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Chaitra 16, 1935, at 07:17:27 PM
The Economic Reforms’ Order, 1972
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Sections |
Contents |
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1 |
Short title, extent and commencement |
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2 |
Definitions |
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3 |
Order to override other tows |
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4 |
Power to appoint Managing Director |
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5 |
No compensation for termination of office |
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6 |
Employees to continue in service |
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7 |
Prohibition to obstruct |
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7A |
Power to prohibit dealings in shares, etc |
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7B |
Power to acquire share or business of an establishment |
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7C |
Acquisition of shares |
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7D |
Re-organization of establishment |
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7E |
Vesting of management etc., acquired by Federal Government in a corporation |
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7F |
Constitution of Board of Directors, etc |
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8 |
Bar of jurisdiction |
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9 |
Indmenity |
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10 |
Delegation of powers |
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11 |
Savings |
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12 |
Power to make rules |
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13 |
Removal of difficulties |
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THE FIRST SCHEDULE |
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SECOND SCHEDULE |
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The Economic Reforms’ Order, 1972
PRESIDENT’S ORDER 1 OF 1972
Gazette of
Whereas the benefits of economic development and industrialization have remained confined to the privileged few to the detriment of the common man;
And whereas Islam enjoins equitable distribution of wealth and economic power and abhors their concentration in a few hands;
And whereas it is the duty of Government to ensure that the wealth and economic resources of the country are exploited to the maximum advantage of the common man;
And whereas those who control the means of production are
accountable to the people through their chosen representatives;
And whereas it is necessary to safeguard the interest of the small investor;
And whereas it is necessary for that purpose to provide for
redeeming the promises made to the people in that behalf from time to time
since the creation of
Now, therefore, in pursuance of the Proclamation of the 25th day of
March, 1969, read with the Proclamation of the 20th day of December, 1971, and
the Provisional Constitution Order, and in exercise of all powers enabling him
in that behalf, the President and Chief Martial Law Administrator is pleased to
make the following Order:---
1. Short title, extent and commencement.- (1) This order may be called the Economic Reforms’
Order, 1972.
(2) It extends to the whole of
(3) It shall come into force at once.
2. Definitions.- In this Order, unless there is anything repugnant to
the subject or context,---
(a) ‘establishment’ means any ‘[company,
firm, concern, institution or enterprise the whole or any part of the
undertaking of which pertains] to any of the categories set out in the [First
Schedule] ; and includes any related office, shop, factory, godown, yard stocks
and stores wherever they may be;
(aa) [managed establishment’ means an
establishment in respect of which a Managing Director has been appointed].
(b) ‘Managing Director’ in relation to an
establishment means a Managing Director, appointed under Article 4 in respect
of such establishment; and
(bb) [‘Share-holder’ means a share-holder in the share capital of an establishment,
and includes a stock-holder;
(bbb) ‘person’ includes an individual, a
Hindu undivided family, a partnership firm, an association of persons or a body
of individuals, the Government of a Province and a local authority].
(c) words and expressions used but not defined in this Order shall have the same meaning as in the Companies Act, 1913 (VII of 1913).
3. Order to override other tows.-This Order shall have effect notwithstanding anything
contained in the Provisional Constitution Order or any other law for the time
being in force or in any agreement, contract, memorandum or articles.
[(2) It is hereby declared that development under Federal control of the
industries pertaining to any of the categories set out in the First Schedule is
expedient in the public interest].
4. Power to appoint Managing Director.-(1) The [Federal Government] may, if it considers
necessary in the public interest so to do. by order appoint a Managing Director
in respect of an establishment , [****]
(2) On the appointment of a Managing Director
in respect of an establishment, the administration of the affairs of the
establishment shall vest in him and any person or authority exercising or
having the right to exercise immediately before such appointment, any power or
function in relation to the [*****] establishment shall cease to exercise or to
have the right to exercise such power or function, [and, on and from such date
as the Federal Government may by notification in the official Gazette, specify,
the establishment shall be known by such new name as may be so specified].
(3) The Managing Director shall hold office
during the pleasure of the [Federal Government], and shall, in the discharge of
his functions, be subject to such orders and directions as the [Federal
Government] may from time to time give in writing.
(4} Where a Managing Director is appointed in
respect of an establishment, the [Federal Government] may, by order, remove
from office the Board of Directors, the Managing Agent, any Director or any
other [person] howsoever designated performing or having the right to perform
any function in relation to that establishment:
Provided that the Managing Director may require any Director or other officer
in respect of whom an order is made under this clause, to perform any function
in relation to the establishment as the Managing Director may direct on such
terms and conditions as may appear reasonable.
(5) The Managing Director appointed under
clause (1) in respect of an establishment shall exercise,---
(a) if such establishment is owned or
controlled by a company, all the powers and functions of the Board of
Directors;
(b) if such establishment is owned or
controlled by an individual or a firm, all the powers and functions of that
individual or a firm; and
(c) if such establishment had a Managing Agent to manage its affairs, all the powers and functions of the Board of Directors.
5. No compensation for termination of
office.--No compensation shall be
payable for the termination of any office or of an agreement under or by virtue
of the operation of the provisions of this Order:---
Provided that this Article shall not be construed as preventing the [Federal Government] from authorizing any payment to reimburse a person for any expenses bona fide incurred by him in connection with the management of the establishment before the appointment of a Managing Director.
6. Employees to continue in service.- Unless in any particular case the Managing Director otherwise directs, all persons employed in, by or for the purpose of the business of the establishment by whomsoever appointed or engaged, shall continue in their respective employments on the same remuneration and other conditions of service as were applicable to them immediately before the appointment of the Managing Director of that establishment.
7. Prohibition to obstruct.--No person shall, except under the authority of the [Federal Government], give any instructions to the Managing Director, nor shall any person in any manner obstruct him in the discharge of his functions.
7-A. Power to prohibit dealings in shares,
etc.-(1) The Federal Government may, by
notification in the official Gazette, direct that,---
(a) no dealings or business relating to the
shares of the managed establishment specified in the notification shall be
transacted on any stock exchange ; and
(b) no transfer of the shares of the managed establishment specified in the
notification shall be registered in the share register of the establishment
except to the extent and in the manner so specified.
(2) A notification issued under paragraph (a) of clause (i) shall remain in force for a period of ninety days unless it is earlier rescined or modified.
7-B. Power to acquire share or business of
an establishment.-(1) The Federal
Government may, if it considers necessary in the public interest so to do, by
an order,’
(a) In the case of an establishment which is a company or on establishment
owned by a company;
(i) acquire the entire shares held in the
company by the sponsors and directors of the previous management thereof, the
family members of such sponsors and directors and the associated undertakings
and managing agents which were the associated undertakings and managing agents
of the company ‘at the time at which a Managing Director was appointed in
respect thereof and the whole or a portion of the shares from all or any of the
share-holders of such company and, as from the date of such order, the shares
so acquired shall vest in the Federal Government; or
(ii) acquire the whole or a portion of the
proprietary interests of such company in such establishment and, as from the
date of such order, the’ interests so acquired shall vest in the Federal
Government; and
(b) in the case. of an establishment owned by
a person acquire the whole or a portion of the proprietary interests of such
person and, as from the date of such order, the interests so acquired shall
vest in the Federal Government:---
Provided that no order shall be made under
this Article for the acquisition for the shares held in an establishment by a foreign
investor or an institution owned, managed or controlled by the Federal
Government:---
Provided further that in the case of an
establishment which is a company or an establishment owned by a company, the
Federal Government may, by notification in the official Gazette, exempt from
acquisition shareholdings of any share-holder up to such maximum amount as may
be specified in the notification.
Explanation.-In this clause,
(a) ‘associated undertakings’ has the same
meaning as in the Monopolies and Restrictive Trade Practices (Control and
Prevention) Ordinance, 1970 (V of 1970);
(b) ‘family members’ in relation to a sponsor
or director, means the spouse, lineal ascendants and descendants and brothers
and sisters of the sponsor or director; and
(c) ‘previous management’, in relation to a
company, means a person, body or managing agency in whom the management of the
company vested immediately before the appointment of a Managing Director in
respect of such company or of the establishment owned by it.
(2) Where the Federal Government makes an order under clause (1) in respect of the shares of any company, no dealings or business relating to such shares shall be transacted on any stock exchange for a period of ninety days from the date of such order.
7-C. Acquisition of shares.- Where, under Article 7-B, the Federal Government acquires the whole or a portion of the shares of the shareholders of any company or of the proprietary interest of a company or other person in an establishment, the Federal Government shall [ **** ] pay such compensation as may be determined by it on the basis of the principles set’ out in the Second Schedule.
7-D. Re-organization of establishment.-(1) Where, in respect of any managed establishment which
is a company or an establishment owned by a company, the Federal Government
holds or has acquired the whole or a majority portion of the shares in the
company carrying the controlling voting rights, or where the Federal Government
has acquired the whole or a controlling portion of the proprietary interests it
may at any time re-organize such establishment with a view to increasing its
efficiency and rationalizing its operation.
(2) The re-organization may include provision
for amalgamation of a managed establishment with other such establishments or
within undertakings owned or managed by the Federal Government or by a
corporation set up under the authority of the Government and, in the case of
establishments which are companies or establishments owned by companies, may
provide for the reconstruction of any such company or companies, or
amalgamation of any such two or more companies and for all or any of the
matters contained in section 153 or section 153-B of the Companies Act, 1913
(VII of 1913), or for alteration of share capital or loan structure and
alternation of existing, or adoption of fresh, articles of association of such
companies.
(3) The re-organization shall be implemented and take effect in such manner and at such time as the Federal Government may, by notification in the official Gazette, specify.
Explanation.-’For the purposes of this Article [Article 7-E and Article F] the Federal Government shall be deemed to have a majority portion of the shares in a company carrying controlling voting rights or the controlling proprietary interests in an establishment if the aggregate face value of the shares or proprietary interests in such establishment owned by the Federal Government and by an institution owned or controlled by the Federal Government exceeds 50% of the total voting rights in the issued and paid-up share capital of the company or 50% of the proprietary interests of that establishment.
7-E. Vesting of management etc., acquired
by Federal Government in a corporation.---
(1) Where the Federal Government acquires the whole or a majority portion of
the shares or proprietary interests of a company or other person under Article
7-B. the Federal Government may transfer the management of and such shares or
proprietary interests in such establishment to any corporation wholly owned or
controlled by the Federal Government or a corporation to be set up for the
purpose.
(2) A corporation to which the management of, or shares or proprietary interest in, an establishment is or are transferred under clause (1) shall in the exercise of its powers and performance of its functions, be subject to the general supervision and control of such ‘Board or other authority the Federal Government may set up for the purpose.
7-F. Constitution of Board of Directors,
etc.-(1) Where the Federal Government
has acquired under Article 7-B the whole or a majority portion of the shares of
a managed establishment which is a company and is of the opinion that. in the
interest of the share-holders of the managed establishment, it is necessary to
do so, the Federal Government may, by order in writing direct that a board of
directors consisting of a Managing Director and such number of other directors
as may be specified in the order be constituted in such managed establishment.
(2) Where the Federal Government has made an
order under clause (1) in respect of a managed establishment, the board of
directors of such establishment shall be constituted within a period of sixty
days from the date of the order.
(3) Where the Federal Government has’ made an
order under clause (1) in respect of a managed establishment,---
(a) The Federal Government may nominate such
number of directors including the Managing Director, on the board of directors
of the managed establishment as bears to the total number of directors, as
nearly as may be, the same proportion as the aggregate face value of the shares
owned by the Federal Government and by an institution owned or controlled by
Federal Government and by an institution owned or controlled by Federal
Government, including the Corporation to which the management of the managed
establishment stands transferred under clause (1) of Article 7-E, hereafter in
this Article referred to as the Corporation, bears to the total issued share
capital of the managed establishment; and
(b) the other directors shall from time to
time be elected by the members of the managed establishment, other than the
Federal Government an institution referred to in paragraph (a) and the
corporation, in general meeting in accordance with the Companies (Managing
Agency and Election of Directors) Order, 1972 (P.O. No. 2 of 1972).
(4) The Managing Director nominated under
clause (3) shall be the chief executive of the managed establishment.
(5) The board of directors of a managed
establishment constituted under this Article shall enter upon office on such
date as the Federal Government may by order in writing, appoint in this behalf
and, upon their entering upon office as aforesaid,---
(a) the Managing Director appointed under
clause (1) of Article 4 in respect of the establishment shall cease to hold
office;
(b) the management of the establishment shall
cease to vest in the Corporation and the management and administration of the
affairs of the establishment shall, subject to this Article, stand transferred
to the board of directors; and
(c) the Managing Director nominated under clause (3) shall have such powers and functions as the board of directors may, from time to time, confer upon or entrust to him.
8. Bar of jurisdiction.- (1) No Court, including the Supreme Court and a High
Court shall call in question, or permit to be called in question, any provision
of this Order or of any rule or order made or anything done or any action taken
or purporting to be made, done or taken thereunder.
(2) No Court, including the Supreme Court and a High Court, shall grant any injunction or make any order, nor any such Court shall entertain any proceedings in relation to anything done or intended or purporting to be done .under this Order.
9. Indmenity.-No suit, prosecution or other legal proceeding shall lie against the [Federal Government] or the Managing Director or any other person for anything in good faith done under this Order or any rule or order made thereunder [or for any inadvertent failure to comply with any of the provisions of the Companies Act, 1913 (VII of 1913).
10. Delegation of powers.- [Federal Government] may, by notification in the official Gazette, direct that any of its powers under this Order shall, subject to such conditions, if any, as may be specified in the notification, be exercisable also by a Provincial Government.
11. Savings.- Nothing contained in this Order shall affect any
agreement entered into between the [Federal Government] and a foreign investor
or creditor or any agreement between a foreign investor or creditor and any
citizen of
12. Power to make rules.- (1) The ‘[Federal Government] may, by notification in
the official Gazette, make such rules as appear to it to be necessary or
expedient for carrying out the purposes of this Order.
(2) In particular and without prejudice to
the generality of the foregoing power such rules may provide for, or may
empower any authority to make orders providing for, all or any of the.
following matters, namely:---
(a) ensuring the safety of the properties of
an establishment;
(b) ensuring the due performance of their
duties by the persons connected with an establishment;
(c) Prohibiting anything likely to interfere
with the proper functioning of an establishment;
(d) the administration, management and
disposal by way of transfer or otherwise of any property belonging to or held
or managed by or on behalf of an establishment.
(e) prohibiting the departure from any area
of any person connected with the administration, control or functioning of an
establishment;
(f) the taking over or control of any business,
trade, industry, firm or company which is in the opinion of the 26 [Federal
Government] a subsidiary of an establishment;
(g) the requisitioning of any property,
movable or immovable, belonging to an establishment;
(h) the requisitioning of any property,
movable or immovable, the requisition of which is, in the opinion of the
‘[Federal Government] required for the proper functioning of the Government.
(i) preventing the entry of any person into
any place, yard, factory and mill, shop or office used for the purpose of an
establishment or of any of its subsidiaries;
(j) the taking of any steps for collecting,
controlling and disposing of the assets, movable and immovable of any
establishment [; and]
(k) the procedure and manner of acquiring
shares and proprietary interests in establishments and payment of compensation
therefor and reorganization of managed establishments ; and
(l) in the case of an establishment which is
a company, the calling of meetings of the share-holders of the company and the
conduct of its affairs].
(3) The rules made under this Article may provide that the contravention of any of the provisions or the Order of the rules shall be punishable with imprisonment for a term which may extend to two years, or with fine which may extend to ten Lakhs of rupees, or with both.
13. Removal of difficulties.-If any difficulty arises in giving effect to any
provision of this Order, the [Federal Government] may make such order, not
inconsistent with the provisions of this Order, as may appear to it to be
necessary for the purpose of removing the difficulty:
Provided that no such power shall be exercised after the
expiry of one year from the commencement of this Order.
THE FIRST SCHEDULE
1.
Iron and Steel Industries.
2. Basic Metal Industries.
3. Heavy Engineering Industries.
4. Heavy Electrical Industries.
5. Assembly and Manufacture of Motor Vehicles.
6. Tractor Plants, Assembly and Manufacture.
7. Heavy and Basic Chemicals.
8. Petro-chemical Industries.
9. Cement Industry.
10. Public utilities, that is to say--
(a) Electricity, Generation, Transmission and Distribution ;
(b) Gas ; and
(c) Oil Refineries.
THE SECOND SCHEDULE
Principles and the manner for payment of compensation in
respect of the shares or proprietary interests of an establishment acquired by
the Federal Government.
1. Where the whole
or a portion of the shares of such an establishment is acquired by the Federal
Government, the value of the compensation for the shares so acquired shall be
assessed,---
(a) in the case of shares not quoted on any of the stock
exchanges, as the Break Up Value; and
(b) in the case of shares quoted on any of the stock
exchanges, as the Break Up Value or the Market Value, whichever is less.
2. Where the whole
or a portion of the proprietary interests in such an establishment is acquired
by the Federal Government, the value of the compensation for the interests so
acquired shall be assessed,---
(a) in the case of an establishment which has been in
commercial production for less than 5 years, at the Net Worth Value of the
proprietary interests of such establishment; and
(b) in the case of an establishment which has been in
commercial production for more that 5 years, at the Net Worth Value or the Time
Value of the proprietary interests, whichever is less, of such an
establishment.
3. The
compensation payable in accordance with the principles indicated above shall be
paid by the Federal Government in cash or in the form of Government Industrial
Bonds redeemable at any time at the option of the Federal Government carrying a
rate of interest one per cent. above the bank rate as notified by the State
Bank of
(a) ‘Break UP Value shall mean- the value of the shares
of a company as determined by the auditors of such company on the basis of its
latest audited Annual Balance Sheet, in accordance with clause (e) of Rule 8 of
the Wealth Tax Rules;
(b) ‘Market Value’ shall mean the average value of the
shares of a company as quoted on the stock exchange nearest to the Head Office
of that company on closing on the six working days prior to the date of
acquisition of such shares under the Order or, if, on the date of such order,
dealings or business relating to such shares is prohibited under the Order, the
six days prior to the date on which the dealings or business is so prohibited;
(c) ‘Net Worth Value’ shall mean the value of the
proprietary interest of a company or other person in an establishment, which is
acquired under the Order, as determined by the auditors appointed by the
Federal Government on the basis of the latest annual audited Balance Sheet or,
where no audited Balance Sheet is available on the basis of the latest annual
Balance Sheet of such establishment to he verified by the auditors appointed by
Federal Government for the purpose. The Net Worth Value shall be determined by
valuing the Fixed Tangible Assets appearing in the Balance Sheet at their
written down values, and valuing the Current Assets, e.g. stocks, inventory,
work in progress advances and pre-payments, cash and bank balances, at their
cost or market value, whichever is lower. From the sum total of the fixed and
the current assets so valued as aforesaid, all the outstanding liabilities
appearing in the Balance Sheet shall be deducted, thereby arriving at the Net
Worth Value of the proprietary interests in such establishment;
(d) ‘Time Value’ shall mean the value of the proprietary
interests of a company or other person in an establishment, where such
establishment has been in commercial production for a period of not less than 5
years and shall be determined by multiplying the average net profits of the
last 3 completed years on account of such an establishment by the figure 7; and
(e) ‘Net Profits’ shall mean the net profits as defined
in sub-section (3) of section 87-C of the Companies Act, 1913 (VII of 1913).
The Economic Reforms’ (Acquisition
and Compensation) Rules, 1973
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