' C. M. As, Nos. 2301/78 and 1996/77 ' The above-mentioned two applications are for appointment of receiver. The first application is dated 10-5-1978 and the other is dated 10-5-1979. I may at the very outset state that these applications remained pending as meanwhile, the plaintiff No, 2 had made applications for his examination and the examination of three other witnesses viz. Akhtar Hussain aged 78 years, Pir Mahfooz aged 73 years and Aftab Ahmed Khan aged 64 years, on the ground of their old ages and their evidence has already been recorded. However, during the pendency of these applications on 11-5-1980, plaintiffs made another application (C. M. A. No, 2069 of 1980) for urgent hearing of the above-mentioned applications and pursuant to this application the aforesaid two applications have been heard.
2. I have heard Mr. Ibadat Yar. Khan and Mr. Muzammil Siddiqui on behalf of the plaintiffs on these applications and Mr. Liaquat Merchant for defendants 1 to 5. Mr. Muhammad Hanif Khan defendants 6 and 7 did not address any argument. Mr. Abdullah Chandio was present on the previous dates of hearings but he is not present today and therefore, he has not addressed any argument.
3. Before I deal with the submissions of the learned counsel for the parties on these applications it is necessary to give certain facts leading to the making of these applications.
4. The plaintiffs have filed a suit for declaration, injunction and accounts against the defendants.
Plaintiff No. 1. Alvia Tablighi Trust (hereinafter called the Trust) is a registered trust. Plaintiff 2 claims to be the author and founder of the trust. Plaintiffs 3 to 10 claim to be the other trustees of the Trust.
The plaintiffs 2, 3 and 9 and Defendants 1 and 8 are inter se related to each other. Plaintiffs 2 is the father of plaintiffs 3 and 9 and of Defendants 1 and 8.
5. It is the case of the plaintiffs that the Trust owns a salt work known and run under the name and style of "Sind Salt Works". They claim that in or about August 1976, another salt work viz. "Khurshid Salt Works" (hereinafter called the works) owned by defendants 6 and 7 was offered for sale by its former owner and plaintiff 2 became interested to purchase the same for the Trust and agreed to finance the purchase of the works. The plaintiffs further claim that defendant 1 who was also a trustee of the Trust was instructed to pursue the matter and finalize the sale and obtain the title to the works for the benefit and in favour of the Trust.
6. The plaintiffs further claim the purchase was finalized and an agreement of sale was executed on 28-8-1976 whereby the price of the works was settled at Rs, 7,50,000 and out of this amount a sum of Rs, 1,50,000 was paid to defendants 6 and 7 at the time of execution of the sale agreement and the balance amount was agreed to be paid to them in 12 monthly instalments of Rs, 50,000 between the months of March 1977 and September 1978, as per schedule contained in the agreement. They further claim that for the payment of Rs, 6,00,000 as per schedule a guarantee by the Muslim Commercial Bank Limited was executed and, according to them, the bank guarantee was obtained from the Bank by plaintiff 2 by mortgaging the immovable property with the Bank.
The plaintiffs further claim that defendant I who was, according to them, charged with the duty to finalise the purchase for the benefit of the Trust by completing the formalities of the sale transaction, tried to advance his personal interest at the expense of the Trust and got the agreement dated 28-8-1976, made out in the name of a fake partnership named `Habib Ocean Industries' and held out that the name of Khurshid Salt Works had been changed to Habib Ocean Industries, Habibur Rehman being the name of plaintiff 2 in order to inspire confidence in plaintiff 2 and other trustees. According to the plaintiffs defendant 1 never disclosed that "this Habib Ocean Industries was of self-styled partnership with totally unconcerned and strange people" and the partners shown by him are no other persons than the members of his family namely his brother- in-law and their sons. According to the plaintiffs defendant 1 explained the reasons for obtaining the agreement in the name of partnership which plaintiff 2 did not accept. Thereafter, a few days later the defendant 1 turned up and produced a letter of retirement/withdrawal from the partnership and assured that the final sale-deed would be obtained in the name of the Trust or in the name of plaintiff 2, who, according to the plaintiffs, is the provider of the funds. It is further claimed that contrary to the above assurances defendant 1 at the time of filing the suit, was trying to bye-pass the interest of the Trust and plaintiff 2, was attempting to raise the claim to the ownership to the Habib Ocean Industries and exclude the Trust and plaintiff 2 to get the sale deed in his own name and in the name of Habib Ocean Industries, defendant 2.
7. It is also claimed in the plaint that plaintiff 2 has contributed practically the entire value of the property either by arranging cash or by securing the bank guarantee by mortgaging his immovable property with the Bank and that payment have been made to defendant I as per schedule attached to the plaint and substantial amounts have been paid out of the accounts of the Works and that the defendant 1 has already recovered a total sum of Rs, 6,71,904 from the plaintiffs 1 and 2 to pay to the seller.
8. On the other hand defendants 1 to 5 and 8 deny the claim of the plaintiffs that the works was purchased for or on behalf of plaintiff 1 and/ or 2. Defendants 1 to 5 claim that a sum of Rs, 1,63,631 was remitted by defendant 8 to defendant 1 in the month of May 1976 and out of this amount a sum of Rs, 1.50,00) was paid to the works and the balance amount was agreed to be paid in 12 equal monthly instalments commencing from March 1977. The defendants 1 to 5 however, admit in paragraph 9(e) of their written statement that the wife of plaintiff 2 deposited certain title deeds of property standing in her name as security and executed a letter of undertaking in favour of Muslim Commercial Bank who furnished the guarantee for the payment of amount of Rs, 6,00,000 to defendants 6 and 7. They however, claim that the documents of title of the property of the wife of plaintiff 2 were released by the Bank and were returned by the defendants to the plaintiffs as according to them substantial repayments were made by defendant 2 to defendants 6 and 7.
9. Learned counsel for the Plaintiffs as well as defendants 1 to 5 both wanted to refer to the oral evidence and to certain documents and in fact they did refer to some of them. But I made it clear to them that it would not be proper to examine the evidence is detail for not only the evidence on behalf of the plaintiffs was not complete but the defendants have yet to examine their witnesses and any observation made thereon is likely to affect the final result of the suit. However, Mr. Liaquat Merchant pointed Exhs. 9, 10 and 11. The first document acknowledges the receipt of Rs, 1,50,000 from Habib Ocean Industries and under the cover second document the original guarantee was returned to the Habib Ocean Industries and the third document Is addressed to Habib Ocean Industries and is dated 30-1-1978 which acknowledges the receipt of original guarantee bend and which states the liability entries have been reversed in the books of the Bank. On the other hand Mr. Ibadat Yar Khan referred to Exh. 15/12 which, it is claimed, shows that a sum of Rs, 1.19,000 was advanced by the Sind Salt Works to Habib Ocean Industries for purchase of the works and which, it is claimed, bears the initial of defendant 1. According to Mr. Ibadat Yar Khan no cross-examination was directed against this receipt. Mr. Ibadat Yar Khan also referred to Exhs. 15/14 to 15/18 which according to Mr. Ibadat Yar Khan same of these show a credit of Rs, 70,000 in favour of the Trust and against Habib Ocean Industries which according to Mr. Ibadat Yar Khan was advanced for purchase of the works. Mr. Liaquat Marchant submits that this amount was a loan to defendants.
10. Although learned counsel have referred to these documents but I am of the view that it would not be proper to express any opinion thereon one way or the other. However, from these documents and the written statement of defendants 1 to 5 two things emerge clearly. The first is that a sum of Rs, 70,000 was received by defendant 1 but the question is whether it was paid by the plaintiff to defendant 1 for the purpose of purchasing the works as claimed by the plaintiffs or as a loan, as claimed by defendants 1 to 5. The other thing which emerges is that the wife of plaintiff 2 had secured the Bank guarantee by mortgaging her property. It is claimed by plaintiff No, 2 that besides the property of his wife the property of the trust was also mortgaged with the Bank. Again I have not to give any finding thereon at this stage. It is claimed that substantial amounts have been paid out of the income of the works and in this connection statements of account filed by defendant 1 have been relied upon by the plaintiffs.
11. Now, I would consider another aspect of the matter and it is this that at the time of filing of the suit plaintiffs had filed two applications, one for injunction inter alia, restraining defendants 6 and 7 from executing any documents of title in favour of defendants 1 to 5 and the other for appointment of a receiver. Both these applications were disposed of by a consent order passed on 5-10-1977.
The relevant parts of the order read as follows :- "(1) Defendants 1 to 5 shall submit fortnightly the statement of accounts of the income and expenditure of the salt works business carried on by defendant 2.
(2) Defendants 1 to 5 undertake not to obtain the title of the property in suit or get the same transferred in their names from defendants 6 and 7 during the pendency of the suit or till further orders of the Court.
(3) Defendants 1 to 5 shall not sell, transfer, mortgage, assign or part with the possession of the property in dispute, except the salt, without the permission of the Court during the pendency of the suit.
(4) Mr. Nasir Aslant Zahid Advocate is appointed as Commissioner to visit the premises of defendant 2 as and when he considers convenient and proper in order to check the business records, income and expenditure of defendant 2, working of the business and whether the same is in accordance with the records maintained by the defendants and to verify the statements submitted by the defendants in the Court from time to time.
(5) The plaintiffs shall be free to post at their own expense their employee or agent outside the gate of defendant No, 2 to keep a watch of the trucks carrying salt which leave the premises or enter into the premises or the persons employed by defendant 2. Otherwise, the plaintiffs or their employee or agent shall not interfere with the business and management of defendant 2.
(6) Defendant 2 and other defendants shall carry out all other obligations as to payment of instalments or any due under the sale agreement between them and defendants 6 and 7.
(7) If the Commissioner needs any assistance from any of the parties including the plaintiffs will be free to do so."
' Pursuant to the above order Mr. Nasir Aslam Zahid, Advocate submitted his first and only report on 14-2-1978. He had inspected the premises of defendant 2 on 30-1-1978 and a part of his report on the state of accounts of defendant 2 read as follows :- "(a) Ledger was maintained from 1-1-1977. Entries were shown to have been made up to 31-12-1977, but even these entries were not complete in all respects.
(b) Journal was maintained from 30-6-77 and the last entry was made on 31-12-1977. Entries were not complete in all respects. (The journal started from page 5),
(c) Cash book was not available in the office. Ledger for the year prior to 1-11-1977 and Journals prior to 30-6-1977 were also not available. No other books of previous year was available.
According to Defendant No. 1 these accounts books and registers were with the part-time accountant Mr. Zaheer who was not present in the office on 13-1-1978 being a Friday. According to Defendant No. 1 the books and registers are with Mr. Zaheer Accountant in connection with income- tax Assessm ent."
' He also stated there was a register of Miscellaneous payments made to the members of the staff of defendant 2. This register was maintained w,e,f, 10-11-1976 and the last entry in this register was made on 9-1-1978. It is further stated that according to the defendant 1 production was started by them in the end of the September 1977 and prior to that date there were stocks of salt lying which were sold by them and production report were in the custody of excise department. He also stated that there was a file containing bills relating to sale of salt from 30-6-1977 to 31-12-1977 and the bills were numbered 101 to 248 and he further stated that prior bills, according to defendant I were with the part-time accountant and that defendant 1 stated that all the records would be completed and would be available for Commissioner's inspection by the end of the January 1978. This report speaks for itself.
12. After this report and also periodical statements of account which were filed by the defendants 1 to 5 the plaintiff filed another application for appointment of receiver (C. M. A. No, 2301/78).
However application could not be heard for several reasons, one of them being that meanwhile evidence of several witnesses of the Plaintiffs was being recorded.
' I may state here that after submitting his report, Mr. Nasir Aslam Zahid had expressed his inability to continue as Commissioner and therefore, by consent of the parties, Mr. S. Nasiruddin Advocate was appointed as Commissioner, who has submitted two reports on 29-10-1 979 and 19-1-1980.
' In the report dated 17-1-1980 submitted by Mr. S. Nasiruddin he has inter alia, stated as follows: "The main items in these statements of expenditure under the heading "Road, Rail, Trolley, Channel and Workshop repairs" were checked by me. There are 17 roads, for of them are Railway tracks.
There is one main road and I found that it was under constructions as stones were being placed at the end to extend further the said road. I did not find any traces of repairs. I am therefore of the opinion that the expenditure on the construction and repairs on roads may be in the region of Rs, 6,000 only during the period 16-10-1977 to 15-11-1979. The expenses shown in the statements for repairs of rail, Trolley, Channel and workshop repairs are very much on the high side and I am of the opinion that these expenses cannot be more than 1/1ith of the amount shown in the statement of expenditure from 16-10-1977 to 15-11-1979. Office Equipment's and miscellaneous expenses are very much exaggerated. I did not find anything in the office which can support the expenses shown in the statements. Miscellaneous expenses are shown for the period from 16-8/31-8-1978 Rs, 26, from 16-9-1978 to 30-9-1978 Rs, 30, from 1-10-1978 to 15-12-1978 Rs,
26. Therefore according to mere taking the average miscellaneous expenses cannot be more than Rs, 27 per fortnight.
(2) Office repairs of Majripur Office shown in these statements are also on very high side and according to my opinion only 1/4th of the amount shown in the statements may have been spent.
The expenditure shown on the quarter constructions Rs, 33,000 is also very much on the high side and this expenditure also cannot be more than 114th thereof.
(3) The statements for the period from 16-10-1977 to 15-11-1979 show an amount of Rs, 78,000 to have been spent on the structure and renovation of the Mosque. It cannot be more than : 45,000 in all.
(4) The expenses shown during this period for Live Stock are Rs, 19,000. The expenses of maintaining these animals are shown under different headings. I found only two bullocks, one cow and one Donkey at the site. The total cost of these animals cannot be more than Rs, 7,000.
(5) The refund of loan of Rs, 18,000/- Rs, Eighteen thousand) has not been explained as a Firm financially sound is not expected to borrow Rs, 18,000.
(6) I found a Chart hanging in the office of the Excise Inspector which showed the production and Sale of Salt per kgs. For the months of July. August, September. October and November which is as under : {{FOOT NOTE}} Month Production KGS Sale of Salt KGS July 2014000 2579650 August Nil 1237320 September 1438000 2975280 October 3783400 2459540 November 2885000 2291345 {{FOOT NOTE}} ' I made enquiries from the Excise Inspector as well as the contesting defendant Mr. Mujibur Rehman as to what arrangements exist for ' avoiding misuse of Excise permits in taking out the trucks loaded with Salt from the Site to the City but I did not receive any satisfactory reply from them.
(7) I have already stated in my previous report dated 24-11-1979 that the partners of Habib Ocean Industries maintain Current Account No, 48 in Habib Bank Ltd., Mauripur Branch, the partners of this firm have not been able to explain as to the withdrawal of Rs, 4,00,000 on 15-10-1979 from this account.
(8) 1 had intimated the parties of my visit to the site for 22nd December 1979 but due to rains I had postponed the visit. I therefore, again intimated the parties that I would visit the site for verification of the remaining work on bund repairs on Thursday the 10th of January 1980 at 2-30 p.m. Mr. Muzammil, Advocate for the plaintiffs with Dr. Alvi one of the plaintiffs started for the site at 2/30 p.m. And reached the site at 3 p.m. Neither Mr. Abdullah Chandio, Advocate for defendant 8 was present there nor Mr. Mujibur Rehman the contesting defendant. One Zardar Khan, Supervisor was present at the site. I was informed by Mr. Zardar Khan that after the raid by the Martial Law Team at the site the sale of salt is being affected against cash payments. The Accountant was not present at the side so I could not find out as to what quantity of salt was sold and how much sale proceeds were received by the Accountant up to 10-1-1980. I asked Zardar Khan, Supervisor to accompany me and others to the bund. I went to the Bund on foot and found that there were green bushes around it. I did not find any signs of repairs around the bund. It is possible that the repairs made by the defendant No, 2 might have been washed away during the rains. The bunds, however, were found to be absolutely intact. I asked the plaintiffs Advocate to supply me with a copy of the plan of the bund which is filed as Annexure CR/1.
(9) I had been given to understand at the site that Mr. Mujibur Rehman of Habib Ocean Industries was convicted on the allegation of evasion of Excise duty etc. By the Military Court.
(10) The Control on production and sale of salt is very important work and since the present arrangement of maintaining the accounts are not satisfactory, it is not possible to say that the Excise permit which is for a single trip for a truck to the city is not being used again and again for passing out truck on the same Excise permit. I would, therefore, suggest for consideration of this Hon'ble Court the appointment of a whole time receiver to supervise the production sale and stocks, income and expenditure and checking of the passage of trucks on valid Excise permits."
' However, the plaintiffs made yet another application C. M. A. No, 1996/ 79) for appointment of receiver on 10-5-1979 wherein they levelled various charges of mis-management and exaggeration of expenses of the business and falsification of accounts by the defendants Nos. 1 to 5.
' Thereafter, came the application for urgent hearing of these two applications which I have already disposed of wherein it is alleged that Martial Law team has raided the salt works and apprehended the defendant 1 and his staff and even the excise inspector with whose collusion and complicity huge stocks of salt were being sold which remained unaccounted for. On 10-1-1980 the plaintiffs had filed an affidavit stating in paragraphs 4 and 5 thereof as follows :-
(4) That apprehension of the plaintiffs proved to be true. The Special Martial Law Teams have apprehended the defendant Mujibur Rahman red handed. He was charged of taking out at least 20 trucks a day while showing sale of only one truck load. In this manner he was avoiding payment of Excise Duty to the tune of Rs, 10,000, (Ten Thousand) per day, what to say of the value of the Salt itself which he was misappropriating for his personal benefit.
(5) That the defendant and the Excise Inspector and dealer/agent who were acting as his accomplices, were tried by Military Court. The defendant Mujibur Rahman has been found guilty and sentenced to a term of imprisonment for one year and a fine of Rs, 90, Lacs which is equivalent to the estimated loss caused to the Government and illegally pocketted by the defendant.
Photostat of relevant news in the newspapers annexed and marked A-1, A-2, A-3, A-4, A-5, A-6 and A-7."
' Having stated the back grounds of these applications, now, I propose to deal with the contention raised before me by the learned counsel for the parties.
' It is submitted by Mr. Ibadat Yar Khan that the reports of the Commissioners viz. : Nasir Aslam Zahid and Mr. S. Nasiruddin and the fact that the defendant 1 has been convicted under Martial Law for avoiding payments of excise duty on the salt sold sufficiently show that the business is not being conducted in an honest manner and if receiver is not appointed, the plaintiffs if succeed, might not be able to recover the properties and profits which might have been and would be misappropriated and the works might be lost to them because of the Martial Law fine of Rs, 90 lakhs and it is therefore necessary that a receiver be appointed to protect the properties of the Works and the prayer is that plaintiff 2 be appointed as receiver.
' On the other hand Mr. Liaquat Merchant stated that the plaintiffs have no prima facie case for title to the property because (1) no payments towards sale consideration were made by them ; (ii) that defendants 1 to 5 are in possession : (iii) the agreement of sale is between defendants 1 to 5 and defendants 6 and 7. He further submitted that it is even otherwise not just and convenient to appoint a receiver of the business of the Works.
With regards to submission that plaintiffs have no prima facie case for title to the property it would suffice to say that the stage of arguing that plaintiffs have no prima facie case was when the order dated 5-10-1977. Appointing the Commissioner was passed, for, if plaintiffs had no prima facie case there was no question of making any concession and agreeing to the appointment of a Commissioner on the terms mentioned in the consent order. At this stage no finding can be given as who purchased the works or who paid the sale consideration.
' As regards the submission that it is not just and convenient to appoint a receiver it is submitted that the property was not being alienated, disposed! Of or wasted. However, the two reports of commissioners, who were appointed by consent of the parties, do show, to put it very mildly, that the accounts are not being maintained satisfactorily and nature of business is such that if defendant 1 or the other defendants are allowed to continue to manage the business of the Works, the Trust in case of success might be deprived of its due profits from the business and its properties. Lastly, the conviction of defendant 1 by the Martial Law Authority and imposition of fine makes it a fit case in which a receiver should be appointed.
' I may mention that it was pointed out by Mr. Liaquat Merchant that the operation of the order of conviction of defendant 1 has been stayed by the High Court in a writ petition filed by him. But the stay would not remove the apprehension of the plaintiffs as to mis-management of the business and falsification of accounts.
' In support of his submission Mr. Liaquat Merchant has cited several cases. These are Smt.
Vaniabai and another v. Republic of Pakistan and 36 others (1) ; V. Krishnaswamy Chetty v. C.
Thangavelu Chetty and others t2) ; Muhammad Siddiq v. Muhammad Yaqoob (3) and M. Ataur Rehman Alvi v. Inamur Rehman (4).
' In the first two cases the application of the principle "just and convenient" was considered. It would suffice to say that what is just and convenient would depend on the facts of each case and on the facts of the case under consideration I find it just and convenient to appoint a receiver. In the third case it was laid down that plaintiffs should have a prima facie title to the properties of which they claim a receiver to be appointed. In the present case the plaintiffs case is that works were agreed to be purchased for and on behalf of the Trust. Further no title deed has been executed as ye because of the order dated 5-10-1977 and the question who paid the none for purchase of the property and for whose benefit the property is purchased are in issue in the suit.
' As regards the last named case the High Court had refused the application for appointment of receiver on the ground that admittedly major portion of the share stood in the name of the person other than the parties to the suit. In the present case both the parties are claiming that they have purchased the property. Therefore, this case is also distinguishable.
' It was lastly submitted by Mr. Liaquat Merchant that the plaintiffs had abandoned the two applications but I have nothing on record to show that the plaintiffs had abandoned the applications. Plaintiffs perhaps did not press the applications because the evidence of for of their witnesses was being recorded and they had thought that the whole suit would be disposed of soon which hope did not materialize. Further the Martial Law case and conviction of defendant 1 therein made them to move this Court for urgent hearing of the receivership applications. In fact in the application for urgent hearing they have mentioned that this case was fixed on 24 dates but the applications were not heard. This grievance of the plaintiffs is not well-founded for on these dates the case was either adjourned by consent of the parties or there were other proceedings in the case and only on 4 or 5 dates the case was not taken up for want of time. It may be mentioned that on the following dates evidence of plaintiff's witnesses was recorded :- "22-2-1978, 1-11-1978, 13-12-78. 6-2-1979, 7-2-1979, 11-2-1979, 13-2-1979, 18-2-1979, 20-2-1979. 21-2- 1979, 25-2-1979, 11-3-1979, 6-2-1980, 9-3-1980 and 10-3-1980."
' For all the aforesaid reasons I grant the applications. However, the {{FOOT NOTE}}
(1) PLD 1970 Kar. 42 (2) AIR 1955 Mad. 430
(3) PLD 1965 K P 584 (4) 1974 SCM R 54 {{FOOT NOTE}} ' questions who should be appointed receiver. Plaintiff 2 has claimed that he may be appointed receiver. However I am of the view the some independent person should be appointed as receiver.
Accordingly. I appoint Official Assignee, Karachi as the receiver. In case he is unable to accept the appointment for any reason, Nazir will be appointed as the receiver.
' Since most of the evidence of the plaintiffs has already been recorded, if the parties agree, the case may be fixed for final hearing at an early date.
' The Court time is already over. The remaining applications will come up for hearing on a date in office.