1. ' Brief facts of the case are that the respondents. Nos.3, 4 and 5 had pledged 1.073,551. 611,463 and 89,761 shares of respondent, No,1 company respected with the petitioner. The pledge was made. By way of security collateral facility extended by the petitioner to the respondent No,2. The respondent No,2 of course is an associated company of the respondent No,
1. Thus, the total shares pledged with the petitioner by way of security were 1,774,775. In the normal course of business at the request of respondent No,2 and in consideration of the security given and the guarantees given .By respondents Nos.1, 2, 3, 4 and 5. The petitioner agreed to provide certain financial accommodation/facilities to the respondent No,2 up to a limit of Rs,100 Million. Pursuant to these arrangements the petitions offered the respondent No,2 immediate disbursement of a finance facility in the sum of Rs,35 -Millions for the period of one year at a mark-up @ 20% per annum payable quarterly. This facility was availed of by the respondent No,2 on 6-2-1996. The finance facility in question was repayable in five installments. It appears that the first and second instalments were paid in time but the third instalment was delayed but eventually paid. However, fourth and fifth instalments in the sum of Rs,1,788,888.89 and Rs,39.647,222.2 were not paid at all and are still due and payable by respondent No 2 to the petitioner. Due of this default of the respondent No,2, the petitioner, remonstrated but to no avail and the respondent No,2 faded to fulfil its obligations.
2. ' Consequently the petitioners in exercise of their right under the law sold 1,574,000 shares of the respondent No,1 company pledged, to respondents NoS.3. 4 and 5 between the period of 11-3-1997 to 2-4-1997 A sum of Rs,27.514.128.75 to was realised from the sale of 1,574.000 shares leaving as on 10-4 -1997 a sum of Rs, 13,921,982.36 , as the outstanding purchase price besides some liquidated damages amounting to Rs,2,489, 121.60, thus, making a total amount of Rs,16.411,103.96. In order to recover the balance amount the petitioner filed a banking Suit No,444 of 1997 in Banking Court No,1, Karachi under the provisions of Banking 'Companies (Recovery of Loans, Advance, Credits and Finances) Act. 1997 against the respondents Nos.1 to 5. 1 am informed that this banking suit has since been decreed.
3. ' The 'shares i,e, total of I ,574,000, that were sold by the petitioners were so sold through respondent No,7 which acted as Stock Broker for the petitioners. These shares were sold - in several lots through the Respondent No,6, the Karachi Stock Exchange. It is significant to note that this sale Of the shares was never challenged by the respondents Nos.1 104 nor did they ever seek to revoke the said sale or obtain any restraining order stay from the Ranking Court No,1, Karachi. However. When these shares were presented to respondent No 6 for transfer they refused to register the said _shares in the name of the buyers., It semis Respondent No,1 informed one of the buyers i,e, the respondent NO.8 that they would not register the share it his name on the grounds that since the mater was sub judice before the Banking Court in Suit No,447 of 1997 they were unable to register the shares in their names till the disposal of the suit. The respondent No,1 also refused to register the shares in the name of the other buyers of 69,000 shares i,e, the respondent No,9.
4. ' As a result of this refusal of the registration of the shares by respondent No,1 a chain reaction started. That is to say, the buyers of the shares then contacted the broker and called upon them to replace the shares at the earliest as, per the rules for ready delivery contracts of the Karachi Stock Exchange. In turn the broker contacted the petitioner and placed them on notice that in the vent the respondent No,6, Karachi Stock Exchange, required replacement of the said shares then the broker would seek recourse against the petitioner for ' procuring the required replacement shares and or making payment for the same. This was followed by the respondent No,6 actually calling upon the broker to replace the said shares. The petitioner therefore contends that due to this refusal of registration of the shares in the names of 'the buyers by the respondent No,1, eventually it will be the petitioner who will be the looser. They have, therefore, filed this Judicial Miscellaneous praying that the respondent No,1 be directed to rectify the register of members by effecting the transfer of registration of the concerned shares of the respondent No,1 company i,e, 35,500 and 27,000 shares in the names of respondents Nos.7, 8 and 9 and also direct them not to refuse to register the remaining shares of other buyer who may purchase them subsequently and submit these to respondent No,1 for registration.
5. ' It appears that respondent No,1 in this judicial miscellaneous had chosen offence to be the best defence and, therefore, have filed their suit being Suit No,327 of 1998 against the defendant No,2 in the petition as well as the petitioner and various other parties. In the plaint of this suit the plaintiffs or the respondent No,1 in the judicial miscellaneous i,e, the Pakland Cement Limited do not deny the facts mentioned in the judicial miscellaneous. Their main contention is that they are not interested in the subject-matter of this suit or for that matter the judicial Rliscellaneous. They contend that they are not in a position to transfer these shares in favour of any particular person without being put on risk themselves by any other person who claims to be the original owners or claimant of the said shares. They have taken pains to explain that there is no collusion between them and the Saadi Cement Limited or the others. In the snit Pakland Cement Limited pray for a declaration that the plaintiff be discharged from all liabilities against the defendants in respect of the said shares.
6. ' In view of the fact that the suit in the Banking Court No,1, Karachi has now been decreed, the liability of respondents Nos.1 and 2 in respect of the petitioner's claim has been established.
7. Consequently, the, sole grounds whereby the respondent No,1 had refused to register the shares of the buyers is now no longer available to them. Even the counsel of respondents Nos.1 to 4 now really has nothing to say in the matter as Mr. Arif Khilji very candidly observed in the Court. That the question that arises now is why is it that the respondent No,1 or. The plaintiffs in this suit i,e, the Pakland Cement Limited are resisting the transfer of shares. It is obvious that as they themselves admit in their plaint that they have no interest in the subject matter and that their only fear is that the respondent No,1 might be held liable. This to my mind is fallacious argument. In my view the emulative effect of section 76 and section 77 of Companies Ordinance, 1884 and section 31 of Securities and Exchange Ordinance, 1969 would be that once a person acquires a share or lawful consideration he becomes entitled to have the shares transferred in his name. I have held this in another case that is Suit No,117 of 1998. I can do no better then reproduce the relevant portion of my judgment in that suit, which is as follows:- "The provisions of section 31 of the Securities and Exchange Ordinance, 1969 are very clear and are reproduced below-- (3.1) 'Securities acquired in good faith.--
(1) A person who, without fraud and for a lawful consideration, becomes the possessor of certificate of an equity, security, scrip, debenture, debenture stock or bond, and who is without notice that the title of the person from whom he derived his own title was defective shall hold such certificate all rights attached thereto free from any defect of title of prior parties and free from defence available to prior parties among themselves.
8. 2) A Stock Exchange may regulate the documentations, procedures and guarantees required to transfer property in securities and the effects thereof on the respective rights and liabilities of the parties and such regulations, if approved by the Federal shall constitute binding and enforceable terms and conditions of contracts effected on the exchange, shall govern the rights and liabilities of the parties thereto, and shall govern the rights and liabilities with respect to transfers of shares on its books of the issuer of listed securities not with stinking any provisions to the contrary contained in the Contract Act, 1872 (IX of 1872), the Negotiable Instruments Act, 1881 (XXVI of 1881), the Transfer of Property Act, 1882 (IV of 1882) or the Companies Act, 1913, or any other law for the time being in force'.
9. ' A plain reading of section 31 would show that once a person acquires a share for lawful consideration then he becomes entitled to have the share transferred in his name and indeed on this basis the entire structure of the Stock Exchange rests, not only in Pakistan but in rest of the world. It is obvious that there is here more than meets the eyes as regards the conduct of Holders.
10. Be that as it may, but if the Holders are in any way aggrieved with the conduct of the Broker then it is for the Holders to initiate proceedings against the Broker rather than interfere with the working of the Stock Exchange. In so far as the plaintiffs are concerned, it is apparent that they are bound to transfer the shares, valid Transfer Deeds for which are lodged with them and the fact that they are resisting to do this under the cover of a legal opinion only goes to show that perhaps they have some interest in not transferring the shares."
11. ' The question that is now proffered is that if the Pakland Cement Limited acts in accordance with law and does transfer these shares can they be held liable for acting in accordance with law. I think not! No one can be held liable for acting in accordance with law. To that extent the fears of the Pakland Cement Limited are unjustified and it would appear to me that they are indulging in this exercise of delaying the registration of the shares for the benefit of certain defendants in the suit who had pledged these shares. Be that as it may. The fact remains that under the law the respondent No,1 or the plaintiff i,e, Pakland Cement are bound to register these shares in the name of the buyers who are present before me as well as the other buyers who might appear before them subsequently for the transfer of their shares. I, therefore, direct that the Pakland Cement Limited are to transfer/register the validly executed transfer .Deeds of the shares sold by petitioners totaling 1,574,000 shares as per Annexure "D" to the plaint when presented to them and to the extent that they act in accordance with law in doing this they will have no liability in the matter.
12. With these observations I dispose of this Judicial Miscellaneous as well' as Suit No,327 of 1998.