Huzaima Bukhari and Dr Ikramul Haq

Nawaz Sharif, his offspring, son-in-law, Muhammad Safdar, and father-in-law of younger daughter, Muhammad Ishaq Dar, in multiple review petitions filed against the decisions of Supreme Court of April 20, 2017 and July 28, 2017, in the Panama Case, raised many legal points. The five-member bench, constituted after objection on three-member bench on September 12, 2017, after three days’ of continuous hearings, unanimously rejected all the review petitions on September 15, 2017 with detailed reasons to be recorded later on. With the dismissal order on review petitions, the matter has attained finality. Using the pretext of pendency of review petitions, Nawaz Sharif, his children, son-in-law and sitting Finance Minister, Ishaq Dar, decided not to appear before the National Accountability Bureau (NAB), even when no restraining order was secured. The NAB, nevertheless, filed references as directed by Supreme Court. The Accountability Court in the meantime has fixed one reference in Flagship Case for September 19, 2017 and also summoned Ishaq Dar on September 20, 2017 in the reference filed against him. NAB also informed the Supreme Court on September 15, 2017 that within one week it will file appeal in Hudabiya Papers Mills against the order of the Lahore High Court as approval to this effect has been given by the Chairman.

On September 12, 2017, a story in an English newspaper suggested that Supreme Court committed an error by citing definition of the term “asset” from the Black Law Dictionary (which allegedly was taken from Marketing Dictionary published under A & C Black series and not from the Black Law Dictionary) and that “clearly, the apex court judgment was in contradiction with the Section 12 and 32(1) of the ITO 2001. In addition to clear definition of salary in section 12, the ITO 2001 gives a choice to citizens to adopt any accounting system and thus an adverse decision could not have been given. A citizen is not at all supposed to go through dictionaries to find out definition of financial terms and supposed to follow the law of the land and prevalent practices. Ironically, the real Black’s Law Dictionary not only supports all the concepts given in Pakistani tax law but also raises serious questions on the unique concept given in Pakistani apex court July 28 judgment”.

The claim by the author of story regarding taxation of salary and method of accounting is fallacious inter alia for the following:

1. Section 32(1) is subject to the Ordinance. It means that if any provision requires taxation of salary on due basis then that provision will apply. Section 32(1) cannot override the principles of taxation of salary income as already explained in these columns [SC: jurisdiction & justice, Business Recorder, August 25 and August 27, 2017 and Punished at last, Business Recorder, August 4, 2017]. The word “received” as used in section 12 has to be read in conjunction with section 69 of the Income Tax Ordinance, 2001, which says:

69. Receipt of income.– For the purposes of this Ordinance, a person shall be treated as having received an amount, benefit, or perquisite if it is–

(a) actually received by the person;

(b) applied on behalf of the person, at the instruction of the person or under any law; or

(c) made available to the person.

‘Receipt’ of income is defined in section 69 and since section 32(1) is subject to the Ordinance, section 69(c) will apply which purports to tax salary when it is made available even if not withdrawn.

2. As resident, Nawaz Sharif was legally bound to offer for tax his total world income, including salary from Capital FZE, whether received or not as per 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 income and amounts that are foreign-source income”.

[Note: From Tax Year 2008 onwards, Nawaz Sharif was liable to tax both for Pakistan and foreign-source incomes being resident in Pakistan and under section 69(c) he had to offer salary from FZE Capital 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 UAE and hence could not claim exemption in Pakistan]

3. The non-disclosure of salary income attracted disqualification as per ratio laid down by Supreme Court in Muhammad Siddique Baloch v Jehangir Khan Tareen [PLD 2016 Supreme Court 97] holding 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”.

4. From Tax Year 2008 onwards, Nawaz was bound by law to offer for tax salary income from Capital FZE, on due or receipt basis, whichever matured earlier [section 12 read with section 69 of the Income Tax Ordinance, 2001]. He did not declare any such income in his tax returns and in nomination papers filed by him on March 31, 2013 omitted the fact of employment. He also concealed the bank account maintained in the UAE. Judgement of Supreme Court for disqualifying Nawaz Sharif is based on a report of Joint Investigation Team (JIT) which was confronted to him and he also filed a reply. Those claiming that no case is proved against Nawaz Sharif should read this part of JIT report which says:

“Further, evidence thus procured reveals that Mian Nawaz Sharif, Respondent No 1, was the chairman of the board for Capital FZE from August 7, 2006 until April 20, 2014 at a salary of AED 10,000. Further, evidence revealed that this salary was revised on February 02, 2007 vide Employment Contact Amendment-Form 9, duly signed by Respondent No 1, filed with JAFZA. On the basis of this employment Respondent No 1 was able to procure “Iqamah” dated 5-7-2009 and valid up to 4-6-2015 to work and reside in Dubai (Annex G)”.

5. In its order of July 28, 2017, the Supreme Court noted that Nawaz Sharif “denied withdrawal of salary, but payment of salaries to all employees electronically, through the Wage Protection System, under Ministerial Resolution No. (788) for 2009 on Wage Protection used by United Arab Emirates Ministry of Labour and Rules 11(6) and 11(7) of the Jebel Ali Free Zone Rules, would belie his stance”. Rule 11(7) says:

A Client shall be registered in WPS and shall transfer the Employees’ salaries through the WPS to confirm that all emoluments due have been paid between the 1st and 15th of every month. A Client failing to register in the WPS, as required by Jafza, may suffer penalties. A Client is required to keep certified copies of certificates of payments - duly signed by both the Employee and the authorised signatory of the Client approved by Jafza. A Client shall have available for inspection such certified copies of the certificate of payment.

6. Capital FZE did not produce evidence in Supreme Court that it was penalized for violating the above rule by not paying salary to Nawaz Sharif. If salary was paid but not withdrawn by Nawaz Sharif, it could not escape taxability under section 12 read with section 69 the Income Tax Ordinance, 2001 and closing balance was to be declared on asset side in wealth statement and in nomination papers. If salary was not paid by Capital FZE, it was violation of law of the UAE.

7. It is also worth mentioning that the deadline for implementing WPS for firms with more than 100 workers was before November 30, 2009, companies with a workforce of 15 to 99 by February 28, 2010 and companies with less than 15 workers before May 31, 2010. Companies failing to meet the said deadlines were to be denied new work permits. It is evident from record that Nawaz Sharif was issued second Iqamah [7104231/201/06 expiring on June 4, 2015]—earlier one was issued on July 6, 2009 that expired on July 5, 2012. Had salary not been transferred to his account, Capital FZE could not get second Iqamah for him.

Before further discussing the rejection of review petitions, the verdict of the Supreme Court (relevant part) is worth reproducing:

“13. The next question emerging for the consideration of this Court is whether respondent No. 1 as a Chairman of the Board of Capital FZE is entitled to salaries and whether the salaries if not withdrawn being receivable as such constitute assets which require disclosure in terms of Section 12(2) of the Representation of the People Act, 1976 and whether his failure to disclose them would entail his disqualification? The word asset has not been defined in the Representation of the People Act, 1976, (“ROPA”), therefore, its ordinary meaning has to be considered for the purposes of this case. The word asset as defined in Black’s Law Dictionary means and contemplates “an asset can be (i) something physical such as cash, machinery, inventory, land and building (ii) an enforceable claim against others such as accounts receivable (iii) rights such as copyright, patent trademark etc (iv) an assumption such as goodwill”. The definition of the word receivable as used in the above mentioned definition as given in the Black’s Law Dictionary is also relevant which means and contemplates “any collectible whether or not it is currently due. That which is due and owing a person or company. In book keeping, the name of an account which reflects a debt due. Accounts receivable, a claim against a debtor usually arising from sales or services rendered”. The word ‘receivable’ also has similar ring and connotation according to Business Dictionary which reads as under:-

“Accounting term for amount due from a customer, employee, supplier (as a rebate or refund) or any other party. Receivables are classified as accounts receivable, notes receivable etc and represent an asset of the firm”.

The definitions reproduced above leave no doubt that a salary not withdrawn would nevertheless be receivable and as such would constitute an asset for all legal and practical purposes. When it is an asset for all legal and practical purposes, it was required to be disclosed by respondent No. 1 in his nomination papers in terms of Section 12(2) of the ROPA. When we confronted, the learned Sr. ASC for respondent No. 1, whether the said respondent has ever acquired work permit (Iqamah) in Dubai, remained Chairman of the Board of Capital FZE and was entitled to salary as such, his reply was in the affirmative with the only addition that respondent No. 1 never withdrew any salary. This admission was reiterated in more categorical terms in the written arguments filed by the learned Sr. ASC for respondent No. 1 in the words as under:-

“So far as the designation of Respondent No. 1 as Chairman of the Board is concerned, this was only a ceremonial office acquired in 2007 when the respondent No. 1 was in exile, and had nothing to do with the running of the Company or supervising its affairs. Similarly, the respondent No. 1 did not withdraw the salary of AED 10,000”. Thus, the salary shown in the Employment Contract in effect never constituted an “asset” for the respondent No. 1.”

It has not been denied that respondent No. 1 being Chairman of the Board of Capital FZE was entitled to salary, therefore, the statement that he did not withdraw the salary would not prevent the un-withdrawn salary from being receivable, hence an asset. When the un-withdrawn salary as being receivable is an asset it was required to be disclosed by respondent No. 1 in his nomination papers for the Elections of 2013 in terms of Section 12(2)(f) of the ROPA. Where respondent No. 1 did not disclose his aforesaid assets, it would amount to furnishing a false declaration on solemn affirmation in violation of the law mentioned above, therefore, he is not honest in terms of Section 99(1)(f) of the ROPA and Article 62(1)(f) of the Constitution of the Islamic Republic of Pakistan”.

In the judgement of Supreme Court, the conclusion is: “When the un-withdrawn salary as being receivable is an asset it was required to be disclosed by respondent No. 1 in his nomination papers for the Elections of 2013 in terms of Section 12(2)(f) of the ROPA. Where respondent No. 1 did not disclose his aforesaid assets, it would amount to furnishing a false declaration on solemn affirmation in violation of the law mentioned above, therefore, he is not honest in terms of Section 99(1)(f) of the ROPA and Article 62(1)(f) of the Constitution of the Islamic Republic of Pakistan”.

The disqualification of Nawaz Sharif was perhaps warranted on the following four counts (though Supreme Court’s order does not take into account any of these):

1. Nawaz Sharif was guilty of concealing the fact of employment with Capital FZE in the nomination paper as in column 8 [‘My present occupation’] he mentioned only: “politician and agriculturist”. He concealed the fact of employment with Capital FZE.

2. For continuing the employment with Capital FZE even after taking oath of Prime Minister on June 5, 2013.

3. For tax evasion as he was bound to declare salary income on due basis under section 12 read with section 69 of the Income Tax Ordinance, 2001; and

4. Concealing the bank account maintained in the UAE in which Capital FZE transferred salary etc [In ‘Annex G’ (‘JAFZA & MNS Iqamah’) of JIT report there is evidence of transfer of six amounts on March 6, 2013, April 10, 2013, May 7, 2013, June 11, 2013, July 1, 2013 and August 11, 2013]. The claim by Nawaz Sharif that no money was ever received is thus incorrect, although his counsel had argued that the former prime minister did not operate that account.

The question is whether the Supreme Court committed any material error, floating on the face of the record, that calls for review or not. In fact, the Supreme Court could have disqualified him on much stronger grounds than what is written in the order. Nawaz Sharif should have been disqualified on four counts mentioned above. The sole ground cited by Supreme Court is concealment of asset: receivable salary that remained un-withdrawn. The order could have been more elaborate, taking into account the provisions of Income Tax Ordinance, 2001 (as discussed above), misdeclaration in the column 8 of Nomination Papers filed on March 31, 2013 and asking the JIT to identify the account in the UAE which was not declared.

The moot issue vis-à-vis review petitions was whether the basis of disqualification would change merely for wrong quotation of the term ‘asset’ from a particular dictionary that is not from Black Law Dictionary but from somewhere else. The incontrovertible fact remains that the violation of Income Tax Ordinance, 2001 and ROPA was made. The taxation of salary, as explained above, was warranted by provisions of the Income Tax Ordinance, 2001. The detailed order of dismissing all the review petitions may entail further findings strengthening the case for disqualification, as many points discussed above escaped mention in the order of July 28, 2017.

The Supreme Court has authority to review its orders under Article 188 of the Constitution read with Order XXVI of the Supreme Court Rules, 1980. Article 188 says: The Supreme Court shall have power, subject to the provisions of any act of Majlis-e-Shoora (Parliament) and of any rules made by the Supreme Court, to review any judgment pronounced or any order made by it. There are a number of judgements of Supreme Court that explain the scope of Article 188 read with relevant rules. Some are discussed below:

Khalid Iqbal and 2 others v Mirza Khan and others PLD 2015 SC 50

“The Supreme Court has been conferred the powers to review its judgment or order under Article 188 of the Constitution which is subject not only to the provisions of any Act of Parliament but also to the provisions of any Rule made by the Supreme Court.

A regular judicial order passed by a Bench of the Supreme Court, after hearing the Counsel for the parties, can only be reviewed or set aside in Review jurisdiction as provided in Order XXVI of the Supreme Court Rules, 1980, which Rules are framed under Article 191 of the Constitution. A party has the right to file Review Petition as per the provisions of Article 188 of the Constitution, in terms of Order XXVI Rule 1 of the Supreme Court Rules 1980, subject to all the limitations prescribed by law including the parameters of the review jurisdiction laid down by this Court. Order XXVI [Rule 9] of the Supreme Court Rules mandates that “After the final disposal of the first application for review no subsequent application for review shall lie to the Court and consequently shall not be entertained by the Registry”. The remedy of Review Petition cannot be sought as a matter of right, as it is a discretionary relief”.

In a recent case announced on January 22, 2016 [Civil Miscellaneous Application No. 125 of 215 and 8635 of 2015], after accepting the review petition, it was held by Supreme Court that:

“Scope of the review, thus is limited and is confined only to error apparent on the face of the record or floating on the surface of the judgment which, if noticed earlier, would have direct bearing on the conclusions drawn by the Court….. In such view of the matter there is an apparent error on the face of record. We therefore, allow these review petitions, set aside the judgment dated 19.08.2015. The Civil Petitions and the Constitution Petition shall be listed for hearing afresh”.

In another case [CMA No. 5144 OF 2011 & Civil Review Petition No.129/2010 in Constitution Petition No. 76/2007 & CMAs No. 1427/2011 etc], it was observed:

“While dismissing the review petition, we reiterate the earlier view of this Court in Justice Khurshid Anwar Bhinder v. Federation of Pakistan (PLD 2010 SC 483) wherein at Page 526 it was held as follows:-

“A review is by its very nature not an appeal or a re-hearing merely on the ground that one party or another conceives himself to be dissatisfied with the decision of the court, but that it should not only be granted for some sufficient cause akin to those mentioned in Order XLVII, Rule 1 of the Code of Civil Procedure, the provisions thereof incorporate the principles upon which a review was usually granted by Courts of Law in England. The indulgence by way of review may no doubt be granted to prevent remediable injustice being done by a court of last resort as where by some inadvertence an important statutory provision has escaped notice which, if it had been noticed, might materially have affected the judgment of the court but in no case should a rehearing be allowed upon merits.”

In Mohtarma Benazir Bhutto v President of Pakistan and 2 others PLD 2000 SC 77, it was held that:-

1. Where a conscious and deliberate decision has been made with regard to the nature of orders which it is empowered to pass under a provision of law only, because another view with regard thereto is canvassed cannot and does not constitute a ground for review.

2. A review can lie on the ground of an error only if it is material to the conclusion reached in the judgment sought to be reviewed.

3. The exercise of review jurisdiction does not mean a rehearing of the matter and as finality attaches to the orders, a decision, even though it is erroneous per se, would not be a ground to justify is review. Accordingly, in keeping with the limits of the review jurisdiction, it is futile to reconsider the submissions which coverage on the merits of the decision.

4. Before an error can be a ground for review it is necessary that it must be one which is apparent on the face of the record, that is, it must be so manifest so clear that no Court could permit such an error to remain on the record. It may be an error of fact or of law, but it must be an error which is self-evident and floating on the surface and does not require any elaborate discussion or process of ratiocination.

5. Review of the order of Supreme Court on the ground that after the passing of the orders by Supreme Court there has been improvement in the status of the petitioner is not valid ground for review.

6. A review petition would not lie on the grounds which were already advanced at the hearing of appeal or petition or were attended to by the Court.

7. Review petition cannot be allowed to be pressed on the basis of material available and not produced earlier but produced for the first time in review.

8. Contention not raised at the hearing of petition for leave to appeal or appeal cannot be allowed to be raised in review proceedings.

9. Review proceedings cannot partake re-hearing of a decided case. Therefore, if the Court has taken a conscious and deliberate decision on a point of law or order cannot be obtained on the grounds that the Court took an erroneous view or that another view on reconsideration is possible.

10. Review also cannot be allowed on the ground of discovery of some new material, if such material was available at the time of hearing of appeal or petition but not produced. A ground not urged or raised at the hearing of petition or appeal cannot be allowed to be raised in review proceedings. Only such errors in the judgment/order would justify review, which are self-evident, and have a material bearing on the final result of the case.

As discussed above, this was not a fit case of review. In fact, many legal provisions and facts could not find place in the order to justify disqualification more forcefully. However, the decision in review petitions, in itself cannot strengthen the future of democracy and promote transparency in governance in Pakistan. This is not in the hands of Supreme Court but in the hands of people who alone can reject the corrupt (from whichever party they may belong) through votes. One thing that has clearly emerged so far is that as long as state institutions remain subservient to rulers of the day, we cannot effectively check corruption and plundering of national wealth. People can enjoy the fruits of representative rule that is at the core of democracy, by using their vote power and if the fail to do so they would be the sufferers.

All over the world, the main issue arising from the Panama Papers and other leakages is lack of moral standards for those who represent people and hold public office. They cannot and should not hide their financial matters behind laws of secrecy and privileges. In this context, it is necessary for all the elected representatives to come forthwith and make public the sources for their life of luxury. Most of the elected members have a fleet of expensive cars (besides using official ones) and palatial bungalows. These are either not shown in their asset declarations or claimed to have been received as gifts in declarations filed before Election Commission of Pakistan.

Many elected representatives have an army of servants and guards. They must tell the public who are the donors of gifts that fund their luxuries. Such donors are certainly not doing so as charity! Many members own huge agricultural lands and have investments in industrial units like sugar, textile and paper mills. Many have properties outside Pakistan. Any elected member, who is beneficiary of “wealth” and “gifts” from family members or friends at home or abroad, must explain the sources and modes of these “financial favours”. This is the requirement of different laws like Representation of People Act, 1976 and Income Tax Ordinance, 2001.

In the wake of judgement of Panama case and dismissal of review petitions, the assets of politicians, generals, judges and high-ranking civil officers should also be made public on priority basis vis-à-vis their tax declarations. The heads of NAB, Federal Board of Revenue, Federal Investigation Agency, State Bank of Pakistan etc should also explain to the public the reasons behind inefficiency of their respective organisations in countering unlawful outflows/inflows, tax evasion and corruption.

The majority of the members of Parliament have declared shamelessly low incomes as evident from Tax Directories for 2013, 2014, 2015 and 2016 published by FBR. The elected members, politicians, public office holders, bureaucrats, generals and judges should be investigated by an independent commission, comprising experts and men of impeachable integrity, as to ownership of their assets (in own name, family, relatives and benami) and style of living vis-à-vis their declared incomes. This process alone will ensure true accountability in Pakistan and not mere judgement in any case by the Supreme Court. Once the rich and mighty are taken to task, all citizens will automatically obey the laws and pay their taxes honestly and diligently.

(The writers, lawyers and partners in Huzaima, Ikram & Ijaz, are Adjunct Faculty at Lahore University of Management Sciences)