' This petition has been filed under section 161 (8) of the Companies Ordinance 1984 seeking declaration that annual general meeting of Haryana Asbestos Cement Industries held on 30th April, 1986 is invalid, and for direction to hold fresh meeting in accordance with law.
2. Facts briefly stated are, that Haryana Asbestos Cement Industries Ltd. (hereinafter referred as, "The Company") is a Public Limited Company incorporated under Companies Act, 1913 on 29-6- 1982. Petitioners who are also Directors of "The Company" approached this Court alleging that a group of members and Directors headed by respondents No.2 and 3 have unjustifiably taken over control and management of entire affairs of "The Company" and are illegally representing themselves as its Chairman and Managing Director. It is the case of petitioners that respondents No.2 and 3 were fraudulently manipulating the affairs without maintaining accounts and record etc, as required by law. In the circumstances report about such mismanagement was made to Deputy Registrar Joint Stock Company, Quetta as well Corporate Law Authority. Whereupon Corporate Law Authority appointed an Inspector to investigate the matter as required by section 263 of Companies Ordinance 1984 (herein after referred as "1984 Ordinance"). However, Deputy Registrar Joint Stock Company Quetta directed holding of Annual General Meeting by means of letter No. DRQ/COM-1 (351)-284, dated 19th March, 1986. The Management requested for extension of time but same was refused. Consequently on 8-4-1986 notice for holding Annual General Meeting, dated 30-8-1986 at E-31/-Block-4 Gulshan lqbal, Karachi were issued for considering following Agenda:-
(1) To confirm the minutes of the Second Annual General Meeting of the Company held on 16th December, 1984.
(2) To receive, consider and adopt the Audited Accounts of the Company for the year ended 30th June, 1985 together with the Director's and Auditor's Report thereon.
3. To appoint Auditor's and fix their remuneration for the year ending 30th June, 1986. The present Auditors being eligible offer themselves for re-appointment.
4. To transact any other business with the permission of the Chair.
' Petitioners have alleged that in connection with said Annual General Meeting, on or about 27-4- 1986 they went to deposit proxies, but under the instructions of respondents Nos. 2 and 3, same were not entertained rather were torn off by them. Additionally, it is asserted that petitioners and certain members were forcibly prevented from participating, in the meeting. According to petitioners there was 'material defect' in the notice for convening Annual General Meeting, and grounds for the same have been set out in para 15 of petition, which is reproduced for convenience:- "Para."
15. That it is respectfully submitted that there are material defects and/omissions in the Notice calling the Annual General Meeting in as much as:-
(i) The Notice was issued without having been considered or approved in any meeting of the Board of Directors.
(ii) The Notice did not comply with the statutory provisions as contained in section 233(4) of the Companies Ordinance, 1984 since copies of the Balance Sheet, profit and loss account and the Auditors' report were not sent to the members alongwith the Notice.
(iii) The Notice was not accompanied by a Proxy Form as required under section 161(2) of the Companies Ordinance.
3. Similarly circumstance indicating serious irregularities committed in holding the meeting are mentioned in para. (16) of the petition which also is reproduced:-
(16) That it is further submitted that there have been gross irregularities in the meeting inasmuch as:
(i) Duly executed proxies were lodged with the Company but the same were not accepted and were torn by the respondents Nos. 2 and 3.
(ii) The petitioners were not allowed entrance in the meeting and were forced to leave the meeting place through rowdyism and goondaism.
4. Respondents filed a detailed written statement on 29-6-1986, wherein maintainability of petition has been challenged on account of defect in power of attorney executed by petitioners Nos.3 and 4 and for non-joinder of Registrar Joint Stock Company as well as sbsence of any material defect in the Notice or proceedings of Annual General Meeting of "The Company" held on 30-4-1986.
Assertions regarding alleged irregularities, spelled out in the petition have been specifically denied.
It is however maintained that said meeting was conducted in accordance with the provisions of law. According to respondents, none of the proxies were refused. It has been explained that allegations are vague, imaginary and malacious. As regards material defects and irregularities in the meeting paras. 15 and 16 have been replied as under:- ' Para. 15 (of written statement):-With reference to para. 15 of the petition it is specifically submitted that there is no material defect or omission in the notice or irregularity in proceedings of the meeting.
(i) The notice of the AGM was duly approved by the Board of Directors.
(ii) That the petitioners had called for the audited account from the company and they were duly and promptly supplied. Copy of such letters are filed and marked R/H, R/I & R/J. Further the audited accounts were also available for inspection.
(iii) (a) the proxy form is part of the articles of association of the company and they were used by the share holders, whosoever desired to be represented by proxy.
(b) that in the notice of Annual General Meeting it was clearly mentioned that a member is entitled to attend and vote through proxy. No one including the petitioners complained that because the notice of the meeting did not accompany the proxy form they will not be able to attend or exercise their right of vote in Annual General Meeting.
' Para. 16 (of written statement): With reference to para. 16 it is respectfully submitted that the allegations are not true. It is denied that there have been gross or any kind of irregularities in the meeting.
(i) The allegation is already replied as untrue and baseless.
(ii) The allegation already replied as untrue and baseless.
' Thus claim in petition has been vehemently opposed. On the pleadings, following 9 issues were framed on 29-6-1986:-
(1) Whether any Notice, to the Board of Directors for the meeting held on 3-4-1986 was necessary?
If so, whether the same was issued? (O.P.).
(2) Whether Registrar of Joint Stock Companies is a necessary party? O.D
(3) Whether power of attorney filed by the plaintiff provides valid authority to institute present proceedings? (O.Parties)
(4) Whether procedure for holding annual general meeting as prescribed by law has not been adopted by defendant No.1? (0.Parties).
(5) Whether notice issued for Annual General Meeting held on 30-4-1986 was invalid, or not suffered from any material defect rendering the proceedings of said meeting void and of no legal effect? O.P.
(6) Whether question of grant minutes of Annual General Meeting held on 30-4-1986 can be considered in the putition, filed within the perview of section 161(8) of the Companies Ordinance, 1984 (O.D.)
(7) If issue No.6 is proved in affirmative, whether minutes of Annual General Meeting were required to be given to Directors, if so, whether same were supplied in accordance with law? (O.P.)
(8) Whether on account of any act, omission or conduct any of the members was prevented from using effectively his right of participation in the meeting. If so, what is its effect? (O.P.)
(9) Relief.
5. Petitioners have not adduced any evidence. Whereas the other side got recorded statement of respondent No.2, (Haji Islamuddin) in support of their stand. He has however, explained on oath that he presided over meeting of "The Company" held on 30-4-1986. None of the members were at all prevented from attending or participating in said meeting. "The Company" had received and entertained proxies sent to the office, and maintained that no proxy was at all refused. In cross- examination he has admitted that Annual General Meeting was held in pursuance of direction given by Deputy Registrar Joint Stock Companies, Quetta. He denied the allegation that Board of Directors had not determined the date etc. For holding General Meeting.
Arguments were addressed by learned counsel for the parties. With their assistance, I have also gone through record of the case.
6. Mr. Muhammad Sadiq, learned counsel for petitioners vehemently urged that:
(i) as per para. (181) of 'Articles of Association' copies of balance sheet and report were required to be circulated to the members not less than 14 days prior to the meeting. Thus by virtue of section 31 of "1984 Ordinance", the "Company" was bound to abide by the provisions of Memorandum of Association and Articles of Association; (ii) Notice for holding Annual General Meeting which was issued on 8-4-1986, was invalid, because under section 158(3) of "1984 Ordinance" 21 days gap was necessary from the time when normally such notice may be deemed to have been received, and the date of meeting. Thus according to him all the proceedings concerning Annual General Meeting recorded in the matter were void;
(iii) Notice issued by "The Company" did not fulfil, requirements of section 233(4) of "1984 Ordinance", therefore, meeting was improperly held;
(iv) The notice for holding Annual General Meeting, must contain proxy form, as contemplated by section 161(2), of "1984 Ordinance" which according to him is a mandatory requirement and failure to do so vitiated, whole proceedings.
7. Whereas on the other hand Mr. Obaidur Rehman, learned counsel for respondents strenuously argued that;
(i) Petition under section 161(8) would be maintainable only if petitioners are able to satisfactorily prove any (a) material defect or omission in the notice or (b) irregularities in the proceedings of meeting which prevented the members from using effectively their rights.
(ii) Non-furnishing of 'Proxy form' does not vitiate, holding of Annual General Meeting, because petitioners besides being Directors could hold the proxy in the manner contained in section 3.5 of "1984 Ordinance". Besides no prejudice has at all been caused to any of the petitioners for non furnishing of proxy form; specifically when according to their own stand set out in para. 12 of the petition, proxies were deposited by them but were torn off, besides neither petitioners nor any of the members or shareholders have alleged any deprivation to their right on account of non- availability of proxy.
(iii) Notice of meeting was admittedly sent on 8th of April, 1986, whereas meeting was scheduled for 30th April, 1986 therefore, same were evidently sent and despatched on the normal course twenty one (21) days prior to the date of meeting, therefore, the objection about invalidity of notice is misconceived.
(iv) Procedure for obtaining minutes as specified in section 173 of "1984 Ordinance" and penalty for violation is also specifically provided under section 173 (8) of said Ordinance. Besides alleged noncompliance relates to a period subsequent to holding of Annaul General Meeting, therefore, same cannot form basis for challenging validity of meeting within the purview of section 161 (8) of the Companies Ordinance 1984. After considering the arguments advanced by learned counsel for parties and examining relevant provisions of law, I record following reasoning for the settlement of issues involved in the case.
' ISSUE NO. 1: ' Respondent No.2 in his statement has proved the postal certificate Exh.D/1, regarding notice for holding meeting of Board of Directors on 3-4-1986. Evidence in this behalf has not been controverted. It is therefore, held that Notice in respect of aforesaid meeting, as required by law, was issued.
' ISSUES NOS. 2 AND 3: ' Issues Nos. 2 and 3 relate to maintainability of the petition. Perusal of prayer clause explicitly indicates that, no relief has been claimed against Registrar of Joint Stock Companies. Even assse rtions in the petition do not refer to any violation committed by him. Apparently dispute is between directors, inter-se. Since there is absolutely nothing to show that without impleading the Registrar effective determination of the claim in the petition cannot be sought; he as such is not a necessary party. Taking in view, these aspects learned counsel for respondents also conceded to this legal position.
' As regards defect of power of attorney, it may be mentioned that merely name of respondent No.1 has been incorrectly styled in the said document which is obviously a technical error. It hardly needs any discussion, that defective authorisation does not affect maintainability of the petition, as same is always deemed to be curable, on the principle considered in Australasia Bank v. Abdul Aziz Jan and others PLD 1983 Pesh.
64. Besides the petition on behalf of remaining petitioners admittedly can be perused for the relief sought for in the matter. In the circumstances preliminary objections are not well conceived. Issues Nos.2 and 3 are accordingly disposed of.
' ISSUES NOS. 4, 5 and 8: ' These issues are inter dependent, therefore, same are being discussed simultaneously. Evidently procedure for holding Annual General Meeting is laid down in section 158 of "1984 Ordinance". It is contended that twenty one days clear notice was needed for holding the meeting therefore, Annual General Meeting was not validly held on 30th April, 1986. Provision concerning duration of notice is specified in sub-section 3 of section 158 which is reproduced for ready reference:- "3. The Notice of an Annual General Meeting shall be sent to the shareholders at least twenty-one days before the date fixed for the meeting and, in the case of a listed company, such notice, in addition to its being despatched in the normal course, shall also be published at least in one issue each of a daily newspaper in URDU language having circulation in the Province in which the stock exchange on which the company is listed is situate.".
' Admittedly, respondent No.1, is not a "listed Company". Bare examination of aforesaid provision, indicates that there should be a minimum gap of twenty-one days between date of notice, and actual holding of the meeting. In this provision in order to emphasize over minimum period of gap between 'notice' and 'meeting' word "at least" has been used preceding time specification of "Twenty-one days". CARIES in his book On Statute Law, Seventeenth Edition at page '260' and '261' has discussed the principle of interpretation as under:- "When a statute is passed for the purpose of enabling something to be done, and prescribes the way in which it is to be done, it may be either what is called an absolute enactment, or a directory enactment, the difference being as axplained in Woodward v.. Sarsons, that "an absolute enactment must be obeyed or fulfilled exactly, but it is sufficient if a directory enactment be obeyed or fulfilled substantially" i.e. That the act permitted by an absolute enactment is lawful only if one in accordance with the conditions annexed to the statutory permission.
(a) Absolute enactment. If an absolute enactment is neglected or contravened, a Court of law will treat the thing which is being done as invalid and altogether void, but if an enactment is merely directory it is immaterial so far as relates to the validity of the thing which is being done, whether it is complied with or not"
(b) Directory enactment. But, on the other hand if a statute is merely directory, it is immaterial so far as relates to the validity of the thin g to be done, whether the provisions of the statute are accurately followed out or not. Thus, section 24 of a Public Health Act of 1848, enacted for the purpose of electing a local board of Health," the Chairman shall cause voting papers in the form in Schedule A" to be distributed among the persons entitled to vote. In R.v. Lofthouse voting papers had been distributed which were not precisely in the form given in schedule A, as the column for the number of votes was left blank. It was held that this omission did not vitiate the voting papers nor make the election void. The validity of the election, said Blackburn J. "depends upon whether the insertion of the number of votes is a condition precedent to the validity of a voting paper, or in other words, whether the requirement of the statute on this head is obligatory. I think the omission does not vitiate the voting paper."
' It is profitable to refer to the observations of following reported cases:-
(i) Atta Muhammad Qureshi v The Settlement Commissioner, Lahore and others PLD 1971 SC 61.
"It is well settled that the neglect of the plain requirements of a statutory enactment, which prescribes how something is to be done, will invalidate the thing being done in some other manner if the enactment is absolute but not if it is merely directory. The real question which thus arises for consideration is when an enactment is to be considered as absolute and when as merely directory? It is not possible to lay down a general rule of universal application in this behalf, but the one which is suggested by reported authorities in this connection is the affirmative or negative character of the language in which the provision is couched. If it is negative, that is to say, if the statute enacts that certain action shall be taken in a certain manner and in no other manner, it has been held that the requirements are absolute and that neglect to attend them will invalidate the whole procedure. If, on the other hand, the language is affirmative, it may be considered as a directory provision. Nonetheless, it appears that in several reported English cases, it has been held that an enactment, prescribing the formalities which are to be observed for validating an action, are not absolute although expressed in negative or prohibitory language As a general rule, statutes, which enable persons to take legal proceedings under certain specified circumstances, demand that those circumstances must be accurately obeyed, notwithstanding the fact that the provisions thereof are expressed in merely affirmative language."
(ii) Niaz Muhammad Khan v. Mian Fazal Raqib PLD 1974 SC 134.
"As a general rule however, a statute is understood to be directory when it contains matter merely of direction, but not when those directions are followed up by an express provision that, in default of following them, the facts shall be null and void. To put it differently, if the Act is directory, its disobedience does not entail any invalidity; if the Act is mandatory disobedience entails serious legal consequences amounting to the invalidity of the act done in disobedience to the provisions".
' Keeping in view aforementioned reports the provisions of section 158(3)1c of '1984 Ordinance' are evidently mandatory.
' Learned counsel for petitioner has attempted to argue that twenty-one days are supposed to be calculated from receipt of notice which ordinarily be deemed to consume 24 to 48 hours.
Therefore, according to him after deducting the same, original notice of meeting sent on 8-4-1986 is invalid. I am afraid that said interpretation is not in consonance with true spirit of law. Legislature appears to have consciously specified the terminus-qua of notice from date of its sending and not from date of its delivery or receipt. Thus if notice of meeting is factually issued or despatched by the management twenty-one days prior to the date of meeting in my opinion purpose of law would be fully served. Because by applying ordinary dictionary meanings to word 'sent' used in section 158(3) it would connnote cause to go; cause to move; transmit to destination, or bring about conveyance of. Therefore point for commencement of 'time gap' is not to be computed from receipt or delivery of such notice, but from the stage of its sending or despatching. Admittedly in the instant case notice for holding meeting on 30-4-1986 were issued on 8-4-1986. As such by simple deduction it may be seen that there exists gap of 22 days which clearly qualifies the minimum requirement of sub-section (3) of section 158 of '1984 Ordinance'.
' Now considering next contention, it may be mentioned that there is no cavil to the proposition that provisions of 'Articles of Association' and 'Memorandum of Association' bind 'the company' and members whereby they are deemed to have covenanted, to carry out rights and obligations in the specified manner. Para. 181 of 'Articles of Association' lays down that copy of balance sheet and reports etc. Shall be furnished to the share holders at least 14 days prior to holding of annual general meeting. Petitioners being Directors of 'The Comany' are equally responsible to ensure necessary compliance in this behalf, bacause in the event of failure to maintain proper account books or balance sheets etc the responsibility equally extends to all the Directors within the purview of section 230(7). Therefore, unless any justifiable circumstances are indicated or any prejudice is shown to have been caused to the petitioners on account of contravention of para. '181' the notice would not be deemed to suffer from any material defect because, evidently requirements in this behalf is of directory nature. It is not challenged that accounts books of 'The Company' were availabe for inspection as explained in written statement. In addition to this on demand some of the petitioners were even supplied relevant accounts and balance sheet much prior to the date of meeting.I am therefore, inclined to hold that alleged violation concerning failure to provide the balance sheet, Audit report etc alongwith notice, being directory would not vitiate the proceedings .
8. In the same context it is to be seen whether failure to supply copy of 'proxy form' as required under section 161(2) of "1984 Ordinance" is at all detrimental to the validity of Annual General Meeting held on 30th April, 1986. The relevant clause is reproduced for ready reference.
161.
1. ................................................................
(2) Every notice of a meeting of a company shall prominently set out, the member right to appoint a proxy and the right of such proxy to attend, speak and vote in the place of the member at the meeting and every such notice shall be accompanied by a proxy form".
' Perusal of aforementioned provision indicates that notice should have specified, the right of member's to appoint proxy; and to attend or speak or vote through proxy, in place of such member at the meeting; besides a proxy form ought to have been attached to the notice. It is not disputed that "proxy form" did not accompany the notice. Therefore, it needs to be ascertained, whether failure to attach 'proxy form' with the notice is fatal or is otherwise condonable. The requirement for providing 'proxy forms' in the amended law is apparently to facilitate availability of these forms so that same can be conveniently utilized and members without facing difficulty or botheration of producing it so as to avoid delay or frustration of the purpose such proxy.
9. The aforementioned provisions has two portions. First part suggests express intimation to the members about their respective right to use the proxy and the second part relates to requirement of attaching copy of 'proxy form' with the notice. In the light of principle of law already discussed in the foregoing paras it is quite apparent that first part is of mandatory nature whereas the latter part is merely directory. Even otherwise no prejudice is shown to have been caused on account of non-supply of 'proxy form'. Therefore omission or contravention of directory portion of the said provision would not be fatal to the meeting held on 30-4-1984.
10. Apart from the same in the instant case petitioners have not expressed any grievance on account of non-supply of "proxy form". Because in para 12 of the petition, it has been unequivocally asserted that proxies deposited by them were torn off by respondents Nos. 2 and 3. Thus according to petitioner's own showing "proxy forms" were available with them as such obviously no prejudice had occasioned on account of omission to attach it with notice. Anyhow undisputedly no evidence has been led by petitioners to substantiate the allegation regarding refusal of "The Company" to entertain proxies. In fact no suggestion in this behalf was even put to respondent No. 2 when he came in the witness box to give statement. The stand taken up by the petitioners is unsupported.
Factually there is not an iota of evidence on record to establish any such allegation. Therefore, taking into consideration all the factors, I am inclined to hold that proper procedure for holding annual general meeting was adopted, and the time gap between the issuance of notice and the date of holding the meeting was in accordance with requirements of section 158(3) of "1984 Ordinance", and minor omission or contravention pointed out by the petitioners are merely of directory nature which as such do not invalidate the proceedings.
11. Additionally, it is pertinent to note that every error or omission or irregularity would not be amenable to the jurisdiction of this Court within the purview of section 161(8) of the "1984 Ordinance". It is only when facts or circumstances are such which may constitute material defect or omission in the notice or irregularity in the proceedings of the meeting that proceedings can be sought to be declared invalid. Obviously it has to be seen something more than mere defect or incidental omission or minor irregularity when Court may take action under the law. Therefore, in the instant case, it has to be ascertained whether act, omission or irregularity is sufficient enough to indicate flagrant violation of law or is of such gravity that it would tend to effect the results or consequences leading to the meeting or proceeding thereof. Although the violation of giving notice for minimum period within the purview of section 158(3) can be a material defect yet in this case notice did not suffer from any illegality or impropriety concerning minimum time gap. However, as discussed above the failure to provide balance sheet or copies of proxy forms alongwith notice, are merely minor deviation contravening provisions which are apparently of directory nature.
Therefore, there is no material defect or irregularity proved to have been committed accordingly this petition is not maintainable. The aforesaid issues are as such decided in negative.
' ISSUES NOS. 6 AND 7: The requirements to supply copy of minutes within specified period is evidently relatable to period subsequent to meeting. Whereas section 161(8) mainly deals with defect of notice for holding meeting, or the proceedings of the meeting. Therefore, any violation or contravention even if shown or proved to have been committed by respondent subsequent to the date of holding of the meeting shall fall beyond the scope of petition under section 161(8) of Companies Ordinance 1984.
The issues are accordingly disposed of.
' RELIEF: ' From the foregoing discussion, I am inclined to hold that circumstances for claiming relief set out in the petition have not been substantiated by the petitioners. The petition is as such directed to be dismissed, with no order as to costs.