1. ' The plaintiff claiming to be one of the shareholders of B. R. Herman & Mohatta Limited, a private limited liability company, holding 100 shares out of 11,000 shares of the face value of Rs, 100 each since the year 1968, has brought this suit for declaration that disposal of 5,000 shares of defendants 2 to 7 to defendants 8 to 10 or anyone else is void, ineffective in law, contrary to and ultra vires Article 25 of the Articles of Association of defendant 1 and for declaration that the plaintiff has prior preferential right and first option to buy the shares held by the existing share-holders of defendant 1, and that any attempt to sell and dispose of any share without first offering them to the plaintiff is illegal, ultra vires and contrary to the Articles of Association of defendant 1, and for further declaration that 5,900 shares of foreign group have not been acquired by defendants 2 to 7 and defendants' claim to the ownership of those shares is fake, void and contrary to the provisions of F.
2. E. Regulations and the Articles of Association of defendant 1 (hereinafter called the Articles) and seeking direction to defendants 1 to 10 or such of them as may be found in control of defendant 1 with effect from "2-9-1979" to the date of the filing of the suit i,e, 23rd April, 1979, to pay the share of the plaintiff in the profit. The plaintiff has also claimed in the suit an injunction restraining the defendants from finalizing the deal of transfer of the shares or giving effect to any such transfer in any manner whatsoever, and transferring any properties, movable and immovable, belonging to defendant 1 and creating any charge or encumbrance upon them in any way.
3. ' Alongwith the suit the plaintiff also filed an application under Order XL, rule 1, C. P. C. And order 39, rules 1 and 2, C. P. C. Read with section 151, C. P. C., being C. M. A. 1805 of 1979, for appointment of a receiver to take charge and control of the management of the properties and business of defendant 1 and for direction "to maintain status quo of the company of defendant 1" and for temporary injunction restraining defendants 1 to 11 from finalizing the deals of transfer of the shares and from giving effect to any transfer of the shares in any manner, whatsoever and further restraining defendants 1 to 10 from transferring, disposing of, encumbering, mortgaging, removing and pulling down the machinery installed and other assets of defendant 1.
4. ' On 24th April, 1979, notice of this application was ordered to the defendants and meanwhile they were restrained from transferring disposing of, encumbering, mortgaging, removing and pulling down machinery, and other assets but it was made clear that the order would not apply to normal trading.
5. ' Thereafter, defendants 1 and 8 to 10 have moved an application dated 30th April, 1979, under 0.
6. XXXIX, rule 4, C. P. C. Read with section 151, C. P. C. (C. M. A. No, 1822 of 1979) praying for discharge of the order of injunction dated 24th April, 1979 passed against the defendants. Defendants 2 and 3 also moved a separate application dated 29th April, 1979, under Order XXXIX, rule 4, C. P. C. Read with section 151, C. P. C. (C. M. A. No, 1824/79) praying for discharge of the ad interim order passed on 24th April, 1979 or variation thereof in such terms as deemed appropriate in the circumstances of the case.
7. ' I have beard Mr. Ibadatyar Khan, Advocate for the plaintiff and Mr. A. K. Brohi Advocate for defendants 8 to 10.
8. ' After hearing of the elaborate arguments of the learned counsel it appears that the applications under consideration can be decided on the question whether the plaintiff has been able to make out prima facie that he is the owner of 100 shares out of 11,000 shares of the face value of Rs, 100 each of defendant 1, for the case of defendants 2 to 7 inter alia, is that up to 22nd January, 1979 the plaintiff held those 100 shares on their behalf as evidence by defendants' letter dated 6th June, 1970 filed by Sadruddin defendant 2, in support of C. M. A. No, 1824 of 1979, as Annexure 'F' to the affidavit and the agreement dated 2nd September, 1974, a copy whereof the plaintiff has himself annexed to the plaint marked as Annexure `D' and that on 22nd January, 1979 he tendered his resignation from the directorship of defendant 1 which was accepted and he also transferred the said 100 shares to Sadruddin defendant 2.
9. ' On the other hand the case of the plaintiff is that he being the owner of 100 shares in accordance with the Articles 25 to 27 of the Articles has the first option to purchase the shares and without complying with the provisions of these Articles the shares could not be sold and transferred by defendants 2 to 7 to defendants 8 to 10. Here I may mention that by article 25 of the Articles an embargo is placed on the transfer of the shares to any person who is not a member of the company so long as any member is willing to purchase the same at the fair value which is to be determined in accordance with the provisions of Articles 26 and 27 of the Articles. But the question of compliance of the provisions of Articles 25 to 27 would arise only if the plaintiff is a share-holder of defendant 1 as claimed by him.
10. ' I would therefore, proceed to consider the question whether the plaintiff has been able to prima facie show that he is the owner of 100 shares of defendant 1. It is the case of the plaintiff that out of 11,000 shares of the company 5000 shares were originally owned by Mohatta Group and 6,000 shares by Herman Group. The latter were foreign residents and nationals who used to manage and control defendant 1. On 28th April, 1968, the plaintiff had acquired 100 shares of defendant 1 company and had qualified himself to become a director in the company and subsequently he became the resident director of defendant 1, which position he continued to enjoy till January, 1979 when according to him, he was ousted and deprived of the directorship under threats and coercion although he still holds his own 100 qualified shares and suffers no disability. However, I may mention here that the plaintiff has not sought any relief in this suit arising out of these allegations. It is further the case of the plaintiff that after the partition of the subcontinent Mohatta Group left for India and became evacuee and after Indo-Pak War 1965, 5,000 shares which were held by them were treated as evacuee property vide Notification dated 10th May, 1968 and in spite of challenge to the modification and litigation these shares remained evacuee property and ultimately the Custodian of Enemy Property agreed to sell these shares to the plaintiff for a consideration of Rs, 7,00,000 who in turn agreed to sell and transfer the same to defendant 2 under an agreement dated 23rd May, 1970 which is annexed to the plaint marked as Annexure 'C'. The material terms whereof read as follows :
(4) That Group Capt. Murad irrevocably agrees to transfer the 5000 shares purchased from the West Pakistan Enemy Property Board, Lahore as aforesaid in the name of Mr. Gangji and/or his nominee or nominees.
(5) That Mr. Gangji shall pay, on such transfer a sum of Rs, 1,50,000 to Group Capt. Murad (plaintiff) and shall be personally liable to the Muslim Commercial Bank Ltd. To repay the said sum of Rs, 7,00,000, lacs. Mr. Gangji will furnish a Bank guarantee to Group Capt. Murad for the payment of the said sum of Rs, 1,50,000.
(6) That Mr. Gangji agrees that Mr. Murad (plaintiff) will continue to be Director of Messrs Herman & Mohatta Ltd. For a period of five years from the date hereof and so long as Mr. Murad is an active Director of Herman Mohatta & Co., Ltd., he shall be paid a consolidated remuneration of Rs, 1,625 per month.
(7) That Mr. Murad has informed Mr. Gangji of the pending litigation regarding the said shares and that there will be further litigation Mr. Gangji agrees to bear the entire cost of the litigation present as well future.
(8) That in the event of Mr. Murad being not able to get the said shares Mr. Gangji will be entitled to only refund of Rs, 7,00,000 and all expenses incurred on litigation or payments made to Mr. Murad hereinabove mentioned shall not be refundable to Mr. Gangji.
(9) That if Group Capt. Murad fails to obtain the transfer of shares from the Board within a period of one year from the date hereof, Mr. Gangji shall have the option to terminate this agreement."
11. ' Finally, the Custodian of Enemy Property at the instance of the plaintiff transferred these shares to defendant 2 and thereafter the plaintiff and defendant 2 entered into a contract of service dated 2nd September, 1974, whereby he became a resident director on a basic salary of Rs, 5,000, house rent of Rs, 1,500 and entertainment allowance of Rs, 300. Here it may be useful to reproduce some of the recitals and terms of the agreement :- ' Whereas the First Party has, at the instance and with the help of the Second Party, purchased from the West Pakistan Enemy Property Management Board 5000 shares of the company called B. R.
12. Herman & Mohatta Ltd., which have been duly transferred in the name of the First Party and the transfer entered into the books of the Company.
13. ' And whereas the First Party additionally holds 100 shares of the said Company in his own name.
14. ' And whereas the entire purchase price of the said 5000 shares amounting to Rs, 7 lakhs (Rupees Seven Lakhs only) was paid to the West Pakistan Enemy Property Management Board through Funds provided by the Second Party and upon the distinct understanding (as evidenced by an agreement dated 2nd June, 1971) that the First Party shall hold the said 5000 shares as also the additional 100 shares in trust for and on behalf of the Second Party and that the real ownership of the said shares would vest at all limes in the Second Party.
15. (I have underlined* for emphasis).
16. ' And whereas, as a result of the aforesaid arrangement and the premises recited earlier above the Second Party becomes vitally interested in the affairs of the Company and is desirous of making certain provisions with regard to the future management and conduct of the business and affairs of the Company.
17. ' And whereas the Second Party would like to enter into a contract with the First Party in relation to the above matters.
18. ' THIS AGREEMENT WITNESSED : "(1) With effect from the date the amicable settlement between the Second Party and the Litigants in the various suits comes into *Rive in italics] ' effect, the First Party shall be deemed to be the Resident Director of the aforesaid Company, exercising such powers as would be assigned to him by the Board of Directors of the Company.
(2) The First Party shall, in consideration for the services to be rendered by him to the Company as its Resident Director, be entitled to the following emoluments :
(I) Basic Salary of Rs, 5,000
(ii) House Rent of Rs, 1,500
(iii) Entertainment Allowance of Rs, 300
(6) The First Party herein acknowledges and confirms having executed the transfer forms in respect of his entire shareholdings in the said Company and delivered them to the Second Party. The Second Party shall be entitled to transfer the said shares to himself or to his nominees and the said transfers will be registered in the books of the Company as and when notified. Notwithstanding anything herein contained, the First Party shall continue to hold his 100 qualification shares of the Company in his own name but in trust for the Second Party and/or his nominees."
19. (Underlined *is mine for emphasis).
20. ' It is obvious from the recitals and the provisions of clause 6 that the plaintiff by the said agreement acknowledged and confirmed that he held 100 shares of the company in his name but in trust for defendant 2 and or his nominees.
21. ' Defendant 2 in his affidavit filed alongwith the application under Order XXXIX, rule 4, C. P. C. Dated 29th April, 1979 (C.M.A. No, 1824 of 1979) has denied that he or defendant 3 or defendant 6 have threatened or coerced the plaintiff. He has stated that the plaintiff at his request tendered his resignation from the Board of Directors of defendant, on 22nd January, 1979, without any threat or coercion in the meeting of the Board held on the same day he attended, which was accepted. He has annexed a letter dated 22nd January, 1979, addressed to the Board of Directors of defendant 1 whereby he tendered his resignation. He also annexed a photo stat copy of Form XII dated 23rd January, 1979, filed with the Registrar, Joint Stock Companies, Karachi under which he had informed the Registrar, Joint Stock Companies, Karachi, about the resignation of the plaintiff from the Board of Directors and other supporting documents. He has further claimed that the plaintiff was holding the directorship of defendant 1 as his nominee. In support of the claim that the plaintiff was not the owner of 100 shares he has annexed to the affidavit a copy of letter dated 6th June, 1970, which was delivered by the plaintiff to Mr. Fakhruddin G. Ebarhim (now Mr. Justice Fakhruddin G. Ebrahim) to be delivered to defendant 2. It will be useful to reproduce this letter in extenso: ' Karachi ' Dated June 6, 1970.
22. ' Dear Mr. Saddruddin, ' I confirm having arrived at the following settlement :
(1) That I have, by separate documents, agreed to sell to you 5,100 shares in Messrs B. R. Herman & Mohatta Ltd., i,e, 100 shares *[Here in italics] standing in my name and 5000 shares which the Custodian has agreed to transfer in my name. The price of 5000 shares has been advanced by the Muslim Commercial Bank Ltd. Under your instructions and on payment of the said amount by you to the Bank.
(2) I agree that I will make every endeavour to have the said 5,000 shares transferred in your name or the name/names of your nominee/nominees. Please, however, note that if I cannot transfer the said shares in your name I will be holding the said shares on your behalf and for your exclusive benefit. I will be only a nominee shareholder of 5100 shares.
(3) I further agree that if I am appointed as receiver of the said Company or otherwise become entitled to manage the said Company, I shall be doing so on your behalf and under your instructions and for your benefit.
(4) That I agree to abide by whatever instructions that will be issued by you or on your behalf in relation to the business of the said Company.
23. ' Please note that this letter is to be read in conjunction with our previous agreement of sale of 5000 shares by me to you.
24. ' He has also annexed to the affidavit a photostat copy of blank transfer deed of 100 shares duly signed and signature verified which was, according to him, delivered to him. He has further stated that 100 shares were transferred by the Board of Directors of Company defendant 1 at its meeting held on 22nd January, 1979, to his nominee which meeting was attended to by the plaintiff.
25. ' In the affidavit-in-rejoinder the plaintiff has denied that he had attended the meeting held on 22nd January, 1979, or that he voluntarily resigned from the directorship of the company on 22nd January, 1979, or such resignation was accepted. His case is that on that date he was in Lahore and he had returned to Karachi on 23rd January, 1979, by Flight No, PK-303 reaching Karachi after 3.00 p m. With regard to the letter dated 6th June, 1970, his stand is that this was a privilege communication between him and his counsel while the case of defendant 2 is that this letter was delivered by the plaintiff to his counsel for delivering it to him (defendant 2). He has also denied that he ever gave the original share certificate of 100 shares to the plaintiff and desired an order by the Court for production of the original share certificate if he delivered the same to the defendants as claimed by the defendants. He has however, not denied the execution of the blank transfer deed and has also not explained as to how defendant 2 came in possession of the blank transfer deed.
26. He, however, claims to be the owner of the shares and in support of the claim he has annexed a photo stat copy of a certified copy of Form-E issued by the Registrar, Joint Stock Companies, Karachi on 4th April, 1979, which contains a list of share-holders of defendant 1 as on 21st May, 1978, which shows that he was the owner of 100 shares on that Oat,.
27. ' Here I may mention that while arguing the case Mr. A. K. Brohi, learned counsel for defendants 7 to 10 produced in Court the original share certificate which was seen and returned to him which according to him bore the signature of the plaintiff as director of the company, defendant 1. On the other hand learned counsel for the plaintiff was unable to produce the original script if the same was still in his possession and he was still the owner of 100 shares.
28. I have perused all the documents pointed out by the learned counsel for the parties and on the basis of the present record I am unable to prima facie find that the plaintiff is the holder of 100 shares of defendant 1. The letter dated 6th June, 1970, and the agreement dated 2nd September, 1974, the execution whereof is not denied by the plaintiff show that he was holding 100 shares as nominee and trustee of defendant 2. He has also not denied the execution of the blank transfer deed in respect of the said shares and has not explained as to how and in A what circumstances he delivered that blank transfer deed to defendants and in view of the fact that he has not produced the original share-certificate and has also not explained its absence and on the other hand production of the original certificate by the defendants and the fact that he resigned on 22nd January, 1979, from the Board of Directors by the letter dated 22nd January, 1979, are all factors which when taken into consideration lead to one conclusion for the purposes of prima facie finding that he is not the owner of 100 shares. His stand that he was in Lahore and returned to Karachi on 23rd January, 1979, by Flight No, PK-303 reaching Karachi after 3-00 p.m. And therefore he could not have taken part in the meeting alleged to have been held on 22nd January, 1979, is vague for he has not stated since when he was in Lahore and if he had gone to Lahore on 22nd January, 1979, by what flight he had gone there. As regards the form containing the list of persons holding shares in defendant 1 annexed to the affidavit marked as Annexure 'A/2', which shows him as holding 100 shares, but this list shows him so on 21st May, 1978, and this has to be read in conjunction with the agreement dated 2nd September, 1974, and other documents which show him holding these shares in trust for defendant 2.
29. ' I have therefore, come to the conclusion that the plaintiff has failed to show prima facie that he is a share-holder of defendant 1 and therefore, he is not entitled to any interim relief. I, therefore, dismiss the application and vacate the interim order of injunction passed on 2nd May, 1979. The other two applications also stand disposed of.
30. ' I may note that all or any observations made in this order are of tentative nature and have been made only in relation to interim relief claimed by the plaintiff and the main case will course, be decided on merits after the parties have led their evidence.