ORDER: MUSARRAT HUSAIN ZUBERI, CHAIRMAN-1. To provide for measures against undue concentration of economic power, growth of unreasonable monopoly power and unreasonable restrictive trade practices, the President of Pakistan promulgated an Ordinance (V of 1970) on the 21st February, 1970. Under section 1(3), the Ordinance was to come into force on such date as the Central Government may, by notification in the official Gazette, appoint. The Central Government enforced the Ordinance on 17th August, 1971 and constituted the Monopoly Control Authority under section 8 of the Ordinance. The power to make rules for carrying out the purposes of the Ordinance was given to the Authority under section 24 of the Ordinance. The Authority promulgated "The Monopoly Control Authority Rules, 1971" and they came into force from the 31st December, 1971. 2.
One of the functions of the Authority, under section 10(a) of the Ordinance, is to register undertakings, individuals and agreements. Under rule 10 of the Monopoly Control Authority Rules, 1971, every undertaking, individual and agreement of the nature referred to in section 16 of the Monopolies and Restrictive Trade Practices (Control and Prevention) Ordinance, 1970 (V of 1970) was required to be registered with the Authority within 15 days of the publication of the Rules in the official Gazette in the forms prescribed under the same Rules, 15th January, 1972 was, therefore, the last date for receipt of applications for registration though the Authority could extend the date on representation from persons or undertakings concerned if it was satisfied that the extension was justified.
3. By a registered letter, dated the 15th of January, 1972 (received in the Authority on 17-1- 1972), Habib Bank (Overseas) Limited informed this Authority that their Bank is incorporated in Pakistan with the sole purpose of establishing branches in foreign countries and carrying on operations in foreign countries and is being managed in Pakistan by Habib Bank Limited but as the said Bank is not rendering any banking services or carrying on any operations in Pakistan, and even does not hold any licence to carry on banking operations in Pakistan, it is not required under Rule 10 of the Monopoly Control Authority Rules, 1971 to be registered. By another letter received in this office on the 31st of January, 1972, the Habib Bank (Overseas) Limited informed this Authority as under:- "We invite your kind attention to our letter No. HDH/167, dated the 15th January, 1972, where we have mentioned that, in spite of the fact that our bank and Habib Bank Limited had got common management, it was not necessary for us to get ourselves registered as an associated undertaking, because we have been advised that we do not have any operations in Pakistan but are solely operating in foreign countries. Now on the issue of the Companies (Managing Agency and Election of Directors) Order, 1972, we have separated the management of our Bank, and Habib Bank Limited no longer manages our work. We have now to inform you that Mr. Rashid D. Habib Managing Director of Habib Bank Limited and our Bank, has ceased to hold the office of Managing Director of our Bank. He only continues as an ordinary Director of our Bank. We have got another Managing Director appointed by our Board. Our management is now separated and independent and our Head Office is located separately at the above address with effect from the 20th instant". In view of the above we trust you will kindly agree with us that there is no need for registration of our bank and Habib Bank Limited as "Associated Undertakings".
4. By Letter No. MCA/SUS/72, dated January 31, 1972 the Habib Bank (Overseas) Limited was informed by the Authority that on the facts stated by them they were registrable under section 16(1 )(g) of the Ordinance. By Letter No.*GAM/252, dated February 7, 1972, Habib Bank (Overseas) Limited requested the Authority to reconsider the matter as it was still of the opinion that this Bank did not require registration under the provision of section 16(1 )(g) of the Ordinance. By Letter No. MCA/SUS/72, dated the 21st February, 1972 the Habib Bank (Overseas) Limited was again informed that their Bank fell within the definition of associated undertakings, and was registrable. They were also required to supply certain information within 10 days of the receipt of the said letter. The Habib Bank (Overseas)
Limited again sent a Letter No. GAM/353, dated March 6, 1972, which reads as under:- "We thank you for your Letter No. MCA/SUS/ of 1972, dated the 21st February, 1972 which was received by us on the 29th ultimo. We had by our Letter No. HDH/167, dated the 15th January, 1972 submitted to you that our Bank does not hold any licence to carry on banking operations in Pakistan. As such we are not rendering any banking services or carrying on any operations in this country but are solely operating in foreign countries where we have established our branches. In view of the above facts we had submitted that under the scheme of the Monopolies and Restrictive Trade Practices (Control and Prevention) Ordinance, 197, the intention is to make it applicable only to companies operating in Pakistan and not to companies operating in foreign countries. We, therefore, request you one again to kindly consider this aspect of the matter and exempt our bank from the requirements of registration".
5. The Authority then directed the Habib Bank (Overseas) Limited on 21-3-1972 to show cause, within ten days of the receipt of the notice, as to why action under section 19 of the Monopolies and Restrictive Trade Practices (Control and Prevention) Ordinance, 1970 should not be taken against it.
6. Cause was shown by the said Bank on 28-3-1972 (received in this office on 30-3-1972). The matter was then fixed up for hearing on the 17th of April, 1972. Mr. Mahmood Farooqui, Legal Advisor, Habib Bank (Overseas) Limited, appeared before the Authority on the date of hearing. His contentions were as under: (i) That registration requirement arises out of section 16, sub-section (1), clause (g) of the Ordinance which provides that a bank which in relation to any other undertaking is an associated undertaking should be registered. Therefore, a bank which is not an associated undertaking is not registrable. Associated undertakings have been defined in section 2(1)(b) of the Ordinance and the two clauses (i) & (ii) of the section should be read together as they are conjunctive and not disjunctive. The Habib Bank (Overseas) Limited, is not associated with any other undertaking. (ii) That Habib Bank (Overseas) L-imited does not, in fact, fall under the definition of an 'Undertaking' given in section 2(1 )(m) of the Ordinance as the bank does not carry on any banking business in Pakistan. (iii) That the Monopolies and Restrictive Trade Practices (Control and Prevention) Ordinance, 1970 being a fiscal and penal legislation should be interpreted in favour of the subject. The written submissions of Mr. Mahmood Farooqui, Legal Adviser, are exhibited as Exh. No. R. 11.
7. In answer to the queries made by the Authority, the Legal Adviser admitted as follows: (i) Habib Bank (Overseas) Limited is registered in Pakistan with Headquarters at Karachi. (ii) Ail the Directors are Pakistani nationals residing in Pakistan and they formulate the policy and control the management of the bank from Pakistan. (iii). The bank does not have any non-national shareholders. (iv) Yearly balance sheet is published in Pakistan. (v) The Original share capital was supplied by the Directors of Habib Bank Limited. (vi) Messrs Habib Bank Limited have separate foreign branches of their own. (vii) Profits of the branches of Habib Bank (Overseas) Limited are repatriated to Pakistan and distributed amongst the shareholders in Pakistan. (viii) Messrs Habib Bank A.G. Zurich is registered in Switzerland because the Swiss Law does not allow Foreign Banking concerns to function in Switzerland.
8. The Legal Adviser was directed to produce the latest copy of the Memorandum and Articles of Association of the Habib Bank (Overseas) Limited and all relevant sanctions issued by the State Bank of Pakistan.
9. On 24th April, 1972, i.e. The date of resumed hearing, the Legal Adviser produced the latest copy of the Memorandum of Association with Articles of Association of the Habib Bank (Overseas) Limited (Exh.
No. R.10). Article 111 gives the objects for which the company is established. Article 111 (a) reads as follows: "III(a) To carry on business of a Banking Company as defined under section 277-F of the Companies Act as applicable in Pakistan in foreign countries and/or anywhere in Pakistan and particularly to transact the following forms of business. (Amended as per special Resolution passed ln the Extraordinary meeting of the shareholders held on 27-7-1953)". Articles 111(1 )(2)(3) and (4) inter alia provide for banking and other financial activities. The contention of the Legal Adviser was that the Habib Bank (Overseas) Limited undertakes banking , business only outside Pakistan and Article 111(a) of the Memorandum of Association, referred to above, was amended on 27th July, 1953 to carry on business in foreign countries and/or anywhere in Pakistan. The Legal Adviser admitted that in 1956 Habib Bank (Overseas) Limited had applied to the State Bank of Pakistan for sanction to receive rupee deposits in Pakistan, but the State Bank gave the permission with the condition that such deposits would be accepted from Habib Bank only and the amount so received should be invested in the Pakistan Government securities only. A sum of Rs. 50 Lacs was received from the Habib Bank Limited in 1956. In 1957 it was raised to Rs. 1 crore. Further, extensions were sought for and authorised by the State Bank of Pakistan in 1958, 1960 and 1962. The deposits were returned to Habib Bank Limited in 1964.
10. The Legal Adviser also submitted that all the 35 branches of Habib Bank (Overseas) Limited were situated in foreign countries and that the Head Office only was situated in Pakistan. He admitted that Habib Bank (Overseas), Limited and Habib Bank Limited were under a common Managing Director till the 15th of January, 1972. He further admitted that deposits were accepted by Habib Bank (Overseas) Lenited from Pakistanis living abroad and that profits were also repatriated to Pakistan by the Bank.
11. He was asked vide M.C.A's. Letter No. M.C.A./SUS/72, dated 25-4-1972 to :-- (i) explain and furnish details of loans and advances, etc., with names of the parties-whether outside Pakistan or in Pakistan-together with the terms thereof indicating whether these loans were sanctioned by the Head Office or by the Foreign Branches, (ii) indicate whether the branches of the Habib Bank (Overseas) Limited accept deposits from Pakistanis living abroad and send remittances to their relations and families in Pakistan and were these remittances handled in Pakistan by Habib Bank (Overseas) Limited? If so, give the total
(iii) of the remittances received from abroad under the Bonus Scheme year-wise for the last three years, (iii) indicate the figures of profit of their Head Office in Karachi and to explain what do they comprise of and how are they earned? Statement of profits remitted by branches of Habib Bank (Overseas) Limited for the year 1966, 1967, 1968, 1969, 1970 and 1971 is exhibited as Exh. No. 5. The information on the same point received from the Ministry of Finance, Government of Pakistan, is at F/FF. The points for determination are: (i) Whether Habib Bank (Overseas) Limited, is an undertaking as defined in section 2(1 )(m) of the Ordinance; (ii) Whether Habib Bank (Overseas) Limited, if held to be an undertaking, is an associated undertaking as defined in section 2(1)(b) of the Ordinance, and (iii) Whether Habib Bank (Overseas) Limited is registrable under section 16(1 Xg) of the Monopolies and Restrictive Trade Practices (Control and Prevention) Ordinance, 1970. Section 2(1 )
(m) of the Ordinance defining undertakings reads as follows: "Undertaking" means any concern, institution, establishment or enterprise engaged in the production, supply or distribution goods, or in the provision or control of any service." The main contention of the Legal Adviser was that the Bank was not engaged in any banking transactions in Pakistan and therefore was not providing any service in the country. This contention has to be examined in the light of the facts revealed during the hearing and as admitted by the Legal Adviser and the documentary evidence supplied.
It is admitted that the headquarters of the bank are located in Karachi (Pakistan). The Directors of the bank, who control the policy and management of the Bank, are Pakistani nationals and reside in Pakistan. According to the balance sheet, the Head Office of the bank makes its own profits and all the profits earned abroad are repatriated to Pakistan and distributed amongst the Directors and the Share-holders of the Bank in Pakistan. Further, Pakistanis living abroad'make remittances to their families and relations in Pakistan by trte branches.Of the Habib Bank (Overseas) Limited, in foreign countries and are handled by the Habib Bank Limited, in Pakistan and the bank makes very considerable profit on these bonus remittances. According to the information supplied by the bank, the total remittances made by the Habib Bank (Overseas) Limited through Habib Bank Limited for disbursement to beneficiaries under the Home Remittance Bonus Scheme for 1969, 1970 and 1971 were (in sterling) 12,776, 219, 9,350, 159 and 7,283,691 respectively. According to the information supplied by the Ministry of Finance, Government of Pakistan, Habib Bank Limited handled 43.8% in 1969, 38.01% in 1970 and 45.9% in 1971 of the total remittances received through banking channels in Pakistan under the Home Remittances Bonus Scheme from all Pakistanis living abroad. The profits earned by the Habib Bank Limited as a share of their commission on these remittances was Rs.
2,03,909 in 1969, 54,563 in 1970 and 85,713 in 1971. Profits made thereon are substantial and accrue in Pakistan. The advances are also allowed to Pakistani firms and individuals in foreign exchange by the Habib Bank (Overseas) Limited. These loans are negotiated in Pakistan and are made to Pakistani firms and individuals and include N.S.C., P.I.A., Dawood Corporation and M.A. Footwear Industries Limited, and the total of such advances in Pakistani rupee comes to Rs. 76,95,984.
Investments are made in Pakistan and the statement of investments as on 31st December, 1971 is at Exh. R-13. The ingredient of definition of undertaking amongst others is the provision or control of any service. The activities and financial transactions illustrated show that the bank does provide service in Pakistan to Pakistani nationals and Pakistani corporations. The Head Office of the Bank is in Karachi and controls the service from Karachi. The Bank is a Pakistani Bank and controls what are merely branches outside Pakistan. The Bank is incorporated in Pakistan and is controlled by the State Bank of Pakistan like any other Bank transacting banking business in Pakistan. It is also worth emphasizing that Articles of Association and Memorandum of Association do give permission to the bank to carry on business in Pakistan. The rupee deposits alone are not accepted though for years Habib Bank Limited, did invest a crore of rupees. Investments are made in Pakistan. The Head Office at Karachi provides control of service as laid down in section 2(1)(m) of the Ordinance (V of 1970) and makes substantial profits (Exh. R. 14 II). It repatriates its profits which are a source of income to the Directors and Share-horders residing in Pakistan. Provision of foreign exchange facilities to the firms and individuals having operations in Pakistan are also made. The admitted facts are, therefore, that though this bank has branches in foreign countries, its operations are controlled by the Head Office at Karachi. It is, thus, established that Habib Bank (Overseas) Limited, with its Head Office in Karachi is an institution engaged in the provisions of banking service and the Head Office provides the control of such service. It is, therefore, held that the Habib Bank (Overseas) Limited, is an undertaking within the meaning of definition in section 2(1)(m).
12. To establish that this bank is not an associated undertaking as defined in section 2(1 )(b) of the Ordinance, the Legal Adviser submitted that the two clauses of the section are conjunctive and not disjunctive for the following reasons: (a) If they were intended to be disjunctive, then there was no necessity of a separate sub-clause (ii) but after the last word, "Undertaking" in clause (i), the word, "or" could have been used, as "or" has been used three times in this very sub-clause, and the contents of sub-clause (ii) could have been added after this "or". The very fact that the legislature has introduced a separate sub-clause (ii) in clause (b) indicates that (i) and (ii) are intended to be conjunctive. (b) If it was intended that sub-clause (ii) should be disjunctive in the main clause (b) instead of using the word, "inter-connected" with each other in the following manner..................... The legislature would have used the words, "inter-connected" with each other in any one of the following manners. (c) If sub-clause (i) and sub-clause (ii) are to be treated as disjunctive then a very large number of Companies who do not have common management or common control but merely have one common Director, would become Associated Undertakings and this would lead to an absurd circumstance which the legislature cannot be deemed to have intended. (d) Sub- clause (i) and sub-clause (ii) are joined neither by an 'or' nor by an 'and' but joined by a mere semi-colon. In other parts of the Ordinance such as section 5(2) clauses (a) and (b), section 6(2) clauses (a) and (b), section 7(3) clauses (a) and (b) are subjoined by a semi-colon and the interpretation on that semi-colon can be that the two sub-clauses are conjunctive and not disjunctive. A fortiori, sub-clause (i) or clause (b) can only be interpreted as conjunctive.
13. The definition of associated undertakings in clause 2(I)(b)(i) provides for two different situations: (i) where a person is the owner or partner, officer or director of an undertaking is also the owner or partner, officer or director of another undertaking, and (ii) if there is a person who directly or indirectly holds or controls shares carrying not less than 20% of the voting power in such an undertaking also directly or indirectly holds or controls shares carrying not less than 20% of the voting power in another undertaking: Clagse 2(1)(b)(ii) provides for three different sets of situations, namely: (i) If two or more undertakings are (a) unoer common management; or (b) uncher common control; or (c) one is subsidiary of another; The definition of associated undertakings, therefore, provides for five different situations and any one of them makes two or more undertakings inter-connected with each other. Even the situations mentioned in sub-clause
(ii) are not conjunctive but disjunctive. Similarly, sub-clauses (i) and (ii) are disjunctive and not conjunctive. The Legal Adviser has further supported his arguments of these clauses being as conjunctive by referring to sections 5(2) and 6(2) where clauses (a) and (b) are separated by word 'or' but are definitely conjunctive. He, however, omits to take notice of the word 'and' used between sub-clauses (b) and (c) of sections 5(2) and 6(2) in both the sections. The three sub- clauses become conjunctive because in both the sections the word 'and' has been used as is commonly used before the last clause and not because they are still separated by semi-colon; as argued by the Legal Adviser. The word 'and' is not used between sub-clauses (i) and (ii) of section 2(i)(b) and that could not be because the wording makes it abundantly clear that the clauses deal with distinct separate situations. The intention that even if they are separated only by a semi-colon to make them disjunctive can be further illustrated on the analogy of the submission made by the Legal Adviser of earlier portion of sections 5 and 6 quoted by him. Now section 5(1) has three clauses and there is no 'and' or 'or' and the clauses are separated only by a semi-colon and provide for three different situations. Similarly in section 6(1 )(a) and (b) the sub-clauses are separated with a semi-colon and deal with different situations. The intention of the legislature to make them disjunctive is clearly reflected in their wording. Sub-clause (i) of section 2(1 )(b) in fact deals with cases of 'persons' and sub-clause (ii) deals with 'undertakings' as clearly mentioned therein and cannot be conjunctive. We, therefore, hold that the clauses were intended to be and are disjunctive. The Legal Adviser has further submitted that at best there is an ambiguity as to whether the sub-clauses (i) and (ii) of clause 2(1 )(b) are disjunctive or conjunctive. Since the Ordinance is a fiscal statute, it must always be construed in favour of the subject as laid down in a long string of consistent judicial decisions. The Ordinance has been, drafted by the State and in case of any ambiguity, the benefit should be given against the State in favour of the subject. It is a misconception to think that the present Ordinance is a fiscal one and as such the question of interpreting it in favour of the subject does not arise. Moreover, we are of opinion that there is no ambiguity as to whether clauses (i) and (ii) are disjunctive or conjunctive and have held that they are disjunctive. It is admitted on behalf of the bank that on 15th January, 1972, which was the last date of registration of undertakings under rule 10 of the Monopoly Control Authority Rules, 1971, the Habib Bank (Overseas) Limited, was directly controlled and managed by the Habib Bank under a common Managing Director, Mr. Rashid D. Habib. The separation took place subsequently and separate Managing Directors were appointed when the Government abolished the Managing Agency System under the Presidential Order No. 2 of 1972. On the last date of registration, the two were "associated undertakings" as they were under common management and even now remain so because there are common Directors of the two banks and Mr. Rashid D. Habib also continues to be a Director of both Habib Bank Limited and Habib Bank (Overseas) Limited. We, therefore, hold that the Habib Bank Limited and Habib Bank (Overseas) Limited, are associated undertakings and as such both are registrable with the Authority under section 16(1 )(g) of the Ordinance read with Rule 10 of the Monopoly Control Authority Rules, 1971. It may be mentioned here that Habib Bank Limited, after advancing initially similar arguments have voluntarily registered themselves (the Authority condoned the delay) and have shown Habib Bank (Overseas) Limited, as their "associated undertaking". Now paragraph 7 appearing at page 7 of the statement of case filed on 24-4-1972 before this Authority on behalf of the Habib Bank (Overseas) Limited reads as under:- "The objects of defending the position of the applicant is not to impugn the Monopoly Control Authority's lawful powers or to defy its orders, but the defense is respectfully submitted only on the point of principle that under the law, as it stands today, the applicant is not liable for registration."
But, after a very careful consideration of the facts and circumstances, we are inclined to hold that Habib Bank (Overseas) Limited has willfully failed to register itself with this Authority as required by the provisions of the Monopolies and Restrictive Trade Practices (Control and Prevention)
Ordinance, 1970. It not only failed to get itself registered within the time prescribed under the provisions of Rule 10 of the Monopoly Control Authority Rules, 1971, which was the 15th of January, 1972 but it failed to get itself registered even after long correspondence with the Authority. If this Bank had really entertained any genuine doubt about its liability for registration under the Monopolies and Restrictive Trade Practices (Control & Prevention) Ordinance, 1970 it could have sought advice from the Authority under section 10(d) of the Ordinance. But instead of following this normal procedure, it adopted a contesting attitude. The bank did not disclose all the relevant information voluntarily, but every piece of information had to be extracted out of it. Even the supply of information was delayed as for instance what was required to be supplied by 29th April, 1972 was not supplied till 12th May, 1972. The inference, therefore, is that to support its case it tried to suppress relevant information from the Authority. As we are satisfied that the Habib Bank (Overseas) Limited willfully failed to register itself as required by the provisions of the Monopolies and Restrictive Trade Practices (Control and Prevention) Ordinance, 1970, read with Rule 10 of the Monopoly Control Authority Rules, 1971, we direct it to pay to the Central Government by way of penalty, a sum of Rs.
30,000 (Rupees thirty thousands). We further direct that the Habib Bank (Overseas) Limited shall register itself with the Authority by the 15th June, 1972. In case of its failure to register by that date, the Habib Bank (Overseas) Limited shall pay by way of penalty to the Central Government a further sum of Rs. 3,000 (Rupees three thousand) for every day after 15th June, 1972 till compliance.