MUHAMMAD FAISAL KAMAL ALAM, J.---Succinctly, Plaintiff is a public sector company and had entered into an agreement with Defendant in respect of sale of 10087 tons of hot rolled 'mild steel reinforcing deformed bars of various sizes in pursuance of a public notice dated 19.01.1982. It has been pleaded on behalf of the Plaintiff Company that since Defendant failed to honour their commitment and in view of irreconcilable disputes, present proceedings were filed with the following prayer :- "The plaintiffs therefore pray for a decree as under:-
1. Decree for a sum of Rs.63,54,569.53.
2. Interest/loss of profit on the amount blocked at 15% per anum.
3. Such other relief or reliefs as this Honourable Court may deem fit."
2. The Defendant has filed its written statement and disputed the claim of plaintiff and elaborated that it was plaintiff, which misrepresented about the specification of goods sold as well as the Plaintiff did not allow pre-inspection before lifting the above said goods/steel bars, which later become the main cause of dispute amongst the parties hereto.
3. That on a legal objection that suit has been filed by an unauthorized person, after hearing the parties, by an earlier order of 16.08.2005, the plaint was rejected, which order was though challenged in High Court Appeal No.261 of 2005 but without any success and eventually the Honorable Apex Court vide order dated 25.02.2010, while setting-aside the impugned judgment passed in the aforesaid High Court Appeal No.261 of 2005, remanded the case to the Trial Court for a fresh decision after hearing all the parties and without being influenced in any manner from the observations already made in the afore mentioned decision in the High Court Appeal.
4. By the order dated 26.02.2013, which granted the interlocutory application (C.M.A. No.11549 of 2010) filed by Defendant under Order VI, Rule 17, of C.P.C., seeking amendments in the written statement, an amended written statement dated 27.02.2013 containing the following two preliminary legal objections was filed.
"(i) Mr. Shameem Ahmed, Principal Officer has no authority to institute this suit neither resolution of Board of Directors of the Plaintiff authorizing him has been filed with the plaint nor it has been pleaded that he has been duly authorized, hence the suit is liable to be dismissed under Order XXIX, Rule I, C.P.C.
(ii) Mr. Shameem Ahmed, Principal Officer is not competent to file this suit."
5. On 27.02.2014 three following issues primarily pertaining to the maintainability of the present suit were framed:- I. Whether the Plaintiff's Board of Directors passed any resolution to file the suit at the time of instituting present suit authorizing Shamim Ahmed to institute, sign and verify the plaint?
II. Whether Shamim Ahmed Principal Officer was competent to file this suit?
III. Whether the suit is not barred under Order XXIX, Rule I, C.P.C.?
' By a subsequent order on 02.03.2015, the aforesaid mentioned preliminary objections are to be decided first before handing down a judgment in the instant suit.
6. Mr. Mazhar Jafri along with Mr. Imran Hussain, learned counsel for plaintiff have argued that the instant suit has been filed by Mr. Shameem Ahmed, who was the Principal Officer at that relevant time and was fully authorized to institute the present proceedings and therefore the requirements of Order XXIX, Rule 1, of Civil Procedure Code, 1908, was complied with and the present suit does not suffer from the irregularities as pleaded by the Defendant side. The learned counsel for Plaintiff referred to the above provision of C.P.C. by laying much emphasis on the word Principal Officer as contained in Rule 1 of Order XXIX in support of his arguments, that even in the absence of a Board Resolution, the said Shameem Ahmed, being the Principal Officer had competently instituted the instant suit. It would be advantages to reproduce the relevant portion of the above provision:- ORDER XXIX OF C.P.C.
"1. Subscription and verification of pleading. In suits by or against a corporation, any pleading may be signed and verified on behalf of the corporation by the secretary or by any director or other principal officer of the corporation who is able to depose to the facts of the case."
7. Evidence was also led with regard to the above preliminary issues. In order to factually prove the above contention, the learned counsel for plaintiff has referred to the internal Noting sheet of Plaintiff Company, which has been produced in evidence and has been exhibited as P/2. Relevant portion of this Noting sheet is available at pages-23 to 25 and paragraphs-20 to 25-N; wherein a note was put up by the said Shameem Ahmed, and was subsequently, approved by Director (CSD) on 29.10.1984 and then by the Chairman [of Plaintiff] on 30.10.1984, besides other senior officers of the Plaintiff, including the concerned General Manager. The Para-25/N, which is available at page- 25 mentions the Management approval for filing a suit against the present Defendant and it would be just and proper, if the said paragraph is reproduced herein under-- "Photocopy of Notes of 4 pages from 196 to 200 containing Management's approval for filing a suit against M/s. Haji Khuda Bux Amir Umer Limited is forwarded to our legal cell for n/action."
8. To further substantiate his arguments the learned counsel for plaintiff has cited the following judgments:-
(i) 2001 SCMR Page-1887 (China Annang Construction Corporation v. K.A. Construction Company)
9. In the above cited case law, after a discussion on the above point of law, it was held by the Honorable Supreme Court, inter alia, (i) that the plea of maintainability, specially that a suit was un-authorizedly filed, should be taken at the first instance at the trial level and not at a belated stage, otherwise it would be implied that Defendant had no objection, (ii) mentioning of term 'legal matters' in the resolution by the Board, and a Power of Attorney given in pursuance of the Resolution proves that the person/attorney [Mr. He Yi]. was duly authorized to institute legal proceedings including appeals. This judgment, in my considered view is not applicable to the facts and issues at hand, for the reason that, although after many years, but the plea about suit being not competently filed, has now been incorporated in the pleadings in the form of an amended written statement and, secondly, the instant matter is still at the trial stage. Consequently, the above Supreme Court decision is distinguishable.
(ii) 2007 CLC page-1811 (Trading Corporation of Pakistan v. Merchant Agency)-[the Trading Corporation decision].
10. The above reported case is coincidentally of present plaintiff but against some other party.
Facts are also almost identical as in this cited judgment issues about non availability of a formal Board resolution, authorization the filing of a recovery suit, was raised by the Defendant, which was decided by this Court. Mr. Justice Faisal Arab Las his lordship then was], writing for the Court, while liberally interpreting the approval given through internal note sheet, has held, "Article 106 of the Articles of Association of the appellant provides that minimum quorum for the meeting of Board of Directors shall be two. (emphasis supplied) In this background even if no formal meeting of Directors was called for passing the requisite resolution, the approval of three Directors including the Chairman can be treated as "resolution by circulation" under Article 113 of the Articles of Association of the appellant, granting authorization for filing the recovery suit. Thus, we hold that though there was no formal resolution passed in a meeting for filing recovery suit against the respondent, there did exist approval of the requisite number of Directors in terms of Article 113, who authorized the filing of the suit. In such circumstances absence of formal resolution could only be treated as technical omission which in the peculiar circumstances cannot be regarded as incurable defect. Furthermore, the appellant, out of abundant caution, has filed a formal resolution of appellant's Board of Directors signed by six Directors including its Chairman, ratifying the act of the person who filed the suit on behalf of the appellant."
11. The next decision is a reported case of a learned Single Bench of this Court - 1988 CLC Page-1381, wherein, a similar legal objection of Defendant was repelled, on the ground that the same was not taken either in the pleadings or by way of additional issues and consequently, the impugned order of the Banking Court was set aside.
12. Another reported case of Learned Lahore High Court has been cited to support his contention and reported in 1982 CLC Page-I276 (Zamendar Co-operative Society v. NBP).
13. A division bench judgment reported in 2004 MLD Page-1778 of Hon'ble Peshawar High Court has also been relied upon.
14. In the last cited judgment - PLD 1997 Karachi Page-62, learned Division Bench of this Court has summarized the entire case law on this very question of law in paragraph-37. The principle laid down in the above cited judgments vis--vis the present controversy can be broadly summed up as follows--
(i) any shortcoming in compliance of Order XXIX, Rule 1 is curable, for instance, if a formal Board Resolution is not there, then the Articles of Association and/or internal record [un rebutted one] like Note Sheets, can be taken into account to determine about the authority of a person instituting a legal proceeding/suit, as held in the above reported case of Trading Corporation of Pakistan, but,
(ii) if the very suit has been unauthorizedly and incompetently filed, that is, neither any authorization from the Board of Directors exists, nor the Articles of Association provide such authority, then such a defect remains incurable, even by a subsequent ratification.
15. On the other hand Mr. Zia ul Haq Makhdoom, learned counsel for Defendant has strenuously argued that neither any resolution is available on record, nor it was passed. To further elaborate, the learned counsel has also referred to the cross examination of Plaintiff's present concerned officer Mehmood Ali, who in his cross examination which is Exhibit-B, Page-27 of the evidence file, inter alia, has admitted that there is no resolution of Board of Directors of Plaintiff in favour of Mr. Shameem Ahmed, Principal Officer, prior to filing of the instant suit.
16. Mr. Zia ul Makhdoom, learned Counsel for Defendant has also invited Court attention to the verification clause of the plaint, to justify his stance that even in the verification clause, there is no mentioning of the fact that the said Mr. Shameem Ahmed, Principal Officer was duly authorized by the Plaintiff Company for instituting the present suit. He has read the relevant portion of the decision given in the above High Court Appeal No. 261 of 2005, which was later reported as 2007 YLR Page-1745 . As per learned Counsel for Defendant, that in absence of a Board Resolution, prior to filing of the suit and a specific Clause in the Articles of Association to this effect, the instant suit suffers from incurable defect, which goes to the very root of the case being fatal in nature and, therefore, the suit in the first round of litigation was rightly dismissed and should meet the same fate again.
17. The Defendant counsel next argued that since the instant case has been incompetently filed, therefore it is implied that there is no proceedings of the nature sub judice against the Defendant and the claim of Plaintiff has become time barred. He further contended that once a claim is time barred then valuable rights accrue in favour of the other side, that is, the present Defendant. In support of his arguments he has cited following case law--
(i) 2008 SCMR Page-358
(ii) 2013 SCMR Page-I419.
18. In the above two judgments, inter alia, it was held that, invoking of remedy beyond the prescribed period of limitation creates valuable legal rights in favour of the opposite party, therefore, in such cases delay of each day to be explained by the defaulting party to the satisfaction of the Court Although, there cannot be a different view than what has been laid down by the Honourable Supreme Court, in the above cited judgments, but, the principle would have been applicable to the instant case only when the suit was dismissed earlier was not restored by the Honourable Supreme Court by its order dated 25.02.2010. Consequently, the above two cited judgments are distinguishable and thus not applicable to the instant case.
19. Taking into account the facts of the case and various judicial pronouncements, in my considered opinion the decision handed down by the Learned Division Bench of this Court in Trading Corporation (ibid); 2007 CLC page-1811, squarely applies to the case at hand, as, one of the Directors and a Chairman recorded their separate approvals to file the instant proceeding, besides other senior officers who were at the helm of the affairs of the Plaintiff-Company, recorded their respective approvals after a detailed discussion, as also mentioned in the above paragraph-7.
Veracity and authenticity of the aforementioned Note Sheets/Noting Portion was never disputed.
Secondly, even in the amended written statement, the Defendant has not disputed that the said Shameem Ahmed was not a Principal Officer of the Plaintiff Company. Thus the testimony of said Mahmood Ali, the present officer of the Plaintiff to the effect that there was no Board Resolution in favour of erstwhile Principal Officer Shamim Ahmed, would not be fatal to the Plaintiff's stance.
There is another reason to follow the aforesaid Trading Corporation decision, which is still holding the field, on the principle of stare decisis as explained by Honourable Supreme Court in its judgment reported as 1997 SCMR page-66, relevant paragraph-18, reproduced herein under-- "We may incidentally mention here that the decision in A.F. Ferguson & Co. was rendered by a Division Bench of High Court of Sindh which consisted of Dorab Patel and Muhammad Haleem, JJ.
(as their Lordships then were). Employees' Union, Jamia Karachi's case was also decided by another Bench of Sindh High Court consisting of Zaffar Hussain Mirza (as he then was) and Saleem Akhtar, JJ. while the case of K. G. Old was decided by Shafiur Rehman J. (as he then was)
Sitting single in the Lahore High Court. All the learned Judges who decided the abovementioned three cases were subsequently elevated to this Court and one of them (Saleem Akhtar, J.) is still a Judge of this Court. As this Court neither approved nor disapproved specifically the views expressed in A.F. Ferguson & Co., Employees' Union of Jamia Karachi and K. G. Old they are entitled to the highest considerations and respect as and when these cases come up for consideration before this Court." (emphasis added)
20. Since both the learned Judges of this Court, who have handed down the above reported Trading Corporation decision, were later elevated to the Honourable Supreme Court, the above Trading Corporation decision is a binding judicial precedent and is to be followed in the instant case.
21. In evidence, the Board Resolution by circulation dated 25.06.2010, has already been produced and exhibited as Exhibit-P/1, whereby different officers of Plaintiff-Company were authorized to pursue the instant suit, inter alia, and to adduce evidence in all the Courts. Taking into account the relevant uncontroverted factual position relating to the .above referred preliminary objections about the maintainability of the suit, in my considered view, the present case is also covered by the doctrine of substantial compliance and in this regard guidance can be taken from a leading reported case of Honourable Supreme Court-PLD 1989 Supreme Court Page-222 (Messrs Nishat Mills Limited v. Superintendent of Central Excise Circle-II and others). A detailed discussion of the above principle has been mentioned and after considering a number of decisions on the subject, it was held that compliance of the statutory rules may not be applied and operated as 'stumbling blocks', but, as, stepping stones and quoting the exact words of their lordships, it was held that "And we may add that they should also be not used simply to trap people by technicalities of these rules instead of advancing the purpose for which they are framed".
22. In addition to this, both the learned counsel for the parties, in compliance of the order dated 16.01.2016, have filed paper book of C.P.L.A. No.1430 of 2006, in which the above referred order of the Honourable Supreme Court, remanding the instant case for afresh decision was passed. Purpose of filing the paper book is that it contains Articles of Association of the Plaintiff-Company, which has been referred to by the Plaintiff's side in furtherance of their arguments that even under the Articles of Association, the Chairman was empowered to authorize the said Shamim Ahmed for filing the present case and, therefore, as per Plaintiff's counsel, the law laid down in Trading Corporation case (supra), is fully applicable to the instant case. The Plaintiff's counsel has relied upon the Articles 114, 115, 116 and 117 of the Articles of Association, which are available from pages-90 to 93 of the paper book. Article 115 provides specific powers to the Directors and its sub-Article (g) authorizes the Board to institute, conduct, defend, compound or abandon any legal proceeding by or against the Corporation. However, Mr. Zia ul Haq Makhdoom, learned counsel for the Defendant, controverted the above contention and instead referred to the Defendant's Counsel, was not done.
23. To appreciate the rival contentions, it is necessary to peruse above mention Article 105 of the Articles of Association, where under it has been mentioned that three Directors shall form the quorum for the Board meeting, which, as per the Articles; Article 114 provides that management of Plaintiff-Company vests in its Board of Directors, whereas, Articles 116 and 117 relate to the Chief Executive and general powers of the Chairman. But, in the present controversy, Article 112 is of significance, which lends support to the ratio decidendi of above reported decision of Trading Corporation. As per Article 112, which is reproduced herein under for a reference, a resolution passed by at least two Directors would be a valid one.
Article 112.
' A resolution in writing signed or initiated by all the Directors for the time being in Pakistan (not being less than two Directors) shall be as valid and effectual as it has been passed at a meeting of the Directors.
' The above Article 115 of the Articles of Association is of relevance, which is subject to section 196 of the Companies Ordinance, 1984, which spells out the powers of Directors of a Company and authorizes that the Board of Directors of a company can determine the terms, inter alia, on which a law suit can be compromised and claim or right in favour of a Company, released, extinguished or relinquished [Section 196, subsection (2) (m)(iii)]. The act of compromising the law suit or releasing or relinquishing the Company's claim is dealt with by way of a mandatory provision, viz. section 196 of the Companies Ordinance, 1984, which provides a penalty for non-compliance, but with regard to filing of the legal proceedings the said provision is significantly silent and it can be construed that it is due to the very fact that the act of filing a law suit/legal proceeding is to be regulated by the Articles of Association of a Company, viz. Article 115(g) of the Plaintiff-Company. As stated in paragraph-19 above, since the Chairman and Director, besides other senior officials at the helm of affairs had given their separate approvals for filing the present case, therefore, it cannot be said that the present suit was incompetently filed or instituted and, therefore, three issues reproduced herein above have been answered accordingly, in view of the above discussion, the upshot of which is that the said Shamim Ahmed, Principal Officer of the Plaintiff-Company was duly authorized to file the instant suit, which has been competently filed by him in the name of Plaintiff's Company against the Defendants and the same is maintainable.
24. Office is directed to fix this matter for further proceeding in the Court.