' ANWAR ZAHEER JAMALI, J.- A suit for recovery of Rs.63,54,569.53 instituted by the appellant in the original. Civil jurisdiction of this Court on 20-2-1985 was dismissed by impugned judgment and decree on the sole ground, that the person, who had instituted such suit on behalf of appellant, Trading Corporation of Pakistan, was not duly authorized on behalf of the Company, either through Board Resolution of the Company or by its Memorandum of Association.
2. In the context of above noted short controversy involved in this appeal, we have heard Mr. Nasrullah Awan, Advocate for the appellant. He has contended that in the written statement filed in the suit by the respondent, no plea as regards incompetency of the person who had instituted the suit and signed and verified its plaint, was raised by the respondent, therefore, it was not open for them to raise such plea at some belated stage. In this context, he placed reliance upon the case of M/s Mastersons through its Partner v. M/s Ebrahim Enterprises and another (1988 CLC 1381). He further contended that the learned single Judge while passing the impugned judgment, did not carefully examine Board Resolution of the appellant-Company dated 26th November, 2004, produced before him (available at page 145 of appeal file) whereby the acts of filing and defending of Suits Nos.585 of 1983 and 176 of 1985, were ratified by the Board of Directors of the appellant-Company. He also made reference to the other Board Resolution of the appellant- Company dated 8-9-2005 (available at page 313 of appeal file) to show that the ambiguity in the earlier Board Resolution. If at all, as regards due authorization of Mr. Shamim Ahmed son of Nazeer Ahmed for institution of suit on behalf of appellant-Company,- was removed and his acts on behalf of the Company were further ratified though after the passing of impugned judgment and decree. He also made reference to Article 115(2) of the Memorandum of Association of appellant- Company, in an attempt to justify institution of instant suit by Mr. Shamim Ahmed, the Manager and employee of the Company on that basis, but we have found no force in such submission as Article 115(g) only deals with specific powers given to the Directors to bring and defend actions and thus it has no relevancy to present controversy, which relates to institution of suit by the General Manager/ employee of appellant-Company. He lastly contended, that law favours adjudication of disputes on merits, rather than technicalities of law, more particularly when the suit was instituted in the year 1985, it remained pending for over two decades and during this period all usual proceedings in the suit were completed and it was ripe for final disposal on merits.
3. In his reply to the above submissions of Mr. Nasrullah Awan, Mr. Adnan Iqbal Chaudhary strongly contended that inherent defect in the institution of suit through an unauthorized person could not have been cured by way of ratification under section 196 of the Contract Act and this position is amplified by section 200 of the Contract Act. He further contended that due to inaction of the appellant in this regard for almost two decades, valuable rights have accrued in favour of respondent with reference to limitation, thus, any act of ratification, if deemed to be validly undertaken by the Board of Directors of appellant-Company, would not affect such legal rights of the respondent, being protected by section 200 of the Contract Act. In this context, learned counsel made reference to the cases T.S.P.L.S. Thinnappa Chettiar v'. Putti Krishna Rao and others (AIR 1941 Madras 6), Notified Area Committee, Okara v. Kidar Nath and others (AIR 1935 Lahore 345) and Muhammad Hussain v. Bashir Ahmed and others (PLD 1987 Lahore 392). Relevant discussion made in these cases read as under:- ' T.S.P.L.S. Thinnappa Chettiar v. Putti Krishna Rao and others (AIR 1941 Madras 6) (relevant Page 16).
"Mr. Sitarama Roa has relied on S'.200 Contract Act, and contended that under that section the ratification could only be deemed invalid if it had the effect of subjecting a third person to damages or of terminating any right or interest'of third person and the ratification by Jaya Rao did not have that effect so far as defendants 5 to 8 are concerned. We are not inclined to agree with this contention of Mr. Sitarama Rao. The provisions of the Contract Act relating to agency are not meant to be exhaustive. We do not think that S.200, Contract Act, or the other provisions relating to ratification affect the general principle of law of agency that the general rule as to ratification would not apply when it would affect the rights of other parties: vide the observations of Channel J.
In (1901) 1 K B 683 at p.693. In Halsbury's Laws of England Vol.l, p. 181, the rule is thus stated: ' A ratification does not relate back when persons other than the co-contracting party have acquired interests prior to ratification.
' It cannot be denied that so far as the alienee defendants are concerned, Jaya Rao has parted with his interest long before^ the date of the ratification. Therefore the ratification made by Jaya Rao would certainly affect their rights and put the property in their hands to peril. But it seems to us that it is open to the defendants to contend that the ratification would terminate their right or interest within the meaning of S.200; Contract Act. On the date of the ratification the right to enforce the mortgage was barred by limitation. The defendants have therefore acquired a valuable right to plead the statute. The effect of the ratification would be to terminate that right.
Again, the ratification would have the effect of terminating the interest of the alienee defendants in the property alienated to them because it would be liable to be sold by reason of the mortgage debt being kept alive. We are therefore prepared to hold that the alleged ratification is not binding on defendants 5 to 8.
' Notified Area Committed. Okara v. Kidar Nath and others (AIR 1935 Lahore 345) (relevant Page 346)
"Counsel further relies on the so- called subsequent ratification by the Committee of the act of its Secretary in instituting these suits, but here also he is mistaken. An illegal act cannot be legalized subsequently. Ratification is of no avail in those cases where the original act was ab initio illegal. If the original resolution therefore was ultra vires, an illegal act done under cover of it could not be made intra vires by a subsequent resolution of the same body. Similarly, 0.29, R.1, Civil P.C., also does not help the appellant. It merely defines the person who is authorized to sign or verify the pleadings on behalf. Of the corporation (in this case the committee). It therefore comes into operation only after the proceedings have been validly started and cannot be utilized to authorize an unauthorized person to institute suits on behalf of the corporation. We accordingly uphold the judgment and dismiss the appeal with costs."
Muhammad Hussain v. Bashir Ahmed and others (PLD 1987 Lahore 392) (relevant page 395).
"Thereunder, a ratification is incapable of terminating the right or interest of a third person and if the institution of this pre-emption suit is taken to have been validated by the '.Ratification made by Muhammad Hussain then, in the event of its ultimate success, the right and interest of the vendee- defendant will come to be terminated on account only of this ratification.
' Hence, the act of signing die amended plaint by - Muhammad . Hussain may if at all, operate as his own act, not referable to the attorney, from that date onwards but since the limitation for filing the suit had long since expired, therefore, this act is only unavailing to the appellant."
4. Learned counsel also made reference to a Division Bench judgment of this Court in the case of Abdul Rahim and 2 others v. M/s. United Bank Ltd. Of Pakistan, (PLD 1997 Karachi 62) wherein detailed examination of case-law was made by the learned bench with reference to the scope and applicability of Order XXIX, rule 1, C.P.C. And the effect of institution of suit by a person not duly authorized on behalf of company. Relevant conclusion deduced in the said judgment in this regard, has been reproduced in para.37 thereof which reads as under:- ' .
"37. From the analysis of the above decisions the following principles can be extracted:--
(i) Order XXIX, rule 1, C.P.C. Only deals with signature and verification of pleadings by the persons mentioned therein, The said rule is completely irrelevant to guage a person's competence or authority to institute a suit on behalf of a company;
(ii) for a suit to be valid it had to be shown that firstly it was verified and signed by the proper person in terms of Order XXIX, rule 1, C.P.C. And secondly, it was instituted by a competent person having the power and authority to do so;
(iii) in case there is default in compliance of Order XXIX, rule 1 the same is not a fatal defect and can be cured even after the suit has been instituted (See All India Reporter Limited v. Ram Chandar bhondo Datar, AIR 1961 Bom. 292);
(iv) however, in case there is any defect in institution of the suit i.e. .It is instituted unauthorisedly and incompetently the said defect remains, incurable even by a subsequent ratification (See Puhjab Livestock and Salehe Hayat 1980 CLC 1932); (v)there appears to be some inconsistency as to how competence/authority of a person to institute a suit has to be determined. In Muhammad Siddiq a Full Bench of the Supreme Court clearly stated that it is the Articles of the company which have to be seen to assess as to whether a person filing the suit was properly authorized, while the requirement to produce a resolution of the Board of Directors could be dispensed with. In Iftikhar Mamdot, the earlier case of Muhammad Siddiq was not referred therein, a Full Bench of the Supreme Court took the view that in case a resolution from the Board of Directors is not passed and proved after a duly convened meeting, a suit filed even by a director-incharge is to be taken as an incompetently instituted suit. In the subsequent case of Central Bank of India the learned Judge of a Division Bench of the Supreme Court followed Muhammad Siddiq, however, no reference was made to Iftikhar Mamdot. In Central Bank of India it was emphatically stated that there was no requirement of law to prove resolution passed by the Board of Directors. In Green Garments a learned Single Judge of this Court made an attempt to reconcile Muhammad Siddiq and Iftikhar Mamdot by holding that in case, suit is filed in consequence of a power Of attorney no resolution of Board of Directors is required. With due respect we cannot subscribe to this distinction or reconciliation as, the same is not borne out from the principles of law* extracted in the two decisions of the Supreme Court (referred supra). We would reconcile the two decisions of the Supreme Court on another plane. It is settled that the business and affairs of a company are to be conducted strictly in consonance with the Articles of Association subject of course to the operative laws. The business and affairs of a company include the power, competence and authority to institute legal action (See H.M. Ebrahim Saith v. South India Industries Ltd, AIR 1938 Mad. 962) By deduction, the factum of competence and authority to institute legal proceedings would also have to be determined strictly in consonance with the articles of the company. Such interpretation would also be in consonance with Muhammad Siddiq and Central Bank of India wherein it has been categorically stated that where the competence to institute legal action is challenged reference has to be necessarily envisaged to the articles. Where articles of the company confer power on a particular person or director to institute legal action and that person or director institutes.The suit there can be no additional requirement of a resolution of the Board of Directors for the simple reason that such power is to be exercisable by a real person.
However, where the power to institute the suit is conferred upon an artificial person or body e.g. The Board of Directors or a Committee (as in Premier Sugar Mills supra) the requirement to produce and prove the resolution passed by that artificial person or body cannot be dispensed with since such a person can only take a decision as a body through a resolution passed in a duly convened meeting and not. Otherwise. The above principles would also become applicable in the case of delegation or sub delegation of powers i.e. In case the delegator is a real person (when articles confer the powers to' institute legal action on a real person) all that would he required would be to scrutinize the articles and then the power of attorney to see whether it has been properly executed and confers the power so claimed. There would be no requirement to produce or prove the resolution from the Board of Directors in this regard. If on the other hand, the delegator is an artificials person/body (when the articles confer the power to institute legal action on e.g. The Board of Directors or some committee) the resolution passed by that artificial person/body i.e. The.
Board/Committee shall become indispensable. However, there would be no requirement to produce or prove a separate power of attorney. In this backdrop we would venture to reconcile Muhammad Siddiq, Iftikhar Mamdot and Central Bank of India by presuming that in Muhammad Siddiq and Central Bank of India the articles conferred the power to institute or defend legal proceedings to a real person i.e. a director. Thus the requirement to produce or prove a resolution from the Board' of Directors was dispensed with. However, in Iftikhar Mamdot the articles conferred the power to institute or defend legal proceeding upon an artificial person/body i.e. The B Board of Directors in view whereof the requirement to produce and prove the resolution thereof authorizing institution of the suit was found to be indispensable;
(vi) it is not only the principal who can challenge the agent's power and competence to institute/defend legal action. Khayam Films in this regard cannot be considered as good law any more since in Muhammad Siddiq the Supreme Court has taken the view that a person dealing with a company must know that any action by the company is in consonance with the articles;
(vii) objection regarding competence to institute/defend legal action can only be entertained where such a plea is taken in the pleadings or where request is made to frame additional issues or any evidence or additional evidence is led in respect thereof, or where the Court suo motu raises an objection in this regard; (viii)a plaint can be rejected on grounds of incompetence to institute the same."
5. We have carefully considered the arguments advanced by the parties' counsel and perused the case record, which goes to show that institution of suit on behalf of appellant company on 20-2- 1985 was made under the signatures of Mr. Shamim Ahmed. General Manager of the appellant company without any Power of Attorney or Board Resolution in his favour authorizing .Him in this behalf. The Vakalatnama of the learned counsel was also signed by the same officer/employee of the appellant company. This factual position is not disputed by Mr. Nasrullah Awan. Indeed, in this context, no objection, as to the maintainability of the suit, was raised by the respondent in their written statement, therefore, no issue was framed to this effect, but at the time of final arguments in the two counter suits, being Suit No.176 of, 1985 instituted by the appellant-Company and the earlier Suit No.585 of 1983 instituted by the respondent-Company, such objections were raised by learned counsel for the parties and it was, therefore, agreed between them before the Court that the issue of maintainability in this context, will be heard as preliminary issue, which fact is also evident from the impugned judgment. In this background of the matter, the grievance of the appellant that no objection as to the maintainability of suit was raised at the earliest stage, has no force. Moreover, non raising of such legal objection on behalf of the respondent at an earlier stage cannot be made basis for condonation of such lapse or negligence on behalf of appellant- Company.
6. In the impugned judgment, learned single Judge has squarely placed reliance upon two reported judgments of the Honourable Supreme Court of Pakistan in the case of M/s Muhammad Siddiq Muhammad Umar and another v. The. Australiasia Bank Ltd. (PLD 1966 SC 684) and Khan Iftikhar Hussain Khan of Mamdot v. Ghulam Nabi Corporation Ltd. (PLD 1971 SC 550) and concluded that on the basis of admitted facts of the two suits and the rule laid down in these cases, Suit No.176/85 as well as other Suit No.585/83, both having been instituted on behalf of B their respective companies without due authorization in favour of the concerned signatories of the plaint, were not maintainable. In the context of submissions of Mr. Nasrullah Awan, as regards Board Resolution dated 26-11-2004, we have seen that in this Board Resolution also no specific authorization or ratification was made in favour of Shamim Ahmed, the then General Manager/employee of the appellant-Company, but only a vague reference about the pendency of two suits was made in para.2 of the Board Resolution, which was not sufficient for due authorization and ratification of the acts of the then General Manager of the appellant-Company. Such lapse on the part of Board of Directors of the appellant-Company, while passing the Board Resolution dated 26-11-2004 seems to have been realized by them at later stage when the other Board Resolution dated 8-9-2005 was passed by the appellant with specific ratification of the acts of the then General Manager Shamim Ahmed, who had instituted the suit on behalf of appellant-Company.
Obviously, such Resolution, not in the field at the time of passing of impugned judgment and decree, cannot be looked into or taken into consideration at this belated stage. The contention of Mr. Adnan Iqbal Chowdhary, with reference to the valuable legal rights of the respondents, having been accrued during the intervening period and the suit having become time-barred on that account, with specific reference to section 200 of the Contract Act and the above discussed cases, is also not without force.
7. The result of the foregoing discussion is that we are in agreement with the conclusion recorded by the learned single Judge in the impugned judgment. Accordingly, this appeal is dismissed with no order as to costs.