ABDULLAH ISMAIL Versus SINDH INDUSTRIAL TRADING ESTATE LIMITED

1. I intend to dispose of J. Misc. No. 260 of 1994 alongwith its CMA No. 1703/94 and CMA No. 2757/95 filed by the plaintiffs against the defendants in Suit No.348/95 for declaration and injunction.

2. Petitioners have filed this petition under sections 156, 158, 160, 161, 166, 173, 178, 180 and section 205 of the Companies Ordinance, 1984 against the respondents. Case of the petitioners is that on 18‑5‑1994 a meeting of the Board of Directors of respondents was held which was attended to by the petitioners as tenant Directors and by two other tenant Directors i.e. Mr. S.M.. Munir and Mr. Khalid Mahmood Khan. The other members in the meeting were Government nominated Directors including the Managing Director. The Board's meeting on 16‑8‑1994 was fixed for holding the 22nd Annual Meeting of the General Body of the respondent for various items including elections of tenant Directors and for the purposes of the annual meeting list of the tenant members was finalised. However, no steps were taken by the respondent such as circulation of the notices for holding the Annual General Body Meeting, circulation of agenda and printing of the notices in newspapers as required by the law. Another Board's meeting was held on 11‑8‑1994 under the chairmanship of the Commissioner, Karachi Division. Item No.2 of the minutes shows that Board decided and resolved to extend the date of 22nd Annual General Body Meeting of the respondent to 1‑9‑1994 and the agenda pertaining to the above meeting was also approved and Secretary circulated the agenda of 22nd Annual General Body Meeting to be held on 1‑9‑1994. Item No.4 of the agenda pertains to the election of the tenant directors of the respondent and Secretary of the respondent on 11‑8‑1994, also issued a company notice to that effect. The petitioners M/s. S.M. Muneer, Khalid Mahmood Khan filed their nomination for being elected as tenant Directors of the respondent on 18th August, 1994 and also obtained 23 proxis of the members of the General Body Meeting of the respondent to be held on 1‑9‑1994. That Managing Director of respondent contrary to law and without authorisation of Board of Directors of the respondent issued a notice dated 30‑8‑1994 stating that General Body Meeting to be held on 1‑9‑1994 shall stand adjourned till certain pre‑conditions are duly fulfilled and fresh notice of General Body Meeting will be published and moreover the public notice was issued in the newspaper of 31‑8‑1994 to the effect that the meeting is adjourned. Petitioners in reply to the said notice published a notice in daily 'Dawn' of 1‑9‑1994, stating that the adjournment of the Annual General Body Meeting is without legal authority or without the authority of the Board of Directors. The petitioners had received the notice of the respondents adjourning the General Body Meeting in advance and they immediately sent, a legal notice dated 31‑8‑1994 challenging the right of respondent in adjourning the meeting. Respondent was also informed that the petitioners and two other. nominee Directors will attend the meeting, that the notice adjourning the 22nd Annual General Body Meeting issued by the Managing Director of the respondent was also illegal and could not be acted upon. The relief sought by the petitioners is as follows:‑‑

(a) Declare that the fixation of the election on 6th November, 1994 as the date of holding 22nd Annual General Body Meeting of the respondent is illegal, without authority and the notices in this respect are liable to be cancelled;

(b) declare that 22nd Annual General Body Meeting was rightly held according to the law on 1‑9‑1994 and election of tenant Directors rightfully took place and Directors were rightly elected;

(c) declare that the petitioners are rightly and lawfully tenant Directors duly elected on 1‑9‑1994 in the 22nd Annual General Body Meeting;

(d) direct the respondent to register the names of the petitioners in the register of Directors according to the provisions of section 205 of the Companies Ordinance, 1984;

(e) restrain permanently the respondent from holding other illegal so‑called 22nd Annual General Body Meeting on 6th November, 1994;

(f) grant such other relief or reliefs as this Hon'ble Court may deem fit and proper in the circumstances of the case.

3. Mr. Mansoorul Arfin, the learned counsel has contended that (i) adjournment of general body meeting can take place only in accordance with the provisions of the Companies Ordinance and the Articles of Association of the respondent No. 1; (ii) the Board of Directors of the respondent No. l had not authorized the Managing Director to adjourn the Annual General Body Meeting; (iii) that adjournment cannot take place in advance unless meeting is held; (iv) that a general body meeting can be adjourned only if the quorum was not present. The General Body Meeting was held as scheduled on 1‑9‑1994 and the same was attended by the petitioners and by Mr. Inam Elahi Shaikh, Mr. Abdul Razzak Bandoka and Muhammad Amin Khatri meeting was held at the registered office of respondent and 23 proxies were filed by the members, out of 23 proxies three members attended in person. Muhammad Amin Khatri was elected to be the Chairman of the meeting. The various items of the agenda, already issued were taken up and the petitioners as well as Khalid Mehmood Khan and S.M. Munir were elected as unopposed Directors for a period of three years. The unopposed election of the Directors was also published in 'Business Recorder' of 2‑9‑1994. In support of application under Order 39, Rules 1 and 2 read with section 151, C.P.C. (CMA No. 1703/94) affidavit of Mr. Abdullah Ismail has been filed. Counter‑affidavit on behalf of respondents has been filed by Mr. Rizwan Merton, the Secretary of the respondent. Affidavit‑in‑rejoinder on behalf of petitioners and respondent has been filed.

4. Mr. Khalid M. Ishaq, the learned counsel has contended that application itself is not maintainable. That memorandum and Articles of Association Annexure A/I filed by the petitioners, Article 3, sub‑clauses iii, iv, v, vi, vi‑a, vi‑b, vi‑c and vii provides as under:

(iii) The company will not issue any‑ shares to the public. If shares are required by law, they will be of the minimum amount possible and held by Government, unless under law, each Director must hold a certain minimum amount of shares. The Company will make no profit or declare any dividend on its shares, if any.

(iv) Except as provided in the previous paragraph, the Company will be financed solely by Government, though provision might be made for the issue, letter, of debentures.

(v) The Director will receive only fees for attendance at meetings. Government Officials, who are also Directors, will receive no fees.

(vi) The Director shall be;

(a) Ex Officio, the Finance Secretary, Secretary Agriculture and Industries Department, and the Director of Industries.

(b) The Managing Director, who will be a sallaried Government servant, appointed by Government.

(c) Three representatives of the tenants of the Estate to be elected by them on the one firm one vote principle.

5. No member of the Sindh Assembly shall be eligible to become a Director.

(vii) If the Managing Director or either of the ex officio directors so desires, he may ask that a resolution passed by the Directors be suspended pending a reference to Government in the appropriate department. On such reference Government may decide that the resolution shall have no effect or shall have effect in a modified form. "

6. The learned counsel also referred Article 58 of the Memorandum and Articles of Association:

7. Article 58.' If the Managing Director or any Director nominated by the Provincial Government so desires, he may .ask that the execution of the resolution passed by the Directors be suspended pending reference to the Provincial Government in the appropriate department. On such reference, the Provincial Government may decide that the resolution shall have no effect or shall have effect in a modified form, and such decision shall be binding on the Company.

8. Keeping in view the above provisions, the Managing Director on 30th August 1994 issued the following notice:

9. "The attention of the Managing Director, SITE Limited having been drawn to the non‑inclusion of several members of Site Limited in Site Register of Members and other issues, being mandatory pre‑conditions for the holding of a General Body Meeting. I, Nadir Ali Markhiani, Managing Director, Site Limited, hereby notify that the Site General Body Meeting notified to be held on 1st September, 1994 shall stand adjourned till the said pre‑conditions are duly satisfied, whereupon a fresh notice of the General Body Meeting shall issue."

10. This notice was published in daily Dawn dated 31‑8‑1994 and Jang dated 31‑8‑1994. According to the provisions of section 183 of the Companies! Ordinance 1984 the application is not maintainable. That petitioners have no locus standi to file the present petition as petitioners in the meeting of the Board of Directors held on 13‑10‑1994 at the office of the Managing Director of the Company are signatory of the minutes of the meeting wherein it was decided to hold elections for the four positions of the tenant Directors of the Board on 6‑11‑1994 on the basis of revised lists of members of General Body hence the principle of "waiver" is in the way of petitioners. That the present petition filed under the sections mentioned hereinabove and none of the above sections empowers the petitioner to file the petition. That the Managing Director as per Memorandum and Articles of Association referred hereinabove is empowered to suspend the resolution passed by the Directors, is within the four corners of the Memorandum of the Association of the respondent. That in the Board meeting held on 13th October, 1994 petitioners have not lodged any resentments or protest regarding the elections of tenant Directors on the contrary the minutes of the meeting shows that this issue was decided without any protest. That the Secretary of the Board in his affidavit has submitted the copy of the attendance at Meeting of Board of Directors held on 13th day October 1994 showing the signatures of petitioners which is Annexure R‑4 at page 183 and have also filed revocation of proxies for the General Body Meeting of the respondents by Mr. Nazar Muhammad Shaikh, Secretary to Government of Sindh are filed at page 185, Shahid Aziz Siddiqui at page 187, Rafiq Hussain Agha at page 189, Muhammad Javed Ashraf Hussain, Saleem Ahmad Memon at page 193, Nazar Muhammad Shaikh at page 195, Muhammad Saleem Khan at page 197, Ali Muhammad G. Shaikh at page 199, A.B., Soomro at page 201, Muhammad Saleem Khan at page 203, Salik Nazir Ahmed at page 205, Syed Roshan Zamir at page 207, Aslam Sanjrani at page 209, Asadullah Sheikh at page 211 and K.B. Rind at page 213.

11. Mr. Mansoorul Arfin, the learned counsel has referred the following books and authorities, (1) The Administration of Company Meeting by G. Nizamuddin which provides the power to adjourn.

12. A motion to adjourn may usually be proposed at any point during a meeting and will take priority over the matter then in hand. The power to adjourn is an inherent power of a meeting, and most articles confirm this. By Regulation 28 the Chairman shall adjourn if so directed by the meeting; the Chairman may adjourn only with the consent of the meeting. "

2. R.K. Agarwal's Company Board Meetings (Law and Practice):

13. Agenda simply means a write‑up on the items of business to be transacted at the meeting explaining the pros and cons as well as the implications thereof to facilitate consideration at the meeting accompanied by supporting papers

14. And agenda should be clear and explicit, and in a summary form, specimen of which is given in this Chapter. It should assist the members of the Board to ascertain what matters will be discussed and, if circulated before hand, give them an opportunity to form some opinion as to the course to be taken at the meeting. The items on the agenda should be in their order of importance preferably in consultation with the Chairman.

3. Shackleton on the Law and Practice of Meetings Ian Shearman:

15. When once a general meeting has been convened upon due‑notice, it cannot be postponed or cancelled. The correct procedure, where the purpose for which a meeting has been convened has ceased to exist, is to hold the meeting as convened and adjourn it sine die without putting the resolution to the members. A purported cancellation will not be valid.

4. Company Secretarial Practice by Abu Obaida Siddiqui:

16. A meeting is adjourned for want of quorum according to the provisions section 160 (2) of the Companies Ordinance which states that "If within half an hour from the time appointed for holding the meeting of the company. If quorum is not present, the‑ meeting, if called upon requisition of members shall stand dissolved; in any other case it shall stand adjourned to the same day in the next week at the same time and place."

17. Thus it is clear that if a meeting is called upon on the requisition of the members and the quorum was not present within half an hour of the time fixed for meeting, it will be dissolved. Dissolution means that the meeting is terminated. It cannot be held again. Adjournment means that the items will not be discussed any more at that meeting to be held later on.

5. Company Secretarial Practice by Q.A. Wadud:

18. The adjournment of a company meeting is regulated by the Articles. If the Table A applies, the Chairman of the meeting may, with the consent of the meeting or if the meeting so directs, adjourn the meeting from time to time and from place. It thus places the power to adjourn the meeting in the hands of the majority.

19. If, however, the company's Articles provide only that the Chairman may adjourn the meeting with the consent of the meeting, he cannot be compelled to do so against his wishes.

20. The Chairman can adjourn the meeting even without the consent of the meeting, in any of the following situations:

(a) Where he is given express power to do so by the company's Articles.

(b) Where there is persistent disorder and a short adjournment is necessary to let the disturbance subside and thus enable the business to be proceeded with.

(c) Where the number of the persons present falls short of the quorum.

6. Salisbury Gold Mining Company Ltd. v. Hathorn and others (A.C.1897 page 268 held that:

21. "The power vested in the Chairman is a power to adjourn or not adjourn at his option, subject to this‑‑that if he adjourns it must be with the consent of members present; if ,he does not adjourn, he may dispense with that consent.

7. Reports of Company Cases, Volume 42, 1972:

(i) that it is settled law that when a meeting is called, no Chairman can arbitrarily adjourn it or disperse it at his own choice, without the consent of the members, unless the business for which it was convened has been concluded. The power of adjournment vests in the majority of those present at the meeting. If the Chairman should vacate the chair or adjourn the meeting regardless of the views of the majority those remaining, even if a minority, can appoint a Chairman and conduct the business left unfinished by the former Chairman.

8. Shafiq Ahmed v. Mirza Muhammad Anwar Beg (PLD 1968 Lahore 367), it has been held:

22. In order to apply Order 11, Rule 2, it is not necessary that all the allegations made in the two plaints should be taken and that the bar would apply only when they are identical.

9. Sh. Maqbool Elahi and 2 others v. Khan Abdul Rahman Khan and 6 others (PLD 1958 (W.P) Lahore 721):

81. There is nothing in the Articles of Association of the company to indicate whether the Directors can, during their meeting, take up any matter which is not on the agenda. That the agenda for the meeting of 16th September consisted only of one item, namely to consider the requisition of certain shareholders for the convention of an extraordinary general meeting for examining the affairs of the company, is admitted. It was not a meeting for the filling up of the vacancies on the Board of Directors, and the two or three absent Directors had no notice of the agenda which was in the mind of the Chairman. Article 120 was relied upon as empowering the Directors to transact any business at a meeting, and it reads thus:‑‑

23. "Article 120.‑‑A meeting of the Directors for the time at which a quorum is present shall be competent to exercise all or any of the authorities, powers and discretions by or under the Article of the company for the time being vested in or exercisable by the Directors generally."

24. Mr. Khalid M. Ishaq the learned counsel for the respondent has referred (1) Subject Index Companies Ordinance, 1984 compiled by M. Aslam under which applications filed under sections 5, 67, 83, 97, 140, 263, 264, 275, 282, 288, 290, 294, 309, 339, 380, 386, 392, 404, 434; 440, 441, 442, 450, 483, 503 are not maintainable. (2) Datta on the Company Law:

25. Notice need not be in a particular form. It may not contain an agenda. In certain cases actual notice need not be issued if all the Directors attend the meeting without any objection.

(3) A Ramaiya Guide td the CompAnies Act where it is mentioned;

26. "The law does not require an agenda for the meetings of the Board. Abnash Kaur v. Lord Krishna Sugar Mills Ltd., (1974) 44 Com. Cases 390, 413 (Del.) The Board of Directors can transact business even without a formal agenda. ‑Sunil Dev v. Delhi and District Cricket Association, (1990) 2 Comp LJ 245, 254 (Del.).

27. This is the universal practice in all advanced Western countries. The Model Business Corporation Act generally adopted by the Corporations in the United States of America provides: "Neither the business to be transacted‑at, nor the purpose of any regular or special meeting of the Board of Directors or any committee designated thereby need be specified in the notice or waiver of notice of such meeting unless required by the bye‑laws."

(4) Jewan v. Hassan Muhammad, etc. (1989 CLC 2393). In this authority Lahore High Court held that:

28. Plaintiff could challenge mutation in previous suits as it stood attested at time of filing of previous suits and as such by omitting to do so in previous suit, plaintiff could not sue in respect of mutation through subsequent suit in view of rule 2, 0.11.

29. While hearing CMA 1703/94, the Court passed the following order:

30. "So far CMA 1703/94 is concerned learned counsel for the parties state that this application be heard alongwith the main application. Order accordingly.

31. On 8‑5‑1995, the Court passed the following order:‑‑

32. "Mr. Khalid Ishaq submits that the petition is not maintainable because there is no provision in the Companies Ordinance, 1984 permitting the filing of such a petition. He submits further that if the petitioner has any grievance he may, if he so chooses, file a suit but certainly cannot seek any relief by way of petition. Mr. Mansoorul Arfin requests that the hearing be adjourned to enable him to answer the objection. By consent adjourned to a date in office in the second week of May, 1995 to be fixed according to roster. "

33. Subsequently connected suit bearing No.348/95 was filed in the Court on 15‑5‑1995 with the following prayer.

(a) declaration that 22nd Annual General Body Meeting was rightly held on 1‑9‑1994 and election of tenant Directors including that of plaintiffs rightfully took place and the plaintiffs and the defendants 5 and 6 rightly elected as Directors of the defendant No. l in that meeting held on 1‑9‑1994 and are entitled to act as directors of the Defendant No. l and that the fixation of the alleged election and of holding alleged 22nd Annual General Body Meeting of the defendant No. l on 6‑11‑1994 was/is illegal, and of no effect and defendants 2 to 5 were and are not the rightfully elected Directors of the defendant No. l;

(b) an order restraining the defendant No. l permanently from treating the defendants 2 to 4 and defendant No.5 as Directors of defendant No. 1 by virtue of illegal meeting and election of 6‑11‑1994;

(c) cost of the suit;

(d) grant such other relief or reliefs as this Honourable Court may deem fit and proper in the circumstances of the case. "

34. In this background of the matter, I have considered the contentions of the learned counsel for the parties, the Managing Director appointed by the Government according to the Memorandum and Articles of Association referred hereinabove: If the Managing Director or either of the Ex officio Directors so desires, he may ask that a resolution passed by the Directors be suspended pending a reference to Government in the appropriate department. On such reference Government may decide that the resolution shall have no effect or shall have effect in a modified form. The Article 58 of the Memorandum and Articles of Association referred hereinabove also authorises Managing Director or any other Director nominated by the Provincial Government if so desires, he may ask that the execution of the resolution passed by the Directors be suspended pending reference to the Provincial Government in the appropriate department. On such reference, the Provincial Government may decide that the resolution shall have no effect or shall have effect in a modified form, and such decisions shall be binding on the company. The provisions of section 183 would be very advantageous for the decision of this petition which provides:

35. S. 183. Certain provisions not to apply to directors representing special interests. ‑‑‑Nothing in section 178, section 180 or section 181. shall apply to‑‑

(a) Directors nominated by the Pakistan Industrial Credit and Investment Corporation Limited or by a Corporation or Company formed under any law in force and owned of controlled, whether directly or indirectly, by the Federal Government or a Provincial Government on the Board of Directors of a company in or to which the said Corporation or such Corporation or company has made investment or otherwise extended credit facilities;

(b) Directors nominated by the Federal Government or a Provincial Government on the Board of Directors of the Company; or

(c) directors nominated by foreign equity holders on the Board of the Pakistan Industrial Credit and Investment Corporation Limited, or of any other company set up under a regional cooperation arrangement approved by the Federal Government:

36. Provided that, where a Director referred to in clauses (a), (b) or (c) is nominated, such number of the votes computed in the manner laid down in subsection (5) of section 178 as is equal to the minimum number of votes which would have been sufficient to elect such Director if he had offered himself for election shall stand excluded from the total number of votes otherwise available at an election of the Directors to the authority or person nominating him:

37. Provided further that a Director nominated under this section shall hold office during the pleasure of the. Corporation, Company, Government of Authority which nominates him."

38. The respondent was established vide Government Resolution No.24‑I, B/47‑1 dated 2nd June, 1947 set out below:‑‑

(i) Resolution. ‑‑‑With a view to bring about Industrial Development of Sindh, Government are pleased to direct that a company called "The Sindh Industrial Trading Eastes Company" should be formed to establish and manage trading estates at Karachi, Hyderabad and Sukkur, on the following lines:‑‑

(ii) The functions of this Company will be to acquire land for these trading estates, to lay out and develop such land by construction of roads and drainage and the provision of light and where either at the request of a particular trader or otherwise it appears to be advantageous to do so, to construct and rent premises to traders. The company will make such charges for water and electricity supplied and for the rent of land and premises as to enable it to pay its expenses and interest at a rate not higher than 4 per cent. on its capital outlay."

39. The Article 8 of the Memorandum and Articles of Association provides as:

40. Article 8. If upon the winding up or dissolution of the company there remains, after satisfaction of all its debts and liabilities, any property whatsoever, the same shall not be paid to or distributed among the members of the Company, but shall be paid or transferred to the Provincial Government of Sindh or to its nominee to be applied in such manner as it may direct.

41. The meeting scheduled to be held on 1st September, 1994 was adjourned by the competent authority by exercising powers vested in him under the Articles of Association. The proxies filed by the members of the Board of Directors produced by Rizwan Ahmed in his affidavit in rejoinder mentioned hereinabove clearly show that in view of those proxies and other compelling circumstances proposed meeting was rightly adjourned. With all humbleness and with due respect to the authors and the authorities referred by Mr. Mansoorul Arfin, learned counsel I am clear in my mind that the relevant portions of the books and the authorities are not relevant and helpful to the case of the petitioners. The word ask provided in the Memorandum and Articles of Association has been defined in the Oxford English Dictionary with the meaning as follows:

42. To ask as by right, call for, demand, to ask a person for a thing, to make request, to need, require, demand, call for, to ask, to come, to invite.

43. The literary meaning of the word ask is "as by right, call for, demand". The books and provisions of the Companies Ordinance referred hereinabove by Mr. Khalid M. Ishaq learned counsel are very much relevant and applicable to the case of the respondent. The meeting was adjourned by the Managing Director while exercising his powers, and subsequently petitioners attended the meeting on 30‑10‑1994 of Board of Directors and thereafter they even did not make any objection or protest. The total sum and substance of this discussion is that J. Misc. Application is not maintainable which must fait and the same is dismissed.

44. While hearing CMA No.1703/94 on 3‑11‑1994 the Court passed the following order:

45. "Mr. Mansoorul Arfin, Advocate for the petitioner.

46. Mr. Jawed Siddiqui, Advocate for the Respondent.

47. It is almost 1‑30 p.m. and no time is left to take up this matter which, it appears, will take quite some time. As such by consent it is adjourned to a date in office and till further orders of this Court neither the Directors who claim to have been elected in the alleged general body meeting held on 1‑9‑1994 nor the Director who may be elected in the alleged general body meeting to be held on 6‑11‑1994 will attend the meeting of the Board of Directors of the respondents."

48. Prima facie as discussed hereinabove balance of convenience is not in favour of the petitioners, moreover they are not likely to suffer an irreparable loss or injury whatsoever but on the contrary the respondents are likely to suffer l irreparable loss if this ad‑interim order is allowed to continue. Consequently this ad interim restraining order is hereby re‑called.

49. In consequences thereof CMA No.2757/95 pending for hearing in Suit No.348/95 between the same parties stands dismissed having become infructuous.

50. A.A./A‑98/K Order accordingly.