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Petitioner: Sher Asfandyar Khan and others VS Respondent: Neelofar Shah and others
Court Name: Sindh High Court Judge(s): Irfan Saadat Khan, Kausar Sultana Hussain Title: Sher Asfandyar Khan and others vs Neelofar Shah and others Case No.: High Court Appeals Nos. 107, 109 and 114 of 2012 Date of Judgment:2019-09-16 Reported As: 2020 CLD 1260 Result: Order accordingly
JUDGMENT
JUDGMENT IRFAN SAADA T KHAN, J.---These three High Court Appeals arise out of the order passed by the learned Single Judge in J.M. No.31 of 2007, decided on 05.07.2012. The learned Single Judge after hearing the case at considerable length, through an elaborate and erudite order , allowed the said J.M. by observing as under: Accordingly , this petition is allowed and disposed of f in terms of the following orders and directions: (a) In this para, the "Shah group" means Mr. Nazeer and the petitioner or any of them (and no other person), and the "Khan group means the respondents Nos. 2 to 4 or any of them (and no other person). (b) Within 10 days from the date of announcement of this .Judgment ("announcement date"), the Official Assignee shall appoint a date and time (being a date not earlier than three weeks from the announcement date, nor later than six weeks from that date) for the holding of an EOGM for the election of a fresh board of directors of the Company ("election date"). The Official Assignee shall communicate the election date to the Company , but it shall be the responsibility of the Shah and Khan groups themselves to ascertain the election date from the Official Assignee. (c) The EOGM shall be held at the registered office of the Company and shall be presided and supervised by the Official Assignee. (d) The elections shall be held only on the basis of the undisputed shareholding, i.e., 44% for the Shah group and 26% for the Khan group. The shareholders shall elect four directors of whom two must be from the Shah group and two from the Khan group. Each of the Shah and Khan groups may, by decla ration submitted to the Official Assignee not later than seven days before the election date (which may be submitted only once and shall be irrevocable), alter the shareholding inter se the group. and the Official Assignee shall hold the election on the basis of such declaration and the persons listed in the declaration shall be deemed to be shareholders of the Company in terms of the shareholding therein stated. If no such declaration is filed, then the petitioner No.1 shall be deemed to
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hold 26% shares, the petitioner No.2, 18% and the respondent No.3, 26%. However , each of the respondents Nos. 2 and 4 shall be deemed to hold one qualifying share in the Company . Only shareholders of the Company shall be eligible to stand for election. Only such members of the Shah and Khan groups as are shareholders shall be entitled to attend and participate in the EOGM and may appear and vote at the EOGM by proxy (which, however , may be given only to a member of the group) and which may be delivered to the Official Assignee at any time up to the holding of the EOGM Any proxy so delivered shall form part of the report to be prepared by the Official Assignee. (e) Once the EOGM has been held and the directors elected, the Official Assigne e shall declare the result, close the meeting and immediately supervise the first meeting of the newly elected board. The only agenda for the first meeting shall be to elect a chairman who must be from the Shah group and appoint a chief executive who must be from the Khan group and one of the persons elected to the board. In case there are any differences or disputes that cannot be resolved, the Official Assignee shall, in his discretion, appoint the chairman or chief executive (as the case may be) and such appointment shall be final and binding. At the meeting, the Khan group shall hand over to the Official Assignee the original share certificates in relation to the 30% shares registered in the name of respondent No.2 (including the certificate regarding the qualifying share of respondent No.4) who shall keep the same in safe custody pending further disposal in terms of these directions or as otherwise ordered by the Court. The first meeting of the board shall then stand concluded. (f) The Company , the Shah group and the Khan group and any and all servants, employees or agents of each of them shall provide all such assistance to the official Assignee as he may require or deem fit, including providing any information or record that he may call for, whether on, before or after the election date for purposes of or related to anything contained in this para. Without prejudice to the generality of the foregoing, the Company shall promptly satisfy the Official Assignee that it has made all corporate entries and filings to reflect (i) any change in the shareholding as permitted under clause (d), and (ii) the election of directors and appointment of chief executive in terms of clause (e) above. (g) The Official Assignee shall prepare a report in respect of the foregoing matters and place the same on the record. The fee of the Official Assignee is Rs.100,000/- payable by the Company , but the fee may be paid at any time by either of the Shah or Khan groups who shall be suitably reimbursed by the Company . The Official Assignee shall not be bound to take any action in terms as provided in this para, save and except as in clause (b) above, unless his fee has been paid in full. (h) The term of office of the board of directors elected, and chief executive appointed, in terms as above shall be one year from the election date, and thereafter a new board of directors shall be elected and chief executive appointed in terms as provided in The Companies Ordinance. At any meeting of the board elected in terms of clause (e) above, the chairman shall at all times have a second or casting vote. (i) Any director of the Company , whether elected in terms of clause (e) above or any time thereafter , shall have immediate, full and unimpeded access to all books of accounts and papers of the Company (howsoever stored) and its advisers and to all its properties and assets (subject to third party rights ) and neither the Company , the Shah group or the Khan group nor any of their servants, employees or agents shall at any time by act or omission prevent, hinder or impede any director's access as aforesaid, but the right hereby confirmed shall only be exercisable by the director in person and not through any attorney or agent. (j) At no time shall any person exercise any voting or other rights in respect of the 30% shares save and except as herein permitted or provided and any dividends declared by the Company shall, in relation thereto, be promptly deposited with the Nazir of this Court, who shall invest them in some profit bearing scheme. (k) If by or before the end of the one year period specified in clause (h) above, the Shah and Khan groups have come to some understanding or arrangement with regard to the transfer of the 30% shares (or any portion thereof) to the person(s) identified for this purpose in the Main Agreement, the same shall be affirmed and recorded by the board of directors and a certified copy of the relevant resolution shall be provided to the Official Assignee. He shall thereupon hand over a suitable number of share certificates to the Company for transfer to the person(s) concerned and also issue a certificate in relation thereto to the Nazir who shall release the relevant portion of any
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dividends deposited to the person(s) concerned upon confirmation by the Company that the shares have been transferred in his name. (l) If by or before the end of the one year period specified in clause (h) above, the Shah and Khan groups have not been able to come to any understanding or arrangement in terms as stated in clause (j) above, then the Official Assignee shall, after making such inquiries with the Company as he deems appropriate, release the relevant share certificates to the Company for transfer of the shares to the Shah group and the last part of clause (1) shall apply mutatis mutandis. However , the shares (and share certificates) in relation to the portion transferable to the respondent No.5 (10%) and the respond ent No.8 (6%) shall continue to be retained by the Official Assignee and their disposal shall depend on the outcome and fate of the civil suits filed by each of these respondents or as may otherwise be ordered by the Court. (m) The Second Agreement and those provisions of the Main Agreement as relate to Tower II are unenforceable and shall not be given any effect by the Company or the Shah group or the Khan group. (n) The affairs of the Company and the rights of its shareholders shall, for a period of one year from the election date, be regulated and governed by company law and the provisions of parts (D) to (l) of the Main Agreement (but subject. always to this para). After the expiry of the aforesaid period of one year, but subject to the terms of this para, the affairs of the Company and the rights of its shareholders shall be regulated and governed strictly by and in accordance with company law. Howeve r, as long as the Khan group continues to hold at least the same number of shares as held in the name of respondent No.3 as on the announcement date, the Khan group shall be entitled to elect two directors and the total numbe r of directors of the Company shall not five. If the Company is converted into a public company then, subject to the foregoing condition, the Khan group shall be entitled to elect three directors and the total number of directors of the Company shall not exceed seven. (o) The civil suits, filed by the responden ts Nos. 5 and 8 respectively that stand transferred to this Court shall be registered as suits on the original side and be fixed for further proceedings and, unless the Court otherwise directs, shall be listed together . (p) The Official Assignee, Company , Shah group, Khan group or the Nazir (as the case may be) may at any time apply to the Court for such directions and/or clarifications as the Court may deem , fit and appropriate to give or make in order to give effect to anything stated or contained in this para. (q) The Shah group or the Khan group may place a certified copy of this judgment before the Official Assignee and/or Nazir in order to ensure compliance, but the office shall in any case forwa rd a copy hereof to the Official Assignee. (r) Nothing in this para shall prevent the Shah group and the Khan group from, at any time, coming to a settlement or compromise with regard to any or all of the matters herein contained (save and except in relation to the shares claimed by the respondents Nos.5 and 8 in the civil suits filed by them), and any or all such matters may be altered, modified or superseded by any such settlement or compromise, but no such settlement or compromise shall have any effect unless it is (i) placed before the Court by appropriate application, and (ii) the Court accepts and endorses the same, whether with or without amendment. The petition stands disposed off in the above terms. All pending applications have become infructuous and stand disposed off accordingly . 2. Briefly stated, the facts of the case are that the Company , namely , Of space Private Limited (hereinafter referred to as "the Company") the appellant in H.C.A. No.109 of 2012 was incorporated on 17.12.1997. Among other objects of the Company , as duly mentioned in its Articles of Association, the main object of the Company was to conduct the business of construction of office spaces, buildings and properties of all kinds, whether residential or commercial, and generally to act as contractor . The other objects of the Company include to purchase and sell the land, buildings, warehouses, showrooms, factories, bungalows, flats, multistoried buildings, etc. The authorized capital of the Company is Rs.10,00,00,00 40/- (Rupees ten crore), whereas the paid-up capital is Rs.25,00,000/- (Rupees twenty five lac) divided into 25,000 shares. The Company acquired two office Towers on plot No.ST -8, Commercial Area, opposite Aisha Bawani School, main Shahrah-e-Faisal, Karachi, admeasuring 1306 square yards (hereinafter referred to as "the property") vide sale agreement dated 07.01.1998 and sale deed dated
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21.01.1998. The Company thereafter constructed two Towers, with the aim to lease/let out the same, (for convenience these towers are referred to as "Tower-I " and "Tower-II "). The construction of these Towers was completed in 2001. Tower-1 comprises of 1000 square yards, whereas Tower-2 comprises of 306 square yards, respectively . The Company is earning its income from lease of these Towers. The purchase of the said building and construction made thereupon was funded by IBM. 3. That a lease agreement was entered between the Company and IBM on 26.12.1997, whereby IBM agreed to take on lease Tower-I or substantial portion thereof It is the claim of the attorney of the appellants, who filed the JM, namely , Nazeer Hussain Shah (hereinafter referred to as "Mr. Shah ") that the Company was incorporated by him and all initial funding etc. was also made by him. It was the claim of Mr. Shah that Mr. Sher Asfandyar Khan (hereinafter referred to as "Mr. Khan ") was his old friend and since Mr. Khan was facing some financial hard time so he brought him to the Company as Chief Executive to look after its affairs but it is the claim of Mr. Shah that not a single penny was contributed by Mr. Khan either with regard to financing of the Company , the project or with regard to the initial set up of the Company . Mr. Shah also claimed that Mr. Khan has no contribution so far as the capital or the projects are concerned, in respect of the Company . In order to run the affairs of the Company smoothly and efficiently shareholders agreement dated 14.01.1998 was made wherein it was mentioned that Mr. Shah along with his wife, namely , Mrs. Neelofar Shah and son Reza A. Shah would hold 44% shares of the Company , whereas 26% shares were to be held by Mst. Sajida Naeem, who is the sister of Mr. Khan, whereas the rest of the 30% shares initially were held by Alamgir Khan, who is the brother of Mr. Khan, for a limited period and purpose and subsequently the same would be transferred to the persons mentioned in the agreement dated 14.01.1998. Since Mr. Shah was suffering with certain ailments and had to undergo medical treatment, he went to United States of America in 1999 and finally returned back in 2006, though admittedly during this period he intermittingly visited Pakistan. 4. Upon the final arrival of Mr. Shah in Pakistan in 2006, he started investigation about the affairs of the Company and came to know that in his absence huge manipulation with the accounts and shares of the Company have been made by Mr. Khan. A number of correspo ndences then took place between the parties, however , when Mr. Shah realized that Mr. Khan has shattered his confidence and has betrayed him and by playing fraud with him has become a major shareholder of the Company , by violating the terms of the agreement dated 14.01.1998, thereafter he filed the present J.M. under sections 290/291 of the Companies Ordinance, 1984 (hereinafter referred to as "the Ordinance ") on the ground that he has discovered "oppression" and thus a declaration was required that Mr. Khan had conducted the affairs of the Company in violation of the Company laws as well as has acted in a derogatory manner against Mrs. Neelofar Shah and Reza A. Shah and other shareholders of the Company , except Mst. Sajida Naeem and Alamgir Khan, who are the wife and brother of Mr. Khan respectively . The J.M. was heard at length by the learned Single Judge and thereafter judgment dated 05.07.2012 was passed. It is against this order that Mr. Sher Asfandyar Khan filed H.C.A. No.107 of 2012 through Messrs Munir A. Malik, Messrs Ofspace (Pvt.) Ltd. filed appeal through Mr. Shakeel Hassan bearing High Court Appeal No.109 of 2012, duly represented by Messrs Rasheed A. Razvi, Mst. Sajida Naeem and Mr. Alamgir Khan filed High Court Appeal bearing No.114 of 2012 duly represented by Mr . Kashif Paracha Advocate. 5. Messrs Munir A. Malik and Ch. Atif Rafiq, Advocates have appeared on behalf of the appellant (Mr. Khan) in H.C.A. No.107 of 2012 and for the respon dent No.3 in H.C.As. Nos.109 and 114 of 2012. They submitted that the order of the learned Single Judge is not in accordance with law as he has ignored a number of factors going to the roots of the case, therefore, the instant appeal may be allowed or in the alternative the matter may be remanded to the learned Single Judge for passing a fresh order by considering the following facts. They stated that the learned Single Judge has failed to consider the aspect that when the appellant and the respondent No.1 had denied the very execution of the main agreement and the second agreement and the signatures appended thereupon, there was no justification available with the learned Single Judge to place reliance on these two agreements. They further stated that these two agreements were never produced in original by Mr. Shah before the learned Single Judge. They stated that the learned Single Judge has himself examined the signatures of the appellant and the respondent No.10 rather than seeking opinion of some expert in this behalf. They in this regard have laid emphasis
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on the blow-up signatures of these two persons by submitting that there are material differences in the usual signatures of these two persons and their signatures appended on these documents. 6. The learned counsel, while elaborating their viewpoint, submitted that since the very agreements i.e. main agreement and second agreement were fabricated and forged, therefore, the observation of the learned Single Judge that the respondent No.10 held the shares of the Company in trust was not correct and the only grievance of the respondent No.1 arose when these 30% shares were transferred to the appellant and the Khan group (comprising of Mr. Sher Asfandyar Khan, Mst. Sajida Naeem and Mr. Alamgir Khan) became the majority shareholders. According to M/s. Munir A. Malik and Ch. Atif Rafiq when Mr. Shah left the country the affairs of the Company were being run by Mr. Khan and it is an admitted position that the Company was running into huge profits and when he returned back in order have a major shareholding in the Company , a dispute arose between Mr. Khan and Mr. Shah and when Mr. Shah came to the conclusion that his group (Shah group comprising of Mr. Nazeer Hussain Shah, Mst. Neelofar Shah and Mr. Reza A. Shah) fell into minority shareholding thereafter application under sections 290/291 of the Ordinance was moved with mala fide intention. They stated that the transfer of 30% shares (7499) was done in accordance with law and all the necessary documents in this behalf were duly furnished to the SECP which, according to them, have supported the stance of the appellant but the learned Single Judge by totally ignoring this aspect has decided the matter in favour of the respondent No.l. 7. The learned counsel also stated that the learned Single Judge has failed to appreciate the true connotation of sections 290/291 of the Ordinance. They then read out the provisions of the said Sections and stated in the instant matter this provision does not attract, as no breach with regard to the affairs of the Company has occasioned so as to entail the applicability of these Sections. They further stated that the transfer of the shares to the Shah group took place by fulfilling all the legal norms and conducting the board meetings and duly informing the SECP in this behalf and the learned Single Judge has erred in not accepting the fact that eithe r no proper meetings took place on 15.01.1999 or these meetings were coram non-judice with regard to transfer of shares or that the legal formalities in this behalf have not been fulfilled, hence, observation of the learned Single Judge that the transfer of the shares to Mr. Shah was dubious or not in accordance with law is an incorrect observation and the same may be vacated. In the alternative, Messrs Munir A. Malik and Ch. Atif Rafiq submitted that even if for arguments' sake it is accepted that the main agreement and the second agreement are genuine even the same are not liable to be considered, since there is a disparity between various clauses of the agreements and the Articles of Association of -the Company , which has rendered the clauses of the agreement impractical to be acted upon due to these being violative of the Companies Ordinance. They then read out various clauses of the agreements to prove their stance. 8. Messrs Munir A. Malik and Ch. Atif Rafiq have also submitted that the very proceedings initiated by the learned Single Judge were ab initio void and illegal, as according to them, company matter proceedings are always summary in nature. They submitted that when the learned Single Judge did not proceed in a summary manner rather dealt with the matter in a usual manner then issues were to be framed and evidence has to be recorded, which aspect has totally been ignored by the learned Single Judge, as according to them the matter has been decided without recording of evidence and framing of the issues, hence, the order of the learned Single Judge suffers with this grave illegality and irregularity and needs to be vacated. They in this regard have placed reliance on the following decisions: i) Mian Javed Amir v . United Foam Industries (Pvt.) Ltd. (2016 SCMR 213 ) ii) Baz Muhammad Kakar and others v. Federation of Pakistan through Ministry of Law and Justice, Islamabad and others (PLD 2012 SC 870 ) 9. Messrs Munir A. Malik and Ch. Atif Rafiq have stated that when the learned Single Judge came to the conclusion that he would proceed with the matter as a normal case, which he was not obliged to since the instant matter should have been proceeded in a summary manner , however the learned Single Judge has failed to proceed with the matter as if it were a normal case by not framing the issues, recording the evidence and proceeding accordingly . In support of their above submissions, they have relied upon a number of decisions, summary of which is given as under: A. Case-laws on comparison of signatures:
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i) Rehmat Ali Ismailia v . Khalid Mehmood (2004 SCMR 361 ) ii) . Muhammad Kabiruddin v . Muhammad Munirruddin (1993 CLC 747 ) iii) Muhammad Nurul Haq Mia v . The State (PLD 1958 Dacca 341 ) iv) Muhammad Ali Hemani v . Altai Fatima (1987 CLC 282 ) B. Decisions on non-giving of the effect to the provisions of agreement, if not incorporated into Articles of Association: i) V. B. Rangaraj v . V. B. Gopalakrishnan (AIR 1992 SC 201) ii) Crompton Greaves v . Sky Cell Communication Ltd. [115 Company Cases 832 (Madras)] iii) IL and FS T rust Co. Ltd v . Birla Perucchini Ltd. [AIR (2004) Company Cases (Bombay 335)] C. Decision on jurisdiction and interpretation of section 290 of the Ordinance: i) Elder v . Elder and W atson (1952 SC 49) ii) Re H.R. Harmer Ltd. [1959 (1 WLR 62)] iii) Re Unisoft Group Ltd. (No.2) [1994 BCC 766] iv) Re Legal Costs Negotiators Ltd. (1999 BCC 547) v) Muhammad Fikree v . Fikree Development Corporation Ltd. (1992 MLD 668 ) vi) Shaheen Foundation v . Capital F .M. (Pvt.) Ltd. (2002 CLD 188 ) vii) R v. Board of T rade (1964 2 All E.R 561) viii) Re Leeds United Holdings plc. (1997 BCC 131) ix) Rajahmundry Electric Supply Corporation v . Nageshwara Rao (AIR 1956 SC 213) x) Registrar of Companies v . Pakistan Industrial and Commercial Leasing Ltd. (2005 CLD 463 ) xi) Scottish Co. Operative Wholesale Society Ltd v . Meyer (1959 A. C. 324) xii) Shahbazud Din Chaudhry v . Services Industries T extiles Ltd. (PLD 1988 Lahore 1 ) xiii) Associated Biscuits International Ltd. v . English Biscuits Manufacturers (Pvt.) Ltd. (2003 CLD 815 ) 10. Messrs Rasheed A. Razvi, Tahmasp R. Razvi and Mr. Waleed Rehan Khanzada, Advocates, have appeared as counsel for the appellant in H.C.A. No.109 of 2012 and as counsel for the respo ndent No.8 in H.C.A. No.107 of 2012 and as counsel for the respondent No.9 in H.C.A. No.114 of 2012. They have adopted and supported the arguments of Messrs Munir A. Malik and Ch. Atif Rafiq. They have stated that the J.M. No.31 of 2007 filed under sections 290, 291 and 292 of the Ordinance was barred by time under Article 181 of the Limitation Act, 1908 (hereinafter referred to as "the Act") which aspect, according to them, has totally been ignored by the learned Single Judge. They further stated that even otherwise since the cause of action arose from the date of the execution of the two agreements dated 14.01.1998 hence Articles 120 and 113 of the Act are also applicable in the instant proceedings. In support of their arguments they have placed reliance on the following decisions: i) Khurshid Ahmad Khan and another v. Pak Cycle…
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