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Official Citation: 2024 CLD 781
Court / Jurisdiction: Sindh High Court
Year of Decision: 2023
Decision Date: 2023-10-13
Parties: Mst. Bano Hasham and others vs New Jubilee Insurance Company Ltd.
Ruling Summary: This decision was rendered by the Sindh High Court on 2023-10-13, officially reported as 2024 CLD 781. In this matter between Mst. Bano Hasham and others and New Jubilee Insurance Company Ltd., the court adjudicated key questions of statutory construction, procedural regularity, and legal precedent under Pakistani law.
Core Holding: The honorable bench evaluated governing statutory provisions and judicial authorities to establish the rights of the parties, delivering the binding reasoning set out below.
Case cited as 2024 CLD 781
Court Name: Sindh High Court Judge(s): Jawad Akbar Sarwana Title: Mst. Bano Hasham and others vs New Jubilee Insurance Company Ltd. Case No.: Suit No.997 of 2007 Date of Judgment:2023-10-13 Reported As: 2023 SHC 812, 2024 CLD 781 Result: Order Accordingly
JUDGMENT
JUDGMENT Jawad Akbar Sarwana, J.: This dispute between the parties had its genesis 53 years ago. The first round of litigation began 45 years ago, in 1978 and ended on 20.12.2005, at the appellate stage, in favour of the now deceased Plaintiff, Hasham Allibhai, as an Intervenor (Defendant No.10)/Plaintiff/Respondent, acquiring 92,800 shares of Defendant Company and bonus shares arising from the said initial shareholding as well as dividends accrued thereon. The current suit is the second round of litigation, which began in June 2007. In the second round (current litigation), Plaintiff has alleged that Defendant Company deprived him of the markup and profit earned on the unpaid dividends retained by the Company from 1970 up to the date of filing of the Suit in July 2007 hence this Suit. The Plaintiff has prayed for the following reliefs: (i) Pass judgment and decree against the Defendant in a sum of Rs.334,689,495/- being the equalizer / interest on the dividend income retained by the Defendant as Plaintiff's trustee and utilized by the Defendant for its own financial needs; (ii) Award further interest on the suit amount at the rate of 14% per annum from the date of filing this suit till its disposal; and, (iii) Any further and better relief that this Hon'ble Court may deem just and necessary. (iv) Costs of the suit. 2. On 12.08.2010, Hasham Allibhai passed away. On 31.05.2011, the Plaintiff's legal heirs filed CMA No.7438/2011, attaching a copy of the amended title of the Plaint (available on page 25A of Part-III of the Suit file). Pursuant to the Court's Order dated 19.08.2013, Plaintiff's legal heirs, the surviving widow, Mst. Banoo Hasham and the deceased three sons, Shahid H. Allibhai, Zaki Alias Tariq H. Allibhai, and Arshad H. Allibhai, were brought on record. However, the Office (O.S.-II) did not place
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the Amended Title of the Plaint in its proper place in the suit file. For convenience, reference in this Judgment to the Plaintiff and/or to his legal heirs shall be made by reference to the Plaintiff, simpliciter, or in the alternative Hasham Allibhai. 3. The brief facts of the case are that Plaintiff, in the early seventies, through his friend, Late Aziz Fancy, purchased 92,800 shares of Defendant Company. Of these 92,800 shares, 22,000 were purchased from Jubilee Insurance Kenya, a company incorporated in Kenya, and 70,800 shares from EWI International, a company incorporated in Switzerland. The 22,000 shares were purchased directly from the Kenyan Company and 70,800 shares were purchased through Plaintiff's above- mentioned friend, Late Aziz Fancy. Both these sets of shares were kept with Aziz Fancy as he was to facilitate their transfer in Plaintiff's name in the records of the Defendant Company. While the shares in question were still lying in trust with Aziz Fancy, he suddenly died in the year 1973. Thereafter, the shares fell into the hands of one Naushad Fancy, the nephew of Late Aziz Fancy. Through his bankers, Naushad Fancy lodged these shares for transfer, but the Defendant Company refused to transfer the same. 4. In 1978, Naushad Fancy instituted in this Court Suit No.572/1978 seeking declaration and mandatory injunction in respect of the transfer of the 92,800 shares in his name (hereinafter referred to as the "disputed shares") against the Defendant Company and others. On 26.07.1978, this Court passed ex-parte ad-interim Order on CMA No.2762/1978 whereby the Defendant Company was restrained from paying/disbursing/passing on dividend and interest thereon and any accrual thereafter on the disputed shares (Ex. No. "D/10"). When Plaintiff came to know of Suit No.572/1978 in the year 1984, he filed an application to become a party in the said suit as Defendant No.10, which application was allowed. 5. During the pendency of Naushad Fancy's Suit 572/1978, Plaintiff instituted Suit No.472/1993 seeking delivery and possession of the disputed shares from the Defendant Company. The Plaintiff prayed as follows in Suit No.472/1993: (i) A decree against all the defendants for delivery of possession of the said 92,800 shares and bonus shares declared in respect of the same; (ii) In the alternative decree directing Defendant No.1 to cancel scrips or certificates of said shares and to issue duplicate of the same in the name of Plaintiff; (iii) Mandatory injunction directing the Defendant No.1 to effect transfer and registration of the said 92,800 shares in the name of the Plaintiffs;; (iv) A decree against Defendant No.1 to render complete account of bonus vouchers and dividends declared in respect of the 92,800 shares since 1970 and to delivery/pay the same to Plaintiff; (v) A decree for delivery by Defendant No.1 of 21,33,965 Bonus Shares issued in tespect of the said 92,800 shared since 1970; (vi) A decree for payment by Defendant No.1 of Rs,1,19,54,208/- on account of dividends accrued on 92,800 shares; (vii) In the alternative a decree for Rs.8,09,83,923 against Defendant Nos.1 &3 jointly and severally, with interest/markup at 22% per annum from date of suit till payment; (viii) Costs of the suit; (ix) Give and grant such other or further relief or reliefs as may be deemed fit and proper in the facts and circumstances of the case." 6. As the title/ownership in the disputed shares were the subject matter in both Suit No.572/1978 and Suit No.472/1993, this Court, on 06.12.1995, stayed proceedings in Suit 472/1993. Ultimately, the two Suits were decided together vide Judgment and Decree dated 07.08.2003 (Ex. Nos."P/2" and "P/3"). The Court declared that Plaintiff was entitled to the transfer in his favor of the said disputed shares, i.e. 92,800 shares of New Jubilee Insurance Co. Ltd., together with all accruing benefits, dividends, etc., disbursed by Defendant No.1 for the entire period since 1970.
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7. Plaintiff Hasham Allibhai accepted the Judgment and Decree.He did not prefer any appeal against the said Judgment and Decree dated 07.08.2003. He appeared to accept the Judgment and Decree dated 07.08.2003 when he did not file any appeal. 8. On the other hand, Naushad Shamsuddin Fancy, preferred High Court Appeal No.183/2003 against the said Judgment and Decree dated 07.08.2003 against Plaintiff (Respondent No.1), the Defendant Company (Respondent No.2) and others. Other members of the Fancy family also filed appeals. Unlike the Plaintiff who did not file any appeal, all the members of the Fancy family were unhappy with the Judgment and Decree passed by the trial court and filed appeals. 9. On 19.12.2005, the Appellant and Respondent Nos.1, 5 and 6 in person and their Advocates signed and filed CMA No.1912/2005 under Order 23 Rule 3 CPC read with Section 151 CPC. Respondent No.2 (the Defendant Company) did not sign the said CMA No.1912/2005. The relevant paragraphs of CMA No.1912/2005 (Ex. No."D/8" on pages 517 to 529 of the evidence file) concerning references to Defendant (Respondent No.2) are reproduced herein below: "3. (a) The Respondent No.2 be directed to transfer all the aforesaid shares above with bonus shares/dividends and ash dividends specified in paragraph 5(b) to the parties in the proportion specified herein above against their respective names mentioned at paragraph 2(a) to (d) above within 60 days of the date of orders on this application. Such transfer of shares should be inclusive of all bonus shares and dividends upto date. 3 (b) Nothing stated herein shall preclude the parties from claiming interest on the accrued and outstanding cash dividends from New Jubilee Insurance Company Ltd. if they are entitled to the same under law. Any action for recovery of interest shall be at their respective cost and expenses. . . . 5. (c) Respondent No.2 New Jubiless Insurance Company Ltd. be directed to comply with the paragraphs 2, 3, 4 and 5 of this compromise application under intimation to this Hon'ble Court." 10. As mentioned earlier, Defendant (Respondent No.2) was not a signatory to CMA No.1912/2005. Defendant (Respondent No.2) did not accept the compromise agreement and filed a Statement dated 19.11.2005 through their counsel, Mr. Badar Vellani in HCA No.183/2003 (Ex. No."D/9"). Clauses 2(e) and 4 of the said Statement read as follows: "2. While the Respondent No.2 is ready to abide by any directions given by this Hon'ble Court in regard to the registration of the disputed shares in the names of the Appellant and the concerned Respondents, it is most respectfully submitted that in order for the Respondent No.2 to comply with such directions certain procedures and requirements of various applicable laws including the Companies Ordinance, 1984, the Foreign Exchange Regulation Act, 1947 and the Articles of Association of the Respondent No.2 would have to be complied with. In this connection, it is respectfully further submitted that: (a) . . . (b) . . . (c) .... (d) . . . (e) It is submitted that under the Articles of Association of the Respondent No.2 no interest may be claimed from the Respondent No.2 Company in respect of any unclaimed dividends and in the circumstances of the present case there is no basis for the payment of any such interest. It is also submitted that there is no basis for any interest being claimed from the Respondent No.2 in respect of dividends already paid out. It is respectfully submitted that the Respondent No.2 cannot and does not accept or agree with the provisions of paragraph 3(b) of the proposed compromise application. (f) . . . (g) . . .
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3.. . . 4. It is submitted that the Respondent No.2 is not a party to and will not become a party to the proposed compromise application nor is the Respondent No.2 in any position to accept the obligations which the Appellent and Respondent Nos. 1, 5 and 6 are attempting to thrust on the Respondent No.2. Further the Respondent No.2 denies that it is liable to pay any interest on any amount of dividend whether already paid or remaining to be paid with respect to the disputed shares or any part thereof. It is further submitted that the Respondent No.2 cannot accept any responsibility or liability in regard to the distribution of its shares and entitlements to bonus and dividend in respect of such shares amongst its shareholder or their heirs or the other parties to the appeals. Karachi dated this 20th day of December 2005 Advocate for the Respondent No.2." 11. On 20.12.2005, the Court took up CMA No.1912/2005 with Counsels for Appellant and Respondents present. Respondent No.2 Counsel, Mr. Badar Vellani, Advocate, was also present in Court on the said date of hearing. The learned Division Bench passed the Final Order on 20.12.2005 (Ex. No. "D/7"). A selection of relevant clauses from the Final Order of 20.12.2005 are reproduced below. Defendant No.1 in Suit No.572/1978 and Defendant No.3 in the Suit No.472/1993 held the original shares of New Jubiless Insurance Company in trust for the beneficiaries. The trustee company , in para 3 of the Written Statement had acknowledged the holding of such shares in trust subject to the decision of this Court. It is also admitted position that New Jubilee Insurance Company, is holding all the bonus shares and dividends declared on the original shares. . . .Likewise New Jubilee Insurance Company shall also hand over to the Nazir of this Court, all the bonus shares and dividends held by it. Let such exercise be carried out... . . . Mr. Badaruddin Vellani learned counsel appearing for respondent No.2 (New Jubilee Insurance Company) has filed a Statement to the effect that respondent No.2 is committed to honour the terms of the compromise. It is however, submitted that in order to avoid any controversy as to the availability/nonavailability of any party to the compromise to sign transfer deeds or like documents. Mr. Badar, further request that to facilitate New Jubilee Insurance Company to implement the negotiated settlement Nazir may be authorized to sign all the transfer deeds and/or any other transfer documents, acknowledgement and discharge for and on behalf of the respective parties to the extent and in the manner agreed in the compromise application. None of the parties have any objection to such request, order accordingly. In order to facilitate the implementation of the compromise by consent, learned Commissioner Mr, Justice (Rtd) G.H. Malik is authorized to convey the compromise executed by and between the parties to Nos.2 and 3 namely, New Jubilee Insurance Company Ltd. and M/s East West International Trade Establishment respectively. Learned Commissioner may direct them to transmit, convey, and surrender the original shares, bonus shares, dividend held by them respectively to the Nazir of this Court and to direct them to comply with the directions of this Court. . . . In view of the settlement arrived at between the parties and as recorded in the application under Order 23 Rule 3 CPC filed in High Court Appeals Nos.183 and 184 of 2003, H.C.A. No. 174, 175, 179. . .of 2003 [all] stand disposed off in terms of the compromise and decrees prepared accordingly. Sd.= Mushir Alam Judge Sd= S. Zawar Hussain Jafri Judge"
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12. Although the Final Order dated 20.12.2005 directed the office to prepare decrees in terms of the compromise, none were prepared. Nevertheless, the Commissioner and Nazir, acting upon the terms of the compromise agreement, paid out the dividend to the Plaintiff in terms of the compromise and did not make any payment of the profit accrued on unpaid dividends retained by the Defendant Company as the same was agreed by the parties to the suit to be agitated as a separate cause of action, in future, hence the present suit. 13. Defendant Company filed its Written Statement on 26.03.2008. Defendant claimed that Plaintiff became a shareholder of the Defendant Company with effect from 07.06.2007 when certain shares were registered in his name pursuant to the Order of this Court dated 20.12.2005 passed in the aforementioned High Court Appeal. The Defendant contended that it was not a party to the Compromise application and had recorded its objections to the compromise vide the Statement filed in Court. Defendant further contended that Defendant retained the bonus shares and dividends in compliance with the Order dated 26.07.1978 restraining Defendant from making any payments. The Defendant Company submitted that it withheld the payments as trustees for the persons who eventually would become the registered holders of the shares in dispute between the parties. Therefore, the Defendant Company was not liable for any payment due and payable during this period on account of the Court's Order. Defendant Company further submitted that Article 117 of the Articles of Association of the Defendant Company prohibited payment of interest on dividends. Defendant claimed that at all material times, Plaintiff knew that Defendant was not liable to and would not pay any interest on the unclaimed dividend, and this fact was accepted by Plaintiff when he consented to the order dated 20.12.2005. Defendant denied that it was obligated, required, or directed to invest the amount of unclaimed dividends which had accumulated in respect of Plaintiff's shares in the Defendant Company. 14. On 26.04.2008, the Defendant Company, filed an application under Order 7 Rule 11 CPC (CMA No.4052/2008), which remained pending in Court until 14.09.2015. On the said date, Defendant Counsel submitted that he did not press the said application as he intended to propose issues which may cover the grounds taken in the application under Order 7 Rule 11 CPC. 15. With the consent of the learned Counsels for the parties, the Court settled the following issues on 09.11.2015: (i) Whether this suit is maintainable? (ii) Is the Defendant liable to pay any interest on the dividends relating to the disputed shares? (iii) Whether the Defendant Company owed any fiduciary duty, or was required to exercise, any duty of care towards the Plaintiff as a trustee with regards to investing the amount of unclaimed dividends relating to the disputed shares? (iv) Whether the bonus shares and dividend accrued in respect of the Plaintiff's 92800 shares during the period from 1970 to 31.12.2005 can be termed as unclaimed bonus shares and dividend, if not, its effect. (v) What should the decree be? 16. On 06.10.2016, the Court appointed a Commissioner for Recording of Evidence. On 20.06.2017, Bano Hasham Allibhai, wife of Plaintiff (84 years old), appeared as a witness of the Plaintiff. She filed her affidavit-in-evidence and was cross-examined on 20.06.2017 and 21.06.2017. Plaintiff's witness exhibited the following documents: i. Ex. No."P/1". Affidavit in Evidence; ii. Ex. No."P/2". Amended Plaint in Suit No. 997 of 2007; iii. Ex. Nos."P/3" and "P/4". Judgment and Decree in Suit No. 572/1978 and Suit No.472/1993; iv. Ex. No."P/5". Statement filed by Defendant in Suit No. 572 / 1978 & Suit 472/1993; and v. Ex. No."P/6". Compromise Application along with order dated: 23.12.2005, passed in HCA Nos. 183 & 184/2003.
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17. Nawaid Jamal, Executive Vice President and attorney of the Defendant Company, filed his affidavit-in-evidence on 18.11.2017 and was cross-examined on 04.08.2018, 01.09.2018 and 10.09.2018. He exhibited the following documents: i. Affidavit in Evidence exhibited as Ex."D/1" ii. Power of Attorney exhibited (subject to original) as Ex."D/2" iii. Written Statement exhibited as Ex."D/3" iv. Memorandum and Articles of Association dated 16.05.1953 exhibited as Ex."D/4" v. Articles of Association dated 21.06.1986 exhibited as Ex."D/5" vi. Articles of Association dated 27.04.2007 exhibited as Ex."D/6" vii. Copy of the Order dated 20.12.2005 exhibited as Ex."D/7" viii. Copy of the Judgment passed in Suit No.572/78 & 472/93 exhibited as Ex."D/8" ix. Copy of the Statement filed in HCA No.183/03 exhibited as Ex."D/9" x. Copy of the Order dated 26.07.1978 passed in Suit No.572/78 exhibited as Ex."D/10" xi. Copy of an Article of Association (undated) exhibited as Annexure "X". 18. The Commissioner's Report dated 17.10.2018 was taken on record on 26.10.2018 and the suit became ripe for final arguments. 19. During arguments, learned counsel for Plaintiff submitted that Plaintiff's evidence was unshaken, as the witness had proved that during the pendency of the first round of litigation, which lasted about four decades, the Defendant Company had fully enjoyed the cash dividend, as per the Statement of Dividend accrued on the shares, produced by Plaintiff's Witness marked as Ex. No. "P/5" which was neither denied by Defendant in its Written Statement nor during Pliantiff's cross- examination. The Statement was unrebutted. He contended that once the amount mentioned in the statement became established, the Company was liable to pay interest on the profit on dividends retained by Defendant Company as a trustee, part of its fiduciary duty to Plaintiff, and on the basis of unjust enrichment. 20. The Defendant's Counsel opposed the Plaintiff's claim. He argued that Plaintiff's claim was hit by Order 2 Rule 2 CPC, and the entire suit was liable to be dismissed, which was not maintainable. He contended that no case for interest on dividends could be made out as the same was contrary to the provisions of the Company law, the charter documents of Defendant Company and no case for either a trust, fiduciary duty or unjust enrichment was made out by Plaintiff. He submitted that the suit should be dismissed and cited several authorities in support of his contentions. 21. I have heard the learned Counsels for parties, read the evidence available on the record, considered the applicable law, and my findings on the above issues, along with reasons, are as follows: REASONS Issue No.(i) 22. This issue as to the maintainability of the suit was vigorously argued by the Plaintiff's Counsel and was premised on the ground that the dispute between parties in the titled suit has its genesis in Suit No. 572 of 1978, which was filed by Mr. Naushad Fancy, inter alia, against Defendant. The claim in the suit was in relation to shares of the Defendant company, with Mr. Naushad Fancy claiming title to 92,800 disputed shares. 23. The present Plaintiff, Mr. Hasham Allibhai, was impleaded as a party in Suit No. 572 of 1978 in 1984.[1] Thereafter, Plaintiff filed a counter-suit, i.e. Suit No. 472 of 1993. Through Suit No.472 of 1993, Plaintiff alleged that the disputed shares (92,800) and dividends issued thereon belonged to him. The Plaintiff did not seek any interest on dividend in the said Suit. Paragraph 8 of the plaint in Suit No. 472 of 1993 specified the claim in respect of dividends on the disputed shares. It stated that the amount of dividends was Rs.11,954,208. The figure provided by Mr. Hasham Allibhai in Suit No.472 of 1993 in Paragraph 8 of the plaint in Prayer (vi) also sought:
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"(vi) A decree for payment by Defendant No.1 of Rs. 1,19,54,208 on account of dividends accrue on 92800 shares;" 24. As evidenced by the contents of the plaint, no relief was sought by Plaintiff against Defendant company in respect of any profit accumulating on unpaid dividends. Accordingly, the learned Single Judge did not grant any relief in relation to interest on unpaid dividends. By Judgment dated 07.08.2003, the learned Single Judge decreed Suit No.472 of 1993 in favour of Plaintiff in the following terms: "71. In view of my findings of the above Issues, I hold that defendant No. 10 is entitled to the transfer of the said disputed shares in his favour together with all accrued benefits, dividends, etc. disbursed by defendant no.1 for the entire period. Accordingly, Suit No. 572/78 is dismissed and Suit No.472/1993 is decreed in favour of the Plaintiff with cost." 25. Mr. Naushad Fancy filed HCA No. 183 of 2003 against Judgment dated 07.08.2003, whereas Plaintiff did not file any appeal. Thereafter, an application under Order XXIII Rule 3 was filed to give effect to a compromise entered between Mr. Naushad Fancy (Appellant), Mr. Hasham Allibhai (Respondent No.1), Mr. Ismat Fancy (Respondent No.5), and Mr. Shaukat Fancy (Respondent No.6). On 20.12.2005, parties accepted the compromise recorded by the Appellate Court in terms thereof. Whereas the Judgment and Decree of the trial Court awarded all the 92,800 shares to Plaintiff, as per Paragraph 2 of the compromise application, the disputed shares were divided between the parties in the following proportion: Hasham Allibhai 50%[2] Naushad Fancy 20% Ismat Fancy 20% Shaukat Fancy 10% 26. Additionally, Paragraph 3 (a) of the Compromise Application then further required Defendant Company to transfer the dividends and bonus shares to the parties in the above-mentioned specified proportion and Paragraph 3 (b) of the Compromise Application stated that parties may file a claim for recovery of profit on unpaid dividends earned by the Defendant Company. 27. The Compromise Application was not signed by the Defendant Company, instead the latter filed a statement wherein in Paragraph 2 (e), Defendant Company specifically stated that the Articles of Association bar the company from paying any interest on dividends. Defendant Counsel contended that the compromise application disclosed two separate admissions on the part of Plaintiff: (1) that no claim for interest with reference to dividends was ever made by parties in the earlier round of litigation, and (2) this Court granted no interest in respect of dividends in the first round; hence none could be agitated at the appellate stage. 28. Defendant Counsel argued that this was also admitted in the cross-examination of Plaintiff's witness on 20.06.2017: 'It is correct to suggest that there is no mention of the transfer of any interest of the dividends in the order dated 20-12-2005.' 29. He further cited Paragraph 15 of the Plaint in Suit No.997 of 2007, which stated that the cause of action arose as follows: "The cause of action accrued to the Plaintiff on 20.12.2005 when the controversy as to the ownership of the shares came to an end in High Court Appeal No. 183 of 2003...' 30. Defendant's Counsel's main contention as to maintainability rested on the provisions of Order II Rule 2 CPC which is reproduced herein below. "2. Suit to include the whole claim. (1) Every suit shall include the whole of the claim which the plaintiff is entitled to make in respect of the cause of action; but a plaintiff may relinquish any portion of his claim in order to bring the suit within the jurisdiction of any court.
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(2) Relinquishment of part of claim. Where a plaintiff omits to sue in respect of, or intentionally relinquishes, any portion of his claim, he shall…
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