WATER AND POWER DEVELOPMENT AUTHORITY VS EXCISE AND TAXATION DEPARTMENT, GOVERNMENT OF THE PUNJAB, 2017 PTD-LAHORE-HIGH-COURT-LAHORE 517 (2016)

2017 P T D 517

[Lahore High Court]

Before Shahid Karim, J

WATER AND POWER DEVELOPMENT AUTHORITY through Director Services and Estates

Versus

EXCISE AND TAXATION DEPARTMENT, GOVERNMENT OF THE PUNJAB through Director General and 4 others

W.P. No.25605 of 2014, decided on 02/12/2016.

(a) Punjab Urban Immovable Property Tax Act (V of 1958)---

----S.16(4)---Constitution of Pakistan, Arts.165, 98, 157, 90, 154, 153 & Fourth Sched.---Water and Power Development Authority Act (XXXI of 1958) Ss. 3, 21 & Preamble---Constitutional exemption of certain public property from taxation under Art. 165 of the Constitution---Property owned by, and in use of, Water and Power Development Authority ("WAPDA") as an instrumentality of the Federal Government---Test to determine whether benefit of Art. 165 of the Constitution should be extended to an instrumentality of the Federal Government---Constitutional mandate for functions performed by and authority over, WAPDA---Scope---Petitioner/Water and Power Development Authority ("WAPDA"), impugned notice under S. 16(4) of the Punjab Urban Immovable Property Tax Act, 1958 wherein it was held liable for payment of Provincial property tax---Contention of the petitioner WAPDA was that, per Art. 165 of the Constitution, as an instrumentality of the Federal Government, it was entitled to exemption in respect of property tax levied by the Provincial Government---Validity---For the purposes of invoking Art. 165 of the Constitution, what had to be shown was that the instrumentality owning property performed functions of the Federal Government, and that it was a virtual monopoly and a department of the Federal Government---Provisions of the Constitution clearly showed that it was the sovereign function of the Federal Government to construct or cause to be constructed hydroelectric or thermal power installations and said function was exclusively devolved upon the Federal Government by the Constitution and must be performed by it to the exclusion of all others---Although, the Provinces had a limited scope of activity in the area however, scale of construction of hydroelectric and thermal power was unique and so enormous that no other entity including a Province could compete with WAPDA in such activity ---WAPDA therefore, exercised the sovereign powers of the Federal Government in the performance of its functions in terms of Art. 157 read with Art. 98 of the Constitution and was for all practical purposes, a department of the Federal Government---Part II of the Fourth Schedule to the Constitution referred to WAPDA as being administrated and managed by the Federal Government and there could be no clearer expression of the intention in no less a document than the Constitution that WAPDA was administered and managed by the Federal Government, which also was the intention that was also gathered from an entire reading of the Water and Power Development Authority Act, 1958---Constitutional provisions relating to the power of Federal Government to construct in any province or cause to be constructed inter alia, hydroelectric or thermal power installations were to be performed by WAPDA as an authority of the Federal Government and thus WAPDA performed a Constitutional function and had exclusively been set up to undertake such function by the Federal Government under the mandate of the Constitution---Per the Constitutional mandate as expounded in Art. 154 of Constitution, Council of Common Interests (CCI), formulated and regulated policies in relation to matters in Part II of the Federal Legislative List and exercised supervision and control over related institutions---WAPDA, therefore, for all its independence as a body corporate and an instrumentality of the Federal Government, was not only subject to the administrative and management control of the Federal Government but was also subject to the CCI which exercised supervision and control over it and to such extent, the executive power of the Federal Government stood abridged and curtailed and had come to vest in the CCI---WAPDA was therefore, not an ordinary instrumentality but was a Constitutional public utility provider and, the mere fact that the said authority had been set up by a statute did not detract from the said conclusion to be drawn---Impugned notices / challan forms demanding payment of property tax from WAPDA were held to be issued without lawful authority and of no legal effect, and furthermore the Provincial Government was permanently restrained from imposing or charging property tax on WAPDA---Constitutional petition was allowed, accordingly.

National Bank of Pakistan v. Executive District Officer (Revenue) Multan and another 2015 CLC 1618; Union Council Ali Wahan, Sukkur v. Associated Cement (Pvt.) Ltd. 1993 SCMR 468; Province of N.-W.F.P. through Secretary Local Government and Rural Development Peshawar and others v. Pak Telecommunication through its Chairman and others PLD 2005 SC 670; Islamabad and another v. WAPDA and another PLD 2014 SC 766; Karachi Development Authority v. Central Board of Revenue through Members Central Excise and Land Customs, Islamabad and others 2005 PTD 2131; Messrs Gadoon Textile Mills and others v. WAPDA and Federation of Pakistan 1997 SCMR 641; A Biography of Pakistan Federation, Unity in Diversity by Mian Raza Rabbani; Federation of Pakistan v. United Sugar Mills Ltd. PLD 1977 SC 397; Muhammad Nawaz Sharif v. Federation of Pakistan PLD 1993 SC 473 and Corpus Juris Secundum, Volume 81A rel.

(b) Words and phrases ---

----"Sovereignty"---Meaning and concept explained.

Major Law Lexicon, vol. 6, by P. Ramanatha Aiyar; Sovereign Power in Words and Pharases volume 39A (West Publishing Co.); Harold J. Laski, in The Foundation of Sovereignty and other Essays (1921) and The Grammar of Politics, (1941) rel.

(c) Words and phrases ---

----"Sovereign power"---Meaning and concept, explained.

Sovereign Power in Words and Pharases Volume 39A (West Publishing Co.) rel.

(d) Water and Power Development Authority Act (XXXI of 1958)---

----S.3---Constitution of Pakistan, Arts.165, 98, 157, 90, 154, 153 & Fourth Sched.---Constitution of the Authority as instrumentality of the Federal Government---Object and scope.

Umer Sharif for Petitioners.

Nasar Ahmad, D.A.G. for Respondents.

Anwar Hussain and Muhammad Jamal ud Din Mamdot, A.A.Gs. along with Abid Zia, Law Officer.

Date of hearing: 9th November, 2016.

JUDGMENT

SHAHID KARIM, J.---This petition under Article 199 of the Constitution of Islamic Republic of Pakistan, 1973 ("the Constitution") seeks the following prayer:--

"It is, therefore, most respectfully prayed that instant writ petition may very kindly be accepted and;

a)The act and action of the respondents regarding sending different notices/challan forms regarding property tax to the petitioner may kindly be declared as illegal, unlawful and without jurisdiction;

b)The letter dated 03.08.2011 (Annex-A) issued by the respondent No.3 may kindly be declared as illegal and unlawful and the same may kindly be set aside accordingly.

c)The respondents may kindly be directed to implement the directions of the Federal Government issued through O.M dated 19.02.2013 (Annex-B) in letter and spirit.

d)By setting aside letter dated 02.10.2013 (Annex-D) the respondents be directed to refund the property tax already received within one month, for which the claim has already been lodged.

e)The petitioner/WAPDA may kindly be declared as exempted from payment/levy of property tax under Article 165 of the Constitution of Islamic Republic of Pakistan, 1973."

Facts and Structure of Law:

2.The facts are refreshingly simple. The challenge in this petition is to the notices at Annexure E/I-4 sent to the petitioner in terms of section 16(4) of the Punjab Urban Immovable Property Tax Act, 1958. The notices require the petitioner to make over an amount specified in the notices as property tax. WAPDA, which is a Federal Government instrumentality, disputes the payment of property tax, seeks to its aid the provisions of Article 165 of the Constitution and thereby claims exemption in respect of the tax which is sought to be imposed and demanded by the respondents.

3.There has been a healthy body of case law on the jurisprudence around Article 165 of the Constitution and the claim of exemption in terms thereof by the instrumentalities of the Federal Government. Under varying circumstances corporations and industries of the Federal Government have claimed their properties to be the properties of the Federal Government and thus entitled to the grant of exemption in terms of Article 165 on the property of these corporations and industries.

4.Water and Power Development Authority ("WAPDA") has been set up under section 3 of the Pakistan Water and Power Development Authority Act, 1958 ("the Act, 1958"). It is not necessary at this juncture to refer to the various provisions of this Act, which will be adverted to in the latter part of this judgment. Suffice to say that by fiction the Authority has been assigned the status of a body corporate entitled to hold and dispose of property and having perpetual succession and a common seal. It can also sue and be sued in the name of the Authority. The substantial provisions relating to the Authority and the functions that it carries out on behalf of the Federal Government give an inkling into the precise role of the Authority and its setting in the Constitutional scheme of things. We can begin the discussion by referring to Article 157 of the Constitution, which reads as under:--

"157. Electricity.--- (1) The Federal Government may in any Province construct or cause to be constructed hydro-electric or thermal power installations or grid stations for the generation of electricity and lay or cause to be laid inter-Provincial transmission lines.

Provided that the Federal Government, prior to taking a decision to construct or cause to be constructed, hydro-electric power stations in any Province, shall consult the Provincial Government concerned.

(2) The Government of a Province may--

(a)to the extent electricity is supplied to that Province from the national grid, require supply to be made in bulk for transmission and distribution within the Province;

(b)levy tax on consumption of electricity within the Province;

(c)construct power houses and grid stations and lay transmission lines for use within the Province; and

(d)determine the tariff for distribution of electricity within the Province.

(3)In case of any dispute between the Federal Government and a Provincial Government in respect of any matter under this Article, any of the said Governments may move the Council of Common Interests for resolution of the dispute.

5.Subsequently, amendments in Article 157 were brought about by the Constitution (18th Amendment), Act, 2010. Therefore, by Article 157, it is the function of the Federal Government to construct hydro-electric or thermal power installations or grid stations for the generation of electricity and lay or cause to be laid Inter-Provincial transmission lines. It is common ground between the parties that the only object and function of WAPDA that remains is the one delineated in Article 157 and the distribution and other functions have been carved out to distribution companies etc. and the role of WAPDA is merely confined to water resources and hydro generation. Item No.3 in Part II of the Fourth Schedule of the Constitution is an entry relating to subjects on which the Parliament is empowered to enact laws in terms of Article 142 of the Constitution. One of the subjects in the said entry includes WAPDA. The subject of WAPDA is also included in the rules of business and more particularly in entry 3A, Item No.30 of Schedule 3 of the rules of business framed by the Federal Government. Article 165 of the Constitution which is the fulcrum of the arguments of the WAPDA as also the Federation and the Province of Punjab reads as under:--

"165. Exemption of certain public property from taxation.---(1) The Federal Government shall not, in respect of its property or income, be liable to taxation under any Act of Provincial Assembly and, subject to clause (2), a Provincial Government shall not, in respect of its property or income, be liable to taxation under Act of Majlis-e-Shoora (Parliament) or under Act of the Provincial Assembly of any other Province.

(2) If a trade or business of any kind is carried on by or on behalf of the Government of a Province outside that Province, that Government may, in respect of any property used in connection with that trade or business or any income arising from that trade or business, be taxed under Act of Majlis-e-Shoora (Parliament) or under Act of the Provincial Assembly of the Province in which that trade or business is carried on.

(3) Nothing in this Article shall prevent the imposition of fees for services rendered.

6.The Federation supports the stance of WAPDA and through the Deputy Attorney General has made a statement that the property in question i.e. WAPDA House is, in fact, the property of the Federal Government and, therefore, the Federal Government seeks an exemption from property tax on the said property. It may be stated that the issue relates to and concerns WAPDA House which is situated in Lahore and which is an office block which houses the main offices of WAPDA and is also the premises from which the Authority conducts its operations and manages its affairs. It is the jewel in the crown of WAPDA and in case the property is made subject to property tax, WAPDA will not be able to claim exemption for the other properties which vest in it.

Precedents on Art.165 of Constitution:

7.As adumbrated, there is cluster of case law of the superior courts which has dilated upon and determined with varying degrees and nuances the issue relating to exemption of the corporations and industries of the Federal Government and in some of the cases the question related to the exemption to properties of WAPDA as well. In a recent judgment by a Single Bench of this Court, National Bank of Pakistan v. Executive District Officer (Revenue) Multan and another (2015 CLC 1618) the entire landscape of the case law has been discussed and the following conclusions were drawn from a survey of the case law:--

22. From a resume of the case law referred to above it can be culled out as under:-

I.The benefit under Article 165 of the Constitution, is not limited to property owned directly by the Federal Government merely but also extends to properties owned by the Federal Government through its instrumentalities and body corporates.

II.The courts have, in case of doubt, pierced the veil of incorporation to ascertain the real ownership and control of a corporation for the purpose of Article 165 of the Constitution. However, there must exist justifiable reasons for making use of this doctrine.

III.A corporation whose entire shareholding is owned by Federal Government is included within a sweep of Article 165 of the Constitution. This, too, must cross the threshold set by Associated Cement case.

IV.Contrarily, a corporation which is not wholly owned by the Federal Government and part of the shareholding vests in other entities and persons as well, will not be extended the benefit.

V.A corporation or instrumentality of the Federal Government having a monopoly in the area of its operation, will be deemed a department of the Government and hence entitled to the exemption under Article 165 of the Constitution.

VI.A Government Corporation conducting commercial activities in the normal course of business and competing with similar entities cannot be treated preferentially by extending them the benefit.

23. It may be noticed from a reading of the rulings of the Supreme Court which have been cited above that Associated Cement case is a common strand which runs through every judgment which has been rendered by the Supreme Court of Pakistan following the Associated Cement judgment. That case has set the tone for future jurisprudence, too. The Associated Cement case, therefore, is the law as regards the applicability of the exemption under Article 165 of the Constitution to instrumentalities and corporations claiming to be owned by the Federal Government.

8.It was further held in that judgment:--

" . The Supreme Court of Pakistan elaborately and with erudition analysed the settled principles regarding lifting of veil of incorporation and referred to various treaties on the subject. It was concluded that the device of lifting of veil of incorporation in the hands of the courts was well established yet the same could not be pressed into service as a matter of course in every case and there should be justifiable reasons to warrant the lifting of veil of incorporation. It was observed by the Supreme Court that courts have not pierced the veil of incorporation in order to allow exemption from payment of tax or to reduce tax burden. It was further held that the companies and corporate entities, though owned by the Federal Government, which were run as ordinary commercial entities, could not be equated with instrumentalities which carried on the sovereign functions of the State as that would place those companies in an advantageous position to the detriment of similar companies which were not so entitled to the benefit of such tax exemptions which accrued on the basis of Article 165 of the Constitution. The Supreme Court of Pakistan while relying upon Article 25 of the Constitution held this to work discriminately against other companies ."

9.It can be seen from the conclusion made in the case of NBP above that the benefit of Article 165 is not limited to the property owned directly by the Federal Government but also extends to properties owned by the Federal Government through its instrumentalities and body corporate. On this touchstone, WAPDA ostensibly qualifies to the exemption under Article 165. This alone is not enough to extend the benefit of the exemption to WAPDA. The other qualification which was culled out in the case of NBP and which could be made use of by WAPDA is regarding the rule that a corporation or industry of the Federal Government having a monopoly in the area of its operation will be deemed a department of the Government and hence entitled to the exemption under Article 165 of the Constitution. The two judgments which expound these rules were Union Council Ali Wahan, Sukkur v. Associated Cement (Pvt.) Ltd. (1993 SCMR 468) and Province of N.-W.F.P. through Secretary Local Government and Rural Development Peshawar and others v. Pak Telecommunication through its Chairman and others (PLD 2005 SC 670). The discussion with regard to these two precedents in the judgment of NBP and reproduced above, brings forth ineluctably that these rules have been recognized to exist by the Supreme Court of Pakistan and if the test laid down with regard thereto in these precedents is fulfilled by a statutory corporation, the exemption under Article 165 must be extended to it and the property held by such statutory corporations must be held to be owned by the Federal Government so as to be entitled for the benefit.

10.There are two clear streams of judgments and before any conclusion is drawn in the instant case, the distinction must clearly be brought forth with regard to these two streams of judgments. The first judgment is based on Article 165-A and must be held to be distinguishable from the facts and circumstances of the present case and, therefore, must be held to be authorities for their own facts. These judgments are not applicable to the present petition and, therefore, do not assist the Province of Punjab in its claim to extract property tax from WAPDA. The cases under Article 165 are also divided in two sub-sets. The distinction between these two sub-sets within Article 165 was brought forth in the Associated Cement case in the words of Salim Akhtar J, to the following effect:--

"...In the present case, the Cement Corporation is not the sole manufacturer of cement in Pakistan. There are several other corporations which are engaged in this business activity. Where a Government owns, controls and manages a corporation which is engaged in a commercial activity competing with other public/private companies engaged in similar business, the Corporation can hardly claim any privilege or immunity to the disadvantage of its competitors. Subject to these observations in my view the appeal may be allowed with no order as to costs."

11.Therefore, although the shareholding of Associated Cement entirely vests in the Federal Government, this did not convince the Supreme Court of Pakistan in extending the benefit of Article 165 to the company. It refused to lift the veil of incorporation on the ground that doing so will unduly discriminate against other similarly placed corporations which were competing against Associated Cement and were engaged in a similar commercial activity. The Supreme Court held that this could not be countenanced and the corporation owned by the Federal Government could hardly claim any privilege or immunity to the utter disadvantage of its competitors. This was the basis on which the benefit of Article 165 was denied in the Associated Cement case. The observations of the Supreme Court of Pakistan which went to the heart of the matter were that a corporate entity owned by the Federal Government which was run as a commercial entity could not be equated with an instrumentality which carries on the sovereign functions of the State as that would place those companies in an elevated position to the detriment of similar companies. Therefore, a window was kept open by the Supreme Court of Pakistan in Associated Cement with regard to the instrumentalities which carry on sovereign functions of the State. Thus, the Supreme Court of Pakistan applied what can be termed as the functions test in the application of Article 165 and the determination of the question regarding the grant or refusal of exemption. The first test was whether the instrumentality was carrying on the sovereign functions of the State.

12.The Supreme Court of Pakistan has, in later cases as well, discountenanced piercing of the veil of incorporation in the context of Article 165A of the Constitution as reported in Islamabad and another v. WAPDA and another (PLD 2014 SC 766) and Karachi Development Authority v. Central Board of Revenue through Members Central Excise and Land Customs, Islamabad and others (2005 PTD 2131). These cases have been referred to by the Province of Punjab but the conclusions drawn in these precedents are not directly applicable to the facts and circumstances of the present case. Karachi Development Authority was a case which related to the imposition of excise duty on bank loans and the issue was regarding the benefit which was claimed by WAPDA which was repelled on the basis of Article 165A and the Supreme Court of Pakistan reiterated the ratio of Associated Cement case as also in the case of 2005 PTD 2131.

Issues:

13.Therefore, the question that requires to be determined is whether in the instant case, the corporate veil ought to be pierced to determine the real ownership of the property in question and whether it vests in the Federal Government. The next question that would require to be answered is as to whether WAPDA carries on the sovereign function of the state and is, in fact, a monopoly as well as a department of the Government.

14.Federal Government states that WAPDA performs the functions of the Federal Government and is an extension of the Federal Government, in fact. We may refer to the definition of the term Federal Government, as given in Article 90 of the Constitution, which says:--

"90. The Federal Government.---(1) Subject to the Constitution, the executive authority of the Federation shall be exercised in the name of the President by the Federal Government, consisting of the Prime Minister and the Federal Ministers, which shall act through the Prime Minister, who shall be the chief executive of the Federation. (2) In the performance of his functions under the Constitution, the Prime Minister may act either directly or through the Federal Minister."

15.Clearly, the Federal Government consists of the Prime Minister and the Federal Ministers and the Federal Government shall act through the Prime Minister who shall be the chief executive of the Federation. The Federal Government exercises the executive authority of the Federation. The structure of the Federation, therefore, is not dissimilar to a corporate structure and a parallel may be drawn between Board of Directors of a company and the Federal Government. However, Article 165 grants exemption to the property or income of the Federal Government against taxation under any act of the Parliament. From the definition given in Article 90, it is incredulous to think that the ownership of the property shall vest in the Prime Minister or the Federal Ministers and certainly something more will have to be done in order for the Federal Government to own property. A reference, therefore, will have to be made to Article 98 of the Constitution, which enacts that:--

"98. Conferring of functions on subordinate authorities: On the recommendation of the Federal Government, Majlis-e-Shoora (Parliament) may by law confer functions upon officers or authorities subordinate to the Federal Government."

16.It is Article 98 of the Constitution, reproduced above, from which the functions test seems to have been deduced by the Supreme Court of Pakistan in the Associated Cement and the PTC cases. By Article 98, the Parliament on the recommendations of the Federal Government, may by law confer functions upon officers or authorities subordinate to the Federal Government. One of the functions of the Federal Government has been delineated in Article 157 of the Constitution which requires the Federal Government to construct hydro-electric or thermal power installations or grid stations for the generation of electricity. That function has been assigned to WAPDA by an enactment passed by the Parliament on the recommendations of the Federal Government. This discussion lends actuality to the events by which WAPDA was established as a statutory body.

17.Punjab refers to Article 173 of the Constitution to urge that that Article of the Constitution has not been invoked by WAPDA. By Article 173, the Federation and a Province have been given the executive authority to the grant, sale, disposition or mortgage of any property vested in the Federal Government or as the case may be, the Provincial Government and to the making of contracts. It also provides by clause (2) that all property acquired for the purposes of the Federation or of a Province shall vest in the Federal Government or as the case may be in the Provincial Government. This has to be contrasted with the term of 'Federal Government' used in Article 165 of the Constitution. Placing without any disposition, it follows that the Federation may hold and acquire property which shall vest in the Federal Government as also that the Federal Government may also own property to which a reference in Article 165 has been made. In both cases the properties shall vest in the Federal Government. It is also not in doubt that the Federal Government may either acquire and own a property directly or through its instrumentalities and this makes little or no difference. For the purposes of invoking Article 165, what has to be shown is that the instrumentality which owns the property performs functions of the Federal Government and is a virtual monopoly and a department of the Federal Government.

18.In our constitutional enterprise WAPDA has a unique position. Reading the various provisions of the Constitution, it comes across clearly that it is the sovereign function of the Federal Government to construct or cause to be constructed hydro-electric or thermal power installations. This function is exclusively devolved upon the Federal Government by the Constitution and must be performed by it to the exclusion of all others. There is no cavil that the Federal Government has a complete sway over the area regarding the construction of hydro-electric or thermal power installations and does not compete with any private commercial entities in the field of generation of electricity. Although, the Provinces have a limited scope of activity in the area of hydro-electric or thermal power installations for the generation of electricity but the extent and sweep of WAPDA is unmatched and without parallel. The scale of construction of hydro-electric and thermal power is unique and is so enormous that no other entity including a Province can compete with WAPDA in such activity. The position, in my opinion, is indefensible that WAPDA exercises the sovereign powers of the Federal Government in the performance of the functions in terms of Article 157 read with Article 98 of the Constitution and is for all practical purposes a department of the Government.

19.The holding of the Supreme Court of Pakistan in Associated Cement and PTC cases and the subtle distinction drawn with regard to the functions test is based on the modern day commercial activity which has taken varying shapes and formats. There is an array of contracting out and privatization where a large number of functions of the Federal Government are being devolved upon corporations which are extensions of the Federal Government and are its instrumentalities yet retain their independent corporate existence. We are in the twilight of the era of large government and lean and efficient government is the requirement of the day. It was precisely these considerations which prompted the Supreme Court of Pakistan to draw a line between corporate entities of the Federal Government competing in the commercial arena and free market and the ones which are virtual departments of the Government and exercise functions which are exclusive and sovereign and which are not performed by private commercial entities. In my opinion, WAPDA still retains the character of a monopoly and a department of the Federal Government and undoubtedly exercises the sovereign functions of the Federal Government.

20.The character of WAPDA as an authority has been the subject of a cluster of cases by the superior courts. It will suffice to refer to the observations of Saleem Akhtar J., in Messrs Gadoon Textile Mills and others v. WAPDA and Federation of Pakistan (1997 SCMR 641). Dilating upon the nature of WAPDA as an authority established by the Federal Government, it was held that:--

"22. WAPDA is a corporation constituted under the WAPDA Act. According to the preamble of the Act, it was to provide for the unified anti coordinated development of the water and power resources of Pakistan. The Authority was constituted under section 3 of the Act for the above purpose and for carrying out the purposes of the Act. It was empowered to hold and dispose of property as a body corporate and was authorised to sue and be sued in its name. Clause (iii) of subsection (3) of section 3 was added by Ordinance XXXIX of 1994 dated 19-5-1994, Ordinance LXIII of 1994 dated 19-9-1994 and Ordinance CXXIV of 1995 dated 2-12-1995, which provided that the Federal Government may, from time to time, issue such directives as it may consider necessary on matters of policy and the Authority shall comply with such directives and in case a question arises whether any directive relates to a matter of policy, the decision of the Federal Government shall be final. The powers and duties of the Authority are specified in Chapter 3 of the Act in which general powers and duties of the Authority and framing of schemes, (section 8), the schemes framed by other agencies (section 9), survey and experiment (section 10), and control over water and power houses and grids (section 11) have been mentioned. Section 8, subsection (2), clause (ii) provides that the Authority may frame a scheme or schemes for a Province or any part thereof providing for the generation, transmission and distribution of the power, construction, maintenance and operation of the power houses and grids. Such schemes which are mentioned in subsection (2) of section 8 are subject to the approval of the Government, which in the present dispensation means the Federal Government. Section 11, subsection (1) inter alia provides that the Authority shall have control over the operation of its power houses and grids and such works as may be necessary for their proper operation, maintenance of power houses and grids and may make recommendations to the Government for permitting simplification of methods of charge or supply of electricity and standardization of the system of supply. The exercise of authority under, subsection (1), clause (I) of section 11, is subject to notification by the Government in respect of the area over which and the extent to which the control was intended to be exercised. The Authority for the purposes of the Electricity Act, 1910, shall be deemed to be a licensee and shall have all the powers and discharge all the obligations of the licensee under the Act. However, being deemed to be a licensee under the Electricity Act, sections 3 to 11, subsections (2) and (3) of section 21 and sections 22, 23 and 27 or clauses (I) to (XI) of the Schedule to the said Act relating to duties and obligations of a licensee shall not apply to the Authority."

21.It has been adumbrated that WAPDA has been mentioned as an institution which is administrated or managed by the Federal Government in Part II of the 4th Schedule of the Constitution. This in itself is significant and Entry 3 of Part II mentions the words "administrated or managed by the Federal Government immediately before the commencing day including the Pakistan Water and Power Development Authority." Clearly, therefore, the Constitution and the 4th Schedule itself refers to WAPDA being administrated and managed by the Federal Government. There could be no clearer expression of the intention in no less a document than the Constitution that WAPDA is administered and managed by the Federal Government. This is truly the intention that one gathers from an entire reading of the WAPDA Act, 1958. Entry 4 relates to electricity in Part II of Fourth Schedule and has been inserted as a new entry by the Constitution (18th Amendment) Act, 2010. Previously, the subject of electricity was in the Concurrent Legislative List but the Authority of the Federal Government has been reinforced in respect of the subject of electricity by taking the subject out of domain of Provincial Assemblies and putting it clearly within the ambit of Parliament. Thus, by Entries 3 and 4 taken in combination, the Federal Government administrates and manages not only WAPDA but also is empowered to legislate on the subject of electricity. We will now revert to Article 157, which has been referred to above and which is the constitutional provision relating to the power of Federal Government to construct in any province or cause to be constructed hydro electric or thermal power installations or grid stations for the generation of the electricity or caused to be laid inter-provincial transmission lines. These functions are to be performed by WAPDA as an authority of the Federal Government and thus WAPDA performs a constitutional function and has exclusively been set up to undertake that function by the Federal Government under the mandate of the Constitution.

22.The judgment in Gadoon Textile Mills and the provisions of Articles 153 and 154 relating to the Council of Common Interests, have not been referred to by the learned counsel for the parties, yet in my opinion, these provisions are of pivotal importance. By Article 153, the Constitution sets up a Council of Common Interests. These provisions are reproduced hereunder:--

153.---(1) There shall be a Council of Common Interests, in this Chapter referred to as the Council, to be appointed by the President.

(2) The Council shall consist of---

(a) the Prime Minister who shall be the Chairman of the Council;

(b) the Chief Ministers of the Provinces; and

(c) three members from the Federal Government to be nominated by the Prime Minister from time to time.

3* * * * * * * * *

(4) The Council shall be responsible to Majlis-e-Shoora (Parliament) and shall submit an Annual Report to both Houses of Majlis-e-Shoora (Parliament).

154. (1) The Council shall formulate and regulate policies in relation to matters in Part II of the Federal Legislative List and shall exercise supervision and control over related institutions.

(2) The Council shall be constituted within thirty days of the Prime Minister taking oath of office.

(3) The Council shall have a permanent Secretariat and shall meet at least once in ninety days:

Provided that the Prime Minister may convene a meeting on the request of a Province on an urgent matter.]

(4) The decisions of the Council shall be expressed in terms of the opinion of the majority.

(5) Until Majlis-e-Shoora (Parliament) makes provision by law in this behalf, the Council may make its rules of procedure.

(6) Majlis-e-Shoora (Parliament) in joint sitting may from time to time by resolution issue directions through the Federal Government to the Council generally or in a particular matter to take action as Majlis-e-Shoora (Parliament) may deem just and proper and such directions shall be binding on the Council.

(7) If the Federal Government or a Provincial Government is dissatisfied with a decision of the Council, it may refer the matter to Majlis-e-Shoora (Parliament) in a joint sitting whose decision in this behalf shall be final.

23.There are some significant changes brought about in these Articles by the Constitution (18th Amendment) Act, 2010. The amendments have been dilated upon and explained by Mian Raza Rabbani in his book "A Biography of Pakistan Federalism, Unity in Diversity" in the following terms:--

"Articles 153, 154 and 156:

In order to formulate and regulate policies regarding matters in Part-II of the Federal Legislative List, and exercise supervision and control over related institutions, the 18th Amendment has introduced two major steps: (i) expanding the scope of Federal Legislative List-II and (ii) revitalizing the composition of the Council of Common Interests (CCI).

The CCI has emerged as one of the most important forums in the new institutional framework. It is a constitutional body comprising the Prime Minister as its Chairman and the four Chief Ministers representatives of the Federation and Provinces. Conceived as a body that will deliberate on items in the Federal List-II, the Council will become an effective dispute resolution, economic planning and development forum.

The 18th Amendment directs that the CCI should be constituted within thirty days of the Prime Minister taking the oath of office. A meeting is mandated at least once in ninety days. It shall have its own secretariat. The Parliament shall be kept informed of its activities through an annual report to both Houses.

National planning and national economic coordination, including planning and coordination of scientific and technological research, major ports and the census have been transferred from the Federal Legislative List---I. Newly constituted entries include all regulatory authorities established under a federal law, supervision and management of public debt and inter-provincial coordination matters.

The composition, function and rules of procedure of the CCI are covered under Articles 153 and 154. This Council, established by the 1973 Constitution, was conceived as a constitutional mechanism to formulate and regulate policies in relation to Part-II of the Federal Legislative List and, insofar as it concerns the affairs of the Federation, to entry 34 (electricity) from the Concurrent Legislative List. Charged with exercising supervision and control over related institutions, the CCI is responsible to Parliament."

24.As brought forth in the extracts, reproduced above, the CCI was conceived as a constitutional forum to formulate and regulate policies in relation to Part-II of the Federal Legislative List. Part-II of the Fourth Schedule includes WAPDA and electricity as subjects. The object of the incorporation of clause (1) of Article 154 of the Constitution, has been brought forth in para 33 of the constitutional committee's report namely to conform to the spirit of federalism and new arrangement has been worked out to assure effective participation of the Federal Government in sensitive and important spheres of national life.

25.By the constitutional mandate as expounded in Article 154, the CCI shall formulate and regulate policies in relation to matters in Part II of the Federal Legislative List and shall exercise supervision and control over related institutions. There is no doubt that WAPDA is a matter which finds mention in Part II of the Federal Legislative List and in respect of which CCI is empowered to formulate and regulate policies and to exercise supervision and control. For the purposes of present petition, it is sufficient to conclude that WAPDA for all its independence as a body corporate and an instrumentality of the Federal Government, is not only subject to the administrative and management control of the Federal Government but is also subject to the CCI which exercise supervision and control over it. To that extent, the executive power of the Federal Government stands abridged and curtailed and has come to vest in the CCI. The nature, character and the unique position that CCI holds for the constitutional scheme was noted in Federation of Pakistan v. United Sugar Mills Ltd. (PLD 1977 SC 397) and it was observed that:-

"Again in one significant respect the federal Executive Authority has been obliged under the Constitution and has been entrusted to a newly created institution called "the Council of Common Interests." It is a body quite apart from the Federal executive. (See Articles 153-156). The administration of matters falling in Part II of the Federal Legislative List (Railways, mineral oil natural gas etc.) and item 34 of the Concurrent List (electricity) are entrusted to the Council of Common Interests. This is a body consisting of the representatives of the Federal Government and the four provinces. Any dispute arising between one or more Provinces inter se or between the Federation or a Province regarding aforesaid subjects is referable to the Parliament in joint session for final decision. This Constitutional arrangement also abridges the original jurisdiction of the Supreme Court under Article 184 and correspondingly new power essentially quasi-judicial in character has been conferred on the Parliament in joint sitting."

26.Reference may also be made to the observations of Ajmal Mian J., in Muhammad Nawaz Sharif v. Federation of Pakistan (PLD 1993 SC 473) while dealing with the issue of privatization of WAPDA in the following words:--

"In my view, the Federal Government should have brought the matter of privatization in respect of the items covered by the above Constitutional provisions before the CCI. The petitioner's plea that, it was not mandatory is not sustainable."

27.In the context of the observations of Ajmal Mian J., reproduced above, let us assume for a moment that WAPDA were to decide to sell the WAPDA House, its prime property and which is the subject matter of this petition or to privatize some of its assets which it holds. Will it be possible for WAPDA to dispose of any of these assets or to privatize its functions without seeking approval from the Federal Government or more pertinently could the Federal Government grant an approval in respect of such matters without recourse to the CCI. The answer to this question clearly is in the negative.

28.In Gadoon Textile Mills, the Supreme Court of Pakistan reflected upon the true nature of WAPDA and its relation with CCI in considerable detail. Some of the observations of the Supreme Court of Pakistan in Gadoon Textile Mills are reproduced below in order to bring home the point that the WAPDA as an instrumentality is not entirely independent in the functions which are in essence the functions of the Federal Government and are mandated by the Constitution. It was observed by the Supreme Court of Pakistan:--

" The object of the incorporation of clause (1) of Article 154 of the Constitution is reflected inter alia in para. 33 of the Constitution Committee's Report reproduced hereinabove in para. 18, namely, "to confirm to the spirit of Federalism, a new arrangement has been worked out to ensure effective participation of the Provincial Governments in sensitive and important spheres of national life".

" under the provisions of the Act as is evident from the resume of the same given in para. 8 hereinabove, the Federal Government has administrative control over WAPDA which includes financial discipline inasmuch as by virtue of section 21 of the Act, WAPDA is obliged to submit after the end of every financial year but before the last day of September next following a report on conduct of its affairs for the year along with a copy of audit report for placing before the National Assembly, which, in turn, is required to refer the same to its Committee on Public Accounts for its scrutiny. Whereas under section 27 of the Act, WAPDA is to submit for approval to the Government a statement of estimated receipts and expenditure in respect of the next financial year in the month of January each year. Under section 22, WAPDA fund comprises inter alia grants made by the Government, loans obtained with the special approval of the Government. It may further be observed that under section 24, the liability of the Government to the WAPDA's creditors is limited to the extent of grants made by the Government and the loans raised by WAPDA with the sanction of the Government. In addition to that, sanction/approval of the Government is required for execution of various schemes as already highlighted in para.8 hereinabove besides that under subsection (3) of section 3, the Federal Government may from time to time issue such directives as it may consider, necessary on matters of policy and the Authority (i.e. WAPDA) is bound to comply with such directives."

(Per Ajmal Mian, J)

10. WAPDA being in Part II of the Federal Legislative List falls within the domain of ,CCI which shall formulate and regulate its policies. There is no dispute about it but on question whether supervision and control on it can also be exercised by CCI, the learned counsel for the parties have different views. Article 154 vests power in CCI to formulate and regulate policies and exercise supervision and control over institutions related to the matters in Part II of the Federal Legislative List including WAPDA. This interpretation finds full support from the Constitutional Accord, clause 25 of which provides that in respect of Railways, mineral oil and natural gas; liquids and substances declared by Federal law to be dangerously inflammable and the items now enumerated in Entry 3 in Part II of the Federal Legislative List and the item of electricity in so far it relates to Federation, "the Council shall exercise control on Policy. The institutions relating to these items shall function under the control and supervision of this council". This clearly indicates that the CCI has not only to formulate and regulate policy but shall also exercise supervision and control as well. Article 154 has to be read with Part II of the Federal Legislative list. For purposes of the present case it must be read in conjunction with Entry 3 of Part II. It seems anomalous that CCI shall formulate and regulate policies without having any control or supervision. The word 'regulate' in this context must be given wider meaning. The words 'formulate and regulate policies' used in Article 154 have great significance and their meaning and interpretation will define the jurisdiction, power and sphere of activity of CCI. The word 'Policy' means, "general principles by which a Government is guided in its management of public affairs or Legislature in its measures. This term as applied to law, ordinance or rule of law, denotes its general purpose or tendency considered as directed to the welfare or prosperity of the state of community".

"We respectfully agree with the above observation. Any person authorised to regulate any matter will have the right to prescribe rule and enforce and govern by exercising control and supervision over it. Unless the context otherwise permits, word 'regulate' is capable of broad meaning and wide implication. So far WAPDA is concerned, CCI has the authority not only to lay down rules and chalk out plan for its development, finances and administration, but to supervise, control and oversee it."

" These Rules leave no room for doubt that CCI is not to formulate guidelines in general terms only. It not only formulates and regulates the Policy but makes decision and has at its command full machinery for its implementation. By introducing the concept of "decision" in Article 154 and power to decide the issues by majority CCI is not merely a recommendatory body but it has to thrash out the issues objectively and then decide the same. CCI is thus an important and powerful Constitutional organization, not limited to lay guideline but also to effectively decide issues before it against which appeal is provided to the Parliament. For implementing such decisions, as explained above, an effective machinery at the higher level of administration has been provided. The control and supervision is thus exercised by CCI through the concerned Ministries and the Cabinet Division.

"Again in one significant respect the Federal executive authority has been abridged under the Constitution and has been entrusted to a newly created institution called 'the Council of Common Interests'. It is a body quite apart from the Federal executive. (See Articles 153-156). The administration of matters falling in Part II of the Federal Legislative List (Railways, mineral oil, natural gas etc.) and item 34 of the Concurrent List (Electricity) are entrusted to the Council of Common Interests. This is a body consisting of the representatives of the Federal Government and the four Provinces. Any dispute arising between one or more Provinces inter se or between the Federation or a Province regarding aforesaid subjects is referable to the Parliament in joint session for final decision. This Constitutional arrangement also abridges the original jurisdiction of the Supreme Court under Article 184 and correspondingly new power essentially quasi judicial in character has been conferred on the Parliament in joint sitting."

" In case of WAPDA as it is in Part II of the Federal Legislative List, the executive and administrative authority, the supervision and control in this respect is subject to the Policy formulated and regulated by CCI. The tariff or rate for supply of power to consumers should be fixed in accordance with the Policy formulated by CCI. WAPDA independently without reference to CCI cannot determine rates of tariff under any decision, direction or approval of the Federal Government as Federation does not exercise executive authority over WAPDA."

17. It is a misconception that CCI will examine and provide for day to day working of WAPDA. It will formulate Policy and guidelines leaving the operation and machinery part to WAPDA for implementing the Policy. This is the accepted role of all Policy-making, supervisory and regulatory institutions.

"31, WAPDA is a pubic utility company whose object is to develop energy resources and to supply it to the consumers not like a commercial company, but a public utility corporation with an object to develop and serve the country. Its motive is not to earn commercial profit and pay dividend, but to charge reasonable rate without suffering any loss. Such a corporation should place the Summary for determining increasing tariff before its administering or consultative body, as required under law and not before any executive authority, committee or commission which is not authorised under law to determine tariff or levy Surcharge/Additional Surcharge. By adopting the later process and complying with their direction to levy Surcharge or increase tariff makes the entire levy illegal."

(Per Saleem Akhtar, J)."

29.It was further held in Gadoon Textile Mills that:--

"8. The Authority is indeed an important statutory corporation; it is a public utility instrumentality of the State, with monopoly in the generation, distribution and supply of electricity throughout Pakistan. Its importance has been recognized by the Constitution of 1973 by expressly treating it as a distinct legislative matter and mentioning it in Article 154 and Part II of the Federal Legislative List."

"16. It has been seen that WAPDA is, as a legislative matter, in the Federally Legislative List; therefore, the executive authority of the Federation must extend to the Authority, unless the provisions of Article 154 compel a different conclusion. The proviso to Article 97 also would not in that case help the appellants, for that applies to matters in the Concurrent Legislative List. True that 'Electricity' is in the Concurrent Legislative List, but in view of the fact that WAPDA has been recognized as a distinct legislative matter, that too cannot affect the position that the Federation's executive authority extends to WAPDA. As regard Article 154, that indeed authorises the Council of Common Interests to perform certain functions in relation to the Authority; those functions are to formulate and regulate policies but to formulate and regulate policies does not comprehend the whole of the executive authority. In other words the combined effect of Article 154 and WAPDA being in the Federal Legislative List, is that the generality of the executive authority, as regard the Authority, vests in the Federation but that is subject to the powers vested in the Council of Common Interests under Article 154. Of course there can be a possible argument that some of the powers which stand vested under the Act of 1958 in the Federal Government are in reality the powers of the Council of Common Interests under Article 154 but we are not called upon to decide that larger question in these appeals, and we, therefore, leave it open to be raised and decided in an appropriate case."

30.Thus, in the holding of the Supreme Court of Pakistan, WAPDA as a legislative matter was in the Federal Legislative List and, therefore, the executive authority of the Federation must extend to the Authority. It was concluded that a binding effect of Article 154 and WAPDA being in the Federal Legislative List was that the generality of the executive authority as regards the Authority, vested in the Federation but that was subject to the power vested in the CCI under Article 154. Also that the Authority was an important statutory instrumentality and it was a public utility organ of the State with monopoly in generation, distribution and supply of electricity throughout Pakistan. Its importance had been recognized by the Constitution by expressly treated it as a distinct legislative matter and by mentioning it in Article 154 of the Constitution as also in Part II of the Federal Legislative List. Thus, clearly the Supreme Court of Pakistan was of the view that the executive authority of the Federation would extend to the Authority set up by the Act of 1958. Moreover, an important plank of the judgment was that WAPDA was a public utility authority whose object was to develop energy resources but its primary object was to serve the country. Its motive was not to earn commercial profit and pay dividend, but to charge reasonable rate without suffering any loss. The clear division of work was delineated in the judgment of the Supreme Court of Pakistan. CCI was tasked with formulation of policy and guidelines leaving the operation and machinery part to WAPDA for implementing that policy. Thus, WAPDA functioned under the overarching regulatory framework with its apex as the CCI. Ajmal Mian J. held in the majority judgment that the Federal Government had administrative control over WAPDA which included financial discipline inasmuch as by virtue of section 21 of the Act, 1958, WAPDA was obliged to submit after the end of every year a report of conduct of its affairs for the year along with a copy of the audit report for placing before the National Assembly which, in turn, is required to refer the same to its Committee of Public Accounts for its scrutiny. By section 27 of the Act, 1958, WAPDA was obliged to submit for approval to the Government a statement of estimated receipts and expenditure in respect of the next financial year in the month of January each year. By section 22, the WAPDA fund comprises inter alia grants made by the Government. Section 27 of the Act, 1958 which obliges WAPDA to submit for approval to the Government a statement of estimated receipts and expenditures in respect of next financial year, would also include any decision made by WAPDA with regard to any of its properties including WAPDA House which is the subject matter of the instant petition.

31.Aristotle remarked long ago that the first step in any investigation is to ask the right question. The right question in this case is whether WAPDA is free to deal with WAPDA House at its will and without recourse to the Federal Government or seeking permission from it. Quite clearly, in the paradigm of the constitutional enterprise, referred to above, and the judgments of the Supreme Court of Pakistan and in particular the Messrs Gadoon Textile Mills judgment, there is no doubt in my mind that WAPDA cannot deal with WAPDA House either to sell the property or to offer it as a collateral for any loan without the express permission of the Federal Government and, in fact, if the judgments of the Supreme Court were made applicable in their letter and spirit by the CCI, which in fact, supervises and controls WAPDA and regulates policies with respect thereto. The learned Deputy Attorney General on behalf of the Federal Government made a clear statement upon seeking instructions from the relevant Division of the Federal Government. According to the statement made by the learned D.A.G, WAPDA House was the property of the Federal Government and the Federal Government could not allow WAPDA to deal with that property in any manner that it chooses without permission from the Federal Government. If the Federal Government makes such a statement and WAPDA does not take exception to it, there is no reason for this Court not to believe that statement or to doubt its credibility.

Does WAPDA perform sovereign functions.

32.Thus the instrumentality must either be exercising sovereignty powers or is virtually a department of the government to be entitled to Article 165 exemption. Sovereignty is a protein word of ancient origin. It has been defined as:--

"Sovereignty. The supreme power which governs the body politic that constitutes the state; a term used to express the supreme political authority of an independent state or nation; power by which any state is governed."

"Sovereignty powers. "The .sovereignty powers' of Government include all the powers necessary to accomplish its legitimate ends and purposes, Such powers must exist in all practical Governments. They are the incidents of sovereignty, of which a State cannot divest itself. Boggs v. Meree Min Company, (14 Cal. 279, 300 ). In all Governments of constitutional limitations 'sovereignty powers' manifest itself in but three ways. By exercise in right of taxation; by the right of eminent domain; and through its police power. [United State v. Douglas-Willan Sartoris Company, (22 pp. 92, 96, 3 Wyo. 287. Agricultural Produce Market Committee v. Ashok harinkani and another, (2000) 8 SCC 61]."

(quoted in The Major Law Lexicon, Vol. 6, by

P. Ramanatha Aiyar)

33.More relevant for our purposes is the explication of the term 'Sovereign Power' in Words and Pharases, volume 39A (West Publishing Co) in the following manner:

"The "sovereign powers" of a government include all the powers necessary to accomplish its legitimate ends and purposes. Such powers must exist in all practical governments. They are the incidents of sovereignty, of which a state cannot devest itself. Boggs v. Merced Min. Co., 14 Cal. 279, 309.

By the term "sovereign power of the state" is meant the people of the state in their sovereign capacity, acting through their representatives in the Legislature. Kennebec Water Dist. V. City of Waterville, 52 A. 774, 778, 96 Me. 234.

In all governments of constitutional limitations "sovereign power" manifests itself in but three ways. By exercising the right of taxation ; by the right of eminent domain ; and through its police power. United States v. Douglas-Willan Sartoris Co., 22 P. 92, 96, 3 Wyo. 287.

"Sovereign power in the state" is such power as may subject all property in the commonwealth to those general regulations which are necessary to the common good and general welfare ; such power as extends to the protection of the lives, limbs, health, comfort, and quiet of all persons, and the protection of all property, within the state. Donnelly v. Decker, 17 N.W. 389, 391, 58 Wis. 461, 46 Am.Rep. 637."

" The sovereignty of a state does not reside in the persons who fill the different departments of its government, but in the people, from whom the government emanated; and they may change it at their discretion. Sovereignty, then, in this country, abides with the constituency, and not with the agent ; and this remark is true, both in reference to the federal and statement governments. Spooner v. McConnell, 22 Fed.Cas. 939, 943."

"There is no ground to deny the full and sovereign power of the commonwealth, within its limits, by legislative acts, to exercise dominion over the sea and the shores of the sea, and all its arms and branches, and the lands under them, and all other lands flowed by tide water, subject to the rights of riparian ownership."

34.And as to the definition of Sovereignty, the same volume describes it in the following words:--

"Sovereignty" means supremacy in respect of power, domination or rank; supreme dominion, authority or rule, Brandes v. Mitterlling, 196 P.2d 464, 67 Ariz. 349.

A person is invested with part of "sovereignty" of state where specific statutory and independent duties are imposed upon him in relation to exercise of police powers of state, or he is vested with independent power in disposition of public property or power to incur financial obligations on part of county or state, or he is empowered to act in those multitudinous cases involving business or political dealings between individuals and the public. State ex rel. Webb v. Pigg, Mo., 249 S. W.2d 435, 438."

35.By the above definition, WAPDA has a better reading of Article 165 of the Constitution in claiming exception. It exercises part of the sovereignty of the state and is invested with specific statutory duties to exercise the public powers of the state and with disposition of public property and to incur financial obligations.

36.Section 11(1)(i) of the Act of 1958 gives control to the Authority of underground water resources of any region in a Province. This is, without doubt, a sovereign power of the state being conferred on WAPDA.

37.Harold J. Laski, in The Foundation of Sovereignty and other Essays (1921), said that:

"Nothing is today more greatly needed than clarity upon ancient notions. Sovereignty, liberty, authority, personality---these are the words of which we want alike the history and the definition; or rather we want the history because its substance is in fact the definition."

38.The same political theorist contended in The Grammar of Politics, (1941):--

"It would be of lasting benefit to political science if the whole concept of sovereignty were surrendered on the ground that "it is at least probable that it has dangerous moral consequences and is of dubious correctness in fact."

39.But we may not be obscured by the outmoded and pedantic concept of sovereignty in analyzing the status of WAPDA. By all means, WAPDA is a department of the Federal Government. But it has a higher and more onerous duty to perform. It carries into effect the constitutional mandate of Article 157 which the Federal Government is obliged to fulfill. In that context, WAPDA is not an ordinary instrumentality but is a constitutional public utility provider and its very concept originates from the constitution itself. Lest the Federal Government is lacking on its obligation, the supervision and policy-making has been assigned to CCI. This is the whole scheme in which WAPDA functions. WAPDA, in any opinion, is Federal Government in fact and the mere fact that the Authority has been set up by a statute does not detract from the conclusion to be drawn.

40.At this stage, the enumeration of the concept of immunity of Federal Government or instrumentalities from state/provincial as explained in Corpus Juris Secundum, Volume 81A, may be adverted to:--

"Generally, the activities of the federal government are free from regulation by any state. Thus, the police power of a state does not extend to the United States or its transactions. It has been held, however, that the burdens placed on the national government as the result of regulation by the states of their internal affairs, save as Congress may act to remove them, constitute normal incidents of operation within the same territory of a dual system of government, and that no immunity of the national government from such burdens is to be implied from the Constitution.

In accordance with the general rule, there is an implied constitutional immunity of the national government from state regulation of the performance, by federal officers and agencies, of governmental functions. Generally, a state may not interfere with or burden the instrumentalities, means, and operations employed by the Unites States in the exercise of its governmental powers. An agency of the United States is no subject to the police power of the state and is not within the jurisdiction of the state although operating in the territory of the state.

It has been held, however, that federal instrumentalities are subject to the reasonable exercise of the police power of the states in certain matters affecting their external relations, at least where no federal law or rule provides otherwise.

Generally, any commission bureau, corporation, or other public organization, created and wholly owned by the federal government for convenient prosecution of its governmental functions and existing the will of its creator is an instrumentality of government, with respect of immunity from state control or regulation. The term "federal instrumentality" within the doctrine of immunity of such instrumentalities from interference by the states is not, however, properly applicable to a private corporation existing primarily for profit, but granted incidental duties or privileges by the federal government. Thus, persons contracting to furnish supplies or render services to the federal government are not "agencies of the Unites States" and do not perform governmental functions so as to render them immune from state regulation which are reasonable and not discriminatory, even though regulation of the contractor by the state imposes an increased economic burden on the federal government."

The United States Constitution gives to Congress the power to dispose of and make all needful rules and regulations respecting the territory or other property belonging to the United States. In general, the policy power of a state does not extend to the property of the United States and such property is immune from state regulations. Thus, property owned by the United States is immune from state seizure, even a seizure made to collect a valid fee."

41.Thus the concept is well-entrenched as a rule of constitutional law. Corporations or other public organizations, created and wholly owned by the Federal Government is an instrumentality of the government, with respect to immunity from state control or regulation. This is a species of the distribution of sovereign powers as defined in our Constitution.

42.As per Schedule II of the Rules of Business, 1973, Item 30, Water and Power Division of the Federal Government is the governing division of WAPDA and WAPDA is specifically mentioned as part and parcel of Federal Government. In a statement filed by Ahmad Bukhsh Tarar, DG (Law), WAPDA, it has been stated that:--

"WAPDA develops these projects through the funds provider by the Federal Government and is not in any way a profit earning entity. WAPDA is just an executing arm of Federal Government for development of Water and Hydel power resources of the country."

43.A holistic analysis of the Act, 1958 does not leave any doubt regarding the role of Federal Government vis a vis WAPDA. It has a complete sway over all primary and core functions of WAPDA. The appointment of the Chairman and members is by the Federal Government and so is the removal under section 6. This is a substantial power vesting in the Federal Government and the Chairman or any member may be removal "if he refuses or fails to discharge his responsibilities under this Act." There cannot be a clearer expression of the control that the Federal Government exercises over the Authority. The primary function of the Authority is to prepare a comprehensive plan for the development and utilization of the water and power resources of Pakistan and which is subject to the approval of the government . (Section 8). By sub-section (4), the government may sanction or refuse to sanction a scheme. Thus in the approval and execution of all schemes developed by the Authority, Federal Government is the decision-making authority. Punjab placed heavy reliance on the amendment made in section 3 of the Act, 1958 by the Pakistan Water and Power Development Authority (Amendment) Ordinance, 1997 which reads as under:--

"(3) The Federal Government may, from time to time, issue such directives as it may consider necessary on matters of policy and the Authority shall comply with such directives; and if a question arises whether any directive relates to a matter of policy, the decision of the Federal Government shall be final.

Explanation.---The expression "matters of policy" shall not include matters specified in subsection (2) of section 13 and section 18 of this Act."

44.This amendment, on the contrary, reinforces the hegemony of the Federal Government underlying the Act, 1958. It further gives power to the Federal Government to issue directives on matters of policy as it may consider necessary. Nothing turns on the Explanation added thereby. Sections 13(2) and 18 are merely residuary power and are dependent upon the initial sanction of the scheme by the Federal Government. It is certainly inconceivable to imagine that the Authority is not vested with the whole gemut of power to carry out the schemes approved by the Federal Government. These are all delegated powers and WAPDA is merely a delegate of the Federal Government. Section 21, in the present context, occupies a unique place and is determinative of the controversy in many respects. It bolsters the subservience of WAPDA not only to the Federal Government but also to Public Accounts Committee of the National Assembly. It says that:--

21. Submission of yearly reports and returns, etc.---(1) The Authority shall submit to the Government, as soon as possible after the end of every financial year but before the last day of September next following, a report on the conduct of its affairs for that year.

(2) A copy of the report mentioned in subsection (1), together with a copy of the audit report referred to in section 28 shall be placed by the Government before the National Assembly and the National Assembly shall refer the same to its Committee on public Accounts for scrutiny and examination.

(2-A) The Committee on Public Accounts shall scrutinise and examine the reports referred to it under subsection (2) in the same manner as, and shall in respect thereof, perform the same functions and exercise the same powers as are required by it to be performed and exercised in respect of appropriation accounts of the Federal Government and the report of the Auditor-General of Pakistan thereon]

(3) The Government may require the Authority to furnish it with--

(i) any return, statement, estimate, statistics or other information regarding any matter under the control of the Authority, or

(ii) a report on any such matter, or

(iii) a copy of any document in the charge of the Authority, and the Authority shall comply with every such requisition.

45.What comes out starkly from a reading of section 21 is that the accounts and report on the conduct of the affairs of WAPDA shall be submitted to the Government and the Government shall place, a copy of that report and of the audit report before the National Assembly. More significantly, the Committee on Public Accounts shall scrutinize and examine the reports in the same manner and exercise such powers as are required to be performed and exercised in respect of appropriation accounts of the Federal Government. Thus for all intents, the report under subsection (1) and audit report are in fact the reports of the Federal Government and subject to like scrutiny. To this we may add the powers of CCI to exercise supervision and control over WAPDA. Is it then conceivable than that WAPDA, despite being under the glare of such powerful constitutional bodies, were to dispose off and sell WAPDA House and escape any scrutiny or supervisory oversight by any of those three bodies? Although section 3(2) does give ostensible powers to the Authority to hold and dispose of property, an entire reading of the Act, 1958 and the Constitutional provisions in this regard do not lend credence to this power being exercised without the consent and approval of the Federal Government and by the CCI, too.

46.In view of my holding above, this petition is allowed. The notices/challans forms laying a demand for payment of property tax from WAPDA are held to be without lawful authority and of no legal effect. The respondents are permanently restrained from imposing or charging property tax on WAPDA House, the property which is the subject matter of the instant petition.

I owe a debt of gratitude to the Research Centre of Lahore High Court for the valuable assistance provided in this case.

KMZ/W-11/L Petition allowed.