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Petitioner: Messrs Mandviwalla Builders And Developers and another VS Respondent: M. Awais JUDGMENT
Court Name: Lahore High Court Judge(s): Jawad Hassan Title:Messrs Mandviwalla Builders And Developers and another vs M. Awais
JUDGMENT
Reported As: 2023 CLD 885 Result: Application allowed Judgment JUDGMENT "Jurisdiction is not given for the sake of the judge, but for that of litigant" (Blaise Pascal, French Philosopher) JAWAD HASSAN, J. By way of this application (C.M. No.03 of 2023) in terms of section 5 of the Companies Act, 2017 (the "Act") read with Order VII, Rule 10 of the Code of Civil Procedure, 1908 (the "C.P.C."), the Applicant made following prayer: "Under the circumstances, it is therefore most respectfully prayed that the titled C.O. No. 11/2022 may very graciously be struck off the register of this Bench and returned to the Applicants. It is further prayed that the Applicants may please be burdened with heavy costs for furnishing incorrect, misleading and misconceived information to this Honorable Court and thereby procuring the interim order dated 12.12.2022 from this Court and circulating the same without permission from this Honourable Court." 2. On 23.01.2023, the Applicants/Respondents filed captioned application raising objection qua the maintainability of the main petition on the ground of lack of territorial jurisdiction of this Court. Learned counsel for the Applicants/Respondents Mangla View Resort (Pvt.) Limited and Mangla Garrison Housing (Pvt.) Limited has filed application to return the titled Civil Original filed under section 286 of the Companies Act, 2017 on the basis that registered office of the Respondent No.1 is situated at Lahore as evident from Annex-A of this petition. I. PRELUDE OF THE APPLICATION RAISING OBJECTION AGAINST TERRITORIAL JURISDICTION:
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3. While deciding application, the Court will dilate upon and interpret, at first instance, section 5(1) and section 5(4) of the "Act" in connection with status of a registered office of the company for the purpose of ascertaining jurisdiction by this Court, that too, keeping in view the legal track, process, procedure, limits and aim, object and purpose envisaged in the provisions of the "Act", repealed Companies Ordinance, 1984 (the "Repealed Ordinance"), the Companies' (Court) Rules, 1997, The High Courts (Establishment) Order (Punjab Amendment) Ordinance, 1981 (Pb Ord. I of 1981) (the "Amendment Ordinance") and the Rules and Orders of Lahore High Court Volume V (the "Rules"). Since the petition under Section 286 of the Companies Act, 2017 (the "Act") has to be decided by this Court in the light of recent judgment passed by this Court in "Nadeem Kiani v. Ms. American Lycetuff Pvt. Limited and others" (2021 CLD 7) but once the application on territorial jurisdiction has filed, the Court has to decide that first. II. OVERTURE TO THE FACTS OF THE CASE 4. Brief facts of the main case are that Petitioner No.1/M/s Mandviwalla Builders and Developers (the "Petitioner No.1") Tariq Mehmood is a shareholder of Petitioner No.2/Mangla View Resort Pvt. Ltd. (the "Petitioner Company") i.e. a Special Private Limited Company registered with the Respondent No.4 Securities and Exchange Commission of Pakistan (the "SECP") for the purpose of designing, construction, development, marketing and selling the housing project on the land comprising 324 acres situated 7-Kilometer, Mangla Gadari Road. Mangla Cantt including allowable covered area, retail component (without circulation), retail circulation, residential component, office component, amenity/recreational, parking (1000 cars), service/misc. area/lobbies, external development and total built-up-area (the "Project Land"). It is noted that Tariq Mehmood is also the shareholder in Petitioner No.2 Mangla View Resort (Pvt.) Limited. In order to protect the rights of the parties, a joint venture agreement (the "JVA") dated 16.02.2015 was executed between the "Petitioner No.1" and the "Petitioner Company" with an authorized capital of Rs.150,000,000/- setting up other commitments and business plan. The "Petitioner No.1" and Respondent No.1 have equal shares of 50% in the "Petitioner Company". It is mentioned down in contents of main petition that the "JVA" was mutually terminated in accordance with clause 11 thereof, in relation whereto, another joint venture agreement dated 10.01.2018 (the "termination agreement") was also executed amongst the "Petitioner No.1", the "Petitioner Company", Respondent No.1 and Respondent No.3, wherein M/S Harley Willington (Pvt.) Limited (HW) (the "third party") expressed its willingness to undertake the objectives of the above project and to settle all claims of the "Petitioner No.1" in the "project land", in the event whereof, the "third party" issued seven cheques worth Rs.125 Million drawn on Soneri Bank Ltd. for the purpose of full and final settlement of the claims of the "Petitioner No.1"; however, only two cheques worth Rs.60 Million could be encashed as rest ones had bounced back with note of bank concerned that the "third party" had stopped payment and such act of the "third party" was in connivance with the Respondent No.1. It is further averred by the Petitioners that, after bouncing of cheques referred above, criminal cases were got registered as well as summary suit for recovery of amount was instituted under Order XXXVII of the "C.P.C." by the "Petitioner No.1" before Sindh High Court, Karachi. However, on basis of later patched compromise, further 20 Million PKR were paid to the "Petitioner No.1" by the "third party", but due to its fault in payment of remaining agreed amount, the matter has not finally been settled. The Petitioners contended further that the Respondent No.1 though is Chief Executive Officer (CEO) and Director of the "Petitioner Company" beside lessee of the "project land", but he has now established the Respondent No.2/M/s. Mangla Garrison Housing Private Limited (the "Respondent/ Company"), that too, without informing the Petitioners and is shifting the entire capital of the "Petitioner Company" to the "Respondent Company", which act is beyond the terms of the "JVA" and is in violation of the relevant Article of Association (the "AOA") and Memorandum of Association (the "MOA"), in derogation of law envisaged in the "Act" as well as is in conflict to his fiduciary duties as
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being CEO and Director of the "Petitioner Company". It is further agitated that the "Respondent Company' fraudulently and with mutual connivance of the "Respondent No.1", has started illegal construction and development work on the "project land" without Petitioners' permission and inviting them in the board's meetings again in blatant violation of the "AOA" and the "MOA". Hence, the Petitioners have approached this Court seeking interference to prevent injustice and also to cure the mismanagement on part of the "Respondent No.1". III. APPLICANTS/RESPONDENT'S SUBMISSIONS: 5. Syed Ijaz Ali Akbar Sabzwari, ASC for the Applicants/ Respondents Nos. 1 and 2 inter alia submitted that as per section 5 of the "Act" the Civil Original petition can be filed/entertained at the place at which the registered office of the "Respondent Company" is situated/located and, as per Form-A, admittedly the "Registered Office" of the "Petitioner Company" is located at "Office No. 04, Ground Floor, Avais Chamber, I/C-5, Sikandar Malhi Road, Gulberg-II, Lahore"; that while filing this Civil Original, the Petitioners have malafidely concealed material facts of the case with intent and design to mislead this Court by way of banking upon misstated, incorrect and distorted facts in connection with the Registered Office of the "Petitioner Company"; that this Court is not seized with the territorial jurisdiction over the issue in controversy and the orders/directions rendered by this Court ultimately would be "void ab-initio" and "Qoram Non Judice" as well as of no legal consequences; that the main C.O on behalf of the Petitioners/ Respondents is blended with fraud and misrepresentation, wherein they have secured interim restraining order from this Court and, without permission of the court, went on to publicize said order in media as well as widely circulated letters in connection thereto amongst the peers of applicants/Respondents thereby causing great deal of damage and loss to the business of the applicants/Respondents. Syed ljaz Ali Akbar Sabzwari, ASC for Applicants/Respondents concluded stressing hard that this Court lacks jurisdiction to entertain this matter and he prayed that the main C.O may be struck off the Register of this Bench and may be returned to the Petitioners/Respondents alongwith imposing heavy costs upon them for furnishing incorrect, misleading and misconceived information before this Court. In support of his contentions, he has relied upon the judgments of this Court reported as "Province of Punjab through Secretary to Government of Punjab, Communication and Works Department, Lahore and another v. Messrs Muhammad Tufail and Company through Muhammad Tufail (deceased) through Legal Heirs (PLD 2017 SC 53), "Messrs Jet Green (Pvt.) Limited v. Federation of Pakistan and others" (PLD 2021 Lahore 770) and "Zafar Iqbal and 3 others v. Nasreen Ahmed and 8 others" (2014 CLD 1039). IV RESPONDENTS/PETITIONERS' SUBMISSIONS: 6. Mr. Mohsin Kamal, Advocate for the Petitioners/Respondents inter alia argued that challenged activities of the Respondent No.1 and the "Respondent Company" are illegal, unlawful, unjust and against all norms of natural justice, fairness and equity; that the actions of the Respondent No.1 and the "Respondent Company" are in absolute disregard to the "JVA", the "AOA" and the "MOA" of the "Petitioner Company" requiring the notices of every meeting of the Board of Directors to be transmitted in advance and in writing whilst affording with reasonable time and disclosing the nature of business to be transacted in intended meeting; that the "AOA" and the "MOA" further required the whole business and affairs of the "Petitioner Company" to be subject to control and supervision of the Board of Directors as well as managed and controlled by CEO, which obligations contained in the "AOA" and the "MOA" were not honored by Respondent No.1 and the "Respondent Company"; that the Respondent No.1 got incorporated the "Respondent Company" in direct conflict with legally recognized interests of the Petitioners; that the act of the Respondent No.1 for collecting undue gains by way of transferring shares of the "Petitioner Company" to the "Respondent Company" without approval of Board meeting of the "Petitioner Company", is in clear violation of section 204 of the "Act"; that if any Director was directly or indirectly interested in any contract or
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arrangement entered into by the relevant company, he would be required to disclose the same in a meeting of the Directors, but the Respondent No.1 has failed to perform his duties in accordance with mandate provided by law; that section 208 of the "Act" envisages that a company may enter into any contract or arrangement with a related party only in accordance with the policy approved by the board, but the Respondent No.1, despite of being CEO of the "Petitioner Company", incorporated the "Respondent Company" without requisite approval by the board and transferred shares of the "Petitioner Company" to the "Respondent Company" setting forth illegal constructions and developments over the "project land"; that the conduct of Respondent No.1 and the "Respondent Company" are oppressive in nature towards the "Petitioner No.1" as well as members and creditors of the "Respondent Company"; that impugned acts of the Respondent No. 1 and the "Respondent Company" are fraudulent, deceptive, illegal and without fulfillment of statutory/legal requirements contemplated in law, in result whereof, the "Petitioner Company" had not been run in proper manner and has been forced to undergo heavy financial loses necessitating it's winding up; that legal notice transmitted by the "Petitioner No.1" with regard to above mentioned mal-handling at the hands of the Respondent No.1 and the "Respondent Company" was not responded/replied as well; that attending circumstances indicated surely qualify to agitate matter before court seeking the required investigation and ultimate desired protection of rights of the Petitioner Company and it's members, which relief is aimed at to avoid further irreparable loss. To support his said submissions, learned counsel for the Petitioners/Respondents has relied upon pronouncements in cases titled "Brother Steel Mills Ltd. and others v. Mian Ilyas Miraj and 14 others" (PLD 1996 Supreme Court 543), "Chairman Board of Directors, Jubilee Life Insurance Company Limited: In the matter of Show Cause Notice (2016 CLD 17), Registrar of Companies v. Pakistan Industrial And Commercial Leasing Limited and 30 others" (2005 CLD 463). 7. In connection with in hand Application (C.M. No. 03 of 2023), learned counsel for the Petitioners/Respondents has vehemently raised objection qua its maintainability by stating that all the relevant documents including tax returns, letter heads, etc. and JVA dated 16.02.2015, the address of the office of the "Petitioner Company" is shown as "at 7-Kilometer, Mangla Gadari Road, Mangla Cantt". He added that the "project land" exists in Mangla, which falls within the territorial jurisdiction of this Bench i.e. Rawalpindi Bench. He added that all the business activities are being conducted within the area of Rawalpindi, therefore, this Court is competent to entertain the civil original. V. SECP'S SUBMISSIONS: 8. Mr. Muzaffar Ahmed Mirza, Chief Prosecutor, Executive Director, Legal Affairs, SECP assisted by Syeda Muneeza Fatima, Special Public Prosecutor, in support of the para-wise comments filed on behalf of SECP, submit that the "Petitioner Company" was incorporated on June 25, 2004 having Corporate Universal Identification No.0047808 with authorized and paid up share capital of Rs.150 Million and Rs.120 Million respectively divided into 15 Million and 12 Million shares of Rs.10/- each; that the "Petitioner Company" was incorporated with main object to acquire by purchase or otherwise lands to develop them in plots for sale, to establish upon them housing estates or to construct houses, golf courses, community buildings, flats and apartments etc. It is added that the "Respondent Company" was incorporated on November 30, 2018 having corporate Universal Identification No.0126883 with the registered office address as 98-D, 5th Floor, Commercial Broadway, DHA Phase 8, Lahore; that the authorized and paid up capital of the "Respondent Company" is Rs.9 Million and Rs.9,00,000/- respectively divided into 9,00,000 and 90,000 shares of Rs.10 each; that the principal line of business of the "Respondent Company" is to lay out, construct, build, erect, demolish, alter, re-model or to do any work in connection with any infrastructure including apartments, homes, plazas etc. In addition to disclosure of said formal facts, objection raised by the Applicants/Respondents regarding jurisdiction of this Court is also supported on
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behalf of SECP with submission that registered office of the "Petitioner Company" is situated at Office No.4, Ground Floor, Avais Chambers, 1/C-5, Sikandar Malhi Road, Gulberg II, Lahore as had been notified vide Form No. 21 dated 14.11.2014 therefore; this C.O is not maintainable before this Bench at Rawalpindi in terms of section 5(1) of the "Act". Mr. Muzaffar Ahmed Mirza, Chief Prosecutor, Executive Director, Legal Affairs, SECP assisted by Syeda Muneeza Fatima, Special Public Prosecutor have relied upon pronouncements in cases titled "Iftikhar Hussain and others v. Dadex Enternit and others" (2002 CLD 575), "Zafar Iqbal and 3 others v. Nasreen Ahmed and 8 others" (2014 CLD 1039), "Province of Punjab through Secretary to Government of Punjab, Communication and Works Department, Lahore and another v. Messrs Muhammad Tufail and Company through Muhammad Tufail (deceased) through legal heirs" (PLD 2017 SC 53) and "Chief Executive Officer, Peshawar Electric and Power Company (PEPCO) v. Sajeeda Begum" (2022 SCMR 2058). VI. DETERMINATION BY THE COURT i. Prime desire of law to first cross barrier of question/objection of jurisdiction: 9. Part H of the "Act" deals with jurisdiction of the Court and section 5 of the "Act", starts with the Court having jurisdiction under this Act shall be the High Court having jurisdiction in the place at which the registered office of the company is situated. Hence, the issue revolves around the point whether this Court at Rawalpindi Bench has the jurisdiction to entertain the titled Civil Original under the "Act". The capacity of the Court to take account of any dispute submitted to it is called jurisdiction. Thus, without a specific jurisdiction, the Court will not possess the prowess to decide on a particular dispute. In company law matters, litigants before proceeding with their claim face with one most common question, sometimes perplexing, as to which Court shall have the territorial jurisdiction to hear and finally adjudicate the dispute. section 5 of the "Act" deals with jurisdiction of the Court and the law contained in Constitution and relevant statutes civil and criminal code and statues on various subject matters clearly provide and demarcate jurisdiction of the Courts but in spite of the same, the common issue that often arises before the Court is with regard to territorial jurisdiction of the Courts. Jurisdiction of Court refers to power of the Court to deal with the matter and render a decision for its resolution. Jurisdiction of every court is on three counts i.e. Subject matter, Pecuniary and Territorial. Territorial jurisdiction refers to power of the court to inquire and proceed with the trial of matter that is presented before it. The issue of territorial jurisdiction of this Court under the "Repealed Ordinance" was being determined in terms of section 7 of the "Repealed Ordinance" keeping in consideration location of the registered office of the Company, which provision has been kept intact in section 5 of the "Act". Thus, location of registered office of a company carries pivotal role and status while determining territorial jurisdiction of the Court dealing with company matters. This Court in the case of "Iftikhar Hussain and others v. Dadex Enternit and others" (2002 CLD 575) and Peshawar High Court in "PHOENIX Security Service (Pvt.) Ltd. through Director Commercial v. Messrs Emerald Mining Company (Pvt.) Ltd." (PLD 2000 Peshawar 78) have also dealt with the same issue by holding that the Court having jurisdiction under the "Repealed Ordinance" shall be the High Court having jurisdiction in the place at which registered office of the Company is situated. 10. It is by now a settled law that if a mandatory condition for the exercise of a jurisdiction before a Court, tribunal or authority is not fulfilled, then the entire following proceedings become illegal and suffer from want of jurisdiction. So, there rests no room for stepping ahead with in hand Civil Original without first attending to and adjudicating upon question of jurisdiction as has been held by the Supreme Court of Pakistan in case titled "Zahid Zaman Khan and others v. Khan Afsar and others" (PLD 2016 SC 409) that "the law enjoins a duty upon the Court to settle question about its jurisdiction first because subject to certain exceptions, any decision rendered by the court having no jurisdiction stands vitiated on that account alone". In "Government of Sindh through Secretary
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Education and Literacy Department and others v. Nizakat Ali and others" (2011 SCMR 592) it has been held that "every Court prior to taking cognizance and adjudicating upon an issue should first resort to the question of assumption of its jurisdiction and if it comes to the conclusion that jurisdiction can be assumed only then the issue can be adjudicated upon". Further, it is held in case titled "Pakistan Red Crescent Society, Punjab Provincial Branch v. Zia Ullah Khan Niazi" (2011 PLC (C.S.) 1640) it has been held that "The tenor of the afore-referred order passed by this Court indicates that the Tribunal had to decide the appeal afresh and "in accordance with law". The law includes the question of jurisdiction and the court ought to have decided the same in the first instance rather than relying on merely the remand order of this Court to assume jurisdiction". Moreover, esteemed guideline with regard to deciding question of jurisdiction at very outset of judicial proceedings is enumerated in case titled "Izhar Alam Farooqi, Advocate v. Sheikh Abdul Sattar Lasi and others" (2008 SCMR 240) reading that "notwithstanding the raising of such an objection by the parties, the forum taking cognizance of the matter must at the first instance decide the question of its jurisdiction. There can be no exception to the principle that an order passed or an act done by a Court or a tribunal not competent to entertain the proceedings is without jurisdiction and that it is mandatory for the Court or tribunal as the case may be to attend the question of jurisdiction at the commencement of the proceedings". It has also been held in case titled "Khyber Tractors (Pvt.) Ltd. through Manager v. Pakistan through Ministry or Finance, Revenue and Economic Affairs, Islamabad" (PLD 2005 SC 842) that "question of jurisdiction of a forum is always considered to be very important and any order passed by a Court or a forum, having no jurisdiction, even if is found to be correct on merits, is nor sustainable. The jurisdiction of a Court lays down a foundation stone for a judicial or quasi-judicial functionary to exercise its powers/authority and no sooner the question A of jurisdiction is determined in negative, the whole edifice, built on such defective proceedings, is hound to crumble down ...". (ii) Purpose/object of The Companies Act, 2017: 11. Returning to issue in the lis in hand, the Act was promulgated for facilitating corporatization and protecting interests of shareholders and it focuses on inculcating principles of good governance and safeguarding minority interests in corporate entities, being regulated by Board of Governors. Preamble of a Statue for sure signifies, confines and denotes aims it is destined for as has been held in case titled "Messrs Jet Green (Pvt.) Limited Versus Federation of Pakistan and others" (PLD 2021 Lahore 770) reading as follows: "7. ... The preamble to a statute is though not an operational part of the enactment but it is a gateway, which opens before us the purpose and intent of the legislature, which necessitated the legislation on the subject and also sheds clear light on the goals which the legislator aimed to secure through the introduction of such law. The preamble of a statute, therefore holds a pivotal role for the purposes of interpretation in order to dissect the true purpose and intent of the law. ..." 12. Visiting preamble of the "Act" is abundantly clear when it is weighed on touchstone of above narrated esteemed observation. For ready reference, Preamble of the "Act" is reproduced as under: "WHEREAS it is expedient to reform company law with the objective of facilitating corporatization and promoting development of corporate sector, encouraging use of technology and electronic means in conduct of business and regulation thereof, regulating corporate entities for protecting interests of shareholders, creditors, other stakeholders and general public, inculcating principles of good governance and safeguarding minority interests in corporate entities and providing an alternate mechanism for expeditious resolution of corporate disputes and matters arising out of or connected therewith; (iii) Anatomy of Section 5 of The Companies Act, 2017 13. In relation to question of jurisdiction of this Court raised by Applicants/Respondents, the Court has to examine section 5 of the "Act", which mandates jurisdiction in a case to a High Court having
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jurisdiction in a place at which a "Registered Office" of the company is situated. For ready reference Section 5 ibid is reproduced as under: "5. Jurisdiction of the Court and creation of Benches:- (1) The Court having jurisdiction under this Act shall be the High Court having jurisdiction in the place at which the registered office of the company is situate. (2) Notwithstanding anything contained in any other law no civil court as provided in the Code of Civil Procedure, 1908 (Act V of 1908) or any other court shall have jurisdiction to entertain any suit or proceeding in respect of any matter which the Court is empowered to determine by or under this Act. (3) For the purposes of jurisdiction to wind up companies,- the expression "registered office" means the place which has longest been the registered office of the company during the one hundred and eighty days immediately…
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