1. ' The petitioners had filed petition under section 161(8) of the Companies Ordinance, 1984 for declaring invalid the proceedings of the 77th Annual General Meeting (AGM) of the members of respondent No,1, a Company known as Lahore Race Club. Subsequently an application (C. M.
2. No,370-L of 2003) was moved for treating the petition under section 160-A, in view of the amendment made by Companies (Amendment) Ordinance, (C of 2002). The said application was allowed on 3-6-2003.
2. The respondent-Race Club is a Company Limited by guarantee and having no share capital. It was incorporated on 18-1-1924, under the repealed Companies Act, 1913. It is functioning in terms of section 42 of the Companies Ordinance, 1984. In its Annual General Meeting held on 21-12-2002 at its Registered Office, its Directors/Stewards were elected. The petitioners are the members of the respondent-Company/Lahore Race club Petitioners 1 to 4 were the candidates for election to the Board of Stewards of the Race Club. They have prayed for invalidating the proceedings of Annual General Meeting held on 21-12-2002.
3. Learned counsel for the petitioners contended that the respondent-Company is a Company Limited by guarantee having no share capital. Under proviso (a) of subsection (1) of section 161 of the Companies Ordinance, 1984 a member of a Company having no share capital is not entitled to vote at a meeting of the Company by proxy. He further argued that a poll was demanded by members present in the AGM. Once the poll is demanded, the elections are to be carried out by poll. The election of Stewards should have been conducted by way of secret ballot. Lastly he submitted that no voting whatsoever took place. The election was a sham, as such the 77th Annual General Meeting held on 21-12-2002 be declared invalid.
3. ' Conversely, learned counsel for the respondents submitted that this petition seeking invalidation of the AGM is in fact an application for invalidating the election of Directors of the Club which is not maintainable under section 179 of the Companies Ordinance, 1984. Learned counsel urged that the Directors were unanimously elected by the members. In the circumstances the question of poll would not arise. Proxies were not used. However, he placed reliance on Messrs Muzaffar Poultry Farm v. Pakistan Poultry Association and others (PLD 1992 Kar.181), to contend that proviso (a) of subsection (1) of section 161 of the Companies Ordinance. 1984 has not affected Article 24 of the Articles of Association of the Company permitting voting by proxy.
4. I have considered the arguments of the learned counsel for the parties, gone through the relevant provisions of law and the case-law cited by the learned counsel for the respondents.
5. In the case of Messrs Muzaffar Poultry Farm v. Pakistan Poultry Association, etc. (supra) it was held as under:--'
4. "Prior to the enactment of the Companies Ordinance, 1984, no right to vote by proxy was conferred by any statute although such right was recognized by section 79 of the Companies Act, 1913; and the existence of such a right depended upon a provision therefor, in the Articles of Association of a Company. However, by subsection (1) of section 161 of the Companies Ordinance the right to vote by proxy has been expressly conferred upon members of companies; and an exception to this provision is made by proviso (a). The only effect of the proviso is that the right to vote by proxy which is conferred on members of the companies by virtue of section 161(1) is not so conferred upon members of a company not having share capital. It does not follow that the right of a company not having share capital to provide by its Articles of Association for voting by proxy has in any manner been taken away by proviso (a). That right remains unaffected.
5. ' It need hardly be stated that a proviso has to be construed strictly and in the context of a provision to which it is a proviso. To construe proviso (a) in the manner contended for by Mr. Naqvi would amount to importing therein a provision to take away the right of a company not limited by shares to provide, by its Articles of Association, for voting by proxy. There is nothing in the language of proviso (a), either in express words or by necessary intendment, to warrant such construction."
6. ' I find myself unable to subscribe to the view taken by Abdul Rahim Kazi, J. Proxies are agents of the shareholders and are governed by the law of Agency, Chapter X of Contract Act, 1872. On a poll, vote could be given either personally or by proxy under section 79 of the Companies Act, 1913. After the promulgation of the Companies Ordinance, 1984, this recognition was converted into a statutory right conferred by section 161(1) of the Companies Ordinance, 1984. However, proviso (a) was inserted putting limitation on the right to vote by proxy. The aforementioned subsection is reproduced as under:-- "Proxies.---(1) Any member of a company entitled to attend and vote at a meeting of the company shall be entitled to appoint another person as his proxy to attend and vote instead of him and a proxy so appointed shall have such rights as respects speaking and voting as the meeting as are available to a member: ' Provided that---
(a) this subsection shall not apply in the case of a company not having a share capital."
7. ' In my view there can be no proxy voting in the case of a Company limited by guarantee and having no share capital. Express right was conferred on a member to vote by proxy under section 161 (1) of the Ordinance, 1984. At the same time this right has been taken away by inserting proviso
(a) to the aforementioned subsection. A restriction has been placed that the subsection will not apply to a Company not having a share capital. Section 136 of the repealed (English) Companies Act, 1948, section 372 of the (English) Companies Act, 1985 and section 176 of the Indian Companies Act, 1956 are similarly worded regarding proxies. Provisos to said section are couched in the following words:-- "Provided that, unless the Articles otherwise provide:
(a) "This subsection shall not apply in the case of a company not having share capital."
8. ' It is significant that the phrase "unless the Articles otherwise provide", has not been enacted in section 161(1) of the Companies Ordinance, 1984. The proviso as given in aforementioned section 161(1) has expressly taken away the right from the members of a Company not having a share capital. Under section 31 of the Companies Ordinance, Memorandum and Articles bind the Company and its members subject to the provisions of the Ordinance. As a general rule, the proviso to section cuts down the meaning of that section. Its function is to restrict, limit or qualify the enacting part to which it is attached but not to nullify the enacting part or render it wholly inoperative. See Yousaf Ali Khan, Bar-at-Law v. Muhammad Javed Iqbal Cheema, Esq. Additional District Judge, Lyallpur and 6 others PLD 1975 Lahore 1339; Syed Shabbar Raza Rizvi, Advocate v The Government of the Punjab and 2 others PLD 1988 Lahore 501 and Mian Rafi- ud-Din and 6 others v.
9. The Chief Settlement and Rehabilitation Commissioner and 2 others PLD 1971 SC 252. The Honourable Supreme Court in the aforementioned case held as under:-- "The function of a proviso' is to restrict, limit or qualify the enacting part of a section to which it is attached but not to nullify the enacting part or render it wholly inoperative."
10. ' If the interpretation of section 161(1) as placed in the case of Messrs Muzaffar Poultry Farm v.
11. Pakistan Poultry Association and others (supra) is accepted the proviso to section 161(1) of the Companies Ordinance, 1984 will be rendered nugatory which cannot be considered the intention of the Legislature. With all due respect to the learned Judge I do not agree with the view taken by him in the aforementioned case. Without importing the expression "unless the Articles otherwise provide" into subsection (1) of section 161 of the Companies Ordinance and without reading the said phrase with the word "provided" the right to vote by proxy cannot be exercised. The Court itself cannot add into or delete any word from any section of an enactment.
12. Section 440 of the Companies Ordinance, 1984 reads as under:-- "440. Application of Ordinance to companies formed and registered under previous Companies Acts. ---This Ordinance shall apply to existing companies as follows:---
(a) In the case of a limited company other than a company limited by guarantee this Ordinance shall apply in the same manner as if the company had been formed and registered under this Ordinance as a company limited by shares;
(b) in the case of a company limited by guarantee, this Ordinance shall apply in the same manner as if the company had been formed and registered under this Ordinance as a company limited by guarantee; and
(c) in the case of a company other than a limited company, this Ordinance shall apply in the same manner as if the company had been formed and registered under this Ordinance as an unlimited company: ' Provided that reference, express or implied, to the date of registration shall be construed as a reference to the date at which the company was registered under the previous Companies Acts concerned."
13. ' Bare reading of the above section shows that the Ordinance of 1984 shall apply in the same manner as if the Company had been formed and registered under this Ordinance as a Company limited by guarantee. Under section 513 of the Ordinance, 1984 "Within one year from the commencement of this Ordinance, all Companies shall alter their Memorandum and Articles or any existing contract or agreement and shall take such other actions as are necessary to bring the constitution, working and procedures of the company in conformity with the provisions of this Ordinance: Provided that notwithstanding the fact that such actions have not been taken or such changes have not been made, the companies shall comply with the provisions of this Ordinanee as if they were registered under this Ordinance".
14. ' The above provisions leave not a scintilla of doubt in my mind that after the promulgation of this Ordinance, provisions of the same will apply as if this company was registered under the Ordinance of 1984. The company was bound to bring its Article of Associaion in conformity with the provisions of Ordinance, 1984. The argument of the learned counsel for the respondent that under section 167 Ion a poll the votes may be given either personally or by proxy and under section 29, a company can elect the Forms of Memorandum and Articles as set out in Table (C) of the First Schedule and Table (C) contains a provision for a voting by proxy, is devoid of any force. Any provision contained in the Memorandum, Articles, agreement or resolution shall, to the extent to which it is repugnant to the provisions of this Ordinance, become or be void under section 6 of the Companies Ordinance, 1984. Section 161 is a special provision excluding its application to the companies not having share capital. All other provisions are general provisions and cannot override the special provisions applicable to a particular class of companies.
15. ' Learned counsel for the respondent urged that the petitioners have been regularly voting by proxies. Petitioner No,1 used proxies from 1997 to 2000. Petitioner No,2 appointed proxies in 1997 and 1998-1999. Petitioner No,3 used proxies from 1997 to 2000. Petitioner No,4 voted by proxies from 1997 to 1998. Petitioner No,5 appointed proxies from 1997 to 2002. Petitioner No,6 used proxies from 1997 to 2000. The learned counsel submitted that he was only pointing out the conduct of the petitioners and not pleading an estoppel against them. Suffice to say that there is no estoppel against a statute.
6. Under section 160-A, the proceedings of the meeting can be invalidated if there has been a statutory infringement of a personal right of a Member. This infringement has been categorized into--
(a) infringement of the procedures contained in the statute or the Article;
(b) Infringement of any personal right.
16. ' In the case of infringement of procedures, in Parker and Cooper Limited v. Reading (1926) 1 Ch. 975, it was observed as under:-- "Now the view I take of both these decisions is that where the transaction is intra vires and honest, and especially if It is for the benefit of the company, it cannot be upset if the assent of all the corporators is given to it. I do not think it matters in the least whether this assent is given at different times or simultaneously."
17. ' This view was approved in Re: Doumatic Ltd. (1969) 1 All ER 161 and Re: Bailey, Hay & Co. Ltd. (1971) 3 All ER 693. The second type of infringement has been found to have been given a personal cause of action to a member. The English Courts have found the following as the infringement of the personal rights:--
(1) Depriving a member of his right to be heard; ' Wall v. London and Northern Assets Corporation (1898) 2 Ch. 469.
(2) Right to move amendments to resolutions; ' Henderson v. Bank of Australasia (1890) 45 Ch. D 330.
(3) To have the Chairman correctly determined the sense of the meeting; ' The Second Consolidated Trust Ltd. v. Ceylon Amalgamated Tea and Rubber Estates Ltd. (1943) 2 All. ER 567.
(4) Right to have votes recorded; ' Cousins v. International Brick Co. Ltd. (1931) 2 Ch. 90.
(5) Right to prevent improper votes being used; Shaw v. Tati Concessions Ltd. (1913) 1 Ch. 292.
(6) to have the proper notice of meetings; ' Kaye v. Croydon Tramways Co. (1898) 1 Ch. 358 and Baillie v. Oriental Telephone and Electric Co.
18. Ltd. (1915) 1 Ch. 503.
19. ' In the case of Haji. Abdul Jabbar and others v. Haryana Asbestos Cement Industries 1987 CLC 726 it was observed as under:-- "Additionally, it is pertinent to note that every error or omission or irregularity would not be amenable to the jurisdiction of this Court within the purview of section 161(8) of the "1984 Ordinance". It is only when facts or circumstances are such which may constitute material defect or omission in the notice or irregularity in the proceeding of the meeting that proceeding can be sought to be declared invalid. Obviously it has to be seen something more than mere defect or incidental omission of minor irregularity when Court may take action under the law. Therefore, in the instant case, it has to be ascertained whether act, omission or irregularity is sufficient enough to indicate flagrant violation of law or is of such gravity that it would tend to effect the results or consequences leading to the meeting or proceeding thereof."
20. ' In the instant case the petitioners 1 to 4 were the candidates for Stewards. Under section 178(3) of the Companies Ordinance, 1984, any person who seeks to contest an election to the office of Director shall offer himself for election as a Director provided, he may before the holding of election can withdraw the notice. The minutes of the AGM held on 21-12-2002 reveal that twenty members are present on the said date. Twenty-two members including petitioners 1 to 4 had offered themselves for Stewardship/Directors of the Club. Ten members were proposed in consultation with Syed Fakhar Imam, Arbab Nur Muhammad Khan and Mr. Tariq Aziz and duly seconded and were elected by the house unanimously as Stewards of the Lahore Race Club. I do not find any provision in the Articles of Association of the respondent-Club about the proposing and seconding of the candidates as Stewards. Admittedly no notice as envisaged by section 178(3) of the Ordinance, 1984 withdrawing the candidature by the members who had offered their names flor Stewardship, is placed on the record. In the absence of the withdrawal of the names by the members who had offered themselves as candidates for Stewardship they will remain as candidates. The minutes of the meeting show that ten candidates were unanimously elected as Steward. It is thus clear that only ten members who were proposed and seconded were elected as Stewards and other candidates were ignored simply on the ground that none of them was proposed or seconded. As stated above there is no such provision either in the Ordinance, 1984 or in the Articles of Association of the Club. There appears to be an irregularity in the Annual General Meeting of the Club giving a personal cause to members.
21. ' There is a specific provision in the Companies Ordinance, 1984 to challenge the elections of the Directors of a Company. Under section 179 of the Ordinance, on the application of the members holding not less than twenty per cent. Of the voting power in the Company, the Court may declare the elections of all Directors or any one or more of them invalid, if it is satisfied that there has been material irregularity in the holding of the elections and matters incidental or relating thereto.
22. Admittedly the petitioners did not hold the twenty per cent. Of the voting power. In the presence of a special provision for declaring the elections of the Directors invalid, resort to the general provisions for setting aside the proceedings of Annual General Meeting, cannot be made. It is well established that where an enactment contains a special provision with respect to a particular subject-matter or issue, these provisions will override the general provisions of the statute while dealing with a particular situation. Where in a statute there are two provisions, one of which is of specific character and the other general one, the specific provision ought to be applied unfettered by the general one. In the case The State v. Zia-ur-Rehman and others PLD 1973 SC 49, the Honourble Supreme Court observed as under:-- "It is well-established rule of interpretation that where in a statute there are both the general provisions as well as special provisions for meeting a particular situation, then it is the special provision which must be applied to that particular case or situation instead of the general provisions."
23. ' In the case of Sapphir Textile Mills Ltd. v. Collector of Central Excise and Land Customs, Hyderabad 1990 CLC 456, wherein it was observed as under:- "Therefore, specific provision has been made for grant of exemption in respect of Surcharge and Iqra Surcharge. Where specific provision is made to deal with a particular situation then it supersedes the general provisions to the same effect."
24. ' See also Haji Kadir Bux v. Province of Sindh and another 1982 SCMR 582 and Muhammad Arshad Khan v. J. & P. Coates Pakistan Ltd., Karachi and 2 others PLD 1977 Karachi 83. For setting aside the proceedings of a general meeting in which the infringement of the personal right is alleged, the voting power required for making a petition to the Court for the aforementioned purpose is 10%.
25. Whereas, for invalidating the election of Directors an application can be made under section 179 of the Companies Ordinance, 1984 by members holding not less than 20% of the voting power in the Company. The petitioners admittedly do not possess twenty per cent. Of the voting power in the Company. They cannot be allowed to achieve indirectly what they cannot do directly. No suggestion of fraud has been made, in the absence of the same no interference can be made in the matters intra vires of the Company. This petition is dismissed leaving the parties to bear their own costs.