SHAMS MEHMOOD MIRZA, J. This order shall decide the present petition as well as connected Civil Original No.49 of 2015 on account of similarity of facts and the cause of action agitated therein.
2. The petitioner being subscriber of respondent No.1 Company (the Company) has filed this petition under section 152 of the Companies Ordinance, 1984 (the Ordinance) seeking a declaration that Form A for the years 2008 and 2011 through which the shares of the petitioner were shown to have been transferred in the first place to respondent No.3 and then to respondents Nos.2 and 5 be declared to be illegal.
3. The facts of the case in brief are that the respondent company was incorporated on 25.07.2007 with paid-up capital of Rs.3 Million divided into 300,000 shares of Rs.10/- each. There were four sponsors of the Company including the petitioners in both the petitions to whom 75000 shares each were allotted. It is alleged that respondent No.2 was in full control of the company and in concert with respondents Nos. 3 and 5 fraudulently transferred the shares of the petitioner on 08.05.2008 to respondent No.3. These shares were subsequently shown to have been transferred to respondents Nos. 2 and 5 on 19.07.2011. In the connected petition, the shares of the petitioner were allegedly transferred in favour of respondent No.2 who subsequently transferred the same in favour of his wife, Uzma Abbas Bassi, respondent No.5. These transactions are reflected in the relevant Form A submitted to the Securities and Exchange Commission of Pakistan (the Commission). The petitioners upon gaining knowledge of the fraudulent transfer of their shares, applied for the relevant Forms from the Commission in the year 2015 and came to know about fraud perpetrated by the respondents and immediately filed these petitions.
4. Reply to this petition has been filed by respondents Nos.2, 3 and 5 (the respondents). During the course of arguments, the learned counsel for the respondents simply alleged that the shares as mentioned in the Memorandum of Association were never transferred to the petitioner. In the alternate, it is argued that the petitioner never paid the share deposit money. In this regard, reference is made to proviso to section 17(2) of the Companies Act, 2017 (the Act) which stipulates that in case the share money is not deposited within the prescribed time, the shares shall be deemed to be cancelled and the name of that subscriber shall be removed from the register. The respondents also alluded to the fact that some arbitration proceedings took place between the parties in which the claim put forward by the petitioner was found to be false. The arbitration clause in the Memorandum and Articles of Association was also pressed into service to contend that this petition was not maintainable.
5. The name of the petitioners in both the petitions is duly reflected in the Memorandum of Association of the Company having subscribed to 75000 shares. Similarly, Form A for the year 2008 shows transfer of petitioner's 75000 shares in favour of respondent No.3. These documents clearly reflect title of the petitioners over the disputed shares. When questioned about these documents that are not in dispute, the learned counsel reiterated his stance that the shares were either not allotted to the petitioner or were subsequently got cancelled on account of non-payment of share deposit money. The respondents have not demonstrated through any document that the share money by the petitioner was never deposited in the accounts of the Company. The allegation that the petitioners were not the owners of the shares is dispute is thus not made out.
6. Furthermore, section 17(2) of the Act has no applicability to She facts of the present case as the transaction for issuance of shares occurred in the year 2007 as is reflected from the Memorandum of Association. It is noted that the Ordinance does not contain any provision corresponding to section 17(2) of the Act.
7. Section 74 of the Ordinance commands that every company shall, within ninety days after the allotment of any of its shares, and within forty-five days after the application for the registration of the transfer of any such shares complete and have ready for delivery the certificates of all shares allotted or transferred, and unless sent by post or delivered to the person entitled thereto, within that period, shall give notice of this fact to the shareholders immediately thereafter in the manner prescribed, unless the conditions of issue of the shares otherwise provided. The expression "transfer" in this provision is stated to mean a transfer duly stamped and otherwise valid, and does not include such a transfer as the company is for any reason entitled to refuse to register and does not register.
8. Section 76 of the Ordinance stipulates that an application for registration of the transfer of shares in a company may be made either by the transferor or the transferee and the company shill enter in its register of members the name of the transferee in the same manner and subject to the same conditions as if the application was made by the transferee. The proviso to section 76 provides that the company shall not register a transfer of shares or debentures unless proper instrument of transfer duly stamped and executed by the transferor and the transferee has been delivered to the company along with the scrip.
9. Section 76 of the Ordinance prescribes a particular procedure or transfer of shares and also, provides that a company shall not register a transfer of shares unless proper instruments of transfer duly stamped and executed by the transferor and the transferee has been delivered along with the scrip. In the present case, the respondents have utterly failed to demonstrate that the transfer of shares allegedly by the petitioner in the year 2008 in favour of respondent No.3 was in conformity with the provision of section 76 of the Ordinance. The respondents have neither produced the transfer deeds duly stamped between the parties and have also not produced the scripts. In the absence of these mandatory documents, this Court cannot draw any inference regarding the transfer of shares as reflected in Form A dated 08.05.2008 submitted before the Commission. The alleged transfer of shares by the petitioner in favour of respondent No.3 as reflected in Form A for the year 2008 has, therefore, not been proved on account of the failure of the respondents to demonstrate the said transfer in the prescribed manner.
10. In regard to the allegation of the arbitration award inter se the parties, suffice it to state that the High Court is the persona designata for adjudication of all disputes covered by the Ordinance (see Orix Leasing Pakistan Limited v. Colony Thal Textile Mills Limited. PLD 1997 Lahore 443). Needless to say, that section 5(2) of the Act ousts the jurisdiction of all courts to entertain any suit or proceeding in respect of any matter which the High Court is empowered to determine by or under this Act. Although the issue of limitation was not raised at the time of arguments, the respondents did raise it in their reply. This Court is not inclined to decide this issue in favour of the respondents for the simple reason that the petitioners in their petitions alleged that they came to know about the fraudulent transfer in the year 2105 when they applied for certified copies of the relevant Forms with the Commission which are appended with this petition. This allegation has not specifically been denied by the respondents in their reply. It is thus evident that the petitioners in both the petitions approached this Court immediately after getting knowledge that their shares have illegally been transferred. The issue of limitation thus does not arise in the present case.
11. The respondents have not been able to prove either that the petitioner did not make the payment of the shares or that valid transfer of shares as reflected in From A dated 08.05.2008 took place in the mode and manner prescribed by section 76 of the Ordinance. The alleged transfer of shares of the petitioners as reflected in Form A submitted by the respondents with the Commission on 08.05.2008 and 19.07.2011 has no legal sanctity as no document has been brought on the record to substantiate the allegation that the process formalities prescribed by section 76 of the Ordinance which are mandatory in nature were duly complied with.
12. In the result, this petition and the connected petition are allowed and transaction for transfer of shares of the petitioners in both the petitions as reflected in Form A submitted on 08.05.2008 and 19.07.2011 with the Commission are declared to be null and void. The Company and the respondents are directed to forthwith enter the names of the petitioners in the Register of Members and to transmit the relevant information to the Commission through Form A.