1. ' By Order dated 14-12-1998, I disposed of these suits by a short order. The following are the detailed reasons for the same.
2. ' This will be a common judgment in all these three suits i,e, Suit No,116 of 1998, 117 of 1998 and 118 of 1998 because the questions of facts and law are identical in these. However, wherever there are differences these will be elaborated upon separately.
3. ' The main actors in these suits are the plaintiffs and the Karachi Stock Exchange Guarantee Limited (hereinafter referred to as "KSE"), Corporate Law Authority (hereinafter referred to as "CLA"), Muhammad Rashid Jamali, Broker (hereinafter referred to as "Broker"), certain buyers of the shares (hereinafter referred to as "Buyers") and there are also certain individuals who have acquired large number of shares Of the plaintiffs (hereinafter referred to as "Holders"). Since the numbers allotted to the defendants in various suits and the names of certain parties are different while the actual acts attributed to them are similar, it will greatly facilitate the writing of this judgment if these parties are referred to by the acts they perform in these suits, which is mentioned above, rather than by the number 'allocated them.
4. ' The brief facts of the case are that the plaintiffs are a public limited company listed on the KSE. It appears that the Holders had acquired large number of shares of the plaintiffs which were held with the broker collateral to extend or maintain credit to the Holder. However, it seems that the Broke was declared to be a defaulter on 17-6-199 by KSE and his Membership was suspended Upon this happening the Holders became concerned about the shares that he had place with the broker.
5. Consequently, the Holder wrote to KSE and the plaintiffs and also placed a notice in the newspaper requesting the KSE to inform its Members not to deal with the said shares (hereinafter referred to the "suit properties") or to register an change of ownership with regard to the sin properties.
6. Whereupon, the plaintiffs informed KSE regarding the complaint of the Holders to the effect that the Share Scrip's has been reported to be lost/stolen and they requested KSE to inform the Members not to deal with the suit properties in the meantime, it appears that the plaintiff obtained a leg opinion from lawyers to the effect that title to suit properties should be determine' by the Court of law. The plaintiffs also through these letters invited objections within 14 days of the notice but no objections were received within the stipulated period. After the expiry of the said 14 days the buyers on the shares purported to be lost, lodged the claims for transfer of the suit properties in their respective names with the plaintiffs, whereupon the plaintiffs informed the buyers that the title to the shares was disputed and hence it could not be transferred in the name of the buyers as per the legal opinion obtained by them and consequently a determination of the title by Court of law was essential. It appears that this action by the plaintiffs was not acceptable to KSE, and they lodged a complaint against the plaintiff with the CLA to the effect that the plaintiffs had violated the provisions of section 31 of Securities and Exchange Ordinance, 1969. This contention of KSE was duly rejected by the plaintiffs. At the same time, KSE directed the plaintiffs to transfer the shares to the buyers but the plaintiffs relying on the legal opinion obtained, declined to transfer the shares. This led to the issuance of a show-cause notice to them by KSE who threatened to suspend the share trading of the plaintiffs on the Stock Exchange if the plaintiffs did not transfer the shares as suggested by KSE. Nevertheless, the plaintiffs informed the KSE that they were unable to transfer the shares in view of the contending claims. Later, it seems that they verbally informed the plaintiffs that they would be suspending the plaintiffs share trading on the KSE. The plaintiffs contend that they have no interest in the suit properties and that it is only by way of abundant caution that they are resisting the transfer of the shares to the buyers since the title to the shares is under dispute.
7. The plaintiffs further contend that they have filed the suit purely to seek indemnity against any possible claims that may be filed against them subsequently the plaintiffs also want the withdrawal of the threat of suspension of their trading on the Stock Exchange.
8. ' Along with the suit, the plaintiffs have also filed an application under Order 39, Rules 1 and 2 read with section 151,whereby they have sought to restrain the KSE from taking coercive steps against the plaintiffs. When this matter came up for hearing of this application before me, amongst the defendants only KSE and Holders were represented. At the time the learned counsel for the parties agreed that the points involved were very short and since there would be no need for leading evidence the entire suit could be disposed of along with the applications.
9. ' The defendants obviously had no time to file any written statement and hence in their defence they had relied only on counter-affidavits, which were only filed by KSE, to the application under Order 39, Rules 1 and 2 in their counter-affidavits KSE emphasised that KSE was a national institution and that it was necessary to maintain its credibility otherwise the entire economy of the country would be effected. Such credibility could be maintained, according to KSE, only if the trading on the Stock Exchange is not disturbed for frivolous reasons and that the Rules of the Stock Exchange are strictly followed. According to KSE the Buyers of transferees of the shares are beneficial holders of the same, having obtained such shares for valuable consideration and without notice as to any defect in the title of the same. Since valid and duly verified signed transfer deed without any defect had been lodged with the plaintiffs by the buyers, the plaintiffs had no right to decline to register the transaction on the ground that there was a dispute with regard to title to the shares. According to KSE the denial by the plaintiffs of registration of shares is a mala fide and a collusive act that it is only due to this errant behaviour of the plaintiffs that the KSE had indicated that they would stop trading of the plaintiffs shares on the Stock Exchange.
10. ' I have heard the learned counsel and have examined the documents filed by them. It is obvious to me that the Broker was in possession of the shares for whatever reasons but the reasons were certainly not mala fide. It is true that the use of the shares as collateral is not permissible under the rules of KSE but nevertheless, such practice is in vogue and as a rule blind eye is turned to it. The fact that the licence of the Broker was cancelled only means that he would not be able to act as an Agent for trading shares from the day when his licence was suspended. However, whatever transaction that he indulged in with respect to these shares before his suspension would be valid.
11. There is also considerable contradiction in the contentions of the plaintiffs inasmuch as the plaintiffs in the same breath talk of the theft of the shares as well as the fear of the Broker misusing the shares. The provisions of section 31 of the Securities and Exchange Ordinance, 1969 are very clear and are reproduced below:-- "31. 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.
12. (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 Government, 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 notwithstanding 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 1982) or the Companies Act, 1913, or any other law for the time being in force."
13. 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.
14. 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 institute 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, thus, under the cover of a legal opinion only goes to show that perhaps they have some interest in not transferring the shares. It is obvious that such conduct is reprehensible and cannot be permitted in so far as trading on the Stock Exchange is concerned. As far as the plaintiffs' fear that they may be stopped, from trading on the Stock Exchange or that they may be saddled with any liability in the event that the shares are transferred to the wrong person, it is obvious that this is only an ephemeral fear and under the law no liability attaches to them if they have acted bona fide. As far as their fear of being stopped from trading on the Stock Exchange is concerned, the learned counsel for the Stock Exchange Mr. Mehmood Mandviwalla has stated before me that if the plaintiffs transfer the shares as per Rules of KSE and as per provisions of section 31 of Securities and Exchange Ordinance, 1969, there of the KSE will take no adverse action against the plaintiff. I, therefore, find no merit in these suits and direct that KSE will withdraw their notice/letter dated 9-2-1998 with immediate effect and that the plaintiffs will transfer the shares as listed below against suit numbers mentioned to bona fide purchasers. {{TABLE}} Suits Nos. No, of shares.
15. 116 of 1998 5.8 million 117 of 1998 3,230,280 118 of 1998 5,713,672 ' Suits Nos.116 of 1998, 117 of 1998 and 118 of 1998 are disposed of in the above terms.