' SAIYED SAEED ASHHAD, J.---This High Court Appeal has been filed against the order of the learned Company Judge, dated 14-5-1997 in J.M. No,70 of 1991 whereby two applications being C.M.A.
No,3332 of 1991 under sections 314 and 325 of the Companies Ordinance and C.M.A. No,93 of 1996 under section 290 of the Companies Ordinance were disposed of. The petitioners have challenged the order of the learned Company Judge relating to dismissal of C.M.A. No,93 of 1996.
' The brief facts leading to the aforesaid High Court Appeal are that the appellants and respondents Nos.1, 2, 4, 5, 6 and 9 are the Directors of respondent No,3, Messrs Shan Hospital for Women and Children (Pvt.) Limited, which is a hospital providing medical facilities to about 60 indoor patients and to hundreds of outdoor patients. Appellants and respondents Nos.4 to 9 own 65.5% shares of the company while the remaining 34.5% are hold by respondents Nos.1 and 2, who visit the hospital daily. Differences arose between the appellants and respondents Nos.4 to 9 and respondents Nos.I and 2 in the management and administration of the affairs of respondent No,3 leading to in filing or winding up position by respondents Nos.1 and 2 on the ground that the appellants and respondents Nos.4 to 9 on the strength of majority shares were running the affairs of the company in an oppressive and illegal manner, not allowing respondents Nos.1 and 2 to participate therein by taking over control of entire general administration, finance, accounts, income tax, electric, general staff and medical administration, nursing, laboratory, X-Ray, chemist store and out door patients matters. Respondents Nos.1 and 2 also challenged the appointment of petitioner No,1 Tasneem Arif as Medical Director on the ground she was neither a doctor nor conversant with the medicines but was being paid salary of Rs,5,000 per month, which from time to time was raised to Rs,18,000 per month. Respondents Nos.1 and 2 further averred in their winding up petition that the appellants and respondents Nos.4 to 9 violated the provision of the Memorandum and Articles of Association and also proposed alterations/ amendments therein to suit their foretasted designs. Respondents Nos.1 and 2 further averred that by resort to the aforesaid illegal, mala fide and oppressive actions and designs the appellants clearly expressed their intention to illegally acquire or annex the company completely and to oust respondents Nos.1 and 2 from the same.
' During the pendency of the above winding up petition appellants submitted an application under section 290 of the Companies Ordinance praying therein that respondents Nos.1 and 2 be directed to sell their shares to the appellants and respondents Nos.4 to 9 all of whom were willing to purchase the same, in proportion to their present shareholdings at a price to be fixed by the auditors of the company. This application being C.M.A. No,189 of 1992 was disposed of by the learned Company Judge vide order, dated 1-8-1993 as modified by order, dated 6-12-1993 by consent of the appellants and respondents Nos.4 to 9 and respondents Nos.1 and 2 and Messrs Sandhu & Co. And Messrs Ferguson & Co. Chartered. Accountants were appointed respectively to fix the value of the shares of respondent No,3. Messrs Sandhu & Co. On behalf of the appellants fixed the value of the shares at Rs,13.08 per share, while Messrs Ferguson & Co., appointed by respondents Nos.1 and 2 valued the share at Rs,22.08 without goodwill and Rs,29.54 with goodwill.
After submission of the value of the share of respondent No,3 the aforesaid C.M.A. No,93 of 1996 came up for hearing before the learned Company Judge and the same was dismissed as aforestated. The reasons advanced by the learned Company Judge for dismissal of the said application was, that in the first place, the two Chartered Accountants respectively appointed by the two erring parties were not unanimous in fixing the value of the share of respondent No,3 and the value fixed by them enormously offered. The other ground stated by the learned Company Judge was that during the course of hearing of the aforesaid Miscellaneous Application learned counsel for respondents Nos.1 and 2 had submitted that respondents Nos.1 and 2 were willing to purchase the shares held by the appellants and respondents Nos.4 and 9 at Rs,70 per share. The learned Company Judge, therefore, held that in the circumstances it was not possible to determine or fix a proper value of the share of respondent No,3 and dismissed the application under section 290 of the Companies Ordinance.
' We have heard the arguments of Mr. Muhammad Ali Saeed, learned counsel for the appellants and respondents Nos.4 and 9 and Mr. A.I. Chundrigar, learned counsel for respondents Nos.1 and 2.
We have also perused the material on record, the relevant provisions of Companies Ordinance and the case-law referred to us by the learned counsel for the parties.
' Mr. Muhammad Ali Saeed vehemently attacked the impugned order of the learned company Judge and submitted that the learned company Judge in dismissing the C.M.A. No,93 of 1996 (application under section 290 of the Companies Ordinance) praying for orders for sale of the shares held by respondents Nos.1 and 2 in favour of the appellants and respondents Nos.4 to 9 did not take into consideration the object and the purpose of section 290 of the Companies Ordinance which is to save the company from being wound up if by having recourse to the provisions of section 290 of the Companies Ordinance it was possible to allow the company to carry on its business and affairs. He further submitted that one of the methods which can be adopted under section 290 of the Companies Ordinance for allowing the company to carry on its business and affairs is to provide the majority share-holders to acquire full control of the company by purchasing the shares of minority share-holders so that the company may continue to function and perform its business, while the minority share-holders feeling aggrieved or dissatisfied with the management and running of affairs of the company would have their grievance redressed after receiving money for the shares held by them. In this connection he referred us to the case of Chander Krishan Gupta v. Pannalal Girdhari Lal (Private) Ltd., and others, (1984) 55 Company Cases 702.
' Another ground on which Mr. Muhammad Ali Saeed, assailed the impugned order is that the learned Company Judge completely lost sight of the fact that both the erring parties by consent had agreed to refer the matter to two Chartered Accountants, to be appointed by each of them for the purpose of fixation of the value of the share of respondent No,3. He further submitted that both the erring parties had agreed to get the value of the share fixed after submission of the application under section 290 of the Companies Ordinance wherein the appellants had prayed for direction either for purchase of the shares of respondents Nos.1 and 2 by respondent No,3 with permission to correspondingly reduce the share capital of respondent No:3 or of the appellants and respondents 4 to 9 in accordance with the proportion of the shares held by each of them. He further submitted that respondents 1 and 2 having agreed to appoint the Chartered Accountant on their behalf to fix the value of the share of respondent No,3 impliedly agreed or consented to the disposal of the application under section 290 of the Companies Ordinance in terms of the reliefs prayed for by the appellants, otherwise there was no purpose for their agreeing/consenting to the proposal for fixation of the value of the share of respondent No,3. Mr. Muhammad Ali Saeed, further submitted that in view of the above, respondents 1 and 2 could not wriggle out of the consent for valuation of share which clearly and unambiguously was indicative if their intention to sell/dispose of the shares held by them either to respon -lent No,3 or fo the appellants and respondents 4 to 9.
According to him this was the obvious inference which could be had from the conduct of respondents 1 and 2 in appointing a Chartered Accountant on their behalf for fixing the value of the share of respondent No,3. In the circumstances, he submitted that it was not open to respondents 1 and 2 to make an offer in Court for purchasing the shares held by the appellants and respondents Nos.4 to 9 or to raise the value of the share of respondent No,3 by bidding in Court during the hearing of C.M.A. No,93 of 1996. In support of his above agreements he referred us to the case of Muhammad Aslam v. Member, Board of Revenue and others, reported in PLD 1980 SC 45 and Muhammad Bibi and others v. Abdul Ghani, reported in PLD 1973 Kar.
444. Mr. Muhammad Ali Saeed, finally submitted that in the presence of the above facts the learned Company Judge should have allowed C.M.A. No,91 of 1996 in terms of the reliefs prayed therein.
' Mr. A.I. Chundrigar, the learned counsel for respondents 1 and 2 fully supported the impugned order and submitted that the same was proper, valid and in accordance with the facts and circumstances of the case. He further submitted that the appellants alongwith respondents 4 to 9 by running the management and affairs of respondent No,3 were not only acting against the interest and rights of respondents 1 and 2 which was causing oppression 11 them but were also violating the provisions of the memorandum and Articles of Association as well as of the Companies Ordinance and, if they had been allowed to purchase the shares held by respondents 1 and 2 for taking over complete management and affairs of respondent No,3, they would continue to tut the affairs, management and business of respondents No,3 in an illegal and mala fide manner in violation of the provisions of law. He further submitted that a Court of law could not be a party to acts which were illegal, ultra vires and mala fide which it would have become if C.M.A No,93 of 1996 was allowed in terms of the reliefs prayed by the appellants. With regard to the contention that respondents 1 and 2 had implied by consenting to dispose of their share-holdings either in favour of respondent No,3 or the appellants and . Respondents 4 to 9, Mr. A.I. Chundrigar, submitted that from a bare perusal of the two orders dealing with the appointment of the Chartered Accountants for fixation of value of the share of respondent No,3, it could not be presumed or inferred that the said exercise was being undertaken for the purpose of sale of the shares held by respondents 1 and 2 in favour of the appellants and respondents 4 to 9. He further submitted that at the most it could be deduced that respondents 1 and only consented or agreed that the value of the shares of respondent No,3 be fixed but in no way they agreed or consented either expressly or by implication that they intended to dispose of/sell their share-holdings to the appellants and respondents 4 to 9.
' Mr. A.I. Chundrigar, further submitted that in a situation where the erring parties are related to each other and there is complete lack of confidence between the erring parties the proper course is to wind up the company and not to resort to the provision of section 290 of the. Companies Ordinance by ordering sale'of the shares of the minority share-holders to the majority share- holders as such an order would perpetuate illegality, mala fide acts and violation of law by the majority share-holders. In support of his above contention, he referred us to the cases of, (1) Ladli Prasad Jaiswa l v. The Karnal Distillery Co. Ltd. Reported in PLD 1965 SC 221, (2) Brush Rehman Ltd. v.
Brush Electrical Engineering Co. Ltd., reported in 1986 SCM R 1612, (3) In re: Kruddson Ltd., Karachi PLD 1972 Kar. 376, and (4) Iqbal Alam and another v. Plasticraftors (Pvt.) Ltd. And others reported in 1991 CLC 589.
' We have thoroughly considered the arguments advanced by the learned counsel for the parties and have also minutely examined the relevant provisions of law and the case-law referred to us by the parties. Before proceeding to consider the respective arguments of the learned counsel for the parties, we think it desirable to reproduce the relevant sections from the Pakistani and Indian Companies Laws, which are as under:--- Companies Ordinance, 1984:---
(a) Section 290. Application to Court. (1) if any member or members holding not less than twenty per cent of the issued share capital of a company, or a creditor or creditors having interest equivalent in amount to not less than twenty per cent of the paid up capital of the company, complains or complain, or the Registrar is of the opinion, that the affairs of the company are being conducted, or are likely to be conducted, in an unlawful or fraudulent manner, or in a manner not provided for in its memorandum, or in a manner oppressive to the member or any of the members or the creditors or any of the creditors or are being conducted in- a manner prejudicial to the public interest, such member or members or, the creditor or creditors, as the case may be, the Registrar may make an application to the Court by petition for an order under this section.
(2) If, on any such petition, the Court is of opinion--
(a) that the company's affairs are being conducted, or are likely to be conducted, as aforesaid; and
(b) that to wind up the company would unfairly prejudice the members or creditors; the Court may, with a view to bringing to an end the matters complained of, make such order as it thinks fit, whether for regulating the conduct of the company's affairs in future, or for the purchase of the shares of any members of the company by other members of the company or by the company and, in the case of purchase by the company, for the reduction accordingly of the company's capital or otherwise."
Companies Act. 1956:---
(b) Section.
397. Application to Court for re ief in cases of oppression.-- (1) Any members of a company who complain that the affairs of the company (are being conducted in- a manner prejudicial to public interest or) in a manner oppressive to any member or members (including any one or more of themselves) may apply to the Court for an order under this section, provided such members have a right so to apply in virtue of section 399.
(2) If, on any application under subsection (1), the Court is of opinion:---
(a) that the company's affairs (are being conducted in a manner prejudicial to public interest or) in a manner oppressive to any member or members; and
(b) that to wind up the company would unfairly prejudice such member or members, but that otherwise the facts would justify the making of a winding up order on the ground that it was just and equitable that the company should be wound-up; ' the Court may, with a view to bringing to an end the matters complained of, make such order as it thinks fit."
Repealed Indian Companies Act. 1913:---
(c) Section 153-C. Prevention of mismanagement or oppression of members.--- (1) If any member or members holding not less than one-tenth of the issued share capital of a company complains or complain, or the Federal Government is of the opinion, that the affairs of the company are being conducted in an unlawful or fraudulent manner, or in a manner not provided for its memorandum, or in a manner oppressive to the member or any of the members, or are being conducted in a manner prejudicial to the public interest, such member or members or, as the case may be, the Federal Government may make an application to the Court by petition; and the Court may make such order as it thinks fit in the circumstances for regulating the conduct, of the affairs of the company and matters ancillary thereto.
(2) Where an order is made under subsection (1) on the application of any member or members, the company in relation to which the order is made shall cause a certified copy thereof to be delivered to the Registrar for registration within fourteen days aftei the completion of the order, and if default is made in complying with this subsection, the company and every officer of the company- who is knowingly and wilfully in, default shall be liable to a fine not exceeding five thousand rupees and to a further fine not exceeding five hundred rupees for every day during which the 'default continues.
' Mr. A.I. Chundrigar, submitted that in the facts and circumstances of this present case application under section 290 of the Companies Ordinance was not maintainable and the only solution of the dispute was in winding up of the company. This contention does not carry weight. A plain reading of section 290 of the Companies Ordinance is sufficient to suggest that an application under section 290 of the Companies Ordinance could be made by any of the parties to the winding up petition if the requirements of subsection (1) of section 290 are in-existence and also empowers the Court to A make such order as may be deemed fit with a view to bring an end to the matters complained of either by regularizing the affairs of the company in future or directing the purchase of shares of the oppressed members of the company either by the company or by other members if the winding up of the company would unfairly prejudice the share-holders and creditors of the company. We may also refer here to the case of Rajahmundry Electric Supply Corporation Ltd. v. A.
Nageshwara Rao and others, reported in AIR 1956 SC 213. In this case the Supreme Court of India while examining the provision of section 153-C of the repealed Indian Companies Act, 1913, which were analogous to the provisions of section 290 of the Companies Ordinance, observed that while proceedings under section 162 of the repealed Companies Act, 1913 for making an order for winding up of the company, which provision were analogous and similar to the provision of section 305 of the Companies Ordinance, if a liquidator could be appointed to manage the affairs of the company when an order for winding up was to be made under section 162, then an administrator could also be appointed to manage its affairs. We may also refer here to the case of K.R.S. Narayana Iyengar and others v. T.A. Mani and others, reported in AIR 1960 Madras 338, wherein provisions of sections 397 and 398 of the Indian Companies Act, 1956 relating to the powers of the Court to deal with the case of oppression of the minority or mismanagement was examined and it was observed that the object of these provisions was intended to avoid winding up, if possible, and keep the company alive and running while at the same time relieving the minority share- holders from acts of oppression and mismanagement. It was further observed that the Court would have the power to impose upon the parties whatever settlement the Court would consider to be just and equitable in the circumstances of a particular case. The provision of section 290 of the Companies Ordinance is similar to the provisions of sections 397 and 398 of the Indian Companies Act, 1956. It follows that if the Court instead of ordering winding up of a company and appointing a Liquidator has the power to appoint an administrator to run and manage the company as winding up would not be just and equitable, the Court would. Also have the power to take action in the nature of directions for sale of the share-holdings of minority members to the majority share- holders for keeping the company alive and to continue to run its affairs provided that such action is in the interest of the majority share-holders, creditors and the persons having dealings with the company. In the circumstances, the contention of Mr. A.I. Chundrigar that in a situation where the two erring parties are relating to each other and have lost confidence in each other on account of mismanagement and oppression the only solution would be to wind up the company by having recourse to section 290 of the Companies Ordinance is without any substance and merits no consideration.
' It is pertinent to note that respondent No,3 is a hospital. It is providing in-door facilities of 60 beds and two hundreds of out-door patients who are treated every day. In a city where medical facilities are scarce and limited, respondent No,3 is playing a very important role in providing medical facilities and health care both to the in-door and out-door patients. Winding up of respondent No,3 which is managing and running the hospital would result in stoppage of work of hospital which in return would deprive thousands of persons of the medical facilities and health care being provided by respondent No,3. It would be in the interest of patients admitted in the hospital as well as of the general public who attend the hospital for medical treatment that some solution or via media be found out which would enable respondent No,3 to continue to run and manage the hospital. It is also to be noted that appellant No,2 is a qualified pediatrist and heads the National Institute and Children Hospital attached to Jinnah Post Graduate Medical Centre. By rendering his services to the hospital of respondent No,3, he is imparting highly specialised and expert treatment to the children visiting Shan Hospital, of which the children would be deprived of if respondent No,3 is wound up.
' In view of the factual position stated above as well as the observation made by the Indian Supreme Court in the case of Rajahmudry Electric Supply Corporation Ltd. v. A. Nageshwara Rao and others, reported in AIR 1956 SC 213 and the Madras High Court in the case of K.R.S. Naryana Iyengar and others v. T.A. Mani and others, reported in AIR 1960 Mad. 388, we are of the view that winding up of respondent No,3 Shan Hospital will neither be in the interest of the appellants and respondents 4 to 9 who are providing their time and rendering services to the hospital for providing medical facilities and health care to hundreds of patients every day nor in the interest of the general public and the persons suffering from diseases and ailments and it would be appropriate, in the interest of justice and in accordance with the spirit of section 290 of the Companies Ordinance that the minority share-holders be directed to sell their share-holdings in favour of the appellants and respondents 4 to 9 so that they would continue to manage and run the affairs of the Hospital for the benefit of the sick and ailing people as it is a matter of record that the Hospital is being managed and run exclusively by the appellants and respondents 4, 5, 6 and 9 while respondents 1 and 2 have no role in the management and working of the Hospital. The case-law relied upon by Mr. A.I. Chundrigar in support of his contention that winding up of respondent No,3 Shan Hospital was the only remedy in the facts and circumstances of the case is of no assistance to respondents 1 and 2 as the question of providing medical facilities and health care was not in issue therein, which in our view is a very important factor going against the winding up of respondent No,3 Shan Hospital. Even, otherwise the cases relied upon by Mr. A.I. Chundrigar do not support his contention that winding up of a company would be the only solution when the members/directors have formed groupings and there was complete lack of confidence between the different groups so formed. In the case of Ladli Prasad Jaiswal PLD 1965 SC 221, it was observed that section 153-C of the repealed Companies Act, 1913, corresponding to section 290 of the Companies Ordinance, furnished a remedy alternative to winding up of company but the Court could not enforce a person to resort to remedy under section 153-C, who had already applied for winding up. In the case of Brush Rehman Limited (1986 SCM R 1612) the winding up order of company of the High Court was upheld by the Supreme Court as it was found to be just, equitable and proper in the circumstances. The issue relative to the remedy alternative to winding up was not at all considered by the Honourable Supreme Court. In the case of in re: Kruddson Ltd. Karachi PLD 1972 Kar. 376 again the issue of the alternate remedy provided by section 153-C of the repealed Companies Act, 1913 was neither involved nor considered. In the case of Iqbal Alam and another 1991 CLC 589 a learned Single Judge of this Court ordered winding up of the company as it was found to be justified on account of the affairs of the company. The order of winding up was to take effect after expiry of specified period within which both the parties were given the option either to purchase shares of other party or bifurcate the company on terms to be mutually agreed between them. The observations made to the above effect in this case are helpful to the case of the appellants and respondents 4 to 9 rather than being of any assistance to the case of respondents 1 and 2.
' A study of the case-law relied upon Mr. A.I. Chundrigar reveals that the observations and pronouncements made therein do not support or advance the case of respondents 1 and 2. On the contrary the pronouncements made in the cases of Ladli Prasad Jaiswal PLD 1965 SC 221 and Iqbal Alam and another 1991 CLC 589 negate the contention of Mr. A.I. Chundrigar that provisions of section 290 of the Companies Ordinance would have no application to the case in hand.
' The question which now requires determination relates to the fixation of the price/value of the share of Shan Hospital. Both the erring parties had by consent appointed their respective Chartered Accountants for fixation of the value of Shan Hospital. The Chartered Accountants acting on behalf of the appellants declared the value at Rs,13.08, while the Chartered Accountant acting on behalf of respondents Nos.1 and 2 had fixed the value/price of the share at Rs,22.60 and at Rs,29.54 with goodwill. Mr. Muhammad Ali Saeed, submitted that the appellants and respondents 4 to 9 were carrying on the affairs and management of Shan Hospital on no loss no profit basis and that it was not in the nature of a profit earning or commercial activity so as to have goodwill. He, however, submitted that the appellants and respondents 4 to 9 were willing to purchase the shares held by respondents 1 and 2 at Rs,29.54. Mr. A.I. Chundrigar vehemently controverted the arguments of Mr. Muhammad Ali Saeed and submitted that from the material on record it was not possible to determine a fair price or value of the share of respondent No,3 Shan Hospital in view of three different prices/values given by the two Chartered Accountants. In this connection he submitted that even the price of Rs,22.06 calculated by the Chartered Accountant of respondents 1 and 2 without taking into consideration the goodwill of respondent No,3 Shan Hospital showed a difference of Rs,8 as compared to the price of Rs,13.08 calculated by the Chartered Accountant of the appellants. He further submitted that apart from the fact that three different prices were fixed, respondents 1 and 2 had offered to purchase the share-holding of the appellants and respondents 4 to 9 at Rs,70 per share and, if in view of the facts and circumstances of the case winding up of respondent No,3 is not found just and equitable then the appellants and respondents 4 to 9 should be asked to purchase the shareholdings of respondents 1 and 2 at Rs,70 per share. The argument advanced by Mr. A.I. Chundrigar is devoid of force in view of the fact that respondents I and 2 had consented to have the price or the value of the share of Shan Hospital fixed by the two Chartered Accountants appointed by each of the erring parties, whereby they had consented to accept the price/value of the share determined or fixed by the two Chartered Accountants. Admittedly both the Chartered Accountants had not arrived at one and the same value and had valued the share differently. This fact would not deter the Court from itself determining a fair value/price of the share. The Chartered Accountant appointed by respondents 1 and 2 had valued the shares of Shan Hospital at Rs,22.06 and Rs,29.58 without and with goodwill respectively. Even if, Mr. Muhammad Ali Saeed, had not stated that the appellants were willing to purchase the share-holdings of respondents 1 and 2 at Rs,29.58 per share, we would have directed respondents 1 and "4. Holding to the appellants and respondents 4 to represented the highest price/value determined or fix.
Accountant appointed by respondents 1 and 2 for this p. Contention of Mr. A.I. Chundrigar that respondents 1 and purchase the share-holdings of the appellants and respondents 4 . Per share, we can only say that such a course was not open to the 1 and 2 inasmuch as no bidding could be made by any party in Court, for fixing the value/price of the share of Shan Hospital and further that the price bid on behalf of respondents 1 and 2 was without any basis, foundation or mode for valuing the share of a joint stock company and further that respondents 1 and 2 having agreed and consented to a procedure for determining/fixation of the value of the share of Shan Hospital by appointment of two Chartered Accountants could not avoid or wriggle out of the consent given by them. The two Chartered Accountants had determined the price/value of the share of Shan Hospital in accordance with the consent of the parties and in spite of differences in the value/prices fixed by the two Chartered Accountants their findings could not be said to be unfair, unjust and improper so as to discard or ignore them. We may refer to the case of Muhammad Aslam v. Board of Revenue and others, PLD 1980 SC 45 wherein the Supreme Court refused to grant leave to appeal against the judgment of a Division Bench of High Court refusing to proceed with an appeal against the order of a Single Judge passed with consent of the parties. It will be appropriate to reproduce the relevant portion from the judgment as under:--- "But there would be nothing wrong with the order of the learned Judges of the Division Bench refusing to proceed with an appeal against the order of a Single Judge passed with consent of the parties, if the order is otherwise fair, just and proper. Another reason is that when a consent order is passed the parties have indeed nothing to appeal against."
' Upon the above discussions, we are satisfied that the appellants have succeeded in making out a case for a direction for sale/transfer of the shares held by respondents 1 and 2 in favour of the appellants/ respondents 4 to 9 at the rate of Rs,29.58 per share. Accordingly, we allow this appeal, set aside the impugned order and direct respondents 1 and 2 to dispose of/sell their share- holdings to the appellants/respondents 4 to 9 as aforestated.
2000 CLC 376 [Lahore] Before Syed Najam-ul-Hassan Kazmi, J ASHIQ HUSSAIN---Appellant versus NIAZ MUHAMMAD---Respondent First Appeal from Order No,23 of 1991, heard on 29th September, 1999.
(a) Cantonments Rent Restriction Act (XI of'1963)-- ----S. 17(4), proviso---Use of rented premises as hotel, Sarai, lodging houses---Ejectment of tenant from such premises---Service of mandatory notice---Benefit of proviso to S.17(4) of Cantonments Rent Restriction Act, 1963---Scope---Tenant was duty bound to prove that the premises was being used as hotel, at the time of commencement of Cantonments Rent Restriction Act, 1963, or the same was let out for hotel expressly, with the consent in writing of landlord---In absence of any consent in writing, the tenant could not claim any benefit of the proviso to S.17(4), Cantonments Rent Restriction Act, 1963. [p. 379] A
(b) Cantonments Rent Restriction Act (XI of 1963)--- ----S. 17(4)---Ejectment petition---Maintainability---Non-service of two years' prior notice--- Effect---Basic purpose for which the property was let out was relevant as such the subsequent use of the property as hotel was not material---Any subsequent conversion of the use by the tenant without the written consent of the landlord could not justify raising of objection to the maintainability of ejectment petition---Where the tenant failed to establish any existence of such written consent of landlord, the ejectment petition was maintainable. [p. 379] B Lt.-Col. (Retd.)
Muhammad Hassan Safdar v. Malik Shabbir Ahmed and another 1994 CLC 286 and Kamil Khan and another v. Government of Sindh through Deputy Commissioner, Sanghar and 22 others PLD 1998 Kar. 268 ref.
(c) Cantonments Rent Restriction Act (XI of 1963)--- ----S. 17---Ejectment of tenant---Non-issuance of notice to tenant---Effect--Where notice was required, the ejectment petition itself could have been treated as a notice. [p. 380] C -Aziz Begum v. Faiyaz Butt 1991 CLC Nbte 9 at p.6 rel.
2000] Ashiq Hussain v. Niaz Mt.
(Syed Najam-ul-Hassan Kaz.
(d) Cantonments Rent Restriction Act (XI of 196. - ---S. 17---Premature ejectment petition---Effect---Wh ci) was matured during the pendency of the case, the Rent denuded of his power to decide the case on merits. [p. 3801 Abdul Razaq v. Abdul Hamid 1979 SCM R 534 and Raj and 11 others v. Haji Muhammad Zareen and 3 others 1980 SC/qt.
(e) Cantonments Rent Restriction Act (XI of 1963)--- - ---S. 17---Ejectment petition---Moulding of relief---Effect---Rent Controller was competent to mould relief according to the changed circumstances. [p. 380] E Mst. Amina Begum and others v.
Mehar Ghulam Dastgir PLD 1978 SC 220 rel.
(f) Cantonments Rent Restriction Act (XI of 1963)--- ----S. 17---Bona fide personal need of landlord---Proof---Landlord was expected to make statement on oath about the personal need and where such statement was consistent with the pleadings and nothing was extracted from landlord in cross-examination, the same was sufficient to prove bona fide personal need of landlord---Question of personal use had to be considered in context with the protective clause which provided adequate checks against mala fide eviction. [p.
380] F (g)Cantonments Rent Restriction Act (XI of 1963)--- ----S. 17---Bona fide personal need of landlord---Plea of intention to increase rent---Effect---- Where bona fide need was otherwise established on record, plea of intention to increase rent could not adversely affect the case for personal use. [p. 381] G Shamsul Islam Khan v. Pakistan Tourism Development Corporation Ltd. 1985 SCM R 1996 rel. Syed Muhammad Ali Gillani for Appellant.
Pir Muhammad Asif Rafi-ud-Din Shah for Respondent.
Date of hearing: 29th September, 1999.
' This judgment will decide First Appeal from Order No,23 of 1991 which arises from order, dated 15- 4-1991 of the learned Rent Controller, Multan Cantt.
2. Facts out of which this appeal arises are that appellant filed an action under section 17 of Cantonments Rent Restriction Act 1963, for the eviction of respondent from a shop, on the ground of personal use. It was claimed that the shop was purchased vide sale-deed, dated 15-12-1986, on purchase, notice dated 14-5-1987 was served upon the respondent who started making payment of rent and that the shop was required by the appellant for his personal use and occupation.
3. Respondent resisted the petition, claiming that the same was not maintainable as no notice under section 17 of the Cantonment Rent Restriction Act, 1963 was served for seeking eviction from a hotel. It was added that the petition was premature and that the respondent had made certain improvements in the shop and also that the appellant was not in need of shop.
4. Points at which the parties were at variance, were transferred in the following issues:--
(1) Whether the ejectment application is not maintainable in view of preliminary objection No,1?
OPR
(2) Whether the ejectment application is premature? OPR
(3) Whether the respondent has spent Rs,50,000 over the improvement of shop in dispute. If so, its effects?
(4) Whether the shop in dispute is required by the petitioner for his personal use bona fide and in good faith?
(5) Relief.
5. The appellant produced in evidence Sarfraz Khan, A.W.1, Faqir Ahmad A.W.2, Qadir Nawaz A.W.3 and while he himself appeared as A.W.4. In defence, Ali Muhammad, Assistant Revenue Superintendent Cantonment Board appeared as R.W.1, Imtiaz Ali, Tax Clerk R.W.2, Shahzad Anwar R.W.3, Sabir Ali R.W.4 while respondent Niaz Muhammad appeared as R.W.S.
6. The learned Rent Controller, Multan Cantt., vide impugned order, dated 15-4-1991 dismissed the ejectment petition, on the ground that notice under section 17 of the Cantonments Rent Restriction Act, 1963 was not served, and that the appellant failed to prove personal use.
7. Learned counsel for the appellant argued that no notice under proviso to subsection (4) of section 17 was required as the respondent did not prove that the property was rented out for running a hotel. Learned counsel submitted that even if a notice was required, the ejectment petition could be treated as notice and on account of maturity of cause of action, the case should have been decided on merit. It was added that sufficient evidence existed on record to prove bona fide needs.
8. In reply, it was argued by learned counsel for the notice was mandatory, the personal use was not proved and that the not suffer from any error of law.
9. With the assistance of learned counsel for the parties, the entire evidence was examined.
10. The ejectment application was field on the grounds that the shop was required in good faith by the appellant, for his personal 'use. It was his case, that the shop was purchased through a' registered sale-deed, dated 15-12-1986, notice dated 14-5-1987 was served upon the respondent who started making payment of rent and that the appellant intended to carry his own business.
The defence was that the respondent was running a hotel in the shop in issue and, therefore, without service of a notice under proviso to subsection (4) of section 17 of Cantonments Rent Restriction Act, the ejectment petition could" not be maintained.
11. The fir/ question to be attended is as to whether the property was rented out for the purposes of running a hotel. Proviso to section 17(4) contemplates that if the landlord required a building, which was tented out for running Sarai hotel, lodging houses for personal business, he can do so after serving notice of two years upon the tenant. The proviso also provides that if the building was not being used for the above purpose on the commencement of the Act, or was not let out expressly for any such purpose, it shall not be converted to any such purpose except with the consent in writing of the landlord. Precise objection was that the premises was primarily let out for running hotel. To seek benefit of this proviso, the respondent was duty bound to prove that the premises was being used as hotel, at the time of commencement of the Act or that it was let out, for hotel expressly, with the consent in writing of the landlord. In the absence of any consent in writing, the tenant could not claim any benefit of the proviso. In this case, the respondent did not claim or prove that the shop was let out, expressly for hotel purpose, with written consent of the landlord.
Learned counsel for the respondent submitted that the shop was let out by the previous owner. It was not denied that there was no written consent from the previous landlord or from the appellant.
This being so, the plea was based on oral assertion. With a view to have the benefit of the proviso, it was mandatory that the respondent should have produced written permission or document from the previous owner/landlord, or from the appellant, to make out a case that the premises was let out, expressly for hotel purpose. In the absence of any written permission, the respondent cannot possibly be benefited by the proviso nor could object to the maintainability of the ejectment petition on the plea that two years prior notice was not served. The learned Rent Controller, was influenced by the evidence, by which the respondent attempted to establish that he was using the premises as a hotel. This evidence was not helpful, for the reasons, that the subsequent user of the property as hotel was not material and in fact it was the basic purpose for which the property was let out which was relevant. Any subsequent conversion of the user by the tenant without the written consent of the landlord could not justify raising of objection to the maintainability of the ejectment petition. Since the respondent could not prove by any valid document that there was written consent, for the letting out of the shop, for hotel purposes, the plea raised was devoid of merit.
Reference can be made to Lt.-Col (Retd.) Muhammad Hassan Safdar v. Malik Shabbir Ahmed and another 1994 CLC 286 and Kamil Khan and another v. Government of Sindh through Deputy Commissioner, Sanghar and 22 others PLD 1998 Kar. 28 (DB) where similar view was taken. Even if any notice was required, the ejectment petition itself could have been treated as a notice.
Reference can be made to Aziz Begum v. Faiyaz Butt 1991 CLC Note 9 at p.6. This being so, the ejectment having been filed on 6-7-1987, the learned Rent Controller, could have decided the same on merit, on 17-4-1991 as two years having expired after filing of ejectment petition, which being a notice, the ejectment application could be deemed to have been validly instituted. It is a settled rule, that if a premature petition is filed, and the same is matured during the pendency of the case, the Rent Controller is not denuded of its power to decide the case on merit. Reference can be made to Abdul Razaq v. Abdul Hamid 1979 SCM R 534 and Raj Muhammad and 11 others v. Haji Muhammad Zareen and 3 others 1980 SCM R 339. It is also a rule, that the E Rent Controller is competent to mould relief according to the changed circumstances. Reference can also be made to Mst. Amina Begum and others v. Mehar Ghulam Dastgir PLD 1978 SC 220.
12. In this view of the matter, the Rent Controller, by treating the petition as a notice, could have decided the main petition on merit instead of non-suiting the appellant on technicalities.
13. As to the plea of personal use, the appellant was expected to make statement on oath about the personal need, and if the statement was consistent with the pleadings and nothing extracted in cross-examination, the question of personal use had to be considered in context with the protective clause which provides adequate checks against mala fide eviction. In this case, the appellant did appear in the witness-box and deposed that the shop was required in good faith and bona fide manner for the personal use, he was not in occupation of any other shop, he wanted to run the business of 'Tikka Karahi', he was already working with his brother and brother-in-law and that he wanted to have a shop of his own to carry his independent business, as there was some dispute with the brother and brother-in-law. He was cross-examined in detail but the statement could not be shaken. Appellant's statement was also corroborated by the statement of other witness who deposed about his bona fide need. The statemer of A.W.4 was consistent with the averments in the petitioner and the same could not be shaken or rebutted by any evidence worthy of credence. The evidence led by the respondents was mainly for the purpose of showing that the shop was being used as a hotel. It was also claimed that the appellant was running the business with his brother. Mere fact that the appellant was working with his brother would not debar him to have independent business in his own shop. Another plea was that the appellant intended to increase rent although it could not be proved that the intention was to increase rent yet in law plea of intentions to increase rent cannot adversely affect the case for personal use, if the bona fide need is otherwise established on the record. Reference can be made to "Shamsul Islam Khan v.
Pakistan Tourism Development Corporation Ltd. "(1985 SCM R 1996). There being sufficient evidence on the record to prove the bona fide of the appellant, the learned Rent Controller fell in error in ignoring the evidence and rejecting plea of personal use, on flimsy grounds. The order passed by the learned Rent Controller suffers from misreading of the record and perversity of reasoning.
14. For the reasons above, this appeal is allowed, the impugned order is set aside, the ejectment application is granted and an order of ejectment is passed against the respondent, directing him to deliver vacant possession of the shop to the appellant within three months.