' M/s. Chittagong Steamship Corporation Limited, a company incorporated with limited liability under the Companies Act 1913, was carrying on a business as a Steamship Company. On 1st of January, 1974, the Pakistan Maritime Shipping (Regulation and Control) Ordinance, 1974, (Ordinance No,III of 1974) was promulgated by the President which authorised the Federal Government to take over the management and/or to acquire the shares or business of an establishment if it was considered necessary in public interest so to do. PuRs,uant to this Ordinance, on 1st of January, 1974 the management of the company was taken over by the Government which appointed its own Managing Director on the same day.
2. Subsequently on 7th May, 1975, the Government acting under section 5 of the Pakistan Maritime Shipping (Regulation and Control) Act, 1974 (which had replaced the Ordinance in the meanwhile) acquired the shares of all the shareholdeRs, of the company including those of the petitioneRs,
3. There is no dispute that compensation payable to the shareholdeRs, was to be worked out on the basis of the principles set out in the schedule to the Act as required by section 14 thereof.
4. On 8th May, 1975 an order was passed by respondent No,1 purporting to determine the break-up value of the shares of the company of the face value Rs,100 at Rs,51.17. According to the petitioner, this determination was not in accordance with law and the break-up value of the share should have been determined on the basis of the latest audited balance-sheet i.e. For the year ending 31st of December, 1973.
5. It appeaRs, that when the petitioner was informed that the compensation bonds were ready for delivery, he accepted the bonds under protest and without prejudice to his right to claim additional compensation as is evident from letter dated 1st of December, 1975 (Annex E to this petition).
Subsequently the petitioner represented against the valuation fixed by respondent No,1 but having failed in all his efforts to persuade the respondents to revise the valuation, he feed this Constitutional petition claiming various reliefs inter aka that it be declared that the shares were acquired on the basis' of the break-up value determined according to the latest audited balance- sheet for the year ending 31st of December, 1973.
6. In the written statement filed by the respondents the facts are more or less, admitted but the entitlement of the petitioner to receive compensation on the basis of the balance-sheet for the year ending 31st of December, 1973 has been specifically disputed. On the other hand, it has been asserted that the latest audited balance-sheet was the one for the year ending 31st of December, 1972 and not the balance-sheet for the year ending 31st of December, 1973 which was approved in the Annual General Meeting of the shareholdeRs, only on 31st of August, 1976.
7. Mr. Khalid Anwar, Advocate, the learned counsel for the petitioner has contended that as per the schedule to the Pakistan Maritime Shipping (Regulation and Control) Act the break-up value has to be determined on the basis of the latest audited balance-sheet. According to the learned counsel it stands admitted on the. Record that the AuditoRs, of the Company namely MessRs, Mana & Company had audited the balance-sheet for the year ending 31st of December, 1973 which was available at the time of acquisition of shares and on the basis whereof the petitioner would be entitled to compensation at the rate of Rs,155.64 per share as is evident from certificate of M.B.
Mana & Company, the AuditoRs, dated 11-12-1974 (Annexure B to this petition). The learned counsel has relied upon the authority of the Supreme Court in the Pakistan Shipping Corporation and another v. Rustam F. Cowasjee and otheRs, 1989 SCM R 1332 and two judgments of this Court namely Rustam F. Cowasjee and 5 otheRs, v. Government of Pakistan through Secretary, Ministry of Communications and another PLD 1981 Lah. 1 and Pakistan Shipping, Corporation and another v.
Rustam F. Cowasjee and 5 otheRs, PLD 1982 Lah. 671 to contend that the balance-sheet to be taken into consideration was the balance-sheet prepared and audited by the AuditoRs, irrespective of the fact whether the accounts had been approved by the company in its annual meeting or not. It was pointed out by the learned counsel that as the management of the company was taken over on 1-1-1974 when the respondents assumed control of the company, failure of the respondents to place the balance-sheet for the year 1973 before the Annual General Meeting till 1975 cannot operate to the prejudice of the petitioner.
8. Mr. Mansoor Ahmad, the learned standing counsel for the respondents has, on the other hand, argued that at the time of acquisition of shares, the approved available balance-sheet was for the year ending 31st of December, 1972 and the petitioner was not entitled to compensation on the basis of balance-sheet for the year ending 31st of December, 1973, which though audited by the AuditoRs, had not been approved by the company at the time of acquisition of the shares.
9. There is no dispute that on the promulgation of the Pakistan Maritime Shipping (Regulation and Control) Act, 1974, the management of the shipping companies was in the fiRs,t instance taken over and subsequently, the shareholding was acquired by the Government. The principle for determination of these shares are set out in the schedule to the Act. The import of the word 'latest audited balance-sheet' was considered by this Court in Rustom F. Cowasjee and 5 otheRs, v.
Government of Pakistan through: Secretary, Ministry of Communications and another (PLD 1981 Lahore,1). The dispute in that case pertained to valuation of shares held by Rustom Cowasjee and 5 other shareholdeRs, of East and West Steamship Company.
' While accepting the writ petition filed by them, it was held that the petitioner would be entitled to compensation worked out on the basis of the latest balance-sheet audited by the AuditoRs, and any subsequent change in the accounts would not be of any avail. This Court declared the revision of the audited balance-sheet as being without lawful authority. The judgment was upheld by the Division Bench in Pakistan Shipping Corporation and another v. Rustom F. Cowasjee and 5 otheRs, (PLD 1982 Lah. 671) and then by Supreme Court in the Pakistan Shipping Corporation and another v.
Rustam F. Cowasjee and otheRs, (1989 SCM R 1332).
10; The above precedents are applicable with full force in the present case also where it is common ground that the AuditoRs, had audited the accounts of the company and had also prepared a balance-sheet for the year ending 31st December, 1973 which was available at the time when the shares were acquired. The reasons as to why this balance-sheet was excluded from consideration by the respondents as disclosed in their written statement is that the said balance-sheet had not been approved by the Company till 31st August, 1976. The averments appearing in sub paras. (b), (c),(d), (e), (f) of para. 33 of the written statement of respondents 2, 3 and 5 are relevant which read as under:- "(b) The Audit Certificate dated 11th December, 1974, was based on unapproved accounts for the year ended 31st December 1973, which contained fictitious entries relating to Capital Reserve and Share Investment Reserve, which were subsequently deleted in the approved accounts as audited on 31st August 1976. There has been no violation of law in this respect.
(c) The allegation is baseless. The latest audited annual balance-sheet available at the time of acquisition of shares was for the year ended 31st December 1972 and in accordance with the provisions of the Schedule to Act XVIII of 1974 only that balance-sheet could form the basis. For determining the break-up-value for the purpose of, compensation, The accounts for the year ended 31st December, 1973 as prepared initially contained fictitious entries and the audit certificate based thereon could not be acted upon. The accounts for the year ended 31st December 1973 could be finalised only in August 1976. Hence they could not be taken as a basis for determining the break-up-value of shares acquired in May, 1975.
(d) The break-up-value was required to be determined by the AuditoRs, of the Company as per latest audited annual balance-sheet of the Company available at the time of acquisition of shares and action was taken accordingly. Consultation with shareholdeRs, in the matter was not required.
' The petitioner has placed reliance on the Audit Certificate dated 11th December, 1974 (copy at Annexure 'B' to the petition), which was based on unapproved accounts and could not be acted upon as already explained against (b) and (c) above.
(f) The direction given to the AuditoRs, of the Company meant only reedit of the accounts for year ended 31st December, 1973 on the basis of the accounts as prepared after omitting incorrect entries relating to Capital Reserve and Share Investment' Reserve .
11. It is also to be noticed that M/s. Mana & Company the AuditoRs, of the Company, respondent No,4 have admitted in their written statement that they had issued the certificate dated 11th December, 1974 on the basis of the audited balance-sheet for the account year ending 31st of December, 1973.
12. From, the above the conclusion which fallows is that the audited baiance-sheet for the year ending 31st of December, 1973 being available had to be considered "the latest balance-sheet" and the break-up-value of the shares of the petitioner should have been worked out on the basis of that balance-sheet.
13. So far as the revaluation of the fixed assets of the company and its subsequent deletion of certain entries by the new management, this aspect need not be dilated upon in view of the pronouncement of the S upreme Court in the above-cited case wherein it has been held that it was open to the company to revalue its assets and the entries in the latest balance-sheet could not be reveRs,ed by the new management.
14. Notice may also be taken of letter dated 28th November, 1974, addressed by the Ministry of Communication, Government of Pakistan to the Chairman Pakistan Shipping Corporation Board Karachi copy of which has beenfiled as Annex. 'K' to this petition. The relevant paragraph of the said letter reads as under:- "The matter has been considered further by the Finance Division in consultation with the Law Division. It has been held that the determination of the , break-up-value of shares for the purpose of the Schedule to the Pakistan Maritime Shipping (Regulation and Control) Act, 1974; the "latest audited annual balance-sheet" would be the one available on the date of acquisition of shares .
The break-up-value certificates in respect of the various Shipping Companies furnished by you were based on the latest audited annual balance-sheet as available on the date of the takeover as indicated below-
(1) Pan Islamic Steamship Company.
(2) Chittagong Steamship Corporation.
(3) Muhammadi Steamship Company Ltd. As on 31st.
December, 1972.
(4) Crescent Shipping Lines Ltd.
(5) Trans Oceanic Steamship Co,Ltd.
(6) Pakistan Shipping Line Ltd. As on 30th December 1972)
(7) Gulf Shipping Corporation Ltd. As on 30th June, 1973.)
' Fresh break-up-value certificates may now be obtained from the auditoRs, of the companies at 1 to 6 on the basis of their latest audited annual balance-sheets as prepared for the completed accounts in 1973, i.e. As on 31st December, 1973 in the case of the companies at 1 to 5 as on 30th September, 1973 in the case of the company at 6."
In face of this letter the insistence of the respondents that the break-up-value was to be worked out on the basis of balance-sheet for the year 1972 is wholly ill-founded.
' In view of what has been stated above this petition is allowed in terms that the respondents are directed to work out the break-up value of the shares of the petitioner in accordance with the balance-sheet for the year ending 31st of December, 1973 as audited by the AuditoRs, at that time.
No order as to costs.