with IR Arif Rauf Vs Government of KP through its Chief Secretary, Civil Secretariat, Peshawar and others

JUDGMENT SHEET

PESHAWAR HIGH COURT, PESHAWAR

JUDICIAL DEPARTMENT

W.P No.4601-P/2024 with IR

Arif Rauf Vs Government of Khyber Pakhtunkhwa through its Chief Secretary, Civil Secretariat, Peshawar and others

JUDGMENT

Date of hearing: 23.01.2025

Petitioner (by): Mr. Shumail Ahmad Butt, Advocate Respondents (by): M/s Taimoor Haider, Addl: AG and Tariq Altaf, Advocate alongwith Babar Khan Tanoli (respondent No.4) and Muhammad Nouman Younas, Section Officer (Litigation), Local Government.

SYED ARSHAD ALI, J.- The instant petition challenges the notification dated 11.09.2024, whereby the Government of Khyber Pakhtunkhwa has transferred and posted Mr. Babar Khan Tanoli, respondent No.4, a civil servant (PMS BS-18), Deputy Secretary, Sport & Youth Affairs Department, as a Chief Executive Officer (“CEO”) of Water & Sanitation Services Company (“WSSC”), Kohat, a public sector limited company, under Section 10 of the Khyber Pakhtunkhwa Civil Servants Act, 1973 (“Act of 1973”). As a consequence of the said transfer/posting, the petitioner, who was the CEO of WSSC, Kohat, was relieved from his duties.

2.Water, sanitation utility and solid waste management services delivery is one of the primary functions of the Local Government(s). On 04.06.2015, WSSC, Kohat, was incorporated as a public sector

company under the erstwhile Companies Ordinance, 1984 (“Ordinance”). The object of creation of WSSC, Kohat, was to establish, run and manage aggregated, corporatized and modern water and sanitation utility in the District Kohat and adjoining Districts in Kohat Division, ensuring unremitting water, sanitation and solid waste management service delivery to the residents of the Kohat Division.1

3.Articles of Association (“AOA”) of WSSC, Kohat, stipulates the number of members of WSSC, Kohat, who shall be nominated by the Government of Khyber Pakhtunkhwa. Article 29 of the AOA envisages that there shall be, for the overall management of the company’s affairs, a Board of directors, which will be elected from amongst the members for a term of three years and in the manner as provided under Section 187 of the Ordinance. It is further stipulated by article 45 of the AOA that the directors shall recommend at least three individuals to the Government of Khyber Pakhtunkhwa for appointment of a CEO of the company and upon receiving concurrence of the Government of Khyber Pakhtunkhwa, the Board shall appoint the CEO for a terms of three (3) years; eligible for reappointment. Similarly, a CEO can be removed by the directors by not less than three-fourths of the total members of directors for the time being or the company through a special resolution.

4.Through notification dated 17.12.2020, the Government had notified eleven (11) Directors of WSSC,

1.Sub-clause 1 of clause iii of the Memorandum of Association of WSSC Kohat.

Kohat, out of which, seven (7) are from general public whereas four are nominee of the Government.

5.Statutory Dispensation under the Companies Act, 2017.

Sections 187 “187. Appointment of subsequent chief executive.

(1)Within fourteen days from the date of election of directors under section 159 or the office of the chief executive falling vacant, as the case may be, the board shall appoint any person, including an elected director, to be the chief executive, but such appointment shall not be for a period exceeding three years from the date of appointment: Provided that the chief executive appointed against a casual vacancy shall hold office till the directors elected in the next election appoint a chief executive.

(2)On the expiry of his term of office under section 186 or sub-section (1) of this section, a chief executive shall be eligible for reappointment.

(3)The chief executive retiring under section 186 or this section shall continue to perform his functions until his successor is appointed, unless non-appointment of his successor is due to any fault on his part or his office is expressly terminated.

(4)Notwithstanding anything contained in this section, the Government shall have the power to nominate chief executive of a company where majority of directors is nominated by the Government, in such manner as may be specified. Section 188

188.Terms of appointment of chief executive.

(1)Save as provided in sub-section (2), the terms and conditions of appointment of a chief executive shall be determined by the board or the company in general meeting in accordance with the provisions in the company’s articles.

(2)The terms and conditions of appointment of a chief executive nominated under section 186 or 187 shall be determined by the Government, in such manger as may be specified.

(3)The chief executive shall if he is not already a director of the company, be deemed to be its director and be entitled to all the rights and privileges, and subject to all the liabilities, of that office.

Section 190

190.Removal of chief executive. (1) The board by resolution passed by not less than three-fourths of the total number of directors for the time being, or

the company by a special resolution, may remove a chief executive before the expiration of his term of office notwithstanding anything contained in the articles or in any agreement between the company and such chief executive.

(2)Notwithstanding anything contained in this section, the Government or an authority or a person authorized by it shall have the power to remove chief executive of a company where more than seventy-five percent of the voting rights are held by the Government.”

Public Sector Companies (Appointment of Chief Executive) Guidelines, 2015.

SCHEDULE-I

[See paragraph 2] Procedure for Appointment of Chief Executive The principles of transparency, merit and equal opportunities shall be followed while making appointment to the position of the chief executive. Following procedure may be followed by the Board of a public sector company while making appointments to the position of chief executive:

1.Development of Job Profile/Job Description.- The Board shall develop a job profile containing job description for the chief executive in the light of the job requirements and the fit and proper criteria specified by the Commission.

2.Advertisement for the Position.- (1) The Board shall initiate the appointment process, at least three months before the term of the incumbent chief executive is going to expire, by issuing a public advertisement in the print media, inviting applications for appointment against the vacant position. The advertisement shall also be posted on the website of the public sector company or that of the line ministry. Direct applications shall also be acceptable, and the fact may be specified in the advertisement.

(2)The applicant shall be required to complete and sign an Application Form, as per Annexure “A” to these Guidelines, to demonstrate his fitness and propriety for the position of the chief executive. Copies of the degrees/testimonials, duly verified by the Higher Education Commission or the professional body or association, whichever is relevant, shall also be provided alongwith the application.

(3)The applicant shall also submit a declaration on a non-judicial stamp paper of

requisite value, as per Annexure “B” to these Guidelines, that he is not ineligible to act as a chief executive, in accordance with the provisions of the Ordinance, the Rules and these Guidelines.

(4)The appointing authority may hire the services of an executive search agency for assistance in the appointment process, including issuance of the advertisement.

3.Shortlisting process.- The Board shall shortlist the applicants from the following sources:

(1)Those shortlisted through the database, (2) Those applying against the public advertisement, and

(3)Those derived through the succession plan.

4.Evaluation of Candidates.- (1) The Board shall undertake evaluation of the shortlisted candidates on the basis of the Fit and Proper Criteria specified by the Commission.

(2)The Board shall arrange necessary due diligence and pre-appointment scrutiny of the shortlisted candidates through the concerned departments/agencies, including SECP, FBR, NADRA, SBP, HEC, concerned sectoral regulator/professional body or association and others, as deemed appropriate.

5.Interviewing Process.- The Board shall conduct the preliminary interview of the candidate keeping in view the following:

(a)The chief executive has the primary responsibility for the management of the public sector company’s affairs, its performance as well as implementation of corporate strategy. Accordingly, the interview for the position of chief executive shall primarily focus on having the candidate present his strategic vision for running the affairs, and/or turning around the performance of the public sector company.

(b)The candidate’s skill set including his technical expertise/sectoral knowledge, leadership, strategic vision, as well as communication skills, etc., shall be thoroughly evaluated.

(c)Interviews shall be conducted on merit and against clear criteria, as set out in the fit and proper test as well as the vacancy profile. Reasons for decisions shall be recorded. Only the candidates who meet the criteria shall be interviewed.

(d)It shall be ensured at interview that the candidates demonstrate that they are committed to, and have an understanding of, the value and importance of the principles of public service.

(e)The interview shall be used to explore any potential conflicts of interest declared by the candidates. Even if a candidate does not declare a conflict of interest, the nomination committee still needs to reassure that no conflict of interests exists.

(f)If any conflict of interest situation explored during the interview is resolved by the candidate, he may be considered to be shortlisted for the position.

(g)The interview shall also be used to explain the importance of adhering to the public sector company’s code of conduct, and to emphasize the importance placed on maintaining high standards of propriety in the conduct of the public sector company’s business.

6.Recommendation from the Board to the Competent Authority.– (1) The Board shall recommend a minimum of three candidates to the line ministry for appointment to the position of Chief Executive.

(2)Copy of the minutes of meeting of the Board recommending the shortlisted candidates shall be forwarded to the line ministry for information and perusal.

(3)If the line ministry does not concur to appoint any of the proposed candidates, it shall highlight the reasons for non-concurrence and refer the matter back to the public sector company for reconsideration and with the direction to identify additional/alternative candidates.

(4)The Board may either re-evaluate the candidates from the pool of available applicants or reinitiate the appointment process, if none of the shortlisted candidates is found fit and proper for the position.

(5)The candidates shall be recommended to the line ministry in the order of preference based on the results of evaluation.

7.Appointment of Chief Executive.- (1) Upon concurrence of the competent authority, the Board shall appoint the chief executive and issue him a contract letter, with the requisite terms and conditions of appointment, signed by the Chairman, or other person authorized by the Board.

(2)It shall be ensured that the appointment of chief executive is finalized at least thirty days before the date of expiry of the term of the incumbent chief executive so that the appointment is made by the Board within the period stipulated under sections 198 and 199 of the Ordinance.

6.POLICY FRAMEWORK by the Province of Khyber Pakhtunkhwa

Guidelines on matter regarding Chief Executive Officer of Public Sector Companies and Autonomous Bodies in Khyber Pakhtunkhwa.

The Provincial Government has approved a policy framework to be followed by the Public Sector Companies and Autonomous Bodies for matter relevant to the CEO. The salient features of the said policy are as under:

Activity Scope Responsibility • Board responsible for profile setting Board of the CEO i. Setting • Core competencies relevant to the profile of entity’s strategic goals the CEO • Skill and attributes relevant to the

CEO

• Roles and responsibilities • Performance appraisal framework • Salary and compensation ii. • Board shall develop & approve Board Recruitment candidate evaluation criterion process • Advertisement:

i. Initiate at least 3 months before the expiry of term of incumbent

CEO

ii. Advertise in two leading newspapers: English & Urdu each iii. Upload on entity’s website • Application submission (option for online submission; transparency in receipt of applications) • Candidates shortlisting by the Board HR Committee:

i. Prepare a long list of candidates based on eligibility criteria ii. Shortlist candidates based on evaluation criteria iii. Evaluate based on “fit & proper” criteria iv. Carry out due diligence & pre- appointment scrutiny of shortlisted candidates through concerned agencies including SECP, FBR, NADRA, SBP etc.

as deemed appropriate.

• Interview to be conducted by the Board:

i. Evaluate candidate’s skill set including technical expertise, sector knowledge, leadership, strategic vision & communication skills

ii. Merit-based interview and evaluation against a set criterion iii. Explore any potential conflict of interest iv. Inform the shortlisted candidate at least 7 days in advance of the interview via email and telephone iii. Terms and • Board to determine remuneration and Competent conditions of Terms & conditions authority appointment • CEO to submit self-evaluation to the (Government or including Board against agreed targets within as the case may performance one month after the end of the fiscal be) contract year • The Board shall discus performance with the CEO and highlight areas of improvement and set objective targets for next year • The Board shall finalize performance evaluation of the CEO and approve/reject bonus linked to her/his performance, if any

iv. • Board to prepare list of at least 3 Competent Appointment candidates in order of preference authority of the CEO based on evaluation results (Government or • List of candidates along with Board as the case may minutes of the meeting to be shared be) with the competent authority (Government or as the case may be) • Competent authority to make the final decision on appointment • In case the competent authority does not concur to appoint any of the proposed candidates, it shall highlight the reasons for non- concurrence and refer the matter back to the Board; Board shall either re-evaluate from the existing pool or re- initiate the process • Upon concurrence of the competent authority, the Board shall appoint the CEO & issue a contract letter signed by the Chairman • Appointment for 3 years with the possibility of re-appointment for another 3-year term • Board to ensure the appointment of the new CEO is finalized at least 30 days before the expiry of term of the incumbent v. CEO on • The organization shall not hire Government on deputation Chief Executive Officer (DG/ MD/ Board any other designation for the recommendation executive head) on deputation except in cases where individual competes against an advertised position and is selected on merit/criteria.

• The CEO hired on deputation shall be for a term not less than three years, extendable for a further period of 2 years, subject to

approval from competent authority.

• A CEO hired on deputation shall meet the job requirements in terms of education, experience, and competency for the CEO position (subject to NOC and other formalities from respective department).

• A CEO hired on deputation cannot stay in the same organization on any position for a period exceeding five years from the date of joining the organization.

• The terms & conditions of the CEO hired on deputation will be determined by the Board of Directors/Governors, or whatever the case may be.

vi. Removal • Board may recommend the removal Government on of the CEO of the CEO to the competent Board authority by a resolution passed by Recommendation not less than three-fourths of the total directors at that time • The CEO shall be given an opportunity to present her/his views in front of the Board and these views shall be forwarded to the competent authority when deciding on CEO termination vii. Stop-gap • Board to appoint an individual from Board arrangement the existing senior executives of the of the CEO entity for a period not exceeding 3 months within 14 days of the office of the CEO falling vacant.

• This period shall serve as a stop-gap arrangement and shall not be extendable. It will be ensured by the Board that a full time Chief Executive is appointed within the aforesaid 3 months.

7.Subsequent to the establishment of WSSC, Kohat, the process of appointment of the first CEO was initiated vide a letter dated 15.07.2015, and the petitioner was appointed as the CEO of WSSC, Kohat, vide a letter dated 06.05.2016. After the completion of the first term, the position of CEO was advertised in various newspapers where certain qualification was also set for the said position and accordingly, the petitioner was once again appointed as a CEO of WSSC, Kohat for a further term of three years, vide a notification dated 27.08.2020.

8.On expiry of the period of appointment of the petitioner as CEO, the matter was considered for fresh appointment in the 30th Board of Directors meeting of WSSC, Kohat, dated 24.07.2023, notified through letter dated 07.08.2023. The relevant para of the decision of the Board for the present case is as under:

2.CEO contract The Chairman of the Board The Board agreed on: expiry: explained the expiry of in the Advertisement CEO’s contract. He also told 1. Recall the of the position the Board that he had advertisement; and agreement instructed the DGM HR and on interim Proc to advertise the position 2. Fresh advertisement arrangements of CEO. He was informed that wil be published before initiating recruitment with new criteria; process, NOC from the election commission of 3. The present CEO Pakistan as required as a ban is will continue as imposed on all new required under recruitments. The chairman section 187(3) of had directed the DGM HR to Companies Act, write to the provincial 2017 till new government to seek NOC from recruitment. the Election Commission of Pakistan. An advertisement was issued for the recruitment of new CEO. Mr. Ahsan Paracha and some other members had reservations over the criteria laid down for the eligibility of the candidates.

9.Pursuant to the decision of the Board of Directors, a formal notification was issued on 09.08.2023 stating that the petitioner will continue as CEO of WSSC, Kohat under Section 187(3) of the Companies Act, 2017 (“Act of 2017”), till the appointment of new CEO. Accordingly, the position of the CEO of WSSC, Kohat was advertised in various dailies with the following essential qualifications.

Position Qualification Post Qualification Experience Chief A Bachelor’s degree Candidate holding a Bachelor’s Executive in a relevant degree should have a minimum of Officer (CEO) Engineering field, 15 years of relevant experience. Preferably, Candidate with a Master Degree Candidate with a Master degree in Environmental should have a minimum of 13 years Engineering/Sciences of relevant experience.

are desired. Preference will be given to candidate who have experience in Urban services delivery.

10.The essential grievances of the petitioner are that instead of proceeding with the recruitment process as provided under the aforesaid legal dispensation, through notification dated 11.09.2024, Mr. Babar Khan Tanoli, respondent No.4, was appointed/transferred against the position of CEO under Section 10 of the Act of 1973.

11.To support the said appointment, it was the contention of the worthy Additional Advocate General that the appointment of Mr. Babar Khan Tanoli, respondent No.4, a civil servant as the CEO of WSSC, Kohat, was made under Section 10 of the Act of 1973 and furthermore, sub section (4) of Section 187 of the Act of 2017 empowers the Government to nominate chief executive of a company where majority of directors are nominated by the Government; therefore, the impugned appointment/transfer of a civil servant against the position of CEO of WSSC, Kohat was within the jurisdiction of the Provincial Government, and keeping in view the law laid down by the Apex Court in the case of Mustafa Impex2, the cabinet has approved the said appointment; therefore, it is not subject to judicial review.

12.We do not tend to agree with the aforesaid submissions of the learned Additional Advocate General representing the Provincial Government. We are mindful of the well-settled principle of law that the responsibility of deciding suitability of an appointment, posting or

2.Messrs Mustafa Impex, Karachi and others vs. The Government of Pakistan through Secretary Finance, Islamabad and others (2016 PLD 808)

transfer fell primarily on the executive branch of the State; the courts ordinarily refrain from interfering in policy making domain of the Executive as the framing of recruitment policy and rules thereunder fell within the Executive domain; however, the Constitution of the Islamic Republic of Pakistan is based on the principle of trichotomy of powers where legislature is vested with the function of law making, the executive with its enforcement and judiciary of interpreting the law and that the courts can neither assume the role of a policy maker nor that of a law maker.3 Nevertheless, the Constitutional Courts are the guardian of public rights and has the legal mandate to ensure that the public appointments are made by the executive in accordance with law. Whenever there are statutory provisions or rules or regulations which govern the matter of appointments, the same must be followed. In case of any appointment of a public sector organization challenged before a Constitutional Court, the Court ordinarily will not engage in any exhaustive or full-fledged assessment of the merits of the appointee nor will it seek to substitute its own opinion for that of the Executive; however, the Constitutional Court will have the mandate to examine the integrity of selection process and to see if it was such as would ensure compliance with the provisions of the governing law.4

13.It is by now the global idea that the public sector work such as water management, waste management, public services at the gross root level be governed through the formation of public sector companies. Not only the said companies would be independent in its 3. Executive District Officer (Revenue), District Khushab at Jauharabad and others vs. Ijaz Hussain and another [2012 PLC (CS) 917].

4.Muhammad Yasin vs. Federation of Pakistan through Secretary, Establishment Division, Islamabad and others (PLD 2012 SC 132).

work but would be more efficient, effective and accountable organizations that can deliver better services to citizens. The key principle behind the said idea is efficiency and effectiveness that the public sector companies can operate with more flexibility and autonomy, allowing them to respond quickly to changing circumstances and make decisions without being bogged down by bureaucratic processes; the said companies are to be managed by professionals with expertise in specific areas rather than general civil servants, enabling better decision making and more effective implementation of the policy of the government governing the management of public sector companies Therefore, once the public sector companies are established under the relevant legal dispensation with full autonomy then appointment of civil servant at the helms of affairs of such companies would run counter to the basic idea of creation of public sector companies.

14.Moving on further to the arguments of the worthy AAG in support of the impugned transfer notification in terms of Section 10 of the Act of 1973. Section 10 provides that a civil servant is liable to serve anywhere in the government, a corporation, or a body set up by the government. It only casts an obligation on civil servant that he can be transferred to any post. However, it does not entitle the provincial government or the civil servant to appoint or to be appointed, as the case may be, to any post through transfer without qualifying the requirement of the said post under the law. This fact is not only evident from the Civil Servants (Appointment, Promotion & Transfer) Rules, 1989, which envisages the method of appointment and the qualifications required for a civil

servant to hold a post, but also from the Public Sector Companies (Appointment of Chief Executive) Guidelines, 2015 as well as the Policy Framework of the province of Khyber Pakhtunkhwa as provided in Para-6 above, stipulating the manner and mode of the appointment of the CEO of the Public Sector Companies.

15.Similar is the verbiage and command of sub section (4) of Section 187 of the Act of 2017, which though empowers the Provincial Government to nominate CEO of a company where majority of directors are nominated by the Government but through a specified manner. Nevertheless, these two provisions do not provide unstructured discretion to the Government to make any appointment in violation of the express provisions of law.

16.It is settled law that where the law requires something to be done in a particular manner, it must be done in that manner. Another important canon of law is that what cannot be done directly cannot be done indirectly.5 Similarly, the Apex Court in the case of Muhammad Akram6 has very elaborately held that when law requires a thing to be done in a particular manner then it would be a nullity in the eyes of law, if not performed in that very prescribed manner. The Apex Court in the case of Messrs Al-Faiz Industries7 had further expounded the proposition by holding that it is well-settled and established principle of law that when the Legislature requires the doing of a thing in a particular manner then it is to be done in that manner and

5.Muhammad Hanif Abbasi vs. Imran Khan Niazi and others” (PLD 2018 SC

6.Muhammad Akram vs. Mst. Zainab Bibi (2007 SCMR 1086) 7. Director, Directorate-General of Intelligence and Investigation and others vs. Messrs Al-Faiz Industries (Pvt.) Limited and others” (2006 SCMR 129)

all other manners or modes of doing or performing that thing are barred.

17.Even otherwise, if it is assumed that the Government enjoys such powers, it is by now settled that such powers shall be exercised judiciously, fairly and to advance the purpose for which the discretion was conferred upon it. The Government in such like cases does not enjoy absolute discretion. Indeed, it is settled that when an authority has a discretion in relation to any matter then the said discretion is to be exercised according to rational reasons which means that; (a) there be findings of primary facts based on good evidence; and (b) decision about facts be made for reasons which serve the purposes of statute in an intelligible and reasonable manner. Any action which do not meet these threshold requirements are considered arbitrary and misuse of power.8

18.Any decision made by an Executive Authority which lacks reasons is otherwise void and has no place in the modern principle of good governance. Dicey in his book Law of Constitution 10th Edition, while referring to Douglas J (United State Vs Wunderlich) 342 U.S 98 (1951) has stated, when it has freed man from the unlimited discretion of some ruler where discretion is absolute, man has always suffered. Similarly, the Apex Court of India in the case of Delhi Transport Corpn9, in paragraph No.276, has emphasized that the absence of arbitrary power is the first essential power of rule of law upon which the whole Constitution is based. The Apex Court of India has further observed: -

8.Tariq Aziz-ud-Din and others (2011 PLC (CS) 1130) 9. Delhi Transport Corpn vs. D.T.C Mazdoor Congress (AIR 1991 SC 101)

“In a system governed by rule of law, discretion, when conferred upon executive authorities, must be confined within defined limits. The rule of law form this point of view means that decisions should be made by the application of known principles and rules and, in general, such decisions should be predictable and the citizen should know where he is. If a decision is taken without any principle or without any rule it is unpredictable and such a decision is the antithesis of a decision taken in accordance with the rule of law. (See Dicey---“Law of the Constitution”).”

19.In view of the above, the impugned Notification dated 11.09.2024, whereby Mr. Babar Khan Tanoli, respondent No.4, a civil servant, has been appointed as the CEO of WSSC, Kohat, is not only contrary to law but also to the scheme of corporate governance discussed above. Therefore, the contention of the worthy Additional Advocate General regarding the subsequent approval of the Board of Directors of the appointment of respondent No.4 cannot be approved by this Court as neither the Government nor the Board of Directors can be allowed to appoint the CEO of Public Sector Companies in violation of law.

20.As far as the contention of the learned counsel for the petitioner that only an engineer can be appointed against the post of CEO, we could not find ourselves persuaded by the said assertion, because it is the Public Sector Company which has to lay down the criteria for such appointment aligned with requirement of the job.

21.The perusal of the aforesaid fact would also reveal that the present petitioner though remained the CEO of the WSSC, Kohat for two times and in terms of Section 187(3) of the Act of 2017, on retirement, he can continue to hold the said position until his successor is appointed. However, since the petitioner is contesting for the

position of CEO, therefore, he cannot be allowed to hold the said post.

22.In view of what has been stated above, this petition is partially allowed, and the impugned Notification dated 11.09.2024 appointing respondent No.4 is accordingly set aside. The Chairman of the Board of Directors, as a stopgap arrangement, shall act as the CEO of WSSC, Kohat for a limited purpose; to convene the meeting of the Board to deliberate and frame the eligibility criteria including qualification for the CEO of WSSC, Kohat; advertise the position of CEO and complete the appointment/recommendation for appointment process in terms above strictly in accordance with law within a period of three months of receiving the judgment of this Court.

Sd/---

JUDGE

JUDGE

Date of hearing and announcement of judgment ............ 23.01.2025 Date of preparation and signing of Judgment ................08.02.2025

D.B Hon’ble Mr. Justice Syed Arshad Ali & Hon’ble Mr. Justice Wiqar Ahmad Mahmood Shah, SSS