 |
| Fake meeting cancelled by High court and order to fresh meeting under the supervision of SECP. |
Fake meeting cancelled by High court and order to fresh meeting under the supervision of SECP.
عدالت نے 31.12.2020 کو ہونے والی EOGM اور اس سے متعلقہ دستاویزات کو کالعدم قرار دیتے ہوئے نئی جنرل میٹنگ منعقد کرنے کی ہدایت دی اور SECP کو اس عمل کی نگرانی کرنے کا حکم دیا۔
**درخواست:**
**درخواست گزار:**
شاہد محمود اینڈ کمپنی (پرائیویٹ) لمیٹڈ اور 2 دیگر
**جواب دہندگان:**
زاہد محمود اور 5 دیگر
**درخواست گزاروں کی درخواست:**
درخواست گزاروں نے 31.12.2020 کو منعقدہ ایگزٹرا آرڈنری جنرل میٹنگ (EOGM)، اس میں لیے گئے فیصلوں اور اس پر مبنی تعمیراتی عمل کو چیلنج کیا ہے۔ درخواست گزاروں نے درج ذیل دستاویزات کو کالعدم قرار دینے کی درخواست کی ہے:
1. بورڈ کی قرارداد تاریخ 23.01.2023 (Annex-I)
2. خط تاریخ 24.01.2023 (Annex-J)
3. ادائیگی کا چالان تاریخ 24.01.2023 (Annex-K)
4. فارم-28 تاریخ 21.02.2023 (Annex-L)
5. فارم-29 تاریخ 21.02.2023 (Annex-M)
6. الیکٹرانک فارم-28 تاریخ 23.02.2023 (Annex-N)
7. الیکٹرانک فارم-29 تاریخ 23.02.2023 (Annex-O)
درخواست گزاروں کا کہنا ہے کہ کوئی EOGM نہیں ہوئی اور جو دستاویزات SECP میں جمع کرائی گئی ہیں، وہ جعلی ہیں۔
**جواب دہندگان کا جواب:**
جواب دہندگان نے درخواست کے قابل سماعت نہ ہونے کی بات کی، کیونکہ درخواست کی گئی کارروائیوں کو چیلنج کرنے کے لئے قانونی مدت گزر چکی ہے۔ انہوں نے یہ بھی دعویٰ کیا کہ EOGM قانونی طور پر منعقد کی گئی تھی اور تمام قانونی تقاضوں کی پیروی کی گئی تھی، حالانکہ وہ اس حوالے سے کوئی ٹھوس ثبوت فراہم کرنے میں ناکام رہے۔
**فیصلہ:**
عدالت نے فیصلہ دیا کہ 31.12.2020 کو منعقدہ EOGM اور اس سے متعلقہ کارروائیاں کالعدم ہیں۔ عدالت نے ہدایت کی کہ فریقین ایک نئی جنرل میٹنگ منعقد کریں اور اس میٹنگ کی نگرانی SECP کرے۔ یہ عمل فیصلے کی تصدیق شدہ کاپی وصول کرنے کے دو ماہ کے اندر مکمل کرنا ہوگا۔
**حکم:**
درخواست کو مذکورہ شرائط کے تحت منظور کیا گیا، اور کوئی خرچ کا حکم نہیں دیا گیا۔
Must read judgement
Form No.HCJDA-38
JUDGMENT SHEET
IN THE LAHORE HIGH COURT, LAHORE
JUDICIAL DEPARTMENT
C. O. No. 62104 of 2023
Shahid Mahmood & Company (Pvt.) Limited
and 2 others
Versus
Zahid Mahmood and 5 others
JUDGMENT
Date of hearing:
04.06.2024
Petitioners by:
Mr. Bilal Kashmiri, learned
Advocate.
Respondents No. 1
to 5 by:
Mr.
Faisal Islam,
learned
Advocate.
Respondent No. 6
by:
Mr. Ruman
Bilal, learned
Advocate.
Sultan Tanvir Ahmad, J:- In this petition, extra
ordinary general meeting (EOGM) dated 31.12.2020, the
decisions taken therein and superstructure built thereupon
have been challenged. Besides request to rectify the
register of directors and other prayers, the petitioners
have also sought to declare the following documents as
null and void:-
i. Board Resolution dated 23.01.2023 (Annex-I)
ii. Letter dated 24.01.2023 (Annex-J)
iii. Payment Challan dated 24.01.2023 (Annex-K)
iv. Form-28 dated 21.02.2023 (Annex-L)
v. Form-29 dated 21.02.2023 (Annex-M)
2
vi. Electronic Form-28 dated 23.02.2023 (Annex-N)
vii. Electronic Form-29 dated 23.02.2023 (Annex-O)
2.
M/s Shahid Mahmood & Company (Pvt.)
Limited (hereinafter called as the “Company”) was
incorporated on 01.10.1995 with authorized capital of
Rs.20,000,000/- divided into 200,000 ordinary shares of
Rs.100/- each. As per Form-A filed until 31.12.2020 and
record of respondent No. 6 / Securities & Exchange
Commission of Pakistan (SECP), petitioner No. 2 and
petitioner No. 3 are holding 52000 and 2000 shares,
whereas, respondents No. 1 to 5 are holding 48500,
50500, 5000, 2000 and 40000 shares, respectively. It is
the claim of petitioners No. 2 and 3 that on account of the
dispute inter-se the directors as well as shareholders, no
meeting has taken place, however, respondents No. 1 to 5
prepared fake documents including Form-28 and Form-
29 dated 31.12.2020 and then filed the same on
21.02.2023 with SECP; that the election of directors or
EOGM has never taken place. It is further averred that
above referred ante-dated documents being bogus are
liable to be declared null and void.
3.
Mr. Bilal Kashmiri (learned ASC), on behalf of
the petitioners has submitted that respondents No. 1 to 5
have prepared back dated forms on the basis of EOGM
dated 31.12.2020, which has never taken place, to
deprive petitioner No. 2 (Chief Executive and director)
and petitioner No. 3 (director), from their rights given
under the Companies Act, 2017 (the ‘Act of 2017’).
Learned counsel for the petitioners invited the attention
of the Court towards various provisions of the Act of
2017 and he has stated that provisions relating to
C.O. No. 62104 of 2023
3
issuance of notice, convening or holding the statutory
meeting are not followed or reflected from the record,
which essentially makes it amply clear that the fake
documents were prepared in the year 2023 without any
meeting and by staging this fraud Petitioners No. 2 and 3
have been excluded from management and they have
been deprived from their rights under the company law;
that this act of fraud is further evident from failure to file
timely return under section 197(3) of the Act of 2017;
that mandatory provisions of sections 55, 133, 158 and
159 have been violated. Learned counsel added that it
remained the case of petitioners No. 2 and 3 throughout
before this Court as well as the SECP that the documents
are fake and they are not backed-up by any meeting or
valid resolution, however, till to date respondents No. 1
to 5 have failed to produce any notice, any evidence
about the date of notice, receipt of notice or agenda of
meeting, which clearly reflects the fraud.
4.
Mr. Faisal Islam-learned ASC, on behalf of
respondents No. 1 to 5, has raised objections as to the
maintainability of the present petition on the basis of
delay relying upon section 136 and 160 of the Act of
2017. He stated that the said provisions require to
approach the Court within thirty days from the date of
election of directors or relevant meeting, whereas,
present petition is filed after more than three years of the
EOGM dated 31.12.2020, in which respondents No. 1
and 2 were elected as directors. He also raised objection
that the Company has been wrongly impleaded as one of
the petitioners in the array of parties, which cannot be
maintained as such. He also contended that the SECP
C.O. No. 62104 of 2023
4
cannot refuse to accept any form or document on account
of delay in view of Section 468 of the Act of 2017.
5.
Mr. Ruman Bilal, learned counsel for
respondent No. 6 / SECP has filed para-wise comments
and relevant record. He has reiterated contents of parawise comments, in course of his arguments.
6.
I have heard the arguments and gone through
the documents produced before the Court by the
contesting parties as well as the record provided by SECP
with its comments.
7.
To refute the allegation of filing fake
documents with the SECP, respondents No. 1 to 5 have
asserted that decision(s) and the documents are in
pursuant to the decisions taken in EOGM under section
133(5) of the Act of 2017, which took place on
31.12.2020 and respondents No. 1 and 2 were elected as
directors after adopting procedure and in compliance of
substantial law given in section 159 of the Act of 2017.
Section 159 of the Act of 2017 is reproduced as unde
Sub-section 2 of Section 159 of the Act of 2017,
reproduced above, requires notice of meeting at which
directors are proposed to be elected, specifying number
of directors fixed and names of retiring directors. Any
member, retiring or otherwise, can give notice of
intention to offer himself for election of directors in
terms of Section 159(3) ibid. Notices of intention
received by company are required to be transmitted to
members not later than seven days before the date of
meeting.
8.
It has been claimed by learned counsel for
respondents No. 1 to 5 that directors / respondents No. 1
and 2 were appointed in EOGM dated 31.12.2020.
Section 133 of the Act of 2017 permits directors to call
C.O. No. 62104 of 2023
6
EOGM to consider any matter that requires the approval
of the company. EOGM can also be requisitioned by
members by adopting the course given in section 133 (2)
of the Act of 2017 and subsequent sub-sections.
However, notice of EOGM is required to be served upon
the members under section 133(8) of the Act of 2017. It
will be beneficial to reproduce of the relevant part of
section 133 which reads as under
The Act of 2017 has given complete mechanism
from calling a meeting, its notice with agenda of any
special business, conducting meeting and giving voting
rights etc. In the present case, the respondents have
though produced an extract from minutes of alleged
meeting but somehow during the entire dispute before the
SECP and the proceedings before this Court, the date
when meeting was called / date when the notice was
issued or any copy of issued notice to the members or the
agenda of meeting conspicuously remained missing.
9.
In case titled “Khalid Mehmood and 4 others
vs. Messrs Multi Plus Corporation Private Limited and 2
others” (2017 CLD 1737) learned Sindh High Court,
C.O. No. 62104 of 2023
8
while interpreting the then applicable provisions of
sections 159 and 178 of the Companies Ordinance-1984,
concluded that failure to convene meeting / EOGM in the
manners provided therein or not issuing notice of the
same, since followed by penal provisions, are mandatory.
The contravention of provision, as to holding EOGM
under Section 133 of the Act of 2017, once again carries
penal consequences. I would like to reproduce the
relevant extract of Khalid Mehmood case (supra
C.O. No. 62104 of 2023
9
In case titled “Nizam Hashwani vs. Hashwani
Hotels Limited and 14 others” (1999 CLC 1989) the
requirement to issue notice of EOGM to conduct such
business was discussed in the following manners:-
“It was strenuously argued on behalf of the
plaintiff that the elections of the nine
Directors held during the meeting of E.G.M.
of 23-1-1995 was illegal and defective
inasmuch as the notices were not issued in
strict compliance of section 159(7) and
section 50(2) of the Companies Ordinance,
1984. He has relied upon the case of The
Karnal Distillary Company Limited Karnal
PLD 1556 (W.P.) Lah. 731 wherein a
learned Single Judge of the Lahore High
Court B. Z .Kaikaus, J. (as his Lordship then
was) held that if a notice sent on 4thMarch is
served on 8thMarch and the meeting was
held on 28thMarch, the number of clear days
would be only 19. Reliance was placed by
the Lahore High Court on the cases of
Railway Sleepers Supply Company's case
(1885) 29 CH 204 and Hector Shalling
Limited's case (1936) 1. In the instant suit
the
defendants have refuted these
allegations of the plaintiff and have
maintained that there was no violation of
Companies Ordinance, 1984 by holding
E.G.M. and elections of Directors.
Subsection (7) to section 159 of the
Companies Ordinance provides that the
notice of Extraordinary General Meeting
shall be issued to the members at least 21
days before the date of meeting. Subsection
(2) to section 50 provides that in case a
notice is issued, services of the same shall
be deemed to be effected, if it is properly
addressed pre-paid and posted unless the
contrary is proved.”
(Emphasis supplied)
To pass a resolution, holding a valid meeting
with the required quorum after due notice, has always
C.O. No. 62104 of 2023
10
been considered important even in the previous
enactment(s) as well as under the common law. In case
titled “In the matter of the Karnal Distillery Company
Ltd., Karanaland of the application of Mr. L.P. Jaiswal”
(PLD 1956 Lahore 731) meeting without notice was
held invalid. The following part of the said judgment is
highly relevant:-
0.
It is the claim of petitioners No. 2 and 3 that no
meeting of the Company has been held since 2018 due to
complete deadlock and dispute inter-se the shareholders
as well as the directors. The petitioner-side also relied
C.O. No. 62104 of 2023
11
upon Form-29 dated 31.12.2017 registered with the
SECP on 31.01.2018 and they have stated that no change
has taken place since then. Importantly, the SECP has
also confirmed that the Company or respondents No. 1 to
5 have never intimated or filed the required documents
until the recent past. SECP has highlighted the following
position as per their record and prior to the filing that
resulted into dispute, in response to paragraphs 3 and 4 of
the petition:-
“3. No Comments except that Mr. Shahid
Mehmood is CEO of the Company since its
incorporation. As per Form A made up to
28-10-2020 the shareholding position of the
Company is given below:-
S.No.
Name of Shareholder
Number
of Shares
1
Mr.
ShahidMehmood/Petitioner
No.2
52000
2
Mr. Zahid
Mehmood/Respondent No.1
48500
3
Mr.
AbidMehmood/Respondent No
2
50500
4
Mrs. FirdousBano/Respondent
No.3
5000
5
Mr. Hamid
Mehmood/Respondent No.5
40000
6
Mr. Umer Farooq/Petitioner
No.3
2000
7
Mr. Usman Zahid /Respondent
No.4
2000
Total
200,000
4. Correct as per Form 29 dated 31-12-
2017, filed by the Company. Following
persons are the director of the Company:-
S.No
.
Name of Person
Designation
1
Mr. ShahidMehmood/Petitioner
No.2
Director/
CEO
2
Mr. Zahid
Mehmood/Respondent No.1
Director
3
Mr. AbidMehmood/Respondent
No 2
Director
C.O. No. 62104 of 2023
12
4
Mrs. FirdousBano/Respondent
No.3
Director
5
Mr. Umer Farooq/Petitioner
No.3
Director
6
Mr. Usman Zahid /Respondent
No.4
Director
11.
Mr. Bilal Kashmiri has relied upon different
documents and he has stated that no meeting of members
or EOGM took place on 31.12.2020; that the extract from
minutes of meeting and subsequent actions are fake and
fabricated. He unequivocally argued that no meeting was
called for the above purposes as well as no notice was
issued or served upon petitioners No. 2 and 3. Mr. Faisal
Islam- learned ASC though denied that the documents
are forged and fabricated, however, he failed to show
anything from record regarding any notice for alleged
EOGM or even disclose the date of issuing or service of
notice(s). This dispute remained pending before the
SECP for some time and before SECP issued letter dated
19.05.2023 referring to sections 466, 197(5) and 160 of
the Act of 2017. The contesting respondents were
repeatedly asked to provide documents or to answer
about the deficiencies. They filed different replies before
SECP. Perusal of the same, including the written
response dated 10.03.2023 filed by the respondents and
appended with the reply to this petition, reflect that the
same is totally silent about the above deficiencies
including calling date of EOGM, notices etc.
12.
Right from the beginning of dispute, petitioner
No. 2 kept complaining before SECP that respondents are
deliberately reluctant to give proof or appending
document showing that EOGM was ever called or it took
place. This complaint is also reflected from letter dated
C.O. No. 62104 of 2023
13
17.05.2023 available on the file. Somehow, respondents
No. 1 to 5 even up till now are reluctant to append those
documents or to show anything from the record if any
notice was ever prepared. It is averred in the reply that
EOGM has taken place on 31.12.2020 when two
directors namely Zahid Mahmood and Abid Mahmood
were elected. This reply does not reflect the date of
notice(s), their issuance or service. The reply is totally
silent as to which mode of service under section 55 of the
Act of 2017 was adopted. The reply does not contain
plausible reason or justification to stay silent for years
and not contacting SECP or filing the forms or the
required return. Form-29 in dispute contains date of
31.12.2020. No cause could be given by the respondents
for not filing the same through electronic mode or
otherwise for more than two years and then getting it
received manually on 21.02.2023.
13.
Mr. Faisal Islam- learned ASC for respondents
No. 1 to 5 instead of offering response to all above, has
mainly focused on his preliminary objection(s), much
emphasizing on the proviso to section 136 and section
160 of the Act of 2017, arguing that meeting can be
called into question within thirty days only and the same
period is provided for challenging election of directors.
The relied provisions read as under
Section 136 of the Act of 2017 provides that
proceedings of general meeting can be declared invalid
for the reasons of material defect or omission in the
notice or irregularity in the proceedings of the meeting,
which prevented members from using effectively their
rights. The proviso to the same reads that petition in this
regard can be made within thirty days of the impugned
meeting. Section 160 of the Act of 2017 also provides
thirty days to challenge the election of all the directors or
any one or more of them on the ground of material
irregularity in holding the election. Admittedly, the
legislature has envisaged thirty days period to challenge a
meeting, however, the case in hand is not that of
irregularity or defective meeting but no meeting at all. It
is not the case of the petitioners either that the election of
directors has taken place which suffers from material
irregularity. The proposition put-forth by learned counsel
for petitioner No. 2 and 3 is that no meeting has taken
place and only documents are submitted to change the
existing position or composition of the board and
C.O. No. 62104 of 2023
15
objection is raised after filing untrue documents with
SECP that too after more than two years of the so-called
meeting; the peculiar facts and circumstances of the case
give rise to the question that in the absence of holding
EOGM, if it can be permitted to merely file forms or
documents with SECP and then to state that challenge
was required to be made within thirty days by simply
showing an extract of minutes of so-called meeting that
pertains to a period much prior to thirty days, claiming
before the Court that delay is caused by the party
complaining. The above discussed provisions do not
contemplate that instead of holding meeting just to file
forms backed up by some extract from minutes of
clueless and so-called meeting and then to take shelter of
thirty days period to make challenge. Proviso to section
136 of the Act of 2017 provides that petition shall be
made within thirty days of the impugned meeting but
present case is one where holding of meeting or EOGM
could not be convincingly shown from the record. In the
unusual circumstances of the case, respondents No. 1 to 5
should have first persuaded or at-least demonstrated with
some certainty that the EOGM has actually taken place
and then to seek shelter of the period provided by law to
make challenge. Learned counsel for the petitioners has
stated that falsehood is further evident from failure to file
return or forms for such a long time period. He has stated
that even return in terms of section 197(3) of the Act of
2017 for the change claimed in pursuance to the so-called
EOGM does not exist. This position is confirmed by
SECP. Learned counsel for respondents No. 1 to 5
instead of explaining the reasons for non-compliance of
C.O. No. 62104 of 2023
16
several provisions of the Act of 2017 is simply seeking
escape on the basis of period to make challenge,
however, he even could not produce copy of notice, the
mode adopted under section 55 of the Act of 2017 or any
affidavit from the respondents to show the date of issuing
notice of the EOGM inviting all entitled to notice, attend
and vote in the EOGM.
In case titled “Tariq Aziz and others vs.
Makhdum Ahmed Mahmud and others” (2022 CLD
1279) this Court, while exercising powers under sections
136 and 160 of the Act of 2017 and declaring the
concerned election as invalid, directed to hold fresh
meeting and concluded:
…Section 160 of the Act empowers the
Court to declare election of all directors or
any one or more of them' invalid if it is
satisfied that there has been material
irregularity in its holding. Therefore, in the
light of principles enunciated in "National
Investment Trust Ltd. v. Al-Qaim Textile
Mills Ltd." (1999 CLC 926) wherein it was
held that "the very meeting held on the 27th
March, 1998was irregular and not in
accordance with law as the members were
prevented from using their right to vote
effectively. In consequence thereof; the
proceedings of Agenda Item No.3 relating to
elections of Directors are declared to be
invalid and the respondent is directed to
hold afresh a General Meeting for holding
of elections of members of the Board of
Directors of respondent's Company in
accordance with law" the Petitioners' right
of vote was denied by the Respondents to
participate in AGM….
14.
For the above discussed failure(s) on the part of
respondents No. 1 to 5 and keeping in view the peculiar
circumstances of the case, I have no hesitation to hold
C.O. No. 62104 of 2023
17
EOGM dated 31.12.2020 and its proceedings as invalid. In
consequence thereof, parties are directed to hold afresh
general meeting, in accordance with law. Notices and
agenda shall be issued strictly in terms of the Act of 2017.
SECP to appoint an officer to supervise the process and the
meeting. This process shall be completed within two months
from the date of receipt of certified copy of this judgment. It
is clarified that no act or transaction with any third party and
the Company is brought into question in this case. No order
as to cost.
15.
Allowed in the above terms.
(Sultan Tanvir Ahmad)
Judge
Announced in open Court on _________.
Judge
Tags
Company law