' This is an application (C.M.A. No,8618 of 2002) filed by the plaintiff under Order 39, rules 1 and 2, C.P.C. Seeking an interim injunction restraining the defendants and the persons acting through them from handing over the possession of the factory known as Metropolitan Steel Corporation Limited (hereinafter referred to as MSCL) to any third party or create any third party rights, interest in the suit property and shares of the company till final disposal of the suit.
2. Briefly the case of the plaintiff is that vide an Agreement to Sell dated 9-5-1992 (hereinafter referred to as the Original Agreement) the Privatization Commission agreed to sell 4,164,944 shares representing 50.93% of the paid-up capital of MSCL to Sardar Muhammad Ashraf D. Baloch (Pvt.)
Limited (hereinafter referred to as the Original Buyer). Initially these shares were agreed to be sold at a total price of Rs,168,680,232 calculated on the basis of Rs,40.50 per share. In terms of the Original Agreement, the Privatization Agreement was also obliged to co-opt the directors on the Board of MSCL nominated by the Original Buyer and entrust the management of MSCL to such nominees. It is important to note that the shares agreed to be sold by the Privatization Commission were owned by the State Engineering Corporation, Investment Corporation of Pakistan and State Life Corporation of Pakistan.
3. The Original Buyer made partial payment of the purchase price and thereafter agreed to sell the said shares to the plaintiff vide Agreement of Sale dated 26-8-1993. The plaintiff, the Original Buyer and the Privatization Commission also entered into a Novation Agreement dated 27-11-1994 to record the aforesaid sale by the Original Buyer. It is the plaintiffs case that the said shares have not been transferred in the name of the plaintiff allegedly on account of mala fide reasons. The plaintiff however admits that it has been operating MSCL from 1994 onwards.
4. The 'plaintiff has further stated that a Memorandum of Understanding dated 21-7-1998 (hereinafter referred to as the MOU) was executed between MSCL, the erstwhile N.D.F.C. Which has now been amalgamated with defendant No,2 (National Bank of Pakistan), Habib Bank Limited and United Bank Limited (hereinafter referred to as the Lenders).
5. In terms of the MOU, the outstanding liabilities of MSCL were restructured by way of revising the repayment schedule, waiver of certain liabilities and a debt equity swap. It is the last of the aforesaid steps which is the basis of the present' dispute. In terms of para.12(A) of the MOU an amount of Rs,228 million out of the outstanding liabilities admitted by MSCL was agreed to be converted into equity of MSCL and MSCL agreed to issue shares to the Lenders para.12(C) of the MOU reiterates the aforesaid commitment of the parties and gives the actual amounts which each Lender agreed to convert into equity. In this para. MSCL has also undertaken to complete all formalities for issuance of shares within 90 days of the date of signing the MOU.
6. It appears from the perusal of various documents brought on record by defendants Nos, 2 and 3 that MSCL did issue the shares to the Lenders in the agreed amount.
7. The crux of the plaintiff's case is that the Lenders are now selling 73.60% shares by calling bids through press advertisements and such shares include the 50.63% shares purchased by the plaintiff from the Original Buyer, which have not been transferred in the name of the plaintiff till date. On the basis of the aforesaid contention an ad-interim injunction was granted in favour of the plaintiff vide order dated 31-12-2002.
8. Defendants Nos,2 and 3 have filed their counter-affidavits alongwith a number of documents and the plaintiff has filed an affidavit in rejoinder to the counter-affidavits filed by defendants Nos,2 and 3.
9. I have perused the record and heard the learned counsel for the parties at length.
10. Learned counsel for the plaintiff has asserted that the shares that the plaintiff is the owner of 50.93% shares of MSCL and accordingly is entitled to first right of refusal for the purchase of shares issued to LendeRs, In support of his assertion, the learned counsel has placed reliance on MOU and the argument that the shares issued to the Lenders were "right shares" and could have only been issued to the Lenders after first offering the same to the plaintiff.
11. The learned counsel for defendant No,2 has contradicted the aforesaid assertion of the plaintiff s counsel on two grounds. Firstly he has referred to the MOU emphasizing that the plaintiff was not a party to the MOU and therefore cannot claim any right on the basis of MOU and moreover the MOU does not contain any provision giving any preferential or other right to the plaintiff. Secondly the learned counsel for defendant No,2 has urged that the shares that are being sold by the Lenders were issued to them in lieu of the outstanding liabilities of MSCL in accordance with the procedure laid down in sections 86 and 87 of the Companies Ordinance, 1984 and has no connection whatsoever with the shares purchased by the plaintiff from the Privatization Commission.
12. Learned counsel for defendant No,2 has also referred to the minutes of meeting of the Board of MSCL held on 22-5-1998 wherein the issuance of shares to the Lenders was approved while the directors nominated by the plaintiff were on the Board of MSCL. He further asserts that Lenders had advertised for the sale of the shares in the first week of July, 2002 while the present suit has been filed on 31-12-2002 after the lapse of almost six months. According to the learned counsel the delay is fatal to the plaintiffs case and the plaintiff is not entitled to the injunctive relief.
13. The learned counsel for defendant No,3 has opposed the application on the basis that the shares sold by the Lenders and purchased by defendant No,3 were issued to the Lenders as a result of the debt equity swa p and the Lenders are fully entitled to sell the same. He further asserts that these shares have no connection with the shares purchased by the plaintiff from the Privatization Commission.
14. The learned counsel for the Privatization Commission states that plaintiff has not made the full payment for the shares agreed to be sold by the Privatization Commission by way of the original agreement and the novation agreement and therefore the plaintiff is not the owner of the shares.
15. The learned counsel appearing for the newly added defendant UBL has adopted the arguments of the counsel for defendant No,2.
16. As noted above, the shares included in the original agreement and the novation agreement were owned by the State Engineering Corporation, Investment Corporation of Pakistan and State Life Corporation of Pakistan as is specified in recital A of the original agreement. However, the shares owned by the Lenders were issued in lieu or the outstanding liabilities of MSCL as is clearly set out in the MOU. Defendant Nos,2 and 3 have filed several documents alongwith their affidavits which include the Annual Reports of MSCL and the Statutory Returns filed by MSCL from time to time. A perusal of these documents show that pursuant to the MOU, MSCL had convened an extraordinary general meeting for passing special resolutions for increase in the authorized capital of MSCL and the issuance of shares to the LendeRs, The proposed special resolutions were passed in the EGM held on 16-11-1998 and the extract of the minutes of EGM was also filed with the Companies Registration Office at Karachi. Thereafter the shares were issued and the requisite returns were filed by MSCL with the Companies Registration Office at Karachi. All of these actions were taken when the directors nominated by the plaintiff were on the Board of MSCL including the person authorized to file the present suit. The plaintiffs assertion that the shares which were subject-matter of the original agreement and the novation agreement are part of the shares being sold by the Lenders is patently false.
17. The plaintiffs' assertion that it has right of first refusal for the purchase of shares being sold by the Lenders appears to be equally baseless. The learned counsel for the plaintiff has been unable to point out any provision in the MOU which gives any such rights to the plaintiff who in any case is not a party to the MOU. The learned counsel for the plaintiff also attempted to support this assertion by arguing that the shares in favour of the Lenders could not have been issued without first offering the same to the plaintiff in proportion to the plaintiff s shareholding of 50.93%. This argument again is misconceived for the reason that admittedly the shares subject-matter of the Original Agreement and Novation Agreement have not been transferred in the name of the plaintiff. Furthermore section 86 of the Companies Ordinance, 1984 does allow issuance of shares without issuance of right shares subject to certain conditions. Similarly section 87 of the Companies Ordinance, 1984 also allows issuance of share in lieu of the outstanding debts. The plaintiff has not brought on record any thing to show that shares in favour of the Lenders were not issued in accordance with the provisions of the Companies Ordinance, 1984 nor the plaintiff appears to have initiated any action under the Companies Ordinance, 1984. I may also point out that this assertion was not raised in the plaint and only a half-hearted attempt was made in the affidavit in rejoinder to introduce this argument.
18. The plaintiff has also come to this Court after a lapse of six months of the advertisement for sale of shares by the Lenders which was published in leading newspapeRs, The plaintiff has stated in the plaint that it was shocked upon receiving credible information from various sources, the plaintiff however has failed to disclose these sources which provided this information after a lapse of six months.
19. The plaintiffs claim that it is ready to operate MSCL and to improve the bid also appears to be illusory in view of its own conduct in the past. The plaintiffs letter dated 16-12-1999 attached with the counter-affidavit of defendant No, 2 clearly shows that the plaintiff s nominee directors voluntarily withdrew their nominations from the election of MSCL directors and have never shown any interest in the affairs of MSCL thereafter. There would not be any possibility of the plaintiff running the management of MSCL even if the shares subject-matter of the Original Agreement and the Novation Agreement are transferred to the plaintiff since the same would only constitute a small minority in the currently paid-up capital of MSCL.
20. It is regrettable to note that the plaintiff has deliberately attempted to cause a false impression that it owns more than 50% shares of MSCL and the shares being sold by the Lenders include such shares. Such conduct alone would disentitle the plaintiff from obtaining any equitable relief.
21. In view of the aforesaid, the plaintiff has failed to make out a prima facie case. The balance of convenience is also not in favour of the plaintiff nor the plaintiff has been able to show any irreparable loss that may be caused to the plaintiff on account of sale of shares owned by the Lenders which were issued to them in lieu their outstanding dues.
22. The application is, therefore, dismissed with costs.