10 February 2005	Thursday	30 Zilhaj 1425

LAHORE, Feb 9: Two Pakistan Railways companies in the private sector, the Railcop and the Pakistan Railways Advisory and Consultancy Services (PRACS), continue to function without a lawful authority.

It is learnt that the railway administration has yet to submit to the Securities and Exchange Commission of Pakistan the amended memorandum of association and article of association about the change in the nature of their job.

The administration has for decades not been submitting such a change, though the companies have been indulging in a business which was not stipulated for them. They were created to be engaged in an activity of building up rail track and other installations abroad, but have now been involved in a contractual business with the railway administration in violation of its original task.

Such a submission to the SECP is a legal obligation under Section 2(21) of the Companies Ordinance, 1984, because "a private company can not engage (itself) in a business which is not fairly incidental to or consequent upon the business."

The two companies have for decades not sent a new job description for themselves to the Corporate Law Authority or the SECP, which succeeded the former. The reason why a change of the directors of the two companies and their engagement in the business that was not originally specified, is because of the virtual abolition of the Railway Board without a legal sanction. Under the law, the board is the authorized agent to deal with the matters of the two companies with the SECP.

But because all the board members have since been appointed additional general managers of four railway public companies in the passenger, freight, infrastructure and residual sectors in addition to the director-general Walton Training School and the Federal Government Inspector of Railways, it is not complete and thus rendered legally incapacitated to discharge its lawful duty.

RAILCOP: The Railcop was established in 1974-75 in the private sector with the purpose of undertaking rail projects abroad. The company succeeded in the beginning in working on certain projects in Saudi Arabia. The PRACS followed in 1975-76 with the purpose of giving expert opinion to the Railcop in its ventures.

The two companies, later, submitted to the Joint Registrar, Trade and Commerce, of the Corporate Law Authority a memorandum of association and an article of association informing the authority, which was succeeded by the SECP, about their objectives, the size of their working capital and the boards of directors who were also members of the Railway Board.Later, the railway officers, who are civil servants under article 240 of the constitution, were transferred to the two companies despite the fact that no civil servant could be sent to a private company under the constitution, the Railways Act of 1890 and the Companies Act. However, the two companies continued to work for decades without a legal authority.

With the passage of time, the Railcop lost its foreign business but the railway bosses did not dispense with any of the two companies. They rather added another illegality to their credit by entrusting them with those works on a commission basis, which the Pakistan Railways itself could execute.

For example, the railway administration has assigned the PRACS with operating booking agencies (for ticketing), sell platform tickets, operate dining cars in different trains and perform other PR functions. All the tasks have been contracted to the companies on the basis of a five per cent commission and this amount comes to about Rs1 billion a year. They have accommodated a good number of railway officers after retirement, who are getting pension from the department as well.

Some of them have turned into contractors and getting job from them. The estimated annual salary bill of the two companies is about Rs500 million. Many more such officers are eying a job with the companies or turning into contractors.

The companies submitted to the CLA the names of its directors who were also members of the Railway Board, although the appointment of PR officers as directors of private companies was illegal.