OMAR SIAL, J.---The issue that requires adjudication in these petitions is whether NAB can file a Reference in connection with a "regulated activity " (defined later in this opinion) without a complaint having been made by the.
Securities and Exchange Commission of Pakistan ("SECP").
2. Facts relevant for the present purposes are that the Abandoned Properties Organisation ("APO"), a government entity , instructed a brokerage firm by the name of First National Equities Limited ("FNEL") to sell its shareholding in two companies at the highest possible price. It is alleged that FNEL did not comply with the instructions of APO in a timely manner and as a consequence APO incurred a loss. This led to a dispute between the parties which could not be resolved amicably and consequent ly FNEL filed a suit (No. 590 of 2016) seeking determination of the liability of FNEL as according to FNEL, APO was demanding an exaggerated price from FNEL. The suit is pending adjudication in this Court. APO filed a complaint with NAB regarding the belated sale of its shares, which complaint culminated with the filing of Reference No. 34 of 2018.
3. Ali Aslam Malik who is the Chief Executive Officer of FNEL has filed both the captioned petitions. Through C.P.
No. D-7437 he seeks pre-arrest bail whereas through C.P. No. D-1401 of 2019 he seeks quashment of Reference No.34 of 2018 as according to his learned counsel, NAB could not have inquired into/investigated the transactions complained of without a complaint being made to it by the SECP . In support of his argument, learned counsel has relied solely on section 41-B of the Securities and Exchange Commission of Pakistan Act, 1997.
4. We have heard the learned counsel for the petitioner as well as the learned Special Prosecutor , NAB. Our observations are as follows.
5. On 19th December , 1997, the Securities and Exchange Commission Act, 1997 (Act No. XLII of 1997) came into effect ("the Act of 1997 "). On August 6, 2016, by virtue of the SECP (Amendment) Act, 2016 (XXXVI of 2016) ("the Second Amendment"), the following section 41-B was inserted in the SECP Act: 41B. Inquiry , investigation and other proceedings in respect of regulated persons.--
(1) Notwithstanding anything contained in any other law, including National Accountability Ordinance, 1999 (XVIII of 1999) and Federal Investigation Agency Act, 1974 (VIII of 1975) no action, inquiry , investigation or proceedings in respect of any regulated activity , regulated securities activity , transaction, process or permission granted under this Act or any administered legislation, shall be taken, initiated or conducted by any Federal or Provincial investigating agency , bureau, authority or institution by whatever name called without reference from the Commission. (2) No proceedings shall lie before any agency, bureau, authority or institution at the instance of any party to a matter which is or has been in issue before the Commission, in respect of a matter which is actually or has been or might or ought to have been a proper subject of complaint to the Commission under the administered legislation: Provided that cases pending before any court having jurisdiction before coming into force of this Amendment Act, shall continue to be prosecuted and conducted without reference from the Commission.
6. In essence, in terms of section 41-B, inter alia, NAB has been barred from conducting any action, inquiry , investigation or proceedings in respect of any regulated activity , regulated securities activity , transaction, process or permission, as defined in the Act of 1997 without a reference having been made by the SECP .
7. Section 2(pa) of the Act of 1997 defines the term "regulated activity" to mean any activity which is required to be registered with or licensed by the Commission under the Act of 1997 or any administered legislation. FNEL is a brokerage firm which is mandatorily requi red to be registered with the SECP , which admittedly it is. It is also listed on the Stock Exchange and cannot operate in its line of business without the requisite licence/permission from the SECP . The learned law officer of SECP has categorically confirmed that FNEL is registered as a company with the SECP and that its activities fall within the ambit of "regulated activity" as defined in the Act of 1997. He has also confirmed that the SECP has not made any complaint/reference, to date, regarding the activities of FNEL to NAB.
In this regard the Additional Director , Securities and Market Division, SECP filed a written statement, paragraph 3 of which read as follows: "It is further submitted that no reference has been filed by the SECP in the matte r of FNEL relating to misuse of claimant's (APO) shares and/or non settle ment of claim by the petitioner before the NAB under section 41B of the Securities and Exchange Commission of Pakistan Act, 1997 which has been promulgated/inserted in the SECP Act, 1997 through SECP (Amendment) Act, 2016 (XXXVI 2016) dated 6th August 2016, however , SECP has provided all the assistance to the NAB as and when required by the NAB."
8. On the other hand, the National Accountability Ordinance, 1999 ("N.A.O., 1999") was promulgated as a special law in 1999 i.e. 2 years after the Act of 1997. Section 3 of N.A.O., 1999 gives it an overriding effect over other legislation by providing that: The provisions of this Ordinance shall have effect notwithstanding anything contained in any other law for the time being in force.
9. The situation that arises is that which of the two non obstante clauses will prevail. It is an admitted position that both legislations are special legislations and that the Second Amendment was made in 2016 whereas section 3 of the N.A.O., 1999 was introduced in the said legislation in the year 1999 through the National Accountability Bureau (Amendment) Ordinance, 1999 (XIX of 1999). In the case of Syed Mushahid Shah and others v. Federal Investigating Agency and others (2017 SCMR 1218) the honourable Supreme Court has reiterated and clarified that "when there are two special laws both of which contain overriding clauses, in the case of conflict between the two laws generally the statute later in time will prevail over the statute prior in time". Keeping this principle in mind it is section 41-B of the SECP Act which will prevail over section 3 of the N.A.O., 1999, hence a reference from the SECP was a condition precedent for initiation of action against FNEL. We are cognizant however that the honourable Supreme Court in the Syed Mushahid Shah's case (supra) has gone to observe that, "However , we are of the opinion that the presumption is not automatic: instead a host of other factors including the object, purpose and policy of both statutes and the legislature's intention, as expressed by the language employed therein, need to be considered in order to determine which of the two special laws is to prevail."
10. For the sake of brevity we have not reproduced the preambles of the two legislations but suffice to say that the Act of 1997 was enacted for the SECP to be established for the beneficial regulation of the capital markets, superintendence and control of corporate entities and for matters connected therewith and ancillary thereto. The N.A.O., 1999, on the other hand, was promulgated to prosecute people involved in corruption and corrupt practices and recover ill-gotten wealth.
11. Under the Second Amendment, SECP has been given extensive powers to investigate an offence or a contravention which may have been comm itted by any person under the Act of 1997 or any administered legislation or a subordinate regulation or if a regulated person has engaged in committing fraud, misfeasance or other misconduct in carrying on a regulated activity .
12. Operations of the capital markets and the dynamics that prevail in it are of a specialized nature and are further regulated by a multitude of laws and regulations. These laws and regulations are highly complex within their sub- areas and the contempt of such is extensively sanctioned with penal provisions existing within the framework of those laws in themselves. Any arbitrary and ill-informed action, especially one under the criminal law, has the potential of having an adverse impact on the capital markets which can negatively impact the economy' of the country . On a plain reading, the intention of the legislature in introducing section 41-B seems clear as it specifically mentions that NAB and FIA may not probe an alleged offence pertaining to a regulating activity without a reference from the SECP .
13. We also note that the dispute between the parties is one pertaining to the rate that the shares of APO were sold by FNEL and that a suit is already pending in this Court for determination of the amount at which the shares were to be sold. The liability of FNEL, if any, towards APO has yet to be determined. It is FNEL's view that its liability towards APO is Rs. 149,352,836 whereas APO claims a higher price. Needless to say that there are many factors and market conditions that have to be taken into account before FNEL's liability can be affixed. This, as mentioned above, is an ongoing process and will reach finality when the pending suit for determination of liability is decided.
In the circumstances of the present case, SECP would be best placed to in the first instance determine whether an offence or fraud has taken place. Through the Second Amendment, SECP was granted substantial powers (contained in section 29 of Part VIII of the Act of 1997) to investigate whether any regulated person has engaged in committing fraud, misfeasance or other misconduct in carrying out a regulated activity which is APO's complaint against FNEL. Section 29(4) provides that SECP may, for the purposes of investigation seek the assistance of any other investigating agency or bureau.
14. In the case of State v. Imam Baksh (reported at 2018 SCMR 2039 ), the honourable Supreme Court has observed that "A provision in a statute is mandatory if the omission to follow it renders the proceedings to which it relates illegal and void". It is clear from section 41-B that non-compliance of the said section would render the very proceedings initiated by NAB illegal and void.
15. The complaint filed by APO against FNEL and specially keeping in view the fact that the primary dispute is whether shares were sold at the "correct" time, in our view falls within the ambit of the jurisdiction of the SECP and SECP is best suited to determine whether the allegation is correct and whether it tantamounts to a criminal offence.
SECP has been given extensive powers to investigate the same and if need be may file a reference with NAB. As no reference was made by SECP in the present case, the proceedings against the petitioner would be void ab initio and hence we are of the view that same should be quashed. SECP may investigate the matter however and if it reaches the conclusion that a reference to NAB is required it would be at liberty to do the same. Order accordingly .