IN THE SUPREME COURT OF PAKISTAN 
(Original/Appellate Jurisdiction) 
 
 
 
 
 
PRESENT 
 
Mr. Justice Iftikhar Muhammad Chaudhry, CJ. 
 
Mr. Justice Rana Bhagwandas 
 
Mr. Justice Javed Iqbal 
 
Mr. Justice Abdul Hameed Dogar 
 
Mr. Justice Muhammad Nawaz Abbasi 
 
Mr. Justice Tassaduq Hussain Jillani 
 
Mr. Justice Saiyed Saeed Ashhad 
 
Mr. Justice Hamid Ali Mirza 
 
Mr. Justice Karamat Nazir Bhandari 
 
CONSTITUTION PETITION NO.  9 OF 2006   & 
CIVIL    PETITION   NOs.    345 & 394 OF  2006 
 
 
(On appeal from the judgment/order of High Court 
 
 
of Sindh at Karachi dated 30.03.2006 passed in  
 
 
Constitution Petition No.D-240 of 2006)  
 
 
 
Const. P.9/2006 
Wattan Party through its President  
 
… 
… 
Petitioner. 
 
 
 
 
 
Versus 
Federation of Pakistan, 
through Cabinet Committee of Privatization, 
Prime Minister Secretariat, Islamabad and others  
… 
Respondents.  
 
CP.345/2006 
Pakistan Steel Peoples Workers Union,  
CBA through its Chairman  
 
 
… 
… 
Petitioner. 
 
 
 
 
 
Versus 
Federation of Pakistan, 
through the Cabinet Secretary and others  
 … 
… 
Respondents.  
 
CP.394/2006 
Federation of Pakistan, 
through the Cabinet Secretary and others  
…  
… 
Petitioners  
 
 
 
 
 
Versus 
 
Pakistan Steel Peoples Workers Union,  
through its Chairman & others  
 
… 
… 
Respondents 
 
 
For the petitioner  
 
: 
Barrister Zafarullah Khan, Sr. ASC. 
(in Const. P.9/2006) 
 
 
Raja Muhammad Akram, Sr. ASC 
 
 
 
 
 
Assisted by Ms. Sadia Abbasi, Advocate. 
 
 
 
 
 
Muhammad Habib-ur-Rehman, Adv. 
 
For the petitioner  
 
: 
Mr. Abdul Mujeeb Pirzada, ASC. 
(in CP.345/2006 and for Respt. 
 
Mr. M.S. Khattak, AOR. 
No.1 in CP. No.394/2006) 
 
For the petitioner  
 
: 
Syed Zafar Abbas Naqvi, AOR. 
(in CP. No.394/2006) 
 
On Court Notice  
 
: 
Mr. Makhdoom Ali Khan,  
(in Const. P.9/06 & for  
 
 
Attorney General for Pakistan. 
petitioner in CP.No.394/06)  
 
Assisted by Mr. Khuram M. Hashmi, Adv. 
 
Const Petition No. 9 of 2006 etc 
 
 
2
 
For respondent No.1 
 
: 
Mr. Abdul Hafeez Pirzada, Sr. ASC 
(in Const.P. No.9/06 & for  
 
 
Raja Abdul Ghafoor, AOR 
Respt. No.2 in CP.No.345/06) 
 
Mr. Mehr Khan Malik, AOR 
 
 
 
 
 
Assisted by Mr. Hamid Ahmed, Adv. 
 
 
 
 
 
Mr. Sikandar Bashir Mohmand, Adv. 
 
For respondent No.2&4  
: 
Syed Sharifuddin Pirzada, Sr. ASC. 
(in Const. P.9/2006) 
 
 
Mr. Sulman Aslam Butt, ASC  
 
 
 
 
 
Mr. Mehr Khan Malik, AOR. 
 
 
 
 
  
Assisted by Ms. Danish Zubari, Adv. 
 
 
 
 
 
Mr. Waqar Rana, Adv. 
 
For respondent No.3 
 
: 
Mr. Wasim Sajjad, Sr. ASC. 
(in Const. P.9 /2006 & 
 
 
Mr. Arshad Ali Ch. , AOR.  
For Respondent No.5 
 
 
Assisted by Mr. Idrees Ashraf, Adv. 
(in CP.345 /2006 
 
 
 
Mr. Ali Hassan Sajjad, Adv. 
 
 
 
 
For respondent No.7 
 
: 
Mr. Khalid Anwar, Sr. ASC.  
(in Const. P.9/2006) 
 
 
Mr. Kazim Hassan, ASC 
 
 
 
 
 
Mr. M.A. Zaidi, AOR. 
 
 
 
 
 
Assisted by Mr. Raashid Anwar, Adv. 
For Respondent No. 4   
: 
Mr. Anwar Mansoor Khan, AG (Sindh)  
(in CP.345/2006)  
 
 
Dr. Qazi Khalid Ali, Addl. AG (Sindh) 
 
 
 
 
 
Raja Abdul Ghafoor, AOR. 
 
 
  
 
(Ms. Afshan Ghazanfar, AAG) 
 
For the applicant  
 
: 
Mr. Ahmer Bilal Sufi, ASC. 
(in CMA.1190/2006) 
 
 
Mr. G.N. Gohar, AOR 
 
 
 
 
Respondent No. 5 & 6  
: 
Nemo. 
(in Const.P.9/06) 
 
Respondent No. 2-3&5  
: 
Nemo. 
(in C.P.345/06) 
 
Respondent No.2-5  
 
: 
Nemo. 
(in Const.P.394/06) 
 
Dates of hearing  
 
: 
30th & 31st May, 1st , 5th to 8th, 12th to 15th  
 
 
 
 
 
19th to 23rd June 2006.  
 
JUDGMENT 
 
IFTIKHAR MUHAMMAD CHAUDHRY, CJ. –  These petitions were 
disposed of vide short order dated 23rd June, 2006, concluding para therefrom is 
reproduced hereinbelow:- 
“we have heard learned counsel for the parties at great 
length, in view of the importance of the matter. After due 
deliberations and taking into consideration the issues 
involved therein in depth, by means of instant short 
order, which will be followed by detailed reasons later, 
it is held and directed as follows:-- 
 
1. 
Conscious of the mandate of Article 153 and 154 
of the Constitution, we hold that the establishment 
and working of the Council of Common Interests 
(CCI) is a cornerstone of the Federal structure 
Const Petition No. 9 of 2006 etc 
 
 
3
providing for protection of the rights of the 
Federating units. Mindful that this important 
institution is not functioning presently and taking 
note of the statement made by the counsel for the 
Federal Government Mr. Abdul Hafeez Pirzada 
that the process for making it functional is 
underway, we direct the Federal Government to 
do the needful expeditiously as far as possible but 
not later than six weeks. 
 
2. 
The approval for the privatization of Pakistan 
Steel Mills Corporation by the Council of 
Common Interests on 29th May 1997 continues to 
hold the field. But in view of the developments 
having taken place during the intervening period 
and the divergent stand taken by the counsel for 
the Federal Government to the effect that the 
afore-referred order was never recalled and the 
stand taken by the counsel for the P.S.M.C. that 
the matter of its privatization was dropped 
subsequently, by way of propriety, it would be in 
order if the matter is referred to the Council of 
Common Interests (C.C.I.) for consideration. 
 
3. 
The Privatization Commission Ordinance No. LII 
of 2000 is not ultra vires of the Constitution. 
 
4. 
While exercising the power of judicial review, it is 
not the function of this Court, ordinarily, to 
interfere in the policy making domain of the 
Executive which in the instant case is relatable to 
the privatization of State owned projects as it has 
its own merits reflected in the economic 
indicators. However, the process of privatization 
of Pakistan Steel Mills Corporation stands 
vitiated by acts of omission and commission on 
the part of certain State functionaries reflecting 
violation of mandatory provisions of law and the 
rules framed thereunder which adversely affected 
the decisions qua prequalification of a member of 
the successful consortium (Mr. Arif Habib), 
valuation of the project and the final terms 
offered to the successful consortium which were 
not in accord with the initial public offering given 
through advertisement. 
 
For the foregoing reasons, the Letter of 
Acceptance (LoA) dated 31st March, 2006 and 
Share Purchase Agreement dated 24th April, 2006 
are declared as void and of no legal effect.” 
 
2. 
Brief facts are that Pakistan Steel Mills Corporation (P.S.M.C.) is a 
private limited company and its 100% equity is owned by Government of 
Const Petition No. 9 of 2006 etc 
 
 
4
Pakistan. It was incorporated in 1968 at a total cost of Rs. 24.7 billion. It 
commenced production in 1981 to 1984. The Mill is the biggest producer of steel 
in Pakistan and the only major manufacturer of flat and long bars and billet. It 
being situated near Port Qasim (Karachi) has got its jetty, water, natural gas and 
power. The plant was installed with the collaboration of Russian Government by 
the Ministry of Industries, Production and Special Initiatives. Mills net assets 
include land measuring about 19000 acres out of which the plant and the 
machinery is located on 4457 acres of land (core land) besides the land of 
downstream industrial estates.  
3. 
The annual designed capacity of P.S.M.C. is 1.1 million tons. As 
explained in the written reply submitted by the management of the Mill, during 
initial years of its establishment, its profitability was not too remarkable on 
account of overstaffing, financial liabilities, poor work discipline, low capacity 
utilization, low sales, mismanagement and lack of a culture of accountability, etc. 
It was added that no appreciable investment was made in maintenance and 
mandatory repairs resulting in deterioration of machinery/equipment. However, in 
the year 1997, the Government of Pakistan (G.O.P.) decided to privatize it and got 
approval for the same from the Council of Common Interests (C.C.I.). But 
somehow process of privatization could not be completed and in the meanwhile on 
20th May, 2000, its restructuring was approved by the Chief Executive of Pakistan. 
The process also included rightsizing of its manpower, repair and maintenance of 
plants, etc. It is the case of the Chairman P.S.M.C. that these measures were aimed 
at making P.S.M.C. a financially viable entity. To achieve the object following 
measures were adopted:- 
(a) 
Financial Restructuring. 
(b) 
Manpower Restructuring. 
(c) 
Repair & Maintenance. 
(d) 
Offer of Equity to Private Sector. 
(e) 
No New Investment in Direct Expansion. 
Const Petition No. 9 of 2006 etc 
 
 
5
The idea of restructuring of the plant was conceived perhaps due to dropping the 
idea of privatization in 1998. The plan of restructuring so put forward proved 
successful as in the following years i.e. 2002-03, 2003-04, 2004-05, the audited 
accounts depicted its financial position as follows:- 
Rs. In Million 
Years 
Capacity 
Utilization 
(%) 
Net 
Profit 
before 
Tax 
Net 
Profit 
after 
Tax 
Accumulated 
Profit/Loss 
Duties 
& 
Taxes 
paid 
End 
Year 
Liquidity 
Earning 
per 
share 
(Rupees)
2002-03 
92 
1239 
1024 
(7648) 
5505 
412 
0.60 
2003-04 
94 
7094 
4852 
(2796) 
5395 
7751 
2.82 
2004-05 
89 
10191 
6734 
3938 
8901 
11096 
3.91 
Total 
18,524 12610
 
19,801
9280* 
 
*as on 19.05.2006 
4. 
Despite the above improved financial position of P.S.M.C. 
Government of Pakistan Ministry of Privatization and Investment, Privatization 
Commission on 4th March 2005 moved a summary to the Board of Privatization 
Commission suggesting therein that P.S.M.C. may be included in the privatization 
programme and recommendation to that effect may be made to the Cabinet 
Committee on Privatization (C.C.O.P.). It seems that in pursuance to it the Board 
of Privatization Commission gave approval to the proposal for the privatization of 
P.S.M.C. Later on, on having obtained approval from the Privatization 
Commission Board, Privatization Commission commenced the proceedings and in 
this behalf publications were made inviting Expression of Interest (EOI) from 
strategic investors to participate in the privatization of Pakistan Steel Mills 
Corporation (Pvt) Limited. The vibrant financial position of the company was also 
made public. It is important to note that besides publishing financial summary, the 
following statement showing the Profile of the company was notified:- 
“PSMC is the country’s largest and only integrated steel 
manufacturing 
plant 
with 
an 
annual 
designed 
production capacity of 1.1 million tons. It was 
Const Petition No. 9 of 2006 etc 
 
 
6
incorporated as a private limited company in 1968 and 
commenced full scale commercial operations in 1984. 
PSMC complex includes coke oven batteries, billet mill, 
hot and cold rolling mills, galvanizing unit and 165 MW 
of own power generation units, supported by various 
other ancillary units. It is located 30km south east of the 
coastal city of Karachi, in close proximity to Port Bin 
Qasim, with access to a dedicated jetty, which facilitates 
import of raw materials. PSMC manufactures a wide 
mix of products, which includes both flat and long 
products. PSMC effectively enjoys a captive domestic 
market due to the prevalent demand-supply imbalance in 
the country’s steel industry, where demand has 
historically exceeded local supply. PSMC also strives to 
maintain high quality and environmental standards and 
in this regard has received ISO 9001, ISO 1400-1 and 
SA 8000 certifications, along with the Environmental 
Excellence Award 2005. As a result of sustained 
improvement 
in 
Pakistan’s 
macroeconomic 
environment, the demand for steel in the country is 
expected to grow substantially. PSMC is uniquely 
positioned to take advantage of the expected demand 
growth as adequate infrastructure is already in place to 
cater to capacity expansion.” 
 
5. 
Before inviting E.O.I the Valuers were appointed to carry out a 
valuation. As per record, M/s City Group were appointed. The Group was assisted 
by Advisors namely M/s CORUS to provide technical “due diligence”, including 
plant mechanical integrity assessment and technical inputs to the valuation model 
and environmental “due diligence” and M/s A.F. Ferguson & Co. (an affiliate firm 
of Price Waterhouse Coopers) for the purpose of Accounting, Tax, HR and IT 
“due diligence” along with M/s ORR, Dignam & Co. Advocates for legal “due 
diligence”. It is relevant to point out that Financial Advisors/Valuers prepared the 
Valuation Report on the basis of the report submitted by A.F. Ferguson, CORUS 
and ORR, Dignam & Co. without undertaking independent exercise in respect of 
accounting, tax, etc and other aspects of the matter. A.F. Ferguson had also relied 
upon the Statement of Accounts furnished by P.S.M.C. In fact the Statement of 
Accounts and the balance sheet were copied in verbatim by the A.F. Ferguson. As 
far as these reports are concerned, admittedly, they are prepared on historical value of 
Const Petition No. 9 of 2006 etc 
 
 
7
assets of a concern i.e. according to the book value which is always based on 
depreciated price of the unit.  
6. 
The Financial Advisor completed exercise for preparation of 
Valuation Report on following guidelines provided by Privatization Commission 
(P.C.):--- 
“The objective is to apply various internationally 
accepted valuation techniques to obtain a valuation 
range for PSMC as a going concern. The valuation 
model will take into account the capital expenditure and 
earning 
projections, 
costs 
and 
other 
business 
considerations. The model will be used to undertake a 
sensitivity analysis in order to highlight the impact of 
changes in different variables, such as gross product 
margins, rate of custom duty on import of iron. A 
valuation based on comparative pricing analysis will 
also be prepared. Inputs of the valuation model and 
valuation methodology will be reviewed with the PSMC 
management.” 
 
7. 
In pursuance to the publication of E.O.I. 19 parties had shown their 
interest. As such, Privatization Commission issued them Request for Statement of 
Qualifications (RSOQ) out of which the names of following nine prospective 
bidders were approved:- 
(i) 
Aljomaih Holding Company (Saudi Arabia). 
(ii) 
Al-Tuwairqi Group (Saudi Arabia) and Arif Habib Group 
(Pakistan). 
(iii) 
Azovstal Steel/System Capital Management (Ukraine). 
(iv) 
Government of Ras-Al-Khaimah (UAE). 
(v) 
International Industries Ltd (Pakistan) and Industrial Union 
of Donbass (Ukraine). 
(vi) 
Magnitogorsk Iron & Steel Works Open JSC (Russia). 
(vii) Nishat Mills Ltd. and D.G. Khan Cement Co. Ltd (Pakistan). 
(viii) Noor Financial Investment Co. (Kuwait). 
(ix) 
Shanghai Baosteel Group Corporation (China). 
 
It is stated that in the meanwhile on 28th October 2005, the Financial Advisor 
(F.A.) City Group submitted the interim report of Valuation of Shares followed by 
the final report on 30.03.2006. 
Const Petition No. 9 of 2006 etc 
 
 
8
8. 
It may not be out of place to mention here that at the time of the 
issuance of the E.O.I., the Privatization Commission intended to sell 51 to 74% 
out of 100% equity stake in P.S.M.C. but at the time of bidding total 75% shares 
were put on sale. A perusal of the profile of P.S.M.C. published in the newspapers 
indicates that nothing was mentioned therein in respect of the incentives which 
were provided later on to the successful bidder by the Privatization Commission 
including the exclusion of the price of land on which unit/project is situated i.e. 
4457 acres and goodwill of the P.S.M.C. The incentives/concessions not 
advertised but extended to successful bidder included:-- 
(i) 
The stock in trade contained in the Unit worth about Rs. 
10.00 billion. 
(ii) 
The commitment of the Government of Pakistan to clear 
the loan liability of PSMC which was due for the year 
2013 to 2019, amounting to about Rs.7.67 billion from 
the cash of Rs.8.559 billion lying with the Mills as per 
the Statement of Account. 
(iii) 
Refund of Rs.1.00 billion paid in advance as tax to 
Government of Pakistan 
(iv) 
Responsibility accepted by Government of Pakistan to 
satisfy the claim of the workers opting for Voluntary 
Separation Scheme (V.S.S.) up to Rs. 15.00 billion. 
9. 
Admittedly, according to the report of Valuer (City Group) the 
value of the land has not been added in calculating the share price. In the final 
Evaluation Report/Summary dated 30th March, 2006 submitted by the F.A. to the 
BOPC, it was observed by the latter as follows:--- 
“The Board of Privatization Commission considered the 
valuation carried out by the FA as well as the 
replacement cost of plant and recommended total value 
of PSMC at US $ 500 Million. Based on this, the 
Reference price for 75% strategic stake would be US$ 
Const Petition No. 9 of 2006 etc 
 
 
9
375 Million i.e. Rs. 17.43 per share calculated at the 
rate of Rs.60 per US $ (total shares being divested are 
1,290,487,275).” 
 
The summary also indicates that the Privatization Commission Board (BOPC) 
having considered the valuation recommended by the Financial Advisor proposed 
that, “ the current market value of total assets of P.S.M.C. may also be taken into 
account.” The Board of Privatization Commission however while considering F.A. 
report as well as the replacement cost of the plant recommended that the total 
value of P.S.M.C. would be U.S. $ 500 Million and based on this the reference 
price for 75%  strategic stake would come to US $ 375 million i.e. Rs. 17.43 per 
share calculated at the rate of Rs. 60 per U.S. $. 
10. 
On the next day i.e. 31st March, 2006, the matter was placed before 
the Cabinet Committee on Privatization (CCOP). The CCOP however did not 
accede to the proposal of the Privatization Board with regard to the inclusion of 
the value of total assets as also the per share price worked out by it on the basis of 
F.A. Valuation and the replacement cost (Rs. 17.43 per share) and instead decided 
as under:-- 
“The Cabinet Committee on Privatization (CCOP) 
considered the summary dated 30th March 2006, 
submitted by the Privatization & Investment Division on 
“Privatization of Pakistan Steel Mills Corporation” and 
approved the valuation of US$ 464 million based on 
DCF valuation for privatization of the Pakistan Steel 
Mills Corporation Limited (PSMC) for its 100% equity 
stake. On the basis of above, 75% equity stake 
(1,290,487,275 shares) works out to US$ 348 million i.e. 
Rs. 16.18 per share. 
 
II. 
The CCOP also approved the proposal contained 
in Para 8 of the summary to issue Letter of 
Acceptance (LoA) to the Successful Bidder if 
their per share price is equal or higher than the 
Reference Price mentioned in sub para I above. 
 
III. 
The CCOP directed the Privatization Division to 
follow the approved policy for Privatization, 
strictly in letter and spirit. Any deviation from the 
approved policy, if deemed necessary, should be 
brought up to the CCOP well in advance for 
consideration and approval of waiver, if any.  
Const Petition No. 9 of 2006 etc 
 
 
10
 
IV. 
The CCOP directed the Privatization Division to 
impress upon the potential buyer to make the 
entire payment of the transaction to the GoP 
within the period stipulated in the bid documents. 
V. 
The CCOP directed the Privatization Division to 
invariably 
add 
their 
viewpoint(s) 
recommendations explicitly in their summaries, 
in future.” 
 
11. 
In view of the above decision of C.C.O.P. the consortium 
comprising M/s Arif Habib Group of Companies, M/s Al-Tuwairqi Group of 
Companies and M/s Magnitogorsk Iron and Steel Works, Russia was declared 
successful bidder at the rate of Rs.16.80 per share. Thereafter the matter was not 
again placed before the CCOP and the Letter of Acceptance (LoA) was issued on 
the same date. 
12. 
In the meanwhile on 27th February, 2006, the ongoing process of 
privatization of P.S.M.C. was challenged by Pakistan Steel Mills Workers Union 
(CBA) and three others before the High Court of Sindh at Karachi in a 
Constitutional petition (bearing No. 240 of 2006) claiming therein the following 
reliefs:- 
“a) 
Direct the respondent No.1 to constitute Council 
of Common Interests (CCI) under Articles 153 
and 154 of the Constitution. 
b) 
Declare 
that 
the 
provisions 
of 
Sections 
3,5,6,7,9,14,16,22 of the Privatization Ordinance 
LII of 2000 are ultra vires of Articles 153 and 
154 of the Constitution and therefore, void and of 
no legal effect. 
c) 
Declare that the process of Privatization is 
violative of Articles 2-A, 3, 4, 5, 9, 25, 38 of the 
Constitution. 
d) 
Declare that the process of Privatization adopted 
by respondents No.1 and 3 in respect of sale of 
shares and management control in the PSM is 
illegal, arbitrary, irrational and without any 
lawful authority.’ 
e) 
Restrain the respondents No. 1 and 3 from 
carrying through with the Privatization of P.S.M. 
without the directions and supervision of CCI 
and the Province of Sindh. 
Const Petition No. 9 of 2006 etc 
 
 
11
f) 
Direct the respondents to maintain status quo 
during the pendency of this petition. 
g) 
Any other relief (s) fit and necessary in the 
circumstances of this case may also be granted.” 
 
13. 
Incidentally the above petition came up for hearing on 30th March, 
2006 before acceptance/finalization of the bid and it was dismissed in limine vide 
short order reproduced hereinbelow:- 
“For reasons to be recorded later, we are of the view 
that the provisions of Article 154 are mandatory and the 
functions of the Cabinet under the Privatization 
Ordinance 2000 ought to be performed by the Council of 
Common Interest. Nevertheless in view of the fact that 
the Provincial Government has consented to the 
privatization of the respondent No.5 and other facts and 
circumstances we are not persuaded to exercise 
discretionary jurisdiction under Article 199 for the 
purpose of issuing any directions in respect of 
respondent No.5. The petition stands disposed of.” 
 
Later on detailed reasons for the above order were issued on 31.05.2006. 
14. 
Wattan Party through Barrister Zafarullah Khan filed a petition 
under Article 184 (3) of the Constitution of the Islamic Republic of Pakistan 
challenging the process of privatization and acceptance of bid of respondent No.7 
before this Court. Aggrieved by the order/decision of High Court, C.P. No. 345 of 
2006 was filed by the Workers Union C.B.A. and C.P. No. 394 of 2006 has been 
filed by the Federation of Pakistan against the same judgment. 
15. 
It is to be observed that Federation of Pakistan and others 
challenged the judgment of the Sindh High Court at Karachi inter alia on the 
ground that Articles 153 and 154 of the Constitution of Islamic Republic of 
Pakistan are not attracted in the case of privatization of a company wholly owned 
by the Federal Government and further that in exercise of its Constitutional 
jurisdiction, the High Court can not decide academic question like vires of a 
statute when such decision was not warranted, upon the facts of the case. The 
learned Sindh High Court in the detailed reasons concluded that for privatization 
of the Federal Government owned industries approval of CCI is mandatory but 
Const Petition No. 9 of 2006 etc 
 
 
12
relief was declined because the Chief Minister Sindh being one of the members of 
the C.C.I. had consented to the privatization of P.S.M.C. and in the facts and 
circumstances of the case, this consent of Chief Minister was sufficient to deny the 
petitioner, the discretionary relief under Article 199 of the Constitution. 
16. 
Before dilating upon the merits of the case it is to be noted that both 
the learned counsel for Federation of Pakistan and Privatization Commission 
admitted that approval of CCI for privatization of Federal Government owned 
industrial units is necessary. Learned counsel for the Privatization Commission 
during his arguments placed on record a decision of CCI dated 29th May 1997 to 
substantiate that approval of CCI had already been obtained. Similarly learned 
counsel for the Government of Pakistan relied on the same decision and also 
brought on record complete summary placed before the CCI seeking approval for 
privatization of Federal Government owned industries including PSMC. He 
contended that the assertion (in Statement of Affairs filed by PSMC through its 
Chairman) that in 1998 the decision of privatization of PSMC was dropped is 
incorrect. He added that he has been instructed to make statement that the decision 
of C.C.I. dated 29th May 1997 still holds the field. On enquiry by the Court on the 
point as to whether C.C.I. has been appointed/activated so far or not, learned 
counsel after explaining the importance of C.C.I., answered that the process of 
making C.C.I. functional was “underway”. 
 
17. 
Learned counsel for the petitioner (C.P. No. 9 of 2006) Barrister 
Zafarullah contended that P.S.M.C. is the only huge integrated iron mill having 
finishing plants, blast furnaces, steel converters, Hot and Cold Roll Galvanizing 
Unit, grinding units, 65 mega watts power generation plant, 4 steel plants in 
Thatha, water supply plant, thermal power plant, 40 locomotives of 100 HP each, 
more than 100 railway wagons, 110 kilometers metalled road, 10 k.m. railway 
track, water treatment plant, jetties and 98 coke ovens, 80 brand new vehicles, 
Const Petition No. 9 of 2006 etc 
 
 
13
cash in hand, etc. But the Privatization Commission had sold its 75% shares 
against Rs.16.80 per share which comes to U.S. $ 348 million i.e. Rs. 21.68 billion 
along with the land measuring 4457 acres which has been unbundled from total 
land of 19086 acres on which Gulshan-i-Hadeed Town, schools etc are located. He 
further stated that out of the downstream industrial estates located on P.S.M.C. 
220 acres land has been allotted to M/s Al-Tuwairqi Group of Companies by the 
Government of Pakistan (GoP) for the purpose of establishing a steel mill.  Earth 
breaking ceremony of the said mill was carried out on 30th March, 2006, therefore, 
according to him for the best reasons known to the Privatization Commission its 
shares were sold to the same group along with the consortium of M/s Arif Habib 
Group of Companies, M/s Al-Tuwairqi Group of Companies and M/s 
Magnitogorsk Iron and Steel Works, Russia. He added that the petitioner being a 
registered political party having direct interest in national assets including the 
Steel Mill has invoked the jurisdiction of this Court under Article 184 (3) of the 
Constitution in its own right. He contended that ‘Access to Justice’ is a 
fundamental right of everyone, therefore, petition is maintainable. Reliance in this 
behalf has been placed by him on S.P.Gupta v. M. Tarkunde and others (A.I.R. 
1982 SC 149), Miss Benazir Bhutto v. Federation of Pakistan and another 
(PLD 1988 SC 416), Al-Jehad Trust v. Federation of Pakistan (PLD 1996 SC 
324), Malik Asad Ali v. Federation of Pakistan (PLD 1998 SC 161) and Syed 
Zafar Ali Shah v. General Pervez Musharraf, Chief Executive of Pakistan 
(PLD 2000 SC 869). 
18. 
Mr. Abdul Mujeeb Pirzada, learned ASC contended that he is 
appearing on behalf of the members of the Union and it being a public interest 
litigation locus standi of the petitioners to invoke the jurisdiction either of the 
High Court or this Court should not be questioned for the purpose of denying 
relief to the petitioners. He stated that before the completion of the process of 
privatization, the Privatization Commission itself took into confidence the workers 
Const Petition No. 9 of 2006 etc 
 
 
14
as it is evident from the letter dated December 20th, 2005 because the members of 
the Union have a right to form the workers and management group for the purpose 
of giving a bid to purchase the shares of the Mill and in fact in pursuance of such 
offer the workers were ready to participate in the bid but as at the eleventh hour 
they were called upon to deposit U.S. $ 30 Million as earnest money which they 
could not arrange hurriedly although the funds belonging to the workers 
amounting to about Rs. 18.00 billion were lying with the management. Therefore, 
the objection to the maintainability of the petitions is without any substance. 
Reliance was placed on Multiline Associates v. Ardeshir Cowasjee (PLD 1995 
SC 423) and Ardeshir Cowasjee v. Karachi Building Control Authority 
(KMC) Karachi (1999 SCMR 2883). Learned counsel contended that the 
petitions have also been filed under Article 185(3) of the Constitution against the 
judgment of the Sindh High Court at Karachi passed in writ petition on 30th of 
March, 2006, detailed reasons thereof were issued subsequently on 31st May 2006. 
Against this very judgment, the Federation of Pakistan had also filed a petition 
under Article 185(3) of the Constitution with the prayer that the same may be set 
aside. The issues involved being similar, the question of locus standi would be 
merely an academic and insignificant question. 
 
19. 
Syed Sharif-ud-Din Pirzada learned counsel for the Privatization 
Commission contended that to invoke jurisdiction of this Court under Article 
184(3) of the Constitution, two conditions are required to be fulfilled namely 
infringement of the fundamental rights and absence of alternate remedy. In the 
case in hand no fundamental right has been infringed and under the scheme of 
Privatization Commission Ordinance No.LII, 2000 (hereinafter referred to as 
“Ordinance”), two alternate remedies are available in terms of section 27 and 
section 28 of the Ordinance. According to learned counsel the judgment relied 
upon by the petitioner in S.P. Gupta’s case ibid, in the circumstances of the 
Const Petition No. 9 of 2006 etc 
 
 
15
instant case is not applicable because thereafter the Indian Supreme Court in the 
case of BALCO Employees Union (Regd) v. Union of India (AIR 2002 SC 350) 
has explained the scope of the public interest litigation. 
20. 
Learned Attorney General, however, at the outset contended that 
after hearing the case at length by this Larger Bench for a long period, it will not 
be fair on his part to say that, “no point of public importance is involved in this 
case”, therefore, he will not be questioning locus standi of the petitioners 
particularly in view of the judgments in the cases of Multiline Associates and 
Ardeshir Cowasjee ibid. 
21. 
This Court in the referred cases and the Indian Supreme Court in the 
case of S.P. Gupta ibid have laid down a rule namely that any member of the 
public having sufficient interest can maintain an action for judicial redress of 
public injury arising from breach of the public duty or from violation of some 
provision of the Constitution or the law and for enforcement of such public duty 
and observance of such Constitutional provision.  
 
In the case of Benazir Bhutto ibid, it was held that only when the 
element of public importance is involved , the Supreme Court can exercise its 
power to issue the writ while sub Article 1(c) of Article 199 of the Constitution 
has a wider scope as there is no such limitation therein. 
 
In Al-Jehad Trust ibid, it has been held that, “question of locus 
standi is relevant in a High Court but not in the Supreme Court when the 
jurisdiction is invoked under Article 184(3) of the Constitution.” 
 
In Malik Asad Ali ibid it was observed that under Article 184(3) of 
the Constitution, this Court is entitled to take cognizance of any matter which 
involves a question of public importance with reference to the enforcement of any 
of the fundamental rights conferred by Chapter I Part II of the Constitution even 
suo moto, without having any formal petition. 
Const Petition No. 9 of 2006 etc 
 
 
16
 
In Multiline Associates ibid this Court held that requirement of the 
locus standi in the case of pro bono publico (public interest litigation is not so 
rigid) has extended scope. This principle has been reiterated in Wukala Mahaz 
Barai Tahafuz Dastoor v. Federation of Pakistan (PLD 1998 SC 1263) 
 
As far as the judgment in All Pakistan Newspaper Society v. 
Federation of Pakistan (PLD 2004 SC 600) cited by the learned Sr. ASC Syed 
Sharif-ud-Din Pirzada is concerned, it is distinguishable because in that case we 
have held that it pertains to a financial dispute between two groups of newspaper 
industry i.e. employer and employees and no question of public importance was 
involved as the parties (employer and employees) were litigating with each other 
in respect of the validity or otherwise of Wage Board Award published by the 
Government of Pakistan on 25th October, 2001. Likewise, Balco’s case ibid need 
not be discussed in view of the judgments referred hereinabove and keeping in 
view that the learned Attorney General has himself conceded that this case 
involves questions of public importance, therefore cannot be thrown away 
summarily. Besides we are conscious of the fact that it is not only the petition 
under Article 184 (3) of the Constitution which is pending consideration before us 
but at the same time there are two other petitions which have been filed under 
Article 185(3) of the Constitution (one by the Workers Union and second by the 
Federation of Pakistan), involving similar questions therefore, keeping in view the 
importance of the case and the alleged violation of Article 4 and Article 9 of the 
Constitution, we hold that the petition under Article 184(3) of the Constitution 
filed by the Wattan Party is maintainable. 
22. 
Now we turn to the question relating to availability of alternate 
remedy to petitioner in terms of section 27 and 28 of the Privatization Commission 
Ordinance, 2000. For facility of reference both these sections are reproduced 
hereinbelow:- 
Const Petition No. 9 of 2006 etc 
 
 
17
“27. Investigations.- (1) The Federal Government or 
any of its agencies authorized by it, may of its own or 
on a complaint oversee, scrutinize or investigate any 
privatization transaction within one year of the 
completion of the privatization. 
(2) After the expiry of the period referred to in sub-
section (1), the Federal Government or any of its 
agencies shall not be empowered to carry out any 
such scrutiny or investigation. 
28. Jurisdiction of High Courts.- Notwithstanding 
anything contained in any other law for the time 
being in force, the High Court shall exercise 
exclusive civil and criminal jurisdiction- 
(a) 
to adjudicate and settle all matters related to, 
arising from or under or in connection with this 
Ordinance; 
(b) 
to adjudicate and settle all matters transferred 
pursuant to section 31; and  
(c) 
to 
try 
offences 
punishable 
under 
this 
Ordinance.” 
 
23. 
Learned counsel Mr. Abdul Mujeeb Pirzada contended that the 
Federal Government itself is petitioner in one of the petitions (C.P. No. 394 of 
2006), in the memo of the petition it is supporting the process of privatization as 
prayer has been made for the dismissal of petition filed on behalf of the Workers 
Union before the High Court bearing C.P. No. D-240/2006. Besides from day one 
when the proceedings started the matter was discussed at considerable length 
wherein number of omissions and commissions in the privatization of the project 
under consideration have been pointed out which according to him were sufficient 
to annul the Letter of Acceptance (LoA) dated 31st March, 2006 and the 
subsequent Share Purchase Agreement between the parties dated 24th April, 2006. 
But no concern was shown at all on its behalf, therefore, under these 
circumstances availing an opportunity to lodge complaint before the Federal 
Government in terms of section 27 of the Ordinance would be nothing but a futile 
exercise. In this behalf he has placed reliance on Anjuman-e-Ahmadiya, 
Sargodha v. The Dy Commissioner Sargodha (PLD 1966 SC 639) and The 
Murree Brewery Co. Ltd v. Pakistan thr. The Secretary to Government of 
Pakistan, Works Division (PLD 1972 SC 279). He also submitted that because he 
Const Petition No. 9 of 2006 etc 
 
 
18
is challenging the very vires of the Ordinance, he cannot be compelled to avail the 
so-called remedies. 
24. 
Syed Sharif ud Din Pirzada, learned ASC for the Privatization 
Commission opposed the arguments put forward by Mr. Abdul Mujeeb Pirzada 
learned ASC and stated that in presence of a statutory remedy the petition under 
Article 199 or Article 184(3) of the Constitution is not maintainable. 
25. 
Learned Attorney General contended by relying on the principles 
laid down in The Chairman East Pak Railway Board Chittagong etc v. Abdul 
Majid Sardar, Ticket Collector Pak Eastern Railway Laksam (PLD 1966 SC 
725) and Lahore Improvement Trust, Lahore thr. Its Chairman v. The 
Custodian Evacuee Property West Pak Lahore (PLD 1971 SC 811) that “the 
Court to explore possibility of every possible explanation for the validity of an 
order passed by public authority,” suggested resort to section 27 of the Ordinance 
by making reference to the Federal Government for the purpose of further probe 
into the case to examine the legality and validity of transaction.  
26. 
It is important to note that as far as the principle of law discussed in 
the cases of Anjuman-e-Ahmadiya, Sargodha and Lahore Improvement Trust 
ibid is concerned, there is no cavil with the same and we with utmost respect 
approve the same. But at the same time, we have also to keep in mind another very 
important principle of law enunciated by this Court in the case of Syed Ali abbas 
v. Vishan Singh (PLD 1967 SC 294) i.e. petitioner cannot be refused relief and 
penalized for not throwing himself again (by way of revision or review) on mercy 
of authorities who are responsible for such excesses. This principle has to be read 
along with the principle laid down in the case of Anjuman-e-Ahmadiya, 
Sargodha ibid wherein it has been held that if an adequate remedy provided by 
law is less convenient, beneficial and effective in case of a legal right to 
performance of a legal duty, the jurisdiction of the High Court can be invoked. 
Similarly this principle has been reiterated in the The Murree Brewery’s case 
Const Petition No. 9 of 2006 etc 
 
 
19
ibid wherein it has been held that if a statutory functionary acts mala fide or in a 
partial, unjust and oppressive manner the High Court in exercise of its writ 
jurisdiction has power to grant relief to the aggrieved party. 
27. 
Thus we are of the opinion that under the circumstances of the case, 
it would not be in the interest of justice to push the petitioners back to the 
authority who had already exercised the jurisdiction and is insisting that the action 
so taken by it is not only in accordance with law as it suffers from no legal 
discrepancy or infirmity but is also transparent. Therefore under the circumstances, 
referring the case of the petitioner to the Federal Government or this Court 
directing investigation under section 27 of the Ordinance would be inappropriate 
and an exercise in futility and it would also not serve the interests of justice. 
28. 
Now turning towards the implication of section 28 of the Ordinance 
a perusal whereof indicates that civil and criminal jurisdiction has been conferred 
on the High Court to adjudicate and settle all matters related, arising from or under 
or in connection with the Ordinance as also all matters transferred pursuant to 
section 31 and to try offences punishable under the Ordinance. In our opinion the 
matters shall be arising in respect of the rights and obligations of the parties who 
are the subject of the Ordinance. As far as pro bono publico cases are concerned, 
those shall not be covered under this provision of law because in such cases Court 
has been called upon to exercise Constitutional jurisdiction on the basis of the 
information laid before it that the matter involves question of public importance 
relating to their fundamental rights individually or collectively. A perusal of 
section 28 clause a, b, c, indicates that for such like litigants this section provides 
no remedy for redressal of their grievances. 
29. 
Besides above reasons there is an important aspect of the case 
namely these remedies are available within the Ordinance and Mr. Abdul Mujeeb 
Pirzada learned ASC has challenged its vires on the touchstone of Article 153 & 
154 of the Constitution. Therefore the law vires, of which have been challenged, it 
Const Petition No. 9 of 2006 etc 
 
 
20
would not be fair to compel the petitioner to avail the remedy under the same law. 
The High Court within its limited jurisdiction under section 28 can not strike down 
any of the provisions of the Ordinance. Furthermore, petitioner’s learned counsel 
has raised issues of great public importance falling within the Constitutional 
domain of this Court which could not have been adequately addressed to by the 
Court in terms of section 28 of the Ordinance. 
30. 
Mr. Abdul Mujeeb Pirzada learned ASC argued that without the 
approval of C.C.I. privatization of P.S.M.C. is unconstitutional in view of the 
mandate of Article 154 of the Constitution. The Mill is owned by the people of 
Pakistan and its tax payers, there is representation of employees of all the 
Provinces and its sale proceeds are to be spent for alleviation of poverty of the 
people and discharge of debts, therefore, bypassing the CCI by the Federal 
Government is not only illegal but is also against the Command of the 
Constitution. He further contended that despite restoration of the Constitution 
w.e.f. 31st December, 2002, the C.C.I. has not been constituted and made 
functional so far. Therefore, the whole process of privatization has become illegal 
for this reason. He also stated that the learned High Court accepted the arguments 
of the petitioner in this behalf but declined to grant relief by not exercising 
discretionary jurisdiction under Article 199 of the Constitution for reasons which 
are not tenable in law. Therefore, he prayed that on this sole ground the process of 
privatization of P.S.M.C. deserves to be declared unconstitutional. According to 
him, even the Ordinance is bad law having not been approved by the CCI. 
31. 
Syed Sharif-ud-Din Pirzada, learned Sr. ASC contended that as far 
back as 29th May, 1997, approval for the privatization of P.S.M.C. had been 
obtained. To substantiate his plea, he has placed on record decision of the CCI 
dated 29th of May 1997 along with the Schedule containing approval for 
privatization of Pakistan Steel Mills Corporation and its units and contended that 
Const Petition No. 9 of 2006 etc 
 
 
21
after having taken approval there was no necessity for placing again the matter 
before the CCI. 
32. 
Mr. Abdul Hafeez Pirzada learned Sr. A.S.C. contended that Article 
173 of the Constitution has directly conferred authority upon the Federation and 
Provinces to dispose of their property. In this case as well, in exercise of the same 
authority, the CCI has not been bypassed as the Federal Government had received 
its categorical, explicit and unambiguous endorsement of the entire privatization 
programme on a summary submitted to it in accordance with the rules on 25th May 
1997 approval of which was granted on 29th May, 1997. He explained the object of 
establishing the institution of CCI during the process of making of Constitution of 
1973. According to him, in the Federal System of Government, it is necessary to 
take along the Federating Units in the affairs of the Federation and once CCI had 
taken a decision this Court in judicial proceedings has no jurisdiction to revise the 
same because under the principles of trichotomy of Powers the three Organs of the 
State have got their respective areas for the purpose of exercising jurisdiction. 
Therefore, interference made in the approval of the CCI dated 29th May 1997 
would give rise to an anomalous position. Learned counsel placed on record a 
paper book containing documents of “Constitution Making in Pakistan” ever since 
the inception of this country. It is to be noted that management of P.S.M.C. had 
stated in unambiguous terms that the decision of its privatization was dropped in 
1998 and in the year of 2000 a decision was taken by the then Chief Executive to 
revamp the Pakistan Steel Mills and to achieve the object loans were to be 
arranged from the banks. Two Memoranda of Understanding (MOUs) were also 
signed with Russian and Chinese Governments for the purpose of providing 
technical support to the Government of Pakistan to revamp Pakistan Steel Mills. In 
view of such stand taken by P.S.M.C., Mr. Wasim Sajjad learned counsel 
appearing on its behalf was asked to explain the position by filing another 
statement. In compliance of the order, he submitted an explanation wherein he 
Const Petition No. 9 of 2006 etc 
 
 
22
took the stand that, “by implication the privatization process was dropped. The 
restructuring was approved by the then Chief Executive on 20.05.2000.” 
33. 
Mr. Abdul Hafeez Pirzada, learned counsel for the Federal 
Government and learned Attorney General were on the same wavelength when 
they contended that the decision of C.C.I. can only be annulled by the Parliament 
in a joint sitting in accordance with the provisions of Article 154 (5) or could be 
rescinded by the CCI itself and such decision cannot be undone by any other 
functionary. This is in line with this Court’s earlier view given in Messrs Gadoon 
Textile Mills  v. WAPDA (1997 SCMR 641) wherein at Page 769 it was observed 
as under:-- 
“It is significant to note that the Federal Government 
has not been authorized to give any direction to the 
CCI. Clause 5 of Article 154 provides a procedure in 
a case where the Federal Government or the 
Provincial Government is dissatisfied with the 
decision of the Council. Any of the aggrieved 
governments may refer the matter to Majlis-i-Shura 
(Parliament) in joint sitting whose decision in that 
behalf shall be final.” 
 
34. 
Learned Attorney General contended that in view of the facts of the 
case in hand the reference in respect of the approval for privatization of P.S.M.C. 
by the C.C.I. is no more a live issue in view of its decision dated 29th May 1997, 
the question relating to taking approval of C.C.I. before privatization of an 
industry owned by the Federation presently seems to be academic one, therefore, it 
may be left open for decision in some other case where there is a live controversy 
when there is actually no approval of C.C.I. and then this Court may interpret 
Article 153, 154 and 173 of the Constitution and law. To substantiate his plea he 
has relied upon Qazi Hussain Ahmad v. Gen. Pervaiz Musharaf  (PLD 2002 SC 
853), Shah Sawar v. the State (2000 SCMR 1331), Commissioner Income Tax 
v. M/S. Hasan Associates (Pvt) Limited (1994 SCMR 1321), A.K. Roy v. Union 
of India (A.I.R. 1982 SC 710), Naresh v. State of Maharashtra (AIR 1967 SC 
1) and Mst. Kaneez Fatima v. Wali Muhammad (PLD 1993 SC 901 at page 
Const Petition No. 9 of 2006 etc 
 
 
23
915). In the last mentioned case it has been decided that it is an accepted principle 
that if a case can be decided on other issue properly it is not necessary to enter into 
Constitutional issues. The importance of CCI has been examined by this Court in 
Mian Muhammad Nawaz Sharif v. President of Pakistan (PLD 1993 SC 473). 
Relevant para therefrom is reproduced hereinbelow:- 
“The Council of Common Interests is an important 
Constitutional institution which irons out differences, 
problems and irritants between the Provinces inter se 
and the Provinces and the Federation in respect of 
matters specified in Article 154. The Council is 
responsible to Majlis-e-Shoora, which in joint sitting 
may from time to time by resolution issue directions 
through the Federal Government generally or in 
particular matters to take action as the Parliament may 
deem just and proper and such directions shall be 
binding on the Council. Ground C(i) of the dissolution 
order specifies that the Council of Common Interests has 
not discharged its Constitutional functions to exercise its 
powers particularly in the context of privatization of 
industries in relation to the subject matter mentioned in 
Article 154.” 
 
35. 
After perusal of judgment in Muhammad Nawaz Sharif’s case as 
well as an earlier judgment reported in Khawaja Ahmad Tariq Rahim v. The 
Federation of Pakistan (PLD 1992 SC 646), one can well conceive the 
importance of CCI and by making it functional the Federal Government can 
resolve number of issues/differences including the process of privatization of 
industries owned by the Federal Government as per mandate of the Constitution 
and procedure laid down therein. In the instant case, the decision/approval was 
taken to privatize good number of industries mentioned in the schedule attached to 
the decision dated 29th May 1997 including P.S.M.C. Therefore the view taken by 
this Court in the case of Messrs Gadoon ibid is respectfully approved with 
reference to functioning of C.C.I. under Articles 153 & 154 of the Constitution. As 
a consequence whereof the view taken by the Sindh High Court in the impugned 
judgment is upheld. 
Const Petition No. 9 of 2006 etc 
 
 
24
36. 
Thus in view of the statement so made on behalf of the Federation 
of Pakistan as well as learned counsel appearing for Privatization Commission that 
approval from CCI had already been taken on 29th May 1997, no further 
discussion is called for except to consider the effect of the stand which has been 
taken in the written statement by the counsel of PSMC namely that in 1998 the 
decision was dropped and its restructuring was planned by the then Chief 
Executive on 20.05.2000. Learned counsel for Federation of Pakistan stated that 
once the approval has been obtained from the CCI, the same decision cannot be set 
aside except in accord with the procedure laid down in Article 154(5). On having 
gone through the relevant Constitutional provision we agree with his contention 
but at the same time we are mindful of the fact that in the process of restructuring 
which started after about 3 years of the decision of CCI dated 29.05.1997, the 
project was restructured by investing huge money. The MoUs were also signed 
with the governments of China and Russia for the purpose of providing technical 
support to increase its capacity up to 1.5 metric tons per year and thereafter the 
Mill had started making profit as is evident from the Statements of 
Accounts/balance sheets pertaining to the years 2002-03, 2003-2004 and 2004-05. 
It is significant to note that during these years the project made remarkable profits 
and according to the stand taken on behalf of PSMC it wiped off all its losses and 
carried forward accumulated profit of Rs.3.938 billion as on 30th June, 2005, 
therefore, we observe that in view of these healthy developments having taken 
place during the intervening period and the divergent stand taken by the counsel 
for the Federal Government to the effect that order dated 29th May 1997 was never 
recalled and the stand taken by the counsel for the PSMC that the matter of its 
privatization was dropped subsequently, by way of propriety if not as a matter of 
legal obligation, it would be in order if the matter is referred to the Council of 
Common Interests (C.C.I) for fresh consideration. There is another reason to keep 
intact the decision dated 29th May 1997 because its validity or otherwise has not 
Const Petition No. 9 of 2006 etc 
 
 
25
been challenged before us nor it was ever challenged before the Parliament in 
terms of Article 154 (5) of the Constitution. 
37. 
During the course of arguments, learned counsel for the Federation 
was called upon to apprise the Court as to whether C.C.I. is functioning or not? 
He, after obtaining instructions, stated at the Bar on the following day that process 
for making C.C.I. functional was underway.  
 
Thus in view of the importance of C.C.I. as a body envisaged by the 
Constitution, we direct the Federal Government to do the needful expeditiously as 
far as possible but not later than six weeks. 
38. 
The next most important question raised before us is with regard to 
the vires of the Privatization Commission Ordinance LII 2000. Mr. Abdul Mujeeb 
Pirzada learned ASC argued that Ordinance 2000 is ultra vires of the Constitution. 
He explained that it was promulgated during the period when the Constitution was 
in abeyance therefore the requirements of Article 154 of the Constitution were not 
fulfilled. However, on revival of the Constitution it was necessary to amend the 
same in order to bring it in line with the said Article. According to him, the C.C.I. 
is an important Constitutional body but perusal of the contents of Ordinance 2000 
indicates that it has no role to play for the purpose of getting its policies 
implemented. As far as the executives are concerned, they are not supposed to take 
decisions for the purpose of privatization of the industries belonging to the Federal 
Government or to deal in other fields wherein CCI has got jurisdiction as per its 
Constitutional mandate. He emphasized that the vires of Ordinance 2000 were 
challenged before the Sindh High Court but it has failed to dilate upon this aspect 
of the case as the Constitutional petition has been dismissed in limine. It was also 
argued by the learned counsel that Constitutional protection available to the 
Ordinance in pursuance to 17th Amendment in the Constitution does not prohibit the 
Legislature to repeal or amend different sections of the Ordinance through the process of 
legislation. Substance of his arguments was that when there is a conflict between 
Const Petition No. 9 of 2006 etc 
 
 
26
Constitutional provision and the sub constitutional provision then the sub 
Constitutional provision has to yield to the Constitutional provision and different 
provisions of the Ordinance including sections 2,3,5,6,7,9,14,16,22 are not in 
consonance with Articles 153 and 154 of the Constitution, therefore, the same are 
liable to be struck down. Reliance was placed by him on Mehram Ali v. 
Federation of Pakistan (PLD 1998 SC 1445) and Syed Zafar Ali Shah ibid to 
explain judicial powers of the Court to examine the constitutionality of a law on 
the subject. He also contended that where a law encroaches upon fundamental 
rights or it comes in conflict with another provision of the Constitution, the same 
shall be deemed to be violative of the Constitutional provisions. The workers of 
P.S.M.C. are earning their livelihood and are responsible for its effective running 
but they were not permitted to form a group for the purpose of participating in the 
bid, therefore, section 25 of the Ordinance needs to be amended incorporating a 
further clause in the modes of privatization and in absence of such provision of 
law they have been deprived of their fundamental right to life. He further 
submitted that the Constitution is a social contract and it regulates rights and 
obligations of its subjects, therefore, any violation of the same by a subordinate 
legislation calls for striking off the same being contrary to Constitutional 
commitments between the parties.  
39. 
Mr. Abdul Hafeez Pirzada learned ASC for the Federation 
contended that Ordinance 2000 does not suffer from procedural or substantive 
ultra vires. He argued that perhaps an impression has been gathered that CCI has 
to be approached for each and every item of privatization which is neither required 
nor possible. Reliance was placed on Gadoon Textile Mills  ibid wherein it has 
been held that CCI superimposes its will on the Cabinet and the Cabinet is bound 
under the provisions of Article 154 of the Constitution to follow the decisions and 
directions of the CCI. According to him it would not be proper to say that in the 
entire process of privatization CCI is involved. He submitted that Ordinance 2000 
Const Petition No. 9 of 2006 etc 
 
 
27
was promulgated by the Chief Executive competently under the powers available 
to him at the relevant time and the same was protected/ratified under Article 270-
AA of the Constitution. According to him the intent of the Parliament cannot be 
overridden by this Court in exercise of the power of judicial review unless it is 
shown that it is in conflict with any provision of the Constitution. He further 
explained that this Court can strike down a law on the following touchstones:- 
(i) 
If it is tainted with malice which must be proved as a fact. 
(ii) 
If it lacks procedural propriety which is extension of the 
principle of natural justice. 
(iii) 
If it is ex facie illegal. 
(iv) 
If there is failure to conform to the principle of 
proportionality (proportionality has not been defined even in 
England). In this regard he referred to the principle of 
reasonableness laid down in Associated Provincial Picture 
Houses Ltd. v. Wednesbury Corp., [1947] 2 All ER 680. 
He also submitted that if this Court at all comes to the conclusion that there is 
conflict between Article 154 and 270-AA which has provided protection to the 
Ordinance then the two Articles of the Constitution are to be reconciled as this 
Court is not empowered to strike down any provision of Constitution. 
 
He further contended that according to his information Rules and 
Procedure of the Council of Common Interests were promulgated (in exercise of 
the powers conferred by sub Article 3 of Article 154 of the Constitution) by the 
C.C.I. in the year 1991 and since then CCI is implementing its policies through the 
executives who are exercising the jurisdiction as per the provisions of Rules of 
Business of the Government of Pakistan. 
40. 
Learned Attorney General for Pakistan (on Court notice) contended 
that there are two kinds of ultra vires, procedural and substantive. Procedural ultra 
vires is that law has been made in a manner different from which it should have 
Const Petition No. 9 of 2006 etc 
 
 
28
been made as required by the Constitution and Substantive ultra vires means that it 
is in conflict with the provisions of the Constitution. Procedural ultra vires is 
sought to be cured by curative legislation in the form of validation of laws. Article 
270-AA cured that procedural ultra vires because it has been protected by this 
Constitutional provision, therefore, this question is no longer open to this Court. 
As far as substantive ultra vires is concerned, the Ordinance will be protected 
throughout the extra Constitutional period and after the restoration of Constitution 
the Ordinance has been protected by 17th Amendment, therefore, it would be 
deemed to be a protected law and cannot be called ultra vires. Reliance was placed 
by him on Miss Benazir Bhutto ibid, Mrs. Benazir Bhutto v. Federation of 
Pakistan (PLD 1989 SC 66). He further contended that legislation should not be 
randomly struck down. The Court must endeavour to find every reason for its 
validity as held in The Province of East Pakistan v. Sirajul Haq Patwari (PLD 
1966 SC 854), Mehreen Zaibun Nisa v. Land Commissioner (PLD 1975 SC 
397), Inamur Rahman v. Federation of Pakistan (1992 SCMR 563), Multiline 
Associates ibid, Messrs Elahi Cotton Mills Ltd. v. Federation of Pakistan 
(PLD 1997 SC 582), Pakistan Burma Shell Ltd. v. Federation of Pakistan 
(1998 PTD 1804), Dr. Tariq Nawaz v. Govt of Pakistan (2001 PLC (CS) 57), 
Mian Asif Islam v. Mian Mohammad Asif (PLD 2001 SC 499),  Pakistan 
Muslim League (Q) v. Chief Executive of Pakistan (PLD 2002 SC 994) and 
Pakistan Lawyers Forum v. Federation of Pakistan (PLD 2005 SC 719). 
41. 
Before examining respective arguments advanced by the learned 
counsel for the parties it would be appropriate to observe that the concept of 
Council of Common Interests/Inter Provincial Council was conceived during the 
making of 1973 Constitution in pursuance of an Accord between the 
Parliamentarians:-- 
“To conform to the spirit of federalism, a new 
arrangement has been worked out to ensure effective 
participation of the Provincial Governments in 
Const Petition No. 9 of 2006 etc 
 
 
29
sensitive and important spheres of national life. In 
respect of the subjects in Part II of the Federal 
Legislative List and the item of electricity in the 
Concurrent Leglislative List, special provision has 
been made for the creation of a Council of Common 
Interest to be appointed by the President as envisaged 
in the Constitutional Accord. The Council shall consist 
of the Chief Ministers of the Provinces and an equal 
number of members from the Federal Government. The 
Council shall formulate and regulate policies in 
relation to the specified matters and exercise 
supervision and control over related institutions.” 
 
42. 
In line with the above accord, Council of Common Interests was to 
be constituted with following objects and purposes:- 
“24. 
COUNCIL 
OF 
COMMON 
INTERESTS/INTER 
PROVINCIAL COUNCIL. 
 
There shall be a Council of Common Interests under the 
Constitution which shall consist of four provincial Chief 
Ministers and four members of the Federal Cabinet to be 
nominated by the Prime Minister. 
25.  
In respect of the items No.17 , 27 and 29 of the Federal List 
above and item of electricity on the Concurrent List in so far 
as it relates to the Federation, the Council shall exercise 
supervision and control on policy. The institutions relating 
to these items shall function under the control and 
supervision of this Council. 
26. 
The decisions of the Council shall be implemented by the 
concerned Ministries of the Federal Government. 
27. 
The Council shall, through the Prime Minister, be 
responsible to the Parliament.” 
 
43. 
Subsequent thereto, the Constitution makers transformed the above 
provisions in Article 153 and 154 of the Constitution. Article 153 provides for the 
composition of the Council of Common Interests whereas Article 154 deals in 
respect of the functions and rules of procedure. For convenience these Articles are 
reproduced hereinbelow:- 
“153. (1) There shall be a Council of Common Interests, in 
this Chapter referred to as the Council, to be appointed by 
the President. 
(2) The members of the Council shall be------  
(a) 
the Chief Ministers of the Provinces, and 
(b) 
(an equal number of members from the Federal 
Government to be nominated by the Prime Minister from 
time to time. 
(3) The Prime Minister, if he is a member of the Council, 
shall be the Chairman of the Council but, if at any time he is 
Const Petition No. 9 of 2006 etc 
 
 
30
not a member, the President may nominate a Federal 
Minister who is a member of the Council to be its Chairman. 
(4) The Council shall be responsible to [Majlis-e-Shoora] 
(Parliament)]. 
“154. (1) The Council shall formulate and regulate policies 
in relation to matters in Part II of the Federal Legislative 
List and, in so far as it is in relation to the affairs of the 
Federation, the matter in entry 34 (electricity) in the 
Concurrent Legislative List, and shall exercise supervision 
and control over related institutions. 
(2) The decisions of the Council shall be expressed in terms 
of the opinion of majority. 
(3) Until [Majlis-e-Shoora] (Parliament) makes provision by 
law in this behalf, the Council may make its rules of 
procedure. 
(4) [Majlis-e-Shoora (Parliament)] in joint sitting may from 
time to time by resolution issue directions through the 
Federal Government to the Council generally or in a 
particular matter to take action as [Majlis-e-Shoora 
(Parliament)] may deem just and proper and such directions 
shall be binding on the Council. 
(5) If the Federal Government or a Provincial Government 
is dissatisfied with a decision of the Council, it may refer the 
matter to [Majlis-e-Shoora (Parliament)] in a joint sitting 
whose decision in this behalf shall be final.” 
 
A perusal of Article 154 indicates that the Council shall formulate and regulate 
policies in relation to matters in Part II of the Federal Legislative List and in so far 
as it is in relation to the affairs of the Federation, the matter in entry 34 
(electricity) in the concurrent legislative list and shall exercise supervision and 
control over related institutions. There is no need to furnish the details of the 
matters enunciated in Part II of the Federal Legislative List because presently we 
are only concerned in respect of privatization of Federally owned industries. It is 
nobody’s case that in the matter of disinvestment or privatization of PSMC the 
CCI has no jurisdiction.  
44. 
On the basis of the law laid down by this Court in the case of Mian 
Muhammad Nawaz Sharif ibid, the Privatization Commission moved a summary 
dated 25th of May, 1997 to the CCI for the purpose of its approval to privatize the 
government owned industries details whereof were mentioned in the Schedule 
attached therewith. Relevant para therefrom is reproduced hereinbelow:- 
Const Petition No. 9 of 2006 etc 
 
 
31
“Based on the functions and powers of CCI, its concurrence is 
necessary for the privatization of utilities (electricity, oil, natural gas 
and miners resources) and state-owned entities (industrial units and 
other undertakings). The honourable Supreme Court of Pakistan in 
Muhammad Nawaz Sharif v. the Federation of Pakistan (PLD 1993 
Supreme Court Page 473) had observed that the Government ought 
not to have transferred any units included in Part II of the Federal 
Legislative List to the private sector in the absence of a policy or 
policies framed by the CCI.” 
 
45. 
In pursuance to above summary, the following decisions were 
recorded by the CCI:- 
“The Council of Common Interests (CCI) considered the 
summary dated 25th May, 1997 submitted by the 
Privatization Commission on “Privatization of Utilities and 
other State Owned Entities” and decided to grant ex post 
facto approval to the disinvestments completed by the 
Privatization Commission so far subject to the reservations 
that non transparent and irregular transactions during the 
previous government’s tenure of office as in the case of Kot 
Addu Power Station, PTC, National Press Trust Newspapers 
and 
any 
other 
transactions 
should 
be 
thoroughly 
investigated and necessary action taken to proceed against 
those involved. 
II. The CCI decided to approve the recommendations as 
outlined in the Summary submitted by the Privatization 
Commission for early implementation. 
III. The CCI decided that the Privatization Commission 
should include at least one representative from each 
Province. 
IV. The CCI decided that the net sale proceeds accruing 
from privatization process should be utilized primarily for 
debt retirement and should not be used for budgetary 
support. 
V. The CCI approved the sale of surplus railway land for 
improving the financial position of the railways, providing 
better railway facilities and retirement of debt. The sale of 
surplus land available with federal and provincial 
governments/agencies should be expedited to retire the debt 
of federal and provincial governments. 
VI. The CCI decided that the share of hydel profits or 
royalties/gas development surcharge from Oil and Gas 
sources should remain at levels at which it would have 
remained, had there been no privatization. 
VII. The CCI endorsed the need for establishment of 
Regulatory 
Authorities 
i.e. 
for 
power, 
gas, 
telecommunications, railways and wherever required. The 
Regulatory Authorities, apart from other functions, should 
keep in view the CCI decision at (VI) above concerning their 
respective fields.” 
 
Const Petition No. 9 of 2006 etc 
 
 
32
46. 
It is to be noted that prior to the promulgation of Ordinance 2000 
the privatization was being done by a Commission established under the executive 
fiat of the Federal Government. Later on, apparently to implement the decisions of 
the CCI, Ordinance 2000 was promulgated also with a view to structure the 
discretionary authority of the Privatization Commission and to ensure greater 
transparency. 
47. 
Article 8 of the Constitution grants the power of judicial review of 
legislation according to which this Court is empowered to declare a law void if it 
is inconsistent with or in derogation to the fundamental rights. However, at the 
same time this Court is empowered to declare any legislation contrary to the 
provisions of Constitution under some of the identical provisions of the 
Constitution as under Article 143 of the Constitution on having noticed 
inconsistencies between the Federal and Provincial laws the Court is empowered 
to declare that which out of the two laws is in accordance with the Constitution. 
Besides it is an accepted principle of the Constitutional jurisprudence that a 
Constitution being a basic document is always treated to be higher than other 
statutes and whenever a document in the shape of law given by the Parliament or 
other competent authority is in conflict with the Constitution or is inconsistent 
then to that extent the same is liable to be declared un-Constitutional. This is not 
for the first time that a law like Ordinance 2000 has come for examination before 
the Court as in the past a number of laws were examined and when found against 
the Constitution the same were declared void and of no legal effect. Reference 
may be made to the case of Syed Zafar Ali Shah v. Gen. Pervez Musharaf, 
Chief Executive of Pakistan (PLD 2000 SC 869) wherein it was held that judicial 
power means that the superior courts can strike down a law on the touchstone of 
the Constitution. The nature of judicial power and its relation to jurisdiction are all 
allied concepts and the same cannot be taken away. It is inherent in the nature of 
judicial power that the Constitution is regarded as a supreme law and any law 
Const Petition No. 9 of 2006 etc 
 
 
33
contrary to it or its provisions is to be struck down by the Court, as the duty and 
the function of the Court is to enforce the Constitution. Prior to the case of Zafar 
Ali Shah, this Court had examined different laws and declared that provisions of 
some of them were contrary to the provisions of the Constitution. Reference to the 
cases of Mehram Ali ibid, Sh. Liaqat Hussain v. Federation of Pakistan (PLD 
1999 SC 504), Khan Asfand Yar Wali v. Federation of Pakistan (PLD 2001 SC 
607), etc is pertinent. Keeping in view the principles defining the powers of 
judicial review of this Court to examine a law at the touchstone of the 
Constitution, we have considered the arguments put forward by learned counsel 
for the petitioner and have also minutely gone through the provisions/sections of 
the Ordinance 2000 referred to by the learned counsel in his arguments to 
ascertain as to whether any of them negates the provisions of the Constitution. 
48. 
It may be noted that the main concern of Mr. Mujeeb Pirzada was 
that as under Article 154 of the Constitution, it is the domain of the C.C.I. to lay 
down policies, therefore, with reference to the process of privatization the 
legislature must have given some role to the C.C.I. instead of conferring the 
jurisdiction upon the Privatization Commission. According to him, even in the 
definition clause C.C.I. has not been mentioned. It may be noted that a perusal of 
the Preamble of Ordinance 2000 shows that it has been drafted  substantially and 
in consonance with the spirit of the summary which was put up before the C.C.I. 
on 25th May 1997.  The Federal Government had made some commitments therein 
that the proceeds of privatization will be utilized for the retirement of the Federal 
Government  debt and for poverty alleviation. To achieve the object a 
Privatization Commission  has been established under section 3 for carrying out 
the purpose of the Ordinance.  It is most important to note that earlier to the 
promulgation of the Ordinance,  the Privatization  Commission was  responsible  
for  disinvestment of the government entities in the  industrial sector  and it was  
functioning under  the Notification  bearing No. F(5)(1) Admn-1/1991 dated 22nd 
Const Petition No. 9 of 2006 etc 
 
 
34
January, 1991.   But after the promulgation of the Ordinance the said notification 
was rescinded in terms of section 3(ii) of the Ordinance. 
 
The provisions of section 5 of the Ordinance deal with the functions 
and powers of the Commission. One of the functions enumerated therein is to 
recommend privatization policy guidelines to the Cabinet etc. It is to be noted that 
in the year 2000 when the Ordinance was promulgated at that time the 
Constitution was in abeyance. Therefore, the Commission was authorized to 
provide guidelines to the Cabinet but no sooner the Constitution has been revived 
the policy guidelines of privatization prepared by the Commission shall be 
subservient to the policy guidelines of the CCI which it has to provide under 
Article 154 of the Constitution. Under the scheme of the Constitution the 
Commission independently cannot provide such guidelines and it has to follow 
whatever guidelines are provided by the CCI.  
 
Section 6 deals with the composition of Board of the Commission, 
general management and decision of the affairs of the Commission. This provision 
has been promulgated for the purpose of smooth working of the Commission for 
the purpose of implementing the Constitutional mandate given to the CCI in terms 
of Article 154 of the Constitution.  
 
Section 7 of the Ordinance deals with the appointment of the 
Chairman, Secretary and the members by the Federal Government. Obviously for 
the purpose of carrying out the object and the purposes of the Privatization 
Commission, appointments have to be made by the Federal Government and such 
appointment when made cannot be said to be un-Constitutional. 
 
As far as section 9 relating to the delegation of powers by the Board 
its examination does not identify violation of any of the provisions of law for the 
purpose of holding it contrary to the Constitution.  
 
Likewise sections 14, 16 and 22 deal with the privatization fund and 
their distribution for the purpose of the smooth running of the affairs of the 
Const Petition No. 9 of 2006 etc 
 
 
35
Commission. Sections 14 and 16, deal with the establishment of fund, preparation 
of budget of the Commission which will be utilized while performing its functions 
and exercising its powers under the Ordinance. 
 
As far as section 16 is concerned, it is one of the important sections 
in the Ordinance therefore the same is reproduced hereinbelow:- 
“Privatization Fund.---(1) The Commission shall 
establish and maintain a distinct and separate 
Privatization Fund in which all Privatization proceeds 
shall be deposited. The Commission shall, out of the 
moneys so deposited, withdraw and contribute to the 
Commission’s Account such amount or amounts as 
may be needed by it from time to time but only to 
supplement the other resources therein if and to the 
extent necessary. The remaining Privatization proceeds 
shall be kept in trust for and distributed to the Federal 
Government or the enterprise owned or controlled by 
the Federal Government entitled to such proceeds.” 
 
 
The above provision seems to have been enacted to carry out the 
object for which CCI has given the approval on the summary dated 25th May 1997 
viz that the sale proceeds of the project shall be used for the purpose of retirement 
of Federal Government debts.  
49. 
It is to be observed that Section 16 of the Ordinance was amended 
by means of Ordinance CXVI of 2002 dated 8th of November 2002 by virtue of 
which two provisos were added:- 
2.---Amendment of Section 16, Ordinance LII of 
2000.---In the Privatization Commission Ordinance, 
2002 (LII of 2000) in section 16, in subsection (1) for 
the full stop at the end, a colon shall be substituted 
and thereafter the following provisos shall be 
inserted, namely:- 
“Provided that the Commission may, if so required 
by the Federal Government, withhold a specified 
amount out of the Privatization proceeds, of the 
Government of Pakistan’s shares in the oil and gas 
fields specified in the Schedule to this Ordinance. 
Provided further that the amount withheld under the 
foregoing proviso shall be paid to the Federal 
Government and shall not exceed the sum equivalent 
to such proceeds as may be necessary to compensate 
the Federal Government for the investments made by 
it in such oil and gas fields.” 
 
Const Petition No. 9 of 2006 etc 
 
 
36
 
Perusal of the above provisos indicates that the sale proceeds can be 
used by the Federal Government for the purpose other than that which has been 
approved by the CCI therefore the Federal Government has to examine its 
implication and to ensure that it takes ex post facto approval from the CCI. 
 
Thus it is concluded that subject to above observation, section 16 is 
also not contrary to any of the provisions of the Constitution. 
50. 
Section 22 of the Ordinance reads as under”- 
“22.---Privatization 
Programme.—Subject 
to 
the 
provisions hereinafter provided, the Commission shall, 
after approval by the Cabinet, carry out the 
Privatization programme in the prescribed manner.” 
 
51. 
Learned counsel emphasized that in terms of Article 154 of the 
Constitution, it is the CCI which has to give the programme and as this section 
gives power of approval to Cabinet, it is in conflict with Article 154. At this 
juncture Mr. Abdul Hafeez Pirzada, Learned Sr. ASC appearing for the Federal 
Government stated that all the policies of the CCI have to be implemented by 
some agency therefore section 22 has provided a vehicle for the implementation of 
such policy. A perusal of this section indicates that it does not speak in respect of 
the policy which essentially has to be framed by the CCI under Article 154(1) of 
the Constitution. Admittedly CCI has no implementing agencies, therefore, the 
Constitution makers had only assigned the job of giving the policies to it and as far 
as their implementation is concerned for that purpose Privatization Commission 
has been established. As stated hereinabove initially the Commission was acting 
under a notification but then it has been institutionalized by way of promulgating 
Ordinance 2000. It is Cabinet which is bound by the policy of the CCI and has to 
see that privatization programme is in accord with the same. 
52. 
Before discussing the manner in which CCI policies are 
implemented by the Federal Government it would be appropriate to note that 
framing the policy and issuing the programme for the purpose of carrying out 
Const Petition No. 9 of 2006 etc 
 
 
37
privatization are distinct and different from each other. The word “Policy” has 
been defined in Black’s Law Dictionary 7th Edition Page 1178 as follows: 
“the general policies by which a Government is 
guided in its management of public affairs.” 
 
Whereas the word “Programme” has been defined in 20th Century Dictionary Page 
1107: 
“the schedule of proceedings for and list of 
participants in a theatre performance, entertainment, 
ceremony, etc; an agenda, plan or schedule, a series 
of the planned projects to be undertaken”. 
 
On having seen the meanings of both the expressions one can conveniently 
conclude that the programme which is to be provided by the Commission is 
merely a schedule for the purpose of the privatization in a manner prescribed in 
law.  
53. 
Article 154 of the Constitution has itself provided mechanism for 
the purpose of functioning of the CCI. Its sub Article (3) lays down that until 
“Majlis-e-Shoora (Parliament) makes provisions by law in this behalf, the Council 
may make its rules of procedure”. In pursuance of such interim arrangement the 
Council has framed its rules as far back as 12th January, 1991 which have inter alia 
provided a procedure for implementing the decisions. Rule 4 of the Procedure 
stipulates the kind of cases which are to be submitted to the Council for 
formulation and regulation of the policies on which the CCI has jurisdiction of 
supervision and control. The list provided under the sub rule (c) includes all 
undertaking projects and schemes of such institutions, establishments, bodies and 
corporations; industries, projects and undertaking owned wholly or partially by the 
Federal Government or by a Corporation set up by the Federation. Essentially it 
also includes the supervision and control over PSMC. 
 
Rule 5 is again important as it deals with the meetings of the 
Council. The Chairman from time to time has been authorized to summon a 
Const Petition No. 9 of 2006 etc 
 
 
38
meeting of the Council to meet at such time and place as he thinks fit. According 
to this rule there shall be at least one meeting of the Council in a year.  
 
As far as Rule 14 is concerned, according to it the minutes of the 
meeting should be circulated by the Cabinet Division to all the members who shall 
return the same after perusal. Discrepancies, if any, shall be reported by the 
members within seven days of the receipt of the minutes. Sub rule (2) says that the 
Cabinet Division shall also pass on the decision of the Council to all concerned for 
necessary action but the primary responsibility for the proper implementation of 
the decision would be that of the sponsoring secretary or the chief secretary of the 
Province concerned who would ensure that the decision has been duly passed on 
to all the agencies concerned. As per sub rule (4) it is the responsibility of the 
Cabinet Secretary to watch the implementation of the decision and the Secretary of 
the Division concerned or the Chief Secretary of the Provincial Government 
concerned shall supply to the Cabinet Secretary such documents as the latter 
should by general or special request require to enable him to complete his record 
of the case and to satisfy himself that the decision has been fully implemented.  
 
 
It is important to note that a perusal of both these rules abundantly 
makes it clear that the policy decisions of the CCI are required to be implemented 
by the Cabinet Secretary as well as the Secretary of the concerned Ministry. 
Therefore, it is not correct to assert that the powers of the C.C.I. have been 
transferred/delegated to the Commission for the purpose of making its policies 
independent of C.C.I. while discharging the functions in terms of section 5 as well 
as section 22 of the Ordinance 2000. It would not be out of place to mention that 
as far as the procedural rules are concerned they have got  Constitutional 
support/backing, therefore, whatever decision will be pronounced by the CCI the 
Executive Government in discharge of its functions in terms of Article 97 of the 
Const Petition No. 9 of 2006 etc 
 
 
39
Constitution is bound to implement the same unless it is varied by the Parliament. 
It may be recorded that validity of these Rules has not been challenged before us. 
54. 
Besides the above decision to further elaborate the role of the 
executive for the implementation of the decisions of the CCI reference may be 
made to Sub Article (4) of Article 154 of the Constitution which provides that 
Majlis-e-Shoora (Parliament) in joint sitting may from time to time by resolution 
issue directions through the Federal Government to the Council generally or in a 
particular matter to take action as [Majlis-e-Shoora] (Parliament) may deem just 
and proper and such directions shall be binding on the Council. A perusal of this 
Article indicates that the Constitution makers have even not allowed the 
Parliament to speak to the CCI directly but for communication of its directions it 
has also taken the help of the Federal Government. Since both the institutions are 
constitutional bodies there was no impediment for the Parliament even to address 
directly to the CCI in respect of the resolution passed by it. Making available the 
agency of the Federal Government clearly goes to show that it is just within the 
scheme of the Constitution because such decisions/resolutions even if passed by 
the Parliament have to be carried out or implemented through the Federal 
Government in terms of Article 97 of the Constitution which is repository of the 
Federal executive powers. In the instant case as well the various provisions of the 
Ordinance 2000 indicate that the object was nothing but to implement the decision 
of the CCI through a Privatization Commission which has been constituted under a 
statutory provision and the functions etc of the Privatization Commission clearly 
demonstrate that it was just for the purpose of providing a vehicle to the CCI for 
the implementation of its programme on the same analogy as the Majlis-e-Shoora 
(Parliament) takes the assistance of the Federal Government for purpose of getting 
implemented its resolution in terms of Article 154 (4) of the Constitution. 
 
We may point out here that the procedural rules are not ordinary 
rules framed under an Act of Parliament but are the rules which have been framed 
Const Petition No. 9 of 2006 etc 
 
 
40
under the Constitutional provision, therefore, their status would not be less than 
that of an Act of the Parliament in any manner and so long Majlis-e-Shoora has 
not made the rules they shall hold the field. There is identical rule making 
provision in the Constitution i.e. Article 191 which confers power upon the 
Supreme Court and Article 202 which confers power upon the High Courts to 
frame their rules. Similarly Articles 90 and 99 confer powers upon the Federal 
Government to frame their Rules of Business.  
55. 
Thus it is held that the procedural rules framed by the CCI are 
required to be adhered to strictly for the purpose of implementation/carrying out 
its policies. 
56. 
All the above provisions have been tested by us at the touchstone of 
Article 8 of the Constitution in the light of the arguments put forward by the 
parties’ counsel. But we fail to find any provision in the Ordinance 2000 to be 
contrary to any of the fundamental rights. Besides it has got constitutional 
protection under Article 270-AA and adhering to the principles laid down in 
Mehmood Khan Achakzai v. Federation of Pakistan (PLD 1997 SC 426) it was 
promulgated competently by the Chief Executive and it has not been shown to us 
that either it has been framed by an incompetent authority, or that it suffers from 
mala fides and lack of jurisdiction. In as much in the post revival period of the 
Constitution when the Court’s powers were restored for judicial review to examine 
the legislation at the touchstone of the Constitution nothing has been identified or 
pointed out lacking or against the mandate of the Constitution as has been 
discussed hereinabove. Therefore, it is held that the Privatization Commission 
Ordinance, (LII) of 2000 is not ultra vires of the Constitution. 
57. 
The next question is in respect of the judicial review of the policies 
of the Government. It is well settled that normally in exercise of the powers of 
judicial review this Court will not scrutinize the policy decisions or to substitute 
its own opinion in such matters as held in Messrs Elahi Cotton Mills ibid. 
Const Petition No. 9 of 2006 etc 
 
 
41
Likewise in the case of Balco Employees ibid, the Supreme Court of India 
observed as follows:- 
“Process of disinvestments is a policy decision 
involving complex economic factors. The Courts have 
consistently refrained from interfering with economic 
decisions as it has been recognized that economic 
expediencies lack adjudicative disposition and unless 
the 
economic 
decision, 
based 
on 
economic 
expediencies, is demonstrated to be so violative of 
constitutional or legal limits on power or so abhorrent 
to reason, that the Courts would decline to interfere. In 
matters relating to economic issues, the Government 
has while taking a decision, right to “trial and error” 
as long as both trial and error are bona fide and within 
limits of authority.” 
 
This view is in line with this Court’s view as given in Elahi Cotton ibid. Similar 
view was taken by the Indian Supreme Court in Delhi Science Forum v. Union of 
India (AIR 1996 SC 1356).  
58. 
The parameters of judicial review were graphically commented 
upon in Associated Provincial Picture Houses Ltd. Ibid which has been relied 
upon by counsel for both sides where in the concluding paragraph the Court came 
to the conclusion in the words of Lord Somervell as under:- 
“I do not wish to repeat what I have said, but it might 
be useful to summarize once again the principle, which 
seems to me to be that the court is entitled to 
investigate the action of the local authority with a view 
to seeing whether it has taken into account matters 
which it ought not to take into account, or, conversely, 
has refused to take into account or neglected to take 
into account matters which it ought to take into 
account. Once that question is answered in favour of 
the local authority, it may still be possible to say that 
the local authority, nevertheless, have come to a 
conclusion so unreasonable that no reasonable 
authority could ever have come to it. In such a case, 
again, I think the court can interfere. The power of the 
court to interfere in each case is not that of an 
appellate authority to override a decision of the local 
authority, but is that of a judicial authority which is 
concerned, and concerned only, to see whether the 
local authority have contravened the law by acting in 
excess of the powers which Parliament has confided in 
it.” 
 
Const Petition No. 9 of 2006 etc 
 
 
42
 
This view was further reiterated and the principle laid down therein 
was followed in Nottinghamshire County Council v. Secretary of State for the 
Environment and another appeal (1986) 1 All ER 199) wherein the Court 
observed as follows: 
“The law has developed beyond the limits understood 
to apply to judicial review as practiced by the courts in 
1947. The ground on which the courts will review the 
exercise of an administrative discretion by a public 
officer is abuse of power. Power can be abused in a 
number of ways: by mistake of law in misconstruing 
the limits imposed by statute (or by common law in the 
case of a common law power) on the scope of the 
power; 
by 
procedural 
irregularity; 
by 
unreasonableness in the Wednesbury sense; or by bad 
faith or an improper motive in its exercise. A valuable, 
and already ‘classical’; but certainly not exhaustive 
analysis of the grounds on which courts will embark on 
the judicial review of an administrative power 
exercised by a public officer is now to be found in Lord 
Diplock’s speech in Council of Civil Service Unions v. 
Minister for the Civil Service [1984] 3 All ER 935, 
[1985] AC 374.” 
 
 
There is no cavil to the proposition being espoused by learned 
Attorney General with reference to Peter Can’s “An Introduction to 
Administrative Law” 2nd Edition that the Court while exercising power of 
judicial review may not express opinions on polycentric issues requiring technical 
expertise and specialized knowledge. In the instant case, however, we are seized 
not with a polycentric issue as such but with the legality, reasonableness and 
transparency of the process of privatization of the project under consideration i.e. 
PSMC. These are well established basis for exercise of judicial review. Thus it is 
held that, in exercise of the power of judicial review, the courts normally will not 
interfere in pure policy matters (unless the policy itself is shown to be against 
Constitution and the law) nor impose its own opinion in the matter. However, 
action taken can always be examined on the well established principles of judicial 
review. 
Const Petition No. 9 of 2006 etc 
 
 
43
59. 
Barrister Zafar Ullah Khan learned ASC contended that process of 
privatization of PSMC lacks transparency for number of reasons which he has 
explained in his petition duly supported with evidence available to him, therefore 
irrespective of the fact as to who is the successful bidder the transaction deserves 
to be declared contrary to the provisions of the Ordinance 2000 as well as rules 
framed thereunder. Mr. Abdul Mujeeb Pirzada learned ASC as well as Ahmar 
Bilal Sufi Advocate who appeared on behalf of Intervener (Iftikhar Shafi) 
supported his contention. Learned counsel for the Federation, for Privatization 
Commission, for P.S.M.C. and the bidders contended that the transaction of 
privatization of PSMS has been completed in the most transparent manner, 
therefore, calls for no interference by this Court. Learned Attorney General, 
however, contended that in the facts and circumstances of the case, the Court may 
not enter into controversial facts and can find out middle way to resolve the 
controversy, the suggested way was to direct investigation provided under section 
27 of the Ordinance 2000. 
60. 
We consider it appropriate at this stage to first of all ascertain the 
status of the material which is available on record in order to decide as to whether 
the Court has to confine to the material which has been placed on record only by 
the petitioners or in view of the importance of the case the documents which are 
not disputed between the parties can be taken into consideration. Learned senior 
ASC for the Privatization Commission stated that as far as the newspaper 
clippings are concerned those cannot be considered valid piece of evidence for 
judicial review. Reference in this behalf has been placed by him on the case of 
Raja Muhammad Afzal v. Ch. Muhammad Altaf Hussain and others (1986 
SCMR 1736). He further emphasized that if the practice of equating the news 
clippings with evidence is allowed then every public interest litigation will be 
based on the press clipping. It will be highly dangerous. Similarly learned 
Attorney General contended that it is not the first case in which the reliance has 
Const Petition No. 9 of 2006 etc 
 
 
44
been placed on the news clippings but there are may other cases like Islamic 
Republic of Pakistan v. Abdul Wali Khan (PLD 1976 SC 57), Khawaja 
Ahmad Tariq Rahim  ibid, Miss Benazir Bhutto ibid and Mian Muhammad 
Nawaz Sharif  ibid but the distinction which is required to be noted by this Court 
is that in the cases which he has referred to the decision had already been taken by 
the President of Pakistan for the purpose of forming his view not only on the basis 
of media reports but information received by him from different sources and this 
Court had to examine the validity of the decision of the President in dissolving the 
Assembly or taking action for banning a political party whereas in the instant case 
the Court is being called upon to accept the news clippings and based on the same 
give a verdict that the transaction of privatization lacks transparency which 
according to him is not possible unless the allegations are proved in accordance 
with law. He contended that all these judgments were reconciled by the Lahore 
High Court in the judgment reported in Pakistan Lawyers Forum v. Federation 
of Pakistan (PLD 2004 Lahore 130) authored by one of the learned Member of 
this Bench Mr. Justice Tassaduq Hussain Jillani. In this context he also relied upon 
the judgments in the case of Benazir Bhutto v. President of Pakistan (PLD 2000 
SC 77) and Muhammad Shahbaz Sharif v. Federation of Pakistan (PLD 2004 
SC 583). In the case of Pakistan Lawyers Forum ibid, the learned author Judge 
laid down following parameters for the purpose of taking judicial notice of a 
newspaper report and articles:- 
(i) 
Where direct evidence is not available. 
(ii) 
Where it is sought to be proved that a person has notice of 
the contents of the newspaper report. 
(iii) 
Where it is sought to be shown that a person is an author or 
otherwise responsible for the statement or article published 
in a newspaper which is to be used against him. 
(iv) 
In cases of defamation. 
(v) 
If the issue/occurrence is rather old and eye-witnesses are 
either wanting or less reliable. 
 
From the above parameters laid down by the learned Lahore High Court it is 
manifest that newspaper reports and articles can only be used in above exceptional 
Const Petition No. 9 of 2006 etc 
 
 
45
circumstances meaning thereby that if on record admissible evidence is available 
which is not disputed between the parties particularly in the cases where the 
defendant/respondent himself had brought on record certain documents in proof of 
his plea then the Court is not debarred to look into the same for the purpose of 
arriving at a just conclusion particularly in the exercise of jurisdiction under 
Article 199 and Article 184(3) of the Constitution, where the Court had no 
occasion to record the evidence itself and had to base on the pleadings of the 
parties who are supported with the documents like the instant case although the 
petitioners in Const.   Petition No.9 of 2006 had relied upon the press clippings 
and articles but the respondents either on their own or under directions of the 
Court had brought on record material to satisfy the Court that the transaction under 
challenge is in accordance with law.   Therefore, while accepting such request and 
declining to give relief, it would be incumbent upon the Court to rely upon the 
documents which are not disputed between the parties and such documents can be 
considered/treated as evidence on record.   It may be noted that in the judgment 
passed by this Court in Constitutional Petition No. 59 of 1996 Mohtarma Benazir 
Bhutto v. President of Pakistan (PLD 1998 SC 388), a review was filed under 
Article 188 of the Constitution on the premise that in the judgment under review 
findings had been recorded in a summary manner and such findings may be 
detrimental during the trial of the petitioner on different charges.   Keeping in 
view this aspect, this Court observed in the case of Benazir Bhutto ibid that in 
order to remove any doubt, it was clarified that the observations made in the order 
under review were restricted in their application to the proceedings under Article 
184 of the Constitution for the purpose of Article 58 (2-b) alone and were not to be 
treated as a proof of charges for any other purpose.   In Mian Muhammad 
Shahbaz Sharif  ibid, this Court observed as under:- 
 
Const Petition No. 9 of 2006 etc 
 
 
46
“23. As far as evidentiary value of press reports is concerned, it 
is noted that one line of precedents in the jurisprudence of the 
country is that no evidentiary value is attached to the press 
reports and no reliance can be placed on a press report where a 
person claims a legal right on its basis. The Courts do not decide 
cases on press reports. In the other line of authorities, such as 
Wali Khan’s case, Ms. Benazir Bhutto’s case and Mian 
Muhammad Nawaz Sharif’s case, the press reports are relied 
upon, but these cases are distinguishable. This Court in exercise 
of its jurisdiction under Article 184(3) does not act as a Court of 
appeal, but as a Court of review. 
24. Basically to believe or disbelieve the press reports is a 
question of fact and before reaching a positive conclusion such 
facts need to be examined, keeping in view their intrinsic value. 
Many such statements are given only for political purposes, but 
the same cannot straight away be taken as proved nor at their 
own  they create a legal right nor any evidentiary value can be 
attached to press reports, unless irrefutable evidence is brought 
on record for establishing their correctness.” 
 
 
We have no reason to disagree with the above proposition of the 
law. However, in the present case controversy is not only to be settled on the basis 
of the press clippings which were filed for the first time when the petition was 
submitted by the petitioner under Article 184(3). The other petition filed by Mr. 
Abdul Mujeeb Pirzada bearing (C.P.No. 345 of 2006) also has no documents to 
decide the factual controversy perhaps for the reason that when originally 
petitioner invoked the jurisdiction of the High Court under Article 199 of the 
Constitution the petition was dismissed in limine and against the short order 
followed by detailed reasons, petition for leave to appeal was filed. At the same 
time the Federation of Pakistan has also filed petition for leave to appeal (No. 394 
of 2006) against the same judgment of the Sindh High Court. Thus, we will be 
evaluating the documents which have been placed on record by the respondents 
themselves. Amongst those, the important documents which were filed on behalf 
of the PSMC in pursuance of order dated 18th May 2006 passed by this Court are 
as follows:- 
(i) 
Comprehensive report about the existing affairs of the Mill 
along with its assets and the balance sheets duly audited for 
the last three years. 
Const Petition No. 9 of 2006 etc 
 
 
47
(ii) 
The Privatization Commission also produced before the 
Court complete proceedings including the summary it 
submitted and the deliberations/proceedings by the Cabinet 
Committee 
for 
Privatization, 
its 
decisions 
and 
the 
reasons/grounds which persuaded the Commission and the 
Government of Pakistan to privatize Pakistan Steel Mills. 
Some other documents including Memorandum and Article of Association of 
PSMC were also placed on record. Likewise financial statements for the period 
ended June 30th 2003, June 30th 2004 and June 30th 2005 were filed without 
expressing any reservation to their admissibility. Similarly on behalf of the 
Privatization Commission all the necessary documents were filed including a 
secret report of CCI approving the privatization of the PSMC along with other 
projects. It is important to note that this document otherwise was not part of the 
pleadings but was placed on record during the course of hearing. 
 
It is most interesting to note that as far as the Government of 
Pakistan/Federation of Pakistan is concerned, it also filed a thick paper book of 
about 
650 
pages 
containing 
documents 
and 
other 
record 
of 
proceedings/deliberations taking place during the process of the privatization. The 
petitioners have not denied these documents in any manner whereas the 
respondents are bound by the same. Therefore, for our findings/decision, we will 
be relying upon/referring to these documents rather than press clippings or media 
reports, unless reference to latter is found absolutely necessary and we are 
convinced of its correctness and authenticity. 
61. 
Now the stage has arrived where we have to examine and adjudicate 
the contentions raised by the learned counsel for the parties and to see whether on 
account of omissions and commissions committed by the relevant functionaries, 
the transaction is valid and transparent. To determine validity/transparency or 
otherwise following questions are to be addressed:- 
Const Petition No. 9 of 2006 etc 
 
 
48
(i) 
Whether the terms of reference framed for the valuer were in accord 
with the Privatization Commission Valuation Rules, 2001? 
(ii) 
Whether the method adopted in valuing the property satisfied the 
mandate of law contained in Privatization Ordinance 2000 and the 
rules framed thereunder and whether it is in accord with the 
internationally recognized principles in this regard? 
(iii) 
Whether the process of pre-qualification of potential bidders 
satisfied the requirement of Privatization Commission Regulations? 
(iv) 
Whether the decision dated 31.03.2006 taken by the Cabinet 
Committee (CCOP) to sell the Mill if the bid was above Rs.16.18 
per share satisfied the requirements of law? 
(v) 
Whether the final terms/concession offered to the highest 
bidder/consortium on 31.03.2006 were in accord with the terms and 
conditions of initial public offering given to the potential bidders 
through advertisement dated 19.10.2005 and if not whether these 
can be justified on the touchstone of law and “reasonableness”? 
62. 
In view of the above points it may also be borne in mind that CCI 
vide its approval dated 29th May 1997 had given the approval for the privatization 
of the Federal Government owned projects or entities for the purpose of retiring 
the debts and this object has been duly transformed in the Preamble of the 
Ordinance 2000, therefore, keeping in view the object for privatization it should 
have been the endeavour on the part of the Privatization Commission to adopt 
such ways and means which may fetch highest price of its assets. Admittedly, in 
this context the report of the statement of affairs submitted on behalf of the 
Chairman of PSMC becomes more relevant coupled with the Statements of 
Accounts. The owners generally make their efforts to show less book value of the 
assets for purpose of lessening the tax burden on the concern. Admittedly such 
balance sheets and the statements of accounts were never prepared for the 
Const Petition No. 9 of 2006 etc 
 
 
49
purposes of disposing of the assets, shares etc in the market. It is not disputed that 
before the appointment of Financial Advisor (F.A.), the P.C. was required to 
determine and decide the most important issue i.e. valuation of property according 
to section 24 of the Ordinance 2000 and its mode. The valuation of property is to 
be done in the prescribed manner i.e. the Privatization Commission (Valuation of 
Property) Rules, 2001 by independent valuers who are to be hired in accordance 
with Privatization Commission (Hiring of Valuers) Regulations, 2001. It may be 
noted that as per section 2 (l) of the Ordinance, property “includes any right, title 
or interest in property, moveable or immovable in whole or in part or any means 
and instruments of production owned or controlled directly or indirectly by the 
Federal Government or any enterprise owned or controlled by the Federal 
Government whether in or outside Pakistan”. The cumulative effect of the relevant 
law/rules/regulations is that the valuation of the property is part of the process of 
privatization of an ongoing concern. This conclusion about legislative intent is 
further reiterated by the Privatization Commission (Hiring of Valuers) Regulation 
2001. Regulation 3 of which provides that for a fair and independent valuation of 
the property the Privatization Commission shall frame terms of reference for the 
valuer which shall, “include inter alia, a brief history of the entity, the financial 
position, a description of the produce line/service of the entity if any, a description 
of land, building, plant and machinery, the current assets and liabilities and the 
current state of industry.” 
63. 
In the instant case during the hearing of the case, the land of PSMC 
had been one of the focal points for consideration, both for the Court as well as for 
the learned counsel appearing on behalf of the parties. Perhaps this issue has arisen 
in view of the report which has been submitted by the PSMC in respect of its 
affairs which says that the value of the non-core property situated in the 
downstream industrial estate is considerably high, therefore, the valuation of the 
land has attained more importance under the circumstances of the case. As already 
Const Petition No. 9 of 2006 etc 
 
 
50
stated in Para (supra) the terms of reference given by the Privatization 
Commission to the valuer did not make any reference to determine the value 
of land. A perusal of the report of the statement of affairs of the PSMC reveals 
that PSMC has total of 19086 acres of land out of which little less than 9000 acres 
is meant for labour colony and little more than 1000 is earmarked for plants, 
storage of raw material and waste products. The Government of Pakistan has 
offered plant and machinery located on 4457 acres of the land for bidding 
purposes but unfortunately in the reference sent to the Financial Advisor nothing 
was stated for the valuation of the land and if the same was added in the assets 
then what would be the price of a share which the government was going to 
privatize. It was all the more essential as strategic equity share of 75% and 
management control was being handed over to the successful bidder. With this 
percentage of share holding, the owner under the Companies Ordinance has very 
wide powers. It was precisely for these reasons that, “the Disinvestment 
Commission of India” while laying down policy guidelines stressed the need that 
if strategic sale of equity holding of more than 50% has been offered for sale then 
the valuation of land becomes necessary. The report lays down as under:- 
“Strategic sale implies sale of a substantial block of 
government holdings to a single party which would 
not only acquire a substantial equity holdings of up 
to 50% but also bring in the necessary technology for 
making the PSU viable and comparative in the global 
market. It should be noted that the valuation of the 
share would depend on the extent of disinvestment 
and the nature of share holder interest in the 
management of the company. Where the Government 
continues to hold 51% or more of the share holding 
the valuation will relate mainly to the shares of the 
company and not to the assets of the company. On 
the other hand where shares are sold through 
strategic sale and management is transferred to the 
strategic partner, the valuation of the enterprise 
would be different as the strategic partner will have 
control of the management. In such cases the 
valuation of land and other physical assets should 
also be computed at current market values in order 
to fix the reserve price for the strategic sale.” 
 
Const Petition No. 9 of 2006 etc 
 
 
51
The afore-referred recommendation of the Disinvestment Commission of India is 
in accord with the spirit which underlies section 24 of the Privatization Ordinance, 
2000 and rule 3 of the Privatization Commission (Hiring of Valuers) Regulations, 
referred to above. When the case was being heard and reports were being 
examined the learned counsel appearing for the respondents candidly admitted 
that the Financial Advisor (City Group) had not valued the land on which the 
PSMC is located which is described as core land. This fact is also evident from 
the report of the City Group. Contrary to it the agreement of sale and purchase as 
per clause 4.2 of the Share and Purchase Agreement dated 24.04.2006 entered 
with 
purchasers, 
lays 
down 
condition 
precedent 
to 
completion 
that 
notwithstanding any other provision of this agreement completion shall not occur 
until and unless the unmutated land has been mutated in the name of the company 
in the relevant record of rights. When we inquired from the learned counsel for 
P.C. that without adding the value in the property (assets) of PSMC in terms of 
section 24 read with valuation rule 3 how can the property/land be mutated, he got 
recorded following statement as an officer of the Court but not as a counsel for 
P.C.:- 
“Admittedly the land has not been evaluated. What is 
the nature of the land subject to the document which 
has been produced by the learned Advocate General 
of Sindh, my submission is that since the land has not 
been valued and it appears that land was partly 
acquired under Acquisition Act for the purpose of the 
PSM by the Sindh Government and secondly it was 
given by the Sindh Government at a special rate 
again for the purpose of Steel Mill, so my personal 
opinion, I am not speaking as a counsel for the 
Privatization, my personal opinion as officer of the 
Hon’ble Court, that so long as the unit of the Steel 
Mills they can leave/use it, but if they are not going 
to leave/use it as Steel Mill then they are not entitled 
to the land, it will revert to the Federal Government, 
subject to the document which will come.” 
 
Const Petition No. 9 of 2006 etc 
 
 
52
Whereas contrary to the above statement Mr. Khalid Anwar who appeared on 
behalf of the successful bidders contradicted the above statement and stated as 
follows:- 
“The land always belong to a company and name of the 
Company is PSM Co. Before the sale to me the land 
belongs to the company. The shape of the agreement the 
foundation says I am buying shares in the company. A 
separate question what does the company owns, the 
answer is the company owns land, plant, current assets. 
Land as such is not being sold. Not a single square inch 
of the land as such is being sold. Why not? The land 
always belong to the company; the land will always 
continue belong to the company. It will never ever be 
mutated in the name of the buyer. All that is happened is 
that out of that 19000 acres of land, which is already in 
the name of the company, the company will surrender 
only 13500 acres, and small amount of few hundred acres 
will be transferred in the name of the company not in the 
name of the buyer. I state in all integrity and seriousness 
before your lordship that my client is not buying a single 
square inch. Not one.” 
 
The above facts are sufficient to draw the inference that in the valuation process of 
the property the land underneath the unit was not added.   Similarly A.F. Ferguson 
& Co. one of the Advisors to assist the City Group (F.A) engaged to conduct the 
accounting, tax, HR and I.T. due diligence had stated in unequivocal terms that 
they had conducted their due diligence review based on the draft UNAUDITED 
financial statements of the Corporation for the year ended June 30, 2005 which 
were provided to them by the management on September 16, 2005.   The data 
provided to the F.A. was all the more insignificant as it had been informed by the 
management that significant adjustments had been incorporated in the financial 
statements of the Corporation in the year ended June 30, 2005 subsequent to the 
date on which the un-audited financial statements were provided to them for the 
purpose of their report.   It was admitted at the Bar by the learned counsel 
appearing on behalf of the  official  respondents  that  these  unaudited  financial 
statements were prepared  on  book  value  (historical  value  and  not  on  the 
basis of market value of its assets, stock in trade raw material etc).    It  is  
important  to note  that  the  market  value  of  the  assets  is  reckoned  all  over 
Const Petition No. 9 of 2006 etc 
 
 
53
the world, reference in this behalf may be made to the report prepared by the 
experts in the exercise carried out under the auspices of United Nations. While 
commenting on the mode of valuation the report concludes as under:- 
“Unfortunately, the lesson of valuation as an inexact 
science has not been easy to learn. Political 
expediency (e.g. government officials often believe that 
the more financially rigorous the valuation is, the more 
politically defensible the sale will be) and the 
investment banking culture brought by most Western 
financial advisors, has led to the construction of 
sophisticated valuation models in perhaps too many 
privatization exercises.  
This is not to suggest that conventional valuation 
techniques are useless or should not be applied. 
Rather, their results should be viewed with an 
understanding of this uncertain and evolving context. 
There is never” one right answer.” The quality of the 
results of the valuation exercise is a function of the 
accuracy of the inputs used and the validity of 
assumptions made. The adage “garbage in-garbage 
out” rings true in this setting. Ultimately, we believe 
that resources are better spent developing and 
strengthening market-based mechanisms for price 
discovery, rather than relying on armies of investment 
bankers to conduct a valuation.” (Emphasis is 
supplied). 
 
64. 
We are conscious of the fact that the courts are not supposed to 
settle the controversy as to which method should have been followed by the valuer 
for the purpose of determining the value of shares. As per Mr. Abdul Hafeez 
Pirzada this is not a science but an art. Same view was endorsed by the learned 
Attorney General although he has cited a number of judgments i.e. Commissioner 
of Wealth Tax v. Mahadeo Jalan [1972] 86 ITR 621 and Commissioner of Gift 
Tax v. Kusumben D. Mahadevia [1980] 2 SCC 238. However, we can look into 
the models of valuation internationally recognized to ascertain as to which out of 
them suits the seller and buyer respectively. In this behalf Mr. Abdul Hafeez 
Pirzada, learned ASC placed on record a report prepared by the World Bank titled 
as, “The Case-by-Case Approach to Privatization Techniques & Examples” 
wherein the principle for assessing the market value of assets for an ongoing 
concern has been stressed in the following words:-- 
Const Petition No. 9 of 2006 etc 
 
 
54
“……….The government, on the other hand, has a 
fiduciary responsibility to its citizens when it privatizes 
an asset. It is entrusted to sell privatizable assets at or 
above their fair market value, and must take every 
precaution to ensure that this happens. Agreeing to sell 
state assets below their market value is tantamount to 
favouring a buyer, and it deprives the state of needed 
financial resources. While this may sometimes be 
politically desirable---for example, in  the case of 
employees of privatized companies---transparency is 
crucial. Thus the size of the discount offered should be 
determined and publicly disclosed.” 
(Emphasis is supplied). 
 
65. 
The above quotation from the World Bank Report goes to show that 
the Government must make efforts to adopt such a procedure on the basis of which 
fair market value of its assets can be achieved. As far as the judgments cited by the 
learned Attorney General are concerned, which are referred to hereinabove, those 
are not helpful in the context of the instant case, in as much as they are relatable to 
fixation of share for the purposes of Wealth Tax and Income Tax Act. These do 
not seem to be relevant for determining the share value for the purposes of 
privatization under the Ordinance.  
66. 
Mr. Khalid Anwar, learned Sr. ASC appearing for the bidder stated 
that the bidders before the bid got prepared valuation report for their consumption 
from an independent valuer and the reference price fixed by the said valuers was 
mostly similar, therefore, the report of the City Group does not suffer from any 
material irregularity. 
67. 
Suffice to observe in this behalf that the method of valuation 
favoured by buyers is known as “Discounted Cash Flow” (D.C.F.) and the method 
liked by the seller for calculating market value of share are different and distinct 
from each other. Incidentally the bidders got assessment of the share on the basis 
of historical evaluation of the assets handed over to it by PSMC, rightly so 
because their interest was to purchase the share at a lesser value whereas as has 
been noted above, generally this formula is not preferred by the seller. Be that as it 
may, even in the report which has been relied upon by the bidders, the assets 
Const Petition No. 9 of 2006 etc 
 
 
55
including the land have not been evaluated and the valuation has been based on the 
discounted cash flow method. Both the reports prepared by the City Group and 
Taseer Hadi from whom the bidders got prepared the report had calculated the 
discounted cash flow from 2006 onward without having regard to the fact that 
after restructuring in the year 2002-03 the PSMC did increase its profitability and 
the P.C. while publishing the notices for Expression of Interest in the newspapers 
had shown the statement of positive financial condition. The crux whereof is that 
in the fiscal year 2004-2005, PSMC had recorded annual sales of over Rs.30.00 
billion and net profit of Rs.6.00 billion. It is equally important to note that after 
restructuring, the liquidity of the Corporation improved and it paid off principal 
amount of debt of Rs. 11.35 billion on 30th June 2003. Therefore under these 
circumstances it was incumbent upon the Privatization Commission to have taken 
care about these facts and these must have been mentioned categorically in the 
Terms of Reference framed for the Financial Advisor that the Mill is ongoing 
profitable concern and it has marketable assets and the liabilities are  much less 
than the assets, therefore, keeping in view these facts any internationally 
acceptable methodology for calculating its shares may be adopted. At this juncture 
it is important to note that according to the report of PSMC 10% equity offer will 
be made to the private sector meaning thereby enlisting its shares on the Stock 
Exchange for the purpose of ascertaining correct value in order to achieve the 
object for which in terms of the Ordinance the privatization was to take place. 
 
68. 
It is equally important to note at this stage that this procedure could 
have been more appropriate, accurate and acceptable to the seller i.e. the 
Government of Pakistan in view of its experience in respect of privatization of 
23.2 percent government owned shares of the National Bank of Pakistan and to 
follow this procedure there was no difficulty to take steps for the purpose of 
offering 10% shares for public through Stock Exchange. In this behalf, the 
Const Petition No. 9 of 2006 etc 
 
 
56
Privatization Commission had a precedent in respect of the case of National Bank 
of Pakistan which is reported as PLJ 2004 Central Statutes 259, the following 
paragraphs are relevant to discussion:- 
“NBP was the first SOE whose shares were offered by 
means of an Offer for Sale to the general public. The 
Cabinet Committee on Privatization (CCOP) decided 
to offer 5% (18,652,000) shares of NBP with a green 
shoe option of an additional 5% shares in case of over-
subscription Shares of NBP were listed on the Karachi, 
Lahore 
and 
Islamabad 
Stock 
Exchanges 
and 
subscription for the shares was held during 19-22 
November 2001. Since it was an initial offering, shares 
were offered at par value (Rs. 10/- per share) to attract 
small investors. The offering was heavily over-
subscribed and applications for an amount of Rs.1.04 
billion were received against the required amount of 
Rs.186.5 million (for 5% shares). Thus Government 
exercised the green shoe option and divested 
37,304,000 shares for gross proceeds of Rs.373 
million. 
In October 2002, it was decided to divest an additional 
5% (18,652,000) shares of NBP through a secondary 
public offering at the Stock Exchanges with a green 
shoe option of additional 5% shares. Taking the market 
price of NBP share as a benchmark, the CCOP fixed 
the offer price as Rs.21/- per share. Subscription for 
the shares was held during 07-09 October, 2002. This 
offer was also heavily oversubscribed and applications 
were received for an amount of Rs.1.63 billion against 
the target amount of Rs.391.7 million (for 5% shares). 
The Government chose to exercise the green shoe 
option and realized proceeds of Rs.783.3 million. 
To take advantage of the bullish market and excess 
liquidity available with investors, it was decided in 
June 2003 to offer additional shares through a third 
public offering. However, on this occasion the offer 
size was restricted to 3.2% (13.131 million) of the 
outstanding shares in order to keep the Government’s 
shareholding above 75%. Again using the market price 
as a benchmark, shares were offered at the price 
Rs.46/- per share and subscription as held during 13-
15 October 2003. The offer was oversubscribed and 
funds received amounted to Rs.1.22 billion against the 
required amount of Rs.604 million. 
Through the above process, The Government has 
divested 23.2% (87.7 million) shares of NBP for total 
proceeds of Rs.1.76 billion. 
As the divested shares were owned by the Government 
through State Bank of Pakistan (‘SBP’), the 
Privatization Commission remitted the proceeds for the 
first two offerings to SBP in early 2002 and early 2003. 
Sale proceeds for the 3rd offering have also been 
Const Petition No. 9 of 2006 etc 
 
 
57
remitted to SBP on January 14, 2004. The transaction 
stands successfully completed on January 14, 2004.” 
 
 
It is in our knowledge that the shares of the National Bank of 
Pakistan were already listed on the Stock Exchange but there was no harm in even 
taking steps and adopting measures for the purpose of enhancing the value of the 
shares of the PSMC by adopting the same procedure and bringing its limited 
shares on the Stock Exchange as the Government had already decided to sell its 
10% equity to the public. And if for this purpose, some legal formalities were 
required to be taken, the same ought to have been resorted to. 
69. 
The contract for valuation of project was awarded in terms of a 
written agreement/terms of reference, para 3.2.6 of which required that the final 
report of valuation shall be submitted by the Financial Advisor six weeks prior to 
the bidding date. The said paragraph reads as under:- 
“3.2.6. Final Valuation Model 
The final valuation model will be used to determine the Reserve 
Price for the bidding process. The FA is expected to present the 
valuation model to explain and discuss the underlying assumptions 
and workings at various forums within the Government to obtain 
approval of the Reserve Price. The final valuation report shall be 
submitted at least six weeks prior to the bidding date.” 
 
 
For reasons best known to the F.A. and which have not been 
explained either in the written statement filed by the counsel for the P.C. or by the 
counsel for the Federal Government the final report was submitted to the P.C. on 
30th March 2006, the date P.C. sent a summary to the C.C.O.P. regarding approval 
of the reference price. The requirement of six weeks was mandatory as after 
submission of the valuation report the P.C. is required to examine it at its own 
level so as to fix a fair reference price for approval by the C.C.O.P. This belated 
submission just 24 hours before the bidding date on the one hand deprived the PC 
to assess the report independently and the CCOP of a well considered and 
independent comment on the said report on the other hand. 
Const Petition No. 9 of 2006 etc 
 
 
58
70. 
The argument of Mr. Abdul Hafeez Pirzada, learned Sr. ASC that 
the interim report submitted on 28th October 2005 meets the requirement of 
Regulation is not tenable because requirement under Para 3.2.6. is that of “FINAL 
REPORT” and not the interim report and secondly the lapse of “half a year” may 
have changed the objective conditions and thirdly it is not the case of PC that the 
interim report was considered at the time of fixing the reference price. 
71. 
This brings us to the question as to whether decision taken by the 
Cabinet Committee (CCOP) on 31.03.2006 for sale in favour of anybody offering 
more than the reference price of the share i.e. Rs. 16.18 is valid. 
72. 
Unmindful of the codal violation (violation of para 3.2.6. of the 
Terms of Reference sent to the valuer) and of the qualitative infirmity, the PC 
carried out the exercise of preparing a summary for approval of the reference price 
by the CCOP the same day. According to the written statement filed by Mr. Zahid 
Hameed Consultant P.C., during course of hearing, on 30.03.2006 the Board of 
Privatization Commission convened and deliberated on the privatization of PSMC 
for 4-5 hours. During this meeting the Managing Director of the F.A. Mr. Joz 
Garza who had already flown in from U.K. came and presented salient features of 
the valuation report to the members of the Board. The meeting according to him 
was held in the afternoon of the afore-referred date. The summary prepared by 
P.C. and submitted to the CCOP on 31.03.2006 reads as under:- 
“The Financial Advisors, Citigroup Global Markets Limited (FA) 
has conducted the valuation of Pakistan Steel mills Corporation 
(PSMC) using three standard valuation methodologies used in 
global M&A transactions. These include: 
(a) Discounted Free Cash Flow Analysis (DCF) 
(b) Public Multiple Analysis (comparable companies). 
(c) Precedent Transaction Analysis. 
2. 
On the basis of DCF approach, the valuation ranges 
between US$ 407-464 Million. The weighted average cost of capital 
assumed for discounting the free cash flows to the firm is 12%. 
3. 
Using Public multiple Analysis, the valuation ranges 
between US$307-406 Million. 
4. 
On the basis of Precedents Transaction Analysis, the 
valuation ranges between US$ 389-501 Million. 
Const Petition No. 9 of 2006 etc 
 
 
59
5. 
The FA has recommended a value of US$ 375 Million (on 
100% equity basis). This recommendation is on the basis of average 
of above three valuation methodologies with a 10% discount as 
bidders are not expected to pay full fair value. 
6. 
The PC Board considerd the valuation as recommended by 
the FA and proposed that the current market value of total assets of 
PSMC may also be taken into account. Valuation recommended by 
the FA reflects the core operations of PSMC (i.e., excluding surplus 
land and assets) and therefore, is based on PSMC as a going 
concern. The non-core land and assets being unbundled from 
PSMC includes Steel Town and Gulshan-e-Hadeed land which have 
been evaluated at US$ 500 Million by Nanjee & Co Karachi. The 
replacement value of the plant is estimated at around US$500 
Million. These estimates do not include the current market value of 
Downstream Industries land and land reserved for NIP (this 
segment includes approximately 5,000 acres). Adding up these 
elements the value of PSMC comes in excess of US$ 1.0 Billion. 
7. 
The Board of Privatization Commission considered the 
valuation carried out by the FA as well as the replacement cost of 
the plant and recommended total value of PSMC at US$ 500 
Million. Based on this, the Reference price for 75% strategic stake 
would be US$ 375 Million i.e. Rs. 17.43 per share calculated at the 
rate of Rs. 60 per US$ (total shares being divested are 
1,290,487,275). 
8. 
It is proposed that the Privatization Commission may be 
authorized to issue Letter of Acceptance (LoA) to the Successful 
Bidder if their per share price is equal or higher than the Reference 
Price approved by the CCOP. 
9. 
The Cabinet Committee on Privatization (CCOP) is 
requested to approve the proposals made in para 7 and 8 above. 
10. 
The Minister of the Privatization and Investment has seen 
and authorized the submission of this summary to CCOP.” 
 
73. 
The C.C.O.P. on examining the above summary recorded its 
minutes and the decision on 31.03.2006 as follows:- 
“MINUTES---Privatization Division informed the CCOP that 
the Financial Advisor (FA) of Pakistan Steel Mills Corporation 
(PSMC) has recommended a valuation of US$ 375 million for 
privatization of PSMC on 100% equity basis. The FA of PSMC is 
Citigroup Global Markets Limited. 
2. CCOP was informed that FA’s valuation of US$ 375 million 
for 100% equity stake is based on the average of the following 
three valuation methodologies with a 10% discount: 
(i) 
Discounted Free Cash Flow Analysis (DCF) 
valuation ranges between US$ 407-464 million 
with weighted average cost of capital assumed for 
discounting at the rate of 12%. 
(ii) 
Public Multiple Analysis (comparable companies) 
valuation ranges between US$ 307-406 million. 
(iii) 
Precedents Transaction Analysis valuation ranges 
between US$ 389-501 million. 
 
3. CCOP was informed that the Board of Privatization 
Commission has recommended a total value of US$ 500 million 
for 100% equity stake of PSMC. According to this, the Reference 
Const Petition No. 9 of 2006 etc 
 
 
60
Price for 75% equity stake (1,290,487,275 shares) works out to 
US$ 375 million i.e. Rs. 17.43 per share (calculated at the rate of 
Rs. 60 per US$). 
 
4. Privatization Division briefed the CCOP that the Board of 
Privatization 
Commission 
considered 
the 
valuation 
as 
recommended by the FA and proposed that the current market 
value of total assets of PSMC may also be taken into account. PC 
Board observed that the valuation recommended by the FA 
reflects the core operations of PSMC (i.e. excluding surplus land 
and assets) and therefore, is based on PSMC as a going concern. 
The non-core land and assets being unbundled from PSMC 
includes Steel Town and Gulshan-e-Hadeed land which have 
been evaluated at US$ 500 million by the evaluators. The 
replacement value of the plant is estimated at around US$ 500 
million. These estimate do not include the current market value of 
Downstream Industries and land reserved for NIP (this segment 
includes approx 5,000 acres). Adding up these elements the value 
of PSMC comes in excess of US$ 1.0 billion. 
 
5. It was acknowledged that DCF is the most acceptable 
methodology for valuation of on-going units. 
 
6. Privatization Division briefed the CCOP on the profiles of the 
prospective bidders, also. 
 
7. CCOP observed that Privatization Division has not amplified 
their viewpoint in the summary in detail. Privatization Division 
clarified that the viewpoints of FA, Board of Privatization, as 
well as, the Privatization Division have been covered in its 
overall context in the summary. 
 
8. On the question of payment of VSS to the employees of PSMC, 
the CCOP was informed that the entire liability on this account 
would be borne by the GoP. 
DECISION 
The Cabinet Committee on Privatization (CCOP) considered the 
summary dated 30th March, 2006, submitted by the Privatization 
& Investment Division on “Privatization of Pakistan Steel Mills 
Corporation” and approved the valuation of US$ 464 million 
based on DCF valuation for privatization of the Pakistan Steel 
Mills Corporation Limited (PSMC) for its 100% equity stake. On 
the basis of above, 75% equity stake (1,290,487,275 shares) 
works out to US$ 348 million i.e. Rs. 16.18 per share. 
 
II. The CCOP also approved the proposal contained in para 8 of 
the summary to issue Letter of Acceptance (LoA) to the Successful 
Bidder if their per share price is equal or higher than the 
Reference Price mentioned in sub-para I above. 
 
III. The CCOP directed the Privatization Division to follow the 
approved policy for Privatization, strictly in letter and spirit. Any 
deviation from the approved Policy, if deemed necessary, should 
be brought up to the CCOP well in advance for consideration and 
approval of waiver, if any. 
 
IV.  The CCOP directed the Privatization Division to impress 
upon the potential buyer to make the entire payment of the 
transaction to the GoP within the period stipulated in the bid 
documents. 
Const Petition No. 9 of 2006 etc 
 
 
61
 
V. The CCOP directed the Privatization Division to invariably 
add their viewpoint(s) recommendations explicitly in their 
summaries, in future.” 
 
74. 
The above decision of the CCOP not only reflects disregard of the 
mandatory rules but also all material which was essential for arriving at a fair 
reference price. Because firstly determining the reference price for approval of the 
CCOP is a separate exercise to be carried out in terms of rule 6 of the Privatization 
Commission (Valuation of Property) Rules 2001 whereas the approval of the 
highest bidder is a separate exercise undertaken under the Privatization (Modes & 
Procedure) Rules, 2001. Rule 4(2) of these rules mandates that, “Upon selection of 
a highest ranked bidder as specified in sub-rule (1) the Board shall refer the matter 
for approval, or rejection of such highest ranked bidder with full justification, to 
the Cabinet”. While approving the summary the Cabinet Committee totally 
ignored rule 4 of the Privatization (Modes & Procedure) Rules, 2001, referred to 
above and instead abdicated its authority to the Privatization Commission to issue 
Letter of Acceptance to whoever is the highest bidder. Secondly the Cabinet 
Committee totally ignored the proposal of the Board of Privatization Commission 
that the net assets should also be included while valuing the project. Thirdly the 
decision that the Government of Pakistan shall bear the liability of the entire VSS 
of the employees of the PSMC was neither part of the summary submitted by the 
Privatization Commission nor was it included in the initial public offering given to 
the bidders through advertisement. Fourthly notwithstanding the proposal of the 
Board of Privatization Commission to value the share of PSMC at the rate of 
Rs.17.43 it reduced it to Rs. 16.18 without assigning any good reason whatsoever. 
This is violative of section 24-A of the General Clauses Act of 1997 as interpreted 
by this Court in M/s Airport Support Services v. Area Manager Quaid-i-Azam 
International Airport Karachi (1998 SCMR 2268). There is no cavil to the 
proposition that when the law entrusts a power to an authority it has to be 
Const Petition No. 9 of 2006 etc 
 
 
62
exercised by the said authority and this Court may not substitute its opinion with 
that of the said authority. But if the decision of the authority betrays total disregard 
of the rules and the relevant material, then the said decision fails the test of 
reasonableness laid down by the Constitutional Courts for the exercise of the 
power of judicial review. Faced with such a situation a Constitutional Court would 
be failing in its Constitutional duty if it does not interfere to rectify the wrong 
more so when valuable assets of the nation are at stake. 
75. 
The last question framed pertains to the question of divergence in 
the initial public offering to the successful bidders and the final terms/conditions 
offered to the highest bidder (on 31.03.2006) and whether these were in accord 
with the terms and conditions of public offering given through advertisement 
dated 16.09.2005. 
76. 
For a better appreciation of the issue under consideration it would 
be in order if the terms offered in the advertisement are kept in view. The 
advertisement dated 16.09.2005 reads as under:- 
“The Transaction: 
The Privatization Commission (“PC”) intends to sell as 51-74% equity stake in Pakistan 
Steel Mills Corporation (Pvt) Ltd. (PSMC or the Company), together with management 
control; to a qualified strategic investor on an “as is, where is” basis. A consortium led 
by Citigroup Global Markets Limited is advising the PC on the sale. 
Expression of Interest 
Investors interested in joining the process are requested to submit an Expression of 
Interest (EOI), at the earliest. EOIs should clearly provide the following information: 
• Name of company/group and its background information 
• Audited financial statements for the preceding three years. 
• Details of ownership/group structure. 
Upon receiving the EOIs and processing fee, Request for Statement of Qualification 
(RSOQ) will be dispatched to the interested investors immediately. EOIs should be 
submitted (in duplicate) together with a non-refundable processing fee of US$ 5,000/- or 
Pkr 300,000/- payable in the form of a bank draft favouring ‘Privatisation Commission, 
Government of Pakistan’. EOIs and the bank drafts should reach the Director General 
(I&T), PC at the given address by 8th October, 2005. 
The Company 
PSMC is the country’s largest and only integrated steel manufacturing plant with an 
annual designed production capacity of 1.1 million tons. It was incorporated as a private 
limited company in 1968 and commenced full scale commercial operations in 1984. 
PSMC complex includes coke oven batteries, billet mill, hot and cold rolling mills, 
galvanizing unit and 165 MW of own power generation units, supported by various other 
ancillary units. It is located 30km south east of the coastal city of Karachi, in close 
proximity to Port Bin Qasim, with access to a dedicated jetty, which facilitates import of 
raw materials. PSMC manufactures a wide mix of products, which includes both flat and 
Const Petition No. 9 of 2006 etc 
 
 
63
long products. PSMC effectively enjoys a captive domestic market due to the prevalent 
demand-supply imbalance in the country’s steel industry, where demand has historically 
exceeded local supply. PSMC also strives to maintain high quality and environmental 
standards and in this regard has received ISO 9001, ISO 1400-1 and SA 8000 
certifications, along with the Environmental Excellence Award 2005. 
 
PSMC’s brief financial summary is as follows: 
Financial Summary 
(Pkr million) 
FY02 
FY03 
FY04 
FY05 
Net Sales 
14,286 
22,084 
24,778 
30,452 
Operating Profit 
4 
2.275 
6.666 
9.761 
Net Income 
102 
1,024 
4,852 
6,008 
Total Assets 
30,151 
23,669 
30,935 
36.687 
Equity 
8,544 
9,568 
14,420 
20,419 
(1) Provisional 
 
As a result of sustained improvement in Pakistan’s macroeconomic environment, the 
demand for steel in the country is expected to grow substantially. PSMC is uniquely 
positioned to take advantage of the expected demand growth as adequate infrastructure 
is already in place to cater to capacity expansion. 
Preliminary information on PSMC is available on the following websites: 
www.paksteel.com and www.privatization.gov.pk. “ 
 
 
A bare reading of the afore-referred advertisement would show that 
the Privatization Commission had invited Expression of Interest from strategic 
investors for the privatization of PSMC and the salient features of the public 
offering were mainly two:- 
(i) 
Sale of 51 to 74% equity stake (it was increased to 75% by way of 
corrigendum) of PSMC. 
(ii) 
The sale carried with it the transfer of management control to 
strategic investors on and “as is” “where is” basis. 
There was no break up of the land which was to be sold to the strategic investors 
along with PSMC. There was no undertaking that the liability of VSS (up to 
Rs.15.00 billion) would be borne by the seller. There was no commitment that 
loans (about Rs. 7.67 billion) would be cleared before the Sale Purchase 
Agreement is signed. These concessions which had been offered after the 
acceptance of the bid were rather huge. The liability of VSS it was admitted before 
this Court by the counsel for Federation and counsel for the Steel Mills would 
amount to Rs.15.00 billion. The loan liability which was to be cleared by the 
Government of Pakistan amounted to Rs.7.67 billion and this was payable 
immediately even though the due date was June 2013, onwards. 
Const Petition No. 9 of 2006 etc 
 
 
64
77. 
Similarly valuable core land part of which had not been transferred 
to the PSMC had to be transferred to it without which it was stipulated in the 
agreement that the agreement shall not be complete (Clause 4.2 of the agreement). 
The value of inventories it was admitted before the Court was not less than 12.00 
billion. Similarly the refund of Rs. 1.00 billion excess tax which shall now be 
received by the bidder if he is allowed to operate after issuing the letter of 
acceptance in this manner minus the price of land the bidder shall be having 
benefit of Rs. 12.451 billion (Inventories of raw material etc as per Statement of 
Net Assets dated 31st March 2006) + Rs. 8.517 billion (cash in hand as per 
Statement of Net Assets dated 31st March 2006) + Rs. 1.00 billion (refund of Rs. 
1.00 billion tax as per report 2006) = Rs. 21.968 Billion. When Mr. Wasim Sajjad 
counsel was confronted with the afore-referred figures and asked what is the net 
benefit of the sale he replied that the cost of the land which is being unbundled 
amounts to Rs.70.00 billion and this according to him would be the ultimate gain. 
This argument ignores the reality that land always belonged to Government of 
Pakistan and could be unbundled, even without privatization. Similarly Mr. Abdul 
Hafeez Pirzada, learned Sr. ASC said that as the Government of Pakistan is 
disbursing the loans which were due in 2013 therefore the amount of mark up 
(existing) which would come to about Rs. 6.00 billion shall be saved in this 
manner. We asked him as to whether the amount of the interest would have not 
been paid if the mill remains in operation and has shown profit as it has started 
making the improvement in its performance from the year 2000 to 2003, he could 
not answer satisfactorily. It may also be noted that besides the above profit the 
bidder will also be entitled to get another profit if the employees opt for VSS then 
the liability of Rs.15.00 billion shall be paid by the Government of Pakistan. On 
our enquiry during the hearing, it was informed by the Director Operations that up 
till now more than 2000 employees have applied for VSS Scheme. 
Const Petition No. 9 of 2006 etc 
 
 
65
78. 
This transaction is outcome of a process reflecting serious violation 
of law and gross irregularities with regard to sale of the first and the biggest steel 
mill that this country has. From the facts admitted before us, even the procedural 
irregularities are not disputed. It has been argued by Mr. Abdul Hafeez Pirzada 
that rule 4(2) of the Privatization Commission (Modes & Procedure) Rules 2001 
has been satisfactorily applied even though it was conceded that the name of the 
highest bidder was neither before the CCOP nor approved. The fact is that even 
the bidding took place after CCOP decision dated 31.03.2006. He obliquely 
suggested that in any case the CCOP knew the names of the bidders. If this be 
correct, how could the CCOP import its behind the scene knowledge into decision 
making and that also without noting it. Learned Attorney General argued 
somewhat on the similar lines even though he admitted that PC and CCOP have 
adopted somewhat “convoluted” procedure. 
79. 
In our judgment rule 4 is couched in absolute language which 
requires full compliance. The rule has a wisdom behind it when it says that the 
CCOP will approve the name of the highest ranked bidder and not the highest 
bid. To us the wisdom in requiring approval of the highest bidder rather than the 
highest bid is that the Cabinet/CCOP will also have to keep in view the 
considerations not purely economic in approving or not approving the names of 
the highest bidder. As mandatory and absolute requirement of Rule 4 has not been 
met, in our considered view this alone is sufficient to invalidate the Letter of 
Acceptance and the Share Purchase Agreement based on it. 
80. 
Learned Attorney General stated that the Courts are not supposed to 
substitute their own opinion with that of the authority under the law unless it is 
shown that the action is not sustainable being unreasonable. He relied upon 
Associated Provincial Picture Houses ibid and Nottinghamshire County 
Council  ibid. 
Const Petition No. 9 of 2006 etc 
 
 
66
81. 
We have considered learned Attorney General’s contention and 
have gone through the precedent case law. The case law would have been relevant 
if the public functionaries had not committed violation of the rules, noted above. 
Question of reasonableness would be relevant if the transaction/action was 
otherwise in accordance with law/rules. 
82. 
Besides it has been noted by us with concern that the whole exercise 
reflected indecent haste by P.C. as well as C.C.O.P. in that on 30th of March 2006 
the final report of the F.A is received, the officials of the PC process the same on 
the same day, the meeting of the Board of Privatization Commission also takes 
place the same day and the summary is prepared the same day. The very next day 
i.e. 31st of March 2006, the CCOP meets, considers the summary, fixes a 
reference price and authorizes the P.C. to approve the highest bid. Even the 
Managing Director of the FA had already flown a day earlier to make presentation. 
During lengthy hearing spread over almost three weeks, no counsel much less Mr. 
Abdul Hafeez Pirzada learned Sr. ASC for Federation could offer any explanation 
for the haste in finalizing the process of the privatization. Apart from the illegality 
noted above viz complete violation of Rule 4, this unexplained haste casts 
reasonable doubt on the transparency of the whole exercise. 
83. 
It has been argued by the learned Attorney General that as no 
consequences of non-compliance of rule 4 have been provided in the Rules, the 
same be held as directory and not mandatory. For this purpose he relied on 
Maulana Noor ul Haq v. Ibrahim Khalil (PLJ 2001 SC 380). Non provision of 
consequence is one of the tests to determine the “directory” or “mandatory” nature 
of a statutory provision. The whole purpose of legislation is also to be kept in view 
to determine whether the duty cast is of absolute nature or of directory nature. We 
have already explained that the rule creates a distinction between the bid and the 
bidder and obliges the CCOP to approve the highest ranked bidder and not the 
bid. The language employed is mandatory in nature. Therefore, we repel the 
Const Petition No. 9 of 2006 etc 
 
 
67
argument that the rule is “directory” in nature and having been substantially 
complied with the Court should condone the twisted or as he put it “convoluted” 
procedure. Reference made by him on Messrs Nishtar Mills Limited v. 
Superintendent of Central Excise Circle II (PLD 1989 SC 222) is not apt under 
the circumstances.  
84. 
As far as the argument of the learned Attorney General that as 
making fresh reference to the CCOP for reconsideration may result in reiteration 
of the earlier decision, therefore, the Court should not strike down the decision on 
this ground is concerned, it is clear that we are not striking down the action on this 
ground alone as the contents of this judgment reveal. The argument, therefore, has 
no merit. In any case reaffirmation of the decision after compliance with law, 
would demonstrate the supremacy of law. 
85. 
The process of pre-qualification of potential bidders is an important 
limb of privatization process as it is the declared motto of the Privatization 
Commission (as manifested on the first page of the Annual Report 2004) that 
“Privatization in an open, fair and transparent manner, for the benefit of the 
people of Pakistan, in the right way, to the right people, at the right price”. To 
ensure that only “sound bidders with adequate experience and sound track record 
of corporate governance participate in the bidding process” the PC issued 
elaborate set of conditions in October 2005 containing conditions of eligibility and 
disqualification for pre-qualification with nomenclature titled as, “Request for 
Statement of Qualification. Pakistan Steel Mills Corporation Limited October 
2005”. The definition clause defines, inter alia, consortium, due date and lead 
bidder. The due date for submission of seeking pre-qualification was 29th October 
2005. Condition 2.1 lays down the eligibility requirements sub paras of which are 
relevant for the instant case: 
(a) 
the Potential Bidder, and if the Potential Bidder is a 
Consortium the Lead Bidder, must be a company or a 
Const Petition No. 9 of 2006 etc 
 
 
68
body corporate, whether incorporated in Pakistan or 
abroad (refer to Section 3.5). 
(b) 
…………… 
(c) 
if the Potential Bidder is a Consortium there must be a 
Lead Bidder (refer to Section 3.5(b) who is duly 
authorized (to the satisfaction of the Commission) by all 
other Consortium members to act on their behalf. After 
the submission of the SOQ, the Consortium members shall 
not be changed (both in respect of the percentage of the 
Equity Stake specified in Section 3.5 (b) below and any 
addition or deletion in the composition of the 
Consortium), unless the Commission consents to the same, 
in its sole discretion, not later than thirty (30) days prior 
to the proposed date of bidding. 
(d) 
………….. 
(e) 
the Potential Bidder, and in the event the Potential Bidder 
is a Consortium each Consortium member, must 
demonstrate a track record of sound corporate 
performance and governance. 
(f) 
……………. 
(g) 
the acquisition of the Equity Stake by the Potential Bidder 
(or where the Potential Bidder is a Consortium, any part 
of the Equity Stake by any member of the Consortium) 
should not be in violation of the laws of Pakistan.” 
 
Condition 2.2 spells out the basis for disqualification some paras of which would 
be relevant, those are as follows:- 
“(a) ………… 
(b) 
………… 
(c) 
………… 
(d) 
………… 
(e) 
has a track record of corporate behaviour evidencing 
any willful defaults on any of its obligations to any 
bank or financial institution in or outside Pakistan or 
is currently in default of its payment obligations to 
any bank or financial institution; 
(f) 
…………. 
(g) 
…………. 
(h) 
…………… 
(i) 
…………….. 
(j) 
is involved in any litigtion, arbitration or any other 
dispute or event which may have a material adverse 
effect on its ability to acquire the Equity Stake or to 
manage PSMC after completion of the acquisition of 
the Equity Stake. 
(k) 
………… 
(l) 
………….. 
(m) 
………….. 
(n) 
…………..” 
 
86. 
19 parties filed Request for Statement of Qualification (ROSQ) out 
of which following nine were found eligible:- 
Const Petition No. 9 of 2006 etc 
 
 
69
i. 
Aljomaih Holding Company (Saudi Arabia). 
ii. 
Al-Tuwairqi Group (Saudi Arabia) and Arif Habib Group 
(Pakistan). 
iii. 
Azovstal Steel/System Capital Management (Ukraine). 
iv. 
Government of Ras Al Khaimah (UAE). 
v. 
International Industries Ltd (Pakistan) and Industrial Union of 
Donbass (Ukraine). 
vi. 
Magnitogorsk Iron & Steel Works Open JSC (Russia). 
vii. 
Nishat Mills Ltd. and D.G. Khan Cement Co. Ltd (Pakistan). 
viii. 
Noor Financial Investment Co. (Kuwait). 
ix. 
Shanghai Baosteel Group Corporation (China). 
 
At Sr. No.2 of the above eligible parties, Arif Habib and Al-Tuwairqi Group 
formed a consortium from the very beginning. The due date for constitution of 
consortium as given in the Request for Statement of Qualification was 29th 
October 2005. The Consortium which ultimately participated in the bidding 
process on 31.03.2006 consisted of the following:-- 
(i) 
M/s Arif Habib Group of Companies. 
(ii) 
M/s Al-Tuwairqi Group of Companies. 
(iii) 
M/s Magnitogorsk Iron and Steel Works, Russia 
Admittedly this Consortium had not applied within the afore-referred due date and 
their qualification as Consortium had not undergone the test of scrutiny. This 
aspect has assumed importance for two reasons: firstly because during the course 
of hearing of C.M.A. No. 1190 of 2006 filed by Iftikhar Shafi levelling serious 
allegations which remained uncontroverted and this factual position has also been 
admitted by counsel for Mr. Arif Habib during the hearing at the Bar, with regard 
to his qualification to participate in the bidding process falling within the mischief 
of Condition (i) and (ii) of the Basis of Disqualification (reproduced ibid). The 
conditions for qualification required that change can be brought about in the 
consortium “not later than 30 days” prior to the proposed date of bidding (Para 
2.1 of the Request for Statement of Qualification). In the instant case even if there 
was a valid sanction order for the creation of the Consortium on 22.03.2006 this 
Const Petition No. 9 of 2006 etc 
 
 
70
change in the composition of the bidding party was hit by the afore-referred 
condition. 
 
87. 
A comment on the corporate credentials of a member of the 
consortium would be pertinent in view of the mandatory requirements of the 
“Request for Statement of Qualification” (RSOQ) referred to above. It has not 
been denied by the respondent Mr. Arif Habib that he is involved in following 
criminal and civil cases: 
 
 
(i) 
FIR No. 55/2003 dated 26.05.2003 under sections 342, 386/ 
409 and 506 of Pakistan Penal Code at PS Lahore. 
 
(ii) 
Suit No. 481/2003 for the recovery of Rs.5600611760 in 
Sindh High Court filed by Iftikhar Shafi against Arif 
Habib/Ms Arif Habib Securities Ltd. 
 
(iii) 
Suit No.639/2003 for the recovery of Rs.1701035843 in 
Sindh High Court filed by M/s Shafi Chemicals against Arif 
Habib and M/s Arif Habib Securities Ltd. 
 
(iv) 
Suit No.480/2003 for the recovery of Rs.10989948199 in the 
Sindh High Court Karachi, filed by M/s Diamond Industries 
Ltd against Arif Habib and M/s Arif Habib Securities Ltd. 
 
(v) 
Representation dated 5 April 2002 filed before SECP and 
pending against Arif Habib. 
(vi) 
Representation to the President of Pakistan against Arif 
Habib. 
(vii) Representation to the Prime Minister of Pakistan against Arif 
Habib. 
(viii) Arbitration proceedings notified by the Chief Minister Punjab 
and still pending. 
(ix) 
Proceedings of the inquiry Committee reports on the affairs of 
Karachi Stock Exchange and Lahore Stock Exchange dated 
31st August 2000 and 14th June 2002.” 
 
Copies of the afore-referred F.I.R and the civil suits were appended with C.M.A. 
No. 1190 of 2006 which indicate that in the F.I.R., he was the principal accused 
Const Petition No. 9 of 2006 etc 
 
 
71
and the allegations were that through his manipulation the stock exchange crashed 
leading to enormous losses to the small investors running into billions. In the civil 
suits the allegations are that the respondent Arif Habib and others manipulated the 
stock market and thereby caused losses. Learned counsel placed on record a copy 
of the report of four member Task Force headed by Mr. Justice Saleem Akhtar (a 
retired Judge of the Supreme Court of Pakistan) against certain individuals. In the 
report on different occasions the Commission had made observations about the 
corporate behaviour of Mr. Arif Habib. It may be noted that at the time of the 
crash of the Karachi Stock Exchange (K.S.E.) Mr. Arif Habib was President of the 
KSE as well as one of its major brokers. One of the following paras from the Task 
Force report would reflect about the corporate behaviour of Mr. Arif Habib:- 
“In these circumstances, the role of Badla financing in whetting 
investor appetite needs to be understood. Badla financing which 
grew markedly during this period, provided financing to 
investors who lacked liquidity to purchase in the ready market, 
albeit at high interest rate. Investors were willing to borrow at 
exorbitant Badla rates (which were capped at 18% in KSE but 
rose in the uncapped LSE to over 100%) because the 
accelerated rise in stock prices made such expensive borrowing 
feasible. The growing availability of Badla financing from 
lenders, who were largely brokers and institutions added to the 
buying frenzy in the ready market, raising stock prices on a 
daily basis and further amplifying expectations in the futures 
market. It may be noted that some of the major Badla providers 
were the same people who were selling the future market, and 
thus benefiting from the heightened expectations of price rises 
in the future. In other words, there was a strong nexus between 
lenders and brokers/investors who could influence market 
sentiment to their own advantage. 
The major brokers representing financiers of Badla on 
February 28, 2005 and some of the largest net sellers in the 
March Futures were:- 
Badla Providers 28th 
February 2005 
Amount (Rs. Million) 
Arif Habib Securities 
4,622 
Aqeel Akarim Dedhi 
4,233 
 
It is equally significant to note here that in reply to C.M.A. filed on behalf of 
Iftikhar Shafi it was admitted on behalf of Arif Habib that, “it may be mentioned 
that the existence of these suits has been expressly stated in the annual accounts of 
Const Petition No. 9 of 2006 etc 
 
 
72
Arif Habib Securities Limited, which is a public document and it was also filed 
with the Privatization Commission.” This statement in the pleadings on behalf of 
Arif Habib goes to substantiate without any doubt that his involvement in litigation 
was in the knowledge of the Privatization Commission. Thus, it had a duty to have 
applied mind before declaring him qualified to be one of the members of the 
consortium because we are of the opinion that a person who is involved in 
litigation in respect of the matter which pertains to a corporate body like K.S.E., 
etc, and against whom a report publicly has also been issued by the Task Force 
could not be considered a person who could, prima facie, handle the affairs of the 
Pakistan Steel Mills transparently. Thus, his involvement in the litigation as well 
as the corporate behaviour as is evident from the Task Force Report could have 
disqualified him under Para 2.2(j) of the RSOQ. Apparently this aspect seems to 
have been ignored by the Privatization Commission. We are conscious of the fact 
that the observations being made herein are not conclusive and can only be used 
for the purposes of the present litigation in view of the principle laid down by this 
Court in the case of Mohtarma Benazir Bhutto ibid (PLD 2000 SC 77). 
88. 
This Court would not like to comment on the veracity of the 
allegations levelled either in the application, in the F.I.R., the civil suits filed or the 
report of the Enquiry Commission lest it may prejudice the case of either side 
before appropriate forums/courts. However, for the purposes of qualification as a 
potential bidder, the disqualification condition stipulates that a potential bidder 
would be disqualified to participate in the bidding process if, “he is involved in 
litigation, arbitration or any other dispute or event which may have material 
adverse effect on its ability to acquire the Equity Stake or to manage PSMC after 
completion of the acquisition of the Equity Stake.” It is surprising that although 
the afore-referred allegations are a matter of record and have not been controverted 
either by respondent Mr. Arif Habib or by the Privatization Commission yet he 
was cleared of the qualification process and was allowed to participate. 
Const Petition No. 9 of 2006 etc 
 
 
73
89. 
After bidding the consortium consisting of (i) M/s Magnitogorsk 
Iron & Steel Works (ii) M/s Al-Tuwairqi Group of Companies and (iii) M/s Arif 
Habib Group of Companies was declared successful and Letter of Acceptance 
dated 31.03.2006 issued. But surprisingly agreement dated 24.04.2006 was 
executed between the:-- 
(i) 
President of Islamic Republic of Pakistan through the 
Ministry of Privatization and Investment (the “Seller”) and 
(ii) 
the Privatization Commission, established under the 
Privatization Commission Ordinance, 2000 (Ordinance LII of 
2000), having its principal office located at 5-A Constitution 
Avenue, 
Islamabad, 
hereinafter 
referred 
to 
as 
the 
“Commission”. and 
(iii) 
PSMC SPV (Mauritius) Limited a company incorporated and 
existing under the laws of Mauritius as joint venture 
company having its registered office at Suite 450, 4th Floor, 
Barkly Wharf East, Le Caudan Waterfront, Port Louis, 
Mauritius and the existing and paid up capital of which is 
owned entirely by ATG Holdings and MMK Holdings in 
equal shares (“PSMC Mauritius”) and 
(iv) 
Arif Habib Securities Limited a company incorporated and 
existing under the laws of Pakistan and having its registered 
office at 60-63 Karachi Stock Exchange Building, Stock 
Exchange Road, Karachi Pakistan (“AHSL”) and 
(v) 
Arif Habib son of Habib Haji Shakoor, resident of 86/11 10th 
Street, Khayaban-e- Sehr Phase VI, DHA Phase NIC 
No.42301-1015651-1 (“AH”) (AHSL and AH forming 
“AHG” as defined below. 
 
Following parties stood as guarantors for the purchasers named above:- 
(i) 
ATG Holdings Mauritius Limited, a company incorporated and 
existing under the laws of Mauritius a wholly owned subsidiary of 
ISPC whose registered office is at Suite 450, 4th Floor, Barkly 
Wharf East, Le Caudan Waterfront, Port Louis, Mauritius (“ATG 
Holdings”). 
(ii) 
Al-Ittefaq Steel Products Company, a company incorporated and 
existing under the laws of the Kingdom of Saudi Arabia whose 
registered office is at P.O. Box 2705 Dammam-31461, Kingdom 
of Saudi Arabia (“ISPC”). 
(iii) 
MMK Holdings (Asia) Limited, a company incorporated and 
existing under the laws of Mauritius whose registered office is at 
Suite 450, 4th Floor, Barkly Wharf East, Le Caudan Waterfront, 
Port Louis, Mauritius a wholly owned subsidiary of MMK 
(“MMK Holdings”). 
 
 
Const Petition No. 9 of 2006 etc 
 
 
74
(iv) 
Magnitogorsk Iron and Steel Works Open Stock Company, a 
company incorporated and existing under the laws of the Russian 
Federation whose registered office is at 93 Kirova Street, 
Magnitogorsk, Chelyabinsk Region, Russia (“MMK”). 
 
90. 
It is an admitted fact that the PSMC SPV (Mauritius) Limited got 
certificate of incorporation from Republic of Mauritius on 19th Day of April, 2006. 
Learned counsel appearing for bidders namely Mr. Kazim Hussain also filed a 
statement mentioning therein that except Mr. Arif Habib remaining members of 
the Consortium had no office in Pakistan. Relevant para therefrom is reproduced 
herein below:- 
“The guarantors ATG Holdings Mauritius Limited, Al-Ittefaq 
Steel Products Company, MMK Holdings (Asia) Limited and 
Magnitogorsk Iron and Steel Works Open Stock Company do 
not have any place of business or office in Pakistan at the 
present time. 
2. 
PSMC SVP (Mauritius) Limited also does not have 
any place of business or offices in Pakistan at the present 
time.  
3. 
Arif Habib Securities Limited however is a public 
limited company duly incorporated in Pakistan having its 
registered office at Karachi.” 
 
It is clear that bidders are different than the purchasers. The names of the 
purchasers shown in the Agreement dated 24.04.2006 have not been approved by 
the C.C.O.P. When asked to explain the anomaly, learned counsel for successful 
bidder explained that the afore-referred arrangement was devised with a view to 
provide a corporate vehicle through which the successful bidder could exercise 
corporate control on P.S.M.C. He further attempted to explain that this devise was 
adopted to save the double taxation. We fail to understand that the Privatization 
Commission readily accepted the arrangement which was to the benefit of the 
bidders for the purpose of entering into the Sale Purchase Agreement knowing 
well that under the law of our country no such permission can be granted because 
the contract is to be entered between the seller and the purchaser as approved by 
Const Petition No. 9 of 2006 etc 
 
 
75
the Privatization Commission Board and the CCOP in terms of Rule 4(2) of the 
Privatization Commission (Modes and Procedure) Rules, 2001. Further under 
section 10 of the Contract Act the parties have to make contract for a lawful 
consideration and with a lawful object which are not thereby expressly declared to 
be void. In view of this principle of law it is to be borne in mind that the 
expediencies of the bidder with regard to save their skin from double taxation 
could not form a valid basis for the Privatization Commission to accept such a plea 
for the purpose of allowing them to enter into contract through an offshore 
company which has been incorporated out of the country. Even otherwise, we 
cannot encourage such practice because if at all the bidders wanted to have any 
benefit of taxation they should have resorted to the municipal law of Pakistan and 
in this behalf if at all there was necessity they could have obtained incorporation 
of any other company within the territory of Pakistan having its own permanent 
office or business. Although we are mindful of the fact that after starting the 
business in Pakistan a company can open its office and can get the registration for 
the same purpose in terms of section 450 of the Companies Act. But if a corporate 
body i.e. PSMC SVP (Mauritius) Limited had got incorporation few days before 
entering into an agreement i.e. on 19th April 2006 in a different country coupled 
with the fact that this company is not a bidder, the PC should have not entered into 
contract in the present shape.  
91. 
Now turning towards the contents of the contract it may be noted 
that the same has been signed after vetting but there is not a single clause 
incorporated therein to the effect as to whether the bidders had furnished any 
guarantee for the purpose of making investment in the PSMC with a view to raise 
its production capacity. On this when we enquired from the learned Attorney 
Const Petition No. 9 of 2006 etc 
 
 
76
General as well as learned counsel appearing for the bidders, they filed following 
statement on 8th June, 2006:- 
“We refer to your request for clarification regarding 
the utilization of PSMC land and future enhancement 
in the production capacity of PSMC. 
We hereby confirm that PSMC land will only be used 
for purposes of the steel industry and related industrial 
activities and we shall not carve it out for sale or 
disposal for commercial or residential purposes. 
We hereby confirm that immediately after the 
Completion Date we shall commence work on the 
repair and revamping of the existing facilities of PSMC 
in an effort to ensure sustained utilization of its 
designed production capacity of 1.1 MTA and 
thereafter shall seek an economic enhancement of its 
production capacity up to 1.5 MTA. It is estimated that 
immediately an investment of US$ 250 mm will be 
required for PSMC to be become economically viable. 
Thereafter furthr investments will be made to raise the 
capacity of up to 3.0 MTA.” 
 
92. 
It may be noted that at the initial stage of the hearing when the 
learned counsel appearing for the P.C. Syed Sharif-ud-Din Pirzada made a 
statement in his personal capacity that the land underneath the Mill cannot be used 
for any other purpose except for the purpose of running the business of the Mill, 
the learned counsel for the bidder did not agree but when the proceedings went on 
and the Court expressed its apprehension in respect of the valuation of shares 
without including the value of the land as has been discussed, then for the first 
time the above statement was filed. It is equally important to note that no 
assurance/guarantee was obtained earlier. The incorporation of the above letter to 
the effect as to how much investment would be made when for the first time this 
Const Petition No. 9 of 2006 etc 
 
 
77
fact was also highlighted in the above letter but without making any commitment 
that the amount shall be invested because the language employed therein indicates 
that in the revamping of the existing facilities of PSMC in an effort to ensure 
sustained utilization of its design production capacity of 1.1MTA and thereafter 
shall seek enhancement of its production capacity to 1.5 MTA it is estimated that 
immediately an investment of U.S. $ 250 mm will be required for PSMC to 
become economically viable. Thereafter further investment will be made to raise 
the capacity to3.0 MTA. The letter in terms does not clearly suggest that this much 
amount shall be invested. However, the learned Attorney General as well as the 
counsel for the bidder stated that this letter may be read as one of the conditions of 
the warranty of the agreement and this may be read and treated as part of the 
agreement. The submission made on their behalf is not acceptable for a number of 
reasons: firstly the document is not the part of the original transaction; secondly 
during the Court proceedings such documents cannot be read as part of the 
agreement unless it is agreed to by the PC and when essentially this document 
does not bear the signatures on behalf of the PC; thirdly it is not signed by the 
parties who are signatories to the Share Purchase Agreement. Fourthly, it has been 
issued and placed on record not as a reflection of genuine transaction between the 
contracting parties but to allay the concerns of the Court reflected in observations 
made during hearing.  
93. 
At this juncture it is noted that the amount which purchaser intends 
to spend, if the statement is considered as commitment for the sake of argument, 
then the same has to be examined along with the fact that equal to this amount the 
Government of Pakistan itself is paying to its employees i.e. Rs. 15.00 billion if 
they all accept VSS besides other financial benefits break-up of which has already 
Const Petition No. 9 of 2006 etc 
 
 
78
been given in above paras. Thus, examined from this angle as well, there was no 
necessity to privatize the PSMC at a lesser price instead of selling it at a fair 
market price for achieving the objects set out for privatization. 
94. 
It may be pertinent to point out here that the learned counsel 
appearing for the bidder was not holding the brief on behalf of the PSMC SVP 
(Mauritius) because power of attorney had been filed only on behalf of guarantors 
and Arif Habib. We may explain as to why it was enquired with regard to the 
investment of the amount because during the hearing impression was being 
created that the object of privatization is not to close the PSMC but to increase its 
production capacity. Therefore, the violation was also done by following the 
internationally acceptable principle of DCF which only deals with in respect to the 
future prospects of an on-going concern. It was pointed out to the learned counsel 
for the respondents that if the object was so, then where is the condition in the 
contract of Sale Purchase Agreement dated 24.04.2006 to the effect that how much 
money will be invested by the purchaser for enhancing its capacity. There was no 
answer to it and at the end of the day the above statement was filed. It is equally 
important to note here that there is no doubt that the Government can 
independently form a policy for the purpose of privatization but here in Pakistan 
the policies have to be framed in pursuance to the decisions of the C.C.I. The 
decision of C.C.I. dated 29th May 1997 explicitly provides that the object of 
privatization would be to retire the debts and this policy has been incorporated in 
the Ordinance 2000, as well. Therefore, if the P.C. wanted to sell the shares of 
PSMC for any other purpose i.e. to build its capacity for the purpose of catering 
the requirements of steel in the country then in that case they should have again 
approached the CCI for the purpose of modification of its policy. Thus the result 
Const Petition No. 9 of 2006 etc 
 
 
79
could be that after framing a policy through C.C.I., privatization can take place, 
however, the only object should be the debt retirement and for this purpose the 
government may apply any such formula internationally recognized which may 
ensure to bring more money in the country. 
95. 
In the above context the next important question is with regard to 
the period of holding. Admittedly, in the agreement the holding period has been 
fixed only three years meaning thereby that after three years there is no guarantee 
whether the actual purchaser would not sell the shares of this on-going concern 
which is an industry of a very important nature known as mother industry. But no 
guarantee in this behalf has been obtained. Learned counsel appearing for the PC 
stated that there is a clause that the shares shall not be transferred against the 
security of Pakistan. We quite agree with him but at the same time it has not been 
defined anywhere that for the purpose of ensuring the security of Pakistan what 
measures shall be followed if the purchaser ultimately decides to dispose of/sell 
the shares against the interests of Pakistan. Therefore, in this behalf a clause 
should have been incorporated into the agreement. As we have observed 
hereinabove that even the agreement dated 24th of April 2006 has not been 
conditionalized to safeguard the interest and it seems that it is an ordinary standard 
type of agreement which has been signed without looking into the pros and the 
cons.  
96. 
In the circumstances and for above reasons, Constitution Petition 
No. 9 of 2006 and C.P. No. 345 of 2006 (after conversion into appeal) are allowed 
and C.P. No. 394 of 2006 is dismissed, all in the above terms. Parties are left to 
bear their own costs.