Shahid Karim J: - A synoptical resumption of facts in this petition is that the petitioner company wrote a letter dated 5.8.2011 to the Chairman, Oil & Gas Regulatory Authority (OGRA)/ respondent No.2 to issue application form relating to rules, regulation and investigation criteria for setting up Oil Marketing Company (OMC) which was accordingly issued by respondent No.2 vide letter dated 19.8.2011 wherein the petitioner was required to submit an application as per new policy/criteria of Government of Pakistan, approved by ECC of the cabinet vide its decision No.10 ECC-107/9/2003 dated 25.10.2003 and letter dated 23.7.2010 issued by the Director (L&M) Ministry of Petroleum and Natural Resources, for issuance of license for establishing OMC.
2. The petition lays a challenge to the said criteria issued by the respondents and in particular para I and VI(a) of the criteria for issuance of Petroleum Products Marketing License Policy (policy). This policy has been issued in pursuance of the ECC decision dated 25.10.2003. The para I and VI(a) of the policy, which has given rise to the cause of action in this petition are reproduced as under: - Para-I " However, the prospective company should not be affiliated, in any manner, with existing oil marketing company operating in Pakistan."
Para VI(a)
The prospective company shall submit an affidavit confirming that: "None of the Sponsors/Directors/ Relatives of Sponsors/Directors is involved in any criminal case, and or bank/loan and direct and indirect Federal taxes default."
3. The learned counsel for the petitioner submits that these two criteria of the policy are ultra-vires Article 18 and 25 of the Constitution of Islamic Republic of Pakistan, 1973(Constitution). According to him, these conditions were unreasonable and would be tantamount to deny the right of the petitioner to carry on trade and business which is an inalienable right conferred by the Constitution under Article 18. The stance of the respondents, on the other hand, is couched in the parawise comments filed by respondent No.1 as well as respondents No.2 and 3. The reply to paragraph No.3
(c) and 4 by Federal Government, respondent No.1, should be sufficient to bring forth the stance of the respondents which replicates in material particulars the grounds of support for the policy urged by respondent No.2, OGRA. The learned counsel for respondent No.2-OGRA has passionately defended the contours of the policy under challenge as being the fundamental sinew of the policy for grant of an OMC. It has been submitted by the said respondent that: "(c) Sub para (c) with regard to the criteria for establishing new oil marketing companies in the country is by no means contrary to the spirit of the constitution. The last two lines of para-1 of the criteria provides only to eliminate inefficient practices in oil marketing sector so that no company undertakes any business under the guise of facilities and goodwill of other companies. Rather, they establish and introduce their own infrastructure, finance, facilities etc. Similarly, para VI(a) of the said criteria is also not contrary to the Articles of the constitution of Pakistan in its entirety. It provides for transparency in business activities. The said para ensures that no criminal element and illegal practices is present in commercial activities. For ready reference, para-vi(a) is reproduced as under: - "None of the Sponsors/Directors/ Relatives of Sponsors/Directors is involved in any criminal case, and or bank/loan and direct and indirect Federal taxes default."
4. Government have attempted through the application of para VI(a) of the criteria to block the way of entry to the unwanted criminal and defaulting elements to the business activities like "relatives of sponsors/directors". As such, the policy matters which are formulated in the national interest are not open for judicial review."
4. The learned counsel for the petitioner has, in the above context, submitted that the impugned criteria would serve as a roadblock in the way of the petitioner company in obtaining the license.
He submits that one of the relatives of the directors of the petitioner company namely Shehzad Anjum is a Director of an existing OMC, namely Askar Oil Services (Pvt.) Ltd. and one of the relatives of the director of the petitioner company viz Ch. Zulfiqar Ahmed is facing a trial before the Accountability Court No.V in connection with reference No.21/2001 filed by the NAB. However, none of the Directors/Promoters of the petitioner company is directly or indirectly involved in any existing business of OMC nor is involved in any criminal case.
Mr. Nasar Ahmad, learned Deputy Attorney General, based his arguments on the comments filed by respondent No.1. He sought to bolster his arguments by reference to section 2(2) of the Companies Ordinance, 1984 which defines what an affiliate of a company is. He submitted that OGRA as a regulator has the power and authority to objectively conclude if the company applying, has its own independent infrastructure and other essential attributes.
5. Both these criteria are being dealt with separately.
Policy and its amenability to challenge:
6. The superior courts have laid down clear rules on the basis of which a challenge to the policy of the Government can be made and sustained by the courts. This has its provenance in the trichotomy of powers which is the scheme of the Constitution. The matter is one which is wedded to the notion of deference to the will of the Executive, in that, it is the prerogative of the Executive to make policies and to give effect to them according to the Governmental and political considerations. There are very clear rules laid down by the courts which circumscribe the powers of the court in relation to challenges made to policies. It has repeatedly been laid down by the superior courts that the Constitution is an organic whole and has to be construed in the context of the overall scheme of the Constitution. A balance has to be struck on the basis of separation of powers and due deference has to be shown to the policies framed by the Government. In recent years, there has been a spate of litigation challenging the various policies of the Government and on different occasions the Hon'ble Supreme Court of Pakistan was invited to deal with the question of challenges to policy matters. In this regard, I will only refer to the following cases for an overview of the case law on the subject. i. In Dr. Akhtar Hassan Khan and others v. Federation of Pakistan and others (2012 SCM R 455) it was held as under: "Though its policies sometimes may be open to criticism but that is for the concerned economists in the government or academics to examine and opine but once the Competent Authority in the government has taken a decision backed by law, it would not be in consonance with the well established norms of judicial review to interfere in policy making domain of the executive authority."
23. In Tata Cellular v. Union of India (36(1994) 6 SCC 651), the Court while dilating on the parameters of judicial review in matters of awarding of contract by the Government candidly laid down as follows:-- "77. The duty of the court is to confine itself to the question of legality. Its concern should be:
(1) whether a decision-making authority exceeded its powers?
(2) committed an error of law,
(3) committed a breach of the rules of natural justice,
(4) reached a decision which no reasonable tribunal would have reached or,
(5) abused its powers.
Therefore, it is not for the court to determine whether a particular policy or particular decision taken in the fulfillment of that policy is fair. It is only concerned with the manner in which those decisions have been taken. The extent of the duty to act fairly will be a vary from case to case. Shortly put, the grounds upon which an administrative action is subject to control by judicial review can be classified as under:--
(i) Illegality: This means the decision-maker must understand correctly the law that regulates his decision-making power and must give effect to it.
(ii) Irrationality, namely, Wednesbury unreasonableness.
(iii) Procedural impropriety. The above are only the broad grounds but it does not rule out addition of further grounds in course of time." ii. In Watan Party and another v. Federation Of Pakistan and others (PLD 2013 Supreme Court 167), the Hon'ble Supreme Court of Pakistan had this to say on the subject of policy: "From the bare reading of the Constitution, particularly, Articles 29 and 38 of Chapter 2, Part-II, relating to the principles of policy, it is evident that policies are to be made by the respective Federal and Provincial Governments and all decision regarding their implementation are also to be taken by them on the basis of determined priorities of different projects and availability of financial resources at their disposal. Obviously, this exercise cannot be ordinarily interfered with by this Court by invoking its jurisdiction under Article 184(3) of the Constitution, unless shown to be mala fide or in violation of the fundamental rights guaranteed under the Constitution to every citizen of this Country, thereby affecting the interest of public at large.".
In the Indian jurisdiction the question has been the topic of discussion by the Supreme Court of India as well. It would suffice to refer to M.P. Oil Extraction and another v. State of M.P. and others (1997) 7 Supreme Court Cases 592), Premium Granites and another v. State of Tamil Nado and others (1994) 1 SCR 579 and Narmada Bachao Andolan etc. etc. v. Union of India and others (AIR 2000 Supreme Court 3751).
7. A detailed analysis of the case law has recently been undertaken by the Hon'ble Supreme Court of Pakistan in Dossani Travels Pvt. Ltd. and others v. Messrs Travels Shop (Pvt) Latd. And others (PLD 2014 Supreme Court 1) and upon such analysis it has been held in that judgment that: "28. A comparative analysis of the constitutional law from various jurisdictions would indicate that the Courts have deferred to the decisions of the administrative bodies and those entrusted with the policy making functions of the Executive if there was no violation of law."
The interference with policy matters can only be made on the parameters laid down by the superior courts and not beyond that. There is very limited scope of interference with the policy matters yet this Court is not denuded of the power to interfere in case of:
(i) illegality;
(ii) irrationality namely Wednesbury unreasonableness; and
(iii) procedural impropriety.
With this in view, I will now proceed to deal with the challenge to the policy of 25.10.2003 relating to criteria for issuance of petroleum products marketing license.
Para I of the policy: The petitioner is aggrieved of the condition that the company should not be affiliated in any manner with existing OMC operating in Pakistan. Affiliation has not been defined in the said policy and has a broad connotation and could include multiple scenarios within it. However, the learned counsel for the petitioner has referred to the comments filed by respondents No.2 and 3 where the concept of affiliation has been sought to be explained by the said respondents. It is being reproduced as under: "that no company undertakes any business under the guise of facilities and goodwill of other companies. Rather, they establish and introduce their own infrastructure, finance, facilities etc."
8. The learned counsel for the petitioner submits that this is a fair elucidation of the term 'affiliated' and truly brings forth the intent underlying of the term affiliated as used in para I. It seems that the word "affiliated" used in para 1 has to have a meaning which is structured and which cannot be so broadly read as to leave it to the whims and discretion of the officers dealing with the grant of license. It cannot be like the chancellor's foot to mean that it moves with the foot of the officer deciding upon the said application according to the license. In my opinion the explanation to the term given in para 3 (c) of the comments filed by respondent No.1 truly bring forth the underlying criteria which should serve as the standard for seeing whether the condition under para I of the policy has been fulfilled by the applicant or not. The learned counsel for the petitioner submits that certainly he has no objection to such criteria being laid down and that it is for the Authority to satisfy itself that the company is not applying for license under the guise of facilities and goodwill of other companies. This will lend fairness and reasonableness to the entire process. I would, therefore, hold that so far as para I of the policy is concerned, the term 'affiliated' should be taken to mean that the company applying for license should commence and operate its business on the basis of its own facilities, infrastructure etc. Surely, it is not difficult for OGRA to analyse the application and to satisfy itself on these matters. If a company is investing rupees 500 million or more, then the facilities and structures cannot be in the air and have to be on the ground and in full view. OGRA has the means and skill to determine whether these facilities exist independently or not.
The said determination should be made on objective criteria and a check list can be developed for the purpose. The purpose seems clearly to be for the applying company to stand on its merit without reference to any other company. I should think that the word 'affiliation' ought to be understood in the ordinary dictionary meaning as having no connection with any existing OMC. In laying this criteria and by the use of the term 'affiliated', it is legitimate to think that the Federal Government had the concept of an 'associated company' as defined in section 2(2) of the Companies Ordinance, 1984, in its contemplation, as argued by the learned D.A.G. Yet that, in my opinion, will be unduly restricting the criteria set by the Federal Government. It will bear emphasis that the purpose here is the existence of the applicant company's own infrastructure etc. to enable it to set up and operate an OMC and for that it should not be dependent on another company.
Simply put, the purpose of the term 'affiliated' as used in para I of the policy. I will not go into the question whether an applicant company could be an associated company of another company and will it be caught in the mischief of the policy for another day as that question is a moot question in this petition.
Para VI (a):
9. The petitioner takes offence to the requirement of an affidavit to be procured from the relatives of sponsors to the effect that they are not involved in any criminal case or bank loan and direct and indirect federal taxes default. This criteria has wide sweep and on the face of it is irrational. As brought forth above on the basis of case law, that irrationality and unreasonableness is one of the grounds on which the policy can be challenged. OGRA is a core public Authority and should lay down rules and policies which are reasonable and can be fairly applied. It would be relevant to pause here to consider three concepts of Administrative Law on the basis of which a policy can be impugned. The first is Wednesbury unreasonableness. This is a formulation by Lord Greene M.R in Associated Provincial Picture Houses Limited v. Wednesbury Corporation (1948) 1 KB 223 to the effect that the courts can only interfere if a decision "is so unreasonable that no reasonable authority could ever come to it". It has been recognized that official decisions may be held unreasonable when they are unduly oppressive. Here I would refer to a passage from De Smith's Judicial Review (seventh edition) at page 622: "Official decisions may be held unreasonable when they are unduly oppressive because they subject the complainant to an excessive hardship or an unnecessarily onerous infringement of his rights or interests. As we shall see, the principle of proportionality directs itself to the evaluation of the permitted degree of infringements of rights or interest."
10. The next principle which will be attracted in this case is the principle of irrationality on the touchstone of which this policy could be analyzed to see if it can be sustained. The concept of rule of law requires that policies must be rational and not contrary to constitutional rights. The adoption of a policy creates a legitimate expectation and the adoption of an irrational policy as to how a discretion will be exercised unlawfully fetters that discretion.
11. The third principle which is fast gaining currency is the ground of proportionality. Here again, in order to illustrate the concept of proportionality I would draw from De Smith's Judicial Review 7th Edition at page 629: "Insofar as the general concept of proportionality is a test requiring the decision-maker to achieve a fair balance, it provides an implicit explanation for some of the existing judicial interventions on the ground of unreasonableness, particularly under two of the categories of unreasonableness we have identified above, namely, those held invalid because they manifestly failed to balance one or more (relevant) consideration, and those where the decision was held to be unreasonably onerous or oppressive under the first of these, the courts evaluate whether manifestly disproportionate weight has been attached to one or other considerations relevant to the decision. Under the second, the courts consider whether there has been a disproportionate interference with the claimants' rights or interest. Their will of course always be an examination of rationality in its narrow sense of logical connection between ends and means. In these instances, it makes little difference whether the term employed to describe the administrative wrong is "unreasonable" or "disproportionate" although the latter describes more accurately why the decision is unacceptable. The principle difference between this kind of proportionality and the structured test is that the burden of asserting the disproportion is normally on the claimant rather than the decision-maker."
12. Analysing para VI(a) of the policy on the touchstone of reasonableness, rationality and proportionality, I am convinced that the requirement of an affidavit to be submitted of the relative of sponsors is unduly oppressive requirement and offends the principle of proportionality and reasonableness. The learned counsel for the petitioner certainly has no cavil with submitting an affidavit of sponsors/directors that they are not involved in any criminal case etc. However, he submits that the term relative is of wide amplitude and it would be irrational to expect a prospective applicant to submit the affidavits of all the relatives and extended family of the sponsors and directors. Beside being irrational the said requirement would give a wide discretion in the hands of the Authority and its officials to play with this term and to use it at their own sweet will.
This cannot be permitted to be done on the basic principle that discretion has to be structured and cannot be unfettered. The learned counsel for the petitioner submits that a reasonable interpretation would be that the directors and sponsors are required to give the affidavits of their spouse and dependents and not other relatives in the extended family. The basis for this is firstly that all persons being independent, a person applying for a license will not be concerned with or connected with the activities of his close relatives or even of his siblings. Certainly, it is unreasonable to expect him to have enough influence on his entire lot of relatives to compel them to give an affidavit to this effect. Surely, any of his relatives may be involved in a criminal case etc. yet such misdemeanor of any of the relatives cannot be burdened on the applicant and he cannot be debarred for life on this account. I would, therefore, hold the policy to the extent of paragraph VI(a), which requires an affidavit to be filed of the relatives of sponsors/directors, to be irrational and unreasonable.
13. The learned counsel for the petitioner has relied on Article 18 of the Constitution to submit that this condition impinges upon the right of trade and business given in that Article. He has relied on Abid Mehmood v. Capital Development Authority through Chairman and another (PLD 2012 Islamabad 27) in supports of his submission. However, I am not inclined to consider the vires of this policy on the touchstone of Article 18 of the Constitution for the reason firstly, that I have held it to be irrational in the forgoing paragraphs and secondly, Article 18, in my opinion, is perhaps not strictly applicable to this case, for the right given by Article 18 excludes from its operation the regulation of any trade by license system. It is the case of the petitioner that he has applied for a license to operate an OMC. Therefore, as per his own showing, the trade that he intends to enter upon is to be regulated by license system. Therefore, Article 18 of the Constitution, in my opinion, will not be attracted to the present case. For this reason also, the judgment cited by the learned counsel for the petitioner is not applicable. The true import of Article 18 has been construed in the above noted judgment of the Hon'ble Supreme Court of Pakistan viz Dossani Travels Pvt. Ltd. and others v. Messrs Travels Shop (Pvt) Latd. And others (PLD 2014 Supreme Court 1) and the exception of the regulation of any trade by a license system has been duly noted in that judgment.
14. The question now remains as to whether the paragraph VI(a) of the policy is to be declared void or not. In my opinion, it is not necessary to declare the said paragraph void and it can simply be read down to only include within the term relatives as the spouse and dependents of the sponsors/directors. The interpretative tool of reading down is now well entrenched in our jurisprudence. This is resorted to in order to resolve a conflict and also with the object of saving a provision. The Supreme Court of India in Delhi Transport Corporation v. D.T.C Mazdoor Congress and others (AIR 1991 Supreme Court 101) held as under: "The doctrine of reading down or of recasting the statue can be applied in limited situations. It is essentially used, firstly, for saving a statute from being struck down on account of its unconstitutionality. It is an extension of the principle that when two interpretations are possible- one rendering it constitutional and the other making it constitutional the former should be preferred. The unconstitutionality may spring from either the incompetence of the legislature to enact the statue or from its violation of any of the provisions of the Constitution."
To the same effect, is another judgment of the Indian Supreme Court viz Calcutta Gujrati Education Society and another v. Calcutta Municipal Corporation and others (AIR 2003 Supreme Court 4278).
The rule has found expression in our jurisprudence in Messrs Elahi Cotton Mills Ltd. and others v.
Federation of Pakistan through Secretary M/o Finance, Islamabad and 6 others (PLD 1997 Supreme Court 582), Indus Jute Mills Ltd. through Chief Executive v. Federation of Pakistan through Secretary Finance, Islamabad and 3 others (2009 PTD 1473) and lastly by my learned brother (Syed Mansoor Ali Shah J.) in Lone Cold Storage, Lahore v. Revenue Officers, Lahore Electric Power Co. and others (2010 PTD 2502).
15. Applying the rule of reading down, I would hold that the expression 'relatives' of sponsors/directors found in para VI(a) of the policy should be read as only referring to the spouse and dependents of those sponsors/directors. This is a fair and pragmatic manner in which para VI(a) of the policy can be read.
16. In view of the above discussion, this petition is accepted in the above terms.