In the nomination papers filed by Nawaz Sharif on March 31, 2013 with the Election Commission of Pakistan (ECP), he did not mention in column 8 ('my current occupation') employment with Capital FZE-showing his entitlement of salary of AED 10,000. It really does not matter whether he actually drew salary or not. The disclosure of employment was necessary. Secondly, he retained this position even after taking oath as Prime Minister of Pakistan for the third time on June 5, 2013 (Nawaz Sharif was Chairman of Board of Capital FZE-FZE stands for 'Free Zone Establishment'-from August 7, 2006 to April 20, 2014. The non-disclosure of fact of employment in nomination papers, holding the position in violation of oath of office of Prime Minister and non-payment of tax on emoluments attract Article 63(1)(l) and Article 63(1)(O) of the Constitution of Pakistan.
In the 29-page written reply submitted by Nawaz Sharif in the Supreme Court after the judgement was reserved by the three-member Implementation Bench, it is claimed that fact of Residence Visa (Iqama) was disclosed through attaching a copy of passport as "there was no separate column in the nomination forms for any such information to be provided by the candidate contesting the election". This claim is incorrect. Column 8 was for this purpose and the fact of employment should have been mentioned there. This act of concealment of employment is also evident from the fact that bank account maintained in the UAE by Nawaz Sharif as necessary requirement for obtaining Iqama as Chairman was also not disclosed. The claim made in the written reply that Nawaz Sharif was neither a shareholder nor a director or a secretary of Capital FZE may be correct but undeniably he was an employee as Chairman of Board.
Whether an individual or a company, a single shareholder can register a Free Zone Establishment (FZE) in Dubai's Jebel Ali Free Zone (Jafza). An FZE is essentially a Limited Liability Company within the Free Zone. FZCo is essentially a Limited Liability. Partnership within the Free Zone, with the liabilities of the company is limited to the paid up capital. A FZCo has a legal personality distinct from that of its shareholder and it has the capacity, rights and privileges of a natural person.It is claimed in the reply that the post of Chairman of Board of Capital FZE was ceremonial. This is totally incorrect. As an employee, Chairman under the UAE corporate law [Articles 3, 4, 5 and 12 of the Governance Rules)] has additional duties as compared to directors that include: "ensuring efficiency of the board's discussions and performance; having prime responsibility for the drafting of agendas for board meetings; maintaining good communication between the board and the shareholders; and promoting positive relations between the non-executive and executive directors and ensuring the former's participation; and non-executive directors have specific duties, including those requiring them to show independence in board meetings; give priority to the interests of the Company and shareholders in the event of a conflict of interest; participate on the audit committee of the Company; follow up on the Company's performance, monitor achievement of performance objectives and draft associated reports; and enhance the performance of the board and committees through use of their individual skills and diversity."
Before accepting the post of Chairman, Nawaz Sharif was to obtain a briefing on the history and strategy of the Company; understand the major drivers of performance and key performance indicators; get a SWOT (Strengths, Weaknesses, Opportunities and Threats), analysis of the Company; get a background/resume on the other directors and key members of the management team; understand relationships and roles within the management team; understand who were the key suppliers or customers; understand the status of relationships with employees and unions; obtain an industry briefing; get the auditors' input and perceptions on historical accounts and disclosure issues; and understand key legal relationships, any past or current litigation and issues with compliance and regulators. How could his role have been ceremonial and unpaid? The salary was also paid in his account under the law otherwise Iqama could not have issued.
As resident (stay from 01-07-2012 to 30-06-2013 was more than 182 days) in tax year 2013, Nawaz Sharif was also supposed to offer for tax his total world income, including salary from Capital FZE, whether received or not as per the following provisions of the Income Tax Ordinance, 2001:
Section 11(5):
"The income of a resident person under a head of income shall be computed by taking into account amounts that are Pakistan-source incomeand amounts that are foreign-source income".
[Note: In Tax Year 2013, Nawaz Sharif was liable to tax both for Pakistan and foreign-source incomes being resident in Pakistan and under section 69(3) he had to offer salary for tax that was made available to him]
Section 102:
"Any foreign-source salary received by a resident individual shall be exempt from tax if the individual has paid foreign income tax in respect of the salary".
[Note: Nawaz Sharif admittedly did not pay any tax in the UAE and hence could not claim exemption in Pakistan]
The non-disclosure of salary income attracts disqualification as per ratio laid down by Supreme Court in Muhammad Siddique Baloch v Jehangir Khan Tareen [PLD 2016 Supreme Court 97] that "a person who is untruthful or dishonest or profligate has no place in discharging the noble task of law making and administering the affairs of State in government office".
In the case reported as Hameed Akbar Khan vs. Election Appellate Tribunal and others [PLD 2013 Lahore 548], while interpreting Article 63(1)(O) of the Constitution of Islamic Republic of Pakistan,1973, which envisages a default in payment of government dues and utility expenses for over a period of six months at the time of filing of nomination papers, it was held that if the dues were paid before filing of the nomination papers then such disqualification is cured but nothing was paid till filing of nomination papers and payment of such dues consequent to filing nomination papers, cannot cure the default. It means that default in the case of Nawaz Sharif is not curable as he did not discharge his tax liabilities as mentioned above till March 31, 2013- the day he filed his nomination papers.
(The writers, Advocates and partners in Huzaima, Ikram & Ijaz, are Adjunct Faculty at Lahore University of Management Sciences)