TIP v/s KPT: KPT trustees are bound to abide by all relevant government rules: legal opinion

"The trustees of KPT are legally bound to abide by all relevant government rules/regulations, including Public Procurement Rules (PPR) 2004, while approving any contract or accepting proposals involving expenditure of KPT funds."
These views have been expressed by a former Justice, Dr Ghous Muhammad, Advocate, Supreme Court of Pakistan, and former Judge of the Sindh High Court, in response to Transparency International Pakistan's (TIP) request seeking legal opinion, on the legal opinion sought by KPT on the subject: 'Trustees of KPT are public servants'.
The TIP had sought opinion to clarify the impression perceived by a number of KPT trustees that they enjoy immunity against any of their acts as trustees under KPT Act 1886. The legal opinion received was forwarded by TIP on April 16 to KPT. Syed Adil Gilani, Chairman of TIP, had written a letter to the Chairman of KPT in June last year updating all the board members that they are not indemnified for their acts as trustees of KPT under sections 84, 85 and 86 of the Act.
He had also requested KPT trustees to abide by all government regulations and procedures, especially PPR 2004, while approving any contract, proposal which involve expenditure of KPT funds. TIP was informed by Manager, Legal Affairs, KPT, that the legal points raised in the letter were studied and examined in depth by the KPT board. Legal opinion was also sought from M Shafiq Usmani, ex-judge and senior advocate, which was forwarded to TIP on April 4.
Dr Ghous, while forwarding his legal opinion, wrote to Adil Gilani that he had perused the opinion given by Usmani & Iqbal, Advocates, on the subject. "Suffice it to say that the contents of your letter of June 19, addressed to the Chairman, KPT, Karachi, are free from any legal lacuna."
He further said: "I could not persuade myself to agree fully with the opinion of M/s Usmani & Iqbal advocates but it would be advantageous to reproduce the following from the said opinion: " 'But this is not to say that if the trustee deliberately influences the board to cause it to enter into a contract in violation of procurement rules knowing that it will cause loss to KPT he will have no liability in law. Nothing could be farther from the truth since such an erring member will have tortuous liability and could even be indicted under the criminal law'."
Usmani and Iqbal advocates had informed the KPT that TIP's concern expressed in their letter arises from certain misconceptions about the duties, responsibilities and liabilities of trustees of the Port of Karachi. TIP seems to be under the impression that merely because under section 84B, KPT Act, trustees have been declared to be 'public servants' within the meaning of Section 21 of Pakistan Penal Code (PPC) 1860, the trustees may feel that they enjoy some kind of indemnity for their acts as trustees. TIP takes it upon itself to warn the trustees that such is not the case and that they enjoy no such indemnity.
They said they believed that TIP views in this regard are misconceived because in law, being a public servant in itself does not confer any indemnity on the trustees in the first place; hence TIP's warning is uncalled for. Indeed, in so far as civil liability of a public servant is concerned, the privilege that he has by virtue of being a public servant is as provided in sec 80, Civil Procedure Code (CPC).
They further explained that as per Sec 86 a trustee shall be criminally liable for any involvement in misapplication of money entrusted to the board of trustees, even if it occurs due to his negligence. However, giving this section its natural meanings, it would appear that it refers to misuse of funds at the disposal of the board by a trustee either due to indulgence in corruption or due to inefficiency or incompetence. It does not apply to contracts entered into by the board of trustees.
It is Sec 85 KPT Act which applies to contracts according to which trustees are protected from any personal liability arising from any loss that KPT may suffer as a result of entering into a contract or an expense incurred by or on behalf of board of trustees.
In effect, what the above Sec 85, KPT, provides is that a trustee cannot be held personally liable for any loss suffered by KPT arising from a contract, including procurements contract, entered into by trustees, even if it is in violation of procurement rules, which in any case are in the nature of subordinate legislation and not primary legislation. However, the trustees will have collective responsibility and will owe an explanation for violation of procurement rules to its administrative authority.
Consequently, Usmani and Iqbal said, "we believe, TIP over reaches itself when it attempts to lean on the law to evoke trepidation amongst the trustees for their actions when negotiating to enter into a procurement contract and thereby persuade them to observe the procurement rules. Indeed this is a laudable objective but alas, more on the moral plane than legal." Syed Adil Gilani said that no comments have, however, been received so far from the KPT on the legal opinion of Dr Ghous Muhammad forwarded by TIP on April 16.