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P L D 1986 Lahore 346

Before Rustam S. Sidhwa, J

RAFHAN MAIZE PRODUCTS COMPANY LTD.‑Petitioner

versus

MONOPOLY CONTROL AUTHORITY AND 9 OTHERS -Respondents

First Appeal from Original Orders Nos. 2, 3 and 5 of 1983, decided on 28th June, I986.

(a) Monopolies and Restrictive Trade Practices (Control and Prevention) Ordinance (V of 1970) ‑

----Preamble‑Object of Ordinance.

(b) Monopolies and Restrictive Trade Practices (Control and Prevention) Ordinance (V of 1970)

---- Ss. 3, 4, 11 & 12‑‑Object, scope and application of Ss. 3, 4, 11 & 12.

Section 3 of the Ordinance (V of 1970), inter alia, declares that there shall be no undue concentration of economic power and section 4 states the circumstances under which undue concentration of economic power shall be deemed in law to have been brought about, maintained or conti nued. Under section 4, undue concentration of economic power is inter alia, deemed present if there is an undertaking, the total value of whose assets is more than five crores of rupees, and which is either (i) not owned by a public limited company or (ii) is owned by a public limited company in which any individual holds or controls shares carrying more than 50 % of the voting power in that undertaking. Where the authority is satisfied that there is or is likely to be undue concentration of economic power within the meaning of section 3 and that action is necessary in the public interest, it can make one or more of such orders specified in section 12 as it may deem appropriate, but, before making any order in that respect, the Authority, under section I1(1), has to give notice of its intention to make such an order, stating the reasons, therefore to such persons of undertaking as may appear to it to be concerned in the contravention, to show cause why such order should not be made and to give to the persons or undertaking an opportunity of being heard in support of their contention Under section 12 of the Ordinance, an order of the Authority under section 11 can, inter alia, in the case of undue concentration of economic power, either require the firm or company concerted, which is not a public limited company, to convert itself, within such time and to such manner a; may be specified in the order, into a public limited Company, or require the controlling shareholders of the public limited Company concerned to offer such part of the stocks and shares held by them within such time and in such manner as may be specified in the order to the general public, including the NIT and any investment institution established controlled by the Government. It is obvious that section 4(a)(i) connects with the action proposed cinder section 12(i)(a)(i) and that section 4(a)(ii) connects with the action proposed under section 12(1)(a)(ii) of the Ordi nance.

(c) Monopolies and Restrictive Trade Practices (Control and Prevention) Ordinance (V of 1970)‑

--------Ss. 12 & 11‑Partnersbip firm or a private limited company having assets over five crores of rupees is deemed to have undue concentration of economic power‑Such company or firm can lead to an order under S. 12(1)(a)(i), if action is considered necessary in public interest under S 11(1) and notice of action proposed to be taken is given under S. 11(2).

(d) Monopolies and Restrictive Trade Practices (Control and Prevention) Ordinance (V of 1970)

---‑ Ss. 12, 11 & 16‑Words "within such time and in such manner as may be specified in the order" appearing in 19. 12(1)(a)(i) relate to the procedural requirements which a firm or a private limited company would have to meet to convert itself into a public limited company‑Any direction by Authority covering disinvestment of shares in an order passed under S, 12(1)(a)(i) would be without jurisdiction and null and void.

The words within such time and in such manner as may be specified in the order" as appearing in sub‑clause (i) of clause (a) of subsection (1) of section 12 of Ordinance (V of 1970) obviously relate to the procedural requirements to be complied with by the firm or the private limited company concerned, when converting itself into a public limited company. Under section 11(3), the Ordinance overrides all other laws. The Authority can give directions for minimal requirements for conversion, which it may deem sufficient for itself to accept the conversion. These words are not intended to enlarge tae scope of the Authority to call upon the partners of the firm or the shareholders of the private limited company concerned to disinvest any part of their capital or shareholding. It is only after a firm or a private limited company converts itself into a public limited company, that the authority can call upon the controlling shareholders of the said public limited company concerned to disinvest any part of their shares to tile general public, as required by sub‑clause (ii) of clause (a) of sub section (1) of section 12. The argument that the words "within such time and in such manner as may be specified in the order", appear ing in section 12(l)(a)(i), includes the power to order disinvestment, as mere conversion of a firm or a private limited company into a public limited company by the mere preparation of the memorandum and articles of association of the Public Company or by some amendments to some clauses therein, a not what is really intended by the Ordinance. The argument appears attractive, but has no basis in law. In the first instance, the Ordinance does not arm the Authority with any larger powers, over and above what is clearly given in the Ordinance. It is true that a firm may have to get the memorandum and articles of association of the public company to be formed prepared by its legal advisor and to file the same with other relevant documents before the Corporate Law Authority and other relevant authorities. A private company is one, which, by its articles of association, restricts the right to transfer its shares, limits the number of its members to fifty, not including persons who are in its employment, and prohibits any invitation to the public to subscribe for its shares or debentures, if any, and that if such a company is to convert itself into a public limited company, it would have to amend its articles to remove these restrictions which are contained therein and to file the said amendments with tile prospectus or statement in lieu thereof and other documents with the Corporate Law Authority and other authorities. In addition, under the Monopolies Control Ordinance, a private limited company, having assets exceeding five crore rupees has to register itself with the Authority under section 16(1)(d), whereas a public limited company having similar assets does not have to so register itself, though under the same section it may have to do so for other reasons, but an individual who holds or controls, whether directly or indirectly, shares carrying more than 50 % of the voting power in such public limited company would have to register himself under section 16(1)(h) of the Ordinance. The object of compelling the firm or the private limited company to convert itself into a public limited company, is not to make any beneficial distribution of capital or shares held by its partners or shareholders in favour of the general public, but to compel the firm or company to change its legal character become more broad based and thus become open to public scrutiny by the Corporate Law Authority, the Monopoly Control Authority and by any member of the general public, who would have the right of inspecting the various documents and returns filed by the public limited company both with the Corporate Law Authority and the Monopoly Control Authority. In these circumstances, the words "within such time and in such manner as may be specified in the order" appearing in sub‑clause (i) of clause (a) of subsection (1) of section 12 of the Monopoly Control Ordinance, obviously are limited to the procedural requirements which a firm or a private limited company would have to meet to convert itself into a public limited company.

Held, any direction by the Authority covering disinvestment of shares in an order passed under section 12(1)(a)(i) would be without jurisdiction and null and void.

Moghal Tobacco Company's case P L J 1978 Tr. C. 315 and Metalex Corporation's case P L J 1978 Tr. C. 320 mentioned.

(e) Monopolies and Restrictive Trade Practices (Control and Prevention) Ordinance (V of 1970)‑‑

‑‑ Ss. 4(a)(i)(ii), 11 & 12‑Word "may" in S. 11 is enabling and to be used when necessary in the public interest‑On discovery of a case of undue concentration of economic power under S. 4(a)(i) or 4(a)(ii), it is not mandatory for Authority, to take action under S. 12(1)(a)(i) or S. l2(l)(a)(ii), irrespective of all consequences- "Public interest"‑Limits.‑[Interpretation of statutes].

Section 11(l) of Ordinance (V of 1970) clearly states that where the Authority is satisfied that there is or likely to be a contraven tion of the provisions of section 3 and that action is necessary in the public interest, it may make one or more of such orders specified in section 12, as it may deem appropriate. In view of the language of this subsection, it is clear that the Authority should first find as a fact that action is necessary in the public interest. The determination of this question is a subjective one, but the material on which the decision must be based must come from sources alieunde which objectively show that the making of the order under section 12 would serve the "public interest". Public interest does not necessarily imply the interest of the shareholders, though it may be one of the factors which the Authority may take into consideration when passing an order under section 12. In these circumstances, it cannot be said that no sooner a case of undue concentration of economic power under section 4(a)(i) or a(a)(#) is made out, that blindly the Authority must straightaway proceed to issue a notice under section 11 for proposed order under section 12(1) (a)(i) or 12(1)(a)(ff) of the Ordinance respectively. Public interest with respect to an order proposed to be passed under section 12(1)(i) may perhaps only be limited to the consideration of compelling the private company to convert itself into a public company to make itself more broad based and vulnerable to public scrutiny by the Corporate Law Authority and the Monopoly Control Authority, or perhaps with the future consideration of determining and taking action against persons who may hold or control 50 % or more of the voting power in the public company to be formed but public interest with regard to an order proposed to be passed under section l2(1)(a)(ii) would have to take into considera tion more important questions, such as whether any of the controlling shareholders, whose shares are proposed to be offered to the general public, is not a foreign individual or company who has been allowed to invest his or its capital on special terms under the Foreign Investment (Promotion and Protection) Act, 1976, and whether any investment by the said individual or company would not violate any solemn commitment

made to him or them by the Pakistan Government and whether such an order proposed to be passed would not violate generally any public assurance given by the Pakistan Government to foreign entrepreneurs to invest their capital in this country, under special favoured terms. The view that once the Authority finds a case of undue economic power made out under section 4, it must mandatorily make an order under section 12, irrespective of consequences, cannot be accepted. If such was the intention, there was no need of having section 11. The word "may" in section 11 also shows that the power is enabling and to be used when necessary, in the public interest.

(f ) Monopolies and Restrictive Trade Practices (Control and Prevention) Ordinance (V of 1970)‑

‑‑ Ss. 12, 11, 4, 2 & 16‑Power of Authority to order disinvest ment‑Extent.

There is no power to order disinvestment under section 12(1)(a)(i) of Ordinance (V of 1.970) when calling upon any firm or private company to convert itself into a public limited company. No such power can be derived from section 11 (3). There is power to order disinvestment under section 12(a)(ii), if the Authority finds that any individual shareholder of a public company holds or controls shares carrying 50 per cent or more of its voting power, but the Authority's power is only the limited to the said controlling share holder, who has to be an individual. There is no power with the Authority to order disinvestment by shareholders who own or control less than 50% of the voting power. When determining who is the "individual" holding the controlling power for the purpose of section 4,(a)(ii), the Authority can go behind the veil by not only determining the voting power held by such individual in the public company concerned, which is the subject of the inquiry, but by the voting power held by him in any firm or company, which is also a shareholder in the company, which is the subject of inquiry; it being understood, under section 2(2), that the individual would include his spouse, brother or sister or lineal ascendants or descendants. Indivi duals who hold or control, whether directly, or indirectly, shares carrying 500 or more of the voting power in public companies, the total value of whose assets exceeds five crore of rupees, also have to get themselves registered under section 16(l)(h) with the Monopoly Control Authority. In determining whether such individuals holds 50% or more voting power, the fact that they do so through other intermediary companies or firms is generally examined.

For the purposes of section 16(1)(h), the word "individual" does not cover a company.

On a parity of reasoning, the word "individual" in section 4(a)(ii) also does not include a company. Thus, an order of the Authority under section 12(1)(a)(ii) can require the controlling shareholder of the public limited company concerned, to disinvest such part of the stocks and shares held by him, as may be specified in the order, to the general public, includ ing NIT or any other investment institution established or controlled by Government.

Excepting this limited power of disinvestment, which the Authority has under section 12(1)(a)(ii), it has no other power.

Saeed ullah Khan's case 1986 C L C 2254 ; Khawaja Muhammad Yousaf's case 1Q86 C L C: 2256 a Shafiq Hanif Company's case 1986 C L C 2252 and Sher Hassan Khan's case 1986 C L C 2253 mentioned,

(g) Monopolies and Restrictive Trades Practices (Control and Prevention) Ordinance (V of 1970)‑

‑‑ Ss. 12 & 11‑Capital Issues (Continuance of Control) Act (XXIX of 1947), S. 3(4)(b)‑Power of Controller of Capital Issues to order disinvestment under S. 3(4)(b) of Act (XXIX of 1947)‑Monopoly Control Authority cannot arrogate to itself powers of ordering disinvestment, otherwise available to other Authorities or Depart ment of Government on any basis whatsoever, either by pretending' it has powers under S. 11(3) of Ordinance 1970 which it does not have, or on any equitable basis.

The Controller of Capital Issues, as the representative of the Federal Government, has powers to order disinvestment under section 3(4)(b) of the Capital (Continuance of Control) Act (XXIX of 1947). Under the Ministry of Finance notification SRO 53(R)/68, dated 2‑4‑1968, the Federal Government has power, while granting permission for the establishment or expansion of any industrial project, to require the public company to offer 50 Y. of its entire share capital to the public, where the capital is hundred per cent Pakistani, and by virtue of Ministry of Finance Notifica tion SRO 66(R)/68 dated 22‑4‑1968, the Federal Government has power to vary the percentage of the total issue of capital to be offered to the public, in respect of a company in which capital has or Is to be subscribed to foreign exchange by foreign participants. Under the latter notification, the general policy of the Federal Government is to order 50 % of the Pakistani part of the capital to be offered to the public, in the case of companies with foreign participation. Under section 11(3) of the Ordi nance, an order made by an Authority has effect notwithstanding anything contained in any other law for the time being in force or in any contract or memorandum or articles of association, but it must be emphasised that this provision does not enable the Authority to gratuitously extend its powers under section 12(1)(a)(i) or 12(1)(a)(ii). The Authority cannot arrogate to itself the powers of ordering disinvestment, otherwise available to other authorities or departments of Government, on any basis whatsoever, either by pretending it has powers under section 11(3) of the Ordinance, which it does not have, or on any equitable basis, by compelling Companies to accept consent orders and thus save themselves from having their order. set aside by the High Court.

(h) Monopolies and Restrictive Trade Practices (Control and Prevention), Ordinance (V of 1970)‑

‑ S. 12‑Authority which is empowered to pass an order, if certain circumstances exist, must in its order show the existence of these circumstances‑Where such circumstances are not stated in order of Tribunal, order can be declared void.‑[Appeal (civil)).

Sharif Ahmad Hashim's case 1978 S C M R 367 ref.

(i) Monopolies and Restrictive Trade Practices (Control and Prevention) Ordinance (V of 1970)‑

‑‑‑ S. 12(1)(a)(i) & (ii)‑Powers of Authority to order disinvestment under S. 12(1)(a)(ii) is so limited that it only applies to the Control ling shareholder or shareholders ‑ Scope of powers to order disinvestment is not limitless as to cover all the shareholders of a company whether having controlling interest or otherwise.

E. A. Naumani for Appellant.

Munir .A. Sheikh, Dy. A,.‑G. of Pakistan for Respondent No. 1,

Fakharud Din G. Ibrahim and M. Afzal Siddiqui for Respondents Nos. 2 and 3.

Kh. Habibullah for Respondent No. 4. Bahadur Ali for Respondents Nos. 5 to 12.

Dates of hearing : 24th, 25th and 26th May, 1986.

JUDGMENT

This judgment will dispose of First Appeal against Order (F.A.O.) No. 2 of 1983 preferred by Raf ban Maize Products Company Limited appellant, and First Appeal against Order (F.A.O.) No. 3 of 1983 preferred by Knorr Zurich A.G. and Monda Alimenta A.G., appellants, both calling for the setting aside of the order of the Monopoly Control Authority dated 23‑12‑1982 and First Appeal against Order (F.A.O.) No. 5 of 1983 preferred by Mian Muhammad Hanif Monnoo, appellant, calling for the setting aside of only that portion of the said impugned order of the Monopoly Control Authority to the extent that it calls upon him to disinvest a part of his shareholding to the public.

2. For the purposes of these three appeals, the facts as given in First Appeal against Order (F.A.O.) No. 2 of 1983 shall be adopted.

3. The brief facts of the case are that Rafhan Maize Products Company Limited, appellant (hereinafter to be referred to as "the Rafhan Company") is a Private Limited Company in the Province of Sind, engaged in the manufacture of large quantities of high quality starch, glucose, dextrose, corn oil and a number of subsidiary products for the home and export markets.

4. That the Rafhan Company was established in 1950 by the late Haji Muhammad Shafi Monnoo (hereinafter called "Haji Shafi"), who also associated his three sons, Mian Mohammed Hanif Monnoor Mian Nasir Ahmad Monnoo and the late Mian Muhammad Rafi Monnoo in the business (Haji Shafi and sons or the survivors of these four individuals are hereinafter jointly referred to as "the Shafi Group)."

5. That in 1962, after years of negotiations with the family and the Government of Pakistan, Corn Products Company, a U.S. Corporation (hereinafter called "the Corn Products Company") was permitted to purchase through its Swiss subsidiary, Knorr Zurich A.G. the respondent No. 2 (hereinafter referred to as "Knorr Company") 51 % of the issued capital of the Rafhan Company from the Shafi Group, at a premium of approximately 300% under an elaborate Purchase Agreement Copies of the Purchase Agreement together with the Memorandum and Articles of Association of the Rafhan Company have been annexed with the appeal and marked "A" and "B" .

6. The Purchase Agreement. which was a very comprehensive docu ment, contained inter alia, detailed and specific provisions, which in conjunction with the Articles of Association, whilst assuring certain seats on the Board of Directors and one of the two Managing Directorships to the Shafi Group, as long 7; it or any individual survivors of the group held 36% of the shares, effectively transferred control of the Rafhan Company to the Corn Product Company, in that most important matters were made subject to resolution of the Company in General Meeting where the Knorr Company had an absolute majority. Even in the Board of Directors, the Purchase Agreement was so worded that the Chairman of the Board of Directors, who had the casting vote and hence the final voice in the Board of Directors, was to be elected by a majority of the votes in a general meeting from the members of the Shafi Group, only so long as he enjoyed the confidence of the Knorr Company.

7. As long as Haji Shafi lived, he enjoyed the confidence of the Knorr Company and therefore, remained the Chairman of the Board of Directors. However, he died on 19th December, 1986, and hereafter the Chairman of the Board of Directors was always a nominee of the Knorr Company. The Corn Product Company, therefore, effectively remained in control of the entire management of the Rafhan Company, since its subsidiary the Knorr Company purchased the shares. Thus the Chairman and Chief Executive Officer of the Rafhan Company, since the purchase of the shares by the Knorr Company, were Haji Shafi, up to December, 1963, when he died, and then Mr. P.H. Brown, Mr. H.R. White Mr. Malcolm Macdonald, Mr D.J. Fenn and Mr. R. Senn, who is the present Chairman and the Chief Executive Officer. Apart from Haji Shafi, all the other Chairmen named above were foreign nationals and were, therefore, appointed with the approval of the Government of Pakistan. A copy of the last approval of the Government for the appointment for Mr. R. Senn, the current Chairman, has been annexed with the appeal and marked "C".

8. That after the death of Haji Shafi, differences arose between the Knorr Company and the Shafi Group on the interpretation of the Purchase and the Articles of Association, which also led to litigation. One of the tactics adopted by the Shafi Group to obstruct the running of the Rafhan Company was to prevent holding of general meeting by remaining absent. To remedy this, the Knorr Company transferred two of its shares to Monda Alimenta A.G. (hereinafter referred to as "the Monda Alimenta Com pany '), another Swiss Company wholly owned subsidiary of the Corn Products Company. The 'Rafhan Company issued and paid‑up capital at that relevant time was :‑

Shareholders Holding ordinary shares

of Rs. 100

Knorr Zurich A.G. 30,463

Monda Alimenta A.G. 2

Mian Muhammad Rafi Monnoo 7,169

Mian Muhammad Hanif Monnoo 7,168

Mian Nisar Ahmad Monnoo 7,168

Mst. Hamida Begum 3,883

Mst. Farida Begum 3,883

Total ... 59,736

9. That with the association of the Corn Product Company with the Rafhan Company, the latter Company achieved substantial and continuing progress and increase in production as a result of the advanced technology and efficiency rendered possible by the active interest taken by the former. Thus, up to 1978, the Rafhan Company was able to achieve substantial export earnings in excess of rupees one crore per year and ensured that the products could be offered to domestic industries at economic prices and of a quality comparable to any world standard. It also promoted cultiva tion of maize, by making available imported seeds and other technical and material assistance to farmers and provided them with an expanding and guaranteed market Apart from supporting the farmers, the Rafhan Company employed more than 600 people directly and many more indirectly e.g. suppliers, contractors, etc. It also provided technical and managerial talent from visiting specialists and training of the local staff in overseas affiliates. It also generated huge revenues in duties and taxes ( excise, sales and income) for the country.

10. As a result of this progress, the Rafhan Company's total asset exceeded well over Rupees one crore when the Monopolies and Restrictive Trade Practices (Control and Prevention) Ordinance, V of 1970, came into force on August 17, 1971. The objects of the Ordinance were, inter alia, the prevention of undue concentration of economic power in the hands, of individuals and their families, the sharing of benefits of industrial development by the general public, the elimination of largely narrow family oriented attitudes of the entrepreneurs and the subsequent establishment of professional management in control of enterprises then managed and controlled by big business family groups.

11. Under section 4 (a) of the Monopolies Control Ordinance, as originally enacted, any private company with total assets of not less than one crore of rupees was deemed to constitute undue concentration of economic power, which was prohibited under section 3 of the Ordinance.

12. In March 1977 the Rafhan Company received a Notice No. F 90/ R/UND/MCA/72, dated March 2, 1977 from the Monopoly Control Authority under section 11 of the Ordinance to show cause why action under section ll read with section 12 (1) (a) (i) should not be taken in respect of the Rafhan Company. A copy of this notice together with a copy of the Company's reply, dated April 13, 1977, have been annexed with the appeal and marked D' and E'.

13. The Rafhan Company contested this notice and a hearing took place on January 8, 1978, when an order was also passed directing the Company to submit certain information. This order was complied with.

14. That in 1978 the limit of total assets under section 4 (a) of the Ordinance was raised to rupees two crores. As a result, the said notice was withdrawn and a fresh Notice No. F 90/R/UND/MCA/72, dated August 28, 1978, was served on the Rafhan Company. A copy of the said show cause notice has been annexed with the appeal and marked "F".

15. The Rafhan Company submitted its reply to this show‑cause notice by its letter, dated October 8, 1978, a copy of which is annexed with the appeal and marked "G".

16. That a hearing took place at Islamabad on November 15, 1978, when Mr. E.A. Nomani, Advocate, filed his power of attorney and appear ed on behalf of the Refhan Company. At the hearing, the Monopoly Control Authority indicated that not only did it propose to order that the Rafhan Company should be converted into a public company, but also that it should be quoted on a stock exchange in Pakistan. The Rafhan Company raised the objection that apart from the grounds submitted in its reply (Annexure "G"), the show‑cause notice (Annexure "F") did not give any indication that the order would also require listing on a stock exchange and hence such an order would be illegal for want of notice under section 11 (2) (a). This objection was upheld and consequently the Rafhan Company was served another Notice No. F 90/R/UND/MCA/72, dated December 9, 1978, in continuation of the previous notice, dated August 28, 1978 (Annexure "F") informing the Company that the proposed order would also require it to be listed on a stock exchange in Pakistan. A copy of the said further notice has been annexed with the appeal and marked "H".

17. That the Rafhan Company submitted its reply to the second show‑cause notice on February 14, 1979, copy of which has been annexed with the appeal and marked "I", together with a further reply dated April 4, 1979, annexed thereto and marked "J".

18. That a bearing took place before the Monopoly Control Authority on October 28, 1979, at Karachi where Mr. E. A. Nomani, Advocate, appeared for the Rafhan Company. He also appeared on the same day for several other private companies with foreign participation, who had received similar show‑cause notices. All these companies strongly contested the show‑cause notices and after the nearing the Monopoly Control Authority asked Mr. E. A. Nomani, Advocate, to obtain the views of these companies and their shareholders whether they would be willing to accept consent orders on the following basis:

(1) That the companies would accept being converted into public companies.

(2) That where a company was more than 70 % foreign owned, the foreign shareholders should bring their shareholdings down to 70 %.

(3) That the Pakistani shareholders would offer 50% of their shares (or new shares be issued to all shareholders except existing Pakistani shareholders), so that the public in Pakistan, including N. I. T., I. C. P. and employees of the Company concerned could hold an equal percentage of shareholding with the existing private Pakistani shareholders. It was stated that this was in accordance with the publicly stated and followed policy of the Government of Pakistan that where a private company with foreign participation exceeded a certain size, it should convert itself into a public limited company and offer 50% of its Pakistani capital to the general public in Pakistan. It was stated that this policy had been in force for many years even before the promulgation of the Ordinance and was based on the ground that no foreign participation in any investment was permissible in Pakistan unless the Government was satisfied that such foreign participation was beneficial for the industrial or agricultural development or economic progress of Pakistan It was asserted that once the investment was permitted, the benefits of such investment should not be monopolized by local private indivi duals or families, who should share them with the general public in Pakistan and that as long as the foreign control did not exceed 70% ownership of the outstanding stock, it should not be disturbed. It was averred that this policy was also aimed at encouraging such foreign investment in Pakistan as was beneficial for its industrial or agricultural development or economic progress.

19. That the Corn Product Company through Knorr Company had made its investment in Pakistan on the understanding that its shareholders being well below 70 %, it would not be deprived of its control of the Rafhan Company. Thus, even as recently as 1974, when the Rafhan Company sought the Government of Pakistan's permission to increase its capital, permission was granted only on the condition that it converted itself into a public company and offered 50% of its Pakistani share capital to the general public. A copy of this consent order, dated November 27, 1974, has been annexed with the appeal and marked "K". Since this condition was not acceptable to the Shafi Group, the Rafhan Company could not increase its capital and did not utilize the consent order.

20. That in due course, many foreign controlled private companies accepted these proposals of the Monopoly Control Authority voluntarily, i. e. without an order from the Authority and converted themselves into public companies; the said Companies being:‑

Name of the Company Foreign Share‑ After

holding before Conver

Conversion sion.

(a) Wellcome Pakistan Ltd. 100% 70%

(b) Abbott Laboratories 85 % 70 %.

Pakistan Ltd.

(c) Pakistan Gum & Chemicals

Limited. 60 % No change as

below 70%.

(d) Burshane Pakistan Ltd. 81‑54 % 63.84%

In all these cases, except Wellcome, where there was no Pakistani share holding, 50 % of the Pakistani capital was offered to the general public, including N. I. T and employees. In Wellcome, of course, the entire 30% was offered to the general public, including N. I. T. and employees. The Monopoly Control Authority also persuaded Bata Pakistan Ltd. and K. S. B. Pumps Ltd. to convert themselves into public companies and bring down their foreign shareholdings to 70 %. In no case, however, did the Authority interfere with the foreign shareholdings, if they were less than 70% and publicly declared this to be its intention, inter alia, at the hearing held on October 28, 1979.

21. That it was pointed out to the Monopoly Control Authority at the said hearing that about half of the Pakistan shares of the Rafhan Company were still registered in the name of Haji Shafi, who had died, and as there was litigation between his sons and daughters on the owner ship of these shares, consequently it was not possible to offer 50 % Pakistani shares to the general public. Nevertheless, the Authority directed Mr. E A. Nomani to obtain the view of the Shafi Group (i. e. Messrs Rafi, Hanif and Nisar Monnoo) on these proposals by December 31, 1979.

22. That Mr. E. A. Nomani conveyed the Authority's suggestions to the Rafhan Company vide his letter, dated November 6, 1979, addressed to the Company, which has been annexed with the appeal and marked "L". The Rafhan Company forwarded copies of this letter to the Shafi Group and also the daughters and widow of‑ Haji Shafi, who were party to the litigation relating to the late Haji Shafi's shares.

23. That one of the Pakistani shareholders, Mr. Nisar A. Monnoo requested Mr. E. A. Nomani, Advocate, to obtain an extension of time from the Authority, as he was taking his daughter to U. S. A. for treatment. A copy of his letter, dated December 11, 1979, has been annexed with the petition and marked "M". Mr. Muhammad Rafi Monnoo and Mr. Muhammad Hanif Monnoo, the remaining members of the Shafi Group, also informed Mr. E. A. Nomani, Advocate, that they would like to give their reply after full consultation with Mr. Nisar and requested that the time be extended upto February 29, 1980. The Rafhan Company's Advocates, therefore, wrote to the Authority confirming what had happened at the hearing on October 28, 1979, and requested for extension of time on behalf of Mebsrs Rafi Monnoo, Hanif Monnoo and Nisar Monnoo, Pakistani Shareholders, upto February 29, 1980. A copy of the Company's Advoc‑ite's letter, dated December 22, 1979, has been annexed with the appeal and marked "N".

24. That on January 16, 1980, the Authority allowed the request for extension of time upto February 29, 1980. A copy of the Authority's letter, dated January 16, 1980, has been annexed with the appeal and marked "O".

25. That on February 20, 1980, Mr. Muhammad Hanif Monnoo wrote to the Rafhan Company on his own behalf and on behalf of Messrs Rafi and Nisar Monnoos pointing out that no communication whatso ever had been received by him and his brothers from the Monopoly Control Authority and, therefore, they reserved their rights to take their stand when the Authority approached them. He also expressed their opposition to the proposed conversion. A copy of his letter, dated February 20, 1980, has been annexed with the appeal and marked "P".. Consequently on February 28, 1980, the Rafhan Company's Advocates informed the Authority that the company had failed to persuade its Pakistani shareholders to agree to its proposals and that in the circumstances the show‑cause notice should be withdrawn. A copy of the Advocate's letter, dated February 28, 1980, has been annexed with the appeal and marked "Q".

26. That in June, 1980, the limit of total assets under section 4(1) of the Ordinance was raised to rupees three crores. Consequently, the said notices, dated 8th August and 9th December, 1978, were withdrawn by order, dated August 6, 1980, and a fresh Notice No. 90/R/UND/MCA/ 72 dated August 10, 1980, was served on the Rafhan Company based on the total assets of the company being not less than three crore rupees. Copies of the order withdrawing the previous notices and the fresh notice have been annexed with the appeal and marked "R'' and "Rl". This notice did not disclose the nature or details of the order which the Authority proposed to pass and, unlike the previous notice, did not even state that listing on the Stock Exchange was required.

27. That on August 25, 1980, the Rafhan Company submitted a short reply to the latest show‑cause notice adopting the replies dated April 13, 1977 (Annexure "E"), October 8, 1978 (Annexure "G"), and April 4, 1979 (Annexure J') and also relied on all the replies, documents and information already submitted. The Rafhan Company at the same time pointed out that the show‑cause notice was defective, as it did not give details of the nature of the order which was under contemplation. The Rafhan Company did not, however, expressly adopt the reply, dated February 14, 1979 (Annexure "I"), as that reply was to the show‑pause notice, dated December 9, 1978, (Annexure "R") wherein listing on the Stock Exchange was desired. A copy of the reply dated August 25, 1980, has been annexed with the appeal and marked "S" No hearing took place for some time, as in the meantime Mr. Riaz Ahmad. Chairman, of the Authority had retired. On January 20, 1981, a hearing took place before the Authority with the new Chairman Mr. Irtiza Hussain and Mr. S. M. A. Sabzwari, Member. Mr. E. A. Nornani, ‑Advocate, appeared for the Rafhan Company and after opposing the notice on the grounds given in the replies, he explained what had happened so far in the proceed ings and that while the Company was prepared to accept an order of conversion with 50 % of the Pakistani shares being offered to the public, the Pakistani shareholders were not accepting this. The Advocate further informed the Authority that there had been a compromise amongst the legal heirs with regard to the late Haji Shafi's shares and that unless the Authority was able to persuade all parties to voluntarily accept a consent order, the Authority could not compel any one to divest his shares under the Ordinance, on the grounds already submitted in the Rafhan Company's replies and arguments advanced before the Authority. The Authority directed Mr. Nomani Advocate to furnish the details of the compromise. This was done by letter, dated February 14, 1981, a copy of which has been annexed with the appeal and marked "T".

28. That a hearing was held again on April 13, 1981, at Karachi where Mr. E. A. Nomani, Advocate, again appeared on behalf of the Rafhan Company and informed the Authority that the Company was unable to convert, in accordance with the proposals of the Authority, as although the 51 % controlling shareholders were willing to support the proposals of the Authority, the requisite balance of votes required for the Special Resolution was not available.

29. That thereafter the Authority issued notices to Messrs Rafi Monnoo, Hanif Monnoo and Nisar Monnoo, but the Rafhan Company was not given intimation of these notices, nor made aware whether any notices were issued to the remaining Pakistani Shareholders, i. e. the two sisters. However, no notices were ever issued to the Knorr Company or the Monda Alimenta Company.

30. That it is the case of Mr. E. A. Nomani, Advocate, that throughout the proceedings from 1977, he had appeared only for the Rafhan Company and had filed power of attorney on its behalf only, which is on the record of the Authority. He never represented the foreign shareholders nor had he any authority to do so. He submits that the Authority assumed that be represented both the Rafhan Company and the controlling shareholders, Knorr Company and the Monda Alimenta Company, because the Rafhan Company advocated that it was in its best interest that its control remained with the Corn Products Company and that he had occasionally conveyed the view of the controlling shareholders to the Authority. Mr. E. A. Nomani submits that the Rafhan Company informed the Authority that it had been trying to persuade the Pakistani shareholders to accept the proposals of the Authority and that the control ling shareholders were willing to compensate the Pakistani shareholders generously for divesting their share‑holding. The controlling shareholders had in fact offered rupees one crore to the Pakistani shareholders in addition to the price ‑that they would receive by selling 50% of their shares to the public. The Company gave details of this offer to the Authority by its letter, dated March 7, 1982, a copy of which has been annexed with the appeal and marked "U".

31. That throughout the long period of five years, it was never even verbally suggested by the Authority that the controlling shareholders i. e. the Knorr Company and the Monda Alimenta Company, would also be required to divest its shares.

32. That another hearing took place on March 15, 1982, when Mr. E. A. Nomant, Advocate, appeared for the Rafhan Company and Dr. Pervaiz Hassan, Advocate, appeared for Mr. Muhammad Hanif Monnoo. It was there for the first time that Dr. Pervaiz Hassan, to oral argument, raised the issue that the controlling foreign shareholders should also be asked to disinvest and that asking the Pakistani shareholders alone to disinvest amounted to discrimination. Both Dr. Pervaiz Hassan and Mr. E. A. Nomani were asked to submit their written arguments. They were however. not asked to supply copes to each other. The Rafhan Company's Advocates submitted their written arguments on March 17, 1982. A copy of the same has been annexed with the appeal and marked "V". It was stated in these arguments that:

(a) The Rafhan Company's Advocate was representing only the said Company and not the controlling shareholders;

(h) That the Rafhan Company's Advocate confined his arguments only to answer Dr. Pervaiz Hassan's arguments. Since the hearing of March 15, 1982, was confined to the question whether the Pakistani shareholders should divest, the arguments were also confined to that subject. The Company however never withdrew or waived its original objections on merits to the show‑cause notice itself and this was made clear even in the written arguments in the following words:

"In the above circumstances, it is submitted that, at best, the Autho rity only has power to order a technical conversion and in this connection reliance is placed on the Company's reply to the show cause notice."

33. That since Mr. Rail Monnoo and Mr. Nisar Monnoo bad asked for an adjournment on March 15, 1982, they were issued another notice of hearing before the Authority on April 21, 1982. No notice of this hearing was issued to the Rafhan Company or to the foreign shareholders. Mr. E. A. Nomani, Advocate, however, happened to be present before the Authority on April 21, 1982, in some other cases, and therefore, he requested for permission to be present on behalf of the Rafhan Company. This request was granted. Mr. Rao N. S. Khan, Accountant, appeared for Messrs Rafi and Nisar Monnoos. He repeated the arguments of Dr. Pervaiz Hassan, Advocate, and stated that his clients had no objection to divest, if the controlling foreign shareholders were also willing to divest propor tionately. Mr. E. A. Nomani, Advocate, opposed this on behalf of the Rafhan Company on the basis of his previous arguments. Mr. Rao N. S. Khan was directed to submit his written arguments and the Rafhan Company was also directed later by letter to submit its written arguments, which it did.

34. That Mr. Rafi Monnoo died on 12th January, 1983. His shares in the Rafhan Company remained registered in his name, as no request was received by the Company for transfer or transmission of the same.

35. That the Rafhan Company did not hear anything for seven months. However, to its great surprise on January 13, 1983, it received an order, dated December 23, 1982, passed by the Authority directing the Company to convert itself into a public limited company and to offer 25 % of its shareholding to the general public, including N. 1. T., and that this 25 % offer to the public was directed to be made up from 25 % of the shareholding of each shareholder. It further directed that the Rafhan Company should get itself listed on the Stock Exchange and that the order should be complied with by June 30, 1983. A certified copy of they order (hereinafter called "the impugned order") has been annexed with the appeal and marked "Y".

36. Being aggrieved by the impugned order dated 23‑12‑1982, Rafhan Company preferred an appeal (F. A. O. No. 2 of 1983) against the same in the High Court. Likewise, the Knorr Company and the Monda Alimenta Company also preferred an Appeal (F. A, O. No. 3 of 1983) against the same.

37. Mian Muhammad Hanif Monnoo, one of the Pakistani Share holders, not being satisfied with the decision of the Authority to the extent that it called upon him to divest 25 % of his shares, also preferred an appeal (F. A. O. No. 5 of 1986) against the impugned judgment seeking protection from disinvestment.

38. During the pendency of the appeals in the High Court, an Agreement was reached between the Rafhan Company and all its share holders, including the Knorr Company, the Monda Alimenta Company and the other Pakistani shareholders, except Mian Muhammad Hanif Monnuo, one of the Pakistani shareholders. Under the said Agreement; it was agreed that the Rafhan Company would agree to be converted into a public company; that the Rafhan Company would capitalize its reserves in the amount of Rupees eighty crore seven lacs forty‑four thousand three hundred (Rs. 80,07,44,300) by issuing bonus shares to all its shareholders; that all the Pakistani shareholders, excluding Mian Muhammad Hanif Monnoo (being together referred to as "the offerers"), who between themselves owned 37 % of the shares of the company, would immediately, after issue of the bonus shares, offer 50%. of their share holding (equal to 18.5 0 of the entire capital) to the public, including the N. I T. and the employees of the Company, at a price to be determined by the Controller of Capital Issues, Government of Pakistan. Ministry of Finance, Islamabad; that in future the Rafhan Company would make issue of share to the general public against right issue so as to raise the shareholding of the general public to a minimum of 50% of the local capital provided that no present shareholder would be deprived of his rights or entitlement without his consent and upon sale of 50% of the shareholding by the Pakistani Group, excluding Mian Muhammad Hanif Monnoo, the said offerers would be paid U. S. 1,330.000 by or on behalf of the Knorr Company as price for the sale of their shares to the general public, in addition to the offerers receiving the price of the shares sold from the public; and that the Rafhan Company, the Knorr Company and the offers would as soon as practicable seek approval of the Controller of Capital Issues, the Monopoly Control Authority arid such other Authorities or Agencies of the Pakistan Government as may be applicable, for the implementation of their Agreement with regard to the conversion of the Company into a Public Company, the listing of the Company on the Karachi and Lahore Stock Exchanges and the approval of the agreements arrived at between parties and the finaliza tion/settlement of the appeals pending in the Rawalpindi Bench of the Lahore High Court, it being understood that if the same was not possible, the agreement would become null and void.

39. In view of the above Agreement, the Rafhan Company, the Knorr Company and the offerers amongst the Pakistani shareholders applied to the Monopoly Control Authority for their approval to the Agreement and the disposal of the two appeals (F. A. O. No. 2 of 1983 and F. A. O. No. 3 of 1983) preferred by the Rafhan Company and the Knorr Company in terms therewith. Notices were issued to the 'parties to the Agreement and to Mian Muhammad Hanif Monnoo, one of the Pakistani shareholders, who was not a party to the said Agreement, and the views of those that desired to be heard, were heard by the Authority. The objections of Mian Muhammad Hanif Monnoo, pressed through his Advocate, were heard by the Authority. to view of the fact that the Pakistani Government was receiving U. S. 1,330,000 in foreign exchange and that the Pakistani public was getting one of the biggest offer of shares (worth Rs. 16,400,000) of one of the most well‑known and well established foreign Company, the Authority, in the public interest, signified its approval to the same.

40. In view of the above position, the Rafhan Company filed an application (Criminal Miscellaneous 32‑C of 1986) in F. A. O. No. 2 of 1983 under Order XXIII, rule 3 read with section 151, C. P. C. for the disposal of the said appeal and connected appeals F. A. O. No. 3 of 1983 and F. A. O. No. 5 of 1983, in terms of the said compromise. During the hearing or. 24‑5‑1986, Mr. Munir A. Sheikh, Deputy Attorney‑General, Government of Pakistan, who appeared for the Monopoly Control Authority, verbally intimated to the Court that the Authority had granted its approval to the Agreement and that it had no objection if the Court disposed of the appeals, which were pending, in terms therewith. Since I was not sure in my mind whether the statement made by the Deputy Attorney‑General bound the Authority to the compromise application filed by the Rafhan Company in Court, I directed the Deputy Attorney -General to snake a statement whether the Authority should be treated as a party to the compromise application and be treated as bound by the compromise. The Deputy Attorney‑General, after consulting Mr. M. A. Bhullar, Deputy Registrar of the Authority, made a statement in Court, which was duly recorded, whereby he confirmed that the Authority approved the compromise, the terms of which were stated in the Agreement, photo copy of which was exhibited as P 1. in respect of which the com promise application (C. M. No. 32‑C of 1986) had been filed, that the Authority would be bound by the compromise as a party to the compromise and that though the Authority had not signed the compromise application, it should be treated as a party to the same.

41. It appears that Mian Muhammad Hanif Monnoo, a Pakistani shareholder, who had not accepted the compromise filed written reply to the said application (C. M. No. 3Z‑C of 1986) seeking the assistance of this Court to declare the compromise as illegal, null and void. He also pressed leis appeal F. A. O. No. 5 of 1983.

42. Mr. Fakhar‑ud‑Din G. Ibrahim, Advocate, has argued the case yin behalf of the Knorr Company and the Monda Alimenta Company. Mr. E. A. Nomani, Advocate, who appears for the Rafhan Company, and Mr. 13ahadur Ali, Advocate, who appears for the Pakistani shareholders (other than Mian Muhammad Hanif Monnoo), adopt the arguments of Mr. Fakhar ud‑Din G. Ibrahim, Advocate. Mr. Munir A. Sheikh, Deputy Attorney -General of Pakistan, appears for the Monopoly' Control Authority He has conveyed the approval of the Authority to the Compromise Agreement Exh. P. 1 and the compromise application (C. M. No. 32‑C of 1966) and has intimated to the Court, by his statement recorded on 24‑5‑1986, that the Authority is bound by the compromise as a party to the same and that though it has not signed the application (C. M. No. 32‑C of 1986), it should be treated as a party to the same. Khawaja Habib Ullah, Advocate, appears for Mian Muhammad Hanif Monnoo, the objecting Pakistani shareholder, in F. A. Os. Nos. 2 and 3 of 1983. Dr. Pervaiz Hassan, Advocate, appears for the same Pakistani shareholder in F. A. O. No. 5 of 1983.

43. On behalf of the Rafhan Company and the Knorr Company, it is submitted that the impugned order of the Authority dated 23‑12‑1982 was legal and valid to the extent that it called upon the Rafhan Company to convert itself into a public Company, but it was illegal, null and void to the extent that it compelled the shareholders to proportionately disinvest their shares, as no power to compel disinvestment was available to the Authority under the Ordinance. In this connection it is submitted that where an undertaking, the total value of whose assets exceeds five crores, is not owned by a public Company, undue concentration of economic power is deemed to have been brought about, maintained or continued under section 4 (a) (i) of the Ordinance and that where the Authority is satisfied that there has been or is likely to be a contravention of the provi sions of section 3 and that action is necessary in the public interest, it may, under section 11, issue a notice to the undertaking of its intention to make such order as may appear to be necessary under section 12. An order of the Authority, under section 11 can, in the case of undue concentration of economic power require the undertaking not being a public limited Com pany, to convert itself, within such time and in such manner as may be specified in the order, into a public limited Company. It is submitted that the words "in such manner as may be specified in the order" appearing in sub‑clause (i) of clause (a) of subsection (I) of section 12 of the Ordi nance only relates to the procedural requirements, by which steps have to be taken by the private limited Company to convert itself into a public limited Company, but does not arm the Authority with any power to order any shareholder to disinvest his shares, even though he may be a major shareholder in the Company having 50% or more controlling interest. It is further submitted that it is only after a private limited Company has become a public limited Company, that the Authority, if it finds under section 4 (a) (fl) that any individual therein, with his relatives, as stated in section 2(2), controls shares carrying more than 50 % of the voting power therein, it can, under section 12 (1) (a) (ii), call upon such controlling shareholders of the public limited Company concerned to offer any part of their shares held by them to the general public, including the National Investment Trust or any investment institution established or controlled by the Government. Since the Authority attempted to compel all the share holders to disinvest their shares, before the Rafhan Company converted itself into a public limited Company, that part of the impugned order relating to disinvestment was without jurisdiction and null and void. It is further submitted that the compromise terms now agreed to between all the parties to the first two appeals, excepting Mian Muhammad Hanif Monnoo, the objecting shareholder, supersede the impugned order and should be given effect to, as it involves the voluntary acceptance of an arrangement arrived at by the Rafhan Company and its major shareholders to which the Authority can have no objection; as the matter does not concern them. Supporting this action, it is submitted that the Authority has given its approval to the compromise terms agreed to between the Knorr Company and Rafhan Company and its Pakistani shareholders and others, other than Mian Muhammad Hanif Monnoo, and that the said approval has been given in the public interest, as the Government of Pakistan would be receiving U. S. Dollars 1.33 million in foreign exchange and that the Pakistani public would be benefited by one of the biggest offers of shares of Rs. 16.4 million made by a well‑known and well established Pakistani Company having a foreign interest. With regard to Mian Muhammad Hanif Monnoo, the objector shareholder's grievance that since the Rafhan Company has assets over rupees five crores, undue con centration of economic power should be deemed present and the Authority once having made an order requiring the foreign shareholders, the Knorr Company and the Munda Alimenta Company, to disinvest, neither the parties can be permitted to enter into a compromise nor the Authority can be permitted to withdraw its impugned order, it is submitted that the said objector shareholder has no locos stanch as his shares are not being dis invested and he is not a party to the compromise and that he cannot compel the Authority, through the agency of any Court, not to vary its order if the Authority, in the public interest, does desire to revoke, modify or vary its earlier order.

44. Khawaja Habib Ullah, Advocate, who appears for Mian Muhammad Hanif Monnoo, the objector shareholder, in First Appeal against Orders (F.A.Os.) Nos. 2 and 3 of 1983, has made the following submissions to show that the compromise agreement cannot be acted upon. First, that the compromise agreement is illegal and against the public policy. Second, that the Authority having given a decision that there was concentration of economic power and having passed an order to that effect. it cannot become a party to the agreement and undo what it did. Third, that during the pendency of the appeal, the Authority could not act in such a way as to stifle the appellate Court from giving its decision on the present appeals. Fourth, that the Authority being a public functionary, could not be per mitted to barter away its rights or obligations under the Ordinance, so as to place itself in a position whereby which it would not be able to take any legal action in future. In this connection learned counsel has referred to Wali Muhammad v. State (P L D 1971 Lah. 411) and Birkdal District Electric Supply Company v. South Port Corporation (1926 A C 355). Fifth, that the impugned order dated 23‑12‑1982, when passed by the Authority was final and had been acted upon. Sixth that the order of the Authority was for the benefit of all the shareholders present or future, including Mian Muhammad Hanif Monnoo, the objector shareholder, and it was mandatory upon the Authority to act upon the said order. Seventh and last, that the Authority, by accepting the compromise, was preventing this Court from deciding the legal issues before it. It was also submitted that the compromise was contrary to sections 23 and 24 of the Contract Act, that tinder section 21 of the General Clauses Act, the Autho rity had the jurisdiction to withdraw itself from the earlier order, but only "in the like manner" after notice to the parties concerned, which notice and hearing had not been given and that the compromise was not in the public interest.

45. Dr. Pervaiz Hassan, Advocate, who appears for Mian Muhammad Hanif Monnoo, the objector shareholder in First Appeal against Order F. A. O. No. 5 of 1983, has made the following submissions to show that the compromise agreement cannot be acted upon. First, that under the impugned order of the Authority dated 23‑12‑1982, the objector‑share holder could, in combination with Pakistani shareholders, get more management rights in the company, which he would not be able to do so under the compromise arrangement and since the compromise dilutes and irretrievably prejudices the objector‑shareholder's desire to secure the management rights of the company in future, the same should be declared illegal. In this connection it is submitted that whereas under the basis of the impugned order dated 23‑12‑1982, we shareholding would be distributed as follows :‑

"Knorr Zurich A.G. 38.25%

Hanif Monnoo objector‑shareholder 9.00%

Other Monoo shareholders 27.75 %

Pakistani Public including NIT 25.00%

under the proposed compromise, the division would be as follows :‑

Knorr Zurich A.G. 51.00%

Hanif Monnoo objector‑shareholder 12.00%

Other Monnoo shareholders 18.50%

Pakistani Public including NIT 18.50%

Second, that the proposed compromise is against the specific provisions of the Monopolies and Restrictive Trade Practices (Control and Prevention) Ordnance, 1970, since the Rafhan Company has admittedly assets over rupees five crores and perpetuation of the 51 % shareholding held by the Knorr Company would permit under concentration of economic power, as defined in section 4, in favour of the said foreign company, which should not be permitted. Third, that a contextual examination of the Ordinance would show that the application of section 4 cannot be saved and that once the Authority moves against a company under section 11, in respect of a section 4 offence, the Authority is bound to make an order either under section 12(1) (a)(i) or 12(1) (a)(ii) of the Ordinance, which action is mandatory and no exception in the public interest is envisaged. Fourth, that in view of the mandatory nature of section 4 and the fluid nature of sections 5 and 6 of the Ordinance, the words "public interest" in section 11 can only be deemed to relate to a section 5 or section 6 offence and not to a section 4 offence. Fifth, that once an order was passed under section 12(11 (a)(i), the words "in such manner as may be specified", gave a broad scope to the Authority to order both conversion to public company as well as disinvestment, for mere con version from private to public company was a pro forma formality, which would have been meaningless under such an important legislation as the Monopolies Ordinance. Sixth, that the impugned order of the Authority dated 23‑12‑1982 created vested rights in favour of the objector‑shareholder, as stated in the first submission above and, therefore, the same could not be varied to his disadvantage by the compromise. In this connection it is submitted that if the impugned order is allowed to stand, the objector‑shareholder would have the ability to team up with his family members in the future and get management rights in the Rafhan Company, whereas under the proposed compromise all the Pakistani shareholders together are placed in a minority. It is also asserted that presently the bait of three crore rupees has been accepted by some of the Pakistani shareholders. but that it is likely that at some future date the blood relationship between them would unite them to regain their manage ment rights. Seventh, that section 21 of the General Clauses Act is not applicable to the case, as the impugned order dated 23‑12‑1982 created vested rights in favour of the objector‑shareholder, which could not be reversed. In this connection it is submitted that even if the said section is held applicable, it has not been complied with, as no notice was given by the Authority to the objector‑shareholder, as required by the words "exerciseable in the like manner" used in that section, and that the impugned order has not been varied by any subsequent speaking order. Eighth, that the documents enclosed with the Rafhan Company's compromise applica tion C. M. No. 5‑57;C of 1986 were not supplied to the objector‑share holder, that the statement made by the Deputy Attorney‑General in the High Court is at variance with the decision communicated by the Authority to the objector‑shareholder and that in any event no section of the Ordi nance enables the Authority to vary an older passed under section 12. Ninth and last that the Authority became functia officio after the impugned order was passed and could not revise it.

46. I have given my anxious consideration to the arguments addressed by the learned counsel for Rafhan Company, the Knorr Company and Mian Muhammad Hanif Monnoo, the objector‑shareholder. Before dealing with the arguments, it is necessary to reproduce sections 2(t) (d), (e), (m), 2(2), 3, 4, 11 and 12(t)(a) of the Monopolies Control Ordinance of 1970.

"2 (1)(d).‑"Control"; in relation to an undertaking, means the power to exercise a controlling influence over the management or the policies of the undertaking, and, in relation to shares, means the power to exercise a controlling influence over the .voting power attached to such shares ;

(e) "individual" includes a Hindu undivided family ;

(m) "undertaking" means any concern, institution, establishment or enterprise engaged in the production, supply or distribution of goods, or in the provision or control of any service.

2. (2) For the purposes of this Ordinance an individual shall be deemed to own, hold or control a thing if it is owned, held or controlled by the individual or his spouse, or by a brother or sister of the individual, or by any of the lineal ascendants or descendants of the individual.

3. There shall be no undue concentration of economic power; unreasonable monopoly power or unreasonably restrictive trade practices.

4. Undue concentration of economic power shall be deemed to have been brought about, maintained or continued if‑

(a) there is established, run or continued an undertaking the total value of whose assets is not less than fifty million rupees or such other amount as the Authority may by rule prescribe and which is :‑

(i) not owned by a public company, or

(ii) is owned by a public company in which any individual holds or controls shares carrying not less than fifty per cent. or such other percentage as the authority may by rule prescribe, of the voting power in the undertaking ;

(b) there are any dealings between associated undertakings which have or are likely to have the effect of unfairly benefiting the owner of shareholders of one such undertaking to the prejudice of the owner or shareholders of any other of its associated undertakings.

11. (1) Where the Authority is satisfied that there has been or is likely to be a contravention of the provisions of section 3 and that action is necessary in the public interest, it may make one or more of such orders specified in section 12 as it may deem appropriate.

(2) Before making an order under subsection (1), the Authority shall‑

(a) give notice of its intention to make such order stating the reasons, therefor, to such persons or undertaking as may appear to it to be concerned in the contravention to show cause on or before a date specified therein as to why such order shall not be made, and

(b) give the persons or undertakings an opportunity of being heard and of placing before it facts and material in support of their contention.

(3) An order made under subsection (1) shall have effect notwithstand ing anything contained in any other law for the time being in force or in any contract or memorandum or articles of association.

12 (1) An order of the Authority under section 11 may ‑‑

(a) in the case of undue concentration of economic power ‑

(i) require the firms or companies concerned, not being public limited companies, to be converted, within such time and in such manner as may be specified in the order, into public limited companies;

(fi) require the controlling shareholders of the public limited companies concerned to offer such part of the stocks and shares held by them within. such time and in such manner as may be specified in the order to the general public, including the National Investment Trust and an investment institution established or controlled by Govern ment ;

(iii) prescribe the circumstances in which and the conditions on which the associated undertakings concerned may deal with each other."

47. Section 3 of the Ordinance inter alia declares that there shall be no undue concentration of economic power and section 4 states the circum stances under which undue concentration of economic power shall be deemed in law to have been brought about, maintained or continued. Under section 4, undue concentration of economic power is inter alia deemed present if there is an undertaking, the total value of whose assets is more than five crores of rupees, and which is either (i) not owned by a public limited company or (ii) is owned by a public limited company in which any individual holds or controls shares carrying more than 50% of the voting power in that undertaking. Where the Authority is satisfied that there is or is likely to be undue concentration of economic power within B the meaning of section 3 and that action is necessary in the public interest, it can make one or more of such orders specified 'in section 12 as it may deem appropriate, but, before making any order in that respect, the Authority, under section I1(1), has to give notice of its intention make such an order, stating the reasons therefor to such persons or undertaking as may appear to it to be concerned in the contravention, to show cause' why such order should not be made and to give to the persons or undertaking an opportunity of being heard in support of their contention. Under section 12 of the Ordinance, an order of the Authority under section 11, can inter alia, in the case of undue concentration of economic power, either require the firm or company concerned, which is not a public limited company, to convert itself, within such time and in such manner as may be specified in the order, into a public limited company, or require the con trolling shareholders of the public limited Company concerned to offer such part of the stocks and shares held by them within such time and in such manner as may be specified in the order to the general public, including the NIT and any investment institution established or controlled by the Government. It is obvious that section 4 (a) (i) connects with the action proposed under section 12(1) (a) (i) and that section 4(a) (ii) connects with the action proposed under section 12 (1) (a) (ii) of the Ordinance. Thus, where a partnership firm or a private limited company has assets over five crores of rupees, the said firm or private limited company is deemed to have undue concentration of economic power. It could lead to an order under section 12 (lj (a) (i), if action is considered necessary in the public interest under section 11(1) and notice of the action proposed to be take is given under section 11(2).

48. With the above background, I would now examine the important legal questions that arise in this case. The first question that arises is whether in respect of a case covered by section 4(a)(1) of the Ordinance, the Authority can require a firm or a private limited company to both convert itself into a public limited company and also to call upon all the partners or shareholders thereof to disinvest any portion of their capital or shareholding in favour of the general public. The words "within such time and in such manner as may be specified in the order" as appearing in sub‑clause (i) of clause (a) of subsection (1) of section 12 obviously relate to the procedural requirements to be complied with by the firm o the private limited company concerned, when converting itself into a public limited company. Under section 11(3), the Ordinance override all other laws. The Authority can give directions for minimal require ments for conversion, which it may deem sufficient for itself to accept the conversion. These words are not intended to enlarge the scope of the Authority to call upon the partners of the firm or the shareholders of the private limited company concerned to disinvest any part of their capital or shareholding. It is only after a firm or a private limited company converts itself into a public limited company, that the Authority can call upon the, controlling shareholders of the said public limited company concerned to disinvest any part of their shares to the general public, as required by sub‑clause (ii) of clause (a) of ‑subsection (1) of section 12. On behalf of the objector‑shareholder it is asserted that. the words "within such time and in such manner as may be specified in the order'.', appearing in section 12(1)(a)(i), includes the power to order disinvestment, as .mere conversion of a firm or a private limited company into a public limited company by the mere preparation of the memorandum and articles of association of the public company or by some amendments to some clauses therein, is not what is really intended by the Ordinance.. The argument appears attractive, but has no basis in law. In the first instance; the Ordinance does not arm the Authority with any larger powers, over and above what is clearly given in the Ordinance. It is true that a firm may have to get the memorandum and articles of association of the public company to be formed prepared by its legal advisor and .to file, the same with other relevant documents before the Corporate Law Authority and other relevant authorities. A private company is one. which, by its articles of association, restricts the right to transfer its shares, limit the number of its members to fifty, not including persons who are in its employment, and prohibits any invitation to the public to subscribe for its shares or debentures, if any, and that if such a company is to convert itself into a public limited company, it would have to amend its articles to remove these restrictions which are contained therein and to file the said amendments with the prospectus or statement in lieu thereof and other documents with the Corporate Law Authority and other authorities. In addition, under the Monopolies Control Ordinance, private limited company, having assets exceeding five crore rupees has to register itself with the Authority under section 16(I)(d), whereas a public limited company having similar assets does not have to so register itself, though under the same section it may have to do so for other reasons but an individual who holds or controls, whether directly or indirectly, shares carrying more than 50% of the voting power in such public limited company, would have to register himself under section 16(1)(h) of the Ordinance. The object of compelling the firm or the private limited company to convert itself into a public limited company, is not to make any beneficial distribution of capital or shares held by its partners o shareholders in favour of the general public, but to compel the firm or company to change its legal character, become more broad based and thus become open to public scrutiny by the Corporate Law Authority, the Monopoly Control Authority and by any member of the general public, who would have the right of inspecting the various documents and returns filed by the public limited company both with the Corporate Law Authority and the Monopoly Control Authority. In these circumstances, the words "within such time and in such manner as may be specified in the order" appearing in sub‑clause (i) of clause (a) of subsection (1) of section 12 of the Monopoly Control Ordinance, obviously are limited to the procedural requirements which a firm or a private limited company would have to meet to convert itself into a public limited company. The Monopoly Control Authority's own view of these words is not different. In various cases where the Authority itself has called upon private limited companies to convert themselves into public limited companies, it has given directions that it should do so, as envisaged under section 154 of the Companies Act, 1913, by filing with the Registrar of Joint Stock Company concerned a prospectus or statement in lieu thereof, containing the parti culars set out in Form II to the Second Schedule to the said Act, within the stipulated period, as stated in its order. If any authority is required for this view, Moghal Tobacco Company's case (1986 C L C 2240), Metalex Corporation's case (P L J 1978 Tr. C. 320) and others may be referred. Even since the Monopoly Control Authority was created in 1970 till the very date that the present impugned order was passed. all directions under section 12 1)(a)(i) of the Ordinance have been limited to this procedural requirement alone and nothing further has been attempted. The present case appears to be the only one where the Authority has exceeded its jurisdiction, totally ignoring the rule of stare decisis laid down by itself over many years. Any direction by the Authority covering disinvestment of shares in an order passed under section 12(1)(a)(i) would be without jurisdiction and null and void.

49. The next question that 'remains to be determined is whether, where a case of undue concentration of economic power is discovered under section 4(a)(i) or 4(a)(ii) of the Ordinance, that action under section 12(1)(a)(i) or 12(i)(a)(ii) must mandatorily be taken, irrespective of all consequences. Section 11(1) clearly states that where the Authority) is satisfied that there is or likely to be a contravention of tile provision 1s of section 3 and that action is necessary in the public interest, it may make one or more of such orders specified in section 12, as it may deem appro priate. In view of the language of this subsection, it is clear that the Authority should first find as a fact that action is necessary in the public interest. The determination of this question is a subjective one, but the material on which the decision must be based must come from sources alieunde which objectively show that the making of the order under section 12 would serve the "public interest". Public interest does not necessarily imply the interest of the shareholders, though it may he one of the factors which the Authority may 'take into consideration when passing an order under section 12. In these circumstances, it cannot be said that no sooner a case of undue concentration of economic power under section 4(a)(i) or 4(a)(ii) is made out, that blindly the Authority must straightaway proceed to issue a notice under section 11 for proposed order under section 12(1)(a)(i) or 12(1)(a)(ii) of the Ordinance respectively. Public interest with respect to an order proposed to be ‑passed under section 12(I)(i) may perhaps only be limited to the consideration of compelling the private company to convert itself into a public company to make itself more broad based and vulnerable to public scrutiny by the Corporate Law Authority and the Monopoly Control Authority, or perhaps with the future consideration of determining and taking action against persons who may hold or control 50 % or more of the voting power in the public company to be formed, but public interest with regard to an order proposed to be passed under section 12(1)(a)(ii) would have to take into consideration more important questions, such as whether any of the controlling. shareholders, whose shares are proposed to be offered to the general public, is not a foreign individual or company who has been allowed to invest his or its capital on special terms under the Foreign Investment (Promotion and Protection) Act, 1976, and whether any invest ment by the said‑ individual or company would not violate any solemn commitment made to him or them by the Pakistan Government and whether such an order proposed to be passed would not violate generally any public assurances given by the Pakistan Government to foreign entrepreneurs to invest their capital in this country, under special favoured terms. The view that once the Authority finds a case of undue economic power made out under section 4, it must mandatory make an order under section 12, irrespective of consequences, cannot be accepted. If such was the intention, there was no need of having section 11. The word "may" in section I 1 also shows that the power is enabling and to be used) when necessary, in the public interest.

50. Another question that remains to be answered is as to what extent can the Authority order disinvestment under the Ordinance. There is no power to order disinvestment under section 12(l)(a)(i), when calling upon any firm or private company to convert itself into a public limited company. No such power can be derived from section 11(3). There is power to order disinvestment under section 12(1)(a)(ii), if the Authority finds that any individual shareholder of a public company holds or controls shares carrying 50 per cent. or more its voting power, but the Authority's power is only limited to the said controlling shareholder, who has to be an individual. There is no power with the Authority to order disinvestment by shareholders who own or control less than 50 % of the voting power. When determining who is the "individual" holding the controlling power for the purpose of section 4(a)(ii), the Authority can go behind the veil by not only determining the voting power held by such individual in the public company concerned, which is the subject of the inquiry, but by the voting power held by him in any firm or company, which is also a shareholder in the company, which is the subject of inquiry ; it being understood, under section 2(2), that the individual would include his spouse, brother or sister or lineal ascendants or descendants. It may be here mentioned that individuals who hold or control, whether directly or indirectly, shares carrying 50 % or more of the voting power in public companies, the total value of whose assets exceed five crore of rupees, also have to get themselves registered under section 16(1)(h) with the Monopoly Control Authority. In determining whether such individuals) hold 50% or more voting' power, the fact that they do so through other intermediary companies or firms, is generally examined. If any, authority is required for this view, Saeed 0llah Khan's case (1986 C L C 2254), Khawaja Muhammad Yousaf's case (1986 C L C 2256), Shafiq Hanif Company's case (1986 C L C 2252) and Sher Hassan Khan's case (1986 C L C 2253) may be cited. For the purposes of section 16(1)(h), the Authority has held that the word "individual" does not cover as company. See Shafiq Hanif Company's case. On a parity of reasoning,, the word "individual" in section 4(a)(ii) also does not include a company. Thus an order of the Authority under section 12(1)(u)(ii) can require the) controlling shareholder of the public limited company concerned, to disinvest such part of the stocks and shares held by him, as may be specified, in the order, to the general public, including the NIT or any other invest ment institution established or controlled by the Government. Past orders passed by the Authority and which stand reported in various law journals show that it has not permitted the shareholding of any individual controlling shareholder to fall below 49 % and, strange as it may seem, in none of the cases has it called upon the said individual to offer his stocks and shares to the general public, including the National Investment Trust or any other investment institution established or controlled by the Government. What it has generally done is to ask the individual to reduce his shareholding to less than 50%. The Authority's own decisions under section 12(1)(a)(ii) have remained circumscribed. However, other than this limited power of disinvestment, which the Authority has under section 12(1)(a)(ii), as stated above, it has no other power.

51. This brings me to the power of the Controller of Capital Issues. The Controller of Capital Issues, as the representative of the Federal Government, has powers to order disinvestment under section '3 (4) (b) of the Capital (Continuance of Control) Act (XXIX of 1947). Under the Ministry of Finance Notification S. R. O. 53 (8.)/68 dated 2‑4‑1968, the Federal Government has power, while granting permission for the establish ment or expansion of any industrial project, to require the public company to offer 50% of its entire share capital to the public, where the capital is hundred per cent. Pakistani, and by virtue of Ministry of Finance Notifica tion S. R. O. 66 (R)/68 dated 22‑4‑1968, the Federal Government has power to vary the percentage of the total 'issue of capital to be offered to the public, in respect of a company in which capital has been or is to be subscribed in foreign exchange by foreign participants. Under the latter notification, the general policy of the Federal Government is to order 50% of the Pakistani part of the capital to be offered .to the public, in the case of companies with foreign participation. Under section 11 (3) of the Ordinance, an order made by an Authority has effect notwithstanding anything contained in any other law for the time being in force or in any contract or memorandum or articles of association, but it must be emphasis ed that this provision does not enable the Authority to gratuitously extend its powers under section 12 (1) (a) (i) or 12 (1) (a) (ii), the Authority cannot arrogate to itself the powers of ordering disinvestment, otherwise available to other authorities or departments of Government, on any basis whatsoever, either by pretending it has powers under section 11 (3) of the Ordinance, which it does not have or on any equitable basis, by compelling Companies to accept consent orders and thus save themselves from having their orders set aside by the High Court.

52. This now brings me to the appeals in hand. The impugned order of the Authority, dated 23rd December, 1982 was passed on the strength of the last show‑cause notice (Annexure R 1' to the petition) issued to the Rafhan Company on 10th August, 1980 under section 11(2) (a) of the Ordinance. The said notice required the Rafhan Company, which had assets exceeding three crore of rupees, to show cause in writing within fifteen days from the date of receipt thereof why an order under section 11 read with section 12 (1) (a)(i) of the Ordinance should not be made in respect of the company. The notice did not call upon the Rafhan Company to show cause why 25 % of its shareholding should not be offered to the general public, such offer to be made up from 25 % of shareholding of each shareholders. The last hearing before the Authority was on 21st April, 1982. In the meantime the limit of the value of assets of a Company liable to action under section 4 (1) (a) was raised from three crore rupees to five crore rupees. By the date the final impugned order was passed on 23rd December, 1982, no fresh notice was given to the Rafhan Company stating that its assets were over rupees five crores and why action should not be taken under section 12(1) (a) (I) of the Ordinance. A Tribunal which is empowered to pass an order, if certain circumstances exist, must in its order show the existence of these circumstances and where the same are not stated, the order can be declared void. The record does, not show that on 23rd December, 1982, the value of the assets of the Rafhan Company was over rupees five crores. The impugned order is, therefore, wholly void. It does not exist in the eye of law. It does not have to be struck down (See Sharif Ahmed Hashim's case (1978 S C M R 367). But even assuming for a matter of argument that Rafhan Company by its own admission was prepared to convert itself into a public limited company and had not objected to the jurisdiction of the Authority, after the limit of the value of assets was raised from rupees three crores to rupees five crores, yet, as stated earlier, the Authority had no power under section 12 (1) (a) (i) of the Ordi nance to direct all the shareholders of the Rafhan Company, which was to be converted into a public company, to disinvest its shareholding in favour of the public. In these circumstances, the impugned order passed by the Authority on 23‑12‑1985, to the extent that it calls upon the Ral'han Company to convert itself into a public limited company, can be treated as legal and valid, but to the extent that it directs 25% of its shareholding to be offered to the public and the said offer to be made up from 25 % of the shareholding of each shareholder, the same is without jurisdiction and null and void. The latter part of the order being void, it shall be treated as if it does not exist in the eye of law. In these circumstances, the second, third, fourth, fifth anal sixth submissions made by Kh. Habib Ullah, Advocate, and the first, sixth, seventh eighth and ninth submissions made by Dr. Pervaiz Hassan, Advocate, who both appear for the objector shareholder, have no weight and carry no meaning in law.

53. The submissions on behalf of the objector‑shareholder that the words "in such manner as may he specified" as appearing in section 12 (1) (a) (i) of the Ordinance, give power to tae Authority to order disinvestment, cannot be accepted, for reasons already given in para. 48 above. The power of disinvestment under section 12 (t) (a) (ii) is so limited that it only applies to the controlling shareholder or sharenolders. It cannot be imagined that under section 12 (.1) (a) (i) the scope would be limitless as to cover all the shareholders of a company, whether having controlling interest or otherwise. In these circumstances, the fifth submission made by Dr. Pervaz Hassan, Advocate, on behalf of the. objector‑shareholder, has no merit.

54. On behalf of the objector‑shareholder it has also been urged that once a section 4 offence is made out, the Authority is bound to make an order under section 12, irrespective of consequences, and that the words "public interest" appearing in section 11 has no relationship with a section 4 offence. I am afraid I cannot accept these arguments, for reasons already recorded in para. 49 above. The first, second, third and fourth submission made by Dr. Pervaiz Hassan, Advocate for the objector‑shareholder, therefore, have no basis in law.

55. I now turn to the compromise filed by the Rafhan Company, which is based on the agreement arrived at by the said company with its foreign and Pakistani shareholders, excluding Mian Muhammad Hanif Monnoo, the Pakistani objector‑shareholder. The Monopoly Control Authority has given its blessings to the compromise and also has allowed itself to be treated as a party to the compromise. The compromise is neither unlawful, nor forbidden by law, nor would defeat the provisions of the Monopolies Control Ordinance, nor is against public policy. The objector‑shareholder has refrained from joining himself in the compromise. He cannot, therefore, object to the same. His shareholding, in any case, is nut being diminished. The objections on his part are fanciful and remote and since the Monopolies Control Ordinance has not been promul gated with the object of protecting the future rights of minority share holders, be has no legal basis to thwart the compromise, in view of some apprehensions he has of not being able to secure management rights. In these circumstances, the first and seventh submissions of Kh. Habib Ullah, Advocate, and the second and sixth submissions made by Dr. Pervaiz Hassan, Advocate, who both appear for the objector‑shareholder, have no merit and must be rejected.

56. In view of the above, the compromise application (C. M. No. 32‑C of 1986) is accepted and the two appeals F. A. O. No. 2 of 1983 and F. A. .O. No. 3 of 1983 shall stand disposed of in terms of the compromise terms as stated in the said application and more particularly detailed in the Agreement Exh. P. 1. In accepting this compromise, it must be understood that the power of the Authority to take action in the public interest at any future stage under section 12 (1) (a) (ii) against any individual shareholder having 50% or more voting power in the Rafhan Company, shall not be deemed to have been compromised by their accepting the present compromise terms. The third appeal F. A. O. 5 of 1983 is accepted to the extent that no part of the shareholding of Mian Muhammad Hanif Monnoo; objector‑shareholder, shall be offered to the general public and that he shall not be bound by the compromise.

57. There shall be no order as to costs.

K. B. A . Order accordingly.

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