SYED HAIDER ALI PIRZADA, J.-l. This is a petition under section 152 of the Companies Ordinance, 1984 (hereinafter referred to as the Ordinance) for rectification of register of members of a limited company.
2. The facts leading to the filing of the above petition are that the petitioner No. 3 is a private limited company incorporated under the Ordinance having its registered office at Shop No. 9, Auto Market, Dilkusha Chambers, Plaza Square, Karachi, and hereinafter referred to as the Company. The authorised capital of the petitioner No. 3 is Rs. 4.00 million whereas the paid-up capital is 2.00 million divided as under:--
(i) Petitioner No. 1 10,000 shares of Rs. 100,000 each share being of Rs. 10.
(ii) Petitioner No. 2 50,000 shares of Rs. 500,000 each share of Rs.10.
(iii) Mrs. Zulekha Firoz Dossani 1,40,000 shares of Rs. 1,400,000 each share of Rs. 10.
3. It is the case of the petitioners that petitioner No. 3 was incorporated at Karachi on 11th December, 1986 through M/s. A. Razzak & Company, Chartered Accountants, 115, Uni Plaza, I.I.
Chundrigar Road, Karachi. It is their further case that Mrs. Zulekha Firoz Dossani is at present in America and is the first cousin of the petitioner No. 1. Thus, the petitioner No. 3 is a family concern of the petitioners Nos. 1 and 2. The petitioners had appointed M/s. A. Razzak & Company, Chartered Accountants as the auditors of the petitioner No. 3 right from its incorporation.
4. It is the further case of the petitioners that the respondent No. 1 became the Resident Manager of M/s. A. Razzak & Company, Chartered Accountants and had been looking after all the corporate work and the auditing work of the petitioner No. 3. It is the further case of the petitioners that since the petitioners required working capital for the Company, they had to make an application to any financial institution in Pakistan for obtaining the loan for working capital. Accordingly the petitioners appointed respondent No.1 as attorney of the Company to file loan application with any scheduled bank or financial institution in Pakistan and to submit all the relevant documents etc. For that purpose and pursue obtaining of loan from the bank or financial institution. Besides this, the petitioner No. 1 under cover of letter dated 28th June, 1989, handed over to the respondent No. 1 the documents i.e. The power of attorney in favour of respondent No. 1, N.O.C, from Government of Baluchistan, Industries, Commerce and Mineral Resources Development, Quetta, possession letter Hub Industrial Trading Estates, Standard Agreement of lease, photo copy of letter from Government of Baluchistan Lasbella, site plan of the factory, site plan of boundary walls and invoices of the imported machinery.
5. It is the case of the petitioners that recently the petitioners have learnt that the respondents have filed certain fraudulent documents with the Registrar, Joint Stock Companies, showing allegedly that the shares have been sold by the petitioners Nos. 1 and 2 and their cousin Mst.
Zulekha Firoz Dossani to the respondents 1, 2 and 3. The petitioners have obtained certified copies of various forms which have been fraudulently filed by the respondents with the Registrar, Joint Stock Companies. The copies of the above documents are annexed with the petition as Annexures D, E, F, G and H.
It is the case of the petitioners that the above forms wrongly show that the respondent No. 1 is the Chief Executive and also wrongly show that the respondents Nos. 2 and 3 are the directors or that Mrs. Zulekha Firoz Dossani and Mrs. Jehan Ara Sharif resigned as directors of the Company. These forms also wrongly show the shareholding of different parties and these are forged documents.
6. It is the further case of the petitioners that the respondents 1, 2 and 3's names are wrongly mentioned as shareholders of the Company and/or directors and respondent No. 1 showing as Chief Executive of the petitioners are of fraudulent and of no effect. The register of the members of the Company is liable to be corrected and/or removing the names of the respondents as shareholders therefrom.
7. The respondent No.1 filed counter-affidavit wherein contending that the shares of petitioner No.1 were transferred to respondent No. 1 vide Annexure B-3 to the counter-affidavit. He also annexed photostat copies of receipt dated 15th January, 1988 executed by Chief Executive of the Company.
8. I have heard Mr. Mansoor-ul-Arfin and Qasim Ali, learned counsel appearing for the petitioners, Mr. Iqbal Ibrahim learned counsel appearing for the respondents Nos. I and 2 and Mrs. Naveen Merchant for the respondent No. 3.
9. Mr. Iqbal Ibrahim contended that the petition was not maintainable as proceedings under section 152 of the Ordinance providing a summary remedy in non-controversial matters, were not suitable in this case.
10. It is settled legal position that when serious disputes are involved, proper forum for their adjudication is a Civil Court. The Superior Courts have expressed the view that the summary remedy under section 152 of the Ordinance is not available to the litigant as of right without the Court having direction to refuse it. The Superior Courts have also expressed the view that if the case be one of difficulty and complication, it should more appropriately be decided at a regular trial and that this provision is not intended for settling controversies under several heads necessitating a regular investigation. Having regard to the nature of the controversy and comparatively simpler facts of this case, it is a case which can be suitably disposed of by this Court under section 152 of the Ordinance. In determining whether judicial discretion be expressed by the Court for the purposes of directing or refusing rectification of register of members, depends on the facts of each particular case. I do not find any similarity between the comparatively simple matters in controversy in this case and the cases where serious disputes are involved. I do not find this to be a case in which I should have abstained from proceeding under section 152 of the Ordinance. The contention of Mr. Iqbal Ibrahim as to the non-maintainability of these proceedings is devoid of force and this contention is, therefore, rejected.
11. The question to be decided is whether the sale in favour of respondents Nos. 1 and 2 was valid and for consideration. The case of respondents Nos.1 and 2 is that the petitioners and Mrs. Zulekha Firoze Dossani had sold the shares in question with due formalities and for consideration to them.
On the other hand, respondent No. 3 maintained that he had never purchased from the petitioner No. 3.
12. The respondent No. 1 produced photostat copy of receipt dated 15th January, 1988 for Rs.
15,00,000 being the advance for issuance of 15,5000 ordinary shares of Rs. 10 each of the petitioner No. 3. The respondents Nos. 1 and 2 have not produced transfer deeds which were important documents and are deliberately not being produced in this Court. Under the circumstances, there is ample justification for presuming that if produced they would not have supported the respondents' contention that the shares had been validly transferred by the Company.
13. I cannot help observing that in this case in which grave allegations have been made by the petitioners against the respondent No.1 it was his bounden duty to give evidence or to produce the documents supporting his defence, particularly when the circumstances relating to the passing of consideration etc. Were within his personal knowledge. The presumption against them cannot be avoided. In this case, it has been amply shown from evidence on the record that the pleas of the respondents were false to his knowledge.
14. So far as the legal position is concerned, it admits of no doubt that a forged or fraudulent transfer does not defeat. The title of the true owner and the person defrauded has a right to require the company to restore his name to the register. The true owner can obtain rectification of the register of members by striking out the name of the third person and restoring his own. As against the real owner a forged or fraudulent transfer is a nullity and the person so deprived of his shares can compel the company if it has removed his name from the register, to reinstate him as the holder of shares vide Barton v. North Staffordshire Railway Company (1888) 38 Ch.D. 458. In Barton v. London and North Western Railway Company (1888) 38 Ch. D. 144 at page 149 Cotton, L.J. Said as under:- "... It is well established that persons, whose stock is transferred out of their names in consequence of a forged deed of transfer, may go against the company whose duty it is to keep the register of stockholders, and say: 'it was your duty to keep this stock in our names until it was effectually transferred by a deed of transfer duly executed by us or by persons who had authority to act for us, and as you have transferred it without the authority of a good deed of transfer you must replace it"."
Reference may also be made among others to Davis V Bank of England (1824) E.R 357. In re: Bahia and San Francisco Railway Company (1868) 3 Q.B. 584 and Halsbury's Laws of England, 4th Edition, Volume 7, page 228, para 414.
15. Section 16 of the Ordinance provides that an application for registration of the transfer of shares and debentures in a company may be made either by the transferor or the transferee and subject to the provisions of this section, the Company shall 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. Proviso to section 76(1) 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. Articles 9 and 10 of the Articles of Association provide mode of transfer and transmission of shares.
16. In the instant case the respondents have not produced transfer deeds duly stamped and executed by the petitioners Nos. 1 and 2 and Mrs. Zulekha Firoze Dossani. The provisions of section 76 of the Ordinance are mandatory, it appears that provisions of section 76 of the Ordinance have not at all been complied with.
17. I entertain no doubt in my mind that this relief contemplated by section 152 of the Ordinance is eminently suitable in the facts of this casa; when the name of a person who is a member of the Company has been struck off, the effect is the same as if his name had never been entered. The striking out of his name from the register thus causes his name to be omitted from it; and against such an omission the section provides a remedy.
18. In re: Bank of Hindustan China, and Japan ex-parte Kintrea (1870) 5 Ch. Appeals 95 at page 99 Giffard, L.J. Said:- "It is clear, then, according to this, that if there is a fraud, or if the transaction is such that it cannot stand, the name is on the register without sufficient cause"."
19. There is ample authority for the proposition that a colourable transaction, whereby shares of a genuine owner are transferred in consequence of a fraud or forgery, cannot be allowed to stand.
The names of Akbar Ali Sharif, Mrs. Jehan Ata Sharif and Mrs. Zulekha Firoze Dossani must be restored on the register of members of M/s. National Bearings Industries (Pvt.) Limited.
20. The result of the above discussion is that the petition succeeds. I, therefore, order rectification of the register Of members of M/s. National Bearings Industries (Pvt.) Limited, Karachi, petitioner No. 3 and I direct that the names of respondents Nos. 1, 2 and 3 be removed from the register of Members of M/s. National Bearings Industries (Pvt.) Limited be restored with effect from the date of the alleged transfer of 200,000 shares which stood in the names of petitioners Nos. 1 and 2 and Mrs. Zulekha Firoze Dossani. In the circumstances of the case, the parties are directed to bear their own costs.
21. The above are the reasons for the short order dated 27th March, 1990 allowing the petition on conclusion of the arguments.