SUIT NO.1408 OF 2012
Shafique Ahmed Qureshi Hyderabad Chambers of
& others Vs. Commerce & Industry
and another
SUIT NO.1409 OF 2012
Shafique Ahmed Qureshi Hyderabad Chambers of
& others Vs. Commerce & Industry
and others
Dates of hearing 27.03, 10.04, 24.04, & 29.5.2013.
Dr.Mohammad Farogh Naseem, Advocate for the plaintiffs in both the suits.
Sardar M.Aijaz Khan, Advocate for the defendant No.1 in both the suits.
Mr.Ravi Pinjani, Advocate for the defendant Nos.3 to 8 in suit No.1408/2012.
Mr.Jhamat Jethanand, Advocate for the defendant Nos.11 to 18 in Suit No.1408/2012 & for defendant No.6 to 13 in suit No.1409/2012.
Mr.Haq Nawaz Talpur, Advocate for defendant Nos.9 and 10 in Suit No.1408/2012 & for defendant No.8 in suit No.1409/2012.
Judgment
Muhammad Ali Mazhar, J:- This common judgment will dispose both the suits along with listed applications.
2. The suit No.1408/2012 has been filed for declaration and permanent injunction. The plaintiffs have prayed for the declaration that holding of elections by the defendants for the year 2012-13 upon the existing voters list/electoral college is completely without jurisdiction and of no legal effect. The brief facts of the case are that the plaintiffs are members of the defendant No.1 which is registered under Section 42 of the Companies Ordinance 1984. Earlier the defendant No.1 was regulated by Director General of Trade Organization, Ministry of Commerce, Govt. of Pakistan, however, due to lapse of the Trade Organization Ordinance, 2007, the defendant No.1 is not regulated by the said department and in this regard C.P.No.D-3124/2012, is pending in this court in which interim order has been passed. The only statutory Organization which regulates the functions of the defendant No.1 is the defendant No.2, which is situated at Karachi. In terms of clause 6 of the Article of Association of the defendant No.1 there are two classes of membership one is “Corporate Member” and the other is “Associate Member’. It is necessary that such members must have annual turnover of more than Rs.50 million. The injunction application CMA No.9910/12 was fixed in this court for orders on 20.9.2012, when notice was issued to the defendants and till then the defendants were restrained from holding election.
3. The Suit No.1409/2012 has been filed by the same plaintiffs for the declaration that the actions of the defendants Nos.4 and 5 along with some illegal members of the defendant No.1 in interfering with the affairs of the defendant No.1 and appointing an illegal Ad-hoc Committee on 01.10.2012, sealing the premises of the said defendant No.1 so also the failure of the defendant No.2 and 3 to take corrective actions are without jurisdiction, illegal, mala fide and of no legal effect. Brief facts of this case are that vide order dated 20.09.2012 this court in Suit No.1408/2012 stayed the elections of the defendant No.1, which means that previous elected body will continue till next date or the next election as the defendant No.1 cannot be left without duly authorized or elected representatives. The grievance of the plaintiff in the present suit is that the defendant No.4 and 5 without any lawful authority and in violation of Section 177 of the Companies Ordinance sealed the office of the defendant No.1. Section 177 of the Companies Ordinance provides that the directors so retiring shall continue to perform their functions until their successors are elected. The injunction application (CMA No.10409/12) was fixed in this court for orders on 2.10.2012 on which notice was issued to the defendants and till then the Nazir was directed to visit the office of the defendant No.1 and contact the defendant Nos.4 and 5 and submit his report that under what authority or law, office of the defendant No.1 has been sealed and if it is found that office has been sealed, the defendant No.4 and 5 will de-seal the premises and allow the office bearers to continue their office.
4. The defendant Nos.1, 2, 3 to 8, 9 and 10 have filed their written statement while Mr.Jhammat representing defendant Nos.11 to 18 stated that the counter affidavit filed by his clients may be treated their written statements. On 24.4.2013 all the learned counsel while concluding their arguments jointly stated that since only the issues of law are involved hence both the suits may be treated short cause and be decided on the basis of arguments and documents available on record as there is no factual controversy is involved for which evidence is required to be led. By consent let both the suits be treated short cause in terms of Rule 22 of the Sindh Chief Court Rules (O.S). Ref: My own judgment reported in 2010 CLC 1253 (Abu Dhabi Medical Devices Co. L.L.C Vs. Federation of Pakistan).
5. After examining the pleadings and the bone of contention between the parties it would be appropriate and expedient to cast following issues of law:-
(1) Whether the suit is maintainable and this court has territorial jurisdiction to try the suit?
(2) Whether a person can become associate member of the defendant No.1 who is not a body corporate or a multinational or sales tax registered manufacturer and business concern not having annual turnover of Rs.50 million or above?
(3) Whether the previously elected body rightly continued to hold their offices after the restraining order passed by this court on 20.9.2012 in Suit No.1408/2012?
(4) What should the decree be?
6. Mr.Farogh Naseem, the learned counsel for the plaintiffs argued that the schedule for the annual election of the Defendant No.1 for the year 2012-13 was announced, which, inter alia, provided that from 23.7.2012 to 30.7.2012 a provisional list of the voters of the Defendant No.1 shall be displayed and within 7 days and any person having any objections to the said provisional voters list may submit objections. The plaintiffs submitted their objections over 90% of the members of both the classes did not transact an annual turnover of Rs 50 million and above but the objections submitted by the plaintiffs were not decided. The list of voters is to be corrected so that the voters who are a "body corporate" or "multi-national" or those who are registered in sales tax as manufacturers having annual turnover of Rs.50 million or above or those "business concerns" having annual turnover of Rs.50 million or above may be included and those having annual turnover less than Rs.50 million may be excluded. As regards the second suit No.1409/2012 the same has been filed in the aftermath of the interim order dated 20-9-2012 passed in the first Suit No.1408 of 2012. In consequence of the above interim order, and in view of Section 177 of the Companies Ordinance, 1984, the old/existing office bearers are to continue till the holding of fresh elections but despite clear position, the defendants Nos. 4 and 5 along with some illegal members of the defendant No.1 entered into the office of the defendant No.1 on 1.10.2012.
7. To the alleged applicability of Trade Organization Ordinance in the matter, it was averred that Sections 1 (3), 2 (d), 3 (2) (b) (c) (e) (f), 2 (I) (q), 3 (1), 3 (8) and 34 (1) of the Trade Organizations Ordinances, 2006, 2007 and 2008 have clearly provided that in case an entity whose functions/businesses were being carried out in more than one province, the Trade Organization Ordinance, 1961 would stand repealed. He referred to Memorandum of the defendant No.1. The objects clause of the Memorandum of the Defendant No.1 is clause No.3. Clause 3(a) of the Memorandum confirms that one of the objects of the Defendant No.1 is to provide protection and promotion of trade, commerce-cum-industry and services in Hyderabad and elsewhere. The word "elsewhere" is of a very wide import and signifies everywhere which can be anywhere in Pakistan. Similarly, clause 3(d) of the Memorandum specifies the promotion of the understanding of businessmen and industrialists outside Hyderabad and to safeguard general mercantile interest in Hyderabad and "outside". Also clause 3(f) prescribes the protection and promotion of rights and privileges of trade, industry and services in and outside Hyderabad. The term "outside" as used in clauses 3(d) and 3(f) is again of very wide import. No restriction can be inferred for the word "outside" as it means anywhere outside Hyderabad, meaning anywhere in Pakistan or outside Pakistan. Clause 3(o) of the Memorandum permits the defendant No.1 to purchase, construct, lease or acquire any movable/immovable property and to sell or mortgage the same. No territorial restriction has been imposed. This means that the property which is the subject matter of clause 3(o) can be situated anywhere in Pakistan or even abroad. Clause 3(w)(iii) and (iv) of the Memorandum further confirms that the Defendant No.1 can help in the exports outside of Pakistan and imports from other countries of all industrial products commodities in all possible ways, including advancing of loans to Pakistan and other dealers and manufacturers for consideration or otherwise. This also confirms that the activities of the defendant No.1 are not confined to Hyderabad or the province of Sindh. Most importantly clause 3(aa) specifies that the Defendant No.1 can nominate, delegate as advisors to represent the employers of Pakistan at the annual international labour conferences and others. This clearly means that the scope of activities of the Defendant No.1 is not confined to Hyderabad or Sindh only but extends to the entire Pakistan. He further argued that in view of the operation of the judgment of the Hon'ble Supreme Court of Pakistan in Sindh High Court bar Association v. Federation of Pakistan PLD 2009 SC 879 at page 961 para vii it is more than clear that the Trade Organizations Ordinance, 2009 not having been saved or converted into an Act of Parliament, has expired by efflux of time and the lapse of the Trade Organizations Ordinance, 2009 is also evident from the provisions of Article 264(a) of the Constitution, which specifies that if a law is repealed or deemed to have been repealed by virtue of the Constitution, the said repeal would not result in the revival of anything which was not in force or existing at the time when the said repeal took effect. Admittedly, in view of Article 89(2), the lapse of the Trade Organizations Ordinance, 2009 by efflux of time is by virtue of provision of the Constitution and hence in view of Article 264(A), upon the lapse of the latter Ordinance, nothing would automatically revive as nothing was in force at the time of the repeal. The issue as to whether the expiry of the Ordinance, 2009 has led to automatically revival of the Trade Organizations Ordinance, 1961 is sub judice in CP No.D-3124/2010 in which on 2.11.2010 an interim order has been passed. The defendant No.1 is a petitioner in the said petition upon which arguments have been finally heard and the order has been reserved.
8. Sardar M.Aijaz Khan, learned counsel for the defendant No.1 argued that as per clause 6 of the Memorandum and Articles of Association of the Defendant No.1 both the ‘Corporate’ and ‘Associate’ members are required to have an annual turnover of rupees 50 million and above. Even in the Rules of the lapsed Trade Organization Ordinance, 2007, the requirement annual turnover of Rs.50 million or above for the purposes of membership of ‘Associate’ and ‘Corporate’ member was mandatory. This requirement is necessary for maintaining some standard otherwise, every person will become member whether maintaining the required limit of annual turnover or not. The record shows that a large number of present members do not qualify as their annual turnover is below Rs.50 million. Out of 1,382 number of members 1,233 number of members represents the ‘Associate Member’ and 149 number of members represents the ‘Corporate Member’.
9. Mr.Waqas Shaikh, Law officer filed the written statement of defendant No.2 (S.E.C.P). According to their record, the plaintiff Nos.1, 3 and 4 are corporate members. It was further averred that the defendant No.1 is a trade organization licensed by Director General Trade Organization and it is also registered with defendant No.2 under Section 42 of the Companies Ordinance, 1984. It was confirmed that the defendant No.2 had received complaints from plaintiff Nos.1 to 4 regarding fake voters list issued by defendant No.1 for the election 2012–2013 on 20.9.2012 by post and the defendant No.2 issued a notice vide letter dated 24.9.2012 to defendant No.1 for submission of their comments on the said complaints but no response was received from defendant No.1 yet.
10. Mr.Jhamat Jethanand, learned counsel argued that declaration and injunction sought do not fall under the provisions of Sections 42 and 53 to 55 Specific Relief Act. The plaintiff's case is that in view of lapse of Trade Organization Ordinance 2007, the defendant No.1 is not regulated by Director General and in this regard interim orders are passed in C.P.NO.D-3124 of 2010 as such defendant No:2 is the regulatory authority of defendant No.1. He argued that the matter in suit is mainly governed by the provisions of Trade Organization Ordinances promulgated from time to time. The 1st Ordinance of 1961 was the permanent legislation. All subsequent Ordinances were temporary legislation which lapsed under Article 89 of the Constitution i.e. Trade Organization Ordinance 2006, Trade Organization Ordinance 2007 and Trade Organization Ordinance, 2008 and 2009. It was further contended that the articles/memorandum association of defendant No.1 shows that the objects and business of the defendant No.1 are confined to Hyderabad Division of Sindh Province. He referred to Section 1 (3) and Section 35 (a) of Trade Organization Ordinance, 2009 which read as under:-
Section 1 (3)
"It shall apply to Trade Organization whose objects and business are not confined to a Province".
Section-35 (a)
"The Trade Organization Ordinance 1961 (XLV of 1961) in its application to trade organizations with objects and businesses not confined to a provinces shall stand repealed".
11. The learned counsel argued that after lapse of the temporary Ordinance, there was an automatic revival of permanent Ordinance of 1961. He further argued that no cause of action has accrued to plaintiffs within the territorial jurisdiction of this Court. Joining of defendant No.2 who is neither necessary nor proper party and has only the office at Karachi does not confer any territorial jurisdiction to this Court. Reliance was placed on PLD 2010 Karachi 261. He refuted the contention of the plaintiff that associate member not having turnover of Rs.50 million is not eligible to vote. Article 6 of memo relates to clarification of member. The eligibility of membership is defined in article 7 and 8 and all the associate members are continuously members of defendant No.1 since its inception.
12. Mr.Ravi Pinjani, the learned counsel for the Defendant Nos. 3 to 8 adopted the arguments advanced by the counsel for the Defendant Nos. 9 to 18 in respect of the applicability of the Trade Organization Ordinance 1961. In addition thereto, he argued that in light of Section 7 of the Companies Ordinance 1984, the instant suit is not maintainable, as the appropriate forum in terms of Section 7(i) of the Companies Ordinance 1984 would be the High Court of Sindh at Hyderabad. He relied upon a notification of the High Court of Sindh establishing the Circuit Court of Hyderabad dated 26.07.1982 which provides that all cases pertaining to the Districts of Hyderabad, Thatta and others are to be instituted at the Circuit Court Registry at Hyderabad, without making any distinction regarding the subject matter of the case.
13. It was further averred that in the light of Section 152 read with Sections 7 and 9 of the Companies Ordinance 1984 and the hon'ble Supreme Court's decision in the case of Lahore Race Club V/s. Raja Khusbakht-ur-Rehman (reported in PLD 2008 SC 707), the instant suit is not maintainable. It was further contended that paragraphs 4,5 and 8 of the plaint made it clear that the plaintiffs have challenged the membership of the 90% of the members of Defendant No.1; which is a matter pertaining to the rectification of the register of the Company, hence, the matter is squarely covered by Section 152 of the Companies Ordinance 1984. He heavily relied upon the case of Lahore Race Club, in which the hon'ble Supreme Court held that that a matter for rectification of register must always in the first instance be brought by way of a J.M. Application under Section 152 of the Companies Ordinance 1984 and not by way of a civil suit. He further relied upon the decision of the full bench of this Court in the case of Rimpa Sunbeam reported PLD 2006 Karachi 444, wherein it was observed that the jurisdiction of this Court to entertain suits is basically neither the ordinary nor the extraordinary original civil jurisdiction of the High Court but simply a District Court jurisdiction.
14. He further argued that Defendant No.2 is a State functionary constituted under a statute, namely the SECP Act of 1997. The registered office of HCCI is at Hyderabad, the Plaintiffs case in effect is that the SECP had to take corrective action in Hyderabad. The plaint nowhere claims that any alleged collusive activity happened in Karachi. When the cause of action has accrued elsewhere, this court will not have jurisdiction simply because the SECP has its principal office located here. He referred to the case of Muhammad Saeed V/s. Federation of Pakistan, reported in PLD 1954 Sindh 117, Pakistan V/s. Waliullah Sufyani, reported in PLD 1965 SC 310 and the case of Mushtaq Ali Tahirkheli, reported in PLD 2003 SC 930.
15. Mr.Haq Nawaz Talpur, the learned counsel for the defendant Nos.8 to 10 argued that the affairs of the defendant No.1 are governed by Ordinance, 1961, which is a perpetual enactment by virtue of Article 225 (7) of Constitution of Pakistan, 1962. The defendant No.1 is working within Province of Sindh only i.e. in Hyderabad. The Trade Organization Ordinance 2006 had only limited the applicability and operation of Ordinance, 1961 to those Trade Organizations whose object and business are confined to federation or inter provinces. Reliance was placed to clause (a) of Section 34 of Ordinance, 2006. The aforesaid legal position was also maintained in subsequent promulgations. It was contended that S.E.C.P is not regulatory authority of defendant No.1 but for all practical and legal intent and purposes, the regulatory authority of defendant No.1 is Director Trade Organization (DTO).
16. It was further averred that Section 20 (c) of the Code of Civil Procedure, 1908 is not applicable in view of Ordinance, 1961, therefore, the doctrine of dominus litis cannot be pressed into the service. Under the Ordinance, 1984, the rectification of registration of Members can only be made through Section 152 of the Ordinance, 1984.
17. He further argued that there is a marked difference between eligibility of Members and classification of Members of defendant No.1. The eligibility of Members is governed vide Article 7 of Article of Associations and classification of Members viz (a) Corporate Members and (b) Associate Members. There is no condition of having a turnover of Rs.50 Million and above attached with eligibility of Members. So far as Suit No.1409/2012 is concerned, he argued that the Power of Executive Committee is governed by Article 66 of Article of Association. The quorum of the Executive Committee is governed by Article 76. Notice of the emergent urgent meeting dated 29-09-2012 is on Court file. On 01.10.2012, the meeting was attended by Eight (08) Members of Executive Committee out of Twelve (12) Members. In the Minutes of the meeting it was unanimously resolved that Mr. Nadeem Ahmed Siddiqui will be the convener of defendant No.1 till the commencement of fresh Election 2012-2013. The Executive committee had been constituted strictly in accordance with the Articles of Associations of defendant No.1. Mr.Goharwala was appointed/elected on 01-10-2011 for the period of Two (2) years and his tenure was expired on 01-10-2012. Hence, he ceased to be office bearer of the defendant No.1. Section 177 of Ordinance, 1984 provides that on the date of the first annual general meeting of a company all directors of the company for the time being who are subject to election shall stand retired from office and thereafter all such directors shall retire on the expiry of the term laid down in section 180. Provided that the directors so retiring shall continue to perform their functions until their successors are elected. Provided further that the directors so continuing to perform their functions shall take immediate steps to hold the election of directors and in case of any impediment report the circumstances of the case to the registrar within fifteen days of the expiry of the term laid down in section 180. Since the first Annual General Meeting was held in July 1961, therefore, the first proviso of Section 177 of Ordinance, 1984 cannot be pressed into the service. At the best, the case of the plaintiffs is governed by Section 180 of the Ordinance, 1984 which provides that a director elected under section 178 shall hold office for a period of three years.
18. In rebuttal, Mr.Farogh Naseem, learned counsel argued that Section 7 of the Companies Ordinance, 1984 is in relation to the jurisdiction exercisable by a Company Judge, notified under the first proviso to section 7(1) of the 1984 Ordinance. The case of the plaintiffs is that against the illegalities committed by the defendant No.1, whereby elections were being held through a defective and illegal electoral college, the plaintiffs approached the Registrar of Companies but he abdicated his jurisdiction by stating that the matter is to be decided by the Director General, Trade Organizations hence this suit was filed. In Chalna Fibre v. Abdul Jabbar PLD 1968 SC 381, the hon'ble Supreme Court of Pakistan was pleased to maintain the jurisdiction of the civil courts in relations to company's matter. There is nothing in the Companies Ordinance which debars the jurisdiction of the civil courts. Be that as it may, there can be no dispute with regard to the territorial jurisdiction of this Court as the plaintiffs are partly aggrieved by the failure of the SECP to act in accordance with law. The SECP is duly situated in Karachi and it is a settled proposition of law that where even a fraction of the cause of action arises, the courts of that area will have the jurisdiction. In this respect, he referred to 2010 CLD 760, PLD 2011 Karachi 416, 1998 SCMR 1618 and PLD 1993 SC 395. The learned counsel also suggested that the present President of the Defendant No.1 may be directed to immediately call the general body so as to endorse or amend the existing clause 6 of the Articles of Association of the Defendant No.1, whereafter a proper electoral college be formed and elections be conducted within 90 days thereof.
19. Heard the arguments. First I would like to take up the issue regarding maintainability of the suit. The purpose of filing suit by the plaintiff in this court is that many of its Associate Members were inducted by the defendant No.1, who did not qualify the criteria to become member. The plaintiffs lodged their complaint to the defendant No.2 who failed to take any action on the ground that the regulatory authority in this case is Director General Trade Organization appointed by Federal Government under the Trade Organization Ordinance, 2006, which Ordinance was promulgated from time to time up to 2009. This fact is admitted in the written statement that complaint was lodged to them but no action was taken. Since SECP is located within the territorial jurisdiction of this court and the cause of action said to have been accrued within the jurisdiction of this court, hence, the plaintiff has filed the instant suits.
20. Learned counsel for the plaintiff argued that the Trade Organization Ordinance, 2006 lastly promulgated on 27.11.2009 has been repealed by flux of time and at the time of filing the suit it was not in force. He also referred to the interim order passed by the learned Division Bench of this court in C.P.No.D-3124/2010 in which reference of two other C.Ps were given. The main contention raised by the petitioners in the C.P. is that after expiry of Trade Organization Ordinance by flux of time it was not re-promulgated hence, the order passed by the Director General Trade Organization was unlawful. On this contention the learned D.B. suspended the impugned order passed by Director General Trade Organization.
21. Conversely, all the learned counsel appearing for defendants except defendant No.1 argued that the suit is not maintainable in this court and took the plea that lastly promulgated Trade Organization Ordinance 2009 was only applicable to Trade Organization whose object and business was not confined to province. Section 35 of the aforesaid Ordinance was also referred to which provides that the Trade Organization Ordinance, 1961 in its application to Trade Organization with object and business not confined to province shall stand repealed. It was contended by the learned counsel for the defendants that the repeal took effect only for the Trade Organization whose object and business are not confined to province, hence it does not apply to the defendant No.1 whose object and business are confined to Province of Sindh and not at national level.
22. Mr.Jhammat referred to the case of Naveed Aslam reported in PLD 2010 Karachi 261 in which the learned Single Judge of this court after detail discussion held that the jurisdiction of this court at original side has been conferred under Section 7 of West Pakistan Civil Court Ordinance, 1962, which is only for the territorial limits of districts of Karachi and no other territory would come within its ambits. This judgment was affirmed by the Division Bench of this court in which I was one of the members of the bench and authored the judgment which is reported in 2011 CLC 1176. Though the judgment of learned Single Judge was affirmed by the Division Bench but the fact remains that the controversy involved in Naveed Aslam case was altogether different as in that case the right to immovable property and declaration of title was involved for the land situated within the territorial jurisdiction of court at Hyderabad but in this case the main purpose of filing suit at original side of this court is that the defendant No.2 is situated at Karachi but despite lodging complaint it failed to take any action.
23. Mr.Ravi Pinjani learned counsel for the defendant Nos.3 to 8 referred to the notification dated 26.7.1982. He also referred to Section 7 of the Companies Ordinance, 1984, which provides that the court having jurisdiction under this Ordinance shall be High Court having jurisdiction in the place at which the registered office of the company is situated and he further argued that instead of filing civil suit in this court, the recourse should have been made under Section 152 of the Companies Ordinance by filing judicial misc. application. He referred to the case of Lahore Race Club reported in PLD 2008 707. In the Lahore Race Club case, Raja Khusbakht-ur-Rehman instituted the civil suit for declaration on the ground that he was one of the members of the club and he sought the declaration that the decision of club management removing his name from the register of membership of club was illegal, mala fide and unjust. The facts of the cited case are distinguishable as in the case in hand the interpretation of clause relating to associate member is in question and it is not the case that the name of any associate member is fraudulently or without sufficient cause entered in or omitted from the register of members. So in my view this is not the case in which Section 152 of the Companies Ordinance could be invoked by the plaintiff. He then referred to the case of Rimpa Sunbeam Cooperative Housing Society reported in PLD 2006 Karachi 444 in which the hon’ble full bench dilated upon the jurisdiction of this court at original side. It was held that the jurisdiction of this court to entertain suit is basically neither the ordinary nor the extraordinary civil jurisdiction of High Court, but simply a district court jurisdiction which was conferred and regulated by provisional statutes. There is no cavil to the well settled proposition expounded by the learned full bench. At the same time it is also necessary to examine whether any cause of action accrued to the plaintiff or not within the jurisdiction of this court. It is reiterated that a suit has been filed to question an inaction of SECP, which is situated within the territorial jurisdiction of this court. The action was denied by SECP with the advice to approach Director General Trade Organization, while the plaintiffs’ assertion is that after repealing 1961 Trade Ordinance and subsequent Ordinance up to 2009, the only regulatory authority was SECP to perform its regulatory function and role. Learned counsel referred to the case of Muhammad Saeed reported in PLD 1954 Sind 117. The facts of the referred case are distinguishable as this was a suit for recovery against the Federation of Pakistan for the supply of meat at Sialkot. Learned Single Judge focused on Section 20 (a) C.P.C., which is not relevant to the facts and circumstances of this case. The SECP is situated within territorial jurisdiction of this court, hence it could be sued here in case the cause of action wholly or in part arises. Learned counsel further referred to the case of Pakistan v. Waliullah Sufyani reported in PLD 1965 SC 310, in which the hon’ble Supreme Court held that the suit against a person can only be brought under CPC at a place where the cause of action arose and where the defendant resides or carries on business or personally works for gain. A suit would not lie in the Indian Courts because the cause of action arose at a place which is not in India and government neither resides anywhere nor carries on business nor works for gain. In fact in this case the hon’ble Supreme Court has more strengthened the well settled proposition of law that the suit can be brought under C.P.C. at a place where the cause of action arose. He further referred to the case of Mushtaq Ali Tahirkheli reported in PLD 2003 SC 930 in which the reliance was placed on Waliullah Sufyani case (supra) and it was held that the Federation of Pakistan could not be said to carry on business or could be said to reside or to work for gain as the said terms have been used with reference to natural person.
24. Mr.Haq Nawaz Talpur, learned counsel for the defendant Nos.9 and 10 in Suit No.1408/2012 & for defendant No.8 in suit No.1409/2012 argued that the defendant No.1 is working within the Province of Sindh at Hyderabad and according to him despite repealing of lastly promulgated Trade Ordinance, 2009, Director General Trade Organization is still regulatory authority of the defendant No.1 and SECP has nothing to do with it. He supported the arguments of Mr.Ravi Pinjani that the doctrine of dominus litis is not applicable and the plaintiff ought to approach this court through judicial misc. application under Section 152 of the Companies Ordinance, 1984.
25. The learned counsel for the plaintiff referred to the case of Chalna Fibre reported in PLD 1968 S.C. 381 in which the Managing Director of company sought declaration that his removal from office of managing director was fraudulent and changed in the memorandum and articles of association was illegal. The hon’ble Supreme Court held that ouster of jurisdiction of civil court in respect of civil suit is not to be readily inferred unless that jurisdiction has been either expressly or impliedly taken away by some other law, it will continue to vest in the civil court. He then referred to the case of Pakistan Kuwait Investment Company Ltd. reported in 2010 CLD 760. This judgment was authored by me, in which I held that the term cause of action referred to every act which if traversed should be necessary for the plaintiff to prove in order to support his right to judgment. Even a fraction for cause of action gives territorial jurisdiction to decide the case. He further referred to the case of Normeen Shafi reported in PLD 2011 Karachi 416. This judgment was also authored by me, in which I discussed Section 20 (c) of C.P.C. He then referred to the case of Hitachi Ltd. reported in 1998 SCMR 1618, in which it was held that an action can be maintained where cause of action wholly or in part arises. No right to urge that municipal court can entertain an action against foreigner only when he either permanently or temporarily resides within the limits of a municipal court or he submits to its jurisdiction. Lastly he referred to the case of Muhammad Yasin reported in PLD 1993 SC 395 in which the plaintiff was resident of Quetta and reached an agreement with the defendants who was resident of Faisalabad for the supply of coal. Coal was to be dispatched through the goods company at Quetta to Faisalabad and after receiving the same payment was to be made. The hon’ble Supreme Court held that the suit for recovery of amount can be instituted in court within local limits of whose jurisdiction the cause of action wholly or in part arose.
26. A bare look to the Trade Organization’s Ordinance, 1961 shows that it was promulgated to provide for the regulation and control of trade organizations and for the matters and ancillary thereto. In the year 2006, Trade Organization Ordinance 2006 was promulgated. The aims and objects were to ensure appropriate representation of all genders and business sectors at all levels in the trade organizations and that to play significant role in developing policy framework for improving business environment and economic growth. It was also found imperative to define the purpose, role, responsibilities and operational framework including code of corporate governance for trade organizations and for matter connected therewith. The 2006 Ordinance repealed 1961 Ordinance in its application to trade organizations with objects and business not confined to a province. By efflux of time 2006 Ordinance was repealed by 2007 Ordinance and lastly the same ordinance was re-promulgated in the year 2009 which was also repealed by efflux of time. 1961 Ordinance was applicable to whole of Pakistan and subsequent ordinances were also have their applications to the entire country, but in the subsequent ordinance a condition was attached that the ordinance shall apply to trade organizations, those objects and business are not confined to province. Much emphasis were made by the learned counsel appearing for the defendants except the defendant No.1 that the repeal made through temporary legislation did not affect the application of 1961 Ordinance in the case of defendant No.1 as the aims and objects and its activities are confined to Province of Sindh and city of Hyderabad. In order to see the scope of activities and its performance it is necessary to examine the memorandum and articles of association of the defendant No.1. Paragraph 3 of the memorandum of association pertains to the objects for which the defendant No.1 was established. A glance to the objects clearly show that the defendant No.1 was established to protect and promote the trade, commerce, industry and services in Hyderabad and elsewhere. Another object is to promote uniformity amongst the business and industry in and outside Hyderabad and to safeguard the general mercantile interests in Hyderabad and outside. The one of the objectives is to help in the export out of Pakistan and import from other countries of all industrial products and commodities in all possible way and to advance loans to Pakistan and other dealers and manufacturers for consideration or otherwise. It is also included in the objectives that the defendant No.1 will formulates ideas of each international labour conference and will support or oppose recommendations for international labour conference and convention and will also nominate delegate and advisers to represent the employers of Pakistan at all annual international labour conference and others. One of the objective is to represent the Government and public bodies in order to protect the rights and privileges and trade, industry and services in and outside Hyderabad. The various highlighted objectives of defendant No.1 are suffice to show that its nature of activities and objectives are not confined to the Province of Sindh only but it is based on brought spectrum. Article 5 provides that the defendant No.1 has been established for the purposes expressed in the memorandum of association while the definition of chamber means the Hyderabad Chamber of Commerce and Industry Organized to represent trade, industry and services in Hyderabad district. After examining the article and memorandum, I am of the view that the object and business of defendant No.1 is not confined to province, hence there is no doubt in my mind to hold that the Trade Organization Ordinance, 1961 so far as its application to the defendant No.1 was repealed. It is also a matter of record that after repealing the Ordinance the authority under trade organization passed some orders which were impugned in the C.Ps and their orders were suspended and in this regard at least three C.Ps are pending, which fact is also reflecting from the interim orders passed by the learned division bench of this court. After repealing of Ordinance and the interim order passed by this court the plaintiffs on the same analogy that Trade Organization Ordinance is no more in field invoked the jurisdiction of SECP to assail unlawfully allowance of membership to associate members who allegedly have annual turnover of less than 50 million but on their complaint SECP has failed to take any action. So far as arguments advanced by the learned counsel for the defendants that Trade Organization Ordinance, 1961 was revived after expiry of 2009 Ordinance. I would like to observe that neither Trade Organization Ordinance, 1961 is revived nor in the said Ordinance any powers were vested in the Director for passing any declaration regarding the criteria of membership provided in the memorandum and articles of association. The powers conferred upon Director under Section 9 of the repealed Ordinance did not include any power to decide such controversy which is involved in this case. After considering the pros and cons and the case law cited at bar, I feel no hesitation in my mind to hold that the suit is maintainable and this court has jurisdiction to try the suit. Issue is answered accordingly.
27. Now I would like to take up issue No.2, which pertains to the criteria for becoming an associate member, which is in fact the actual bone of contention between the parties. The eligibility for membership is provided under Article 7 while in the definition clause, the term member is defined as under:-
“(ii) ‘Member’ means a business concern whether Sole Proprietorship Partnership, Association of Persons, or a Company admitted as Associate or Corporate member of a Chamber.”
After defining the term “Member”, Clause 6 of the articles of association, provides classification of members which is reproduced as under :-
Classification of Members
6) The Membership of the Chamber shall comprise two categories of members namely:-
(a) Corporate Members of the Chamber which are either a Body Corporate or a Multinational Corporation, having its Head Office or Branch Office in Pakistan or a Sales Tax Registered Manufacturer having turnover of Rs.50 million or above and Business concern having annual turnover of Rs.50 million or above.
(b) Associate Members of the Chamber which are not a Body Corporate or a Multinational or a Sales Tax Registered manufacturer and Business concern having annual turnover of Rs.50 million or above.
28. The defendant No.1 filed its written statement along with draft of amended articles of association, in which the criteria for becoming associate member is same but there is a slight variance for the membership of corporate member, which is not much material as its spirit and scope is same as the classification of corporate member provided in the articles of association attached with the plaint.
29. The classification of members provided in the articles of association is analogous to the criteria of membership of associate member and corporate member provided under the Trade Organization Rules, 2007, which are not valid after expiry of Ordinance, 2007 in terms of judgment of this court reported in 2012 CLD 1339. However, merely for reference the definition of associate member and corporate member are reproduced as under :-
(a) ‘associate member’ means a member of a trade organization which is not a body corporate or a multinational or a sale tax registered manufacturing concern or a sales tax registered business concern having annual turn-over of Rs.50 million or above.
(d) ‘corporate member’ means a member of a trade organization which is either a body corporate or a multinational corporation with its head office or branch office in Pakistan or a sales tax registered manufacturing concern or a sales tax registered business concern having annual turnover of Rs.50 million or above.
30. It is also pertinent to point out that during pendency of this suit, Trade Organization Act, 2013 has been promulgated, which is applicable to trade organizations whose object and business are not confined to a province. The Trade Organization Rules 2013 were also notified on 26.3.2013 in which under Rule 2(b) and (g) the definition of associate member and corporate member has been provided which is reproduced as under :-
(b) ‘associate member’ means a member of a trade organization which is not a body corporate or a multinational or a sale tax registered manufacturing concern or a sales tax registered business concern having annual turn-over of not less than fifty million rupees.
(g) ‘corporate member’ means a member of a trade organization which is either a body corporate or a multinational corporation with its head office or branch office in Pakistan or a sales tax registered manufacturing concern or a sales tax registered business concern having annual turnover of not less than fifty million rupees.
31. In the 2013, Rules very significant change has been made in the definition of associate member and perhaps in order to remove the confusion and ambiguity the rule making authority has clarified that associate member means a member of trade organization, which is not body corporate or a multinational or a sales tax registered manufacturing concern or a sales tax registered business concern having annual turnover of not less than fifty million rupees. This significant change shows that now it is necessary that only such a person can become associate member whose business enterprises as defined in the clause shall have annual turnover of not less than fifty million rupees.
32. Now I would like to revert back to the memorandum and articles of association of the defendant No.1, which is the subject matter of the suit. At present the definition of associate member provided in the clause pertaining to the classification of members is just like double edge weapon. Counsel for the plaintiff argued that the associate member must have annual turnover of fifty million rupees or above, which arguments are supported by the learned counsel for defendant No.1, while other learned counsel have given their own interpretation and they are reading the classification of associate member with opening word ‘not’ and made much emphasis that since the aforesaid clause is starting with negative covenant, therefore, entire clause will be read in negative from which means that any person can become associate member, whose business enterprises has not annual turnover of fifty million rupees or above.
33. If the interpretation advanced by the learned counsel for the defendants is accepted this will create absurdity and complications and any person will become associate member without any threshold, which is in my view against the true intention and scope of classification of associate member. The basic intention of the author shows the differentiation of two classes of members such as corporate and associate but the basic criteria and the threshold is annual turnover of fifty million rupees or above. The body corporate, multinational corporation or sales tax manufacturer having turnover of fifty million rupees or above and business concern having annual turnover of fifty million or above can become a corporate member. On the contrary for becoming an associate member the person may not be body corporate and or multinational or a sales tax registered manufacturer but according to the intention of the author manifesting from the articles of the association such member must have annual turnover of fifty million rupees or above. The word ‘and’ used is qualifying that the associate member may not fulfill the above pre-requisite but he should be a business concern having turnover of fifty million rupees or above. If this threshold is read in negative which means that there would be no control and any person can apply for the associate membership, no matter what business he is doing. So what I understand is that associate membership can only be allowed with some restrictions in the class itself. The same plea has been taken by the defendant No.1 in their written statement that the requirement of annual turnover of fifty million rupees or above is mandatory for both the classes of members, which is in fact the true spirit and interpretation of clause 6.
34. Though I have given aforesaid findings on the issue in question but the most important and crucial aspect cannot be ignored which is floating on the surface of the record that out of total 1382 members, 1233 members are the associate members and only 149 members are the corporate members. This fact is clearly reflecting from the written statement of the defendant No.1 which statement has not been refuted or denied either by plaintiffs or the defendants. It is also a matter of grave concern that despite threshold of annual turnover either the present management or the previous management have made number of associate members who might not have annual turnover of 50 million rupees so at this stage the associate members who allegedly failed to fulfill the requirement cannot be scratched away out rightly but there must be a proper mechanism and modality to deal such a situation amongst the members of defendant No.1 in a democratic process so that after a meaningful debate amongst themselves they may decide the fate of associate members having turnover of less than 50 million rupees. It is also a matter of record that initially the plaintiffs had filed the suit only against the Hyderabad Chamber of Commerce and SECP but subsequently 17 interveners came and filed their applications for becoming party which applications were allowed and they have been impleaded as defendant Nos.3 to 18, but the fact remains that still a large number of associate members are not party to the proceedings and if in their absence any order is passed for cancellation of their membership, it will seriously affect their interest and they will be condemned unheard which will be against the principle of natural justice, so in my view a mechanism should be evolved so that all members under one roof can gather and by way of exchange of their point of views and or divergent views, they may settle their bone of contention amicably by the will of majority. The plaintiff’s counsel also suggested that the present management may be directed to immediately call an extra ordinary general body meeting either to endorse clause 6 of the articles of association or to amend the same according to the wishes of majority while learned counsel for the defendants have also argued more keenly that the election of the defendant No.1 should be announced and conducted as soon as possible. So in my view it would advance the cause of justice if the present management of the defendant No.1 is directed to call extra ordinary general meeting of members both corporate and associate members within 30 days in accordance with the notice period and other formalities as required to be fulfilled under the articles of association and thereafter, EGM will decide either to accept the clause 6 in the present form or to propose any amendment. The issue is answered accordingly.
35. Now I would like to take up issue No.3. It is a matter of record that in suit No.1408/2012 injunction application was placed before the learned single Judge of this court on 20.9.2012 and after reducing in writing the controversy, the elections of the defendant No.1 were stayed. The suit No.1409/2012 was filed on 2.10.2012 in which the plea was taken that despite interim order passed by this court in Suit No.1408/2012 the defendant Nos.4 and 5 without any lawful authority and in league with some illegal members entered into the office of defendant No.1 and by force appointed an adhoc administrative committee which act is in violation of Section 177 of the Companies Ordinance.
36. Learned counsel for the plaintiffs argued that since by interim orders elections were stayed therefore, the previous management shall continue till next election. Section 177 of the Companies Ordinance refers to the first annual general meeting of the company. However, its proviso stipulates that the directors so retiring shall continue to perform their functions only until their successors are elected. Its further proviso makes it clear that the directors so continue shall take immediate steps to hold the election of directors and in case of any impediment report the circumstances to the Registrar within 15 days. The contention of the learned counsel for the defendants is correct that the Section 177 of the Companies Ordinance has no direct application or germane to the controversy involved herein but an important aspect cannot be ignored that once this court restrained the defendant No.1 from holding election it means that status quo was required to be maintained and formation of adhoc committee in the intervening period was not a lawful act. At best the defendants who were interested to form adhoc committee could have approached this court with the proposal or with the request either to modify the interim order or to request the court for the formation of committee and for vacation of stay order. In the present scenario I am of the firm view that when the interim orders were passed by this court in Suit No.1408/2012, defendant Nos.4 and 5 in Suit No.1409/2012 had no lawful justification and or authority to form an adhoc committee. Since I have already observed that entire controversy can be resolved between both types of members if extra ordinary general meeting is convened, therefore, at this stage any appointment of adhoc committee will not serve the purpose which will not only complicate the situation but will become further instrumental to delay the election process. The issue is answered accordingly.
37. For the foregoing reasons both the suits are decreed in the following terms:-
(i) The present executive committee of the defendant No.1 shall continue to hold their offices till next election.
(ii) Till next election the present executive committee shall neither terminate/cancel the membership of any member nor induct any new member.
(iii) The executive committee within one month shall hold extraordinary general meeting (EGM) of its members (both corporate and associate) on 21 days clear notice to all members in accordance with the articles of association.
(iv) The agenda of EGM will be to discuss Article/Clause (6) of articles of association. The matter will be decided according to the will of the majority of members either to endorse the present article/clause 6 of the articles of association in its present form or to make any amendment.
(v) After deciding the fate of article/clause 6 in the EGM, the present executive committee on same day shall announce the date of next election for the year 2013-14 and also appoint an independent and impartial election sub-committee and appellate commission as provided in the articles of association.
(vi) The EGM and the election of the defendant No.1 shall be conducted under the supervision of Nazir of this court and it shall be the responsibility of the present executive committee and the election sub-committee to inform the date of election to the Nazir. So far as EGM is concerned the present executive committee shall inform the Nazir to ensure his presence on the date of EGM.
(vii) The election shall be held strictly in accordance with the articles of association before 30th September, 2013 except the conditions to some extent varied in this judgment in order to expedite and accelerate the election for the year 2013-2014. All present members shall be allowed to cast their votes.
(viii) The election result will be announced by the election sub-committee in presence of the Nazir of this court. The charge will be handed over to the newly elected executive committee immediately.
(ix) The executive committee through secret ballot shall elect their President and Vice President in accordance with the procedure provided under the articles of association.
(x) The resolution if any passed in the EGM, either approving the amendment or endorsing the present Article/clause 6 of the Articles of Association shall not affect the date and process of election. The amendment in the articles will be filed to the concerned authorities in due process.
(xi) Nazir fee shall be rupees one hundred thousand only which shall be paid by the defendant No.1 in advance. The Nazir shall submit the compliance report in chamber.
(xii) All pending applications are also disposed of
Karachi:-
Dated.5.8.2013 Judge