1985 PLP 1193 (MLD)

I proposed to dispose of the main petition and the learned counsel for the parties addressed extensive arguments but after going through the order in J. Miscellaneous 4 of 1985, dated 10-3-1985 passed by the learned Chief Justice, who is also the Company Judge, in all fairness I deem it improper to touch the question of maintainability of the petition under section 290 of the Companies Ordinance, 1984 as there may be conflicting views on this point. The order reads as under:- "I am not satisfied on the point, whether section 290 of the Companies Ordinance will be attracted in this case. The scheme of this section is that, either on a complaint by a member, or a creditor, the Registrar can make an application to the Court, in addition to the Registrar making such an application on the basis of his own knowledge. The question ;hat then arises, is, whether this application by a member can be entertained directly. Mr. Malik Muhammad Saeed requests for two weeks time to examine the position. Call up after two weeks." I, therefore, decided to dispose of two applications C.M.A. Nos.1144 and 1148 of 1985.

2. The petitioners have called in question the resolution passed by the respondents in their meeting held on 10-6-1985 by which the petitioner No. 1 was removed as Chief Executive and Director of the Company.

3. Briefly the facts are that Arag Industries Limited was under compulsory liquidation and its shares were sold by the official liquidator and the sale was confirmed by the order, dated 11-6-1984. The shares were purchased by the petitioners. It is the case of the petitioners that the Directors of the Company duly approved the transfer of the shares in favour of petitioner No. 1, his wife and the petitioner No.

2. Against the sale confirmation order the purchasers deposited the sale consideration amounting to Rs. 4.10 million in Court and upon receipt thereof the Official Assignee and Liquidator handed over 1,33,000 shares to the petitioner No. 1 and 16,500 shares to the petitioner No.

2. An appeal was filed against the confirmation of sale by Messrs Crescent Star Insurance Company and another in this Court being Appeal No. 45 of 1984 which was subsequently withdrawn. The Board of Directors of Company consist of four Directors namely, Mr. Abdullah H. Habib, Kassim H. Habib (respondents 1 and 2), Khawar M. Butt, the petitioner No. 1 and Mr. A.R. Pendry (alternate Mr. J.F.C. Gallaher) representing petitioner No.

2. The Chairman of the Board has a casting vote in the event of equality of votes.

4. The resolution of the Board of Directors, dated 10-6-1985 has been impugned in this petition and interim relief has been claimed by the petitioners. The operative part of the resolution is as under:- "Resolved that since no permission was obtained from the Investment Promotion Bureau, Government of Pakistan, in respect of the appointment of Mr. Khawar M. Butt as Chief Executive of the Company as the nominee of foreign shareholders, his appointment is invalid and he cannot continue to act as such: and the Managing Director should be appointed as Chief Executive is in accordance with the Company Law." ' This resolution is illegal on the ground that it offends provisions of section 202 of the Companies Ordinance, 1984. accordance to which the directors of a company by resolution passed by not less than three-fourth of the total number of directors for the time being, or the company by a special resolution, 'may remove a chief executive before the expiration of his term of office notwithstanding any thing contained in the articles, or in any agreement between the company and such chief executive. !, There are four directors of the company and the resolution was passed by the two directors and the casting vote of the chairman. It means that out of five votes three were in favour of the resolution meaning thereby 60$ of the total number of votes had favoured the resolution. Therefore the necessary requirement of law that three fourth of the total number of directors has to pass the resolution has not been, complied with as such this resolution has no legal sanctity. The petitioner was appointed as Chief Executive in 1978 and since then he is working in that capacity. The respondents by their) own conduct have accepted the appointment of the petitioner No. 1 and, ratified his actions. It was a past and closed transaction. During all this period no objection about his appointment was taken. Even they, matter was not referred to the Investment Promotion, Bureau for its permission. Learned counsel for the petitioner has stated that no such permission is required but even if such permission was necessary, the company should have referred the matter to I.P.B. and the directors could not assume the functions of I.P.B. It cannot be positively urged by the respondents that such permission would have been refused by the I.P.B. It is for the I.P.B. to accord sanction and the respondents have no legal authority to take over the functions of the I.P.B. There was no complaint about the conduct of the petitioner. In these circumstances the respondents were estopped to challenge the appointment of the petitioner by their own conduct. They cannot blow hot and cold in the same breath.

5. The second resolution which has been assailed in this petition is as under:- "Resolved that in compliance with the Stay Order passed by the Hon'ble High Court of Sind in H.C.A. No. 45 of 1984, which order has come to the notice of the Managing Director very recently, Mr. K.M. Butt is not entitled to act as Director of the Company inasmuch as the shares presently in his name cannot be counted as his qualification shares and he also cannot exercise any voting rights on the basis of the said shares." No prior notice of this resolution was given to the petitioner and an) objection to that effect was also taken by the two Directors in the meeting. Moreover the matter should have been referred to the Court whose order was being interpreted by the respondents. It may be stated that Appeal No. 45 of 1984 was filed by Messrs Crescent Star Insurance Company and another against the decision of a learned single Judge and the order was stayed. The matter was pending before the High Court and, therefore it was not proper for the respondents to pass the resolution without waiting for the result of the Court's decision. It has been disputed by the petitioner that the order of the High Court was not in the knowledge of the Managing Director. The appeal, was withdrawn by the appellants and, therefore, interim stay granted by the High Court was not in the field after the disposal of the appeal. On this ground also the resolution which was passed on the order of the High Court has to be struck down. The respondents have themselves filed a suit for declaration and consequential relief whereby a declaration has been sought that they are entitled to get 1,49,500 shares standing in the names of the petitioners with a mandatory injunction directing the petitioners to transfer these shares in their names. The suit is still pending and, therefore, it needs no comment. In this suit in para. 11 of the plaint the respondents have admitted that 1,49,500 shares were transferred in favour of the petitioners.

6. All these facts would show that the petitioners have a prima facie case. At present they are holding majority shares. The balance of convenience lies in their favour, so that they may not be disenfranchised by the impugned resolution. Their interests would be jeopardized if the interim relief is not granted to them and it would result in the multiplicity of litigation. The general principles for granting relief of temporary nature are that the plaintiff must have a prima facie case, and the balance of convenience also lies in his favour and irreparable loss would be caused to him if such relief is not granted. These conditions are fully applicable to the case of the petitioner. Therefore, it is declared that the petitioner shall continue as Chief Executive in terms of his contract of 1978 and 1980 and will also continue as Director of the Company and act and take part in all business and affairs of the company as its Chief Executive and Director as has been doing before the meeting of 10-6-1985. M . Y . H . Petition accepted.