1. SHABBIR AHMED, J. ~ I intend to dispose of these petitions by common order, involving similar facts and identical questions of law, which were heard together, It may not be necessary to recapitulate the facts of each particular case as they were similar for the purpose of deciding the controversy between the parties and it might suffice, by way of explaining the factual background to refer to the contents of J.M. No. 1 9 of 2000.
2. The petitioner, a trust known as Shaheen Foundation, created under the Charitable Endowments Act for the welfare and benefit of retired and in-service personnel of Pakistan Air Force, has find these petitions under Sections 290 and 291 of Companies Ordinance. The petitioner is a minority share-holder to the extent of 25% in the paid-up capital of respondent No. 1 with two nominees amongst the Directors of the respondent No. T, Private Ltd. Company and one of the components of the Group of Companies^of Javed Pasha and his local and foreign associates, Javed Pasha, respondent No. 3 is one of the Directors and a shareholder to the extent of 25% in respondent-No. 1.
3. The respondent No. 5 is a foreign associate and owns and possesses about 50% of the shares of respondent No. 1. The respondents Nos. 2 and 5 are Directors nominated by the majority Share- holders. Javed Pasha and his associates/nominees/representatives prepared feasibility report to establish T.V. Channels in Pakistan as well as Radio Stations on FM Bands at Islamabad/Rawalpindi, Karachi and Lahore in private sectors, thereafter detailed presentation of the feasibility of establishment of T.V.. Channels and Radio Stations in private sector was held. On such representations, petition agreed to invest 25% in the equity/paid-up capital of the Group of Companies (i) Messrs Pay T.V. (Pvt.) Ltd.; (ii) Messrs FMS (Pvt.) Ltd.; (iii) Messrs Capital FM (Pvt.) Ltd.;
(iv) Lahore Broadcasting Corporation (Pvt.) Ltd. And/or a purported holding company Messrs FM Hundred (Pvt.) Ltd., which was represented and supposed to own and control the three afore-said companies. The petitioner entered into two separate joined venture agreements, one, dated 16th January, 1996, whereby the petitioner agreed, inter alia, to subscribe 25% of the paid-up capital of Messrs Pay T.V. (Pvt.) (Now called Shaheen Pay T.V. (Pvt.) Ltd.). By second agreement, dated 4th March, 1996, the petitioner agreed, inter alia, to subscribe 25% of the paid-up capital of holding company to own and control three subsidiary companies, namely, FMS (Pvt.) Ltd., Capital FM (Pvt.)
4. Ltd. And Lahore Broadcasting Corporation (Pvt.) Ltd. Three separate licences were obtained to establish three FM Bands Radio Stations in private sector in Islamabad/Rawalpindi, Karachi and Lahore. Later on, it transpired that holding company viz. FM Hundred (Pvt.) Ltd. Was never established or incorporate under any law. However, in consideration of the petitioner's agreement to acquire and own 25% shares in each of the four companies above-named of Javed Pasha, the petitioner allowed its name to be associated with these four companies, on mutually agreed terms as under:-
(a) The petitioner shall acquire and own 25% fully paid-up shares of each of the three companies.
(b) At least two Directors nominated by the petitioner shall be appointed as Directors of each of the three companies.
(c) The Articles of Association of three companies shall be amended to incorporate and include in the Articles some of the operative provisions of the afore-said Joint Venture Agreement, dated 4th March, 1996 relating to the composition and functioning of the Board of Directors of each of three companies for protection of the interest of the interest of the petitioner.
5. Accordingly 25% full paid of each of the said three companies were issued/transferred to the petitioner, two of the nominees were elected Directors of each of the three companies and Articles of Association of one company were amended, whereas, Articles of Association of other two companies were not amended in spite of repeated request. The agreement was duly implemented as under- la) Paid-up capital of the respondent No. 1 was determined at Rs. 10,000,000/- divided into 1,000,000 shares of Rs. 10/- each share.
(b) The petitioner was allotted/transferred 250,000 number of fully paid-up shares of face value of Rs. 10/- each being 25% of the paid-up capital of respondent No. 1, which was duly communicated and registered with respondent No. 6.
(c) The Board of Directors of respondent No. 1 comprising six Directors was constituted with effect from June, 1997 including two Directors namely, AVI\/1 (R) Nafees A. Najmi and Aftab M. Khan, nominees of petitioner. Respondents Nos. 2 and 4 were also elected as Directors, It is the petitioner's case that--
(i) not a single annual general meeting or any meeting of the Board of Directors of respondent No. 1 have ever been held, despite repeated requests and demands made by the petitioner.
(ii) Neither the books of accounts have been prepared or maintained, approved, presented or find with the Authorities as required by law.
(iii) Auditors have not been appointed.
(iv) The respondents have also neither intimated to Registrar regarding change in Board of Directors of respondent occurring on account of resignation tendered by Fazal Kamal, nor this vacancy has been find up.
(v) The respondents have also repeatedly defaulted in filing the annual returns and other returns regularly on time in lawful manner as required by law. Some of the returns were submitted in unlawful manner without Signatures of the duly authorized and competent Chief Executive or Director Consequently, the Registrar has refused to accept some of such Returns, on account of serious discrepancies and objections raised by the Registrar.
(vi) Neither any amount of dividend or profit has been paid to the petitioner nor the respondents ever provided any information or periodical reports about its business, affairs and accounts to the petitioner.
6. The petitioner has reasons to believe and apprehends that respondents may have given rise to some fictitious rights, inflated charges or may have transferred and misappropriated funds of the respondent through over invoicing, under invoicing transfer invoicing, manipulation of accounts and/or through unlawful or unauthorized transactions or, entries in books of accounts with a view to deprive the petitioner or of its investment in the equity as well as lawful share in the profits earned. The business and affairs of respondent No. 1 is not being run in a transparent and lawful manner with mala fide motives with a view to deprive the petitioner of their lawful investment in the equity and share in the profits as well as of the rights of the petitioner to participate in the business and affairs of the respondent and with a view to cause harm and toss to the petitioner. The respondents are consistently failing and/or refusing to disclose, the accounts and business and affairs of respondent No. 1 and they are violating the provisions of the Articles of Association of respondent as well as the applicable laws including Sections 156, 158, 196, 205, 230, 233, 234, 36, 241, 242, 252 etc. Of the Companies Ordinance. Thus are acting in an unlawful, fraudulent and oppressive manner against the interest of the petitioner and being minority share-holder, In the interest of justice as well as for prevention of oppression, mismanagement and for regulating conduct of the business and affairs of respondent in a lawful just and fair manner, the respondents be divested . Of the shares. Directorships, Administration, Management and Control on the following grounds:-
(A) The conduct of the business affairs of the company in an unlawful, fraudulent mala fide manner, which is oppressive to the petitioner.
(B) Neither books of accounts have been made nor the accounts have been audited, approved or filled with authorities nor the Annual General Meetings have been held as. Required by law. Meeting has been held in past several years as required under Section 233 of the Companies Ordinance.
(C) The respondents have repeatedly committed and continuing to commit act and omissions in violation of Articles of Association.
7. The following reliefs have been claimed through the petition:-
(a) Call for the record and documents relating to the respondent No. 1 from the respondent No. 6.
8. 4 I
(b) Declare that business and affairs of the respondent No. 1 are being conducted by the respondents Nos. 2 to 5 and their nominees in an unlawful, fraudulent and oppressive manner, prejudicial to the rights and interest of the petitioner being a minority share-holder of the respondent No. 1.
(c) Grant an order divesting the respondents Nos. 2 to 5 from the Directorship, Management and Control of the respondent No. 1 and direct them to transfer and hand over the same to the petitioner and/or its nominees.
(d) Direct the respondents Nos. 3 and 5 to sell and transfer the shares of the respondent No. 1 to the petitioner on the basis of true and correct break-up value of the shares of the respondent No. 1, that may be determined by an independent Chartered Accountants and Auditor's after conducting through investigations into the record and books of accounts of the respondent No. 1.
(e) Grant cost to the petitioner; and
(f) Grant such other relieves as. This Hon'ble Court may deem fit and proper in the interest of justice.
9. The petitioner have been resisted by the respondents through counter-affidavit, wherein the objections on legal as well as factual plane were taken, the preliminary objections are as follows:-
(1) The petition by Shaheen Foundation, a Trust, registered under the Heritable Endowments Act, is not maintainable, it can only sue in the name of treasurer or in the name of trustee or not in the name of foundation itself. The Shaheen Foundation is not a juristic person and cannot sue in its name as trust.
(2) . The petitioner did not actually make any contribution to the extent of 25 per cent in the share- holding of respondent No. 1, thus do not quantify to lodge or maintain the petitions under Section 290 of the Companies Ordinance.
(3) On factual plain, they maintained that the TV and Radio Channels proposed to be set up constitute media service and media professionals, obtained transmission and broadcasting licences on their own. Thereafter the petitioner showed interest in joining the business and was admitted in 1996, when transfer deed for 25000 shares was given to the petitioner, when the prospects were very good. The feasibility was correctly made as according to the conditions prevailing the feasibility was duly verified and scrutinized by the petitioner. Thereafter, the petitioner paid Rs. 1,00,000/- only part payment in January, 1997. They have denied that petitioner was allured to join all of the companies. They have admitted the execution of joint venture agreements whereby the petitioner agreed to subscribe to 25% equity in Pay TV (Pvt.) Limited, which subscription was not made yet 25% shares were transferred. The company was then renamed as Shaheen Pay TV Limited. It was maintained that the Foundation owes Rs. 92 lacs to Pay TV, hence it shares to this extent shall be deemed to be under legal lien.
10. They also maintained that Foundation has Snot acquired legal title in 25% shares of SPTV.
11. Respondent No. 1 was pre pressurized by the Foundation, whereupon under pressure and forcibly 25% shares were transferred to the Foundation in the other three Companies, including respondent No. 1 without any consideration in July, 1996. In January, 1997, the Foundation did pay a nominal amount of Rs. 1,00,000/- each, which is actually contribution for 10,000 shares in each company only but shares valued 75 lacs have been transferred for Rs. 3 lacs only. However, no title has been acquired by the Foundation to that extent. The licence was obtained by the sponsors of respondent No. 1, well before the joining of the petitioner in Pay TV Limited, which remains the property of the licensee. They have denied that Javed Pasha made inaccurate representation to the Foundation.
12. The agreement is not a formalized arrangement and conditions mentioned in subparagraphs a, b and c have no legal sanctity. The petitioner was to acquire 25% shares in three companies for consideration but paid only Rs. 3 lacs and obtained transfer of shares worth Rs. 75 lacs. They maintained that Annual General Meetings and Board Meetings of Shaheen Pay TV Limited and respondent-company's meetings were held simultaneously as agreed and last meeting was held in London in the year 1999. The mutition for 2000 w-as requisitioned which could not be The learned counsel for the petitioner contended in support of the grievance that not a single General Body Meeting or Board of Directors have been held, the Registrar in his comments has stated that Annual! General Body Meetings were held on 30.6.1996, 30.9.T997 and 30.12.1998. The respondents have taken the plea that Annual Genera! Body Meeting and Board of Directors meeting were held periodically and regularly. Last meeting was held in London, the meeting for 2000 year requisitioned, could not be heid, due to non-availability of Directors of the Foundation, and to support their plea, they have produced the petitioners' letter, dated 17.8.2000, whereby the petitioner has intimated to the respondents, about non-availability of the Directors of Foundation till 3rd week of September, 2000 owing to exigency of work. The petition was find much before the date mentioned in the Annexure R/I.
13. The learned counsel for the respondents contended that the respondents have taken a clear and unambiguous plea that Annual General Meetings are being held regularly and the last meeting was held in London pertaining to the year 1999 and the Annual General Meeting cannot be held due to non-availability of the petitioners' Director as reflected through Annexure R/3. It was further contended that the plea of the respondents to the extent of previous meeting up to the year 1998 is admitted by the Registrar of Companies in their comments: and the petitioners have not denied the fact stated in para 13 of the counter-affidavit in clear terms. This amounts to admission in terms of Order 8, Rule 5 and referred the Division Bench judgment of this Court in Malik Muhammad Ishaque (Represented by 9 Heirs) and 11 others v. Messrs Erose Theatre, Karachi and 26 others (PLD 1973 Karachi 52), wherein the effect of Rule 5 of Order 8 was examined and the view taken as follows:- "The effect of this rule is that every allegation of fact in a plaint if not denied 'shall be taken to be admitted except as against a person under disability'. Not only does the proviso to the rule confer discretion on the Court, but the rule itself shows that it is not applicable to minors."
14. Mr. Muhammad Afzal Siddiqui, learned counsel for the respondents also referred the following cases:-
(1) Ganga Prasad v. Prem Kumar Kohli (AIR 1949 Allahabad 173), (.2) Sardar Begum v. Muhammad Aslam (1989 SCMR 704).
15. The Registrar of Companies in his comments has admitted holding of Annual General Meetings for the years 1996, 199 7 and 1998. The respondents pleaded holding of 1999 meeting in London and there is no bar of holding such meeting at any other place than in town of the registered office, the respondents being a private company though in respect of the listed company (public limited company), the Annual General Meeting has to be held ;n the town of registered office in terms of Section 158(2/ of the Ordinance. The company would be deemed to be under mismanagement if fail to convene consecutive two General Meetings in terms of clause (b) of Section 305.
16. In the present case, the factum of holding of Annual General Meeting up to the year 1998 has not beer, specifically denied, such meeting has been confirmed by the Reg;strar's comments. The respondents have pleaded holding of meeting in London in 1999. The meeting pertaining to the year 2000 could not be held, due to non-availability of the petitioner's Directors and +he petitions were find before the expiry of time for holding such meeting, as such this ground is not available to the petitioners.
17. The petitioner's counsel in support of the petition has canvassed before me that books of accounts were never prepared/audited even the auditors have not been appointed since 1996.
18. The respondents' counsel contended that in para 17 of the counter-affidavit, the respondents have pleaded that statements of income and expenses of the companies were prepared for the years 1996, 1997. 1998 and 1999 and audited by auditors. They have also find Annexures R/20 to R/23, the auditors' report to the members, by Rao & Company, Chartered Accountants, (1) ending June, 1996 (R/23), (20 auditors' report ending 30.6.1997 (R/22), and (3) auditors' report ending 30.6.1998 (R/21).
19. The Registrar in his comments .(para 13) has admitted that Messrs Rao & Company, Chartered Accountants have been shown as auditor of the company. The petitioner's case is that the amounts have not been maintained nor audited even auditors have not been appointed. This plea is not even supported by the report of the Registrar. Registrar has reported that under the law private limited company is not required to file annual accounts with the Registrar. The Annexures R/2Q to R/23 are the auditors' report of Messrs Rao & Company. There is nothing on record from the side of the petitioner except the oral assertion which has been rebutted by the respondents by filing copies of auditors' report. The contention of the petitioner is not supported by the comments of the Registrar even otherwise, such fact becomes disputed one and cannot be gone into by the Company Judge as these questions require detailed inquiry. Reference can be made to the following cases:-
(1) Khurshid Ahmed Khan v. Pak. Cycle Manufacturing Ltd. (PLD 1987 Lahore 1), (2' Habib Bank Ltd. v. Messrs Golden Plastic Company Ltd. (1991 MLD 124) and
(3) Salahuddin Khan v. Al-Mansoor (PLD 1987 Lahore 569).
20. This brings me to the last allegation regarding non-payment of the dividend. The petitioner's counsel contended that till date no dividend has been paid to the petitioner, In reply to such contention, the respondents' counsel contended that the payments have been made to the Foundation, which has been received by Foundation, in this regard reference has been made to Annexure R/5, whereby the mode of payment to Shaheen Foundation was inquired from the petitioner and in reply, the Foundation through its letter, dated 31.8.1999 asked respondents'
21. Manager Finance for monthly payment to Shaheen Foundation through Messrs Hawk ,, Advertising Consultants, by invoice for subject payment. The contents of letter reads as follows:- SF(PAF)0757/48/Accts Mr, Ahmed Mateen Manager Finance v-x FMS (Pvt.) Limited Plot No. 43-t/E3 Block 6 PECHS Karachi-75400 Fax 021-4546851 MONTHLY PAYMENT TO SHAHEEN FOUNDATION
(1) Further to our letter even reference, dated 18th August, 1999 regarding the subject.
(2) It is informed that Messrs Hawk Advertising and Consultants will invoice FM 100 for the subject payment agreement in the Board of Directors' meeting, 'he invoice will be on A/C of Consultancy Services on advertising for each month.
(3) It is requested that prompt clearance of invoices may please be ensured.
22. With regards For Shehaen Foundation, PAF (Sd.)
23. (Jamil Qureshi), Wing Commander (Retd.), Deputy Director Accounts.
24. Through Annexures R/7 to R/18 such payments were made to the petitioner.
25. The counsel for the petitioner contended that no doubt Messrs Hawk Advertising is subsidiary of the petitioner but the payment to Messrs Hawk Advertising was not in respect of the dividend to petitioner but it were in respect of the advertising charges.
26. The letter, dated 31.8.1999 (R/6) of the petitioner conveying the mode of payment to Foundation by the respondents is unambiguous. The plea taken by the petitioner's counsel is not tenable as it pertains to monthly payment to Shaheen Foundation as agreed in Board of Directors' meeting. The petitioners themselves have suggested mode of payment, they cannot take contrary plea to the contents of the Annexure R/6 by pleading that it pertains to advertising charges.
27. In Mohan La! Chandumall and others v. Punjab Company Ltd. Bhatinda and others (AIR 1961 Punjab 485) non-payment of dividend amount to oppression. However, oppression has not been defined and it is left to the Court to decide on the fact of each case whether there is such oppression as calls for action under ^his Section 290. The question in each case is whether the conduct of the affairs of a company by the majority Share-holders was oppressive to the minority Share-holders and that depends upon the facts proved in a particular case, It is not enough to show that there is just and equitable cause for order under Section 290. Mere loss of confidence between groups of Share-holders would not come within the mischief of 290 unless it is shown that this lack of confidence sprang from a desire to oppress the minority in the management of the company's affairs and that there was at least an element or lack of probity and fair dealing to a member in the matter of his proprietary right as a share-holder as ruled in Shanti Prasad Jain v. Kalinga Tubes Ltd. Etc. (AIR 1965 SC 1535). - Lastly, the respondents' counsel further contended that respondent No. 5, a Director holds 50% share in the respondents' company is registered/resident of outside the jurisdiction of this Court, thus this Court has no jurisdiction over said Director and referred the case of Dishadendu Gupta v.
28. H. Langham Reed and others (AIR 1937 Patna 196), wherein some of the Directors of the company were residing in England and one residing in British India but in different province during the pendency of application under Section 235 of Companies Act, 1913. It was held that Court has no jurisdiction over the persons residing in England but had jurisdiction over the person residing in British India though in different province regarding matter connected with the company and its asset. Therefore, I am of the view that the petition is maintainable against the Directors, who are residing in Pakistan.
29. It may be stated that Registrar in para 14 of the comments has stated that some of the returns find by the respondents were not properly filled and were not accepted, deficiencies were not removed, I am of the view that this vague statement could hardly be sufficient material to form an opinion that the affairs of the company are being mismanaged.
30. In the light of above discussions, I am of the view that petitioner has failed to bring on record the material to form an opinion by this Court that the affairs of the respondent No. 1 are being mismanaged and/or is oppression to the minority shareholders, consequently, the petitions are dismissed, however, with no order as to costs.