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Petitioner: INTERNATIONAL MULTI LEASING COMPANY VS Respondent: CAPITAL ASSETS LEASING JUDGMENT
Court Name: Lahore High Court Judge(s): Muhammad Ghani Title:INTERNATIONAL MULTI LEASING COMPANY vs CAPITAL ASSETS LEASING
JUDGMENT
Reported As: PLJ 2004 Lahore 586 Result: Appeal dismissed. Judgment JUDGMENT International Multi Leasing Corporation Limited (hereinafter referred to as the appellant-company) has authorized share capital of Rs, 100,000,000.00 divided into 10,000,000 ordinary shares of Rs,10/- each, whereas its paid-up share capital in Rs, 54,000,000.00. Capital Assets Leasing Corporation Limited (henceforth called the respondent-company) has authorized share capital of Rs, 200,000,000.00 divided into 20,000,000 ordinary shares of Rs, 10/- each whereas its paid-up share capital is Rs, 77,831,410.00. On 31st of March 2002 the assets of the appellant company were valued at Rs, 65,661,084.00 whereas its liabilities were Rs, 13,814,091.00 while assets of the respondent- company were to the tune of Rs, 117,415,367.00 and its liabilities amounted to Rs, 107,080,563.00. Both the companies are public limited companies, and are listed on the Lahore Stock Exchange. 2. On 19.10.2002, a petition (C.O. No, 95 of 2002) under Section 284 read with Sections 285 to 288 of the Companies Ordinance, 1984, was filed jointly by the two companies through M/s Muhammad Rafiq and Fazal H. Rizwan, respectively the Chief Executive and the Company Secretary of the appellant-company and Mr. Salman Qureshi, Chairman of the respondent-company with the prayer that the Court may make:- "(a) an order under Section 284(1) of the Company Ordinance 1984 for a meeting of the members of Petitioner No, 1 and Petitioner 2 to approve the Scheme of Amalgamation; (b)an order under Section 284(2) of the Companies Ordinance 1984 sanctioning the Scheme of Arrangement attached as Annexure "L" hereto so as to make the said Scheme of Arrangement binding on the petitioner, their respective' creditors and members; (c)the following orders under Section 287 of the Companies Ordinance, 1984:
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(i) an order under Section 287(1) of the Companies Ordinance 1984 for the transfer to and vesting in Petitioner No, 12 of the whole of the undertaking and business of Petitioner No, 2 together with all of the assets, properties, rights, liabilities and obligations of every description of Petitioner No, 2, more particularly described of Petitioner No, 2, more particularly described in the Scheme of Arrangement attached as Annexure "L" hereto with effect from the effective date, as defined in the said Scheme of arrangement; (ii)an order under Section 287(1)(a) of the Companies Ordinance, 1984 for the transfer to and vesting in Petitioner No, 1 of the assets of Petitioner No, 2 including properties of all kinds whether movable or immovable, tangible or intangible, stock-in-trade, inventory, rights in leases, leasehold properties, actionable claims, book debts, advances deposits, prepayments and other receivables; loans made, investments, cash and bank balances; (iii)an order under Section 287(1)(a) of the Companies Ordinance, 1984 for the transfer to and vesting in Petitioner No, 1 of the rights, powers, authorities and privileges of Petitioner No, 2 (including all registrations, licenses, permissions and approvals under the Leasing Companies (Establishment and Regulation) Rules 2000, all other registration, licenses, permits, categories, entitlements, sanctions and permissions relating to trading, imports and exports or otherwise concerning the investment in or carrying on of any business by Petitioner No, 2; (iv)an order under Section 287(1)(b) of the Companies Ordinance, 1984 approving the issuance at par and allotment of 5400,000 new ordinary shares of Petitioner No, 1 credited as fully paid up shares to every registered holder of the shares of Petitioner No, 2 within 30 days from the completion date (as defined in the Scheme of Arrangement) on the basis of a swap ration of 1:1, that is, for every one ordinary share of Rs, 10/- each of Petitioner No, 2 held by a registered shareholder of Petitioner No, 2, 1 (one) ordinary share of Rs, 10/- each of Petitioner No, 1 shall be issued in the name of such registered shareholder. (v)An order under Section 287(1)(c) of the Companies Ordinance, 1984 directing that all suits, appeals and other legal proceedings instituted by or against Petitioner No, 2 and pending immediately before the effective date (as defined in the Scheme of Arrangement) to be treated as suits, appeals and legal proceedings by or against Petitioner No, 1 and may be continued, prosecuted and enforced by or against Petitioner No, 1 accordingly. (vi)An order under Section 287(1)(d) of the Companies Ordinance, 1984 directing the dissolution, without winding up, of Petitioner No, 2 on the date on which the ordinary shares of Petitioner No, 1 are allotted to the registered holders of the ordinary shares of Petitioner No, 2 or on such later date as the Hon'ble Court may prescribe. (vii) An order under Section 287(1)(d) of the Companies Ordinance, 1984, directing that all contracts, agreements, trusts, leases, conveyances, grants and instruments of transfer entered' into by or subsisting in favour of Petitioner No, 2 upon being transferred to and vested in Petitioner No, 1 shall remain in full force and effect as if originally entered into by or granted in favour of Petitioner No 1 instead of Petitioner No, 2, as the case may be, and that Petitioner No, 1 may enforce all rights and shall perform all obligations and discharge all liabilities arising thereunder accordingly; (viii)An order under Section 287(1)(f) of the Companies Ordinance 1984- directing that with effect from completion date (as defined in the Scheme of Arrangement) the name of Petitioners Nos, 1 and 2 shall be changed to "CALCORP Multi Leasing Limited". (ix)Such further order: or orders as may be deemed to be just and proper to this Hon'ble Court to secure that the amalgamation of Petitioners 1 and 2 is fully and effectively carried out as proposed in the said Scheme of Arrangement. (x)Such further order or orders as may be deemed to be just and proper to this Hon'ble Court .to secure that the amalgamation of Petitioners 1 and 2 is fully and effectively carried out as proposed
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in the said Scheme of Arrangement. Since it was a joint petition, both the parties were represented by the same counsel. In the "SCHEME OF ARRANGEMENT" filed as Annex "L" with the petition the principal object of the scheme of merger, as stated, was to effect as amalgamation between the two companies, through the transfer to and vesting in the respondent-company of the whole of the undertaking and business of the appellant-company, together with all of its assets, property, rights, liabilities and obligations of every description, against allotment of fully paid-up ordinary shares of the respondent-company to the registered share holders of the appellant-company in lieu of shares held by them, and to dissolve the appellant-company, without winding up, in accordance with the provisions of Sections 284 to 288 of the Companies Ordinance, 1984. With effect from the completion date, respondent- company was to be re-named as "CALCORP MULTI LEASING LIMITED". The scheme of arrangement was drawn up on 17th of June 2002 and bears signatures of Mr. Muhammad Rafiq, Chief Executive of the appellant-company and Mr. Salman Qureshi, Chairman of the respondent-company. The petition was accompanied by the Resolutions of the Board of Directors of the two companies. 3. When the petition came up for hearing on 21.10.2002, notices were issued to the Security and Exchange Commission of Pakistan, and Members and Contributories of the two companies. In order to give wide. publicity, notices were directed to be published in the Daily The News" and the Daily "Nawa-i-Waqt". At the same time, learned counsel who appeared to prosecut&the petition was directed to file, within three days, list of creditors of both the companies, which order was duly complied with. From the order, dated 24.1.2003 passed by the learned Judge seized of the petition, it appears, direction was then sought by both the companies for holding of their Extraordinary General Meetings so that the scheme of arrangement for merger of the two companies, already approved by their Boards of Directors, could be presented before their respective members/share- holders to obtain approval. The request was allowed vide order, dated 24.1.2003 and Mr. Ziaud-din, Advocate, was appointed to chair meetings of both the companies in order to find out genuineness and bona fides of the scheme of arrangement for merger. Notices were also ordered to be issued to the Registrar of Companies and to the creditors of the two companies, which were also published in both the Newspapers already mentioned. Consequently, separate meetings of both the companies were held on 21.2.2003. Mr. Zia-udDin, who had chaired separate meetings of both the companies submitted his Reports on 24.2.2003. It was in this backdrop of events that the learned Judge allowed the petition vide order, dated 4.3.2003, operative part of which reads as follows: "In this view of the matter there appears to be no legal impediment in granting the prayer made by the petitioner. I, therefore, grant this petition as prayed for and sanction the scheme of arrangement marked as "Annex-L" which shall be read as part of this order and binding on petitioner, their members and creditors. It is directed that the Joint Registrar of Companies, Lahore shall place all documents relating to Petitioner No, 1 and registered with him on the file maintained in relation to Petitioner No, 2 and the files relating to Petitioner No, 2 and 1 shall be consolidated accordingly. The parties to the arrangement or other persons interested shall be at liberty to apply to this Court for any direction that may be necessary in regard to the working of the arrangement. A copy of this order shall be sent to Joint Registrar Companies, Lahore." 4.On 31st of March 2003 an application (C.M. No, 225-L of 2003) "under Section 151 CPC read with all other enabling provisions of law" was filed by the appellant-company for recall of the order, dated 4.3.2003. In the meantime, another application (C.M. No, 215-L of 2003) was filed on 27.3.2003 on behalf of the two companies by the same learned counsel who had earlier filed C.O. No, 95 of 2003, though this application bears signatures only of Mr. Salman Qureshi, on behalf of the respondent- company. Essentially, therefore, the application was on behalf of the respondent-company. In the
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second application, the grievance voiced against the appellant-company was that implementation of the agreed scheme was being obstructed by the appellant-company and accordingly, certain directions were sought for implementation of the agreed scheme of merger. 5.Notices of the two applications were given to the opposite side and, after hearing the parties, application (C.M. No, 225-L of 2003) was dismissed by the learned Judge vide the impugned order, dated 12.6.2003. However, the learned Judge simultaneously disposed of the other application (C.M. No, 215-L of 2003) of the respondent-company by giving the following further directions in conjunction with the directions, dated 4.3.2003, reproduced above:-- (i)"As consideration for the transfer to and vesting in CALCORP of the IML Undertaking, CALCORP shall issue at par and allot 5,400,000 new ordinary shares of CALCORP credited as fully paid up shares to be allotted to every registered holders of the shares of IML on the basis of a swap ratio of one: one, that is, for every one (1) ordinary shares of Rs, 10 each of IML held by a registered shareholder of IML, 1 (one) ordinary share of Rs, 10 each of CALCORP shall be issued in the name of such registered shareholder. The aforesaid issuance and allotment of the shares shall be made by CALCORP within 30 days commencing June 20, 2003. CALCORP shall consolidate all fractional shares, sell the same on the Stock Exchange and make payment of the proportionate amounts of the sale consideration so received to the members entitled thereto. The Board of Directors of CALCORP shall comprise of seven Directors in the ratio of 4 (CALCORP) and 3 (IML) to be elected in accordance with the provisions of the Companies Ordinance, 1984 as soon as possible. As interim measure all bank accounts of CALCORP and IML shall be operated by the existing. Directors of CALCORP. In future all decisions shall be taken by the Board of Directors elected as directed above. (ii)All members whose names shall appear in the Register of Members of IML on November 15, 2002, maintained by SECP shall surrender their share certificates for cancellation thereof to CALCORP. In default, upon the new shares in the CALCORP being issued and allotted by it to the members of IML whose name shall appear on the REGISTER OF members of IML on the date, as aforesaid, the share certificates in relation to the shares held by them in IML shall be deemed to have been cancelled. (iii)All contracts, agreements, trusts, leases, conveyance, grants and instruments of transfer entered into by or subsisting in favour. of IML upon being transferred to and vested in CALCORP shall remain in full force and effect as if originally entered into by or granted in favour of CALCORP instead of IML, as the case may be, CALCORP may enforce all rights and shall perform all obligations and discharge all liabilities arising there-under accordingly. (iv)The debts, liabilities, claims against and the obligations of IML upon being transferred to and vested in CALCORP shall be treated as the debts, liabilities and claims against and the obligations of CALCORP as if originally incurred by CALCORP instead of IML, CALCORP shall pay and discharge all such debts and liabilities, shall satisfy all such claims and shall perform all such obligations accordingly. (v)CALCORP shall take in employment all such employees of IML who have accepted employment with CALCORP in lieu of their employment with IML on the terms and conditions applicable to such employees at IML immediately preceding the Completion Date including the terms relating to entitlement upon termination of employment, that is; provident, gratuity and pension funds with the benefit of past employment in IML. (vi)All suits, appeals and other legal proceedings instituted by or against IML and pending immediately before the completion date shall be treated as suits, appeals and legal proceedings by or against CALCORP and may be continued, prosecuted and enforced by or against CALCORP accordingly. (vii) The IML shall stand dissolved without winding up on the date on which the ordinary shares of CALCORP are allotted to the holders of the ordinary shares of IML in accordance with the scheme of
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amalgamation/merger. (viii)The entire undertaking of IML including all assets, properties, rights, the privileges, bank accounts, trade marks, patents and licenses of IML are transferred to and stand vested in CALCORP". It was further observed that the parties to the arrangement or other persons interested shall be at liberty to apply to the Court for further directions if need arises for working of the arrangement. It is in this background that the appellant-company has filed this Intra-Court Appeal. 6. At the very outset, Mr. Munawwar-us-Salam, learned counsel for respondent-company has raised multi-dimensional preliminary objections i,e, that the appeal against the original order, dated 4-3-2003 having been. filed on 21.6.2003 was barred by 88 days and there is no application for condonation of the delay; that the subsequent order, dated 12.6.2003, passed, as it is, on an application under Section 151 CPC, is not appealable; that even if the application, dated 31.3.2003 (C.M. No, 225-L of 2003) is treated as a review petition under Order XLVII, Rule 1, CPC, no Intra-Court Appeal is competent against the order, dated 12.6.2003, whereby said application was dismissed; that the instant Intra-Court Appeal filed, as it is "under Section 10(3) of the Companies Ordinance, 1984 read with all other enabling provisions of law against the order, dated 12.6.2003" is not, at all, competent; that there is no provision in the Companies Ordinance, for "recall" of an order sanctioning an arrangement for merger/amalgamation of two companies; that where the Legislature had so intended, it has specifically made a provision to that effect in the Ordinance itself, reference to Section 319 being in point; that even if C.M. No, 225-L of 2003 is treated as an application under Section 12(2) CPC, the impugned order, dated 12.6.2003 passed thereon is not appealable, that the order, dated 4.3.2003 having been obtained by the two companies themselves, the same is a-consent order and, therefore, not open to impeachment collaterally, let alone through a miscellaneous application; that the proper remedy for the party considering aggrieved of the same was to have assailed the original order, in appropriate proceedings; that the principle of estoppel being also attracted with full force to the facts and circumstances of the present case, the appellant cannot be allowed to approbate and reprobate; that the application (C.M. No, 225-L of 2003) having been filed by a wholly unauthorized person, was not maintainable; that once the scheme for amalgamation was approved, by the statutory majority, neither any member/shareholder/creditor nor the company itself could have challenged the same, and that once the scheme had been sanctioned by the Court, it assumed finality, became a statutory instrument and was immune from challenge in any manner whatsoever. In support of his submission, learned counsel for the respondent-company made extensive reference to case-law mainly from Indian jurisdiction, and also the law laid down by our own Superior Courts, to which we shall advert while dealing with his respective submissions. 7.In reply, Mr. M. Saleem Sahgal, learned counsel for the appellant relying on PIAO GUL versus The State (PLD 1960 SC 307) and Pakistan Fisheries Ltd., Karachi and others versus United Bank Ltd. (PLD 1993 SC 109) contended that a party cannot be non-suited on the ground that. the provision of law under which the proceedings have been instituted has been inadvertently misquoted; that when the application (C.M. No, 225-L of 2003) was entertained by the Court, no objection was raised to its maintainability; that by the impugned order, dated 12.6.2003, the scheme already sanctioned has been modified, specific reference having been made to clauses (iv) and (v) of the original scheme and directions at serial Nos, (i) and (ii) in the impugned order to say that the original scheme was modified; that since the original scheme could be modified only under Section 285 of the Ordinance, C.M. No, 225-L of 2003, should have been treated and tried as a fresh application under Section 284 and the decision thereon could be taken only after complying with the entire gamut of procedure. Reliance in support of the last contention was placed on In re Comrade Bank Ltd. (PLD 1957 Dacca 554). Learned counsel for the appellant, by referring to Section 107 read with Order XLI,
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Rule 33 C.P.C. further argued that the appeal is a vested right; it is continuation of original proceedings and the appellate Court has the same powers which the Court of first instance possesses. On these premises, he submitted that irrespective of any technical impediment in our way, we can grant him the same relief which the learned Judge could have granted. Learned counsel for the appellant also submitted that the scheme of merger/amalgamation of the two distinct companies, members of one not being the members of the other, was beyond the pale of jurisdiction which the Court had under Part IX of the Ordinance and, therefore, the petition (C.O. No, 95 of 2002) and the consequent order passed thereon, on 4.3.2003, being wholly without jurisdiction, was non-existent and has to be ignored altogether; that even if it be assumed that before 15th of November 2002 the petition for sanctioning of a scheme for merger/amalgamation could lawfully be instituted before the Company Judge of this Court, jurisdiction of this Court was taken away as from the said date, by Ordinance No, CXXIII of 2002, whereby Securities and Exchange Commission of Pakistan (SECP) had. been invested with the exclusive power to entertain such a petition, pertaining to Leasing Companies, and that the Court simultaneously stood stripped off its jurisdiction to proceed further with the petition; that in any case, the order, dated 4.3.2003 having been obtained by concealment of material facts tantamounting to fraud and misrepresentation, it stood vitiated, and neither the bar of limitation nor the principle of estoppel, for any reason and on any ground whatsoever, could be pressed into service to save it from being challenged directly as well as collaterally. 8. In support of his submissions, learned counsel for the appellant placed reliance on Abdul Majid Ahmed Bawany v. III Sind Labour Court (PLD 1979 Karachi 549) in which the view taken was that an appeal is only a step in the proceedings which is not a matter of mere procedure, but a substantive right which has to be presumed till the rest of the career in litigation; that the right of appeal becomes vested as soon as an action commences and further that such right can only be extinguished if the Legislature expressly so provides or the conclusion of extinction can be justified on the doctrine of necessary intendment. These propositions are well engrafted in our case-law, but the real question in the instant case is whether the order obtained by the appellant itself could be assailed in the manner it had been done through C.M. No, 225-L of 2003 and whether the appeal against the order passed thereon would be competent, if the same had become barred by limitation against the original order, dated 4.3.2003. Learned counsel for the appellant submitted that C.M. No, 225-L of 2003 was competent since the appellant had challenged the very jurisdiction of the Court, and in support of his contention he relied on Pir Sabir Shah v. Shad Muhammad Khan, Member, Provincial Assembly, N.W.F.P. and another (PLD 1995 Supreme Court 66) where at page 263 of the Report it was observed: "Further as was held in State v. Zia-ur-Rehman (PLD 1973 SC 49 at 77) if there is a dispute on the point as to whether a Court has or has not jurisdiction over a certain subject-matters it can certainly hear and determine that dispute, even if the result be that it had to hold that it has no jurisdiction". The argument of the learned counsel, in other words, is that even if it be assumed that the order, dated 4.3.2003 was a consent order, C.M. No, 225-L of 2003 was competent since it sought to challenge the very jurisdiction of the Court passing the order. We may observe that question here is not what the appellant thought of the order, dated 4.3.2003, but whether the said order was, in fact, coram non judice. If the assumption of the appellant, howsoever innocent the same may be, is eventually found to be untenable, the question would arise whether he could take benefit of wholly incompetent proceedings to avoid the rigours of law of limitation, as has been argued by the learned counsel for the respondent-company. Mr. Sahgal further submitted that even if exception to the jurisdiction of the learned Judge was not taken before him, the appellant could still, in these. proceedings, throw challenge to the same in view of the decision of the Supreme Court in Shagufta Begum v. the Income-Tax Officer, Circle-XI, Zone-B, Lahore (PLD 1989 Supreme Court 360) where it was held "that a plea regarding assumption of
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jurisdiction by a Tribunal or a Court is available to a litigant even when appearing before the highest Court in the country". He also relied on Muhammad Hayat v. Additional District Judge 1st., Okara and 2 others (PLD 1990 Lahore 350) where a Civil Judge, not invested with the powers of a Guardian Judge under the Guardian and Wards Act (No, VIII) of 1980, had dealt with a guardianship petition, the High Court declared the order without jurisdiction by observing that in a case of total lack of jurisdiction and proceedings being coram non judice objection could be raised at any stage. Learned counsel for the appellant relied on Brother Steel Mills Ltd. and others vs. Mian Ilyas Miraj and 14 others (PLD 1996 Supreme Court 543) to contend that the jurisdiction which the High Court exercises under the Companies Ordinance is original civil jurisdiction and the proceedings are of civil nature to which the Code of Civil Procedure is applicable by virtue of the provisions contained in its Section 117. In the cited case, it was inter alia held that the proceedings under the Ordinance are initiated in the High Court as…
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