2016 PLP 1888 (CLD)

IRFAN SAADAT KHAN, J.

This High Court Appeal under section 3 of the Law Reforms Ordinance, 1972 read with section 15 of the Code of Civil Procedure (Amendment) Ordinance, 1980 and section 96 of the Code of Civil Procedure, 1908 is directed against the judgment and decree dated 3.10.1998 and 30.1.1999, respectively passed by the learned Single Judge of this Court whereby Suit No.49 of 1979, filed by the respondents was decreed in their favour.

2. Briefly stated, the facts of the case are that the respondent/ plaintiff No.1 i.e. National Investment Trust (NIT) is a Managing Company, while respondent/plaintiff No.2 i.e. National Bank of Pakistan is the Trustee of the National Investment (Unit) Trust. The respondents filed the aforementioned suit before this Court in its original civil jurisdiction against the appellant/defendant, a public limited company, for declaration and recovery of 130520 ordinary shares of the appellant/ defendant and for 26104 Bonus Shares, Dividend and Interest thereon of Rs.668,262.00, alleging therein that the Controller of the Capital Issues (CCI), vide letter dated 03.01.1975 conveyed to the appellant the consent of the Central Government under the Capital Issues (Continuance of Control) Act, 1947, to the proposed issue of capital in Pakistan to the value of Rs.1,17,18,000/- divided into 11,71,800 fully paid ordinary shares of Rs.10/- each as "Right Shares", with the conditions that the Right Shares shall be offered to all the existing shareholders strictly in proportion to the paid-up value of the shares held by them and if the shares were not taken-up by the existing shareholders then these shares shall be offered at par to the respondent No.1/NIT and if the respondent No.1 does not subscribe a part or whole of the shares, so offered, the Board of Directors may allot them in any manner they deem fit. Thereafter, vide letter dated 09.10.1975 the appellant informed the respondent No.1 that the shares of nominal value of Rs.13,05,200/- remained unsubscribed and offered the same to the respondent No.1 for purchase at par. Respondent No.1, vide letter dated 27.12.1975 informed the appellant about its decision of taking-up all the unsubscribed Right Shares and requested for sending an allotment letter for 1,30,520 shares in the name of N.B.P. Trustee Department. Appellant responded to the respondent No.1 through letter dated 01.01.1976 and demanded Bank Draft amounting to Rs.13,05,200/- so as to enable them to send one share certificate for 1,30,520 shares in the name of respondent No.1. It was averred that the respondents sent the requisite Bank Draft, which was encashed by the appellant on 21.01.1976 and thereafter the appellant declared dividend on 31.01.1976 of Rs.2.00 per share for the year ending on 31st July, 1975, but the appellant did not send the share certificate as agreed, and raised question with regard to the competency of the respondent No.1 to subscribe any share after expiry of the validity of the consent order dated 31.01.1975. It was further averred that the CCI was apprised of the question raised by the respondents who vide letter dated 07.04.1976 extended the validity of the consent order for a period of five months and directed the appellant to issue Right Shares to the respondent No.1 but the appellant declined to do so, vide letter dated 10.06.1976 and sent a cheque dated 19.06.1976 for Rs.13,05,200/- to respondent No.1. It was the case of the respondents that the contract for purchase of Right Shares was completed on 01.01.1976, before the expiry of the original date in the consent order and the two extensions were made by the CCI extending the validity of the consent order up-to 03.12.1976, therefore, the appellant took an unreasonable and unlawful stand in declining to issue the Right Shares to the respondent No.1, and thereby committed breach of the contract and also deprived the respondent No.1 from the benefits accruing from the holding of the Right Shares with effect from 01.01.1976, hence a cause of action accrued to the respondents to file the aforementioned suit with the following prayers: "A) For a declaration that the plaintiffs are shareholders of 1,30,520 Right Shares of the Defendant Company with effect from 27.12.1975 or 1.1.1976 and are entitled to all the benefits, rights and advantages of being such shareholders with effect from 27.12.1975 or 1.1.1976 including receipt of dividends and bonus shares declared by the Defendant company after 27.12.1975 or 1.1.1976 and that the names of the plaintiffs be shown as such share-holders from the said date in the Register of Shareholders maintained by the defendant Company; B) The Defendant Company do pay sum of Rs.522,080 towards unpaid dividends and 26,104 shares declared for the year ended 31 July, 1977 and Rs.146,182 towards interest on unpaid dividends at 14% per annum from the date the dividends were payable till the filing of the suit; C) The Defendant Company further pray an interest at 14% per annum on the amount decreed from the date of the filing of the suit till recovery; D) Costs of the suit, and E) Such other further/additional relief(s) as this Hon'ble Court may deem fit and proper in the circumstances of this case."

3. The appellant/defendant resisted the suit by filing written statement wherein, besides raising legal objections, inter alia, on the maintainability of the suit and joinder of respondent No.2 as co-plaintiff, the appellant denied the case of the respondents on the premise that the respondent No.1 remitted the value of shares after the expiry of required period reserved under the consent order and the same was mistakenly encashed, but by way of rectification of its mistake the appellant offered to pay interest to the respondent No.1. It was also pleaded that on account of failure of the respondent No.1 to timely remit the requisite consideration absolved the appellant of its assumed obligation to send the requisite share certificate. It was further pleaded that the purported extension of the validity period did not bind the appellant.

4. Out of the pleadings of the parties, following issues were framed by the learned Single Judge of this Court:

1. Whether this Honourable Court has no jurisdiction to try this suit and the plaint is liable to be returned for presentation to the Court having jurisdiction?

2. Whether the Suit is barred by limitation?

3. Whether Pakistan is a necessary and proper party and suit is bad for non-joinder thereof?

4. Whether the suit has been improperly valued and improper Court fee has been paid? If so, whether the plaint is liable to be returned/rejected?

5. Whether the plaint has not been properly signed and verified?

6. Whether the plaintiff No.2 has been improperly joined? If so, what is the effect?

7. Whether there was no concluded contact between the parties as alleged in Para 12 of the W.S.?

8. Whether the Controller of Capital Issues was not competent to extend the validity of the Consent Order?

9. Whether the plaintiff is not entitled to the relief claimed?

10. What should the decree be?

5. The learned Single Judge, after recording pro and contra evidences and hearing the counsel of the parties at length, decided the Issue No.1 in "Negative"; Issues Nos.2 to 5 were dropped by the counsel for the appellant; Issue No.6 was conceded by the counsel for the respondents and, while deciding the Issues Nos.7 to 9 in favour of respondents, the learned Single Judge decreed the suit, vide Judgment and decree dated 23.09.1998 and 03.10.1998, respectively in the following terms:- "A) It is hereby declared that the plaintiffs are owners of 130,520 right shares along with 26,104 bonus shares in the defendant company with effect from the date of this decree viz. 03.10.1998. They would be entitled to all rights, benefits and dividends to be declared in the forthcoming financial year. That the defendant do pay to the plaintiff an amount calculated on the basis of 15% per annum on Rs.1,305,200 compensation from 15.01.1975 till the date of decree viz 03.10.1998. That the defendant to bear costs of the suit as taxed and set below." It is against this judgment that the present High Court Appeal has been preferred by the appellant/defendant.

6. Mr. Zahid F. Ebrahim, Advocate has appeared on behalf of the appellants and stated that the learned Single Judge has failed to consider the matter in the light of the evidences on record hence the impugned judgment is liable to be set aside. While elaborating his view point the learned counsel has submitted that the learned Single Judge did not consider the letter dated 20.2.1976, which reveals that the respondent No.1 had failed to subscribe to the Right Shares within the validity period of the consent order. The learned counsel has further submitted that the offer for the right shares was made by the appellants vide letter dated 9.10.1975, which was duly accepted by the respondent No.1, vide letter dated 27.12.1975, however, the respondent No.1 failed to subscribe those shares before the expiry of the consent order, which clearly proves that the respondent No.1 was not interested in having those right shares otherwise they would have made the payment of those shares to the appellant in a timely manner. He also submitted that it is a matter of record that the payment of the shares made by the respondents was refunded by the appellants on 14.1.1976, which was after the consent order and not only the respondent No.1 was informed about the non-acceptance of the amount but the CCI was also informed that since the respondents have failed to abide by the consent order, the appellants could not accept the payment of the right shares made by the respondents after the specified date but all these letters were ignored by the learned Single Judge, hence the impugned judgment and decree being result of non-reading of the evidence deserves to be set aside on this score alone. He further submitted that the learned Single Judge has opined that the consent order has a retrospective effect, which according to the learned counsel again is a misreading of the consent order and therefore cannot be sustained. He submitted that the learned Single Judge has also failed to note that it was the requirement of the consent order that the Right Shares were to be offered to the National Investment (Unit) Trust/ respondent No.1 whereas the respondent No.1 sought issuance of the Right Shares in favour of respondent No.2. According to the learned counsel both these respondents are separate and distinct entities hence the Respondent No.1 was not justified in requiring from the appellants issuance of Right Shares in favour of respondent No.2 and, thus, have rendered not only themselves not entitled for the issuance of the shares but also for respondent No. 2 as well. He also submitted that the learned Single Judge has allowed the relief which was not even claimed in the suit.

7. Mr. Muhammad Masood Khan Advocate has appeared on behalf of respondent No.1 and has vehemently refuted the arguments of learned counsel for the appellant. He has maintained that the learned Single Judge through his exhaustive judgment has discussed each and every aspect of the case and recorded his findings on the issues framed and thereafter reached to the correct conclusion that the respondents were not only entitled for issuance of the right shares but were also entitled for the bonus shares, dividends accrued on those shares and 15% compensation. While elaborating his view point the learned counsel has added that the present appeal has been filed by suppressing certain facts and by presenting an incorrect picture. He has further maintained that the appellant offered right shares to the respondent No.1, vide their letter dated 9.10.1975 but no date was mentioned in the said letter to justify that the offer was a time bound offer which was duly accepted by the respondent No.1 vide their letter dated 27.12.1975. According to the learned counsel the said letter was written much before the expiry date and was accepted by the appellant hence the stand taken by the appellant that the respondent No.1 has failed to reply to the offer of the appellants in a timely manner is an incorrect and misleading statement. He has also maintained that the appellant had even demanded and accepted the payment of the shares sent by the respondent No.1 through demand draft on 14.1.1976 and the same was even encashed by the appellant, which clearly proves that the appellant accepted the said payment without any objection thereon. The learned counsel also added that after accepting the said demand draft, the respondent No.1 then asked the appellant to issue Share Certificates to them but it was the appellant who refused to do so, which prompted the respondents to file a suit against them which was rightly decreed in their favour and this High Court appeal being devoid of any merit is liable to be dismissed with heavy costs.

8. Nobody has appeared on behalf of the Respondent No.2, despite service.

9. We have heard both the learned counsel at considerable length and have also perused the record.

10. The point for consideration before us is "whether the impugned judgment and decree suffers from any illegality or irregularity requiring interference of this Court".

11. There is no denial to the fact that a consent was obtained by the appellant company from the CCI for increase in their capital by issuance of 11,1800 fully paid up shares of Rs.10/- each upon fulfillment of certain conditions. In the letter dated 3.1.1975, it has been mentioned that the authority conveyed in the letter will lapse on the expiry of twelve months from the date of issue of the letter and within one month of the date of the expiry of the authority concerned, the appellant should forward to the CCI a report of the action taken by the company about raising of its capital.

12. It is an admitted position that the shares offered by the company were not fully subscribed and thereafter as per the condition mentioned in the consent letter the appellant was under legal obligation to offer the shares at par to the respondent No.1 for subscription and in the event of non-acceptance of the said subscription of the shares, in whole or in part, only then the directors of the appellant company were authorized to allot them in the manner they deem fit.

13. It is also noted that the last date for subscription of Right Shares was 28.05.1975 which was extended upto 16.06.1975, however a certain portion of the shares had remained unsubscribed and in October 1975, on a reminder by the respondent No.1, the appellant company offered them 130520 unsubscribed right shares. It is thus evident that there was a substantial delay on the part of the appellant company in offering the unsubscribed shares to the respondent No.1 hence the delay in accepting the offer of the shares attributed to the respondent No.1 is found to be misplaced. It is further noted that the respondent No.1 vide their letter dated 27.12.1975 duly informed the appellant company about the acceptance of the offer of the shares by categorically mentioning that the management of the company has decided to take up 130520 unsubscribed shares and has further requested the appellant company to send the allotment letter for these shares in the name of respondent No.2. The said letter was thereafter replied by the appellant vide their letter dated January 1, 1976 with the note of applause by clearly mentioning that appellant company is happy to note that the respondent has consented to subscribe the unsubscribed Right Shares amounting to Rs.1305200 and had even advised them that since the offer made by them has been accepted by the respondent No.1, no formal Provisional Allotment Letter is necessary in the particular case. In the said letter the appellant has also stated that they would be grateful if a Bank Draft amounting to Rs.1305200/- in the name of the appellant company be issued to enable the company to send one Shares Certificate for 130520 shares in the name of the respondent immediately.

14. It is also a matter of record that the respondent company immediately sent a Bank Draft dated 14.01.1976 for Rs.1305200/- to the appellant. It would not be out of place to mention that in the letter dated January 1, 1976 no specific date has been mentioned by the appellant for sending the bank draft and the respondent No.1 was only required by the appellant to pay an amount of Rs.1305200/- to enable them to immediately send the share certificate to the respondent No.1, which amply proves that the assertion of the appellant that there was a time bounding between the appellant and respondent No.1 is contrary to the records. The expression "immediately" used in the letter dated January 1,1976 as envisaged in the letter is not with regard to sending of the amount rather the same is with regard to sending of the shares in the name of respondent No.1.

15. There is no denial to the fact that not only the Bank Draft sent by the respondent No.1 was accepted by the appellant but the same was even encashed by them and it was only after passage of sometime, as an afterthought, the appellant returned the amount of Rs.1305200 to the respondent No.1 after which the dispute between the parties arose. It is also seen from the consent letter that the condition of timely issuance of shares was imposed upon the appellant by the CCI and not upon the respondent No.1. It is categorically mentioned in the consent letter that "the authority conveyed in this letter will lapse on the expiry of the twelve months from the date of the issue of the letter" which clearly stipulates that the CCI through the consent letter made it incumbent upon the appellant to abide by the said communication in letter and spirit and after the expiry of 12 months the matter of issuance of shares could not further be convened by them. Hence in our view the subscription of the shares was a condition precedent which has to be complied with by the appellant and not by the respondent No.1.

16. It has further been observed that it was the appellants who delayed the matter in offering the unsubscribed shares which they offered as late as in October, 1975, when admittedly the matter of issuance of shares to the shareholders culminated on 16.06.1975 hence on this aspect also we find no justification in the contention raised by the learned counsel for the appellant that the respondent No.1 since did not accept the subscription in a timely manner, debarred themselves in accepting the subscription after the expiry of date mentioned in the consent order. It is also a matter of record that it was the appellant who from time to time sought permission from the CCI for extension of validity of the consent order which on their request was extended by the CCI, as evident from letters dated 4.2.76, 7.4.76 and 30.9.1976 respectively. Hence on this aspect also we find no force in the contention raised by the learned counsel for the appellant that since the respondent No.1 has failed to accept the offer of the Right Shares in a timely manner hence they have rendered themselves incapable for the issuance of those shares. We are of the view that when the respondent No.1, vide, their letter dated 27.12.1975 accepted the offer made by the appellant it has to be presumed that a term of the contract between the parties with regard to the offer and acceptance stood established and when the date of the consent order on the request of the appellant was extended from time to time by the CCI the delay in making the payment, so far as respondent No.1 is concerned, has impliedly been condoned by the CCI by granting extension to the consent letter hence the appellant in our view cannot now take advantage of the consent order dated 03.01.1975 by stating that by virtue of this consent order since the respondent No.1 has failed to subscribe the shares before 02.01.1976, they have rendered themselves ineligible for the issuance of allotment of those shares.

17. We, therefore, in view of what has been stated above have come to the conclusion that the learned Single Judge has rightly declared that the respondent No.1, who was the plaintiff No.1 in the Suit No.49/1979, is entitled for the 130520 right shares so also, of bonus shares, dividend accrued on those shares and all the rights and benefits accrued or declared on those shares in the succeeding financial years along with 15% compensation from 15.01.1975 till the date of the decree along with the costs and thus the impugned judgment and decree do not suffer from any illegality or irregularity requiring interference by this Court. The instant High Court Appeal, is therefore, found to be devoid of any merit and is, accordingly, dismissed along with the listed application, with no order as to costs. MH/L-3/Sindh Intra-court appeal dismissed.