MUNIB AKHTAR, J. --After hearing learned counsel for the parties, I had, by means of a short order dated 2.10.2009, dismissed the present petition. Following are the detailed reasons for my having done so.
2. The case put forward by Syed Muhammad Abbas Haider, learned counsel for the Petitioner, is that the Petitioner, which is registered charitable trust, is a share-1 holder of the Respondent No. 1 (herein after referred to as the "Respondent Company"). The admitted position is that the Petitioner holds 40% of the total share-holding of the Respondent Company. The Respondent Company is a private limited company, and its other share-holder are the Respondents Nos. 2 to 4 who, amongst themselves, hold the balance 60% of the shares. The Respondent No. 2 is also the Chief Executive of the Respondent Company.
3. By means of a special resolution passed at an extra-ordinary general meeting of the Respondent Company held on 24.1.2006 (herein after "the E.O.G.M."), the Respondent Company has been put in members' voluntary winding up. Lt is this resolution, and the winding up initiated thereby, that the Petitioner assails by means of-the present petition. Learned counsel for the Petitioner states that no proper notice of 21 days was received by the Petitioner of the E.O.G.M The Petitioner only received an intimation by fax on 21.1.2006, a mere four days before the date of the meeting. Learned counsel stated that Since there was a material irregularity in the issuance of the notice, the E. O.G.M, was not validly held. He further submitted that in any case the Petitioner (which did not attend the E.O.G.M) held 40% of the shares, and hence no special resolution could have been validly passed at the meeting in its absence, It was also submitted that the Respondent Company was a solvent entity and a prosperous, going concern which was regularly declaring dividends, and therefore no occasion arose for putting it in liquidation.
Learned counsel referred to para 14 of the counter-affidavit of the Respondent No. 2, wherein it is stated that the induction of M/s. Tan veer Kazmi and Munir Kazmi as trustees of the Petitioner trust, had necessitated the decision by the other Share-holders to put the Respondent Company in members' voluntary winding up. Learned counsel assailed this as an invalid reason for doing so. He also submitted that the Respondent No. 2 had set up the Respondent No. 5 (another private limited company) by a misuse of the funds of the Respondent Company, and that this company's business was in competition with that of the Respondent Company, It was for this mala fide reason, according to the learned counsel, that the Respondent Company was being wound up.
4: In reply, Mr. Asim Mansoor, learned counsel for the Respondents Nos. 2 and 3, raised a preliminary objection as to the maintainability of the petition. According' to learned counsel, the petition had been brought in the name of the Petitioner trust which was not a legal entity. Rather, the petition ought to have been brought in the name of the trustees. On the merits, learned counsel strongly contested the various averments made on behalf of the Petitioner. Learned counsel submitted that the E.O.G.M. Had been validly called for 24.1.2006. In this regard, learned counsel referred to the notice for the meeting, dated 2:1.2006, by which the Share-holders of the Respondent Company had been intimated that an extra-ordinary general meeting of the members was proposed to be held on 24.1.2006 to discuss, and if thought fit, pass the following resolution as a special resolution of the company: "Resolved that the Company be and is hereby wound up voluntarily". Insofar as service of this notice on the Petitioner was- concerned, learned counsel pointed out that the Petitioner had made a complaint to the Securities and Exchange Commission of Pakistan ("S.E.C.P.") regarding the holding of the E.O.G.M. SECP had sought the comments of the Respondent Company and forwarded the same to the Petitioner. The Respondent Company had produced copies of a courier (T.C.S.) receipt dated 2.1.2006 and the postal slip dated 3.1.2006 showing dispatch of the notice to the Petitioner by registered post. These documents were annexed to the petition itself. Learned counsel submitted that in any case, the Petitioner admittedly had knowledge of the holding of the E.O.G.M. At least 4 days prior to the date thereof, but did not attend the meeting. The learned counsel strongly disputed the claim that there had been any misuse of the funds of the Respondent Company by the Respondent No. 2, whether to set up the Respondent No. 5 otherwise, or that the business of the latter respondent was in competition with that of the Respondent Company. Mr. Saalim Salam Ansari, alongwith Mr. Mukhtiar Ahmed Kuber, Learned counsels for the Respondent No. 4, adopted the submissions of Mr. Asim Mansoor.
5. Exercising his right of reply, learned counsel for the Petitioner stated that the petition was maintainable. He pointed out that the shares were registered in the name of the Petitioner trust in the record of the Respondent Company. Replying on Muhammad Sohail Butt v. Capital Insurance Company Ltd, and another 2007 CLD 1484, a decision of the Lahore High Court, learned counsel submitted that a trust was a person that could be a shareholder of a company, and hence the petition was maintainable as filed.
6. Insofar as the preliminary objection is concerned, in my view, it must fail. There are two reasons for this. Firstly, the share-holder of record of the Respondent Company is admittedly the trust. The shares are registered in its name, In the context of winding up proceedings, shareholders are "contributories" and there, it is the Petitioner trust which is the "contributory" in the present instance.
Secondly, nothing substantive really turns on this rather technical objection. All that would be required to remedy the irregularity (even if it be such) would be the filing of an amended title, and that,-in the present context, is only a procedural . Mater and nothing more. The preliminary objection is therefore overruled.
7. I turn now to examine the matter on the merits. A company can be wound up in different ways, the one most familiar (at least to lawyers) being a winding up ordered by the Court under Section 305 of the Companies Ordinance, 1984 (herein after the "1984 Ordinance"). A company can also be wound up voluntarily, either by its members or its creditors. The circumstances in which the members can themselves put their company into liquidation are specified in Section 385. I will presently examine the relevant provisions of this section in some detail. For now, it suffices to note that a members' voluntary winding up requires the passing of a special resolution. Since the Petitioner's case is that the E.O.G.M. At which the relevant resolution was passed was invalid (by reason of a failure to notify the Petitioner in accordance with law), and that such a resolution could not have in any case been passed in the absence of the Petitioner (by reason of its share-holding), it is necessary first to examine what a special resolution is and how it is passed.
8. A special resolution is defined in Section 2(36) as follows':--- "'special resolution' means a resolution which has been passed by a majority of not less than three- fourths of such members entitled to vote as are present in person or by proxy at a general meeting of which not less than twenty-one days notice specifying the intention to propose .The resolution as a special resolution has been duly given; Provided that, if all the members entitled to attend and vote at any such meeting so agree, a resolution at a meeting of which less then twenty-one days notice has been given."
The proviso is not relevant for present purposes. Insofar as the notice for the meeting is concerned, two points emerge from the definition. Firstly, the notice must specify that the resolution to be tabled before the members is to be passed as a special resolution. This requirement is met in the present case. As noted above, the notice dated 2.1.2009 clearly specified that the proposed resolution was intended to be passed (if approved by the required majority) as a special- resolution. Secondly, at least 21 days' notice must be given to the members. The manner in which a notice is to be served on a company's members is specified in Section 50, which in material part states as follows:- "50. Service of notice on members, etc - (1) A notice may be given by a company to any member either personally or by sending it by post to him to his registered address or, if he has no registered address in Pakistan, to the address, if any^ within Pakistan supplied by him to the company for the giving of notices to him.
(2) Where a notice is sent by post, service of the notice shall be deemed to be effected by properly addressing- prepaying and posting a letter contained the notice and, unless the contrary is proved, to have been effected at the time at which the letter would be delivered in the ordinary course of post.... "
In the present case, it appears that notice was in fact duly sent to the Respondent Company, both the registered post and by courier service. This is apparent from the record produced before the S.E.C.P. By the Respondent Company, as noted above. The presumption in sub-section (2) would therefore come into effect. Nothing has been produced on the record to rebut the material produced by the Respondent Company showing that notice was sent to the Petitioner, In my view therefore, the Petitioner was duly notified and served by the Respondent Company in respect of the holding of the E.O.G.M.
9. There is another aspect of the matter. Section 160A of the 1984 Ordinance (which was added in 2002, replacing an identical remedy earlier to be found in Section 161(8)) provides that members of a company holding not less than 10% of its shareholding can petition the Court within 30 days of the holding of a general meeting, seeking to have the meeting declared invalid on the ground, inter alia, of any material defect or omission in the issuance of the notice for that meeting. The Petitioner, holding 40% of the Respondent Company's shares, could have filed such a petition on the ground that it had not been properly served with a notice of the E.O.G.M., if that were indeed the case.
Furthermore, the Petitioner could have done so within 30 days of the E.O.G.M. Since, on its own showing, it was aware of the proposed meeting at least 4 days prior to the date of the meeting. No such remedy or relief was sought from the Court. Having failed to avail the specific statutory remedy provided in the 1984 Ordinance, it is now not open to the Petitioner to-raise the issue in this manner.
10. The next question that needs to be examined with reference to a special resolution is as to how such a resolution is passed, since the Petitioner claims that no such resolution could have been passed in its absence. A special resolution must be passed "by a majority of not less than three- fourths of such members entitled to vote as are present in person or by proxy" at the meeting concerned. As the highlighted words making clear, the resolution is not, as the Petitioner misapprehends, to be passed by three- quarters of the total shareholders of the company. The required percentage (75%) is to be considered on the basis of the members actually present at the meeting. A shareholder holding (or more than one Share-holders who together hold) more than 25% of a company's shares can always block a special resolution, provided that he or they show up . At the meeting and vote against the resolution. However, such share-holder(s) chose to. Stay away, they do so at their own peril, since if more than three-quarters of the members .
Actually present at the meeting vote in favour of the resolution it will be passed as a special resolution. To take a somewhat extreme example: if a company has 1,000 ordinary shares held by 100 members, but at the relevant meeting only 4 Share-holders, together holding 250 shares, show up, and three of the Share-holders vote in favour of the resolution with one opposed, the resolution will pass as a special resolution (see Gower's Principles of Company Law, 5th Edition (1992), pg. 519, from which, this example is adapted). Mere absence therefore, is not enough. If a shareholder (or Share-holders) have or control more than 25% of the shares of a company, and thus have a veto power over special resolutions, they must actually exercise this power for it to be effectual.
11. In the present case, the Petitioner chose to stay away from the E.O.G.M., even though it admittedly had (at the very least) four days' advance knowledge of the meeting, and could have easily attended it. Had it attended the meeting, and voted against the proposed special resolution, it would have been defeated. The Petitioner however, remained absent. The record shows that the remaining three members of the Respondent Company (holding the balance 60% shares) did attend the meeting. There was thus a valid quorum at the meeting (see Section 160(2)(b) of the 1984 Ordinance,' and Article 23 of the Respondent Company's Articles of Association). The members present unanimously passed the proposed special resolution, In my view, the special resolution was validly passed as such, and was complaint with the requirements of Section 2(36). I may clarify that (quorum requirements apart), the actual share-holding of the members present was not the decisive factor; as explained above, the question was only whether more than three- quarters of the members present had voted in favour of the resolution. Since all the members actually present voted in its favour, this requirement was met, and the tabled resolution was passed in accordance with law a$ a special resolution.
12. (n my view therefore, both, in law and on the facts as available from the record, the Petitioner had notice of the E.O.G.M., and its absence from the meeting on 24.1.2009 did not prevent the proposed resolution from being passed as a special resolution of the members voluntarily winding up the Respondent Company.
13. I now turn to examine Section 358. This provides in material part as follows:- "358. Circumstances in which company may be wound up voluntarily.-- A company may be wound up voluntarily:-
(a) when the period (if any) fixed for the duration on the company by the articles expires, on the event (if any) occurs, on the occurrence of which the articles provide the he company is to be dissolved and the company in general meeting has passed a resolution requiring the company to be wound up voluntarily;
(b) if the company resolves by special resolution that the company be wound up voluntarily; "
As is clear from the foregoing, a company can be put in voluntary liquidation if either clause (a) or clause (b) apply. Clause (a) is not relevant for present purposes, though it may be noted in passing that it only requires an ordinary resolution. Clause (b), which is relevant, requires only that a special resolution be passed that the company be wound up. As noted above, in my view, a proper special resolution was passed at the E.O.G.M. Lt follows that the requirements of clause (b) were fulfilled in the present case.
14. Lt has long been settled by English decisions that the right of the Share-holders of a company to pass a special resolution to voluntarily wind it up is a matter of the internal management of the company, and will not lightly be interfered in by the Court by means of an injunction or otherwise: see British Water Gas Syndicate v. Notts Deby Water Gas Co. Ltd. (1889) 6 TLR 44 and Ellis V: Dadson (1891) 7 TLR 318. In the latter case, it was observed that it would "require a very strong case indeed to justify" intervention by the Court, In my view, these principles correctly reflect the proper interpretation of Section 358. The reason put forward by the Petitioner to assail the special resolution passed in the E.O.G.M. Do not come up to the required standard. The Petitioner has alleged that the Respondent No. 2 (the Chief Executive) has set up the Respondent No. 5 from funds belonging to the Respondent Company, and that this company is in competition with the latter. No material has however, been produced in support of this allegation. The law is well-settled that a bare allegation will not suffice. Corroboratory material is required, the quality and nature of which depends on the facts and circumstances of each case, It is true that Section 203 of the 1984 Ordinance places a bar on the Chief Executive of a public company from engaging in a business that is. The same as or directly competitive with the business of the company of which he is the Chief Executive. However, in the present case, the Respondent Company is a private, and not a public, company and even otherwise, nothing has been shown to establish that the Respondent No. 5's business is in competition with that of-the Respondent Company. The fact that the Respondent Company is a going concern earning good profits is no ground at all for assailing a resolution under Section 358. Finally, the reference to the contents of para 14 of the Respondent No. 2's counter- affidavit is also insufficient. As noted above, the passing of special resolution is an internal matter for the Share-holders to decided amongst themselves. The Petitioner could easily have blocked the special resolution had it chosen to attend the E.O.G.M. Lt chose to stay away, and must now live with the consequences of its own inaction.
15. Finally, I consider the actual provision under which the petition has been presented, namely, Section 391 of the'1984 Ordinance. This provision is to be found in a set . Of section (Ss. 383-395) titled "Provisions Applicable to Every Voluntary Winding Up/" For present purposes, it is sufficient to examine only sub-section (1) of Section 391, which states as follows:- "391. Power to apply to Court to have questions determined or powers exercised - (1) The liquidator or any contributory or creditor may apply to the Court:-
(a) to determine any question arising in the winding up of a company; or
(b) to exercise as respects the enforcing of calls, the staying of proceedings or any other matter, all or any of the powers which the Court might exercise if the company were being wound up by the 1 Court."
As is dear from the foregoing provision, Section 391 deals with a situation arising during or within the course of a voluntary winding up, and enables the liquidator, or any contributory or creditor, to apply to the Court for any necessary determination in this regard. Section 391 certainly does not relate to the question of whether the company ought to have been voluntarily wound up at all. That is a question beyond the scope and purview of this section. Therefore, in my view, the petition, as filed, was misconceived.
16. For all of the foregoing reasons, I had made the short order dismissing the petition. There is no order as to costs.