GOVERNMENT OF PAKISTAN vs PREMIER SUGAR MILLS and others

' M. MAHOOB AHMAD, CJ.---This Regular First Appeal has been instituted by the Government of Pakistan through Secretary, Ministry of Defence, Islamabad against Premier Sugar Mills and Distillery Company Ltd. And 12 others.

2. The facts necessary for the purpose of this appeal briefly stated are that respondents Nos.1 to 9 instituted a suit against the appellant Government and respondents Nos. 10 to 13 for the recovery of Rs, 3,76,022.70 as price of three thousand tons of sugar supplied by the plaintiffs' Sugar Mills to defendant No,1, the present appellant. Plaintiffs/respondents Nos.1 to 8 are duly incorporated companies under the Companies Act, 1913 whereas plaintiff No,9 is the Association of Sugar Mills. It was asserted in the plaint that the plaintiffs were entitled to receive Rs,67 per maund for the sugar supplied but instead the defendants made payment at the rate of Rs,61 per maund and as such the amount of Rs,6 per maund still remains payable and that since the appellant-defendant was not paying the same, the plaintiffs-respondents were obliged to file the suit. This suit was resisted by the defendant and on the divergent pleadings of the parties, following ten issues including that of relief were framed:--

(1) Whether the plaint fails to show a cause of action and is liable to rejection? O.D.

(2) Whether the plaintiffs have a locus standi for filing the present suit? O.P.

(3) Whether the defendants had a right to fix any price of the sugar? O.D.

(4) Whether sum in suit is payable by the defendants to the plaintiffs and in what proportion? O.P.

(5) Whether the suit is bad for misjoinder of the party?

(6) Whether the suit is barred under Order 2, Rule 2, C.P.C.? O.D.

(7) Whether the suit is within time? O.P.

(8) Whether suit has competently been instituted? O.P.

(9) Whether defendant No,1, is entitled to special costs? O.D.

(10)Relief.

' On the conclusion of the trial, the learned Civil Judge 1st Class, Lahore by his judgment dated 30- 3-1980 decreed the suit of the plaintiffs with costs as against the appellant defendant only.

3. Before us today the finding of the learned Civil Judge on issue No,8 has been at the outset questioned on behalf of the appellant.

4. The learned counsel for the appellant has contended that the suit had not been instituted through a duly authorised person and was therefore not competent. He referred to the discussion on this issue as made by the learned Civil Judge and submitted that the finding is not only not based on record but is wholly unsustainable on the legal plane as well. It was also contended by the learned counsel that the plaintiffs-respondents having not proved the issue, it was not expected of the appellant under law to refute the issue on which the plaintiffs/respondents had led no cogent or tenable evidence. In the same context the learned counsel for the appellant urged that the issue aforementioned had been framed in pursuance of the preliminary objection No,1 in the written statement of the appellant and had to be decided in the context thereof.

5. On the other hand the learned counsel for the contesting respondents submitted that the finding of the learned Civil Judge is wholly unexceptionable and has been found as a matter of fact in favour of the appellant in view of the statement of Ali Ahmad P.W.1, the Secretary of respondent No,9 who as the Secretary was authorised under the Articles of Association to institute the suit.

6. The learned counsel for the appellant in reply has submitted that the Articles of Association did not form part of the record and therefore the same could not have been relied upon to clothe the Secretary with the power to institute the suit on behalf of the plaintiffs.

7. We have given due consideration to the respective arguments of the learned counsel for the parties. We find force in the contentions raised on behalf of the appellant. It is the admitted position that respondents Nos. 1 to 8 are independent entities being Public Limited Companies incorporated under the Companies Act, 1913. There is no material whatsoever available on record and neither anything has been referred to in the impugned finding nor pointed out today at the bar which could show the competent institution of the suit on behalf of the said respondents Nos. 1 to 8 plaintiffs. It is well settled that when a company institutes a suit, it has to establish that the suit has been competently and authorisedly instituted on its behalf. The rigor of this principle is to the extent that even a person incharge of the affairs of the company unless specifically authorised in this regard is not considered competent to initiate proceedings on behalf of the corporate entity. In Iftikhar Khan of Mamdot v. Messrs Ghulam Nabi Corporation Ltd., Lahore reported as PLD 1971 Supreme Court 550 it was held that a suit on behalf of Company by a person (Director Incharge of Company) is not competent unless he is so authorised by a resolution passed by Company's Board of Directors in a meeting of Directors duly convened. In the light of the above principle that the suit had not been competently filed the appeal before the Supreme Court was allowed and the objection as to the invalid institution of the suit was upheld.

8. Adverting now to the question of competence or otherwise of the suit out of which the appeal under consideration has arisen, it may be noted that plaintiff No,9 whose Secretary alone was produced as a witness to prove issue No, 8, is only an Association of which the other plaintiffs are the Members. The Association as such is not the direct person who was to receive the amount in dispute as the sugar, additional price for the sale of which had been claimed in the suit, was the property of the Sugar Mills i.e, plaintiffs Nos. 1 to 8 and that price had also to be received by the said plaintiffs. The Secretary of plaintiff No,9 in no manner represented plaintiffs Nos. 1 to 8 in the suit as he even did not sign the plaint on their behalf nor did he depose anything about his competence to institute and file the suit on behalf of the said plaintiffs. The suit, therefore, on the own showing of the plaintiffs had not been competently filed so far as plaintiffs Nos.1 to 8 are concerned.

9. In addition to the above basic factor that the incompetent institution of the suit on behalf of respondents-plaintiffs Nos. 1 to 8 cannot be validated, even if the suit could be taken to have been validly instituted on behalf of respondent No,9, it may be observed that the suit on behalf of respondent No,9, also had not been competently instituted. Although the Memorandum and Articles of Association of respondent No,9 had not been duly brought on record but in view of the statement of P.W.1, the Secretary of respondent No,9, as made before the trial Court that he was during his examination equipped with the Memorandum and Articles of Association of respondent No,9 which had been seen by the learned trial Court we thought it fit to ourselves examine the said Memorandum and Articles of Association to see as to whether the person who filed the suit on behalf of respondent No,9 had requisite authority or not. For the purpose, the case was adjourned on 11-3-1991 to enable the respondent to produce the said Memorandum and Articles of Association which has been produced today and perused by us. Strangely enough the learned trial Court had placed reliance on the statement of Ali Ahmad P.W.1 alone to find issue No,8 in favour of respondents-plaintiffs on his bare statement which when seen in the light of Articles of Association of respondent No,9 in no manner authorises him independently to institute the suit.

10. The ,powers of the Secretary under the Articles of Association of respondent No,9 are contained in Article 39. The Article relevant to the present controversy is Article 39(xiii). It reads as under :-- "(xiii) to represent the Association for all purposes whenever action arises before any Court of Law in any suit or proceeding instituted by or against the Association provided that he shall not be competent to compromise any suit or proceeding without the sanction of the Committee;"

' A bare reading of this Article shows that the power of the Secretary is only to represent the Association in actions and suits or proceedings instituted by or against the Association. As against this Article, the power to commence institute, prosecute and defend the matters in Courts is vested in the Committee as found from Article 19(xvii).

' The said Article reads as under:- "(xvii) to commence, institute, prosecute and defend all such actions and/or suits on behalf of the Association as may be deemed necessary or expedient and to compromise or submit to arbitration and action, suit or dispute or difference;"

11. A conjunctive reading of the two articles therefore adequately shows that the Secretary by himself, is not authorised to commence and institute the proceedings in Courts on behalf of respondent No,9 which power is vested in the Committee and that the only power with the Secretary is that where the Committee validly decides to commence and institute the proceedings and such proceedings are commenced and instituted, the Secretary shall represent the Association respondent No,9 in those proceedings. It therefore stands proved on the own showing of respondent No,9 especially in the absence of any resolution of the Committee of respondent No,9 about the decision to commence and institute the suit that the same had not been instituted competently on its behalf as well.

12. It may also be pertinently observed that the words 'commence and institute' have significant and distinct meanings assigned to them in the dictionary as against the word 'filing'. The first two phrases as explained in the dictionary tend to show that some initiative and decision has to be made for taking some action whereas the third phrase viz. "filing" is only a ministerial and consequential act to follow up the intent of the first two viz. 'commencement' and 'institution'. The authority if any needed in support of the above conclusion may be found in Messrs Muhammad Siddiq - Muhammad Umar and another v. The Australasia Bank Ltd. Reported as PLD 1966 Supreme Court 684. It therefore, stands squarely established that the plaintiffs-respondents had not discharged the onus of the issue under discussion.

13. Before parting with this case, we may also observe that the finding of the learned trial Court that the defendants have not brought any evidence to refute the assertion of the plaintiffs on this issue is wholly uncalled for as there was nothing brought on record by the plaintiffs to establish the issue.

An issue can only be controverted by the opposite-party when there is something on record to controvert it. The finding on issue No,8 as arrived at by the learned trial Court in the attendant circumstances detailed above cannot be sustained and has of necessity to be reversed.

14, In view of the foregoing discussion, we would allow this appeal and setting aside the judgment and decree of the learned trial Court dated 30-3-1980 dismiss the suit of respondents Nos. 1 to 9 as having been incompetently instituted. There will however be no order as to costs.