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Petitioner: Dr. Muhammad Imran Qureshi and Others VS Respondent: Mohammad Asif
Court Name: Sindh High Court Judge(s): Muhammad Junaid Ghaffar Title: Dr. Muhammad Imran Qureshi and Others vs Mohammad Asif Case No.: J.C.M. No. 03 of 2018 Date of Judgment:2019-11-18 Reported As: 2019 SHC 446, 2020 CLD 1060, KLR 2020 Civil Cases 281, 2020 P C T L R 922 Result: petition disposed of
Judgment Muhammad Junaid Ghaf far J. This is a Petition under Section 286 of the Companies Act, 2017 seeking the following prayer(s):- i. "Declare that the operation and management of the Respondent No.5 Company are being conducted in violation of the Articles and Memorandum of Association of the Company; that the same has been usurped by the Respondent No.1 in a manner oppressive to the Petitioners and also prejudicial to public interest; ii. Declare that there is complete deadlock amongst the main shareholders of the Respondent No.5 and that circumstances exist for the winding up of the Respondent No.5 therefore the shares of the Respondents be sold to the Petitioners at fair market value; iii. Appoint a leading audit firm to conduct a forensic audit into the affairs of the Respondent No.5 and its main assets the NMC Hospital; iv. Appoint Receiver to take charge of the day to day affairs of the Respondent No.5 and its main asset the NMC Hospital pending final disposal of this Petition; v. Award costs of these proceedings; and vi. Grant any other relief deemed appropriate by this Hon'ble Court." 2. The three Petitioners before this Court claim to be owners to the extent of 33% shareholding in Respondent No.5 ("Company") and it is their precise case that Respondents No.1 to 4 are now running the Company in an oppressive manner , without fulfilling the statutory / legal requirements as contemplated in law; therefore, the Company is not being run in a proper manner; hence, instant Petition. 3. Learned Counsel for the Petitioners has contended that though the quantum of shareholding to the extent of 33% as claimed by the Petitioners is disputed by the Respondents; however , they do admit that the Petitioners shareholding is to the extent of 25%; hence, this Petition is otherwise competent under Section 286 of the Act; that earlier in respect of change / manipulation of the shareholding of the Petitioners, J. M. No.18/2014 was filed before
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this Court, which is pending, wherein, ad-interim order dated 17.06.2014 is operating; that the Respondents No.1 & 2 are one group of shareholders, and Respondents No.3 & 4 are a second group of shareholders, whereas, the Petitioners are the third group; that Respondents No.1 & 2 are in fact controlling the entire affairs of the Company which is managing a big hospital in Karachi; that it is the case of the Petitioners that no meeting of the Board of Directors has been held in the last 10 years, and similarly no shareholders meeting as well; that the Directors have not prepared and filed any annual reports; that in the past 10 years no audited accounts have been finalized; that in the entire response of the Petition no such document has been annexed, either by the Directors / Respondents, or for that matter by the Company; that though Petitioner No.2 is involved in the management as alleged by the Respondents; however , he has no contro l over any such affairs of the Company; that despite making huge profits, the Company is not paying proper dividend / share to the Petitioners, whereas, to avoid documentation, the transactions are being carried out in cash; that it is a case of deadlock amongst the respective shareholders and so also mistrust; that the Petitioners stance is that a forensic audit of the accounts of the Company be conducted so as to overcome this deadlock enabling proper management of the Company; that earlier Respondent No.4 had filed J.M. No.19/2014 which was on identical terms as to J. M. No.18/2014, whereas, both had made similar allegations against Respondents No.1 & 2 regarding manipulating the exten t of shareholding; however , J. M.19/2014 was withdrawn surreptitiously without knowledge and consent of the Petitioners; that even Respondents No.3 & 4 had also filed J. M. No.6/2016 seeking inspection and investigation into the affairs of the Company; however , the same was also withdrawn on 12.1.2018, again without knowledge and consent of the Petitioners; but all these Petitions reflects that there are allegations against the management and the manner in which the Company in question is being run by Respondent No.1 & 2; that admittedly , the conduct is inappropriate, hence, corrective orders may be passed by this Court; that it is the case of the Petitioners that management of the hospital is in the hands of unqualified persons which may cause danger to the lives of the people; that no proper response has been filed by the Company / Respondents as to the failure to comply with various provisions of the Companies Act, 2017, except that an ad-interim order passed in J. M. No. 18/2014 has restrained the Company from doing so; however , this is incorrect as the Court has not completely restrained the Respondents; that dummy accounts have been prepared and managed, whereas, even those accounts have not been audited; that in view of these submissions the Petition be allowed by passing appropriate orders as may be deemed fit by this Court. In support of his contention he has relied upon the case reported as Light Metal and Rubber Industries (Pvt.) Limited and others Y. Sarfraz Qaudri (2011 CLD 1485 ). 4. Learned Counsel for Respondent No.1 has contended that the Company is fully operational, functional, profit- making entity and is being run in accordance with law, relevant rules and regulations according to its Articles of Association; that it runs a hospital and has a clear operational record of nearly 2 decades amply establishing the fact that its affairs are being run in a professional manner; that Respondent No.1 has dedicated his life towards the functioning and running of the hospital; that Respondent No.1 has been instrumental in investing money and making it operational from the very beginning; that the onus is on the Petitioners to prove the allegations levelled against the Respondents; that the Petitioners have miserably failed to bring on record any material to substantiate their allegations; that it is settled law that the Petitioners should succeed on the strength of their own case; that the word oppression has to be decided on a case to case basis as it has not been defined under the law; that it is settled law that in order to seek relief under Section 286 of the Act the person claiming oppression has to establish that they have been constrained to submit to a conduct which lacks in probity or to a conduct which is unfair; that Respondent No.5 is a Company and the affairs of the Company are being governed by its Board of Directors, Board meetings are convened and all the parties on the Board are jointly responsible for the decisions made with respect to the Company; that it has not been denied that petitioners are availing benefits from the Company in accordance with their shareholding; that Petitioner No.1 is not a permanent resident of Pakistan and resides in USA; that petitioner No.3 is not even a shareholder of the Company and therefore has no locus standi to file instant Petition; that Petitioner No.2 is actively involved, fully aware and participates in the daily management, administration, workin g and financial affairs of the Company , whereas, petitioner No.2 regularly attends his office and in fact sits in the same office, next to the answering Respondent; that Petitioner No.2 is a singly authorized signatory of all bank
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accounts of the Company including but not limited to Habib Metro, Bank Al-Habib and in fact has been regularly signing cheques even after the filing of this petition; that he has even given loans to consultants/doctors on behalf of and from the Company fund(s); that the Petitioner No.2 has also availed facility of a personal car for his own usage from the Company funds; that Petitioner No.2 is actively involved in deciding and signing maintenance contracts, imports, buying and purchasing of expensive machinery etc. required for the Company; that he also has access to everything including FBR records, daily bank reports, daily reports of the Company , audit reports etc.; that vide Board Resolution dated 1-2-2010 he was also given the power to acquire land on behalf of the Company; that Books of accounts have been regularly prepared and maintained and the Company is compliant of the rules and regulations of SECP and FBR; that Petitioner No.2, himself is one of the signatories of the AGM held in the year 2013 and the Minutes clearly reflect that the audited accounts of the Company along with the auditor's report were presented, reviewed and adopted; that denial of his signatures during the course of the proceedings, was rather shocking and is put to strict proof thereto; that the Petitioners alleged claim that over the past decade the Company has not held a single general meeting of its shareholders is incorrect, whereas, if it was so, then why no action was taken until 2018 when instant petition was filed; that even SECP was never approached for such purposes; that the substratum of the Company is intact and the objective for which it was incorporated, still continues; hence no case for indulgence is made out; that there is no comple te deadlock amongst the main shareholders; that the ingredients for winding up are not available, and therefore it will not be just and equitable to do so; that winding up of a Company in the case of the wishes of the shareholders, strained relationships, and dispute amongst the shareholders is extremely flawed and no more a good law; that a private limited Company is to be treated as one and not like a partne rship at will and reliance is placed on In re: Kruddson Ltd. Karachi Y. In re: Kruddson Ltd. Karachi (PLD 1972 Karachi 376); that the entire controversy pertains to a dispute in shareholding as a result of the share transfer which is already a subject matter of JM No.18 of 2014, hence, this petition is not maintainable until the said J.M is decided; whereas, vide Order dated 17-06-2014 passed in JM No.18 of 2014 there is a restraining order from filing returns and documents on behalf of the Company , with SECP; that the collective shareholding of the Petitioner No(s) 1 & 2 along with the shares appearing in the name of their late father (Mr. Sultan Qureshi) is approximately 25 percent since they had transferred 8 percent of their shares to the Respondent No.1; that it is trite law that inter-se dispute between the shareholders is not ad-judicable under Section 286 of the Companies Act , 2017; and reliance may be placed on the case of Muhammad Hussain Y. Dawood Flour Mill (2003 CLD 1429 Karachi) and Muhammad Aijaz Tahir Y. Federation of Pakistan (2014 CLD 1683 Lahore); that the petition is based on factual controversies, regarding denial of signatures on the documents/annexures as annexed by the Respondents, therefore, cannot be resolved in this case; and in support reliance may be placed on the case of Mian Javed Mir Y. United Foam Industries Pvt. Limited Lahore (2016 CLD 393 SC); that insofar as statement of Mr. Hammad Dosslani under S 161 of the CRPC is concerned it is submitted that he is not even a party in the instant proceedings and therefore the answering Respondent is not in a position to state upon the reasons and circumstances under which the said statement was made, whereas, this Statement made under s. 161 of the CRPC does not have any evidentiary value and is not admissible and was in fact made in respect of another matter which has no nexus with the instant case; that the accusations in respect of siphoning of funds etc. are vehemently denied and all such allegations upon the answering Respondent are based on surmises and conjectures which has no value in the eyes of law; that the plea that what harm will an audit cause is untenable because in the first place, the burden rests on the petitioners to make out a case of oppression, mismanagement or fraud, which they have been unable to do so, whereas, section 286 is a provision incorporated for extreme circumstances and as an alternative to winding up and empowers the Court to order purchase of shares of one party by another and therefore, it cannot be used in support of pleas that no harm will be caused by an audit; that Petitioner No.2 did not join the previous JM filed by his mother and brother being J.M. No.18 of 2014, or the one filed by the Respondents No.3 & 4 being J.M. No. 19 of 2014, which were filed on the same day through the same attorney as at that time the Petitioners No. 1 and 3 and Respondent No. 3 & 4 were all acting together as a group, and this reflects that Petitioner No.2 did not joined these proceedings in 2014 as then he was of the opinion that the Company is not being run in an oppressive manner and only came before this Court when he discovered that
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Respondent No.1, 3 and 4 have settled their disputes; that Petitioner No.2 has also filed Suit No.10 of 2018 to stop their alleged settlement on 2.1.2018, whereas, this JCM was filed after one month on 01.02.2018; that it is clear from this conduct that Petitioner No.2 has no other grievance, other than a fear or apprehension that a majority is formed within one family; that Company is running a hospital with hundreds of patients, whereas, the Petitioners have failed to make out a case for interference by this Court as it will disrupt the working of the hospital; that alternate remedy is available with them under the Companies Ordinance / Act; that for pleading oppression, heavy burden rests upon the Petitioners, whereas, in view of the dicta laid down in the case reported as Ladli Prasad Jaiswal v The Karnal Distillery Co., Ltd., (PLD 1965 SC 221) a minority shareholder cannot be included into the management of the Company; therefore, in view of these submissions instant petition is liable to be dismissed. 5. Learned Counsel for Respondents No.3 & 4 has contended that this Petition is misconceived and is liable to be dismissed as the grievance of the Petitioners is already a subject matter of an earlier Petition bearing JCM No.18/2014; that prayer No.(ii) is identical ; requesting sale of the shares to the minority; that the Petitioners want to buy and throw out the 66% shareholding of the Respondents; that in law it ought to have been the other way round as the Petitioners should be bought out by the Respondents; that nothing has been brought on record by the Petitioners in their petition to justify any audit of the accounts of the Company; that by way of ad-interim and interlocutory orders the Petitioners are seeking the maximum and entire relief in the Petition which admittedly , cannot be granted; that the Petitioners ought to have invoked the provisions of the Companies Act by making complaint to SECP and therefore, this Petition is premature; that there is nothing on record to suggest that the Company is being run in an oppressive manner; that even various Civil Suits are pending between the parties and therefore, this Petition is misconceived; that the allegations in respect of siphoning off funds from the accounts of the Company is devoid of any merits, whereas, Petitioner No.2 has all the access to the accounts and the financial matters of the Company; that even otherwise this is not a ground for winding up, whereas, the Courts are always reluctant to enter into internal administrat ion of the Company when there is no complaint made to SECP; that the matter involves various disputed facts; hence, even otherwise this Court lacks jurisdiction; that there are precedents even to the extent that non-holding of meetings does not fall or amounts to oppression. In support of his contention he has relied upon Muhammad Suleman Kanjiani and 3 others V. Dadex Eternit Ltd. and 4 other s (2009 CLD 1687 ), Tasnim and another v. Rustom Ali and others (2000 CLC 364), Mian Waqar uddin and 3 others V. Messrs United Industries Limited and 11 others (2017 CLD 696), Shahamatullah Qureshi V. Hi- Tech Construction (Pvt) Ltd. (2004 CLD 640), Khawer Hanif V. Imran Hanif and othe rs (2017 CLD 1788 ) and Pervaiz Arshad & another V. Rauf Textiles and Printing Mills (Private) Limited and 132 others (2019 CLD 72) and Registrar of Companies v Pakistan Industrial and Commercial Leasing Limited (2005 CLD 463 ). 6. Learned Counsel for Respondent No.5 has contended that Petitioner No.1 is a non-resident Pakistani who permanently resides in the USA and is an absentee in the functioning of the Company; that Petitioner No. 2 is instrumental in running the hospital and is involved in taking day to day decisions in matters pertaining to the Hospital; that Petitioner No.3 is a stranger to the present proceedings who is neither a shareholder , nor a director in the Company; that false allegations have been made in the petition that Respo ndent No.1 has usurped control over the day to day financial affairs of the Company; that in fact it is the Petitioner No.2 who exercises greater financial autonomy in the matters of the Company; that regular meetings of the Board of Directors are held and it has been resolved that three directors namely , Respondent No.1, 2 and Petitioner No.2 could singly sign to process any transaction on behalf of Company; that enough documents have been placed on record by the Respondents evidencing that Petitioner No.2 exercises financial discretion by paying salaries of employees, entering into contracts on behalf of the Company; paying taxes, procuring machinery etc.; that nothing has been placed on record through the petition to substantiate the allegations of oppression and mismanagement; that prayers of the petition are self-contradictory; that denial of signatures by Petitioner No.2 on certain documents makes it necessary to record evidence, therefore, the present petition cannot be decided on merits; that in terms of Section 290 of the Companies Ordinance, 1984 and Section 286 of the Companies Act, 2017, the Court has to form an opinion that the Company is being run in an "oppressive manner" and then in order to rectify the wrongdoing the Court has to pass an order regulating the affairs of the Company; however , such an order can only
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be made in the clearest of cases which do not raise or involve disputed question of facts or complex issues, which according to the learned Counsel is not the case here; hence, the prayer in the petition cannot be granted, whereas, term "oppression" has not been defined in law, and the Court has to decide oppression and / or mismanagement on a case-to-case basis, as settled in the case reported as Registrar of Companies v. Pakistan Industrial and Commercial Leasing Limited (2005 CLD 463) and Najamuddin Zia v. Asma Qamar (2013 CLD 1263 ); that the issue of shareholding and its percentage and quantum is a matter in dispute in J.M 18 of 2014, which has to be decided first; therefore, this petition is premature and in support he has relied upon the cases reported as Muhammad Anwar Monno v. Waqar Monno (1987 CLC 1943 at 1946 A) and Muhammad Fikree v. Fikree Development Corporation Ltd (1992 MLD 668 at 670 A); that that meetings of the Board of Directors have been held regularly , whereas, the Petitioners remained silent for 10 years; hence are not entitled for the relief claimed; that audit of the Accounts of the Company are being regularly conducted by the approved Auditors, whereas, if not, then the remedy is available by approaching SECP . 7. Learned Counsel for Respondent No.2 in addition to adopting the arguments made on behalf of Respondent No.1 & 5 has contended that all requisite meetings are regularly conducted and attended to by the Directors; that the case of the petitioners is premised on false pleadings; that Petitioner No.2 is actively involved in running the affairs of the Company and is even signing cheques singly; that no supporting documents are annexed with the memo of petition to substantiate the allegations; that under section 6(12) of the Companies Act, 2017, this Court is fully competent to take note of such false pleadings and assertions; that if a petition for rectification of share register is pending, then no further petitions are maintainable; that the alleged fraud in respect of change in shareholding is not a ground for maintaining the present petition under s.286 ibid in view of the dicta laid down in the case reported as Muhammad Hussain v Dawood Flour Mill (2013 CLD 1429); that the only prayer is in respect of having audit of the Company; however, an alternate remedy is available to them under s.256 of the Act and the Commission can be approached in view of the dicta laid down in the cases reported as Malik Aziz ul Haq v Crystaline Chemical Industries (Pvt) Limited (2016 CLD 970) and Registrar of Companies v Pakistan Industrial & Commercial Leasing Limited (2005 CLD 463); that s.286 of the Act is an alternative to a winding up petition and if no case for winding up is made out, then this provision cannot be invoked; that even through the rejoinder affidavit of the petitioners the defects pointed out in respect of misstatements by them, have not been cured; hence, no reliance can be placed on their pleadings. 8. While exercising his right of rebuttal, learned Counsel for the Petitioners has reiterated his arguments that neither any meeting of the Board of Directors has been held; nor any Annual General Meeting or Extraordinary General Meeting has ever been held in the last 10 years; that neither any election of Directors; nor appointment of auditors has been made as required in law; that Respondent No.3 is the Chief Executive of the Company in question but despite serious allegations levelled, no counter affidavit or reply has been filed by her; that J.C.M.18/2014 is not an impediment in the grant of this Petition as the same was in respect of rectification of share register against illegal transfer of shares done by Respondent No.1; that the ad-interim order of the Court in that matter does not restrain the Company from making compliance of the statutory provisions; but is only restricting the Company in relation to the changes made by the Respondents in the shareholding of the members in the Company; that the accounts produced with the counter affidavits of respondents are not audited accounts; but are even unsigned and unaudited; hence, do not fulfill the requirement of the Companies Act, 2017; that no right shares offer was ever accepted by the Petitioners and no money was ever paid; therefore, the question that right shares were allotted to the shareholders is unfounded; that if the contention of the Respondents to the effect that Petitioner No. 2 is involved in the management of the Company is correct then when Petitioner No. 2 is himself before the Court and asking for a forensic audit, on the ground that accounts are not being properly maintained, then the Respondents are not justified in raising any objection to that effect; that Mr. Hammad, the son of Respondent No.1 has been appointed as a Director , whereas, he in his 161 Cr.P.C statement in some other proceedings, has stated that he is an employee and not a shareholder or a Director of the Company; that the alleged minutes of the Board Meeting filed only for 2 years are forged and fabricated, whereas, at the relevant time Petitioner No.1 was never in the country , hence, this alone is a valid ground for granting the Petition.
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9. I have heard all the learned Counsel and perused the record. The precise facts have been stated hereinabove and for the sake of repetition, it may be noted that the Petitioners No.1, 2 & 3 (legal heirs of late Dr. Sultan Qureshi) hold 33.3% shares, which (quantum) is though disputed by the Respondents as according to them they only have approximately 25% shareholding; howeve r, for the present purposes, neither the said quantum of shareholding is the subject matter of the Petition; nor the admitted quantum of 25% shareholding or so, affects the very maintainability of this petition as otherwise, the petitioners have the minimum required shareholding to maintain a Petition under Section 286 of the Act. It further appears that Respondents No.1 & 2 is one set of shareholders having 33.3% shares, whereas, Respondents No.3 & 4 are collectively holding 33.3% shares, being the other set of shareholders. It further appears that Resp ondent No. 3 is the Chief Executive of Respondent No. 5/ Company . The Company was established in 1983 and owns and operates a medical facility known as National Medical Centre Karachi . The pattern of the shareholding (though disputed by Respondents) of the parties as stated in the Petition is in the following terms:- Shareholder No. of Shares Percentage Dr. Parveen Malik (Respondent No.3)11,668 16.6% Arsalan Malik…
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