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Petitioner: Messrs SHAHEEN FOUNDATION VS Respondent: Messrs CAPITAL F.M. (PVT.) LIMITED and JUDGMENT
Court Name: Sindh High Court Judge(s): Shabbir Ahmed Title:Messrs SHAHEEN FOUNDATION vs Messrs CAPITAL F.M. (PVT.) LIMITED and
JUDGMENT
Reported As: 2002 CLD 188 Result: Petitions dismissed Judgment JUDGMENT ' I intend to dispose of these petitions by common order, involving similar facts and identical questions of law, which were heard together. It may not be necessary to recapitulate the facts of each particular case as they were similar for the purpose of deciding the controversy between the parties and it might suffice, by way of explaining the factual background to refer to the contents of J.M. No, 19 of 2000. ' The petitioner, a trust known as Shaheen Foundation, created under the Charitable Endowments Act for the welfare and benefit of retired and in-service personnel of Pakistan Air Force, has filed these petitions under sections 290 and 291 of Companies Ordinance. The petitioner is a minority shareholder to the extent of 25% in the paid-up capital of respondent No,1 with two nominees amongst the Directors of the respondent No,1, a Private Ltd. Company and one of the components of the Group of Companies of Javed Pasha and his local and foreign associates, Javed Pasha, respondent No,3 is one of the Directors and a shareholder to the extent of 25% in respondent No, 1. The respondent No,5 is a foreign associate and owns and possesses about 50% of the shares of respondent No, I. The respondents No,2 and 5 are Directors nominated by the majority shareholders. Javed Pasha and his associates/ nominees/ representatives prepared feasibility report to establish T.V. Channels in Pakistan as well as Radio Stations on FM Bands at Islamabad/Rawalpindi, Karachi and Lahore in private sectors, thereafter detailed presentation of the feasibility of establishment of T.V. Channels and Radio Stations in private sector was held. On such representations, petition agreed to invest 25% in the equity/paid-up capital of the Group of Companies (i) Messrs Pay T.V. (Pvt.) Ltd.; (ii) Messrs FMS (Pvt.) Ltd.; (iii) Messes Capital FM (Pvt.) Ltd.;
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(iv) Lahore Broadcasting Corporation (Pvt.) Ltd. And/or a purported holding company Messrs FM Hundred (Pvt.) Ltd., which was represented and supposed to own and control the three aforesaid companies. The petitioner entered into two separate joined venture agreements, one, dated 16th January, 1996, whereby the petitioner agreed, inter alia, to subscribe to 25% of the paid-up capital of Messrs Pay T.V. (Pvt.) (Now called Shaheen Pay T.V. (Pvt.) Ltd.). By second agreement, dated 4th March, 1996, the petitioner agreed, inter alia, to subscribe 25% of the paid-up capital of holding company to own and control three subsidiary companies, namely, FMS (Pvt.), Ltd., Capital FM (Pvt.) Ltd. And Lahore Broadcasting Corporation (Pvt.) Ltd. Three separate licences were obtained to establish three FM Bands Radio Stations in private -sector. In Islamabad/Rawalpindi, Karachi and Lahore. Later on, it transpired that holding company viz. FM Hundred (Pvt.) Ltd. Was never established or incorporated under any law. However, in consideration of the petitioner's agreement to acquire and own 25% shares in each of the four companies above named of Javed Pasha, the petitioner allowed its name to be associated with these four companies, on mutually agreed terms as under:--- (a) The petitioner shall acquire and own 25% fully paid-up shares of each of the three companies. (b) At least two Directors nominated by the petitioner shall be appointed as Directors of each of the three companies. (c) The Articles of Association of three companies shall be amended to incorporate and include in the Articles some of the operative provisions of the aforesaid Joint Venture Agreement, dated 4th March, 1996 relating to the composition and functioning of the Board of Directors of each of the three companies for protection of the interest of the petitioner. ' Accordingly 25% full paid-up shares of each of the said three companies were issued/transferred to the petitioner, two of the nominees were elected Directors of each of the three companies and Articles of Association of one company were amended, whereas, Articles of Association of other two companies were not amended in spite of repeated request. The agreement was duly implemented as under:--- (a) Paid-up capital of the respondent No,1 was determined at Rs,10,000,000 divided into 1,000,000 shares of Rs,10 each share. (b) The petitioner was allotted/transferred 250,000 number of fully paid-up shares of face value of Rs,10 each being 25% of the paid-up capital of respondent No,1, which was duly communicated and registered with respondent No,6. (c) The Board of Directors of respondent No,1 comprising six Directors was constituted with effect from June, 1997 including two Directors namely, AVM (R) Nafees A. Najmi and Aftab M. Khan, nominees of petitioner. Respondents Nos.2 and 4 were also elected as Directors. It is the petitioner's case that (i) not a single annual general meeting or any meeting of the Board of Directors of respondent No, 1 have ever been held, despite repeated requests and demands made by the petitioner. (ii) Neither the books of accounts have been prepared or maintained, approved, presented or filed with the Authorities as required by law. (iii) Auditors have not been appointed. (iv) The respondents have also neither intimated to Registrar regarding change in Board of Directors of respondent occurring on account of resignation tendered by Fazal kamal, nor this vacancy has been filled up. (v) The respondents have also repeatedly defaulted in filing the annual returns and other returns regularly on time in lawful manner as required by law. Some of the returns were submitted in unlawful manner without signatures of the duly authorized , and competent Chief Executive or Director. Consequently, the Registrar has refused, to accept some of such Returns, on account of serious discrepancies and objections raised by the Registrar. (vi) Neither any amount of dividend or profit has been paid to the petitioner nor the respondents ever provided any information or periodical reports about its business, affairs and accounts to the petitioner. ' The petitioner has reasons to believe and apprehends that respondents may have given rise to some fictitious rights, inflated charges or may have transferred and misappropriated funds of the
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respondent through over invoicing, under invoicing transfer invoicing, manipulation of accounts and/or through unlawful or unauthorized transactions or entries in books of accounts with a view to deprive the petitioner or of its investment in the equity as well as lawful share in the profits earned. The business and affairs of respondent No,1 is not being run in a transparent and lawful manner with mala fide motives with a view to deprive the petitioner of their lawful investment in the equity and share in the profits as well as of the rights of the petitioner to participate in the business and affairs of the respondent and with a view to cause harm and loss to the petitioner. The respondents are consistently failing and/or refusing to disclose the accounts and business and affairs of respondent No,1 and they are violating the provisions of the Articles of Association of respondent as well as the applicable laws including sections 156, 158, 196, 205, 230, 233, 234, 236, 241, 242, 252 etc. Of the Companies Ordinance. Thus are acting in an unlawful, fraudulent and oppressive manner against the interest of the petitioner and being a minority shareholder. In the interest of justice as well as for prevention of oppression, mismanagement and for regulating conduct of the business and affairs of respondent in a lawful just and fair manner, the respondents be divested of the shares, Directorships, Administration, Management and Control on the following grounds:-- A. The conduct of the business affairs of the company in an unlawful, fraudulent mala fide manner, which is oppressive to the petitioner. B. Neither books of accounts have been made nor the accounts have been audited, approved or filled with authorities nor the Annual General Meetings have been held as required by law. Meeting has been held in past several years as required under section 233 of the Companies Ordinance. C. The respondents have repeatedly committed and continuing to commit act and omissions in violation of Articles of Association. The following reliefs have been claimed through the petition:-- (a) Call for the record and documents relating to the respondent No,1 from the respondent No,6. (b) Declare that business and affairs of the respondent No,1 are being conducted by the respondents Nos.2 to 5 and their nominees in an unlawful, fraudulent and oppressive manner, prejudicial to the rights and interest of the petitioner being a minority shareholder of the respondent No, 1. (c) Grant an order divesting the respondents Nos.2 to 5 from the Directorship, Management and Control of the respondent No,1 and direct them to transfer and hand over the same to the petitioner and/or its nominees. (d) Direct the respondents Nos.3 and 5 to sell and transfer the shares of the respondent No,1 to the petitioner on the basis of true and correct break-up value of the shares of the respondent No,1, that may be determined by an independent Chartered Accountants and Auditors after conducting through investigations into the record and books of accounts of the respondent No, 1. (e) Grant cost to the petitioner; and (1) Grant such other relieves as this Hon'ble Court may deem fit and proper in the interest of justice. ' The petitions have been resisted by the respondents through counter-affidavit, wherein the objections on legal as well as factual plane were taken, the preliminary objections are as follows: (1) The petition by Shaheen Foundation, a Trust, registered under the Charitable Endowments Act, is not maintainable, it can only sue in the name of treasurer or in the name of trustee or not in the name of foundation itself. The Shaheen Foundation is not a juristic person and cannot sue in its name as trust. (2) The petitioner did not actually make any contribution to the extent of 25 per cent. In the shareholding of respondent No,1, thus do not quantify to lodge or maintain the petitions under section 290 of the Companies Ordinance. (3) On factual plain, they maintained that the TV and Radio Channels proposed to be set up constitute media service and media professionals, obtained transmission and broadcasting
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licences on their own. Thereafter the petitioner showed interest in joining the business and was admitted in 1996, when transfer deed for 25000 shares was given to the petitioner, when the prospects were very good. The feasibility was correctly made as according to the conditions prevailing the feasibility was duly verified and scrutinized by the petitioner. Thereafter, the petitioner paid Rs,1,00,000 only part payment in January, 1997. They have denied that petitioner was allured to join all of the companies. They have admitted the execution of joint venture agreements whereby the petitioner agreed to subscribe to 25% equity in Pay TV (Pvt.) Limited, which subscription was not made yet 25% shares were transferred. The company was then renamed as Shaheen Pay TV Limited. It was maintained that the Foundation owes Rs,92 lacs to Pay TV, hence it shares to this extent shall be deemed to be under legal lien. They also maintained that Foundation has not acquired legal title in 25% shares of SPTV. Respondent No,1 was pressurized by the Foundation, whereupon under pressure and forcibly 25% shares were transferred to the Foundation in the other three Companies, including respondent No,1 without any consideration in July, 1996. In January, 1997, the Foundation did pay a nominal amount of Rs,1,00,000 each, which is actually contribution for 10,000 shares in each company only but shares valued 75 lacs have been transferred for Rs,3 lacs only. However, no title has been acquired by the Foundation to that extent. The licence was obtained by the sponsors of respondent No,1, well before the joining of the petitioner in Pay TV Limited, which remains the property of the licensee. They have denied that Javed Pasha made inaccurate representation to the Foundation. The agreement is not a formalized arrangement and conditions mentioned in sub-paragraphs a, b and c have no legal sanctity. The petitioner was to acquire 25% shares in three companies for consideration but paid only Rs,3 lacs and obtained transfer of shares worth Rs,75 lacs. They maintained that Annual General Meetings and Board Meetings of Shaheen Pay TV Limited and respondent-company's meetings were held simultaneously as agreed and last meeting was held in London in the year 1999. The meeting for 2000 was requisitioned which could not be held since the Directors of Foundation were not available. (Annexure R-3). The commercial business and activities are being carried out on very limited basis, due to redical and changed political and financial situation in the country, the circumstances did not permit to undertake the broadcasting and telecasting in the manner and to that extent as per original plan. However, the business is just being kept alive with great difficulty and petitioner is fully aware of the fact. The entire income and expenditure is audited. The respondent-company are running FM Radio Channels which make very little profit. The income and expenditure is duly reflected in the statement of accounts. Payments have been made to the Foundation in the past which the Foundation received through subsidiary namely Messrs Hawks Advertising. They have denied that the respondents have indulged in any such activity as alleged by the petitioner. The Income-tax Returns are correctly submitted. The income and expenses of companies are matter of record which is subject to statutory audit. Accounts for the years 1996, 1997, 1998 and 1999 were duly prepared and audited through Annexures R/20 to 23. The petitioners have been provided all the requisite information as and when demanded by the petitioner. The Foundation has paid only Rs,1,000,000 and has received much more by way of dividends. The petitioners total financial exposure in SPTV Limited is Rs,9 lacs and in other three companies is another Rs,3 lacs, for total exposure to the extent of Rs,12 lacs. Petitioner is bent upon destroying four companies. The reputation of the Foundation is not in jeopardy because of respondents. The Foundation wants to wriggle out of its commitments. They have denied oppression or mismanagement. The company is being run with very little business and in the hope that the situation will improve to enable it to operate its business as originally conceived and planned. The companies are engaged in media service business, which is a highly specialized business and is being conducted in efficiently as the circumstances permit and maintained that the business is being conducted in a lawful and bona fide manner. The books of accounts are
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being maintained in due course of business and are subject to statutory audit. All the meetings have been held periodically. The accounts are audited. The respondents have not committed any violation of Article of Association nor they have violated any provision of the Companies Ordinance. ' In rejoinder the petitioner maintained that any amount is not due or payable by the petitioner either to Shaheen Pay TV (Pvt.) Limited or to respondent No,1 or to any of the aforesaid companies. False and fabricated plea has been raised through purported counter-affidavit for the first time as an afterthought in an hopeless attempt to mislead and prejudice the Court as well as reduced the ratio of fully paid-up shares owned and possessed by the petitioner in the equity of the respondent No,1 as well as in the equity of aforesaid three companies. Fully paid-up shares lawfully owned and possessed by the petitioner has never been in dispute. It has been acknowledged by the respondent, the record of Registrar of Companies, Karachi also confirms irrefutable fact. They maintained that all the Directors of four companies are same but the plea that summaries meeting of all the companies were held with the consent and knowledge of Shaheen Foundation is capricious and untenable in law. Each company is an independent entity. It was further maintained that the respondent No,1 has never paid or returned any amount to the petitioner at any occasion. They have also denied that petition has been filed with any mala fide purpose. Motive or intention and the petition was filed without lawful authority and maintained that the Managing Director is competently authorized to sign the petition in the name and on behalf of the petitioner. They have also denied that the total financial exposure or investment of the petitioner in the equity of the respondent No,1 or that of other three companies is collectively Rs,12 lacs only. ' In reply to the preliminary objection, the petitioner maintained that in exercise of the powers conferred by sub sum of Rs,30 lacs was allocated for the charitable Organization of the petitioner, which amount was initially vested in the Treasurer of Charitable Endowment for charitable purposes, by another Notification, dated 25th October, 1977 issued in exercise of the powers conferred by subsection (3) of section 10 of the Act, The Federal Government was pleased to divest the Treasurer of the said amount of Rs,30 lacs and vested the same in the Committee of Administration for Shaheen Foundation. The Committee of Administration of the petitioner through its resolution, dated 7th February, 1989 has delegated all the powers of administration to the Managing Director of the petitioner. Air Marshal Sayed Shahid Zulfiqar Ali was appointed as the Managing Director w,e,f, 3rd August 1999, he is fully competent and authorized in law to act on behalf of the petitioner and to exercise all such powers including the power to file and defend in the name and on behalf of petitioner all cases and matter in any Court or before any Authority. It was reiterated by the petitioner that petitioner own and possess 25% full paid-up shares in the equity of the respondent No,1 and is competent to file the petition under section 290. ' I have heard Mr. Iqbal Haider, learned counsel for the petitioner and Mr. Muhammad Afzal Siddiqui, learned counsel for the respondents. ' Before considering the petition on merits, it would be proper to dispose of the preliminary objection taken by the respondents about the maintainability of the petition. The respondents through counter-affidavit have questioned the maintainability of the petition and canvassed by learned counsel for the respondent, the following grounds: (1) That the petitioner Messrs Shaheen Foundation, a Trust, registered under the Charitable Endowments Act, is not a juristic personality, thus can sue either in the name of Treasurer or in the name of the trustees, not in its own name. (2) The petitioners have not acquired 25% shareholding and has paid only Rs,1 lac each which shall be deemed to the part payment of 25 lacs at the best it acquired right of 10,000 shares only. Thus do not qualify as holder of 20% or more share in the company as such it cannot lodge or file the petition under section 290 of the Companies Ordinance.
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(3) The petition involving the management of the trust property, cannot be maintained except with the permission of Advocate-General in terms of section 92 of C.P.C. Thus in absence of permission, the petition is not maintainable. ' Reverting to the third ground taken by the learned counsel for the respondents that the petition for want of sanction of Advocate-General under section 92 of C.P.C., is not maintainable as the petitioners' Foundation is a Trust and the proceedings involving the Trust property, the permission of Advocate-General in terms of section 92, C.P.C. Is mandatory. Learned counsel for the respondents has referred the following cases (1) Pramatha Nath Mullick v. Pradhyumma Kumar Mullick and another (AIR 1925 PC 139), (2) Janaki Bai Ammal v. Sri Triuchitrambala Vinayakar of Melman AIR 1935 Madras 825), (3) Raje Anandrao v. Shamrao (AIR 1961 SC 1206), (4) Mehbood Elahi v. KM. Idrees (PLD 1955 Lahore 242). (5) Charan Singh and another v. Darshan Singh and others (AIR 1975 SC 371). ' Section 92 of C.P.C. Contemplates for filing of suit, in the nature envisaged by section 92(1) to obtain a decree for any one or more of the reliefs enumerated in clauses (a) to (h) by the Advocate-General or two or more persons having interest In the Trust with the consent in writing of the Advocate-General. The reliefs in respect of the Trust enumerated in clauses (a) to (h) of subsection (1) are (a) removal of trustee, (b) appointment of new trustee, (c) vesting of any property in trustee, (d) directing for accounts and inquiries, (e) declaration of the proportion of the trust property or of the interest therein allocated to particular object of the trust, (i) authorizing the whole or any part of the trust property to be let, sold, mortgaged or exchanged; (g) settling of a scheme; or (h) granting such further or other relief as the nature of the case may be required. ' The question whether suit or proceeding falls within section 92 depends not upon the character in which the plaintiff sues, but upon the nature of relief sought. In the instant case, no doubt the petitioner, a trust, has filed the petition under section 290 of the Companies Ordinance with allegation of mismanagement and oppression of minority shareholder and the relief asked for in the present proceedings is not similar to that mentioned in clauses (a) to (h) of section 92, C.P.C. Therefore, I am of the view that in case proceedings has been brought on behalf of the trust seeking relief not enumerated in above clauses would not be subject to the permission from the trust merely because the character of the petitioner/plaintiff is a Trust, thus the ground urged for want of sanction is not tenable. ' The second ground taken by the respondents' counsel was that the petitioners do not qualify to be a member to bring the proceedings under section 290 of the Companies Ordinance. According to learned counsel, the petitioner is not legally holding the shares to the extent of 25%, thus the petition cannot be filed by a person, who is holding the shares less than 20%. To elaborate his contention, the respondents' counsel canvassed that no doubt the petitioner had agreed to have 25% shares in all the three companies and the respondents in good faith transferred the shares but the petitioner has paid Rs,1 lac each, by referring Annexure R/2, letter of the petitioner, dated 29-1- 1997, whereby nine demand drafts were sent to the respondent No,2 of Rs,3 lacs. On the basis of Annexure R/2, it has been contended that the petitioner would be deemed to be holder of 10,000 shares in each company, which will not bring the petitioner holder of 20% shares, as such they are not qualified to file the petition. In this regard the respondents' counsel has referred the judgment recorded by Division Bench of Allahabad High Court in Shiromani Sugar Mills Ltd. v. Debi Parasad (AIR 1950 Allahabad 508), wherein it was held that "to constitute a binding contract to take shares in a company when such a contract is based upon application and allotment, it is necessary that there should be an application or allotment, by intending shareholder an allotment by the Directors of the Companies of the shares applied for, and a communication by the Directors to the applicant of the fact of such allotment having been made".
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' This objection has been met by learned counsel for the petitioner by urging that the petitioner has acquired 25% shares in all three companies. The transfer of share was reported to the Registrar, Joint Stock Companies and the Registrar in his comments has submitted that the petitioner owns 25% shares of the company, thus the respondent cannot deny petitioner's holding of 25% shares. He further contended that the shares were purchased from private persons namely, Amir Ansari, Nisar Aziz, Robi Durrani, Mani Begum, Nasreen Akhtar, Atif Jalil, Jameel Behari, Sumera Jameel, Samina Pirzada, till date none has challenged the petitioner's holding of 25% shares, no suit or any proceeding is pending. He contended that if any amount is payable, the same can be recovered, once the share has been transferred and registered with the Registrar, Joint Stock Companies, the right under section 290 of such member cannot be doubted or denied. ' The facts of Shiromani Sugar Mills Ltd, referred by respondents' counsel were that the respondents had obtained preference shares of Rs,100 each, Rs,20 were payable on the application for the shares, Rs,30 were payable on the share being allotted and the balance…
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