P L D 1969 Lahore 615 (PLP)

(b) That the N. P. T. had not returned the aforesaid loan to the Company and, therefore, as per Regulation 63 of the Regulations in Table A of the Companies Act, the said Trust was not eligible to vote at the said meeting. The amount due against the Trust, according to the petitioner, up‑to‑date, was Rs. 40,00,000.00 (Rupees forty lacs only) ; (c) That the petitioner apprehends that a correct record of the proceedings of the general meeting would not be prepared; and (d) that in the Agenda will come up an item of sanctioning an amount of Rs. 3,00,000.00 (Rupees three lacs only) as, "service charges", to the crust. According to the petitioner, "the Trust was not rendering any service to the Company, therefore, such a huge amount could not be legally paid to the Trust and the petitioner feared that the Trust holding a majority of shares would get this item passed, as it did in the previous years and they will thus cause a loss to the Company". In this respect, the petition went on to say that it would like to draw the attention of the Court to some other alleged illegalities also, which were pointed out by the auditors in their report, about which, however, no argument was raised before me during the hearing of this case.

4. The above petition was contested by the Company. In reply to the various allegations tabulated in para. 3 above, it was pleaded that since lending of money was included in the ordinary functions of the Company in its memorandum of association etc., therefore, advancement of loan to the N. P. T., was saved by the proviso attached to subsection (2) of section 54‑A of the Companies Act. It was further stated that the loan, anyhow, was returned to the Company on 27/28‑12‑1968, when a cheque of Rs. 41,30,000.00 (Rupees forty‑one lacs and thirty thousand only) was got encashed by the Company. A photostat copy of the receipt to this effect was placed on record. As regards the apprehension that a correct record of the meeting will not be maintained, it was pleaded that there was no basis for the same and the allegation was vague ‑and not supported by cogent material. As regards service charges, it was stated that the Trust was, in fact, rendering services to the Company and, in any case, the matter could be thrashed out its details obtained and voted upon in the meeting. In the alternative, it was pleaded that if the expenditure was unauthorised the person aggrieved had independent remedies to get the matter scrutinized on proper evidence in a proper forum and that the present petition could not be used as a handle for the said remedies. As regards the illegalities alleged to have been mentioned in the report of the auditors, it was stated that that report will be duly taken into consideration and attended to in the meeting. If after the meeting any concerned person felt grievance on any count, he could get the matter vindicated in a Court of law in a proper manner and that no im practibility was involved in the holding or the conducting of the meeting.

5. Alongwith the main petition, the petitioner had filed a. civil miscellaneous application bearing No. 138/L of 1968, in which it was prayed that, "in view of the submissions made` above and those in the application, it is most respectfully prayed that this Court may be pleased to pass an interim order appointing a Chairman to conduct the forthcoming generals: meeting on 30‑12‑1968 with the direction that the National Press Trust shall be restrained from exercising its voting rights at the said meeting in any manner whatsoever and that item in the profit and loss account regarding payment of Rs. 3,00,000.00 (Rupees three lacs only) to the National Press Trust as service charges shall not be approved at the said meeting". This shows that the main reliefs, which were claimed in the main petition, were also being claimed in the form of ad interim relief. Since the reliefs claimed in the main petition and the civic miscellaneous, hereinbefore mentioned, are the same, this judgment will dispose of both of them.

6. Section 79(3) of the Companies Act, under which the main petition has been filed reads as :‑ "

3. If for any reason it is impracticable to call a meeting: of a company in any manner in which meetings of that company may be called or to conduct the meeting of the company in manner prescribed by the articles of this Act, the Court may, either of its own motion or on the application of any director of the company or of any member of the company who would be entitled to vote at the meeting, order a meeting of the company to be called, held and conducted. in such manner as the Court thinks fit, and where any such: order is given may give such ancillary or consequential directions as it thinks expedient, and any meeting called, held and conducted in accordance with any such order shall for all purposes be deemed to be a meeting of the company duly called, held and conducted. A perusal of the aforesaid will show that it applies‑ (i) when it is impracticable to call a meeting of a company in any manner in which meeting of that company may be' called ; or (ii) when it is impracticable to conduct the meeting of the company in the manner prescribed by the Articles or the Act. In the instant case, the main petition has been drafted and filed with reference to the second contingency alleging that it is not practicable to hold or conduct the meeting in the manner provided by the Articles of association of the Company and the provisions of the Companies Act, though subse quently, in the course of belated arguments, a case was sought to be made out with regard to the first part of the aforesaid provision of law as well, as will be mentioned in the later part of this judgment. I have, therefore, first to examine as to whether the petitioner has been able to make out any case of impractibility in the conducting of the meeting within the meaning of the aforesaid provisions of law. Taking up the allegations tabulated in sub‑paras. (a) to (d) in para. 3 of this judgment, my views thereon seriatim are as follows :‑

7. As regards the point at (a), subsection (2) of section 54‑A of the Companies Act, reads as follows :‑ "(2) No company limited by shares other than a private company, not being a subsidiary company of a public company, shall give, whether directly or indirectly, and whether by means of a loan, guarantee, the provision of security or otherwise, any financial assistance for the purpose of or in connection with a purchase made or to be made by any person of any shares in the company: Provided that nothing in this section shall be taken to, prohibit, where the lending of money is part of the ordinary business of a company, the lending of money by the company in the ordinary course of its business." A perusal of this subsection read with subsection (3) will firstly show that if a company provides financial assistance to a would‑ be‑purchaser of its shares, then the said Company and its every officer, who is knowingly and wilfully in default, is liable to a fine not exceeding Rs. 1,000.00 (Rupees one thousand only) but it says nothing as to what is to happen to the shares and who is to be considered to be their owner, namely, whether the purchaser, or the vendor who has gone out of company after receiving the money and has passed on the shares to the purchaser. Secondly, it also does not show whether the loan advanced by the Company becomes invalid and cannot be recovered or that the title in the shares does not pass to, the purchaser or that the agreement becomes invalid in its entirety. Thirdly, the proviso to the subsection saves such Companies whose ordinary business is lending. In this behalf, if Article 3 (i)(vii) of the Memorandum of Association of the Company is attended to, it will show that, "to lend money" is included in the ordinary business of the Company and, therefore, the present case is out of the mischief of the operative portion of section 54‑A(2) and is rather saved by the proviso attached thereto. Fourthly, the point looses all significance in the instant case for the purposes of the present petition; because now the Trust has paid all the dues of the Company and has returned the loan in full. On the point with which I am dealing at the moment, I may state that though I have hereinbefore given reasons in the form of firstly, and secondly, but I would like to base my adjudication for the present on the reasons contained in thirdly, and fourthly and my observations in firstly and secondly, should be considered only in the form of a query reserving the right to express a considered finding thereon in some more appropriate cases. This caution is necessary to be administered‑because if I express any final opinion one the points posed therein, it is likely to cause prejudice to various persons who were parties to the various deals in connexion with the transfer of shares at various stages and who not being parties before me, it is not advisable to go in the detail of the same.

8. As regards the point at (b) this again has no value- because on the record has been placed a photo‑stat copy of the receipt showing that a sum of Rs. 41,30,000.00 (Forty one lacs and thirty thousand only), has been received by the Company on account of "full settlement of all amounts owed by N. P. T. to P. P. L.". The amount thus having been cleared, before the actual holding of the meeting, the objection hereinbefore referred to loses all force.

9. As regards the point at (c), this too has no force. The accusation is merely vague. It contains no particulars and there is no basis to hold that the Chairman will prepare a dishonest record of the proceedings of the meeting which is to be held in a public manner in the presence of all the share holders of the Company. The contention has to be noticed simply for the purpose of being rejected.

10. As regards the point at (d), that again is no ground for the Court to take over the charge of the would‑be‑meeting. It is well‑known that Directors of a Company stand in somewhat fiduciary capacity in their control of the Company and if their action amounts to a fraud on the minority, then the minority can always bring an action (known as minority shareholders action on behalf of themselves and others) to recover the Companies money from the person to whom it may have been illegally paid. Reference can be made to Burland and others v. Earle and others ((1902) A C 83 (P C)), Cook v. G. S. Deeks and others ((1916) 1 A C 554) and observations of Jenkins, L. J., in Edwards and another v. Halliwell and others ((1950) 2 A E R 1064, at p. 1067), at p. 1067, portion marked "A", wherein he said :‑ "It has been further pointed out that where what has been done amounts to what is generally called in these cases a fraud on the minority and the wrong doers are themselves in control of the Company, the rule is relaxed in favour of the aggrieved minority who are allowed to bring what is known as a minority shareholders' action on behalf of themselves and all others. The reason for this is that, if they were denied that right, their grievance could never reach the Court because the wrongdoers themselves, being in control, would not allow the company to sue." This means that since the petitioner will have an adequate remedy for thrashing out the matter aforesaid, there is no justification for this Court to take charge of the annual general meeting on this count.

11. The disposes of the objections tabluated in the main petition. At this stage, learned counsel for the petitioner argued that this Court on the 30th of December 1968, while passing an ad interim order, had adjourned the meeting to 15‑2‑1969, the effect of which. according to him, is, that now first part of section 79(3) of the Companies Act also gets attracted to the facts and the circumstances of the present case and at the moment a contingency has arisen when it has become im practicable to call a meeting of the company in the manner in which meetings of the Company are called. Elaborating the point he says that according to section 76(1) of the Companies Act, an annual general meeting is to be called within a calendar year and now that the calendar year of 1968 has run out, the meeting can be held only be this Court and not be the Company itself The contention has no force. Meeting had already been called within the calendar year and all that my learned brother Shaukat Ali, J., did on 30‑12‑1968, was that he adjourned the meeting to 15‑2‑1969. An adjourned meeting is nothing but in continuation of the previous meeting and, therefore, it cannot be subjected to any objection on that count. See Mrs. A. Anantha- lakshmi Ammal v. The Hindustan Investment and Financial Trust Ltd. (A I R 1951 Mad. 927, 929), McLaren v. Thomson ((1917) 2 Ch. D 41) and Scadding v. Lorant (3 H L C 418, 446, 447). Again the petitioner himself was a party to the date, namely, 15‑2‑1969, which was fixed with his consent for holding the meeting. After having obtained this date himself, it does not lie in his mouth to find faults in it. Learned counsel for the petitioner says that he was on 30‑12‑1968, opposed to the adjournment in general and all the agreed to was the date, namely, 15‑2‑1969. Be that as it may, this was a date on his own choice from which he should not derive any premium. Still another aspect of the matter is that acts of Courts cannot be construed to cause disadvantage or prejudice to any party and nor can any party exploit those acts to his advantage; because that will tantamount to an abuse of the process of the Court.

12. Before parting with this case, I may make mention of some other important facts and they are (i) that the present petition has been moved only by one shareholder and no other or others ; (ii) that though the shares were transferred in the name of the N. P. T., some years ago, the petition raising objection on that count has been filed on 27‑12‑1968 ; (iii) that is only three days before the meeting was going to be held ; (iv) that the petitioner had himself been participating in the previous general meetings of the Company where N. P. T. have been exercising their right of vote and the petitioner never objected to the same (v) that the name of the N. P. T. is duly borne on the register of shareholders of the Company ; (vi) that there is neither at the moment, nor there, was in the past any move for the rectification of the register of the shareholders ; and (vii) that unless the register is rectified, a person whose name appears on the register of shareholders is allowed by law to participate in the meeting. All these facts and the various reasons given by me hereinbefore lead me to the conclusion that this is not such a case in which I should exercise my discretion under section 79(3) of the Companies Act to interfere in or assume control of the annual general meeting of the Company now scheduled to be held on 15‑2‑1969.

13. The petitions, having no merits, are dismissed with costs. K. B. A. Petitions dismissed.