On 3-1-1975 the defendant who are a public limited company having their registered office at Lahore were conveyed the Consent of the Controller of Capital Issues, Government of Pakistan to issue 11,71,800 fully paid right shares of the denomination of Rs,10 subject to the following conditions laid down in the Consent Order:---
(a) 'Right Shares' shall be offered to all the existing shareholders strictly in proportion to the paid- up value of the shares held by them.
(b) If any shares are not taken up by the existing shareholders under (a), these shares shall be offered at par to the National Investment Trust Ltd. For subscription; and
(c) If National Investment Trust Ltd. Does not subscribe a part or whole of the shares so offered, the Board of Directors may allot them in any manner they deem fit."
2. After allotment of such shares to the existing shareholders, 130,520 shares remain unsubscribed and in accordance with the requirements of the Consent Order the defendant vide letter, dated 9- 10-1975 addressed the plaintiffs as follows:--- "According to the provisions of the consent Order No,R-123-CCI (111)/74, dated 3-1-1975 of the Controller of Capital Issues, Government of Controller of Capital Issues, Government of Pakistan, Islamabad, we hereby offer 130,520 shares of Rs,10 each to you for subscription at par.
' If you wish to take up these shares, please favour us with a Demand Draft for Rs,13,05,200 (Rupees thirteen lacs, five thousand two hundred only) in the name of Lawrencepur Woollen and Textile Mills Limited, at your earliest convenience."
3. In response to the aforesaid letter the plaintiff vide their letter, dated 27-12-1975 informed the defendant that it had been decided to take up the 130,520 unsubscribed shares and requested them to send an allotment letter for the same. The defendant responded vide letter, dated 1-1-1976 to the following effect:--- "We are happy to note that you have consented to subscribe against the unsubscribed Right Shares mounting to Rs,13,05,200. Since the offer made by us has been accepted by you, no formal Provisional Allotment Letter is necessary in this particular case.
' We should be grateful if you let us have a Bank Draft amounting to Rs,13,05,200 duly made out in the name of Lawrencepur Woollen and Textile Mills Limited, Civic Centre, Islamabad', so as to enable us to send you one Share Certificate for 130,520 shares in the name of National Investment Trust Limited immediately. The aforesaid share certificate shall be split up into marketable lots as and when desired."
4. Consequently a demand draft in the amount of Rs,1,305,200, dated 14-1-1976 was dispatched to the defendant which was cashed. However, apparently in response to a letter from the plaintiffs, dated 4-2-1976 the defendant informed the plaintiff vide letter, dated 18-2-1976 that the validity of the consent order expired on 2-1-1976 and thereafter they were not legally authorised to issue any securities.
Therefore, the amount received was being returned through a draft. However, it appears that the Controller of Capital Issues extended the validity of the consent order and thereupon the plaintiff insisted that shares be issued and returned the draft dispatched to them which was retained by the defendant.
5. The above facts are not disputed by either of the parties. However, disputes arose with the plaintiffs' insistence that the defendants were liable to issue the shares in question and the defendants contending that no such liability existed after the plaintiffs' failure to disburse the price of the shares within the period of validity of the first consent Order i,e, till 2-1-1976. A great deal of correspondence was exchanged with both parties sticking to their respective points of view and eventually the present suit was filed on 28-12-1978, praying for the following reliefs: -- 'The plaintiffs pray for a judgment and decree as under:---
(a) For a declaration that the plaintiffs are shareholders of 130,530 right shares of the defendant Company with effect from 27-12-1975 or 1-1-1976 and that the names of the plaintiffs be shown as such shareholders from the said date in the register of shareholders maintained by the defendant Company;
(b) The defendant Company do pay sum of Rs,522,080 towards unpaid dividends and 26-104 bonus shares declared for the year ended 31st July, 1977 and Rs,146,182 towards interest on unpaid dividends at 14% per annum from the date the dividends were payable till the filing of the suit;
(c) The defendant Company further pray an interest at 14% per annum on the amount decreed from the date of the filing of the suit till recovery;
(d) Costs of the suit, and
(e) Such other further/additional relief(s) as this Honourable Court may deem fit and proper in the circumstances of this case."
6. The defendants filed written statement largely premised upon the legal contentions, questioning, inter alia, the maintainability of the suit, the territorial jurisdiction of this Court, existence of a completed contract, the liability to issue shares after the expiry of the Consent Order and the mode of relief sought by the plaintiffs. The following issues were settled: "(1) Whether this Honourable Court has no jurisdiction to try this suit and the plaint is liable to be returned for presentation to the Court having jurisdiction:
(2) Whether the suit is barred by limitation?
(3) Whether Pakistan is a necessary and proper party and suit is bad for non-joinder thereof?
(4) Whether the suit has been improperly valued and improper court-fee has been paid? If so, whether the plaint is liable to be returned/rejected?
(5) Whether the plaint has not been properly signed and verified?
(6) Whether the plaintiff No,2 has been improperly joined? If so, what is the effect?
(7) Whether there was no concluded contact between the parties as alleged in para.12 of the W.S.?
(8) Whether the Controller of Capital Issues was not competent to extend the validity of the Consent Order?
(9) Whether the plaintiff is not entitled to the relief claimed?
(10) What should the decree be?"
7. Relevant documents were placed on record by witnesses deposing on behalf of the parties and elaborate arguments addressed by Mr. Nadeem Akhtar, Advocate for the plaintiff and Mr. Fazle Ghani Khan, Advocate for the defendants. Upon consideration of the same I proceed to record my issue wise findings as follows:-- ' Issue No,1
8. Mr. Fazle Ghani Khan, learned counsel for the defendants at the outset questioned the territorial jurisdiction of this Court. He argued that admittedly the registered office of the defendant was located in Lahore and there was no evidence to the effect that it had any branch office at Karachi, therefore, according to him the suit would have only be filed at Lahore. In view of the requirements of section 20, C.P.C. Read with Explanation II thereof, which may be reproduced as under:-- "20. .......................................................
(a) the defendant, or each of the defendants where there are more than one, at the time of the commencement of the suit, actually and voluntarily resides, or carries on business, or personally works for gain; or
(b) any of the defendants, where there are more than one, at the time of the commencement of the suit, actually and voluntarily resides, or carries on business, or personally works for gain, provided that in such case either the leave of the Court is given, or the defendants who do not reside, or carry on business, or personally work for gain, as aforesaid, acquiesce in such institution; or
(c) the cause of action, wholly or in part, arises. Explanation.
' Explanation II.---A corporation shall be deemed to carry on business at its sole or principal office in Pakistan or, in respect of any cause of action arising at any place where it has also a subordinate office, at such place."
9. Learned counsel placed reliance upon a judgment of erstwhile High Court of Sindh and Baluchistan in Registered Firm Sheikhan v. W.P. Industrial Development Corporation (PLD 1976 Quetta 94) which indeed supports his point of view. With profound respects to the learned counsel and the audible author of the aforesaid judgment it may be pointed out that the view taken therein was not only dissented from, inter alia, in Gharibwal Cement Ltd. v. Universal Traders, Gakhar Mandi (PLD 1977 Lahore 481), but subsequently overruled by the Honourable Supreme Court in Brady & Co.
(Pakistan Limited) v. Sayed Saigol Industries Limited (1981 SCMR 494). In the last mentioned case it was clearly laid down by the Honourable Supreme Court that Explanation II in the abovementioned statutory provision was only relatable to clauses (a) and (b) and not (c), and a suit could be filed within the territorial jurisdiction of a Court where the cause of action or any part thereof arose irrespective of the question whether the defendant Corporation had its principal or subordinate office within such jurisdiction. I am, therefore, constrained to repel this contention. Alternatively Mr. Fazle Ghani Khan contended that no part of the cause of action had accrued within the territorial jurisdiction of this Court inasmuch as, even if the existence of a duly completed contract be assumed, the cause of action could arise only where the contract was made or where it was alleged to have been breached. According to the learned counsel the contract could only be assumed to be made in Lahore, where the plaintiffs offer to purchase share was alleged to have accepted by the defendants and similarly there could be no question of any breach of contract having taken place at Karachi. Learned counsel is correct to the extent that a contract is considered to have come into existence upon acceptance of proposal. The question of territorial jurisdiction, however, can only be decided on the basis of the case made out by the plaintiff and not the defence set up by the defendant. Mr. Nadeem Akhtar, learned counsel for the plaintiff argued that according to the plaintiff the defendants had made the offer vide their letter, dated 9- 10-1975 (wherein the expression "offer" has been specifically used) and a valid contract came into being upon the plaintiffs' acceptance vide letter, dated 27-12-1975. Moreover, the expression "cause of action" has been held to mean the totality of fact which if proved entitles the plaintiff to relief.
Evidently the plaintiffs were required to prove that they had accepted or undertaken to purchase the shares offered by the defendant and this happened at Karachi. I am, therefore, clearly of the view that at least a part of the cause of action accrued at Karachi.
10. Finally Mr. Fazle Ghani Khan argued that the matter related to issuance of shares of an incorporated company and could be adjudicated only by the Court having jurisdiction under the Companies Ordinance, 1984. Learned counsel referred to the definition of the expression 'Court' contained in section 2(ii) of the Ordinance and the provision of section 7 which stipulate that the Court having jurisdiction under this Ordinance, shall be the High Court having jurisdiction where the registered office of the Company is situate. It is indeed correct that the powers conferred upon "the Court" under the Companies Ordinance can only be exercised by the High Court where the company's registered office is located. However, learned counsel was unable to point out any provisions of the Ordinance or any other law whereby a dispute relating to performance of contract of sale of shares of an incorporated company could only be decided by the Company Court. I am, therefore, quite clear in my mind that the present dispute could only be adjudicated by an ordinary Civil Court of general jurisdiction and there is no force in this contention either. This issue, therefore, must be answered in negative.
' Issues Nos.2 to 6.
11. Issues Nos.2 to 5 were dropped by the learned counsel for the defendant and with respect to Issue No,6 counsel for the plaintiff conceded that he would be satisfied if suit is decreed in favour of the plaintiff No,1 alone as such no finding on these issues is necessary. Issue No,7.
12. Mr. Fazle Ghani Khan, learned counsel( for the defendants in the first place attempt to reiterate the plea taken in the written statement that the defendants' first letter, dated 9-10-1975 (Exh.4/3) was not an offer but only in the nature of a pre-contract inquiry. I fail to see how this contention can be sustained in the face of the admitted position that under the Consent Order the unsubscribed shares were first required to be offered to the plaintiff at a specified price, the letter in question mentioned the exact number of shares available for subscription and not only in the sale letter but also in a subsequent letter, dated 1-1-1976 (Exh.4/5) the defendants themselves used the expression "offer". Alternatively, learned counsel argued that it was only a conditional offer, which could not be accepted without payment of consideration in the form of Demand Draft and by the very nature of things, was valid only till the expiry of the Consent Order i,e, 2-1-1976. He contended that the fact that the consent of the Controller of Capital Issues was to expire on the rates mentioned above was known to the plaintiff and this fact has not been disputed. Therefore, according to the learned counsel the Demand Draft having not been dispatched within the given time the offer expired on 2-1-1976 and subsequent dispatch of such draft was inconsequential.
Explaining the contents of the letter, dated 1-1-1976 (Exh.4/5), learned counsel stated that it only indicted that the condition of the offer had not been fulfilled by the plaintiffs. Relying upon the Fifoot on Contracts (1976 Edition, page 55), it was contended that if an offer is valid for acceptance on or up to a particular date, later acceptance would be ineffective.
13. Mr. Nadeem Akhtar, learned counsel for the plaintiffs, on the other hand, contended that the defendants "letter', dated 9-10-1975 (Exh.4/3) contained of the ingredients of a complete offer and its acceptance by the plaintiff vide their letter, dated 27-12-1975 (Exh.4/4) created a binding contract between the parties. He argued that immediate payment of the sale price was not an essential condition of the offer and nothing to the said effect could be spelt out either from the defendants' letter, dated 9-10-1975 or their response to the plaintiffs communication of acceptance, dated 1-1-1976.
' Learned counsel further relied upon a Division Bench judgment of the Lahore High Court in Commissioner of Income Tax, North Zone v. Crescent Textile Mills Limited (PLD 1973 Lahore 387) and contented that a contract for sale of shares was in the nature of a contract for sale of goods to which sections 5 and 20 of the Sale of Goods Act were fully attracted. In the aforesaid case in somewhat different context i,e, application of section 15-B of the Income Tax Act, the Court had the occasion to examine the nature of a contract for sale of shares and recorded the following conclusions:--
(i) Under section 2(7) of the Sale of Goods Act shares were included in the definition of goods and the provision of the Act would apply to contract for sale of shares.
(ii) In view of section 5 of the Act a contract of sale is made by an offer to buy or sell goods for a price and the acceptance of such offer.
(iii) Under section 20 where there was an unconditional contract for the sale of specific goods in deliverable state the property in the goods possessed to the buyer when the contract is made and it is immaterial the time for payment of the price or the time for delivery of goods or both is postponed.
(iv) Share certificates was nothing more than documentary evidence of sale of shares and there was no requirement of law making transfer of shares or the property therein subject to issuance of such certificates.
14. I regret I find no force in either of the contentions of learned counsel for the defendants. In the first place by their letter, dated 9-10-1975 the defendants expressly stated 'we hereby offer 130,520 shares of Rs,10 each to you for subscription at par. "After having received the plaintiffs' communication, dated 27-12-1975 (unaccompanied by a demand draft), they responded vide their letter dated 1-1-1976 stating since the offer made by us has been accepted by you no formal provisional letter is necessary in this particular case". Secondly it is evident that if the defendants were of the view that the plaintiffs letter of acceptance was not responsive to the offer they could have conveniently apprised the plaintiff of the same. Not only, did they fail to do so but went on to express their happiness over the plaintiffs' acceptance and assured the plaintiff to be treated as shareholder by stating that no provisional allotment letter was necessary. Therefore, even if the plaintiffs' letter, dated 27-12-1975 is considered not to be responsible to the offer and is merely treated as counter-offer 'as Mr. Fazle Ghani would like the Court to believe' such `counter-offer' was also clearly accepted vide letter, dated 1-1-1976. The fact that the defendants subsequently accepted the sale consideration and attempted to refund the same more than one month's letter only shows that such plea was an afterthought.
15. Finally Mr. Nadeem Akhtar appears quite right in asserting on the basis of the Division Bench in Crescent Textile Mill's case (PLD 1973 Lahore 387) that even property in shares had passed on to the plaintiffs and I see no reason to take a contrary view. Therefore, from whatever angle the matter is looked at the conclusion is inescapable. That a valid binding contract had come into existence.
' Issue No,8.
16. In view of my finding the effect that the contract had been concluded and the property in the shares had passed on to the plaintiff during the subsistence of the initial consent order the Controller of Capital Issues i,e, up to 2-1-1976. This issue has become inconsequential. It may, however, be observed that the only possible defence which could have been available to the defendant and which had in fact been raised in their several letters (Exh.4/15 etc.) was that after making a contract it becomes impossible for the defendant to perform the same in view of a legal bar imposed by the Capital Issue (Continuance of Control) Act, 1947, whereby sale price could not be accepted after the consent had expired. However, even we assume that the issue of capital could only be made upon receipt of consideration and the bar accrued by section 3(2) of the Act became applicable, section 6(2) confers ample powers upon the Government to condone violation of section 3 and therefore, the moment consent was extended with retrospective effect the defendant could not even plead the existence of such legal bar.
' Issue No,9.
17. It may now be pertinent to consider the question of relief. Mr. Nadeem Akhtar contended that having made a contract having received and accepted the entire sale consideration and having used the money for 20 years the plaintiff were entitled to a decree in terms prayed for i,e, a declaration that they are holders of 130,520 right shares in the defendant Company and all consequential benefits i,e, the amount of dividend declared in 1976 and 1977, 26104 bonus shares declared for the year ending 31st July, 1977 and the interest on amounts payable till recovery Mr. Fazle Ghani Khan, learned counsel for the defendants, however, argued that even if it was found that a concluded contract between the parties had taken effect the reliefs prayed for could not be granted, inter alia, for the following reasons:--
(i) That the subject-matter of the suit did not pertain to legal character or right in property and a declaratory decree in terms of section 42 of the Specific Relief Act could not be granted.
(ii) That assuming the existence of a contract the plaintiff, not having paid the sale consideration on the relevant date and not having been allocated shares certificates could not claim a declaration as to status of being a shareholder and could, subject to availability of such remedy under the law, at best seek specific performance of contract of sale.
(iii) That the alleged contract not being one for sale of immovable property and monetary compensation being possible the alleged contract could not be specifically enforced.
(iv) That in any event specific performance could only be ordered in the discretion of the Court and the plaintiff having caused inordinate delay in responding to the defendants' letter, dated 9-10- 1975 and having responded only on 27-12-1975 i,e, barley six days before the expiry of the consent Order and that too without sending a draft for payment disentitled the plaintiff to such remedy.
(v) That according to settled principles of Company Law allotment of shares was the prerogative of the directions of the Company and intervention by Court was not called for unless illegality or mala fides were established.
(vi) That grant of the reliefs claimed and treatment of the plaintiff as shareholder retrospectively from a date more than twenty years ago would be impractical, upset closed transactions and affect the interests of several shareholders who are not arrayed before the Court.
17-A. In support of his first contention Mr. Fazle Ghani Khan relied upon the well-known judgment of his Court in Alvi Sons' case (PLD 1968 Karachi 222) and contended that the question of being shareholders of a company was not a matter of legal character in terms this expression was construed by Noorul Arfin, J. In the foresaid judgment. I do not think that there can be any serious cavil with this preposition of law. However, I am not inclined to agree that the plaintiffs claim as to ownership of shares cannot be treated as a claim pertaining to right as to property in terms of section 42 of the Specific Relief Act. Learned counsel indeed relied upon a judgment of this Court in Saeed Ahmad Malik v. Naval Estate Officer (1989 CLC 1056) to contend that a mere claim against a particular property does not amount to a right in property in respect whereof a declaratory decree can be obtained. I do not see how this judgment can be of much help to Mr. Fazle Ghani Khan inasmuch as it was held by Syed Abdul Rehman, J. That a claim to property under a revocable licence did not fall within the terms of section 42. As discussed above it has been found that in the instant case, the contract of sale of shares was neither revocable nor in fact revoked, and in any event the property in the shares having been passed on to the plaintiff, it is impossible to see how it could be treated as a mere claim and not right as to specific property.
18. The second, third and fourth contentions of Mr. Fazle Ghani Khan appear to be founded upon the hypothesis that even if a contract for sale of shares had come into being, it was required to be given effect or enforced upon payment of price and allotment of share certificates. I must confess the contention appeared plausible. Nevertheless as explained by their Lordships in Commissioner of Income-tax v. Crescent Textile Mills (PLD 1973 Lahore 387) the sale had been completed and even the property in the goods (shares) had passed on to the buyers i,e, the plaintiffs. They had acquired title to the goods and when the defendant chose to deny their title I see no impediment in granting the declaration prayed for Mr. Fazle Ghani Khan was unable to show that the view taken in the above judgment was wrong or cite a precedent wherein a contrary view had been taken. No question of specific performance-arises in the circumstances and it is idle to refer to the clogs on the power of the Court relating to specific enforcement of contract. Mr. Fazle Ghani Khan, however, argued that issue of capital and allocation of shares was a matter which according to requirements of company law was to be decided by the directors of the company and did not warrant any intervention on the part of the Court in imposition shareholders whom the company was not willing to be associated with. He relied upon a Division Bench judgment of the Bombay High Court in Nanalal Zaver and others v. Bombay Life Assurance Co. (AIR 1949 Bombay 56), wherein it was held that if the issue of capital was made by the Directors in the bona fide exercise of powers under section 105-C, of Companies Act, 1913 (comparable to section 86 of the 1984 Ordinance) Courts intervention was not warranted unless it was shown that the requirement of law was not adhered to or the action was taken in bad faith. I do not see how this principle can be invoked in the present case, where the plaintiff is not questioning the act of Director in fiduciary capacity, but only seeking adjudication of their rights under a valid civil contract.
19. Nevertheless despite holding that the plaintiff are entitled to the declaration prayed for I have given my anxious consideration to the question of consequential relief, particularly in view of the fact that the suit is being decided more than twenty years after the transaction was made. I am not impressed by the plea that equities weigh against the plaintiff. Evidence on record indicates that before signifying their acceptance of the defendants' offer, dated 9-10-1975 the plaintiff were making some bona fide enquiries regarding the financial position of the defendant Company.
Moreover, having confirmed the plaintiffs offer, dated 27-12-1975 vide their letter, dated 1-1-1976, the defendant cannot complain that the response was delayed. The fact that they have utilised the price of the shares for more than twenty years without passing any benefit to the plaintiff cannot be overlooked. Furthermore, the delay in disposal of the suit cannot be attributed entirely to the plaintiff who filed it in 1978 and it is settled law that act of a Court should not be allowed to prejudice a party. However, the only factor persuading me to modify the relief claimed is that financial transactions that have taken place during the last two decades cannot be nullified and those who have received benefits and dividends and acquired rights on the basis of a particular state of shareholdings cannot be required to divest themselves of the same, then they are not even before the Court. Moreover, there is no evidence before the Court as to what benefits the plaintiff could have acquired as shareholders of the defendants during the pendency of the suit. Keeping in view these factors I would decree the suit in the following terms:
(a) The plaintiff are entitled to a declaration that they are owners of 130,520 right shares alongwith 26,104 bonus shares in the defendant Company with effect from the date of this decree. They would be entitled to all rights, benefits and dividends to be declared in the forthcoming financial year.
(b) The defendants will pay an amount calculated on the basis of 15% per annum on Rs,1.305,200 compensation from 15-1-1975 till the date of decree.
(c) The plaintiff will also be entitled to costs of the suit.