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Petitioner: MUHAMMAD AKRAM SHAIKH VS Respondent: Messrs PAK LIBYA HOLDING COMPANY (PVT.) LTD. through Authorized Officer and 14 others
Court Name: Sindh High Court Judge(s): Muhammad Ali Mazhar Title:MUHAMMAD AKRAM SHAIKH vs Messrs PAK LIBYA HOLDING COMPANY (PVT.)
LTD. through Authorized Officer and 14 others Case No.: Judicial Miscellaneous No,25 of 2008 in Suit No,420 of 1997 Date of Judgment:2010-07-23 Reported As: PLD 2010 Karachi 400 Result: Application allowed Judgment ORDER ' MUHAMMAD ALI MAZHAR, J.--This application under section 12(2) C.P.C. Is brought by the applicant for setting aside judgment and decree dated 4-6-1998 passed by this Court in Suit No,420 of 1997 with the further prayer to maintain the impugned judgment and decree only against the respondents Nos. 2, 9 to 15, who had signed the said compromise application. The applicant has also prayed that the name of the applicant may be deleted/excluded from the array of Judgment Debtors in the Execution Application No,184 of 2001. ' The bare bones leading to controversy are that a Banking Suit No, 420 of 1997 for recovery of Rs,59,158,291 was filed against the respondents Nos.2 to 8, including the applicant. The said suit was decided vide compromise decree dated 4-12-1998 and an Execution `Application No, 184 of 2001 was also filed by the respondent No,1 in this Court. Later on, the Execution was transferred to the Lahore High Court for the reasons that the properties mentioned in the list are situated in Sheikhupura and the same is now pending in Lahore High Court. The applicant was defendant No, 3 in the above Suit so also Judgment-debtor No,3 in the execution Application. On C.M.A. No, 584 of 2007 filed by the respondent, the decree was transferred to Lahore for execution as some properties sought to be attached and sold are situated in Lahore. On 21-6-2007, the applicant came to know through newspaper Daily Jang that Accountability Court, at Lahore has issued warrants of arrest of 10 Directors of a Cotton Factory which also included the name of applicant. On this information, the applicant tried to locate the files of said proceedings and it transpired that a Reference has been filed against the respondent No,2 due to some default of payments to respondent No, 1. The said Reference was filed on the basis of a compromise decree in Suit No,420
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of 1997 against the respondent No,2 and others. The applicant approached to the office of this Court whereupon he was informed regarding the pendency of Execution Application on the basis of a compromise decree passed by this Court. The applicant approached to his lawyer after obtaining the record of the proceedings and came to know that on 22-3-1997, the above Suit was filed for recovery of Rs,58,158,221. Along with the main suit, several Miscellaneous Applications were also filed including C.M.A No,5907 of 1998 for compromise, which was signed by the newly-inducted Directors only, who were not even a party to the suit at the time, the said C.M.A. Came up for adjudication before this Court. None of the original defendants i.e, defendants Nos. 2 to 8 had signed the said application. This application was also signed by the counsel of new Directors and the respondent No,2, CKL, as well as the respondent No, 1 (plaintiff-Bank). The crux of the matter was that the machinery and the fixtures had been stolen and in this view of the matter, the applicant could not be held liable for the misdeeds of the new management of the respondent No, 2 as well as respondent No, 1. The Official Assignee reported to this Court that Binyamin Khalil's son was an auction-purchaser and he appointed his security gtyrds whereas the respondent No,1 had also appointed its security guards and it appeared that these guards in league with the other persons had stolen the machinery and fixtures for which an F.I.R. No,116 of 2000 under sections 395/394, P.P.C. Was also registered at District Sheikhupura. The assets of the respondent No,2 had been sold to one Mr. & MRs, Pervaiz Akhtar for one crore while only the land has been taken over by the said auction-purchaser. The applicant was declared absconder by NAB whereas the applicant was never served by the NAB authorities. The said Reference is pending in Accountability Court No, III, Lahore. This Reference has been filed against all Judgment Debtors in Execution Application No, 184 of 2001 on the basis of judgment and decree dated 4-6-1998 of this Court, which is a result of compromise application C.M.A. No,5907 of 1998 signed by the new directors of the respondents No, 2 only so also it was signed by their counsel, the plaintiff bank and its counsel. The applicant had resigned on 19-9-1996 as per Form 29 submitted to SECP, showing the position of the Directors. The core issue only relates to an application for compromise filed in this Court by the persons who were not even parties to the said suit. The respondent No,1 itself agreed to enter into a compromise with the said persons who under the genies of an agreement voluntarily took over the responsibility to pay the debts of the respondent No,2. In view of the said agreement, guarantees and promissory notes had been submitted by the said persons and duly accepted by the respondent No,l. In the year 1996, the applicant was informed that some other persons are ready and willing to join company, therefore, if the applicant wants to resign, he can resign from the respondent No,2, the applicant had agreed and resigned from the respondent No,2 on 19-9-1996. However, in 1998 the applicant was informed by one of his friends that a dispute with the respondent No,1 has arisen and that the respondent No,1 has gone to Court and due to this fact a lawyer at Karachi is to be engaged for the respondent No, J and the applicant needs to sign Vakalatnama for the said purpose in order to settle the matter amicably. The, applicant got a blank power of attorney/vakalatnama signed but after some time the applicant was informed that compromise has been made with the respondent No,1 and that the matter has been settled amicably. The power of attorney dated 23-12-1997 in favour of Syed Tauqir Hussain was used fraudulently before this Court as the applicant never signed the application for leave to defend. The applicant never engaged Ch. Binyameen Khalil as his counsel in the matter and the vakalatnama dated 14-5-1998 was never signed by the applicant. The terms and conditions of the compromise application reflect that the incoming directors took over the entire liability in respect of the respondent No, 1. It was also submitted that the respondent No,1 and other respondents clearly settled the matter, therefore, the respondent No,1 accordingly obtained the consent decree on the basis of the compromise application. The applicant was never a party to the compromise application nor did sign the said application rather the respondent No,1 signed the said compromise application along
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with its counsel for the purpose of obtaining a consent decree dated 4-12-1998. The applicant and other similarly placed directors have been fraudulently implicated in the execution proceedings and NAB matter. The compromise application was submitted by the existing management of the respondent No,2 with the consent of the respondent No, 1 . The non-signatories of the said compromise application are being harassed through the proceedings in the NAB Court which are based solely on the decree of this Court. By adopting the said procedure and exercising fraud and misrepresentation, the decree was obtained by the plaintiff/ respondent No,1 in collusion with the respondents Nos. 2 to 15. Counter-affidavit was filed by the authorized officer/attorney of the respondent No,1 wherein preliminary objections, inter alia, are that the application under section 12(2) is false, frivolous and misconceived as well as barred by time. It is also submitted that the applicant has not come with clean hands. The application does not come within the parameters of section 12(2), C.P.C. As the applicant has failed to disclose any fact regarding fraud, misrepresentation or lack of jurisdiction. The subject application is barred by the principles of law of waiver, acquiescence and estoppels. The respondent No,1 further stated that a Reference was filed in the Accountability Court on account of wilful default of payment to the plaintiff by the Judgment-debtors. The applicant had a knowledge of suit, compromise decree and filing and execution application and he is falsely trying to pretend ignorance about these proceedings with ulterior motives. The applicant has falsely stated on Oath that till July, 2008 he had no knowledge of suit filed on 22-3-1997. The applicant remained the Director of the respondent No,2 for years and he had duly executed the charge documents and was fully involved in the loan to the respondent No,2 and had executed personal guarantee. It is also submitted that C.M.A. No,5907 of 1998 was signed by the new Directors as well as the plaintiff and Advocates for the parties. The new Directors became party to the suit and they were party when the C.M.A. Was decided. As such, the compromise has binding effect on all the defendants. The applicant did not file any application for recalling the order or any appeal against the consent decree. All of them are jointly and severally liable to pay the decretal amount along with costs of funds. The applications for leave to defendant filed by the defendants including present applicant were dismissed on merit vide order dated 14-5-1998 whereas the application under Order I, Rule 10, C.P.C. By the other members of management was disposed of in terms of order on compromise application. All the old and new directors including the applicant and all the Judgment-Debtors and respondents are equally, jointly and severally liable for payment of the decretal amount notwithstanding the compromise agreement with the new management. The plaintiff did not enter into any agreement with any person for discharge of liability of any defendant or to exonerate any defendant/Judgment-debtor. The alleged resignation did not in any way exonerate old directors. The new directors had no authority to discharge old directors from the liability. The applicant is trying to hoodwink the Court by taking frivolous and baseless pleas to wriggle out of the responsibility. Finally it was submitted that the application is liable to be dismissed with costs. ' I have heard the learned counsel for the parties and perused the available record including R & P of Suit No, 420 of 1997. ' The crux of the arguments advanced by the learned counsel for the applicant is that the applicant and respondents Nos. 3 to 8 never signed the compromise application which was filed on 4-6-1998 CMA No,5097 of 1998. In fact, the compromise application was only signed by the new directors, the respondents Nos. 9 to 15 in the instant application. At the time of signing this compromise application the new directors were even not party to the suit, which fact is clearly reflecting from the title of judgment and decree. Even otherwise, the decree can only operate against the defendants who signed the compromise application at their own peril and accepted the liability. It is very strange that the decree-holder has filed the execution application against the new directors and the previous directions in order to gain or derive unlawful advantage, the decree holder has
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filed application with mala fide intention against the persons, who never signed the compromise application. I have seen the compromise application and it is apparent that the persons, who signed the application were not the original defendants but eight (8) new persons accepted the entire liability and signed the compromise application. The record does not show that they were ever impleaded as defendants in suit and no order is available to show that they were allowed to join as necessary party in the suit nor any amended title is available to reflect any such position to understand whether they were made party or not. The order dated 14-5-1998 shows in the last paragraph that the Advocate appearing for the defendant No,1 sought directions that two applications filed under Order I, Rule 10 C.P.C. And another application under section 9(4) of Act XV of 1997 are pending and may be fixed in Court for hearing. On 4-6-1998, at Sr. No,1 No,8083-97 was fixed for hearing and at Sr. No,2 the matter was fixed for further orders on which date the compromise application (C.M.A. No,5097 of 1998) was allowed and the order says that the application has been signed by all the defendants and representatives of the plaintiffs besides their counsel. It was further observed in the order that execution of signatures was duly acknowledged by both the learned counsel. However, it is clear from the record that the execution application was not signed by the defendants, but in fact it was signed by the newly inducted directors. In support of the arguments, the learned counsel for the applicant relied upon a judgment of Hon'ble Supreme Court reported in 2002 SCMR 1838 Mst. Bibi Sahiba and others v. Mustaqir Shah and others. In this reported judgment, the Hon'ble Supreme Court has held that without determination of disputed questions regarding genuineness of compromise and rights of the parties in suit property, the decree on the basis of compromise between parties in the suit with exclusion of applicants would not be sustainable. The learned counsel further relied upon another judgment of this Court reported in PLD 1992 Karachi 323 Abdul Sattar v. Ibrahim in which the learned single Judge of this Court has held that normally a decree in absence of necessary parties or want of jurisdiction is to be set aside. In reality, section 12(2), C.P.C. Merely postulates an unspecified remedy where a decree suffered from want of jurisdiction or was tainted with fraud or had emerged upon misrepresentation and the Court, therefore, has all available options to. Fashion relief according to the requirements of a situation. In the same judgment, it has been further held that in appropriate cases where upon the recall of the decree a foreseeable result should follow which may be no different than what could be achieved without setting aside of the decree a rectification or modification could be ordered. Such relief may even be accorded without any elaborate inquiry and concomitant loss of time. The learned counsel cited another judgment of this Court reported in 1992 CLC 777 Abdul Aziz Khan Niazi v. Mrs, Salma Rehman. In this judgment also, section 12(2), C.P.C. Was discussed and it was held that where fraud was apparent on the face of the record and proceedings of the suit, decree obtained as a result thereof, was liable to be annulled. Provision of section 12(2), C.P.C. Contains the word "persons" and not "party". Word "person" would include any person irrespective of the fact whether he was a party to suit or not. Applicants seeking setting aside of decree though not a party to suit, were persons affected by such decree and thus, had locus standi to challenge the decree under provisions of section 12(2), C.P.C. ' Mr. Waleed Ansari, Advocate for the respondents Nos.3 & 6 adopted the arguments of the learned counsel for the applicant and he has also supported the cause of applicant with the prayer to set aside the decree against the applicant and other defendants in the suit, who never signed the compromise application. He also referred to a judgment of Lahore High Court reported in PLD 2000 Lahore 168 Syed Nizam Ali and others v. Ghulam Shah and another. This judgment pertains to section 12(2) C.P.C. In which it was held that when consent decree was obtained by misrepresentation, the application is maintainable for setting aside the decree obtained by misrepresentation. He further relied upon another judgment reported in PLD 1982 SC 204 Messrs
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Arokey Ltd. And another v. Munir Ahmad Mughal and others. In this judgment, the Hon'ble Supreme Court has held that special remedy provided by section 12(2) available ()illy in respect of cases where ground of attack based on fraud, misrepresentation, or want of jurisdiction. Finally, he relied upon another judgment of Hon'ble Supreme Court reported in 1984 SCMR 586 Ch. Jalal Din v. Mst. Asghari Begum and others. In this judgment, the Hon'ble Supreme Court has held that legislature purposely used Word "person" only and not intended to restrict right of filing application under section 12(2), C.P.C. Only to "judgment-debtor" or his "successor-in-interest" or a "person" who was party thereto. ' The nutshell of the arguments advanced by the learned counsel for the applicant and the learned counsel for the respondents Nos. 3 & 6 is that the consent decree was obtained by fraud and misrepresentation and none of the defendants had signed the compromise application. The compromise was entered between the plaintiff and the newly inducted directors, who were not party to the suit, however at their own wish and volition, they without any objection or reservation entered into a compromise with the Bank, therefore, in all fairness, the decree can only operate against the newly inducted directors, who signed the compromise application and accepted the entire liability of the bank but the decree holder in this case has filed the execution application not only against newly inducted directors but also against the previous directors/persons who never acceded to compromise. The Court while passing the consent decree was misrepresented whereby a material aspect was ignored that the compromise application was not filed between the plaintiff and the defendants, but eight (8) other persons had signed the compromise application and in the order of this Court has again on misrepresentation observed that the application was signed by all the defendants. The judgment and decree passed against the original defendants have no legal sanctity and it is liable to be set aside. ' In order to justify the plea of limitation, the applicant has stated in the application that he came to know about the proceedings on 21-6-2007 through news item published in Daily Jang, Lahore regarding the arrest warrant issued by the Accountability Court, Punjab and the name of applicant was also included amongst the directors, therefore, the present application is within time according to Article 181 of Limitation Act. In my view, the dictum relied upon by the learned counsel for the applicant and learned counsel for respondents Nos. 3 & 6 are applicable to the present controversy so far as relate to the extent of powers of this Court under section 12(2) C.P.C. And setting aside the compromise decree obtained on the basis of fraud and misrepresentation. The learned counsel for the respondent No,1 vehemently opposed the application. He argued that the application is time barred, besides that he further argued that the applicant has failed to mention any fraud, misrepresentation or lack of jurisdiction. The applicant had knowledge of the compromisedecree and filing of execution. However, he admitted that C.M.A. No,5907 of 1998 was only signed by the new directors as well as the plaintiff and their Advocates. The applicant failed to file any application for recalling or order or any appeal; hence the compromise decree has attained the finality. He further argued that leave to defend application filed by the defendants 'including the present applicant was dismissed on 14-5-1998 whereas the application under Order I, Rule 10, C.P.C. Was disposed of in terms of order passed on compromise application. After compromise decree, the applicant is stopped by the principle of law of waiver, acquiescence and estoppel from challenging the decree disputing the liability. In fact the learned counsel for the respondent No,1 laid much emphasis that the applicant was in the knowledge of the consent decree, however, he has not denied that the compromise application was only signed by the newly-inducted directors and not the original defendants of the suit. The learned counsel further argued that the Advocate for the applicant has also signed the compromise application and if any wrong was committed by their Advocate, they may file suit for damages against the Advocate but the decrees cannot be set aside. In support of his arguments, the learned counsel relied upon a
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judgment of the Hon'ble Supreme Court reported in PLD 1982 SC 204 Messrs Arokey Ltd. And another versus Munir Ahmad Mughal and others. The same judgment has also been relied upon by the learned counsel for the respondents Nos.3 & 6. The learned counsel relied upon this judgment to show that if Vakalatnama gives power to the Advocate for entering into a compromise then party is bound by the compromise entered into by the Advocate. The Hon'ble Supreme Court has held that nothing in the application even remotely suggesting that the petitioner's Advocate, or respondents, while entering into compromise, being in any way motivated by considerations of fraud, nor any allegation made of any misrepresentation having been made, Vakalatnama executed by petitioners including power to compromise and no question of jurisdiction of Court being involved in passing order on compromise, Court left with no option but to accept same and dispose of petitions in terms of compromise. This judgment is distinguishable to the facts and circumstances of the present case. In the above judgment, the Hon'ble Supreme Court held that in terms of Vakalatnama given to the Advocate who appeared for the petitioner in writ petition, the petitioners had empowered him to compromise the case therefore the Court was satisfied that the Advocate who represented the petitioners was competent to enter into a compromise and executed the same on their behalf. In the present case, the compromise was not entered into by the Advocate but all newly inducted directors had themselves signed the compromise application as defendants. The learned counsel further relied upon a judgment reported in 1988 MLD 2560 Province of Punjab v. Muhammad Rashid and others. In this judgment, it was held that under section 12(2), C.P.C., decree could not be challenged on merits, the scope of which was limited and could be involved for getting the decree Set aside on grounds of fraud and misrepresentation or want of jurisdiction. It has been further held that the limitation prescribed by Limitation Act for making application under section 12(2), C.P.C. Is three years under Article 181 of the Limitation Act. This judgment is also distinguishable as the applicant has claimed that the consent decree was passed on misrepresentation of facts and he also pleaded the knowledge from the news item published in Daily Jang, Lahore on 21-6-2007. The learned counsel also relied upon another judgment of this Court reported in 1989 CLC 1251 Muhammad Yamin and Company v. United Bank Limited. This judgment pertains to ex parte judgment and decree passed against the petitioner on their counsel's statement about receiving no instructions. Again this judgment is distinguishable on the ground that in the present case the compromise application was not signed alone by the counsel but it was also signed by all newly-inducted directors, therefore this judgment is also not helpful to the respondent No, 1. The learned counsel next relied upon another Divisional Bench judgment of this Court reported in PLD 1992 Karachi 183 Mobile Eye Service of Pakistan, Karachi v. Director Social Welfare/Registration Authority. In this judgment also, the authority of counsel to compromise the matter on behalf of his client has been discussed. This was also an application under section 12(2), C.P.C. And matter was based on consent order. The learned Divisional Bench of this Court has held that only allegation made in the application was that counsel had no authority to enter into compromise on behalf of his client, but there was not even a remote suggestion that counsel while giving his consent was motivated by any consideration of fraud, or that he had colluded in any manner with opposite party to give his consent to said compromise. No misrepresentation was alleged to have been made by counsel when making compromise. This judgment is also not helpful to the case of respondent No, 1 as in this case it was held that no compromise could be set aside merely on the ground that counsel had no authority to compromise. The learned counsel further relied on a judgment reported in 1997 CLC 268 Ali Hasan v. Manzoor Ahmad in which the learned Single Judge of Lahore High Court has held that limitation for filing application under section 12(2), C.P.C. Is three years under Article 181 of the Limitation Act. In this case, the decree was passed on 1-2-1975 and the application for setting aside the decree was filed after 13 years. It was further held in the judgment that no application for condonation of delay
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was filed along with…
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