MUSHIR ALAM, J. - Plaintiff is a Public Limited Company incorporated in 1965 under the laws of Pakistan and filed the instant suit for declaration, injunction and rendition of accounts.
2. Facts, in brief, are that, plaintiff Company is one of the leading Urea and Fertilizer Producer in Pakistan, originally sponsored by ESSO (later Exxon Corporation) before adopting present attire it was ESSO Pakistan Ltd. It is averred, at the relevant time, it represented largest foreign investment and in 1980's the Exxon Corporation decided to disinvest its interest in the plaintiff's company. The employees of the plaintiff alongwith its other companies acquired 75% of the equity gave its present name 'Engro Chemical Pakistan Limited'. Plaintiffs is also venturing in petro chemical business with a substantial investment. Grievance of the plaintiff as raised in the suit against the defendant No. 1 and defendant No. 2, who is also producer of urea fertilizers and is one of the producer of urea fertilizers and is one of the arch rival of the plaintiff company. Defendants Nos. 2 to 4 are said to be managed and controlled by defendant No. 1. Plaintiff claims that the defendants quietly accumulated the plaintiffs shares from the Stock Exchange in a manner so as to embark a hostile take over of the plaintiff which acquisition of the shares by the defendant No. 1 directly or indirectly claimed to be against Public Policy. Foreign Exchange Regulations Act, 1947 (hereinafter referred as the "FERA Act of 1947"_. Companies Ordinance, 1984 and Monopolies and Restrictive Trade Practices (Control and Prevention) Ordinance, 1970 and so also against the Public Policy.
Plaintiff apprehending further acquisition of its shares would lead influence and change of its policy in the management and board of Directors which according to the pleadings against the Principal of good governance of the company, In the foregoing backdrop, the plaintiff have claims following reliefs:--
(1) Declaration that the shares of the plaintiff acquired by the defendants 1-5 have been acquired in violation of the provisions of law and public policy as mentioned in the foregoing paragraphs;
(2) Permanent injunction restraining the defendants Nos. 1-5 and any other company of the Hussain Dawood Group from acquiring any further shares of the plaintiff and from exercising and receiving any rights and benefits accruing from the shares acquired by them in violation of law, including the rights to receive dividends, bonus and right shares and voting at share-holder meetings;
(3) Permanent injunction restraining the defendants 1- 5 from seeking election of themselves or their nominees, employees, representatives or agents as directors to the Board of the plaintiff directly or indirectly for their benef't and in violation of fiduciary obligations to the plaintiff; [Vol.VIII Engro Chemical Pak. V. Muhammad Hussain Dawood C.L 65 (Mushir Alam, J.)
(4) For a mandatory injunction directing that the defendants Nos. 1-5 divest and sell in the open market all shares in the plaintiff company acquired by them;
(5) For preliminary decree for rendition of accounts to the plaintiff by the defendants Nos. 1-5 of all profits earned by them in trading, in shares of the plaintiff and payment to the plaintiff of such profits which the plaintiff tentatively estimates at Rs. 500 million;
(6) Appropriate orders/penalties against defendants 1- 5 for violating the provisions of Sections 206, 208, 2098 and 220-224 of the Companies Ordinance, 1984;
(7) Any other, further or additional relief which this Hon'ble Court may deem fit in the facts and circumstances of this case;
(8) Cost of the suit.
3. In the suit plaintiff has filed an application i.e. CMA No. 1388/2000 under Order 39, Rules 1 and 2, CPC seeking interim relief in the nature of relief mentioned at serial No. 2 in the Prayer Clause. By order dated 25.2.2000 while ordering notices to the defendants meanwhile. Defendants Nos. 1 to 5 were restrained from exercising any right or receiving any benefit whatsoever accruing from the shares already acquired by them and voting on the basis of shares or the share-holders meeting Defendants were further restrained from purchasing any share of the plaintiff in violation of law.
Sudh ad-interim order was confirmed on the statement of all the parties concerned without prejudice to their respective contentions. Suit was ordered to be disposed with 6 months vide Order dated 8.3.2000. Written statements were filed with the assistance of all the learned counsels concerned as many as 37 issues were framed on 13.8.2001. On the application of the defendant No. 1 i.e. CMA No. 6217/2001 seeking hearing of preliminary issues, which according to the defendants, would decide the controversy without recording of the evidence. The Court vide Order dated 17.9.2001 following issues treated as preliminary issues:--
(1) Whether the suit is maintainable?
(2) Whether this Court has jurisdiction in respect of alleged violation of the provisions of the Companies Ordinance, 1984, Central Depositories Act, 1997, Foreign Exchange Regulation Act, 1947 and Monopolies and Restrictive Trade Practice (Control and Prevention) Ordinance, 1970?
(3) Whether this Court has jurisdiction under Section 9 of the Civil Procedure Code, 1908 in respect of the subject-matter of this suit?
4. It was ordered that the parties may be heard first on the point of jurisdiction vested in this Court and thereafter to proceed further. If it is held that, this Court has jurisdiction to proceed with the case. Regularly, the case has come-up for hearing of the afore-mentioned preliminary issues.
5. Mr. Abdul Hafiz Pirzada, learned senior counsel for defendant No. 1 contended that it is merely an apprehensive suit, none of the Share-holders have come to the Court and only the company has complained of hostile take over. He further contends that essentially the plaintiff has pleaded purported violation of various laws by the defendant No. 1 in acquiring share-holding in the plaintiff company. Violation plead are in respect of the provisions of Companies Ordinance, 1984.
Monopolies and Restrictive Trade Practice (Control & Prevention) Ordinance, 1970, FERA Act, 1947, Central Depositories Act, 1997 and Securities & Exchange Commission of Pakistan Act, 1997. Learned counsel took me through previous provisions of the Companies Ordinance, 1984, which are alleged to have been violated by the defendants. First violation complained of is under Section 208 of the Companies Ordinance, 1984 which regulates the manner of investment in associated company and undertaking. According to the learned counsel, violation, if any, is punishable under sub- section (5) of Section 208, adjudication of offence is provided for under Section 476(1 )(b) of the Ordinance, 1984, against the decision whereof, an Appeal is provided under Section 477(1 )(c), thereof, the remedy is further stretched to Appeal under Section 485 before this Court. Ha, however, contends that the grievance urged regarding violation of Section 208, if any, effective remedy manner and mechanism is sufficiently provided for under the Companies Ordinance, 1984. He, therefore, urged that the suit in respect thereof is not maintainable. Likewise he took me to the alleged violation of Sections 208, 196, 220, 221, 222, 223 and 224 of the Companies Ordinance.
Violation of the above referred provisions is cognizable in original jurisdiction by the Sub- Registrar, Registrar of the Companies and Appeal thereof is provided before the Registrar, Securities and Exchange Commission of Pakistan, as the case may be, further remedy by way of appeal before this Court is available, In a manner similar as detailed in respect of violation of Section 208 of Companies Ordinance, 1984 above. Mr. Abdul Hafeez Pirzada, learned senior counsel, then took me to paras 10 to 17 of the plaint outlining of Section 23 is thereof complained. He contends that, Tribunal under the Act of 1947 has been constituted, the Act itself provide for the procedures and penalty that may be imposed on violation of any of the provision of the Act of 1947. Mr. Pirzada, drew my attention to paras 39 to 41 of the plaint giving an account of alleged violation made by the defendants under the Monopolies and Restrictive Trade Practice (Control & Prevention)
Ordinance, 1970. He argued that the penalty is laid down under Section 20 thereof a specialized forum is established under the Act to deal with the complaint for the violation of the Ordinance, 1970, authority therein, is vested with powers both that of civil and criminal Courts Appeal again is provided against any decision to the High Court.
With regards to the Securities and Exchange Commission of Pakistan Act, 1999 it was contended that, now Securities and Exchange Commission has been established which has taken over all the functions and the jurisdiction of the Corporate Law Authority constituted under the Companies Ordinance, 1984 Ample powers and jurisdiction are vested in such Commission to decide and take decision I respect of the matter complained of Highlighting the above provisions allegedly violated by the defendants and the remedy provided against such violation in the relevant law itself, it was urged that, all the laws referred to above are cognizable in original jurisdiction conferred on the authority constituted and established in each Act, with Appellate Forum culminating in this Court, It was urged that the plaintiff is neither the share-holder in any of the defendants company it is more like a probono publico litigation as the plaintiff company has filed the suit through its management and not through its Share-holders as is usually done. Mr. Pirzada contended that company in its own capacity is not affected by the shares that may be held by any person, It was further contended that present suit is by surrogate plaintiff. He urged that the alleged hostile take over is not against the company but, against the Share-holders who are not before this Court, It was contended that this Court in its ordinary plenary jurisdiction cannot sit and decide the controversy in suit. According to him, Specialized Forums and Tribunals have been established under the relevant statute to take cognizance of all the alleged violations raised in the suit, action, if any, can be taken against the defendants under relevant laws, this Court cannot investigate into such offence which falls within the domain of such Specialized Forums, In furtherance of his arguments, the contends that the prayer No. 1 is not part of private law no personal rights of the plaintiff company were infringed nor any rights of the company vis-a-vis violation thereof against the defendants is recognized under the law. As far as prayers Nos. 2 to 5 are concerned, it was urged that the same relates to the [Vol. VI11 Engro Chemical Pak V Muhammad Hussain Dawood C L. R9 (Mushir Alam. J.) violation of a Public Law this Court will not impose penalty even if it comes to a conclusion that prima facie the violation has been made, Mr Pirzada urged that where the statute creates right and also provides for enforcement then the jurisdiction of Civil Court is barred, It was argued that the Act which is required to be done by a nominated Authority cannot be undertaken to be performed by any other person. To further augment of his arguments, he has drawn support from Section 9 of Civil Procedure Code, 1908 which provides that Civil Court have jurisdiction in respect of all the matters that may be before it unless expressly or impliedly bar. According to him. Express bar is contained as for instance if there be any ouster or baring clause in any statute like for instance Section 273 of Cantonment Act and similar provisions in various other laws, which provision specifically bars the jurisdiction of the Civil Court in cases where the forum/authority established thereunder is conferred jurisdiction to decide on controversy. According to him, implied bar would apply in cases where the rights and remedies are specifically provided for in a particular enactment the jurisdiction of Civil Court is impliedly barred. In support of his contentions, he has heavily relied upon the following case-laws. -
(1) 1999 CLC 1795.
(2) 1990 CLC 1008.
(3) 1988 CLC 1186.
(4) 1088 CLC 123.
(5) 1979 CLC 857.
(6) PLD 1949 Lahore 301.
(7) PLD 1979 Karachi 612.
(8) PLJ 1982 Lahore 396.
(9) AIR 1963 S.C. 1547.
(10) AIR 1965 S.C. 338.
(11) AIR 1956 Bombay 649.
(12) PLD 1960 S.C. 113.
(13) PLD 1964 S.C. 673; and
(14) Unreported judgment in Civil Petitions Nos. 2502 to 2504 of 2001 titled as Securities & Exchange Commission of Pakistan v. Mian Nisar Ellahi and others.
6. Mr. Mujtaba, Advocate appearing for defendant No. 2, Mr. Qazi Faez Essa, Advocate for defendant No. 3, Mr. Arshad Tayabally, Advocate for defendant No. 4 adopted the arguments advanced by Mr. Abdul Hafeez Pirzada. Mr. Zahid F. Ebrahim, Advocate for defendant No. 5,* while adopting the arguments of Mr. Pirzada further contends that in view of Section 263 of he Companies Ordinance, 1984 the Commission can carry out the investigation against any company on the complaint of any person.
7. Mr. Makhdoom Ali Khan, learned senior counsel for the plaintiff contended that the consent issues were settled on 13.8.2001 and issues mostly are mixed question of facts and law including the question of locus standi is covered under issue No. 6, therefore, it will not be appropriate at this functure to embark and decide the question of locus standi as has been ventured by Mr. Pirzada.
Accordingly, he argued that the Court will only confine itself to the preliminary issues only. He contended that originally under the Common Law claims relating to the affairs of the company were( taken to the Court by the company itself but progressively such norms has undergone change and provisions were grafted under the law whereby the Share-holders could bring the grievance before the Court and in Pakistan also Section 290 of the Companies Ordinance, 1984 gives such right to a specifies numbers of the Share-holders. As to the objections of Mr. Pirzada that the case has been filed by the company and not the share-holders, It was contended that prima facie Court will only see the ostensible authority of a person to bring an action and will not go behind such authority under the doctrine indoor management as expounded in PLD 1985 Karachi 481, PLD 1969 747 and 1999 CLC 795. Learned counsel for the plaintiff argued that as far as penal consequences are concerned, law provides mechanism for taking action; however, such law can be set into motion at the behest of a particular percentage of Share-holders on the basis of resolution passed by the company, on the direction of the Court and/or on its own motion. As far as the remedies under the FERA Act, 1947 are concerned, it was argued that cognizance is taken only in a representation by a person who has been authorized by the State Bank of Pakistan and Federal Government. According to the learned counsel, none of the grievance urged in the suit could be remedied by any of the functionaries created under the special enactment. Therefore, this Court has jurisdiction, In support of his contention, he has relied upon the case reported as Integrated Technologies and Systems Ltd. v. Interconnect Pakistan (Pvt.) Ltd. (2001 CLC 2019) = (2001 L.N. (Lah)
861). Mr. Makhdoom Ali Khan, learned counsel contends that the plaintiff is not a share-holder in any of the defendants companies, therefore, has no right to seek winding-up under Section 290.
The grievance urged can only be redressed by this Court. According to him, even if the defendants are punished under the penal provisions the injury caused to the plaintiff can only be remedied by bringing an action before the Civil Court. He contends that where the Civil and Criminal remedies emanates out of same action and there is no mechanism to provide for the remedy of a civil grievance then same can be urged before the Court, unless there is specific bar under special enactment Civil Court will always have jurisdiction, In support of his contention, he relied upon the case-laws as reported in PLD 1968 S.C. 381, PLJ 1996 S.C. 1697, 1999 CLC 1989, AIR 1947 Madras 322 and AIR 1967 Allahabad 118.
8. Issue No. 1: Adverting to issue No. 1, regarding maintainability of the suit, It may be observed that the plaintiff has challenged the acquisition of its share by the defendants. Allegations in the plaint by and large is against the purported bid of hostile takeover of the plaintiff by the defendant No. 2 in particular and by the other defendants, who it is averred, are the front companies and otherwise under his influence and control.
9. Mr. Abdul Hafeez Pirzada, learned senior counsel, strenuously and maticulously took me to each and every breach of various provisions of different enactments and highlighted the penal consequences thereof and remedy against such wrongs, as discussed in the narrative above. To emphasize that, remedy against each wrong is provided under different provisions of various enactments, which remedy in most of the cases extends to High Court as well. He, therefore, contends that where such remedy is available instant suit is not maintainable.
10. All the other counsel adopted the arguments of Mr. Pirzada, Mr. Zahid Ibrahim, counsel appearing for Dawood Foundation, the defendant No. 5, further augmented by saying that plaintiff could have recourse to remedy provided under Section 263 of the Companies Ordinance, 1984..
11. Adverting first to the contention of Mr. Zahid Ibrahim, It may.Be observed that investigation of affairs of the defendants companies could only be made by SECP, only at the motion of certain percentage of members of any particular company, affairs of which are sought to be investigated or on the report by the Registrar of the Companies In this case neither the plaintiffs Company is said to be a member or alleged to be holding any share in any of the defendant's Companies nor.
There is any report by the Registrar, therefore, jurisdiction of the SECP under Section 263 of the Companies Ordinance, 1984 cannot be set in motion.
12. Contention of learned counsel for the defendants that since remedy against each breach has since been provided under relevant laws therefore, remedy if any lies before the authority and or forum specifically provided thereunder and not by way of suit, therefore, the suit is not maintainable. Arguments in the first sight appear to be persuasive, It may be observed that a wrong or breach of any penal provisions may give rise to both, penal consequences as well as civil liability. For example trespass, is a penal offence, a person committing trespass may be prosecuted under the Penal Code of Pakistan At the same time it may give rise to civil action for possession and damages. Libelous publication is also an offence under the Penal Code; it may also give rise to civil action for damages. In both the cited situation even injunctive relief can be obtained by bringing suit for injunctive reliefs against apprehended dispossession and threatened trespass and so also against publication of libelous publication (see Section 55 illustration (e) of Specific Reliefs Act). Even causing death by rash and negligent driving entails both criminal prosecution and civil liability. Even in some cases where one person who may be personally liable for the penal consequences other persons may be held vicariously liable, for the civil liability arising out of same wrong. Even a situation may arise where a person wronged or injured may not be interested to prosecute wrongdoer for the penal consequences but may be interested to enforce civil liability. In such a situation, a person an neither be denied injunctive relief against apprehended wrong or repetition of wrong nor, can be non-suited and denied compensation and/or damages that might have been stained as an after match or as a consequence of a wrong which may otherwise, also entail penal consequences.
Learned counsel for the defendants have relied upon judgment rendered in Civil Petitions Nos. 2502 to 2504 of 2001 viz. Securities and Exchange Commission of Pakistan v. Mian Nisar Elahi, to contend that remedy if any lies before, SECP and not by separate proceedings. Fact in said case were that a show-cause notice was issued to the respondents therein by the SECP to show cause why they may not be prosecuted for the alleged violation of Section 17. Such notices were challenged before the High Court, It was in such context held that remedy lies before the SECP. It may be observed that remedy as against penal provisions indeed is available under the enactments referred to by the counsel for the defendants, but there is no remedy against the civil liabilities that have ensued as a consequence of breach of penal provisions to party who had suffered at the hands of wrongdoer.
13. None of the defendants counsel were able to point out any provision under relevant laws that may extend any remedy against the alleged wrongful acquisition of shares in plaintiffs' company or as it is said in corporate parlance against hostile takeover. I have already dealt with acquisition of shares and hostile takeover in somewhat detail in the case of Adamjee Insurance Company (supra).
14. Since, in Pakistan unlike other countries of the world, there is neither any legislation nor, self regulatory code nor, any regulations have been framed by the SECP to regulate the issue and matter relating to or arising out of transactions relating to substantial acquisition of shares by one company in a bid to takeover and/or to acquire the management or control of another company, therefore, under circumstances, in my humble opinion, this Court has jurisdiction to scrutinize the legality and proprietary of such transactions.
15. Contention of Mr. Abdul Hafeez Pirzada, learned senior counsel, that plaintiff, a Company has no business to ventilate grievance as to who may hold its share. If at all, it was contended, it is prerogative of the Share-holders of a company who may apprehend injury of any kind that may arise out of acquisition of shares in their company by any other person, It was contended that the plaintiff is a surrogate plaintiff, therefore, plaintiff has no locus standi to challenge such transaction.
This is indeed very pertinent question. But the fact remains as rightly pointed out by Mr. Makhdoom Ali Khan, learned counsel for the plaintiff that issue of locus standi is altogether a different question, that cannot be adverted to at this juncture, as same is covered by issue No. 6 framed by the Court which reads as follows:-- "Whether the plaintiff can file a suit against its share-holder(s)?"
15. It may be pointed out that out of as many as 37 issues framed by the Court, at the motion of learned senior counsel for the defendant, Court vide Order dated 17.9.2001 set out three issues reproduced above, as preliminary issues, In this view of the matter, any comment as to the locus standi of the plaintiff will certainly prejudice the case of either party. Therefore, I refrain from commenting on said point, It will, however, be open to defendants to raise such plea when occasion to argue on such issue may arise.
16. A suit for declaration that share transfer agreement was illegal and contrary to Article of Association and consequential injunctive relief was entertained, in a case reported as Yousuf A.
Mitha v. Aboo Baker (PLD 1980 Karachi 492).
In another Suit No. 347/2002 viz. Adamjee Insurance and others v. Muslim Commercial Bank Ltd.
And others attending to the question of hostile takeover, it was held:- "Fact that SECP, under given circumstances has authority to pass orders when the company's affairs are under its investigations, this Court under circumstances of the case has jurisdiction to examine the vires of transaction of acquisition of shares of MCB and others subject-matter of the suit."
17. For the foregoing reasons, I am of the view that the suit to question the proprietary of acquisition of shares or in other words against hostile takeover in absence of any legislative enactment, rules or regulation is maintainable. Issue is answered accordingly.
18. Issue No. 2: Mr. Abdul Hafeez Pirzada, learned senior counsel for the defendant strenuously argued that whatever plaintiff has complained of in the plaint are breach of various provisions of different enactments, as detailed in the narrative above, It is true that, me plaintiff has given a detail account of acquisition of shares in the plaintiff Company by the defendants in purported breach of various provisions, under different enactments, In the wake of such allegations reliefs is couched in prayer clause No. 6, reproduced above.
19. It is true that, jurisdiction of Civil Court cannot be invoked to seek mere enforcement of penal laws (see Section 7 of the Specific Relief Act). Jurisdiction of Civil Court under Section 9 of the Code of Civil Procedure, 1908 extends to try suits of civil nature. As already observed, while deciding issue No. 1 that, a wrong or breach of a penal law may entail both, a criminal liability as well as civil obligation, In case of penal or criminal liability, cognizance is taken and wrongdoer is prosecuted and tried by specialized Courts, authorities or Tribunal constituted or established under relevant enactments, In case where a civil injury is sustained by a person on account of wrongful act or as an incidence of breach of penal provision committed by another, then it is on account of resultant civil injury caused to a person or his property giving rise to civil liability against the wrongdoer the jurisdiction of Civil Court rest. Civil Court itself will not take upon .Itself the responsibility to take cognizance, try and prosecute a penal offence, except quasi-criminal offence or wrong like Contempt of Court. However, Civil Court will not hesitate to redress civil injury and enforce civil liability arising out of penal breach or wrong, against a wrongdoer, as already discussed while deciding issue No. 1. Issue is decided accordingly.
20. Issue No. 3: Now adverting to third issue, relating to jurisdiction of this Court, It was contended by Mr. Abdul Hafeez Pirzada, learned senior counsel for the defendant that by virtue of Section 7 of the Companies Ordinance, 1984, it is only the Company Court that may hear this matter and since this Court has not been nominated by the Honourable Chief Justice, therefore, this bench not being a company bench cannot heai this case. Arguments are fallacious High Court on the strength of Section 7 of the Companies Ordinance, 1984 has jurisdiction to adjudicate and decide the controversies that may arise in relation thereto, in respect of which no jurisdiction is conferred on any other authority like the Joint Registrar, Registrar or the SECP as the case may be. Even in cases where intricate question of facts and laws are involved, despite summary jurisdiction conferred.
Civil Court is considered competent to resolve the complicated and disputed question arising therefrom. For instance issues relating to shares and rectification of share register under Section 152 of the Companies Ordinance, 1984.
21. As already held above Civil Court has the jurisdiction to decide all civil suit of civil nature.
22. It is indeed up to the authority constituted under various enactments, as detailed by learned counsel for the defendants and discussed in the narrative, above, to take cognizance of the offences and penal breaches allegedly committed by the defendants in their pursuit to acquire share in the plaintiffs Company. This Court, as held above, will only examine the proprietary and vires of transaction of a acquisition of shares 'in the plaintiff Company by the defendants and resultant civil obligations and liabilities that might have been contracted by the defendants out of transaction of acquiring shares said to be in breach of various enactments. Therefore, in my humble view, as held in the case of Adamjee Insurance Company Ltd. (supra) this Court has jurisdiction to decide the controversies raised in the suit. Issue replied accordingly.