AYESHA A. MALIK, J.---Through this Petition, the Petitioners have impugned the actions of the Respondent National Highway Authority (" NHA ") and two letters both dated 9.3.2020 issued by the NHA.
2. The case of the Petitioners is that they were awarded a construction contract for the road project known as the Gwadar-Ratodero Road Project, Khuzdar Shahadakot, Package III, Section IV of the Motorway , M-8 (KM 35+000 to KM 84+500) on 9.8.2004 ("the Construction Contract "). Subsequently some variation was required with the terms of the Construction Contract for which meetings were held under the Chairmanship of Member (Motorways), NHA who finalized the amendments known as Variation Order No.2 to reflect changes in Appendix C to the Construction Contract vide minutes of meeting dated 26.6.2006. Variation Order No.2 was approved by the Executive Board of the NHA in its meeting held on 18.8,2006. Variation order No.2 was placed before the Executive Board of the NHA in its meeting held on 12.3.2008 and was approved by the Board on the said date as is apparent from the appended minutes of meeting dated 12.3.2008. In the light of this decisio n by the Executive Board of the NHA, the Construction Contract including Appendix C was amended through Amendment No.1 dated 20.5.2008 and in terms thereof. Subsequently escalation payments have been made to the Petitioners on the basis of the amended contract especially the amendment to Appendix C.
3. The present dispute arose on account of a direction given by Respondent No.2, Public Accounts Committee ("PAC") to the Respondent NHA to recover amounts from the Petitioner . NHA followed the same notwithstanding the fact that they have approved all amendments made to the Construction Contract including amendments to Appendix C and without application of mind. Learned counsel for the Petitioner argued that the precise dispute is with respect to the audit objection noted in paragraph 4.4.13.5 of the Audit Report 2015 to the effect that escalation payments made to the contractor with respect to input element of skilled labour cost is not admissible under the Standard Procedure and Formula for Price Adjustment issued by the Pakistan Engineering Council ("PEC Procedures "). Learned counsel further argued that Respondent NHA does not deny the amendment to Appendix C whereas PAC has denied the same and submits that the amendments are unlawful and should not have been made. Learned counsel also argued that initially an audit objection was raised on the same issue in the year 2010 ,and an inquiry was called. The inquiry report issued on 28.10.2015 comprehensively dealt with the objection of PAC and the stance of the NHA. As per the inquiry report, the Petitioners are entitled to escalation payment as per its requirements as fuel and labour factors were revised in Appendix C with the approval of the NHA Board and implemented through necessary amendm ents in the contract. Subsequent to the inquiry , the matter stood settled and the Petitioners were paid accordingly .
4. Learned counsel stated that on 9.3.2020 the same objection was raised as audit para 4.4.13.5 in the Audit Report 2015 with respect to the same escalation payments and the factors relevant thereto. Learned counsel for the Petitioners stated that NHA claims that an over payment has been made to the Petitioners on account of the price escalation of skilled labour which was not part of the original agreement and hence these amounts must be recovered. The matter was discussed by the Departmental Accounts Committee ("DAC ") in its meetings held in November 2014 and December 2014 and a direction was given to recover the said amount which has allegedly been paid in excess. Learned counsel argued that the NHA has not denied the amendments to the Construction Contract particularly Appendix C in which the weightage for skilled labour was agreed upon between the parties and Respondent No.4 and Respondent No.2, PAC cannot seek recovery of the excess amounts since the parties to the contract agreed to the amendments. Furthermore in case any excess amount is alleged to have been paid due process must be followed by issuing notice to the Petitioners, granting opportunity of hearing and allowing an adjudicatory forum to settle the dispute. Learned counsel argued that even otherwise the objection that the amendments are in violation of the PEC Procedures is not relevant as the PEC Procedures were issued later in time and cannot be applied retrospectively to the amended contract. Learned counsel further argued that there is no inquiry or recovery directed by PAC against the Respondents yet despite the same their invoices are not being processed and Respondent NHA is attempting to pursue recovery of amounts which they are not entitled to.
5. Report and parawise comments have been filed on behalf of Respondent No.4, Auditor General of Pakistan.
Learned DAG argued that any decision made by the NHA with reference to the Construction Contract is subject to DAC approval and the Audit Department approvals; that PAC is responsible to see how public money is being spent and Respondent NHA cannot enter into any contractual arrangement which is contrary to the rules. Hence the recovery is justified.
6. Report and parawise comments have also been filed by Respondent No.1, NHA in which they admit the amendments in the Construction Contract were made by their Board; that PAC has given instructions to recover amounts from the Petitioner in 2017 and that NHA is bound by the decision of PAC. However , on behalf of PAC, learned DAG was unable to show any order seeking any inquiry or recovery in terms of the audit objection raised in para 4.4.13.5 of the Audit Report 2015. Learned DAG also raised the objection that this dispute is subject to arbitration; that it is a contractual obligation and the parties have agreed to a dispute resolution method, hence the instant Petition is not maintainable.
7. Heard and record perused. The basic issue before the Court is with respect to the stance taken by NHA that the Petitioners are not entitled to the weightage factors with reference to the price escalation of skilled labour as agreed in Appendix C to the amended Construction Contract. The Petitioners' contention that Appendix C was amended; that an audit objection on the same issue was raised in 2010, inquired into and settled as per the inquiry report which is apparent from the record is not denied by any of the Respondents. Subsequent to the inquiry report issued by NHA, the audit objection of 2010 was removed and the Petitioners were admittedly paid price escalation in terms thereof. The same issue arose again with the same audit objection with reference to the financial year 2014-15 in the Audit Report for the year 2015. The objections noted in paragraph No.4.4.13.5 of the Audit Report 2015 in essence provides that price escalation was paid on input element of skilled labour cost which is not admissible in the light of the PEC Procedures which does not allow price escalation on input element of skilled labour cost. Hence as per the objection, the Petitioner has been paid in excess under the Construction Contract.
8. At the very outset, it is noted that this is not a contractual dispute, hence is not arbitrable in terms of the dispute resolution clause contained in the construction contract. This dispute pertains to the decision taken by the NHA to recover amounts from the Petitioners on the instructions of PAC, which is not subject to the terms of the contract, hence not subject to the dispute resolution clause. Therefore, there is no merit in the preliminary objection with reference to the arbitrability of the dispute.
9. The Respondent NHA does not deny the amendments made to the Construction Contract including Appendix C, the decisions of its Executive Board dated 18.8.2006 and 12.3.2008 and payments made to the Petitioners pursuant to these decisions. Hence the question before this Court is whether NHA can recover amounts from the Petitioner based on an audit objection raised by PAC and whether the decision of PAC can form the basis 'of recovery without due process and adjudication on the issue of recovery .
10. Article 69 of the Constitution of Islami c Republic of Pakistan, 1973 ("Constitution") provides that (i) The validity of any proceedings in [Majlis-e-Shoora] (Parliament) shall not be called in question on the ground of any irregularity of procedure (ii) No officer or member of [Majlis-e-Shoora] (Parliament) in whom powers are vested by or under the Constitution for regulating procedure or the conduct of business, or for maintaining order in [Majlis-e-Shoora] (Parliament), shall be subject to the jurisdiction of any court in respect of the exercise by him of those powers. The relevant rules are the Rules of Procedure and Conduct of Business in the National Assembly , 2007 (As modified up to the 13th September , 2019) issued by the National Assembly of Pakistan ("Rules of Business 2007"). Rule 203 of the Rules of the Business 2007 provides for the Functions of the P AC which states that: The Committee shall examine the accounts showing the appropriation of sums granted by the Assembly for the expenditure of the Government, the annual finance accounts of the Government, the report of the Auditor General of Pakistan and such other matter . as the Minister for Finance may refer to it.
Furthermore Sub-Rules (4) and (5) of Rule 203 of the Rules of the Business 2007 provides as follows:
(4) If any money has been spent on any service during a financial year in exces s of the amount granted by the Assembly for that purpose, the Committee shall examine with reference to the facts of each case the circumstances leading to such an excess and make such recommendation as it may deem fit.
(5) The report of the Committee shall be presented within a period of one year from the date on which reference was made to it by the Assembly unless the Assembly , on a motion being made, directs that the time for the presentation of the report be extended to a date specified in the motion: Provided that extension in the time for the presentation of the report shall be asked for before the expiry of the time allowed under the rule.
Therefore as per the Rules of Business 2007, PAC is a recommendary committee which is required to examine the accounts of the relevant year and make recommendations as it deems fit. The report of the PAC is then to be presented along with its recommendations to the Assembly for a decision. Conse quently in terms of Article 69 of the Constitution, there is a bar on the decision of the [Majlis-e-Shoora] (Parliament) taken with respect to any decision of questioning and inquiring to the proceedings of the National Assembly . This will include any decision taken by P AC.
11. Article 69 of the Constitution has been interpreted in Muhammad Azhar Siddiqui and others v. Federation of Pakistan and others (PLD 2012 SC 774). The provisions of Article 69 of the Constitution were elaborately examined by the august Supreme Court of Pakistan wherein it was held that: It is, therefore, obvious that the proceedings of a formally constituted Committee of either House falls within the ambit of internal proceedings of the Majlis-e-Shoora (Parliament) and consequentl y are immune from challenge in Courts in the light of the bar contained in Article 69 of the Constitution. The proceedings of the Public Accounts Committee are, therefore, the internal proceedings of the Parliament and as such immune from being inquired into by this Court.
The judgment finds that the proceedings of a formally constituted committee of Majlis-e-Shoora (Parliament) falls within the ambit of internal proceedings and consequently is immune from challenge in courts in the light of the bar contained in Article 69 of the Constitution. Consequently the proceedings of PAC are internal proceedings of Parliament and immune from being inquir ed into by this Court. Therefore in view of the clear stipulation provided in Article 69 of the Constitution, as interpreted by the august Supreme Court of Pakistan a decision taken by PAC is not subject to writ jurisdiction. In the case of Nawab Khan Khattak v. Public Accounts Committee and others (2002 YLR 2209 ) the findings of P AC were also considered wherein the Court held: It will, therefore, be seen that the functions of the PAC are confined to the scrutiny of the audited accounts to satisfy itself, that money shown in the accounts as having been disbursed were legally available and applicable to the service purpose to which applied; the expenditure conforms to the authority; and that every re-appropriation has been made in accordance with the rule framed by the Government. Indeed, the report of the Committee, preliminary or final, is to be laid before the House, under rule 186 of the Rules of Procedure.
It was further held in 2002 YLR 2209 (supra) as follows: Even after hearing the affected persons the PAC could at the most recommend/suggest the action to the concerned Agency/ Department of the Government. We are clear in our view that the PAC could not straightaway direct action against the petitioners, for it could only recommend and the Government was to judge each and every case independently in accordance with law. It is mentioned that if the recoveries were made voluntarily in time then no Department/criminal action whatsoever may be taken and no adverse entries in the A.C.Rs be reflected but an Officer involved in the misdeeds hesitates to make the loss good, he is to be proceeded under the Rules without raising technical points. We are clear in our mind that the PAC could be straigh taway direct action against the petitioners; it could only recommend and the Government was to judge each and every case of the petitioners independently in accordance with law .
Furthermore in a recent judgment BNP (Pvt.) Ltd. v. Capital Development Authority and others (2016 CLC 1169) two questions were discussed firstly as to whether the proceedings of PAC are barred or immune from judicial review in the light of Article 69 of the Constitution and secondly , whether the authority could have acted without application of mind and in a mechanical manner pursuant to the directives of the PAC. In this regard, the Hon'ble Islamabad High Court held that: It is, therefore, obvious that the proceedings of a formally constituted Committee of either House falls within the ambit of internal proceedings of the Majlis-e-Shoora (Parliament) and consequentl y are immune from challenge in Courts in the light of the bar contained in Article 69 of the Constitution. The proceedings of the Public Accounts Committee are, therefore, the internal proceedings of the Parliament and as such immune from being inquired into by this Court.
It was further held in 2016 CLC 1 169 (supra) as follows: There is no cavil to the proposition that the Public Accounts Committee, being an integral part and its proceedings falling within the ambit of 'internal proceedings' of the Parliament, has to be given utmost respect and treated with deference. Its findings and recommendations carry immense sanctity and, theref ore, have to be considered and acted upon with great care and diligence. However , as already pointed above, Rule 201(4) of the Rules of 2007 expressly provides that after the Public Accounts Committee has forwarded its report of findings and recommendations to a. Ministry or its associated public body , then the latter is under an obligation to submit its reply to the Committee. It is implicit in Rule 201(4) that after receiving the report of findings or recommendations of the Public Accounts Committee, the Ministry or its associated public body , as the case may be, shall consider the same and, if required, afford an opportunity of hearing to the person being adversely affected, and then submit its reply to the Committee. The requirement of submitting a reply contemplated in Rule 201(4) essentially involves a process of considering the relevant factors, deliberations and taking appropriate decisions and actions. The recommendations, therefore, if acted upon in a mechanical manner , would not be in consonance with the law, particularly the Rules of 2007.
It was also held in 2016 CLC 1 169 (supra) as follows: The Board, in the instant case, was required to have considered the recommendations/directives of the Public Accounts Committee and ought to have taken decisions based on the exercise of independent judgment, and thereafter to have submitted a reply to the latter . However , admittedly , as conceded by the learned counsel and also apparent from the record, the Board, instead of considering the directions/ recommendations of the Public Accounts Committee, issued the impugned letter in a mechanical manner .
Hence only after following due process as contemplated under the Rules of Business 2007, can any recovery be made. In this regard only after PAC has placed its recommendations before the relevant department or authority whose accounts were audited for due consideration and necessary action, after it has been approved by the National Assembly .
12. In this case the Petitioner has challe nged the decision of Respondent NHA wherein it is seeking to recover amounts from the Petitioner allegedly on the instructions of PAC. In this regard, the National Highway Authority Act, 1991 ("NHA Act") establishes a National Highway Authority for planning, development, operation and maintenance of National Highways and strategic roads and to provide for matters connected therewith or incidental thereto.
Section 24 of the NHA Act provides for the Audit of its accounts, in terms of which the accounts of the Authority shall be audited every year by the Auditor General in such manner as may be prescribed by the Federal Government. Hence the accounts of the NHA are subject to audit by the Auditor General. In terms thereof during the audit of the 2015 accounts an audit objection noted in paragraph No.4.4.13.5 stated that price escalation was paid on input element of skilled labour cost which is not admissible in the light of the PEC Procedures. As per the record there has been no recommendatio n by PAC on the audit objection. The record also shows that even though the objection was placed before PAC, it was not taken up in that meeting. Notwithstanding, NHA issued letter dated 9.3.2020 wherein it conveyed to the Petitioner that on a direction given by PAC, they seek to recover amounts under audit para No.4.4.13.5. On the same date, another letter was issued to General Manager (Const-North), National Highway Authority , Quetta to recover amounts as per audit para No.4.4.1 3.5. Both letters clearly stipulate that this is .being done on the instructions of P AC.
13. As per report and parawise comments filed by PAC, audit para 4.4.13.5 of the audit report for the year 2014-15 was on the agenda of PAC meeting held on 14.9.2017, however the said para along with other paras could not be discussed and the meeting was adjourned. Therefore in terms of the report and parawise comments filed, PAC never gave any instructions to NHA to recover any amounts from the Petitioner . Hence the contention of NHA is belied on the basis of the report and parawise comments filed by P AC before this Court.
14. Learned counsel for NHA during the course of proceedings was asked to show the recommendation of PAC and the instructions given by PAC on the basis of which they claim that they have been directed to recover amounts from the Petitioner . Learned counsel was unable to show any such letter or report. Learned counsel for the Petitioner however has relied upon the report of the Inquiry Committee on the directives of PAC dated 28th and 29th July 2015 regarding printed para 3.2.48 for the year 2010-1 1 which is on the same subject matter and the same dispute, however pertaining to the year 2010. As per this report, the amendments to the contract were made with the approval of NHA on the initiation of the Planning Commission and was binding on the parties. All codal formalities were duly followed and were duly approved by NHA Executive Board and ultimately the Inquiry Committee concluded that the revisions made to Appendix C were all made in accordance with law as per the procedures laid down, therefore the recov ery is not justified. Hence even the decision of NHA itself as per its own Inquiry Report suggest that they cannot make any recovery against the Petitioner on account of the amendments made to the Construction Contract which was all done in accordance with law after following due process.
15. On the basis of the aforementioned it is evident that NHA has used the audit objection as a basis for recovering amounts from the Petitioner . An audit objection is merely an objection highlighting irregularities under the relevant finance related rules. The purpose of the audit and audit objection is to ensure that public money is spent as per rules and regulations. An audit objection requires evaluation, recommendations and settlement. Until the audit objection is settled, it is merely an observation which requires probe, after giving the relevant department an opportunity to explain its position. By itself an audit objection is merely information placed before the authority which requires looking into, to determine whether there is breach of any finance related rule or regulation. Hence an audit objection cannot form the basis for recovering amounts from the Petitioner , that too without following due process. Furthermore in this case NHA is bound by the terms of its Construction Contract and cannot simply ignore the terms of its contract and initiate recovery without following due process and without raising the dispute before the Petitioner .
16. Under the circumstances, the Respo ndent NHA cannot recover the disputed amounts from the Petitioner as there are no instructions by PAC in this regard. Even otherwise PAC is a recommendatory committee which presents its recommendations to Parliament and cannot as such issue directions to NHA to initiate any recovery .
Furthermore if at all there is an audit objection, that objection has to be considered and dealt with as per law where after due process must be initiated if at all recovery is to be taken of any amount from the Petitioner which means acting under the Construction Contract, giving notice to the Petitioner and obtaining a declaration from the competent forum that the Petitioner owes amounts to the Respondent NHA as amounts paid in excess under the Construction Contract.
17. In view of the aforesaid, the instant Petition is allowed and the impugned recovery letters both dated 9.3.2020 issued by the Respondent NHA are set aside.