Daily Times

The esteemed Supreme Court of Pakistan’s five-judge bench has disqualified Prime Minister Nawaz Sharif because he was not deemed ‘honest’ according to Section 99(1)(f) of the Representative of the People Act 1976 (ROPA) and Article 62(1)(f). Nawaz Sharif was not deemed ‘honest’ because, according to the Court’s judgement, “he did not disclose his aforesaid assets” and thus furnished “a false declaration”. The ‘aforesaid assets’ in the judgement referred to ‘unwithdrawn salaries’ of Nawaz Sharif which he was entitled to as a Chairman of the Board of Capital FZE.

The entire Pakistani nation is now worried that if a sitting and popular Prime Minister is dismissed on the above logic, then with this high threshold of ‘honesty’ and with this low threshold of disqualification, the widest of gates has been opened for future merry go rounds of Prime Ministers

It is very clear from the Court’s judgement, then, that what convinced the Supreme Court to disqualify a sitting Prime Minister elected by an overwhelming majority of Pakistanis was a) the interpretation by the Court of the technical term ‘asset’ and b) equating the salary that Prime Minister Nawaz Sharif did not withdraw with an ‘asset’. Therefore, it is very important for the lawyers of Nawaz Sharif, regarding their review petition, to be very clear about the accounting basis of their petition.

In my view, the legal team of Nawaz Sharif has an exceptionally solid case on which to file a review which the Supreme Court has graciously allowed. Also, in my view, the lawyers of Nawaz Sharif
should only focus on one point (as follows) and leave all the others untouched, because the Court itself has focused only one point — the link between the unpaid salary of Nawaz Sharif and the term ‘asset’.

The Court’s judgement notes that ROPA 1976 does not define the word ‘asset’. Therefore, the Court has referred to Black’s Law Dictionary which defines an asset as a) something physical such as cash, machinery b) enforceable claim against others such as accounts receivable c) copyrights, patents, trademarks etc. d) goodwill. The court quotes the Black’s Law Dictionary as clarifying that a ‘receivable’ is “any collectible whether or not it is currently due. Accounts receivable is a claim against a debtor usually arising from sales or services rendered.” The Court believes that “a salary not withdrawn would nevertheless be receivable and as such would constitute an asset for all legal and practical purposes.”

According to every business management professor I have spoken to, there are some very serious questions about the above-mentioned linkage(s) between Nawaz Sharif’s un withdrawn salary and the technical term ‘asset’. First and foremost, from an audit point of view, not every account receivable is an asset. A few conditions have to be met. The receivables should be supported by related contractual and legal documents such as bills of receivables and promissory notes. There should also be likelihood that these receivables will be collected. As an example, you may claim that your assets amount to five lac rupees (one lac in cash and four lac loaned to four friends) but if all the chances of their paying back is zero, your assets amount not to five lacs but one lac. If the esteemed Court’s opinion is applied to the banking sector, it may collapse in one week because every account receivable claimed by the bank will automatically turn into an asset!

Second, even the link between the unwithdrawn salary of Nawaz Sharif and the term accounts receivable is not clear. Assuming that he has not withdrawn salary over many years, and had no intention of withdrawing any salary in the future, the logic of linking his unwithdrawn salary to the term ‘accounts receivable’ is very dicey. I think it does not even exist. In this case, the claimant himself has no intention whatsoever of receiving the salary. The unwithdrawn salary cannot turn into an account receivable, much less to an asset.

Ideally, the Court could have asked the 100 or more Accounting and Finance professors working in Pakistan at prestigious universities such as LUMS and KSBL for their views as experts. But to base the entire decision of disqualifying a sitting Prime Minister and disbanding the entire cabinet on an assumed link between an unwithdrawn salary and an account receivable, and then between an account receivable and an asset, and then between that asset and the ROPA Act, and then between ROPA and 62(1)(f) is, to say the least, prima facie, flawed and untenable.

The entire Pakistani nation is now worried that if a sitting and popular Prime Minister is dismissed on the above logic, then with this high threshold of ‘honesty’ and with this low threshold of disqualification, the widest of gates has been opened for future merry go rounds of Prime Ministers, notwithstanding Jemima Khan’s earnest prayer that the future Prime Minister lasts five years.

Reviews are not to challenge the integrity of the Courts. The decisions of the Supreme Court carry huge cachet and must be respected. At the same time, they carry massive consequences. (Devaluation of Rs two of our currency on the news of disqualification meant USD two billion extra repayment of loans for Pakistan). Also, judges are humans, and humans can make mistakes. Only Allah and His Prophet (PBUH) are without error. Therefore, such cases must be brought first in lower courts so that possible errors of fact and logic are correctable.

All Pakistani eyes are on the Supreme Court. Disqualifying a democratically elected Prime Minister is the most serious decision the Supreme Court can take. Every Pakistani is hoping that a full bench of the Supreme Court will hear the petition both in the interests of justice and Pakistan’s political and economic stability. If the same five judges hear the review petition, the chances of correction of a serious accounting flaw will be close to zero.

The writer has degrees in Business Management, from INSEAD, Cranfield and CEIBS

Published in Daily Times, July 31^st , 2017.