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Petitioner: PAKISTAN SHIPPING CORPORATION AND Another VS Respondent: RUSTOM F. COWASJEE JUDGMENT
Court Name: Lahore High Court Judge(s): Abdul Shakurul Salam, Muhammad Aslam Mian Title:PAKISTAN SHIPPING CORPORATION AND Another vs RUSTOM F. COWASJEE
JUDGMENT
Reported As: PLD 1982 Lahore 671 Result: Appeal disposed of Judgment JUDGMENT ABDUL SHAKURUL SALAM, J.-This Intra-Court Appeal has not only chequered history but geography too. The respondents were carrying on maritime business in Karachi with vessels on the high seas. Their manage--ment was taken over and subsequently proprietary interests acquired by the appellants. They came to plains for relief. The then learned Chief Justice to the, L shore High Court accepted the petition. Appellants filed an appeal. A preliminary objection was taken that the judgment was no judgment in the eye of law having been sent in after elevation of the learned Chief Justice of the Supreme Court. It was decided that the matter being in appeal, it should proceed to arguments on merits. The decision was challenged through Civil Petition for Special Leave to Appeal (365/1982) which has granted but the proceedings in the appeal were not stayed by the learned Supreme Court of Pakistan. Hence, we proceed to decide the appeal on merits in the mountains at the foot of Himalayas. 2. The history is that the respondents were carrying on business under the name and style of East and West Steamship Company (1961). This firm was plying two ships m. v. 'Rustom' and m. v. 'Ohrmazd'. On 1-1-1974, Pakistan Maritime Shipping (Regulation and Control) Ordinance, 1974, Ordinance No. III of 1974 was promulgated. The same day i.e. 1-1-1974, under: section 5(1)(a) of the Ordinance the Federal Government took over the management of all the shipping concerns including the respondents' establishment, and in exercise of powers under section 6 (1) of the Ordinance appointed a Managing Director for the same. The Managing Director appointed an Officer on Special Duty for the respondents' establishment. On 3-1-1974, the Managing Director asked the O. S. D. To indicate position of the latest audited accounts and the interim accounts, who
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submitted a preliminary report on 9-1-1974 stating that the latest audited annual accounts of the respondents as available were for the year ending 28-2-1970 and the latest unaudited accounts for the year ended 28-2-1973. On 30-1-1974, the O. S. D. Appointed Rahim Jan & Company, who were previously the auditors of the firm, to audited the accounts for the years ending 28-2-1971, 29- 2-1972 and 28-2-1973: On 7-2-1974, the Managing Director appointed M/s. A. F. Furguson & Company to determine the Net Worth Value of the "respondents" establishment in term of principle 4 (b)' of the Schedule to the Ordinance. For taken-over establishments, a Board of Management known as Pakistan Shipping Corporation Board was established under section 7 of the Ordinance. Respondent No. 1 was appointed as Chairman of the Board on 20-2-1974. The aforementioned Ordinance was enacted into Pakistan Maritime Shipping (Regulation and Control) Act, 1974 (Act No. XVIII of 1974) which came in force on 7-3-1974. The Federal Government re-affirmed the appointment of A. F. Forguson & Company. Respondent No. 1 objected to the appointment on account of strained relations. The earlier appointed auditors, Rahim Jan & Company audited balance-sheet for the year 1971-72 on 17-6-1974 and for the year 1972-73 on 28-6-1974. In the last balance-sheet, the auditors showed the re-valuation of the aforementioned two vessels calculate] by M/s. G. B. Potts & Company Limited Maritime Engineers Surveyors as at the end of 1972, vide their letter dated 30-3-1973 at Rs. 1,02,30,000 and Rs. 5,37,50,000, including the original value of the vessels. The re-valuation had increased the value of the two vessels by Rs. 3,01,90,074. The auditors' report is dated 28-6-1974. In view of the objection about the appointment- of M/s. A. F. Forguson & Company as auditors, the Federal Government appointed M/s. Ford, Rhodes, Robson and Morrow as the auditors on 16-8-1974. On 23-11-1974, respon--dent No. 1 was replaced as Chairman of the Board of the Pakistan Shipping Corporation by one Mr. Saeed Ahmad. On 6-1-1975, the latest audited annual balance-sheet prepared by Rahim Jan & Co. Was .Accepted and acting thereon Income-tax Return was submitted by the appellants. On 14-1-D75, the new Chairman, National Shipping Corporation, on the directions of the Federal Government, asked the auditors M/s. Rahim Jan & Company to revise the balance-sheet for the year 1972-73 ending on 28-2-1973 by reversing the entries relating to the revaluation of the two vessels by the Surveyors. The auditors, M/s. Rahim Jan & Company replied on 22-1-1975 that it was not within the competence of the auditors to revise the audited accounts. If the Chairman required any change in the audited accounts, he bad to direct his Accounts Department to draw the revised statement of accounts for the year ending on 28-2-1973 after incorporating the desired adjustment in the accounts. When the revised statement of accounts was resubmitted to the auditors for their initial/ signatures, the question of re-audit would not arise and they would verify whatever adjustments were made in the accounts and mentioned in their certificate the alterations made in the original audit statement of accounts. On 25-1-75, M/s. Rahim Jan & Company sent an amended balance-sheet bearing the dates 28-6- 74/25-1-74 wherein increased value of the assets by 50 lacs odd was shown on account of arithmetical mistake earlier made. Balance- sheet was resubmitted to the auditors M/s. Rahim Jan & Company excluding the re-valuation of the vessels, who verified the same and submitted the report on 14-2-1975. On 10-6-1975, M-/s. Ford, Rhodes, Robson & Morrow deter--mined the Net Worth Value as on 28-2-1973, but the report was not accepted by the Federal Government on the ground that it was too qualified and unworkable. On 26-12-1975, the Federal Government appointed M/s. Hyder Bhimjee & Company as new auditors to determine the Net Worth Value. The latter i.e. M/s. Hyder Bhimjee & Company submitted a report by which Net Worth Value was assessed at Rs. 24,32,279. After making the adjustment of the drawings made by the partners of the firm against their personal accounts during the year 1973-74 prior to take over of the management amounting to Rs. 24,46,677, a sum of Rs. 14,3 ,8 was found payable by the partners of the firm to the respondents. This is dated 18-21976. On 21-2-1976, in exercise of powers under section 5 (1) (c) of the Act, the Federal Government acquired the proprietary interests of the partners of the firm. On
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24-3-1976, the respon--dents were informed by the Federal Government about the report of M/s. Hyder Bhimjee & Company and called upon them to pay the aforesaid sum of Rs. 14,388. They made a representation on 2-4-1976 pointing out discre--pancies, asking for basis of disallowance of various items, for accounts etc. Interim reply was given on 5-5-1976 assuring consideration of points raised and further communication. Further clarification was made on 12-10-1976. Respondents continued writing and asked for profits, during the take over of the management up til acquisition of the proprietary rights. Representation was made on 19-9-1977 to the Secretary- General-in-Chief of the Government of Pakistan and orally to the Secretary, Communication, on 3- 12-1977. Final reply refusing documents and hearing, was sent to the respondents on 6-2-1978. Constitutional petition was filed on 1-3-1978. 3. The respondents challenged the action of taking over of the manage--ment of their establishment, its acquisition and the last mentioned communi--cation making inter alia grievances that the re-valuation of the two vessels had wrongly been excluded, that they Were not paid their share of the profits from the take-over of the management on 1-1-1974 to the date of acquisition of their proprietary interests on 2I-2-1976, even though they had been made to pay the tax for that profit by the Income-Tax Department, that a sum of Rs. 66,62,821.85 which stood to their credit on their current account on 31-12-1973, had not been paid to them, and that they had not been supplied the requisite documents nor afforded opportunity of hearing. The writ petition was accepted as mentioned above and the following decisions of the appellants were declared to be without lawful authority and, therefore, void ; "(1) The revision of the latest audit balance-sheet (1973) and the refusal to accept the re-valuation of the ships as carried out by the Company before the taking over of the establishment. (2) The decision to deduct a sum of Rs. 24,46,667 on account of drawings made by the partners from their personal accounts during the account--ing year 1973-74. (3) The decision refusing to make over the profits to the petitioners from the time of the take over upto the date of the acquisition of the proprietary interests. (4) The decision to refuse to supply the copies of all the documents asked for by the petitioners. (5) The decision not to re-imburse the petitioners in respect of the advance made by them to the firm and forming part of their current account with it." It was directed that the appellant shall determine the Net Worth Value of the establishment (of the respondents) on the basis of the latest annual Balance-- Sheet originally existing at the time of take over of the management without making any alterations in it. They shall reimburse the petitioners (now respon--dents) in respect of the advances made by them to the Company and referred to above. The respondents (appellants) shall furnish to the petitioners respondents) copies of all the documents claimed by them and pay to them e profit, if any, made by the respondents (appellants) from the establishment upto the time the assets were acquired". This judgment is under appeal. 4. The first argument raised by the appellants has been canvassed by the learned Advocate- General, Punjab appearing for the Federal Government and that is that the Lahore High Court had no jurisdiction to entertain the writ petition as the cause of action accrued at Karachi and all the parties excepting the Federation Government were residents of Karachi. He submitted that a High Court has the jurisdiction over its territorial limits and not beyond. He relied on The Superintendent, Land Customs, Torkham (Khyber Agency) v. Zewar Khan and 2 others (1), Maulvi Tamizuddin Khan v. Federation of Pakistan and others (2), The Collector of Central Excise & Land Customs West Zone, Chittagong v. Imdad All (3), Malik Ghulam Jdani v. The Government of Pakistan through the Secretary, Ministry of Interior, Islamabad and 3 others (4), Faiz Najmuddin Abdul Ali v. The Capital Development Authority, Rawalpindi and another (5). Anticipating the contention of the learned counsel for the respondents that the appellants had not raised the objection regarding the
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territorial jurisdiction of the Lahore High Court before the learned Chief Justice, the learned Advocate-General contended that submission to jurisdiction does not confer the jurisdiction if the Court or Tribunal does not have it otherwise. He relied on Muhammad Afzal v. Board of Revenue, West Pakistan and another (6), Khair-ud-Din v. Abdul Hamid and others (7), Ahmad and 32 others v. Additional Commissioner (Revenue), Lahore Division Lahore and another (8) and Wall Dad v. Deputy Commissioner, Karachi and 2 others (9). 5. Learned counsel appearing for the respondents submitted that the question of lack of jurisdiction of the Lahore High Court was not rightly raised before the learned Chief Justice and it is an afterthought. He submitted that it is established law that a matter can be brought before a Court within whose jurisdiction cause of action arises or the defendant resides. Learned counsel contended that cause of action arose to the respondents when the Federal Government commenced action and passed orders ir-elating to the respondents' establishment. These acts happened within the territorial jurisdiction of the Lahore High Court. Secondly, the principal defendant on whose motion actions were taken and who is responsible for payment of compensation etc. Under the relevant law is the Federal Government and it has its seat within the territorial jurisdiction of the Lahore High Court. Therefore, the latter had the jurisdiction to entertain and determine the dispute. (1) P L .D 1; 69 SC 485 (2) PLD 1955 Sind 96 (3) 1969 SCMR 708 (4) PLD 1976 Lah. 38 (5) PLD 1976 Kar. 1084 (6) PLD 1967 SC 314 (7) PLD 1966 Lah. 362 (8) PLD 1971 Lah. 979 (9) PLD 1975 Kar. 202 6. We have given considerable thought to the question regarding the territorial jurisdiction of the Lahore High Court to entertain the dispute and decide the writ petition. There is no cavil with the propositions enunciated in the cases cited by the learned Advocate-General. However, facts in the case in hand are different. Here there are other principles of fundamental importance which attract attention. First, we were very conscious of the fact that if the High Court where the respondents' establishment was located and where its Management and later on proprietary interests were taken over, were to have the exclusive jurisdiction in the matter, the other High Court in the Federation would not like to assume jurisdiction. A Federal Constitution is very delicate document requiring careful construction. Its interpretation in one Federating ,Unit should not be such that it may be taken in another Federating Unit as trenching upon the latter's rights and jurisdiction. Second, a High Court is a creation of an organic instrument, the Constitution, which operates over all the component parts of the Federa--tion and has its sway over all the territories of the Federation. Jurisdiction of a Constitutional body cannot be construed too narrowly. Nor, its authority whittled down by technical or artificial reasons. Third, a High Court is a Court of Record and is presumed to be possessed of jurisdiction. Unless it is shown to be ousted by express legislative instrument, it cannot be avoided. On facts, the appellants did not question the jurisdiction of the Lahore High Court to entertain and determine the writ petition. Having lost the game, it is neither permissible, nor, befitting the appellants, to raise this plea in appeal. Moreover, it is truism that jurisdiction of a Court extends to where cause of action arises. Cruse of action does not necessary arise, nor, is confined to, where its consequences ensue. It also arises where it is initiated or commenced. In the present case, the cause of action are at the seat of the Federal Government where on its authority and motion, actions were initiated to take over the Management and later on the proprietary interests of the respondents. Moreover, the cause of action concluded when the Federal Government called upon the respondents to pay Rs. 14,388. It is the Federal Government who is liable under the law t pay the compensation etc., if admissible otherwise. Further, under Article 3 of the High Courts (Establishment) Order, 1970. President's Order
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No. 8 of 1970, the Lahore High Court has the jurisdiction over the Province o Punjab and the Islamabad Capital territory. Under Article 199 of the Constitution, 1973, a High Court has jurisdiction of (a) "directing a person, performing within the territorial jurisdiction of the Court, functions in connection with the affairs of the Federation . . . To refrain from doing anything he is not permitted by law to do, or to do anything he is required by law to do ; or (b) declaring that anything done or proceedings taken within the territorial jurisdiction of the Court by a person performing functions in connection . With the affairs of the Federation . . . Has been done or taken without lawful authority and is of legal effect". Under sub---Article (9) it is provided that "in this Article, unless the context otherwise requires,-"person" includes any body politic or corporate, any authority or, or under the control of the Federal Government. . ". Therefore, the actions taken and orders passed impugned in the petition, by person and authorities of and under the control of the Federal Government, were amenable under Article 3 of the President's Order No. 8 of 1970 read with' the Constitution to examination, in exercise of Constitutional jurisdiction by the Lahore High Court. Therefore, the contention on the point is without force. 7. Some aspects of the case referred to which though do not concern the crucial controversy may be dealt with. It was said that the last impugned order was passed on 24---3-1976-but the Constitutional petition was not filed until 1-3-1978 and, therefore, it suffered from laches, is insubstantial as representations of the respondents were being considered. His effects to have the documents and hearing finally failed when he was informed on 6-2-1978. Therefore, there was no delay when petition was filed on 1-3-1978. Second, that the relevant- balance-sheet for the year- 1972-73 audited by Rahim Jan & -Co. Showing re-valuation of the two vessels, was prepared on 28- 6-1974 when the respondent No. 1 was the Chairman of the National Shipping Corporation since 20-2-1974. It ME been replied in the counter-- affidavit that the allegation is false and mala fide. The re-valuation had taken place before taking over of the management on 1-1-1974 and although the firm owed large sums of money to the respondents yet the respondent No. 1, who was senior partner, had in his possession fixed deposit receipts in the sum of about 29 lacs which he scrupulously returned to the Govern--ment after take over instead of adjusting them against the advances. Further that during his tenure the Board made a profit of about two crores whereas thereafter it went down to about forty thousand only. The respondent No. 1 had been appointed as Chairman by the Federal Government --obviously for his capability and integrity. The innuendo in the argument is baseless, afterthought and inconsequential for decision of the controversy on the point as will be seen subsequently at proper place. It is highly undesirable to hit below the belt when the other is in stocks and extremely noxious to attack personal character and integrity wantonly. 8. For consideration of crucial points of controversy, the learned counsel for the appellants Mr. Iqbal Ahmad Qazi, Advocate read the following sections of Pakistan Maritime Shipping (Regulation and Control) Act, 1974 in support of his submissions on the merits of the case :- "Section 3. Declaration.-It is hereby declared that the industry shall be carried ,. On .And owned by the Federal Government . ,or by a Corporation' controlled by it, to the exclusion of all other persons, except a foreign investor. Section 5. Power to. Take over management or acquire shares or business of an establishment.(1) The Federal Government may, if it considers necessary in the public interest so to do, by an order in writing- (a) take over the management of any establishment and, as from the date of such order, the previous management shall stand divested of such management ; (b) . , . . ,---------------.. (c) in the case of an establishment owned by a person, acquire the whole pr a portion of the proprietary interests of such person, and as from the date of the order the interests so acquired
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shall vest in the Federal Government. Provided that no order shall be made under this section for the acquisition by the shares held in an establishment by an institution owned or controlled by the Federal Government, including the National Investment Trust and the Investment Corporation of Pakistan or the shares held by a foreign investor Provided further that in the case of an establishment which is a company or an establishment owned by a company, the Federal Government may, by notification in the official Gazette, exempt from acquisition share-holdings of any share-holder up to such maximum amount as may be specified in the notification. Section 6.. Appointment of Managing Directors.-(1) Where the Federal Government has made an order under section 5 in respect of an establishment, it may appoint a Managing Director in respect of such establishment. (2) Upon the appointment of a Managing Director in respect of an establishment, the administration and management of the affairs of the establishment shall vest in the Managing Director, and any company or person or authority exercising or having the. Right to exercise, immediately before such appointment, any power or function in relation to the establishment shall cease to exercise or to have the right to exercise such power or function. Section 7. Board of Management.-(1) The Federal Government may, by notification in the official Gazette, set up a Board of Management to control, manage and direct the affairs of establishments in respect of which Managing Directors have been appointed and, where it sets up more than one Board shall specify in the notification the establish--ment or class of establishments in respect of which each Board shall exercise its powers and perform its functions under this Act. (2) A Board shall consist of a Chairman and such number of members. Not exceeding nine, as the Federal Government may appoint. Section 11. Adoption of balance-sheet.-In the case of a managed establishment owned or controlled by a company, the general meeting of the company before which a balance-sheet is laid shall not, if the Federal Government by order in writing so directs, have the authority to refuse to adopt the balance-sheet, but nothing in this section shall be construed to prevent any share- holder from expressing his views on the financial affairs of the establishment and a record of the proceedings of such meeting shall be forwarded to the. Federal Govern--ment not later than fifteen days of the meeting. Section 14. Acquisition of shares.-Where, under section 5, the Federal Government orders acquisition of the whole or a portion of the shares of the share-holders of any company or of the proprietary interests of a company or other person in an establishment it shall acquire the shares or interests within a period of ninety days on payment of such compensation as- may be determined by the Federal Government on the basis of the principles set out in the Schedule. Section 19. Creditor.-(1) A creditor of a managed establishment may apply to the Federal Government for payment to him of the amount due to him from the establishment. (2) The Federal Government may, on receipt of an application under subsection (1) and after such enquiry as it may deem fit, direct the managed establishment- (a) to repay the amount. Due to the creditor in such instalments and within such period as may be specified in the direction ; or (b) if such managed establishment be a company, to convert the amount due to the creditor into share capital of the establishment. (3), If a managed establishment fails to comply with a direction issued to it under subsection (2), the Federal Government may order that the amount specified in the direction be recovered from it as an arrear of land revenue and paid to the creditor.
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Section 26. Minimum return.-(1) Where the Federal Government takes over the management of an establishment but does not hold majority portion of shares in a company carrying voting rights, or controlling proprietary interests, therein; it shall, on behalf of such establishment, guarantee to the shareholders or proprietors of such establishment, a minimum annual rate of return equivalent to one per cent above the bank rate. (2) The minimum rate of return referred to in subsection (1) shall be worked out, in the case of an establishment which is a company or is owned by a company, on the paid up capital of such company, and, in the case of an establishment owned by a person other than a company, on the Net Worth Value of investment as defined in the Schedule on the basis of the figure appearing in the latest annual balance-sheet: of such establishment. The Schedule Principles and the manner for payment of compensation in respect of the shares or proprietary interests of an establishment acquired by the Federal Government. 2. Where the whole or a portion of the proprietary interests in such an establishment is. Acquired by the Federal Government, the value of the compensation for the interests so acquired shall be assessed at the Net Worth Value. 3---------------------.. 4. Definitions.-In this Schedule,- (a) . ------------------------.. (b) "Net Worth Value" shall mean the value of the proprietary interests of a company or other person in an establishment, which is acquired under the Order, as determined by the auditors appointed by the Federal Government on the basis of the latest annual audited Balance --Sheet or, where no…
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