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Petitioner: SHAFIQUE AHMED QURESHI and otherss VS Respondent: HYDERABAD CHAMBERS OF JUDGMENT
Court Name: Sindh High Court Judge(s): Muhammad Ali Mazhar Title:SHAFIQUE AHMED QURESHI and otherss vs HYDERABAD CHAMBERS OF
JUDGMENT
Reported As: 2013 CLD 2056 Result: Suits decreed Judgment JUDGMENT ' MUHAMMAD ALI MAZHAR, J.---This common judgment will dispose both the suits along with listed applications, ' The Suit No,1408 of 2012 has- been filed for declaration and permanent injunction. The plaintiffs have prayed for the declaration that holding of elections by the defendants for the year 2012-13 upon the existing voters list/electoral- college is completely without jurisdiction and of no legal effect. The brief facts of the case are that the plaintiffs are members of the defendant No,1 which is registered under section 42 of the Companies Ordinance 1984. Earlier the defendant No,1 was regulated by Director General of Trade Organization, Ministry of Commerce, Govt. Of Pakistan, however, due to lapse of the Trade Organization Ordinance, 2007, the defendant No,1 is not regulated by the said department and in this regard C.P. No,D-3124 of 2012, is pending in this court in which interim order has been passed. The only statutory Organization which regulates the functions of the defendant No,1 is the defendant No,2, which is situated at Karachi. In terms of clause 6 of the Article of Association of the defendant No,1 there are two classes of membership one is "Corporate Member" and the other is "Associate Member". It is necessary that such members must have annual turnover of more than Rs,50 million. The injunction application C.M.A: No,9910 of 2012 was fixed in this court for orders on 20-9-2012, when notice was issued to the defendants and till then the defendants were restrained from holding election. 3. The Suit No,1409 of 2012 has been filed by the same plaintiffs for the declaration that the actions of the defendants Nos.4 and 5 along with some illegal members of the defendant No,1 in interfering with the affairs of the defendant No,1 and appointing an illegal ad hoc Committee on 1-10-2012,
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sealing the premises of the said defendant No,1 so also the failure of the defendants Nos.2 and 3 to take corrective actions are without jurisdiction, illegal, mala fide and of no legal effect. Brief facts of this case are that vide order dated 20-9-2012 this court in Suit No,1408 of 2012 stayed the elections of the defendant No,1 which means that previous elected body will continue till next date or the next election as the defendant No,1 cannot be left without duly authorized or elected representatives. The grievance of the plaintiff in the present suit is that the defendants Nos.4 and 5 without any lawful authority and in violation of section 177 of the Companies Ordinance sealed the office of the defendant No, 1. Section 177 of the Companies Ordinance provides that the directors so retiring shall continue to perform their functions until their successors are elected. The injunction application (C.M.A. No,10409 of 2012) was fixed in this court for orders on 2-10-2012 on which notice was issued to the defendants and till then the Nazir was directed to visit the office of the defendant No,1 and contact the defendants Nos.4 and 5 and submit his report that under what authority or law, office of the defendant No,1 has been sealed and if it is found that office has been sealed, the defendants Nos.4 and 5 will de-seal the premises and allow the office bearers to continue their office. 4. The defendants Nos.1, 2, 3 to 8, 9 and 10 have filed their written statement while Mr. Jhammat representing defendants Nos.11 to 18 stated that the counter affidavit filed by his clients may be treated their written statements. On 24-4-2013 all the learned counsel while concluding their arguments jointly stated that since only the issues of law are involved hence both the suits may be treated short cause and be decided on the basis of arguments and documents available on record as there is no factual controversy involved for which evidence is required to be led. By consent let both the suits be treated short cause in terms of Rule 22 of the Sindh Chief Court Rules (O.S.). Ref: My own judgment reported in 2010 CLC 1253 (Abu Dhabi Medical Devices Co. L.L.C. v. Federation of Pakistan). 5. After examining the pleadings and the bone of contention between the parties it would be appropriate and expedient to cast following issues of law:- (1) Whether the suit is maintainable and this court has territorial jurisdiction to try the suit? (2) Whether a person can become associate member of the defendant No,1 who is not a body corporate or a multinational or sales tax registered manufacturer and business concern not having annual turnover of R.50 million or above? (3) Whether the previously elected body rightly continued to hold their offices after the restraining order passed by this court on 20-9-2012 in Suit No,1408 of 2012? (4) What should the decree be? 6. 6. Mr. Farogh Naseem, the learned counsel for the plaintiffs argued that the schedule for the annual election of the defendant No,1 for the year 2012-13 was announced, which, inter alia, provided that from 23-7-2012 to 30-7-2012 a provisional list of the voters of the defendant No,1 shall be displayed and within 7 days and any person having any objections to the said provisional voters list may submit objections. The plaintiffs submitted their objections over 90% of the members of both the classes did not transact an annual turnover of Rs, 50 million and above but the objections submitted by the plaintiffs were not decided. The list of voters, is to be corrected so that the voters who are a "body corporate" or "multi-national" or those who are registered in sales tax as manufacturers having annual turnover of Rs,50 million or above or those "business concerns" having annual turnover of Rs,50 million or above may be included and those having annual turnover less than Rs,50 million may be excluded. As regards the second Suit No,1409 of 2012 the same has been filed in the aftermath of the interim order dated 20-9-2012 passed in the first Suit No,1408 of 2012. In consequence of the above interim order, and in view of section 177 of the Companies Ordinance, 1984, the old/existing office bearers are to continue till the holding of fresh
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elections but despite clear position, the defendants Nos.4 and 5 along with some illegal members of the defendant No,1 entered into the office of the defendant No,1 on 1-10-2012: 7. To the alleged applicability of Trade Organization Ordinance in the matter, it was averred that sections 1(3), 2(d), 3(2)(b)(c)(e)(f), 2(I) (q), 3(1), 3(8) and 34(1) of the Trade Organizations Ordinances, 2006, 2007 and 2008 have clearly provided that in case an entity whose functions/businesses were being carried out in more than one province, the Trade Organization Ordinance, 1961 would stand repealed. He referred to Memorandum of the defendant No, 1. The objects clause of the Memorandum of the defendant No,1 is clause No,3. Clause 3(a) of the Memorandum confirms that one of the objects of the defendant No,1 is to provide protection and promotion of trade, commerce-cum-industry and services in Hyderabad and elsewhere. The word "elsewhere" is of a very wide import and signifies everywhere which can be anywhere in Pakistan. Similarly, clause 3(d) of the Memorandum specifies the promotion of the understanding of businessm en and industrialists outside Hyderabad and to safeguard general mercantile interest in Hyderabad and "outside". Also clause 3(f) prescribes the protection and promotion of rights, and privileges of trade, industry and services in and outside Hyderabad. The term "outside as used in clauses 3(d) and 3(f) is again of very wide import. No restriction can be inferred for the word "outside" as it means anywhere outside Hyderabad, meaning anywhere in Pakistan or outside Pakistan. Clause 3(o) of the Memorandum permits the defendant No,1 to purchase, construct, lease or acquire any movable/immovable property and to sell or mortgage the same. No territorial restriction has been imposed. This means that the property which is the subject matter of clause 3(o) can be situated anywhere in Pakistan or even abroad. Clause 3(w)(iii) and (iv) of the Memorandum further confirms that the defendant No,1 can help in the exports outside of Pakistan and imports from other countries of all industrial products commodities in all possible ways, including advancing of loans to Pakistan and other dealers and manufacturers for consideration or otherwise. This also confirms that the activities of the defendant No,1 are not confined to Hyderabad or the province of Sindh. Most importantly clause 3(aa) specifies that the defendant No,1 can nominate, delegate as advisors to represent the employers of Pakistan at the annual international labour conferences and others. This clearly means that the scope of activities of the defendant No,1 is not confined to Hyderabad or Sindh only but extends to the entire Pakistan. He further, argued that in view of the operation of the judgment of the Hon'ble Supreme Court of Pakistan in Sindh High Court Bar Association v. Federation of Pakistan PLD 2009 SC 879 at page 961 para vii it is more than clear that the Trade Organizations Ordinance, 2009 not having been saved or converted into an Act of Parliament, has expired by efflux of time and the lapse of the Trade Organizations Ordinance, 2009 is also evident from the provisions of Article 264(a) of the Constitution, which specifies that if a law is repealed or deemed to have been repealed by virtue of the Constitution, the said repeal would not result in the revival of anything which was not in force or existing at the time when the said repeal took effect. Admittedly, in view of Article 89(2), the lapse of the Trade Organizations Ordinance, 2009 by efflux of time is by virtue of provision of the Constitution and hence in view of Article 264(A), upon the lapse of the latter Ordinance, nothing would automatically revive as nothing was in force at the time of the repeal. The issue as to whether the expiry of the Ordinance, 2009 has led to automatically revival of the Trade Organizations Ordinance, 1961 is sub judice in C.P. No, D-3124 of 2010 in which on 2-11-2010 an interim order has been passed. The defendant No,1 is a petitioner in the said petition upon which arguments have been finally heard and the order has been reserved. 8. Sardar M. Aijaz Khan, learned counsel for the defendant No,1 argued that as per clause 6 of the Memorandum and Articles of Association of the defendant No,1 both the 'Corporate' and 'Associate' members are required to have an annual turnover of rupees 50 million and above. Even in the Rules of the lapsed Trade Organization Ordinance, 2007, the requirement of annual turnover of
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Rs,50 million or above for the purposes of membership of 'Associate' and 'Corporate' member was mandatory. This requirement is necessary for maintaining some standard otherwise, every person will become member whether maintaining the required limit of annual turnover or not. The record shows that a large number of present members, do not qualify as their annual turnover is below Rs,50 million. Out of 1,382 number of members 1,233 number of members represents the 'Associate Member' and 149 number of members represents the "Corporate Member'. 9. Mr. Waqas Shaikh, Law Officer filed the written statement of defendant No,2 (SECP). According to their record, the plaintiffs Nos.1, 3 and 4 are corporate members. It was further averred that the defendant No,1 is a trade organization licensed by Director General Trade Organization and it is also registered with defendant No,2 under section 42 of the Companies Ordinance, 1984. It was confirmed that the defendant No,2 had received complaints from plaintiffs Nos.1 to 4 regarding fake voters list issued by defendant No,1 for the election 2012-2013 on 20-9-2012 by post and the defendant No,2 issued a notice vide letter dated 24-9-2012 to defendant No,1 for submission of their comments on the said complaints but no response was received from defendant No,1 yet. 10. Mr. Jhamat Jethanand, learned counsel argued that declaration and injunction sought do not fall under the provisions of sections 42 and 53 to 55 Specific Relief Act. The plaintiffs case is that in view of lapse of Trade Organization Ordinance 2007, the defendant No,1 is not regulated by Director General and in this regard interim orders are passed in C.P. No,D-3124 of 2010 as such defendant No,2 is the regulatory authority of defendant No, 1. He argued that the matter in suit is mainly governed by the provisions of Trade Organization Ordinances promulgated from time to time. The 1st Ordinance of 1961 was the permanent legislation. All subsequent Ordinances were temporary legislation which lapsed under Article 89 of the Constitution i,e, Trade Organization Ordinance 2006, Trade Organization Ordinance 2007 and Trade Organization Ordinances, 2008 and 2009. It was further contended that the articles/memorandum association of defendant No,1 shows that the objects and business of the defendant No,1 are confined to Hyderabad Division of Sindh Province. He referred to section 1(3) and section 35(a) of Trade Organization Ordinance, 2009 which read as under:-- ' Section 1 (3) "It shall apply to Trade Organization whose objects and business are not confined to a Province". ' Section 35 (a) "The Trade Organization Ordinance 1961 (XLV of 1961) in its application to trade organizations with objects and businesses not confined to a province shall stand repealed". 11. The learned counsel argued that after lapse of the temporary Ordinance, there was an automatic revival of permanent Ordinance of 1961. He further argued that no cause of action has accrued to plaintiffs within the territorial jurisdiction of this Court. Joining' of defendant No,2 who is neither necessary nor proper party and has only the office at Karachi does not confer any territorial jurisdiction to this Court. Reliance was placed on PLD 2010 Karachi 261. He refuted the contention of the plaintiff that associate member not having turnover of Rs,50 million is not eligible to vote. Article 6 of memo relates to clarification of member. The eligibility of membership is defined in Articles 7 and 8 and all the associate members are continuously members of defendant No,1 since its inception. 12. Mr. Ravi Pinjani, the learned counsel for the defendants Nos.3 to 8 adopted the arguments advanced by the counsel for the defendants Nos.9 to 18 in respect of the applicability of the Trade Organization Ordinance 1961. In addition thereto, he argued that in light of section 7 of the Companies Ordinance 1984, the instant suit is not maintainable, as the appropriate forum in terms of section 7(i) of the Companies Ordinance 1984 would be the High Court of Sindh at Hyderabad. He relied upon a notification of the High Court of Sindh establishing the Circuit Court of Hyderabad dated 26-7-1982 which provides that all cases pertaining to the Districts of Hyderabad, Thatta and
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others are to be instituted at the Circuit Court Registry at Hyderabad, without making any distinction regarding the subject matter of the case. 13. It was further averred that in the light of section 152 read with sections 7 and 9 of the Companies Ordinance 1984 and the Hon'ble Supreme Court's decision in the case of Lahore Race Club v. Raja Khusbakht-ur-Rehman (reported in PLD 2008 SC 707), the instant suit is not maintainable. It was further contended that paragraphs 4, 5 and 8 of the plaint made it clear that the plaintiffs have challenged the membership of the 90% of the members of defendant No,1: which is a matter pertaining to the rectification of the register of the Company, hence, the matter is squarely covered by section 152 of the Companies Ordinance 1984. He heavily relied upon the case of Lahore Race Club, in which the Hon'ble Supreme Court held that that a matter for rectification of register must always in the first instance be brought by way of a J.M. Application under section 152 of the Companies Ordinance 1984 and not by way of a civil suit. He further relied upon the decision of the full bench of this Court in the case of Rimpa Sunbeam reported in PLD 2006 Karachi 444, wherein-it was observed that the jurisdiction of this Court to entertain suits is basically neither the ordinary nor the extraordinary original civil jurisdiction of the High Court but simply a District Court jurisdiction. 14. He further argued that defendant No,2 is a State functionary constituted under a statute, namely the SECP Act of 1997. The registered office of HCCI is at Hyderabad, the plaintiffs' case in effect is that the SECP had to take corrective action in Hyderabad. The plaint nowhere claims that any alleged collusive activity happened in Karachi. When the cause of action has accrued elsewhere, this court will not have jurisdiction simply, because the SECP has its principal office located here. He referred to the case of Muhammad Saeed v. Federation of Pakistan, reported in PLD 1954 Sindh 117, Pakistan v. Waliullah Sufuani, reported in PLD 1965 SC 310 and the case of Mushtaq Ali Tahirkheli, reported in PLD 2003 SC 930. 15. Mr. Haq Nawaz Talpur, the learned counsel for the defendants Nos.8 to 10 argued that the affairs of the defendant No,1 are governed by Ordinance, 1961, which is a perpetual enactment by virtue of Article 225(7) of Constitution of Pakistan, 1962. The defendant No,1 is working within Province of Sindh only i,e, in Hyderabad. The Trade Organization Ordinance, 2006 had only limited the applicability and operation of Ordinance, 1961 to those Trade Organizations whose object and business are confined to federation or inter provinces. Reliance was placed to clause (a) of section 34 of Ordinance, 2006. The aforesaid legal position was also maintained in subsequent promulgations. It was contended that SECP is not regulatory authority of defendant No,1 but for all practical and legal intent and, purposes, the regulatory authority of defendant No,1 is Director Trade Organization (DTO). 16. It was further averred that section 20(c) of the Code of Civil Procedure, 1908 is not applicable in view of Ordinance, 1961, therefore, the doctrine of dominos lit is cannot be pressed into the service. Under the Ordinance, 1984, the rectification of registration of Members can only be made through section 152 of the Ordinance, 1984. 17. He further argued that there is a marked difference between eligibility of Members and classification of Members of defendant No, 1. The eligibility of Members is governed vide Article 7 of Article of Associations and classification of Members viz (a) Corporate Members and (b) Associate Members. There is no condition of having a turnover of Rs,50 Million and above attached with eligibility of Members. So far as Suit' No,1409 of 2012 is concerned, he argued that the Power of Executive Committee is governed by Article 66 of Article of Association. The quorum of the Executive Committee is governed by Article 76. Notice of the emergent. Urgent meeting dated 29- 9-2012 is on Court file. On 1-10-2012, the meeting was attended by Eight (8) Members of Executive Committee out of Twelve (12) Members. In the Minutes of the meeting it was unanimously resolved that Mr. Nadeem Ahmed Siddiqui will be the convener of defendant No,1 till the commencement of
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fresh Election 2012-2013. The Executive Committee had been constituted strictly in accordance with the Articles of Associations of defendant No,l. Mr. Goharwala was appointed/elected on 1-10-2011 for the period of Two (2) years and his tenure was expired on 1-10-2012. Hence, he ceased to be office bearer of the defendant No,l. Section 177 of Ordinance, 1984 provides that on the date of the first annual general meeting of a company all directors of the company for the time being who are subject to election shall stand retired from office and thereafter all such directors shall retire on the expiry of the term laid down in section 180. Provided that the directors so retiring shall continue to perform their functions until their successors are elected. Provided further that the directors so continuing to perform their functions shall take immediate steps to hold the election of directors and in case of any impediment report the circumstances of the case to the registrar within fifteen days of the expiry of the term laid down in section 180. Since the first Annual General Meeting was held in July 1961, therefore, the first proviso of section 177 of Ordinance, 1984 cannot be pressed into the service. At the best, the case of the plaintiffs is governed by section 180 of the Ordinance, 1984 which provides that a Director elected under section 178 shall hold office for a period of three years. 18. In rebuttal, Mr. Farogh Naseem, learned counsel argued that section 7 of the Companies Ordinance, 1984 is in relation to the jurisdiction exercisable by a Company Judge, notified under the first proviso to section 7(1) of the 1984 Ordinance. The case of the plaintiffs is that against the illegalities committed by the defendant No,1, whereby elections were being held through a defective and illegal electoral college, the plaintiffs approached the Registrar of Companies but he abdicated his jurisdiction by stating that the matter is to be decided by the Director General, Trade Organizations hence this suit was filed. In Chalna Fibre v. Abdul Jabbar PLD 1968 SC 381, the Hon'ble Supreme Court of Pakistan was pleased to maintain the jurisdiction of the civil courts in relations to company's matter. There is nothing in the Companies Ordinance which debars the jurisdiction of the civil courts. Be that as it may, there can be no dispute with regard to the territorial jurisdiction of this Court as the plaintiffs are partly aggrieved by the failure of the SECP to act in accordance with law. The SECP is duly situated in Karachi and it is a settled proposition of law that where even a fraction of the cause of action arises, the courts of that area will have the jurisdiction. In this respect, he referred to 2010 CLD 760, PLD 2011 Karachi 416, 1998 SCMR 1618 and PLD 1993 SC 395. The learned counsel also suggested that the present President of the defendant No, 1 may be directed to immediately call the general body so as to endorse or amend the existing clause 6 of the Articles of Association of the defendant No, 1, where after a proper electoral college be formed and elections be conducted within 90 days thereof. 19. Heard the arguments. First would like to take up the issue regarding maintainability of the suit. The purpose of filing suit by the plaintiff in this court is that many of its Associate Members were inducted by the defendant No,1, who did not qualify the criteria to become member. The plaintiffs lodged their complaint to the defendant No,2 who failed to take any action on the ground that the regulatory authority in this case is Director General Trade Organization appointed by Federal Government under the Trade Organization Ordinance, 2006, which Ordinance was promulgated from time to time up to 2009. This fact is admitted in the written statement that complaint was lodged to them but no action was taken. Since SECP is located within the territorial jurisdiction of this court and the cause of action said to have been accrued within the jurisdiction of this court, hence, the plaintiff has filed the instant suits. 20. Learned counsel for the plaintiff argued that the Trade Organization Ordinance, 2006 lastly promulgated on 27-11-2009 has been repealed by flux 'of time and at the time of filing the suit it was not in force. He also referred to the interim order passed by the learned Division Bench of this court in C.P. No,D-3124 of 2010 in which reference of two other C.Ps. Were given. The main contention raised by the petitioners in the C.P. Is that after expiry of Trade Organization Ordinance by flux of time it was not re-promulgated hence, the, order passed by the Director General Trade
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Organization was unlawful. On this contention the learned D.B. Suspended the impugned order passed by Director General Trade Organization. 21. Conversely, all the learned counsel appearing for defendants except defendant No,1 argued that the suit is not maintainable in this court and took the plea that lastly promulgated Trade Organization Ordinance. 2009 was only applicable to Trade Organization whose object and business was not confined to province. Section 35 of the aforesaid Ordinance was also referred to which provides that the Trade Organization Ordinance, 1961 in its application to Trade Organization with object and business not confined to province shall stand repealed. It was contended by the learned counsel for the defendants that the repeal took effect only for the Trade Organization whose…
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