' MUHAMMAD ANWAR KHAN KASI, C.J.---This petition has been filed with the following prayer; "...Respondent No,4 be called to explain under what authority of law and Constitution he is holding the office of Director IESCO and his appointment vide Notification dated 21-8-2013 to the extent of respondent No,4 be declared void, illegal and ultra tires of the Constitution."
2. Learned Counsel for petitioner submitted that his objection on the appointment of respondent No,4 is two fold firstly that appointment is in violation of Rule 2(d)(vi) of Public Sector Companies Corporate Governance) Rules, 2013 as it is an appointment admittedly made for fourth term which is not permissible under the Rule referred; and secondly, it is hit by conflict of interest due to his being owner of Sihala Flour Mill, which is prejudicial to the interest of company and said apprehension materialized in form of audit objection respecting loss of Rupees 24.389 Millions upon installation of 11 KV feeder (Floor Mill 2) 1-9 Feeder.
3. It is next submitted that respondent himself appointed while chairing the 69th meeting of BOD, held on 31-10-2008, therefore, this act amounts to escape from the cherished principle that none can be a judge in his own cause.
4. It is also argued that principle of transparency is visibly absent in the impugned appointment and is also in violation of the principles set in judgment of Hon'ble apex Court in Khawaja Asif Case [2013 SCM R 1205], therefore, it is ultra vires to the Constitution and law.
5. Refuting the above perspective learned standing counsel on behalf of respondent No,1 primarily objected upon the very maintainability of petition as the Corporate Governance Rules ibid have been framed under section 506 of Companies Ordinance, 1984, while Securities and Exchange Commission being regulatory body provides complete mechanism for redressing corporate complaints, in this respect learned counsel referred Rule 25 ibid wherein punishment for deviation from the Rules is provided.
6. Maintainability.Of the petition was further attacked by stating that respondent No,4 is resident of territory beyond ICT, therefore, this court lacks territorial jurisdiction.
7. It was next contended that appointment of director of a company cannot be assailed in Constitutional jurisdiction under Article 199.
8. It is also submitted that Form 29 annexed with the petition proves that change in directorship was also placed before SECP.
9. It is also argued that Corporate Governance Rules 2013 were to be enforced in June, 2013 after a period of ninety days from 8-3-2013 i.e, date of issuance of said Rules, hence after promulgation of rules it would be construed as first term and under Article 12 of the Constitution, the retrospective implementation has been prohibited.
10. It is next averred that Rule 2(d)(vi) provides the 'qualification' of independent director and not the 'disqualification', moreover, disqualification is not provided anywhere in the law or rules.
11. Learned Counsel for respondents 2 to 4 adopted the arguments of learned .Standing Counsel on maintainability whereas regarding rest of the controversies, it is submitted that writ of quo warrant is not a writ of right but a discretion and petitioner is to prove his good intentions while in this case petitioner is apparently playing as puppet in the hands of secret supporters, therefore, he is not entitled for grant of discretionary relief.
12. It is next submitted that Rule 3 of Corporate Governance Rules describes that composition of board divides the directors into executive and non-executive directors and latter is further divided into independent and non-independent directors, purpose of same is to achieve diversity in the board, therefore, where it was requirement of rules, Conflict of Interest does not attract.
13. It is further clarified that assertion of influence of respondent No,4 or any other independent director on administrative decisions is illusive as all such actions are taken after fulfilment of procedure which cannot be circumvented by a director, learned counsel explained that 1-9 feeder was installed in order to achieve better load management as previously both the residential as well as industrial consumers of area had been using one feeder which created inconvenience for residential consumers and on their complaints decision of separate feeder was taken. As far as audit objection is concerned, same was only a requirement for inquiry.
14. In rebuttal learned counsel for petitioner submitted that impugned appointment was made by the Federal Government which renders the same as public office and qualification for appointment on a public office is given under Article 62(1)(a) of the Constitution.
15. It is next submitted that availability of alternate remedy is not a valid ground for ouster of petitioner in the backdrop of Articles 225 and 184(3) of the Constitution. Learned counsel in this respect placed reliance on case of Mahmood Akhtar Naveed v. Fop [2012 SCM R 1101] and Sumera Malik's case [PLD 2007 SC 362].
16. Heard and record perused.
17. Primarily the question respecting territorial jurisdiction is to be addressed viz the objection taken by respondents that respondent N.4 [whose appointment is assailed] is not resident of ICT. Test for jurisdiction in cases pertaining to Writ of Quo Warranto is some what different as it is to be examined on the hallmark of Article 199(1)(b)(ii) itself which reads as following:-- "(b) requiring a person within the territorial jurisdiction of the Court holding or purporting to hold a public office to show under what authority of law he claims to hold that office.
18. The test emanating from the above provision is as to whether the answering respondent is holding or purporting to hold the office within the jurisdiction of this Court. The answer obviously is affirmative because the respondent distribution Company performs functions within the territorial jurisdiction of this Court and impugned appointment was also made by the authority stationed at ICT, therefore, this objection on the territorial jurisdiction is overruled.
19. Next claim of the respondents is that interference under constitutional jurisdiction is not warranted against the respondent Company where it is a non-statutory joint stock company incorporated under Companies Ordinance, 1984 and is not funded by the State. This averment is devoid of force for the reason that respondent has admitted that Public Sector Companies (Corporate Governance) Rules, 2013 are applicable to it and Rule 2(g) defines a public sector company as following:-- "Public Sector Company "means a company, whether public or private, which is directly or indirectly controlled, beneficially owned or not less than fifty percent of the voting securities or voting power of which are held by the Government or any instrumentality or agency of the Government or a statutory body, or in respect of which the Government or any instrumentality or agency of the Government or a statutory body, has otherwise power to elect, nominate or appoint majority of its directors, and includes a public sector association not for profit, licensed under section 42 of the Ordinance."
20. Above description respecting the status of respondent-Company is sufficient to bring it within purview of Constitutional jurisdiction, however, respondent No, 4 is also holding Public Office because the respondent-company is providing essential public service by distribution of electricity to the public and as such is performing Function in connection with affairs of the State. As far as the claim of the respondent that they are not within the governing control of the State same is also belied from record wherein it is shown that Auditor-General of Pakistan has conducted audit of the respondent's accounts and respondents have also admitted to reply the same. These facts are sufficient to make the impugned appointment amenable to Constitutional Jurisdiction. Guidance is sought from case of Salahuddin etc. u. Taj Muhammad Khanzada [PLD 1975 SC 244] wherein it was held that; "The primary test must always be whether the functions entrusted to the organization or person concerned are indeed functions of the State involving same exercise of sovereign or public power: whether the control of the organization vests in a substantial manner in the hands of Government: and whether the bulk of the funds is provided by the State. If these conditions are fulfilled then the person including a body politic or body corporate may indeed be regarded as a person performing functions in connection with the affairs of the Federation or a Province; otherwise not."
21. Adverting to the actual controversy, it is observed that petitioner has questioned the eligibility of respondent No, 4 on two counts - Firstly that petitioner has already exhausted more than two terms and has become ineligible by operation of disqualification set in Rule 2(d)(vi) of Public Sector Companies (Corporate Governance) Rules; 2013 and. Secondly that respondent owns a flour mill within the area of operation of the Company where he is appointed as director which gives rise to conflict of interest, rendering him ineligible for appointment. For convenience sake Rule 2(d) is reproduced; "Independent Director" means a Non-Executive Director who is not in the service of Pakistan or of any statutory body or any body or institution owned or controlled by the Government and who is not connected or does not have any other relationship, whether pecuniary or otherwise, with the Public Sector Company, its associated companies, subsidiaries, holding company or directors. The test of independence principally emanates from the fact whether such person can- be reasonably perceived as being able to exercise independent judgment without being subservient to any form of conflict of interest.
' A director shall not be considered independent [emphasis added) if one or more of the following circumstances exist.--
(i) he has been an employee of the Public Sector Company, any of its subsidiaries, or holding company during the last two years:
(ii) he has, or has had within the last two years, a material business relationship with the Public Sector Company either directly or indirectly, or director of a body that has such a relationship with the Public Sector Company;
(iii) he has received remuneration in the two years preceding his appointment as a director or has received additional remuneration excluding retirement benefits from the Public Sector Company apart from director's fee or has participated in the Public Sector Company's share option or a performance-related pay scheme;
(iv) he is a close relative (spouse, lineal ascendants and descendants and brothers and sisters)of the company's promoters, directors or major shareholders:
(v) he holds cross-directorships or has significant links with other directors through involvement in other companies or bodies; or
(vi) he has served on the Board for more than two consecutive terms from the date of his first appointment provided that such person shall be deemed independent director after a lapse of one term;"
22. It is imperative to mention here that by virtue of Rule 3 of rules ibid Board of directors is composed of two kinds of directors i.e, Executive Directors and the Non-' Executive Directors and latter is again sub-divided into Independent and Non-Independent Directors.
23. Plain reading of Rule 2(d) does not support the argument of respondents that same is definition o qualification only and does not operate as disqualification because had it been the intention of law makers, I would not have been set in negative form, in addition t that the word "or" at the end of sub-rule (v) also make the same a disqualification, the proviso part of sub-rule (vi when read in juxtaposition with Rule 3(2) providing period of two years for enhancement of independent directors to 40% of all board members, clearly reflects that director, shall practically have three terms before becomes ineligible to be re-elected as independent director, meaning thereby that after two years' period from the effective date i.e, 6-6-2013, and if appointment of a non-executive director contravenes the ratio of minimum 40% independent directors and he does not qualify to be an independent director, he would become ineligible to remain on the Board.
24. It is pertinent to mention here that respondent No, 4 after amalgamation of first two terms has admittedly been appointed for the third term which disqualifies him to be considered an independent director but he still can remain a Non-Independent Non-Executive Director as the grace period given in Rule 3(2) is yet to expire, therefore, at present the directorship of the respondent No,4 is not hit by the given provision till lapse of said period and even after that it would be examined on the touchstone of Rule 3(2), but by the Securities and Exchange Commission of Pakistan being the regulatory body as well as proper forum under the Rules and Companies Ordinance, 1984. It would not be out of place to mention here that the previous terms undergone by respondent No, 4 shall be counted, as nothing repugnant to that has been provided in the Rules ibid. The argument contra to the retrospective effect in the context of Article 12 of the Constitution is thus exceptional as said bar has been given in context of criminal cases.
25. It is concluded that petitioner has failed to prove the Conflict of Interest because the image of diversity In the Board of Directors, contained in Rule 3 ibid is of participation from all segments of society and even otherwise, conflict of interest does not attract to mere consumership because if the same is admitted true, it would entail the consequence that none of the directors would be able to become consumers of their company. In fact the principle of Conflict of interest connote to having rival interest and that situation would have arisen if respondent No 4 would have been running a business in competition to the respondent distribution company.
26. In view of above, petition, being devoid of force, is dismissed with no order as to costs.