' The petitioner Muhammad Kaleem Rathore is a Member of the Institute of Chartered Accountants (respondent No,1). He is aggrieved of two paragraphs of the directive dated 28-3-2002 issued in the form of a Code of Cooperative Governance by the Securities and Exchange Commission of Pakistan (SECP) in purported exercise of the powers vested in SECP under section 34(4) of the Securities and Exchange Ordinance, 1969. The portion of the aforesaid directive, against which the petitioner asserts a grievance, relates to external auditors of listed companies and is reproduced as under:-- "External Auditors (xxxvii) No listed company shall appoint as external auditors a firm of auditors which has not been given a satisfactory rating under the Quality Control Review Programme of the Institute of Chartered Accountants of Pakistan.
(xxxviii) No listed company shall appoint as external auditors a firm of auditors which firm or a partner of which firm is non-complaint with the International Federation of Accountants' (IFAC)
Guidelines on Code of Ethics, as adopted by the Institute of Chartered Accountants of Pakistan."
2. The SECP, which is a respondent in this case, has issued directions to the Stock Exchanges in Pakistan requiring them to insert the above directive in their respective listing regulations. Learned counsel for SECP has stated that according to his information the Stock Exchanges in Pakistan have, through an amendment, incorporated the above directive in their listing regulations although he is presently in possession of the amended listing regulations of the Karachi Stock Exchange only.
3. At the outset it needs to be noted that the petitioner has no grievance as to the objective of the aforesaid directive or to its salutary and beneficial nature. His learned counsel has acknowledged that the directive can serve a useful purpose in ensuring the quality of external audits in the case of listed companies. It is, however, contended by learned counsel for the petitioner that the directive is violative of section 254 of the Companies Ordinance. More specifically, it has been contended that section 254 does not envisage classification between Members of the Institute of Chartered Accountants. Likewise, section 2(1)(s) of the Chartered Accountants Ordinance, 1961 also does not envisage such classification. It has therefore, been argued that the classification, which has been made by the SECP in the above directive and by the Stock Exchanges through incorporation of the aforesaid directive in their listing regulations, is violative of section 254 of the Companies Ordinance. On this basis it has been argued that the aforesaid directive of the SECP cannot be given effect because section 254 of the Companies Ordinance being part of a statute, overrides any subordinate legislation such as the Code of Cooperative Governance referred to above which contains the impugned directive.
4. In order to appreciate the argument of learned counsel for the petitioner it is necessary to examine section 254 aforesaid, the relevant part whereof reads as under:-- "254. Qualification and disqualification of auditoRs,---(1) A person shall not be qualified for appointment as an auditor--
(i) in the case of a public company or private company which is subsidiary of public company unless he is a Chartered Accountant within the meaning of the Chartered Accountants Ordinance, 1961 (X of 1961); and
(ii) in the case of a private company having paid-up capital of three million rupees or more unless he is a Chartered Accountant within the meaning of the Chartered Accountants Ordinance, 1961 (X of 1961)."
5. The above statutory provision is couched in A language which is negative and merely sets out the minimum qualification for an auditor in the case, inter alia, of a public company which may or may not be a listed company. There is nothing in section 254 which can be taken as prohibiting the SECP or a Stock Exchange or, for that matter, any other private or public body from prescribing additional conditions for the appointment of auditoRs,
6. As noted above, the impugned directive has been issued in exercise of powers vested in SECP under section 34(4) of the Securities and Exchange Commission Ordinance, 1969. The said statutory provision, for ease of reference, is reproduced as under:-- "34(4) Where the Commission (SECP) considers it expedient so to do, it may, by order in writing, direct a Stock Exchange to make any regulation, or to amend or rescind any regulation already made, within such period as it may specify in this behalf."
' The SECP is thus fully empowered to issue the impugned directive. Furthermore, for reasons given below I find no conflict between the said directive and the provisions of section 254 of the Companies Ordinance.
7. The Stock Exchanges, even otherwise, being independent entities incorporated under the Companies Ordinance, are competent to frame their own listing regulations. The power to frame regulations is expressly conferred on Stock Exchanges under section 34(1) of the Securities and Exchange Ordinance; the only restriction being that the regulations must have prior SECP approval, and must be consistent with the rules framed under the said Ordinance.
8. At this point it is important to bear in mind that the principal object of the Securities and Exchange Ordinance as set out in its preamble is the protection of investoRs, Learned counsel for the petitioner did not deny that the impugned directive, by ensuring the quality of external audits, would directly result in the protection of investors wishing to invest in the securities issued by listed companies. The SECP and the Stock Exchanges therefore, have quite clearly fulfilled a statutory mandate by issuing the impugned directive and through incorporation thereof in the listing regulations.
9. The Companies Ordinance, 1984 and the Securities and Exchange Ordinance are meant to focus on distinct legislative concerns and to regulate separate areas of activity even though these separate areas may overlap to the extent that both enactments contain provisions dealing with listed companies. The Companies Ordinance, 1984 is a general law which has been enacted for the purpose of regulating all matters relating generally to all types of companies including listed companies. The scope of the Securities and Exchange Ordinance, however, is much more limited and is confined to matters such as Stock Exchanges and the listing of companies by such Exchanges.
10. All that has been done by the SECP through the impugned directive is to impose an additional qualification on such members of the Institute of Chartered Accountants as are desirous of being appointed as external auditors of listed companies. In the circumstances, there is no conflict between the impugned directive and the provisions of section 254 of the Companies Ordinance reproduced above.
11. Learned counsel for the petitioner also argued that the impugned directive is in conflict with the provisions of Articles 18 and 25 of the Constitution inasmuch as it imposes a restriction on the ability of the petitioner to engage in his profession as a Chartered Accountant and also because it is discriminatory. These contentions are wholly misconceived. For the reasons noted above, I am clear that there is neither any impermissible restriction imposed on the petitioner nor is there any invidious discrimination against him. The petitioner can always act as an external auditor of a listed company by obtaining requisite certification from the Institute of Chartered Accountants provided he meets the standards prescribed by the Institute for satisfactory rating under its Quality Control Review Programme.
12. For the foregoing reasons, I find no merit in this petition which is, therefore, dismissed.