1. MUHAMMAD ALI MAZHAR, J. - These four Civil Miscellaneous Applications are brought by Mian Munir Ahmed, objector No. 1 and Ms. Ayesha Ahmed, objector No. 2. In all applications the property in question is the same and both the objectors have' prayed that Flat No. A-605, Mehran Heights, Block-8, Clifton Karachi may be released from attachment and the order dated 5.6.2009 may be recalled.
2. The first Objector Mian Munir Ahmed has stated in C.M.A. No. 1040/2009 that in 1994, the decree- holder filed a. Suit for recovery of Rs. 35,94,968/- on account of rent etc. Against M/s. Fazal & Sons (Pvt.) Ltd. The said suit was decreed in favour of the Decree-Holder vide Judgment dated 26.5.2000.
3. Ln 2002 the Decree-Holder filed instant Execution application against the Judgments-Debtor, which was not contested. On 25.3.2005, the Decree-Holder filed a statement in the Court with a prayer to attach his personal properties. The record of the Court shows that the notice of the said statement was ordered to be served upon the objector No. 1, however, the same was never served.
4. According to the order itself, the bailiff said that the objector was not home at the time of service and therefore the information of the above execution application never came to his knowledge. On 7.5.2008, the decree-holder filed another statement, for seeking attachment and sale of objector No. 1 personal property Flat No. A-605, Mehran Heights, GC-I, K.D.A. Scheme 5, Block 8, Clifton Karachi. The objector further stated in his affidavit that the said property was orally gifted by him to his daughter (objector No. 2) in the year 1995. Even otherwise, it is a basic legal position under the corporate laws of Pakistan that a corporate entity is a separate independent entity, distinct from its directors and officers. The director/chief executive officer of a company is not personally liable to pay the liability of their company. Under the corporate law, liabilities of a director are limited to the extent of his share in the company, which principle has been ignored while passing the order, It is further stated in the affidavit that the objector has been condemned unheard. First time, the objector came to know the order dated 5.6.2009, when on 30.9.2009, the notice of attachment was issued by Official Assignee. The objector further alleged that the judgment-debtor company no more exists on the register of the Securities and Exchange Commission of Pakistan. The objector never remained the director in JD Company after 1999.
5. Similarly, the objector No. 2, Ms. Ayesha Ahmed who is daughter of the first Objector has stated in her application that her father gifted apartment in question land since then the subject property is in her occupation. She further stated that most of the time her husband's guests/technicians come to Karachi from different parts of the country and stay at the subject apartment. She usually -send her employee for cleaning of the flat arid on 7th October, 2009, she sent. Her one Employee for cleaning of the flat and it was found that a notice was affixed on the subject flat.
6. It is further submitted by the objector No. 2 that she inquired from her father about the reason of attachment and ' auction, he informed her that a decree was passed in favour of State Life Insurance Corporation Pakistan against Fazal and Sons (Pvt.) Limited of which my father was one of the Director.
7. The Decree-Holder filed counter-affidavit in which it is inter alia contended that the Objector has falsely alleged that in early 90's Mian Munir Ahmed had gifted put the apartment bearing No. A- 605, Mehran Heights, GC-t,. K.D.A. Scheme No. 5, Block-B, Clifton, Karachi, It is equally incorrect and false that the subject property is in occupation and possession of objector No. 2 wherein her husband's guests allegedly reside. The objection has concocted a false story for her ulterior motives Ind mala fide designs to give undue favour to her father who on merits is not entitled to get any relief or benefit of whatsoever. The story of 7th October,' 2009 as alleged by the objector is false, fabricated and mala fide in nature, It is also denied that Mian Munir Ahmed was informed by his daughter in respect of the subject issue, It is also incorrect to allege that under the provisions of law, personal properties to allege that under the provisions of law, personal properties of the directors cannot be sold out for satisfaction of decree against private limited company. The objector No. 2 has failed to file any relevant document in support of her contention.
8. Heard the arguments. The learned counsel for the objector No. 1 pointed out the order of this Court dated 5.6.2009 in which it is reflected that S.E.C.P. Informed that the Judgment-Debtor Company was wounded up in the year 1-998 and its record has also been destroyed. The learned counsel for the decree-holder filed a statement on 25th March, 2009, whereby he brought to the notice of this Court that according to the record of S.S.C.P. One Munir Ahmad was Chief Executive of the Judgment-Debtor Fazal & Sons Pvt. Ltd., therefore, he prayed to the Court for the attachment of his personal property. The order further reflects that on 7th May, 2008, the learned counsel for the Decree-Holder filed a further statement in relation to the property bearing No. GC-1, K.D.A. Scheme No. 5, Flat No. A-605, Mehran Heights, Block-8, Clifton, Karachi stands in the name of Munir Ahmed, and therefore, he prayed that this; property may also be included in the annexed list of schedule to the execution application. On the statement of the learned counsel for the Decree-Holder, this Court vide order dated 5.6.2009, attached the above property and directed the official assignee to take further steps for auction in leading newspapers. Mr. Hassan Akbar, learned counsel for the Objector No. 1 argued that Mian Munir Ahmed resigned from the company M/s. Fazal & Sons (Pvt.)
9. Ltd. In the year 1994, the Decree-Holder filed the suit for the recovery of electricity charges in the year 1994 which was decreed in the year 2000. He further argued that the property in question was already gifted by Mian Munir Ahmed to his daughter Ms. Ayesha Ahmed in the year 1995 who is also objector No. 2 in this execution proceeding, It is further contended that while passing the impugned order, the learned Single Judge of this Court did not appreciate that in the execution of decree passed against the company, a personal property of the objector No. 1 could not be attached.
10. Finally the learned counsel concluded that though the Objector No. 1 resigned in the year 1994 and suit was also filed in the year 1994 against the company but it was decreed in the year 2000. Lt is Well-settled principle of law that Director/Chief Executive Officer of a company is not personally liable to pay the liabilities of the company. The impugned order was passed without giving any opportunity of hearing to. The objectors and the said company against which the execution is pending is no more exist on the register of Security and Exchange Commission of Pakistan. Ln support of his arguments the learned counsel relied upon the following case-laws:-
(1) 2000 CLD;WS {M/s. Sakhi Dattar Cotton Industries v. Mahmood Pvt Ltd.): In this Judgment the learned Single Judge of this Court has discussed the concept of limited liability whether Director of private limited company can in any way be made personally liable for the obligations of the company and held that word 'limited' used in Section 2(8) of the Companies Ordinance, 1984 clearly means that the liability of share-holder for the debts or any other obligations of the company is limited to the extent contributed by them in the share ... Capital. Therefore, a shareholder cannot be made liable beyond the extent of his contribution towards the share capital.
11. For any unsettled liability, it is only the assets of the company, which can be proceeded against by an unpaid creditor or claimant. The shareholders cannot be treated as principal for the company and company cannot be treated as agent to the Share-holders so to make the share-holder liable for the transaction entered ^ into by the company. The Managing Director, therefore, cannot be liable for the obligations of the company simply because he was its Managing Director.
(2) 1995 CLC 299 (Shamim-ud-Din v. Federal Government of Pakistan): This case pertains to the non-payment of electricity charges- claimed through Land Revenue Act. Learned Judge of Lahore High Court held that the Director of the limited company cannot be held personally liable for the debts of the company. The arrears in question, having been declared as land revenue arrears against the limited company and same could be proceeded against in accordance with law.
12. Detention of Directors of limited company was declared to be illegal, unlawful, ultra-vires and without lawful authority.
(3) 1982 CLC 2387 (Tariq Saeed Saigol v. District Excise & Taxation Officer): This matter pertains to Workers Children (Education) Ordinance, 1972 and Rule 7 of Public Education Cess Rules, 1973 to make recovery as arrears of land revenue, In this judgment, it is held that company is a separate justice person distinct from Share-holders and Directors. Share-holders and Directors are not liable for liabilities of the company except to the extent and manner provided under statute. Authority conferred under Section 5 of the Workers Children (Education) Ordinance, 1972 and Rule 7 of Punjab Education Cess Rules, 1973 to make recovery as arrears of land revenue not to be stretched for power to attach and dispose of personal property of the Chief Executive or Director or for that matter to arrest and detain him.
(4) PLD 1984 Lahore 411 (Muhammad Anwar Khan Tiwana v. Sadeeqa Begum): In this judgment, it is held that company and its office' bearers or for that matter Share-holders of the company, were altogether separate entities. Share-holders were constituents of the company who manage its affairs, therefore, Directors in accordance with its Articles of Association but assets of company are owned by company itself and pot by Directors. Since the Directors of the company were not liable for its debts, except to the extent and in manner provided under a. Statute, therefore, personal assets of Director cannot be appropriated for recovery of debts from company.
(5) PLD 2000 Lahore 414 (Ayas Durrani v. Chairman WAPDA): In this judgment it is held that company incorporated under Companies Ordinance, 1984 was' a separate and distinct juristic person quite apart from the Chief Executive, Director or Share-holders. Liability of such a company cannot fall upon the Directors or the Share-holders who had no personal liability for the same.
13. Action of recovering the disputed amount from the Chief Executive was without lawful authority and of no legal affect.
(6) 2003 MLD 60? (Haji Khuda Bux Nizamani v. Election Tribunal): In this judgment it is held that basic principle of a company law is that the company is separate and distinct legal entity from its Share-holders or directors and liability of share of Share-holders in the liability of the company is limited to the extent of unpaid amount of his shares, unless otherwise provided in its memorandum.
(7) 1999 PTD 2940 (Habib Bank Limited v. M/s. Rudolf Donhill and others): In this judgment also the learned Division Bench of this Court held that power to manage affairs of the company generally vested in its Board of Directors and the same acted as collective body and individual Directors cannot be treated as being vested with powers of the Board. Where there was nothing to prove that respondents/Directors had controlled or dominion over the moneys belonging to the company in his individual capacity, such Director cannot be made personally liable to pay such income tax liability.
14. The learned counsel of the Objector No. 2 Mrs. Soofia Saeed Shah adopted the arguments of the learned counsel for the objector No. 1 and additionally argued that the flat in question is owned by Objector No. 2 which was gifted to her by the objector No. 1 and the Apartment is in her possession.
15. The Wealth tax assessm ent orders for the assessment years 1992-93, 1993-94, 1994-95 and 1995- 96 available on Court file clearly show that flat in question is owned by the objector No. 2 Ms. Ayesha Ahmed. While passing the order dated 5.6.2009, the learned Single Judge did not consider all the facts, the order was passed without giving any ample opportunity of hearing and unless-the order is recalled and flat in question is released from the attachment, the objector No. 2 shall be seriously prejudiced.
16. Ln response to the arguments advanced by both the learned counsel for the objectors, Mr. Mukesh Kumar argued that there is no legal bar to attach the personal properties of Directors for the satisfaction of the Decree against the company. Before passing the attachment order, notices were issued to the objector No. 1 but he failed to attend . He further argued that the objector No. 2 has falsely alleged that the flat in question was gifted to her in the year 1990 and she has concocted a story for her ulterior motives to give undue favour to her father. The objector No. 2 has made false and baseless assertion that the subject property 'belongs to her. She has not produced any Gift Deed in support of her claim and only field four wealth tax assessment orders. He further pointed out that in the challan of Cantonment Board, Clifton for the property and conservancy tax for the 2008 the flat is in the name of objector No. 1.
17. After hearing the pros and cons of the matter, I have reached to the conclusion that the Decree- Holder filed this execution application against M/s. Fazal & Sons (Pvt.) Ltd. For the satisfaction of the decree passed in Suit No. 401/1994, Though, in the mode, in which the assistance of the Court is required, the decree-holder has mentioned the attachment and sale of the Judgment-Debtors sponsor Directors immovable property as described in the schedule but at the same time, it is the responsibility of the Court to appropriate whether the personal property of the Directors can be.
18. Attached in the execution proceedings for the satisfaction of decree. The order dated 5.6.2009 simply shows that on the basis of statement filed by the learned counsel for the Decree-Holder, the flat in question was attached and ordered to be sold without appreciating the relevant law. The order is also contradictory. On one hand the Official Assignee was required to ascertain the particulars of the properties annexed, on the other hand the same properties was simultaneously attached with further orders to take steps for its auction after publication in leading newspapers.
19. While passing the order, the learned Single Judge did not consider whether for the satisfaction of Decree against a private limited company, personal property of Directors could be attached. The word 'limited' used in Section 28 of the Companies Ordinance, 1984 clearly means that liabilities of the Share-holders for the debts and any other obligation of the company is limited to the extent contributed by them in the share capital. The share-holder cannot be made liable as far as any unsettled liability, it is only the assets of the company which can be proceeded by an unpaid creditor or claimants, In the judgment reported in 2006 CLD 191 the learned Single Judge of this Court has given some other references of judgments i.e. AIR 1994 Orisa 98; in which Directors personal phone was not allowed to be disconnected over company arrears, In Rundan Singh v.
20. Moga Transport Pvt. Ltd. (1987) 62 Com Cases 600 (P&H), it was held that a Managing Director was not personally liable for the unpaid dues of the workers and in Suhnder Nath Khosla v. Excise & Taxation Commissioner Punjab (1995) 4 Comp. LJ 343 (Punj.), it was held that proceeding against the Managing Director and shareholders personal assets for recovery of sale tax dues of the company were void, In the present case it is nowhere stated. that the objector No, 1 purchased the property from the funds of the company that would have called for the invocation of doctrine of lifting the corporate. The doctrine of lifting of the corporate veil does not mean that Share-holders are also to be made equally liable to the company. Judgment relied upon by the learned counsel for the objector No. 1 so as far as relates to the liability of Directors in the Execution against the companies is concerned is relevant to the present facts and circumstances of the case. Almost in all judgments, it has been unanimously held that company is a separate juristic person distinct from Share-holders and directors and to make recovery from the company, the personal property of the Chief Executive Director cannot be attached. Since the directors of the company are not liable for its debts except to the extent and in manner provided under statute, therefore, personal assets of directors cannot be attached for the recovery of debts from the company, lt is held in a judgment reported in 1999 PTD 2940, that power to manage affairs of a company generally vested in its Board of Directors and the same acted as a collective body and individual directors- cannot be treated as being vested with powers of the Board. Where there was nothing to prove that respondent director had controlled or dominion over the moneys belonging to the company in his individual capacity, such director cannot be made personally liable to the liability.
21. So far as the factum of gift is concerned, it is correct that the objector No. 2 has not produced any registered document conferring upon her the title of the property in question. A gift under the Muhammadan Law is to be effected in the manner prescribed by Muhammadan Law. If the formalities prescribed by that law are complied with, the gift is valid, It is essential to the validity of a gift that there should be a declaration of gift by the donor, acceptance of the gift, expressed or implied by or on behalf of the donee and delivery of possession of the subject of the gift by the donor to the donee. Oral gift is permissible and sufficient to transfer of property, it may not be necessarily reduced in writing, if by cogent and conclusive evidence, it is proved that the donor had made an oral gift which had been accepted by donee and possession had been delivered to donee. A gift cannot be implied, lt must be expressed and unequivocal and intention of the donor must be demonstrated by his entire relinquishment of the thing given. Hiba in its literal sense Signifies the donation of a thing from which the donee may drive a benefit (Hedya 482). Gift, as it is defined in law, is conferring of a right of property in something specific, without any exchange (Baillie P. 515). Ln order-to substantiate the plea of gift and ownership of property, the objector No. 2 has produced her four wealth tax assessment orders in which the subject-property is mentioned.
22. According to Section 123 (Chapter VII) of the Transfer of Property Act, it is clear that for the purpose of making a gift of immovable property, the transfer must be effected by a registered instrument signed by or on behalf of donor and attested by at least two witnesses. Simultaneously, under Section 129 of the same Act, it is provided that nothing in this Chapter relates to the gift of movable property made in the contemplation of death, or shall be deemed to affect any rule of Muslim law.
23. Ln a judgment reported in 1977 SCMR 154 (Mst. Umar Bibi and others v Bashir Ahmad and others), the Honourable Supreme Court held that vide Section 129, the provisions of the Transfer of Property Act; gifts made under Muslim Laws are expressly excluded from the operation of Act. Lt is firmly established proposition that under Muslim law a valid' gift could be affected orally if the formalities prescribed by the Muslim law are complied with even-if the instrument of gift is not registered.
24. This is a fact that the objector No. 1 in his own affidavit admitted to have gifted the property to the objector No. 2 and there is no dispute or issue between the both objectors (father & daughter) regarding the factum or existence of the gift, It is also a fact that objector No. 1 has not filed the applications on the basis of transfer of property by way of oral gift but on the legal ground that the personal property of Directors/share-holders cannot be attached for the satisfaction of company's liabilities which stand is based on sound legal foundation, while the application filed by the objector No. 2 under Order 21, Rule, 58, C.P.C, is moved to, show that after gift, the property was not liable to be attached for the satisfaction of decree. The decree-holder applied the attachment of the personal property of the objector No. 1 for the satisfaction of decree against the JD company which is not permissible keeping in view the law and the judgments cited by the learned counsel for the objector No. 1 in question and if the factum of oral gift is considered then also, the property could not be .Attached.
25. For the foregoing reasons, the order dated 5.6.2009 so far it relates to the attachment, auction and sale of the Flat No. A-605, Mehran Heights, GC-1, K.D.A: Scheme No. 5, Block-8, Clifton, Karachi is hereby recalled. Applications disposed of in the above terms.