MUHAMMAD MOOSA K. LAGHARI, J. -- This suit has been filed by the plaintiffs, M/s. Taurus Securities Limited against the defendants for recovery of a sum of Rs. 48, 209,777/-.
2. The facts giving rise to filing of this suit, in brief, as enumerated in the plaint, are that the plaintiff which is a public limited company and is primarily engaged in the business of providing brokerage service facilities; the defendants were its customers. On the request of the defendants, the plaintiff agreed to sell its shares to them and in this connection three respective Agreements dated 31.12.1995, 1.1.1996 and 1.1.1996 were executed between the parties. In order to secure their obligations, the defendants executed three Promissory Notes of the same dates for a sum of Rs.
55,10,125/-, Rs. 1,76,95,682/- and Rs. 31,65,000/- respectively, in favour of the plaintiffs. The defendants, in order to further secure their obligations towards the plaintiffs, also pledged as security, 41,500 shares, 81,700 shares and 10,000 shares, all of Kohinoor Edible Oils Limited, under the above-aid agreements.
3. It is further averred in the plaint that as a result of repeated requests and issuance of repeated reminders by the plaintiffs, the defendants while admitting their liability towards the plaintiffs, submitted a proposal for restructuring of the amounts due and payable by them, vide their letter dated 11.3.1996 and arranged a partial payment of Rs. 7,81,000/- vide cheque No. 24434107, dated 30.6.1996. However, the said cheque was dishonoured by the defendant's bank. Thereafter, in order to get tax relief of liabilities, the defendants by their letter dated 24.4.1998 requested the plaintiffs to issue an outstanding balance confirmation as on 30.6.1997 thereby admitting their liability towards the plaintiffs. The plaintiff confirmed the outstanding. amounts, as requested, vide their letter dated 28.5.1998.
4. Thereafter the plaintiffs served a legal notice dated 17.6.1999 upon the defendants requiring them to clear their outstanding and having failed to get back the outstanding amount from the defendants, plaintiffs filed the present suit for recovery of a total amount of Rs. 48,208,777/-.
5. After the institution of the suit, summons were issued by the office for service upon the defendants through District Judge, Lahore which were accordingly served upon them as is apparent from the case diary dated 12.10.2000. However, Vakalatnama was filed only on behalf of defendant No. 1. Four weeks' time Was granted to the defendants for filing their written statements. Thereafter case was fixed before the Additional Registrar (O.S) On 12.12.2000, 24.1.2001, 28.2.2001, 16.8.2001 for filing written statements by the defendants but no written statement was filed by any of the defendants. Finally the case was fixed on 28.3.2001 on which date none appeared on behalf of the defendants despite service of summons. Consequently, the defendant No. 1, on whose behalf power has already been filed, was debarred from filing written statement whereas the case was fixed before the Court on 9.4.2001 on which date the matter was ordered to proceed ex-parte against defendants Nos. 2 and 3. On 7.8.2001 affidavit of one Abid Naqvi was filed in ex-parte proof;
6. I have heard Mr. Siddique Mirza, Advocate appearing on behalf of the plaintiffs.
7. Learned counsel has referred to certain documents annexed with the plaint, and exhibited with the affidavit filed in exparte proof, in order to substantiate the claim of the plaintiff. On the basis of evidence adduced, learned counsel submits that.the suit against the defendants be decreed in terms of the prayers made in the prayer clause.
8. Before adverting to the merits of the case, the issue which requires to be determined is, as to whether the suit has been instituted by a competent person. From the pleadings, it is , obvious that the plaintiff is a public limited company and, as evident from the power-of-attorney annexed with the plaint, the same is registered under the Companies Ordinance, 1984. The provisions of filing a suit by or on behalf of a body corporate are contained in Order 29, Rule 1, C.P.C. which reads as follows:- "1. Subscription and verification of pleading. -- In suits by or against a corporation, any pleading may be signed and verified on behalf of the corporation by the secretary or by any director or other principal office of the corporation who is able to depose to the facts of the case."
9. The legal proposition arose before the Honourable Supreme Court and was considered in the case of Muhammad . Siddique, reported in PLD 1966 S.C. 684 and subsequently in the case of Khan Iftikhar Hussain Khan Mamdot, reported in PLD 171 S.C. 550. However, the said point was further dealt with by a Division Bench of this Court in the case of Abdul Rahim and 2 others Vs. Messrs United Bank Ltd. of Pakistan, reported in PLD 1997 Karachi 62.
10. After analysing the relevant case-law in this respect, certain principles were extracted in the said judgment. It will be appropriateto reproduce here the following observations made by the Division Bench of this Court:- "We would reconcile the two decisions of the Supreme Court on another plane. It is settled that the business and affairs of a company are to be conducted strictly in consonance with the articles of association subject to course to the operative laws. The business and affairs of a company include the power, competence and authority to institute legal action (see H.M. Ebrahim Saith v. South India Industries Ltd.,-AIR 1938 Mad. 962). By deduction, the factum of competence and authority to institute legal proceedings would also have to be determined strictly in consonance with the Articles of the Company. Such interpretation would also be in consonance with Muhammad Siddique and Central Bank of India wherein it has been categorically stated that where the competence to institute legal action is challenged reference has to be necessarily envisaged to the articles. Where the articles of the company confer power on a particular person or director to institute legal action and that person or director institutes the suit there can be no additional requirement of a resolution of Board of Directors for the simple reason that such owner is to be exercisable by a real person. However, where the power to institute the suit is conferred upon a artificial person or body e.g. the Board of Directors or a Committee (as in Premier sugar Mills (supra) the requirement to produce and prove the resolution passed by that artificial person or body cannot be disposed with since such a person can only take a decision as a body through a resolution passed in a duly convened meeting and not otherwise. The above principles would also become applicable in the case of delegation or sub-delegation of powers i.e. in case the delegation is a real person (when articles confer - the powers to institute legal action on a real person) all that would be required would be to scrutinize the articles and then the power-of- attorney to see whether it has been properly executed, and confers the power so claimed. There would be no requirement to produce or prove the resolution from the Board of Directors in this regard. If on the other hand, the delegator is an artificial person/body (when the articles confer the power to institute legal action on e.g. the Board of Directors or some Committee) the resolution passed by the artificial person/body i.e. the Board/Committee shall become indispensable.
However, there would be no requirement to produce or prove a separate power-of-attorney. In this backdrop we would venture to reconcile Muhammad Siddique, lftikhar Mamdot and Central Bank of India by presuming that in Muhammad Siddique and Central Bank of India the articles conferred the power to institute or defend legal proceedings to a real person i.e. a director.
Thus the requirement to produce or prove a resolution from the Board of Directors was dispensed with. However, in lftikhar Mamdot the articles conferred the power to institute or defend legal proceedings upon an artificial person/body i.e. the Board of Directors in view whereof the requirement to produce and prove the resolution thereof authorizing institution of the suit was found to be indispensable."
11. A Division Bench of Baluchistan High Court in the case of Friendship Textile Mills (Pvt.) Ltd. and others 'vs. Government of Baluchistan and others, reported in 1998 CLC 1767 observed that there is no cavil with the legal position that a suit (petition) on behalf of the Company, would not be competent, unless the person signing the same, has not been authorized by the Resolution passed by the Company's Board of Directors, in their meeting.
12. The matter came up for examination before the Honourable Supreme Court in the case of China Annang Construction Vs. K.A. Construction Co., reported in 2001 SCMR 1877. Their Lordships of the Supreme Court were pleased to lay down the following rule:- "In this view of the matter, it was primarily the resolution passed by the Executive Committee of CACC in pursuance of which the President of the appellant-company executed power-of-attorney which was relevant to ascertain whether the attorney was duly authorized to institute legal proceedings on behalf of the company and not the power-of-attorney itself in isolation in which if any of the matters mentioned in the resolution was missing, reference to resolution itself was necessary. In our view, if the resolution and the powerof-attorney executed in favour of Mr. He Yi are read together, it is plainly clear that he was authorized by the company to deal with all legal matters involving the corporation which certainly included the institution of the legal proceedings, for the expression legal matters in the resolution would become redundant. An intention had been unambiguously expressed by the resolution of the appellant-company, that the attorney shall have the power to institute legal proceedings, therefore, the appeals were validly filed by Mr. He Yi, attorney who was fully empowered to do so aria the findings of the High Court are not sustainable.
13. On perusal of the documents annexed with the plaint, find that the suit has been instituted by one Abid Naqvi who claims to be the Acting Managing Director of the plaintiff who has verified the pleadings and signed the plaint on the basis of general power-of-attorney purporting to have been executed in his favour by Nader Morshed and Sahibzada M. Arshad. The position of the above-said two gentlemen who executed the power-of-attorney is not ascertainable. Neither the resolution of the Board nor the Mernoranddm and Articles of the Company have been exhibited or produced in order to ascertain as to whether the persons who executed power-of-attorney in favour of the said Abid Naqvi, in fact, possessed the authority to delegate/re-delegate the powers for instituting the suit.
14. The burden to .show that the suit was filed by authorized attorney was upon the plaintiff and the plaintiff has failed to discharge this burden. The ratio as evidently clear from the above-referred judgments appears to be that in case there is any defect in institution of the suit i.e. it has been instituted unauthorisedly and incompetently, the said defect was incurable. The business and affairs of a company include the power, competence and authority to institute legal action. By deduction, the factum of competence and authority to institute legal proceedings would also have to be determined strictly in consonance with the articles of the company. Where the article of the company confer power on a particular person or director to institute legal action and that person or director institutes the suit, there can be no additional requirement of a resolution of the Board of Directors for the simple reason that such power is to be exercisable by a real person. However, where the power to institute the suit is conferred upon an artificial person or body e.g. the Board of Directors or a Committee, the requirement to produce aria prove the resolution passed by that artificial person or body cannot be dispensed with since such a person can only take a decision as a body through a resolution passed in a duly convened meeting and not otherwise.
In order to ascertain as to whether a delegator is a real person, all that would be required would be to scrutinize the articles and then the power-of-attornay to see whether it has been properly executed and confers the powers so claimed. In this suit neither any resolution passed by the Board of Directors for appointment of Attorney has been produced nor a Memorandum and Articles of Company been filed. Resultantly, it is not ascertainable if the initiative to institute the action of law has come from the company or the authority envisaged with the management thereof under the Articles of Association.
15. From the above discussion based on the case-law, referred hereinabove, I have arrived at an irresistible conclusion that the suit has been filed by an incompetent person which is not maintainable and is liable to be dismissed. The suit is dismissed accordingly with no orders as to costs.