MUHAMMAD KHALID and others vs Messrs AT.M. CORPORATION LTD. and others
These petitions for special leave to appeal arise from disputes among the shareholders of a private limited company, Messrs. A.T.M. Corporation Limited, involving civil litigation, arbitration proceedings, and multiple petitions under the Companies Ordinance. Differences arose regarding company management and shareholding, leading to a civil suit, subsequent appeals, revisions, and company petitions in the High Court. During the proceedings, a deed of settlement was filed under which a former High Court Judge was appointed as a Referee to resolve the disputes. The Single Judge in the High Court treated the Referee's report as an award, rejected objections, and disposed of all pending civil revisions and company petitions accordingly. The core legal question is whether the High Court was justified in disposing of the matters on the basis of the Referee's report when not all parties had agreed to refer their disputes to the Referee and whether valid grounds existed to challenge the report. The Supreme Court held that the contentions regarding the lack of unanimous agreement among all parties to refer the disputes and the validity of disposing of the matters based on the report required examination, and consequently granted leave to appeal.
- Can a court dispose of civil revisions and company petitions on the basis of a referee's report when not all affected parties agreed to the reference?
- Whether a report submitted by an appointed referee can be treated as a binding award without unanimous consent of all litigating parties?
- Are there sufficient grounds to set aside a High Court order that disposes of company and civil proceedings based on a disputed settlement report?
- Section 152, Companies Ordinance
- Section 161(8), Companies Ordinance
- Section 179, Companies Ordinance
- Section 305, Companies Ordinance
- Section 309, Companies Ordinance
ORDER
' SAAD SAOOD JAN, J.--These petitions for special leave to appeal relate to the affairs of a private limited company known as Messrs. A.T.M. Corporation Limited, a company incorporated under the Companies Act with the head office at Faisalabad. The Company started with an authorised and fully paid up capital of Rupees one million. It was later increased to Rupees two millions.
Muhammad Khalid, petitioner in C.P.S.L.As Nos.1082, 1083 and 1091 claims to be the majority share- holder, owning 1,02,000 shares of Rs,10 each.
2. In 1984, the Company set up a cooking oil plant in Attock with the permission of the Federal Government and foreign participation. Soon thereafter differences among the shareholders arose.
One of the share-holders, namely, Tahir Mahmood, holding himself the Managing Director of the company, filed a civil suit for a permanent injunction to prevent another share-holder, namely, Ijaz Iqbal, from interfering with the management of the plant. The suit was decreed.
Even though the petitioner was not a party to tne suit, the decree passed affected his interest also.
From the judgment of the trial Court, two appeals were preferred before the District Judge. One was by Muhammad Khalid and the other was by Ijaz Iqbal. The appeals were transferred to the Court of the District Judge, Lahore. The learned District Judge dismissed the appeal of Ijaz Iqbal but partly allowed that of Muhammad Khalid with the observation that the decree would not be binding upon him. From the judgment of the District Judge, three civil revision petitions were filed in the High Court. One was by Muhammad Khalid, the second was by Ijaz Iqbal and the third was by Tahir Mahmood and A.T.M. Corporation. These were registered as C.Ps. Nos.486-D, 487-D, and 804/D all of 1987.
3. While the civil suit was pending in the trial Court, an arbitration agreement was entered into out of Court by some of the share-holders of the company (not including Muhammad Khalid). In pursuance of the agreement, two persons namely, Shah Muhammad and Muhammad Ashraf were appointed as arbitrators. They gave their award on 3-7-85. It is the case of Muhammad Khalid that the award was never acted upon; it was neither filed in the Court nor any attempt was made to make it a rule of the Court.
4. While the proceedings were going on in the civil suit at the appellate/revisional stage, three petitions were moved under the Companies Ordinance in the High Court. One, that is C.O. 40 of 1985, was filed by Abdul Majid Chaudhry and Muhammad Rashid under section 152 of the Ordinance for rectification of the register of the shareholders. The second, that is C.O. 4 of 1986, was moved by Muhammad Khalid under sections 161 (8) and 179 of the Ordinance to challenge the proceedings of the Company held on 22-2-86 wherein certain directors were removed and some others elected. The third, that is, C.O. 21, was moved by the petitioner together with Ijaz Iqbal under sections 305 and 309 of the Ordinance for winding up of the company on various grounds. During the pendency of the civil. Revisions and the petitions under the Companies Ordinance, a deed of settlement was filed in the High Court. Muhammad Khalid was again not a party to this deed. In accordance with the terms of the deed, Mr. K.MA. Samdani, formerly a Judge of the Lahore High Court, was appointed as a Referee to settle the dispute between the parties. Mr. Samdani submitted his report. Treating this report as an award, a learned Single Judge in the High Court invited the objections of the parties thereto. After hearing the parties, the learned Single Judge rejected objections, upheld the award and disposed of the civil revisions and the petitions made under the Companies Ordinance in accordance therewith. The petitioners seek leave to appeal from the order of the learned Single Judge.
5. In these petitions for special leave to appeal, the disposal of all the matters on the basis of the report of Mr. Samdani has been challenged. It is inter alia contended that all the parties before the High Court had not agreed to refer their disputes to Mr. K.MA. Samdani and as such they were not bound by his report and in any event there were good grounds for setting aside the report. The learned Single Judge was therefore not justified in disposing of the revision petitions as well as the petitions under the Companies Ordinance in accordance with the report given by Mr.K.MA.
Samdani. These contentions need examination. Leave to appeal is granted in all the petitions.
Security for costs in the sum of Rs,10,000 in each petition. The appeals may be made ready for hearing on the present record with permission to the parties to file additional documents, if any.
The interim order already made to remain in force during the pendency of the appeals.