TOUCHSTONE COMMUNICATION PRIVATE LIMITED Versus FARRUKH ASLAM

MOHSIN AKHTAR KAYANI, J.--- Through the instant Enforcement petition, the petitioner seeks enforcement of the foreign arbitral award whereby the shareholding of respondent No.1 in Touchstone Communication (Private) Limited was directed to be surrendered, in favour of petitioner.

2. The brief facts of the case are that the petitioner is a private limited company incorporated under the name, Messrs Touchstone Communication (Private) Limited, vide Company Registration No. 0045789 by the Joint Registrar of Companies, CRO Islamabad, on 24.07.2003. Its authorized capital since incorporation is Rs.10,000,000/-, divid ed into 1,000,000 shares of Rs. 10/- each as per its Memorandum and Articles of Association. Respondent No.1 subscribed to one ordinary share of Rs. 10/- and was also one of the first directors of the company pursuant to Clause 50 of the Articles of Association and Form-29 dated 24,07.2003. The petitioner seeks implementation of an arbitral award dated 05.05.2011 in the USA under which petitioner was awarded all the equity interests owned by respondent No.1 in Touchstone Texas and Touchstone Pakistan and Respondent No.1 was also ordered to transfer and convey all his ownership interests in Touchstone Texas and Pakistan respectively.

3. During the year 2005, the holding/parent company of the petitioner, Messrs Touchstone Communication-II LLC, Texas, USA, invested a huge amount of money of Rs.8,250,020 into the petitioner company and accordingly the paid-up capital of the petitioner company was enhanced from Rs.20 to Rs.8,250,020, after which M/s Touchstone Communication-II LLC, USA became owner of the share capital and divided into 825,002 ordinary shares of Rs.10 each, which is more than 99% shareholding in the petitioner company, as reflected in Form A dated 30.10.2005.

4. In order to run the daily affairs of the company, the parent/holding company, Touchstone Communication-II LLC, USA, being the majority shareholder in the petitioner company, authorized respondent No.1 to open and operate the bank account on behalf of the petitioner company. Respondent No.1 thereafter misused the powers entrusted upon him by the other directors of the company and, without lawful authority, embezzled an amount of Rs.2,070,000 from the bank account of the company and fled to the USA.

5. The matter has been raised before the 96 Judicial District Court, Tarrant County, Texas, USA, on the ground that on or about 21.11.2007, in flagrant intentional violation of fiduciary duty as manager of Touchstone Texas and as director of Touchstone Pakistan, proven to the arbitrator by clear and convincing evidence, Mr. Farooq Aslam, the respondent No.1, took Rs.20,700,000, worth approximately USD 338,830.47 at the time of transfer, converted funds without lawful authority from Touchstone Pakistan bank account and gave this money to Digital Broadband (Pvt.) Limited (DBL), and Respondent No.1 refused to return the converted funds to Touchstone entities. Similarly, DBL never returned the converted funds to the client. In the course of proceedings in the USA, the matter was referred to arbitration for resolution.

6. Consequently, on 05.05.2011, pursuant to the order of the 96 Judicial District Court, Tarrant County, Texas, USA, an Arbitration Award was announced by an Arbitrator, Mr. Raylander Clay, in favour of Touchstone Communication-II LLC. The operative part of the said order is as under:

Respondent Farukh Aslam is hereby ordered to transfer and convey, free and clear of all encumbrances, all his equity ownership interests in and to Touchstone Texas and Touchstone Pakistan, respectively.

Claimants are hereby awarded full and complete discharge of all liability to Respondent Farukh Aslam for all debts and other obligations regardless of nature or form claimed by Respondent Farukh Aslam and Digital Broadband (Pvt.), Ltd. ("DBL") against Claimants (including without limitation the US$495,576 plus accrued interest claimed by Respondent Farukh Aslam), as equitable and fair damages for Respondent Farukh Aslam's breach of his fiduciary duty to Claimants.

Rylander, Clay and Opitz, LLP is hereby awarded Fourteen Thousand, Eight Hundred Fifty-Five and 50/100 Dollars (US$14,855,50) for work performed pursuant to the order of the 96th District Court in Cause No. 96-2275574-07 and the Arbitrator's Prelimirtary Order Nos.2 and 10 as full and complete satisfaction and payment of all services performed by Rylander, Clay and Opitz, LLP (including full and complete satisfaction of all services performed by Rebecca M. DaVee, CPA) in this arbitration.

Claimants are hereby ordered to pay Rylander, Clay and Optiz, LLP Fourteen Thousand, Eight Hundred Fifty-Five and 50/100 Dollars (US$14,855.50) within thirty (30) colander days immediately following receipt of this signed Final Award by Claimants' counsel of record. No post-award interest shall accrue on this amount ordered paid by Claimants to Rylander, Clay and Opitz, LLP.

7. The order confirms the complete discharge of all the liabilities towards the petitioner. Also, on 12.08.2011, the respondent filed an appeal against the award and judgment passed by the 96 Judicial Court, Tarrant County, Texas, USA, before the Court of Appeal,, Second District, Fort Worth, Texas. However, before the decision of the appeal was made, both parties arrived at a mutual settlement agreement to finally resolve all their disputes, vide mutual settlement agreement dated 29.11.2012.

8. Pursuant to the said agreement, respondent No.1 made a payment of USD 337,967 to the petitioner as a full and final settlement amount under the said agreement. Respondent No.1 also surrendered his one ordinary share of Rs.10 in the petitioner company in favour of Touchstone Communication-II LLC, the parent/holding company of the petitioner. The petitioner approached the office of respondent No.2 for the transfer of the share, but the same was refused. Hence, the petitioner invoked the jurisdiction of this Court.

9. The record reflects that despite adopting all modes of service, respondent No.1 did not appear before the Court; therefore, he was proceeded against ex parte vide order dated 09.10.2019 after considering all possible modes of service.

10. Learned counsel for the parties also drew attention to certain statutory requirements concerning the foreign arbitral award. The Special Prosecutor SECP objected to the maintainability of the Company Original Petition and referred this Court to Section 6 of the Recognition and Enforcement (Arbitration Agreements and Foreign Arbitral Awards) Act, 2011. He submits that the petition is founded on a foreign arbitral award dated 29.11.2012, issued in the United States of America pursuant to a mutual settlement agreement between the petitioner and respondent No.1, under which Rs. 10 million is to be surrendered to the petitioner. He further contends that while SECP must act strictly in accordance with law, the appropriate remedy for the petitioner is to file an execution petition before this Court.

11. In view of the above contention, this Court has gone through the Recognition and Enforcement (Arbitration Agreements and Foreign Arbitral Awards) Act, 2011, along with judgment reported as 2023 CLD 1400 [Islamabad] (China International Water and Electric Corporation (CWE) P.R. China v. National Highway Authority) , for enforcement mechanism, and is of the view that the mechanism provided in the said 2011 Act will be applicable.

12. Therefore, pursuant to this, law, and in terms of Section 6 of the Act, this Court allowed the request and converted the Company's Original Petition into an Enforcement/Execution application petition, accordingly, by order dated 18.09.2025.

13. The next question arises as to what mechanism has to be adopted to give full effect for the enforcement of the foreign arbitral award dated 05.05.2011, passed by the arbitrator in the US, and an agreement the parties entered into on 30.11.2012, whereby one ordinary share of Rs.10 in the petitioner's company was surrendered by respondent No.1 in favour of petitioner's parent/holding company, Touchstone Communication-II LLC, USA, in order to rectify the register of members of Touchstone Communication (Private) Limited, Pakistan. Passing of the said order, the office has converted the Company Original Petition into Enforcement Petition No.3 of 2025, accordingly, and fixed it before this Court.

14. I have heard the arguments of learned counsel for the parties and perused the record.

15. Perusal of record reflects that the matter arises out of a foreign arbitral award as well as a mutual settlement agreement. While considering this aspect, the Court has gone through the Companies Act, 2017, which refers to arbitration only in the context of compromises and arrangements under Section 279, followed by procedural requirements such as notice to the Registrar under Section 283.

16. These provisions deal exclusively with internal corporate arrangements approved by creditors or members and sanctioned by the Commission. The enforcement mechanism under Section 280 is also confined to such sanctioned compromises or arrangements.

17. Importantly, the 2017 Act does not address the recognition or enforcement of foreign arbitral awards, nor does it confer any adjudicatory or enforcement jurisdiction upon the Registrar in respect of such awards.

18. Foreign arbitral awards are specifically governed by the Recognition and Enforcement (Arbitration Agreements and Foreign Arbitral Awards) Act, 2011, whereby Section 6 mandates that such awards must be recognized and enforced by the Court, i.e., the High Court, in the same manner as a judgment of a Pakistani court.

6. Enforcement of foreign arbitral award.-(1) Unless the Court pursuant to section 7, refuses the application seeking recognition and enforcement of a foreign arbitral award, the Court shall recognize and enforce the award in the same manner as a judgment or order of a court in Pakistan.

(2) A foreign arbitral award which is enforceable under this Act, shall be treated as binding for all purposes on the persons as between whom it was made, and may accordingly be relied on by any of those persons by way of defence, set off or otherwise in any legal proceedings in Pakistan.

19. This establishes a mandatory judicial gateway before any administrative body, including the Registrar, can give effect to the rights arising from such an award. The effect requires intervention by a Court of law in Pakistan.

20. This aspect was duly replied to by SECP, which refused the change in status of shareholding of the company, based upon judgment reported as 1998 SCMR 1618 (Hitachi Limited v. Rupali Polyester and others) , whereby the finality of the award is to be determined by the court concerned.

21. As a result, from the interaction between the Companies Act 2017, as well as the Foreign Arbitral Award Act 2011, it appears that the Companies Act requires the Registrar to record, act upon, or give effect to matters arising from compromise under Section 279, but it cannot independently enforce or recognize a foreign arbitral award.

22. The rights or liabilities arising from a foreign award must first be invoked through the exclusive and special procedure under the 2011 Act. Only after this Court recognizes the award under Section 6 further legal or administrative action can be taken. Enforcement before the Registrar without prior intervention of this Court is therefore not legally permissible.

23. On the other end, the powers of the Court under the Foreign Arbitral Award Act, 2011, if seen in the context of Section 3, which refers to jurisdiction by using the non-obstante provision, provide exclusive jurisdiction to adjudicate matters arising out of this Act. Similarly, Section 3A prescribes the procedure to be followed in accordance with the Civil Procedure Code, 1908 (C.P.C.), consequently exercising all the powers of a Civil Court under the C.P.C. available to this Court.

24. The question arises whether the veracity of any foreign arbitral award could be looked into by this Court. The same has to be seen in light of the observation given in 2023 CLD 1400 [Islamabad] (China International Water and Electric Corporation (CWE) P.R. China v. National Highway Authority) , where it was held that:

66. The preamble to the 2011 Act shows that the said Act was enacted because the legislature considered it expedient to provide for the recognition and enforcement of arbitration agreements and foreign arbitral awards pursuant to the NY Convention (to which Pakistan was a signatory) and matters connected therewith. Section 8 of the said Act provides that in the event of any inconsistency between the said Act and the NY Convention, the latter shall prevail to the extent of the inconsistency. This Section, in my view, not just incorporates by reference the provisions of the NY Convention as part of the said Act but also gives it primacy over the provisions of the said Act where there is inconsistency between the two. Where an application is filed before the High Court under section 6 of the 2011 Act seeking the recognition and enforcement of a foreign arbitral award, such application can be refused only if the Court comes to the conclusion that the conditions for refusing to recognize and enforce an award set out in Article V of the NY Convention are satisfied. We say so because section 7 of the 2011 Act provides that recognition and enforcement of a foreign arbitral award shall not be refused except in accordance with Article V of the NY Convention.

67. Redfern and Hunter (Sixth Edition) explains that the grounds for refusing recognition and enforcement of arbitral awards should be applied restrictively and the grounds for such refusal have to be construed narrowly. We have read and re-read NHA's reply to CWE's application under Section 6 of the 2011 Act as well as NHA's written arguments and have not found any reference to the terms of reference (to which the parties had agreed) or any provision of the French law (being the curial law under which the award was made) which had been violated by the Arbitrator while proceeding with the reference.

68. As per the UNCITRAL Guide, Article V(1)(d) expressly affirms the supremacy of the parties' agreement concerning the composition of the Tribunal and arbitral procedure, and that the law of the place of arbitration should apply only failing such agreement; and the application of the law by a Tribunal goes to the actual merits of the dispute and therefore falls outside the scope of review at the recognition and enforcement stage.

69. The NY Convention does not permit any review of the merits of the award to which it applies. The grounds on which recognition and enforcement of a foreign arbitral award can be refused are exhaustively set out in Article V of the NY Convention. Even in cases where any of these grounds are satisfied, the High Court may nevertheless proceed to recognize and enforce the award. This is because the use of the word "may" in Articles V(1) and (2) makes the refusal to recognize and enforce an award permissive and not mandatory. It is by now well settled that the grounds on which the recognition and enforcement of an award can be refused under Article V of the NY Convention do not include an erroneous decision in law or in fact by the Arbitral Tribunal. This Court, while deciding an application under section 6 of the 2011 Act, ought not to review the merits of the Arbitral Tribunal's decision. Reference in this regard may be made to the following case law:-

(i) In the case of Jess Smith and Sons Cotton LCC v. DS Industries (2019 CLD 23), the Hon'ble Lahore High Court inter alia held as follows:-

"The scope of inquiry before the Court before whom the application for enforcement of the foreign award is pending is circumscribed by the condition for refusal set out in clauses (a) to (e) of Article V. It is not open to a party seeking to resist a foreign award to assail the award on merits or because a mistake of fact or law has been committed by the Arbitral Tribunal."

(ii) In the case of Messrs Tradhol International SA Sociedad Unipersonal v. Messrs Shakarganj Limited (2023 CLD 819), the Hon'ble Lahore High Court held that "Courts should apply a narrow standard of review when considering applications for recognition and enforcement of foreign arbitral awards," and that this standard requires Courts to limit their review to procedural matters and to refrain from re-examining the substance of the dispute.

(iii) In the case of Yusuf Ahmed Alghanim and Sons, W.LL v. Toys "R" Us, Inc. (XXIII Y.B. COM. ARB 1058 (1998)), the Court of Appeals, Second Circuit, United States of America held that "there is now considerable case law holding that, in an action to confirm an award rendered in, or under the law of, a foreign jurisdiction, the grounds for relief enumerated in Art. V of the Convention are the only grounds available for setting aside an arbitral award."

25. Similarly, this Court has also been guided by the principle settled in PLD 2012 [Sindh] 114 (Noble Chartering Inc. v. Awan Trading Company (Pvt.) Ltd.) , where it was held that while deciding an application for enforcement of a foreign arbitral award, the Court does not act as an appellate court with the power to re-examine and reappraise evidence. The Court confines itself to examining the final award within the parameters of the Arbitration (Protocol and Convention) Act, 1937.

26. Additionally, in case law reported as 2002 CLD 1121 (A. Meredith Jones and Co. through Attorney v. Usman Textile Mills Ltd.) , where it was held that the Court cannot sit over a foreign award as a court of appeal, nor scrutinize the quality of evidence before the foreign arbitrator. Therefore, the entire matter cannot be reopened by calling for additional evidence or documents not required under the law.

27. The Court, in fact, acts like an executing court and cannot go beyond the award. This Court has also been guided by principles settled in PLD 2023 Lahore 621 (Tradhol International Sa Sociedad Unipersonal v. Shakarganj Limited) wherein enforcement mechanisms are based on certain principles, and the question of unenforceability has to be seen through the prism of public policy in Pakistan.

28. To avail the benefit of Article V(2)(b) of the New York Convention, the objector must satisfy the High Court that recognition or enforcement of the award is contrary to the public policy of Pakistan. A pro-enforcement approach is to be applied in such cases, giving foreign awards a prima facie right to enforcement.

29. The nutshell of the above discussion leads the court to the following conclusions: a) Pro-enforcement policy in the New York Convention promotes finality and enforceability of arbitration awards. b) A narrow standard of review should apply when considering applications for recognition and enforcement. c) Enforcement should be swift and efficient, benefiting both parties and promoting international trade and commerce. d) The Court cannot review or alter the substance of the award. It can only scrutinize whether the award contains matters giving rise to the refusal of enforcement.

30. As per sections 4 and 6 of the 2011 Act, the enforcement mechanism includes the enforcement of the arbitration agreement/final settlement agreement or award, respectively. In the present matter, the arbitral award determines the ownership of shares and specifically directs the respondent No. 1 to cease the use of the title or any other position he held in the petitioner or respondent No.2 companies. Therefore, it requires the transfer of shares and to alteration of the Company's Register of Members. Therefore, the enforcement of this award necessarily involves the mechanism for rectification of the Register, which is governed by the Companies Act, 2017.

31. The Court has ordered the Special Prosecutor SECP as well as the counsel for the execution petitioner vide order dated 15.10.2025 to explain the concepts of transfer of shares by order of the Court, whereby he submits that there are certain requirements to consider, especially when dealing with the rectification of the register.

Enforcement of Court-Ordered Rectification (Domestic Procedure)

When a Court issues an order for rectification of the Register of Members under Section 126 of the Companies Act, 2017, the implementation requires coordinated steps between the Company and the Registrar (Company Registration Office). Under Section 128, the Court itself directs the communication and implementation process. The typical procedure is as under:

Step 1: Judicial Directive and Corporate Notice

The court, upon granting rectification, provides a certified copy of its order to the company and orders the company to notify the Registrar of the rectification within a specified time (15 days under the Act). This ensures the regulator is aware of the change in the members' register.

Step 2: Formal Filing with the Registrar (Form 24]

In compliance with the court's direction, the company prepares and submits a "Notice of Rectification of Register of Members" (Form 24) to the Registrar of Companies, attaching the court order as evidence. This filing formally records the rectification event in the company's official file. (Form 24 is the prescribed form for notifying changes ordered by the Court.).

Step 3: Official Record Update

The Registrar, upon receiving the notice and court order, will update the company's records maintained at the CRO. In practice, this means the Registrar will place the court order on record and ensure that any statutory filings (for example, the next annual return or Form A listing the company's shareholders) reflect the corrected membership information. The rectification order may specifically require that all related records be corrected indeed, in one case the Supreme Court directed that the company's register and the Form-As filed with SECP be amended to restore the proper shareholding.

Distinction between Transfer and Rectification

The question arises whether this ordinary transfer procedure must also be followed when the Court orders rectification. In practice, rectification via Court order is a distinct process, and the Court's directive supersedes the need for a fresh Section 74 transfer application. Key points for enforcement of international arbitration awards requiring rectification is as under:

Normal Share Transfers (Section 74):

Legal basis and required documents: In a routine share sale or transfer, the company cannot register the new owners unless a valid transfer deed (duly stamped) is submitted and the company's board approves the transfer. Compliance with Section 74-76 is mandatory.

Procedure; missing paperwork (e.g. unstamped deeds or no share certificates) means the company must refuse to register the transfer. This reinforces that a person claiming shares must generally have followed the lawful transfer process initially.

Rectification by Court Order:

Legal basis: When a court does grant rectification under Section 126, it is often because something improper occurred with the share register (fraudulent entry, unlawful refusal, or error) despite the entitled party's rights.

No formal document required: In such cases, the court order itself authorizes the change in the register, rather than a new transfer instrument.

Procedure: The company is directed to directly enter or correct the member's name in the register in accordance with the court's decision, and the usual share transfer formalities (e.g. submitting a transfer step at this stage. In essence, the court order serves as the legal basis for the transfer/alteration, replacing the share transfer form that would normally be needed.

Registrar notification: The company must obey the order and the Registrar is notified via Form 24, as described above, instead of processing a Section 74 transfer request.

Implementation of Foreign Arbitral Award (International Enforcement)

The procedure to implement an international arbitral award (foreign award) involving rectification is typically as follows:

Phase 1: Recognition of the Foreign Award in Court:

Pakistan is a party to the New York Convention 1958, implemented through Recognition and Enforcement (Arbitration Agreements and Foreign Arbitral Awards) Act, 2011. A prevailing party from an international arbitration must file a petition in a High Court under this Act to have the foreign award recognized and made enforceable in Pakistan. The court will require the arbitral award and the arbitration agreement (or certified copies) to be produced, as per Article IV of the Convention. Unless the opposing party successfully proves one of the limited defenses under Article V of the New York Convention (e.g. lack of due process, beyond scope of agreement, etc.), the High Court will confirm the award and order its enforcement. Once a foreign award is so recognized, it is treated "as of were a decree" of that court for execution purposes. In other words, the High Court's recognition order converts the arbitration award into a local court order/judgment. Only at this stage does the award attain the force of law in Pakistan.

Phase 2: Registrar's Role Post-Enforcement:

After the High Court has enforced the foreign award (by issuing an order or decree in terms of the award), implementing the share rectification follows the same steps as a domestic court order under Section 126. Typically, the court's enforcement order itself will specify the outcome; for example, it may direct the company to register certain shares in the claimant's name or alter the share register accordingly. The company, now armed with a Pakistan court order (based on the foreign award), must file a notice of rectification (Form 24) with the Registrar, enclosing the order. The Registrar will then update the official records just as with any court-ordered rectification. In substance, the foreign award once recognized leads to a directive, It's important to note that the Registrar cannot unilaterally act on an international award; there must be a local court sanction. This requirement for local court enforcement is a fundamental aspect of Pakistani law, providing an opportunity for the court to review the award under the Convention's framework before altering any company records.

32. Before dilating upon the final verdict, keeping in view the above discussion of the transfer, rectification, domestic and international procedure for implementation of award and update of registers of shares, etc., it is pertinent to mention here that this Court has also noticed that in most cases, proceedings are usually initiated against the Registrar instead of the company secretary. However, where the company secretary is not available or not acknowledging the rights of the transferee, the Court must initiate a process against the company secretary or Board of Directors as the case may be for implementation of orders. In all other cases, the Registrar shall act on the direction of the Court by referring the order of the Court in their register and respective forms and submit a report accordingly.

33. For what has been discussed above, instant petition stands DISPOSED OF with direction to the Registrar of Companies to transfer the share of Respondent No.1 in favour of the petitioner's parent/holding company viz., Touchstone Communication-II, LLC, USA and rectify the register accordingly under intimation to this Court within 30 days.

UN/222/Isl. Order accordingly.