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Petitioner: Haji SHARIF KHAN through Legal Heirs and anothers VS Respondent: Raja ABDUR RAHMAN JUDGMENT
Court Name: Sindh High Court Judge(s): Rasheed A. Rizvi Title:Haji SHARIF KHAN through Legal Heirs and anothers vs Raja ABDUR RAHMAN
JUDGMENT
Reported As: 2000 CLC 4 Result: Suit dismissed Judgment JUDGMENT ' This is a suit for declaration and permanent injunction in respect of a dispute pertaining to a private limited company known as Messrs Khwaja Autocars Ltd. Initially, the suit which was filed on 20th April, 1976 was valued at Rs,60,000 for declaration and at Rs,200 for permanent injunction. Subsequently, plaintiffs filed an application (Civil Miscellaneous Application 1601 of 1997) seeking amendment in the valuation of the suit which was granted by this Court on 26th May, 1997 whereafter plaintiffs were permitted to file amended plaint. It is this amended plaint which has been marked as Exh. 1. 2. This suit was initially filed by two plaintiffs namely Haji Sharif Khan and Haji Abdul Rasheed who expired during proceedings of this suit and now they are being represented by their legal heirs who are all plaintiffs in this suit. It is claimed in the plaint (Exh.1) that these two plaintiffs were appointed on 18-9-1974 as two amongst five Directors of Messrs Khwaja Autocar Ltd. The remaining directors were defendant No,1 Muhammad Tufail Butt and Asghar Ali. The controversy arose sometime in the month of March, 1976 when defendant No,2, Tariq Rehman and defendant No,4 Miss Ghazala Rehman were appointed as directors of the said company. It is alleged by the plaintiffs that these persons were minois at the relevant time; that they were having no share in the said company; that no extraordinary or general meeting was held appointing them a directors. It is further case of the plaintiffs that on 31-3-1976, the defendants got an agreement executed under threat between the plaintiffs on the one hand and defendants Nos.2 to 7 on the other. The plaintiffs have denied to have seen these minors at the time of execution of the agreement. 'Thus, it is challenged by the
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plaintiffs that the defendants Nos.2 to 7 being minors at the time of execution of the said agreement were incompetent to execute that agreement and, therefore such agreement being void ab initio is not enforceable in law. In this background, the plaintiffs have filed this suit seeking following relief:-- "(a) declare that the alleged transfer agreement dated 31-3-1976 executed between the plaintiffs and defendants under threat, coercion and duress is void ab initio and has no force in law. (b) declare that the alleged agreement being void, the plaintiffs continue to be the shareholders, the Members and the Directors of the said Company known as Messrs Khawaja Autocar Limited, Karachi. (c) declare that the alleged letters of intimation obtained from the plaintiffs Nos.1 and 2 (undated) are of no legal effect. (d) declare that the alleged letters of resignation (undated) obtained from the plaintiffs are null and void. (e) declare that all the transactions carried out by the defendant No, 1 from 31-3-1976 till the passing of the decree as a single handed Director of the said Company are illegal, null and void and have no force in law. (f) declare that the defendants Nos.2 and 4 being minors are not eligible to be appointed as or to perform the functions of the Directors of the said Company. (g) restrain the defendants from creating any hindrance, raising objection or disturbing the plaintiffs in working as the legally elected and bona fide Directors of the said Company. (h) allow the cost of the Suit. (i) pass a decree allowing any other relief or reliefs as may be deemed fit and proper." 3. Defendants filed their joint statement which was brought on record as Exh.3. In addition to raising preliminary objections to the maintainability of suit, it was denied that the agreement, dated 31st March, 1976 was void ab initio and incapable of enforcement in law. It was maintained that the plaintiffs have voluntarily resigned from their directorship as a result of such agreement. It was further maintained that on 30th March, 1976, a meeting of the directors/ members of the company was held which appointed defendants Nos.2 and 4 as directors and subsequently, on 31st March, 1976, in the meeting of the Board, the resignations of the plaintiffs were accepted and now have been acted upon. It was prayed that the suit be dismissed with cost. One of the legal objections raised was that the plaintiff is not entitled to declaration and the suit is barred under section 42 of the Specific Relief Act, 1877 (hereinafter referred to as the Act, 1877). 4. As a result of the respective pleadings of the parties, following issues were adopted by this Court on 8th April, 1978 by consent of the parties:- (1) Whether the Agreement dated 31st March, 1976 was executed under duress or is otherwise invalid for any reason stated in the plaint? (2) Whether the defendants or any of them were minors at all material times and whether any representations to this effect were made by the defendant No,1 . (3) Whether the transfer of shares/appointment of directors was invalid by reason of the minority . Of some or all of the defendants or for contravention of the Articles of Association/Companies Act. P.O.I1 of 1972 or for reason of duress? (4) Whether the plaintiffs continue to be the shareholders/directors of the company? (5) Whether all the transactions carried out by the defendants from 31-3-1976 in their capacity as shareholders/directors of the company are null and void? (6) Whether the shares were transferred on the basis of process of bidding and if so its effect? , (7) Whether the defendants paid the plaintiffs Rs,68 lacs as consideration for purchase of the plaintiff's shares?
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(8) Whether for reasons stated in the written statement, the plaintiffs are stopped from questioning the transfer of shares and appointment of directors? (9) Whether the suit as framed is incompetent, bad in law and not maintainable? (10) Whether the suit for declaration is barred by section 42 of the Specific Relief Act? (11) Whether the suit is not properly valued and proper court-fee has not been affixed on the plaint? (12) Whether the suit is bad for non-joinder of necessary party? (13) What should the relief be?" 5. On 5-2-1985, the process of recording of evidence of the parties was concluded and the parties were granted one month's time for arguments but for one or the other reasons, the parties were not able to start arguments. On 26th May, 1998, the parties undertook to file a summary of their arguments with citations and to exchange copies of the same before the next date. None of the parties complied with the said order. However, Mr. Saeed A. Sheikh, Advocate for the defendants finally filed his written arguments on 21-11-1998 but the plaintiffs did not file the same. Several opportunities were extended to them and as a result, the matter was finally kept reserved for judgment vide order dated 15-10-1998. Since the Court encountered some legal questions which could not be traced on the case file, the suit was again fixed for rehearing. But even then no written arguments were filed and on 3-6-1999, the matter was again kept reserved for announcement of judgment on 30th June," 1999. Plaintiffs were permitted to file their written arguments before the next date but the same have not been filed. In such background, I have scrutinised the entire case with the assistance of Mr. Saeed A. Sheikh. 6. At the very outset, Mr. Saeed A. Sheikh has raised preliminary objections to the maintainability of this suit on the ground that since both the original plaintiffs had expired, this suit has abated. He has pointed out to the prayer clauses (b), (d) and (g). It is argued that since the original plaintiffs have expired, they cannot be installed as directors in the said company and that all these reliefs being personal in nature could not be granted in favour of the legal heirs/present plaintiffs. He has referred to the maxim 'actio personal is moisture cum persona' and placed reliance on the case Mercantile Cooperative Bank Ltd. v. Messrs. Habib & Co. And others PLD 1967 Kar. 755. In that case, it was held by this Court after reference to the aforesaid maxim that the right to render account is a personal right available against a person who is liable to account and that such a right does not survive against his heirs except in cases where a claim for money is made and for which accounting is sought. In that case, the plaintiffs had filed a suit against a proprietorship concern but subsequently the proprietor died and his widow, mother and a minor son and daughter were impleaded as defendants. In such circumstances, it was further held by this Court, "The exception is upon the principle that where the deceased had appropriated money or property the cause of action even though personal to him survives." This maxim that the personal right of action dies with the person properly relates only to extention of liability, although it has sometimes been misused in connection with the rule that death does not give rise to liability in tort, as observed by Herbert Broom LL.D. In his famous books, 'A Selection of Legal Maxims' 10th Edition, Sweet & Maxwell Limited London. While concluding his discussion at page 622, the following general rule was laid down:-- "In conclusion the extent and limits of the common law doctrine, actio personalis moritur cum persona, may be summed up thus: it was a rule of the common law that if an injury were done either to the person or property of another for which damages only could be recovered in satisfaction, the action died with the person to whom or by whom the wrong was done: but this rule was never extended to such personal actions as were founded upon any obligation, contract, debt, covenant, or any other similar duty to be performed: for there the action survived." 7. The above maxim was also considered in several other judgments of the. Superior Courts of Pakistan. In Muhammad Aslam v. Wazir Muhammad PLD 1985 SC 46 at 53, it was held, inter alia, by.
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The Honourable Supreme Court, " personal actions connected with the individuality of a person do not survive him.." The Honourable Supreme Court made an exception to this rule and held that where personal actions have matured into a decree or become part of the estate, the legal representative can execute such orders. (For further reference, see the case of Agricultural Development Bank of Pakistan v. Sanaullah Khan and others PLD 1988 SC 67 at 72. The case of Mercantile Cooperative Bank (supra) was followed by another Judge of this Court, G.H. Malik, J. (as he then was) in A. Majid Sama v. The Asbestos Cement Industries, Ltd. And another 1996 MLD 803. In that case, a suit was filed by the plaintiff for recovery of Rs,51,000 by way of damages on account of defamation. During the proceedings of the suit, the said plaintiff died and defendant raised objection that in the death of the plaintiff the cause of action has not survived to his legal representative and referred to the cases Sardar Muhammad Ali v. Pakistan PLD 1961 Kar. 88, Mercantile Cooperative Bank (supra) and Government of Punjab and another v. Mst. Kamina and others 1990 CLC 404. The plaintiff on the other hand, referred to the cases Muhammad Akram v. Mst. Farman Bi PLD 1990 SC 28 and Syed Ghayyur Hussain Shah v. Aziz Alam PLD 1990 Lah. 432 and raised the plea that the right of reputation is to be placed on equal footing with the right of property as per Islamic law. This Court came to the conclusion that since the suit was filed for damages on account of alleged defamation suffered by the plaintiff, the cause of action has not survived upon the death of the plaintiff and the suit was abated. A Division Bench of this Court has also considered the above maxim in the case of Mst. Kamina (supra). In that case, a suit was filed for recovery of Rs,209,000 on account of damages in view of the death of plaintiff's son and on account of damage and loss of business. The suit was decreed in the sum of Rs,1,00,000 and in the appeal the suit was dismissed and the appeal was allowed with the following observations:-- "From the above discussion, it is clear that the meaning of this maxim is that a personal action dies with the person, the effect is that the death extinguishes the liability in tort. In other words the death of the party wronged or the wrongdoer brings an end to the cause of action and the right to sue or be sued for gets extinguished. But this is subject to a qualification viz, where a tortfeasor estate is benefited by the wrong-done, an action would be against the representatives of a wrongdoer. The essence of the maxim applies to an action brought for damages for a personal wrong. ' In the instant case, undoubtedly the action is brought by the respondents Nos.1 and 2 on the foot of a personal wrong of Muhammad Habib Siddique and the present appellants. Unless it is shown that the estate of the deceased wrongdoer was benefited by the tortious act committed by him, the right to sue does not survive because the personal action is said to die with the person." 8. In Pakistan, the above maxim is to be read keeping in view the provisions of Order XXII, C.P.C. Particularly Rule 1 thereof which provides that no abatement to take place in case of death of plaintiff or defendant if the right to sue survives. It is settled that where a party to a suit dies, his legal representative is appointed in order that the suit may proceed and decision be given on the facts of the case. In fact, it is the original party's rights and A disabilities which is to be considered and not those of the legal representatives impleaded in place of a deceased party. Order XXII, C.P.C. Does not extent any independent right to the legal representative higher than the deceased party. (See Muhammad Iqbal and 2 others v. Ghulam Ali Shah PLD 1975 Lahore 1205 at 1211). Now, reverting to the relief being claimed by the legal representatives of the deceased plaintiffs which includes their status as to the directorship of the said company, I am afraid that the right of directorship to a company is not an heritable right. The legal representatives/heirs may be entitled to right to inherit the shares being owned and possessed by the deceased plaintiffs in the company but cannot inherit right to directorship of the company, and, therefore, such relief to the extent of seeking directorship on the basis of inheritance could not be granted in the present suit. The present plaintiffs may be entitled to the relief seeking shares in the company upon declaration
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as illegal and void the agreement impugned and proceedings of the meeting dated 31-3-1976 which I propose to discuss hereinafter. 9. In this suit, some 16 persons were produced by the parties as witnesses and more than 200 documents were exhibited on behalf of plaintiffs and defendants in order to prove and disprove their respective claims. Following are the details of witnesses produced by the parties:-- ' P.W.1 Haji Sharif Khan, plaintiff No,1 (Exh.5) documents exhibited from Exh.5/1 to Exh.5/103. ' P.W.2 Haji Abdul Rashid plaintiff No,2 (Exh.6) documents exhibited Exh.6/1 to Exh.6/23. ' P.W.3 Muhammad Islam from P.A.F. (Exh.7) documents exhibited from Exh.7/1 to Exh.7/2. ' P.W.4 Ghulam Rasool Senior Clerk, Aziz Bhatti Shaheed, Gujrat (Exh.8) Documents exhibited Exh.8/1 to Exh.8/6. ' P.W.5 Muhammad Siddique Khan, Inspector, Central Excise, Kotri (Exh.9) Documents exhibited (Exh.9/1). ' P.W.6 Moinuddin Khan, Central Excise (Exh.10). Witnesses on behalf of defendants ' D.W.1 Viola, Director Piaggio Co. (Exh.11) Documents exhibited Exh.11/1 to Exh.l1/14. ' D.W.2 Muhammad Shoaib Qureshi, Deputy Controller, M.C.B. (Exh.12) Documents exhibited Exh.12/1 to Exh.12/84. ' D.W.3 Mushtaq Ahmed Vorah (Exh.13) Documents exhibited Exh.13/1 to Exh.13/6. ' D.W.4 A.K. Shamim, Advocate (Exh.14) Documents exhibited Exh.14/1 to Exh.14/5. ' D.W.5 Afzal Rasheed (Exh.15) Documents exhibited Exh.15/1 to Exh.15/8. ' D .W .6 Muhammad Saleem (Exh.16) Documents exhibited Exh.16/1. D W .7 Anwar Saleem (Exh.17). ' D.W.8 Muhammad Iftikhar Hussain (Exh.18) Employee of M.C.B. Ltd. ' D.W.9 Mr. Tariq Sayeed (Exh.19) ' D.W.10 Raja Abdul Rehman (defendant No,1) (Exh.20) Documents exhibited Exh.20/1 to Exh.20/13. 10. First I will deal with the legal issues namely issues Nos.9 to 12. Issues Nos.9 and 12. 11. It was argued by Mr. Saeed A. Sheikh that the plaintiffs are not entitled for the declaration as prayed as these reliefs are not in respect of any legal character or status of the deceased plaintiffs pertaining to their right to property. It was further argued that the reliefs (a) to (f) fall outside the scope of section 42 the Specific Relief. Act, 1877. He has placed reliance on the cases M.A. Naser v. Chairman, Pakistan Eastern Railways and others PLD 1965 SC 83. Abdur Rahman Mobashir and 3 others v. Syed Amir Ali Shah Bokhari and 4 others PLD 1978 Lah. 113 and Anwar Hussain v. The Agricultural Development Bank of Pakistan and others 1992 SCMR 1112. In the case of M.A. Naser (supra), the question involved before the Honourable Supreme Court of Pakistan was a catering contract between the appellant and the railway administration. It was held that under the provisions of section 42 of the Specific Relief Act, a person entitled to any legal character or right to property can institute a suit for a declaratory relief in respect of his title to such legal character or right to property and that the said suit does not fall within the scope of section 42. In Anwar Hussain (supra), one of the questions before the Honourable Supreme Court was the acceptance of an employee's resignation. It was held that the suit filed by the appellant was not competent and was rightly dismissed by the High Court. In the case of Abdur Rahman Mobashir (supra), a learned Division Bench of Lahore High Court has dealt in detail with various aspects of a declaratory suit. While referring to section 9, C.P.C., it was held that the suit involving right to property or to an office is a suit of civil nature, and thus, competent. 12. The phrase legal character' and 'legal status' was elaborately discussed by a Judge of this Court Noorul Arfin, J. (as he then was) in the case Alavi Sons Ltd. v. The Government of East Pakistan PLD 1968 Kar.
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222. After making reference to the 15 definitions given by Professor Holland and after reference to the case K.P. Ramakrishna Patter v. K.P. Narayana Patter and others ILR 39 Mad. 80, it was held that these expressions include "personal rights and pertain to the exclusion of -the proprietary relations, contractual capacities and incapacities, or legal conditions imposed upon a person by law without his own consent as opposed to the condition which he has acquired himself by agreement such as position of a slave." It was further held that a suit seeking declaration that the plaintiff has not committed breach of the terms of a contract is a suit neither with regard to an legal character nor any right to or in the property. Recently, this Court in the case of Muhammad Yasin Fecto and another v. Muhammad Raza Fecto and 3 others 1998 CLC 237 has considered interference of a Civil Court in the affairs of a company registered under the Companies Ordinance, 1984 with reference to section 42 of the Specific Relief Act and section 9, C.P.C. Reference was made to the several reported cases including Abdur Rehman Mubashir (supra), Messrs Chalna Fiber Company Ltd. Khulna and others v. Abdul Jabbar and others PLD 1968 SC 381, Fareed Sons Ltd. v. Karachi Cotton Association PLD 1956 Kar. 315 and Parvaiz Aslam Mian Aslam v. Synthetic Chemical Company Ltd., Karachi and another PLD 1980 Kar. 401. In the case of Muhammad Yasin Fecto (supra) the Chief Executive filed a suit seeking declaration that he my be declared to be the Chief Executive and his removal through a resolution passed by the defendants be declared contrary to law, invalid and with no legal effect. After considering the case law, it was held by this Court as follows:-- "From the case-law as discussed hereinabove, it can be safely held that the Courts are not competent to interfere in the day to day working of a company on the well-established doctrine of indoor management. But this is not a absolute bar and there are situations where a Director or a shareholder can bring a case before the Court against a company and its Directors. The Court will be justified to interfere if the following conditions are fulfilled:- (1) Where the majority has acted in depriving the minority of their lawful and legitimate rights. (2) Where the acts, complained of, are ultra vires of the Memorandum and Articles of Association of the Company. (3) Where the Directors have acted malafidely and against the interest of the Company. (4) Where there is violation of a principle of natural justice. (5) Where the act, complained of, amounts to fraud and misrepresentation. ' In the instant case, allegations of the plaintiffs are that plaintiff No, 1, for all legal and pecuniary purposes, was ' removed' (as discussed infra) from the assignment of Chief Executive without adopting due course of law. It is further argued by the learned counsel for the plaintiff that the meeting of 7-8-1995 was mala fide and that the said resolution is ultra vires of the company, therefore, in view of such averments of the plaint, I am of the considered view that this suit is very much maintainable as the plaintiffs have no other remedy available under the other provisions of Companies Ordinance, 1984 through which they are entitled to seek declaration as to their legal status in the Board of Directors after passing of the impugned resolution." 13. In view of the aforesaid discussion, I am of the considered view that the present plaintiffs are entitled to declaration to the extent .Of their rights and entitlement in the shares left by their predecessors as these are their properties -but subject to the condition of proving the fact that the agreement, dated 31st March, 1976 was executed under duress and that no consideration was paid to the deceased plaintiffs against purchase of their shares. Issue No, 11. 14. Initially, this suit was filed and was valued at Rs,60,000 for the purpose of declaration and Rs,200 for permanent injunction. Accordingly, court-fee amounting to Rs,2,275 was tendered. Subsequently an application was filed seeking amendments in the valuation of the suit. The said application was numbered as C.M.A. 1601 of 1997. On 26-5-1997, the said application was granted and the suit was revalued at Rs,6,66,665.74 and further amount of court-fee was paid which is now
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maximum ad valorem court-fee amounting to Rs,15,000. In the circumstances, the defendants have half-heartedly argued this point and, therefore, the same is answered in negative. Issue No, 12. 15. It is contended by the learned counsel for the defendants that M/s. Khawaja Autocars (Pvt.) Ltd. Was a necessary party as the directorship and shares for which the instant suit has been filed pertains to the said company. Since it is a necessary party, it is pleaded that its non-implement should result in dismissal of the instant suit. Mr. Saeed A. Sheikh has not cited any law on this point. However, Order I, Rule 9, C.P.C. Provides that no suit shall be defeated by reason of misjoinder or non-joinder of the parties and that every suit C will deal with the matter in controversy so far as regards the rights and interest of the parties before the said Court. In the instant case, it has not been denied that the present defendants are the directors of M/s. Khawaja Autocars Ltd. And, therefore, fora intent and purposes, it could be presumed that the said company is before the Court. This issue is accordingly answered. Issues Nos. 1 and 6. 16. Plaintiffs are under heavy burden to prove these two issues. According to the averments in the plaint, the agreement dated 31-3-1976 was executed under duress but no specific instances have been mentioned in the body of plaint. Mr. Saeed A.. Sheikh has referred to Order VI, Rule 4, C.P.C. Where it is provided that a party pleading any misrepresentation, fraud, breach of trust, wilful default or undue influence shall state the same with dates and items in his pleadings. In para. 7 of the plaint, it is alleged that after some displeasure crept up between the parties, the defendant No,1 started threatening the plaintiffs to either kill them or to put them behind the bars. In para. 11 of the plaint, it is simply alleged that the resignations of the plaintiffs were obtained under coercion, threat and duress on 31-3-1976. In so far as the question of misrepresentation is concerned, it is alleged that the defendants Nos.2 to 7 were all minors at the relevant time and it was not disclosed to the plaintiffs which led them to…
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