1. 'ZULFIQAR AHMAD KHAN, J.---Contentious point in this petition is whether a right of inspection of company books of account by a director includes the right to make a copy thereof?
2. 'Facts giving rise to the instant controversy is that the petitioner is a public limited company, incorporated under the provisions of the Companies Ordinance, 1984 ("the Ordinance") operating a network of private television channels; while the respondent No,4 is shareholding director of the said company, who wrote a letter to the petitioner on 25.04.2015 while acknowledging the receipt of the certified copy of the Minutes of Annual General Meetings for the years 2008 to 2012, sought certified copies of Audit Committee and Board meetings held in the same period, stating that while the Ordinance makes provisions for the directors to have access to the books and papers thereof, he was only given permission to inspect and examine the books and papers of the company, and was not allowed to take copies of the Minutes of the Board Meetings, Audit reports and certain Contracts entered into between the (petitioner) company with other production houses; which was responded by the petitioner to the extent that Minutes of the Audit Committee and Board meetings were provided to him and with regards books of account etc., he was advised that these are available at the registered office of the company and if he wished to inspect' them, he could visit the office for the inspection during business hours. The controversy reached to the extent that the cognizance of the matter was taken by Respondent No,1, a company-house regulator, who vide his letter dated 26.04.13 (attached therewith wasa copy of the Respondent No,4's letter, to the petitioner) advised the petitioner that the latter was duty-bond under Section 173 to provide a copy of Minutes of the Meeting of the Board of Directors within 14 days of the meeting, as well as, a certified copy of the Minutes of any General Meeting. Vide its letter dated 30.09.15, the petitioner responded to respondent No,1 stating that the respondent No,4 being a director, was regularly provided with the Minutes of the Meeting of the Audit Committee and the Board Meeting within 14 days of such meetings and with regards books of accounts etc. He could visit the registered office of the company for the inspection of these documents during business hours, while maintaining that the company was not obligated to provide copies of the documents so requested by the respondent No,4. Dissatisfied with the said response, the respondent No,1 sent the impugned notice dated 07.05.2013 reminding the petitioner of its obligations under subsection (4) of section 230 of the Ordinance, calling upon the petitioner to ensure that the books of accounts, books and papers of every company were to remain open for inspection of the directors, directed the petitioner to deliver the following documents, in a sealed envelope at the respondent No, l's office in Karachi:
(a) certified copies of Audit Committee and Board Meetings held during the period from 2008 to 2012;
(b) Contracts with various production houses, as listed in the Annexure-A (to the said letter);
(c) (c) Related party transactions register as prepared under the Code of corporate Governance; and
(d) Detail of travel (along with voucher) for the Directors and the top management executives.
3. 'Rather than to send a response to the said notice, the petitioner preferred the instant petition praying that the impugned notice be set aside.
4. 'In order to answer the contentious question, a summary of the powers of director in the said Ordinance may be skimmed. A company being an artificial person does not have a physical existence, no soul nor a body or brain of its own, it cannot act by itself and cannot manage its own affairs, but rather through human beings who act as agents - known as directors, which is a term defined per clause 2(13) of the Ordinance. Per section 196, the business of a company is required to be managed by the directors who may inter alia exercise all powers of the company and as per clause (g) of subsection (2) of section 196, directors have power to authorise a director to enter into any contract with (another) company for making sale, purchase or supply of goods or rendering services with the company.
5. 'The regime encapsulated by the said Ordinance has a bewildering array of possibilities and choices when it comes to keeping and seeking information about the company. The relevant provisions are scattered throughout the Ordinance, and may be grouped as under:-
(a) Keeping of Registers a. S. 147 - Register of Members b. S. 149 - Register and index of debenture-holders c. S. 205 - Register of directors, officers, etc. d. S. 219 - Register of contracts, arrangements and appointments in which directors, etc., are interested; and e . S. 220 - Register of directors' shareholdings, etc.
(b) Making of Reports a. S. 236 - Directors' report b. Auditor's Reports (various provisions)
6. (c)Books of accounts a.'S. 230 Books of accounts to be kept by the company (consisting of the following, per S. 230) i.all sums of money received and expended by the company and the matters in respect of which the receipt and expenditure 'Lake place; ii.all sales and purchases of goods by the company; iii.all assets of the company; iv. All liabilities of the company; and V. In the case of a company engaged in production, processing, manufacturing or mining activities, such particulars relating to utilization of material or labour or the other inputs or items of cost as may be prescribed, if such class of companies is required by the Commission by a general or special order to include such particulars in the books of accounts.
7. (d)Minutes a.S. 173 - Minutes of proceedings of general meetings and directors
(e) Inspection a.S. 150 - Inspection of registers b.S. 230(4) - Inspection by the directors during business hours of the books of account and other books and papers of every company c. S. 231 - Inspection of books of account by registrar, etc. d. 256 - Reading and inspection of auditor's report e. 486 - Production and inspection of books where offence suspected 'With regards, the access to information and inspection of documents, the Ordinance prescribes various modes of inspection which, inter alia, comprise of (i) inspection by the director and (ii) inspection by the registrar or other authorized officers.
8. 'Means for inspections by the directors are provided for in subsection (4) of section 230 which requires that the books of account and other books and papas of the company are to. Remain open for inspection by the directors during business hours. Also of relevance is subsection (5) which provides that the directors shall from time to time, determine whether, to what extent, at what time, place and under what conditions or regulations the accounts and books or papers of the company are to remain open to the inspection of members, not being directors, and no member, not being a director to have any right of inspecting any account and books or papers of the company except as conferred by the Ordinance, or authorized by the directors, or by the company in general meeting.
9. 'Whereas, inspection by the registrar etc., is enabled by subsection (1) of section 231 which provides that the books of account and books and papers of every company shall be open to inspection by the registrar (or by any officer authorized by the Commission in this behalf) if, for reasons to be recorded in writing, the registrar or the Commission considers it necessary so to do. Also of importance is ' subsection (4), which empowers the registrar (or his authorized officer, making the inspection), to make or cause to be made copies of books of account and other books and papers.
10. 'It should be noted that while there are clear provisions of making copies under subsection (4) of section 231 in case of inspection by the registrar etc., whereas no such copying provisions exist under section 230, which allows books of account etc. To be open to the directors. It is also important to note that the only place in this comprehensive Ordinance where words "made copies of" or "make copies are" are used, are in this subsection only. While provision of making "certified copies" are only used in subsections (4) and (5) of section 218 in respect of disclosure of directors' interest in contracts etc., nowhere else in the Ordinance any other provisions of making certified copies exist except in section 131 for the rectification of register of mortgages and in section 173 for the minutes of proceedings of general meetings and directors, latter are irrelevant in the given controversy.
11. 'With regards obtaining extracts, the legislation only offers such possibility under section 150 for the inspection of registers (of members commencing from the date of the registration of the company and the index referred to in section 147, the register of debenture-holders and the index referred to in section 149 and the registers referred to in subsection (4) of section 156); under section 218 in respect of disclosure of directors' interest in contracts etc.; under section 255 in respect of powers and duties of auditors; under section 261 in respect of power of registrar to call for information or explanation; and under section 262 regarding seizure of documents by registrar.
12. 'To understand the rationale behind drawing a curtain between a director and his company, we need to study the concept of the veil doctrine in company law, which is held to be among the most confusing in corporate law (Frank H. Easterbrook & Daniel R. Fischel, Limited Liability and the Corporation, (1985). 52 U.CHI.L.REV. 89) in terms of which, a company (in most instances legally treated as a person and empowered with the attributes to own its own property as well as ability to sue and be sued) is held to be a totally separate and distinct identity from its shareholders (directors). Under one of the theory of this doctrine, interests of directors are weighed against the interests of the company, where theorist have examined the use of a company by its owners (directors) in ways that may benefit the owner (directors) more rather than the company itself. The case of Salomon v. Salomon & Co., (House of Lords. (1896) [1897] A.C. 22 HL) commonly referred to as the Salomon case, is both the foundational case and precedence for the doctrine of corporate personality and the judicial guide to the corporate veil. The House of Lords in this case affirmed the legal principle that upon incorporation a company is generally considered to be a new legal entity separate from its shareholders. Per theorists, the very objective of a company law seems to protect the interests of the company and not necessarily those of the directors, who has a fiduciary duty to protect the interests of the company and not to further their own narrow interests.
13. 'In support of his contentious the learned counsel for the petitioner placed reliance on Rule (3) of the UK Companies (Inspection and Copying of Registers, etc. 1 Regulations 1991 wherein, a permit has been given to "a person" inspecting the register etc. Only by means of the taking of notes or the transcription of the information and not permitting copying thereof. While the said situation does not relate to Pakistan (as each country has different corporate laws), the said provision also relates to the copy of information by "any person" and not to a director. We don't thus find this reference of any influence.
14. 'In support of rival contentions, the learned counsel for the respondent placed reliance on the age- old case of Mutter v. Eastern & Midlands Railway Company (1888 M 469 - 92 Chancery Division )
15. (XXVIII) where on page 103 when inspecting the register, the plaintiff was told that he was at liberty to inspect, but when he sought to take extracts or copies, he was refused leave to do so on the ground that the section did not authorize him, or, at all events, did not compel the company to allow him, to do so. There upon he instituted this action and first court decided that he was entitled to take copies of the debenture stock register. Which order was appealed. Answering to the substantial question whether he is entitled to take copies of this debenture register, the Appellate Court held that "the right to take a copy is treated as incidental to the right to inspect". We beg to submit that the above case is of the year 1888 when business and commerce was done in a very primitive way. The corporate laws were in infancy and the doctrine of corporate veil was not even invented. We therefore, wish to distinguish the instant case. In furtherance of his contentions, the learned counsel also cited 1978 1 All ER 185 and AIR 1938 Cal. 89, with which we are not inclined to be impressed, since both of these citations relate to different jurisdictions (other than Pakistan) and as mentioned earlier, corporate laws are jurisdiction specific and the question at hand is of very mechanical nature (i.e, making of copies), such foreign precedents are of no influential value, as they change from jurisdiction to jurisdiction and on the level of evolution of corporate laws in the respective jurisdictions.
16. 'With regards the question about access to the detail of travel for the directors and the top management executives, per clause (a) of subsection (1) of section 230, a company is required to keep all sums of money received and expended by the company and the matters in respect of which the receipt and expenditure take place as a part of book of accounts; which again, in terms of subsection (4) are to be made available for director's inspection during business hours but the director is not empowered to make a copy of the same.
17. 'With regards contracts with various production houses, as per the above discussion situation is different. It could be noted that there is a requirement of maintenance of a "register of contracts in which directors are interested" under section 219, meaning thereby each and every director would have access to all the contracts signed for and on behalf of the company, as well as, section 214 imposes the duty of disclosure of interest on every director of a company who is in any way, whether directly or indirectly, concerned or interested in any contract or arrangement entered into, or to be entered into, by or on behalf of the company. Also under section 217, a court may declare a director lacking fiduciary behavior if he contravenes the provisions of section 214 by not disclosing his interest in any contract and agreement that his company enters into, we therefore do not find any reasons to keep copies of the contracts asked by the respondent No,4 away from the said respondent, thus these should be provided to the respondent No,4.
18. 'It is also pertinent to mention that in the circumstances where a director not satisfied with the books of accounts etc. Being kept as per the legal requirements by staying quite runs into the exposure of subsection (7) of section 230 in terms of which, every director of the company, who knowingly by his act or omission caused non-compliance with the requirements of section 230, may be punished with imprisonment and (or) with fine. To us, the path available to such an unsatisfied director is to bring the matter to the knowledge of the regulator (SECP), which depending on the merits of the case and for the reasons to be recorded, can commence preliminary inquiry into affairs of a company by commencing inspection proceedings of the books of accounts etc. Under section 231 (2012 CLD 923) and, inter alia, obtain copies of any required documents. However, if a director holds not less than 20% of the issued share capital of the company, he can directly approach courts. Under section 290, alleging that the affairs of the company are being conducted in an unlawful, fraudulent or oppressive manner, thus seeking court's intervention, thereby discharging his fiduciary duties in respect of the company.
19. 'Notwithstanding therewith, in the case at hand, with regards books of account etc., as per the above discussion, conclusion surfaces that under subsection (4) of section 230 of the Ordinance, law permits availability of the books of accounts etc. To the directors during business hours, however there are no provision letting a director to make any copies of the books of account etc. Since the impugned notice is issued by the registrar under section 230(4), which does not grant any powers to the registrar to seek copies of any documents, we do not see any illegality in the refusal of the petitioner from providing the listed documents to the registrar.
20. 'This petition is thus allowed in the above terms.