ISLAMABAD: The Supreme Court has held that the Companies Act 2017 and Securities and Exchange Commission of Pakistan (SECP) Act 1997 do not take precedence over the National Accountability Ordinance (NAO), unless the offences of cheating or dishonestly inducing public at large are also punishable under these acts.

The observation came while the court was deciding a bail plea of Saifur Rehman Khan, chief executive officer (CEO) of the B4U Investment Company that, according to NAB findings, had deprived private individuals of around Rs10.86 billion.

A three-judge Supreme Court bench headed by Chief Justice Umar Ata Bandial and consisting of Justice Syed Mansoor Ali Shah and Justice Muhammad Ali Mazhar withdrew the interim bail earlier granted to the petitioner on Aug 30, 2021.

The very next day, National Accountability Bureau (NAB) authorities had, in dramatic fashion, whisked away the accused from the parking lot of the apex court in the bureau’s vehicles.

SC rules SECP law, Companies Act can’t take precedence over NAB ordinance

Saifur Rehman Khan is facing allegations of using the business name of B4U Global, which was later changed to SR Group during the course of the inquiry being conducted by NAB. He allegedly induced and lured the general public and investors — through advertising and social media platforms — to invest money in B4U Global by promising them unrealistic profits of seven to 20 per cent per month (equivalent to 84 to 240pc per year).

NAB claimed that the lucrative return on investment promised by B4U Global was, in fact, a Ponzi or a pyramid scheme meant to defraud and cheat the public at large and deprive them of their money.

The general public was enticed by the Ponzi scheme of the petitioner, who deposited the money into different accounts in the names of certain individuals, registered companies and unregistered businesses, all controlled and managed by him.

Authored by Justice Syed Mansoor Ali Shah, the judgement explained that the question of the SECP or Companies Act taking precedence over the NAB ordinance did not arise unless it was shown that the offences of cheating, defined in Section 415 PPC to dishonestly induce members of the public at large to deliver any property including money or valuable security to any person, and criminal breach of trust, were also punishable under these acts as they are under the NAB ordinance.

The petitioner denied that he collected any amount for investment from any person, maintaining that private limited companies registered with the SECP had received money from investors. Due to this, he claimed, the matter fell within the exclusive domain of the SECP.

But the material collected by NAB suggests that the money from investors was not only received in the bank accounts of the registered companies, but also in the personal accounts of the petitioner and his family members as well as their unregistered companies, which do not fall within the domain of the SECP, the judgement said.

The actions taken by the SECP under the Companies Act relates to the alleged illegal acts of registered companies and their directors, not those acts that have been committed by the petitioner and his family members in their personal capacity, the judgement said.

It added that even with regard to registered companies, a person who forms a company for any fraudulent or unlawful purpose, or carries on an unauthorised business, was liable to be proceeded against under Section 264 (3) of the Companies Act, as well as any other law in force at the time.

Therefore, there is no bar for NAB to inquire into and investigate the commission of alleged offences under Section 9 of the NAO by the petitioner and to proceed further in the case against him.

The petitioner had claimed that he was already facing proceedings before the SECP, but another investigation by NAB would amount to double jeopardy, violating his fundamental right to protection against double punishment guaranteed by Article 13 of the Constitution. However, the judgement held that this view was not legally tenable.

The judgement noted that the NAB inquiry found about 57 bank accounts that were used for collecting money from B4U investors, of which 26 were in name of the petitioner, his wives and son, while 18 were in the names of registered companies and 16 in the names of unregistered companies.

Published in Dawn, March 6th, 2022