ORDER: G.H. MALIK, J,---1. The plaintiff has made this application under Order 40 read with Order 39, Rules, 1, 2, 7 and 10 and section 151, C.P.C. for appointment of a receiver of the properties and assets of defendant No, 1 and for an order restraining the defendants from doing various things and also directing them to do certain other things. The temporary reliefs sought by the plaintiff by this application are reproduced below in extenso-- "(i) restraining the defendant No, 1 from taking any steps that would result in diluting the equity interest of the plaintiff in any manner whatsoever, including but not limited to by the issuance of Right Shares of the defendant No, 1; (ii)restraining the defendant No, 1 from alienating, transferring, charging, mortgaging, disposing of, or erecting any encumbrance in any manner whatsoever, its properties, including its shareholding in other companies and operating any of its bank accounts; (iii)restraining defendants Nos, 2--6 from dealing in any manner with the share certificates issued in their favour by defendant No, 1; (iv)the defendant No, 1 be directed that the dividends on the shares in question be deposited in Court; (v)share certificates in respect of the 517,400 shares may be taken into custody of the Court and the same be retained under lock and seal of the Court; (vi)defendants Nos, 1 to 7 be personally restrained from dealing in any manner with the balance 165,500 lost shares;
(vii) directing the defendant No, 7 not to register, file or record any transfer of shares of defendant NO. 1 in respect of 517,400 shares owned by the plaintiff, and illegally transferred by the defendants Nos, 1-6 in their favour."
2. The circumstances, as set out in the plaint, in which the present application has arisen may briefly be stated. The plaintiff is the owner of 776,100 shares in the share capital of the defendant No, 1, which is 39.8 per cent thereof. Munir Ahmed, the Chief Executive of the plaintiff holds, directly and indirectly; over 15% of the share capital of the defendant No, 1 and such share holding enables the plaintiff to have at least three directors elected to the Board of Directors of the defendant No, 1 and "gives control majority of defendant No, 1" to the plaintiff. The plaintiff and the defendant No,1 are "associated" companies and their registered offices, at the relevant time, i,e, up to March, 1990, were in common premises; and they had common directors who are brothers inter se. The separation of the two companies within the common premises was maintained but with brotherly feeling that neither party shall interfere or take the assets or properties of the other. The 776,100 shares, mentioned above, were kept at the common premises and "on or about 1 February 1990, it transpired that from within the said common premises 682,900 (in 225 scrips) of the plaintiff's said shares were missing and were not found". This fact immediately came to the notice of Gulzar Ahmed, Chief Executive of defendant No, 1, and his son Tanveer Ahmed. On the 14th February, 1990, a notice of the loss of shares appeared in 'Dawn' and on the same day, the plaintiff wrote a letter to defendant No, 1 forwarding a copy of the resolution passed by the plaintiff on the 18th April, 1989, to the effect that the shares held by the plaintiff in defendant No, 1 could only be transferred under the joint signatures of its Chief Executive and Secretary. Another copy of the resolution was handed over to the defendant No, 1 earlier i,e, on or about the date on which it was passed. On the 17th February, 1990, the plaintiff wrote to defendant No, 1 formally informing it of the loss of the shares and requesting that duplicate share certificates be issued. The defendant No, 1 ignored the plaintiff's letter and the plaintiff, "being apprehensive", desired inspection of the Register of Members of defendant No, 1 but requests for inspection were avoided by the defendant No, 1 and its Chief Executive Gulzar Ahmed; and, consequently, the plaintiff sent, on the 17th February, 1990, a telex message to the Registrar of Companies, Islamabad, complaining of refusal on the part of defendant No, 1 to allow inspection of its Register of Members. The defendant No, 1 re-wrote the Register of Members and on the 18th February, 1990, the plaintiff complained to the Registrar about the re-writing. On the same day i,e, the 18th February, 1990, the defendant No, 1 allowed inspection of the Register and it was found, on inspection, that 517,400 shares of the plaintiff outof the"missing"682,900 shares had been transferred, on the 27th January, 1990, to-- 1.Firdous Spinning and W eaving Mills (defendant No. 2)50,000 shares 2.Mrs. Nilofar Aftab (defendant No. 3)10,000 shares 3.Qamar Ahmed (defendant No. 4)12,000 shares 4.Aftab Investment(Pvt.) Ltd.
(defendant No. 5)221,000 shares 5.Gulzar Investment(Pvt.) Ltd.
(defendant No. 6)224,000 shares The defendants Nos, 2 and 5 are companies of Aftab Ahmed who is a brother of Munir Ahmed and Guizar Ahmed; the defendants Nos, 3 and 4 are the wife and the son, respectively, of Aftab Ahmed and defendant No, 6 is a private company of Guizar Ahmed.
3. The plaintiff repeatedly protested against the action of the defendants but the defendants paid no heed and their plan was to "squeeze out" the representation of the plaintiff from the shareholding and board of directors of defendant No,
1. The plaintiff, however, tried to avoid family disgrace and scandal but, on the 8th March, 1990, the defendants colluded and conspired to deny the plaintiff's voting rights in respect of its 776,100 shares on the plea that 517,400 out of those shares had been transferred; and the plaintiff was excluded from the board of directors of defendant No, 1 and cheated out of majority control of defendant No, 1.
4. In the above alleged circumstances, it is the case of the plaintiff that the transfer of the 517,400 shares was made "without the knowledge or authority of the plaintiff' and that the transfer was "wholly unauthorised, illegal, malicious and mala fide and also fraudulent and without cause or consideration and a nullity in law." The plaintiff has, therefore, sought numerous reliefs including, (i) a declaration that the transfer of 517,400 shares has been made fraudulently and without sufficient cause, (ii) rectification of the Register of Members of defendant No, 1, (iii) permanent injunction restraining the defendant No, 1 from diluting equity interest of the plaintiff in any manner including issuance of Right Shares; and (iv) Rs, 2,500,000 by way of damages.
5. It may here be noted that there is no allegation in the plaint that the defendants Nos, 1 to 6, or any one else on their behalf or at their instance, removed or was suspected of removing the shares which were found "missing" on the 1st February, 1990. All that is alleged is that 682,900 shares were found "missing"--See para. 2.03 of the plaint; and the share certificates, aggregating 517,400 shares were "wrongfully removed" --See para. 3.05 of the plaint.
6. The defendants Nos, 1 to 6 have filed a joint written statement denying all the allegations in the plaint; and their case, as set out in the written statement, briefly stated, is as follows: The plaintiff and defendants Nos, 1 and 2 are companies which were floated by family members of the late Fazal Ahmed (the father of Gulzar Ahmed, Aftab Ahmed and Munir Ahmed) who, during his lifetime, remained in control of the companies. Those companies acquired shares in each other and as a result thereof, the brothers and/or their nominees were directors of all the companies. After the death of Fazal Ahmed, the management of the companies was carried on by the brothers and at first there were no differences. However, Munir Ahmed started reneging on mutual understandings and confidence and, abusing his position as Chief Executive of the plaintiff company, ousted Aftab Ahmed and his wife from directorship of the plaintiff by forging letters of resignation. The plaintiff company then issued Right Shares but did not offer proportionate number of shares either to Gulzar Ahmed's group or Aftab Ahmed's group and the shares held by those groups were illegally shown as reduced in the returns filed by the plaintiff with the result that Munir Ahmed's group increased its shareholding in the plaintiff company relative to and at the expense of the other two groups. The plaintiff company also did not pay dividends due to Aftab Ahmed's group and Gulzar Ahmed's group and, consequently owed large sums Of money to those groups. The latter, however, did not take any legal action "for the sake of family amity" but, instead, an arrangement was worked out whereby 517,400 shares held by the plaintiff in defendant No, 1 were transferred, in partial payment of the amounts outstanding, in favour of Gulzar Ahmed's and Aftab Ahmed's groups. Subsequently, Munir Ahmed has second thoughts and alleged that the shares were stolen and the transfers thereof were illegal and, to resolve the issue, the brothers agreed, by a written agreement dated the 20th February, 1990, that each brother's group was entitled to exclusive control/management of its companies. In the circumstances, it is stated, the plaintiff is estopped from challenging the transfer of the shares.
7. The plaintiff, in its affidavit in support of the application has reiterated the allegations in the plaint and has further alleged that the balance of convenience is in its favour and that it will suffer irreparable harm if the application is not granted as prayed. Nothing, however, has been said to substantiate the allegations regarding the balance of convenience and irreparable harm. The defendants have reiterated their version in the counter affidavit. In the affidavit-in-rejoinder, the plaintiff has denied the defendants' version; denied that a large sum of money was due from the plaintiff to defendants; asserted that, on the contrary, it was the defendants who owed the plaintiff very large sums of money; denied the allegation regarding forgery of resignation letters; alleged, for the first time, that no transfer deeds were signed for transfer of the shares and the transfer was, therefore, void and of no effect; and asserted that the agreement dated the 20th February, 1990, was conditional and contingent upon resolution of disputes between the parties and was, in any case, not binding on the defendants.
8. On the 21st February, 1991, notice of the application was ordered and it was further ordered:-- "In the meanwhile the defendants Nos, 1 to 6 are directed to maintain status quo in all respects including the issuance of right shares in relation to 776,100 shares claimed to have been held by the plaintiff..."
When the application came up for hearing on the 4th March, 1991, the above order was clarified in the following terms-- "Mr. Muhammad Ali Sayeed, learned counsel for the plaintiff states that according to his interpretation the operation of the status quo order passed on 21-2-1991 would not extend to restraining operation of bank accounts by the defendant No, 1 and accordingly he has no objection if the bank accounts are being operated upon by the defendant No,
1. With this clarification, the order of status quo granted on 21-2-1991 shall continue till the next date."
The order to maintain status quo was then modified on the 2nd May, 1991, when it was ordered by consent:-- "That the scope of the status quo order dated 21-2-1991 shall extend to only 776,100 shares which were originally in the name of the plaintiff company."
9. While the hearing of this application was in progress and had been adjourned to the 28th April, 1992, the plaintiff moved another application (C.M.A. 1732/92) to restrain the defendant No, 1 from conducting special business specified in the public notice published in the "Morning News" dated the 9th April, 1992. Arguments on that application were advanced by the counsel on the 28th and 29th April, 1992, and on the 29th April, 1992, the following order was passed:-- "By consent of the learned counsel for the parties, it is ordered that the defendants may hold meeting and pass resolutions mentioned in the notice dated the 9th April, 1992, published in the daily 'Morning News' but that the resolutions will not be implemented until after the decision in C. M.
A. 917 of 1991. This application, therefore, stands disposed of subject to whatever order may be passed in C. M. A. 917/91."
10. With regard to the allegation that the shares were found missing, the plaintiff apparently did nothing between the 1st February, 1990, when they were missing and the 14th February, 1990, when a public notice was published in daily 'Dawn% and no explanation for inaction on the part of the plaintiff during that period has been offered. Again, on the 14th of February, 1990, the plaintiff wrote a letter to the defendant No, 1 sending a copy of the resolution dated the 18th April, 1989, but made no mention in that letter of the alleged loss of the shares. That was done on the 17th February, 1990, when the plaintiff wrote to the defendant No, 1 asking for issuance of duplicate shares. The plaintiff, admittedly, came to know on the 18th February, 1990, that the shares had been transferred; it had already asked for issuance of duplicate shares and their demand in that connection had not been accepted by the defendant No, 1; and, on the 20th February, 1990, an agreement to resolve the disputes among the groups of Munir Ahmed, Aftab Ahmed and Gulzar Ahmed was signed. In that agreement, it has been stated, inter alia, that the real problem and difficulty between the parties is in connection with the bank liabilities and dues of the companies. If the dispute regarding the shares in question is serious enough to compel the plaintiff to resort to litigation now, surely it would have been serious enough on the 20th February, 1990, to have found mention in that agreement. It is alleged in the plaint that "The plaintiff tried to avoid family disgrace and scandal but the defendants have taken further steps to oust the plaintiff' on the 8th March, 1990, when it was excluded from the board of directors of defendant No, 1 on the ground that it no longer held the 517,400 shares which had been transferred to defendants Nos, 2 to 6. The implication of plea appears to be that because of the action taken by the defendants on the 8th March, 1990, it was no longer possible for the plaintiff "to avoid family disgrace and scandal" and it was compelled to seek a remedy with regard to the shares. Yet, the present suit was not filed until the 20th February, 1991, i,e, after almost one year. In these circumstanes, the allegation that the shares were "missing" is, at least, open to serious doubt. It was contended, on behalf of the plaintiff that the agreement of the 20th February, 1990, was a personal agreement between the brothers and was not binding on the companies. The fact, however, remains that the agreement was entered into in relation to the affairs of the companies and if there was a dispute about the shares, it would, naturally, have been mentioned therein.
11. There is no dispute among the parties that prior to the 27th January, 1990, the plaintiff was owner of 776,100 shares in defendant No, 1 and that those shares amounted to 39.8% of the share capital of the defendant No,
1. The plaintiff's case is that out of the 776,100 shares, 682,900 shares were found missing on the 1st February, 1990, and that out of those missing shares, 517,400 shares were transferred to the defendants Nos, 2 to 6 without authority, without consideration and illegally.
In order, apparently, to show that the transfer was without authority, it is alleged that on the 18th April, 1989, a resolution was passed by the plaintiff company to the effect that the shares of the company can only be transferred under the joint signatures of its Chief Executive and Secretary; and that a copy of the resolution was immediately handed over to the defendant No, 1 and another copy was sent to the defendant No, 1 under cover of the plaintiffs letter dated the 14th February, 1990. The defendants contend that the resolution is fake and that no copy thereof was sent to them prior to the 14th February, 1990. Mr. Khalid Anwar pointed out that the resolution, which is alleged to have been passed by circulation, has been signed by Munir Ahmed and his close relations but has not been signed by Gulzar Ahmed who was a Director of the plaintiff company. Nothing has been said in the plaint as to the necessity of passing such a resolution and, in reply to my query in that regard, Dr. Pervez Hassan said only that there was a "possibility of, mischief'. He did not however, specify the source from which the plaintiff apprehended "mischief'. It may, in this connection, be noted that, according to the allegatioqs in the plaint, both the plaintiff and the defendant No, 1 had their registered offices in common premises and that there was mutual trust and confidence between them and that they continued to occupy common premises until March, 1990. There appears to be nothing in the plaint or in the affidavits filed by the plaintiff to show that there was any apprehension on the 18th April, 1989, that the shares might be transferred or removed either by the defendants or anyother person. The allegation that a copy of the resolution was "handed over" immediately to defendant No, 1 has been denied by the defendant No, 1; and the averment, in the plaint, in that regard sufferers from vagueness because the allegation is only that a copy of the resolution was "handed over" to defendant No, 1, without any mention of the letter dated the 18th April, 1989, a copy of which has been annexed to the plaint: In other words, a copy of the letter of 18th April, 1989, has been annexed to the plaint but there is no allegation that a copy of the resolution was sent through that letter. It, therefore, appears, at least prima facie, that the resolution was not passed on the 18th April, 1989, and that there is no proof that a copy thereof was "handed over" to defendant No, 1 immediately or at any time prior to the 14th February, 1990.
12. As far as the agreement dated the 20th February, 1990 is concerned, it has been attacked on several grounds by Dr. Pervez Hassan and Mr. Muhammad Ali Sayeed. It was contended that the agreement is only between three brothers and, therefore, not binding on the companies, that it is without consideration, that it was conditional and contingent and also that it lacks the due formalities required of an agreement between companies. The agreement, on the face of it, has been signed by the three brothers for and on behalf of their respective groups and the contention of Mr. Kahlid Anwar was that it was intended to be an agreement on behalf of the companies which were mentioned in the agreement and which were being managed by the three brothers respectively. Mr. Khalid Anwar contended that Gulzar Ahmed and his group have been described, in the agreement, as majority shareholders in defendant No, 1 only on the basis of the 517,400 shares to them. Mr. Muhammad Ali Sayeed contested the correctness of that assertion and submitted that the group of Gulzar Ahmed does not own majority shares in the defendant No, 1 even after transfer of 517,400 shares. Be that as it may, the present suit is not concerned with the management of the defendant No, 1 but only with the alleged rights in the 517,400 shares which according to the plaintiff have been illegally transferred and which according to the defendants were transferred in pursuance of an arrangement prior to the 20th February, 1990. A perusal of the agreement shows that it does not deal with the transfer of 517,400 shares but is concerned only with the management and control of the several companies mentioned therein. The agreement, therefore, has been relied upon by defendant No, 1 only for the purpose of showing that Munir Ahmed, who is the Chief Executive of. the plaintiff, impliedly confirmed that the disputed shares had been transferred in pursuance of an earlier arrangement between the parties. It is therefore, not necessary to decide as to the effect of this agreement with regard to the management and control of the companies.
13.It was next contended on behalf of the plaintiff that the transfer of the shares to defendants Nos, 2 to 6 was without consideration. The defendants' case, on the other hand, is that the plaintiff was indebted to Aftab Ahmed group and Gulzar Ahmed group for "large sums of money" on account of dividends on the shares held by those two groups and, therefore, an arrangement was worked out whereby 517,400 shares held by the plaintiff in defendant No, 1 company were transferred in partial payment of the amount due. The plaintiff contends that there was no such arrangement because whereas the plaintiff owed the defendants Nos, 5 and 6 a total of Rs, 3,82,64,035, the defendant No, 1 owes the plaintiff a total of Rs, 5,807,682 on account of dividends due and other accounts. Mr. Muhammad Ali Sayeed referred to Annexures 'C-1' and 'C-2' to the affidavit-in-rejoinder of the plaintiff to show that the advances and receivables as against the plaintiff company were the same on the 30th June, 1990, and 30th June, 1991, to contend that no partial payment as alleged by the plaintiff has been made. However, the shares were transferred on the 27th January, 1990, and it cannot be ruled out that the amount shown as receivables on 30th June, 1990, is the amount after taking into account the partial payment by transfer of the shares on 27th January, 1990.
14.It was contended by Dr. Pervez Hassan that the transfer is without consideration also because the alleged transfer was made allegedly in partial payment of the money due by the plaintiff company to Gulzar Ahmed group whereas the shares have been transferred to defendants Nos, 2 and 5, who are the companies owned by Aftab Ahmed, and to defendants Nos, 3 and 4, who are wife and son respectively of Aftab Ahmed. Mr. Khalid Anwar replied that Aftab Ahmed and his group which includes the defendants Nos, 2, 3, 4 and 5 do not claim any interest in the shares transferred to them but that they hold the shares on behalf of Gulzar Ahmed and his group. Mr. Muhammad Ali Sayeed pointed out that Aftab Ahmed has not disclosed the transfer of these shares in his Wealth Statement but Mr. Khalid Anwar said that the non-disclosure was precisely for the reason that Aftab Ahmed does not claim any interest therein. Mr. Khalid Anwar further said that the transfer of all these shares have been disclosed in the Wealth Statement of Gulzar Ahmed; but no such Wealth Statement is on the record of this case. In the present state of allegations and counter allegations between the parties, it is not possible to decide whether the transfer of the shares to Gulzar Ahmed's group or to Aftab Ahmed's group was without consideration or that Aftab Ahmed's group holds the shares transferred to it on behalf of Gulzar Ahmed; and it will be a question to be decided upon evidence at the trial.
15. It was then contended that the transfer of the 517,400 shares was in violation of the provisions of subsections (1) and (2) of section 208 of the Companies Ordinance, 1984. Those provisions are:-- "(1) A company shall not make any investment in any of its associated companies or associated undertakings except under the authority of a resolution which shall indicate the nature and amount of investment and terms and conditions attaching thereto.
Explanation.--The term "investment" shall include any amount which is not in the nature of normal trade credit.
(2) No change in the nature of an investment or the terms and conditions attaching thereto shall be made except under the authority of a resolution."
Now, the transaction in dispute in this suit is not a fresh investment by the plaintiff in the defendant No, 1 but the transfer of an existing investment from the plaintiff to defendants Nos, 2 to 6. This transfer cannot be said to be investment in the defendant No, 1 and in fact, the effect of the transaction is disinvestment rather than investment. Sub-section (1) of section 208 is, therefore, not attracted to the facts of this case. Dr. Pervez Hassan, however, attempted to argue that the transaction of transfer of shares amounts to change in the nature of the investment although he was not able to show how the change was effected. Mr. Muhammad Ali Sayeed contended that even disinvestment by sale of shares results in change in the nature of the investment because whereas before the transfer a company holds the shares, after the transfer it ceases to hold the shares and, instead, receives and holds the consideration for the transfer of the shares. One would like to believe that the argument was not intended to be taken seriously; and it is only necessary to observe that disinvestment does not change the nature of an investment but puts an end to it.
16. Dr. Pervez Hassan submitted that, in any case, the purported transfer of the shares is not valid because no transfer deed, as required by section 76 of the Companies Ordinance, 1984, and Article 26 of the Articles of Association of the defendant No, 1, was executed. In support of his submission, he relied on PLD 1967 Kar. 144; PLD 1977 Kar. 814; AIR 1954 Nag. 293; AIR 1959 Cal. 715 and AIR 1941 Mad. 354. The judgments appear to support the submission which was not contested by Mr. Khalid Anwar. He, however, stated during the arguments, that a deed of transfer was executed by Gulzar Ahmed, who was a Director of the Plaintiff company and that such deed of transfer is in the possession of the defendant No,
1. Mr. Muhammad All Sayeed stated that there is no such deed of transfer and objected that, in any case, the defendant No, 1, not having taken such a plea in its counter-affidavit, cannot now rely on the alleged deed of transfer. Mr. Khalid Anwar replied that it was for the first time in the affidavit-in-rejoinder that the plaintiff had taken the plea that there was no deed of transfer and that, therefore, the defendant No, 1 had no opportunity to rebut the allegation. Mr. Muhammad Ali Sayeed said that it was open to the defendant No, 1 to seek permission to file an affidavit in surrejoinder but the defendant No, 1 failed to do so. However, I asked Mr. Khalid Anwar to produce the deed of transfer and was prepared to allow its production notwithstanding the objections raised by Mr. Muhammad All Sayeed. Mr. Khalid Anwar, however, did not produce any deed of transfer. I would, therefore, hold that, prima facie, the transfer of the shares is in violation of the provisions of section 76 of the Companies Ordinance, 1984, and Article 26 of the Articles of Association of the defendant No, 1 and, therefore, not valid.
17.It would, thus, appear that the plaintiff has established, prima facie, that the transfer of 517,400 shares of the plaintiff to defendants Nos, 2 to 6 is not valid; and the question is whether it is entitled to any interim relief to protect its interest. It was submitted on behalf of the plaintiff that it would not press for appointment of a receiver and that while the plaintiff has no objection to any decisions being taken by the defendant No, 1 on the basis of ordinary majority, it is necessary, in order to protect the plaintiff's interest, that the defendants be restrained from taking any steps which would dilute the plaintiff's equity in the defendant No, 1 and which would result in permanent or irrevocable alteration of the state of affairs to the prejudice of the plaintiff.
18.According to the Notice published in the 'Morning News' on the 9th April, 1992, the object of issuing right shares is "to meet the additional financial requirements for expansion plans of the company". The expansion programme has been set out in Annual Report of the defendant No, 1 for the year 1991 as follows:-- "Your company has finally engaged to install the machinery heretofore lying with it. The civil work for Unit No, 4 has already been started. In the first phase 11520 spindles from Japan will be inducted.
The production is expected to commence by the end of July, 1992.
To adjoin the further financial needs of purchase of local machinery, generators, custom dues and working capital, the Board of Directors has resolved to enhance the equity base of the company by issuing 3,900,000 right shares in the ratio of 2:1 (200%) at a premium of Rs, 5 each subject to approval of Controller of Capital Issues."
The defendant No, 1, in its application to the Controller of Capital Issues have stated that 3,900,000 right shares are proposed to be issued "out of which issue of 1,552,200 ordinary shares (200% of 776,100 shares) will be held in abeyance according to directions of Hon'ble High Court of Sindh to maintain status quo on 776,100 shares of the company.... These remaining shares will be issued subsequently in accordance with the decision of the Honourable High Court "Mr. Khalid Anwar also confirmed that the defendant No, 1 will not, pending the hearing and disposal of the suit, issue right shares in relation to 776,100 shares. The plaintiff, however, is not satisfied with this and its counsel contended that even if no right shares in respect of 776,100 shares are issued, the plaintiff's equity will be diluted during the pendency of the suit; but, assuming this to be the case, the learned counsel was unable to show how any irreparable harm will be caused to the plaintiff by the supposed interim dilution of the plaintiff's equity or that the balance of convenience is in favour of prohibiting issuance of right shares altogether during the pendency of the suit. The plaintiff is, therefore, not entitled to an order restraining the defendant No, 1 from issuing right shares except in respect of 776,100 shares. The intended issue of right shares was also criticised by Dr. Pervez Hassan as mala fide. He submitted that the requirement for local machinery was miniscule and could be met by obtaining loan at concessional interest of 6% per annum; that generators can be purchased by obtaining a loan from U.S.A.I.D.; that the customs duty was not yet due; and that the net profit of Rs, 53 lacs shown in the report of defendant No, 1 can be utilised to meet the need for working capital. He, however, made no attempt to show how it would be of greater benefit to the company to meet its requirements by obtaining loans rather than by increasing its capital or how any prejudice would be caused to the plaintiff if the capital of the company is increased. Indeed, as pointed out by Mr. Khalid Anwar, the plaintiff itself has issued right shares in similar circumstances as is shown by its annual report which is Annexure B/3 to the plaint.
19.The plaintiff objects to the proposed alteration of the objects clause in the Memorandum of Association of the defendant No, 1 in order to avail Tax Holiday under the Income Tax Ordinance, 1979, on the ground that restricting the company to single object amounts to fundamental alteration of the original objects of defendant No,
1. Mr. Khalid Anwar submitted that the defendant No, 1 had never undertaken any business except that of a textile mill and, therefore, in fact, no change in the business of defendant No, 1 will be brought about by alteration of the Memorandum of Association. Be that as it may, it was not contested that by alteration the defendant No, I is not going to suffer any loss and may in fact gain by way of earning substantial exemption from tax further, it was not shown how the alteration would cause any irreparable loss to the plaintiff; and it will be open to the plaintiff, should it succeed in the suit and have the requisite majority, to have the decision altered.
20. With regard to the dividends on the disputed shares, it is only fair that pending disposal of the suit, the rights of the parties who may ultimately succeed should be protected. Such dividends should, therefore, be deposited in this Court.
21.Since the apprehension of the plaintiff is not that its interests would be jeopardised by majority decisions taken by defendant No, 1 but that the defendant No, 1 might, by passing special resolutions, irrevocably affect the plaintiffs rights, the plaintiff would be adequately protected if the defendant No, 1 were required to give notice to the plaintiff of intention to pass any special resolution well in time to enable the plaintiff to take such steps as may be considered by it necessary to protect its interests.
22.In the circumstances, it is hereby ordered as follows:-- (i)The defendant No, 1 may implement the resolutions set out in the notice dated the 9th April, 1992, published in the daily 'Morning News'.
(ii)The defendants shall not, pending the hearing and disposal of the suit, sell, transfer, alienate, pledge or encumber the 776,100 shares in question in this suit.
(iii)The defendant No, 1 shall deposit in this Court all dividends due in respect of the aforesaid 776,100 shares.
(iv)The defendant No, 1 shall give to the plaintiff notice in writing of its intention to pass any special resolution at least fifteen days before the date on which such resolution is intended to be passed.
The application stands disposed of in above terms.