' Sh. Mushtaq Ahmad and his son Sh. Ishfaq Ahmad filed Civil Original No.39 of 1985 tinder section 74 of the Companies Ordinance, 1984, seeking a direction to respondent No.1 for issuance of share certificates in respect of 531 shares allegedly held by them and for imposing the penalty provided therein. It was further prayed that the Register of Members be ordered to be rectified by restoring their names and the respondents be restrained from causing interference in the performance of duties and functions by Sh. Mushtaq Ahmad as a director of the company. The petitioners also filed another petition (Civil Original No.42 of 1985) under sections 152, 265 and 272 of the Companies Ordinance, 1984, seeking restitution of the shares allegedly held by them and for prosecution of the respondents for imposing penalties prescribed by law. This judgment will dispose of both these petitions as the basic question raised is that of rectification of the Register of Members and of imposing penalty on account of non-issuance of share certificates.
2. Both the petitions were tried together and on the basis of the pleadings of the parties, issues framed were:-
(1) Whether the petitioners sold their respective shares to the respondents as claimed in the replies?
(2) Whether a family agreement dated 20-8-1982 was arrived at between the parties? If so, what is its effect on the share-holding?
(3) Whether the present petition is barred by time?
(4) Relief.
3. Sh. Shaukat Javed, respondent, who is the director of respondent company,entered the witness box on behalf of respondents No.1 and 9 to 25. He produced certified copies of Form 'E' and Form XII for the years 1978 to 1983, Exh.R.5 to Exh.R.14. On behalf of respondents No.2 to 8, Kh. Muhammad Akram, Advocate, appeared and produced photo copy of agreement dated 20-8-1982, Exh.R.1, photo copy of minutes of meeting dated 4-10-1982, Exh.R.2. Both these documents were admitted in evidence as the genuineness and correctness of both these documents were admitted by Sh.
Mushtaq Ahmad petitioner and Sh. Ghulam Ahmad, Advocate for respondents No.1 and 9 to 25 in the statements recorded on 2-11-1986. Kh. Muhammad Akram, Advocate, also produced certified copy of Form 'E' fur the year 1978-79, Exh.R.3 and certified copy of Form 'E' for the year 1979-80, Exh.R.4. Sh. Mushtaq Ahmad petitioner entered the witness box on behalf of the petitioners. He deposed that Shaukat Soap Factory, a registered firm, was converted into a private limited company in 1972 and he was one of the promoter-directors of the company alongwith his three brothers. He claimed that he and petitioner No.2 who is his son were the share-holders of the respondent company. He added that his son held 50 shares which were purchased by him in the name of his minor son. In cross-examination, he explained that at the time of incorporation of the company 3500 shares were earmarked for the owners of the assets of the firm which was taken over by the company. He added that he and his son were allotted 481 and 50 shares respectively out of the aforesaid total number of shares. He admitted that Sh. Abdul Hameed was the Managing Director of the company till his death on 29th May, 1979 and that neither he nor his son had any business dispute with his late brother till his death. In cross-examination he also stated that since 1982 he was not associated with the management of the company and that he came to know of the transfer of his shares during the negotiations which culminated into a family agreement dated 20-8-1982. He stated that except for the legal notice issued, he did not initiate any other legal proceedings challenging the transfer of shares. This notice was, however, not produced in these proceedings. It is also in his cross-examination that the question of delivery of share scripts to the management did not arise as the share scripts were not at all issued either to him or to his son. He claimed that he was paid dividend till 1982 though he had no evidence to establish the receipt of dividend from the years 1978 to 1982. He denied the suggestion that he had no dealings with the company since the transfer of shares. He admitted that in 1984, he examined the record available in the office of the Registrar, Joint Stock Companies and on its inspection he came to know that the shares held by him and his son were shown as having been transferred by them to others. He, however, added that on 4-10-1982, Shaukat Ali had told him that he had restored the shares to their names. He claimed that the agreement already on record established the restoration of shares to them. He denied the suggestion that these petitions were filed by them with a view to black-mail the management of the respondent company.
4. The documentary evidence on record shows that 50 shares held by Sh. Ishfaq Ahmad petitioner stood transferred to Shaukat Ali respondent on 31-10-1978. (Reference may be made to Forms 'E'
Exh.R.3 and Exh.R.5). The four hundred and eighy-one shares held by Sh. Mushtaq Ahmad petitioner were transferred on 16-4-1979 to the following respondents:-
(1) Basharat Manzoor respondent No.4.= 100
(2) Ikhlaq Manzoor respondent No.5.= 141
(3) Ali Nawaz respondent No.24= 120
(4) Abdul Waheed respondent No.25 (minor)= 120 ' The above position is reflected by the certified copies of Forms 'E' Exh.R.4 and Exh.R.7. These returns were filed by Sh. Abdul Hameed the then Managing Director and Sadiq All Director respectively. It is pertinent to note that Sh. Mushtaq Ahmad petitioner has admitted in his statement that he had no business dispute with Sh. Abdul Hameed the then Managing Director who was his real brother and that he was kept informed of the affairs and associated with the business of the company till 1982 and that he had also been receiving dividend.
5. The above is the resume of the oral and documentary evidence produced by the parties on record concerning the issues involved in the case. The position that emerges from the record is that the company was incorporated in 1972 and out of 3500 shares earmarked for the owners of the firm taken over by the company Sh. Mushtaq Ahmad and Sh. Ishfaq Ahmad were allotted 481 and 50 shares respectively. The plea of the petitioner however is that they were not issued the shares scripts all these years.
6. Now the question whether the respondents are liable to be penalized for the alleged deliberate violation of the provisions of section 74 of the Companies Ordinance, 1984, relating to the issuance of share certificates may be examined. The company was incorporated in 1972 and the law then in force was the Companies Act, 913.
' Section 108 of the Act, being relevant to the aforenoted question, may be reproduced:-
108. Limitation of time for issue of certificates.
(1) Every company shall, within three months after the allotment of any of its shares, debentures or debenture stock, and within three months after the registration of the transfer of any such shares, debentures or debenture stock, complete and have ready for delivery the certificates of all shares, the debentures, and the certificates of all debenture stock allotted or transferred, unless the conditions of issue of the shares, debentures or debenture stock otherwise provide.
(2) If default is made in complying with the requirements of this section, the company, and every officer of the company who is knowingly a party to the default, shall be liable to a fine not exceeding fifty rupees for every day during which the default continues.
' On the factual side, except for the solitary statement of Mushtaq Ahmad petitioner we have nothing on record in support of the assertion that the share certificates were not issued. Even if the aforesaid assertion is accepted as true, still the respondents cannot be held liable as admittedly, they were neither the directors nor the officers of the respondent company at the relevant time. On the other hand, Sh. Mushtaq Ahmad petitioner was then, as per his own assertion, a director of the company and so he was equally responsible, if any default, by not issuing the share certificates, was committed. Another aspect of the matter is that proceedings for imposing penalty of fine were initiated at the time when the Companies Act 1913 stood repealed. Under Companies Act, 1913, the Court was empowered to impose fine for the default committed but now under section 476 of the Companies Ordinance, 1984, the Company Judge is not to be approached for imposing penalty on account of the default alleged in the petition. For all these reasons the request of the petitioners to impose penalty provided by section 74 of the Companies Ordinance cannot be entertained. The petition to this extent is hereby dismissed.
7. The matter of rectification of Register of Members and restitution of the shares allegedly held by the petitioners may now be taken. The resume of the evidence available on the record has been given above. The shares held by Sh. Mushtaq Ahmad petitioner stood transferred with effect from 16-4-1979 whereas the shares held by Sh. Ishfaq Ahmad petitioner were assertedly transferred on 31-10-1978. The respondent-transferees in whose names these shares presently stand transferred have not brought any evidence on record to show as to how and in what manner these shares stood transferred in their names. Learned counsel on their behalf, however, verbally submitted that these shares were transferred in the life-time of their respective fathers and now after so many years it is not possible for them to produce the documents of transfer. They added that duly executed transfer deed must have been presented to the company but after expiry of many years, the record is not now available even with the company. It was argued that the summary procedure provided by the Company Law is not meant for resolving the controverted questions of fact and law. Lastly it was submitted that the petitioner cannot even avail the remedy of civil suit as the same now stands barred. According to the learned counsel either Article 48 or Article 49 of the Limitation Act applies to the facts and circumstances of the case. On the above premises it was contended that interference in exercise of discretionary power vesting under section 152 of the Companies Ordinance 1984 will not be justified.
8. Learned counsel for the petitioners on the other hand argued that the petitioners came to know of the fraud committed only in the year 1984 and as such the petition filed was within time. It was further contended that remedy before the Civil Court does not stand barred as in the circumstances of the case Article 120 of the Limitation Act would apply.
9. I have given serious consideration to the respective submissions of the parties. It is apparent that serious questions of law and fact require to be determined in the case. Obviously without holding a detailed inquiry, it will not be appropriate to determine these disputed questions. It has been consistently held by superior Courts that though power to rectify the Register of Members is very wide yet this jurisdiction being summary is not to be allowed to be invoked for resolution of disputes of complicated nature necessitating a regular trial. It is equally well established that these proceedings are not intended to be used for deciding disputes requiring investigation. In such a situation the parties should be left to have the controversy resolved through a regular suit. In this petition in view of the allegations made it is necessary to decide as to when the petitioners became aware of the transfer of the shares from their names to the contesting respondents. The questions of transfer of shares and of limitation require to be determined in a regular suit. It would not be proper for this Court to decide this question in summary proceedings under section 152 of the Companies Ordinance 1984. The petitioners, if so advised, may establish their claim in a regular suit before the Civil Court where the parties will be entitled to raise all the pleas available to them under law. In view of the aforenoted view, the findings on the issues framed need not be returned.
The issues stand disposed of with the observations appearing above.
10. Even the directions of the nature contemplated in sections 262 and 272 of the Companies Ordinance, 1984 cannot be obtained from this Court by the petitioners. The action under these sections is to be taken by the Corporate Law Authority constituted under section 11 of the Companies Ordinance, 1984. This Court may issue directions contemplated in section 290 of the Companies Ordinance but here again these directions are to be passed on the move made by the persons specified, namely, the member or members holding not less than twenty per cent of the issued share capital of a company or a creditor. The petitioners, at this stage when they have yet to establish that they are members of the company, have no locus standi to move this Court even under section 290 of the Companies Ordinance.
11. The net result of the above discussion is that these petitions fail and are dismissed with cost.