2022 PLP 1279 (CLD)

"The core of the existing principle of the rule of law: that all persons and authorities within the state, whether public or private, should be bound by and entitled to the benefit of laws publicly made, taking effect (generally) in the future and publicly administered in the courts." Lord Tom Bingham, Chief Justice of England and Wales.1 JAWAD HASSAN, J.

This constitutional petition has been filed by the Petitioners under sections 136 and 160 of the Companies Act, 2017 (the "Act") by making following prayers: i. Declare that the Elected Stewards are the duly elected Stewards of the Club; ii. Alternately, declare that impugned actions are invalid and illegal and that as a consequence; a. The proceedings of the AGM are invalid; b. The appointment of the Selected Stewards is null and void and of no legal effect whatsoever; c. Fresh notices must be issued immediately for the holding of an AGM wherein all the Candidates be allowed to contest while allowing all Members to vote. iii. Grant the Petitioners all costs associated with this petition. BRIEF BACKGROUND

2. The facts of the case are that the Lahore Race Club, Lahore (the "Club") is a Company Limited by guarantee incorporated under the Companies Act, 1913 and was established with object to encourage and promote the sport of horse racing including breeding and training of horses and ponies and all matters incidental/ancillary thereto. The Petitioners are members of the Club, holding 12% of voting power, which is managed and controlled by an elected body of Stewards. Respondents Nos. 1, 3 to 12 are also the members while Respondent No.2 is the Secretary of the Club. For the purpose of election of Stewards for year 2021-2022, seventeen members, including Petitioners Nos.2, 5 and 6 and Respondents Nos. 1, 4 to 12, submitted their nominations. The aforesaid members were issued notice dated 05.10.2021 for 96th Annual General Meeting (the "AGM") held on 30.10.2021 as per Agenda annexed at page 63 of the petition. Due to irreconcilable conflict between different candidates qua elections, all members appointed Respondent No.3, Khalid Mehmood, as the mediator and submitted their withdrawal letters with the understanding that Respondent No.3 would choose and select ten Stewards for the year 2021-2022 with five candidates from each group. However, due to non-neutrality of Respondent No.3, certain candidates including Petitioners Nos.2 to 5 and 6, vide letter dated 26.10.2021, informed him that they wish to contest the elections and as such, he should return their withdrawal letters. As per stance of the Petitioners, the said message was also conveyed to Respondent No.3 through WhatsApp on 26.10.2021, 27.10.2021 and 28.10.2021. The Petitioners have raised their grievance that instead of returning their withdrawal letters, Respondent No.3, announced at AGM that the elections would not take place for the reason that seven out of seventeen candidates had withdrawn from the elections and consequently, he, without conducting elections, proceeded to announce the Respondents Nos.1, 4 to 12 as "Selected Stewards". Thereafter, Respondent No.3 exited the Club along with Respondents Nos.1 and 2 and also stopped the camera proceedings. Due to this action of the said Respondents, the remaining majority members elected Petitioner No.1 to chair the AGM and conduct elections; as a result whereof, he elected Hafeez Akhtar Randhawa (Petitioner No.2), Khawaja Muhammad Arif (Petitioner No.5), Abdul Qadir Khan Mamdot (Petitioner No.6), Syeda Abida Hussain (Respondent No.4), Azmat Ali Ranjha (Respondent No.6), Arbab Mohammad Zahoor (Respondent No.9), Javed Khalid (Respondent No.10), Imran Butt (Respondent No.11), Muhammad Adil Hayat (Respondent No.12) and one Syed Murtaza Mahmud as Elected Stewards for the year 2021-2022. When the Respondents refused the Elected Stewards to perform their functions and to manage the Club, the Petitioners sent a legal notice dated 03.11.2021 to the Respondents which was replied vide letter dated 18.11.2021 reiterating that seven candidates had withdrawn their nominations as such the "Selected Stewards" became the uncontested winners and thereafter, they compiled fraudulent version of the minutes of AGM dated 22.11.2021 which are impugned in this petition. PETITIONERS ARGUMENTS

3. Mr. Feisal Hussain Naqvi, ASC for the Petitioners inter alia argued that the impugned actions of the Respondents are contrary to Articles and Memorandum of Association of the Club; that no Steward could be considered as validly appointed unless it is appointed in accordance with the Articles and Memorandum of Association of the Club and no Stewards could be chosen through the whims of an individual; that Respondent No.3 had no authority to declare the nominations of seven candidates stood as withdrawn but such declaration could have been made by the then Chairman of the Club after duly confirming each relevant candidates; Mr. Feisal Hussain Naqvi, ASC states that the AGM proceedings conducted by Respondent No.3 stained with material irregularities, as such are liable to be declared as invalid; that the Stewards have been elected without proper election as such it is against the principle of corporate democracy; that preamble of the Act provides for its objective of facilitating corporatization and protecting interests of shareholders and focuses on inculcating principles of good governance and safeguarding minority interest in corporate entities, being regulated by Board of Governors but the Respondent No.3 has neither taken into consideration the interest of shareholders of the Club nor right to vote in election of the Stewards. The counsel for the Petitioners has relied on Parshuram Dattaram Shamdasani and others v. Tata Industrial Bank Ltd. and others (AIR 1925 Bombay 49), Syed Zafar Ali Shah v. Federation of Pakistan through Secretary, Ministry of Law, Justice and Parliamentary Affairs, Islamabad and others (PLD 2015 Islamabad 156) and Mirza Tahir Beg v. Syed Kausar Ali Shah and others (PLD 1976 SC 504). RESPONDENTS ARGUMENTS i. Arguments of Respondents Nos.1, 2, 3, 4, 6, 8 and 14.

4. Mr. Jahanzeb Sukhera, Advocate inter alia argued that the Petitioners have failed to point out any material defect or omission in the notice for the general meeting or any irregularity in the proceedings of AGM; that no signed letters were ever received by the office of any persons requiring the Respondent No.3 to return withdrawal letters; that the elections of the Club were conducted strictly as per law as such there exists no question of legal infirmity; that withdrawal of nominations were validly and legally processed and therefore, ten persons had nominated themselves for election and they were elected unopposed; that the Petitioners have failed to establish any material irregularity in holding of elections thus, they cannot seek remedy through the petition in hand. ii. Arguments of Respondents No.12

5. The said Respondent filed reply and supported the arguments advanced by the Petitioners. DETERMINATION BY THE COURT

6. It has been objected by learned counsel for the Respondents that the Petitioners have failed to establish any material irregularity in the AGM followed by election of Selected Stewards therefore, they cannot invoke sections 136 and 160 of the Act. Section 136 of the Act provides for the power of this Court to declare the proceedings of a general meeting as invalid subject to fulfilling of the conditions that the petitioners must have at least ten percent of the voting power in the company and the meeting so held was tainted with material defect of omission in the notice or irregularity in the proceedings of the meeting that prevented the members from using their rights effectively. For the sake of ready reference the provision is reproduced as under:-

136. Power of the Court to declare the proceedings of a general meeting invalid.

The Court may, on a petition, by members having not less than ten percent of the voting power in the company, that the proceedings of a general meeting be declared invalid by reason of a material defect or omission in the notice or irregularity in the proceedings of the meeting, which prevented members from using effectively their rights, declare such proceedings or part thereof invalid and direct holding of a fresh general meeting: Provided that the petition shall be made within thirty days of the impugned meeting. From plain reading of above said Section, it is quite obvious that for invoking this section, the Petitioners must prove: (i) Ten percent of the voting power in the company; (ii) petition shall be made within thirty days of the impugned meeting; (iii) material defect or omission in the notice or irregularity in the proceedings of the meeting which prevented members from using effectively their rights; If above said elements are proved, then the Court may declare such proceedings or part thereof invalid and direct holding of a fresh general meeting.

7. Similarly section 160 of the Act further empowers the Court to declare any such election of directors invalid in toto or with respect to few of them if the petitioners holding at least ten percent of the voting power in the company petitioned within 30 days from the date of election satisfy the Court that there has been material irregularity in the holding of the elections. For the sake of reference, relevant provision reads as under:-

160. Powers of the Court to declare election of directors invalid.

The Court may, on the application of members holding ten percent of the voting power in the company, made within thirty days of the date of election, declare election of all directors or any one or more of them invalid if it is satisfied that there has been material irregularity in the holding of the elections and matters incidental or relating thereto. (Emphasis supplied) For invoking above mentioned Section, the Petitioners have to prove: (i) holding ten percent of the voting power in the company; (ii) irregularity in the holding of elections and matters incidental or relating thereto must have occurred; (iii) application shall be made within 30 days of the election; Now perusal of above-referred provisions of the Act leaves no ambiguity that Court, subject to its satisfaction, is empowered to declare the proceedings of a general meeting and election of directors invalid subject to mandatory requirements mentioned in the provisions as referred hereinabove.

8. This petition was filed by the Petitioners firstly by invoking section 136 of the Act challenging the proceedings of 96th AGM held on 31.10.2021 and secondly by invoking section 160 of the Act to declare the appointments of Selected Stewards as null and void. It has been objected by Mr. Jahanzeb Sukhera, counsel for the Respondents that the Petitioners have failed to demonstrate any material defect or omission in the notice for AGM or irregularity in the proceedings. In response, Mr. Feisal Hussain Naqvi, ASC counsel for the Petitioners while replying to objections stated that Club is limited to 50 members as per Article 2 of Articles of Association (the "AOA") and hold voting power of 12% and that they have filed this petition within time prescribed hence they are competent to file this petition. The Court observed that this fact is not disputed by learned counsel for the Respondents during the course of arguments which is also evident from notice of AGM dated 05.10.2021 (Annex-B of the petition) issued by the Secretary of the Club for holding AGM on 31.10.2021. Admittedly this petition was filed on 25.11.2021 and was fixed for hearing on 26.11.2021, therefore, the instant petition to this extent is held maintainable.

9. Now the questions remain to be resolved by this Court is to identify material defect or omission in the notice or irregularity in the proceedings of meeting which prevented the Petitioners from using their rights as per section 136 of the Act and irregularity in holding of elections in terms of section 160 of the Act.

10. The phrase "Material irregularity" has been defined in Advanced Law Lexicon 4th Edition Volume 1 as 'Material Irregularity' means by committing some error of procedure in the course of the trial which is material in that it may have affected the ultimate decision. Whereas, in Encyclopedic Law Dictionary 3rd Edition 'Material Irregularity' has been defined as "some error of procedure or beach of some provision of law which affects the ultimate decision of the case" This Court in "Abdul Khaliq v. Judge Family Court" (2003 MLD 1120) has also laid down the interpretation of the term material irregularity as committing of some error of procedure in the course of trial which is material to that extent that it affects the ultimate decision. The Court ruled as under:-

12. The term "acted illegally" means acting in breach of some provisions of law and the words "acted with material irregularity" refer to committing of some error of procedure in the course of trial which is material, in that it may affect the ultimate decision. Now, after understanding the literal interpretation of the material terms/requirements of the law as stated out in both provisions i.e., 136 and 160 of the Act for exercising powers of invalidating the Annual General Meeting and election of directors, it would be of much relevance to reproduce section 159 of the Act which provides procedure for election of directors.

159. Procedure for election of directors.

(1) Subject to the provision of section 154, the existing directors of a company shall fix the number of directors to be elected in the general meeting, not later than thirty-five days before convening of such meeting and the number of directors so fixed shall not be changed except with the prior approval of the general meeting in which election is to be held. (2) The notice of the meeting at which directors are proposed to be elected shall among other matters, expressly state- (a) the number of directors fixed under subsection (1); and (b) the names of the retiring directors. (3) Any member who seeks to contest an election to the office of director shall, whether he is a retiring director or otherwise, file with the company, not later than fourteen days before the date of the meeting at which elections are to be held, a notice of his intention to offer himself for election as a director: Provided that any such person may, at any time before the holding of election, withdraw such notice. (4) All notices received by the company in pursuance of subsection (3) shall be transmitted to the members not later than seven days before the date of the meeting, in the same manner as provided under this Act for sending of a notice of general meeting. In the case of a listed company such notice shall be published in English and Urdu languages at least in one issue each of a daily newspaper of respective language having wide circulation. (5) The directors of a company having a share capital shall, unless the number of persons who offer themselves to be elected is not more than the number of directors fixed under subsection (1), be elected by the members of the company in general meeting in the following manner, namely- (a) a member shall have such number of votes as is equal to the product of the number of voting shares or securities held by him and the number of directors to be elected; (b) a member may give all his votes to a single candidate or divide them between more than one of the candidates in such manner as he may choose; and (c) the candidate who gets the highest number of votes shall be declared elected as director and then the candidate who gets the next highest number of votes shall be so declared and so on until the total number of directors to be elected has been so elected. (6) The directors of a company limited by guarantee and not having share capital shall be elected by members of the company in general meeting in the manner as provided in articles of association of the company.

11. Bare reading of subsection (1) of above section reveals that it requires the Board of Directors to fix the number of directors to be elected in general meeting. While subsection (2) thereof put a restriction of fixing the number of directors and the names of the retiring persons in the notice of meeting issued for the purpose of election. Record reveals that the Respondents, while issuing letters dated 05.07.2021 (Annex-A of the Respondent's reply), letter dated 07.07.2021 (Annex-B of the Respondent's reply) and letter dated 22.09.2021 (Annex-C of the Respondent's reply) have neither fixed the number of directors to be elected nor mentioned the names of retiring directors therein while the said requirement is also missing in the letter dated 05.10.2021 issued for AGM by the Secretary of the Club (Annex-B, page 62 of the main petition). From above, it is quite clear that the Respondents have not disclosed in the notice of meeting the numbers of directors as required under section 159(1) and (2) of the Act. It is noted that notice of 96th AGM was issued on 05.10.2021 along with its Agenda to the members of the Club. The Agenda of AGM reads as:

12. Admittedly, aforesaid Agenda was issued for the election of Stewards in General Meeting as per Article 27 of the AOA. It is pertinent to add here that section 17 of the Act provides that memorandum and Articles shall, when registered, bind the company and the members thereof to the same extent as if they respectively had been signed by each member and contained a covenant on the part of each member, his heirs and legal representatives, to observe and be bound by all the provisions of the Memorandum and of the Articles, subject to the provisions of this Act. The scope of memorandum and Articles of Association has been elucidated by the Hon'ble Supreme Court of Pakistan in "Lucky Cement Ltd. v. Commissioner Income Tax, Zone Companies, Circle-5, Peshawar" (2015 CLD 1482) by holding that "MOA provides and prescribes the object(s) and the purpose(s) for which the company has been established and constituted, with specific reference to the business and the avocations which it can conduct, carry on and undertake. While the AOA are the organizational and governance rules of the company which primarily deal with the management affairs". If we read Article 27 of the AOA in the light of aforesaid judgment, it makes it quite clear that "the Stewards shall be elected annually in General Meeting". In the case in hand, the factum of issuance of notice of AGM dated 05.10.2021 is not disputed by the parties, however, the question agitated by the Petitioners is that the Respondent No.3, at the AGM without discussing Item No.6 of the Agenda proceeded to elected ten Stewards as unopposed without giving them right to vote which is contrary to Article 27 of AOA and violation of principle of corporate democracy. Corporate democracy is a necessary economic manifestation of political democracy. Like a good political democratic model, a corporate entity is also adjudged from the criterion of its democratic governance and most particularly the inclusive approach it offers and the facilitation it provides in the process of voting to its shareholders having a right to vote in the process of electing directors in its annual meeting or to become a candidate by themselves in accordance with eligibility criteria. The cornerstone of corporate democracy must be to allow shareholders (as well as management) a reasonable opportunity to elect directors "in fact as well as in theory". This includes the right to nominate a director to appear on the ballot, and the right to vote and have others vote for such nominee by proxy without undue effort or cost. This Court in "Mian Muhammad Ilyas Mehraj and 17 others v. Appellate Bench No. III, Securities and Exchange Commission of Pakistan, Islamabad and 6 others" (2009 CLD 883) highlighted and duly emphasized the significance of holding the annual general meeting by a company as a hallmark of corporate democracy and held that the binding nature of the requirement to hold Annual General Meeting is clearly discernable from the fact that failure to hold such meeting consecutively for two years made a company liable to be wound up under the Act. The Court held as under:- Section 158(4) of the Companies Ordinance, 1984, in unqualified terms, provides for holding of Annual General Meeting. No departure is permissible from the compliance of the mandatory provisions of section

158. The company is artificial person and those who manage it's affairs are under legal as well as fiduciary obligation, to run the affairs of the company as the law (Companies Ordinance, 1984) requires. Corporate democracy is the essence of the corporate personality of a juristic person. The legislature in it's wisdom was conscious of the importance of holding of Annual General Meeting and that is why a company is made liable to be wound up, if fails to hold two consecutive Annual General Meetings. (Emphasis supplied)

13. Earlier, the matter of election of stewards/directors of the Respondent Lahore Race Club was put to challenge before this Court in "Lt.-Gen. (Retd.) Shah Rafi Alam and others v. Lahore Race Club and others" (2004 CLD 373) and the Court made a detailed discussion regarding the applicability of Companies Ordinance, 1984 (now the Act, 2017) to all the provisions contained in the Memorandum, Articles, agreement or resolution of the Company and held that any deviation, to the extent to which it is repugnant to the provisions of the Companies Ordinance (the Act now), become or be void under section 6 of the Companies Ordinance, 1984 (section 4 of the Act). The question involved in that case was regarding validity of provision requiring proposing and seconding a candidate for election of steward/director and whether it amounts to withdrawal by implication for the candidates who failed to have themselves proposed or seconded but the Court determined the question from principle standpoint of applicability of specific provision to seek invalidation of directors under Section 179 of the Ordinance and held that in the presence of specific provision, the Petitioners are required to fulfill the requirements as mentioned in the said provision of law (the requirement of having not less than 20 percent voting power) and the remedy of seeking invalidation cannot be obtained through seeking invalidation of a general meeting under Section 160-A of the Ordinance (where requirements of having not less than 10 percent voting member is a condition. The Court ruled as under:- There is a specific provision in the Companies Ordinance, 1984 to challenge the elections of the Directors of a Company. Under section 179 of the Ordinance, on the application of the members holding not less than twenty percent of the voting power in the Company, the Court may declare the elections of all Directors or any one or more of them invalid, if it is satisfied that there has been material irregularity in the holding of the elections and matters incidental or relating thereto. Admittedly the petitioners did not hold the twenty percent of the voting power. In the presence of a special provision for declaring the elections of the Directors invalid, resort to the general provisions for setting aside the proceedings of Annual General Meeting, cannot be made. It is well- established that where an enactment contains a special provision with respect to a particular subject-matter or issue, these provisions will override the general provisions of the statute while dealing with a particular situation, where in a statute there are two provisions, one of which is of specific character and the other general one, the specific provision ought to be applied unfettered by the general one.

14. However, in the instant case the Petitioners have questioned the election of directors on the grounds as mentioned above including invalidation of Annual General Meeting and under the Act, to question the validity and seek invalidation of Annual General Meeting and election of directors/stewards so elected as governed under section 136 and Section 160 of the Act respectively and as discussed hereinabove both provisions of the Act provide the same principle condition for petitioning before this Court i.e., holding ten percent of the voting power in the Company, which is absolutely met with by the present Petitioners and therefore, the mandatory requirements of the law in this regard has been complied with besides bringing their case within the ambit of the conditions mentioned in both referred provisions of the Act, which has been elaborated hereinabove.

15. It is also agitated by the Petitioners that they informed the Respondent No.3 about their consent to contest election through letter dated 26.10.2021, however, the said fact is denied by the Respondents on the ground that no signed copy of such letter was received by the office of any person. Now, this situation has necessitated discerning the actual and implied meaning of 'communication' in a legal parlance. In Chambers Twentieth Century Dictionary, New Edition, the meaning of the word "communication" is stated as "act of communicating, that which is communicated, intercourse, correspondence, a means of communicating." Similarly in the New Lexicon Webster's Dictionary the word "communication" has been inter alia stated to mean "a sending, giving or exchanging (of information, ideas etc)." The word 'communicate' has been defined by this Court in Nawab Begum's case PLD 1974 Lah. 344 in the following terms:-- "the word 'communicate' is quite comprehensive. It carries with it the meanings of imparting news or information. It also means intercourse which word would indicate impartation of information etc. on one side and reception and understanding on the other"

16. Taking it from another aspect within the meaning of Contract Act, 1872 also leads further to understand the nature of a transaction which can be amounted as valid communication under the law. Section 4 of the said Act provides the definition regarding completion of a communication in general aspect by stating out clearly that the communication of a proposal is complete when it comes to the knowledge of the person to whom it is made. Since the instant case pertains to communication via social media through the application WhatsApp, about repudiation of withdrawal from the offer to contest election of steward made by the (Petitioner/Respondent) so the definition for communication of revocation is slightly and specifically more relevant to understand if such communication of intention through WhatsApp application to withdraw from earlier given notice for not contesting election can be termed as a proper revocation being validly communicated to the (Respondent 3) or not. Section 4 of the Contract Act, 1872 states in this regard as under:- "The Communication of a revocation is complete as against the person who makes it, when it is put into a course of transmission to the person to whom it is made, so as to be out of the power of the person who makes it; as against the person to whom it is made, when it comes to his knowledge."

17. When confronted to Mr. Jahanzeb Sukhera, Advocate for the Respondents whether any letter, regarding withdrawal, was received by the Respondent No.3 from any persons requiring him to return the same, he stated that no such letter was ever received rather the elections of the Club were conducted as per law and withdrawal of nominations were validly and legally been processed. While Mr. Feisal Hussain Naqvi, ASC stated that intention of the Petitioners with regard to returning of their withdrawal letters before holding of elections was duly communicated to the Respondent No.3 through WhatsApp, the aforesaid Respondent admitted in his affidavit. It is to be noted that the Petitioners duly communicated their intention loud and clear to withdraw from the earlier settlement and to contest the election for stewardship to the Respondent No.3 through WhatsApp on 26.10.2021, 27.10.2021 and 28.10.2021, so by sending that message to the Respondent No.3, the Petitioners have fulfilled the requirement of first part of the provision with respect to communication of revocation which also stood completed against the Respondent No. 3 when it came to latter's knowledge as in his affidavit he admitted the said mode of communication between him and the Petitioners. He also categorically admitted receiving of letter in picture form regarding return of withdrawal from not contesting elections in the following manner:- "on 26.10.2021, I received a picture of an alleged grievance letter requesting that I return with the withdrawal letters". In Williston on Contracts Third Edition, the following statement of law appears at section 82-A, page 271, which is relevant for the instant case:- "Deeply rooted in the common law, however, is the principle that, where the parties expressly or impliedly authorized a particular channel of communication, acceptance is effective when and where it enters that channel of communication."

18. Applying this analogy to the situation in hand, it is well established that parties through implied understanding adopted mobile phone as a channel of communication between themselves and this fact has not been controverted by the Respondents either, rather the Respondent No.3 himself admitted the same in his affidavit. Now, the justification offered by Respondent No. 3 for not adhering or giving credit to such request of the Petitioners duly communicated to him via WhatsApp, is that as letter was not sent in physical form, so he did not consider it a valid communication. However, I am constrained to observe that under section 4 of the Contract Act, 1872 the only requirement for communication of revocation of a proposal is that the same came into knowledge of the person to whom it is made and by driving analogy from the said law, which is clearly relevant and appropriate to apply in the instant case, the revocation of withdrawing from contesting the elections made by the Petitioners to the Respondent No.3 was duly communicated to him and came into his knowledge who himself admitted this factum in his affidavit as stated above. Even from the literal interpretation standpoint, the term knowledge has been assigned the meaning in New Law Lexicon Webster's Dictionary as: "The state of knowing, cognition, understanding". In these circumstances, without going further into the form, undeniably the substance of withdrawing from their earlier withdrawal letters was specifically communicated to the Respondent No. 3 as the same came into his knowledge.

19. The Petitioners in order to substantiate their stance, have appended with this petition photocopies of screenshots of WhatsApp communication with the Respondent No.3 before holding of elections. It is pertinent to mention here that before holding of elections of Stewards in AGM, the parties, who submitted their nominations papers, with their understanding appointed the Respondent No.3 to act as mediator and elect five members from each group due to different factions formed amongst the members. As per version of the Petitioners, they informed the Respondent No.3 through letter dated 26.10.2021, 27.10.2021 and 28.10.2021 and same were subsequently being reiterated through WhatsApp communication appended by the Petitioners (Pages 65 to 71 of the Petition). The Respondents, although denied the aforesaid stance of the Petitioners yet in affidavit submitted by the Respondent No.3, he admitted the correspondence with the Petitioners by stating that "My consultations with the parties were done mostly on phone as evident from the enclosed screenshots of the text messages exchanged with Mr. Tariq Aziz wherein, he had listed his preferences of members for the election of stewards". He further admitted in his affidavit that "on 26.10.2021, I received a picture of an alleged grievance letter requesting that I return with the withdrawal letters". However, he denied by stating that "Despite my repeated requests for the same being sent to me physically, I never received it. I was not communicated with by the persons who allegedly had signed the grievance letters, therefore, there was no verified request for me to act upon". The Respondents have not appended with this petition any document/letter to controvert this stance rather from the above admission, it was quite clear that the Respondent No.3 was well within the knowledge of the situation and he should return resignations letters submitted to him by the Petitioners prior to holding elections when seventeen candidates appointed him to act as mediator. Pertinently, the factum of appointment of the Respondent No.3 as mediator is also evident from the statement recorded by aforesaid Respondent in his affidavit which reads as under: "I was approached by the Chairman of the Club, who requested me to facilitate an amicable understanding between the groups of members contesting the elections of stewards. In this regard I was required to enlist the ten members who would contest the elections of the Stewards. The mode selected for this process was that all seventeen members who had nominated themselves for elections would submit their withdrawals of nominations, with Mr. Syed Ahmed Mahmood. These withdrawal letters were then transmitted to me After consultations with both of the groups, the withdrawals of the following persons were transmitted to the club which were then processed in accordance with law: I. Mr. Syed Fakhar Imam II. Mr. Abdul Qadir Khan Mamdot III. Mr. Khwaja Muhammad Arif IV. Mr. Hafeez Akhter Randhawa V. Mr. Mahmood Rafi VI. Mr. Col (Retd) Naeem Sarwar

20. The above statement makes it quite clearly that the Respondent No.3 was approached by the Chairman of the Club to act as mediator in order to choose ten candidates out of seventeen who submitted their withdrawal letters to him. However, he, instead of choosing ten out of seventeen candidates, proceeded to elect only ten candidates not allowing the remaining seven to use their right of vote merely on the ground of submission of withdrawal letters. Pertinently, the said Respondent in his affidavit admitted that he will return the withdrawal letters to the seven candidates whom he refused to use right of vote meaning thereby there was sufficient material available before him to conduct the elections but instead he opted to announce ten candidates as Selected Stewards without consent and without giving right of vote to the remaining. It is important to mention here that the Respondents have not placed on record the minutes of alleged AGM pursuant to which the Respondent No.3 elected ten stewards rather the Petitioners have attached the same with this petition wherein the Agenda No.6 was discussed as under: "The Secretary stated that seventeen members submitted their nominations for election of Stewards. Out of these seventeen, seven deposited their withdrawal from the election. All the remaining ten nominees therefore, won the election of Stewards without consent".

21. From the above it is quite clear that Respondent No.3, at one hand, did not handover withdrawal letters of the Petitioners before the holding of AGM on 30.10.2021 and on the other hand, elected ten candidates as Stewards without consent and without giving right to vote. The said act of the Respondent is not only violative to Article 27 of the AOA but also is against the principle of corporate democracy denying the right of vote of the Petitioners to participate in AGM. Section 160 of the Act empowers the Court to declare election of all directors or any one or more of them invalid if it is satisfied that there has been material irregularity in its holding. Therefore, in the light of principles enunciated in "National Investment Trust Ltd. v. Al-Qaim Textile Mills Ltd." (1999 CLC 926) wherein it was held that "the very meeting held on the 27th March, 1998 was irregular and not in accordance with law as the members were prevented from using their right to vote effectively. In consequence thereof, the proceedings of Agenda Item No.3 relating to elections of Directors are declared to be invalid and the respondent is directed to hold afresh a General Meeting for holding of elections of members of the Board of Directors of respondent's Company in accordance with law" the Petitioners' right of vote was denied by the Respondents to participate in AGM.

22. In view of the law laid down in the aforesaid judgments, it is held that the proceedings at AGM were not in accordance with law which are declared as invalid in terms of section 136 of the Act. In consequence, thereof, the proceedings of Agenda Item 6, in terms of section 160 of the Act relating to elections of Directors are also declared to be invalid. The Respondents are directed to hold AGM afresh for the elections of Stewards of the Club in accordance with law and Articles and Memorandum of Association of the Club within a period of three (03) months from the receipt of certified copy of this order. The present petition is allowed accordingly without any orders as to costs. However, till the above said directions are complied with, the affairs of the Club shall be run by the Administrators as proposed by the parties with consent in terms of order dated 14.12.2021 which reads as: "Learned counsel for the Petitioner has proposed name of Hafeez Akhtar Malik while learned counsel for the Respondents have proposed the name of Syed Tasawar Hussain Shah, to run the affairs of the Lahore Race Club (the "Club") as "Administrator" till the finalization of this petition. Mr. Altaf-ur-Rehman, ASC for the Respondent No.12 also supported the aforesaid recommendation/ arrangement.

2. In view of above consensus of learned counsel for Parties, till the final outcome of this petition, the aforesaid persons shall run the affairs of the Club as "Administrators". However, the Secretary of the Club shall not make any payment without prior permission of the said Administrators". In order to strengthen the principles of corporate democracy as well as corporate governance, the Administrator appointed through the aforesaid order, with the consent of parties, shall ensure that the elections are held in a fair and transparent manner strictly in accordance with relevant provisions of the Companies Act, 2017 and Articles and Memorandum of Association of the Club within the stipulated time. MH/T-18/L Petition allowe