ISLAMABAD, June 23: The Supreme Court on Friday annulled the sale of Pakistan Steel Mills to a three-party consortium and directed the government to refer the matter to the Council of Common Interests (CCI) within six weeks.

A nine-member full bench of the apex court, headed by Chief Justice Iftikhar Mohammad Chaudhry, declared the $362 million transaction with the Russian-Saudi-Pakistani investors null and void.

“The March 31 Letter of Acceptance (LOA) and April 24 Share Purchase Agreement (SPA) with the bidders are declared to be void and of no legal effect,” the chief justice announced in a packed courtroom at 7pm after four weeks of consecutive hearing.

“The decision will prove to be a source of strength for the people of Pakistan, help build the image of the judiciary and further strengthen its independence,” observed Barrister Zafarullah Khan of the Watan Party soon after the unanimous short order had been announced.

Barrister Zafarullah had challenged the sale of 75 per cent stake and handing over of management control of the PSM to the consortium comprising Russian Magnitogorsk, Saudi Al Tuwariqi and Arif Habib Securities for $362 million (Rs21.68 billion) at a rate of Rs16.8 per share.

Mujeeb Pirzada, counsel for the Pakistan Steel People’s Workers Union, and the federal government had come into appeal against a Sindh High Court order.

The Privatisation Commission Ordinance 2000 was, however, not held against the Constitution, but the apex court’s short order said the process of PSM’s privatisation stood vitiated by acts of omissions and commissions on the part of certain state functionaries reflecting violation of mandatory provisions of law and the rules.

This adversely affected decisions like pre-qualifying a member of the successful consortium (Arif Habib), valuation of the project and the final terms offered to the successful bidders which were not in accord with the initial public offering given through advertisement, the short order said.

Conscious of the mandate of Article 153 and 154 of the constitution, it said: “We hold that the establishment and working of CCI was a cornerstone of the federal structure, which provided for protection of the rights of the federating units. Mindful that this important institution (CCI) is not functioning presently and taking note of the statement of Advocate Abdul Hafeez Pirzada, who is representing the federal government, that the process for making it functional was under way, we direct the federal government to do the needful expeditiously as far as possible but not later than six weeks.

“However the approval for the privatisation of PSM by the CCI on May 29, 1997 continues to hold the field.

“In view of the developments having taken place during the intervening period and the divergent stand taken by the counsel for the federal government that this approval was never recalled and the stand taken by steel mills’ counsel that the matter of its privatisation was dropped subsequently, it would be in order if the matter is referred to CCI for consideration.”

On illegalities, the court noted that pre-qualified parties — Arif Habib Group of Companies and Al-Tuwariqi Group of Companies — had entered into a consortium before the bidding process, but the third party, Magnitogorsk Iron and Steel Works Russia, joined hands with the consortium on the day of the bidding.

Since the bid offered by this consortium was found to be higher than the bid of other competitors, therefore it was accepted and LOA was issued on the same day i.e March 31, 2006 followed by the agreement on April 24.

The order noted that the privatisation commission had extended benefits to the purchasers like handing over the stock in trade in the units worth Rs10 billion and cash worth Rs8.559 billion lying in its account out of which post-dated cheques for about Rs7.67 billion had already been issued to clear the liability of loans, which were due from the year 2013 to 2019. Likewise, the tax of Rs3 billion has already been paid, out of which Rs1 billion will be refunded to the purchaser on taking over the unit. Thus total loss to the government in this way works out to be Rs18 billion. Above all, the government has accepted the liability to pay compensation of Rs15 billion to workers under the golden handshake scheme, the order said.