' The facts and circumstances of and the relief claimed in these two matters is the same. They are being disposed of together.
2. The Management of the two Companies, namely, Al.Hilal Vegetable Ghee Mills Limited, Multan and Kohinoor Oil Mills Limited, Kale Shah Kaku, regarding which these petitions have been moved under sections 76(3), 79(3) and 281(2) of the Companies Act was taken over under section 5(a) of the Hyderogenated Vegetable Oil Industry (Control and Development) Act, 1973, vide notification dated 19-9-1973. The shareholdings of the Companies, it is asserted in the petitions, were not acquired under section 5(1)(b) of the Act. The first-mentioned Company is a private limited Company while the latter is a public limited Company. Several establishments were taken over under the Act and were placed under administrative control of the Punjab Industrial Development Board, a statutory Corporation created under the Punjab Industrial Development Board Act, 1973.
Later on the control shifted on to the Ghee Corporation of Pakistan. For financial reasons, the accounting }ear of the taken over Companies was made uniform and changed to period ending with 30th of June. The records of the Companies, it is asserted in the petitions which are accompanied by affidavits, were sealed in September, 1973 and handed over to auditors for propriety audits which were completed In October, 1974. For the main reasons mentioned in Para. 8 of these petitions, it is further assorted. The Companies found it impracticable to hold the relevant annual general meetings. The portion relevant in this behalf of Para. 8 is reproduced below:- "8. The take-over of the Management by the Government entailed the appointment of a Managing Director by the Government, the dissolution of the Company's previous Board of Directors, the sealing of the records of the Company, the commissioning of auditors to conduct propriety audit with regard to the Company and the change of financial years. The suddenness with which take- over was announced resulted, in many instances, in some companies documents were not found at all. The Act visualised these possibilities and gave the taken-over companies extensive powers to require persons to furnish information relating to it. But the Company did not receive willing co- operation in this regard. The change in Management also brought about several other administrative problems and revised priorities. Physical verification of stocks had to be conducted and the result of all these new responsibilities delayed the finalization of accounts, for the year ending 1973 and year ending 1974. Subsequent to such finalization, the accounts were reviewed by the Government. For these reasons the Company found it impracticable to hold its - - - Annual General Meetings - - - - - - -."
' In the above circumstances and for the foregoing reasons prayer was made: for condonation of delay in holding of the meetings; date for holding the meetings to be fixed by the Court; and that the person to preside over the meetings be also nominated with power to do all necessary things in this behalf.
3. Notice having been issued in the case of Kohinoor Oil Mills Limited, the office of the Assistant Registrar concerned took the positica that they had "nothing to urge against the petitioner". Similar notice having been issued in the other case relating to Al-Hilal Vegetable Ghee Mills Limited, the Assistant Registrar concerned has objected to the grant of the above-mentioned prayer. While doing so, reliance has been placed on advice received by the said office from the Ministry of Law, Government of Pakistan. Copy of the said advice having been annexed to the reply submitted by the Assistant Registrar, the same is reproduced below:- "In case of a default made in holding the Annual General Meeting in accordance with the timing specified in subsection (1) of section 76 of the Companies Act, 1913, the company as a juristic person, is liable, under subsection (2) of that section, to a fine of not exceeding Rs, 500. For establishing that the company has incurred that liability all that is necessary to be proved is that a default has occurred. Knowledge and wilfulness have to be alleged not in case of the company but in case of a director or manager. This liability of the company is not excusable under section 281 of the Act, because "company" is not mentioned among those to whom that section is applicable. The High Court order of page 143/C does not rebut this legal position because that, being a compromise order between the company and the Assistant Registrar, does not form a precedent.
' In case of a default of this nature, a similar penalty attaches additionally to a director or a manager in respect of whom it can be proved that he was knowingly and wilfully a party to the default. But under section 281 of the Act such a director or manager can be relieved by the Court, either wholly or partly, of his liability on such terms as the Court may think fit, if on hearing of the case it appears to the Court that such person had acted honestly and reasonably, and that having regard to all the circumstances he ought to be fairly so excused. Grant of relief to a director or manager will not affect the liability of the company, as such.
' Otherwise, the Court can neither condone a default nor grant extension of the statutory time limit prescribed for holding the Annual General Meeting. Subsection (3) of section 76 of the Act is meant to enable a member of the company, in case of continued default in calling the meeting, to enforce his right to have the meeting called and not for condoning past default either generally or by means of an extension of time. An order under this subsection does not affect a liability already incurred under subsection (2)."
' Learned counsel for the petitioner having been given due notice of the advice of the Ministry of Law, they have submitted a concise statement in that behalf.
4. There is no contest in either of these cases in so far as the merits of the main petitions are concerned. They are supported by affidavits. There is no rebuttal. The Assistant Registrar, who appeared in one case, also did not raise any objection on merits. Thus, subject to the legal competency, there is nothing in the circumstances of these two matters to disentitle the petitioners from grant of the relief prayed for. The legal questions that need determination are:-
(f) Whether provision of subsection (2) of section 76 of the Companies Act is so absolute that even if relief is granted under subsection (3) thereof, the Companies are still liable to be punished;
(ii) If the answer to the above question is In the affirmative, whether a case falling under section 76 can be considered for relief under the wider provisions contained in subsection (3) of section 79 of the Act;
(iii) If the answer to the second question is in the affirmative, whether the Companies would also get benefit thereof nowithstending the absolute provisions contained jn subsection (2) of section 76; and
(iv) Whatever the answers to the above questions may be, whether the relief granted under subsection (2) of section 281 of the Act would, as a necessary conse4uence, absolve the Companies of liability under section 76(2) or this relief would react in such a manner that it would work only as an extenuating circumstance.
5. Sections 76, 79 and 281 of the Companies Act are reproduced below:- "76. Annual general meeting.-(I) A general meeting of every company shall be held within eighteen months from the date of its incorporation and thereafter once at least in every calendar year and not more than fifteen months after the holding of the last preceding general meeting.
(2) If default is made in holding a meeting in accordance with the provisions of this Exception the company and every director or manager of the company who is knowingly and wilfully a party to the default shall be liable to a fine not exceeding five hundred rupees.
(3) If default is made as aforesaid, the Court may on the application of any member of the company, call or direct the calling of a general meeting of the company.
79. Provisions as to meetings and votes.-(1) The following provisions shall have effect with respect to meetings of a company other than a private company not being a subsidiary of a public company and the procedure thereat notwithstanding any provision made in the articles of the company in this behalf-
(a) a meeting of a company other than a meeting for the passing of a special resolution may be called by not less than fourteen days' notice in writing; but with the consent of all the members entitled to receive notice of some particular meeting that meeting may be convened by such shorter notice and in such manner as those members may think fit;
(b) notice of the meeting of a company with a statement of the business to be transacted at the meeting shall be served on every member in the manner in which notices are required to be served by Table A and for the purpose of this clause the Expression "Table A" means that table as for the time being in force; but the accidental omission to give notice to, or the non-receipt of notice by, any member shall not invalidate the proceedings at any meeting;
(c) five members present in person or by proxy, or the chairman of the meeting, or any member or members holding not less than one-tenth of the issued capital which carries voting rights shall be entitled to demand a poll: Provided that in the case of a private company if not more than seven members are personally present, one member, and if more than seven members are personally present, two members shall be entitled to demand a poll;
(d) an instrument appointing a proxy, if in the form set out in regulation 67 of Table A, shall not be questioned on the ground that it fails to comply with any special requirements specified for such instruments by the articles; and
(e) any shareholder whose name is entered in the register of shareholders of the company shall enjoy the same rights and be subject to the same liabilities, as all other shareholders of the same class.
(2) The following provisions shall have effect in so far as the articles of the company do not make other provision in that behalf-
(a) two or more members holding not less than one-tenth of the total share capital paid up or, if the company has not a share capital, not less than five per cent. In number of the members of the company may call a meeting;
(b) in the case of a private company two members and in the case of any other company five members personally present shall be a quorum;
(c) any member elected by the members present at a meeting may be chairman thereof;
(d) n the case of a company originally having a share capital, every member shall have one vote in respect of each share or each hundred rupees of stock held by him, and in any other case every member shall have one vote; (e)on a poll votes may be given either personally or by proxy; ( f) the instrument appointing a proxy shall be in writing under the hand of the appointor or of his attorney duty authorised in writing, or if the appointer is a corporation, either under seal or under the hand of an officer or an attorney duly authorized; and
(g) a proxy must be a member of the company.
(3) If for any reason it is impraoticable to call a meeting of a company in any manner in which meetings of that company may be called or to conduct the meeting of the company in manner prescribed by the articles or this Act, the Court may, either of its own motion or on the application of any director of the company or of any member of the company who would be entitled to vote at the meeting, order a meeting of the company to be called, held and conducted in such manner as the Court thinks fit, and where any such order is given may give such ancillary or consequential directions as it thinks expedient, and any meeting called, held and conducted in accordance with any such order shall for all purposes be deemed to be a meeting of the company duly called, held and conducted.
281. Power of Court to grant relief in certain cases.-(1) If in any proceeding for negligence, default, breach of duty or breach of trust against a person to whom this section applies, it appears to the Court hearing the case that that person is or may be liable in respect of the negligence, default, breach of duty or breach of trust but that he has acted honestly and reasonably, and that having regard to all the circumstances of the case, including those connected with his appointment, he ought fairly to be excused for the negligence, default, breach of duty or breach of trust that Court may relieve him, either wholly or partly, from his liability on such terms as the Court may think fit.
(2) Where any person to whom this section applies has reason to apprehend that any claim will or might be made against him in respect of any negligence, default, breach of duty or breach of trust, he may apply to the Court for relief, and the Court on any such application shall have the same power to relieve him as under this section it would have had if it had been a Court before which proceedings against that person for negligence, default, breach of duty or breach of trust had been brought.
(3) The persons to whom this section applies are the following-
(a) directors of a company;
(b) managers and managing agents of a company; (c)officers of a company;
(d) persons employed by a company as auditors, whether they are or ate not officers of the company."
6. It would be seen that section 76(2) provides for the punishment to the Company as well as to every director or manager of the Company who is patty to the default in holding the annual general meeting provided in subsection (1) of section 76. In subsection (3) however, t10 law provided for the calling of the annual general meeting of the company on the application of any member of the company. An application by the company in this behalf has not been provided for.
Nor it is provided therein that on calling of such a meeting under subsection (3) on the application of a member, the company would be absolved of the offence which has already taken place. Thus, in my view, the prosecution and punishment provide In subsection (2) would remain unaffected as a legal requirement, notwithstanding the calling of the meeting by the Court undo subsection (3).
Thus, the answer to the first question posed above is in the affirmative.
7. The second and third questions can be considered together. The controversy involved in these questions is whether after a default has once been committed the company has no remedy so as to avoid prosecution and/or punishment. According to the learned counsel for the petitioners, subsection (3) of section 79 provides such a remedy. The Assistant Registrar who defended the matter with some amount of real and diligence, contended that section 79 covers only companies other than "private company not being a subsidiary of a public company" and the Al-Hilal Vegetable Ghee Mills Limited being a private limited company, section 79 would not be attracted.
He also contended that section 79(3) deals with meetings under the articles of the company and that annual general meeting is not covered thereunder. In other words, what he meant was that the annual general meeting can be dealt with under section 76 only and not under section 79.
Learned counsel for the petitioners, however, by drawing attention to several other provisions of the Act including sections 54-A, 83-A, 83-B and 84(3) and section 2(2) which provides for the definition of "company", contended that according to the scheme of the Act, unless specified otherwise, company means a company formed and registered under the Companies Act or an existing company. Thus, according to him, unless in a certain section it is provided otherwise, wherever the word "company" is used, it would apply to all companies included in the definition and thus a private limited company would be covered by subsection (3) of section 79 because the expression used therein is "a company" and not any particular company. He supported this argument by pointing out that in clause (b) of subsection (2) of section 79 when it was thought necessary to apply it to a private company, the expression "private company" has been mentioned and similarly when a certain category of private companies was to be excluded, subsection (1) of section 79 specifically provided for the exclusion. The argument of the learned counsel appears to be irrefutable in so far as the provisions of the Act which are under consideration in this case are concerned. Definition of 'company' in section 2(2) is prefixed with the purview that unless there is anything repugnant in the subject or context, company would mean 'company formed and registered under the Act or an existing company'. Thus, unless shown otherwise, the expression "a company" used in subsection (3) of section 79 would not have to be subjected to the context and subject otherwise of subsection (1) of section 79 and the expression "a company" accordingly, In the present context, would have to be read In accordance with the definition. That being so, the company concerned can be given benefit under section 79(3) if otherwise it is found legally entitled to it.
8. I do not agree with the Assistant Registrar that the scope of subsection (3) of section 79 is limited to the default qua meetings other than annual general meetings or the meetings which are to be held under articles of the company only. The phrase used in subsection (3), namely, "a meeting of a company In manner in which meetings of that company may be called or to conduct the meeting of the company in manner prescribed by the articles or this Act" is so wide that it would include all types of meetings whether provided under the Act or by the articles. The holding of annual general meeting is a requirement of the Act. If such a meeting is also provided in the articles of a company, that would not make any difference. Thus, if otherwise available on merits, the relief provided in section 79(3) can be granted to a company with regard to an annual general meeting as well, which is the subject-matter of these petitions.
9. After the foregoing discussion, the question posed at No, (ii) in para. 4 above can now be easily resolved. Section 79(3) provides that the Court may: (1) either of its own motion, or (if) on the application of any director of the company, or (iii) of any member of the company, order a meeting of the company to be called, held and conducted in such manner as the Court thinks fit.
Once such a meeting is called, held and conducted in accordance with the order of the Court, it is further provided in the said subsection, it (the meeting) "shall for all purposes be deemed to be a meeting of the company duly called, held and conducted". Subsection (2) section 76 lays down that if a default is made in holding an annual meeting in accordance with the provisions of section 76(1), then the Company and directors or manager thereof shall, on prosecution, be liable to punishment of fine. A relief granted under subsection (3) of section 79 as explained and discussed above, would provide a deeming validity throng the action of the Court to the meeting called, held and conducted in such manner as to remove the default and substitute, by legal notion, thus called, held and conducted meeting for the meeting for the default of which the company and others are liable to be punished undo section 76(2) Through the aforenoted deeming provision and legal notion the company as also its directors and manager would get due legal benefit and they would be no more liable to prosecution. In the light of the foregoing discussion, answers to the second and third questions posed in Para. 4 are in the affirmative.
10. Regarding the last question, it is pertinent to note that the entire section 281 relates to the grant of relief in certain cases regarding the persons specified in subsection (3) thereof, namely, directors; managers and managing agents; officers of and persons employed by a company as auditors whether they are or are not officers of the company. The provision itself does not directly apply to the company. While subsection (1) of section 281 provides for a relief which the Court while hearing a case can grant to the afore-specified persons with respect to negligence, default or breach of duty or trust, subsection (2) provides for an anticipatory relief even when proceedings have not yet commenced. It is also necessary to keep the difference of language employed in subsection (2) of section 281 and section 79(3). While passing orders under the latter provision, a from the legal consequences flowing, the Court has been empowered give such ancillary or consequential directions as it thinks expedient;, a ancillary power has been conferred on the Court under subsection (2) section 281. Accordingly, when passing orders under section 281(2), Court cannot absolve the company of the default which might have the default of the specified persons as well. Learned counsel for petitioners however, relying on The State (through the District Judge, Karachi) v. National Fire Insurance Co. And others (1), contended that the company which only acts through its agents must also, when the agent is absolved under
(1) p L D 1958 Kat 418 section 281 be deemed to have acted similarly and the relief would be equally applicable to the company itself. With profound respect, as interpreted by the learned counsel, I do not agree with the view taken in the said case. However, if the interpretation is different, namely, that the relief granted under section 281 to an agent of the company would, in most of the cases, react favourably on the conduct of the company in so far as the question of Punishment as distinguished from prosecution is concerned, with respect, I would adopt the same. It cannot be ignored that every prosecution and even every finding of guilty reed not result in punishment or a particular punishment. Sometimes, In obedience to the requirements of law, a finding of guilty is recorded but on account of the circumstances of the case or other provisions of the same or other law reacting on the case, it is thought necessary not to award any punishment. In proper cases, after a relief is granted to the agent under section 281, it would not be found necessary to award any punishment to the company notwithstanding the fact that such a relief cannot prevent its prosecution provided by section 76(2). Thus, the answer to the last question is in the negative regarding prosecution, and, in the affirmative in so far as the punishment is concerned,
11. Before closing this part of discussion, it needs to be noticed that the learned counsel for the petitioners, while stating that there are no direct rulings covering the questions raised and discussed above, cited Satish Chandra Banik and others v. Dacca Jute Mills Ltd. And others (1), an unreported judgement in BECO Agencies Ltd., Lahore v. Managing Director. BECO Industries Ltd., Lahore (Civil Original No, 15 of 1973 decided by this Court on 23-12-72), Captain John Joanston v. G.
B. Potts & Co. Ltd. (2) and In re: Messrs K. S. B. Pumps Co. Ltd., Lahore (3) for general guidance. I, with respect, have taken due advantage of certain assumptions of law and analysis of sections 76 and 79 made therein.
12. When applying the answers given in the foregoing paragraphs to the questions posed in the earlier part of this judgment, it becomes abundantly clear that the reliefs claimed in these petitions which have been moved by the Managing Directors of the respective companies, on account of the earlier discussion on questions of merits, can be granted under section 76(3) as also section 79(3) in so far as the calling, conducting and holding of the annual general meetings are concerned. Provisions contained in section 281(2) can also be availed of in so far as the conduct of certain agents of the companies is concerned. The merits of the case, as stated in the petition and discussed above, furnish sufficient justification for exercise of discretion in these matters. Both the petitions together with their supplementary applications (i,e,, C.
0. No, 8 and C. M. 90-L and C.
0. No, 9 and C. M. 91-L of 1917) are accordingly allowed with the short order already passed condoning the delay in holding the annual general meetings concerned, with the direction that the said meetings shall be held within a month with permission to the Managing Director in each case to preside over the meetings and do all necessary things in that behalf. There shall be no order as to costs.
(1) PLD 1968 Dacca 610 (2) PLD 1967 Kar. 496