Newsletter May 2014


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Legal News & Updates

Holding of General Meetings through Video Conference Facility

Listed companies have been allowed to hold general meeting through video conferencing vide Circular No. 10 of 2014 dated May 21, 2014 subject however to the procedures and requirements set forth in the aforementioned Circular issued by the Securities & Exchange Commission of Pakistan.

Per the Circular, if members collectively holding 10% or more shareholding residing at a geographical location, provide their consent to participate in the meeting through video conference at least 10 days prior to date of meeting, the company shall arrange video conference facility in that city subject to availability of such facility in that city.  The company shall also intimate members regarding venue of videoconference facility at least 5 days before the date of general meeting along with complete information necessary to enable them to access such facility.

Securities & Exchange (Microinsurance) Rules, 2014

Securities & Exchange Microinsurance Rules, 2014 have been published by the Securities & Exchange Commission of Pakistan with the approval of the Policy Board. The said Rules govern and regulate insurance products and services for low income persons that meet their needs for risk protection and relief against distress, misfortune or contingent event for modest and defined benefit levels.

CCP Issues Policy Note to HEC to Revise Equivalence Standard

The Competition Commission of Pakistan (CCP) has issued a Policy Note to the Higher Education Commission (HEC) to revise its Equivalence Standard for Master’s degree programs to create an exception for those who attained their Master’s degrees in a period prior to the introduction of Equivalence Standard, to create a level playing field among all the Master’s degree holders.

CCP took notice of concerns raised with regard to Equivalence Standard (ES) introduced by the HEC in Qualification Framework and Revised Roadmap for Business Education – 2012. The Equivalence Standard applies retrospectively and renders the Master’s degrees earned prior to introduction of the Equivalence Standard inferior to those earned after the introduction of ES.

Spectrum Sharing: Now a Necessity in the Telecoms Industry?

bloggingSpectrum is a scarce and valuable resource. The demand for spectrum has grown significantly over the years highlighting the need for efficient use of all available spectrum in order to avoid scarcity. There exists currently a dichotomy in terms of utilization of allocated spectrum in the telecoms industry. While some telecommunications service provider licensees are constrained by spectrum scarcity in meeting the market demand with the requisite QoS, other licensees carry spectrum which is not fully utilized for the time being.

The regulatory regime currently in place prohibits spectrum sharing. Per the terms of licences issued to fixed line and mobile cellular operators by the Pakistan Telecommunication Authority (Authority), licensee shall only use the assigned radio frequency spectrum in its own operations, and it shall not lease, sub-licence, allocate, assign or otherwise make available the use of the assigned radio frequency spectrum to another Operator. Further, reassignment of frequencies can also only be carried out by the Authority and not directly by the operators.

Globally, spectrum management policies are evolving towards more flexible and market oriented models to increase opportunities for efficient spectrum use. Examples include initiatives taken by the relevant authorities in Australia, Bulgaria, Canada and Germany etc. The European Union revised its policy in 2009 to ensure that undertakings may transfer or lease individual rights of use of radio frequencies to other undertakings.  A more recent example is that of the consultation process on spectrum sharing undertaken by Ofcomm in the United Kingdom. An overwhelming majority of the industry stakeholders showed its support in favour of the proposition and the transition towards a regime of spectrum sharing now seems to be underway.

The global turnaround is not so far from the vision of the Authority itself. The Authority has concurred on occasions that the most optimum approach to increase efficient use of spectrum is spectrum trading, which has been adopted in almost all the major developed states in the world. In this approach, the authorized primary users are permitted to allow secondary users to use the entire spectrum or its portion for providing any service. There are many potential benefits of this approach such as more efficient use of spectrum, technologically and economically, more flexibility in spectrum management, including removal of rigidities in primary assignment and ability to charge market value of spectrum.  In Pakistan, spectrum sharing approach has been adopted in some bands but the policy in this regard is not clear and transparent, and the number of such bands is limited. In order to increase efficient use of the spectrum for respective telecommunication services, spectrum trading and sharing would be in list of next ten years regulatory vision.[1]

The outcome of the Authority’s earlier recommendations on the introduction of a converged framework (for broadcasting, IT regulations and efficient spectrum management) as well as the adoption of a general spectrum sharing policy (for use by other efficient users, on a competitive basis, of the unutilized spectrum held by those who have acquired spectrum and are holding the spectrum without efficient use)[2], is yet to be seen.

In light of the above, the increasing demand of telecommunication services, the prospects of efficient utilization and distribution of spectrum, and the Authority’s recommendations in Vision 2020, it is clear that change in legal framework regulating spectrum sharing and assignment is not only a now a necessity but also a possibility. Following the publication of Vision 2020 by the Authority, the telecoms industry anticipates and anxiously awaits a vital change in the legal framework in favor of spectrum re-farming, trading and sharing.

Rida Jamal (Associate) assists Partners in matters related to telecommunication, corporate & commercial laws and has been involved in provision of legal services to various telecom service provider licensees operating in Pakistan.

 


[1] Vision 2020, PTA Publication, Spectrum Re-farming, trading and sharing, Page 67

[2] Vision 2020, PTA Publication, Recommendations, Page 94

 Contracts of Guarantee

Corporate-Commercial-resized‘Contract of Guarantee’ is a trilateral contract among three persons/parties in which one party (Surety/Promisor/Guarantor) owes obligation to discharge the liability of second party (Principle Debtor) on his default in favour of third party (Creditor). Banks usually take the role of Guarantor or Surety in such Contracts of Guarantee.

Most business transactions involve Bank Guarantees and encashment thereof and hence it is essential to be well acquainted with rights of Creditors and duties/obligations of Guarantors/Surety.

In a case, reported vide PLD 2003 (SC) P. 19, relating to encashment of Bank Guarantee, Supreme Court of Pakistan discussed the origin, scope, effect, rights and liabilities of the parties to the Contract of Guarantee and elaborated the nature of such Contract in which Banks undertake unconditional liability to fulfill the guarantee in favor of Creditors. In this regard, following principles were laid down by Supreme Court in the said case:

  • The Contract of Guarantee is an old and time tested concept and is perhaps coeval with the first contract recorded in history.
  • The word ‘warranty’ and ‘guarantee’ are sometimes used indiscriminately, but in general, warranty is applied to a contract as to title, quality or quantity of a thing sold and guarantee is held to be the contract by which one person is bound to other for the due fulfillment of a promise or engagement of a third party.
  • The Bank Guarantee (a Contract of Guarantee between Bank and Creditor in which Bank, as Guarantor, owes obligation to pay certain sum of money to Creditor on default of Principal Debtor) is an autonomous contract which imposes an absolute obligation on the Bank to fulfill the terms thereof and the payment on the Bank Guarantee becomes due on the happening of a contingency on the occurrence of which the Guarantee becomes enforceable. It is an independent contract between the Bank and the party concerned; and thus obligations arising under the Bank Guarantee are independent of the obligations arising out of specific contract between the parties. Accordingly a Contract of Guarantee is to be worked out independently of any dispute arising out of the principal agreement between the parties because encashment of Bank Guarantee has no nexus with the spirit of the contract executed between the parties.
  • As regards to the Contract of Guarantee, rights and liabilities of parties are to be determined with reference to terms and conditions of the guarantees. The Guarantor cannot take advantage of any condition incorporated in the principal agreement, unless same is reflected in a Contract of Guarantee. In an action by a creditor against a Guarantor, the former is only required to establish the liability of the principal debtor and occurrence of default or breach of the terms leading to the liability. The Guarantor cannot resort to technicalities to defeat the claim of the Creditor. Even where the contract becomes unenforceable against the Principal Debtor, yet the Guarantor would still be liable for the surety he had executed, unless there was any covenant to the contrary. The law is thus settled that extraneous claims and counter-claims do not bar the enforcement of the Bank Guarantee.
  • In case of Bank Guarantee, no interim injunction (stay order) by Court restraining payment under the guarantee could be granted; as net effect of injunction is to restrain the Bank from performing the Bank Guarantee which cannot be done because of the established legal principle that ‘one cannot do indirectly what one is not free to do directly’.
  • An irrevocable commitment, either in the form of confirmed Bank Guarantee or irrevocable letter of credit (synonym of Contract of Guarantee), cannot be interfered with (by the courts) except in case of fraud or in case of question of apprehension of irretrievable injustice has been made out.
  • Court held that the commitments of Banks must be honored free from interference by Courts; otherwise, trust in internal and international commerce would be irreparably damaged. It is only in exceptional cases, that is to say, in case of fraud or in case of irretrievable injustice likely to be done, that the Courts should interfere.
  • Once Bank Guarantee is discharged, the obligations of the Banks come to an end. Courts should refrain from probing into the transactions/agreements between the Bank and customer, which led to the furnishing of the Bank Guarantee.

Azm Ali (Intern) routinely assists Senior Partner in matters related to corporate and commercial laws. 

Case Law Watch

Jurisdiction of High Court in Custody Cases

On 28 May, 2014 Sindh High Court passed a judgment in W.P (Habeas Corpus) pertaining to the production of children & their custody.

Brief Facts

Petitioner was married to Respondent No.1 on 22.4.2004 and had three children with him. Respondent No.1 left the Petitioner in November, 2013 with allegations that she is a woman of bad character. Respondent No. 1 with the help of Respondent No. 2 to 6, illegally and forcibly snatched the minor children from the custody of the Petitioner. She has alleged in her Petition that minor children are in the custody of Respondents at Peshawar and there is imminent danger to their lives therefore she is seeking recovery of her children.  The question before the court was whether High Court had jurisdiction to hear this case or whether the issue of custody was the domain of Guardian Judges.

Court’s Observation

Petitioner has already approached the Court of learned District & Session Judge, Karachi under Section 491 Cr. P. C for the same relief which is still pending. Children are of the age of 07 years and 09 years and are in the custody of their father as natural guardian therefore she cannot claim her right of Hizanat.

Petitioner has the remedy of filling a case under Guardian & Wards Act, 1890 to claim the custody or visiting rights of the children.

Jurisdiction of High Court (H.C)

In case titled PLD 2012 SC 758, it was held that jurisdiction of the H.C can be invoked in exceptional and extra ordinary circumstances.

The Hon’ble Supreme Court in the case 2001 SCMR 1782, decreed that the matter of custody of minor children can be brought before a H.C under Section 491 Cr.P.C only if the children are of very tender ages and quite recently been snatched away from the lawful custody, even in such cases H.C may only regulate interim custody of the children leaving the matter of final custody to be determined by a Guardian Judge.

Order

Petition was dismissed as not maintainable.

Mehraj Tareen (Associate) assists Partners in litigious matters with a special focus on family laws






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