1979 PLP 267 (CLC)

(7) new members were not given copies of the Articles of Association.

5. In the comments dated 5-4-1979 to the writ petition the following reasons were given by the respondent for passing the impugned order :- (1) The election programme was not circulated 28 days before the annual general meeting. (2) The list of members eligible to participate in the election was not sent to all the members 28 days before the annual general meeting. (3) The nomination cards were not sent to the members 28 days before the election. (4) The list contained members not eligible for membership.

6. The first three objections in the comments were clearly the result of inquiry held by the respondent subsequent to the passing of the impugned order. Passing of the order of suspension of the proposed election before inquiry thus amounted to putting the cart before the horse. Beside these objections have also been proved to be without merit. I may, therefore, deal with these objections seriatim. 7 The total membership of the petitioner which is entitled to vote is

779. It was stated during hearing that 144 members are those who are not assesses of Income-tax and were ineligible for enrolment as members of the petitioner company. It was contended on behalf of the petitioner that 57 members of this list were not eligible to vote because they had not renewed their membership. This was not rebutted. Out of the remaining 87 members names of 82 persons were supplied through Annexures 'R 1', `R2' and `R3' who had their G.

1. R. and T. R. Numbers. Most of these persons are members since 1975 and only 32 have been enrolled in 1978.

8. The respondent after making the inquiry came out with a list of 12 persons about whom he stated that at least these 12 persons were not income-tax assessees. This was also proved to be incorrect since the assessment orders of at least of them were shown to me as well as to the respondent at the time of the hearing. Regarding the other four it was stated on behalf of the petitioner that they were not available and their assessment orders could not be obtained. From these facts it is clear that the report of the inquiry was incorrect.

9. It is not, however, correct that a person must fill up the column about G. I. R. and T. R. Numbers in his membership form in all cases. Article 2 of the Articles of Association provides that any firm, joint stock company, partnership proprietary concern, associated body or an association of persons engaged in the export, import or any other trade or owning a factory who pays or is liable to pay income-tax shall be eligible for member ship". It is clear from the words underlined by me that the Article clearly contemplates that even those persons who have not been subject to assessment car be enrolled as members if they are assessable to income-tax though not actually assessed. It is not, therefore, necessary that a person applying for membership should be able to show his G, I. R. and T. R. Numbers. This notion was obviously fallacious. However on merits too the objection is proved to be incorrect.

10. About the other objection that 23 of the existing members are not eligible for membership, it was argued that they had their branch officers of Faisalabad. This was not controverted during arguments.

11. In regard to third objection that the applications of 17 members were not genuine reliance was placed upon a query put by the petitioner to those persons. Each of them supported that he was a member and genuine member for that matter.

12. Regarding the fourth objection about change of membership it was stated on the basis of Annexure R. 5 that these changes were made from 1.1-1979 to 31-3-1979 as allowed by Article

5. Reference was made to the receipt book (Annexure `RS') which supported the contention and gave the dates.

13. About the Lyallpur Hosiery Trading Group it was stated that it represented the traders while the All Pakistan Hosiery Manufacturers Association represented the industry. Article 3(c) (i) provides that group membership shall be open to all small groups of trade and industry. It is, therefore, clear that the two groups represented two different groups, i.e. the trade group and the industry group. This membership was not, therefore, in violation of the above Article. Moreover according to the petitioner Lyallpur Hosiery Trading Group is no longer a member since 31-3-1978.

14. The objection about 45 members being not properly seconded is too technical after those persons have been members for some time without any objection by any one in the enrolling body. Thus apart from the fact that only vague objection about there being irregularity in the enrolment of the existing members, when raised by non-members who had no locus stand!, the objections hare been found out as a result of subsequent inquiry without any legal or factual basis.

15. In the comments dated 5-4-1979 certain objections were raised that election programme was not circulated among the members 28 days before the annual general meeting or lists of members eligible to participate were not sent to all members or that the nomination cards were not sent to the members 28 days before the annual general meeting. These objections are said to have been taken by a member, vie. Mr. Makhdoomi during the course of the inquiry held in the month of March 1979. But these were not the points which caused the annual general meeting to be held in abeyance. However, even these points could not be sufficient to attract such an order. Such an objection may be sufficient for setting said the election provided it is considered to be a material irregularity. But it certainly was not an objection calling for wholesale interference with the democratic norms of change of executive. On merits, therefore, the order cannot be sustained and it is absolutely without lawful authority.

16. The learned counsel for the petitioner, however, argued that the respondent has no jurisdiction to pass such an order of interfering with the election before it is held. In this connection he referred to section 9 of the Trade Organizations Ordinance, 1961. He submitted that this section consists of two subsections; one conferring the powers of genera6 control of the affairs of the petitioner Organization by the Central Government and the other dealing with certain specific powers of control conferred upon the Director, Trade Organization. He submitted that the powers conferred by subsection (2) are not attracted to the present facts. Regarding subsection (1) of section 9 also he argued that it does not allow the Central l Government to stay the election since in the absence of non obstante clause the control of the Central Government cannot be contrary to law or the Articles of Association. In this connection he referred to Article 3 which as stated above provides that the election shall be held up to the 31st of December or at most before the 31st of March meaning thereby within 15 months. Section 76 of the Companies Act in its first subsection provides that a general meeting of every company shall be held once at least in every calendar year and not more than fifteen months after the holding of the last preceding general meeting. Section 9(1) according to the learned counsel does not allow the violation of this provision.

17. The Deputy Attorney-General on the other hand referred to several other provisions of the Ordinance with a view to urge that this being a special law and there being non obstante clauses in different sections for example sections 3, 5, 8, 12 and there being indemnity section, vie. section 22, the Ordinance has an overriding effect over all other Statutes including the Companies Act as well as the Articles of Association.

18. This argument of the learned Deputy Attorney-General cannot be accepted. The fact that non obstante clause had been added to only few of the sections, proves that the Legislature did not intend other provisions of the Ordinance to have an overriding effect. Section 22 provides that an order made under this Ordinance shall not be questioned in any Court and no suit, prosecution or other legal proceedings shall lie against any person for anything which is, in good faith, done or intended to be done in pursuance of this Ordinance or any rule or order made or any direction given thereunder. This idemnity section shall not apply to a case where the order made is not an order under the Ordinance or cannot be justified under the Ordinance. If an order is not passed in good faith will not save the person passing the order from a suit it , prosecution or other legal proceedings.

19. Now section 9 deals with the control of the Trade Organization. Section 9(1) provides that all acts and proceedings of a registered trade organization shall be subject to the control of the Director and the affairs of such trade organization shall be managed and conducted in such manner as the Director may, from time to time direct. Subsection (2) lays down that notwithstanding anything contained in any law for the time being in force or in the articles or memorandum of a registered trade organization and without prejudice to the generality of the foregoing provisions the Director may__ (1) require any such trade organization to furnish him with any infor mation, documents and returns relating to the affairs of such trade organization or to answer orally or otherwise any query with respect thereto (2) inspect any office of the trade organization ; (3) attend any meeting of the general body or the executive committee of such trade organization ; (4) watch and supervise any election held by or for the purpose of electing persons to the Executive Committee or other body ; (5) annul the election within 30 days of the announcement of the result if he is satisfied that upon his own knowledge or after such investigation as he may think fit to make or upon a report made by a person authorised by him to make investigation for the purpose, that the irregularities in the conduct of such election justify such annulment and by order in writing direct fresh election to be held within such period as may be specified in the order ; (6) cancel, suspend or modify any resolution or any decision taken by the general body of the Executive Committee of such organization if the same be not in conformity with the provisions of the articles or memorandum or any rules or regulations made thereunder. (7) remove or suspend for a specified period any member or remove from membership register the name of any member provided that the powers for removal or suspension shall not 1,Ie, exercised except " with the approval of the appropriate Government.

20. From these provisions it is clear that power of control of the Director in subsection (1) is .not widened by use of a non obstante clause as has been done in subsection (2) of section

9. The specific provisions of subsection (2) are such which may conflict with the Companies Act or with the Articles or Memorandum. For this reason they have been given overriding effect. But no such effect has been given in subsection (1). The power of control in section 9 except as provided in subsection (2) thereof must be in conformity with other laws as well as the Articles of Association. Thus the power of control in the management and conduct of business of the trade organization cannot be exercised for example to directing the trade organization to enroll members who are not eligible or to refuse to enrol members who are eligible for membership. It cannot also cut down the democratic procedure of management provided by the Articles of Association. In short the control in the affairs of the trade organization shall be subject to Articles of Association also except when those are in conflict with what is provided in subsection (2). This can be the only reasonable interpretation of section

9. The power to stay the election or holding it in abeyance not being there in subsection (2), it cannot be exercised in a manner contrary to what is provided in section 76 of the Companies Act or even the Articles of Association.

21. It may be appreciated that in subsection (2) of section 9 there is power to cancel, suspend or modify any resolution adopted or decision taken by the general body or the Executive tote trade organization but even this power can be exercised if the resolution or decision is not conformity with the provisions of articles of or any rules or regulations made thereunder or that the requirements of the provisions of the articles or memorandum or any rules or regulations made thereunder have not been complied with while adopting such resolution or taking such decision or such resolution or decision is contrary to any rule, regulation, direction or instruction issued by the Director or by the appropriate Government to such trade organization. The power of suspension of a particular resolution cannot, therefora, be exercised arbitrarily. It can be exercised only when it is contrary to articles or memorandum or rules either made under them or order etc. issued by the Director or by the appropriate Government. This provision cannot be invoked in the present case since there is neither any violation of the articles or memorandum or any rules or regulations made thereunder nor are there, any directions or rules or instruction issued by the Director or by the appropriate Government which might have been said to be violated.

22. It is clear from subsection (2) that up to the holding of the election the power of the Director is only to watch and supervise or cause to watched and supervised any election. The interference in the election by its annulment can be exercised after the election and not before and for that also a time limit of 30 days is fixed. If the law had visualised the suspension of the election, a specific provision to that effect would have been added.

23. Again the election cannot be annulled arbitrarily but can be annulled only if irregularities justifying annulment have been committed in the conduct of election. This clearly means that the election can be annulled only for material irregularities. Thus if a person was not served with the list members and has never complained about it, on the other hand his complaint is on some other matter, the Director cannot annul the election on the ground of such an irregularity since it will not affect the result of the election. Instances of such irregularities which do not materially affect the election can be multiplied. If an election cannot be annulled for such an irregularity, I do not see how it can be suspended on allegation of commission of such irregularities.

24. The order keeping the general meeting in abeyance is therefore, without lawful jurisdiction and is quashed. It was on this basis that in my short order dated 11-6-1979 I had passed the following order :-- "For reasons to be recorded later the writ petition is allowed with costs and the order of the respondent dated 21-2-1979 is declared as being without lawful authority." K. M. A. Petition allowed.