner had categorically admitted and acknowledged the cumulative liability of Messrs Ibrahim (Pvt.) Limited, of which he was a majority shareholder in the sum of Rs,56,149,791.80 (COS No,75-2010) and Rs,41,031,824.00 (Suit No,1129-2010). He points out that that in terms of the agreed amounts, applications under Order XXIII Rule 3, C.P.C. Were moved before the Banking Court in which the aforesaid matters were pending and consent decrees were obtained. However, subsequently, despite the consent decrees, the Bank and the petitioner collusively entered into an agreement on the basis of which substantial parts of the afore noted liabilities were written-off. In COS No,75-2010, instead of a sum of Rs,56.1 million, a sum of Rs,39.5 million was agreed to be paid by the company and received by the bank. Likewise, in COS No,1129- 2010, instead of the agreed settlement amount of Rs,41.031 million, the Bank agreed to receive Rs,31 million. He, therefore, points out that in aggregate, the bank agreed to write-off a sum -of Rs,26 million (approximately). He submits that in Article 63(1) (n) of the Constitution, write-off is a disqualification and there is no distinction between different kinds of write-offs under the Constitution.
5. The learned counsel, therefore, submits that the said write-off is clearly hit by the provision of Article 63(1)(n) of the Constitution in view of the fact that for reasons not clear from the record, the bank agreed to accept amounts less than the admitted amount. In response to the argument of the learned counsel that the petitioner had not taken a loan from the banks in his personal capacity, the learned counsel submits that in the first place "loan" has been used in the aforesaid Article in a generic sense and not in the sense used in the definition clause of the Financial Institutions (Recovery of Finances) Ordinance, 2001 (FI0). He submits that if the definition were to be read in its restrictive sense, it would defeat the entire purpose of the said provision which deals with disqualification of a defaulter from the electoral process. He further submits that there was clearly collusion between the banks and the petitioner in view of the fact that in case of some of the banks, the liability is still outstanding but clearance letters have been issued just on the basis of postdated cheques.
6. The learned Standing Counsel, who represents the Federation, as well as, the Attorney General for Pakistan in response to notice under Order XXVII-A, C.P.C. Supported the contentions of the learned counsel for the respondent.
7. During the course of arguments, vide order dated 18-4-2013, we directed Faysal Bank Limited, Trust Investment Bank Limited, Askari Bank Limited and Saudi Pak Leasing Company to depute their Special Asset Management (SAM) Heads to appear in person before this Court in order to clarify the situation. We also directed the State Bank of Pakistan to give a report on the borrowings made by Messrs Ibrahim (Pvt.) Ltd. On 23-4-2013, Mr. Hamid Usman, Asset Manager, Askari Bank Limited appeared before us. He stated that out of a total liability of Rs,9 million, the petitioner/Ibrahim Private Limited had paid a sum of Rs,2.6 million and had issued post-dated cheque in terms of a settlement arrived at between the parties on 28-3-2013.
8. The Representative of Faysal Bank produced a letter dated 28-3-2013 which indicated that out of a remaining loan of Rs,1.603 million, a sum of Rs,0.500 million has been paid through cheque dated 28-3-2013 and the balance of Rs,1.103 million was to be deposited on or before 31-7-2013. He, however, admitted that the afore noted cheque was not en cashed on the request by the company till 29-4-2013 at which time the company deposited a sum of Rs,0.500 million in cash, whereupon the cheque in question was returned to it. In the meantime, balance amount of Rs,1.103 million was also deposited by way of early payment on 24-3-2013. It is observed that the total loan obtained by Messrs Ibrahim (Pvt.) Ltd from Faysal Bank Limited was in the sum of Rs,8 million.
9. The SAM Head appearing on behalf of the Trust Investment Bank Ltd. Informed us that out .Of an entire liability of a sum of Rs,88,053 921/-, Rs,77 million had been paid and the balance had been rescheduled on the basis of an agreement dated 25-2-2013. He confirmed that the balance amount was covered through postdated cheques.
10. He, however, failed to give any plausible explanation regarding the write-off. Therefore, being dissatisfied with the mode and manner in which the agreement to write-off was arrived at, we directed the Heads of SAM to produce before us the record of the recommendations made by the management to the Board of Directors and the minutes of meeting of the Board of Directors, wherein, write-off was allowed. The said minutes were produced before us today, which have been examined by us. It appears that through a Memorandum to the Board of Directors of Trust Investment Bank Limited titled "Rescheduling of Lease Facilities Extended to Ibrahim (Pvt.) Limited and Husnain Cotex Limited" dated June 18, 2010, the management had observed that:--- "Client's both contracting companies are apparently out of business as there is no activity being undertaken for the past two years. We are therefore of the view that no cash inflows are anticipated in foreseeable future. Therefore this is the best time to strike a possible settlement hence the repayment plan presented herewith which we have persuaded with client on best effort basis. (This may not be out of place to mention that owing to client's deteriorating financial health, Faysal Bank Limited has also gone into settlement with them for an exposure of about Rs,1.0 billion). "
11. It appears that the said Memorandum was placed in a meeting of the Board of Directors of Trust Investment Bank Limited held on June 28, 2010. According to the minutes of the Board meeting, the matter was discussed in agenda item No,4 and it was resolved that rescheduling of refinance facilities of Ibrahim (Private) Limited and Husnain Cotex Limited be approved on the terms and conditions as contained in Memorandum No,113-4 dated June 18, 2010. It may be noted that Agreement dated 29-6-2010 incorporated the afore noted arrangement. Further, neither the minutes of the Board meeting nor the agreement disclosed any reason or justification for the write- off other than the assertion that the company had closed down its business for the past two years and no cash inflows were anticipated in the future. We, however, note with concern that no bona fide business considerations were mentioned in the recommendation or in the minutes of the Board of Directors justifying the aforesaid write-off. We also asked the Head of SAM to show to us the policy of Trust Investment Bank Limited regarding write-off and the parameters/guidelines settled by the bank in dealing with the requests for write-off. He candidly admitted to us that there was no such policy, parameters or guidelines for the said purpose and if a request was made by the defaulter party for a write-off, such requests were processed on a case to case basis.
12. It is also significant to note that the Head of SAM took the stance that there was no requirement of reporting the write-off either to the Securities and Exchange Commission of Pakistan (SECP) or any other regulatory authority. He further submitted that the write-offs were reported to the Credit Information Bureau, however, in the instant case, the data of Credit Information Bureau, for reasons best known to the bank did not show any write-offs involving the company.
13. As far as write-offs are concerned, the only statutory provision that we could lay our hands on, relating to legitimate write-offs, is contained in section 8 of the Financial Institutions (Recovery of Finances) Ordinance, 2001, which provides that banks can file suits for recovery of written off finances which were written-off for political reasons or consideration other than bona fide business consideration. Despite being repeatedly asked, neither the learned counsel for the petitioner nor any of the Representatives of the bank could disclose any bona fide business consideration, which could have furnished basis for the afore noted write-offs. The only other exception to this general rule appears to be write-offs given under BPD Circular 29 issued by the State Bank of Pakistan in the year 2001. We have already noted in our order dated 26-4-2013 passed in W.P. No,9734 of 2013 that such write-offs were legitimate write-offs being backed by statutory instruments and having been undertaken under the direct supervision and oversight of the State Bank of Pakistan.
14. As far as the outstanding amount of Faysal Bank is concerned, the argument of the learned counsel for the petitioner that the outstanding amount was Rs,1.6 million, we find that the loan was in the sum of Rs,8 million out of which, Rs,6.3 million was paid and the balance was covered through postdated cheques. The overdue amount of Rs,1.603 million was covered by a cheque in the sum of Rs,0.500 million dated 28-3-2013, which was replaced by payment of cash much after filing of the nomination paper i,e, on 29-4-2013. Further, the remaining payment of Rs,1.130 million was made on 23-4-2013 i,e, after filing of the nomination paper. The said payments having been made after the cut off date of the filing of the nomination paper, is not of much help to the petitioner. Reliance is placed on our order dated 19-4-2013 passed in W.P. No,8680 of 2013 wherein write-off date for the purposes of Article 63(1)(n) of the Constitution has been declared to be before the date of the filing of the nomination papers. On this score also, the provisions of Article 63(1)(n) of the Constitution are attracted to the case of the petitioner.
15. As far as the case of Saudi Pak Leasing Company Ltd. Is concerned, the said company through its letter dated 3-4-2013 informed that they have arrived at a settlement. In terms of the said settlement, certain payments have been made and the balance has been covered through postdated cheques. The very fact that the agreement has been E reached after filing of the nomination paper once again attracts the provision of Article 63 (1)(n) of the Constitution.
16. Learned counsel for the petitioner has argued that the term "he has obtained loan" or "in his own name" appearing in Article 63(1)(n) of the Constitution means that loans must have been obtained by the candidate himself in his own name and, therefore, the loan obtained by a Company incorporated by the candidate stands excluded from the purview of the said Article. Article 63(1)(n) of the Constitution is reproduced:--- Article 63 (1): "A person shall be disqualified from being elected or chosen as, and from being, a member of the Majlis-e-Shoora (Parliament), if
(n) he has obtained a loan for an amount of two million rupees or more, from any bank, financial institution, cooperative society or cooperative body in his own name or in the name of his spouse or any of his dependents, which remains unpaid for more than one year from the due date, or has got such loan written-off;"
17. The purpose behind the above Article is to disqualify a candidate aspiring for a seat in the Parliament if he is a loan defaulter or has got his loan written off, the loan being an amount of Rs,2 million or more from any bank, financial institution, cooperative society or cooperative body, in his own name or his spouse or any of his dependent. It will be restricting the above constitutional disqualification if it were to only cover situations where the aspiring candidate has obtained loan as a natural person under his own name and disregard the loans obtained by the candidate through the vehicle of his business which may be a corporate entity. The disqualifications under Article 63 are penal provisions and in order to effectively enforce the same the Court is free F to assess whether the candidate himself or through his business or any other corporate entity has obtained the loan that stands in default thereof. The "veil of the incorporation" is what separates the petitioner/candidate from the business corporate entity i,e, Messrs Ibrahim (Pvt.) said veil can be lifted to determine whether the petitioner is the major beneficiary of the loan obtained by the corporate entity. It is established principle of Company Law that the Court has the power to lift the veil of incorporation while construing the statute or documents or when the Court is satisfied that the Company is a mere facade concealing he true facts or where it is established that the Company has an authorized agent as its controller or member. Reliance is placed on Gower's Principles of Modern Company Law, 6th Edition, Sweet and Maxwell.
18. In the present case lifting of veil of incorporation (see relevant Form "A") reveals that the petitioner is a majority shareholder in Messrs Ibrahim (Pvt.) Limited, therefore, the loan obtained by the said Company is considered to be the loan obtained by for the petitioner for the purposes of Article 63(1)(n) of the Constitution We, therefore, hold that the term "he has obtained loan" appearing in Article 63(1)(n) of the Constitution includes loan obtained by a candidate or his business or by a corporate entity in which the candidate holds majority share-holding establishing his control and management over the said business of corporate entity.
19. Support is also drawn from the Explanation II to section 12(2) of IJ Representation of the People Act, 1976.
20. For the reasons recorded above, we are not inclined to interfere in the conclusion arrived at by the learned Election Tribunal, hence, this petition is accordingly dismissed.