Determination of Factual Controversy by Company Judge

DETERMINATION OF FACTUAL CONTROVERSY DETERMINATION OF FACTUAL CONTROVERSY BY COMPANY JUDGE By Muhammad Shafiq Civil Judge Ist Class, Rahim Yar Khan The beauty with law is that its keeps on moving with the needs of time. Mostly "Law of Precedents" caters these needs. A legal system requires that precedents, once established, receive a significant degree of judicial respect and deference. Frequent, arbitrary, or capricious overruling of established precedents would destroy the foundation of the system. On the other hand, absolute adherence to precedent would prevent the correction of manifest errors. Therefore, the survival and success of a precedential system depends upon the maintenance of a reasonable balance between stability and change. The value of law system is that the law can be adapted to situations that were not contemplated by the legislature. Usually the legislators use legal terms in very broad and general sense. Courts decide what these general terms mean when they hear specific lawsuits or "cases". The legislatures pass very specific statutes, and these are applied by the courts. Each judge who decides a case looks to the statute, rather than the previous cases, for guidance. In theory, in ambiguous cases each judge is free to reinterpret the statute as necessary to fit the facts of the specific case. Although this interpretation need not draw on previous decisions by other judges. The judges do try to ensure some consistency in the application of the law by taking into consideration previous court decisions but they may deviate from the same if consider fit. Generally, there are two modes of trials in the courts or tribunals, i.e. regular trials or summary trials. Different laws provide different mode of trials. The Company Law Ordinance, 1984 postulates mechanism of summary trial before Company Court (judge). For ready reference, section 9(3) of the Ordinance ibid is reproduced: "In the exercise of its jurisdiction as aforesaid, the Court shall, in all matters before it, follow the summary procedure." In a recent landmark judgment titled Mian Javed Amir and others v. United Foam Industries (Pvt.) Ltd., Lahore and others cited as (2016 SCMR 213), the august Supreme Court of Pakistan has laid down that the Company Judge of High Court, while exercising company jurisdiction, can record evidence and decide factual controversies as well. Precise facts of the stated case are that the Appellants were shareholders to the extent of 38% in the referred Company. They challenged alleged transfer of said shares by the respondents before the company Judge praying for winding up of the company and rectification of registers of - shareholders on the ground that the respondents had manipulated the record and made bogus entries in the register qua alleged transfer. The respondents denied such allegation and levelled counter allegation in written statement. The Company Judge decided to refer the matter to SECP to appoint an Inspector for investigation into the stated allegations. Two ICAs filed by the respondents against the said order were allowed, holding that the Civil Court would be the appropriate forum for adjudication of the controversy between the parties. CMs of the appellants against the said order were also dismissed. Earlier for determination of factual controversy, some Company Judges in Light Metal and Rubber Industries (Pvt.) Ltd. v. Sarfraz Quadri (2011 CLD 1485), Mian Miraj Din v. Brothers Steel Mills (1996 CLC 516), Brothers Steel Ltd and others v. Mian Miraj Din (PLD 1995 SC 320) and Attock Refinery Ltd v. Executive Director Enforcement and Monitoring Division, SECP (PLD 2010 SC 946) referred matters to the SECP to appoint an Inspector under sections 263 and 265 of the Company Ordinance, 1984 because they held that in view of this special law, matters pertaining to companies could not be referred to Civil Courts. Some Superiors Courts of Pakistan and India in Lahore Race Club through Secretary v. Raja Khushbakhat-ur-Rehman (PLD 2008 SC 707), Muhammad Aslam Javed v. Malik Ijaz Ahmed and another (2003 YLR 2150), Muhammad Ahmed v. Associate Engineering Concern (Pvt.) Ltd. (1998 CLC 426), Messrs Ammonia Supplies Corporation Ltd v. Messrs Modern Plastic Containers (Pvt.) Ltd. (AIR 1998 SC 3173) and Messrs Ammonia Supplies Corporation Ltd v. Messrs Modern Plastic Containers (Pvt.) Ltd. (AIR 1994 Delhi 51) respectively held that the findings in regard to ownership of shareholding could only be determined by Civil Courts. However, august Supreme Court of Pakistan in Javed Amir and others v. United Foam Industries (Pvt.) Ltd., Lahore and others. Cited as 2016 SCMR 213 has modified the above referred principles and has laid down the following principles: (1) Section 9(3) of the Company Ordinance, 1984 does not abridge or curtail the power of the court to record oral evidence or receive documentary evidence in the proceedings before it to determine the issues relating to "Company" or its members covered under the Ordinance ibid. (2) All matters relating to companies irrespective of the facts whether factual controversy involved or not is required to be tried by a court having jurisdiction under the Company Ordinance, 1984. (3) Mere insertion of the term "summary procedure" does not debar the Company Judge from receiving evidence in cases where factual controversy is involved. The court having jurisdiction under the Company Ordinance, 1984 can receive evidence in cases it thinks appropriate in the circumstances of the case. (4) The object of section 152 (Powers to Court to rectify register) of the Company Ordinance. 1984, which relates to factual controversy, cannot be achieved without entering into in-depth investigation and recording of evidence. (5) There is no legal bar for a Company Court to enter into factual inquiry, framing of issues for determination and recording of oral as well as documentary evidence in coming to the just conclusion of the case. (6) Power to appoint an Inspector under sections 263 and 265 of the Company Ordinance, 1984 vests with SECP on an application by a member of the company or the Registrar of the Commission. The areas in which Inspector was directed to investigate falls within the jurisdiction of the Company Court and can be investigated and looked into by a Company Judge himself. (7) The dictionary meaning of the term "Summary Proceedings" referred to in section 9 of the Company Ordinance, 1984, is "to be disposed promptly in simple manner out of regular course of the common law". This term by itself does not impose any restriction on the forum from recording evidence to reach a final conclusion. Section 9 of the Ordinance of 1984 does not exclude the jurisdiction of the court to decide the controversial facts. Now Article 10-A of The Constitution of Islamic Republic of Pakistan guarantees fair trial and due process. Golden principle of law is that each party should be given full opportunity to prove its stance with oral as well documentary evidence. The august Supreme Court in the said recent case has not only defined the power of the Company Court but it has also clearly widened the scope of the Company judge to enter into in-depth investigation and recording of evidence in the proceedings before it to determine the issues relating to "Company" or its members covered under the Company Ordinance, 1984.