YAHYA AFRIDI, J. - Abdul Karim Khan, the petitioner, seeks the original jurisdiction of this Court provided under the enabling provisions of the Companies Ordinance, 1984 ("Ordinance") in terms that: "It is therefore, humbly prayed that on acceptance of this petition the Honourable court may kindly be pleased to order:
(a) Rectification of the register of shares with respect to the shares of the petitioner which has been fraudulently reduced from 121612 shares (99500 shares; originally purchased in his name plus 22112 shares which he received in legacy of his late father) to nil by the respondent No.2, without the consent and authorization of the petitioner and his late father in utter violation of the MOM, AOA, of the respondent No.1 and provisions of the Companies Ordinance, 1984 by removing the said adverse fraudulently entries made by respondent No.2 or anybody else in this respect.
(b) restraining the respondents, permanently, from transferring the shares, assets, i.e machinery, building and plot, of respondent No.1 without observing the codal formality incorporated in MOM, AOA and provisions of the Companies Ordinance, 1984 beyond his due shares in share-holding rights of respondent No.1.
(c) To pay fine in respect of the damage and illegalities committed by respondent No.2 in the record, register of shares or business of the Company without the consent and authorization of the petitioner;
(d) Directing the respondent No.2 to conduct the affairs of the Respondent No.1 in accordance with law and its MOM, AOA;
(e) Payment of costs of litigation to the petitioner.
Any other relief which is not specifically asked for but the court deems appropriate under the circumstances may also be granted."
BACKGROUND.
2. It all started in early 1978, when the icon of the family, late Abdul Sattar Khan, the 'predecessor-in-interest' of the petitioner, and the private respondents, bought the controlling shares of Messrs Nishat Sarhad Textile Mills (Pvt) Ltd ("Company"). Initially, affairs of Company were run smoothly, as a family concern, led by Late Abdul Sattar Khan and his three sons, namely; Abdur Rasheed (respondent No-1), Abdul Kareem Khan (petitioner) and Jehanzeb Khan. However, as time passed, the sad "Saga" of the family dispute emerged and resulted in the transfers of shares and the change in management of the affairs of the Company. FACTS.
3. The brief and essential facts leading to the present petition, in chronological orders, are as follows: 01.02.1978.
Late Abdul Sattar Khan acquired the total issued shares of Messrs Nishat Sarhad Textile Mills (Pvt)
Ltd. The shares were distributed in the following manner: Name of Share holders Shares.
Late Abdul Sattar Khan 100500 Abdur Rasheed Khan 100500 Abdul Kareem Khan 100500 Jehanzeb Khan 100500 Total issued shares: 402,000 25.04.1978 The name of the Company was changed to M/S. Haroon-ur-Rasheed Textile Mills (Pvt) Ltd.
Form-E filed by the Company under the enabling provision of the 'Companies Act, 1913, inter-alia', reflected transfer of shares of the Company for the year 1978. The particulars of which are as under: Name of share holders Number of transferred share and name of transferee Remaining shares Late Abdul Sattar Khan 1000 M/S Jamila Begum 99500 Abdur Rasheed Khan Nil. 100500 Abdul Kareem Khan 1000 M/S Shamim Begum 99500 Jehanzeb Khan 1000 M/S Naseem Begum 99500 31.12.1980 Form-E filed by the Company for the year 1980, reflected certain transfer of the shares of the Company. The particulars of which are as follows: Name of share holders Number of transferred share and name of transferee Remaining shares Late Abdul Sattar Khan Nil 99500 Abdur Rasheed Khan 35000 Haroon-ur-Rasheed 35000 Mamoon-ur-Rasheed 24500 Mst.Fatima 6000 Abdul Kareem Khan Nil 99500 Jehanzeb Khan Nil 99500 31.12.2006 Form-A filed by the Company for the year 2006, under the enabling provision of the Ordinance, reflected transfer of the shares of the Company. The particulars of which are as under: Name of share holders Number of share Late Abdul Sattar Khan 300,500 Abdur Rasheed Khan 6,000 Haroon-ur-Rasheed Khan 35,000 Mamoon-ur-Rasheed 35,000 Mst. Fatima 24,500 Mst. Jamila Bibi 1,000 31.10.2007 Form-A filed by the Company for the year 2007, reflected transfer of shares of the Company. The particulars of which are as follows: Name of share holders Number of transferred share and name of transferee Remaining shares Late Abdul Sattar Khan 100,500 Abdul Rashid Khan 50,000 Humayun ul Rashid Khan 50,000 Amin ul Rashid Khan 50,000 Mehran ul Rashid Khan 50,000 Sangeen ul Rashid Khan Nil Abdul Kareem Khan Nil.
Jehanzeb Khan Nil Haroon ul Rashid Khan Nil Abdul Rashid Khan 106,500 Mamoon-ul-Rashid Khan 35,000 Fatima 245,000 Jamila Bibi 1,000 Humaun ul Rashid Khan 5,0000 Aminul Rashid Khan 5,0000 Mehran ul Rashid Khan 5,0000 Sangeen ul Rashid Khan 5,0000 4.8.2010 Late Abdul Sattar Khan purporting himself as 'Chief Executive' of the Company, served a notice dated 4.8.2010 ("Notice") upon respondent No.14, which was acknowledged as received on 6.8.2010.
The Notice also has the signatures of the present petitioner and Jehanzeb Khan, purporting as 'Directors' of the Company, affixed thereon. The Notice reads as follows: "REF; SECP/2010/H-/ August 4,2010. The Joint Registrar of Companies, Securities & Exchange Commission of Pakistan, Peshawar.
Subject: REQUEST TO NOT RECORDED AGM AND OTHER DOCUMENTS.
Sir, It is stated that during the Inspection of the Company file in SECP; I had found that a person fraudulently put my signature on Form 29 in which he show me a ceasing Director/Chief Executive, and also transfer my shares in favour of some other person and file the documents in the Company Registrar Office Peshawar.
In this connection, I solemnly declared and state that I had not sign any resign nor I sign the share transfer deed documents.
Therefore you are requested, kindly not recorded any submit/file documents or allow us to submit revise documents and obliges.
Yours Truly, Abdul Sattar Khan,(CNIC 17301-8977988-1) Chief Executive."
01.11.2010 Petitioner also moved a letter to respondent No.14, complaining about the affairs of the Company and the illegal transfer of shares by respondent No.1.
27.11.2010.
Late Abdul Sattar Khan peacefully passes away by natural death.
2.5.2012.
The petitioner filed a suit before the Ordinary Civil Court at Peshawar, seeking the same relief sought in the instant petition. 7.6.2013.
The worthy Civil Judge returned the plaint to the petitioner under Order-7 Rule-10 of Civil Procedure Code, 1908 ("CPC") for filing it before the appropriate legal forum.
26.2.2014 The appeal of the present petitioner was also dismissed.
20.3.2014 The present petition is filed before this Court under section 152 read with section 290 of the Ordinance, for the prayer already stated hereinabove.
4. The respondent No.1 was put to notice, who apart from contesting the claims of the petitioner on factual and legal grounds, took up a preliminary objection to the filing of the present petition being barred by limitation.
5. Respondent No.14 was also put to notice and asked to file comments. The response in writing has been filed with copies of Form-E and Form-A of the Company. However, the same does not record the affairs of the Company, between 1980 and 2006.
6. Valuable arguments of learned counsel for the parties heard and record perused. PRELIMINARY OBJECTION-LIMITATION.
7. Before proceeding with the merits of the case, it would be appropriate to address the preliminary objection regarding limitation taken by the worthy counsel for the private respondents.
8. There is no period of limitation provided for filing of petition before the Company Court for correction of the Members Register of the Company (section 152) or for seeking directions against the mismanagement of the affairs of the Company (Section 290) under the Ordinance. In view of the same, we would have to refer to the provisions provided under Articles 120 and 181 of The Limitation Act, 1908 ("Act"), which deals with period of limitation for filing of suits and applications having no prescribed period of limitation provided under the law. The said provisions of the Act read as under: 120 Suit for which no Six When the right to sue period of limitation is years. accrues provided elsewhere in this Schedule.
181 Application for which no period of limitation is provided elsewhere in this Three years When the apply accrues right to Schedule or by section 48 of the Code of Civil Procedure (V of 1908).
9. The instant petition being a composite original jurisdiction of this High Court vested under section 9 of the Ordinance, the procedure for adjudication thereof is more akin with that of a civil suit then interlocutory application initiated by any party during the pendency of already initiated proceedings. Accordingly, this Court deems the present proceedings initiated by the petitioner under section 290 and 152 of the Ordinance, to be a 'suit', rather than an 'application'. Hence, the provisions of Article 120 of the Act would be relevant for determining the period of limitation.
10. In the present case, the petitioner has asserted in the heading of the petition that he had 'cause of action' to institute the present petition on 6.4.2012, when he came to know about the illegal transfer of the shares of late Abdul Sattar by respondent No.2 and secondly when the illegal transfer and finally when the suit of the petitioner was returned by the trial and the appellate Court.
11. The record, however, is not clear as to when the shares of the petitioner were transferred from his name to that of his father or when exactly did late Abdul Sattar execute the impugned shares transfer deeds in favour of Abdul Rasheed. At best, the Notice of late Abdul Sattar dated 4.8.2010, addressed to respondent No.14, challenging the transfer of his shares can be considered as the starting point of the knowledge of the petitioner regarding the impugned transfer of his and his father's shares. The Notice has the admitted signature of the petitioner affixed thereon, hence the petitioner cannot resile from knowledge of the impugned action of Abdur Rasheed on the said date.
12. The petitioner first approached the Civil Court on 2.5.2012 and this Court on 20.3.2014 would bring the present petition within the six years time prescribed under Article 120 of the Act.
13. Needless to mention that the petitioner in the instant petition is also claiming legacy of his father late Abdul Sattar Khan, which can be claimed by the petitioner even beyond the six years period prescribed under Article 120 of the Act.
14. In similar circumstances, his lordship Justice Azmat Saeed, while deciding a dispute, as a Company Judge of the Lahore High Court, has dismissed and then repelled the preliminary objection of limitation taken in a Company Petition in Mrs. Saeeda Mehmood's case (2007 CLD 637) in terms that: a petition under section 152 of the Companies Ordinance, 1984 is not open ended where a suit based in a same cause of action seeking substantially the same relief as prayed for under section 152 of the Companies Ordinance, No.XL VII of 1984 has become barred by limitation, the application of this under section 152 of the Ordinance would ordinarily be liable to be dismissed. Time of the knowledge of the facts and circumstances giving rise to the cause of action would be relevant. In our jurisdiction there appears to be no definitive precedent to the effect that the provision of Limitation Act applies to a petition under section 152 of the Companies Ordinance or whether the same is covered under Article 120 or Article 181 thereof however in the Indian Jurisdiction such an application is treated to be covered by the residual Article pertaining to filing of application (i.e in para material to Article 181 of the Limitation Act 1908). However, this aspect of the matter need not to be adjudicated upon for the purpose of deciding the lis in hand as in the instant case, the petitioners have categorically stated that they were excluded from the management of the company and had no direct nexus therewith. And in para-9 of the petition with reference to the date of knowledge it has been categorically stated that recently on coming to know about the alleged intention of the respondents to dispose of all the assets of the company, they approached the Registrar Joint Stock Companies and discovered that their names have been excluded from the register of members as was evident from the Form-A submitted on behalf of the company. In response to para-9 of the petition rather in reply thereto the respondents have merely written "This para is absolutely incorrect hence denied." Denial simpliciter without specifically alleging knowledge of the petitioners of the transactions in dispute is neither sufficient nor inspire confidence. It has also been noted that nowhere in the reply the date of the transfers of the shares has been specified. Close relationship between the parties can also be ignored. Furthermore, a part of the claim of the petitioners pertains to inheritance of the shares owned by the late Mst. Rafiqua Begum and late Mr.Ghulam Ullah Chaudhary and it is a settled law that no limitation applies in respect of claims of inheritance as has been held by the Honourable Supreme Court in the judgments reported as Muhammad Iqbal and 5 others.v. Allah Bachaya and 18 others 2005 SCM R 1447 and Mst.
Kaneezan Bibi and others v. Muhammad Ramzan and others 2005 SCM R 1534"
"It is an admitted fact between the parties that the petitioners were at one point of time shareholders in the company with the petitioner No.1 holding 3099 shares and petitioner No.2 4993 shares. Such shares only could have been transferred in accordance with the section 76 Companies Ordinance N0.XL VII of 1984 requirinjg a duly stamped transfer deed executed by the petitioners along with the original share stamps be lodged with the copy. It has not been pleaded in the reply to this petition that any such transfer deeds were ever executed, duly stamped or delivered to the company along with the original scripts. No such transfer deeds or any original scripts of copies thereof have been filed with this reply at any later stage. Similarly, it is also an admitted fact that the shares also vested in the name of Mr. Ghulam Ullah Chaudhary and Mst.
Rafiqua Begum, it is also an admitted fact that the petitioners in view of the law of inheritance applicable to the parties, the petitioners are also the legal heirs entitled to inherited 25% of the shares each with the balance of 50% going to respondent No.1. The respondents have claimed transfer of such share unto themselves, however, neither they claim that any transfer deeds were ever executed by the late Mr. Ghulam Ullah Chaudhary and Mst. Rafiqua Begum nor such transfer deeds duly executed and stamped along with the scripts were even delivered to the respondent No.1 company. No such transfer deeds purported to have been executed by Mr. Ghulam Ullah Chaudhary and Mst. Rafiqua Begum duly stamped and scripts of shares or copies thereof were appended with the reply nor copies thereof filed in this, Court. In view of the above, it is clear and obvious that requirements of section 76 of the Companies Ordinance, No.XL VII of 1984 have not been complied with which are mandatory in nature. In the absence of such compliance no transfer of shares in law stand effected and the register of members therefore, is liable to be rectified as has been held in the judgments reported as Siddique Muhammad Malik and 4 others v. Immad Iftikhar Malik (2000 CLC 477) and Nisar Ahmad Chaudhry v. Suleman Spinning Mills Ltd. And 2 others (PLJ 1998 Lahore 1017)."
15. Accordingly, this Court is also not in consonance with the legal objection raised by the learned counsel for the private respondents regarding the present petition being barred by time.
MERITS.
16. It would be appropriate to first review the locus standi of the present petitioner to invoke the jurisdiction of this Court under section 290 of the Ordinance. The said provision of law reads as under: Section-290. Application to Court.
(1) If any member or members holding not less than twenty per cent of the issued share capital of a company, or a creditor or creditors having interest equivalent in amount to not less than twenty percent of the paid up capital of the company, complains, or complain, or the registrar is of the opinion, that he affairs of the company are being conducted, or are likely to be conducted, in an unlawful or fraudulent manner, or in a manner not provided for in its memorandum, or in a manner oppressive to the members or any of the members or the creditors or any of the creditors or are being conducted in a manner prejudicial to the public interest, such member or members or, the creditor or creditors, as the case may be, the registrar may make an application to the Court by petition for an order under this section.
(2) If, on any such petition, the Court is of opinion.
(a) that the company's affairs are being conducted, or are likely to be conducted, as aforesaid; and
(b) that to wind-up the company would unfairly prejudice the members or creditors; the Court may, with a view to bringing to an end the matters complained of, make such order as it think fit, whether for regulating the conduct of the company's affairs in future, or for the purchase of the shares of any members of the company by other members of the company or by the company and, in the case of purchase by the company, for, the reduction accordingly of the company's capital, or otherwise
(5) The provisions of this section shall not prejudice the right of any person to any other remedy or action.
17. The conditions precedent for a shareholder to invoke the jurisdiction of a Company Court section 290 of the Ordinance, are the following:
(i) Not less than twenty percent of the paid of capital of the company,
(ii) affairs of the company being conducted or likely to be conducted in an unlawful or fraudulent manner or not provided in the memorandum or oppressive to the members.
18. The record filed by the official respondent No.14, does not depict the present petitioner, as a member of the Company. Hence, his claim for seeking directions of this Court under section 290 of the Ordinance is not maintainable as he lacks the locus standi to seek the same.
19. Moving on to the jurisdiction of this Court to rectify the Members Register of a Company under section 152 of the Ordinance, it is noted that the same provides as under: Section 152. Power of Court to rectify register:
(1) If-
(a) the name of any person is fraudulently or without sufficient cause entered in or omitted from the register of members or register of debenture-holders of a company; or
(b) default is made or unnecessary delay takes place in entering on the register of members or register of debenture-holders the fact of the person having become or ceased to be a member or debenture-holder; the person aggrieved, or any member or debenture-holder of the company, ofr the company, may apply to the Court for rectification of the register.
(2) The Court may either refuse the application or may order rectification of the register on payment by the company of any damages sustained by any party aggrieved, and may make such order as to costs as it in its discretion thinks fit.
(3) On any application under sub-section (1) the Court may decide any question relating to the title of any person who is a party to the application to have his name entered in or omitted from the register, whether the question arises between members or debenture-holders or alleged members or debenture-holders, or between members or alleged members, or debenture-holders, or alleged debenture-holders, on the one hand and the company on the other hand; and generally may decide any question which it is necessary or expedient to decide for rectification of the register.
20. The bare reading of the aforementioned provision of the Ordinance, does not provide any condition precedent of having requisite share capital to invoke the jurisdiction of this Court for seeking correction of the Members Register of a Company. A single shareholder seeking correction of a single share in the Company can seek his remedy under section 152 of the Ordinance, even if his name is not recorded in the Members Register of the Company. Thus, the petitioner has a locus standi to invoke the jurisdiction of this Court under section 152 of the Ordinance.
21. The record in the present case is not sufficient for this Court to arrive at a definite conclusion regarding the claim of the petitioner concerning his shareholding in the Company. What is lacking is that the petitioner has not filed the essential evidence of share certificates to support his bonafide and establish the alleged malafide of Abdur Rasheed (respondent No.1). Similarly, Abdur Rasheed, who claims the ownership of the petitioner's and late Abdul Sattar's entire share capital through valid transfers has not annexed the shares certificates or the transfer deeds required under section 76 of the Ordinance, which reads as under: "Section 76, Transfer of shares and debentures: (1) An application for registration of the transfer of shares and debentures in a company may be made either by the transferor or the transferee, and subject to the provisions of this section, the company shall enter in its register of members the name of the transferee in the same manner and subject to the same conditions as if the application was made by the transferee: Provided that the company shall not register a transfer of shares or debentures unless proper instrument of transfer duly stamped and executed by the transferor and the transferee has been delivered to the company along with the scrip
(2) Where a transfer deed is lost, destroyed or mutilated before its lodgment, the company may on an application made by the transferee and bearing the stamp required by an instrument of transfer, register the transfer of shares or debentures if the transferee proves to the satisfaction of the directors of the company that the transfer deed duly executed has been lost, destroyed or mutilated: Provided that before registering the transfer of shares or debentures the company may demand such indemnity as it may think fit.
(3) All references to the shares or debentures in this section, shall in case of a company not having share capital, be deemed to be references to interest of the members in the company.
(4) Every company shall maintain at its registered office a register of transfers of shares and debentures made from time to time and such register shall be open to by the members and supply of copy thereof in the manner stated in section-150.
(5) Nothing in sub-section (1) shall prevent a company from registering as shareholder or debenture-holder a person to whom the right to any share or debenture of the company has been transmitted by operation of law.
(6) In the case of a public company, a financial institution duly approved by the (Commission) may be appointed as the transfer agent on behalf of the company.
(7) If a company makes default in complying with any of the provisions of sub-sections (1) to (4), it shall be liable to a fine not exceeding five thousand rupees and every officer of the company who is knowingly or willfully a party to such default shall be liable to a like penalty."
22. The conditions precedent prescribed in the aforementioned provision for validating transfer of shares in a Company are:
(i) An application by a transferor or a transferee to the company for transfer of shares to be recorded in the members register of the company,
(ii) The instrument of transfer/transfer deed should be signed by the transferor and the transferee and
(iii) The physical delivery of the share certificate.
23. Keeping in view the aforementioned prescribed essential ingredients for validly registering the transfer of shares in a company and the lack of any record in the present case, which may even suggest the substantial compliance thereof, renders the dispute beyond the mandate vested in this Court under the summary jurisdiction provided under section 9 of the Ordinance. Recently, in similar circumstances, when dispute between the parties required deeper inquiry, which could only be resolved after recording of pro and contra evidence, the Apex Court in "Lahore Race Club..vs..Raja Khushbakht-ur-Rehman" (2008 CLD 1117), has reiterated the scope of the jurisdiction of Company Judge under the enabling provisions of the Ordinance, in terms that: "There can be no doubt that any question raised within the peripheral field of rectification, it is the High Court under section 152 alone which has the exclusive jurisdiction. However, the question raised does not rest here. In case any claim is based on some seriously disputed civil right or titled, denial of any transaction or any other basic facts which may be the foundation to claim a right to be a member and if the court feels such claims does not constitute to be a rectification but instead seeking adjudication of basic pillar some such facts falling outside the rectification, its discretion to send a party to seek his relief before Civil Court first for the adjudication of such facts, it cannot be taken away merely on account of that no such language is provided in the section. For instance, if under the garb of rectification one may lay claim of many such contentious issues for adjudication not falling under it, in other words, the Court under it has discretion to find whether the dispute raised are really for rectification or is of such a nature, unless decided first it would not come within the purview of rectification. A plain reading of the word "rectification" itself cannotes some error, which has crept in requiring correction. Error would only mean everything as required under the law has been done yet by some mistake the name is either omitted or wrongly recorded in the register of the company."
"Having dealt with the matter in hand, in the manner discussed above, we hold that the High Court being Court of "Original Jurisdiction" under the Companies Ordinance, 1984, is empowered under section 152 of the Ordinance to entertain the application for "correction/rectification of the register of members", in the first instance, and thereafter if reached to the conclusion by taking into consideration the application, reply thereto and the documents produced before it, that the matter is out of the purview of the summary procedure as provided under section 9(3) of the Ordinance, it may refer/advise the party to approach the Civil Court for resolution of the disputed controversies."
24. Moreover, in the present case, the claim of the petitioner is based on serious allegations of fraud against Abdur Rasheed (respondent No.1) and his vehement denial thereof, surely warrants deeper probe. More so, when the essential documents to support the respective claims of the parties are not available on the record. Most interestingly, the Regulator, the custodian of the record, the official respondent No.14, in its counter affidavit is completely silent about the affairs of the Company between 31.12.1980 and 31.12.2006. This is the crucial period when the petitioner's shares were stated to have been transferred in favour of late Abdul Sattar, the predecessor in interest of the contesting private parties.
25. Directing the petitioner to again approach the Civil Court, at this stage, would not be legally appropriate. This does not absolve this Court to shy away from the serious allegations of fraud and mismanagement highlighted by the petitioner and the stark callous inaction of the Regulator (respondent No.14).
26. As far as the petitioner's claim over his inherited shares in the legacy of late Abdul Sattar is concerned, the record produced by respondent No.14, in particular Form-A for the year 2007, does not show any share of the Company in the name of late Abdul Sattar. Thus, this claim of the petitioner, at this stage, is premature. In fact, the said claim of the petitioner would only be ripe for consideration, once it is decided that the transfer of shares of his father late Abdul Sattar was illegal.
27. This Court would thus, treat the instant petition as a petition under section 265 of the Ordinance, seeking investigation of the Company. It is by now settled principle of law that mentioning a wrong provision of law in a petition would not deter the Court from exercising its proper authority and appropriate jurisdiction vested under the law, keeping in view the circumstances of the case. In similar circumstances, the apex Court in Mst. Saifa Bibi's case (1982 SCM R 494) and in Multan Electric Power Company Ltd's case (PLD 2006 SC 382) has upheld decisions of legal forums having jurisdiction to entertain the lis even when the provision of law seeking indulgence of the forum was wrongly mentioned therein.
Let us see the mandate of this Court to seek investigation under Section 265 of the Ordinance, which reads as under: Section-265. Investigation of company's affairs in other cases. Without prejudice to its power under section 263, the (Commission)
(a) shall appoint one or more competent persons as inspectors to investigate the affairs of a company and to report thereon in such manner as the (Commission) may direct, if
(i) the company, by a resolution in general meeting, or
(ii) the Court, by order, declares that the affairs of the company ought to be investigated by an inspector appointed by the (Commission); and
(b) may appoint one or more competent persons as inspectors to investigate the affairs of a company and to report thereon in such manner as the (Commission) may direct if in the opinion of the (Commission) there are circumstances suggesting:
(i) that the business of the company is being or has been conducted with intent to defraud its creditors, members or any other person or for a fraudulent or unlawful purpose, or in a manner oppressive of any of its members or that the company was formed for any fraudulent or unlawful purpose; or
(ii) that persons concerned in the formation of the company or the management of its affairs have in connection therewith been guilty of fraud, misfeasance, breach of trust or other misconduct towards the company or towards any of its members or have been carrying on unauthorized business; or
(iii) that the affairs of the company have been so conducted or managed as to deprive the members thereof of a reasonable return; or
(iv) that the member of the company have not been given all the information with respect to its affairs which they might reasonably expect; or
(v) that any shares of the company have been allotted for inadequate consideration; or
(vi) that the affairs or the company are not being managed in accordance with sound business principles or prudent commercial practices; or
(vii) that the financial position of the company is such as to endanger its solvency; Provided that, before making an order under clause (b), the (Commission) shall give the company an opportunity to show cause against the action proposed to be taken.
The judicial consensus on when to allow an application under Section 265 of the Ordinance for seeking investigation in a company is by now settled by the apex Court in Brothers Steel Limited's case (PLD 1995 SC 320) in terms that: "we are of the considered view that in proceedings under section 265 of the Ordinance, full-fledged inquiry in the form of a trial, is not required to be held nor any formal evidence is to be recorded.
Needless to observe that before passing the order under section 265 of the Ordinance, the Court has to only satisfy itself prima facie, of course, on the basis of the material placed before it, that a case for investigation through an Inspector is called for and it is for the Inspector to ascertain and determine the truth or otherwise of the allegations during the investigation to be conducted by him whereafter he will submit the report to the concerned authority. The matter in fact rests in the discretion of the Court, to be decided after following the summary procedure as laid down in section 9 of the Ordinance".
Recently, Justice Irfan Sadaat Khan, J while deciding M/s Light Metal and Rubber Industries's case (2011 CLD 1485) has rendered an exhaustive and thorough review of the precedents on the issue in hand. It was finally concluded that: "it is also well settled proposition of law that prima facie a case of investigation is made out, the discretion vest with the Court to either give directions for appointment of an Inspector or not and this exercise of discretion is not opened to any exception as held by the Hon'ble Supreme Court in the case of Brothers Steel."
Keeping in view the 'ratio decidendi' of the judgments cited above, this Court finds that a 'prima facie' case is made out by the petitioner for seeking investigation of the Company, as provided under Section 265 of the Ordinance.
Accordingly, for the reasons stated hereinabove, this Court holds as under:
(I) That the instant petition under Section 290 read with Section 152 is not maintainable in its present form.
(II) This Court treats the instant petition as a petition under Section 265 of the Ordinance, as prima facie a case for investigation of the affairs of the Company is made out.
(III) Security Exchange Commission of Pakistan is directed to appoint an Inspector within seven days, if not earlier, from the date of receipt of this Order, to investigate, in general the affairs of Messrs Haroon-ur-Rasheed Textile Mills (Pvt) Ltd and in particular, on the following:
(i) Whether the shares of the petitioner were validly transferred or otherwise.
(ii) Whether the shares of late Abdul Sattar were validly transferred or otherwise.
(iii) Render findings on the complaint of late Abdul Sattar dated 4.8.2010.
The office is directed to immediately send a copy of this judgment to the worthy Chairman Security Exchange Commission of Pakistan, to do the needful under the law, as directed hereinabove.