ORDER SYED HASAN AZHAR RIZVI, J.---By this order I intend to dispose of the above mentioned three applications listed at Serials Nos.1 to 3, which have been filed in this suit by the plaintiffs.
2. C.M.A. No.2797 of 2011 under Order XXXIX Rules 1 and 2, C.P.C. At Serial No.1 is for grant of interim injunction seeking suspension of operation of the Agenda No.7 of Special Business, as contained the Notice of 65th Annual General Meeting of defendant No.1, whereby funds from the share premium account are being utilized to extend bonus shares and further restraining the defendants, their officers and agents from taking any further action in pursuance to the said Agenda No.7 of Special Business and from acting upon any bonus shares so approved or issued till disposal of the suit; C.M.A. No.2798 of 2011 at Serial No.2, under section 151, C.P.C., seeking suspension the operation of Agenda No.3 of Ordinary Business, as contained in the Notice of 65th Annual General meeting of defendant No.1 whereby cash dividend @ 20% is being paid till disposal of Suit No.778 of 2007, and C.M.A. No.2799 of 2011 at Serial No.3, under section 151, C.P.C. With the prayer to restrain the defendants, their officers, agents and ci lies from issuing any rights shares, bonus or any, other shareholding or from declaring any dividends in respect of the authorized capital sought to be raised through the impugned notice to the defendants or any other persons except the plaintiffs Nos.1 to 6 till disposal of the suit.
3. This suit for cancellation, declaration and permanent injunction has been filed by plaintiffs against the defendants. The plaintiff No.1 filed this suit in his personal capacity, as the director of plaintiff No.6 and on behalf of plaintiffs Nos.2 to 5 as their duly constituted attorney. Plaintiffs Nos. 7 and 8 are claiming to be the members of public at large and the plaintiff No.9 being the account holder of the defendant No. 1.
4. It is the case of the plaintiffs that at the relevant times the plaintiffs Nos.1 to 6 held about 16% share of the total shareholding of the defendant No.1. It is averred in the plaint that the defendant No.1 malafidely and without jurisdiction attempted to sell the above shares of the plaintiffs in response to which the said plaintiffs filed Suit No.790 of 2004, wherein an application for interim injunction and some other applications are still pending. It is also averred that the defendants No.2 to 14 hatched a conspiracy to acquire the defendant No.1 as a result of which they in collusion with the Government functionaries illegally sold the shares of the plaintiffs Nos.1 to 6 during the pendency of Suit No.790 of 2004 and the application for injunction is also pending therein. The said defendants illegally borrowed funds from other Financial Institutions and utilized the same to acquire 325 millions shares of defendant No.1, which is in violation of the Prudential Regulations. The plaintiffs have challenged the above illegalities on the part of the defendants in Suit No.778 of 2007 in which vide order dated 4-7-2008 parties were directed to maintain status quo and the present defendants No.2 to 14 were restrained from trading the shares claimed by the plaintiffs, that suit is still pending.
5. It is further averred in the plaint that defendants have issued a notice of the 65th Annual General Meeting published in the Business Recorder dated 23-2-2011, which was scheduled to take place on 16-3-2011 at 11-00 a.m., the agenda listed at Serial No.7 under the heading of Special Business, reads as under:- "To consider and approve issuance of bonus shares by utilizing share premium account @ 10% i.e. One share for every ten shares as recommended by the Board of Directors of the Bank for the year ended 31-12-2010."
6. It is also averred that Agenda No.3 falling under Ordinary Business in the impugned notice of the 65th Annual General Meeting seeking approval of cash dividends at 20% in addition to interim dividends at 20% already paid for the year 2010 is a classic case of fraud and further siphoning of and embezzlement of funds aimed at fundamentally weakening the defendant No.1. The defendants Nos.2 to 14 laid a mala fide strategy to purchase free shares, but on top of that will acquire/acquired cash dividends and interim dividends, which action is fraudulent and in violation of law and procedures, so also good governance. It is urged that the entire design on the part of the defendants in this regard is to raise authorized share capital and then issue the same to themselves or to their cronies, which also dilute the shareholding of the plaintiffs Nos.1 to 6 in the defendant No.1 and cause grave loss to the public.
7. In response to the notice issued to the defendants, the defendant No.1 caused their appearance through its counsel and filed written statement as well as counter-affidavits to the above noted listed applications. The defendant No.1 vehemently denied the contents of listed applications and affidavits filed in support thereof being misconceived, false, baseless, inconsistent with and contrary to the averments of the defendant No.1, having no substances and truth. At the outset the defendant No.1 raised the following preliminary objections:--
(a) None of the plaintiffs has any locus standi or cause of action to file the title suit. None of the plaintiffs is a shareholder of the defendant-bank and as such can have no concern with nor raise any grievance with respect to the affairs of the defendant-bank which are being run in accordance with the law. The position admitted in paragraphs 2 and 3 of the plaint is that plaintiffs No.1 to 6 had held certain shares of the defendant-bank in the past which were pledged with the defendant- bank as security for the liabilities of plaintiff No.6. Not all of the shares held by the plaintiffs were reflected in the defendant's bank shareholders' register and their ownership remains subject to determination. Through a notice dated 23-6-2004 the defendant bank had proposed to sell the shareholding of the plaintiffs. The said plaintiffs filed Suit No.790 of 2004 before this Hon'ble Court along with an application for an interim restraining order against the sale of the shares of plaintiffs.
However, no restraining order as prayed for was granted and consequently sale of the shares of the defendant bank held by plaintiffs was duly made on 23-7-2004 to Messrs Askari Commercial Bank Limited with the approval of the State Bank of Pakistan. The fact of that sale was duly recorded by the share Registrar and was also reflected in, the relevant Central Depository Company account.
(b) The plaintiffs Nos.7 and 8 admit to not being shareholders of the defendant bank and claim to have filed the titled suit as members of the public at large. It is submitted that members of the public at large have no standing to file the titled suit before this Hon'ble Court.
(c) That plaintiff No.9 claims to have filed the title suit as an account holder of the defendant bank.
Account holders have no standing to urge the so-called grievance made in the titled suit with respect to the share premium account maintained by the defendant bank."
8. It is stated that the shares previously held by the plaintiffs having been sold and the said sale having been reflected in the relevant CDC Accounts, there is no possibility of any reversion of the shares previously held by plaintiffs Nos.1 to 6, as such the plaintiffs cannot maintain the titled suit, or urge any grievance available to the shareholders of the defendant bank. It is also stated that several issues of bonus and right shares have taken place since July, 2004, including the one approved by the shareholders of the defendant No.1 in the 65th Annual General Meeting held on 16- 3-2011, are made to existing shareholders in the' same ratio as their present shareholding.
Therefore, the proposed issue of bonus shares will not cause any -change in the relative holding of the various shareholders of the defendant No.1 bank and the so-called grievance raised in the plaint that the proposed issue of bonus shares would cause a dilution in the shareholding of the plaintiffs Nos.1 to 6 is an assertion that is meaningless as a matter of law and logic. In any case the said plaintiffs are not shaieholders of the defendant No.1 bank. It is further urged that plaintiff No.1 has not been authorized by plaintiffs Nos.2 to 5, 7 and 8 to file the titled suit as the Special Power of Attorney relied upon by plaintiff No.1 on the basis of his authority to file the titled suit were executed in April, 2007 for the purpose of the suit that was proposed to be filed at that time, so also the resolution of the Board of Directors of plaintiff No.6 dated 5-5-2007 was passed earlier for the purpose of filing Suit No.778 of 2007. As such, the plaintiff No.1 has not been authorized by plaintiff No.6 to institute the titled suit. It is further averred that the shares held by the plaintiffs were pledged with the defendant No.1 as security for the various liabilities of plaintiff No.6. The number of shares claimed by the plaintiffs is denied, being subject to determination. It is also averred that plaintiff No.6 admittedly committed default and accepted its liability through a consent decree dated 29-8-2002 passed in Suits Nos.B-14 and B-32 of 2002. The plaintiff No.6 despite consent decree committed default in the discharge of its obligations forcing the defendant No.1 to exercise its rights as pledgee. It is stated that the defendant No.1 through a public notice published in the national press dated 23-6-2004 invited bids for the sale of 16,376,106 shares of ABL pledged by plaintiffs Nos.1 to 6. It is also stated that in order to defeat the sale of pledged shares, the plaintiffs Nos.1, 2 and 6 filed Suit No.790 of 2004 seeking an injunction against the proposed sale, but they have not succeeded any interim order and the sale of pledged shares was duly made. It is stated that after completion of the said sale of ABL's shares the plaintiffs ceased to be the shareholders of the defendant No.1 and now they cannot raise any grievance available to the shareholders of defendant No.1. It is also denied that any shares owned by plaintiffs Nos.1 to 6 were sold illegally by the defendants nor any illegality was committed with respect to the acquisition of 325 million shares of defendant No.1 or any violation of any of the Prudential Regulations was made.
9. It is denied by the defendant No.1 bank that the notice issued for the 65th Annual General Meeting of the defendant No.1 suffered from any lack of jurisdiction, mala fides or illegality. The AGM of the defendant No.1 took place on 16-3-2011 wherein Agenda Item at Serial No.7 under the heading "Special Business" was duly approved by the shareholders/members of the defendant No.1 and all premium above the face value received by the defendant No.1 on its issue of shares has been duly credited to the share premium account in accordance with section 83 of the Companies Ordinance, 1984. It is also averred that the plaintiffs have deliberately misstated the scope and intent of section 83 of the Ordinance and submitted that section 83(2)(d) expressly allows the issue of bonus shares against adjustments to the share premium account without confirmation by the Court under sections 96 and 97 of the Ordinance of 1984.
10. It is further denied that the proposal for the issuance of bonus shares was illegally recommended by the Board of Directors of the defendant No.1 or that it was put up before the 65th AGM on the basis of mala fides or without any required sanction of the Hon'ble Lahore High Court. It is submitted that no sanction of the Court is required for the issuance of bonus shares against funds available in the share premium account. It is also denied that the utilization of funds in the share premium account maintained by the defendant No.1 is subject to the settlement of any claims on the part of the plaintiffs. The issuance of bonus shares against funds in the share premium account is a routine matter and such issues are made from time to time in order to equally benefit all existing shareholders and that the issuance of bonus shares as approved in the 65th AGM of defendant No.1 is hit by the status quo order dated 4-7-2008 granted in Suit No.778 of 2007. It is also denied that defendants Nos.2 to 14 borrowed any funds from the financial institutions in violation of the Prudential Regulations to purchase the shares of defendant No.1.
11. It is also denied that any show cause-notice was required to be issued to the plaintiffs prior to the proposed issuance of bonus shares. It is denied that any cause of action against the defendants and in favour of the plaintiffs has arisen or that any cause of action continues as the registered office of the defendant No.1 is situated at Lahore and the 65th AGM was also held at Lahore, so also the other defendants arrayed in the titled suit are residents of Lahore, therefore, this Court lacks territorial jurisdiction.
12. Affidavits-in-Rejoinder have been filed by the plaintiffs reiterating the facts as stated in the plaint and the affidavits in support of their respective applications and have denied the objections and pleas raised in the counter-affidavits.
13. I have heard Dr. Muhammad Farogh Naseem learned counsel for the plaintiffs and Mr. Salman Akram Raja learned counsel for the defendant No.1 in support of their respective contentions as raised in the interlocutory applications.
14. Dr. Muhammad Farogh Naseem learned counsel for the plaintiffs in support of their applications has argued that the plaintiffs. Nos.1 to 6 held 16% of the total shareholding of the defendant No.1 at the relevant time, but the defendant No.1 malafidely and illegally attempted to sell the said shares of the plaintiffs for which the said plaintiffs filed Suit No.790 of 2004 along with application for interim injunction which is still pending. He contended that the defendants Nos.2 to 14 hatched a conspiracy to acquire the defendant No.1 as a result of which they in collusion with the Government functionaries illegally sotd the shares of the plaintiffs Nos.1 to 6 during the pendency of Suit No.790. Of 2004 when application for injunction is also pending therein and the said defendants i11 ally borrowed the funds from other Financial Institutions and utilized the same to acquire 325 millions shares of defendant No.1, which is in violation of the Prudential Regulations. He contended that the plaintiffs have challenged the above illegalities on the part of the defendants in Suit No.778 of 2007 in which vide order dated 4-7-2008 parties were directed to maintain status quo and the present defendants Nos.2 to 14 were restrained from trading the shares claimed by the plaintiffs, that suit is still pending.
15. Learned counsel for the plaintiffs after narrating the brief history of the litigation pending between the plaintiffs No.1 to 6 and defendant No.1 has argued that the plaintiffs came to know recently about the issuance of illegal and mala fide notice of the 65th Annual General Meeting published in the Business Recorder dated 23-2-2011 by the defendants, which is scheduled to be held on 16-3-2011 at 11-00 a.m. To consider the agenda mentioned in the notice. He contended that the plaintiffs being aggrieved with the item at Serial No.3 under the heading of Ordinary Business and item at Serial No.7 under the heading of Special Business, which reads as under:-- "(3) To consider and approve Cash Dividend @ 20% (i.e. Rs.2 per share) as recommended by the Board of Directors in addition to. Interim Dividend of 20% already paid for the year 2010."
"(7) To consider and approve issuance of Bonus Shares by utilizing Share Premium Account @ 10% i.e. 1 share for every 10 shares as recommended by the Board of Directors of the Bank for the year ended 31-12-2010."
16. In the above context learned counsel for the plaintiffs has made reference to section 83 of the Companies Ordinance, 1984, which provides that "where a company issues shares at a premium, whether in cash or otherwise, a sum equal to the aggregate amount or the value of the premiums on those shares shall be transferred to an account, to be called 'the Share Premium account'; and the provisions of this Ordinance relating to the reduction of the share capital of a company shall, except as provided in this section, apply as if the share premium account were paid-up capital of the company." He contended that in the present case the per value of share was Rs.10 whereas the sale price of the share was Rs.43.69 per share, which means that the difference between the share price at par and the selling price of the said share was Rs.33.69 per share. As such, for 325 million shares an amount of Rs.10,949,250,000 was to be credited to the share premium account as per the mandate of section 83 of the Ordinance. He further contended that section 83 does not permit issuance of bonus shares by way of dividend to existing shareholders against the balance in the share premium account without the sanction of the High Court in terms of sections 96 and 97 of the Ordinance, 1984. He also contended that some scheme for the issuance of bonus shares is required other than the proposal placed before the shareholders of the company for their approval. He also challenged the vires of section 83(2)(d) of the Ordinance of 1984.
17. Learned counsel has taken me to section 24 of the Banking Companies Ordinance, 1962, which provides restriction on loans and advances. For convenience sake, section 24 is reproduce below:- "24. Restriction on loans and advances.--
(1) No banking company shall,---
(a) make any loans or advances against the security of its on shares; or
(b) grant unsecured loans or advances to, or-make loans and advances on the guarantee of, --
(i) any of its directors;
(ii) any of the family members or any of its directors; (i.e) any firm or private company in which the banking company or any of the persons referred to in sub-clause (i) or sub-clause (ii) is interest as director, proprietor or partner; or
(iv) any public limited company in which the banking company or any of the persons as aforesaid is substantially interested.
(2) No banking company shall make loans or advances to any of its directors or to individuals, firms or companies in which it or any of its directors is interested as partner, director or guarantor as the case may be, without the approval of the majority of the directors of that banking company, excluding the director concerned."
18. Dr. Muhammad Farogh Naseem, Advocate for the plaintiffs contended that any contract which is against the law is void. He has made reference to section 23 of the Contract Act, which provides that every agreement of which the object or consideration is unlawful is void and that the consideration or object of an agreement is lawful unless, inter alia, it is of such nature that, if permitted, it would defeat the provision of any law or the Court regards it as opposed to public policy. Learned counsel in support of his above submissions has placed reliance upon the following cases:-- 1998 SCMR1921, 1991 CLC 1591 PLD 2001 Karachi 264, 2001 MLD 1351, 1995 MLD 1714
19. Learned counsel for the plaintiffs further contended that though the meeting was convened and agenda, which illegally recommended by the Board of Directors, was approved is illegal, mala fide and without the permission of the High Court. He submitted that it is the elementary principle of Companies Law that the all pending dues are to be first settled or liquidated before any scheme of utilization from the share premium account could be sanctioned.
He, therefore, argued that the action taken on the part of the defendants is also illegal as it hit by the order of status quo dated 4-7-2008 granted in Suit No.778 of 2007. He submitted that the entire arrangement whereby the defendants Nos.2 to 14 and their cronies are attempted to benefit from the above illegal device can be appreciated from the following:--
(a) the said defendants Nos.2 to 14 borrowed huge funds from the financial institutions in violation of the Prudential Regulations to purchase shares of the defendant No.1;
(b) shares of the plaintiffs were illegally brought under jeopardy;
(c) if the amount taken from the share premium account is utilized to accord bonus shares to the defendants Nos.2 to 14, this will amount to further augmenting illegality, falling nothing short of a day time dacoity, in that the whole premium on the shares are being given back to the purchasers of these shares, completing hoodwinking the depositors, the people at large so also the plaintiffs. Thus, the said defendants will have virtually acquired the bank by paying nothing or literally just peanuts.
20 Learned counsel for the plaintiffs next contended that the sale of 16.376 millions shares made to Askari Commercial Bank Limited on 2-7-2004 be considered prima facie unlawful and on this basis plaintiff No.2 be treated as a deemed shareholder of defendant No.1 and if bonus shares are to be issued they be issued only to plaintiff No.2 and the Fateh Group. He also contended that until the matter pertaining to the sale of the aforesaid 16.376 million shares is decided defendant No.1 be restrained from issuing bonus shares to its existing shareholders.
21. Dr. Farogh Naseem in response to the objection taken by the defendant No.1 in the counter- affidavits with regard to the locus standi of the plaintiffs, he has placed reliance on the case of LADLI PRASAD JAISWAL V. THE KARNAL DISTILLERY CO. LTD. (PLD 1965 SC 221), wherein it has been held that rights of parties must be adjudged according to the legal position prevailing at time of institution of petition for winding up and not on basis of changes introduced pendente lite unilaterally by other shareholders without consent of shareholder who had instituted proceedings for winding up. He also made reference to the case of BROTHERS STEEL LTD. AND OTHERS V. MIAN MIRAJUDDIN AND OTHERS (PLD 1995 SC 320),
22. On the other hand, Mr. Salman Akram Raja learned counsel for the defendant No.1 has argued that no cause of action has arisen to the plaintiffs at Karachi as the registered office of the defendant No.1 is at Lahore and the impugned resolutions were passed at Lahore in the 65th Annual General Meeting. He urged that the suit has been filed on the basis of Special Power of Attorney executed in April, 2007, which has already been filed in Suit No.778 of 2007 before this Court.
He also urged that members of the general public and depositors have no locus standi to file the titled suit. He further urged that the management of defendant No.1 has been transferred in July, 2004 when the defendant No.1 was privatized. He contended that since seven years dividends was paid, without objection and now for the first time the plaintiffs have objected the same malafidely with ulterior motives and they have succeeded to obtain interim ex parte order dated 16-3-2011 by partial reading of section 83 of the Companies Ordinance, 1984. He submitted that at the time of obtaining the interim order the attention of the Court was not drawn to section 83(2)(d) of the Ordinance which expressly allows the issue of bonus shares against the balance available in the share premium account. He submitted that entire section 83(2) takes effect notwithstanding anything contained in section 83(1) and therefore sanction of this Court in terms of sections 96 and 97 is not required prior to the issuance of bonus shares in terms of section 83(2)(d). He made reference to section 78(2) of the Indian Companies Act, 1956 and stated that section 83(2) of the Ordinance of 1984 is para materia to the said Section. He submitted that language of section 83(2) of the Ordinance is. Sufficient to reject the contention that any sanction under sections 96 and 97 of the Companies Ordinance is requited to issue of bonus shares.
23. In support of above contentions he has placed reliance on the judgment of Andra Pradesh High Court in the case of HYDERABAD INDUSTRIES LTD. Reported as 2005 Company Cases (123) 458, which clearly indicates that no sanction of the Court is required prior to the issuance of bonus shares against the balance available in the share/securities premium account. He also made reference to the treatise on Company Law by C.R. Datta (Sixth Edition at page 1705) wherein the provisions of section 78(2) (para material to section 83(2) of the Ordinance of 1984) are described as an exception to the provisions of section 78(1). Be also invited attention of the Court to section 610(3) of the UK Companies Act of 2006, whereby the issue of bonus shares against the share premium account to all existing shareholders of a company is allowed without any prior sanction by the Court. He, therefore, argued that there is nothing in section 83(2)(d) of the Company Ordinance of 1984 prohibiting the issue of bonus shares to persons who had earlier acquired shares at a premium and also there is no requirement for any specific plan of issue other than fulfilment of the requirements of the Ordinance of 1984. He urged that it is settled law that the Court is not to and words to the clear text of a statutory provision. In this regard, he placed reliance on the cases of MUHAMMAD ABDULLAH YOUSUF AND OTHERS V. MISS NADIA AYUB AND OTHERS (PLD 2005 SC 252) AND STATE OF GUJARAT AND OTHERS V. DILIPBHAI NATHJIBHAI PATEL AND ANOTHER (AIR 1998 SC 1429).
24. With regard to the arguments of learned counsel for the plaintiffs in respect to the vires of section 83(2)(d) of the Ordinance of 1984, learned counsel for the defendant No.1 has contended that section 83(2)(d) presumably on the touchstone of Article 24 of the Constitution is patently without any substance and is based on complete misconception as regards the nature of bonus shares issued against the balance share premium account. The issue of bonus shares in the same proportion as the shares already held by the shareholders of a company leaves the relative entitlement of each shareholder to the assets of the company unchanged. As regard the assets of the company these also remain unchanged and there is simply a transfer from the share premium account to the capital account in the books of the company. In that regard he has made reference to the judgement of the Court of Appeal of the United Kingdom reported as EIC SERVICES V. STEPHEN PHIPPS (2004 EWCA Civ 1096). He, therefore, contended that it is clear that an issue of bonus share does not deprive any person of his property whatsoever. Hence, no question of deprivation of property in violation of Article 24 of the Constitution. He submitted that no interim order is to be made that in effect suspends the operation of the challenged statutory provision. He placed reliance on the case of FEDERATION OF PAKISTAN V. AITZAZ AHSAN. AND ANOTHER (PLD 1989 SC 61), wherein it has been held that until a law is finally held to be ultra vires for any reason it should have its normal operation.
25. Learned counsel next contended that the question of legality or otherwise of the sale of 16.376 million shares in July, 2004 is already sub judice in Suit No.790 of 2004 wherein the plaintiffs have sought the restraining order but the same was not granted. He submitted that plaintiffs having failed to obtain restraining order against the sale of shares in July, 2004 are now attempting to obtain an order against the consequences of the said sale. He submitted that this Court has already taken a prima facie view that the sale of 16.376 million shares to Askari Commercial Bank suffers from no obvious illegality. He vehemently contended that the plaintiffs have not made any attempt for the last seven years to proceed with Suit No.790 of 2004, which is clear from the record that no single witness has been allowed to languish with continuous adjournments. He, therefore, argued that it is clear that the grievance urged therein is nothing but to frustrate the course of justice by putting pressure on defendant No.1 through frivolous litigation from time to time. He also submitted that the reliance made by the plaintiffs in Suit No.790 of 2004 on section 24 of the Banking Companies Ordinance, 1962 is entirely misconceived as finance facilities granted to Fateh Textile Mills were secured against assets other than the shares of defendant No.1 and on account of default on the part of Fateh Textile Mills recovery suit was filed by defendant No.1 in which a consent decree was passed by this Court on 29-8-2002. He submitted that Execution No.69 of 2004 is pending before this Court for recovery of an amount of approximately Rs.250 crores is sought as due and payable by Fateh Textile Mills and its directors/ guarantors. He further submitted that the shares sold by defendant No.1 in July, 2004 were an additional security provided to defendant No.1 and not the security against which loans was originally made. He, therefore, contended that section 24 of the Banking Companies Ordinance, 1962 has no application to the pledge of aforesaid 16.376 millions shares. He contended that the Court has always declined equitable relief to any person seeking to take advantage of his on illegality. In this regard he placed reliance on the cases of JHARIA COAL-FIELD ELECTRIC SUPPLY CO LTD. V. KALURAM AGARWALA (AIR 1951 PATNA 463) AND MUHAMMAD JAMEEL AND OTHERS V. KARAM KHAN AND OTHERS (2002 YLR 1680).
26. Learned counsel has argued that assuming this Court has to come to the final conclusion in Suit No.790 of 2004 that the sale of 16.376 million shares made in July, 2004 was unlawful this Court will not order reversal of this said sale and only monetary compensation will be allowed, if at all, to the plaintiff. He has drawn attention of the Court to section 11 of the Central Depositories Act, 1997, which clearly states that even in the event of a fraudulent and unlawful sale of shares that are included in the Central Depository System the only remedy available to an aggrieved person shall be monetary damages.
He submitted that this provision of law has been examined and applied by the Hon'ble Lahore High Court in the case of MIAN NISAR ELAHI V. LAHORE STOCK EXCHANGE (2007 CLD 376). He contended that logic behind the aforesaid section 11 is that once shares of a particular company have been included in the Central Depository System the paper share scrip with distinctive number ceased to exist. He submitted that it is the admitted position that the shares of defendant No.1 bank have been included in the Central Depository System and no longer exists as distinctive paper scrip and the 36.376 million shares purchased by Askari Commercial Bank in 2004 were lodged with the CDC in the year 2006. He, therefore, contended that the shares that are sold through the Central Depository System cannot be traced and identified in the hands of any particular holders of the said shares.
27. Mr. Salman Akram Raja, learned counsel for the defendant No.1 bank in response to the arguments of learned counsel for the plaintiffs in respect of issue of 325 million shares has submitted that the issue of 325 million shares to the highest bidder was 'made in 2004 by the State Bank of Pakistan through exercise of power to restructure the capital of a banking company available to it in terms of section 47 of the Banking Companies Ordinance, 1962. He submitted that in this case the vires of this issue have only been collaterally assailed and in fact there is no prayer that the issue of 325 million shares be held unlawful. He also submitted that in this case the plaintiffs have not arrayed the State Bank of Pakistan as party and the matter regarding the vires of the issue of 325 million shares is pending adjudication in other proceedings, including Suit No.778 of 2007. He submitted that no interim order can be made or sustained in the present proceedings on the presumption of any illegality in the issue of the 325 millions shares when no Court was pleased to restrain the said issue of sharers nor to interfere in the normal powers of shareholders and the board of directors elected by the shareholders, including the power to pay out dividends to the shareholders of the form of cash and bonus shares in the same ratio as their existing shareholder.
He also made reference to order dated 4-7-2008 passed in Suit No.778 of 2007 and stated that since the date of the aforesaid order dividend in the form of cash and bonus share has been paid with respect to each successive year without any objection from the plaintiffs. He submitted that if any clarification or enforcement of the order dated 4-7-2008 is required then the only course of action available to the plaintiffs is to approach the Court seized of Suit No.778 of 2007 and this Court cannot be called upon to interpret and apply according to the wishes of the plaintiffs the order dated 4-7-2008 passed in Suit No.778 of 2007. He also submitted that the aforesaid order was passed with reference to the shares claimed by the plaintiffs in that suit and the order of status quo has been maintained with respect to the said 16.376 million shares.
28. In the end learned counsel argued that no case for grant of interim injunction is made out as no illegality prima facie exists either with respect to section 83(2)(d) of the Ordinance or with respect to the sale and issue of shares of ABL in the year 2004. He submitted that no new event or development has occurred after a lapse of seven years to justify any restraint with respect to the payment of dividend whether in the form of cash or bonus shares. He also submitted that balance of convenience is in favour of payment of cash dividend and bonus share as in the past to the thousands of shareholders of defendant No.1, which is a public listed company. He further submitted that no irreparable loss will be caused to the plaintiffs if dividend as aforesaid is paid. He submitted that at the most if the plaintiffs succeeding in the titled suit monitory compensation equal to the value of the shares, cash dividend and bonus shares claimed by them will provide complete redress. In support of his submissions, he placed reliance on the cases of NESTLE MILKPAK LTD. V. SINDH INSTITUTE OF UROLOGY AND OTHERS (PLD 2007 Karachi 11), MESSRS PAKISTAN STATE OIL COMPANY LIMITED V. FEDERATION OF PAKISTAN (2010 CLC 1843) and MESSRS SHAKIL WAQAS AND CO. AND OTHERS V. GENERAL MANAGER/ MARKETING, PAKISTAN RAILWAYS AND OTHERS (PLD 2001 Karachi 185).
29. In rebuttal, Dr. Farogh Naseem learned counsel for the plaintiffs contended that the plea raised by the defendant No.1 bank that for the last 7 years dividends are being announced or the share premium account is being reduced, a fresh cause of action accrues to the affected person, hence the same could not be restrained this time is fallacious as order dated 7-4-2008 passed in Suit No.778 of 2007 had directed the parties to maintain status quo, which also stop the issuance of any dividends, but now the defendants have admitted that they have been issuing dividends despite the Court order of status quo dated 4-7-2008. As such, they are liable to be punished for contempt of Court and breach of injunction the charge in this respect may kindly be framed against them. He also contended that if an action may not have been filed earlier is no ground to contend that in future no action can be filed as there is no estoppel, waiver or acquiescence against illegalities. In support of his submissions learned counsel has placed reliance on the following cases:- PLD 1963 SC 486 1996 SCMR 700 1999 SCMR 382 1991 CLC 694 1987 MLD 2182
30. In response to the arguments on section 11 of the Central Depository Act, 1997, the Court no longer has the jurisdiction to grant any relief with regard to the rectification of the Central Depository Register and at best Court may only award damages, Dr. Muhammad Farogh Naseem contended that this argument is totally incorrect. He contended that section 11 of the 1997 Act only contains a non obstante clause in respect of section 152 of the Companies Ordinance, 1984. The same has no bearing on the general jurisdiction of the Civil Court available under section 9 of the C.P.C. He submitted that in other words such general jurisdiction under section 9 of the C.P.C.
Has not been ousted. He also argued that where the Court cannot grant a remedy under section 152 of the Companies Ordinance, the proper remedy is a suit under section 9, C.P.C. He urged that section 11 is only applicable to an account holder or sub-account holder in the CDC. He also urged that admittedly, the plaintiffs are neither account or sub-account holders in respect of ABL shares in the CDS, therefore, section 11 of the 1997 Act is not applicable. He placed reliance on the cases reported in PLD 2008 Karachi 458, 1991 MLD 203, 1988 CLC 1541, 1986 CLC 2560 and PLD 1997 SC 3.
31. With regard to the arguments "raised by the defendants that the interim order is hurting the defendants and may widows and poor people has really no legs, as the defendants have not come to the Court with clean hands till date and have suppressed material information as to who are the shareholders whose dividends are blocked. He submitted that it is the case of the plaintiffs that the entire bank is predominantly a family concern, which has acquired ABL illegally. He made reference to Article 129(g) of the Qanun-e-Shahadat Order, which provides that where vital information is withheld, it has to be assumed that if such information had been produced, it would have gone against the party withholding such information. He placed reliance on the following citations:- PLD 1966 Karachi 253 PLD 2006 Karachi 206 PLD 2005 Karachi 585 1996 SCMR 137 1998 SCMR 96
32. Learned counsel for the plaintiffs submitted that plaintiffs have been able to lay their hands on the Annual Report 2010 of ABL wherein at Pages 235 and 236 the shareholding of ABL has been reflected, which clearly show that the defendants and their family on nearly 82.44% shares in ABL and the general public/individuals on even less than 1% of the shares. Thus, the entire faced created by the defendants that widows, orphans and poor people are badly affected is patently incorrect. He urged that all arguments of emergency and urgency are totally concocted and incorrect, as initially an argument was made by the defendants that if the injunction was allowed to operate for 45 days the same would drag ABL into default. This argument was demolished by the plaintiffs. Reliance was placed on section 251 of the Companies Ordinance, 1984 and the excerpts from Ramiya, Part 2, Pages 1968 and 1969, which establish that a company does not default if non- payment of dividend is made due to operation of a Court order.
33. In response to the arguments advanced by the learned counsel for the defendants that all the shares are not part of the CDC system and have lost their identity and are irretrievable, Dr. Muhammad Farogh Naseem submitted that this argument- is again totally incorrect. He made reference to section 9 of the 1997 Act, which mandates the CDC to maintain all records.
Additionally, the requirements of disclosing all information is also spelt out in section 21 of the 1997 Act. Even otherwise the claim of the plaintiff or any other shareholder is with regard to the extent of shareholding, which cannot be denied on the fake/false averment that the identity of share scrips have been lost. He submitted that Court has ample power to pass any order so as to maintain the extent of shareholding of any person. Also it has been held in PLD 1965 SC 221 that the rights of parties are to be determined at the time of institution of the suit, at which time as admitted by the SBP the plaintiffs No.1 to 6 had held 16% of the shares in ABL.
34. Learned counsel for the plaintiffs in response to the arguments made by the defendants challenging the locus standi of the plaintiffs submitted that plaintiffs Nos.1 to 6 at material times had 16% shareholding. He submitted that even for the purposes of section 152 of the Companies Ordinance, it is not necessary for the petitioner/applicant to possess transferred share-scrips in terms of section 176 of the Companies Ordinance. As regards the locus standi of deposit holders and members of the general public, it is submitted that they have a direct interest as potential investors in the Bank, which partakes nature and character of a public institution. The Court all along has recognized such interest. He also submitted that the requirement of locus standi for the purposes of filing a suit has been much liberalized. Reliance has been made to the cases reported in 1999 CLC 1603, 2002 CLD 102, Ramiya Part I pages 1166, 1171 and 1172, 2006 CLC 578 and PLD 2007 Karachi 11.
35. Learned counsel for the plaintiffs submitted that defendants have also come up with another incorrect argument that the previous suits were similar to the one at hand. He submitted that if this is so then at best this suit could be stayed under section 10 of the C.P.C., though the same is not conceded by the plaintiffs as the cause of action in this suit is distinct from the cause of action in the earlier suits. However, it is a settled law even where the Court may stay a suit under section 10 C.P.C., it is fully empowered to grant interlocutory relief. He placed reliance on 1992 MLD 222, 1996 CLC 1657 and 2006 CLC 1664.
36. With regard to the territorial jurisdiction, learned counsel submitted that this suit is fully competent and maintainable from the point of territorial jurisdiction as at Page No.163 of the first part of the court-file would show that the sale of the impugned shares took place at Karachi. He submitted that at the time of arguments it was shown that ABL in its on website had shown Karachi as the principal office. He placed reliance on the cases of 1991 MLD 313, 1992 SCMR 1174, PLD 2002 Karachi 420 and 2008 YLR 2040.
37. Learned counsel submitted that applications as, prayed be granted. He submitted that it is a settled proposition of law that where an order or action if prima facie illegal, the Courts will grant temporary injunction even without the need of considering the requirement of balance of convenience and irreparable loss. He further submitted that the defendants have breached the status quo orders in the earlier suit and they are guilty of hatching a corporate conspiracy along with officials of the government and SBP to illegally acquire ABL at a very low price and without following the codal formalities prescribed by the Privatization Commission Ordinance, 2000.
38. Mr. Salman Akram Raja learned counsel for the defendant No.1 bank has submitted additional written arguments wherein it has been stated that the submissions made on behalf of the plaintiffs in rebuttal have largely addressed issues of a collateral nature that were in fact not raised by the defendant-bank at all or were not raised in the manner understood by the plaintiffs. It has also been stated that the plaintiffs have made arguments that are completely unsupported by the 'case-law cited at the bar. It has also been stated that Fateh Group is among the largest loan default in the country. It has been further stated that 16.376 million shares claimed by the plaintiffs in earlier pending litigation were acquired by them in a mala fide manner against the law as noticed by the State Bank of Pakistan. It has been stated that no word has been submitted by the plaintiffs as regards the questions of irreparable loss and balance of convenience, both of which are essential elements in the grant of interim injunctive relief.
39. As regards the question of prima facie illegality in the issuance of bonus share against the balance available in the share premium account was argued by the learned counsel for the plaintiffs that in the judgment reported as 1964 (53) ITR 108 the Indian Supreme Court had held that the issue of bonus shares against share premium requires the sanction of the Court was completely incorrect submission. It has been stated that the judgment of the Indian Supreme Court pertained to the payment of cash dividend out of premium received on shares by a company and related to a tax year prior to the coming into force of section 78 of the Indian CompaniL Act, 1956. It has been stated that secti. 18 of the Indian. Companies Act is similar to section 83 of the Companies Ordinance, 1984. It has been stated that reliance by the plaintiffs on various judgment.
Are of no relevance as the 'same relate to distinguishable facts and circumstances. It has been stated that in Suit No.790 of 2004 not only notices were issued in the application seeking restraint of the sale of 16.376 million shares claimed by Fateh Group but lengthy arguments were heard over several days and restraining order was denied even though the application for interim relief was kept pending. It has also been stated that Askari Commercial Bank Ltd. Has not been made a party to the instant suit and, therefore, no order adverse to the purchase made by Askari Commercial Bank Ltd. Can be made in the instant proceedings.
40. It has also been stated that learned counsel for the plaintiff completely misunderstood the arguments raised on behalf of the defendant on section 11 of the Central Depositories Act, 1997 as noticed in the judgment of the Hon'ble Lahore High Court in the case of Nisar Elahi v. Lahore Stock Exchange (2007 CLD 376) may not be taken to cause ouster of the jurisdiction of this Court in terms of section 152 of the Companies Ordinance, 1984 or section 9 of the. C.P.C. And submitted that ouster of the jurisdiction of this Court was never claimed by the defendant bank and further stated that reference to section 11 of the Central Depositories Act,.1997 was only make to demonstrate the fact that the law recognizes the practical impossibility of reversing a share sale made through the Central Depository System.
41. In reply to the arguments advanced by the learned counsel for the plaintiffs that the defendants ought to have disclosed the identities of the shareholders of the defendant bank and non- disclosure of the identities of the shareholders of the bank should lead to adverse consequences in terms of Article 129(g) if the Qanun e Shahadat Order, 1984, it has been submitted that the identities of the shareholders of the defendant bank are not an issue in the present case and no part of the plaint required disclosure of the names of the defendant bank. It has been stated that the defendant bank has no reason to hide the fact that Messrs Ibrahim Fibres Limited, Ibrahim Agencies Limited and the directors of the aforesaid two companies are collectively the majority shareholder of the defendant bank and these persons acquired their shares through a transparent process supervised by the State Bank of Pakistan in July, 2004. It has further been stated that apart from the aforesaid shareholders there are over 20,000 other shareholder of the defendant bank most of whom hold between 500 and 1,500 shares and such information is available in the published Annual Financial Statement of the defendant bank and is a matter of public record. It has further been stated that there is no prayer made in the instant suit regarding the sale of the 16.376 million shares to Askari Bank Limited in the year 2004 as in the entire plaint the said sale is only obliquely mentioned by way of background information in the reference to Suit No.790 of 2004. It is stated that this Court lacks territorial jurisdiction with respect to the cause of action agitated in the present suit, therefore, the plaint merits to be returned forthwith.
42. I have heard the arguments advanced by, the learned counsel for the parties, minutely examined the material available on record and the case law cited at the bar. I have also perused the case files of Suit Nos.744 of 2004, 790 of 2004 and 778 of 2007 filed by the plaintiffs against the defendant ABL.
43. It appears from the record that several litigations are/were pending between the parties. On 5- 7-2004 the plaintiffs filed Suit No.744 of 2004 against State Bank of Pakistan and defendant ABL for declaration and permanent injunction challenging the privatization of defendant ABL and the said suit on the basis of statement of counsel appearing on behalf of defendant No.1 SBP was withdrawn by the plaintiffs on 15-7-2004. Thereafter Suit No.790 of 2004 was filed by the plaintiffs on 20-7- 2004 against the Allied Bank of Pakistan and others for declaration and permanent injunction wherein an application bearing C.M.A. No.4622 of 2004 was also filed seeking restraining order from acting upon the notice dated 22-6-2004 and processing with the sale of any security of the plaintiffs. The Notice dated 22-6-2004 impugned by the plaintiffs was for inviting bids to sell the defendant's shares pledged by the plaintiffs Nos. 5 to 7 as additional collateral security for the financial facility availed by the plaintiff No.1 with the defendant ABL. The said 16.276 million shares of defendant ABL claimed by the Fateh Group were sold by, defendant No.1 through open auction to Askari Commercial Bank in July, 2004 after this Court had declined to restrain the sale in the above suit. The Suit No.790 of 2004 and application for interim injunction is still pending. The transfer of 16.376 million shares in favour of Messrs Askari Commercial Bank has been made after obtaining permission of State Bank of Pakistan vide letter dated 29-7-2004. It may be noted that sale of 16.376 million shares sold by defendant No.1 were an additional security provided to defendant ABL and not the security against which the loan was originally made. Therefore, section 24 of the Banking Companies Ordinance, 1962 has no applicability to the pledge of 16.376 millions shares.
44. Another suit filed by plaintiff is Suit No.778 of 2007 against the ABL and others for accounts, damages, cancellation, declaration and permanent injunction. In this suit this Court on 4.7.2008 passed the following order: -- "04-7-2008.
Mr. Faroz Naseem, Advocate for the plaintiff.
(1) Granted as it has served the purpose.
Adverting to C.M.A. No.6992 of 2007, notice to all concerned parties in the meantime parties are directed to maintain status quo and furthermore the defendants Nos. 2 to 19 are restrained from trading the shares claimed by the plaintiff, till next date of hearing.
Adjourned to 30-7-2008.
(Sd.) Judge"
45. After passing of the above order, the defendant ABL regularly paid dividend in the form of cash and bonus share without any objection or protest from the plaintiffs and if they aggrieved why they have not approached the Court. When confronted Dr. Muhammad Farogh Naseem frankly conceded that no application for contempt has ever been made by the plaintiffs. However, he contended that it is not the case of waiver but it is a continuil ause of action.
46. The main plea raised by the learned counsel for the plaintiffs that section 83 of the Companies Ordinance, 1984 does not permit issuance of bonus shares by way of dividend to existing shareholders against the balance in the share premium account, without the sanction of the High Court in terms of sections 96 and 97 of the Ordinance of 1984. In this regard the language of section 83(2) is very clear, which reads as under:- - "83(2) The share premium account may, notwithstanding anything contained in subsection (1), be applied by the company."
The entire section 83(2) takes effect notwithstanding anything contained in section. 83(1) and clearly allows the issue of bonus.Shares against the balance available in the share premium account. Moreover, section 83(2) of the Companies Ordinance, 1984 is the para materia of section 78(2) of the Indian Companies Act, 1956. Therefore, sanction of this Court in terms of sections 96 and 97 of the Companies Ordinance is not required prior to issue of bonus shares in terms of section 2(d). In fact the plaintiffs have obtained the interim order by way of partial reading of section 83 of the Ordinance and if the plaintiffs brought section 83(2)(d) into the notice of the Court, position might be different.
47. Apparently the plaintiffs have approached this Court seeking a restraint on the payment of dividend by defendant No.1 in the form of cash or bonus shares on that basis that defendants Nos.2 to 14 had made a plan to acquire the defendant No.1 and to do the same they in collusion with government functionaries illegally. Sold shares of plaintiffs Nos.1 to 6 when the Suit No.790 of 2004 is pending in this Court and for acquiring the,shares of defendant N6.1, the defendants Nos.2 to 14 utilized the funds, which they have borrowed from other Financial Institutions which is in violation of Prudential Regulations. The defendant No.1 was privatized in the month of July, 2004 and since then every year notice for Annual General Meeting of the defendant No.1 was published in print media and the dividend in the form of cash and bonus shares has been regularly paid to the thousands of shareholders of defendant No.1 without any objection or protest on the part of the plaintiffs. It may be observed that the entire case of the plaintiffs is based on the point that 16.376' million shares of defendant No.1 bank owned by the Fatal Group and placed as security for the admitted liabilities of Fateh Textile mills were unlawfully sold by the defendant No.1 bank in partial settlement of the liabilities of Fateh Textile Mills for which the plaintiffs have already filed Suit No.790 of 2004 prior to the sale of said shares, but this Court after hearing lengthy arguments has not passed any restraining order against the sale of the said shares. The shares were, issued to the highest bidder through bidding process in terms of section 47 of the Banking Companies Ordinance, 1962 under the supervision of State Bank of Pakistan in a transparent manner. I have also gone through the contents of C.M.A. No.6992 of 2007 filed by the plaintiffs in Suit No.778 of 2007 wherein nowhere mentioned that restraining order sought with respect to the payment of dividend in the form of cash and bonus shares and the prayer made in the application is that "to restrain the defendants Nos.18 and 19 from allowing the sale, purchase, dealing and trading of the defendant No.2s share in their stock exchanges and the defendants Nos.2 to 16 from borrowing any funds, encumbering or selling, creating any third party interest an the assets and shares of the defendant No.2." As such, the status quo order passed on 4-7-2008 in C.M.A. No.6992 of 2007 has no bar to the normal functioning of the defendant No.1 bank.
48. It is an admitted position that defendant No.1 had sold the shares and included the same in the Central Depository System in the year 2006. The 16.376 million shares no longer exist as distinctive paper scrip as the shares that are sold through Central Depository System cannot be traced. According to section 11 of Central Depository Act, 1997 even in the event of fraudulent and unlawful sale of shares that are included in the Central Depository System the only remedy available to an aggrieved person shall he monetary damages. All the shares being traded are now in dematerialized book entry form and have no physical existence. Therefore, it would not be possible to identify the shares being claimed by the plaintiffs and its reversal. It may be observed that if the prayer sought by the plaintiffs is granted not only the defendant No.1 will badly suffer but public at large shall also be seriously prejudiced and have to bear irreparable financial loss and damages. Moreover, if these applications are allowed extreme disorder and severely affect the confidence of investors in the defendant ABL, which will also affect the capital market of the country. However, the contentions raised by the parties require deeper appreciation of evidence, which can be properly thrashed out at the time of trial. It may be observed that the earlier suits viz. Suits Nos.790 of 2004 and 778 of 2007 are pending in this Court and both the suits are at the stage of hearing of miscellaneous applications and settlement of Issues and till date the plaintiffs have failed to adduce evidence of any single witness, which clearly shows that plaintiffs have made no serious efforts to proceed with the suits. It is pertinent to mention here that plaintiffs have filed this suit on 16-3-2011 on the date when the Annual General Meeting of defendant No.1 bank was to be convened on the plea that they came to know recently. The notice of the 65th Annual General Meeting was published in the 'Business Recorder' dated 23-2-2011 and how it is believed that plaintiffs who belongs to business class were not aware of the notice published in the print media, particularly the interested shareholders of a company.
49. Prima facie, I find that there is no illegality or material irregularities committed by the defendant No.1 bank to restrain it from issuing dividend in the form of cash and bonus shares to their shareholders, as approved in the 65th Annual General Meeting, which is to be paid out of the profits of the defendant No.1 bank to. Each of the existing shareholders and issue of such bonus shares will not dilute the shareholding of plaintiffs Nos.1 to 6 in the defendant No.1 bank or cause any loss to the public. It may be noted that stoppage of dividends would result in a crash in the market price of the shares of the defendant bank, which will not only be to the immense detriment of over 20,000 shareholders of the defendant bank but will also paralyze its functioning.
50. It is well-settled proposition of law that relief of injunction is discretionary and court is not bound to grant it in every case and it is not to be granted unless the court is satisfied as to its real need. The discretion is to be exercised in accordance with reasons and sound judicial principles.
Court while dealing with application for grant of injunction has to look and to assess all the circumstances obtaining the suit and more so, to equitable relief. Discretion vested in a court of law has to be exercised judicially and equitably ensuring all the times, that twain of law and justice are adequately applied and administered. Reference is invited to 2000 SCMR 780.
51. From the tentative assessm ent of material available on the record, I am of the considered view that the plaintiffs have no prima facie case at this stage. The balance of convenience is also not in favour of the plaintiffs as great inconvenience will be caused to the defendant bank in exercising their legal rights to deal with the subject-matter as per law. No irreparable loss will be caused to the plaintiff, if injunction is refused, because the loss, if any, can be compensated in the shape of damages which plaintiffs have already claimed in the earlier Suit No.778 of 2007.
52. In the light of what has been discussed above, the C M.As. No.2797, 2798 and 2799 of 2011 listed at Serial Nos.1 to 3 are dismissed with no order as to cost. Interim order passed on 16-3-2011 is vacated.
4. C.M.A. No. 4065 of 2011 is deferred..