P L D 1952 Lahore 465 (PLP)

RAHMAN, J.‑The facts giving rise to this Letters Patent Appeal are as follows :‑ The appellant, Abdus Salam, is a share‑holder in the Asiatic Commercial Bank, Ltd. Lahore, which is under volun tary liquidation. Abdus Salam, applied under section 208 and 213 of the Companies Act, 1913, (hereinafter referred to as the Act), praying inter alia that the Voluntary Liquidator Mian Muhammad Sharif, be removed from office. Cornelious, J. by order dated the 13th of November, 1951, declined to accede to the prayer for the removal of the voluntary liquidator, but directed that the latter should call a meeting of the creditors for the purpose of rectifying any omission that may have occurred in respect of section 209‑A of the Companies Act. Sardar Zafrullah, Advocate, was nominated to act as chairman of the meeting which was to be held in the office of the Bank at 136 Anarkali, Lahore. The liquidator was directed to present a full statement of the company's true state of affaire together with a list of the creditors of the company and the estimated amount of their claims, at the meeting which was also to consider a resolution for confirmation of Mian Muhammad Sharif as voluntary liquidator. The meeting was duly held and its proceedings were reported to this Court. Sardar Zafrullah reported that the resolution confirming the appointment of voluntary liquidator had been passed at this meeting. Objec tions were taken on behalf of Abdus Salam to the validity of the proceedings of this meeting before Shabir Ahmad, J. The learned Judge dismissed the objections by order dated the 18th of February, 1952, and hence this Letters Patent Appeal. There were thirteen persons present in the meeting, eight of whom voted against the resolution confirming the appoint ment of the voluntary liquidator and. five in favour of it including the liquidator himself and one, Ahsan Mahmud. The resolution in respect of the confirmation of the liquidator was moved by Mr. Zaidi, a creditor, and seconded by Mr. Ahsan Mahmud. Mr. Allah Din Malik on behalf of the appellants has raised the following contentions :‑

1. The voting at the meeting was by show of hands and, therefore, the proxies held by those present could not be counted for the determination of the result of the resolution.

2. Mr. Ahsan Mahmud was not a creditor at the relevant date, though he held proxies for three other creditors. His competency to hold those proxies and to attend the meeting was challenged, as he was not a creditor himself.

3. The liquidator's action in canvassing for and obtaining proxies from certain creditors in a matter which concerned his own appointment was illegal or at least irregular. All these points had been taken before the learned single judge, but the contentions raised were negatived. The argument of Mr. Allah Din Malik with respect to the first point is that under the general law of meetings, if voting is by show of hands, every person present and voting should be considered to have one vote only, till a poll is demanded in which case, proxies could also be counted. Learned counsel has referred to‑Earnest v. Loma Gold Mines Limited (1897 1 Chancery I) in this connection. In that case at a meeting of the share‑holders of a company, the articles of which allowed voting by proxy, and voting actually took place by a show of hands, it was held that each person having proxies must be counted as entitled to a single vote under section 51 of the English Companies Act. It was laid down further that till a poll is demanded the person present is only counted once how ever numerous may be those whom lie represents. The case is, clearly, distinguishable as it related to a meeting of share holders and not of creditors and was decided on the basis of the provisions of tile English Companies Act and the rules framed thereunder. Learned counsel also referred us to section. 81 of the Act which pertains to meetings of the company and not of creditors section 239 of the Act appears to be relevant in connection with a creditors' meeting and that specifically provides in sub section (2) that in the case of creditors, regard shall be had to the value of each creditor's debt. In order, therefore, to determine the wishes of the creditors, it will not suffice to merely allow each creditor one vote. The amount due to each creditor will also have to be taken into consideration. The rules framed by this Court by virtue of powers conferred by section 246 of the Companies Act, further provide in rule 77 that a creditor or a contributory may vote either by person or by proxy. It seems to us, therefore, that not legitimate objection could be taken to the proxies given by other creditors being considered at this meeting and that the mere counting of heads of those present, would really give no indication of the wishes of the creditors in the matter. The argument advanced by Mr. Allah Din Malik that as the meeting was deemed to have been held with reference to the provisions of sections 209‑A, 209‑B and 209‑C of the Act, section 239 was excluded from consideration, does not have much force. Section 174 of the Act is a general section which appears to cover the meeting called under the orders of Cornelius, J. in this case, as the learned judge thought it neces sary to ascertain the wishes of the creditors re : the appoint ment of the voluntary liquidator. Rule 66 framed by this Court further provides that at a meeting of creditors, a resolution shall be deemed to be passed when a majority in value of the creditors present personally or by proxy and voting on the resolution, have voted in its favour. In the face of these provisions it is idle to contend that the creditors present should have been allowed to determine the question by mere show of hands giving each person a single vote. With regard to Mr. Ahsan Mahmud, it was contended that it was his wife who was originally the creditor of the company and not he himself. The resolution for winding‑up of the company was passed on the 18th of September, 1949. It was argued that on that day there was no transfer by his wife, Mst. Amatul Hafeez Begum, of her rights in his favour. The competency of Ahsan Mahmud to take part in the meeting as a creditor was challenged before the chairman, but he upheld his claim, as his wife had transferred her rights to him long before the meeting and the liquidator had admitted his claim as a creditor. A letter was produced before the learned single judge, written by the wife to the liquidator, in this connec tion. That letter seems to have been take‑n away after inspec tion by the learned judge, apparently without any objection on the part of Mr. Allah Din Malik. It is now too late in the day for him to say that he had no chance to inspect the docu ment. The mere fact that in the books of the Bank, Ahsan. Mahmud was not shown as a creditor in place of his wife, does not affect the question of his competency as creditor, because the books of the company were in the custody of the Court, and no entry could be made in them by the voluntary liqui dator. We are inclined to agree with the learned Single Judge that Ahsan Mahmud was rightly treated as a creditor. Even if there be any merit in the objection to his participation as a creditor in the meeting called, he could certainly attend it as he held proxies from other creditors. Mr. Allah Din's objection that no one except a creditor could act as a proxy at a creditors meeting is not supported by any authority and is not born out by rules framed by this Court. Our attention was drawn to) Sovereign Life Assurance Company v. Dodd (1892), 2 Queen's Bench Division 573) in this connection. That was, however, a case where different classes of creditors had to be considered separately and, therefore, the authority is not apt in the cir cumstances of the present case. It was laid down in that case that the insured persons whose policies had matured, formed a distinct class of creditors from those whose policies had not matured and that a separate meeting of each such class ought to have been held under the Act in order to make the arrangement binding upon the members of that class. It was in that context that an observation was made is that case that proxies must be confined to the class of persons having identi cal or similar interests. It was then urged that the liquidator was precluded from canvassing for proxies or holding them in a matter which concerned his personal appointment as liquidator. Rule 83 of the rules framed under the Companies Act by this Court was referred to. This reads as follows :‑ "No person acting either under a general or special proxy shall vote in favour of any resolution which would directly or indirectly place himself, his partner or employer in a position to receive any remuneration out of the assets of the company, otherwise than as a creditor, rateably with the other creditors of the company. Provided that, where any person holds special proxies to vote for an application to the Court in favour of the appointment of himself as Official Liquidator, he may use the said proxies and vote accord ingly". Mr. Allah Din Malik relies on the first part of this rule but conveniently ignores the proviso. Somewhat inconsistently he argued that rules 78 to 86 were not really applicable unless, directed otherwise by the Court when a Court meeting of creditors or contributors was called, as was prescribed by rule

77. Here no specific direction was given by Cornelius ], that the rules succeeding rule 77, shall apply except that the learned judge directed Form No. 35 of proxies to be used which clearly brought into play rule

78. But if this position is correct then obviously the whole of rule 83 is not attracted and there will be no positive prohibition against the liquidator acting as proxy for some creditors. The act of the liquidator, therefore, cannot be described as illegal. Even if the proxies in favour of Mian Muhammad Sharif were to be disregarded, the majority in value of the other creditors, would still seem to be in favour of his appointment as liquidator. A reference to the liquidator's affidavit on the file showing the amounts of debts due to the various creditors in para. 5 would make this clear. The correctness of this paragraph 5 was not impugned before us. Proxies held by Mian Muhammad Sharif amounted in value to Rs.77,260‑12‑

6. After deducting this amount from the total amount of Rs. 99,035‑13‑6 which represented the value of debts due to creditors for the resolution, the sum left over would be a‑bout Rs. 22,

000. Those against the resolution included Jameel‑ud -Din, who claimed to have a credit of Rs. 25,646‑11‑0 out of a total of Rs. 33,444‑13‑

3. There is, however, a note below, given by the voluntary liquidator to the effect that the claim of Jameel‑ud‑Din had been rejected on the 25th January, 1951, except for Rs. 86‑11‑

0. We understand that Jameel‑ud‑Din has agitated the matter before the Liquidation Judge. How ever, we have referred to the company's books in Court and prima facie it seems to us that the liquidator's estimate of the debt due to Jameel‑ud‑Din at the relevant time is in accord with the entries in those books. The current account ledger shows that on the 31st of August, 1949, the balance at the credit of Jameel‑ud‑Din was Rs. 86‑11‑

6. The fixed deposit ledger shows that he had Rs. 4,800 to his credit which he transferred to his wife and two daughters, a few days before the winding up of the resolution was passed. It would thus appear that on the balancing of the value of debts of creditors for and against the resolution, even if the proxies held by the liquidator are ignored the majority in value of creditors was in favour of the liquidator's appointment. As a result of the above discussion we find that the con tentions raised on behalf of the appellant are without any substance. We hereby dismiss the appeal with costs. A. H. Appeal dismissed.