IN THE HIGH COURT OF SINDH AT KARACHI

Present: Mr. Justice Aqeel Ahmed Abbasi

Mr. Justice Zulfiquar Ahmed Khan

Constitution Petition No.D-2376 of 2010

Petitioner : Universal Cables Industries Limited

Through Ms. Amber Lakhani, Advocate.

Respondents No.1-3: Federation of Pakistan & 2 others

Through Ms. Lubna Pervez, D.A.G.

Respondent No.4 : Ikram Ahmed Iraqi

Through Mr. Shahenshah Hussain, Advocate

Dates of Hearing : 09.04.2019 and 30.04.2019

J U D G M E N T

AQEEL AHMED ABBASI, J : -- Through instant Constitution Petition, the petitioner being an unlisted public limited company incorporated under the Companies Ordinance, 1984, engaged in manufacturing the production and supply of cables and wires, has expressed its grievance against the respondent No.3 i.e. Assistant Director, Corporate Crime Circle (Karachi), F.I.A. for initiating Inquiry No.21/2009 through letter dated 07.05.2010, requiring the petitioner to produce its record relating to the Incomes Tax and Sales Tax Returns alongwith summaries of sales/purchase invoices, copies of documents and audit reports for Financial Years from 2004 to 2008.

2. Besides, controverting the allegations as contained in the inquiry initiated by the respondents, petitioner has raised a substantial ground of jurisdiction of FIA authorities to proceed against the petitioner company on the basis of a private complaint relating to the affairs of the company, which according to petitioner is governed under the relevant Company Law falling within the jurisdiction and administrative control of Securities and Exchanges Commission of Pakistan. It has been further agitated that the matters relating to the Income Tax and Sales Tax of the petitioner’s company are also beyond the jurisdiction and scrutiny of FIA authorities, as separate laws and forums are provided, including appeals and reforms before the Appellate Tribunal(s) and High Court(s) as well as Hon’ble Supreme Court to examine the legality of orders passed under taxation laws.

3. Learned counsel for the petitioner, while making her submissions in support of legal grounds agitated through instant petition, has argued that the very initiation of proceedings against the petitioner by FIA authorities on a purported complaint of respondent No.4 is based on false and frivolous allegations without any evidence, which amounts to fishing and roving inquiry, whereas, the petitioner inspite of having raised serious objections with regard to the jurisdiction of FIA authorities in the matter, has already furnished relevant details from time to time, however, in view of malafide on the part of the respondents, instead of closing down the frivolous inquiry continued to cause harassment to the petitioner and its Director(s) more than a decade, whereafter, petitioner was compelled to file instant petition for seeking protection of law against such illegal acts of respondents. Learned counsel for the petitioner has further argued that the inquiry initiated by the FIA authorities on the complaint of a private person against the petitioner, besides being baseless and frivolous, is without lawful authority and jurisdiction, as according to the learned counsel, the purported offences as alleged in the inquiry report do not fall within the ambits of FIA Act, 1974 or the scheduled offences as mentioned therein. It has been further argued by the learned counsel for the petitioner that the issue relating to the jurisdiction of FIA authorities in respect of a private person and the matters relating to the Income Tax and Sales Tax, etc. has already been decided by the Divisional Bench of this Court in two recent judgments in the case of Dr. Ashfaq Ahmed Tunio and 4 others vs. Federal Investigation Agency through Director General and 3 others [2018 PLC (C.S.) 1264] and Wali Muhammad Shaikh vs. Federation of Pakistan [2018 YLR 2624], therefore, prayed that by following the aforesaid judgments on the subject, instant petition may be allowed and the inquiry alongwith all proceedings initiated by the FIA authorities against the petitioner in the year 2009, may be declared to be illegal, without jurisdiction and lawful authority.

4. After notice to the respondents, comments have been filed on behalf of the respondents No.3&4, wherein, it has been stated that the inquiry has been initiated against the petitioner in view of written complaint of the respondent No.4 on the ground that the affairs of the petitioner’s company were being mismanaged by its Chief Executive. It has been argued by the learned counsel for the respondent No.4 that no prejudice would be caused to the petitioner if, there is a probe into the allegations relating to mismanagement of the affairs of the petitioner’s company by the CEO, whose conduct according to the learned counsel for respondent has remained dubious and not in the interest of petitioner’s company. It has been prayed that instant petition may be dismissed and the FIA may be allowed to complete the inquiry and to take necessary legal action against the petitioner’s company in accordance with law.

5. We have heard the learned counsel for the parties and perused the record with their assistance and have also examined the relevant provisions of FIA Act, 1974 and the case-law relied upon by the learned counsel for the petitioner.

6. It has been observed that prior initiation of Inquiry No.21/2009, which is subject matter of instant petition, a similar Inquiry No.5/2009 was also initiated against the petitioner on the complaint of respondent No.4. However, according to learned counsel for petitioner, the said inquiry was closed by the orders of the Director, FIA, which according to petitioner could not be reopened on the basis of same allegation by the Junior Officer i.e. Assistant Director, FIA through another inquiry of similar nature. Nothing, in rebuttal, has been argued by learned counsel for the respondents. It has been further observed that there has been no allegation or material produced against the petitioner’s company, which may attract the provisions of scheduled offences under the schedule of FIA Act, 1974, whereas, prima facie, there seems dispute between a private individual and the CEO of the petitioner company, cognizance of which can be taken under the Company Act by filing the legal proceedings before the Securities and Exchange Commission of Pakistan, a statutory body responsible for the control and supervision of the affairs of the company, its management, including CEO, Directors, shareholder and creditors, etc. in accordance with law. Nothing has been brought on record to show that while initiating the inquiry in the instant case against the petitioner company, the legal requirement in terms of section 3 of the FIA Act, 1974 and the procedure as provided under Rule 5 (Inquiries and Investigation) Rules, 2002 have been followed in the instant matter or not, which otherwise, gives the jurisdiction of FIA authorities to proceed against public functionaries of various BPS grade in accordance with law. Moreover, no explanation has been given as to how, the inquiry in the instant matter could not be concluded since 2009. The allegations, besides being vague, relate to purported mismanagement by its CEO and to violation of Income Tax and Sales Tax Laws, which also fall within the domain of relevant tax authorities under the Income Tax Ordinance, 2001 and the Sales Tax Act, 1990.

7. Learned counsel for the respondent No.4 was specifically controverted with regard to the jurisdiction of FIA authorities in the instant case in the light of recent judgment of this Court in the case of Dr. Ashfaq Ahmed Tunio (supra) and to assist this Court as to whether the ratio of the above judgments is applicable to the facts and the law of instant case. In response to such query of the Court, learned counsel for the respondent No.4 could neither submit any reasonable explanation nor could dispute the legal position with regard to the jurisdiction of FIA authorities in matters relating to the private individual/party and also ouster of jurisdiction of FIA authorities in respect of matters, which otherwise falls within specific domain of the Company Act, 2012, Sales Tax Act, 1990 and Income Tax Ordinance, 2001. It will be advantageous to reproduce hereunder the relevant findings of the Divisional Bench of this Court relating to the jurisdiction of FIA authorities in the case of Dr. Ashfaq Ahmed Tunio (supra):

12. In order to examine the scope and jurisdiction of the FIA Authorities, it will be advantageous to examine the preamble of Federal Investigation Act, 1974, Section 3 of the Act, which defines the scope and jurisdiction of FIA, Rule 5 (Inquiries and Investigations) Rules, 2002, which prescribes procedure to initiate inquiry, which are reproduced herein-under:

Preamble:

“Whereas it is expedient to provide for the constitution of a Federal Investigation Agency for the investigation of certain offences committed in connection with matters concerning the Federal Government, and for matters connected therewith.”

“Sec.3” Constitution of the Agency.--- (1) Notwithstanding anything contained in any other law for the time being in force, the Federal Government may constitute an Agency to be called the Federal Investigation Agency for inquiry into, and investigation of the offences specified in the Schedule, including any attempt or conspiracy to commit, and abetment of, any such offence.

(3). The Agency shall consist of a Director-General to be appointed by the Federal Government and such number of other officers as the Federal Government may, from time to time, appoint to be members of the Agency.”

“ Rule 5”

5. Initiation of inquiry and registration of criminal case.--

(1) An inquiry shall be initiated against an accused public servant specified in column (2) of table below with prior permission of the authority, specified in column (3) of that table.

TABLE

S.No Basic Pay Scale of Public Servant Authority

1 BPS 1- 12 and equivalent Deputy Director

2 BPS 13 - 17 and equivalent Director

3 BPS 18 - 19 and equivalent Director General

4 BPS 20 - 21 and equivalent Secretary

5 BPS 22 and equivalent FACC

(2) Subject to sub-rule (3), a criminal case shall be registered against an accused public servant specified in column (2) of table below with prior permission of the authority specified in column (3) of that table.

TABLE

S.No Basic Pay Scale of Public Servant Authority

1. BPS 1-12 and equivalent Director

2. BPS 13-17 and equivalent Director General

3. BPS 18-19 and equivalent Addl. Secretary

4. BPS 20-21 and equivalent Secretary

5. BPS 22 and equivalent FACC

(3) No prior permission under sub-rule (2) shall be required for registration of a case against a public servant caught as a result of the trap arranged by the Agency under the supervision of a Magistrate of the first class. In such case, a report within twenty four hours shall be of the department concerned and immediate superior of the public servant concerned.

(4) If no receipt of complaint, the competent authority decide not to initiate an inquiry or register a case it shall record reason there for.”

From perusal of preamble of FIA Act, 1974, it can be ascertained that the purpose and intention of enactment of FIA Act, 1974 is to provide for the constitution of a Federal Investigation Agency, to investigate certain offences committed in connection with matters concerning the Federal Government and for matters connected therewith. Though the preamble is not an operative part of Statute but nevertheless it does provide a useful guide for finding out the intention of the legislature and therefore, cannot be ignored while interpreting the law. Reliance in this regard can be placed in the case of Murree Brewery Co. Ltd. v. Pakistan through the Secretary to Government of Pakistan and others PLD 1972 SC 279 as well as in the case of Iftikhar Hussain and others v. Government of Pakistan 2001 P.Cr.LJ 146 and the State through Deputy Attorney General v Muhammad Amin Haroon and 10 others 2010 P.Cr.LJ 518. Whereas, as per Section 3 of the Act, the constitution, scope and jurisdiction of FIA has been defined according to which, FIA Authorities have been empowered to conduct inquiry and investigation of the offences specified in the schedule attached to the FIA Act, 1974, including an attempt or conspiracy to commit and abetment of, in such offence. Similarly, as per Rule 5 of the FIA (Inquiries and Investigations) Rules, 2002, prior permission of competent Authority as specified in Column 3 of the table is necessary before initiating an inquiry against an accused public servant. In the instant case, the petitioners against whom the inquiry has been initiated by the respondents are officers of BPS-18 and above, therefore, before initiating any inquiry against the aforesaid petitioners prior permission of D.G. FIA was required to be obtained, however, neither in the impugned letter issued by the respondents nor in the comments or the documents placed on record during the course of hearing the respondents could demonstrate that prior permission was obtained from the Director General in the instant case. From perusal of the entries in the schedule to the Federal Investigation Agency Act, 1974, which are presently 38 in number, it can be seen that offences under the Income Tax Ordinance, 2001; Sales Tax Act, 1990 and Customs Act, 1969 have not been included in the schedule, which shows that any order passed and proceedings initiated under the aforesaid Acts, cannot be subject matter of inquiry and investigation under the FIA Act, 1974. In other words, the scrutiny of assessment proceedings, including the assessment orders under the Income Tax Ordinance, 2001; Sales Tax Act, 1990; and Customs Act, 1969 cannot be made by the FIA Authorities nor any inquiry or investigation can be initiated to examine the legality of assessment proceedings or the orders passed by the Taxation Authorities under the Income Tax Ordinance, 2001; Sales Tax Act, 1990; and Customs Act, 1969. Reliance in this regard can be placed to the reported judgment of the Hon’ble Supreme Court in the case of Director General, FIA and others v. Kamran Iqbal and others [2016 SCMR 447], wherein, it has been held as under:-

“5. Indeed, preamble to a Statute is not an operative part thereof, however, as is now well laid down that the same provides a useful guide for discovering the purpose and intention of the legislature. Reliance in this regard may be placed on, the case of Murree Brewery Company v. Limited Pakistan through the Secretary of Government of Pakistan and others (PLD 1972 SC 279). It is equally well established principle that while interpreting a, Statute a purposive approach should be adopted in accord with the objective of the Statute and not in derogation to the same.

6. Keeping in view the intent of the Act as spelt out from the preamble and the fact that through the Act the FIA, in terms of the schedule to the A ct has been granted jurisdiction and power to act in respect of several offences under the P.P.C. which are cognizable by the local police also, and also in order to avoid a conflict of jurisdiction, the only conclusion that the Court may draw is that for exercising jurisdiction in the matter of the offences enumerated in the schedule to the Act there has to be some nexus between the offences complained of the Federal Government or else there shall be overlapping of the jurisdiction of the local police and the FIA creating an anomalous aspect of concern is that though in terms of notification, bearing SRO 977(1)/2003, Section 489-F, P.P.C. has been made a scheduled offence under the FIA Act, but no reasonable classification has been provided for exercising such power and it is left to the discretion of the concerned officer of the FIA to exercise his authority and jurisdiction under the Act in respect of the said offence, which militates against the protection enshrined by Article 25 of the Constitution of Islamic Republic of Pakistan. If a citizen is exposed to the proceedings in respect of an offence lodged against him which could be initiated before more than one forums, a reasonable classification is the requirement of the Constitution.”

Further reliance in this regard can also be made in the case of Adamjee Insurance Company Limited v. Federal Investigation Agency (F.I.A) [2004 CLD 246].

13. Moreover, perusal of the contents of the complaint and the impugned letters issued by the FIA Authorities to the petitioners, reflects that the allegations and accusation against the petitioners, besides being vague and generalize in nature do not refer to any particular tax year, NTN Number or particulars of a taxpayer nor there has been any reference to Assets acquired by the petitioners through corruption and corrupt practices. FIA Authorities have failed to even verify the complaint and the allegations contained therein, nor have recorded the statement of the complainant inspite of considerable lapse of time. It is astonishing to note as to how, without examining the legal provisions relating to jurisdiction of FIA Authorities, ignoring the legal requirement to seek prior permission from Competent Authority and even without verifying the complaint and the allegations therein to be correct or otherwise, the impugned inquiry could be initiated against the petitioners. It is pertinent to observe that the Income Tax Ordinance, 2001; Sales Tax Act, 1990; and Customs Act, 1969 are special enactments, which provide for quasi-judicial proceedings of assessment of income tax and sales tax liability, as well as determination of customs duty through quasi-judicial orders, which are appealable before the Appellate Forums provided under the respective Statutes, which includes Reference to the High Court, as well as Appeal before the Hon’ble Supreme Court, therefore, the FIA Authorities cannot sit in judgment upon the assessment proceedings or the orders passed by the Taxation Authorities to this effect. Whereas, in terms of Section 227 of Income Tax Ordinance, 2001, Section 51 of Sales Tax Act, 1990 and Section 217 of Customs Act, 1969, even the jurisdiction of Civil Courts has been ousted. Reliance in this regard can be placed to the following cases: -

i. Kohinoor Industries Ltd. Faisalabad v. Govt. of Pakistan through Secretary, Ministry of Finance, Islamabad and others (PTCL 1994 CL 280)

ii. Play Pictures through Proprietor and 8 others v. The Central Board of Revenue through Member, Customs, Islamabad and 4 others (2000 CLC 1403)

iii. English Sweets (Pvt) Ltd. Karachi v. Pakistan through Secretary to the Government of Pakistan, Islamabad and others (2005 PTD 247)

iv. Raj Muhammad Khan and others v. Muhammad Farooq Khan and other (1998 SCMR 699)

14. While applying the ratio of above judgments to the facts of the instant case, it is clear that the very initiation of the inquiry by the FIA Authorities against the petitioners was without lawful authority and based on malafides, whereas, respondents did not comply with legal requirements, which includes verification of complaint and the allegations contained therein, and prior permission of the Competent Authority to initiate any inquiry. In the absence of any material, FIA Authorities cannot be allowed to carry out any fishing and roving inquiry or investigation against a public servant. Reference in this regard can be made to the following cases:-

i. Director General, F.I.A. and others v. Kamran Iqbal and others (2016 SCMR 447)

ii. Assistant Director, Intelligence and Investigation, Karachi v. M/s B.R. Herman and others (PLD 1992 SC 485)

iii. Muhammad Irshad Khan v. Chairman, National Accountability Bureau and 2 others (2007 PCr.L.J 1957)

iv. Ghulam Sarwar Zardari v. Piyar Ali alias Piyaro and another (2010 SCMR 624)

15. In view of hereinabove facts and circumstances of the instant case, we are of the considered opinion that the impugned Notices issued by the FIA Authorities and the inquiry and investigation initiated against the petitioners, pursuant to a purported complaint, are without jurisdiction and lawful authority, and also based on malafides, hence liable to be quashed. Accordingly, vide our short order dated 28.02.2018, instant petition was allowed alongwith listed applications and above are the reasons of such short order.

8. In view of hereinabove facts and circumstances of the case, we are of the opinion that the aforesaid is applicable to the facts of the instant case. Accordingly, instant petition was allowed by our short order dated 30.04.2019 and these are the reasons of the same.

J U D G E

*Farhan-PS*