Supreme Court comes down hard on Sindh government

Judges want NAB to investigate $140m loan given to NSUSC for development works

KARACHI: The Supreme Court (SC) said on Thursday that it will issue a ‘deterrence’ order in the province, as the Sindh government was testing the court's ‘patience’ on the issue of non-transparent disbursement of a $140 million foreign loan meant to improve water supply and sanitation conditions in Sindh.

The apex court ordered a forensic audit into the $140 million spent by the Sindh government-owned North Sindh Urban Services Corporation (NSUSC) on schemes to supply potable water, improve deteriorating sanitation conditions and solid waste management in the province.

A three-judge bench, headed by Justice Amir Hani Muslim, cautioned to refer the matter of the shady disbursements to the National Accountability Bureau (NAB) for investigation. The bench, which also comprised justices Qazi Faiz Isa and Faisal Arab, was hearing a case relating to supply of water and sanitation to people in Sindh at the SC's Karachi Registry.



Provincial Advocate-General Barrister Zamir Ghumro said the provincial government was ready to withdraw two districts from the NSUSC, following reservations regarding fairness in disbursement of the loan acquired from the Asian Development Bank (ADB).

The bench observed it had serious reservations over the terms and conditions in which the corporation had signed agreements with the ADB for a $500 million grant as a loan.

The judges said the matter will be referred to NAB and in the meanwhile the provincial government should transfer municipal functions to the local government bodies, which were supposed to perform such duties.

Ghumro and Chief Secretary Rizwan Memon informed that on Wednesday the chief minister held a meeting with the stakeholders, including the ADB’s country director. The top bureaucrat said the ADB officer had said they will halt the funds if municipal powers were transferred from the NSUSC to the administrative bodies, therefore, they pleaded to not to refer the matter to NAB.



This, however, irked the judges who observed that funds’ disbursement by NSUSC should be accounted for. The court said the foreign lending agency could not dictate the government on the utilisation, as the amount acquired by the government was a loan that will be returned from the public money.

The chief secretary and AG again requested the court not to refer the matter to NAB, as the ADB will also stop giving funds for future schemes in the province. Justice Hani asked them whether the government had conducted an audit of the $140 million of the $500 million loan.

The bench members expressed shock when informed that a former MPA was chairperson of the board of the corporation, while two of its members were nominated by the provincial government and three were independent.



The petitioner, Shahab Osto, said the government had also nominated him as an independent member of the corporation but he had resigned, as the authorities had refused to conduct an audit of the funds’ utilisation.

The bench came down hard on Ghumro for trying to paint a rosy picture of the body, which was never an independent body, and questioned why the matter should not be sent to NAB straight away.

Memon said that the Sindh government was owner of the body.

Justice Hani observed that everyone was making money, instead of electing a body to run the affairs of the corporation.

A former internal chief auditor of the corporation, Amjad Hussain Durrani, disclosed that he was removed for detecting irregularities in funds’ utilisation in 2013. An elected board of the corporation was also illegally removed for seeking accountability of the funds, he alleged.



The bench told Memon and Ghumro that people were being killed by the supply of polluted water and the whole province had been turned into ruins. Justice Isa noted that the company was running headless, as no managing-director or internal auditor had been appointed for two years, which itself was as violation of the Securities and Exchange Commission of Pakistan (SECP) Act, 1997.

Acting MD Mehmood Abbas said three projects - provision water supply, procurement of machinery for solid waste management and designing of the entire project - were under way and at this stage the lender will stop funds if municipal functions were transferred to the local bodies.

He maintained that the company’s board was removed in December 2013 and ever since the post of the MD was advertised three times, but no one had applied in the three years.

The bench members wondered how the government failed to find an eligible person among the 200 million population of the country. Abbas said the company’s internal chief auditor was away performing Umrah.



At this stage, the Sukkur mayor said the corporation was functioning efficiently and was going to execute projects to improve water supply and sanitation conditions.

Justice Hani asked who was actually running the company, but all the officers remained silent. “Do you want the people, who are outside and have lost their jobs, to lose their liberty?” he questioned.

He observed that the government should immediately change the present board of the company and appoint a new one before the court passes an order adverse to the interest of the provincial government.

Justice Isa remarked that since there were serious allegations against the company and the acting MD, who was nobody in the eyes of the law, had no answer, the matter should also be referred to the SECP to take over the company.



Memon said he was trying to protect the government’s interest but the government was ready to transfer all functions of municipal bodies back to the local bodies, as the NSUSC had failed to perform its functions of supplying clean drinking water, improve sanitation conditions and properly manage waste.

He said the government was also ready to wind up the company on account of it failing to achieve the prime objective it was created for. However, he clarified that all the employees hired by the NSUSC on contractual or daily wage basis will be the sole responsibility of the corporation. The government will not regularise them, he said.

Memon requested that some schemes, including supply of pumps for the water supply scheme and machinery for the solid waste disposal scheme, should be allowed to be completed by the NSUSC under monitoring by the public health engineering department.

Allowing the request, the bench directed the public health engineering secretary to submit a report to the judicial commission, which will also independently monitor these schemes either through the concerned deputy commissioners or the district and sessions judges.



Meanwhile, the court ordered the provincial government to conduct forensic audit of the NSUSC through private auditor company AF Ferguson. It ordered that the amount it had received through the ADB, the Sindh government or any other agencies will be accounted for.

The bench ordered that the audit report should be submitted to the judicial commission and the SC, while the government will pay for the audit charges. The auditing firm was directed to complete the forensic audit within two months from the date it was notified as auditor.

The court also ordered the NSUSC’s acting MD to appear on Friday to submit complete details, including minutes of the board meetings conducted so far, funds spent by the corporation on development schemes and progress on such schemes made so far.