MOHSIN AKHTAR KAYANI, J. Through this writ petition, the petitioners Irfan Ahmad Chattha and Suleman Najeeb Khan have assailed the notification dated 01.11.2022, whereby, Government of Pakistan, Ministry of Energy (Power Division) reconstituted Faisalabad Electric Supply Company Limited (FESCO) Board of Directors for a period of three years or till further orders. The petitioners further prayed that respondent No. 1/Federal Government be directed to act in accordance with law and not to interfere with the administrative management of FESCO, and action be also initiated against the officials of Federal Government who are involved in the issuance of notification dated 01.11.2022, in violation of Corporate Governance. Rule, 2013 (amended up to 01 July 2019) read with section 508(2) of the prevailing Companies Act, 2017.
2. Brief facts referred in the instant writ petition are that Secretary Ministry of Energy (Power Division) initially forwarded to the Federal Cabinet and Prime Minister's Secretariat/Office and finally selected/ nominated list of persons to be appointed as Independent Directors/ Consumers Representative Directors / Members of Board of Directors of the Faisalabad. Electric Supply Company Limited (FESCO) vide notification dated 15.09.2022. The same was given approval by Prime Minister of Pakistan vide notification dated 12.10.2022 and consequently the notification for reconstitution for Board of Directors of FESCO was issued on 01.11.2022 by the Government of Pakistan Ministry of Energy (Power Division), whereby, the present petitioners namely Wan Ahmed Chattha and Suleman Najeeb Khan were declared Independent Directors for period of three years or till further orders, however, later on, the petitioners are mainly aggrieved that prior to expiry of period of three year, new Board of Directors could not be constituted in terms of Rule 3-A(1) and (3) of the Corporate Governance Rules, 2013.
3. Petitioner in attendance before this Court contends that procedure for removal of Director appointed in terms of Companies Act, 2017 has been provided in terms of section 163, of the Companies Act, 2017, which was not adopted under the law; that respondent No.1 has issued the impugned notification without fulfilling due process of law and rules described for this purpose.
Even, notification is in violation of Articles 3, 4, 8, 10-A, 18, 25, 27 and 38 of the Constitution of Islamic Republic of Pakistan, 1973; that the respondent No.1 has not provided any reason nor extended right of hearing to the petitioners as to why they have been removed from their positions as Independent Directors, and not even served with show cause notice. The petitioners have heavily relied upon judgment reported as 2016 CLD [Islamabad] 134 (Babar Sattar v. Federation of Pakistan and others).
4. Conversely, learned A.A.G. along with counsels of Board of Directors and the Directors have opposed the instant writ petition on the ground that the petitioners have been appointed as Nominee Independent Directors, who were performing their duties on the doctrine of pleasure provided in subsection (3) of section 165 of the Companies Act, 2017, who can be removed without any notice or reason, and the process for removal of Directors envisaged under section 163 is not available to the present petitioners; that the case law relied upon by the petitioners is not applicable in this case; that no vested right is available to the petitioners to challenge the subsequent reconstitution of Board of Directors of FESCO nor they can be appointed even if the subsequent notification is set-aside as the Federal Government has every prerogative to change their Board of Directions in accordance with subsection (3) of section 165 of the Companies Act, 2017; that the proposed action of the Federal Government could not be challenged in judicial review as petitioners have failed to demonstrate any of their right to remain on positions of Nominee Director against the wishes of the Federal Government.
5. Arguments heard and record perused.
6. Perusal of record reveals that the entire case revolves around the claim of petitioners who were initially appointed as Nominee Directors vide notification dated 28.12.2020, issued by Government of Pakistan Ministry of Energy (Power Division), whereby, reconstitution of Board of Directors of FESCO was announced, but later on, the Federal Government has again processed the summary and reconstituted another Board vide impugned notification dated 01.11.2022. As per the stance of the petitioners, they have been given assurance under the law to remain in position for a period of three years or till further orders. It is further asserted that the petitioner could only be removed by way of process envisaged under section 163 of the Companies Act, 2017 which was not adopted in this case, resultantly, instant petition was filed.
7. In order to resolve the controversy, it, is necessary to go through the relevant provisions of the Companies Act, 2017, read with Corporate Governance Rules, 2013. In terms of section 2(25) of the Companies Act, 2017, the term "director" includes any person occupying the position of a director, by whatever name called. Similarly, in terms of Role 2(C) of the Corporate Governance Rule, 2013 the term "Executive" means an employee of a Public Sector Company, who is entrusted with responsibilities of an administrative or managerial nature, including the Chief Executive and Executive Director, Rule 2(E) of Corporate Governance Rules, 2013, explains "Non-Executive Director" means a director of a Public Sector company who is not entrusted with responsibilities of an administrative or managerial nature.
8. While going through the above three definitions if considered in terms of section 166 of the Companies Act, 2017, manner of selection of Independent Directors and maintenance of databank of Independent Directors were highlighted, whereby, it is mandatory to select an Independent Director from data bank containing names, addresses and qualifications of persons who are eligible and willing to act as Independent Directors, maintained by an institute, body or association, as may be notified by the Commission, having expertise in creation and maintenance of such data bank. Even for the purpose of this section, Independent Director has further been qualified with the special definition as "who is not connected or does not have any other relationship, whether pecuniary or otherwise, with the company, its associated companies, subsidiaries, holding company or directors; and he can be reasonably perceived as being able to exercise independent business judgment without being subservient to any form of conflict of interest". Though in the same provision, the first proviso has further explained eventualities, where no Director shall be considered Independent, if any one of the circumstances referred in sub- clauses A to H of subsection (2) of section 166 exists. Hence, on minute scanning it appears that clause H of the same section highlights "a person nominated as director under sections 164 and 165" excludes the Nominated Director from the provision of Independent Director on the basis highlighted in this provision, even the sub-clause H of the first proviso is in contrast to the definition provided in Rule 2(d) of Corporate Governance Rules, 2013.
9. While considering the above explanation, it appears that there are three kinds of Directors in any public sector company: i. The Elected Directors as explained under section 159 of the Companies Act, 2017 who are elected in the general meeting of the companies not later than thirty five days before convening of such meeting and number of Directors so fixed shall not be changed except with the prior approval of the general meeting in which election is to be held. ii. The Nominated Directors in terms of section 163, read with section 165, where the procedure for removal of Directors have been explained with certain provisions not to apply to Directors representing interests, however, accumulative assessment of these two provisions disclose the process of removal of the elected Directors only, which made distinguish from the Nominee Director, therefore, the exact definition of Nominee Director has to be considered in terms of section 164 of the Companies Act, 2017 where legislature used the phrase "In addition to the Directors elected or deemed to have been elected by shareholders, a company may have Directors nominated by the company's creditors or other special interests by virtue of contractual arrangements", whereas, another kind of Nominee Directors provided in subsection (2) of section 164, where, "a body corporate or corporation owned or controlled by the Federal Government or as the case may he, a Provincial Government may also have Directors nominated on the board to whom such corporation or company has extended credit facilities". iii. The third kind of such Independent Directors explained under section 166 of the Companies Act, 2017, where, "such kind of Directors to be appointed under any law, rules, regulations or code, shall be selected from a data bank containing names, addresses and qualifications of persons who are eligible and willing to act as Independent Directors".
These three kinds of Directors highlighted in the Companies Act, 2017, also explain their eligibility, qualification, including mode and manner in which they have been elected, selected, or nominated by the respective authorities by the companies concerned, whereas, procedure under section 163 of the Companies Act, 2017, deals with the removal of Directors, whereby, a company may by resolution in general meeting remove a Director appointed under section 157 "First Directors", and 162 "the Elected Director who is acquired after the election of Directors, the requisite shareholding to get him elected as Director on the board of company" or in the manner provided under section 159, where, Directors are elected by the company in their meeting. As such no concept of removal of Nominee Director has been explained in the special provision of section 163, which is a complete code for removal of Directors of all kinds except Nominee Director. By comparing these provisions, the legislative intent is clear, where the legislature has not placed the Nominee Directors appointed in terms of section 164 to be placed under the provision of section 163 of the Companies Act, 2017, for its removal. The Nominee Director could only be removed in terms of section 165(3) of the Companies Act, 2017, where it was specifically referred that Director nominated under subsection
(1) holds office during the pleasure of the nominating body. Such aspect made clear distinction between fixation of tenure and removal of Nominee Director, whereby, deciding factor for the latter category is based on the doctrine of pleasure. According to this doctrine, all public officers and servants of the Crown in the United Kingdom hold 'their appointments at the pleasure of the Crown and their services could be terminated at will, without assigning any cause. The pleasure doctrine is not based upon any special prerogative of the Crown but is based on public policy, in public interest, and for public good. The basis of pleasure doctrine is that the public is vitally interested in the efficiency and integrity of civil services, and therefore, public policy requires, public interest needs, and public good demands that civil servants who are inefficient, dishonest or corrupt or have become a security risk should not continue in service. This concept has been held in 2019 PLC (C.S.) [Lahore] 266 (Malik Muhammad Bashir Lakhesar, Assistant Advocate General, Punjab v.
Government of Punjab and others). Even otherwise, the concept of pleasure doctrine has to be considered in that example, where the Law Officers i.e. Advocate General as well as Additional Advocate General and Assistant Advocate General, have no fixed tenure and other law officers have been appointed in terms of lawyer-client relationship with the Government. The said relationship is wholly different from the relationship of the Government with Government servants inter alia because, they may serve in their positions so long as the government reposes confidence in them and may be removed without any procedural formalities. By nature of such appointments of law officers and their functions no vested right is available to claim by those office holders to force continuation of their appointments against the wishes of the government, particularly, when they no longer inspire confidence of the government.
10. At this stage the petitioners have heavily relied upon 2016 CLD [Islamabad] 134 (Babar Sattar v.
Federation of Pakistan through Ministry of Water and Power and others), and claim that doctrine of pleasure has almost become redundant and the concept of absolute, unfettered or unguided exercise of discretion by public authorities is treated as alien to the essence of rule of law. No doubt, the said principle was highlighted in the judgment of Babar Sattar supra, however, the facts narrated in the said case are distinguishable with the present case, where (petitioner) was an Independent Director of National Transmission and Dispatch Company Limited, whereas, in this case the petitioners are Nominee Directors, who are not Independent Directors in terms of section 166(2)(H) of the Companies Act, 2017, and therefore, unlike Independent Director, Nominee Director need not to be picked from the data bank. Similarly, the fiduciary duty of Independent Director is towards company and minority shareholders, whereas, Nominee Director is nominated to protect/watch the interest of the nominating body as well as Independent Director who will naturally be put up for election as non-executive director since those directors are not involved in management, and after his election a tenure of three years is secured in terms of section 161 of the Companies Act, 2017, which in contrast is clearly not the case for Nominated Director, whose tenure is governed by section 165(3). I have also gone through the Corporate Governance Rule, 2013, whereby, the tenure of elected director is governed by section 161, however, per Rule 3A(3) the term of a Nominee Director is governed by section 165, which again referred as doctrine of pleasure by the nominating body.
11. Similarly, the proposition was considered in case titled as 2018 CLD [Sindh] 80 (Agha Imtiaz Ali Khan Babar and 2 others v. Federation of Pakistan through Secretary Ministry of Water and Power and 2 others), where the concept of Nominee Director in terms of Companies Ordinance, 1984, was explained and it was held that Nominee Director would) hold the office for any specified period, even, it was held under the old law in terms of the provision and method of removal of director which was also declared not applicable to the Nominated Directors.
12. This court has also been guided with the judgment reported as 2019 CLD [Islamabad] 1374 (Nadeem Mumtaz Qureshi v. Pakistan Petroleum Limited and others), whereby it was held as under: "Nominee directors need not go through the process of election envisaged by section 159 of the 2017 Act. This is because section 165(1)(b) of the 2017 Act provides that nothing in sections 158, 159, 161, 162 or 163 of the 2017 Act shall apply to directors nominated by virtue of investment made by the Federal Government or, as the case may be, by a Provincial Government or the Commission on the Board. By virtue of section 165(1)(b) of the 2017 Act, the process for the removal of an elected director envisaged in section 163 of the 2017 Act does not need to be followed for the removal of a nominee director."
13. Hence, this Court is of the confirmed view that Nominee Director has no personal right to claim benefit of tenure available to other Directors, even removal of Nominee Directors is based upon the doctrine of pleasure, therefore, the petitioners have rightly been removed which is the prerogative of the nominating body i.e. in this case is Federal Government. It is not the constitutional mandate of the courts to run and manage public or private institutions or to micro-manage them or to interfere in their policy and administrative internal matters. Courts neither enjoy such jurisdiction nor possess the requisite technical expertise in this regard. Courts should step in only when there arise justiciable disputes or causes of action between the parties involving violation of the constitution or the law as held in PLD 2022 [SC] 92 (Khyber Medical University and others v. Aimal Khan and others).
14. For what has been discussed above, the removal of the petitioners by their nominating body is the sole authority of the said body within their policy domain to either allow the petitioners to continue as members of the Board of Directors or to remove them or to reconstitute the Board. The said action of authority could not be called in question by the petitioners in the present scenario under the law discussed above.
15. Learned counsel for the respondents has also explained the powers and functions of Nominated Directors with reference to the creditors or special interests by virtue of contractual arrangement, such Nominee Director represent the special interest of the Federal Government or Provincial Government as the case may be. The fundamental difference between a Nominee Director and Elected Director is that a nominee holds office at the pleasure of the nominator whereas, Elected Director is given a three years tenure under Companies Act, 2017. Nominee Director has to safeguard interests of its nominator first and foremost, whereas, Elected Director has a fiduciary duty to the company and all its shareholders, as held in 2020 CLD [Lahore] 1207 (Waseem Majid Malik v. Federation of Pakistan).
16. Keeping in view above position, the petitioners have failed to high light their vested right, even parawise comments filed by the Federal Government spell out that Directors are appointed by the Federal Government and they are not Independent Directors, hence, instant petition is not maintainable and rights claimed by the petitioners are not justified under the law, therefore, instant petition is DISMISSED being meritless.