Hafiz MUHAMMAD AMIR HUSSAIN Versus SECURITIES AND EXCHANGE COMMISSION OF PAKISTAN
ORDER
INAAM AMEEN MINHAS, J.--- Through the instant writ petition, the petitioner has invoked the constitutional jurisdiction of this Court under Article 199 of the Constitution of Islamic Republic of Pakistan, 1973 ("the Constitution"), seeking a direction to the respondent No.1 i.e. Securities and Exchange Commission of Pakistan ("SECP") to comply with the mandatory requirements of Companies Act, 2017 ("the Act, 2017") to hold elections of directors of the respondent No. 3/company i.e. TRG Pakistan Limited, in accordance with statutory provisions of the Act, 2017. The relief as prayed for is reproduced hereunder:-
"In view of the foregoing facts and circumstances, it is most respectfully prayed before this Honourable Court that: i) Instant Writ Petition may graciously be allowed; ii) Direction be issued to the Respondents to comply with the mandatory requirements of Act and immediately hold elections of the directors of the Respondent No. 3 Company; iii) Immediate action be taken on the Final Notice served by the Petitioner; iv) Direction be issued to the SECP to disqualify all the existing directors of the Respondent No: 3 Company; and v) Any other relief deemed appropriate may kindly also be granted."
2. Brief facts are that the petitioner, a shareholder of respondent Company, holding 55,000 shares, invoked the constitutional jurisdiction of this Court, alleging inaction and failure of SECP to discharge its statutory duties being the regulator of the companies incorporated under the companies laws. The respondent Company's last election of the Company directors was held on 14.01.2022 and subsequent election was required to be held by 15.01.2025 upon expiry of the terms of office of directors on 14.01.2025 as per sections 158 and 159 of the Act, 2017, however election of directors was not held within prescribed time. The respondent Company failed to issue any notice for election or initiate the election process as required under sections 158 and 159 of the Act, 2017. In this regard the petitioner, being a shareholder of the respondent Company, repeatedly approached the respondents to perform their statutory duties of conducting elections. Subsequently, the petitioner sent notice dated 10.06.2025, requesting the SECP to exercise its statutory powers under sections 147, 158, and 172 of the Act, 2017 to ensure the conduct of timely elections and to restrain the continued unlawful functioning of the retired directors. However, SECP failed to initiate regulatory measures against the respondent Company, hence, the petitioner seeks the intervention of this Court.
3. The learned counsel for the petitioner further contended that the instant petition is maintainable under Article 199 of the Constitution, and SECP despite being the regulator under the SECP Act, 1997 ("Act, 1997") and the Act, 2017, has failed to perform its mandatory statutory duties of ensuring compliance with the statutes; moreover, SECP under sections 147 and 158 of the Act, 2017 is empowered to direct any company to convene an Annual General Meeting ("AGM") or Extraordinary General Meeting ("EOGM") for the purpose of election of directors. The learned counsel further contended that SECP has ancillary and consequential powers to facilitate the election process and to take action against defaulting directors under section 172 of the Act, 2017. Despite clear violation of the statutory compliance by the respondent Company and the petitioner's formal request to SECP, the SECP still failed to exercise its regulatory authority, thereby enabling the unlawful and unauthorized continuation of the board of directors. The petitioner submitted that the SECP's inaction constitutes a gross violation of its public duty and undermines the integrity of the corporate regulatory framework. It is, therefore, prayed that this Court may direct the SECP to exercise its statutory powers to ensure the conduct of elections of directors, and take disciplinary action against the directors of the respondent Company to safeguard the interests of shareholders and protect the investors.
4. Conversely, the learned counsel for respondent Company, contended that the writ petition is not maintainable on multiple legal and factual grounds, and asserted that the petition is premature, mala fide, and an attempt to prejudice proceedings already pending before the SECP. The learned counsel further submitted that the petitioner had already filed a formal notice before SECP dated 10.06.2025 on identical grounds, which is still pending adjudication, and till the final outcome of the said application, the petitioner has no locus standi to invoke jurisdiction of this Court under Article 199 of the Constitution. Moreover, the learned counsel submitted that various litigation proceedings are pending before civil courts and Sindh High Court, whereby the respondent Company has been expressly restrained from conducting the elections, and the existing directors are lawfully permitted to continue performing their functions until their successors are duly elected under section 158 of the Act, 2017. The learned counsel for the petitioner also submitted that this Court in Writ Petition No. 731 of 2025 has already dismissed similar proceedings, particularly in paragraph 13 of that order, on the ground that the registered office of the Company is situated in Karachi, thereby rendering the petition not maintainable for want of territorial jurisdiction. Lastly, the learned counsel submitted that the respondent Company has remained compliant with the statutory provisions of law and has acted in good faith, maintaining transparency with the SECP regarding regulatory compliance, therefore, the instant petition may graciously be dismissed for want of jurisdiction and merit.
5. The learned counsel for SECP submitted that it is performing its statutory duties and obligations, that the allegations of the petitioner are denied in this regard and several letters were issued to the respondent company regarding delay in holding elections of directors. The learned counsel for SECP further submitted that, after examining the annual audited accounts of respondent Company, the SECP, through its letter dated 12.02.2025, sought clarification regarding non-compliance with Section 158 of the Act, 2017, whereby respondent Company replied on 14.03.2025, asserting that the delay in elections is due various restraining orders passed by different civil courts, including the Civil Judge, Lahore and Civil Judge, Islamabad, which restrained the respondent Company from conducting the elections of directors. In addition, SECP continued to actively monitor compliance by seeking further documentary confirmation of the legal status of the said court orders and called for regular updates, including through emails dated 12.06.2025 and letters issued subsequently. Moreover, learned counsel for SECP highlighted that the matter concerning elections remained sub judice in multiple proceedings before the Sindh High Court ("SHC"), and SECP has already taken cognizance of the SHC's detailed judgment dated 20.06.2025 in JCM No. 12/2025, and in the said judgment, the SHC clarified that the stay order dated 24.01.2022 issued in Suit No. 1599/2022 only restrained the AGM and did not extend to elections due on 14.01.2025. The SHC further held that reliance by respondent Company on the Islamabad and Lahore civil courts orders amounted to an unjustified delay in conducting mandatory elections under section 158 of the Act, 2017. Consequently, SECP issued further correspondence, including letters dated 24.06.2025 and 25.06.2025, to various stakeholders such as respondent Company, Central Depository Company, and AKD Securities, directing compliance with the SHC's judgment, including the immediate convening of an EOGM for election of directors. Furthermore, the learned counsel for SECP submits that it has acted diligently, within its legal mandate, and stated that SECP can only direct the respondent Company to conduct elections and there is no provision of law where SECP can hold elections for companies, and its role is limited to regulatory oversight and issuance of appropriate directions where necessary. Lastly, prayed that this Court may decide the instant petition in the interest of justice.
6. I have heard the contentions of the learned counsel for the parties and perused the record with their able assistance.
7. Before delving into the merits of the case, it is imperative to consider the maintainability of this petition. The purpose of filing the instant petition by the petitioner in this Court is that the directors of the respondent Company stands retired, and SECP has failed to perform its statutory duties to ensure compliance of the respondent Company. The petitioner sent notice to SECP who failed to take any action after the expiry of term of office of directors from 14.01.2025 till date. Since SECP is located within the territorial jurisdiction of this Court and it is reiterated that the petition has been filed to judicially review inaction of SECP to perform its regulatory function and role against the respondent Company, which is situated within the territorial jurisdiction of this , court. Although the registered office of respondent Company and the concerned Registrar are situated in Karachi, and questions of compliance under section 158 of the Act, 2017 would ordinarily fall within the jurisdiction of the Honourable Sindh High Court, however the present petition is not seeking any relief against the Company or the concerned Registrar. Rather, the mainstay of the petitioner's grievance lies against the inaction of the SECP, a statutory body within the territorial jurisdiction of this Court, since the Petitioner invokes the Commission's failure to exercise its powers under Section 147 of the Act, 2017, a provision that empowers the SECP itself to call or direct the calling of meetings in case of default.
8. Furthermore, the learned counsel for respondent Company as well as the SECP have placed on record the judgments of the Sindh High Court in JCM No. 12 of 2025 and the judgment of this Court in Writ Petition No. 731 of 2025 titled as Sign Source Limited and another v. Securities and Exchange Commission of Pakistan, etc., which was dismissed on the ground of lack of territorial and writ jurisdiction, asserting that such matters fall exclusively within the domain of the Company Bench and the concerned Registrar at Karachi; however, perusal of the record reflects that the judgment of this Court in the Writ Petition No. 731 of 2025 pertained to the funds sent to M/s. Greentree Holdings Limited and to restrain the same so that they may not be used for purchase of shares, a matter which clearly related to the territorial jurisdiction of the concerned registrar in Karachi and which was subsequently adjudicated in JCM No. 12 of 2025. It is further noted that while the restraining order of the Sindh High Court, pertained to the holding of the AGM, the said Court in Direction No. 4 of the operative part of its judgment has specifically directed the Company to convene EOGM for the purpose of conducting elections. Whereas, the present writ petition does not seek a direction to the Company for holding elections under section 158 of the Act, 2017, but rather seeks a direction to the SECP to perform its statutory obligations under section 147 of the Act. This distinction is material and renders the present petition entirely distinct in nature and substance from the earlier proceedings. The prayer as reproduced above is only confined to direct the SECP to discharge its lawful regulatory duties, which clearly fall within the writ jurisdiction of this Court under Article 199 of the Constitution.
9. The superior Courts have settled that a constitutional petition under article 199 of the Constitution is maintainable where no adequate or efficacious alternative remedy exists, or where a statutory body acts in derogation of its legal obligations or fails to act in circumstances warranting its intervention. Even though certain statutory remedies were available to the petitioner before the SECP, and the petitioner, through notice dated 10.06.2025, called upon the SECP to discharge its regulatory obligations and enforce compliance with the applicable provisions of the Act, 2017. This is not merely a case of delay in responding to said notice but rather a persistent and unjustifiable failure on part of the SECP to act from the date of expiry of the term of the directors of respondent Company on 14.01.2025. Moreover, statutory period of ninety (90) days provided under section 158(2) of the Act, 2017, for holding elections has long been lapsed. Despite the lapse of this mandatory period SECP failed to exercise its powers under Section 147 of the Act, 2017. This inaction/failure of SECP to ensure compliance from a public listed company, has created a regulatory vacuum, affecting shareholder rights and public interest alike, and warrants the constitutional intervention of this Court. It is a trite principle that where the inaction or inefficiency of a statutory regulator results in a continuous breach of legal duty affecting public interest or fundamental rights, the High Court may intervene under Article 199 of the Constitution, the public bodies cannot shield behind procedural barriers where public interest and rule of law are at stake. In such circumstances, this Court feels no hesitation to hold that the petition is maintainable and this court has the jurisdiction. In the case of Brig. Muhammad Bashir v. Abdul Karim and others (PLD 2004 Supreme Court 271) the Honourable Supreme Court held that:-
"It is well settled by now that "Article 199 casts an obligation on the High Court to act in aid of law, protect the rights or the citizens within the framework of the Constitution against the infringement of law and Constitution by the executive authorities, strike a rational compromise and a fair balance between the rights of the citizens and the actions of the State functionaries, claimed to be in the larger interest of Society. This power is conferred on the High Court under the Constitution and is to be exercised subject to Constitutional limitations. The Article is intended to enable the High Court to control executive action so as to bring it in conformity with the law. Whenever the executive acts in violation of the law, an appropriate order can be granted which will relieve the citizen of the effects of illegal action. It is an omnibus Article under which relief can be granted to the citizens of the country against infringement of any provision of law or of the Constitution. If the citizens of this country are deprived of the guarantee given to them under the Constitution, illegally or, not in accordance with. law, then Article 199 can always be invoked for redress". (Ghulam Mustafa Khar v. Pakistan and others PLD 1988 Lah. 49, Muhammad Hussain Khan v. Federation of Pakistan PLD 1956 Kar. 538(FB), S.M. Yousuf v. Collector of Customs PLD 1968 Kar.599 (FB). It is to be noted that "paramount consideration in exercise of Constitutional jurisdiction is to foster justice and right a wrong". (Rehmatullah v. Hameeda Begum 1986 SCMR 1561, Raunaq Ali v. Chief Settlement Commissioner PLD 1973 SC 236). There is no cavil with the proposition that "so long as statutory bodies and executive authorities act without fraud and bona fide within the powers conferred on them by the Statute the judiciary cannot interfere with them. There is ample power vested in the High Court to issue directions to an executive authority when such an authority is not exercising its power bona fide for the purpose contemplated by the law or is influenced by extraneous and irrelevant considerations. Where a statutory functionary acts mala fide or in a partial, unjust and oppressive manner, the High Court in the exercise of its writ jurisdiction has ample power to grant relief to the aggrieved party". (East and West Steamship Co. v. Pakistan PLD 1958 SC (Pak.) 41). In our considered view, technicalities cannot prevent High Court from exercising its Constitutional jurisdiction and affording relief which otherwise respondent is found entitled to receive."
10. Now this court would like to take the matter in question which involves the continuous inaction/failure of SECP, as the regulator, in holding elections of the Board of Directors of publically listed respondent Company, which has not only undermined shareholders rights but has the potential to impact public confidence as public interest is involved and regulatory inertia cannot be condoned. Before coming to the actual controversy, it is important to note that SECP is established under section 3 of the Act, 1997, and the powers and functions of the SECP are mentioned under section 20 of the Act, 1997 including the powers of the Commission to be responsible for the performance of the Act, 2017. The preamble of the Act, 2017 is that the mission of SECP is to promote an efficient and transparent capital market, develop the corporate sector and protect the investor through responsive policy measure, effective regulation and enforcement of best governance practices. Though the preamble to a statute is not an operational part of the enactment yet it defines the purpose and intent of the legislature, which necessitated the legislation on the subject and also shed light on the goals which the legislature aimed to secure through the introduction of such law. The Preamble of a statute though not a substantive and enforceable part of the enactment yet it provides primary guidelines about the object and scope of the legislation. The preamble of Act, 2017 clearly demonstrates to reform company law with the objective of facilitating corporatization and promoting development of corporate sector, regulating corporate entities for protecting interests of shareholders, creditors, other stakeholders and general public, inculcating principles of good governance and safeguarding minority interests in corporate entities. Reliance has been placed on Director General FIA and others. v. Kamran lqbal and others (2016 SCMR 447), and The Additional Registrar Company v. Al-Qaim Textile Mills Limited (2021 CLD 931).
11. The SECP, despite having knowledge of the non-compliance of the respondent Company, has failed to issue any direction or initiate action under sections 147, 158 and 159 of Act, 2017, thus, cannot justify the failure to comply with the mandatory statutory requirement to hold elections within the prescribed statutory period after expiry of the term of the directors. The record and correspondence submitted by SECP reflects that the SECP was well awared of the expiry of the tenure of respondent Company's directors since 14.01.2025, however, no action was initiated on plea of pending litigation. Since the controversy revoles around sections 147 and 158 of the Act, 2017, it is relevant to reproduce the same:-
"147. Power of Commission to call meetings.-(1) If default is made in holding the statutory meeting, annual general meeting or any extraordinary general meeting in accordance with section 131, 132 or 133, as the case may be, the Commission may, notwithstanding anything contained in this Act or in the articles of the company, either of its own motion or on the application of any director or member of the company, call, or direct the calling of the said meeting of the company in such manner as the Commission may think fit, and give such ancillary or consequential directions as the Commission thinks expedient in relation to the calling, holding and conducting of the meeting and preparation of any document required with respect to the meeting.
Explanation.-The directions that may be given under subsection (1) may include a direction that one member of the company present in person or by proxy shall be deemed to constitute a meeting.
(2) Any meeting called, held and conducted in accordance with any such direction shall, for all purposes, be deemed to be a meeting of the company duly called, held and conducted, and all expenses incurred in connection thereto shall be paid by the company unless the Commission directs the same to be recovered from any officer of the company which he is hereby authorised to do.
158. Retirement of first and subsequent directors.-
(1) All directors of the company-
(a) on the date of first annual general meeting; or
(b) in case of subsequent directors on expiry of term of office of directors mentioned in section 161, shall stand retired from office and the directors so retiring shall continue to perform their functions until their successors are elected.
(2) The directors so continuing to perform their functions shall take immediate steps to hold the election of directors and in case of any impediment report such circumstances to the registrar within fbrty-five days before the due date of the annual general meeting or extra ordinary general meeting, as the case may be, in which elections are to be held:
Provided that the holding of annual general meeting or extra ordinary general meeting, as the case may be, shall not be delayed for more than ninety days from the due date of the meeting or such extended time as may be allowed by the registrar, for reasons to be recorded, only in case of exceptional circumstances beyond the control of the directors, or in compliance of any order of the court.
(3) The registrar, may on expiry of period as provided in subsection (2), either-
(a) on its own motion; or
(b) on the representation of the members holding not less than one tenth of the total voting powers in a company having share capital; or
(c) on the representation of the members holding not less than one tenth of the total members of the company not having share capital of the company, directs the company to hold annual general meeting or extra ordinary general meeting for the election of directors on such date and time as may be specified in the order.
(4) Any officer of the company or any other person who fails to comply with the direction given under subsection (3) shall be guilty of an offence liable to a fine of level 2 on the standard scale."
12. The legislative intent behind sections 147 and 158 of the Act, 2017 must be interpreted in a manner that furthers corporate governance, safeguard shareholder interests, and reinforces regulatory oversight. Section 158 directs to take steps immediately to hold election of directors or if there were any impediments, same should be communicated to the registrar within forty-five days before the date of AGM or EOGM in which elections were to be held, whereas the record and correspondence placed by the i SECP reflects that the SECP has not taken any steps to hold elections on plea of multiple pending litigations before various Civil Courts and High Courts. In parallel, the powers that flow out of section 147 are entirely different and it empowers the SECP with not only the authority to direct the calling of meetings but also to call such meetings itself when there is a default in holding statutory, annual, or extraordinary general meetings. These powers are independent of company articles and is legislated to ensure that a company cannot paralyze its corporate governance compliance and infringe the rights of shareholders; moreover, there is no statutory threshold of 10% voting powers in a company required to invoke section 147 by an application of shareholders. Section 147 of the Act, 2017 provides an alternative solution to be applied only when the normal machinery of the Company fails which, as is patently evident in the present case. This particular section was also amended in the Companies Ordinance, 1984, through Companies (Amendment) Ordinance, 2002, where the word registrar was substituted by the word Commission, thereby reflecting the intent of legislature to protect the members of the company irrespective of voting powers they hold.
13. The SECP, being the regulator, has not ensured compliance with the said statutory provisions and the stance taken by the SECP, that it is only empowered to direct the company to hold the meeting and not to call the meeting itself, is misconceived. The plain reading of the section 147 unequivocally empowers the Commission not only to direct the .calling of a meeting but also, where circumstances so warrant, to call the meeting itself and to issue such ancillary or consequential directions as may be necessary for the proper conduct of the meeting. It is observed that while violations of section 158 of the Act, 2017, such as failure to hold timely elections, would ordinarily fall within the jurisdiction of the Registrar concerned in Karachi and, by extension, the Honourable Sindh High Court, the present petition does not seek a direction against the Company or the Registrar under that provision as discussed in para 7 of this judgement. Rather, the Petitioner seeks enforcement of the SECP's statutory duties under section 147.
14. For the foregoing reasons the petition is disposed of with the direction to the SECP to invoke its powers under section 147 and call EOGM of the respondent Company to conduct elections in accordance with all the relevant provisions of the Act, 2017, and follow the procedure provided under section 159 of the Act, 2017.
15. This Court hereby appoints Mr. Muhammad Fahad Khattak, Advocate as commission to oversee and ensure compliance with the directions issued hereinabove. The commission shall submit a comprehensive report to the office of the Additional Registrar (Judicial) after every fifteen days, commencing from the date of receipt of this judgment by the SECP, till the conclusion of election. It is further directed that the SECP, as well as all concerned parties, shall extend full and unqualified cooperation to the commission in the discharge of his duties. The election process shall be conducted in the presence of the commission appointed by this Court, who shall also submit a final report to the office of the Additional Registrar (Judicial) within ten days from the announcement of the election results. The commission fee shall be 2 Million PKR paid by the petitioner in advance, along with all expenses incurred in connection with the performance of his duties as commission.
UN/109/Isl Order accordingly.