' GUL MUHAMMAD KHAN, J.-The petitioner calls in question the order dated 26th December 1973 of the respondent by which he partly accepted the proposal of the petitioner about the terms of remuneration of the Chief Executive and two other Directors for rendering extra services while the remuneration of the other Directors, namely, Director Supports, Director Incharge of Cotton Procurement, Director Incharge of Local Sale, Marketting and Forecast and Director Incharge of Labour Administration and Stores had been disallowed. The impugned order had been passed in pursuance to the Notification No, S. R, 0.-1129(1)/72, issued by the Federal Government on 22nd November 1972, in the exercise of its power under section 4(3)(b) of the Capital Issues (Continuance of Control) Act, 1947.
2. Briefly, the facts are that the petitioner had been incorporated as a private limited company on 1st July 1954. To begin with the company issued capital of Rs, 30,00,000 in pursuance to a consent order by the respondent. Condition 9 placed restriction on any increase in Director's fees. About payment of special remuneration for extra services to the Directors, it was stated that it will be subject to the approval of the Company in General Meeting. Any commission to be paid on the basis of profits was also payable after the approval of the respondent had been taken.
3. In 1962 the Company felt the necessity of raising additional capital. It, therefore, sought for permission for the issue of additional capital in the sum of Rs, 40,50,000. The approval was given on 20th August 1962, with certain conditions as narrated in Annexure 'C'. Condition No, 9 laid down that payment of special remuneration to directors for extra services shall be subject to the prior approval of the company in general meeting.
4. On 4th Ferbuary 1971, the Controller of Capital Issues (hereinafter referred to as C. C. I.) allowed the petitioner-Company to raise a further capital of Rs, 22,50,000 against fully paid shares of Rs, 10 each to be issued at par in the form of bonus shares out of the free reserves of the company. The condition attached to this consent reads as under:- "It is a condition of this consent that within one year from the date hereof, the company will either issue additional capital or its existing shareholders shall disinvest in favour of the general public such amount of capital as would constitute fifty per cent. Of the total issued capital, The prospectus or offer for sale shall be submitted for the approval of the Controller of Capital Issues prior to its publication. Thereafter, the Company shall apply for listing to the Karachi Stock Exchange and have its shares quoted for trading on the Stock Exchange."
' It is stated that the above conditions were complied with. Later, the respondent also allowed the convers on of the petitioner-Company into a public limited company vide his letter dated 3rd May 1971.
5. On 29th April 1972, a Board of Directors comprising seven directors was elected under President's Order 2 of 1972 (PLD 1972 Central Statutes 355). The remuneration of the Chief Executive was fixed at Rs, 3,500 while those of the other directors rendering extra services at Rs, 2,500 p.m. Inclusive of all allowances. All the elected Directors were given one or the other assignment and, therefore, were made entitled to receive the above noted remuneration. This decision was in conformity with the conditions that far levied by respondent.
6. On 10th May 1972, the petitioner-Company informed the respondent that it had appointed Mian Abdul Rashid as the Chief Executive of the company in place of Khan Abdur Rehman who had resigned. The petitioner also sought for the approval of the fixed salary of Rs, 3,500 per month to be paid to the new Chief Executive. The respondent asked the petitioner to apply on the prescribed form which was done. The C. C. I. In his letter dated 17th August 1972, also asked for the justification for the payment of the big sums as remuneration to the Directors. A detailed reply was given by the petitioner as per Annexure 'I' on which the respondent vide his order dated 26th December 1973, allowed only the salary of Chief Executive and two other directors and refused to allow remuneration to the other four directors. That order is stated to have been passed on the advice of an advisory committee constituted under section 11 of the Act.
7. The learned counsel for the petitioner raised the following points for consideration : - (a)That the impugned order Annexure T dated 26th December 1973 is invalid and inoperative because Mr. A. Z. Farooqi, who had issued that order bad never been authorized by the Central Government under section 10 of the Act to do the same.
(b)That the notification dated 22nd November 1972 of the delegate of the Central Government issued under section 4(3)(b) of the Act making every consent to issue of further capital subject to the following conditions is ultra vires of section 4(3)(b). The operative part of the notification reads as follows:-
(I) The terms and conditions of appointment of the Chairman, Managing Director, Governing Director, or the other Chief Executive by whatever name called, whenever appointed, shall be subject to the approval of the Controller of Capital Issues.
(ii) The remuneration of a Director for performing extra services shall be subject to the approval of the Controller of Capital Issues.
(c) That in any case the respondent had no lawful authority to apply his order retrospectively. It was pointed out that the impugned order had been issued on 26th December 1973, whereas the appointment had been made on 29th April 1972, in pursuance to which payments had already been made.
8. The first point raised by the learned counsel for the petitioner does not seem to have any force as the learned Deputy Attorney-General did produce before us a Notification No, S. R.
0. 314(1)173, dated the 7th of March 1973, empowering Mr. A. Z. Farooqi with effect from the 28th February 1973, to discharge all the duties and exercise all the powers of the Central Government under the Act.
9. We now turn to the second point to see whether the contents of the notification dated 22nd November 1972 were contemplated by the Act. The control of issue of capital had been applied in India for the first time on 17th May 1943 vide rule 94-A of the Defence of India Rules, 1939. This rule was superseded by Ordinance. XXII of 1946, which was replaced by the Act in 1947. It is to be noted that the preamble, talks of providing for the continuance of control over issues of capital.
According to the statement of objects and reasons for the Act as given by the concerned Minister on 14th of March 1947, the continuance of the control was thought necessary to secure a balanced investment of the country's resources in industry, agriculture and social services. The Ministry of Finance in its booklet titled 'Hints to applicants for Issue Capital' published in 1970 by the Manager of Publications, Karachi, under the heading 'Policy' stated that the control of issue of capital is designed to secure a balanced investment of country's resources and that instrument was used to prevent public participation in premature projects over capitalization and undue dependence on loan capital.
10. Several guidelines, which were envolved by the Government in its bid to achieve the object of the Act and its policy, are set out in the booklet referred to above but all of them need not be referred to in this order because of their irrelevance. The one about the remuneration of the directors for the extra services rendered by them is as under:- "(b) For other services, no remuneration can be paid to any Director without the prior approval of the shareholders in the general meeting (not the Board of Directors). If the payment for extra services is to be made in the form of commission fixed as a percentage of profits, it is subject to the prior approval of the Controller of Capital Issues."
' As about the Chief Executive, it is stipulated as under:- ' Ali) Chief Executive.-The Chief Executive, viz., the Chairman, the Governing Director or the Managing Director, by whatever name called, can be appointed only with the approval of Controller of Capital Issues. The normal terms, inter alia, are :-
(i) That the appointment is not for a period of more than five years.
(ii) That the salary or office allowance (all inclusive) does not exceed an amount calculated at the rate of Rs, 500 per month for the first one lakh rupees and Rs, 200 per month for each succeeding one lakh rupees of capital of the company, or Rs, 3,500 per month, whichever is less."
The restriction placed on the ascertained remuneration of the directors under the above provision is that prior sanction of the general body of the shareholders must be obtained. The approval of the C. C. I. Was necessary only if the remuneration was by way of commission. As it was an ascertained amount in this case the above condition had been complied with.
11. As said above, the policy as set out in the booklet referred to above did not require any approval of the C. C. I. For the appointment of directors and their ascertained remuneration. Even the other contents of the booklet would show that till 1970 the ascertained remuneration of the directors were not considered to be the subject-matter of control by the C. C. I. Section 3(4)(a) which was incorporated in 1967 only provides for the remuneration of the Chief Executive by whatever name called and the Managing Agents. Had the Legislature, intended to include therein the directors as well it would have done so specifically in clause 4(a). The control on the fixed remuneration of the directors has, therefore, been H intentionally kept out of the ambit of the Act.
' Even in the case of Chief Executive etc. The provision is that their remuneration could be allowed only if there was any net profit. However, the C. C. I. In this case permitted Rs, 3,500 per month to the Chief Executive without making the earning of net profit by the company a condition precedent.
The learned counsel for the respondent attempted to justify it by saying that it was done under clause 4(b) of section 3 which empowered the Central Government to lay down 'further conditions'.
The view of the respondent is that section 3(4)(a) disallows to a Chief Executive etc. Not only the remuneration but their office allowance also and that all such payments as are either not provided for or prohibited under that clause can be allowed by the C. C. I. Under clause 4(b) which contains general and residuary provisions. It was, therefore, submitted that in a case where a company was not making any net profit, the Chief Executive, who had to be paid to keep the undertaking going, could be allowed some office allowance under section 3(4Xb) for his subsistence.
12. Section 3(4Xb) under which the notification dated 22nd November 1972, is claimed to have been issued was enacted in 1967. It reads as under :- "3(4)(b).-Such further conditions, if any, whether for immediate or future fulfilment, as the Central Government may from time to time, think fit to impose ;"
It only empowers the Central Government to impose such further conditions as the Government may from time to time think fit. As there is no specific guidance as to what kind of further conditions can be imposed, these C conditions, must be preferable to, either the express provisions of the Act o its objects. It is stated in Maxwell on Interpretation of Statutes, 11th Edition, at pages 78.79: "Before adopting any proposed construction of a passage susceptible of more than one meaning it is important to consider the effect or consequences which would result from it for they often point out the real meaning of the words One of these presumptions is that the Legislature has not intended to make any substantial alteration in the law beyond what it explicitly declares either in express terms or by clear implication or in other words, beyond the immediate scope and object of the statute."
' The immediate scope and object of the Act, on the other hand can be gathered from the statement of object and reasons as a help, if the provisions of the Act do not make the same clear as held in In re: Fatima BIN (1) and Nawabzada Muhmmad Umar Khan's case (2).' However, as for adding further conditions it was held in Ikram Bus Service's case (3), that a regulatory and supervisory authority of that kind could not be equated with power to impose conditions on the grant of permits, not contemplated by the Act. The interpretation and scope of section 3(4)(b), therefore, must remain confined to either the provisions of the Act or the object of the statute.
13. As said above, section 3(4Xb) does not provide any guidance whatever as to what sort of further conditions shall be attached. Clause 4(a) is a very restrictive clause and provides that the amount to be paid to the Secretaries, Managers or any other Chief Executive by whatever name called or the managing agents shall not exceed in any year a proportion of the net profits, as defined in section 87-C of the Companies Act, which dividends would bear to paid-up capital. This would mean that if there is no net profit
(1) PLD 19E2 Lah. 809 (2) P L 1) 1958 Lah. 120
(3) P L 1963 SC 564 then, no remuneration at all could be given to the functionaries referred to above. There is undoubtedly much wisdom in this condition, for, a particular company shall ask for the issuance of additional capital only if its Chief Executive or the Managing Agents are satisfied that it will be beneficially employed, as failing that, they will run the risk of going without any remuneration. This condition may thus be to ensure that those functionaries shall not utilize the investment to pay themselves. However, a closer look at this provision would show that if it is applied strictly to all the cases indiscriminately, the result would be that all the Chief Executives in the early stages of working of any company may go without remuneration till such time the company comes in production and starts earning net profits. No Chief Executive, in such a situation, may join any new company and a very few may be prepared to gamble at the chances of a company likely to make net profits. Such an interpretation will, therefore, impede rather than advance the object of law. In the alternative this situation may compel the Cnief Executives to evolve 'other ways' to pay themselves. This too, in our view, could not be the intention of the Legislature. It was held in Rah Nawaz's case (1), that the interpretation should be keeping in view the object of the Act,
14. We also do not agree with the learned counsel for the respondent that the term 'office allowance' means not the expenses meant for maintaining an office but a subsistence allowance (distinct from remuneration). The contention of the learned counsel can be accepted only if the term 'office allowance' would be synonymous with 'salary'. The Indian Supreme Court in the Central Bank of India's case (2), held that 'remuneration' includes salary, house allowance. . .Bonus. -fees and allowances to directors etc. 'Ts remunerate' is defined in Webster's New International Dictionary as 'To pay an equivalent for (any service, loss, expense etc.) or to pay an equivalent t one for such service etc. To recompense, requite, compensate ; pay;'. 'Salary' on the other hand means a fixed compensation decreed by authority and for permanence and is paid at stated intervals and depends upon time and not the amount of services rendered, while 'allowance' is a variable quantity.. 'Remuneration' thus would cover any loss, expense etc. Also as it is - compensation for services rendered, expenses incurred or loss borne and would include office and subsistence allowance. Salary on the other hand is a fixed compensation depending upon time.
This view is supported in Mohammadally v. Union of India (3). Further 'office allowance' means, is our view, an allowance to maintain and not to assume an office, as contended by the learned counsel for the respondent. So had it not been for this provision any remuneration of a Chief Executive etc. Would have included the expenses to maintain his office as well. However, the office alio Nance item being specifically excluded in clause 4(a) it means that it is to be paid separately but it in no case would be a subsistence allowance as argued by the learned counsel for the respondent. A Division Bench of this Court expressed its view in Mahmud Alam v. Mehdi Hussain (4), that Courts cannot extend statute to meet a cause for which provision has not been made.
15. We have held above that a strict interpretation of section 3(4)(a) would lead us to a situation where no Chief Executive would be entitled t any remuneration if the company to which the Act applied was not making any net profit. We have also found that the term 'remuneration' includes salary or allowance end that in any case an 'office allowance' would not
(1) PLD 1965 Lab. 676 (2) AIR 1960 SC 12
(3) AIR 1964 SC 980 (4) PLD 1970 Lah. 6 mean a subsistence allowance but an allowance for maintaining an office, The only other interpretation, as suggested by the learned counsel for the petitioner, and supported by the official publication referred to above, to keep this provision meaningfully operative, is that section 3(4)(a) applied only where the Chief Executive or the managing agents were to be paid on the basis of commission or percentage and not a fixed amount. Section 87-C of the Companies Act also lends support to such a view. Moreover as the strict interpretation would leave the companies not making profit without a Chief Executive it could not be the intention of the Legislature. It is a firmly established principle of interpretation of statutes that a statute must be interpreted to make it workable as held in Ahmad v. Mir Muhammad Khan (1). The law should be saved than destroyed and that Courts should lean in favour of upholding the constitutionality of a legislation. Reference in support of this observation may be made to Zaibtun Textile Mills' case (2), Sirajul Haq Patwari's case (3) and Province of West Pakistan v. Mahboob All (4). Further it was held in I. T. C. v. Gibbs (5), that where alternative constructions are equally open that alternative is to be chosen which will be consistent with the smooth working of the system which the statute purports to regulate The same view was taken in Shannon Realities Ltd. v. Ville De St. Michael (6). We, therefore, agree with the learned counsel for V e petitioner and hold that ;he C. C. I. Can control the remuneration of the Chie Executive or managing agents only when they are to be paid on commission or percentage of the profits. A corollary of this interpretation could be that the Legislature intended to control the administrative or unproductive expenditure when it was to be based on percentage of net profits or commission basis.
16. The interpretation of such general provision as in section 3(4)(b) can be looked at from another angle as dealt with at page 182 of Craies on Statute Law, 1971 Edition: "Again it is a rule as to the limitation of the meaning of general words used in a statute, that they are to be, if possible, construed so as not to alter the common law. It must be remembered that it is a sound rule to construe a statute in conformity with the common law rather than against it, except where or in so far as the statute is plainly intended to alter the course of the common law."
' It is further discussed at page 188: - " `The general rule in exposition', said the Court of Common Pleas in Arthur v. Bokenham (1708) 11 Mod. 148 150), 'is this, that in all doubtful matters, and where the expression is in general terms, the words are to receive such a construction as may be agreeable to the rules of common law in cases of that nature, for statutes are not Presumed to make any alteration in the common law further or otherwise than the Act does expressly declare'. Again, in Minet v. Leman 6955) 20 Beay.
269, 278), Romilly M. R. Said: 'The general words of an Act are not to be so construed as to alter the previous policy of the law, unless no sense or meaning can be applied to those words consistently with the intention of preserving the existing policy
(1) PLD 1966 Lab. 927 (2) PLD 1971 Kar. 333
(3) PLD 1966 SC 854 (4) PLD 1976 SC 483
(5) (1942) A C 402 (6) (1924) A C 185 ' untouched. . . .This principle of construction as a general proposition cannot be disputed.' A right to demand a poll is a common law incident of all popular elections, and as such, 'cannot be taken away by mere implication which is not necessary for the reasonable construction of a statute,' said Brett L. J. In R. v. Wimbledon L. B. (1R82) 8 Q B D 459 where it was contended that the Public Libraries Acts, 1855, 1866 and 1877 (all since repealed), had abolished the common law rule."
It will be seen that the impugned notification does bring about an alteration in the existing law to deprive a company of its power under the Company Law to decide to pay to its directors, remuneration for extra services rendered by them. The general words of the Act, therefore, could not be intended to take away such a power unless it was specifically or expressly so provided. It would need no authority to say that a subordinate Legislature cannot bring about an express or implied amendment in any law.
17. Thus in order to save section 3(4)(b), the 'further conditions' under it could be said to relate either to the purpose as given in section 3 or the objects as given in the statement of objects and reasons Admittedly the impugned notification bears no relationship to the objects as disclosed while enacting the Act if we refer it to general purpose of section 3(4)(a) it means a general financial control of the non-productive and administrative expenses. In that situation the C. C. I.
Could at the most exercise a general control of expenditure on the remuneration of the directors and other staff such as by fixing some ratio of it either to the paid-up capital or to the net profits etc., but he could not start guiding the company as to how to run its business or to advise it about employing or not one or the other director for rendering extra services. Such an action, in our view, will not only he far away from the control of issue of capital, but a direct interference with the management of an undertaking which can be permitted only if there is an express provision in law about it. We are, therefore, of the view that the impugned order and the notification dated 22nd November 1972, on the basis of which it was issued, are far beyond the scope of the power conferred on the respondent under section 3(4)(6) and hold that they are not valid or Intro vires of the power conferred under section 3(4)(b) of the Act.
18. It was then submitted before us that the action of the Government had been taken on the basis of a decision of the Advisory Committee appointed under a Notification No, S. R.
0. 552(K)66, dated 6th June 1966, issued under section 11 of the Act. The summary placed before the Advisory Committee in the meeting held on 5th December 1973, reads as under:- "While there is seemingly some weight in this argument of the company, it has not been able to justify its proposal for employing as many as 7 Directors for exercising control. Further, as the work entrusted to these directors is of a managerial nature rather than related to policy making, there does not seem to be any necessity of continuing with this arrangement. There is no reason to believe that any difficulty is likely to be faced by the company if it were to exercise control and management through its Chief Executive and possibly two other paid directors. In fact it would be advisable for the company to employ professionally qualified and trained staff to control and organize various departments of the company as is being done effectively both in public sector corporations like WPIDC, Fauji Foundation etc. ' as well as in other efficiently run companies in the private sector."
' The above summary shows that though the company could employ professionally qualified and trained staff to control its various departments, yet it is not clear if it could control the same through the Directors if some or all of them may be professionally qualified for the purpose. The view given in the summary and prima fade accepted by the Advisory Committee is quite arbitrary and does not furnish any basis for it. The decision of the Advisory Committee was as fellows :- "The Committee decided that the company may be permitted to appoint the Chief Executive and only two other directors on the remuneration as proposed in the summary."
The Advisory Committee gave no reason why two directors could do and not seven or none at all?
Any way, the Controller instead of complying with the decision of the Advisory Committee and leaving it to the company as to which of the two directors it would employ, himself named two directors. The petitioner-Company had proposed their remuneration at Rs, 2,500 p.m. Each (see para. 9 of the writ petition) but the C. C. I. In the summary and the sanction order raised it to Rs, 3,000 per month each. Admittedly no such power is vested in the C. C. I. And hence his order cannot be condoned even on that score.
19. As for the third point, it may be noted that it was the notification dated the 22nd November 1972, that for the first time provided that the terms and conditions of appointment of the Chairman, Managing Director, Governing Director or the other Chief Executive, by whatever name called, be, subject to the approval of the Controller of Capital Issues. It was also provided that the remuneration of Director for performing extra services shall also be subject to the approval of the Controller of Capital Issues. The appointment of the Directors had, however, been made on 29th April 1972 in pursuance to the resolution already referred to above. The remuneration bad also been allowed to them in General Meeting as laid down in the previous orders of consent for issue of capital. However, as our view is that the impugned order is in excess of the power conferred on the Controller of Capital Issues under section 3(4)(b) of the Act, the payments made to the other Directors were also not invalid.
' The impugned notification dated 22nd November 1972 and the order dated 26th December 1973, based thereon are, therefore, declared to be without lawful authority. However, as the question involved was not free from difficulty, there will be no order as to costs.