ISLAMABAD: The seemingly controversial affairs of Pakistan Engineering Company (PECO) are said to have put the government in a bind, as it is unable to take any firm decision about the company’s disposal due to litigation, well informed-sources in the Privatisation Commission told Business Recorder.
The PC Board , in its meeting held on June 3, 2021, was informed that along with the complexity and seriousness of the issues, the following new issues have also surfaced during meetings with MoI&P and PECO: (i) a case in Islamabad High Court (IHC); (ii) default on repayment of an NBP loan; (iii) defaulter' status on Pakistan Stock Exchange; (iv) mutation of land in the name of PECO; (v) non-availability of audited/approved financial statements from June 201 8 onwards; (vi) verification of valuation of assets (including Badami Bagh and Kot Lakhpat Land); (vii) unauthorised JV between MD and a private firm; and (viii) inquiry initiated by SECP for non-compliances on March 26, 2021. On June 23, 2021, Privatization Division briefed the Cabinet Committee on Privatisation about PECO’s case and submitted the following proposals for consideration and approval as recommended by the PC Board: (i) PECO may be removed from the Active Privatization List; (ii) PECO's land may be sold by Privatization Commission in light of Cabinet decisions dated 30-5-1994 and 31-12-2004 and subsequent PECO's Board decision for implementation on 12-3-2005 to settle GoP liabilities; and (iii) Privatization may be considered when the entity is free from inherent issues and encumbrances.
During the ensuing discussion, Industries and Production Division stated that there is a serious dispute going on between the MD and PECO Board which has made the organisation almost dysfunctional. Secretary MoI&P indicated that the government’s share has been reduced to 33% over the years. However, the transaction that reduced the government’s share is under investigation by the National Accountability Bureau (NAB). Therefore, the decision to delist is supported in view of multiple litigations. However, the sale of land is not supported on the pretext that it will fetch a very low price of the asset and would also invite more litigation. Secretary Privatization indicated that they would be required to hire transaction advisor to determine the true value of the asset. However, in the presence of current MD and the Board, Privatization Commission could not proceed further.
The Finance Minister observed that reconstitution of the Board and removal of MD PECO is the first step to proceed further, otherwise it will be kept pending. Adviser to the Prime Minister on Institutional Reforms& Austerity, Dr Ishrat Hussain, stated that there could be legal implications therefore the advice of the Ministry of Law and Justice must be sought first.
The Minister for Industries and Production supported the opinion of Adviser to the Prime Minister on Institutional Reforms& Austerity.
After a detailed discussion, the CCoP constituted a Committee under the convenorship of Secretary Privatization Division and comprising Secretary Industries & Production, Secretary Establishment, Secretary Law & Justice, Chairman SECP and Sr. JS (CF) Finance Division to put up recommendations for removal of major bottlenecks to proceed further including removal of current MD PECO and reconstitution of PECO Board. The opinion of the Law Division must be explicitly reflected in it. The recommendations shall be submitted before the CCoP for a decision.
According to sources, the shares held by NIT were neither out of funds of GoP nor were kept by GoP in custody of NIT. These shares were in fact purchased by NIT out of shares market by investing the funds belonging to unit holders. The relationship between NIT and the unit holders was being governed by a Trust Deed which in general, creates a contract between the Management Company and the Trustee.
The sources maintained that the government cannot interfere with the Trust Funds as these are the funds of the investors and under the provisions of the Trust Deed, can only be utilized in the benefit of the beneficiaries of the Trust.
Under the Shareholders Agreement of 1962, the GoP was authorized to appoint Managing Director/ Chairman and beyond that Government could not interfere or more precisely put any embargo and freeze the sale of any shares out of the Trust Funds. The Trust Funds managed under the scheme are governed under the Trust Act 1882.
Copyright Business Recorder, 2021