1996 PLP 1943 (MLD)

It may be mentioned here that the law is enacted and rules are framed to p be complied with, and not to be violated. The contention of the counsel for the respondents that even if any irregularity was committed it caused no prejudice to the petitioner, is not tenable. It is pertinent to mention here the report of the Official Assignee, who was appointed by a consent order dated 27‑6‑1993 passed in J.M. No. 47 of 1993, to hold the General Body Meeting under his supervision. According to his report-dated 31‑7‑1993, the objection of the petitioners in regard to the election of a Chairman for the General Body was rejected by Mr. Gulzar Ahmed and Mr.Tanvir Ahmed on the ground that it was not necessary. Further, that out of 23 ballot papers, 7 ballot papers were rejected which included that of Mr. Munir Ahmed and the Central Cotton Mills and that in spite of several reminders by the Official Assignee, the Minutes of the meeting were not made ready by the respondents. He further submitted that in spite of the fact that the Punjab Cooperative Board for Liquidation had issued three proxies in favour of Mr. Gulzar Ahmed and Mr. Munir Ahmed during the meeting of 29‑7‑1993 the proxy of Mr. Gulzar Ahmed was allowed while that of Mr. Munir Ahmed was disallowed. The Official Assignee also pointed out that Firdous Spinning and Weaving Mills Limited is under liquidation and the Official Assignee, who is also Official Liquidator in respect of the said company, informed Mr. Tanvir Ahmed but in spite of this, 'a proxy was issued in favour of Mr. Tanvir Ahmed. The above facts indicate the mala fides of the action of the respondents vis‑a‑vis the petitioners. In my opinion the genesis of both these petitions and the one which already stands disposed of, lies in the transfer of 517,400 shares of the petitioner No.1 in favour of the respondent No.1 for which a suit, being Suit No.227 of 1991, is already pending in this Court. All the disputes which have arisen from time to time resulting in the different petitions now pending, can be resolved one way or the other, if Suit No. 227 of 1991 is decided. Mr. Muhammad Ali Sayeed has relied on the following cases: (1) (1988) 64 Company Cases 19, (2) (1937) 7 Company Cases 22 (3) (1949) 19 Company Cases 175 In the case of Hector Whaling Limited (1937) 7 Company Cases 22, it was decided that the phrase "not less than 21 days' notice" means 21 clear days exclusive of the day of the service and exclusive of the day on which the meeting is to be held. In the case of Nagappa Chettiar v. Madara Race Club (1949) 19 Company Cases 175, it was observed that the period of 21 days will be excluding the date of service of notice and the date of the meeting. The other cases supporting the same view are: Col. Kuldip Singh Dhillon and others v. Paragon Utility Financers (Private) Limited and others (1988) 64 Company Cases 19 and Calcutta Chemical Company Limited v. Dhiresh Chandra Roy (1985) 58 Company Cases

275. As against the above judgments Mr. Monib relied on the case of Abdul Jabbar v. Haryana Asbestos Cement Industries 1987 CLC 726 wherein it was observed that "Legislature appears to have consciously specified the terminus qua of notice from date of its sending and not from date of its delivery or receipt. While the wording of section 171(1) of the Indian Companies Act, 1956 are: "A general meeting of a company may be called by giving not less than twenty‑one days' notice in writing". The wording of section 158(3) of the Companies Ordinance, 1984 is as under:‑‑‑ "158(3).‑‑‑The notice of an annual general meeting shall be sent to the shareholders at least twenty‑one days before the date fixed for the meeting and, in the case of a listed company, such notice, in addition to its being despatched in the normal course, shall also be published at least in one issue each of a daily newspaper in English language and a daily newspaper in Urdu language having circulation in the Province in which the stock exchange on which the company is listed is situate." Thus, it is clear that the words in the subsection are "shall be sent to the shareholders at least twenty‑one days before the date fixed for the meeting. But Article 65 of the Articles of Association respondent No. 1 is "not less than twenty‑one days' notice (exclusive of the day on which the notice is served or deemed to be served) but inclusive of the day for which notice is given specifying the place, day and hour of the meeting..." The wordings of these sections explain the difference of opinion in the different judgments given by the Courts in India and Pakistan. In the present case though no evidence has been produced by the respondents in support of their contention but it can be presumed that the notice published in newspaper must have been sent a day earlier for publication. As such in my opinion the requirement of section 158(3) were partly complied with as far as the publication is concerned. But as I have already said hereinabove that no supporting material is on record to show that the individual notices were sent to all the directors shareholders as required under section 158(3) of the Companies Ordnance. The law has provided penalty for non‑compliance of any of the provisions of section t 78 and as such the compliance is mandatory. The next contention of Mr. Sayeed was that the notice did not contain the election of Chairman to preside over the proposed meeting. Since the meeting was presided over by a non‑elected Chairman the business conducted during the meeting was invalid. He relied on the case of Satesh Chandra Bank and others v. Dacca Jute Mills Limited PLD 1968 Dacca 610 where a similar situation arose and it was held that:‑‑‑ "The affidavit by respondent No.2 clearly avoids the specific denial of the statement of the petitioners that petitioner No.2 proposed that the Chairman be elected for the purpose of conduct of the Annual General Meeting and, therefore, I am convinced that the statement made by the petitioners is true and in these circumstances respondent No.2 could not have taken the chair by virtue of the provisions of Article

78. Therefore, he could not automatically take the chair under the provision of the Article 78 of the Articles of Association. I therefore, hold that the impugned General Meeting having been presided over by person not entitled to do so was not valid Annual General Meeting. " Section 177 of the Companies Ordinance provides for the retirement of directors who are subject to election and thereafter follow the procedure as laid down under section 180 of the Companies Ordinance. The provisos to this section are:‑‑‑ "Provided that the directors so retiring shall continue to perform their functions until successors are elected: Provided further that the directors so continuing to perform their functions shall take immediate steps to hold the election of directors and in case of any impediment report the circumstances of the case to the Registrar within fifteen days of the expiry of the term laid down in section 180. " Thus, it is clear that the proviso to section 177 direct to take steps immediately to hold the elections of the directors or if there are any impediments the same should be communicated to the Registrar within fifteen days. No such plea is taken nor the Registrar was informed. It is well‑established principle of law that a proviso has to be read cautiously as it cannot be extended to defeat the parent provision itself. As held in the case of Mst. Surayya Begun v. M.C.B. Limited PLD 1990 Lahore page 4:‑‑‑ "A proviso to any parent provisions has to be read very cautiously and the intended whittling effect thereof cannot be so extended as to defeat the provision itself inasmuch as it is not to be presumed that the Legislature intended to take away by one hand through a proviso what it has basically conferred through the other hand by the parent provision. " In the case of Mrs. Anathalakhni Animal v. Teffeis Barytes Asbestos and Paints Limited (1951) 21 Company Cases 294, it was observed that "there is, besides this, enough on the record to convince us that there are factions among the shareholder of the company and it was directed that meeting be conducted by the person to be appointed by the Court who will preside as its Chairman and shall scrutnise the proxy which were duly deposited in time". In the present case also there are two groups involved in the tussle to get the controlling power and oust the other one and unfortunately they are closely related family members. In such a situation it is further obligatory that all legal requirements are complied with. Article 74 of the Memorandum and Articles of Association provides that in case a meeting is adjourned for more than fourteen days a notice be sent as in the case of original meeting. No such notice was given. A notice of an adjourned meeting is also provided under Rules of Stock Exchange. It can be argued again that the petitioners were party to the proceedings when the meeting was adjourned deferred by the Court. But there are other shareholders also who should have been served with such an adjourned date of the meeting. In the case of Re: West Canadian Collurias Ltd. (1962) 1 All England Law Report

26. Notice of the meeting had been given for the purposes of section 141(2)(5) of the Companies Act, 1948 to all the shareholders except, by inadvertence, to nine shareholders. It was held that "there could be no meeting because it is well‑settled as regards a general meeting that failure to give notice to a single person entitled to receive notice, renders the meeting a nullity". The meeting on 30‑8‑1995 was admittedly, presided over by Mr. Tanvir Ahmed who himself was a candidate. In view of the contention raised by the petitioner and keeping in view of Official Assignee's Report the characteristic of the meetings which was scheduled for 29‑6‑1993 and was adjourned to 30‑8‑1993 are as follows: There is not enough proof that the notices were despatched individually to all the directors/shareholders as provided under section 233(4) of the Companies Ordinance, 1984. The agenda prepared for the meeting did not include the election of the Chairman for the proposed meeting. The director's term though had expired on 31‑3‑1993 but no steps were taken for the election as required under sections 177 and 178(3). The meeting was held under the Chairmanship of an un-elected Chairman. Notice of the adjourned meeting was not issued as provided under Article 74 of the Articles of Association of the respondent‑Company and Rules of the Karachi and Lahore Stock Exchanges. In my opinion, since the requirements of the provisions under the Companies Ordinance are mandatory, the non‑compliance of the same render the meetings held on 29‑6‑1993 and 30‑8‑1993 invalid. On my query the learned counsel for the respondent has stated that although elections were held on the date as directed but the results were withheld as per the order of the Court, and since then no orders have been passed, the same directors whose term had expired on 31‑3‑1993 are continuing to hold the office. In view of the circumstances the proceedings of meeting held on 29‑6‑1993 and of adjourned meeting held on 30‑8‑1993 are declared to be invalid and the respondents are directed to immediately take steps in accordance with the Companies Ordinance and Memorandum and Articles of Association to call for the Annual General Meeting immediately. The Official Assignee is appointed to conduct the said meeting under his supervision. The two J. Miscellaneous Nos.51 of 1993 and 67 of 1993 stand disposed of in terms of the above order. A.A./C‑2/K Order accordingly