' QAZI FAEZ ISA, J.---These petitioners for leave to appeal impugn the judgment dated 22nd May, 2014 whereby Constitution Petitions Nos.D-3158 and D-3159 of 2010, respectively filed by Royal Management Services Management Company and Prudential Capital Management Ltd., were dismissed by the Hon'ble High Court of Sindh vide a common judgment.
2. The case of the petitioners is that they were the management companies respectively of First Pak Modaraba and First Prudential Modaraba ("the said Modarabas") registered under the Pakistan Companies and Modaraba (Floatation and Control) Ordinance, 1980 when in the year 2007 enquiries were initiated against them. In May 2007 show cause notices were issued to both of them and the same culminated in the issuance of order dated 29th October, 2010 by the Registrar of Modarabas, which appointed KASB Modaraba Management (Pvt.) Limited (respondent No, 3) as the management companies of the said Modarabas by removing the petitioners as their management companies.
3. Mr. Makhdoom Ali Khan, the learned counsel for the petitioners, has assailed the impugned judgment only on the ground that at the relevant time the Securities and Exchange Commission of Pakistan ("SECP") was not properly constituted, as it did not have the prescribed minimum of five or a maximum of seven members on the Board of SECP. The learned counsel further contended that deficiency was sought to be attended to by inserting saving and validation sections that were brought about by the Finance Act of 2003 but this Court in the case of Muhammad Ashraf Tiwana v. Pakistan (2013 SCM R 1159) had held, that the same did not fall within the domain of a money bill which could be legislated as a Finance Act and consequently it was struck down.
4. Mr. Zahid F. Ebrahim, the learned counsel for SECP, stated that the judgment in Muhammad Ashraf Tiwana's case attended to the saving and validation that was brought about by the Finance Act, 2003 whereas the Securities Exchange Commission of Pakistan Act, 1997 ("SECP Act)" was subsequently amended by the Securities and Exchange Commission (Amendment) Act, of 2013, being Act No,XVIII of 2013, which was published in the Gazette of Pakistan, Extraordinary on 26th March 2013 ("the SECP Amendment Act") and which was not by way of a money bill. Reliance was placed upon the amendments brought about by the SECP Amendment Act whereby the acts, proceedings and decisions of the SECP were saved and validated, as under:-- 'Section 5(5) of the SECP Act: "No act, proceeding or decision of the Commission shall be invalid only by reason of the existence of a vacancy or defect in the constitution of the Commission."
'Section 4 of the SECP Amendment Act: "4. Validation.---Anything done, actions taken, orders passed, instruments made, notifications issued, agreement made, proceedings initiated, processes or communications issued, powers conferred, assumed or exercised by the Commission as defined in clause (g) of section 2 of the said Act or its employees as defined in clause (k) of section 2 thereof in terms of amendments made through this Act, on or after the 19th December, 1997 and before the commencement of this Act, shall be deemed to have been validly done, made, issued, taken, initiated, conferred, assumed and exercised and the provisions of this Act shall have and shall be deemed to have had effect accordingly."
' Therefore, according to Mr. Ebrahim, the judgment of this Court in Muhammad Ashraf Tiwana's case would not be of assistance to the petitioners. The learned counsel further stated that the petitioners had not assailed the decisions of the Registrar of Modarabas on merit, which had been arrived at after issuance of show cause notices and after providing opportunity of hearing. He contended that seven serious allegations had been levelled by the Registrar and the same had been established by the record, which he referred to. He stated that the public had invested in the said Modarabas, however, those at the helm of affairs of the petitioners were using the same as their own personal property. He referred to the record and the orders dated 28th October, 2010 of the Registrar, which had in detail set out the allegations and his findings in respect thereof.
5. That we enquired from the learned counsel for the petitioners whether an incomplete Board of SECP would in any manner adversely affect the interest of the petitioners or whether the Board was an appellate authority against the orders of the Registrar. The learned counsel frankly conceded that the same was not the case of the petitioners, he, however, maintained that the subsequent saving and validation would not cover the orders dated 29th October, 2010, which were of no legal effect as the same were issued at a time when the Board was incomplete.
6. That the first question that arises is whether a particular management company has a right to manage a modaraba despite serious and well founded findings of wrong doing against it.
Modarabas are managed for the benefit of investors and thus the companies managing them must act solely for the benefit of the investors. However, in this case, the said Modarabas were being misused/misappropriated by those who were managing them. In other words the interest of the investors was being compromised. In the cited case of Muhammad Ashraf Tiwana the SECP's role with regard to safeguarding the interest of the investors was also highlighted by one of us (Jawwad S. Khawaja, J.) as under:-- "(5) The SECP as such is amongst the most important regulatory authorities directly impacting the economic life of the citizens of Pakistan. It may also be noted that amongst the various functions and powers of SECP which have been mentioned in section 20 of the Act, there are a number of functions which relate directly to the economic well-being of the people of Pakistan. By way of illustration only, it may be mentioned that in section 20(6), the SECP has been specifically ordered and mandated inter alia, "to maintain the confidence of investors in the securities markets by ensuring adequate protection for such investors". The Securities and Exchange Ordinance, 1969 which, as noted above, is also administered by SECP deals in the capital markets in Pakistan. By virtue of that statue too, the SECP is required "to provide for the protection of investors" (Preamble);"
"It is a self evident fact that persons making investments in and through the capital markets of the country will either be attracted to the capital markets or shy away from such market depending upon the trust and confidence which they have in such markets and this in turn depends upon the rigour and quality of the regulator. Moreover, investments made by the people, being property, are required to be protected through enforcement of the fundamental rights".
7. That in view of the fact that it had been established that the said Modarabas were not being run properly and the interest of the investors had been jeopardized, the question of the composition of the Board fades away. In any event the SECP Amendment Act that contained the saving and validation was neither assailed before the High Court nor it has been assailed before us. Even if for the sake of argument we were to agree with the learned counsel that the Board was incomplete at the relevant date, it would not take away from the fact that the petitioners were not running the said Modarabas in accordance with law, therefore, they had no ground to object to their substitution by another modaraba management company.
8. That there is yet another important aspect of the case. The substitution of the petitioners' management companies was made vide the impugned orders of the Registrar dated 29th October, 2010, but this was after the orders dated 28th October, 2010, however, the orders dated 28th October, 2010 werenot assailed, which therefore attained finality. It was also not the case of the petitioners that the management of the said Modarabas was handed over to the respondent No,3 with a view to benefit respondent No,3.
9. That in view of the aforesaid facts no exception can be taken to the impugned judgment and no case for grant of leave is made out; resultantly, the petitions are dismissed and leave to appeal is declined. We had dismissed these petitions vide our short order dated 23rd October, 2014 and these are the reasons for the same.