Winding Up of Utility Stores Corporation

In Muzammal Rafiq vs. Federation of Pakistan (2024 LHC 3875), the Lahore High Court addressed a petition challenging the Federal Government’s decision to wind up the Utility Stores Corporation of Pakistan (USC). The petitioners contended that the decision violated their fundamental rights, as well as the rights of employees of the USC, and sought a declaration that the Government’s decision to wind up a profitable entity was unlawful and should be set aside.

Background:

The petitioners, including employees of the USC, challenged the Government's restructuring plan, which involved winding up the USC as part of a broader effort to downsize state-owned enterprises. They argued that the USC had been operating profitably and provided essential services to the public, particularly by offering subsidized goods to low-income individuals. The petitioners also claimed that the decision to wind up the USC violated the procedures set out under the Companies Act, 2017, and that it threatened the livelihood of thousands of employees.

Key Issues:

Legality of the Government's Decision to Wind Up USC: Whether the decision to wind up the USC was made in accordance with the law, specifically under the Companies Act, 2017.

Scope of Judicial Review in Policy Matters: Whether the High Court could interfere with the Government’s policy decisions regarding the restructuring and rightsizing of state-owned enterprises.

Impact on Employees and Public Interest: Whether the winding up of the USC would violate the fundamental rights of the employees or the general public, who benefited from the subsidies offered by the USC.

Court's Analysis:

Legality of the Decision: The Court held that the Government's decision to wind up the USC was a policy matter and did not violate any specific provisions of the Companies Act, 2017. The Court noted that the winding-up process had not yet been fully implemented and that no adverse action had been taken against the employees. As a result, the petition was deemed premature.

Scope of Judicial Review: The Court reiterated the established principle that judicial review of policy decisions is limited to examining whether the decision violates fundamental rights or exceeds legal authority. It emphasized that courts should not act as appellate bodies over policy decisions, particularly when such decisions are based on economic considerations and public welfare.

Employee Rights and Public Interest: The Court recognized the concerns raised by the petitioners regarding the impact of the decision on employees and the general public. However, it noted that since no adverse action had been taken against the employees, their rights had not yet been infringed. The Court advised that employees could seek remedies under the law if their rights were affected once the policy was implemented.

Court's Conclusion: The Lahore High Court dismissed the petition, holding that the Government's decision to wind up the USC was a policy matter and did not warrant judicial intervention at this stage. The Court found no violation of the law or the Constitution and ruled that the petitioners could pursue their legal remedies if their rights were impacted during the implementation of the policy.

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