Pakistan Case Law
2007 CLC 1811

TRADING CORPORATION OF PAKISTAN (PVT.) LTD. vs MERCHANT AGENCY

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Citation2007 CLC 1811
CourtSindh High Court
Case No.H.C.A. No,328 of 2006
Date2005-11-23
Judge(s)Sabihuddin Ahmed, C.J. and Faisal Arab
Authored byFaisal Arab
ResultAppeal allowed
AI Summary — generated from this judgment; read the full text below and verify before relying on it.

This appeal arises from a judgment and decree dismissing the appellant's recovery suit on the ground of maintainability, specifically due to the absence of a formal Board of Directors' resolution authorizing the filing of the suit. The core legal question was whether the lack of a formal resolution constitutes an incurable defect rendering the suit non-maintainable, or if internal approvals and subsequent ratification suffice. The Sindh High Court held that the suit was maintainable. The Court observed that internal file notings demonstrated that three Directors, including the Chairman, had approved the suit's filing, which satisfied the requirements for a 'resolution by circulation' under the appellant's Articles of Association. The Court further noted that the appellant had subsequently filed a formal resolution ratifying the act of the person who initiated the suit. The Court established the principle that the absence of a formal resolution is a technical omission rather than an incurable defect when there is evidence of requisite directorial approval or subsequent ratification, and such matters should be decided on merits rather than dismissed on technicalities.

Questions settled in this judgment
  • Can a suit filed on behalf of a corporation be maintained if a formal resolution authorizing the filing was not initially attached?
  • Does the approval of a majority of directors via internal file notings constitute a valid 'resolution by circulation' under corporate Articles of Association?
  • Can the subsequent ratification of a legal action by a Board of Directors cure the initial absence of a formal resolution authorizing that action?
maintainability of suitcorporate authorizationresolution by circulationratification of legal proceedingstechnical omissionArticles of Associationrecovery suit

1. ' FAISAL ARAB, J.--- The present appeal has arisen from the judgment and decree dated 31-5-2006 passed by the learned Single Judge, whereby appellant's suit was dismissed on the sole ground that it was not maintainable in law as no resolution passed by appellant's Board of Directors was filed authorizing the person to file suit on behalf of the appellant. Notice for hearing of this appeal was issued to the respondent but the same could not be served as the respondent had shifted their place of business. As the appellant was not aware of respondent's new address, notice was ordered to be served through publication in newspaper. Notice was duly published in daily "Jang" on 10-11-2006 for hearing fixed for 23-11-2006. On 23-11-2006 no one appeared in Court on behalf of the respondent and therefore, after holding the service good on the respondent we proceed to hear the appeal ex parte.

2. ' Learned counsel for the appellant contended that though no formal resolution authorizing filing of the recovery suit was filed 'along with the suit, yet there was ample material to show that the then Directors of the respondent had given their approval for filing recovery suit against the respondent.

3. He therefore, maintained that learned single Judge committed error in dismissing the suit on the ground that no resolution was filed. Learned counsel for the appellant took us to various notings on the internal file of the appellant that related to the authorization of the then Directors of the appellant for filing recovery suit against the respondent. A bare perusal of noting No,124 on the internal file of the appellant show that three Directors including the then Chairman of the appellant gave their respective approval on 19-1-1988 and 20-1-1988 to the filing of recovery suit against the respondent and only after such approval Suit No,167 of 1988 was filed against the respondent on 25-1-1988. Article 106 of the Articles of Association of the appellant provides that minimum quorum for the meeting of Board of Directors shall be two. In this background even if no formal meeting of Directors was called for passing the requisite resolution, the approval of three Directors including the Chairman can be treated as "resolution by circulation" under Article 113 of the Articles of Association of the appellant, granting authorization for filing the recovery suit. Thus, we hold that though there was no formal resolution passed in a meeting for filing recovery suit against the respondent, there did exist approval of the requisite number of Directors in terms of Article 113, who authorized the filing of the suit. In such circumstances absence of formal resolution could only be treated as technical omission which in the peculiar circumstances cannot be regarded as incurable defect. Furthermore, the appellant, out of abundant caution, has filed a formal resolution of appellant's Board of Directors signed by six Directors including its Chairman, ratifying the act of the person who filed the suit on behalf of the appellant.

4. ' In the circumstances, we are left with no option but to set aside the impugned judgment and decree and direct the learned Single Judge to decide the suit on merits.

5. ' Vide short order, dated 23-11-2006 the above appeal was allowed. The above are the reasons in support of the same.

Cited by 9 cases

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