1. These two petitions have been filed under section 161(8) of the Companies Ordinance, 1984. The petitioners and respondent No.1 company are the same in both the petitions. The respondent No.1, Naveed Textile Mills Limited, is a listed public limited company incorporated under the Companies Ordinance, 1984 with an authorised Share Capital of Rs.30,000,000 (Rupees Thirty million) divided into 3,000,000 shares of Rs. 10 each.
2. The petitioners have more than 10 per cent. Of voting powers in the respondent-company and as such competent to file the petition.
3. The respondents Nos.2 and 6 others were elected as directors of the respondent No.1Company on 8-3-1990 and were to hold office for three years, i.e. From 1-4-1990 to 31-3-1993.
4. The Petition No.51 of 1993 has been filed for declaration that the proceedings of Annual General Meeting (AGM) held on 29-6-1993 be declared as invalid and to direct the respondents to hold fresh A.G.M. In accordance with law and to appoint a natural person as Chairman for presiding the A.G.M. Further, that the respondents be restrained to implement the resolution allegedly passed in the said A.G.M., The A.G.M. Held on 29-6-1993 was convened to transact the following business:
(1) To confirm minutes of the last Annual General Meeting held on April 30, 1992.
(2) To receive, consider and adopt audited accounts of the Company for the year ended September 30, 1992 together with the reports of the Directors' and Auditors' thereon.
(3) To elect Directors of the Company for the period of next three years under section 178(1) of the Companies Ordinance, 1984. The Board of Directors in their meeting held on May 9, 1993 has fixed the number of Directors to be elected as seven.
5. The names of retiring Directors are:
(1) Mr. Ghulzar Ahmed, (2) Mrs. Almas Nasreen, (3) Mr. Tanveer Ahmed, (4) Mrs. Memoona Tanveer,
(5) Mr. Naveed Ahmed, (6) Maj. (Retd.) Fiaz Nabi, (7) Mr. Rehmat Elahi.
(4) To appoint Auditors and to fix their remuneration.
(5) To consider any other business with the permission of the Chair.
6. J. Miscellaneous No. 67 of 1993 has been filed for declaration that the proceedings of adjourned A.G.M. Held on 30-8-1993 be declared as invalid and to direct the respondents to hold fresh A.G.M.
7. In accordance with law. Further, to appoint a neutral person as Chairman for presiding the A.G.M.
8. Mr. Muhammad Ali Sayeed, the learned counsel for the petitioners submitted that the petitioners' grievance in both the petitions is that they were not served with the individual notices of the A.G.M.
9. Allegedly held on 29-6-1993 but became aware of the same from the published notice in the daily 'Business Recorder' dated 9-6-1993. The notice of this A.G.M., as per Memorandum and Articles of Association and Law, should have been served on the petitioners/shareholders at least 21 days before the fisted date of the meeting while the publication appeared only 20 days before the said meeting.
10. It is also submitted that the notice dated 8-6-1993, calling for the A.G.M. Was defective as it did not include the election of the Chairman of the Meeting to be held, and no copies of balance-sheet, profit and loss account and the Auditors' Report were circulated to the members alongwith the said notice which is statutory requirement under section 233(4) of the Companies Ordinance, 1984.
11. Further, that the meeting was held under the Chairmanship of an un-elected Chairman, and the objections raised by the petitioners in this respect were rejected. Further that the minutes of the meeting held on 30-4-1992 were wrongly recorded and in spite of the objections raised by the petitioners, the same were confirmed.
12. It was further argued in respect of J. Miscellaneous 67 of 1993 that there were gross irregularities in the proceedings of the A.G.M. Of the respondent No.1 and petitioners, before holding of the impugned A.G.M., had filed objections in J. Miscellaneous 47 of 1993 and also a miscellaneous application, being C.M.A. No.1173 of 1993, in respect of the election of the Directors. On the said application, the Court had adjourned the A.G.M. Fixed for 29-6-1993 to 18-8-1993 and subsequently in pursuance of the order dated 26-8-1993 it was agreed by the parties that no prejudice will be caused to the parties if meeting is held as scheduled on 30-8-1993 provided that the result of the meeting be withheld. As such the meeting was held as scheduled subject to the decision in J.
13. Misellaneous No. 47 of 1993. However, since the respondent No.1 company is listed on the Karachi Stock Exchange, it was necessary that the respondents should have issued notice of the adjourned meeting to the petitioners and other members/shareholders of the company at least twenty-one days before the date fixed for the adjourned meeting. Further, that since the meeting for the election of the Directors was adjourned to 18-8-1993 and again to 30-8-1993, under Article 74 of the Articles and Memorandum of Association of the respondent No. 1, a notice should have been sent as in the case of an original meeting. No such notice was issued by the respondents intentionally to deprive the petitioners and other members of their participation and of exercising their voting rights and the objection raised by the petitioner in this regard were rejected by the respondents.
14. The adjourned meeting was also presided over by an un-elected Chairman namely Mr. Tanvir Ahmed and the demand of the petitioners to elect a Chairman was rejected.
15. On the other hand, Mr. Munib Akhtar, the learned counsel for the respondents contended that the individual notices were issued according to the law and Memorandum and Articles of Association of the respondent No.1 and that the petitioners have failed to produce any proof contrary to this contention. Further, that the petitioners fully participated in the meeting exercising effectively all their rights. His contention was that for the sake of arguments even if it is accepted that the notice was a day short of 21 days, it has caused no prejudice to the petitioners and that it was not a material irregularity at all.
16. In regard to the next point, Mr. Munib Akhtar contended that although the petitioners have grievance that the accounts, balance-sheets etc. Were not circulated in accordance with section 233(4) of the Companies Ordinance, 1984 but they have annexed balance-sheet and Annual Report of their chartered accountant, which was sent to all its members individually. Even if it is presumed that the provisions of section 233(4) were not complied with by the respondents, the petitioners also failed in performing their statutory duty to raise objections in regard to confirmation of minutes of earlier meeting, as such the allegation on their own showing is not proved. He further contended that the Chairman during the meeting neither exercised power under Article 71 of a casting vote nor under Article 74 to adjourn the meeting and since order passed in Suit No.227 of 1992 neither granted powers nor took away powers vesting in the plaintiff and defendant no illegality was committed or any prejudice was caused to the petitioners.
17. Even if the meeting was irregular since the petitioners are praying for discretionary relief, they have to prove and satisfy the Court that any prejudice has been caused to them.
18. To understand the controversy it will be beneficial to reproduce section 161 (8) of the Companies Ordinance, 1984, which reads as under: 161 Proxies:
(8) The Court may, on a petition by members having not less than ten per cent. Of the voting powers in the company that the proceedings of a general meeting be declared invalid by reason of a material defect or omission in the notice or irregularity in the proceedings of the meeting, which prevented members from using effectively their rights, declare such proceedings or part thereof invalid and direct holding of a fresh general meeting: Provided that the petition must be made within thirty days of the impugned meeting. "
19. There is no dispute as to the period of 30 days within which these petitions were filed.
20. Now, coming to the subsection itself, the issue to be determined is if there was a material defect or omission in the notice or irregularity in the proceedings of the meeting, which prevented the members from using their rights effectively. It is an admitted position that the respondents though may have become aware of the proposed meeting through publication of notice in the daily 'Business Recorder' attended the said meeting and participated in the proceedings. According to the contention of Mr. Muhammad Ali Sayeed, the meeting itself is defective as it did not comply with the statutory 'period of 21 days. His further contention was that the meeting was defective as there was no Board of Directors existing at the time and the care-taker Board of Directors could not conduct the proceedings without first electing a Chairman for the proposed meeting.
21. Mr. Munib Akhtar, the counsel for the respondents, did not deny that the term of the Board of Directors expired on 31-3-1993 and further that no Chairman was elected for the proposed meeting. But his contention was that even if irregularity was committed, no prejudice was caused to the petitioners as they participated and effectively used their rights during the meeting.
22. It may be mentioned here that the law is enacted and rules are framed to p be complied with, and not to be violated. The contention of the counsel for the respondents that even if any irregularity was committed it caused no prejudice to the petitioner, is not tenable. It is pertinent to mention here the report of the Official Assignee, who was appointed by a consent order dated 27-6-1993 passed in J.M. No. 47 of 1993, to hold the General Body Meeting under his supervision. According to his report-dated 31-7-1993, the objection of the petitioners in regard to the election of a Chairman for the General Body was rejected by Mr. Gulzar Ahmed and Mr.Tanvir Ahmed on the ground that it was not necessary. Further, that out of 23 ballot papers, 7 ballot papers were rejected which included that of Mr. Munir Ahmed and the Central Cotton Mills and that in spite of several reminders by the Official Assignee, the Minutes of the meeting were not made ready by the respondents. He further submitted that in spite of the fact that the Punjab Cooperative Board for Liquidation had issued three proxies in favour of Mr. Gulzar Ahmed and Mr. Munir Ahmed during the meeting of 29-7-1993 the proxy of Mr. Gulzar Ahmed was allowed while that of Mr. Munir Ahmed was disallowed. The Official Assignee also pointed out that Firdous Spinning and Weaving Mills Limited is under liquidation and the Official Assignee, who is also Official Liquidator in respect of the said company, informed Mr. Tanvir Ahmed but in spite of this, 'a proxy was issued in favour of Mr. Tanvir Ahmed.
23. The above facts indicate the mala fides of the action of the respondents vis-a-vis the petitioners.
24. In my opinion the genesis of both these petitions and the one which already stands disposed of, lies in the transfer of 517,400 shares of the petitioner No.1 in favour of the respondent No.1 for which a suit, being Suit No.227 of 1991, is already pending in this Court. All the disputes which have arisen from time to time resulting in the different petitions now pending, can be resolved one way or the other, if Suit No. 227 of 1991 is decided.
25. Mr. Muhammad Ali Sayeed has relied on the following cases:
(1) (1988) 64 Company Cases 19,
(2) (1937) 7 Company Cases 22
(3) (1949) 19 Company Cases 175 In the case of Hector Whaling Limited (1937) 7 Company Cases 22, it was decided that the phrase "not less than 21 days' notice" means 21 clear days exclusive of the day of the service and exclusive of the day on which the meeting is to be held.
26. In the case of Nagappa Chettiar v. Madara Race Club (1949) 19 Company Cases 175, it was observed that the period of 21 days will be excluding the date of service of notice and the date of the meeting.
27. The other cases supporting the same view are: Col. Kuldip Singh Dhillon and others v. Paragon Utility Financers (Private) Limited and others (1988)
28. 64 Company Cases 19 and Calcutta Chemical Company Limited v. Dhiresh Chandra Roy (1985) 58 Company Cases 275.
29. As against the above judgments Mr. Monib relied on the case of Abdul Jabbar v. Haryana Asbestos Cement Industries 1987 CLC 726 wherein it was observed that "Legislature appears to have consciously specified the terminus qua of notice from date of its sending and not from date of its delivery or receipt.
30. While the wording of section 171(1) of the Indian Companies Act, 1956 are: "A general meeting of a company may be called by giving not less than twenty-one days' notice in writing".
31. The wording of section 158(3) of the Companies Ordinance, 1984 is as under:--- "158(3).---The notice of an annual general meeting shall be sent to the shareholders at least twenty-one days before the date fixed for the meeting and, in the case of a listed company, such notice, in addition to its being despatched in the normal course, shall also be published at least in one issue each of a daily newspaper in English language and a daily newspaper in Urdu language having circulation in the Province in which the stock exchange on which the company is listed is situate."
32. Thus, it is clear that the words in the subsection are "shall be sent to the shareholders at least twenty-one days before the date fixed for the meeting.
33. But Article 65 of the Articles of Association respondent No. 1 is "not less than twenty-one days' notice (exclusive of the day on which the notice is served or deemed to be served) but inclusive of the day for which notice is given specifying the place, day and hour of the meeting..."
34. The wordings of these sections explain the difference of opinion in the different judgments given by the Courts in India and Pakistan.
35. In the present case though no evidence has been produced by the respondents in support of their contention but it can be presumed that the notice published in newspaper must have been sent a day earlier for publication. As such in my opinion the requirement of section 158(3) were partly complied with as far as the publication is concerned. But as I have already said hereinabove that no supporting material is on record to show that the individual notices were sent to all the directors shareholders as required under section 158(3) of the Companies Ordnance. The law has provided penalty for non-compliance of any of the provisions of section t 78 and as such the compliance is mandatory.
36. The next contention of Mr. Sayeed was that the notice did not contain the election of Chairman to preside over the proposed meeting. Since the meeting was presided over by a non-elected Chairman the business conducted during the meeting was invalid.
37. He relied on the case of Satesh Chandra Bank and others v. Dacca Jute Mills Limited PLD 1968 Dacca 610 where a similar situation arose and it was held that:--- "The affidavit by respondent No.2 clearly avoids the specific denial of the statement of the petitioners that petitioner No.2 proposed that the Chairman be elected for the purpose of conduct of the Annual General Meeting and, therefore, I am convinced that the statement made by the petitioners is true and in these circumstances respondent No.2 could not have taken the chair by virtue of the provisions of Article 78.
38. Therefore, he could not automatically take the chair under the provision of the Article 78 of the Articles of Association. I therefore, hold that the impugned General Meeting having been presided over by person not entitled to do so was not valid Annual General Meeting. "
39. Section 177 of the Companies Ordinance provides for the retirement of directors who are subject to election and thereafter follow the procedure as laid down under section 180 of the Companies Ordinance. The provisos to this section are:--- "Provided that the directors so retiring shall continue to perform their functions until successors are elected: Provided further that the directors so continuing to perform their functions shall take immediate steps to hold the election of directors and in case of any impediment report the circumstances of the case to the Registrar within fifteen days of the expiry of the term laid down in section 180. "
40. Thus, it is clear that the proviso to section 177 direct to take steps immediately to hold the elections of the directors or if there are any impediments the same should be communicated to the Registrar within fifteen days. No such plea is taken nor the Registrar was informed.
41. It is well-established principle of law that a proviso has to be read cautiously as it cannot be extended to defeat the parent provision itself. As held in the case of Mst. Surayya Begun v. M.C.B.
42. Limited PLD 1990 Lahore page 4:--- "A proviso to any parent provisions has to be read very cautiously and the intended whittling effect thereof cannot be so extended as to defeat the provision itself inasmuch as it is not to be presumed that the Legislature intended to take away by one hand through a proviso what it has basically conferred through the other hand by the parent provision. "
43. In the case of Mrs. Anathalakhni Animal v. Teffeis Barytes Asbestos and Paints Limited (1951) 21 Company Cases 294, it was observed that "there is, besides this, enough on the record to convince us that there are factions among the shareholder of the company and it was directed that meeting be conducted by the person to be appointed by the Court who will preside as its Chairman and shall scrutnise the proxy which were duly deposited in time".
44. In the present case also there are two groups involved in the tussle to get the controlling power and oust the other one and unfortunately they are closely related family members. In such a situation it is further obligatory that all legal requirements are complied with.
45. Article 74 of the Memorandum and Articles of Association provides that in case a meeting is adjourned for more than fourteen days a notice be sent as in the case of original meeting. No such notice was given. A notice of an adjourned meeting is also provided under Rules of Stock Exchange.
46. It can be argued again that the petitioners were party to the proceedings when the meeting was adjourned deferred by the Court. But there are other shareholders also who should have been served with such an adjourned date of the meeting.
47. In the case of Re: West Canadian Collurias Ltd. (1962) 1 All England Law Report 26.
48. Notice of the meeting had been given for the purposes of section 141(2)(5) of the Companies Act, 1948 to all the shareholders except, by inadvertence, to nine shareholders. It was held that "there could be no meeting because it is well-settled as regards a general meeting that failure to give notice to a single person entitled to receive notice, renders the meeting a nullity".
49. The meeting on 30-8-1995 was admittedly, presided over by Mr. Tanvir Ahmed who himself was a candidate.
50. In view of the contention raised by the petitioner and keeping in view of Official Assignee's Report the characteristic of the meetings which was scheduled for 29-6-1993 and was adjourned to 30-8- 1993 are as follows: There is not enough proof that the notices were despatched individually to all the directors/shareholders as provided under section 233(4) of the Companies Ordinance, 1984.
51. The agenda prepared for the meeting did not include the election of the Chairman for the proposed meeting.
52. The director's term though had expired on 31-3-1993 but no steps were taken for the election as required under sections 177 and 178(3).
53. The meeting was held under the Chairmanship of an un-elected Chairman.
54. Notice of the adjourned meeting was not issued as provided under Article 74 of the Articles of Association of the respondent-Company and Rules of the Karachi and Lahore Stock Exchanges.
55. In my opinion, since the requirements of the provisions under the Companies Ordinance are mandatory, the non-compliance of the same render the meetings held on 29-6-1993 and 30-8- 1993 invalid.
56. On my query the learned counsel for the respondent has stated that although elections were held on the date as directed but the results were withheld as per the order of the Court, and since then no orders have been passed, the same directors whose term had expired on 31-3-1993 are continuing to hold the office.
57. In view of the circumstances the proceedings of meeting held on 29-6-1993 and of adjourned meeting held on 30-8-1993 are declared to be invalid and the respondents are directed to immediately take steps in accordance with the Companies Ordinance and Memorandum and Articles of Association to call for the Annual General Meeting immediately. The Official Assignee is appointed to conduct the said meeting under his supervision. The two J. Miscellaneous Nos.51 of 1993 and 67 of 1993 stand disposed of in terms of the above order.