This is plaintiffs' first appeal. It is directed against the order of Additional District Judge, Peshawar dated 14-6-1972, whereby the plaintiffs' application under Order XXXIX, rules 1 and 2, read with section 151, C. P. C. For the Issue of a temporary injunction in their suit for injunction, has been rejected. ?He background of this litigation needs a probe in order to facilitate the understanding of the questions involved. The Frontier Sugar Mills and Distillery Ltd., Takhtbai, District Mardan (hereinafter to be called as the Mills) is a public limited company. Taj Mohammad Khanzada was appointed Managing; Director of the Company by special resolution dated 23-4-1950. He was acting as Managing Director of the Company, when In the meantime President'' Order No. 2 of 1972 (Companies (Managing Agency and Election of Directors) Order, 19721 (hereinafter referred to as President's Order), was promulgated and the same came into force at once from 15th January 1972.
Under the provisions of the President's Order, the Managing Agent (Managing Director) and the Directors of the Company nominated by him ceased to hold their respective offices from the date of its enforcement and the remaining Directors of the Company had to appoint a Chief Executive in whom the powers and functions in relation to the management and administration of the affairs of the company subject to general supervision and control of the Directors vested. The Board of Directors, therefore, held a meeting on the 24th January 1972, at 11 a.m. At Takhtbai. Amongst others; resolution Nos. 7 and 10, quoted below were passed: "7. To consider the Government Ordinance regarding Managing Director etc. Mr. Taj Mohammad Khan--zada is appointed Mana--ging Director for a term of three years on the same remuneration i. e. Salary, commission, entertainment allowance, privilege etc. As allowed to him earlier by the general body of shareholders.
0. To consider the implication of the Presidential Order laying down the minimum number of Directors to seven in Public Limited Company.
Resolved that Khan Saadullah Khan of Muhammad Nari isco-opted as Director to complete the minimum number of Directors." th of March 1972, raised the number of Directors from 7 to 9. On the 11 of March 1972, notice to the shareholders was given to hold the 32nd Annual Ordinary General Meeting of the shareholders of the Mills on 3 ist March 1972 at 10 a. m. At Takhtbai. One of the business to be transacted in the Meeting was:- "To elect Directors, in accordance with clause 10 of the Companies (Managing Agency and Election of Directors) Order, 1972. The Directors have fixed the number of Directors of the Company at 9
(nine) including the Chief Executive."
The minutes of the meeting', of 24-1-1972 were confirmed in another meeting of Board of Directors, held on 31st March 1972, at 9 a. m. At Takht Bai. In the same meeting the nomi--nation papers for Directorship were also considered as item No. 3, which is:- "3. To consider the nomination papers for Directorship.
The Board of Directors in their previous meeting had decided to fix the number of Directors for election to the General Meeting of Nine. The retiring Directors had offered themselves for re- election. According to Company Rules to contest the election for Directorship to submit their nomination papers ten days before the day of the General Meeting. The "Secretary placed the nomination papers of Mr. Salahuddin Khan and Mr. Mohammad Yaqub Khan which were found to be in order there being no other nomination paper, it was therefore decided to recommend the election of retiring Directors and that of Mr. Salahuddin Khan and Mr. Muhammad Yaqub Khan. The number of contest were nine for nine seats and hence there was to be no contest, and therefore they are recom--mended to the General Meeting to be elected unopposed."
The proposed annual general meeting of the shareholders of the Company was also held on 31st March 1972, at 10 a. m. At Takht Bai. The meting was attended by 8 Directors and 54 shareholders.
Besides other matters on the Agenla, "the election of Directors as on the Agenda was taken tip. The Chairman brought to the notice of the shareholders that in the new enact--ment the number of Directors was to be fixed by the Board of Directors and that accordingly the Board of Directors had fixed the number of Directors to be 9 (nine) (this number included the Chief Executive). The shareholders were also aquainted with the fact teat the seven existing Directors offered themselves for re-election and for the two extra contest had received only two nomination papers duly proposed and seconded. As there been no contest for re-election and Mr. Salahuddin Khan and Mr. Muhammad Yaqub Khan the only two shareholders who had filed their nomination papers and which after scrutiny had approved to be in order was unanimously declared elected".
On 15th April 1972, at 10-30 a. m. The Board of Directors held a meeting at Takhtbai. The relevant portion of the minutes may be reproduced below:-- "(1) A meeting of the Board of Directors was convened for 15th April 1972, at 10-30 a. m. In the Head Office of the Company at Takht Bhai for which no previous agenda was circulated to the members.
The agenda prepared by the Secretary was distributed in the Board Meeting. The Director felt that as the Board is meeting $o.4 the first time after being constituted, it was necessary to elect a President before the starting of the meeting. After some discussions Mr. Sairab Hayat Khan proposed the name of Khan Fida Mohammad Khan, Director to be appointed as the Chairman of the Board of Directors for a period of three years. The proposal was seconded by Mr. Salahuddin Khan whereafter Khan Fida Muhammad Khan was unanimously appointed as the Chairman of the Board of Directors for the period of three years.
(1a) To record the presence of Directors.th (1a) The presence of Director were recorded.
(2) To confirm the minutes of the last meeting.
(2) The minutes were read out confirmed.
(3) To consider the Presidential Order No. 2 of1972.
(3) Presidential Order No. 2 of 1972 was then discussed by the members. The previous Resolution No. 7 dated 24-1-1972 and con--firmation dated 31-1-1972 was also discussed after which it was resolved that in the light of the Presidential Order No. 2 of 1972, it was necessary to have appointed a Chief Executive for the Company in whom shall have vested the powers and functions in relation to the management and administration of the affairs of the company subject to the general supervisions and the control of the Directors which was not done. Realising this it was held that Resolution No. 7 above mentioned was ultra vires of the Board of Directors as well as against the provision of the Company Act. The Board by an oversight had appointed Mr. Taj Muhammad Khanzada vide above resolution as Managing Director for a period of three years. His re-- munoration etc. Which he enjoyed before this order was also decided to be continued. The Board of Directors therefore, decided unanimously to rescind and annul the above-men--tioned Resolution specially because it was passed in the presence of Mr. Taj Muhammad Khanzada and when he presided the meeting.
Appointment of Chief Executive (3a) Board took up this item after having annulled the Resolution No. 7 dated 24-1-1972. In this con- -nection Mr. Muhammad Yaqoob Khan proposed that Mr. Salahuddin Khan be appointed as Chief Executive of the Company as per Presidential Order No. 2 of 1972. This proposal was seconded by Khan Dost Muhammad Khan of Sherpao. Khan Sadallah Khan proposed the name of Mr. Taj Muhammad Khanzada for the above-mentioned appointment. This proposal was seconded by Mr. Asad Khanzada. The Board of Directors took considerable time in order to the clash and with to arrive Salahuddin be appointed Executive of Company in terms of the Presidential Order while Mr. TaJ Muhammad Khanzada was Resident the day-to-day administra--petition through the Chairman and for further control and supervision constituted general administrative committee of the Board of Directors with Khan Fida Muhammad Khan, Chairman, Sadullah Khan and Khan Sairab Hayat Khan as Members to meet at least once a month for the purpose. The committee was appointed for a period of six months initially. The Board also delegated all its powers to the sub- committee above constituted."
It appears that the matter of appointment of Salahuddin Khan as Chief Executive was sent for approval to the Controller of Capital Issues vide letter No. 3678/73, dated 24-4-1972, Vide letter No. R-131-CCI (11)/70, dated 13th May 1972, from the Government of Pakistan, Ministry of Finance, Islamabad, to the Frontier Sugar Mills & Distillery Ltd. Takht Bai, N.-W. F. P., it was advised to apply for the appointment of Mr. Salahuddin Khan as Chief Executive on the prescribed form, a cop of which was sent.
2. On 12-5-1972, Taj Muhammad" Khanzada and Zaib Alam Khanzada instituted Suit No. 114/1, for declaration and perpetual injunction against:-
(1) Frontier Sugar Mills & Distillery Ltd., Takhtbai, Dist--rict Mardan through its Director Capt. M. Asad Khanzada, defendant No. 4.
(2) Khan Sadullah Khan, Muhammad Narai, Tehsil Char--sadda, District Peshawar.
(3) Begum S. Khanzada, Frontier Sugar Mills & Distillery Ltd., Takhtbai, District Mardan.
(4) Capt. M. Asad Khanzada, village and P. O. Shadi Khan, District Campbellpur.
(5) Sairab Hayat Khan, Resident of village Baghdada, Tehsil and District Mardan.
(6) Dost Mohammad Khan Sherpao, Willcoks Road, Peshawar Cantt.
(7) Yaqub Khan son of Abdul Akbar Khan, village Tangi, Tehsil Charsadda, District Peshawar; and
(8) Salahuddin Khan son of Sher A.I Khan, Mohallah Shah Sarwar, Bicket Ganj, Mardan.
The suit was for the following prayers: "A. (i) that the proceeding of the Annual General Meeting. Of the shareholders of the defendant- Company hold on 31st of March 1972, pursuant to the notice to the shareholders dated 11th of March 1972 in respect of election of 9 Directors as per item 3 of the notice to the shareholders dated 1 i-3- 1972, are illegal, null and voids:
(ii) that the appointment of Mr. Salahuddin Khan defendant No. 8 as Managing Director by the illegally elected Directors of the Company in a meeting held on 15-4-1972 is illegal and null and void, and the proceedings and the decisions made are illegal and ineffective;
(iii) that the plaintiff No. 1 is the Managing Director ap--pointed in accordance with Article 139 of the Articles of Association of the Company vide Special Resolution dated 23-4-1950 and the unanimous resolution dated 24-1-1972 and still continues to be the Managing Director till another Managing appointed through fresh elections according to lair pursuant to the President's Order No. 2 of 1972;
(iv) that the plaintiff No. 1 and -defendants Nos. 2, 3, 4, 5 and 6 continue to be the Directors of the Company till new Directors are appointed through a fresh election !n a General Meeting of the shareholders, and B. Issuing a perpetual injunction restraining the illegally elected Directors including defendant No. 8 from functioning in their impugned capacities, or any other relief deemed fit by this Hon'ble Court may be granted."
Alongwith the plaint the plaintiff also submitted an apple--cation under order XXXIX, rules 1 and 2, read with section 151, C. P, C. For the issue of a temporary injunction, restraining defen--dant No. 8 (Salahuddin) and the illegally elected nine Directors from performing any duty in connection with the affairs of company and restoring the status quo ante till the decision of suit. The trial Civil Judge, Mardan by his order dated 29-5-1972, rejected the application for temporary injunction in view of the bar of Article 16 (2) of the Presidential Order. The plaintiffs of this suit (Suit No. 114/1), withdrew the suit on 31-5-1972.
3. The Secretary, Frontier Sugar Mills & Distillery, Takht Bai gave the following notice to the shareholders:- "Notice to the shareholders of the Frontier Sugar Mills & Distillery Ltd., Takht-i-Bhai, District Mardan, N.- W. F. P.
Frontier Sugar Mills & Distillery Ltd., has received following Notice from Ten shareholders holding 10- -/ of the share capital of the company for convening ordinary General Meeting.
Whereas in the Annual General Meeting held on 31st March 1972, in the Registered Office of the Company 9 Directors have been elected in violation of Clause 10 of the President's Order No. 2 of 1972, and Whereas some of the illegally elected Directors without lawful authority proclaim to have appointed a Managing Director on 15-4-1972, the minutes of which meeting have been declared to be concocted and for this and other reasons have not been confirmed by the majority.
We the undersigned give notice for convening an Extra--ordinary General Meeting in pursuance of Article 119 of the Articles of Association of the Company read with Article 74 of the Company's Articles and read with Clause 12 of the Presi--dent's Order No. 2 of 1972 in order to annul the illegal proceedings of the Annual General Meeting held on 31-3-1972 with regard to item 3 of the notice to the shareholders whereby Directors were illegally elected in direct violation of Clause 10 of the President's Order No. 2 of 1972 and further to annul the subsequent decision of some of the 9 illegally elected Directors whereby they tried to appoint a Chief Executive i. e. The Managing Director of the Company on 15-4-72, and to elect nine Directors including Chief Executive of the Company in accordance with President's Order No. 2 of 1972, Articles of Association and the Companies Act, 1913.
1. Sultan-e-Rome.
7. Taj Mohammad Khan--zada for Farooq Alam Khanzada.
2. Kulsum Najibullah.
8. Taj Mohammad Khan--
3. Salma Khanzada.
9. Mst. Maqbool Jan.
4. Major Javed Alam Khanzada.
10. Kausar Khanzada.
5. Parvez Khanzada
6. Rizwana Khanzada.
Now therefore notice to the shareholders under Article 75 of the Articles of Association of the Company is hereby given that an Extraordinary General Meeting of the shareholders of the company will be held on Thursday the 15th of June 1972, at 9 a.m. At the Registered Office of the company at Takht Bai to consider the above Notice and to transact business accordingly.
Summoned by order of the Board.
(Sd.) M. Ayub Khanzada, Secretary, Frontier Sugar Mills and Distillery Ltd., Takht Bhai.
Dated 27th May 1972.
4. Prior to the holding of the proposed meeting of the shareholders on 15-6-1972, Salahuddin Sahrab Hayat Khan. Dost Muhammad Khan Sherpao, Muhammad Yaqub Khan, all Directors of the company and the Frontier Sugar Mills and Distillery Ltd. Through its Chief Executive Mr. Salahuddin, instituted the present suit (No. 99/1) for injunction against Sultan-i-Rome, care of Taj Muhammad Khanzada, (2) Kalsum--Najibullah, (3) Salma Khanzada, (4) Major Javed Alam Khan--zada, (5)
Parvez Khanzada, (6) Rizwana Khanzada, (7) Farooq Alsm Khanzada, (8) Tai Muhammad Khanzada, (9) Mst. Maqbool Jan and (10) Kausar Khanzada, on 7-6-1972, and prayed that a decree be passed in favour of the plaintiffs and against:
(i) the defendants restraining them by permanent injunction from holding any Extraordinary General Meeting on 15-6-1972 or any time later for the purposes mentioned in the notice; and
(if) the defendant No. 8, Mr. Taj Muhammad Khanzada, in particular restraining him by permanent injunction from dealing with the funds and property of the company in any manner and also refrain from interfering with the functioning of the plaintiff No. 1 as the Chief Executive of the Company."
Alongwith the plaint the plaintiffs also submitted an application dated 7-6-1971 under Order XXXIX, rules 1 and 2 read with section 151, C. P. C. And prayed that pending disposal of the suit a temporary injunction be issued directing the respondents/ defendants to refrain from holding the extraordinary general meeting on the 15th June 1972 or any later date for the purpose mentioned in the notice and the respondent No. 8 (Taj Muhammad Khanzada) be also restrained from dealing with the funds and property of the Company. On 8-6-1972 in the presence of the counsel for the plaintiffs and defendants 5 and 8, notice of application for temporary injunction was given to the defendants for 12-6-1972. On the same day viz. 8-6-1972, Taj Muhammad Khanzada defendant applied to the District Judge, Peshawar for transfer of the suit from the Court of Mr. Zahir Shah, Civil Judge, Mardan, to a Civil Court at Peshawar. The District Judge, Peshawar by his order dated 13-6- 1972, transferred the case to the Court of Mr. Muhammad Alam Khan Kundi, Additional District Judge, Peshawar for disposal of me application for temporary injunction. The Additional District Judge, Peshawar heard the parties on 14-6-1972 and by his impugned order of the same date he rejected the application for temporary injunction. On 15-6-1972, the application for transfer of the suit was also dismissed, and the main suit was ordered to go back for disposal to the Court of Mr. Zahir Shah, Civil Judge, Mardan. The present appeal was instituted on 4-7-1972. In the meanwhile the proposed extraordinary General Meeting of the shareholders was held on 15th June 1972 at 9 a. m. At Takht Bai. 528 shareholders participated in the meeting. After recitation of the Holy Quran the Agenda of the meeting as set out in the notice dated 27th May 1972, referred to earlier, was taken up:- "(2) The minutes of the General Meeting held on 31-3-1972 were presented by the Secretary and implications of Item No. 3 i.e. Election of Directors held in that meeting vis-a-vis Articles Nos. 10 and 12 of Presidential Order No. 2 of 1972 were explained In detail by the Chairman, it was found that the mandatory provisions contained under Article 10 read with Article 12 of the Presidential Order No. 2 of 1972 were not complied with since no polling in the election of Directors was held and the number of votes secured by each Director which should have been specifically recorded in the minutes were not recorded. This omission makes the entire process of the election of Directors in that meet--ing illegal and is therefore null and void and inoperative. The statutory right granted to the shareholder: under Article 12 and other provisions of the Presidential Order No. 2 of 1972 for the removal of the Directors was thus denied to the shareholders. With the above view, the following resolutions were proposed by Mr. Fazeli Moula Khan and seconded by Mr. Ghulam Haidar Khan: Resolved: (A) That the proceedings taken in Item No. 3 of the Agenda of the General Meeting held on 31-3-1972 is null and void.
(B) That a fresh election for the 9 (nine) Directors including the Chief Executive/ Managing Director should be held in accordance with mandatory provisions of the Presidential Order No. 2 of 1972.
(C) That the Board of Directors constituted on the basis of Item No. 3 of the agenda of the General Meeting held on 31-3-1972 had been illegally constituted, the subsequent pro--ceedings by that Board of Directors on 15-4-1972 being without any lawful authority are illegal and inoperative and are thus annulled and all the subsequent decisions result--ing from the Meeting of 15-4-1972 are declared null and void.
The above resolutions were taken up one by one. Resolution (A) was discussed and the legal implication of Presidential Order No. 2 of 1972 were fully con--sidered. It was unanimously passed and the proceedings taken in item No. 3 of the agenda of the General Meeting held on 31-3-1972, were declared null and void and consequently rescinded.
Then resolution (B) was taken and it was decided that in view of resolution (A) having been passed, a fresh election for the 9 (nine) Directors (including the Chief Executive/ Managing Director) should be held in accordance with mandatory provisions of the Presidential Order No. 2 of 1972.
3. After this the election of 9(nine) Directors, the number having already been fixed by the Board, was taken up. The names of the 11 (eleven) nominations submitted were read out and the procedure for election by votes was explained and voting papers were distributed. The completed voting papers duly signed by the shareholders were handed over to the Chairman for scrutinising, compilation and totalling. The number of Proxies received and those who attended the meeting, their votes were adjusted and then the voting papers were taken. After duly scrutinising the voting papers by the Chairman the result was declared by him a9 under :- Name of candidates.
No. Of votes secured.
1. Mr. Taj Mohammad Khanzada.
540482
2. Mr. Sadullah Khan.
405000
3. Mr. Mohammad Asad Khanzada.
380375
4. Mr. Abdul Hameed Khan.
497745
5. Begam S. Khanzada.
340866
6. Mr. Sarwar Jan Khan.
365127
7. Mr. Mohammad Yaqoob Khan.
367543
8. Mr. Mohammad Ayub Khanzada.
370455
9. Mr. Ghulam Haidar Khan.
342145
10. Syed Mohammad Hassan.
11. Mr. Wajid A.I Burki.
The following were therefore declared elected as Directors:
1. Mr. Taj Mohammad Khanzada.
2. Mr. Abdul Hameed Khan.
3. Mr. Sadullah Khan.
4. Mr. Mohammad Asad Khanzada.
5. Mr. Mohammad Ayub Khanzada.
6. Mr. Mohammad Yaqub Khan.
7. Mr. Sawar Jan Khan.
8. Mr. Gaulam Haidar Khan.
9. Begum S. Khanzada.
Then resolution No. C was taken up and it was unanimously passed.
4. After this the appointment of the Chief Executive Managing Director was taken up. Mr. Taj Mohammad Khanzada's name was proposed by Mr. Gujar Khan and seconded by Sahibzada Mohammad Alam Zeb Khan. The House unanimously approved the appointment of Mr. Taj Mohammad Khanzada for a period of three years on the same terms and conditions as given below:
(1) Remuneration Rs. 3,000 per month free of income-tax.
(2) 3 % of the Net-Annual Profit of the company.
(3) Rs. 750 per month (Entertainment Allowance).
The meeting closed with a Vote of thanks to the chair.
The Board of the newly elected Directors held a meeting on 15-6-1972 at 2 p.m. And did the following, among other, business:-
(2) To elect a Chairman for the Board of Directors.
(2) Mr. Taj Mohammad Khanzada proposed the nameof Khan Sadullah Khan to be appointed as a Chairman of the Board of Directors. The proposal was seconded by Mr. Mohammad Yaqoob Khan and was una--nimously appointed as a Chairman.
(4) To confirm the annulment by the Board of Directors of the proceedings of meeting on 15-4-1972.
(4) The proceedings of the meeting of 15-4-1972 were not approved and annulled. These had been also disapproved previously by the majority of the Directors.
(6) To confirm the appointment as already passed by the Extraordinary General Meeting of the shareholders on 15-6-72 of Mr. Taj Mohammad Khanzada, D. S. O., M. C. & M. P. A, as Chief Executive/Managing Director in the light of the Presidential Order No. 2 of 1972 for a period of three years on the same terms and conditions and powers which he had before.
(6) The Board unanimously confirm the election of Mr. Taj Mohammad Khanzada as the Chief Executive/Managing Director of the company and the Board also appoint Mr. Taj Mohammad Khanzada as the Chief Executive of the company in accordance with provisions of Article 4 of the Presidential Order No. 2 of 1972 on the same terms and conditions and powers as before for a period of three years.
5. During the pendency of the present appeal Salahuddin, Sahrab Hayat Khan and Dost Muhammad Khan, Directors filed Writ Petition No. 116 of 1972 on 27-11-72. In the petition the Frontier Sugar Mills and Distillery Ltd., Takhtbai, District Mardan, Mr. Taj Muhammad Khanzada and 9 others were arrayed as respondents. The declaration sought in this petition was that the proceedings of the meeting held on June 15, 1972, by respon--dents 1 to 10, in which petitioner No. 1 and petitioner No. z were, respectively, removed from the office of the Chief Executive and Directors of the Mills is without jurisdiction and of no legal effect, as also election of respondents 2 to 10, who were elected instead as Directors in the said meeting .... . This petition was dismissed by a Division Bench of this Court on 13-12-72 on the ground that the Frontier Sugar Mills could not be termed "person" within the meaning of Article 201 of the Interim Constitution and secondly that a civil suit filed by the petitioners against the respondents is still pending adjudication in a competent Court.
6. In the memo of the present appeal the principal ground (ground No. 4) taken is: "That the appellants have a strong prima face case for the grant of the injunction as prayed for before the first Court except regarding the holding of the meeting on 15th June, of which meeting, the proceedings are a nullity and this Hon'ble Court is bound to ignore them, as non-existent in law."
It i9 prayed in the appeal "that the appeal be kindly accepted and the injunction be kindly allowed restraining respondent No. 8 from interfering with the performance of functions of the Chief Executive by the appellant No. I and also that the respondent No. 8 be restrained from handling the property of the Mill including the funds, in any manner."
It may be pointed out that Muhammad Yaqub Khan plaintiff No. 4 in the suit plaint had applied on 12-6-72 that his name be struck out from the panel of plaintiffs. Muhammad Yaqub Khan is one of the 9 Directors newly elected on 15-6-1972. He has, therefore, been made respondent No. 11 in the Memorandum of Appeal.
7. Mr. Saeed Akhtar, Advocate for the appellants and Mr. Zahurul Haq, Advocate for the respondents were heard at great length on behalf of the parties.
The learned counsel for the appellants advanced the following contentions:
(1) That the office of the Chief Executive had been filled by appellant No. 1 on 15-4-1972 by a resolution of the lawfully elected Board of Directors.
(2) Assuming for the sake of argument that there was defect in the election of Directors, the decision of the Directors to appoint Salahuddin Khan as Chief Executive will not be rendered illegal in view of the protection contained in Article--cle 128 of the Articles of Association of the company and section 86, read with paragraph 94 of the First Schedule, Table T A of the Companies Act.
(3) The appointment of the Chief Executive is only to be made by the Board of Directors under Article 4 of the Presidential Order No. 2 of 1972 and the appointment is for a fixed time of three years under Article 11 of the Presidential Order; the Chief Executive, therefore, cannot be removed before the expiry of three years, which would expire on 15-4-1975.
(4) The initial appointment of Taj Muhammad Khanzada as Managing Director terminated with effect from 15-1-1972 under Article 4 of the Presidential Order. His appointment 6n 24-1-1972 was also expressly rescinded on 15-4-1972 by the new board of Directors of which Mr. Taj Muhammad Khan--zada was also a member and was appointed as Director. He accepted and acquiesced into this arrangement by withdrawal of his suit on 31-5-1972, and also by signing the requisition notice dated 27-5-72 for convening Extraordinary General Meeting (it shareholders on 15-6-1972; thereby waiving all his rights as Chief Executive on the basis of old meeting of the board 0 Directors dated 24-1-1972.
8. During the course of their address the learned counsel for the parties produced various precedent legal decisions in support of their respective points of view.
"Preventive relief is granted at the discretion of the Court by injunction, temporary or perpetual.
Temporary injunctions are such as are to continue until a specified time, or until the further order of the Court. They may be granted at any period of a suit, and are regulated by the Code of Civil Procedure.
A perpetual injunction can only be granted by the decree trade at the hearing and upon the merits of the suit: the defendant is thereby perpetually enjoined from the assertion of a right, or from the commission of an act, which would be contrary to the rights of the plaintiff."
(See sections 52 and 53 of the Specific Relief Act).
Section 56 of the Specific Relief Act lays down guiding principle for refusing injunctions.
Rules 1 and 2 of Order XXKIX, Civil Procedure Code provide for cases in which temporary injunctions may be granted by a Court in suits. Rule 2 of the Order specifically provides for restraining the defendant, in any suit, from committing a breach of contract or other injury of any kind and the plaintiff may, at any time, after the commencement of the suit apply to the Court for a temporary injunction to restrain the defendant from committing the breach of contract or injury complained of, or any breach of contract or injury of a like kind arising out of the same contract or relating to the same property or right.
The well settled principles for the grant or refusal of temporary injunctions are, firstly, whether the plaintiff had a prima facie good case, secondly, whether the balance of conveni--ence lies in favour of the grant of injunctions, and thirdly, he--their the plaintiff would suffer irreparable loss if the injunction is refused. See Shahzada Muhammad Umar Beg v. Sultan Mahmood Khan and another (PLD 1970 SC 139).
Thus although the issue of injunction is discretionary with the Court yet the principles governing the exercise of such discre--petition are fully settled. The considerations enumerated in section 56 of the Specific Relief Act are also applicable in granting or refusing temporary injunctions.
Prima Facie Goad Case
9. In deciding whether there is a prima facie good case the Court has to see whether the plaintiff has a plain and undisputed question to raise as to the existence of the right which he claims. The question of discretion is usually a question of degree and when exercising discretion Court should look to all circumstances of the case. In the exercise U discretion the Court is not to determine the legal rights of the parties on the merits of the case one way or the other. All that is required is to find out whether the applicant has made out a prima facie case. The issue of a temporary injunction is governed by the same principles as the grant of a permanent injunction at the trial of a case. It is no sufficient reason for the purpose of not issuing a temporary injunction that the suit would become infructuous.
The appointment of Managing Agents and election of Directors is governed by the provisions of the Companies (Managing Agency and Election of Directors) Order, 1972 (President's Order 2 of 1972).
The provisions of this Order override other laws according to Article 3 of the Presidential Order, which reads: "This order shall have effect notwithstanding anything contained in the Provisional Constitution Order, the Companies Act, 1913 (VII of 1913), or any other law for the time being in force or any agreement, contract, memorandum or articles."
The other relevant Articles of the Presidential Order are quoted below: "4. Termination of managing agency, agreements and contracts.-(1) All agreements or contracts entered into by a cum: pony with its Managing Agent shall stand terminated forthwith and the Managing Agent and tie directors of the company nominated by the Managing Agent shall cease to hold their respective offices.
(2) On the Managing Agent and Directors of a company ceasing to hold office in pursuance of clause (1),-
(a) the remaining Directors of the company shall appoint a person who is not the Chief Executive of any other company to be the Chief Executive In whom shall vest the powers and functions in relation to the management and administration of the affairs of the company subject to the general supervision and control of the Directors; and
(b) the Managing Agent and directors so ceasing to hold office shall entrust all the propertie3, books of account and other documents of the company to the directors for the time being or to the Chief Executive appointed by them under paragraph (a).
(3) The Chief Executive appointed under Clause (2) shall hold office on such terms as the directors may determine and shall, if he is not already a director of the company, be deemed to be its director.
9. Directors to stand retired.---On the expiration of the period of one hundred and eighty days following the commencement of this Order, or on the date of the first annual general meeting of a company held after such commencement, which ever is due earlier, all directors of a company for the time being shall stand retired from office: Provided that the directors so perform their functions until their successor are elected.
10. Voting for election of directors.---The directors of a company shall fix the number of directors of the company and the directors shall be elected by the members of the company in general meeting in the following manners:
(a) a member shall have such number of votes as is equal to the product of the number of voting shares hold by him and the number of directors to be elected:
(b) a member may give all his votes to a single candidate or divide them between more than one of the candidates in such manner as he may choose; and
(c) the candidate who gets the highest number of votes shall be declared elected as director and Men the candidate who gets the next highest number of votes shall be so declared and so on until the total number of directors to be elected has been so elected.
11. Term of office of directors.-(1) A director, including the Chief Executive, shall hold office for a period of three years unless he earlier resigns, becomes disqualified for being a director or otherwise ceases to hold office.
(2) Any casual vacancy occurring among the directors may be filled up by the directors, and the person so appointed shall hold office for the remainder of the term of the director in whose place he is appointed.
12. Removal of director, etc.---A resolution for removing a director elected in the manner provided for in Article 10, or for reducing the number of directors, shall not be deemed to have been passed if the number of votes against it is equal to, or exceeds, the number of votes that would have been necessary for the election of a director at the immediately preceding annual election of directors in the manner aforesaid.
14, Adaptation of laws, etc.---Any Court, tribunal or authority required or empowered to enforce the Companies Act, 1913 (VII of 1913), or any other law for the time being in force or the memorandum or articles of any company shall, not--withstanding that no actual modifications or adaptations have been made therein, construe that Act or other law or the memorandum or articles with all such modifications and adaptations as are necessary to bring the same into accord with the provisions of this Order.
16. Bar of jurisdiction.---(1) No Court, including the Supreme Court and a High Court, shall call in question, or permit to be called in question, any provision of this Order or of any rule or order made or anything done or any action taken or purporting to be made, done or taken thereunder.
(2) No Court, Including the Supreme Court and a High Court, shall grant any injunction or make any order, nor shall any such Court entertain any proceedings, in relation to any, thing done or intended or purporting to be done under this Order."
Paragraph 6 of Part I of the Schedule annexed to the Capital Issues (Exemption) Order, 1967, governs the appointment of Chief Executive. Paragraph 6 of Part I of the Schedule annexed to the Capital Issues (Exemption) Order, 1:967, under Notification No. F-2 (2)-CCI/67, dated 13th March 1967 in exercise of the powers conferred by subsection (1) of section 6 of the Capital Issues (Continuance of Control) Act, 1947 (XXIX of 1947), reads : "6. The Chief Executive, by whatever name called, shall not except with the approval of the Controller of Capital Issues, be appointed :-
(a) .
(b) .
Recapitulating the facts of the present case in the light of the provisions of Statute, quoted above, Mr. Taj Muhammad Khanzada was appointed Managing Director of the Company by special resolution dated 23-4-1950. He was acting as Managing Director of the Company at the time of the coming into force of the Presidential Order No. 2 of 1972 on 15-1-1972. The Board of Directors of the Company held a meting on the 24th January 1972 and by resolution No. 7 appointed Mr. Taj Muhammad Khanzada a9 Managing Director for a term of three years, on the same remuneration i.e. Salary, commission, entertainment allowance, privilege etc. As allowed to him earlier by the General Body of shareholders. On the expiration of the period of 180 days following the commencement of the Order (viz. On 13-7-1972) or on the date of the First Annual General Meeting of the company held after such commencement, whichever was due earlier, all directors of the company for the time being stood retired from office. However, the directors so retired could continue to perform their functions until their successors were elected. The directors of the company had also to fix the number of the directors of the company, and then to elect the number of the directors so fixed in a general meeting by cumulative voting system compulsory for a term of three years as introduced by sections 10 and 11 of the Presidential Order. The Directors had also to appoint Chief Executive for a period of three years as ordained by Article 11 of the Presidential Order.
After the appointment of Mr. Taj Muhammad Khanzada as Managing Director on the 24th of Jaunary 1972, the Board of Directors raised the number of Directors from 7 to 9 in their meeting held on 10th March 1972. Consequent to notice dated 11th March 1972 the 32nd annual ordinary meeting of the shareholders of the Mills was held on 31st March 1972, when the previous seven directors were re-elected and Mr. Salahuddin Khan and Mr. Muhammad Yaqub Khan were elected unopposed as two other directors, so as to complete the number of directors to be nine. On 15th of April 1972 the Board of Directors held a meeting wherein resolution No. 7 dated 24-1-1972 confirmed on 31-1-1972 was considered as ultra vires of the Board of Directors as well as against the provisions of the Companies Act. The Board of Directors also wag of the view that by an oversight Mr. Taj Muhammad Khanzada was appointed as Managing Director for a period of three years and as such the Board decided unanimously to rescind and annul resolution No. 7, dated 24-1-72, because it was passed in the presence of Mr. Taj Muhammad Khanzada when he himself presided over the meeting. After having annulled resolution No. 7, dated 24.1-1972, the Board of Directors by a unanimous decision of the members appointed Mr. Salahuddinn Khan as Chief Executive of the Company in terms of the Presidential Order while Mr. Taj Muhammad Khanzada was appointed as Resident Director. The proceedings .Of the annual ordinary general meeting held on 31st March 1972 so far stand unconfirmed. The appointment of Mr. Salahuddin Khan as Chief Executive in the meeting of Board of Directors held on 15th April 1972, it appears, was sent for approval of the Controller of Capital Issues, but this authority, instead of approving the appointment, had advised the Company to apply for the appointment of Mr. Salahuddin Khan as Chief Executive on the prescribed form, a copy of which was sent to the Company. The approval of the Controller of Capital Issues in respect of the appointment of Mr. Salahuddin as Chief Execu--tive was necessary but such approval has not been obtained so far. Thus it is evident that in the annual ordinary general meeting of the shareholders of the Mills, held on 31st March 1972, the nine Directors including Mr. Salahuddin, were elected unanimously, and not by cumulative voting system under the mandatory provisions of Article 10 of the Presidential Order. The election of the nine Directors in violation of the mandatory provisions of the Statute strikes at the base of the meeting of the Board of Directors held on 15th April 1972, wherein Salahuddin was appointed as Chief Executive. The lack of approval of leis appointment as Chief Executive by the Controller of Capital Issues also violates the obligatory provisions of para. 6, Part I of the Schedule annexed to the Capital Issues (Exemption) Order, 1967 it is a settled law that if an act or omission violates the statutory provisions of law, the same is a nullity and the Court before which it is brought is not only entitled but bound to ignore it. Mr. Salahuddin appellant, therefore, on the date of Institution of his suit, out of which the present appeal arises, had no fair or undisputed right to hold the office of the Chief Executive of the Company. His right to hold the office being of a doubtful nature, the rule of balance of convenience Mil have no place in his case. The argument of the learned counsel for the appellant that his suit for permanent injunction, if the temporary injunction is not granted to him, would become infructuous, has no legal force in the circumstances of the case.
Balance of Convenience
10. The prayer in this appeal that respondent No. 8 Mr. Taj Muhammad Khanzada be restrained from interfering with the performance of functions of Chief Executive by the appellant No. 1 and that he (respondent No. 8) be restrained from handling the property of the Mills, including the funds in any manner; arises from the proceedings of the extraordinary general meeting held on 15th June 1972, wherein Mr. Taj Muhammad Khanzada was appointed Chief Executive of the Company for a term of three years. This meeting was held during the pendency of the suit and after passing of the impugned order in appeal on 14th June 1972, but before this appeal was preferred. Rule 2 of Order XXXIX, C. P. C. Regulates the grant of a temporary 1 injunction in suits for injunction against apprehended breach of contract or injury of any kind. As such where the act complained of has been doneand completed no injunction could be issued under rule 2. Mr. Taj Muhammad Khanzada had been a Managing Director since 23-4-1950. He was again appointed, temporarily as Managing Director by a Board of Directors in the meeting held on 24-1-1972. He was also appointed Managing Director by the newly elected Directors, elected under the provisions of Article 10 of the Presidential Order in a meeting held on 15-6-1972. This will show that be has not vacated the office of Managing Director or Chief Executive at any time till today, bat he functions in relation to the management and administration of the affairs of the company uninterrupted. Mr. Salahuddin Khan has at no point of time, after his appointment as Chief Executive on the 15 of April 1972 took over the office of the Chief Executive. The issue of temporary injunction in his favour would obviously disturb the functioning of the management and administration of the affairs, of the company. The balance of convenience would, therefore, lie in not disturbing the management and administration of the affairs of the company.
Irreparable Loss
11. This term does not refer to damage which can be physically repaired, but relates to such damage or loss as cannot be compensated adequately. The appellant Mr. Salahuddin, as already stated above, has at no time held the office of Chief Executive on the remuneration fixed for him. As such his relief in the suit for injunction can be compensated in money when he succeeds.
Therefore, the temporary injunction cannot be granted to him.
11-A. Article 16(2) of the Presidential Order also creates a bar to the issuance of injunction in the manner that no Court including the Supreme Court and a High Court, shall grant any injunction orth make any order, nor shall any such Court entertain any proceedings in relation to anything done or intended or purporting to be done under this Order.
12. Before the institution of the present appeal, consequent to the holding of the Extraordinary Annual General Meeting on 15-6-1972, Mr. Taj Muhammad Khanzada and Mr. Muhammae, Yaqub Khan respondents were elected Directors besides Mr. Abdul Hamid Khan, Mr. Saadullah Khan, Mr. Asad Khanzada, Mr. Muhammad Ayub Khanzada, Mr. Sarwar Jan Khan. Mr. Ghulam Haidar Khan and S. Begum Khanzada. The Chief Executive has posers to function in relation to the manage-- ment and administration of the affairs of the Company subject to the general supervision and control of the Directors. Except Mr. Taj Muhammad Khanzada (respondent No. 8) and Muhammad Yaqub Khan, Director of the Company, respondent No. 11, the other seven Directors, named above, have not been made respondents in this appeal. The seven Directors, in my view,are interested in the result of the appeal and they are, therefore, necessary party to the appeal. For default of making them party to the appeal, this appeal would be incompetent.
13. As a result of the above discussion, this appeal is without merits and as such it is dismissed with costs.