ABDUL SHAKURUL SALAM, J.-This Intra-Court Appeal has not only chequered history but geography too. The respondents were carrying on maritime business in Karachi with vessels on the high seas.
Their manage--ment was taken over and subsequently proprietary interests acquired by the appellants. They came to plains for relief. The then learned Chief Justice to the, L shore High Court accepted the petition. Appellants filed an appeal. A preliminary objection was taken that the judgment was no judgment in the eye of law having been sent in after elevation of the learned Chief Justice of the Supreme Court. It was decided that the matter being in appeal, it should proceed to arguments on merits. The decision was challenged through Civil Petition for Special Leave to Appeal (365/1982) which has granted but the proceedings in the appeal were not stayed by the learned Supreme Court of Pakistan. Hence, we proceed to decide the appeal on merits in the mountains at the foot of Himalayas.
2. The history is that the respondents were carrying on business under the name and style of East and West Steamship Company (1961). This firm was plying two ships m. v. 'Rustom' and m. v.
'Ohrmazd'. On 1-1-1974, Pakistan Maritime Shipping (Regulation and Control) Ordinance, 1974, Ordinance No. III of 1974 was promulgated. The same day i.e. 1-1-1974, under: section 5(1)(a) of the Ordinance the Federal Government took over the management of all the shipping concerns including the respondents' establishment, and in exercise of powers under section 6 (1) of the Ordinance appointed a Managing Director for the same. The Managing Director appointed an Officer on Special Duty for the respondents' establishment. On 3-1-1974, the Managing Director asked the O. S. D. To indicate position of the latest audited accounts and the interim accounts, who submitted a preliminary report on 9-1-1974 stating that the latest audited annual accounts of the respondents as available were for the year ending 28-2-1970 and the latest unaudited accounts for the year ended 28-2-1973. On 30-1-1974, the O. S. D. Appointed Rahim Jan & Company, who were previously the auditors of the firm, to audited the accounts for the years ending 28-2-1971, 29- 2-1972 and 28-2-1973: On 7-2-1974, the Managing Director appointed M/s. A. F. Furguson & Company to determine the Net Worth Value of the "respondents" establishment in term of principle 4 (b)' of the Schedule to the Ordinance. For taken-over establishments, a Board of Management known as Pakistan Shipping Corporation Board was established under section 7 of the Ordinance.
Respondent No. 1 was appointed as Chairman of the Board on 20-2-1974. The aforementioned Ordinance was enacted into Pakistan Maritime Shipping (Regulation and Control) Act, 1974 (Act No. XVIII of 1974) which came in force on 7-3-1974. The Federal Government re-affirmed the appointment of A. F. Forguson & Company. Respondent No. 1 objected to the appointment on account of strained relations. The earlier appointed auditors, Rahim Jan & Company audited balance-sheet for the year 1971-72 on 17-6-1974 and for the year 1972-73 on 28-6-1974. In the last balance-sheet, the auditors showed the re-valuation of the aforementioned two vessels calculate] by M/s. G. B. Potts & Company Limited Maritime Engineers Surveyors as at the end of 1972, vide their letter dated 30-3-1973 at Rs. 1,02,30,000 and Rs. 5,37,50,000, including the original value of the vessels. The re-valuation had increased the value of the two vessels by Rs. 3,01,90,074. The auditors' report is dated 28-6-1974. In view of the objection about the appointment- of M/s. A. F. Forguson & Company as auditors, the Federal Government appointed M/s. Ford, Rhodes, Robson and Morrow as the auditors on 16-8-1974. On 23-11-1974, respon--dent No. 1 was replaced as Chairman of the Board of the Pakistan Shipping Corporation by one Mr. Saeed Ahmad. On 6-1-1975, the latest audited annual balance-sheet prepared by Rahim Jan & Co. Was .Accepted and acting thereon Income-tax Return was submitted by the appellants. On 14-1-D75, the new Chairman, National Shipping Corporation, on the directions of the Federal Government, asked the auditors M/s. Rahim Jan & Company to revise the balance-sheet for the year 1972-73 ending on 28-2-1973 by reversing the entries relating to the revaluation of the two vessels by the Surveyors. The auditors, M/s. Rahim Jan & Company replied on 22-1-1975 that it was not within the competence of the auditors to revise the audited accounts. If the Chairman required any change in the audited accounts, he bad to direct his Accounts Department to draw the revised statement of accounts for the year ending on 28-2-1973 after incorporating the desired adjustment in the accounts. When the revised statement of accounts was resubmitted to the auditors for their initial/ signatures, the question of re-audit would not arise and they would verify whatever adjustments were made in the accounts and mentioned in their certificate the alterations made in the original audit statement of accounts. On 25-1-75, M/s. Rahim Jan & Company sent an amended balance-sheet bearing the dates 28-6- 74/25-1-74 wherein increased value of the assets by 50 lacs odd was shown on account of arithmetical mistake earlier made. Balance- sheet was resubmitted to the auditors M/s. Rahim Jan & Company excluding the re-valuation of the vessels, who verified the same and submitted the report on 14-2-1975. On 10-6-1975, M-/s. Ford, Rhodes, Robson & Morrow deter--mined the Net Worth Value as on 28-2-1973, but the report was not accepted by the Federal Government on the ground that it was too qualified and unworkable. On 26-12-1975, the Federal Government appointed M/s. Hyder Bhimjee & Company as new auditors to determine the Net Worth Value. The latter i.e. M/s. Hyder Bhimjee & Company submitted a report by which Net Worth Value was assessed at Rs. 24,32,279. After making the adjustment of the drawings made by the partners of the firm against their personal accounts during the year 1973-74 prior to take over of the management amounting to Rs. 24,46,677, a sum of Rs. 14,3 ,8 was found payable by the partners of the firm to the respondents. This is dated 18-21976. On 21-2-1976, in exercise of powers under section 5 (1) (c) of the Act, the Federal Government acquired the proprietary interests of the partners of the firm. On 24-3-1976, the respon--dents were informed by the Federal Government about the report of M/s. Hyder Bhimjee & Company and called upon them to pay the aforesaid sum of Rs. 14,388. They made a representation on 2-4-1976 pointing out discre--pancies, asking for basis of disallowance of various items, for accounts etc. Interim reply was given on 5-5-1976 assuring consideration of points raised and further communication. Further clarification was made on 12-10-1976.
Respondents continued writing and asked for profits, during the take over of the management up til acquisition of the proprietary rights. Representation was made on 19-9-1977 to the Secretary- General-in-Chief of the Government of Pakistan and orally to the Secretary, Communication, on 3- 12-1977. Final reply refusing documents and hearing, was sent to the respondents on 6-2-1978.
Constitutional petition was filed on 1-3-1978.
3. The respondents challenged the action of taking over of the manage--ment of their establishment, its acquisition and the last mentioned communi--cation making inter alia grievances that the re-valuation of the two vessels had wrongly been excluded, that they Were not paid their share of the profits from the take-over of the management on 1-1-1974 to the date of acquisition of their proprietary interests on 2I-2-1976, even though they had been made to pay the tax for that profit by the Income-Tax Department, that a sum of Rs. 66,62,821.85 which stood to their credit on their current account on 31-12-1973, had not been paid to them, and that they had not been supplied the requisite documents nor afforded opportunity of hearing. The writ petition was accepted as mentioned above and the following decisions of the appellants were declared to be without lawful authority and, therefore, void ; "(1) The revision of the latest audit balance-sheet (1973) and the refusal to accept the re-valuation of the ships as carried out by the Company before the taking over of the establishment.
(2) The decision to deduct a sum of Rs. 24,46,667 on account of drawings made by the partners from their personal accounts during the account--ing year 1973-74.
(3) The decision refusing to make over the profits to the petitioners from the time of the take over upto the date of the acquisition of the proprietary interests.
(4) The decision to refuse to supply the copies of all the documents asked for by the petitioners.
(5) The decision not to re-imburse the petitioners in respect of the advance made by them to the firm and forming part of their current account with it."
It was directed that the appellant shall determine the Net Worth Value of the establishment (of the respondents) on the basis of the latest annual Balance-- Sheet originally existing at the time of take over of the management without making any alterations in it. They shall reimburse the petitioners (now respon--dents) in respect of the advances made by them to the Company and referred to above. The respondents (appellants) shall furnish to the petitioners respondents) copies of all the documents claimed by them and pay to them e profit, if any, made by the respondents (appellants) from the establishment upto the time the assets were acquired". This judgment is under appeal.
4. The first argument raised by the appellants has been canvassed by the learned Advocate- General, Punjab appearing for the Federal Government and that is that the Lahore High Court had no jurisdiction to entertain the writ petition as the cause of action accrued at Karachi and all the parties excepting the Federation Government were residents of Karachi. He submitted that a High Court has the jurisdiction over its territorial limits and not beyond. He relied on The Superintendent, Land Customs, Torkham (Khyber Agency) v. Zewar Khan and 2 others (1), Maulvi Tamizuddin Khan v. Federation of Pakistan and others (2), The Collector of Central Excise & Land Customs West Zone, Chittagong v. Imdad All (3), Malik Ghulam Jdani v. The Government of Pakistan through the Secretary, Ministry of Interior, Islamabad and 3 others (4), Faiz Najmuddin Abdul Ali v. The Capital Development Authority, Rawalpindi and another (5). Anticipating the contention of the learned counsel for the respondents that the appellants had not raised the objection regarding the territorial jurisdiction of the Lahore High Court before the learned Chief Justice, the learned Advocate-General contended that submission to jurisdiction does not confer the jurisdiction if the Court or Tribunal does not have it otherwise. He relied on Muhammad Afzal v. Board of Revenue, West Pakistan and another (6), Khair-ud-Din v. Abdul Hamid and others (7), Ahmad and 32 others v. Additional Commissioner (Revenue), Lahore Division Lahore and another (8) and Wall Dad v.
Deputy Commissioner, Karachi and 2 others (9).
5. Learned counsel appearing for the respondents submitted that the question of lack of jurisdiction of the Lahore High Court was not rightly raised before the learned Chief Justice and it is an afterthought. He submitted that it is established law that a matter can be brought before a Court within whose jurisdiction cause of action arises or the defendant resides. Learned counsel contended that cause of action arose to the respondents when the Federal Government commenced action and passed orders ir-elating to the respondents' establishment. These acts happened within the territorial jurisdiction of the Lahore High Court. Secondly, the principal defendant on whose motion actions were taken and who is responsible for payment of compensation etc. Under the relevant law is the Federal Government and it has its seat within the territorial jurisdiction of the Lahore High Court. Therefore, the latter had the jurisdiction to entertain and determine the dispute.
(1) P L .D 1; 69 SC 485 (2) PLD 1955 Sind 96
(3) 1969 SCMR 708 (4) PLD 1976 Lah. 38
(5) PLD 1976 Kar. 1084 (6) PLD 1967 SC 314
(7) PLD 1966 Lah. 362 (8) PLD 1971 Lah. 979
(9) PLD 1975 Kar. 202
6. We have given considerable thought to the question regarding the territorial jurisdiction of the Lahore High Court to entertain the dispute and decide the writ petition. There is no cavil with the propositions enunciated in the cases cited by the learned Advocate-General. However, facts in the case in hand are different. Here there are other principles of fundamental importance which attract attention. First, we were very conscious of the fact that if the High Court where the respondents' establishment was located and where its Management and later on proprietary interests were taken over, were to have the exclusive jurisdiction in the matter, the other High Court in the Federation would not like to assume jurisdiction. A Federal Constitution is very delicate document requiring careful construction. Its interpretation in one Federating ,Unit should not be such that it may be taken in another Federating Unit as trenching upon the latter's rights and jurisdiction. Second, a High Court is a creation of an organic instrument, the Constitution, which operates over all the component parts of the Federa--tion and has its sway over all the territories of the Federation. Jurisdiction of a Constitutional body cannot be construed too narrowly. Nor, its authority whittled down by technical or artificial reasons. Third, a High Court is a Court of Record and is presumed to be possessed of jurisdiction. Unless it is shown to be ousted by express legislative instrument, it cannot be avoided. On facts, the appellants did not question the jurisdiction of the Lahore High Court to entertain and determine the writ petition. Having lost the game, it is neither permissible, nor, befitting the appellants, to raise this plea in appeal. Moreover, it is truism that jurisdiction of a Court extends to where cause of action arises. Cruse of action does not necessary arise, nor, is confined to, where its consequences ensue. It also arises where it is initiated or commenced. In the present case, the cause of action are at the seat of the Federal Government where on its authority and motion, actions were initiated to take over the Management and later on the proprietary interests of the respondents. Moreover, the cause of action concluded when the Federal Government called upon the respondents to pay Rs. 14,388. It is the Federal Government who is liable under the law t pay the compensation etc., if admissible otherwise. Further, under Article 3 of the High Courts (Establishment) Order, 1970. President's Order No. 8 of 1970, the Lahore High Court has the jurisdiction over the Province o Punjab and the Islamabad Capital territory. Under Article 199 of the Constitution, 1973, a High Court has jurisdiction of (a) "directing a person, performing within the territorial jurisdiction of the Court, functions in connection with the affairs of the Federation . . . To refrain from doing anything he is not permitted by law to do, or to do anything he is required by law to do ; or (b) declaring that anything done or proceedings taken within the territorial jurisdiction of the Court by a person performing functions in connection . With the affairs of the Federation . . . Has been done or taken without lawful authority and is of legal effect". Under sub---Article (9) it is provided that "in this Article, unless the context otherwise requires,-"person" includes any body politic or corporate, any authority or, or under the control of the Federal Government. . ". Therefore, the actions taken and orders passed impugned in the petition, by person and authorities of and under the control of the Federal Government, were amenable under Article 3 of the President's Order No. 8 of 1970 read with' the Constitution to examination, in exercise of Constitutional jurisdiction by the Lahore High Court. Therefore, the contention on the point is without force.
7. Some aspects of the case referred to which though do not concern the crucial controversy may be dealt with. It was said that the last impugned order was passed on 24---3-1976-but the Constitutional petition was not filed until 1-3-1978 and, therefore, it suffered from laches, is insubstantial as representations of the respondents were being considered. His effects to have the documents and hearing finally failed when he was informed on 6-2-1978. Therefore, there was no delay when petition was filed on 1-3-1978. Second, that the relevant- balance-sheet for the year- 1972-73 audited by Rahim Jan & -Co. Showing re-valuation of the two vessels, was prepared on 28- 6-1974 when the respondent No. 1 was the Chairman of the National Shipping Corporation since 20-2-1974. It ME been replied in the counter-- affidavit that the allegation is false and mala fide.
The re-valuation had taken place before taking over of the management on 1-1-1974 and although the firm owed large sums of money to the respondents yet the respondent No. 1, who was senior partner, had in his possession fixed deposit receipts in the sum of about 29 lacs which he scrupulously returned to the Govern--ment after take over instead of adjusting them against the advances. Further that during his tenure the Board made a profit of about two crores whereas thereafter it went down to about forty thousand only. The respondent No. 1 had been appointed as Chairman by the Federal Government --obviously for his capability and integrity. The innuendo in the argument is baseless, afterthought and inconsequential for decision of the controversy on the point as will be seen subsequently at proper place. It is highly undesirable to hit below the belt when the other is in stocks and extremely noxious to attack personal character and integrity wantonly.
8. For consideration of crucial points of controversy, the learned counsel for the appellants Mr. Iqbal Ahmad Qazi, Advocate read the following sections of Pakistan Maritime Shipping (Regulation and Control) Act, 1974 in support of his submissions on the merits of the case :- "Section 3. Declaration.-It is hereby declared that the industry shall be carried ,. On .And owned by the Federal Government . ,or by a Corporation' controlled by it, to the exclusion of all other persons, except a foreign investor.
Section 5. Power to. Take over management or acquire shares or business of an establishment.(1)
The Federal Government may, if it considers necessary in the public interest so to do, by an order in writing-
(a) take over the management of any establishment and, as from the date of such order, the previous management shall stand divested of such management ;
(b) . , . . ,---------------..
(c) in the case of an establishment owned by a person, acquire the whole pr a portion of the proprietary interests of such person, and as from the date of the order the interests so acquired shall vest in the Federal Government.
Provided that no order shall be made under this section for the acquisition by the shares held in an establishment by an institution owned or controlled by the Federal Government, including the National Investment Trust and the Investment Corporation of Pakistan or the shares held by a foreign investor Provided further that in the case of an establishment which is a company or an establishment owned by a company, the Federal Government may, by notification in the official Gazette, exempt from acquisition share-holdings of any share-holder up to such maximum amount as may be specified in the notification.
Section 6.. Appointment of Managing Directors.-(1) Where the Federal Government has made an order under section 5 in respect of an establishment, it may appoint a Managing Director in respect of such establishment.
(2) Upon the appointment of a Managing Director in respect of an establishment, the administration and management of the affairs of the establishment shall vest in the Managing Director, and any company or person or authority exercising or having the. Right to exercise, immediately before such appointment, any power or function in relation to the establishment shall cease to exercise or to have the right to exercise such power or function.
Section 7. Board of Management.-(1) The Federal Government may, by notification in the official Gazette, set up a Board of Management to control, manage and direct the affairs of establishments in respect of which Managing Directors have been appointed and, where it sets up more than one Board shall specify in the notification the establish--ment or class of establishments in respect of which each Board shall exercise its powers and perform its functions under this Act.
(2) A Board shall consist of a Chairman and such number of members. Not exceeding nine, as the Federal Government may appoint.
Section 11. Adoption of balance-sheet.-In the case of a managed establishment owned or controlled by a company, the general meeting of the company before which a balance-sheet is laid shall not, if the Federal Government by order in writing so directs, have the authority to refuse to adopt the balance-sheet, but nothing in this section shall be construed to prevent any share- holder from expressing his views on the financial affairs of the establishment and a record of the proceedings of such meeting shall be forwarded to the. Federal Govern--ment not later than fifteen days of the meeting.
Section 14. Acquisition of shares.-Where, under section 5, the Federal Government orders acquisition of the whole or a portion of the shares of the share-holders of any company or of the proprietary interests of a company or other person in an establishment it shall acquire the shares or interests within a period of ninety days on payment of such compensation as- may be determined by the Federal Government on the basis of the principles set out in the Schedule.
Section 19. Creditor.-(1) A creditor of a managed establishment may apply to the Federal Government for payment to him of the amount due to him from the establishment.
(2) The Federal Government may, on receipt of an application under subsection (1) and after such enquiry as it may deem fit, direct the managed establishment-
(a) to repay the amount. Due to the creditor in such instalments and within such period as may be specified in the direction ; or
(b) if such managed establishment be a company, to convert the amount due to the creditor into share capital of the establishment.
(3), If a managed establishment fails to comply with a direction issued to it under subsection (2), the Federal Government may order that the amount specified in the direction be recovered from it as an arrear of land revenue and paid to the creditor.
Section 26. Minimum return.-(1) Where the Federal Government takes over the management of an establishment but does not hold majority portion of shares in a company carrying voting rights, or controlling proprietary interests, therein; it shall, on behalf of such establishment, guarantee to the shareholders or proprietors of such establishment, a minimum annual rate of return equivalent to one per cent above the bank rate.
(2) The minimum rate of return referred to in subsection (1) shall be worked out, in the case of an establishment which is a company or is owned by a company, on the paid up capital of such company, and, in the case of an establishment owned by a person other than a company, on the Net Worth Value of investment as defined in the Schedule on the basis of the figure appearing in the latest annual balance-sheet: of such establishment.
The Schedule Principles and the manner for payment of compensation in respect of the shares or proprietary interests of an establishment acquired by the Federal Government.
2. Where the whole or a portion of the proprietary interests in such an establishment is. Acquired by the Federal Government, the value of the compensation for the interests so acquired shall be assessed at the Net Worth Value.
3---------------------..
4. Definitions.-In this Schedule,-
(a) . ------------------------..
(b) "Net Worth Value" shall mean the value of the proprietary interests of a company or other person in an establishment, which is acquired under the Order, as determined by the auditors appointed by the Federal Government on the basis of the latest annual audited Balance --Sheet or, where no audited Balance-Sheet is available, on the basis of the latest annual Balance-Sheet of such establishment to be verified by the auditors appointed by the Federal Government for the purpose. The Net Worth Value shall be determined by valuing the fixed Tangible Assets appearing in the Balance-Sheet at their written down value, and valuing the Current Assets, e. g. stocks,.
Inventory, work in progress, advances and prepayments, cash and bank balances, at their cost or market value, whichever is lower. From the sum total of the fixed and the Current Assets so valued as aforesaid, all the outstanding liabilities appearing in the Balance-Sheet shall be deducted, thereby arriving at . The Net Worth Value of the proprietary interests in such establishment."
9. After saying that there was no audited balance-sheet at the time of take-over of the management and the case is to proceed on that basis but being pointed out that the relevant time was the acquisition of the proprietary interest and the audited balance-sheet for the year 1972-73 by Rahim Jan & Company was admitted to be there by the appellants in their written statement to the writ petition, the learned counsel for the appellants submitted that, firstly, it was open to the taken-over management and the Federal Government to direct the auditors Rahim Jan & Co. To reverse the re-valuation of the two vessels from the balance-sheet. Secondly, the Net Worth Value of the Tangible Assets is to be determined at their "written down value", and the "written down value" is defined in section 10(5) of the Income-tax Act, 1922, applicable at the relevant time, as follows;-- "(b) in the case of assets acquired before the previous year the actual cost to the assessee less all depreciation actually allowed to him under this Act, . ." The contention of the learned counsel for the appellants is that re-valuation of the two vessels of the respondents was irrelevant for .The purpose of determining .The Net Worth Value because it is "the actual cost" of the vessels minus all the deprecations allowed which constitutes Net Worth Value. He relied on a Bombay High Court decision in Rogers & Co. v. Commissioner of Income-tax, Bambay City 11, 34 I R 336. He also referred to Income-tax Appellate Tribunal, Lahore's decision reported in 1982 PTD (Trib.) 43 in which it was held that depreciation could be allowed on the original value of the assets and increase in its value by fluctuation of the foreign exchange subsequently, could not be taken into account in calculating the depreciation. Learned counsel pointed out that when it was decided to do so, specific legislation was made in the form of rule 8(8)(e) of the Rules for Computation of Depreciation Allowance, The Third Schedule to the Income-tax Act, 1979. He also referred to an article on Budget proposals, 1980 published in a Journal "Pakistan Economist", Issue XX for May 17- 23, (1980) where it was said that in Pakistan revaluation of assets was not allowed."
10. The second point urged was that the respondents were not entitled to profits during the period the establishment was taken over on 1-1-1974 until the acquisition of proprietary rights on 24-2- 1976, as claimed by the respondents, because after the enactment of the Pakistan Maritime Shipping (Regulation and Control) Act, 1974 from 7-3-1974, under section 3 it was declared that "the industry shall be carried on and owned by the Federal Government or by a Corporation controlled ,by it, to the exclusion of all other persons", and since the respondents could not carry on the business there was no question of making any profit by them or for them. Their only entitlement was the guarantee of a minimum annual rate of return equivalent to one per cent. Above Bank rate on the Net Worth Value of the investment.
11. The third point made was that the respondents were not entitled to be paid Rs. 66,62,821.85 shown in their Current Account, under section 19 of the Act because this provision envisages the creditors to be outsider of the establishment and not the partners of the firm as the respondents were. It was submitted that a partner of a firm cannot be a creditor of the firm because a firm is nothing but the partners and partner -cannot give credit to himself. He relied on a passage at p.
26, Lidley's Partnership, 13th Edn. 1971. He also referred to Ghksulal Ganeshlal v. Gambhirmal Panya I LR62Cal.510, to submit that "one partner cannot sue for money due to the firm of which he is a member. The advance is but an item in the partnership account".
12. The fourth point contended was that the respondents were not entitled to any interests.
13. And finally that the appellants were neither. Bound nor obliged to supply any documents as those were already available with the respondents, nor to give any hearing to the respondents because the matter was calculation of accounts.
14. Learned counsel for the respondents opened the arguments by saying that the Act under consideration is an exproprietary legislation giving all powers to the exproprietor, therefore, it should be construed very strictly. Besides referring to the statutory provisions quoted by the learned counsel for the appellants as noted above, he read out the definitions of various terms given in section (2) of the Act. These are as follows : Section 2.-(e) "Creditor" means any person to whom a managed estab--lishment owes any amount;
(g) "establishment" means any company, firm, concern, institution or enterprise the whole or any part of the undertaking of which pertains to the industry and includes any related office, shop, factory, godown, yard, stocks and stores, wherever they may be ; ( j) "managed establishment" means an establishment in respect of which a Managing Director has been appointed ;
(m) "person" includes an individual, a Hindu undivided family, a part--nership firm and an association of persons or a body of individuals, Government of a Province and a local authority ;
(n) words and expressions used but not defined in this Act shall have the same meaning as in the Companies Act, 1913 (VII of 1913).
15. The learned counsel for the respondents submitted that the conten--tion of the learned counsel for the appellant that a partner cannot be a creditor of the firm as the firm is not a legal entity and a partner cannot sue, is not quite correct for the reasons that per definition of "creditor" in the relevant Act above-quoted, "creditor" means 'any person' and the definition cannot be added upon by the phrase "other than a partner" to read "any person other than a partner". Secondly, the aforequoted definition accepts and acknowledges a firm, albiet, partnership form, as a distinct and separate entity. See clauses (g) and (m) of aforesaid section 2 of the Act. So does Income-tax Act in section 2(6) (aa) and (bb). He relied on a Privy Council decision reported in A.
1. R. 1948 P. C. 100 as referred to with approval by the Supreme Court of Pakistan in Akhtar Ali and another v. Mst.
Umatul Islam PLD 1979SC815He also read from Lindley's Partnership, 14th Edn. Extracts from pages 390, 420, 442. He further submitted that the argument that a partner cannot sue so cannot recover is not sound for the reasons that non-availability of a remedy does not extinguish a right,. Secondly, a suit can be filed under order XXX, rule 9, C. P: C. Though the Court may not order execution without full accounts. Reliance was placed on AIR 1921 Nag. 45, AIR 1936 Lah. 648 and AIR 1950 Bom. 184.
16. As regards the right to profits for the period the management of the establishment was taken over until acquisition of proprietary rights, the learned counsel for the respondents submitted that section 26 of the Act which guarantees minimum annual rate of return, relied upon by the learned counsel for the appellants, itself provides that that is the minimum, not the maximum or total. It does not take away the right to profits, which had to be provided for expressly if intended. Partners are entitled to profits even after their death if their assets continue to be utilized in the firm, vide section 37 of the Partnership Act. Secondly, the learned counsel submitted that until acquisition of proprietary rights of the respondents, obviously those vested in the latter and they were entitled to the profits thereof. The fact that they were not themselves carrying on the business is not relevant as that is neither necessary because business can be carried through managers, nor the respondents were not carrying on the business because of themselves but on account of the acts of the appellants as the latter took over the management. The appellants cannot be heard to say that we take over the management, you cannot carry on the business, and then, deprive the respon--dents by saying that you were not carrying on the business. It will amount to depriving a person of his right and then saying that you have no right as you stand deprived. Thirdly, the learned counsel submitted that the respondents are being dealt with discriminatory in so far as that another establish--ment similarly taken over and proprietary interests acquired, that had been paid profits during the period of the two events. That is Pakistan Shipping Line Ltd. Moreover, the Federal Government itself accepted the right to profits in another case of Hussain Imam and others v. Pakistan and others, Constitutional Petition No. 441/76, in its written statement filed before the Sind High Court. It is illegal and perverse to deny the respondents what is being done for and conceded to others. Lastly, it is submitted that the respon--dents have been imposed tax for the profit by the Income-tax Officer and the order has been upheld by the Income-tax Appellate Commissioner and the Income-tax Tribunal. It is traversity that the respondents are being taxed for the profits by one set of statutory functionaries and the others are denying their entitlement to profits. The respondents have been given the worst of the two. It may, however, be noted that the learned counsel for the appellants has pointed out that the latter have gone in reference to claim that the respondents were not entitled to profits and consequently would not be liable to tax on the. Profits.
17. Learned counsel for the respondents, then, vehemently contended that the revaluation of the two vessels had come about in due course and according to law. It was submitted that accounts are required to give a real and true picture of the position of a business concern. Section 132 of the Companies Act envisages that. He submitted that the respondents acting on legal advice got the two vessels re-valued from a renowned firm of Surveyors, J. B. Potts Co. Ltd., entered the revaluation in the books of accounts, filed income-tax return and paid premium on that basis. On top of it, the appellants too adopted the first Balance-Sheet which showed the revaluation as audited by Government appointed auditors, Rahim Jan & Company and acting thereon had also filed Income-tax return on that basis. Revaluation was accepted as permissible id the case of another similar concern, Pan-Islamic Steamship Co, when the respondents filed a counter-affidavit in the case of that concern in the Sind High Court, though it may be' pointed out that it was not allowed because of no proof of-that having been shown in the income-tax return or any premium paid m that case. It is submitted that these two items having been satisfied in the case of the respondents, the latter could not be deprived thereof by saying that no revaluation could have taken place.
Secondly, it is submitted that after revaluation was shown in the accounts books and the Government appointed auditors showed that in the Balance-Sheet, which was accepted and acted upon by 'the appellants, it was neither open, nor, permissible to the appellants to give direction to reverse the entries relating to the revaluation. It was submitted that auditors are professional people acting under and in accordance with law and subject ;to penalties for default, (the learned counsel referred to 'sections 144 and 145 of the Companies Act), could not be issued direction as to what they should do. If it were permissible the whole purpose would be defeated. It was, therefore, contended that the direction issued by the appellants to the auditors to reverse the entries was ultra vires and resultant consequence of no legal effect..
18. Then, the learned counsel for the respondents contended that when para. (2) (4) of the Schedule to the Act provides for valuing the Tangible Assets at their "Written down value" for determining the Net Worth Value of the proprietary interest acquired, the term `written down value' should be construed in its ordinary commercial connotation and not confined to the meaning given in section 10(5) of the Income-tax Act as contended by the learned counsel for the appellants, for the reasons, firstly, that the meaning of the term in the Income-tax Act is for the purposes of tax only, secondly, if this special meaning were intended to be assigned to it generally, it would have been so defined in the Definition section of the Act q under examination, i.e. Pakistan Maritime Shipping (Regulation and Control) Act, 1975. On the other hand, it is submitted that under that section 2 of the Act, clause (n), it is laid down that "words and expression used but not 'defined in this Act shall have the same meaning as in the Companies Act, 1913 (VII of 1913). Therefore, it is submitted that written down value should be interpreted as used under the Companies Act which covers revaluation of assets as would appear from Form F prescribed under section 13 of the Companies Act, 1913. He also read out extracts from standard books on accounting. He referred to some decisions including (1972) 8 I T R 497, (1965) 58 1 T R (Sh. N.) 37), a decision of the Supreme Court of India wherein the revaluation by the company was accepted by the Wealth Tax Officer and his decision was upheld, in support of his contention.
19. Then, he submitted that in determining the Net Worth Value, Hyder Bhimji & Co. Overstepped their jurisdiction in going behind the latest audited Balance Sheet by saying that a sum of Rs.
50,11,080 was doubtful debt, though that has, in fact, been recovered ; depreciation had been taken into account in the case, of one vessel m. v. 'Ohrmazd' which had come about because of foreign exchange fluctuation, but wrongly from a period prior to 4 years of the fluctuation ; treated Bonus share as Nil on the understanding that nothing was paid therefor, not realizing that those were issued on account of non-disbursement of the - profits in the form of dividends and therefore, had the value. These were required to be evaluated at their market value being lower under the Current Assets in clause (4) of para. 2 of the Schedule to the Act. It is submitted that these acts were clearly beyond legal authority.
20. Then, he submitted that in the impugned order all the respondents were lumped together. They were .Each individually entitled to be paid the compensation or, liable to pay if they owed anything to the appellants. It could not be done that one who was entitled to receive was refused because another owed something.
21. Finally the learned counsel contended that the respondents are entitled to interest on the sums due and not paid. He referred to Interest Act and section 34 of the C.' P. C. He relied on AIR 1938 P C 70, PLD 1976 Lab. 726 at 729 and PLD 1979 Lab. 735.
22. In reply, the learned counsel for" the appellants submitted that the respondents being-not a company were not required to have the auditors and therefore, no argument can be raised on the authority or acts of the auditors. Secondly, the two concerns cited by the respondents who were paid profits instead of minimum annual rate of returns were companies whereas the -respondents were a firm which came to an end no take over of the management. He, further, submitted that the respondents having filed neither cross-appeal nor cross-objection, are not entitled to question the action of Hyder Bhimjee & Co. nor can they challenge the impugned order on the ground that it dealt with them collectively rather than individually. He also submitted that the auditors Hyder Bhimjee & Co. Were right in treating the Bonus share at nil value because those had not cost anything to the respondents and although were shown in the relevant Balance Sheet to have value, but earlier books of accounts of the relevant time showed those to be at nil value. He relied on Commissioner of Income-tax, Bihar v. a Dalmia Investment Company Ltd AIR 1964 SC 1464,The learned Advocate-General supported the arguments of Mr. Kazi and submitted that the constitutional jurisdiction is not attracted to the facts of the case which deals with calculation of various items.
23. Mr. Anwar Khalid, Advocate, pointed out that AIR 1964 SC 1464 relied upon by the learned counsel for the appellants has not been followed by this Court in the case reported as PLD 1976 Lab. 1028.
24. Arguments have been addressed by the learned counsel for the parties at length. The subject is apparently dry. A little diversion may not be out of place and it will not be Love's Labour's Lost.
Shakespeare tells a tale in Merchant of Venice. The marchant had vessels on the high seas. He borrowed some money and executed an instrument promising to pay the sum by a certain date; in default, the creditor was made entitled to take a pound of his flesh. Payment was not made by the due date. The creditor sued the merchant claiming that the clause relating to the default be enforced. He insisted that he was entitled to enforce the contract per its letter, as the law of the land demanded strict enforcement of contracts. The merchant was obviously in quandry. If the instrument were to be enforced literally, the creditor would be entitled to a pound of flesh, which the creditor said he would have it from near the heart of the debtor. The Court ruled that the creditor was entitled to enforce his contract to the letter and to take a pound of flesh from the merchant. But in its wisdom, we may say judicial, it directed that the creditor should not shed a drop of blood, because that was not part of the contract and the law of the land prohibited that.
Obviously, the creditor could not cut the pound of flesh without dropping blood and, therefore.
Asked for return of the money which was declined on the ground this t he having attempted to shed innocent blood was liable to forfeiture of goods, which were distributed, in discretion, in favour of the creditor's progeny as well. With slight variation and due apologies to the renowned author, the story can be adapted to read as far as the case in hand I concerned, to : that the appellants took over the interests of the respondent "on payment of compensation" as required by the Act to be paid "according to the principle prescribed in the Schedule". The principle is so applied by the p appellants that nothing becomes payable or not the due. In other words, what is laid down in the Act is reduced to nothing or nearly that by interpretation and application of the Schedule. The moral of the Shakespearean story was so far as relevant for our purposes, that instruments cannot be so construed that by enforcement of their letter or one part, one destroys the spirit of the whole and end up with what is unjust, but should be so interpretted and enforced that the parties acquiring interest thereunder receive the same without injustice to others. In more technical terms, the legal instruments, including laws, have to be interpretted and enforced not only according to their letter on face but inaccordance with their spirit, so as to secure the rights of the parties which vest in them, without divesting or putting extra or harsh liability on others which were not intended or provided for. Inother words, the principle of construction, albeit elementary, is to construe legal instruments and statutes according to their intent and purpose without twisting the language to the extent that the net result is unjust. Further, it is not to be presumed that what the legislature gives by one hand, it intends to take it away by the other. A statute in its entirety has to be construe and one part thereof cannot be so interpretted as to nullify the effect of the other. It is, again, trite rule of interpretation of laws that a statute which creates in favour of citizens, is construed liberally in their favour and a statute which imposes liabilities or takes always their rights, is construed narrowly and strictly. If a single statute takes away the property of a citizen and provides for compensation, the statute cannot be so construed that property is taken away and compensation calculated to zero. A balance has to be kept. This is law of God and nature. It is the requirement of human justice. All over the world the insignia of administration of justice is the Balance.
25. The basic facts' are that the respondents' establishment, East West Steamship Company (1961) was carrying on business as a partnership firm having two ships, m.v.- Rustom and ,m. v Ohrmazd.
The manage--ment of the establishment was, taken over by the Federal Government on 1-1-1974, proprietary interest of three partners on 24-2-1976. Under section 1 of the Maritime Shipping (Regulation, and Control) Act, 1974, the Federal Government was authorised to acquire the interest "on payment of such compensation as may be determined by the Federal Government on the basis of the principles set out in the schedule" The principle set out in the Schedule is No. 2 which is as follows: "Where the whole or a portion of the proprietary interests in such an establishment is acquired by the Federal Government, the value of the compensation for the interests so acquired shall be assessed at the Net Worth Value". The Net Worth Value is defined in clause 4 (b) of the Schedule as under: "'Net Worth Value shall mean the value of the proprietary interests of a company or other person in an establishment, which is acquired under the Order, as determined by the auditors appointed by the Federal Government on the basis of the latest annual audited Balance---Sheet or, where no audited Balance-Sheet is available, on the basis of the latest annual Balance-Sheet of such establishment to be verified by the auditors appointed by the Federal Government for the purpose.
The Net Worth Value shall be determined by valuing the fixed Tangible Assets appearing in the Balance-Sheet at their written down value, and valuing the Current Assets. e. g. Sticks, inventory, work in progress, advances and prepayments, cash and bank balance, at their cost or market value, whichever is lower. From the sum total of the fixed and the current Assets so valued as aforesaid, all the outstanding liabilities appearing in the Balance-Sheet shall be deducted, thereby arriving at the Net Worth Value of the proprietary interests in such establishment."
In short, compensation is to be assessed at Net Worth Value to determined by the auditors appointed by the Federal Government, on the basis of the latest annual audited Balance Sheet.
Tangible Assets will valued at their 'written down value' and Current Assets at cost or marked value whichever is lower.
26. In the case in hand, there was, admittedly, the latest annual audited Balance Sheet prepared on 28-6-1974 by Rahim Jan & Company, the auditors appointed by the appellants themselves. It was adopted and ante upon by them. This was to form the basis for determining the Net Worth Value by the auditors to be appointed by the Federal Government for valuing Tangible Assets (for the present) and they were to take the written down value' thereof. What has happened in this case is that 'adopted that there was the latest annual audited Balance-Sheet, 'adopted and acted by the appellants themselves, instead of determining the Net Worth Value on the basis thereof, the auditors Rahim Jan & Company were directed by the appellants to reverse the entries relating to the revaluation of the two vessels of the respondents. The auditors declined to do s saying that it was not within their jurisdiction and if that was required the persons concerned may do so themselves and submit the revised balance---sheet to them, which they would verify pointing out the facts. The idea of the appellants was to remove the revaluation of the two vessels from the Balance-Sheet so that while valuing the Tangible Assets at their 'written down value', the reduced figure is taken. There are following points to be kept in view : Firstly, that much before the relevant it me of take-over, on proper advice, revaluation of the two vessels had been made by a renowned firm of Surveyors, G. B. Potts. It was acted upon by paying income-tax, premium etc. Thereon. It was shown in the books of accounts and after proper verification, it was incorporated in the relevant Balance-Sheet audited by Rahim Jan & Company, the auditors appointed by the appellants themselves. On their part also, the appellants adopted and acted upon the Balance-Sheet. It was too late for the appellants to turn round and direct the auditors to reverse the entries. Secondly, it is to be noted that auditors are a professional people who act according to their professional norms and are required by law to apply their expertise and, for default, are liable to punishment. They cannot be issued direction to do what they have not to do, or, to undo what they have done, according to their specialised knowledge. The fact that the appellants were ultimately to pay the compensa--tion etc., is no reason to give them the authority to direct the professional people as to how the latter should act. Fr. Simple illustration may bring home the point. A doctor examines a patient, a Government servant, and writes down a prescription. If the Government is to pay the bill of the medicine, for that reason it cannot direct the doctor to exclude certain medicine, which it thinks should not have been prescribed. Obedience may be fatal for the patient. Most of the consequences under challenge have flowed on account of the aforesaid like direction of the appellant. There is no provision of law pointed out by the learned counsel for the appellants which gives any right or jurisdiction to the appellants to issue a direction to the auditors who have prepared a balance-sheet to make any change. On the other hand, the relevant statute takes the Balance Sheet as basis for its application and enforcement. The learned Chief Justice, if we can say so with respect, was quite right in holding that the direction's to the auditors for reversal of the entries, was ultra vices and illegal.
27. Next we proceed to consider the contention of the learned counsel for the appellants that for evaluating the Net Worth Value of Tangible Assets, "written down value" thereof should be read to mean 'actual cost' minus the depreciation allowed as defined in section 10(5) of the Income-tax Act, 1922. The contention misses the point that that definition is meant for a particular situation stated in that subsection and not generally, otherwise the phrase would have been defined in the definition section of that Act. Moreover, that subsection gives definition of other words, like 'plaint' to include "vehicles" and "books" etc. Books by no means are plant and because of their definition in the subsection, it cannot be said that books of literature, like Milton's "Paradise Lost", or, of Iqbal's Bang-e-Dara should be construed to mean as plant. Therefore, it is neither permissible nor necessary to import the meaning of a phrase in a special context to a different situation under a distinct statute. Secondly, the Act with which we are concerned I.e. Maritime Shipping (Regulation and Control) Act, 1974, provides in section 2(n) that "words and expressions used but not defined in this Act shall have the same meaning as in the Companies Act, 1913 (VII of 1913). In commercial practice and under the Company Law, revaluation is permissible and when the Tangible Assets are re-valued, they are so shown in book of accounts including the revaluation. Thirdly, there is an intrinsic indication of the meaning of Net Worth Value in clause 4(b) of the Schedule relied upon by the learned counsel for the appellants and that is that the Net Worth Value is to be calculated by valuing the fixed Tangible Assets appearing in the balance sheet at their `written down value' whereas in case of Current Assets it is provided that they shall be valued at their `cost or market value whichever is lower'. In other, words, the provision envisages that the valuation of the Tangible Assets will be on the basis of `written down value' in contrast to the Current Assets which will be valued 'at cost or market value whichever is less'. Therefore, the contention of the learned counsel for the appellants that the value of the two vessels as Tangible Assets has to be calculated at the cost incurred by the respondents when the vessels were purchased minus the depreciation allowed, is not quite correct. A little prick will take the 'wind out of the sails of the learned counsel submission if we refer to as what has been done to m. v. Rustom. Its value calculated with reference to original cost minus the depreciation allowed has been arrived at zero. Now, here was a vessel sailing on the high seas and, after take-- over, has been sold by the appellants themselves for about two crores of rupees. To say that its Net "Worth Value was nil is traversity of the highest order. The contention of the appellants is bellow to the roots.
28. There is another aspect of the case. Notwithstanding the repeated requests of the respondents to be heard in support of their case and documents relied upon against them shown, they were neither heard at any stage, nor, supplied the documents. We are aware that the statute does not provide for a hearing to the person likely to be affected by the acts thereunder. We are also conscious of the contentions of the learned counsel for the appellants that since the matter of determination of Net Worth Value is dependent on calculations, therefore, the respondents need not have been heard, but it is being forgotten by the appellants that it is elementary requirement of human affairs that the parties likely to be affected should be afforded an opportunity of being heard and it is truism by now that no person is to be affected in his person or property without being afforded an opportunity of hearing. The All-Knowing who need not know by hearing the person concerned, does not decide affecting his own creation without hearing the latter, taking the evidence and scrutinizing the submissions in support thereof. To start with, Adam was not deprived of his residence without being called upon as to why be should not be so excluded, and on the Day of Judgment. He would hear all before adjudging. When All-Knowing, Almighty, Always-Being, will hear His own creature before taking action, no mortal can claim to know or have the right not to hear another like himself and still deprive him of His person, reputation or property. One who does so sins against his creator and commits wrong against his fellowman. If the letter of mundane law is required as enunciated by human beings, there it is when the highest Court in the land, the learned Supreme Court of Pakistan mentioned its various case in the case of "University of Dacca v.
Zakir Ahmad PLD 1965SC90, and the late distinguished Chief Justice of Pakistan Mr. Justice Hamoodur Rehman observed that "in all proceedings by howsoever held, whether judicial or administrative, the principles of natural just have to be observed if the proceedings might result in consequences affecting the person or property or other right of the parties concerned. This rule applies even though there may be no positive words in the Statute or legal document whereby the power is vested to take such proceedings, for, in such cases this requirement is to be implied into it as the minimum requirement of fairness". In the case in hand, we are quite clear that the matters requiring determination of facts could not be justly or legally determined behind the back of the persons concerned, the respondents. If this were possible, it will be open to the acquiring authority to say that notwithstanding that we are required to .Pay compensation for the acquired interest, we have determined the same in our office and you are entitled to nothing. If the person con--cerned could not come to a Court of law for relief, what else could he do-- except suffer injustice? Which in faith and history of mankind, always rebounds on the person or the authority who acts arbitrarily, unjustly or cruelly. Therefore, we are quite clear and definite that the respondents were entitled to be associated and heard at all stages while their rights to compensation and other ancillary matters were being determined.
29. Since we hold as above, we do not propose to deal with the details of various items, except two which were strenuously argued by the learned counsel for the parties, i.e. that the respondents were entitled to the 'profits' from the time of take over of their management until their proprietary right were acquired. This is so far the obvious reason that until the proprietary, rights were acquired by the appellants and the respondents were divested thereof; the respondents remained vested with the proprietary rights and if their interests were being utilized for carrying on business and the business makes profit, they would be entitled thereto. It is so obvious and patent that we fail to understand as to how it could be urged that the respondents were not entitled to the profits, even though their interests were not acquired, simply because the Management had been taken over and the respondents were not carrying on the business. Besides that the respondents could not carry on the business on account of the acts of the appellants themselves, but even a dead partner is entitled to profits earned by the firm of which he was a partner and which uses his interest, vide section 37 of the Partnership Act. The fact that under section 26 of the Act concerned, minimum annually rate of return is guaranteed, does not mean that that was the maximum. It was minimum ex facie. Maximum was left to be dealt with in accordance with the general practice and law.
30. Also we are of the view that the respondents were clearly entitled to the sums in their Current Account. The same could not be denied on the ground that creditors to be paid under section 19 of the Act concerned, do not include a creditor who happened to be a partner of the firm. Not only the word 'creditor' as defined in section 2(c) of the Act means "any person"and one cannot add to "any person", "other than a partner", because nothing is to be added in a statute if not necessarily called for but it would be thorough--ly unjust to admit the debt and not to pay the same to the creditor whoever that person or body happens to be. The contention of the learned counsel for the appellants that the amounts shown in the Current Accounts of the respon--dents will be an item in the accounting and will be dealt with as between the partners themselves, misses the point that the amounts credited into theindividual accounts of the partners over and above their interest in the firm, are distinct and separate matters. Advances made by partners over and above their shares are separately dealt with under Partnership Act. More so that) will be, if the amounts are shown in separate and distinct accounts of the individual partners. The contention that a partner cannot sue the firm as a creditor is a different story altogether. He may not be allowed to do so until he has settled all accounts as provided for in Order XXX, rule 9, C. P. C. But that does not affect his right. Remedy is only deferred until certain contingency.
31. In view of what has been stated above, we are clearly of the view that the respondent were and are entitled to and the appellants under an obligation to proceed on the latest annual audited Balance Sheet dated 28-6-1974, which had been adopted and acted upon by the appellants themselves, to determine the Net Worth Value of the establishment. The respondents are also entitled to `profit' during the period of take over of the management until acquisition of the proprietary interests and to be paid the amounts shown in their Current Accounts. While this is being done, the respondents shall be afforded opportunity to see the documents and have their say on all other matters and decision thereon. All this shall be done expeditiously and in accordance with law. The claim of the respondents to interest, we cannot allow because the respondents having not been granted the relief by the learned Chief Justice and they having not filed any cross-appeal or cross-objection, are not entitled thereto. We would have considered that, especially in view of the fact that money has gone down in value and a person who was entitled to compensation, let us say, of Rs. 10,000 in 1976 when the rights were acquired, may now even if given Rs. 10,000, find its value only Rs. 6,000 or even less and it is anybody's guess as to when the respondents will ultimately get the compensation etc. And when that time come the value of the money may still have gone down. Since the respondents have not made the claim in appeal and in view of the disputed. Unascertained sums, we cannot allow interest on the sums not paid when those fell due.
32. The appeal is disposed of in the above terms but in view of the fact that the controversy had been raised on account of different approaches to statute, we leave the parties to bear their own costs.