The Supreme Court is to be commended for canceling the PSM sale
In a landmark judgment announced on June 23, a nine-member full bench of the Supreme Court, headed by Chief Justice Iftikhar Mohammad Chaudhry, cancelled the sell-off deal of Pakistan Steel Mils and declared the government’s Letter of Acceptance dated March 31, 20906 and the Share Purchase Agreement dated March 31, 2006 as “void and of no legal effect.”
Disposing of petitions filed by the Wattan Party and the Pakistan Steel Mills Peoples Workers Union challenging the privatization of PSM, the Supreme Court directed the government to refer the matter to the Council of Common Interests (CCI). It also directed the federal government to make the CCI functional within six weeks to finalise policy issues.
The Court said: “Conscious of the mandate of Articles 153 and 154 of the Constitution, we hold that the establishment and working of the Council of Common Interests is a cornerstone of the federal structure for the protection of the rights of the federating units. “Mindful that this important institution is not functioning presently, and taking note of the statement of Advocate Abdul Hafeez Pirzada, who is representing the federal government, that the process for making it functional is underway, we direct the federal government to do the needful expeditiously as far as possible but not later than six weeks.”
The Court said: “The approval for the privatisation of PSM by the CCI on May 29, 1997 continues to hold the field. In view of the developments that have taken place during the intervening period and the divergent stand taken by the counsel for the federal government that this approval was never recalled and the stand taken by the steel mills’ counsel that the matter of its privatization was dropped subsequently, it would be in order if the matter is referred to the CCI for consideration.”
In its short order issued after a four-week hearing of the petitions, the Court observed: “While exercising the power of judicial review, it is not the function of this Court, ordinarily, to interfere in the policy-making domain of the Executive, which in the instant case is relatable to the privatization of state-owned projects, as it has its own merits reflected in the economic indicators.”
However, the Court said in its ruling that in PSM’s case, the privatisation process had been “vitiated by legal violations by state functionaries, including acts of omission and commission.” It said that the government was giving “extra benefits to the successful bidders.”
The Court said the transaction had caused a loss of Rs 18 billion to the government. The order noted that the Privatisation Commission had extended extra benefits to the purchasers, including handing over Rs 10 billion worth of stock in trade in the PSM units to the purchasers and cash amounting to Rs 8.599 billion lying in PSM’s bank accounts – out of which post-dated cheques for about Rs 7.67 billion had already been issued to clear the liability of loans, which were due from the year 2013 to 2019. Also, a tax liability Rs 3 billion has already been paid, out of which Rs 1 billion would have been refunded to the purchaser on taking over the unit. .
Thus the total loss to the government on the transaction worked out to Rs 18 billion. Moreover, the government had accepted the liability to pay Rs 15 billion to PSM workers under the golden handshake scheme, the order said.
Given all this, the Supreme Court has done well to cancel the sale to the consortium comprising the Russian company Magnitogorsk, the Saudi company Al Tuwarqi and the Pakistani company Arif Habib Securities.
It is a historic judgment and one that will be welcomed by everybody who believes in transparency. All the members of the full bench are to be commended for their unanimous decision in this matter.