' NASEEM SIKANDAR, J.---Part IV of the Companies Ordinance, 1984 deals with "Incorporation of Companies and matters incidental thereto". A portion of the part comprising sections 37 to 41 pertains to the "Provisions with respect to names of Companies". For the purpose of disposal of this Commercial Appeal No,1 of 1990, sections 37 and 38 are only relevant. Section 37 contains prohibition of certain names while section 38 provides for rectification of name of a Company. The interpretation of these provisions is called for in this appeal under section 485 of the Companies Ordinance, 1984.
2. On 24th of September, 1989, the respondent No,2 Rashid Ahmad approached the Registrar Joint Stock Companies, Lahore with an application under section 37 of the Companies Ordinance, 1984, praying "that the name of the Company "Progressive Consultants (Pvt.)", be directed to be removed and the management of the Company be also directed to choose another name, for the same". In the petition, it was, inter alia, averred that he entered into a partnership with Sarfraz Ahmad present appellant No,2 in the year 1971 and constituted a firm in the name and style of Messrs Progressive Consultants, Lahore. It was further alleged that during the existence of the firm, the present appellant No,2 got incorporated the appellant No,1 Messrs Progressive Consultants (Pvt.) Imited with the intention to deprive him of the profits of the firm. It was further stated that the firm Messrs Progressive Consultants was still in the process of winding up through Court when the present appellant No,2 had started writing letters to the clients of the firm holding out that the above Company was successor of the firm and thereby misused the goodwill of the firm.
3. The application was subsequently withdrawn on. 10-1-1990. Thereafter, the respondent No,2 filed the same application before the Corporate Law Authority. On 1-2-1990, Malik Muhammad Iqbal, Deputy Chief (Legal) of the Authority conveyed its refusal to interfere on the ground that the case did not fall under section 37 of the Companies Ordinance, 1984 and that the contentious issues between the parties pertained to section 36 of the Partnership Act, 1932. Accordingly the application was found not maintainable. Being aggrieved with the order, the respondent No,2, approached this Court in Constitutional jurisdiction vide Writ Petition No, 1592 of 1990, which was partly allowed on the statement of the learned counsel for the respondents. The aforesaid order, dated 1-2-1990 passed by the Authority and conveyed through the Deputy Chief (Legal) was set aside and his application was deemed pending before the Authority.
4. On remand, the present appellant No,2 contested the petition opposing the jurisdiction of the Corporate Law Authority to entertain a petition under section 37 of the Companies Ordinance, 1984.
However, the respondent Authority by way of the impugned order, date 26-11-1990 proceeded to allow the same and to hold that the name of the appellant No,1 Messrs Progressive Consultants (Pvt.) Limited was deceptive and that its registration was in contravention of the provisions of section 37(1) of the Ordinance. Rejecting the objection qua jurisdiction, the Authority found that the Registrar had no jurisdiction under section 38 to initiate any action without prior and final determination of the question by the Authority which enjoyed "unlimited and final jurisdiction" to decide the matter. Therefore, finding that the name of the Company was deceptive to the clients of the firm which had not yet been dissolved, the Authority proceeded to hold its registration to be in contravention of the provisions of section 37(1) of the Ordinance. A direction was made to the Registrar to take action against the Company under section 38 of the Companies Ordinance, 1984.
5. It is the case of the appellant that the impugned order, dated 26-11-1990 is without jurisdiction inasmuch as it was recorded by the Chairman alone and not by the Authority comprising of at least two members who had heard the petition; that the name of the appellant No,1 Company having already been registered, the provisions of section 38 and not section 37 as erroneously thought by the Chairman of the Authority were attracted; that after withdrawal of the application before the Registrar, the petitioner before the authority was not competent as was rightly conveyed to the respondent through the letter of Deputy Chief (Legal) dated 2-1-1990; that the withdrawal of the application under section 37 of the Ordinance on 10-1-1990 from the office of the Registrar of Companies created a bar for a fresh petition on the subject before the Authority. It is also stated that after the remand of the matter to the Authority by this Court, the objections of the present appellant qua lack of jurisdiction on its part were decided in a slipshod manner and without adverting to the issues involved; that the impugned order is not a legal order as it is not signed by the Authority which had heard the petition and instead it was only the Chairman who signed the order individually which could not be treated as an order of the Authority. The objection against entertainment of application under section 37 of the Ordinance is stated to be a jurisdictional fact going to the root of the case rendering the impugned order to be a nullity ab initio. The order of the Deputy Chief (Legal) dated 1-2-1990 in refusing to entertain the matter as it did not fall under section 37 of the Ordinance is vigorously supported. It is also claimed that after incorporation of the Company, the respondent No,2 could only approach the authority under section 484 of the Ordinance instead of making direct representation under section 37. The application under section 37, according to the learned counsel for the petitioner, could not be treated a review application inasmuch as in the meanwhile the same had become hopelessly time-barred. Lastly that after registration of the appellant Company a petition under section 37 did not lay at all.
6. The learned counsel for the respondent, on the other hand supports the impugned order and describes the same to be in accordance with the remand order of this Court recorded on 13-5-1990 in Writ Petition No,1592 of 1990. It is claimed that the Authority duly heard the parties and the mere fact that the order was signed by the Chairman only does not render the same to be illegal. For the respondent No,2, it is further claimed that the appellant No,2 having violated the terms of the agreement earlier reached between the parties not to use the goodwill of the firm, equity was also in favour of the respondent No,2. According to the learned counsel, the impugned order of the respondent No,1 Authority being final under sub-clause (4) of section 37 of the Ordinance, this Court cannot show any indulgence against the same.
7. Before proceeding to consider the various contentions put forth at the bar for the parties, it appears appropriate to reproduce the impugned order of learned Chairman, Late Corporate Authority (now succeeded by Securities and Exchange Commission) dated 26-11-1990 in which he dealt with the objections of the present appellant with regard to maintainability of petition before the Authority under section 37 of the Companies Ordinance, 1984 and the effect of withdrawal of earlier application by the respondents before the Registrar. The relevant part of the order of the learned Chairman reads as under:-- "The objections of the respondent were not found tenable. The application has been made to the Authority in its original jurisdiction under section 37 and not under appellate jurisdiction under section 484, therefore, objection at (a) above does not stand. So far as the application of section 37 as concerned the Authority has jurisdiction to invoke such power at any stage before or after registration of a Company. Section 38, Companies Ordinance, although provides that Registrar can direct a company to change its name if it is registered through inadvertence or otherwise in contravention of provisions of section 37 but the Registrar can exercise such powers after decision of the Authority under section 37 (ibid). The Registrar without having prior decision of the Authority under section 37 cannot issue direction to a Company to change its name. Subsection (4) of section 37 confers unlimited and final jurisdiction upon the Authority to decide the matter."
8. It needs to be pointed out at the very outset that the interpretation of the provisions of section 37 in the impugned order as reproduced above does not appear in accordance with law. In fact the way the Authority looked at the powers of the Registrar under section 38 of the Ordinance is also not correct. The first three subsections of section 37 provide for a bar on registration of name of a company subject to certain qualifications. A simple reading of the opening part of the three subsections makes it clear that these provisions relate to a company which has not yet been registered. The use of words "no company shall be registered" in subsections (1) and (3) and of the words "a company shall not be registered" in subsection (2) explains the legislative intent that Authority (now the Commission) is the sole arbiter if the name of a company "to be registered" is violative of any provisions of the section. The provisions of subsection (4) when read in the light of the earlier three subsections again make it certain that the powers of the Commission with regard to the question as to whether or not the proposed name of a company is violative of provisions of that section is confined to the stage where a company had yet A not been registered.
9. In the first subsection, the prohibition bears a reference to the names which in the opinion of the commission are inappropriate or deceptive or are designed to exploit or offend the religious feelings of the people. In subsection (2), the resemblance of the name of a proposed company with the one already in existence whether innocent or by design is prohibited. However, unlike subsections (1), (3) and (4) it makes a reference to the powers of the Registrar to allow use of an identical name with that of a Company in the process of being dissolved provided a consent in writing is given by the existing Company in a manner as the Registrar requires. The powers of the Registrar in that subsection are, however, to be read with subsection (4) which gives finality of decision to the Commission. In subsection (3), the use of word "prior approval" is again indicative of the fact that this subsection like the prior relates to the stage, earlier to the registration of the Company.
10. The provisions of subsection (1) unlike the provisions of subsections (2) and (3) are not self- executory. In other words, the provisions of subsections (2) and (3) of section 37 appear complete and self-executory. In subsection (2) where the promoters of a company in the process of registration or of an existing company wishing to change the name of their company approach the Registrar, he is permitted to allow the adoption of the proposed name if the Company in process of dissolution signifies its consent in the manner he requires it to do. Under subsection (3), the Commission can grant the required approval on being approached by the promoters of a Company for a name suggesting patronage of a dignatory or any connection with any Government Institution. The provisions of subsections (1) and (3) of section 37, it will be seen are applicable in cases of fresh registration and are expressive of the jurisdiction of the Commission to be exercised directly before a company stands registered. The provisions of subsection (2) also relate to pre-registration stage of a company wishing to be registered with a name identical with an existing company. The exception given with regard to an existing company in the process of dissolution coupled with the approval of the Registrar is also to be exercised by him before a Company is actually registered. It hardly needs emphasis that under subsection (4), the Commission is the ultimate and sole arbiter if the name of a Company is in violation of any of three subsections of section 37. Where the Commission exercises its jurisdiction before the registration of a company under various subsections of section 37 it acts on administrative side and its decision under subsection (4) is final though the possibility of a review of such order under subsection (2) of section 484 is not ruled out.
11. Section. 38 is self-executory and provides for a remedial measure if a company is registered by a name in contravention of the provisions of section 37. The area in which the provisions of section 38 operate the conditions on which it will come into action and the procedure prescribed for rectification of name of a company is so certain that there hardly appears any difficulty in its implementation. The difficulty, however, appears to be in the procedure prevalent in the company registration offices and office of the Commission. The provisions of sections 37 and 38 it needs to be kept in mind, sprung by splitting up of section 11 of the repealed Companies Act, 1913. Under section 11 of the late Act it was the Registrar who was competent to determine if the proposed name of company was violative of subsections (1) and (2) thereof. Subsection (1) of section 11 of the late Act is identical to subsection (2) of section 37. Subsection (2) of that section contained provisions which are now available in the Ordinance as section 38, subsection (3) of section 11 of late Act is comparable to subsection (3) of section 37 of the Ordinance except that in the late Act "previous consent" was to be given by the Federal Government. It appears that splitting up of section 11 of the Act in sections 37 and 38 has not been appreciated by those involved in the execution of the provisions of Companies Ordinance, 1984 in its correct perspective. Therefore, the practice in companies registration offices has continued on the lines followed before the enforcement of the Ordinance. This resulted in uncertainty as to the correct parameters of the powers and competence of Commission and the Registrar.
12. The Registrar of Companies under rule 5 of the Companies (General Provisions and Forms)
Rules, 1985 instead of merely providing for "information" is almost giving a certificate as to the availability of a name without making a reference to the Commission. This is where the confusion has compounded. The provisions of section 37 are not for mere guidance of the Registrar nor he can bypass them to provide information to an applicant as to the availability of a particular name.
That information in fact means if the proposed name is or not violative of the dictates of section 37.
As per provisions of section 37, that decision has to be made by the Commission and not by the Registrar. The issue if the Commission under subsection (3) of section 12 of the Companies Ordinance, 1984 can delegate any of its power vested in it under section 37 need not be decided in this petition. However, it is certain that according to rule 5 of the aforesaid Rules, the information provided to the promoters of a Company under process of registration or officials of the Company proposing a change in name is subject to the provisions of sections 37 and 38. In our manner of reading section 37, the finality of opinion of the Commission as to the permissibility of a name for adoption comes into play only when the Commission itself expresses that opinion under section 37 before registration of a Company. Accordingly, if the .Commission does not express itself on the information to be supplied on an application under rule 5, the provisions of section 37, which necessarily relate to the preregistration stage and particularly those of subsection (4) of section 37, will be reduced to nullity. That cannot be the intention of the Legislature.
13. The treatment of the legal objections taken before the late Authority by way of the aforesaid operative part of the impugned order does not appear in accordance with law. The impugned order does not suggest as to how an action under section 38 is dependent upon a direction to be made by the Authority under section 37 after a Company has been registered with a particular name. The superintendence and control of the Commission on all those involved in the execution of the Companies Ordinance is not disputed at all. However, where the Ordinance has itself provided for two different for a for different situations, the Commission cannot order one to take precedence over the other. We are also not in agreement with the impugned order that the Registrar cannot issue direction under section 38 to a company to change its name without having "prior decision" of the Authority (Commission) under section 37. That kind of decision could be made only in the form of opinion expressed under section 37 on the administrative side. The claim that the Authority (Commission) could entertain an application under section 37 on the original side of its jurisdiction even after registration of name is against the scheme of the two sections.
14. A reading of sections 37, 38 and rule 5 of the aforesaid Rules gives a very simple mechanism to be followed. It is that under subsection (1) of section 37, the Commission will express itself if the name of the Company proposed to be registered is hit by the mischief of the provisions. Under subsection (2) the Registrar can accept the consent of a company under dissolution. The Commission under subsection (4) is final authority to uphold or reverse that order. In subsection (3), the Commission can allow or decline approval where the proposed name of a company is suggestive of the patronage or connection with Government designatories or institutions. In all three subsections, the action of the Commission is on administrative side and is clothed with finality.
15. Once that stage has gone, either by inadvertence or for any other reason under the sky and a Company is registered by a name and style which is in contravention of section 37 then the Registrar will proceed in the manner specified in section 38 to ensure that the contravention of the aforesaid provisions does not remain in the field. The limitation provided for in section 38 has its own wisdom. It is that without a time-limit the discretion in an executive authority is likely to be unnecessarily feared by public. Secondly, if the registration of a name of a company in contravention of section 37 had not F resulted in any adverse effect on another company or public at large during the stipulated period of three years, then the law assumes that nothing would go wrong in the future as well.
16. After the Registrar has exercised its jurisdiction under section 38, the Commission will again have an opportunity to sit in judgment in revisional jurisdiction to see that the provisions of section 37 had duly been complied with. The exercise of revisional jurisdiction under section 484, however, is a quasi-judicial function and is different from its function on the administrative side as vested in it under section 37.
17. Since in the present case, the appellant No,1 already stood registered, it is presumed that the name was registered with the consent of the Authority as it did not raise an eyebrow upon it while considering the name of the proposed Company under subsection (1) of section 37. The Registrar did not make any order under subsection (2), which could possibly be interfered with, on the administrative side by the Authority under subsection (4) of section 37. Therefore, its role on the administrative side ended. Thereafter, it was only under section 38 that the aggrieved party (the present respondent) could approach the Registrar for a direction to change the name of the Company. After the registration of the name of the Company, the Authority was not competent to entertain an application against the registration of the Company and to record a direction in that application to the Registrar to exercise his jurisdiction under section 38. There is no doubt that the enforcement of the Companies Ordinance, 1984 is vested in the Commission and all persons employed in the execution of the Ordinance are bound to follow its orders and instructions under subsection (7) of section 12. However, such a direction cannot be made to any officer which will result in recording of an order against which a revision lies to the Commission under section 484. It is because if the Commission makes a direction to record a particular order which is revisable before it, the remedy of revision as provided in section 484 will become illusionary. Here again a word of caution needs to be given. It is, that the Commission can pass every order on administrative side but that order if acted upon by the concerned officer will no more be revisable on the revisional side of the jurisdiction of the Commission which is quasi-judicial in nature. On that principle we are of the view that the learned Chairman was not correct in observing in the impugned order that the Authority (Commission) could make a direction to the Registrar on the administrative side under section 37 of the Ordinance to proceed and record an order under section 38 against which a revision laid before it under section 484. The learned Chairman was also not correct in pointing out that the respondents had approached the Authority in its original jurisdiction under section 37 of the Ordinance. As noted earlier, the original jurisdiction of the Authority (Commission) vested in it under section 37 is on the administrative side. In exercise of that it could pass any order to bar or forestall the violation of the provisions of section 37 and that order would have been final. However, that jurisdiction particularly under subsection (1) having not been exercised either directly or on a reference by the Registrar, the Authority (Commission) was no more competent to proceed on the administrative side to direct to the Registrar to record an order under section 38 which was revisable before it.
18. Since we have disapproved the exercise of so-called original jurisdiction by the late Authority after the name of the Company had already been registered, other legal and factual objections against the impugned order need not be ruled upon.
19. This appeal is accordingly accepted and the impugned order of the Authority is set aside.