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Petitioner: RAUF BAKSH KADRI and others VS Respondent: M/s. NATIONAL TECHNOLOGY DEVELOPMENT JUDGMENT
Court Name: Sindh High Court Judge(s): Ata-ur-Rehman Title:RAUF BAKSH KADRI and others vs M/s. NATIONAL TECHNOLOGY DEVELOPMENT
JUDGMENT
Reported As: 2005 CLD 747 Result: Order accordingly. Judgment JUDGMENT This common order pertains to the following petitions:-- J.M. No.03 of 2001 This is a petition filed by Muhammad Mohsin Butt under sections 290, 291 and 292 of the Companies Ordinance, 1984 (the Ordinance), for rendition of accounts division of assets and properties of S.M. Corporation (Pvt.) Ltd. (the company), inter alia praying therein for directions to respondent No.6 to make payment of dividends declared in past as well as payment of future dividends to the petitioner; and not to restrain the petitioner from entering the factory premises and inspect its accounts and operations etc. 2. The counter-affidavit and affidavit-in-rejoinder were filed by the respondent and petitioner respectively. The respondents in their counter affidavit stated that the petitioner had sold off his entire share holdings to the other directors and had received full consideration therefor. In his rejoinder the petitioner denied even entering into such a sale as alleged in the counter affidavit and claimed that the documents relied upon by the respondents were false and fabricated. J.M. No. 1 of 2002 and C.M.A. No.1587 of 2003 3. This is a petition under section 309 read with section 305 of the Companies Ordinance, 1984 filed by M. Masood Butt for winding up of S.M. Corporation (Pvt.) Ltd. inter alia praying therein for appointment of a Liquidator to take over the assets and accounts of the Company including all
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assets of the respondents that have been secured and made from the funds of the company. Counter affidavit/objections have been filed on behalf of the respondent company whereby it denied all averments made in the petition. Petitioner No.1 has filed a. Rejoinder to the counter affidavit wherein he denied the averments made by the respondents and reiterated the contents of the main petition. C.M.A. No.1587 of 2003 4. Muhammad Mohsin Butt who is the petitioner in J.M. No.3 of 2001 has moved this application under Order 1, rule 10, C.P.C. on similar grounds praying to join in as an Intervenor in J.M. 1 of 2002. This application is being opposed by all the parties on the same grounds as those taken by them as respondents in J.M. No.3 of 2001. 5. The Petitions Nos.3 of 2001, 1 of 2002 and the C.M.A. No.1587 of 2003 being connected with each other were heard together. J.M. No.23 of 2001 6. This is a petition under section 152 of the Ordinance filed by Khadim Ali Shah Bukhari & Co. Ltd. for rectification of the Register of the Members and for entering their name as Member claiming to be the holder of 1,800,000 shares having purchased the same from the respondent No.12 and amending Form "A" of Messrs National Technology Development Corporation Limited, the respondent No.1 company. In reply respondents Nos.1, 2 and 12 have filed their counter affidavits while respondent No.11 filed an affidavit adopting the counter affidavit/reply filed by the respondent No.2 whereas respondents Nos.13 to 15 have filed their comments. Respondents Nos.1, 2, 11 and 12 inter alia denied the averments made in the petition and stated that the shares said to be in possession of the petitioner were not issued by the company and that the respondent No.12 had never sold them to the petitioner. J.M. No.48 of 2000 7. This is a petition under sections 161, 152 read with sections 290 and 233 of the Ordinance filed by Rauf Baksh Qadri and it also pertains to National Technology Development Corporation Limited praying therein for directions to the respondents to convene an Extraordinary General Meeting (EOGM) of the members for holding election of the Directors on the basis of their shareholding; and for rectification of the Register of Members (ROM) in line with last filed Form-A by the respondent No.1 based on the transactions recorded in the petition. The respondents Nos.1 and 2 filed their counter affidavit and denied that the petitioner owned 6,698,365 shares as claimed in the petition; and submitted that ROM did not confirm his claim. 8. The Petitions Nos.23 of 2001 and 48 of 2000 are connected and therefore, were heard together. 9. In the hearing of the above petitions, the Counsel appearing for the respondents raised a common plea that the disputes involved in the Petitions and the C.M.A. were intricate questions of facts which could only be decided in a full-fledged inquiry in a civil suit and not through these petitions which were to be adjudicated in a summary procedure under subsection (3) of section 9 of the Ordinance. Their contentions, in other words, is that section 9 of the Ordinance provides that all proceedings are to be taken in a summary manner, and as a result the questions raised by the petitioners/Intervenors cannot be decided merely on the pleadings submitted by the parties. According to them, under the Ordinance evidence is not to be recorded and no in depth inquiry, like in a civil suit, could be conducted. They referred to a number of cases from both Indian and Pakistani jurisdictions in which it was held that where intricate question of facts were involved, the parties ought to be directed to resolve their disputes through regular suits. 10. In view of the submissions of the Counsel for the respondents, as and when any dispute or controversy as to the facts has been raised by the respondents, this Court had no option but to dismiss the petition and to direct the parties to approach the Civil Court. It was observed that
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invariably in all cases presented to the Court, one or another fact was always disputed or controversial; which meant that this Court, without applying its mind and entering into inquiry/investigation in regard to those disputed facts, was to direct the parties to first get a decree from the Civil Court and its hierarchy which would take a period of two to three decades, and then to come back to this Court for the redressal of their original grievance. If this proposition was to be accepted, in my humble opinion it would result in a serious contradiction, as on the one hand there is an Ordinance, comprising of 514 sections, which has been enacted exclusively for dealing with controversies and disputes between the members and members and companies etc. as early as possible but not later than 90 days under section 9, while on the other hand almost in every matter where the facts were controverted by the other side, the Court would retract its jurisdiction from the matter, and refer it to the Civil Court. Keeping the above incongruity in n id, I framed the following questions:-- (1) What is the scope of section 9(3) vis-a-vis the other sections of the Ordinance, namely 152, 290 a I 506 etc., while the Court adjudicates the matter the basis of facts? (2) Whether in summary proceedings the Court can embark upon recording evidence and decide the question of title of shareholders in a petition under section 152 of the Ordinance, or should it direct the parties to have the same decided through civil suit? (3) What is the import of the cases of Latif Ansari and another v. Pakistan Industrial Promoter Ltd. 1988 CLC 1541 and Industrial Development Bank of Pakistan v. Sarelo Cement Ltd. Company 1993 CLC 1540? 11. The learned counsel were asked to assist the Court and Mr. Badaruddin Vellani a senior Counsel of this Court was appointed to act as amicus curaie. Mr. Vellani argued and in his written notes submitted that:-- (i) The Court having jurisdiction under the Ordinance is, by virtue of section 7(1) thereof, the High Court at the place where the registered office of the company is situated (the "Court"). While the Federal Government may, by notification in the official Gazette, empower a Civil Court to exercise the jurisdiction conferred by the Ordinance on the Court, no such notification has as yet been issued by the Federal Government. (ii) Section 9(1) of the Ordinance requires that all matters coming before the Court under the Ordinance should be disposed of, and judgment. should be pronounced, as expeditiously as possible and in any event within 90 days. It has been held that the 90 days period is merely directory and not mandatory. See Punjab Lamp Works Limited v. Investment Corporation of Pakistan 1988 CLC 2127 (Karachi). (iii) Section 9(3) of the Ordinance further requires that the Court should follow the summary procedure. That subsection reads as follows:-- In the exercise of its jurisdiction as aforesaid, the Court shall, in all matters before it, follow the summary procedure. (iv) The expression "summary procedure" is not defined or explained in the Ordinance. (v) Section 260 of the Code of Criminal Procedure, 1898 permits certain offences to be tried in a "summary way" and considers matters tried in the summary way as "summary trials" and decided "summarily". The expressions summary way, summary trial and summarily are not defined or explained in the Code, but cases under this section suggest that "as a rule, summary procedure should be confined to cases of simple nature where not much evidence is needed. It is inappropriate for cases of a complicated or serious nature." (Page 1319 The Code of Criminal Procedure, Volume II, Revised and Enlarged Edition 2000, by Shaukat Mahmood and Nadeem Shaukat, Note 4 under section 260). (vi) The procedure under Order 37 of the Civil Procedure Code, 1908 for the enforcement of rights with respect to negotiable instruments is termed as a summary procedure. However, the rules
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under that order do not state that the Court is required to follow a summary procedure. Under this order the defendant has to seek the leave of the Court to defend the suit, which leave is granted where the defendant is able to show that he has a probable defence and may be granted unconditionally or conditionally. Also, rule 7 of that Order provides that save as provided in the earlier rules of that Order, the procedure to be followed is the same as the procedure in suits instituted in the ordinary manner. (vii) The expression "summary proceedings" is definded in the following two dictionaries as:-- (a) Black's Law Dictionary (Sixth Edition, page 1204, Second Column):-- Any proceeding by which a controversy is settled, case disposed of, or trial conducted, in a prompt and simple manner, without the aid of a jury, without presentment or indictment, or in other respects out of the regular course of the common law. In procedure, proceedings are said to be summary when they are short and simple in comparison with regular proceedings: e.g. conciliation or small claims Court proceedings as contrasted with usual civil trial. (b) P. Ramanatha Aiyar's The Law Lexicon (2nd Edition, Reprint 2002, page 1835):-- "Summary": Performed or effected by a short method; done without delay; carried out rapidly by the omission of certain formalities: "Summary Jurisdiction": In English law the grant of "summary jurisdiction", or the decision of matters in a "summary manner", implies some substitution of a short and quick remedy instead of, or as an alternative to, the more elaborate process of the common law; "Summary proceedings": Proceedings have been classified as regular or summary. When a Court acts or professes to act upon common-law principles, its proceedings are called regular; and not summary, however, expeditiously it may act; but when a Court of common-law jurisdiction is by some law authorized to act differently from the common-law mode it is called a summary proceeding, a summary proceeding being defined to be a form of trial in which the established formal course of a legal proceeding is disregarded. (viii) Thus, subsection (3) of section 9 of the Ordinance merely directs the Court to conduct the case before it under the Ordinance in a manner which is expeditious and simple, without having to follow all the procedures required in the case of a regular suit. This, however, does not mean that the Court cannot record evidence and make all the inquiries which it may consider necessary or expedient for arriving at a decision in the case before it. (ix) Section 152 of the Ordinance grants to the Court the power to rectify the share register, which is required to be maintained by a company under section 147 of the Ordinance and in which is entered the names, shareholdings and other particulars of the shareholders of that company and which is prima facie evidence of the shareholders of the company and the number of shares held by them (section 155 of the Ordinance). This section provides as follows:-- (1) If:-- (a) the name of any person is fraudulently or without sufficient cause entered in or omitted from the register of members or register of debenture-holders of a company; or (b) default is made or unnecessary delay takes place in entering on the register of members or register of debenture-holders the fact of the person having become or ceased to be a member or debenture-holder; the person aggrieved, or any member or debenture-holder of the company, or the company, may apply to the Court for rectification of the register. (2) The Court may either refuse the application or may order rectification of the register on payment by the company of any damages sustained by any party aggrieved, and may make such order as to costs as it in its discretion thinks fit. (3) On any application under subsection (1) the Court may decide any question relating to the title
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of any person who is a party to the application to have his name entered in or omitted from the register, whether the question arises between members or debenture-holders or alleged members, or debenture-holders, or between members or alleged members, or debenture-holders or alleged debenture-holders, on the one hand and the company on the other hand and generally may decide any question which it is necessary or expedient to decide for rectification of the register. (4) An appeal from a decision on an application under subsection (1), or on an issue raised in any such application and tried separately, shall lie on the grounds mentioned in section 100 of the Code of Civil Procedure, 1908 (Act N of 1908):-- (a) if the decision is that of a Civil Court subordinate to a High Court, to the High Court; and (b) if the decision is that of a Company Bench consisting of a Single Judge, to a Bench consisting of two or more Judges of the High Court. (x) Thus, where the name of a person is entered in or omitted from the register, fraudulently or without sufficient cause, or where the fact that a person has become or has ceased to be a shareholder is not entered in the register or where there is a delay in making such entry, then the person aggrieved or any shareholder or the company itself may apply to the Court for the rectification of the register. The Court may on considering such an application order the rectification of the register, direct payment by the company of damages suffered by the aggrieved party, and make such other orders as it may in its discretion think fit. In deciding the application the Court may also decide any question relating to the title of any person who is a party to the application. Such questions may be decided whether relating to disputes between shareholders or between alleged shareholders or between shareholders or alleged shareholders and the company. The Court is also empowered to decide any question which it is necessary or expedient to decide in connection with the rectification of the register. (xi) All of the above questions have to be decided in a summary way as directed by section 9(3) of the Ordinance. That is, the Court must decide the above questions in an expeditious and simple manner. This, however, does not mean that the Court should not apply its mind to the matters in hand or that the Court cannot take into account all available evidence or that the Court should not or cannot make all such inquiries as it deems necessary to decide the matter. (xii) The corresponding section in the repealed Companies Act, 1913 (the "1913 Act") was section 38. That section provided as follows: (1)If: -- (a) the name of any person is fraudulently or without sufficient cause entered in or omitted from the register of members of a company; or (b) default is made or unnecessary delay takes place in entering on the register of members the fact of the person having ceased to be a member; the person aggrieved, or any member of the company, or the company, may apply to the Court for rectification of the register. (2) The Court may either refuse the application or may order rectification of the register and payment by the company of any damages sustained by any party aggrieved, and may make such order as to costs as it in its discretion thinks fit. (3) On any application under section the Court may decide any question relating to the title of any person who is a party to the application to have his name entered in or omitted from the register, whether the question arises between members or alleged members, or between members or alleged members on the one hand and the company on the other hand; and generally may decide any question which it is necessary or expedient to decide for rectification of the register: Provided that the Company may direct an issue to be tried in which any question of law may be raised; and an appeal for the decision on such an issue shall lie in the manner directed by the Code of Civil Procedure, 1908, on the grounds mentioned in section 100 of that Code.
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(xiii) Section 38 of the 1913 Act is almost identical to section 152 of the Ordinance. The principal difference is that section 152 of the Ordinance contains no reference to debenture holders and the proviso to subsection (3) of section 38 of the 1913 Act which does not appear in section 152 of the Ordinance, except for the latter portion of the proviso which is now more elaborately set out in subsection (4) of section 152 of the Ordinance. The first part of the proviso to section 38(3) of the 1913 Act contemplates the possibility of a matter on a question of law being tried separately from the application under that section for the rectification of the register. Similarly, section 152(4) of the Ordinance while making provision for appeals, refers to the possibility of some issue which arises in the application under section 152 of the Ordinance being tried and decided separately. Thus, both section 38 of the 1913 Act and section 152 of the Ordinance contemplate the possibility of an issue which arises in the course of an application for rectification of the register to be tried and decided separately from the application for rectification. (xiv) The corresponding sections in the English and Indian Companies Act provide as follows:-- (a) In England: section 359 of the Companies Act 1985 (the "English Act"):-- (1) If:-- (a) the name of any person is, without sufficient cause, entered in or omitted from a company's register of members, or (b) default is made or unnecessary delay takes place in entering on the register the fact of any person having ceased to he a member, the person aggrieved, or any member of the company, or the company, may apply to the Court for rectification of the register. (2) The Court may either refuse the application or may order rectification of the register and payment by the company of any damages sustained by any party aggrieved. (3) On such an application the Court may decide any question relating to the title of a person who is a party to the application to have his name entered in or omitted from the register, whether the question arises between members or alleged members, or between members or alleged members on the one hand and the company on the other hand, and generally may decide any question necessary or expedient to be decided for rectification of the register. (4) In the case of a company required by this Act to send a list of its members to the Registrar of companies, the Court, when making an order for rectification of the register, shall by its order direct notice of the rectification to be given to the Registrar. (a) In India: section 155 of the Companies Act, 1956 (the "Indian Act"):-- (1) If:--- (a) the name of any person (i) is without sufficient cause, entered in the register of members of a company; or (ii) after having been entered in the register, is, without sufficient cause, omitted therefrom; or (b) default is made, or unnecessary delay takes place, in entering on the register the fact of any person having become, or ceased to be, a member; the person aggrieved, or any member of the company, or the company, may apply to the Court for rectification of the register. (2) The Court may either reject the application or Order rectification of the register; and in the latter case, may direct the company to pay the damages, if any, sustained by any party aggrieved. In either case, the Court in its discretion may make such order as to costs as it thinks fit. (3) On an application under this section, the Court:-- (a) may decide any question relating to the title of any person who is a party to the application to have his name entered in or omitted from the register, whether the question arises between members or alleged members, or between members or alleged members on the one hand and the company on the other hand; and
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(b) generally, may decide any question which it is necessary or expedient to decide in connection with the application for rectification. (4) From any order passed by the Court on the application, or on any issue raised therein and tried separately, an appeal shall lie on the grounds mentioned in section 100 of the Code of Civil Procedure, 1908 (5 of 1908):-- (a) if the order be passed by a District Court. to the High Court; (b) if the order be passed by a Single Judge of a High Court consisting of three or more Judge';, o a Bench of that High Court. (5) The provisions of subsections (1) to (4) shall apply in relation to the rectification of the register of debenture-holders as they apply in relation to the rectification of the register of members. (xv) The provisions of the corresponding sections in the English Act and the Indian Act are materially similar to the provisions of section 152 of the Ordinance, except that section 152 of the Ordinance (as did section 38 of the 1913 Act) in addition to contemplating entries or omissions from the register "without sufficient cause" specifically contemplates "fraudulent" entries or omission from the register. (xvi) Neither the 1913 Act nor the English Act nor the Indian Act made any provision for the manner in which the application for rectification of the register or any other application under those statutes were required to be decided. That is, the application for rectification was not required to be decided summarily, nor was the Court obligated to follow the summary procedure while deciding such applications. (xvii) Palmer's Company Law, 24th Edition, Volume 1, at page 809 paragraph 51-14, provides an illustrative list of cases in which orders have been made under section 390 of the English Act as follows:-- Where the applicant was induced to take shares by misrepresentation; where the company improperly neglected to register a transfer; where shares had been issued to the applicant as paid up without filing a contract in compliance with what is now section 88 of the Act of 1985; where shares were improperly forfeited; where the company, acting on a forged transfer, had removed the name of the applicant, the real owner; where there was a dispute between the vendor and the purchaser of shares; where shares had been irregularly allotted to an applicant; where the signatory of an underwriting letter not constituting a contract had been placed on the register; where a shareholder, who made an ultra vires surrender of his shares to the company, claimed to have his name reinstated. In the same book at pages 810 to 811, paragraph 51-15 the following statement is made in regard to the procedure in Scotland under section 390 of the English Act:-- Procedure in Scotland Section 359 is regarded as a summary procedure available as an alternative to the ordinary jurisdiction of the Courts. It is normally invoked by petition at the instance of the company, a registered member or a person claiming to be registered. It is always for the Court to determine, in the exercise of its discretion, whether it would be more convenient to dispose of the issue raised in the petition process or by ordinary action. A petition under section 359 is, however, appropriate where the issues raised are simple and do not require complex investigation of the facts. (xviii) In India since 1991 the Company Law Board, and thereafter since 2002, the National Company Law Tribunal (which is the successor to the Company Law…
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