STANDARD HOTELS (PRIVATE) LTD. Versus RIO CENTRE

ORDER

The above application has been filed by defendants under Order VII, Rule 11, C.P.C. for rejection of the plaint on the grounds that the present suit has been filed and verified by Rafiuddin, as Director of the plaintiff, which is a private limited company, without any express authority from the company and that neither the certificate of incorporation of the said company nor its Memorandum and Articles of Association, nor the resolution of the Board of Directors, have been produced to show that the person, who has signed and verified the plaint, is so authorized to file the suit. In the counter‑affidavit filed by the said Director, it has been stated that the signatory of the plaint is a Director of the plaintiff‑Company and has the authority to institute the suit as well as to sign and verify the plaint, as he knows the relevant facts.

2. After hearing the arguments the order on the aforesaid application was reserved. However, on 12‑I‑1994, the learned Advocate for the plaintiffs requested for time for filing Articles of Association of the plaintiff‑Company. The plaintiff then placed a photo copy of the Articles of Association of the plaintiff‑Company on the record, Article 98 whereof defines the powers of the Directors of the Company and clause (f) of the said Article authorises directors of the company to institute, conduct, defend, compound or abandon any legal proceedings by or against the Company or its officers.

3. The certified copy shows that the above Memorandum and Articles of Association were operative as from 25‑9‑1978. The learned Advocate for the defendants has placed on record another certified copy of the Memorandum and Articles Association with covering letter in Form 26 which shows that the Articles of the company as of whole were deleted and substituted by new set of Articles with effect from 18‑5‑1984. The amendments are shown to have been made in compliance with section 513 of the Companies Ordinance, 1984; In the said Article there are no provisions akin to Article 98(f). Therefore, the reliance on the Article, of Association that stand superseded and replaced, is misconceived. The learned counsel for the plaintiff has also relied on Order XXIX, Rule, 1, C.P.C. to justify validity of the institution of the suit by the said director on the plea that he being able to depose to the facts of the case; can competently institute it.

4. However, the learned counsel for the defendants has contended that Order XXIX, Rule, 1, C.P.C. provides that in suits by or against corporation pleadings may be signed ‑id verified on behalf of the corporation by the Secretary or by any Director or other Principal Officer of the corporation, who is able to depose to the facts of the case. The above provisions, permit only signing and verification of the plaint, but when the suit is to be instituted on behalf of the corporation, it is to be further shown that the corporation has decided to institute a particular suit and authorised the signatory to do so. In the absence of such resolution or specific authority conferred on such a person by Articles of Association, the suit is not competent and the plaint is liable to be rejected.

5. According to the learned counsel for the plaintiff, the above provisions of the Code of Civil Procedure having been substantially complied with nothing more is required to be done and the suit as filed is competent and maintainable.

As the plain reading of Rule 1 of Order XXIX shows, it provides only for the subscription of signature to and verification of pleadings by the specified persons, in suits by or against corporation. The specified persons are not further authorised to institute suit on behalf of the corporation.

6. The distinction between subscription of signature to and verification of pleadings on behalf of the corporation and institution of the lis on behalf of the corporation, has been pointed out by Zaffar Hussain Mirza, J. (as he then was) in the case of Dumez Borie v. International Forwarders Ltd. (NLR 1983 UC 184) wherein it has been held that the provisions of Order XXIX, Rule 1, C.P.C., as is clear from the following observation, deal only with subscription and verification of pleadings in suit by and against the corporation and do not vest the designations with the authority to institute or defend the suit:‑‑

"1n other words, the rule merely authorises the persons mentioned therein to sign and verify pleadings on behalf of corporation. The rule does not authorise such person to 'institute' suits on behalf of the corporation. "

In the above case the suit filed by the principal officer of the corporation, who was neither authorised by resolution of the company, nor had the authority under the Articles of Association, was held to have been instituted incompetently.

In. the above case reliance was placed on the case of Iftikhar Hussain Khan of Mamdot v. Ghulam Nabi Corporation. Ltd. (PLD 1971 SC 550), wherein the suit was instituted by the Director‑in‑Charge of the company. The question arose whether the meeting of the directors, in which the resolution was passed authorising the said Director, was duly convened. Replying the said question in negative, it was held that no valid authority was conferred on the said director and, therefore, he was not competent to institute the suit. The dismissal of the suit on such ground by the trial Court was found perfectly justified.

As already noted above in reply to the objections taken by the defendant, the plaintiff's director in his affidavit has not stated that any resolution was passed by the plaintiff‑‑Company authorising him to institute the above suit.

7 ????????? The learned Advocate for the plaintiff contended that the ground raised by the defendant for rejection of the plaint is not covered by Order VII, Rule 11 C. P. C.

It is, however, settled law that the grounds of rejection of .the plaint stated in the above rules cannot be regarded as exhaustive of limiting the powers of the Court to reject the plaint. If the suit is found not maintainable, the Court has inherent jurisdiction to reject the plaint. The reference may be made to the case Burma Eastern Limited v. Burma Eastern Employees' Union and others (PLD 1987 Dacca 190).

In the above authority it further observed as under

"The principal involved are two‑fold. In the first place, it contemplates that a still‑born suit should be properly buried at its inception, so that no further time is consumed on a fruitless litigation. Secondly, it gives, plaintiff a chance to retrace his steps, at the earliest possible moment, so that, if permissible under law, he may found a properly constituted case.

Order VII, rule 11 of the Code, as quoted above, enumerates certain categories under which the Court is called upon to reject a plaint, but, it is obvious that they are not exhaustive. It appears from the language of rule 11 of Order VII that it requires that an incompetent suit should be laid at rest at the earliest moment so that no further time is wasted over what is bound to collapse as not being permitted by law."

In view of the rule enunciated in the above authorities it has become inevitable to hold that the Articles of Association do not confer any such authority on the said Director of the company. The plaint and the counter affidavit do not disclose existence of any resolution of the Board of Directors, rather the tenor of the letters point to non‑existence thereof.

In view of the above‑settled law, there is no escape from the conclusion that the suit has been filed incompetently and the plaint is liable to be rejected.

As a result the aforesaid miscellaneous application is allowed and the plaint is hereby rejected. Consequently, CMAs 1509/1993 and 560/1994 are hereby dismissed.

A.A./S‑1082/K ??????????????????????????????????????????????????????????????????????????????????????????????? Plaint rejected