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Thursday, February 09, 2012
SC upholds HBL privatisationBy Hasnaat Malik
ISLAMABAD: Declaring the Habib Bank Limited (HBL) privatisation as lawful, the Supreme Court on Wednesday observed that the transfer of the bank’s ownership in a transparent manner to the Agha Khan Foundation for Economic Development (AKFED) was in accordance with the best global pracitices.
On November 29, 2011, a three-member bench headed by Justice Tassaduq Husain Jilani, after disposing of various petitions, had announced a short order. He authored a 70-page detailed judgement after Dr Akhtar Hassan Khan and Watan Party, nominating the federation of Pakistan and others as respondents, filed identical constitutional petitions.
The court observed, “The approval of the privatisation of Habib Bank Limited by the Cabinet Committee on Privatisation was within the purview of the Privatisation Commission, therefore, it does not reflect the violation of any statutory provisions; neither the process was tainted with lack of transparency or mala fide, nor the successful bidder lacked qualifications prescribed in law; and it is in accord with the best practices around the world and the law declared by this court.”
The petitioners had contended that the privatisation of the HBL was carried out in utter haste and on the desire of the International Monitory Fund (IMF). The procedure adopted to privatise the HBL was mala fide and in violation of the provisions of the Privatisation Commission Ordinance and the rules framed thereunder.
They had also observed that the approval of the highest bidder, AKFED, by the Cabinet Committee on Privatisation in its meeting, held on January 2004, was an improper exercise of discretion and amenable to interference with the well recognised principles of judicial review of administrative action.
“Injecting an amount of Rs 17.7 billion in the HBL and thereafter offering it for privatisation was an act of financial mismanagement of a financial institution causing loss to the public exchequer and against the best practices,” they contended.
The decision to privatise HBL was taken in 1995, but a decisive step culminating in its sale was taken in the year 2000, when the Privatisation Commission Ordinance was promulgated and the Privatisation Commission (PC) appointed an accountancy firm of Pakistan, AF Ferguson, as the financial adviser for evaluation of the HBL.
It invited expressions of interest (EOI) from prospective bidders in June 2002, but on account of sluggish response, the process was called off. In April 2003, the PC again called for EOIs and this time 19 parties submitted EOIs, followed by submission of Statements of Qualification (SQs). A pre-qualification committee examined the SOQs of the bidders, and these bidders were also granted access to the data room prepared by the bank and the PC. It was opened on September 8, 2003, and closed on November 21, 2003. However, only three parties entered the data room to conduct due diligence.
In November 2003, with a view to provide further incentive to the prospective bidders, the PC decided that while bidders would be required to bid for 51% of the issued and paid-up capital of the bank, they would also have the option of either purchasing the entire 51% stake at once or first acquire 26% or more stake with management control and then pay for the remaining stake within a period not exceeding two years.
The reference price recommended by the financial adviser (AF Ferguson & Co.) was Rs 20.609 billion for the value of government stake of 51% in the bank, which was being invested. However, this reference price was revised by the PC itself and fixed at Rs 22.143 billion in its meeting held on December 26, 2003.
This price was later approved by the Cabinet Committee on Privatisation (CCOP). The pre-qualification committee formed by the PC in its meeting dated December 20, 2003, permitted three potential bidders to participate in the bidding process. Agha Khan Foundation for Economic Development (AKFED) was declared the highest bidder in the bidding held on December 29, 2003 for sale of 51% shares of the HBL. The bid was higher than the reference price of Rs 22.143 billion.
Courtesy www.dailytimes.com.pk