P L D 1973 Peshawar 95 (PLP)

2. Mr. Sadullah Khan. 405000

3. Mr. Mohammad Asad Khanzada. 380375

4. Mr. Abdul Hameed Khan. 497745

5. Begam S. Khanzada. 340866

6. Mr. Sarwar Jan Khan. 365127

7. Mr. Mohammad Yaqoob Khan. 367543

8. Mr. Mohammad Ayub Khanzada. 370455

9. Mr. Ghulam Haidar Khan. 342145

10. Syed Mohammad Hassan.

11. Mr. Wajid Ali Burki.

The following were therefore declared elected as Directors:

1. Mr. Taj Mohammad Khanzada.

2. Mr. Abdul Hameed Khan.

3. Mr. Sadullah Khan.

4. Mr. Mohammad Asad Khanzada.

5. Mr. Mohammad Ayub Khanzada.

6. Mr. Mohammad Yaqub Khan.

7. Mr. Sawar Jan Khan.

8. Mr. Gaulam Haidar Khan.

9. Begum S. Khanzada. Then resolution No. C was taken up and it was unanimously passed.

4. After this the appointment of the Chief Executive Managing Director was taken up. Mr. Taj Mohammad Khanzada's name was proposed by Mr. Gujar Khan and seconded by Sahibzada Mohammad Alam Zeb Khan. The House unanimously approved the appointment of Mr. Taj Mohammad Khanzada for a period of three years on the same terms and conditions as given below: (1) Remuneration Rs. 3,000 per month free of income-tax. (2) 3 % of the Net-Annual Profit of the company. (3) Rs. 750 per month (Entertainment Allowance). The meeting closed with a Vote of thanks to the chair. The Board of the newly elected Directors held a meeting on 15-6-1972 at 2 p.m. and did the following, among other, business:- (2) To elect a Chairman for the Board of Directors. (2) Mr. Taj Mohammad Khanzada proposed the name of Khan Sadullah Khan to be appointed as a Chairman of the Board of Directors. The proposal was seconded by Mr. Mohammad Yaqoob Khan and was una nimously appointed as a Chairman. (4) To confirm the annulment by the Board of Directors of the proceedings of meeting on 15-4-1972. (4) The proceedings of the meeting of 15-4-1972 were not approved and annulled. These had been also disapproved previously by the majority of the Directors. (6) To confirm the appointment as already passed by the Extraordinary General Meeting of the shareholders on 15-6-72 of Mr. Taj Mohammad Khanzada, D. S. O., M. C. & M. P. A, as Chief Executive/Managing Director in the light of the Presidential Order No. 2 of 1972 for a period of three years on the same terms and conditions and powers which he had before. (6) The Board unanimously confirm the election of Mr. Taj Mohammad Khanzada as the Chief Executive/Managing Director of the company and the Board also appoint Mr. Taj Mohammad Khanzada as the Chief Executive of the company in accordance with provisions of Article 4 of the Presidential Order No. 2 of 1972 on the same terms and conditions and powers as before for a period of three years.

5. During the pendency of the present appeal Salahuddin, Sahrab Hayat Khan and Dost Muhammad Khan, Directors filed Writ Petition No. 116 of 1972 on 27-11-72. In the petition the Frontier Sugar Mills and Distillery Ltd., Takhtbai, District Mardan, Mr. Taj Muhammad Khanzada and 9 others were arrayed as respondents. The declaration sought in this petition was that the proceedings of the meeting held on June 15, 1972, by respon dents 1 to 10, in which petitioner No. 1 and petitioner No. z were, respectively, removed from the office of the Chief Executive and Directors of the Mills is without jurisdiction and of no legal effect, as also election of respondents 2 to 10, who were elected instead as Directors in the said meeting .... . This petition was dismissed by a Division Bench of this Court on 13-12-72 on the ground that the Frontier Sugar Mills could not be termed "person" within the meaning of Article 201 of the Interim Constitution and secondly that a civil suit filed by the petitioners against the respondents is still pending adjudication in a competent Court.

6. In the memo of the present appeal the principal ground (ground No. 4) taken is: "That the appellants have a strong prima face case for the grant of the injunction as prayed for before the first Court except regarding the holding of the meeting on 15th June, of which meeting, the proceedings are a nullity and this Hon'ble Court is bound to ignore them, as non-existent in law." It i9 prayed in the appeal "that the appeal be kindly accepted and the injunction be kindly allowed restraining respondent No. 8 from interfering with the performance of functions of the Chief Executive by the appellant No. I and also that the respondent No. 8 be restrained from handling the property of the Mill including the funds, in any manner." It may be pointed out that Muhammad Yaqub Khan plaintiff No. 4 in the suit plaint had applied on 12-6-72 that his name be struck out from the panel of plaintiffs. Muhammad Yaqub Khan is one of the 9 Directors newly elected on 15-6-1972. He has, therefore, been made respondent No. 11 in the Memorandum of Appeal.

7. Mr. Saeed Akhtar, Advocate for the appellants and Mr. Zahurul Haq, Advocate for the respondents were heard at great length on behalf of the parties. The learned counsel for the appellants advanced the following contentions: (1) That the office of the Chief Executive had been filled by appellant No. 1 on 15-4-1972 by a resolution of the lawfully elected Board of Directors. (2) Assuming for the sake of argument that there was defect in the election of Directors, the decision of the Directors to appoint Salahuddin Khan as Chief Executive will not be rendered illegal in view of the protection contained in Arti cle 128 of the Articles of Association of the company and section 86, read with paragraph 94 of the First Schedule, Table T A of the Companies Act. (3) The appointment of the Chief Executive is only to be made by the Board of Directors under Article 4 of the Presidential Order No. 2 of 1972 and the appointment is for a fixed time of three years under Article 11 of the Presidential Order; the Chief Executive, therefore, cannot be removed before the expiry of three years, which would expire on 15-4-1975. (4) The initial appointment of Taj Muhammad Khanzada as Managing Director terminated with effect from 15-1-1972 under Article 4 of the Presidential Order. His appointment 6n 24-1-1972 was also expressly rescinded on 15-4-1972 by the new board of Directors of which Mr. Taj Muhammad Khan zada was also a member and was appointed as Director. He accepted and acquiesced into this arrangement by withdrawal of his suit on 31-5-1972, and also by signing the requisition notice dated 27-5-72 for convening Extraordinary General Meeting (it shareholders on 15-6-1972; thereby waiving all his rights as Chief Executive on the basis of old meeting of the board 0 Directors dated 24-1-1972.

8. During the course of their address the learned counsel for the parties produced various precedent legal decisions in support of their respective points of view. "Preventive relief is granted at the discretion of the Court by injunction, temporary or perpetual. Temporary injunctions are such as are to continue until a specified time, or until the further order of the Court. They may be granted at any period of a suit, and are regulated by the Code of Civil Procedure. A perpetual injunction can only be granted by the decree trade at the hearing and upon the merits of the suit: the defendant is thereby perpetually enjoined from the assertion of a right, or from the commission of an act, which would be contrary to the rights of the plaintiff." (See sections 52 and 53 of the Specific Relief Act). Section 56 of the Specific Relief Act lays down guiding principle for refusing injunctions. Rules 1 and 2 of Order XXKIX, Civil Procedure Code provide for cases in which temporary injunctions may be granted by a Court in suits. Rule 2 of the Order specifically provides for restraining the defendant, in any suit, from committing a breach of contract or other injury of any kind and the plaintiff may, at any time, after the commencement of the suit apply to the Court for a temporary injunction to restrain the defendant from committing the breach of contract or injury complained of, or any breach of contract or injury of a like kind arising out of the same contract or relating to the same property or right. The well settled principles for the grant or refusal of temporary injunctions are, firstly, whether the plaintiff had a prima facie good case, secondly, whether the balance of conveni ence lies in favour of the grant of injunctions, and thirdly, whe ther the plaintiff would suffer irreparable loss if the injunction is refused. See Shahzada Muhammad Umar Beg v. Sultan Mahmood Khan and another (P L D 1970 S C 139). Thus although the issue of injunction is discretionary with the Court yet the principles governing the exercise of such discre tion are fully settled. The considerations enumerated in section 56 of the Specific Relief Act are also applicable in granting or refusing temporary injunctions.

9. In deciding whether there is a prima facie good case the Court has to see whether the plaintiff has a plain and undisputed question to raise as to the existence of the right which he claims. The question of discretion is usually a question of degree and when exercising discretion Court should look to all circumstances of the case. In the exercise U discretion the Court is not to determine the legal rights of the parties on the merits of the case one way or the other. All that is required is to find out whether the applicant has made out a prima facie case. The issue of a temporary injunction is governed by the same principles as the grant of a permanent injunction at the trial of a case. It is no sufficient reason for the purpose of not issuing a temporary injunction that the suit would become infructuous. The appointment of Managing Agents and election of Directors is governed by the provisions of the Companies (Managing Agency and Election of Directors) Order, 1972 (President's Order 2 of 1972). The provisions of this Order override other laws according to Article 3 of the Presidential Order, which reads: "This order shall have effect notwithstanding anything contained in the Provisional Constitution Order, the Companies Act, 1913 (VII of 1913), or any other law for the time being in force or any agreement, contract, memorandum or articles." The other relevant Articles of the Presidential Order are quoted below: "

4. Termination of managing agency, agreements and contracts.-(1) All agreements or contracts entered into by a cum: pony with its Managing Agent shall stand terminated forthwith and the Managing Agent and tie directors of the company nominated by the Managing Agent shall cease to hold their respective offices. (2) On the Managing Agent and Directors of a company ceasing to hold office in pursuance of clause (1),- (a) the remaining Directors of the company shall appoint a person who is not the Chief Executive of any other company to be the Chief Executive In whom shall vest the powers and functions in relation to the management and administration of the affairs of the company subject to the general supervision and control of the Directors; and (b) the Managing Agent and directors so ceasing to hold office shall entrust all the propertie3, books of account and other documents of the company to the directors for the time being or to the Chief Executive appointed by them under paragraph (a). (3) The Chief Executive appointed under Clause (2) shall hold office on such terms as the directors may determine and shall, if he is not already a director of the company, be deemed to be its director.

9. Directors to stand retired.

On the expiration of the period of one hundred and eighty days following the commencement of this Order, or on the date of the first annual general meeting of a company held after such commencement, which ever is due earlier, all directors of a company for the time being shall stand retired from office: Provided that the directors so perform their functions until their successor are elected.

10. Voting for election of directors.

The directors of a company shall fix the number of directors of the company and the directors shall be elected by the members of the company in general meeting in the following manners: (a) a member shall have such number of votes as is equal to the product of the number of voting shares hold 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 Men 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.

11. Term of office of directors.-(1) A director, including the Chief Executive, shall hold office for a period of three years unless he earlier resigns, becomes disqualified for being a director or otherwise ceases to hold office. (2) Any casual vacancy occurring among the directors may be filled up by the directors, and the person so appointed shall hold office for the remainder of the term of the director in whose place he is appointed.

12. Removal of director, etc.

A resolution for removing a director elected in the manner provided for in Article 10, or for reducing the number of directors, shall not be deemed to have been passed if the number of votes against it is equal to, or exceeds, the number of votes that would have been necessary for the election of a director at the immediately preceding annual election of directors in the manner aforesaid. 14, Adaptation of laws, etc.

Any Court, tribunal or authority required or empowered to enforce the Companies Act, 1913 (VII of 1913), or any other law for the time being in force or the memorandum or articles of any company shall, not withstanding that no actual modifications or adaptations have been made therein, construe that Act or other law or the memorandum or articles with all such modifications and adaptations as are necessary to bring the same into accord with the provisions of this Order.

16. Bar of jurisdiction.

(1) No Court, including the Supreme Court and a High Court, shall call in question, or permit to be called in question, any provision of this Order or of any rule or order made or anything done or any action taken or purporting to be made, done or taken thereunder. (2) No Court, Including the Supreme Court and a High Court, shall grant any injunction or make any order, nor shall any such Court entertain any proceedings, in relation to any, thing done or intended or purporting to be done under this Order." Paragraph 6 of Part I of the Schedule annexed to the Capital Issues (Exemption) Order, 1967, governs the appointment of Chief Executive. Paragraph 6 of Part I of the Schedule annexed to the Capital Issues (Exemption) Order, 1:967, under Notification No. F-2 (2)-CCI/67, dated 13th March 1967 in exercise of the powers conferred by subsection (1) of section 6 of the Capital Issues (Continuance of Control) Act, 1947 (XXIX of 1947), reads : "

6. The Chief Executive, by whatever name called, shall not except with the approval of the Controller of Capital Issues, be appointed :- (a) . . . . . . . . . . . . (b) . . . . . . . . . . . ." Recapitulating the facts of the present case in the light of the provisions of Statute, quoted above, Mr. Taj Muhammad Khanzada was appointed Managing Director of the Company by special resolution dated 23-4-1950. He was acting as Managing Director of the Company at the time of the coming into force of the Presidential Order No. 2 of 1972 on 15-1-1972. The Board of Directors of the Company held a meting on the 24th January 1972 and by resolution No. 7 appointed Mr. Taj Muhammad Khanzada a9 Managing Director for a term of three years, on the same remuneration i.e. salary, commission, entertainment allowance, privilege etc. as allowed to him earlier by the General Body of shareholders. On the expiration of the period of 180 days following the commencement of the Order (viz. on 13-7-1972) or on the date of the First Annual General Meeting of the company held after such commencement, whichever was due earlier, all directors of the company for the time being stood retired from office. However, the directors so retired could continue to perform their functions until their successors were elected. The directors of the company had also to fix the number of the directors of the company, and then to elect the number of the directors so fixed in a general meeting by cumulative voting system compulsory for a term of three years as introduced by sections 10 and 11 of the Presidential Order. The Directors had also to appoint Chief Executive for a period of three years as ordained by Article 11 of the Presidential Order. After the appointment of Mr. Taj Muhammad Khanzada as Managing Director on the 24th of Jaunary 1972, the Board of Directors raised the number of Directors from 7 to 9 in their meeting held on 10th March 1972. Consequent to notice dated 11th March 1972 the 32nd annual ordinary meeting of the shareholders of the Mills was held on 31st March 1972, when the previous seven directors were re-elected and Mr. Salahuddin Khan and Mr. Muhammad Yaqub Khan were elected unopposed as two other directors, so as to complete the number of directors to be nine. On 15th of April 1972 the Board of Directors held a meeting wherein resolution No. 7 dated 24-1-1972 confirmed on 31-1-1972 was considered as ultra vires of the Board of Directors as well as against the provisions of the Companies Act. The Board of Directors also wag of the view that by an oversight Mr. Taj Muhammad Khanzada was appointed as Managing Director for a period of three years and as such the Board decided unanimously to rescind and annul resolution No. 7, dated 24-1-72, because it was passed in the presence of Mr. Taj Muhammad Khanzada when he himself presided over the meeting. After having annulled resolution No. 7, dated 24.1-1972, the Board of Directors by a unanimous decision of the members appointed Mr. Salahuddinn Khan as Chief Executive of the Company in terms of the Presidential Order while Mr. Taj Muhammad Khanzada was appointed as Resident Director. The proceedings .of the annual ordinary general meeting held on 31st March 1972 so far stand unconfirmed. The appointment of Mr. Salahuddin Khan as Chief Executive in the meeting of Board of Directors held on 15th April 1972, it appears, was sent for approval of the Controller of Capital Issues, but this authority, instead of approving the appointment, had advised the Company to apply for the appointment of Mr. Salahuddin Khan as Chief Executive on the prescribed form, a copy of which was sent to the Company. The approval of the Controller of Capital Issues in respect of the appointment of Mr. Salahuddin as Chief Execu tive was necessary but such approval has not been obtained so far. Thus it is evident that in the annual ordinary general meeting of the shareholders of the Mills, held on 31st March 1972, the nine Directors including Mr. Salahuddin, were elected unanimously, and not by cumulative voting system under the mandatory provisions of Article 10 of the Presidential Order. The election of the nine Directors in violation of the mandatory provisions of the Statute strikes at the base of the meeting of the Board of Directors held on 15th April 1972, wherein Salahuddin was appointed as Chief Executive. The lack of approval of leis appointment as Chief Executive by the Controller of Capital Issues also violates the obligatory provisions of para. 6, Part I of the Schedule annexed to the Capital Issues (Exemption) Order, 1967 it is a settled law that if an act or omission violates the statutory provisions of law, the same is a nullity and the Court before which it is brought is not only entitled but bound to ignore it. Mr. Salahuddin appellant, therefore, on the date of Institution of his suit, out of which the present appeal arises, had no fair or undisputed right to hold the office of the Chief Executive of the Company. His right to hold the office being of a doubtful nature, the rule of balance of convenience Mil have no place in his case. The argument of the learned counsel for the appellant that his suit for permanent injunction, if the temporary injunction is not granted to him, would become infructuous, has no legal force in the circumstances of the case.

10. The prayer in this appeal that respondent No. 8 Mr. Taj Muhammad Khanzada be restrained from interfering with the performance of functions of Chief Executive by the appellant No. 1 and that he (respondent No. 8) be restrained from handling the property of the Mills, including the funds in any manner; arises from the proceedings of the extraordinary general meeting held on 15th June 1972, wherein Mr. Taj Muhammad Khanzada was appointed Chief Executive of the Company for a term of three years. This meeting was held during the pendency of the suit and after passing of the impugned order in appeal on 14th June 1972, but before this appeal was preferred. Rule 2 of Order XXXIX, C. P. C. regulates the grant of a temporary 1 injunction in suits for injunction against apprehended breach of contract or injury of any kind. As such where the act complained of has been done and completed no injunction could be issued under rule

2. Mr. Taj Muhammad Khanzada had been a Managing Director since 23-4-1950. He was again appointed, temporarily as Managing Director by a Board of Directors in the meeting held on 24-1-1972. He was also appointed Managing Director by the newly elected Directors, elected under the provisions of Article 10 of the Presidential Order in a meeting held on 15-6-1972. This will show that be has not vacated the office of Managing Director or Chief Executive at any time till today, bat he functions in relation to the management and administration of the affairs of the company uninterrupted. Mr. Salahuddin Khan has at no point of time, after his appointment as Chief Executive on the 15th of April 1972 took over the office of the Chief Executive. The issue of temporary injunction in his favour would obviously disturb the functioning of the management and administration of the affairs, of the company. The balance of convenience would, therefore, lie in not disturbing the management and administration of the affairs of the company.

11. This term does not refer to damage which can be physically repaired, but relates to such damage or loss as cannot be compensated adequately. The appellant Mr. Salahuddin, as already stated above, has at no time held the office of Chief Executive on the remuneration fixed for him. As such his relief in the suit for injunction can be compensated in money when he succeeds. Therefore, the temporary injunction cannot be granted to him. 11-A. Article 16(2) of the Presidential Order also creates a bar to the issuance of injunction in the manner that no Court including the Supreme Court and a High Court, shall grant any injunction or make any order, nor shall any such Court entertain any proceedings in relation to anything done or intended or purporting to be done under this Order.

12. Before the institution of the present appeal, consequent to the holding of the Extraordinary Annual General Meeting on 15-6-1972, Mr. Taj Muhammad Khanzada and Mr. Muhammae, Yaqub Khan respondents were elected Directors besides Mr. Abdul Hamid Khan, Mr. Saadullah Khan, Mr. Asad Khanzada, Mr. Muhammad Ayub Khanzada, Mr. Sarwar Jan Khan. Mr. Ghulam Haidar Khan and S. Begum Khanzada. The Chief Executive has posers to function in relation to the manage ment and administration of the affairs of the Company subject to the general supervision and control of the Directors. Except Mr. Taj Muhammad Khanzada (respondent No. 8) and Muhammad Yaqub Khan, Director of the Company, respondent No. 11, the other seven Directors, named above, have not been made respondents in this appeal. The seven Directors, in my view, are interested in the result of the appeal and they are, therefore, necessary party to the appeal. For default of making them party to the appeal, this appeal would be incompetent.

13. As a result of the above discussion, this appeal is without merits and as such it is dismissed with costs. B. A. Appeal dismissed.