A. M. MURAD Versus MUSHTAQ AHMAD

This is an application for the withdrawal of this suit. It is supported by all the defendants, except defendant No. 9, and the real point for determination in the application is whether it. has been filed by the two plaintiffs who had filed the suit. The two plaintiffs are Group Captain Morad and Herman and Mohatta Company Ltd. The latter is a private limited company registered in Karachi in 1919, and I shall refer to it as the Company; and as, even according to Mr. Fazeel, the learned counsel for the 9th defendant, this Court has held that Group Captain Morad is a Director of the Company, I shall refer to him as the Director, except where necessary otherwise. Now, as he alone has signed the withdrawal application, the question for consideration is whether he was entitled to file this application on the Company's behalf. Normally, the answer to the question could only have been in the affirmative, but the position here is complicated by the litigation between the parties.

2. Mr. Muhammad Ali Saeed, who advanced the main arguments in support of the withdrawal application and of the withdrawal of the suit, submitted that as the Director had filed the suit on the Company's behalf, he was competent to withdraw it under Order XXIX, C. P. C. But, according to Mr. Fazeel, no application under Order XXIII, C. P. C. could be allowed without the 9th defendant's consent who opposes the withdrawal of the suit. Alternatively Mr. Fazeel submitted that the Director could not press for the withdrawal application or the withdrawal of the suit. Thirdly, he submitted that the Company was being managed by two receivers, the Director Mr. Ishtiaq Ali, but as the withdrawal application had not been signed by Mr. Ishtiaq Ali, it could not be said to be an application by the Company, nor could the suit be withdrawn without Mr. Ishtiaq Ali's consent. The learned counsel for all the other defendants relied on the arguments advanced by Mr. Muhammad Ali Saeed. In order to appreciate the arguments advanced, I may explain that the Company's paid‑up capital consists of 11,000 fully paid shares of Rs. 100 each, and the Mohatta family, which lives in India, had owned 6000 shares before the 1965 War.

On the promulgation of the Defence of Pakistan Rules, 1965, the Company was first declared enemy property, but later this order was withdrawn, anti by a notification issued in April 1968 the Custodian of Enemy Property (the 8th defendant in the present, suit declared the shares of the Mohattas to be enemy. Then as to the other 6000 shares of the Company, when litigation began, it was admitted by Mr. Fazeel that the Director owned 100 shares, whilst the balance of 5900 shares were either owned or held by English shareholders or the legal heirs of deceased English shareholders. Meanwhile however one Mr. Hoon claims to have purchased the 5000 shares of the Mohattas in 1963 by a transaction in England, but the Company refused to register him as a share‑holder, yet he took no steps whatever to enforce his alleged rights uptill the outbreak of the 1965 War. Now Mr. Hoon is a Sikh gentleman, and it was admitted before that he held a U. K. passport issued in Calcutta, and the 9th defendant claims through him. Reverting however to the events leading to the suit, two years after the 8th defendant had declared the shares of the Mohattas to be enemy property, Mr. Hoon filed a suit in this Court, being Suit No. 151 of 1970, against the Company and the Custodian of Enemy Property for a declaration that he was the owner of the 5000 shares declared to be enemy property, and for a permanent injunction to restrain the defendants from interfering with his rights. Together with the suit, he had filed an application for an interim injunction to restrain the defendants from interfering with his rights, but this application was dismissed by me on 18‑5‑1970. A few days later, Mr. Mushtaq Ahmed (defendant No. 1 in the present suit) filed another application to restrain the defendants from transferring the disputed shares to the Director, and although the applicant was not a party to the suit, he contended that he alone was entitled to represent the Company in the suit filed by Mr. Hoon. This application I dismissed on 28‑5‑1970, and, a few days earlier, the Director had filed the present suit (No. 231 of 1970) which is now sought to be withdrawn.

3. Now although Mr. Hoon claimed that the Company had illegally refused to register the transfer of 5000 shares purchased by him, he has not alleged in his suit, nor did Mr. Fazeel even attempt to argue before me. that the Mohattas had first given an option to the other shareholders of purchasing their shares before selling them to a stranger, namely Mr. Hoon. But Article 25 of the Company's. Articles of Association reads as follows:‑

"25. Save as hereby otherwise provided no share shall be transferred to any person who is not a member of the Company so long as any member is willing to purchase the same at the fair value which shall be determined as hereinafter provided."

As Mr. Hoon was not illiterate, he knew, in view of this Article, that his plea to have purchased 5000 shares from the Mohattas would be rejected as false and illegal, unless he could establish that the other shareholders of the Company had been given an option to purchase the shares of the Mohattas, but had refused that offer, Fortunately for Mr. Hoon, none of the English shareholders were interested in holding shares in a foreign country, but as his alleged purchase had not been completed before the 1965 War, and as Group Captain Morad had meanwhile become a member of the Company and was keen to buy the same 5000 shares, some way had to be found of getting rid of him. Therefore, defendant No. 4, who lives in London and is a director of the company, called a series of Board meetings in London, and as he thought he was succeeding in his design to help Mr. Hoon, he even had the effrontery to call the annual general meeting of the Company in London. These meetings purported to elect defendants 1, 6 and 7 in the present suit as Directors of the Company, and it was then claimed that the Director had ceased even to be a member of the Company. Thereafter, Mr. Mushtaq Ahmed came to Karachi took possession of the Company, and as I explained, after I had dismissed Mr. Hoon's injunction application, Mr. Mushtaq Ahmed filed another application to restrain the defendants from transferring any shares to the Director. Now under the Company's Articles, its meetings could only be held at its head office which was in Karachi, and further these meetings had been convened without proper notice, therefore, by my order of 28‑5‑1970, 1 had dismissed the application of the Ist defendant, and I had also held in this order that Group Captain Murad was a Director of the Company and was entitled to file the suit on the Company's behalf.

4. Meanwhile, on 25th May 1970, the Director filed the suit which is now sought to be withdrawn. The relief sought in this suit by the Director and by the Company is that the alleged resolutions passed at the Company's Board meetings and at the Company's annual general meeting in London were illegal, and as the lst defendant had been given possession of the Company's assets in consequence, to the exclusion of the Director, the further relief sought was a permanent injunction to restrain defendants Nos. 1 to 7 from interfering with the Company or with the Director, and for the appointment of the Director as the receiver of the Company. The result of the order passed by me 3 days later was that defendants Nos. 1 to 7 could not continue their illegal possession of the Company's assets. But the Director had also filed with the suit an application for having himself or any other fit person appointed as receiver of the Company, pending the hearing of the suit, and on 5‑6‑1970 my learned brother Noorul Arfin, J. passed an ad interim order appointing the Nazir of this Court as receiver. This order continued for some months and, as I will presently show, Noorul Arfin, J. rejected as false Mr. Hoon's claim to be a shareholder after record ing his evidence. Perhaps because he felt that discretion was the better part of valour, Mr. Hoon thereafter transferred his alleged rights in the 5000 shares originally owned by the Mohattas to the 9th defendant, who acquired them with full knowledge of the Court's orders against Mr. Hoon. Be that as it may, in due course, the 9th defendant was allowed by the Court to be impleaded as defendant in this suit, and as plaintiff in the suit filed by Mr. Hoon. Finally, it is sufficient to state here that, despite his experience of such matters, the management of the Company's assets by the Nazir of this Court was found to be very difficult, and the plaintiffs and defendants Nos. 4, 6, 7 and 9 moved a consent application that the Director and Mr. Ishtiaq Ali, Advocate, be appointed as receivers of the Company in the place of the Nazir. This application was allowed on 20‑5‑1971. It has not solved the problem of running the Company. properly, and now the plaintiff's wish to withdraw their suit.

5. Mr. Fazeel realized that he could not oppose this application, unless he could establish that Mr. Hoon bad purchased the 5000 shares of the Mohattas before the promulgation of the 1965 Emergency. But the difficulty in his way is my order of 15‑5‑1970, in which I had held that Mr. Hoon had failed even to make out a prima facie case to these shares, and, because T had observed in this order that Mr. Hoon's claim was per se illegal, as he had not obtained the prior permission of the State Bank of Pakistan for the purchase of the shares of the Mohattas, learned counsel referred me to the judgment of the Supreme Court in Manzoor Mussain v. Wali Muhammad (P L D 1965 S C 425).

In view of this authority, Mr. Fazeel's submission that Mr. Hoon's agreement with the Mohattas was not per se illegal is correct, but this is not material, because I had also held in my order that the agreement was hit by Article 25 and the other Articles of the Company relating to the transfer of shares, therefore I had further held that as the Mohattas had remained owners of these shares, on the promulgation of the 1965 Emergency, these 5000 shares had vested in the defendant No. 8 (the Custodian of Enemy Property). Accordingly, I had held that the notification in this respect by the said defendant could not be challenged in the suit. As Mr. Boon's appeal against this order was dismissed by a Latters Patent Bench of this Court, he filed a petition for Leave in the Supreme Court which was dismissed by their Lordships, subject however to an undertaking by the Director to Mr. Boon that he would not, pending the decision of Mr. Hoon's suit, transfer the 5000 shares in dispute or "subscribe to any decision which may prejudi cially affect Mr. Boon's rights. Meanwhile, as the Additional Custodian of Enemy Property had sold the 5000 shares formerly owned by the Mohattas to the Director for Rs. 7 lakhs, the Director moved the Court for the registration of these shares on his name. After examining the order of the Supreme Court and the undertaking given by the Director before their Lordships, Noorul Arfin, J. also held by his order of 17‑I1‑1970 that the shares of the Mohattas had become enemy property, that Mr. Boon's claim was false and therefore he allowed the Director's application. This order has been challenged in appeal, but, as with full knowledge of these orders, the 9th defendant claims through Mr. Boon, I cannot accept Mr. Fazeel's submission that there is any equity in this defendant's favour, which requires to be protected by prolonging litigation.

6. Mr. Fazeel's next objection was that the withdrawal application was a breach by the Director of his undertaking to Mr. Hoon, and I may explain here that the application, as originally presented, also sought to record an adjustment with some of the defendants. As this attempt to record an adjustment might be a breach of the Director's undertaking, Mr. Muhammad Ali Saeed met Mr. Fazeel's objection by stating that the plaintiffs were prepared to drop completely any attempt to record any adjustment between the plaintiffs and any other defendant, and that they should be permitted to treat the application as an application simpliclter for the withdrawal of the suit.

7. As Mr. Fazeel conceded that the plaintiffs were entitled to drop the other relief sought in the application I would treat it as an application only under rule 1, Order XXIII for the unconditional withdrawal of the suit. Learned counsel however submitted, very half‑heartedly, that even this unconditional withdrawal by the Director was in breach of his under. taking to Mr. Desa. But as the suit filed by Mr. Boon is pending, if the 9th defendant is entitled in law in any relief in the present suit, he would be entitled to seek it in his own suit, and this was admitted by Mr. Fazeel. Accordingly, it cannot be said that the mere withdrawal of the suit would prejudice Mr. Hoon. Additionally, a Director stands in a fiduciary capacity to the company of which he is a director, and if it is in the interest of a company to withdraw a suit filed by it, it is the duty of its Directors to do so. In the instant case, I am satisfied that it is in the interest of the Company to withdraw this suit, and if the Director does not, he will be in breach of his own obligations to the Company. Now, although I do not think the withdrawal of the suit would be a breach of the Director's undertaking even if I am Wrong, at the highest there is an ambiguity in the undertaking which should therefore be. construed in a matter consistent with the subs tantive law applicable, namely, the Company Law. Accordingly, on this ground also, I would agree with Mr. Muhammad Ali Saeed that the Director has not committed any breach of his undertaking by filing this application for the withdrawal of the Company's suit. And I may further observe in passing that the application is supported by the majority of the Company' shareholders. The result is that, as I pointed out earlier, the real question in the suit is whether the withdrawal application is by the Company.

8. Mr. Muhammad Ali Saeed relied on my order of 28‑5‑1972 in Mr. Hoon's suit in which I had held that the Director was entitled to file the suit on behalf of the Company under Order XXIX, C. P. C. and as Mr. Fazeel conceded that this order was binding on the 9th‑ defendant even in the present suit. Mr. Muhammad Ali Saeed's further submission was that if a director was competent, under Order XXIX, to file a suit on behalf of a company, he was entitled to withdraw that suit. Order XXLX, rule 1 does not draw any distinction between plaints and other pleadings in suit, and as the finding that the Director was entitled to file the plaint o behalf of the company has become final, it follows that he is competent to withdraw the suit on behalf of the Company. Nor does anything turn on the fact that the Director has not signed the application separately for himself and for the Company, as, at the highest, this would be a breach of a technical rule. Mr. Fazeel however relied on the equity in the 9th defendant's favour, but I see no equity in his favour. In any case, the question is of law, and in Mohini Das v. Bungal Das (I L R 17 Cal. 380) the subordinate Court and the High Court had dismissed the suits of the appellants because two out of the three appellants had signed the plaint long after the expiry of the period of limitation. The Judicial Committee allowed the appeals of the appellants and held that as the failure of the appellants to sign the plaints in their suits was a mere technicality, the Courts below had erred in dismissing the suits of the appellants as time‑barred. This authority is applicable with greater force in the instant case, as there is no question of limitation before me. However, ex abundanti cautela, I permit and order the Director to sign the application again expressly on the Company's belief.

9. Mr. Fazeel's next submission was that this Court had appointed the Director and Mr. Ishtiaq Ali as receivers of the company, therefore, these receivers alone were entitled to act on the Company's behalf under Order XXIX, C. P. C. and as the withdrawal application had been signed only by the Director, it was not an application by the Company. The argument assumes that an appointment of an interim receiver automatically involves the suspension of a company, a Board of Directors and as the appointment in the instant case has continued for four years, I observed that the submission was inconsistent with the objects of the Companies Act, 1913. Mr. Fazeel's reply was that when an interim receiver was appointed to manage a firm in a partnership suit, the appointment automatically terminated the authority of the partners to represent the firm, which could thereafter act only through the interim receiver, and the submission was that that this rule was also applicable to suits affecting com panies. Now, even on the assumption that the practice in partnership suits is as submitted, to accept the submission advanced would be to ignore the difference between the Partnership Act and the Companies Act. Unlike the functioning of a firm registered under the Partnership Act, the functioning of companies, both public and private, is subject to elaborate controls under the companies Act. Additionally the Articles of a company are binding on the company and on its members by virtue of section 21 of the Companies Act, and Articles frequently contain a provision regarding directors to meet at prescribed intervals, therefore, if the appointment of an interim receiver autocratically involves the suspension of the Board of Directors, the appointment might result in a breach of a company's Articles, if not of the Companies Act. I do not think this would be consistent with the equitable objects of Order XL, C. P. C. Again, transfers of shares are registered through a company's Board of Directors, but if I accept Mr. Fazeel's submission, on the appointment of a receiver, such transfers could only be effected by the receiver. As the Articles of a company are binding under section 21 of the Companies Act, how can a Court, by the mere appointment of a receiver, and therefore through a side‑wind as he may, suspend the operation of the company's article? Nor would there be any necessity for suspending a company's Board, because in the event of a deadlock between the Directors, the Court could always give appropriate direc tions to the company or take action under section 76. It imposes a mandatory obligation to call annual meetings of a company, within the prescribed period, and if there is any default in complying with this obligation, the Directors. of the company may be liable to a possession. But, if Directors are divested of all powers on the appoint ment of an interim receiver, they would be prevented from calling the annual meeting, therefore, the consequence of accepting the submission would, to say the least, put them in a most difficult position. Fortunately I see nothing in Order XL, C. P. C. to support a submission fraught with such consequence.

10. Mr. Fazeel then attempted to support his submission by reference to judgments reported in Ratan Lal v. Jagadhri Light Railway Co. (A I R 1946 Lah. 193), Muda liyar v. Samarapuri (A I R 1930 Mad. 116) and Malik v. Abdul Ghani (P L D 1967 Kar. 14). As the Karachi case relates to winding up proceedings, it is not relevant. In the Lahore case their Lordships observed that a receiver could be appointed to manage a company, but as they did not appoint a receiver, the observations are obiter only. But the appointment of an interim receiver was upheld in the Madras case. However, nowhere have the learned Judges of the Madras High Court held or observed that the effect of such an appointment was the automatic compensation of a company's Board of Directors for the duration of the appointment. Of course, the result of the appointment of an interim receiver would be to curtail drastically the powers of Directors, which may become nominal during the pendency of such an appointment. But that is another matter. The existence of the Board of Directors may also create problems and difficulties, but that is a good reason for not appointing receivers lightly. Again, if a receiver has to manage the business of a company, he might have to file or defend a suit, but this does not mean that he can claim to be, so to say, the assignee of the successor‑in‑interest of the Directors under Order XXIX, C. P. C. This aspect of the matter would hardly create problems, as generally the power of receivers in the matter of litigation is subject to the Court's control, and this control should be stricter in the case of receivers appointed to manage the business of companies.

11. I would refer here to another circumstance which struck me, as a result of the arguments advanced. Despite his usual industry, Mr. Fazeel was able to refer me to only one reported case from the sub‑continent in which a receiver had been appointed to manage the business of a company in proceedings affecting a company, other than debenture‑holders actions and winding‑up proceedings, and I would pause to emphasise here that I am not concerned in this order with debenture‑holders' actions and winding up proceedings. Reverting however to Mr. Fazeel's submission, I have fur ther to observe that after the close of arguments the receiver, Mr. Ishtiaq Ali, gave me written advice that the withdrawal application could not be allowed because the appointment of the receivers could not be terminated. But, as I will presently show, the Directors of the company have resolved their disputes. As there is time no longer any deadlock, the raiana‑detra for the appointment of receivers has gone, therefore, the receiver's advice seemed incorrect on first principles; yet it. was not supported by any case law: I therefore examined the law myself, and apart from the Madras case cited by Mr. Fazeel, I found only two other reported cases of the English Courts in which interim receivers had been appointed to manage the business of a company. This makes total of three reported cases, yet the books are full of case‑law on the appointment of interim receivers in partnership suits, and unless we are foolish as to think that we have the monopoly of wisdom, there must be good reasons for the reluctance of Judges, over a period of generations. We appoint receivers of companies, and one of the most important of these reasons is the principle of the autonomy of jointstock companies. The rule in Foss v. Harbottle (67 E R 189) is now more than a hundred years old. It turns on the equitable principle that when a .person becomes shareholder in a company, he agrees to be bound, in the event of any dispute, by that company's constitution, as that Courts will not interfere with the company's management except in order to enforce the constitution, and, as companies have generally to be managed by their directors, Courts are reluctant to appoint interim receivers for companies except in the event of a deadlock, whether between the Directors or between the members of a company, therefore, such an appointment should only be for the period required for calling a meeting of the Directors or of the com pany, as the case may be, to resolve the deadlock. No doubt, this rule may cause hardship sometimes, in case of fraud or oppression on the minority, but in the long run, if receivers are freely appointed, it will cause more hardship. Secondly, the Companies Act provides remedies for the aggrieved shareholders; and if sometimes these remedies are found to be inadequate, it must be remembered that there is no rule which does not cause hardship, and that a person takes a risk of facing unknown and unexpected difficulties by becoming a shareholder in a company, therefore, in my humble opinion, although hard cases make bad law, it would not be safe to depart from the practice of appointing receivers of companies only on proof of very stringent conditions.

12. I now turn to the three reported cases on the question under consideration and I would first examine the Madras case (A I R 1950 Mad. 116) relied upon by Mr. Fazeel. There, the appointment of the receiver by the trial Court was challenged on the basis of a judgment of the Calcutta High Court in Datta v. Sadar Munsif (A 1 R 1925 Cal. 812) in which the learned Judges of the Calcutta High Court had observed :

" . there is no jurisdiction in a Court to appoint receiver of a company. If it is necessary to protect the assets of a company other means must be sought which are provided by the provisions of the Companies Act."

The learned Judges of the Madras High Court rejected these observations on the ground that there was nothing in the Companies Act to exclude the, provisions of the Civil Procedure Code, including the provisions of Order XL. I respectfully agree with this view, but even though an interim receiver can be appointed under Order XL does this mean that the Court can, by exercising its powers under the Civil Procedure Code, act in a manner contrary to the principles of Company Law? I do not think so, and, as this point did not arise for consideration in the Madras case, this case does not support the advice to continue the appointment of the receiver including the appointment of the author of the advice. However, this question was examined in the New English cases : Featherstone v. Cooke (16 Eq Cases 298) and Trade Auxiliary Company v. Vickers (16 Eq. Cases 303.) respectively) and Malins V. C. who decided both these cases observed in the latter:

The Court will not interfere with the internal affairs of joint stock companies unless they are in a condition in which there is no properly constituted governing body, or there are such dissensions in the governing body that it is impossible to carry on the business with advantage to the parties interested. In such a case the Court will interfere, but only for a limited time, and to as small an extent as possible."

Buckley's view is the same. The learned Author observed at p. 860 in the 12th Edition of the Companies Act

"There is also authority to the effect that if there are such dissensions among the governing body of a company as that the affairs cannot be properly carried on, the Court will as far deviate from the general rule of refusing to interfere in matters of internal manage ment as to grant an injunction and receiver to protect the property of the company but the interference of the Court will be continued only until a governing body is duly appointed, and as soon as this is done the Court will leave company again to manage its own concerns."

Halsbury contains the following observation (3rd Edn., Volume 6, para. 598): "If, owing to disputes amongst the Directors, they are unable to act and the affairs of the company cannot be carried on, the Court will interfere by injunction and by the appointment of a receiver and manager of the under. taking and assets of the company until the management of the company is restored to a proper footing." In my humble opinion, those passages state the correct law, therefore when an interim receiver is appointed to manage the affairs of a company, the appointment should be only for the period absolutely necessary for enabling the Directors and/or the members of the company to resolve their deadlock, and further there is no reason why such appointment should imply the suspension of a company's Board of Directors during the pendency of litigation, the more so in view of the law's delays. But I would repeat here that I am not considering winding‑up proceedings and debenture‑holders' actions.

13. Mr. Fazeel then submitted that his argument was supported by the terms of the order of appointment of the receivers because this order expressly conferred on them all powers under Order XL, rule 1, C. P. C. According to the copy of this order, which was supplied to me by Mr. Fazeel, it is in the usual form prescribed under the rules of the Sind Chief Court (O S.).. It first states that Mr. Ishtiaq Ali and the Director were appointed "the receiver of the movable property and of the rents, issues and profits of the immovable property" of the Company, and it then states that all powers under Order XL, rule 1, C. P. C. had been conferred on the receivers, This means that the powers conferred under Order XL, rule I are subject to the pre ceding words, which I have quoted, therefore, far from supporting Mr. Fazeel's submission the order of appointment goes against it. Learned counsel then ‑submitted in the alternative that as the order was issued in terms of Form 4 of Appendix 'A' of the Sind Chief Court Rules (O. S.) it was a stereotyped .order, which could not curtail the powers which were intended to be con ferred on the receiver. The argument begs the question, and, on the contrary, in my opinion, the restrictions imposed on the powers of the receivers are in consonance with the law and should have been imposed. Secondly, the order cannot be criticised now, as it has been allowed to become final under rule '18 of the Sind Chief Court Rules (O. S.) Thirdly, as according to the Order, the receivers can only file rent suits without the leave of the Court, their consent might be necessary to the withdrawal of a rent suit. But, as the present suit is not a rent suit, the receivers cannot object to its withdrawal, and any claim in this respect by them would be presumptuous. Accordingly, the very order of appointment goes against Mr. Fazeel's submission.

14. Mr. Fazeel then referred me to my learned brother's second order of 17‑11‑1970 directing the receivers to register the sale of the 5000 shares in dispute in favour of the Director. I may, in this connection, explain here that after the 5000 shares of the Mohattas had become enemy property, the Additional Custodian of Enemy Property had sold them to the Director, and because the Court ordered the receivers to register this sale, the submission was that this order implied that the Company's Board of Directors had been suspended on the appointment of the receivers. The inference thus sought to be drawn from the Court's order appeared plausible, but Mr. Muhammad Ali Saeed referred me to the application on which the order was passed. This application (CMA 1704/70) refers to the order of 8th defendant and then states; "The plaintiff, therefore, prays that this Hon'ble Court be pleased to direct the Nazir of this Hon'ble Court to comply with the said directions of the Additional Custodian of Enemy Property and effect the necessary transfers . . . . . in favour of the plaintiff". As the Court merely allowed the Director's prayer, it did not have occasion to examine the law or the powers conferred on the receivers, therefore, this order should not be treated as a precedent, because the question is of law, and merely because a party, who was himself a receiver, allowed the receivers to do what they could not do, this does not mean that the receivers acquired a right to do what they could not do under the law, or under the terms of their appointment.

15. Additionally, in further support of the same submission, Mr. Ishtiaq Ali, the receiver has referred me to my learned brother's order of 13‑12‑1971, directing the receivers to register a transfer of 1500 shares in favour of Mrs. Harman (defendant No. 10). I may explain here that this advice was given tome after Mr. Muhammad Ali Saeed had left the country, and assuming that the receiver was entitled to give gratuitous advice, he should have taken care to state the facts fairly. Now on examining the order of 13‑12‑1971, 1 find that it was a consent order. Once again, this means that my learned brother did not have occasion to examine the law; accordingly. I would not treat the order as a precedent, and I am constrained to express, my‑ regret that the receiver omitted to state that the order was a consent order.

16. Finally, Mr. Fazeel submitted in the alternative that even if the: permission of the receivers was not required for the withdrawal of the suit,. in view of their appointment, the Company could not be permitted to with draw the suit without the leave of the Court. Assuming without conceding. that the consent of the Court is thus required, I have to consider the matter only from the point of view of the Company's interest, and, as laid down long ago in Salomon v. Salomon dl Co. ((1897) A C 22) a company and its shareholders are different persons in law. Now the question whether the withdrawal of the suit is in the Company's interest cannot be decided without reference to the claim in the suit, therefore, I would recall here that in order to bolster up Mr. Hoon's case, another Director of the Company, the 4th defendant, had called a series of illegal meetings of the Company and of its Board in London and purported to appoint Mr. Mushtaq Ahmed, Mr. Keen and Mr. Ducker (defendants Nos. 1, 6 and 7 in the suit respectively) as Directors. of the Company. Then. the first defendant had come to Karachi, seized possession of the Company and ousted the Director, therefore, the Company and the Director filed this suit for a declaration that all the resolution. ,passed at the so‑called meetings in London were illegal, and they also prayed for a permanent injunction to restrain the first three defendants from acting: under those illegal. resolutions, and/or acting on behalf of the Company. In my order of 28‑5‑1970 I had held that all the resolutions passed at the so‑ called meetings in London were illegal, and the defendants 1, 6 and 7 had never become directors of the Company. Neither the 4th defendant nor these defendants challenged this order, and now that the case is ripe for hearing,. they do not: wish to contest it. Mr. Naseem Farooqi even advanced arguments, on behalf of the first three defendants. in support of the with drawal application and stated that these defendants would not contest the suit. As the defendant. against whom relief was sought admit the claim of the plaintiffs, . .why could the plaintiffs not be permitted to withdraw the suit? It is true that the plaintiffs also sought the appointment‑of a receiver, but, as I explained, this relief is misconceived. and the sooner it is dropped, the better. In these circumstances, the withdrawal of the suit is in the, Company's interest, the more so as the majority of the registered shareholders and the Custodian of Enemy Property support this prayer. Accordingly, even on the assumption that the Court's permission is required for the withdrawal of the suit by the Company, I grant this permission ex abundanti cauteli.

17. This means that in any view of the matter the suit is being withdrawn by the plaintiffs who had filed it, and as the application is, now only for the unconditional withdrawal of the suit, sub‑rule (1) of rule 1 .if Order XXIII is relevant. It reads:‑

"1. (1) At any time after the institution of a suit the plaintiff may, as against all or any of the defendants, withdraw his suit or abandon part of his claim:"

Mr. Muhammad Ali Saeed submitted that as the other prayers in the with drawal application had been dropped the plaintiffs were entitled to withdraw the suit, and that the Court had no discretion in the matter. The submission is supported by the plain 'language of the sub‑rule, which may be compared with sub‑rule (2) of the same rule and with rule 3 of Order XXIII. Both these provisions confer discretion on the Court, but as sub‑rule (1) of rule does not, in my humble opinion, the plaintiffs are entitled to withdraw the suit filed by them. That was also the view of the West Pakistan High Court in Karim Gul v. Shahzad Gul (P L D 1968 Pesh. 134) and this view was again affirmed by Anwarul Haq, C. J. in Mumtaz Ali v. Pakistan (P L D 1971 Lah. 395).

18. Mr. Fazeel however pointed that the withdrawal of the suit would result in the termination of the appointment of the receivers. That is correct, but as Order XXIII, rule 1 does not draw any distinction between suits in which interlocutory orders have been passed and suits in which such orders have not been passed, the right of the plaintiffs to withdraw their suit cannot be curtailed or limited because receivers were appointed in the suit. Even otherwise, the objection does not impress me. The 9th defen dant cannot claim a higher right than shareholders, and as the Directors of the Company have resolved their deadlock, the appointment of the receivers should be terminated, in view of the rule in Fedtherstone v. Cooke. Secondly, the Company's business is a complex engineering business, which must suffer when one of the receivers has no experience of this business, and admittedly Mr. Ishtiaq Ali does not have any such experience. Thirdly, a receiver is an officer of the Court. He is appointed to protect the property in dispute by holding the balance between the parties, therefore, he cannot take sides with them, but, in the instant case, long after his appointment as joint receiver, Mr. Ishtiaq Ali drafted the amended plaint in Suit No. 151 of 1970 on behalf of the 9th defendant. I cannot find words strong enough to deplore this, practice, and as things have come to such a pass, the interests of justice require that this joint receivership should be terminated forthwith, even though the receivers were appointed by consent.

19. Mr. Fazeel however referred me to judgments reported in Hossain Ali Khan v. Firoza Begum (P L D 1971 Dacca 112) and Ashfaq Hussain v. Bunyad Hussain (A I R. 1923 Oudh 252). As the Dacca case relates to Order XXIII, rule 3, it is not relevant. On the other hand, the Oudh case turned on male fides, but Mr. Fazeel neither alleged mala fides, nor is there a shred of evidence to suggest male fides on the part of the Company or of the Director, therefore this judgment is also irrelevant. Mr. Fazeel however relied on the observations in it, and they are very wide, I agree with learned counsel that they support his submission. But those wide observations were not necessary for the decision before the Court, and with respect, in my opinion, the view of Anwarul Haq, C. J. in the case mentioned by me in paragraph 17 is to be preferred.

20. Mr. Fazeel's only other submission was that the 9th defendant had now purchased the shares of some of the other English shareholders who were not parties to this litigation. The plea was advanced in order to establish that the 9th defendant had a majority interest in the Company, so as to get round the rule irk Macdougall v. Gardiner ((1875) 1 Ch. 13). Now it was not disputed before me that this alleged purchase has not been registered with the Company, and Article 25 of the Company's articles is a fatal bar to learned counsel's submission. As the 9th defendant is admittedly not a shareholders, his claim to purchase the shares of the Company must be rejected as frivolous, unless he can first establish that the other shareholders had been given an option to buy these shares, but had refused to buy them. As Mr. Fazeel did not even attempt to argue that the provisions of Article 25 had been complied with, the plea fails.

21. I now turn to the attempt of Mr. Ishtiaq Ali, the receiver, to reopen arguments on behalf of the 9th defendant, and I may explain here that as Mr. Fazeel relied on the fact that Mr. Ishtiaq Ali lead not signed the withdrawal application, I had orally directed Mr. Ishtiaq Ali to state in writing whether he supported this application or opposed it; further as Mr. Muhammad Ali Saeed, was going abroad, arguments were concluded on 15‑4‑1974. Mr. Ishtiaq Ali filed his statement opposing the withdrawal application 3 or 4 days later, and if he had merely stated whether he opposed or supported the withdrawal application, as directed by me, this delay in filing his statement would have been immaterial. However, in the guise of filing his statement, he has advanced lengthy, written arguments in the nature of advice in support of the 9th defendant's case I depreciate this attempt to reopen arguments behind the back of party concerned, but, with this observation, I would very briefly examine the additional arguments thus submitted.

22. According to Mr. Ishttaq Ali, the suit could not be permitted to be withdrawn. because this would prejudice the 9th defendant's interests, Secondly, the withdrawal of the suit was not possible, because the receivers could only give possession of the Company to the person from whom the Court had taken possession, but this was not possible under the withdrawal application. Thirdly, the receivership could not be terminated, because the Company did not have a properly constituted Board of Directors.

23. I have examined Mr. Fazeel's submissions in support of the first objection and rejected them, therefore I would turn to the second objection. it is correct, as submitted by Mr. Ishtiaq Ali, that the ad interim receiver appointed by the Court had taken over the Company's business from the first defendant, but as I have held that this defendant was a usurper, possession cannot be returned to him on the withdrawal of the suit, and if this defendant had supported the 9th defendant, the objection might have had some force. As his learned counsel has no objection to the Director taking over the Company's business from Mr. Ishtiaq Ali, the objection fails, but I have to point out here with regret that Mr. Ishtiaq Ali omitted to state that the first defendant was now opposing the 9th defendant.

24. I now turn to the objection that "there was no proper and legal Board of Directors" of the Company, to whom the receivers could hand over the possession of the Company's assets. Mr. Ishtiaq Ali has also stated that the Company does not have a Managing Director, but it is not clear whether this is the only ground on which he contends that the Company does not have a proper or legal Board of Directors. Assuming that it is, the Company should have a Managing Director under Articles 93 and 94 of its Articles, but even if it has not, this is an irregularity which concerns the shareholders, not outsiders, and as the majority of the registered shareholders support the withdrawal of the suit, the objection is hit by the rule in Macdougall v. Gardiner therefore Mr. Fazeel very properly did not rely on it. But as I observed, the objection is vague, and assuming that it is based on a ground other than the Company's failure to have a Managing Director, it can only be based on the law, on the Court's orders, or some other Articles of the Company. No law has been cited, and Mr. Ishtiaq Ali has been deliberately vague ‑about our orders. However, as. to the Articles, he has also referred me to Articles 86 and 89. Both these Articles relate to the powers of Directors generally, therefore, they do not throw any light on the objection, which is presumably limited to the Company's failure to have a Managing Director. This objection fails. On the other hand, as I have held in my order of 28‑5‑1970 that the Company has two Directors, which incidentally is also the requirement for a quorum, the submission that there is no one legally entitled to receive possession from the receivers is frivolous.

But I pointed out that the objection could be based, on our orders, and in this connection Mr. Ishtiaq Ali has stated:

" . . . But Mr. Justice Dorab F. Patel and Mr. Justice Noorul Arfin in this Suit No. 231/70 and Suit No. 151/70 have observed that plaintiff No. 2 has no proper and legal Board of Directors."

Although there are scores of orders in the two suits, running into hundreds of pages, Mr. Ishtiaq Ali has not cared to specify the orders in which we rave observed that the Company "has no proper and legal Board of Directors'". But in the course of arguments Mr. Fazeel and Mr. Muhammad Ali Saeed had referred me to my learned brother's orders of 17‑11‑1970 and of 20th May 1971, and to my orders of 15‑5‑1970 and of 28‑5‑1970. Faking first my learned brother's orders, the order of 20th May 1971 is not relevant, but in his second order of 17‑11‑1970 my learned brother observed:

"In the order dated 28‑5‑1970 in Suit No. (51 of 1970, my learned brother, Mr. Justice Dorab F. Patel, held that the following are not the Directors of the Company, namely (1) Mr. Keen, (2) Mr. Ducker and (3) Mr. Mushtaq Ahmad. My learned brother has further held that the present Board of Directors as constituted in November 1969, is not a legally constituted board at all. This finding still stands and has not been set aside so far. Therefore, of necessity, since there is no legally constituted board in existence, the registration of transfer of shares has to be effected by the Nazir, who has the sole charge of the Company and its business at present as Receiver."

I can only assume that Mr. Ishtiaq Ali had in mind this order, because the last sentence appears to support his objection. I deliberately used the word appears, because these observations were made on the Director's application that the sale of the 5000 shares sold to him should be registered through the Nazir of this Court. At that time, there was a deadlock between the two directors, so that the Board could not function. But that did not mean that it was not legally constituted, and, on the other hand, there was no Us between the parties on the question whether the Board was legally cons tituted, the only lis being about Mr. Hoon's claim to the same shares, therefore the observations were not necessary for the decision of the application. It is also significant that my learned brother's only reason for holding that the Company's Board was not legally constituted was that this conclusion followed from my order of 28‑5‑1970 in Suit No. 151 of 1970. But, with the utmost respect and with profound humility, this conclusion does not follow from my order of 28‑5‑1970. There I had to decide only two questions: Whether the director Mr. Goldstein had succeeded in removing Group Captain Morad from the Board, and whether Mr. Goldstein had been successful in electing defendants 1, 6 and 7 to the Company's Board. As I decided both questions in the negative and against Mr. Hoon, I did not have occasion to go into the further question whether the Company's Board would be legally constituted after the exclusion of the usurpers, namely defendants 1, 6 and 7. On the other hand, it was not any body's case that defendant No. 4 was not a Director of the Company, and I would further add that this is admitted in the Company's plaint in this suit, therefore, as I held that Group Captain Morad remained a director of the Company, with the utmost ‑respect, my order does not mean that the Company's Board was not properly constituted. However, even if I am wrong, my learned brother's order has to be read in its entirety, and 3s Mr. Hoon had opposed the Director s application, my learned brother, after recording Mr. Hoon's evidence, had rejected as false Mr. Moon's claim to have paid the Mohattas for his alleged purchase of their shares. Accordingly, my learned brother bad expressly re‑affirmed in this very order the view taken by me earlier that Mr. Hoon had failed to make out a prima facie case. and this means that even this order is fatal to the 9th defendant's claim. Thus the attempt to‑supplement Mr. Fazeel's submissions fails, and I may, in passing, observe that the advice submitted by this receiver is contrary to the wishes of the other defendants whose interests also he was appointed to protect.

26. In ‑the result, I allow the plaintiffs to withdraw their suit, but I de not award costs to any party. The appointment of the receivers is terminated, in consequence of this order, but as one of them, Group Captain Morad, is a Director of the Company, the other receiver, Mr. Ishtiaq Ali, shall hand over possession of the Company's assets to him. As I allow plaintiffs to withdraw their suit,. I dismiss as infructuous Mr. Fazeel's application to have the suit consolidated with Suit No. 151 of 1970, which had originally been filed by Mr. Hoon. The applications by the plaintiffs and by the 8th defendant are likewise dismissed a, infructuous without costs. The only other application is by the Chartered Bank for the recovery of its loan to the Company. As the:. appointment of the receivers has been terminated, the applicant will be free to prosecute its claim according to law against the Company, and this application is also dismissed as infructuous. Finally, there is, a reference by the receivers on which no arguments whatever were advanced by any of the learned counsel. However, the reference is with regard to the sale of some stores belonging to the Company, and as the appointment of the receivers has been terminated, the reference has become infructuous, and the Company will be free to deal with its assets according to law.

S. A. H. Order accordingly.