' SABIHUDDIN AHMED, J.---This appeal is directed against an order of the learned Company Judge issuing certain directions relating to the affairs of the appellant No,1 (Company) under section 290 and imposing a fine of Rs.10,000 each on appellants Nos.2 to 7. The appellant No,1 Company (EBM) which is engaged in the manufacture of biscuits and confectionary products was formed as a joint venture between the respondents (ABIL), a British Company and its local sponsors i.e. Appellants Nos.2 to 7. The respondent held 40% shares in EBM while the remaining shares were owned by the appellants Nos.2 to 7. However, for some reasons respondent had withdrawn its representatives from the Board of Directors and the Company was being managed by appellants Nos.2 to 7.
2. Another private limited company known as Coronet Foods (Pvt.) Limited (C.F.L.) was formed as a subsidiary of E.B.M. Wherein 51% shares were owned by E.B.M. And the remaining 49% by the appellants Nos.2 to 7 who were Directors of C.F.L. In the annual general meeting of E.B.M. Held on 30- 8-1999, it was decided that the private shares of appellants Nos. 2 to 7 in C.F.L. May be purchased by E.B.M. So as to make it wholly owned subsidiary and avoid any conflict of interests. The price for purchasing these shares was to be determined on the basis of valuation of such shares to be undertaken by E.B.M. And was to be financed through raising the paid up capital of E.B.M. The representative of respondent present in the meeting fully subscribed to the decision to purchase and the mode of financing such purchase. However, he insisted that the method of valuation should be fair and transparent.
3. The controversy in the present proceedings started when the Board of Directors of E.B.M. Decided to purchase individual shares of the appellants Nos.2 to 7 C.F.L. At a rate of Rs.20 per share i.e. Twice the nominal value of such shares. The respondent was informed that they were entitled to allotment of 808,000 shares at a premium of Rs.10 per share. The respondent moved this Court by way of J.M. No,2 of 2000 primarily alleging that the decision to purchase the shares of the appellants Nos.2 to 7 in C.F.L. At a exorbitantly high price was fraudulent and in :ended to oppress minority shareholders.
4. The learned Company Judge in an elaborate judgment recorded conclusions and issued directions which may be reproduced as follows: "1(a). The respondents are directed to restore ante 15-3-2000 position by reversing the process of acquisition of C.F.L. Shares and issuance of rights shares of E.B.M. Forthwith.
(b) The respondents Nos.2 to 7 have rendered themselves liable for attachment of their properties, however, the end of justice would be met if they are fined in the sum of Rs.10,000 each, same is imposed. The amount of fine be deposited within a week with Nazir of this Court, failing which their property (share holdings in E.B.M.) stand attached.
2(a). The decision of Board of Directors dated 22-1-1999 with regard to further issue of shares to finance the acquisition C.F.L. Shares and all actions in pursuance thereof are declared illegal and of no legal effect.
(b) The valuation of C.F.L. Shares be done afresh through independent valuator/auditor to be engaged at the expenses of E.B.M.
(c) On the basis of valuation fixed by auditor, the shares of C.F.L. Be purchased from the finance by issuance of right shares.
(d) The petitioner be offered to purchase right shares in terms of section 86, if declined or not subscribed, then be sold to other shareholders.
3. The Official Assignee is appointed Commissioner for implementation of above order with power to appoint independent auditor and to ensure that all the materials, records, reports and assistance required by auditors, in the said process are provided to auditors by the respondents."
5. After arguing the matter for some time Mr. Shaiq Usmani conceded that he could not have any serious objection to a fair determination of the value of share of C.F.L. In the circumstances the controversy has substantially narrowed down and we would briefly record our reasons and conclusion in respect of several directions given by the learned Company Judge. Taking up the second set of direction, it may be stated with profound respects that the declaration contained in para.2(a) could not be granted. It is evident from the record that the decision to purchase 49% shares of the appellants Nos.2 to 7 in C.F.L. And fund such purchase through raise in paid up capital of E.B.M. Was assented to by the representative of the respondent in the A.G.M. Held on 8-10-1999.
The only caveat related to the valuation of such shares. In fact the directions at (b), (c) and (d) indicate that the decision to transact the purchase itself was not nullified but only the method of valuation was intended, to be revised. Indeed no exception in principle could be taken to the directions contained in para.2(b), (c) and (d) as well as para.3 could be taken. Mr. Munshi however, alleged that valuation was being undertaken under the influence of competitors of the appellant No, 1, who had closed links with the respondent. Without going into the question of correctness of such allegation we are of the view that all apprehensions in this respect could be allayed by issuing appropriate directions to the Commissioner or the valuators.
6. Mr. Zahid Ebrahim contended that unless the impugned judgment was upheld and status quo ante as existing on 15-3-2000, was restored, the respondent would be gravely prejudiced on account of the fact that right shares in the company had been issued in favour of other shareholders and thereby their 40% holding had been reduced to 13%. Indeed his contention seems to have merits. Mr. Aziz Munshi however, contended that it would be extremely unfair to allow the respondents all the benefits of their 40% holding when additional capital has been arranged by the appellants. In the circumstances, we are of the view that in case the respondents wish to acquire right shares (after the revised valuation) they need to put to terms for the time being. It would therefore be proper to direct the respondents to deposit an amount on the basis of 15 rupees per share by way of an interim measures which would be adjusted against the final price of shares determined after fresh valuation. Such deposit be made within 30 days from today.
7. With respect to the punishment for contempt of Court, indeed there is material on record for holding that the interim order dated 15-3-2000 was not complied with in letter and spirit and some information was withheld from the respondents, we cannot help expressing our strong disapproval of such conduct. Nevertheless Mr. Sharifuddin Pirzada argued relying upon a recent. Full Bench judgment of the Honourable Supreme Court in the case Muhammad Sadiq Leghari (PLD 2002 SC 1033) that no penalty for contempt could be imposed without following the procedural safeguard contained in section 7. Moreover it appears that the maximum amount of fine under the aforesaid act cannot exceed Rs.5,000. No doubt the Court could also punish persons guilty of disobeying an order of injunction under Order XXXIX, rule 2(3), C.P.C. But it is doubtful whether the kind of order disobeyed falls under Order XXXIX, rule 2(1) or punishment could be imposed in proceedings other than those to which the order related. In any event the said provisions of C.P.C. Only provide for attachment of property or imprisonment and apparently no fine could be imposed. Since the impugned order was passed by way of an effort to ensure the proper functioning of the company it might not be desirable to impose any sentence of imprisonment. We would therefore, set aside the penalty for contempt.
8. In view of the foregoing we would dispose of this appeal by maintaining the impugned order subject following modifications.--
(1) That only the decision of the Board of Directors of the appellant No,1 dated 22-12-1999 to purchase the shares of the appellants Nos.2 to 7 at a particular rate and not the earlier decision to purchase such shares and finance the purchase through issuance of right shares, is declared illegal.
(ii) The Official Assignee will cause a fresh valuation by appointing suitably qualified and independent auditors/accountants to carry out the valuation of shares of C.F.L. And determine fair market value without interference from any of the parties of this appeal. In case any information or document is required by the Official Assignee or accountants/ auditors from the appellant No 1, or from any other source proper notice would be given to the parties to enable them to examine the information furnish and object to its authenticity/correctness. The valuation may be carried out as expeditiously as possible preferably within three months.
(iii) The respondent will deposit 75% (15/20) of the amount claimed by the appellant No,1 for financing right shares with the Nazir of the Court within thirty (30) days from the date of this order.
(iv) That the sentence of fine imposed upon the appellants Nos.2 to 7 is hereby set aside.