1. ' MUHAMMAD MUJEEBULLAH SIDDIQUI, J.---This appeal is directed against the order dated 25-2- 2003, passed by the learned Single Judge of this Court, whereby application under Order 39, rules 1 and 2, C.P.C. Has been dismissed.
2. ' The relevant facts for the purpose of this appeal are that the appellant filed a suit for declaration, cancellation, permanent injunction and , specific performance seeking the following relief:- "(A) Declaration that the plaintiff is owner of 50.93% shares of Messrs Metropolitan Steel Corporation Ltd. By virtue of having made the full payment for such shares to defendant No, 1.
(B) Direct the defendant No,1 to specifically perform its duty and obligations under Novation Agreement dated 27-11-1994 in transferring of 50.93% shares of Messrs Metropolitan Steel Corporation Ltd. In favour of the plaintiff.
(C) Mandatory injunction against the defendant No,1 to issue 50.93% share of Messrs Metropolitan Steel Corporation Ltd. In favour of the plaintiff pursuant to agreement dated 27-11-1994.
(D) Declare that any change/alteration in the ownership of 50.93% shares in favour of any third patty instead of the plaintiff is ab initio void, illegal and ncit sustainable in law and further order that the same be delivered up for cancellation.
(E) Permanent injunction restraining the defendants 1 and 2, their subordinate officers, servants, agents, privy, legal heirs, persons acting under or through them from creating third party rights and interest in 50.93% shares of Messrs Metropolitan Steel Corporation Ltd. And further transfer of shares pursuant to advertisement dated 3-7-2002 is illegal, without jurisdiction and void.
(F) Permanent injunction restraining the defendants, their subordinates, officers, servants, agents, privy, legal heirs, persons acting under or through them from handing over the possession of the factory known as Messrs Metropolitan Steel Corporation Ltd. Situated at HS-1, Industrial Area, Landhi, Karachi 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.
(G) Receiver be appointed on the suit property i.e. Messrs Metropolitan Steel Corporation Ltd., situated at HS-1. Industrial Area, Landhi, Karachi is in danger of being wasted and misappropriated by the defendants and the plaintiff be put in possession of the suit property."
3. ' Alongwith the suit an application under Order 39, rules 1 & 2, C.P.C. Was filed seeking temporary injunction restraining the defendants/respondents from handing over the possession of the factory known as Metropolitan Steel Corporation Ltd. To any third party or create any third party right, interest in the suit property and shares of the company till final disposal of the suit.
4. ' On 23-1-2003, the plaintiff/appellant filed an application under Order 6, rule 17, C.P.C. Seeking amendments in the plaint and addition of following paras. In the prayer clause: -- "D(a) declare that the issuance of 73.6% right shares in favour of NDFC (NBP). HBL and UBL Messrs Metropolitan Steel Co oration Ltd. Is contrary to law, MOU and Articles an Memorandum of Association and therefore, illegal and id. D(b) without prejudice to the rights and contentions of the plaintiff that the increase of the share capital is contrary to law. Articles and Memorandum of Association and Memorandum of Understanding, the defendants i.e. NDFC (NBP), HBL and UBL had no right to sell/dispose of the purported 73.6% shares to any third party without the right of first refusal to the plaintiff and any alienation thereof is illegal and void. D(c) mandatory injunction directing the defendants i.e. NDFC (NBP) HBL and UBL to offer for sale the purported 73.6% shares to the plaintiff which has the right of first refusal."
5. ' The facts alleged by the plaintiff in the plaint are that the plaintiff is a Private Limited Company. On 9-5-1992, an agreement of sale was entered between defendant No,1, the Privatization Commission of Pakistan and Mr. Sardar Muhammad Ashraf D. Baloch for sale of 41.64.944 shares out of 80.00.000 shares of Metropolitan Steel Corporation Ltd., (hereinafter referred to as the MSCL) a public limited company. The shares agreed to be sold represented 50.93% of the total paid-up capital in MSCL. Mr. Sardar Muhammad Ashraf D. Baloch made part payment to the extent of 31.76% share agreed to be sold and the balance payment for 68.2% of the shares agreed to be sold, was to be paid by 1-5-1995.
6. ' Mr. Sardar Muhammad Ashraf D. Baloch was facing financial crunch and therefore, he entered into an agreement with the appellant/plaintiff for sale of shares agreed to be sold to him under agreement dated 9-5-1992. It was agreed in the sale agreement dated 9 5-1992 that on payment of entire sale consideration the Privatization Commission on behalf of State Engineering Corporation, Investment Corporation of Pakistan and State Insurance Corporation, shall transfer the shares in favour of Sardar Muhammad Ashraf D. Baloch. It was further agreed that the sellers (State Engineer Corporation Ltd., Investment Corporation of Pakistan and State Life Insurance Corporation through Privatization Commission, Ministry of Finance) shall co-opt Mr. Sardar M.
7. Ashraf D. Baloch and his nominees as Directors on the Board of Directors of the Company in place of the Directors representing 50.93% of the shares in MSCL and entrust to him and his nominees the control and management of the company. It was further agreed that for co-opting Directors of the buyer (Mr. M. Ashraf D. Baloch) the meeting of the Board of Directors of the company shall be convened within seven days of signing of the sale agreement. Inter alia the following conditions were also agreed:--
(5) According to Article 18.5 of the "Instructions to the Bidders", the successful bidder shall take over the entire personnel under their management and their service matters shall continue to be dealt with in accordance with the relevant laws in force in Pakistan. The services of the employees of the company shall not be terminated for 12 months from the date of take-over. The Buyer, hereby indemnifies the Seller against any claim or liability in respect of any employee whether presently in service or terminated before the date of this agreement. If there is any case pending in any Court in respect of any employee against the company or Seller, the Buyer shall be solely responsible in respect of that litigation and shall hold the Seller indemnified against all such claims and liabilities.
8. The Buyer undertakes to pay legal dues such as Provident Fund and Gratuity due to an employee of the Company when he/she eventually retires or leaves service. The Buyer also undertakes to share the liability arising on account of Golden Handshake to the extent of fifty per cent. To be certified by Privatization Commission as per procedure.
(6) In addition to the price for the share capital of the company, the Buyer undertakes to get release of counter guarantees amounting to Rs.456.070 million. The Buyer, hereby undertakes to repay loans/dues amounting to Rs.15.640 million to the Government/ SEC in four equal half-yearly instalments with mark-up on the outstanding amount at 14%, from the date of handing over the management for which Buyer will furnish a bank guarantee.
(7) The Government will transfer the shares to the Buyer upon receipt of 100% of bid value and on conclusion of the agreement and provided the Buyer furnishes bank guarantees for SEC/Government loans and replaces bank guarantees as per clause 6 above within sixty days of signing of the agreement. The share certificates will be kept in the custody of the Privatization Commission till such time SEC/Government counter guarantees are released.
(11) In case of any difference or dispute arising out of this agreement or relating to the meaning, intent, import or interpretation of any of the terms and conditions of this agreement including the "Instructions to the Bidders", between the Seller and the Buyer and their Successors, assigns or legal representatives, the same shall be referred to the Secretary, Ministry of Finance, Government of Pakistan for decision who shall be the sole arbitrator and his decision shall be final and binding on the parties subject to the remedies available under the Arbitration Act.
(13) In addition to the above the Buyer also hereby undertakes to pay to the Seller any liability which may be found due from the company to the Seller or to the Government of Pakistan and indemnifies the Seller against any liability found due to any financial Institution Government of Pakistan/Provincial Government, or any other department or institution after final settlements of accounts of the institutions mentioned above and which is not hereinbefore provided."
9. ' In the agreement dated 26-8-1993, the appellant/ plaintiff and Mr. Sardar Muhammad Ashraf D.
10. Baloch agreed that the Seller (Ashraf D. Baloch) shall co-opt the Buyer (appellant/plaintiff) and his nominees as Directors of the Board. Of Directors of the company in place of the Directors representing 50.93% of the shares in MSCL and entrust to him and his nominees the control and management of the company, immediately upon signing of this agreement. It was further agreed that the appellant shall pay to Mr. Ashraf D. Baloch all the amount paid to MSCL including any amount paid in respect of Golden Handshake or in respect of conduct of his business by 25-4-1995 and any amount due to the company by the seller (Mr. Ashraf D. Baloch) shall also be adjusted during this period. It was further agreed that after fulfilment of the terms and conditions of the sale agreement dated 20-4-1992 between Mr. Ashraf D. Baloch and Privatization Commission, the shares of MSCL will be transferred directly to the Directors of the appellant company in the proportion shown in the agreement. It was further agreed that immediately on signing of the agreement Mr. Ashraf D. Baloch shall hand over the possession of all assets and liabilities on as is, where is basis and meeting of the Board of Directors shall be held to confirm the change of management. The appellants further undertook to accept and fulfil all the terms and conditions of the sale agreement entered into by Sardar Muhammad Ashraf D. Baloch with Privatization Commission of Pakistan. Mr. Sardar Muhammad Ashraf D. Baloch, handed-over the possession of all the assets and liabilities to the appellant/plaintiff.
11. ' After execution of above agreement, the appellant furnished bank-guarantee for payment of the outstanding amount to the defendant No,
1. Thereafter, Novation Agreement was executed on 27- 11-1994 between Messrs Sardar Muhammad Ashraf D. Baloch (Pvt.) Limited the appellant and the defendant No,1 whereby the original Buyer relinquished all its right under the original sale agreement and the defendant No,
1. Released the original Buyer. In this Novation Agreement almost all the conditions agreed with the original buyer were incorporated and thus a new agreement came into existence between the appellant and the defendant No,
1. The appellant and the defendant No,1 inter alia agreed as follows:--- "(a) In case of any difference or dispute arising out of this Agreement or relating to the meaning, intent, import or interpretation of any of the terms and conditions of this Agreement between the Seller and the New Buyer and their successors, assigns or legal representatives, the same shall be referred to the Secretary, Ministry of Finance, Government of Pakistan for decision who shall be the sole Arbitrator and his decision shall be final and binding on the parties."
12. ' The grievance of the appellant/plaintiff agitated in the plaint is that despite the execution of tripartite Novation Agreement and submission of bank guarantee the defendant No,1, refused to transfer the shares in favour of the appellant/ plaintiff for ulterior motives. According to appellant/plaintiff they continued to operate MSCL effectively from 1994 onwards but due to constant economic burden of various financial institutions Messrs MSCL were forced to enter into a Memorandum of Understanding with NDFC predecessor of respondent/defendant No,2, National Bank of Pakistan and its consortium members for adjusting its outstanding dues. A Memo. Of Understanding was consequently executed on 21-7-1998 to streamline/restructure the outstanding dues of Messrs MSCL with NDFC. This Memo. Of Outstanding is a very important document for the purpose of this appeal and therefore, it is reproduced below:-- "Memorandum of Understanding ' This Memorandum of Understanding is made at Karachi this 21st day of July, 1998.
13. Between ' Metropolitan Steel Corporation Limited (MSCL), a Company incorporated in Pakistan and having its registered office at Plot No,HS-1, Landhi Industrial Area, Landhi, Karachi, (hereinafter referred to as MSCL).
AND
(i) National Development Finance Corporation---Established under the National Development Finance Corporation Act, 1973, (Act No,XIII of 1973) having its Head Office at Finance and Trade Centre, Shahra-eFaisal, Karachi (hereinafter referred to as NDFC).
(ii) United Bank Limited a Banking Company incorporated under the Company Laws of Pakistan having its registered office at---Karachi (hereinafter referred to as UBL).
(iii) Habib Bank Limited a Banking Company incorporated under the Company Laws of Pakistan having its registered office at Habib Bank Plaza, I. I. Chundrigar Road, Karachi (hereinafter referred to as HBL). Hereinafter jointly referred to as "Lenders".
14. ' This Memorandum of Understanding (MOU) records the agreement between MSCL and the Lenders (NDFC, UBL and HBL) regarding the amounts owing from MSCL to each of the Lenders as on 30th September, 1997 (hereinafter referred to as the Effective Date) on various accounts and the manner in which those amounts shall be paid to the Lenders and Witnesses as follows:--
(1) The indebtedness of MSCL to the Lenders as at the Effective Date arises on account of various loan and finance facilities provided by the Lenders to MSCL.
(2) That the MSCL admits and acknowledges that it is liable to pay to the Lenders (NDFC, UBL and HBL) the sum mentioned thereagainst, as on 30-9-1997.
15. (Rs. In million) percentage National Development Finance Corporation (NDFC)816.60 63.29 United Bank Limited (UBL) 147.30 11.42 Habib Bank Limited (HBL) 326.40 25.29 1290.30 100.00
(3) That the MSCL admits and accepts that presently it is unable to pay its debts. However, the MSCL agrees and undertakes to clear its liabilities towards the Lenders in the manner as prescribed in para. Twelve (12) hereof to which the Lenders namely NDFC, UBL and HBL have agreed.
(4) That the MSCL agrees and undertakes to place its excess/ surplus land measuring 25 acres at the disposal of the Lenders. In order to dispose of the surplus land at a fair price, a four-Member Committee comprising one each from NDFC, UBL, HBL and MSCL will be formed with full powers to negotiate and finalize the sale of the said surplus land.
16. ' The Committee shall take decisions by majority vote. Notwithstanding the above (i) a determination by the members from the Lenders on any aspect concerning the transaction shall not be challenged or called in question by the MSCL or its representative on the Committee and (ii) no price for the land or any other term relating to payment shall be accepted without the written concurrence of the members representing the Lenders. The MSCL shall execute within 15 days from the date of this MOU a general power of attorney authorizing the members of the Committee to enter into sale agreement, execute the conveyance deed and get the same registered and receive the sale consideration. The proceeds will be utilized for retirement of debt of the MSCL towards the Lenders namely NDFC, UBL and HBL.
(5) That the MSCL will issue standing instructions to all its debtors authorizing them to pay to NDFC the amount payable by them to MSCL. The collection of all receivables of MSCL will however, primarily, remain the responsibility of MSCL. The proceeds will be utilized for debt retirement and operational needs of MSCL. The NDFC in consultation with MSCL shall determine the amount of the operational needs of MSCL.
(6) That the MSCL has opened 3 accounts with NDFC viz., Revenue account, Debt Servicing account and operation and Maintenance account. All the revenue/income and other receipts of MSCL will be deposited in the Revenue account so opened by MSCL. The Revenue account will feed the remaining 2 accounts. An amount which is in line with the debt servicing requirements of HSCL during a particular period, will be transferred from Revenue Account to Debt Servicing Account.
17. However, any determination by NDFC will be treated as final and binding on all concerned. The MSCL will be entitled, subject to overall supervision of NDFC to operate the Operation and Maintenance account to meet its business requirements.
(7) That the amount of Rs.190,301,697.07 deposited by the Federation of Pakistan with the Nazir of the Court pursuant to orders of the Honourable Court of Sindh in Execution Application No,10 of 1994 towards satisfaction of the decree, if and when released, will be deposited in Revenue account of MSCL maintained with NDFC and will be appropriated in the following manner:--
(a) Rs.060.0 million will be appropriated by NDFC towards the liquidation of the liabilities of MSCL.
18. However, the aforesaid amount will be shared by NDFC with the remaining Lenders (UBL and HBL) as specified in para.12 hereof.
(b) Balance amount available with NDFC will be given to MSCL for its working capital needs by transferring into the operation and maintenance account of MSCL maintained at NDFC.
8. That MSCL agrees and undertakes to pay to NDFC its entire claim for refund of excise duty (approximately Rs.80.0 million) in Suit No,745 of 1992 (Metropolitan Steel Corporation Limited v.
19. Federation of Pakistan and others) pending in the Honourable High Court of Sindh if the suit is finally decreed in its favour and the decretal amount is paid and deposited by the judgment- debtor. However, the aforesaid amount will be shared by the NDFC with the remaining Lenders as specified in para.12 hereof.
(9) That MSCL has certified that the Lease Agreement executed by MSCL giving the lease of the plant and machinery of the mill to a third party has since been cancelled by MSCL and the possession and use of the plant and machinery installed therein are exclusively with MSCL and that there is no hitch or hindrance in the use and operation of the mill by MSCL itself. The MSCL will register the cancellation of lease with the competent authority within fifteen days of the signing of this MOU.
(10) That it has been agreed that MSCL will arrange a further cash equity of Rs.100 million to be raised through right issue and deposit the entire amount of equity of Rs.100 million in the Revenue Accounts maintained by MSCL with NDFC, at its FTC Branch, Karachi within 30 days from the date of raising the equity capital. The right issue will be initiated within a reasonable time after the implementation of the restructuring package as referred to in para. 12 of this MOU. Out of equity injection of Rs.100.0 million in the manner mentioned above, Rs.30.0 million will be transferred to Debt Servicing account of the respondent-company maintained with petitioner's FTC Branch and will be utilized for retiring the debt of Lenders as specified in para.11 hereof. The balance Rs.70.0 million will be utilized for working capital needs of MSCL.
(11) That it has been agreed that out of the equity injection referred in para. 10 above Rs.30.0 million will be utilized for debt retirement in accordance with sharing formula mentioned below:-- Pro-rata Share Sharing basis (Rs. In Million)
20. (Percentage) _________ NDFC 63.29 18.99 UBL 11.42 3.43 HBL 25.29 7,58 100.00 30.00
(12) That in return to the commitments made by HSCL as specified in paras. 4-11 hereof, the Lenders namely NDFC, UBL and HBL have agreed to restructure and reschedule their loans as under:--
(A) Restructuring Rs. In Million Total Outstanding 1290 (Payable to NDFC, UBL & HBL)
21. Less
(i) Down payment (out of Rs.100.0 million additional equity)30
(ii) Adjustment against collection of MSCL's receivables/sale of land:--
(a) Adjustment against sale of 25 acres of land100
(b) Adjustment against refund of sales tax (presently lying in the Court)160
(c) Adjustment against refund of excise duty (case80 pending in Sindh High Court)
(d) Adjustment against receivables from WAPDA55
(iii) Payment in 20 bi-annual installments along with mark-up 8161 p.a.416 841 Balance 449 To be waived and converted into equity)1290 ' The Lenders namely NDFC, UBL and HBL have agreed that an amount of Rs.221.41 million will be waived as set out in para. 19(R) and an amount of Rs.228.0 million will be converted into equity against which MSCL will issue shares to the Lenders namely NDFC, UBL and HBL as set out in para. 12
(C) hereof.
(B) The Lenders namely NDFC, UBL and HBL have agreed that subject to successful implementation of this package and debt servicing on time in future, an amount of Rs.221.40 million will be frozen and subsequently waived periodically in direct proportion to debt servicing by MSCL. The amount of waiver allotted to each Lender in the said waiver is given below:-- Share (Rs. In Million)
22. NDFC 142.53 UBL 18.82 HBL 60.66 221.41
(C) The Lenders namely NDFC, UBL and HBL have agreed with MSCL that out of the amount payable by MSCL to Lenders (NDFC, UBL and HBL) an amount, to the extent of Rs.228.0 million will be converted into MSCL's equity. The share of NDFC, UBL and HBL in equity conversion would be as follows:-- hare in conversion of loan amount into equity in Million)
23. NDFC 140.0 UBL 19.0 HBL 69.0 228.0 ' The MSCL agrees that it will complete all the requisite legal formalities and procedure and issue ordinary shares in the capital of MSCL to NDFC, UBL and HBL equivalent to the amounts shown above, within 90 (Ninety) days of the date of signing of this MOU.
(D) Furthermore the Lenders (NDFC, UBL and HBL) have agreed with MSCL that out of the total amount owed and payable by MSCL an amount of Rs.395 million be adjusted by way of collection of receivables /claims and sale of excess land as mentioned at 12.A (ii) a-d above. No mark-up will be charged on the said Rs.395 million till June 30, 1998. The situation will be reviewed in July, 1998 and decision will be made accordingly. The decision of NDFC will be final and binding on all parties.
24. The share of each Lender in the said Rs.395 million on pro rata sharing basis is given below:-- Pro-rata Sharing basisShare Share (Rs. In Million)
25. NDFC 63.29 250.00 UBL 11.42 45.11 HBL 25.29 99.89 100.00 395.00
(E) (i) After the adjustments as proposed above in paras. 12(A)-(D) above against the total outstanding amount payable by MSCL to the NDFC. UBL and HBL an aggregate amount totaling Rs.416 million will still remain to be paid. It is agreed that the balance amount will be paid by the company to the NDFC, UBL and HBL in 20 bi-annual instalments alongwith mark-up at 16.1% per annum. Institution-wise break-up of balance loan of Rs.416 million is given below:-- (Rs. In Million)
26. NDFC 265.08 UBL 61.55 HBL 89.26 415.89 ' The figure is rounded to Rs.416 million.
(ii) A grace period of 2 years will be allowed for payment of this amount i.e. the first instalment will fall due on 30-12-1999.
(iii) Each Lender namely NDFC, UBL and HBL will sign a separate supplemental agreement(s) to cover the revised repayment schedule(s) and the liability of the aforesaid amount to be paid by MSCL to the respective institution. The MSCL hereby undertakes unconditionally that it will sign all the requisite/documents, as required by the respective institutions to give effect and secure all the future repayments of the said liability.
(iv) The mark-up charged during the grace period will be frozen and recovered in one year after the payment of twenty bi-annual instalments referred above.
(v) The security/type of loan of each Lender (except HBL) would remain unchanged. If MSCL secures release of pledged item the amount paid by the MSCL to secure release of the pledge will be adjusted against the very next instalment falling due and accordingly the share of beneficiary.
27. Lender in the next instalment due will be reduced.
(F) Cut-off date for determining the amount outstanding against MSCL, for the purpose of current restructuring will be September 30, 1997 which is the effective date.
(G) Habib Bank Limited will be allowed to create second charge on the assets of the company.
28. Collateral of rest of the creditors will remain unchanged.
(H) Summary of adjustment of total outstanding amounts.
29. ' Total ____________________Adjustments Outstanding Down Waive as on 30-9- 97 payment Conversion into Equity Assignment of Balance Receivable Loan NDFC 816.60 18.99 142.53 140.00 250.00 245.08 UBL 147.30 3.42 18.22 19.00 45.11 61.55 HBL 326.40 7.59 60.66 69.00 99.89 89.26 1290.30 30.00 221.11 228.00 359.00 415.89 (13)That it has been agreed between the parties that a consultant will be appointed by NDFC to implement the whole restructuring exercise. His remuneration will be shared by the NDFC, UBL and HBL.
30. (14)That the Board of Directors of MSCL have appointed Mr. Haq Nawaz Akhtar as the Managing Director and Chief Executive Officer of MSCL w.e.f. June 1, 1998 for a period of one year extendable to one year on mutual consent on the terms and conditions as decided by the Board of MSCL in their meeting held on 22-5-1998.
31. It is agreed between the parties that the Managing Director so appointed will not be removed or changed without the written approval of NDFC, UBL and HBL.
32. (15)It is agreed that a full time financial controller will be appointed for the company. His remuneration will be borne by the Lenders (NDFC, UBL and HBL) participating in the restructuring exercise.
33. (16)That MSCL agrees, undertakes and assures the Lenders (NDFC, UBL and HBL) that it shall settle its disputes with Messrs National Bank of Pakistan, Messrs Chasemanhattan Bank NA, Messrs Deutsche Bank AG and Messrs City Bank NA, Inc. Amicably and clear its liabilities whereafter the recovery suit and the petitions for winding up filed by the aforesaid institutions and pending before the Courts shall be got dismissed as withdrawn---Pending settlement with NBP and the aforesaid three foreign banks, MSCL shall make an effort to get the recovery suit and the petitions for winding up adjourned sine die.
34. ' That it is agreed between the parties that in terms of the above the parties shall move a compromise application in J. M. 22 of 1997 seeking a conditional order of the winding up of MSCL from the Honourable High Court of Sindh.
35. ' It is clearly understood by MSCL and the Lenders namely NDFC, UBL and HBL, that non-compliance of the aforesaid conditions by MSCL will render MSCL liable to be wound up. The MSCL irrevocably accepts, admits and acknowledges that non-compliance as aforesaid shall be, and be deemed always to be, tantamount to an admission and acceptance by. MSCL, that it is unable to pay its debts and that it is just and equitable that it be wound up."
36. ' Nothing herein contained shall prevent the Lenders from seeking and/or pursuing such right or remedies against the MSCL, its sponsors or any guarantors of MSCL as may be available now or at any time hereafter or amount to any waiver of such rights or remedies.
37. ' On 22-5-1998 meeting of the Board of Directors of MSCL was held inter alia to discuss the matters pertaining to the averments made by the management in respect of restructuring of losses, advances from banks/ DFI and compromise agreement to recapitalize the company and present status of the same and discuss the resignation submitted by Syed Asghar Jamil Rizvi and to approve the appointment of Mr. Haq Nawaz Akhtar as new Chief Executive and Managing Director.
38. The following Directors attended the meeting:---
1. Mr. Mohammad Ali Sheikh Director
2. Mr. Manzurul Haq Director
3. Mr. Suleman I. Vohra Director
4. Mr. Ali Sher Jatoi Director
5. Mr. Ghulam Mustafa Jatoi Director
6. Mr. Munir Ahmed Director
7. Mr. S. Asghar Jamil Rizvi Managing Director and Chief Executive ' The minutes further contained as follows:-- "EFFORTS MADE BY THE MANAGEMENT FOR RESTRUCTURING OF LOANS BY BANKS AND NDFC AND REVITALISATION OF THE COMPANY"
39. ' The Managing Director briefly highlighted the efforts made by the management towards restructuring of the loans and advances outstanding against the company. He informed that a revival package which envisaged financial restructuring of the Company including conversion of a portion of loan into equity, freezing of portion of loan to be adjusted against recoverables including amount lying with the Nazir of High Court of Sindh and making available sufficient funds to the company by way of sponsors contribution towards equity etc. Etc., subject to a suitable strengthening of the management has been submitted to NDFC and consortium of banks which is under consideration. Approval by financial institutions for this package will not only revive the company but will also end the ongoing litigation. The M.D. Further informed that the company is still viable as there are orders in hand from WAPDA financed by IBRD and the DGP Army which could keep the company in operation for about a year.
40. ' Resignation of Syed Asghar Jamil Rizvi as Chief Executive and Managing Director ' Director, Ali Sher Jatoi presented to the Boar4, resignation submitted by Mr. Syed Asghar Jamil Rizvi as Chief Executive and Managing Director of the company-. The Board lauded the dedicated services of Syed Asghar Jamil Rizvi and the efforts made by him to keep the company alive during its difficult timing and handling all the negotiations, up till now with HDFC led consortium. Mr. Munir Ahmed suggested to the Board to approve a reward for Mr. Rizvi. The Board accepted the resignation and the following resolution was unanimously passed: ' Resolved that the resignation submitted by Syed Asghar Jamil Rizvi be and is hereby accepted w.e.f. May 31, 1998.
41. ' It was further resolved that in appreciation of his services and as a gesture of goodwill a suitable cash reward be made to Mr. Rizvi and the Chairman is hereby empowered to fix the amount of the reward.
42. Appointment of New Chief Executive and Managing Director ' Then the Chairman introduced Mr. Haq Nawaz Akhtar who was nominated to be appointed as new Chief Executive and Managing Director in place of Mr. Rizvi whose resignation has been accepted by the Board. The Bio data and proposed remuneration package was circulated to the members.
43. All the Directors hailed the nomination and expressed their utmost satisfaction. Mr. Ali Sher Jatoi said that this appointment of Mr. H.N. Akhtar will become a turning point for MSCL. Mr. Munir Ahmed said that keeping in view the present state of affairs and ongoing negotiations with banks, the appointment of Mr. H. N. Akhtar will build the confidence of the institutions, customers and shareholders and will help its revival."
44. ' It is alleged that by virtue of the Memorandum of Understanding dated 21-7-1998 and the meeting of the Board of Directors dated 22-5-1998 the management was for all practical purposes vested with NDFC, the predecessor-ininterest of defendant No,2. It is alleged that, however, the ownership remained with the appellants/plaintiffs. It is alleged that in spite of management being run by NDFC, the MSCL continued to suffer heavy losses. Subsequently, NDFC was wound up and the assets and liabilities were taken over by defendant No,2. The plaintiff has alleged that, the defendant No,1, instructed Prime Commercial Bank Ltd. Vide letter dated 9-5-2002 for encashment of bank guarantee which was furnished on 8-5-1994 and the same was encashed. However, in spite of payment of Rs.6.66 crores the shares were not transferred by the defendant No,1, in favour of appellant/plaintiff and a vested right accrued favouring the plaintiff for completion of the necessary formalities for the transfer of shares. It is further alleged that the undue delay and avoidance to complete all necessary formalities came recently to the knowledge of the appellant/ plaintiff when it discovered that the defendant No,2 has advertised as far back as on 3-7-2002 for the sale of 73.60% shares alongwith management and control of MSCL (the suit was filed on 31-12- 2002). It is contended that such advertisement could not have been issued especially when the above 73.60% shares included 50.93% shares .Which have already been paid by the plaintiff to defendant No,
1. Apart from the above 73.60% shares the balance shares were held by various Government institutions. According to appellant/ plaintiff, the defendants Nos.1 and 2 had no authority in law to sell 73.60% shares out of which 50.93% had already been paid for to the defendant No,1 by the plaintiff. It is further alleged that the appellant/plaintiff was ready and willing to run and manage MSCL and offer the same prices as to the defendants Nos. 1 and 2, however, they failed to hand over the operation to the plaintiff. It is averred that the plaintiff by virtue of holding 50.93% shares had the first right to refusal in the event of sale of shares of MSCL. It is further alleged that by surreptitious negotiations, the defendants Nos. 1 and 2 accepted the offer of defendant No,3 in the sum of Rs.290.5 million. It is alleged that the defendants 1 and 2 have acted in collusion for mutual benefit and the appellant/plaintiff have been kept in dark although it has vested right for the transfer of 73.60% shares. It is further stated in the plaint that the appellant/plaintiff is ready and willing to match the bid after the adjustment of amount already paid by the plaintiff and further reserve the right to increase their bid if so ordered by the Court.
45. ' On the basis of above averments a learned Single Judge of this Court granted ad interim injunction on 31-12-2002 which reads as follows:-- "31-12-2002 ' Messrs Abid S. Zuberi and A.N. Farooqi, Advocates for -plaintiff.
1. It is stated by learned counsel for the plaintiffs that the plaintiff by virtue of agreement to sell is the owner of 50.93% of the shares in Metropolitan Steel Corporation Limited having paid the entire amount for said shareholding as reflected from the letter of encashment of the Bank Guarantee made pursuant to the disposal of Suit No,383 of 1995. It is stated, at bar, that such Bank Guarantee has been encashed. It is, inter alia, contended that the defendant No,2, National Bank of Pakistan, has offered to sell 73.60% of the shares in MSCL which according to learned counsel are not available for disposal as the plaintiffs have already paid for 50.93% of the shares. It is further contended that the defendants are acting in post-haste to transfer the 73.60% shares alongwith management. And assets of Messrs Metropolitan Steel Corporation Limited. Accordingly, the urgency is granted.
46. 2 86 3. It is contended that offers to sell share in MSCL were invited behind the back of the plaintiffs.
47. Knowing fully well the plaintiffs state to the extent of 50.93% shares therein. Mr. Zubairi states that the plaintiffs are prepared to even improve the offer which has been received by the defendants for the sale of the shares of MSCL pursuant to offer received as a result of offer to sell vide Advertisement dated 3.-7-2002 Annexure `P/10' (at page No,147). Learned counsel for the plaintiffs states, at bar that the plaintiffs have been informed that the offer received from defendant No,2 is for Rs.290.00 Million. Learned counsel, on instruction, further submits that plaintiffs, in fact, are prepared to make an offer better than what has been received i.e. Rs.290.00 Million (Two Hundred and ninety Million). Since plaintiff claims to be owner of 50.93% share in MSCL and on the basis of assertion of their right of first refusal against the offer to sell, subject to deposit of 10% of the amount of 290.00 Million. The defendants may not finalize the transfer of the shares or hand over the possession of assets of MSCL to the defendant No,3, Messrs Alloy Steel 10% amount to be deposited within three (3) days with the Nazir of this Court. Plaintiffs also undertake to deposit shortfall, if any, in the total bid amount, as made by the defendant No,3 against the offer as advertised (Annexure `P/ 10'). Let notices through all modes and courier except publication be issued to the defendants for 3-1-2003."
48. ' Subsequently, the counter-affidavit and re-joinder were filed and the injunction application was dismissed on 25-2-2003 which has been impugned in this appeal.
49. ' In the impugned order, the learned Single Judge observed that the crux of the plaintiff's case is that the Lenders are now selling 73.50% 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. The learned Single Judge after perusal of various documents placed on record observed that all the 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 learned Judge further observed as follows:-- ' The plaintiff's 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."
50. ' The plaintiff's 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 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.
51. 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 anything to show that the 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 halfhearted attempt was made in the affidavit in rejoinder to introduce this argument 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 plaintiffs 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. "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.
52. ' With the above observation the injunction application was dismissed with cost.
53. ' We have heard Mr. Anwar Mansoor Khan, Advocate assisted by Mr. Abid Zuberi, Advocate for the appellants and Mr. Khalid Jawaid, Advocate for the respondent No,
1. Mr. Khalid Anwar, Advocate for the respondents Nos. 2 and 5, Mr. Mansoor-ul-Arfain, Advocate for respondent No,3, Mr. Afsar Abidi, Advocate for the respondent No,4 and Mr. Asif Ali, Advocate for respondent No,6.
54. ' Mr. Anwar Mansoor, has contended that the learned Single Judge, did not hear and dispose of the application under Order 6, rule 17, C.P.C. And did not consider the averments made therein. He has submitted that the learned Single Judge ought to have heard and disposed of the application under Order 6, rule 17, C.P.C., first and thereafter should have considered the injunction application.
55. He has further submitted that even if the application under Order 6, rule 17 was not allowed, the learned Single Judge ought to have considered the averments made therein as the amendment can be sought at any stage so as to include the necessary relief which has not been claimed in the original plaint and to allege the necessary facts which were omitted in the original plaint. In support of his contention he has placed reliance on a Division Bench judgment of this Court in the case of Mst. Malik Sultan and others v. Twin Store (Pvt.) Limited 2003 CLC 695, in which reliance has been placed on the judgment of Honourable Supreme Court in the case of Ghulam Bibi v. Sersa Khan PLD 1985 SC 345.
56. ' He has further contended that the facts narrated in the impugned order are not correct and the law discussed is also incorrect and contrary to the established principles. After reading from the plaint and the documents annexed thereto extensively, Mr. Anwar Mansoor Khan has contended that the execution of sale agreement between the Privatization Commission and Mr. Muhammad Ashraf D. Baloch and second agreement between M. Ashraf D. Baloch and the appellant and the execution of tripartite Novation Agreement are admitted. He submitted that the appellant fulfilled all its obligations under the said agreement and fully paid the sale consideration in addition to the payment of amount on account of Golden Handshake Scheme and other liabilities but the shares agreed to be sold were not transferred to Mr. Ashraf D. Baloch and the appellant, although management and control of the MSCL was handed over to them. He has submitted that the entire trouble started with the winding up of NDFC and taking thereof by the National Bank of Pakistan, who are averse to the appellant. He has contended that initially the Memo. Of Understanding was executed for the benefit of NDFC who were having management and control of MSCL though under compulsion and coercion practised upon the appellant. He has submitted that the original authorized capital was to the extent of 8 Million shares of Rs.10 face value and the appellant had purchased 4.1 Million shares which represented 50.93% of the shares and it constituted major shares which gave the right of control and management of the company to the appellant. He has maintained that although the shares were not formally transferred to the appellant but with the payment of entire sale consideration the appellant become the real and actual owner of the majority shares. According to him the banks and NDFC in collusion with each other enhanced the authorized capital with mala fide intention to deprive the appellant of the management and control of the company which is not permissible in law. He has insisted that the appellant who is new purchaser was not a party to the Board's Resolution dated 22-5-1998 in which the authorized capital was increased and in the Memo. Of Understanding the Directors representing the appellant were made to admit each and everything and the purpose of entire exercise was to dilute the majority shares and resultantly the control and management of the appellant held over the company. He has urged that in the MOU the new arrangement has been devised for restructuring and rescheduling but the arrangement therein neither amounts to restructuring nor rescheduling.
57. He has further submitted that it was a financial arrangement and the appellant was entitled to first offer for. Purchase of the increased shares. He has however, conceded that there is no statutory provision in this behalf and there is no contract creating any such right in favour of the appellant.
58. He has stated that the appellant offered to pay Rs.228 million through its Advocate on 31-12-2002 and deposited 10% of the above amount as directed by the Court. He has further submitted that the entire exercise of enhancing the authorized capital is mala fide and amounts to unfair practice which is alone sufficient to grant the interim injunction as according to him, a prima facie case is made out.
59. ' On the other hand, Mr. Khalid Anwar, learned counsel for the respondents Nos.2 and 5 submitted that initially the authorized capital was worth 8 Million shares of the face value of Rs.10 each. The Privatization Commission agreed to sell 4.1 Million shares to Mr. Ashraf D. Baloch, who was obliged to fulfil the other conditions specified in the agreement in addition to the payment of agreed sale consideration. He has further submitted that in the original agreement sale price was agreed at 16.8 crores and subsequently at the instance of appellant it was reduced to 6.6 crores out of which the appellant paid 5.5 crores and executed bank guarantee in the sum of Rs.1.1 crores undertaking to make payment within 60 days. The guarantee was furnished on 31-5-1995 and after few days the appellant filed a suit and got a stay order which was finally encashed after 8 years. He has further submitted that MSCL owed 5.5 crores to bank and the Government furnished guarantee to the bank in the sum of 456.070 Million which guarantee has not been discharged as yet. He has referred to paras. 6 and 7 in the first sale agreement dated 9-5-1992 (which has been reproduced in the earlier part of this order) and has contended that the obligation under above conditions have not been fulfilled as yet with the result that the shares could not be transferred to the appellant. He has maintained that the appellant had realized that all the conditions under the agreement have not been complied with by them and therefore, for a period of 10 years no legal action was taken for transferring of the shares lying with the defendant No,
1. He has argued that the appellant could approach the High Court under section 152 of the Companies Ordinance, 1984 if the name of appellant, fraudulently or without sufficient cause was not being entered in the register of members. He has further submitted that the appellant could approach the Corporate Law Authority and that was also not done.
60. ' He has submitted that the management of MSCL was taken over by the original Buyer and thereafter by the appellant in the year 1992 but they could not manage and run the company and created mess. The debt rose to 129 crores and in the year 1997, the Directors representing the appellant themselves approached for restructuring and for coming to their help with the result that the Banks came to their rescue. He has vehemently argued that Mr. Ali Sher Jatoi, through whom the suit has been filed and Mr. Munir Ahmed representing the appellant/plaintiff participated in the Board of Directors' meeting dated 22-5-1998 and thereafter signed the MOU dated 21-7-1998 and made no complaint of any sort pertaining to any compulsion-coercion exercised on them or any malice or mala fide on the part of the respondents/defendants. He has further submitted that the respondents/defendants waived the loan to the extent of Rs.221.41 Million and due to non- availability of funds with MSCL agreed to convert the amount of Rs.228 Million in the equity against issuance of shares to the NDFC, UBL and HBL. He has contended that all this was done to bail out and revive the company which was totally destroyed by the appellants. He has further submitted that subsequently, Mr. Ali Sher Jatoi and Mr. Munir Ahmed, the Directors representing the appellant lost interest in the management of MSCL and withdrew their names from incoming election vide letter dated 12-12-1999 addressed to Chairman and Chief Executive of MSCL. According to Mr. Khalid Anwar, the authorized capital was increased and the shares were issued to the NDFC, UBL and HBL in accordance with the provisions contained in section 87 of the Companies Ordinance, 1984, as there was no other way out to pay the outstanding balance of loan to them. He has said that it was done as a matter of a very great favour to the MSCL and at the beseeching of the appellant themselves, therefore, now they cannot turn around and say that it was all mala fide and with malice to deprive them of their vested right. He has next contended that the advertisement for sale was published in the newspaper and highest bid given by respondent No,3, was accepted and full payment was made by him. He has taken plea that the appellant in spite of full knowledge that the authorized capital of MSCL has been increased, 228 Million shares have been issued to the NDFC, HBL and UBL in the year 1998 and subsequently, the sale of said shares have been advertised in newspapers kept silent till the full payment of the bid money by the respondent No,3 and acceptance thereof, which shows that the appellant itself filed the suit on false assertions and with unclean hands as rightly observed by the learned Single Judge, Mr. Khalid Anwar has vehemently argued that . The appellant obtained ad interim injunction by concealment of facts and by making assertion that they were the majority shareholders to the extent of 50.93% of the shares although they were reduced to a very minor shareholders at their own instance and consent in the year 1998.
61. He has submitted that the appellant was fully aware that 228 Million shares held by the bank had nothing to do with 4.1 shares agreed to be sold to them and still they made a misstatement that 73.60% shares advertised for sale were inclusive of 50.93% of the shares agreed to be sold to the appellant. He has maintained that the learned Single Judge was perfectly justified in holding that the misstatements made are sufficient to decline the prayer of issuance of interim injunction. Mr. Khalid Anwar, has fully supported the impugned order and has submitted that the appellant has not made out a prima facie case for issuance of interim injunction. The other Advocates for the respondents have adopted the arguments addressed by Mr. Khalid Anwar.
62. ' In reply arguments Mr. Anwar Mansoor, learned counsel for the appellant submitted that although Mr. Ali Sher Jatoi and Mr. Munir Ahmed have been described as Directors of MSCL representing the appellant but they could not be appointed as Directors because under the Companies Ordinance only such person can be appointed as Director who is member of the company and a member means in relation to a company having share capital as subscriber to the memorandum of the company and every person to whom a share is allotted or who becomes holder of the share which gives him a voting right in the company and whose name is entered in the register of its members.
63. He has contended that admittedly the shares have not been transferred to the appellant and their name has not been entered in the register of company therefore, notwithstanding the description of Mr. Ali Sher Jatoi and Mr. Munir Ahmed, as Directors of company and having exercised management and control of the company from 1993 to 1998 they were not Directors in law.
64. ' We have carefully considered the contentions raised by the learned Advocates for the parties and material available on record. We would not like to make any observation about the application submitted before the trial Court seeking amendment in the plaint, because the application is still pending and while sitting in appeal it would not be appropriate to make any observation on the merits of a pending application. We would like to observe that, if for the sake of considering whether the appellant has made out a prima facie case warranting issuance of interim injunction, the averments made in the application under Order 6, rule 17, C.P.C., are taken into consideration, no prima facie case is still made out. The reason being that Mr. Ali Sher Jatoi and Mr. Munir Ahmed were taken on the Board of Directors of MSCL in pursuance of the agreements executed between the appellant and the Privatization Commission which has been reproduced in the earlier part of this order. At this stage, we would not like to give any finding whether they could be appointed as Directors of MSCL in accordance with the law or not, but we would like to observe that the authorized capital was increased and 228 Million shares were transferred to the banks/Lenders at the instance of Mr. Ali Sher Jatoi and Mr. Munir Ahmed, representing the appellant. Everything was done with their full knowledge and consent and we are constrained to observe that glaring misstatement has been made in the original plaint in which it is stated that 73.60% shares sought to be sold were inclusive of 50.93% shares agreed to be sold to the appellant.
65. ' Mr. Anwar Mansoor, has not been able to make out a prima facie case of commission of any mala fide act with malice or illegality, in enhancement of the authorized capital of the company and issuance of shares to the bank by conversion of the outstanding balance to equity. We further find substance in the contention of Mr. Khalid Anwar that in addition to the payment of price for share capital the appellant was required to get released the counter guarantees amounting to Rs.456.070 Million which the appellant failed to do, as no such document has been produced in this regard.
66. ' We further find that there is an arbitration clause in the first agreement between Privatization Commission and M. Ashraf D. Baloch and tripartite Novation Agreement, to the effect that in case of any difference or dispute arising out of the agreement between the Seller and the Buyer the same shall be referred to the Secretary, Ministry of Finance, Government of Pakistan for decision, who shall be the sole arbitrator and his decision shall be final and binding on the parties. The appellant never invoked this arbitration clause. We further agree with the contention of Mr. Khalid Anwar that 73.60% shares sold to respondent No,3 has nothing to do with the shares agreed to be sold to the appellant and thus, notwithstanding, any vested right in favour of appellant pertaining to 4.1 million shares the MSCL could enhance the authorized capital and transfer the shares under section 87 of the Companies Ordinance, 1984.
67. ' For the foregoing reasons, we are of the opinion that the learned Single Judge has rightly rejected the injunction application to which no exception can be taken. The impugned order is upheld and the appeal stands dismissed.
68. ' After hearing the learned Advocates for the parties on 21-3-2003, the appeal was dismissed by a short order and these are the detailed reasons in support. Thereof.