' This judgment will dispose of C.M. 1277-L-91 and Writ Petition No,2612 of 1991 as common questions of law and fact are involved in both these matteRs, Both these petitions were filed in the name of Messrs S.T. Trading Company through Tabassum Shehzad son of Sh. Saif-ud-Din, Managing Partner. C.M. 1277-L-91 was filed on 3-4-1991 under section 7 of the Companies Ordinance in C.O.
45-90, seeking an order restraining Board of Administrators appointed by this Court for Messrs Taj Company Limited from interfering in the affairs of Bahawalpur Board Mills Limited and for recalling two orders passed on 4-2-1991 on reports Nos,6 and 7. It was also prayed that this Court may not pass any order in relation to Bahawalpur Board Mills Ltd. In view of the bar of jurisdiction contained in section 7 of the aforesaid Ordinance. This application was based on the premises that the Bahawalpur Board Mills Limited is a public limited company having its registered office at Karachi within the jurisdiction of the Sindh High Court, Karachi, before which Court a petition JM, 23-91 under section 284 of the Companies Ordinance and a petition JM 42-91 under section 290 of the Ordinance are pending and that C.O. 45 of 1990 relates to Messrs Taj Company which is a public limited company having its registered office falling within the jurisdiction of the Lahore High Court.
It was asserted that the claim of the dissolved management of the Taj Company that the Bahawalpur Board Mills was subsidiary of Taj Company is bogus and in any case this very issue is already pending before a Court of competent jurisdiction i,e, Sindh High Court at Karachi and Mr. Muhammad Naazar Khan, Advocate, one of the administrators of the said company has already become a party in JM 23-91.
2. The Constitution petition was filed on 3-4-1991 showing the petitioner company as a registered firm with the assertion that the said firm had obtained a lease of the Bahawalpur Board Mills Limited through Sh. Muhammad Saleem its Chief Executive for a period of three years commencing from 1-7-1989 to 30-6-1992 at the rate of Rs,5,00,000 per month. The grievance of the petitioner was that the respondents, the Excise Authorities, had no authority in law to refuse renewal of licence to the petitioner or to grant licence to Bahawalpur Board Mills and that the action of the Excise Authorities in issuing licence to the Bahawalpur Board Mills be declared as without lawful authority and direction be issued to the respondents to renew the licence in favour of the petitioner for the year, 1991. These reliefs were prayed for on the premises that though on 14th February, 1990, the Managing Director of the Taj Company along with other persons had forcibly dispossessed the petitioner but the petitioner filed suits for declaration and permanent injunction before the Civil Court at Sheikhupura and that the petitioner, however, re-entered the said mills and now the suits have also been eventually decreed on 2-2-1991 in favour of the petitioner who has been held to be lessee of the mills as well as owner of finished goods and raw material lying in the mills premises. It was further averred that the licence granted to the petitioner filed on 1-10-1989 was renewed for the year 1990-91 as well and as such the application for renewal for the year 1991 should also have been granted.
3. In order to understand the contentions of the parties it will be appropriate to take note of the chequered history of litigation going on between the parties. Messrs Taj Company Limited is a public limited company. A petition (C.O. 45-90) under section 290 of the Companies Ordinance was filed by the Registrar of Companies regulating the conduct of the company's affaiRs, This Court after hearing the concerned parties vide order dated 19-12-1990 appointed a Board of Administrators to conduct the affairs of the company in place of the Board of Directors and the Board of Administrators in pursuance of this order, took over the management of the company.
This order appointing the Board of Administrators in substitution of the Board of Directors was affirmed by this Court vide order dated 3-4-1991 as in fact there was no opposition to its confirmation either by the shareholders of the company or by the ex-DirectoRs, The Bahawalpur Board Mills is a public limited company having its registered office at Karachi but its mills is situated on the Lahore-Sheikhupura Road and as such the principal place of business of this company falls with the jurisdiction of this Court.
4. On the question of right to operate the mill litigation was going on between the parties in this Court. Reference may be made to ICAs 22290, 250-90 and 262-90. These appeals were filed against the judgment dated 16-2-1990 passed in W.P. 6303-90 wherein the dispute was raised with respect to the right to operate the mill of this public limited company. The relevant facts of this controversy are that the mill was purchased by Messrs Taj Company in the month of November, 1985, through vending agreement dated 16-11-1985. Sh. Muhammad Saleem, a Director of Taj Company was appointed as Chief Executive of the Bahawalpur Board Mills Limited. The Board of Directors of the Taj Company was also constituted as the Board of Directors of the Bahawalpur Paper and Board Mills Limited, In June, 1989, the mills was leased out to Messrs S.T. Trading Company, a partnership firm through lease agreement dated 27-6-1989 executed between the mills and S.T. Trading Company through Mr. Siraj-ul-Islam, Managing Partner and Tabassum Shehzad. The lease was as per this agreement terminable by three months' notice by either party and in exercise of this option the Taj Company issued notice on 5-11-1989 to the firm informing it that the said lease agreement would stand cancelled with effect from 5-1-1990 on the expiry of three months' period. This was followed by another notice said to have been given on 11-1-1990, informing the registered firm, the lessee, that the lease agreement stands cancelled. According to the Taj Company Siraj-ul-Islam the Managing Partner of the registered firm handed over the physical possession of the mills on behalf of the firm to the Managing Director of the Taj Company.
These documents of handing over are available on record. The fact that physical possession of the mills was obtained by the Managing Director of the Taj Company is, however, not disputed.
However, the version of Tabassum Shehzad is that a dispute between him and Siraj-ul-Islam, the Managing Partner of the registered firm due to which there was exchange of firing resulting into registration of a case under sections 336-452-148-149, P.P.C. With Police Station Saddar, against Siraj-ul-Islam and others but this dispute was resolved between the partners and Siraj-ul-Islam statedly handed over the assets of the firm including the factory to Tabassum Shehzad and left the partnership after receiving a sum of Rs,4,19,000. As the firing incident was reported to the police the Magistrate, First Class, Sheikhupura, on 7-2-1990 passed an order under section 145, Cr.P.C. For attachment of the said mills till further orders and the S.H.O. Was directed to seal the premises as breach of peace was apprehended. However, this order was recalled by the Magistrate on 10-2- 1992.
5. The Intra-Court Appeals referred to above were decided by a learned Division Bench of this Court vide judgment dated 2-2-1991 with the following observations and directions:-- "We have been driven to the conclusion that the Taj Company is entitled to have possession of the Mill pending the decision of the suits. We would have passed order accordingly for disposal of the appeals in terms thereof but for reasons to follow we have refrained fiom passing such an order. It is pertinent to mention here that after the conclusion of the arguments in this appeal and before pronouncement of present judgment, proceedings under the Companies Ordinance have been initiated in respect of Taj Company which are pending decision before Mr. Justice Khalil-ur- Rehaman Khan, the learned Company Judge of which we have taken a judicial notice. The learned Company Judge has appointed a Board of Administrators to take over and manage the assets of Taj Company. In this view of the matter it appears appropriate that the learned Company Judge seized of the matter may regulate the affairs of the Mill in question and pass appropriate orders in respect of the above-mentioned suits pending decision in the Civil Court. These appeals are disposed of in terms indicated above."
5. After decision of these appeals, Mr. Muhammad Naazar Khan, Advocate, Member, Board of Administrators submitted report No,6, before me for permission to deseal the mill so that further action as to the disposal of raw material and running the mill could be undertaken and finalised pointing out the direction passed by the learned Division Bench in the aforenoted IntraCourt Appeals. As a Company Judge, on 4-2-1991, 1 allowed the Board of Administrators to deseal the mill and to finalise the arrangement for disposal of raw material and running of the mill with the condition that this arrangement before being put into operation would be got approved from the Court. This order was, however, passed reserving the right of the ousted lessee namely S.T. Trading Company to raise objections, if any, available under the law. Notice was, therefore, issued to Messrs S.T. Trading Company. The same day, i,e, 4-2-1991, at 3-00 p.m. Mr. Muhammad Naazar Khan Advocate, presented report No,7 in Chamber staling that pursuant to the order passed in the morning he visited the premises of the mills and found that Tabassum Shehzad had broken open the seals and on asking the reason for his presence in the premises and breaking open the seals he stated that the suit filed by him has been decreed in his favour. It is also in the report that Tabassum Shehzad also supplied a photo copy of the certified copy of the judgment which was received by him on that very day i,e, 4-2-1991. It was also mentioned in the said report that the suit appears to have been decided ex parte on account of nonappearance of Ch. Ali Muhammad, the ousted Managing Director in spite of the fact that the order of the Court replacing the Board of Directors and appointing Board of Administrators was placed on the record of the suit.
Apprehension was expressed that because of the judgment dated 2-2-1991 obtained from the Civil Court the raw material and machinery of crores of rupees will be unauthorisedly removed to the great prejudice of the investors and shareholdeRs, In order to safeguard the raw material and the machinery which is admittedly worth crores of rupees this Court ordered that the premises of the factory be sealed and the Board of Administrators was authorized to oust any body found in possession of the mill including Tabasssum Shehzad. The mill was accordingly sealed pursuant to this order.
' Tabassum Shchzad challenged the two orders dated 4-2-1991 passed on reports Nos, 6 and 7 by filing a Petition for Special Leave to Appeal No, 99 of 1991 in the Supreme Court but the same was disposed of with the observation that the petitioner (Tabassum Shehzad) can file objections before the Company Judge. He then filed objections to the reports.
7. Now the history of the suits filed may be stated. Tabassum Shchzad filed a suit in May, 1990, for possession of the mill of the said company under section 9 of the Specific Relief Act in which it was averred that between the night of 14th and 15th February, 1990, Ch. Ali Muhammad, Managing Director, Taj Company, in connivance with Sh. Muhammad Saleem, Chief Executive of the mill, forcibly took possession from him of the mill. After a period of about seven months from the alleged dispossession Tabassum Shchzad on 1st Septemebr, 1990, filed a suit in the Civil Court at Shcikhupura, for permanent injunction. Tabassum Shehzad filed the amended suit for declaration to the effect that lease agreement dated 27-6-1989 between the plaintiff's company (S.T. Trading Company) and defendant No, 1 (Bahawalpur Board Mills Limited) regarding lease of the mill for three years is still in force, the plaintiff's company is entitled to remain in possession of the mills as lessee in terms of the Lease Deed dated 27-6-1989 for three years or beyond, the finished goods and raw material stored in the mills belong to the plaintiffs who is further entitled to restoration of possession of the mills in terms of order dated 16-9-1990 alongwith permanent injunction as prayed. The suit for possession was sought to be withdrawn on the plea that on 31st August, 1990, he has been put into possession by the Workers' Union of the mills. The suit for possession under section 9 of the Specific Relief Act was then got dismissed as withdrawn vide order dated 1-9-1990 of the learned Civil Judge. In the other suit an application was submitted on behalf of the Board of Administrators forming the Court that the Board of Directors of the Taj Company has been bstituted by the Board of Administrators by the Company Judge of the ore High Court under section 290 of the Companies Ordinance and as such Sh. All Muhammad, the Managing Director, ceased to have any right to represent Messrs Taj Company or Bahawalpur Board Mills. Despite submission of this application, Tabassum Shehzad was not required to implead the Board of Administrators as defendant. The suits were, however, decreed ex parte on 2-2-1991 i,e, on the very date that the judgment in the Intra-Court Appeals was announced.
' The Board of Administrators filed appeals against the judgments and decrees dated 2-2-1991, passed in the two suits of Tabassum Shehzad. These appeals were accepted and the suits were remanded for fresh trial in accordance with law vide judgment dated 1-7-1991 of the learned District Judge, Sheikhupura. Tabassum Shehzad also filed revision petition against the appellate judgment dated 1-7-1991 in this Court on 7-9-1991 and the learned Judge of this Court vide order dated 8-9-1991 directed issuance of preadmission notice to the two companies and also granted status quo order. This status quo order came to an end with the dismissal of the revision petition in limine vide order dated 3-11-1991. It may be mentioned that after remand both the suits were then dismissed for non-prosecution on 3rd September, 1991. Applications for restoration of the suits were filed on 5-9-1991, which have also been dismissed for non-prosecution. With the dismissal of these applications, the pleas advanced on account of the pendency of these suits with respect to the claimed lease rights remain no longer available.
8. The fate of the proceedings instituted in the High Court of Sindh at Karachi may now be stated. It will be recalled that JM 23-91 was filed by Messrs Rizwan Brothers and 9 others against the Bahawalpur Board Mills Limited under section 284 of the Companies Ordinance for direction to hold creditors' meeting. These petitioners claimed that they are creditors of the mills which, however, repudiated the claim by contending that they are not, as per record of the company, creditors of the mills. JM 42-91 was also filed by Rizwan Brothers and others, the so-called creditors, under section 290 of the Ordinance for an order to regulate the affairs and conduct of Bahawalpur Board Mills. In this petition vide order dated 26-6-1991 passed by the learned Judge of the High Court Sindh, Mr. Muhammad Naazar Khan, Advocate, Member, Board of Administrators, was restrained from exercising control over the affairs of the company and its properties. This order was, however, recalled vide order dated 1-9-1991 passed by the same learned Judge of High Court Sindh, on the representation made by the Board of AdministratoRs, Both these petitions (JM 23-91 and JM 42-91) along with other civil miscellaneous applications filed therein were dismissed for non-prosecution on 29-9-1991. The assertion of Mr. Muhammad Naazar Khan is that the proceedings before the High Court Sindh were initiated by Rizwan Brothers etc. At the behest of Tabassum Shehzad who by instituting frivolous litigation thwarted the plans of the Board of Administrators to reconvene the mills by putting it into operation and thus caused immense loss to the respondent company. It is also pertinent to mention that an application was submitted in this Court by....Rcquesting that the mills be leased to it at monthly lease money of Rs,15,00,000. The mills, however, could not be reconvened and the operation could not commence because of the stay orders obtained in one proceedings or the other. It is pertinent to note that the stay orders obtained by Tabassum Shehzad ultimately ceased to be effective with the dismissal of the revision petition on 3-11-1991 while the suits died their natural death on 3rd January, 1992, with the dismissal of the restoration applications.
9. In the perspective of the aforenoted factual aspects, the pleas of the parties may now be noticed. On merits the first plea argued was that Messrs Taj Company has nothing to do with the Bahawalpur Board Mills which is an independent public limited company and that no rights can be claimed by the Taj Company on the basis of the vending contract of the year 1985. Firstly, with the dismissal of the suits, Tabassum Shehzad loses the necessary locus standi to claim possession of the mills on the basis of the alleged lease agreement and also to claim the right to obtain the licence from the Excise Authorities for operating the mills. Secondly, it is not only the vending contract on which the rights are claimed by the Taj Company but 99% shares of the mills have since been transferred in favour of Taj Company as per Form 'A' of the Companies Ordinance, 1984, since 31st December, 1989. The same Board of Directors as that of the Taj Company is the Board of Directors of the other company. The investment of the Taj Company in the Bahawalpur Board Mills runs into sixteen crores of rupees and as such the Bahawalpur Board Mills is a subsidiary of the Taj Company Limited in terms of section 3 of the Companies Ordinance. Section 3 reads as under:-- "3.--(1) For purposes of this Ordinance, a company or body corporate shall be deemed to be a subsidiary of another if--
(a) that other company or body corporate directly or indirectly controls, beneficially owns or holds more than fifity per cent. Of its voting securities or otherwise has power to elect and appoint more than fifty per cent. Of its directors: or
(b) the first-mentioned company or body corporate is a subsidiary of any company or body corporate which is that other's subsidiary."
' The Board of Administrators which is regulating the affairs of the Taj Company is, therefore, in law entitled to manage the affairs of the subsidiary company. The right of Board of Administrators to regulate the affairs of the Bahawalpur Paper and Board Mills was conceded in the judgment dated 2-2-1991 passed by the learned Division Bench of this Court in I.C. As. 222-90 etc. And the said judgment was not challenged by either Messrs S.T. Trading Company or Tabassum Shehzad and as such that judgment also furnishes sufficient legal authority for the Board of Administrators to run and operate the mills in question. This plea is, therefore, without merit and is repelled.
10. Next it was argued that this Court has no jurisdiction to pass orders with respect to Bahawalpur Board Mills as its registered office is situate within the jurisdiction of the High Court Sindh at Karachi.
Firstly, this plea is not available to Tabassum Shehzad as admittedly no such proceedings were instituted by him in the said High Court and the suits filed by him were admittedly pending in the Civil Court within the jurisdiction of this Court. Secondly, this company being a subsidiary company of Taj Company its affairs were being managed by Ch. Ali Muhammad, Managing Director of the Taj Company. Moreover Board of Directors of both these companies was one and the same. The Board of Directors of Taj Company has been superseded by the Board of Administrators which has the right to manage the affairs of the Bahawalpur Board Mills. This Board has been appointed and is acting under the supervision of the Company Judge and as such this Board alone has the authority to manage the affairs of the Bahawalpur Board Mills Limited. In this situation the plea based on section 7 of the Companies Ordinance has no relevance.
11. Learned counsel further contended that notice of termination dated 5-10-1989 issued by the then Chief Executive and the alleged termination of lease on 5-1-1990 are ineffective in law as unilaterally a party cannot terminate a lease though the lease agreement contained a provision regarding termination of lease by service of three months' notice. It is added that the lease agreement still subsists and for obtaining the said declaration a suit dated 16-5-1990 was also filed in the Civil Court, which alongwith other suit for permanent injunction was decreed on 2-2-1991. The relevant facts in respect to this plea are that physical dispossession of S.T. Trading Company from the mill stands admitted. The version of Tabassum Shehzad taken in the suits is that he (Tabassum Shehzad) was running the mill after taking the possession and control of the mills and then a dispute arose regarding possession between the partners of S.T. Trading Company and his partner namely Siraj-ul-Isalm attacked him on 11-1-190 with the help of hired goondas resulting in lodging of F.I.R. No, 23/90 with Police Station Saddar, Sheikhupura but after the above incident an arbitration agreement was witten between him and Siraj-ul-Islam, ex-Partner, and it was decided that the said Siraj-ul-Islam will not work as Partner in S.T. Trading Company. It is further averred that accounts were thereafter settled and the said partner received his share in S.T. Trading Company after final settlement and it was agreed that the firm will work under the managemnt of the remaining partner i,e, Tabassum Shehzad and that he after final settlement of the accounts between him and the ex-Partner started to run the mill as proprietor of S.T. Trading Company.
Tabassum Shehzad on the above permises claims that he is a legal lessee and licence holder of the mill. As against this version, the case of the Board of Administrators is that Siraj-ul-Islam, the Managing Partner of S.T. Trading Company the registered firm, after termination notice dated 5-10- 1989 delivered possession of the mill on 13th January, 1990, and the factum of delivery of possession of the mill was confirmed in writing vide letter of even date. Again Siraj-ul-Islam on 11-2-1990 informed the Assistant Collector, Central Excise and Sales Tax that the Bahawalpur Board Mills has legally cancelled the lease agreement and, therefore, S.T. Trading Company has stopped working the mill and has physically handed over the possession of the mill to the lessor on 13th January, 1990, and that the licence alongwith the approved map plan is being surrendered for cancellation.
Both these letters have been placed on the record by the Board of AdministratoRs, The facts which thus stand established are; that the Managing Partner of the S.T. Trading Company, a registered firm, the lessee, surrendered the possession of the mill as well as licence and that the said registered firm stood dissolved and as such no longer exists. The right even if obtained by Tabassum Shehzad to use the said firm's name and to do business under the said name does not confer any right on him to claim rights under the lease agreement executed between the Bahawalpur Board Mills and the said registered firm, especially for the reason that the Managing Partner before dissolution of the firm surrendered possession without objection on receipt of the cancellation notice in terms of the covenant contained in the lease agreement itself. Mr. Tabassum Shahzad as such has no legal right to claim any rights on the basis of the said cancelled agreement. The plea that the lease agreement could not be terminated unilaterally cannot thus be raised at this stage as the said notice was accepted and acted upon and possession was surrendered by the then Managing Partner without any objection. If the Managing Partner had acted wrongly Tabassum Shehzad may have some right as against his said Partner but certainly he could not claim a declaration as to the subsistence of the lease agreement. Moreover, a suit for declaration that certain contract still subsists even otherwise is not competent for the reason that in case there is any illegality in terminating an agreement remedy at best lies in claiming damages and not a declaration.
12. There is yet another formidable hurdle in the way of the petitioner to seek declaration and discretionary injunctive relief. Tabassum Shehzad admittedly received possession from the Workers' Union. This entry on the face of it is unauthorised as the Workers' Union cannot pass on possession of the mill to a person of their own choice. Such a possession obtained cannot be got protected by having recourse to legal proceedings. It is obvious that equitable jurisdiction of the civil Court cannot be invoked by a party which is a trespasser or encroacher.- Reference may be made to Ghulam Rasul v. Muhammad Anwar (1969 SCM R 254) and Mushraf Ali v. Province of Punjab (1989 SCM R 1503).
13. It is unfortunate that the learned Civil Judge failed to notice the afore-noted features which were apparent from the record. The property worth crores of rupees was involved in the suits and despite the fact that the IntraCourt Appeals were pending pertaining to the same property and though the fact that Ch. Ali Muhammad, Managing Director had been replaced was brought to the notice of the learned Civil Judge by moving a specific application by Mr. Muhammad Naazar Khan, Member, Board of Administrators, yet the learned Civil Judge proceeded to decree the suit without requiring Tabassum Shehzad to make Board of Administrators a party to the suits. He also did not await the decision of the learned Division Bench of this Court in the Intra-Court Appeals despite the fact that the order passed in the writ petition was under challenge in the appeals which had been heard when the proceedings in the suits were hurriedly concluded ex parte, and the suits were decreed on the same date when the judgment in the appeals was announced. Again after decreeing the suits ex parte in this manner ignoring all the aforenoted features learned Civil Judge proceeded to deliver the key of the mill to Tabassum Shehzad without giving any time to Taj Company or Bahawalpur Board Mills to challenge the said judgment decreeing the suits. All this haste was shown despite the fact that the raw material, semi-finished goods as well as machinery worth crores of rupees were lying in the mill premises. This conduct of the learned Civil Judge requires to be examined on administrative side.
14. The last contention of the learned counsel for the petitioner that the proceedings instituted by the Registrar of Companies before this Court under section 290 of the Companies Ordinance are incompetent as the proceedings can be filed only when the Registrar has been authorised by the Authority after proper investigation by the inspector as is contemplated by section 275 of the Companies Ordinance has also no merit. Section 275 contemplates filing of an application for winding up or for an application under section 290 in a different situation. Section 290 of the Companies Ordinance is an independent section and by its own force confers right on the member or members holding not less than 20% of the issued share capital or a creditor or creditors having interest equivalent in amount to not less than twenty per cent. Of the paid-up capital of the company as well as on the Registrar in the given situation to move an application to the Court for the reliefs contemplated therein. It is, therefore, idle to urge that application under section 290 of the Ordinance can only be moved when there is investigation by the Inspector as is contemplated by the provisions contained in Part IX of the Companies Ordinance.
15. From the above discussion it is apparent that Tabassum Shehzad has no right to claim himself to be the lessee of the mill and as such has no right whatsoever to seek renewal of the expired licence and for that matter to claim hearing by the Excise Authorities before grant of licence for operating the mill to the Board of AdministratoRs, It is well-established that hearing can be claimed when there is any likelihood of causing prejudice to a right vesting in a party. As no right subsisted or vested in Tabassum Shehzad when the licence was issued for running the mill in favour of the Board of Administrators, the providing of hearing to Tabassum Shehzad was not at all required.
16. For the reasons given above there is no merit either in the writ petition or in the miscellaneous application filed in C.O. 45 of 1990. These are, therefore, dismissed. The objections to reports Nos, 6 and 7 are also dismissed. Report No,33 which is reply to the objections stands disposed of accordingly.