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Petitioner: PAK TURK ENTERPRISES (PVT.) LTD. VS Respondent: TURK HAVA YOLLARI (TURKISH AIRLINES INC.)
Court Name: Sindh High Court Judge(s): Munib Akhtar Title:PAK TURK ENTERPRISES (PVT.) LTD. vs TURK HAVA YOLLARI (TURKISH AIRLINES
INC.) Case No.: Suit No,1599 of 2012C.M.A. No,13528 of 2012 Date of Judgment:2013-06-11 Reported As: 2015 CLC 1 Result: Application dismissed Judgment ORDER ' MUNIB AKHTAR, J.--- The application that falls for determination has been filed by the defendant seeking rejection of the plaint under Order VII, Rule 11, C.P.C.. The suit is in fact an application under section 20 of the Arbitration Act, 1940 (read with section 41 thereof), seeking to refer to arbitration a dispute said to have arisen between the parties. The merits or otherwise of the main application are not germane to the issue raised by the present application. It suffices to note that the plaintiff is a private limited company registered under the Companies Ordinance, 1984. The sole ground on which rejection is sought is stated as follows in the application:--- "It is respectfully prayed on behalf of defendant above named that this Hon'ble Court be graciously pleased to reject the Plaint in the above Suit as the same has not been filed by a person duly authorized by a resolution of the Board of Directors of the plaintiff and as such is hit by the provisions of Order XXIX, rule 1, C.P.C. And the judicial pronouncements there under by the Superior Courts of Pakistan." 2. Learned counsel for the defendant submitted that it was well-settled that the specific situations listed in Order VII, Rule 11, C.P.C. Were not exhaustive, and the Court could reject the plaint even if otherwise so warranted. Learned counsel referred to Para 26 of the plaint (for convenience, the main application will be referred to herein as the "plaint"). This states as follows:- "26. That this application has been filed by the duly authorized officer of the plaintiff who is well conversant with the facts of the case." ' Learned counsel submitted that this statement by itself was insufficient to establish that the present proceedings had been competently instituted, i.e,, that the officer had been duly
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authorized by a resolution of the board of directors of the plaintiff. Reference was made to Order XXIX, Rule 1, C.P.C. And also to the relevant provisions of the Sindh Chief Court Rules (OS). Learned counsel also referred to section 196 of the Companies Ordinance. 3. By far the most important aspect of the submissions by learned counsel was a reference to and detailed examination of the case law, starting with the judgments of the Supreme Court in Muhammad Siddiq Muhammad Umar and another v. Australasia Bank Ltd. PLD 1966 SC 685 and Ifihikhar Hussain Khan of Mamdot v. Ghulam Nabi Corporation Ltd. PLD 1971 SC 550 and then moving chronologically to the present and ending with a single Bench judgment of this Court reported as National Insurance Corporation and others v. Pakistan National Shipping Corporation and others 2006 CLD 85. On the basis of the cases relied upon, learned counsel submitted that it was clear that the present proceedings had been incompetently filed and the plaint was therefore liable to be rejected. It will be convenient to list and consider the cited authorities later on. 4. Learned counsel for the plaintiff strongly opposed the application for rejection of plaint. It was pointed out that the application under consideration was not supported by an affidavit. Learned counsel also analyzed some of the judgments relied upon by the other side, especially the two Supreme Court decisions noted above. In particular, learned counsel submitted respectfully that in one of the cited judgments, being a single Bench judgment of this Court reported as Dumez Borie v. International Forwarders Ltd. NLR 1983 UC 184, the relevant provisions had not been properly appreciated, which was unfortunate since this decision appears to have been influential in the approach taken in subsequent cases. Learned counsel submitted that the proceedings had been competently filed by a duly authorized person. I may note here that learned counsel submitted that the plaintiff's directors had passed the necessary resolution, which had in fact been annexed along with the vakalatnama of Mr. Jamshed Malik, learned counsel who had been briefed at the time that the proceedings were instituted; To this, learned counsel for the defendant had taken strong exception, since his submission was that when he had inspected the file there was no such board resolution on the record. According to him, the document was a subsequent insertion and an attempt was being made to improve the plaintiff's case in response to the present application. In order to rebut this objection, learned counsel for the plaintiff made detailed submissions, referring to various orders made as well as the record and certain other miscellaneous applications also filed and pending. ' However, for reasons that will become apparent later, it is not necessary for me to consider this aspect and resolve the controversy as to when the board resolution was filed or placed on record. It is, therefore, not necessary to burden the record with a detailed statement of the submissions and counter submissions made in this regard. 4. I have heard learned counsel as above, considered the case law relied upon and examined the record. Before proceeding further, it will be convenient to list some of those decisions that are considered in detail below and indicate how they are cited herein. These are as follows:--- (a) Muhammad Siddiq Muhammad Umar and another v. Australasia Bank Ltd. PLD 1966 SC 685 ("Australasia Bank"); (b) Ifthikhar Hussain Khan of Mamdot v. Ghulam Nabi Corporation Ltd. PLD 1971 SC 550 ("Khan of Mamdot"); (c) Abdul Rahim and others v. United Bank Ltd. PLD 1997 Kar. 62 (DB) ("United Bank"); (d) Dumez Borie v. International Forwarders Ltd. NLR 1983 UC 184 (SHC; SB) ("Dumez Bone"); (e) Standard Hotels (Pvt.) Ltd. v. Rio Centre and other 1994 CLC 2413 (SHC; SB) ("Standard Hotels"). 5. The manner in which an application seeking rejection) of the plaint is to be considered and the principles applicable are well-established. ##T## As is well-known, one of the most important rules is that every averment of fact made in the plaint is to be taken as true and correct and consideration of the plaint must proceed on this basis. Now, the key paragraph from the plaint for
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present purposes has been reproduced above. Learned counsel for the defendant sought to cast the issue as though it was a pure question of law, and that is why so much emphasis was placed on the case law. However, with respect, that is not so. The issue raised is at the very least a mixed question of law and fact. The factual aspect obviously includes the question whether the necessary board resolution was passed or not. If it was not passed at all, or if passed was not appended to the plaint, or was not placed on the record, either at all or at the relevant time, or if passed, what form did it take, are all matters that can entail legal consequences. But all these matters have a factual element, which obviously must also be ascertained. To the extent that paragraph 26 of the plaint relates to the factual aspect, that must at least for present purposes be assumed to be true. It is asserted, as a matter of fact, that the officer (one Mr. M. Aslam Nasim) who filed the plaint was authorized. To the question, authorized how, by whom and when, the paragraph itself gives no answer. But as will at once be appreciated, these are all matters that contain an important factual element. Now, one way to approach the factual aspect, as presently relevant, is to apply the presumption of regularity that can be made under Article 129 of the Qanun-e-Shahadat Order, 1984 and in fact this was urged by learned counsel for the plaintiff. But in any case, the important question is this: can, or are, such factual issues to be resolved while considering an application for rejection of plaint? To this, in my view, the answer can only be in the negative. With respect, it therefore appears to me that the present application is at the very least premature and cannot be sustained at this stage. A resolution of the objection necessarily requires the answering of one or more questions of fact, which must either be deemed to be true or are such as cannot, or ought not, be gone into at this stage. 6. When the cases cited by learned counsel for the defendant are looked at from this perspective, they fall (except for one) into certain categories, which are distinct and different from an application under Order VII, Rule 11, C.P.C. The cited cases can, in this sense, be categorized as follows. Firstly, there are those cases which were appeals arising out of proceedings in which issues were framed, the matter went to trial, evidence was recorded and there was judgment either decreeing or dismissing the suit. It will be seen that in these cases all aspects, both legal and factual, as were in issue were considered in light of the evidence that had been led by the parties. This category includes both judgments of the Supreme Court in Australasia Bank and Khan of Mamdot and another decision of the Supreme Court in Habib Bank Ltd. v. Zelins Ltd. And another 2000 SCMR 472 (rent proceedings that went to trial), a Division Bench judgment of this Court in Dr. S.M. Rab v. National Refinery Ltd. And another PLD 2005 Kar. 478 a Single Bench judgment of this Court reported as Abubakar Saley Mayet v. Abbot Laboratories and another 1987 CLC 367 (on appeal from a civil court judgment) and a Division Bench judgment of the Lahore High Court in Government of Pakistan v. Premier Sugar Mills and others PLD 1991 Lah.381. 7. In the second category come cases which were decided, again after the framing, of issues and a trial at which evidence was led, as suits filed on the original side of this Court. Again, it will be seen that in these cases all issues, both legal and factual, were considered in light of the evidence led at the trial. These cases are Dumez Borie, National Bank of Pakistan and others v. Karachi Development Authority and others PLD 1999 Kar. 260 and National Insurance Corporation and others v. Pakistan National Shipping Corporation and others 2006 CLD 85. (I may note that in the last mentioned decision, the issue of maintainability was decided first, but evidence was led on the issue: see at pp. 89-90.) In the third category are suits that were filed on the original side of this Court, but in which the defendant did not appear and which were therefore, fixed for final disposal. The suits were decided on the evidence as produced by the plaintiffs. Again, although there was no trial as such, the matters proceeded on the basis of the evidence tendered. The cases are Taurus Securities Ltd. v. Arif Saigol and others 2002 CLD 1665 and Gulf Air v. Shakil Air Express (Pvt.) Ltd. PLD 2003 Kar 156, both decisions being of the same learned single Judge. To these cases one can also,
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with respect, add Investment Corporation of Pakistan v. Ajax Industries 2004 CLD 1733, decided by the same learned single Judge. The last mentioned case was a winding up petition, which was refused on the merits. In addition and towards the very end (at pg. 1740) the learned single Judge made certain observations with regard to the maintainability of the petition. I am respectfully of the view that the facts and circumstances of this case were far removed from those at hand. It therefore provides no assistance in resolving the issue raised by the present application seeking rejection of plaint. 8. In the next category comes the Division Bench decision of this Court in United Bank. This common judgment disposed of a number of appeals that arose out of banking suits under the Banking Tribunals Ordinance, 1984. The learned Division Bench observed (at pg. 78) that the "the learned Presiding Officer had decreed the suits without framing any issues, recording any evidence and meeting any of the objections taken by the appellants". Insofar as the present issue is concerned, the learned Division Bench dealt with the same in paras 35 to 37 (pp. 105112) and concluded as follows in para 38: "The learned Banking Tribunal accordingly when deciding the entire case afresh must call for the articles of the respondent [United Bank Ltd.] and decide this issue in terms of the guidelines mentioned above". The appeals were allowed and the matters sent back to the Banking Tribunal "to decide all or other issues in the suits and the suits...." Thus, even here, the factual aspect of the matter was paramount, and since it had not been properly addressed, the suits were returned to the trial forum. 9. The next decision is a Division Bench judgment of this Court reported as Razo (Pvt.) Ltd. v. Director, Karachi Region Employees Old Age Benefit Institution 2005 CLD 1208. In this case (which was a constitutional petition), it was admitted that no board resolution had been passed at the time of the institution of the petition but reliance was sought to be placed on a subsequent ratification of the filing by the board. The learned Division Bench held that there could be no such ratification. As is obvious, the fact-situation of this decision was wholly different from the one at hand. 10. As the above analysis makes clear, the overwhelming majority of the decisions cited by learned counsel for the defendant examined the issue of whether the suit was competently filed not as a pure question of law, but as an issue that could only be decided after evidence had been led and all the factual aspects brought before the Court. This is unexceptionable, and of course not at all the situation at hand. In my respectful view, there is a clear divergence between the conclusion that learned counsel for the defendant seeks to draw from the cited decisions, and what was actually decided therein, and especially the stage at, and basis on, which such decisions were made as opposed to the stage of the present proceedings. 11. The only case cited by learned counsel for the defendant that was decided in the specific context of an application seeking rejection of plaint was Standard Hotels, the 1994 decision of a single Bench of this Court. It is to be noted that the learned single Judge, after reserving order, gave permission to learned counsel for the plaintiff therein to file the Memorandum and Articles of Association of the plaintiff, which were considered in some detail. The learned single Judge also specifically relied on the Khan of Mamdot and Dumez Borie decisions. As already noted, in these cases the matter went to trial after issues were framed and evidence was led by the parties, which was then considered by the court. This was not merely the trial court but also the High Court (where additional evidence was recorded) and finally the Supreme Court in the first mentioned case and of course, this Court on its original side in the second case. This point has already been made above. With the utmost respect, the learned single Judge failed to appreciate that the context in and stage at which these two cases were decided was materially different from the position before him. Furthermore, as explained in detail below, in my respectful view, the learned single Judge has also not properly appreciated what was decided in the aforementioned two cases, especially the
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decision of the Supreme Court. In my respectful view, what has been said and decided in Standard Hotels requires reconsideration. 12. After having considered the cited decisions from the perspective just taken, I now turn to look at the key judgments separately and in some detail. These are the decisions listed in para 4 above. I start with the two foundational cases, the judgments of the Supreme Court in Australasia Bank and Khan of Mamdot. 13. Australasia Bank was a recovery suit filed at Lahore by the respondent bank against the appellants, who were its customer. The plaint was signed by one Mr. Muhammad Khan, who was described therein as the principal special officer and general attorney of the bank. One of the issues framed by the trial court was as follows: "Whether Mr. Muhammad Khan is competent to file this suit on behalf of the plaintiff bank?" At the trial, neither the Articles of Association of the bank, nor any resolution of the board of directors was produced. The only document produced wits a registered power of attorney whereby Mr. Muhammad Khan was appointed as a "general attorney" of the bank and to which the seal of the bank had been affixed. Mr. Muhammad Khan deposed that he had the authority to file the suit on such basis and on instructions received from the bank's managing director. The learned trial court decided the issue noted above against the plaintiff- bank. The issue on the merits was also decided against the bank, with the result that the suit was dismissed. 14. The bank preferred an appeal to the High Court. There was a difference of opinion between the two learned judges who heard the appeal and the matter was therefore referred to a third learned judge. The latter decided that in order to enable him to give decision additional evidence was required, in the shape of the Articles of Association of the bank and also the evidence of the managing director. Such evidence was recorded by and in the High Court itself. The Memorandum and Articles of Association were tendered in evidence, as was a resolution of the bank's board of directors, showing that the board had approved granting the power of attorney to Mr. Muhammad Khan, and they were empowered to do so. The managing director was also examined and indeed extensively cross-examined on his testimony. The third learned judge concluded that the suit had been competently filed and also gave decision on the merits in favor of the bank. The appeal was accordingly allowed. 15. Being aggrieved by this decision, the customer preferred an appeal to the Supreme Court. One question that arose for consideration was whether additional evidence ought at all to have been recorded in the High Court. To this the Supreme Court, after a detailed consideration, gave an affirmative answer. On the question relevant for present purposes, namely whether the suit had been competently instituted, the Supreme Court observed as follows (pg. 695, emphasis supplied): "It was apparent from the pleadings that the suit was being instituted by a constituted attorney of a public limited company. He could only do so if he was duly authorised in that behalf and occupied one or other of the offices mentioned in Rule 1 of Order XXIX of the Civil Procedure Code. A copy of the power of attorney had been produced which showed that Muhammad Khan had been empowered in that behalf but the question still remained to be ascertained as to whether those who gave him that power were competent to do so, as the authority was on behalf of a public limited company. For this purpose a reference to the Articles of Association of the company was certainly necessary see whether the Directors were competent to delegate such power. It was not necessary to see whether the Directors had in fact approved of the giving of such power-of- attorney to the person who presented the plaint. This was, however, proved by the production of the resolution of the Board of Directors as a matter of abundant caution. The additional evidence was to that extent, therefore, in our opinion, rightly admitted. This was all that was required. It was not necessary to call the Managing Director as the Court calling for the additional evidence itself
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realized subsequently. Even the production of the resolution could have been dispensed with, as it was not strictly necessary." ' Two points, of fundamental importance, require attention. Firstly, the Supreme Court held that an examination of the Articles of Association was necessary in order to ascertain whether the directors were empowered to delegate the power of instituting legal proceedings to someone else. Secondly, and perhaps even more importantly, the Supreme Court observed that it was not necessary to see whether, in fact, the board had actually done so. The production of the resolution passed in this regard was considered to have been only "a matter of abundant caution", and it was expressly noted that it could have been dispensed with "as it was not strictly necessary". 16. The reason why the Articles of Association had to be examined was because the power of attorney under which Mr. Muhammad Khan acted was given under seal, and as the Supreme Court observed, "as a rule the Articles of Association of a company contain special provisions prescribing for the manner in which the seal of the company may be affixed and that those who deal with a company are bound to see that the document on the face of it accords with those provisions of the Articles" (pg. 696). It was not enough for a person dealing with the company to be satisfied with the power of attorney as presented simply because, it had the company's seal affixed to it. Any person so dealing with the company had to satisfy himself that the seal had been affixed in the manner as prescribed by the Articles. But that was all that he was required to do. Anything else was covered by the rule of indoor management, which was explained as follows by the Supreme Court (pg. 696): "According to this rule persons dealing with a company are bound to read the public documents of a company, i.e, its Memorandum and Articles of Association, and to satisfy themselves that the transaction entered into or proposed to be entered into is not inconsistent therewith, but they are not bound to do more, nor are they required to enquire into the regularity of the internal proceedings or what has been called 'the indoor management of the company', for, they are entitled to assume that all other things have been done regularly." ' Having seen the Articles of Association of the respondent bank, and the formalities prescribed therein for affixing the bank's seal to an instrument, the Supreme Court was satisfied "that Muhammad Khan was properly and lawfully empowered by the Directors who themselves had express power given to them under the Articles of Association to delegate their authority and the delegation so made empowered Mr. Muhammad Khan to sign execute and present plaints on behalf of the company" (pg.697). The suit was held to have been competently filed. The customer- appellants also failed to satisfy the Court on the merits and the appeal was accordingly dismissed. 17. It is of great importance to note, and the relevance of this point will emerge later, that in Australasia Bank the litigation was between a company (the bank) and a third party (its customer), in a situation where the rule of indoor management was applicable. 18. I turn to consider the decision in Khan of Mamdot. This was also a recovery suit, but with a difference. The suit had been brought in or around 1952 by the respondent company against the Khan of Mamdot (who had passed away by the time of the Supreme Court appeal and was represented there by his heirs). The suit was brought to recover the unpaid amount in respect of a cold storage plant that the company stated had been sold and supplied by it to the Khan of Mamdot. The suit was defended, and it was pleaded that in fact, the company owed a sum of Rs,100,000 (as will be appreciated, a huge sum of money in those days) to the defendant. In settlement thereof, the company agreed to transfer shares in the company worth Rs,50,000 to the defendant and for the balance supply certain plant and machinery. The Khan of Mamdot averred in his defence that 500 shares worth Rs,50,000 were transferred to him but that the plant and machinery supplied was defective and incomplete.
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19. It is crucial for present purposes to note that on becoming a shareholder (and member) of the company, the Khan of Mamdot also became its director. In the written statement, the defendant took the objection that no notice was received by him, as director, of the board meeting at which it was decided by the directors to sue him through one Mr. Khurshid Mehmood, who was himself a director of the company, and who was authorized to file the suit at the meeting. It was contended by the defendant that in such circumstances, Mr. Khurshid Mehmood had not been properly authorized and the suit had not been competently filed. 20. On these pleadings, the issue relevant for present purposes was as follows: "Was Mr. Khurshid Mahmood authorised by the Ghulam Nabi Corporation to institute the present suit on their behalf?" The suit went to trial and evidence was led on this and other issues. This issue was decided against the company and while other issues were decided in favour of the latter, since it failed on the issue of institution, the suit was dismissed. The company preferred an…
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