The Lahore High Court Lahore has recently passed a significant judgment allowing the petition of of CEO of SNGPL who had been suspended by the Board of Directors, through a meeting called with just one day notice.
The judgment Syed Ali Javaid Hamdani VERSUS FOP and Others dwells in detail upon the relationship between the Board and the CEO. It is the first judgment where the Court has dwelled upon the effect of State-owned Enterprises Act, 2022 on issues relating to appointment and termination of CEO. The Court after attending the relevant provisions of the Act extensively and holistically held as follows;
54. “The following conclusions are, therefore, safely drawn from the
examination of the scheme of applicable law:
(i) The offices of the CEO, Chairman and member of the Board are
separate and independent in terms of appointment, removal, role,
powers and functions which are regulated by mandatory provisions
of law and the same cannot be circumvented or made redundant by
exercise of discretionary and general powers vested in any of such
offices;
(ii) The process of appointment and removal of the CEO is regulated
by specific mandatory legal provisions which preempt the general
role of oversight, supervision and control of the Board over the
CEO;
(iii) Notwithstanding the power of nomination of the CEO vested with
the Federal Government under Section 187(4) of the Companies
Act, the Federal Government did not exercise the power of
nomination regarding the incumbent CEO of SNGPL and followed
the process of the appointment prescribed under Section 187(1) of
the Companies Act read with the PSC Guidelines and PSC Rules;
(iv) The incumbent CEO is also a Director of SNGPL and as a member
of the Board has the same powers, functions and responsibilities as
any other member of the Board;
(v) The processes of appointment and removal of the CEO are separate
and distinct and does not have any co-relation with each other;
(vi) There is no role of the Federal Government in the removal of the
incumbent CEO of SNGPL as the Federal Government does not
hold more than 75% shares in SNGPL as ordained by Section
190(2) of the Companies Act;
(vii) Therefore, the incumbent CEO of SNGPL can only be removed in
accordance with the mandatory provisions of Section 190 of the
Companies Act requiring three fourth of total membership of the
Board being not inconsistent with Section 22 of the SOE Act;
(viii) The Board is obligated to delegate such powers to the CEO as are
necessary to enable the CEO to perform the statutory duty of
administration and management of the Company;
(ix) Such powers cannot be withdrawn but the CEO can be removed
even without inquiry under Section 190 of the Companies Act.
However, if the Board deems appropriate, the Board can initiate an
inquiry against the CEO before removing him from office but
without seizure of his powers. If immediate measures are required
to be taken against the CEO, the only course available is to follow
the procedure of removal of the CEO under Section 190 of the
Companies Act;
(x) There is no provision in the law for the appointment of Acting
CEO in the presence of existing CEO. As such, the acts of the
Board of SNGPL of suspending the incumbent CEO and / or
withdrawing his powers, appointing the Acting CEO and
conferring him the powers of the CEO were unlawful, illegal and
void-ab-initio being in violation of Section 190 of the Companies
Act; and
(xi) The manner and conduct of the impugned 600th emergent meeting
of the Board of SNGPL with less than one day notice under a
vague and generalized agenda infringed various principles of good
governance under the applicable law and as such the same was
unlawful being not held in accordance with law.”
