2009 M L D 512

[Lahore]

Before Khurshid Anwar Bhindar, J

Messrs WAK LTD. through Manager Finance---Petitioner

Versus

PROVINCE OF PUNJAB through Home Secretary and 7 others---Respondents

Writ Petition No.12270 of 2007, decided on 13th January, 2009.

Constitution of Pakistan (1973)---

----Art. 199---Penal Code (XLV of 1860), Ss.489-F/420/468/471---Quashing of F.I.R.---

Complainant had lodged F.I.R. against the petitioner company for issuing him cheque
worth Rs.10 million, which was dishonoured by the Bank---Counsel for the petitioner had
submitted that petitioner did not issue any cheque to the complainant, rather it had lodged
F.I.R. under Ss.420/468/471, P.P.C. regarding the loss of cheque book from which cheque
in question was issued---Cheque in question was neither signed by any of the Directors of
the petitioner company nor it was issued to the complainant for the fulfilment of any
liability---In order to constitute an offence under S.489-F, P.P.C. all necessary ingredients
mentioned in the language of said section were to be fulfiled---Petitioner had neither
issued cheque for the purposes of fulfilment of any outstanding liability nor was it
dishonoured on presentation for want of insufficient fund---When the basic ingredients as
mentioned in the language of S.489-F, P.P.C. were not fulfilled as per the facts and
circumstances of the- case, offence under said section was not made out against the
petitioner which had already lodged F.I.R. for the loss of the cheque book and had also
made written request to the Chief Manager of the Bank for stopping payment on the
presentation of stolen cheque book---No mala fide intention of the petitioner was
established, whereas the petitioner had taken precautionary measures by lodging F.I.R.
regarding the loss of cheque book---When no criminal case was made out against
accused, then F.I.R. could sufficiently be quashed---Since none of the necessary
ingredients constituting an offence under S.489-F, P.P.C. were made out against the
petitioner company, all the offences under which the petitioner was liable to be tried were
not made out against the petitioner---Case against the petitioner under S.489-F, P.P.C. or
other relevant provisions of law in the F.I.R., having not been made out, F.I.R. registered
against the petitioner was quashed which was registered against the petitioner with mala
fide intentions.

Page No. 1 of 3
Messrs Sardar Khurram Latif Khan Khosa and Syed Iqbal Hussain Shah Gillani for
Petitioner.

Sarfraz Ali Khan, A.A.G. with Ghulam Nabi A.S.-I.

Pir S.A. Rashid for the Complainant.

ORDER

KHURSHID ANWAR BHINDAR, J.---Through the present constitutional petition,

Messrs WAK Limited through Manager Finance seeks quashing of F.I.R. No.1256 of
2007, dated 20-11-2007, registered under sections 489-F/420/468/471, P.P.C. at Police
Station Civil Lines, Lahore.

2. Briefly the facts of the case are that Mr. Haseeb Azhar, Managing Director, Messrs
Hatco (Private) Limited, 30-KM, Multan Road, Lahore got registered the aforesaid F.I.R.
against the petitioner with the allegations that the petitioner issued a cheque of Rs.10
million in favour of complainant which, on presentation to the Bank of Punjab, was
dishonoured. He also alleged in the F.I.R. that petitioner also transferred two plots of Pak
Arab Society in favour of the complainant which also could not be transferred as the
transfer was stopped at the instance of the petitioner.

3. Learned counsel for the petitioner submit that the petitioner had not issued any cheque
to the complainant. The fact of the matter is that the cheque book of the petitioner was
lost and he had got registered a case F.I.R. No. 1177 of 2007, dated 13-12-2007 under
sections 420/ 468/471, P.P.C. at Police Station Gulberg, Lahore regarding the loss of
cheque book and in consequence whereof the petitioner had stopped payment of account
No.004596-0007 through a written letter addressed to the Chief Manager, The Bank of
Punjab, Main Branch, Egerton Road, Lahore, as such, the petitioner has committed no
offence and the impugned F.I.R. is liable to be quashed.

4. Learned counsel for the respondents submits that the matter in issue requires a factual
probe which exercise is not permissible under the law in these constitutional proceedings,
as such, this constitutional petition is not maintainable.

5. I have heard all the learned counsel and have also perused the record. This Court has to
see as to whether offences under which the petitioner-company is liable to be tried are
made out or not as per the facts and circumstances of the case. In the instant case
complainant had lodged F.I.R. against the petitioner for issuing him cheque wroth Rs.10
million, which according to the complainant, was dishonoured at presentation by the
Bank of Punjab Main Branch, 7-Egerton Road, Lahore. Learned counsel for the petitioner
has submitted that the petitioner did not issue any said cheque to the complainant for the
fulfilment of the outstanding liability rather had lodged F.I.R. No.1177/2007, dated 13-
12-2007 under sections 420/468/471, P.P.C. at Police Station Gulberg, Lahore regarding

Page No. 2 of 3
the loss of cheque book from which cheque was issued worth Rs.10 million. It was
neither signed by any of the directors of the petitioner-company nor was it issued to the
complainant for the fulfilment of any liability. Petitioner-company had put up an
application to the Chief Manager, the Bank of Punjab in June, 2007 requesting therein to
stop payment from account No.004596/0007 to any one as F.I.R. had already been
registered for the loss of cheque book. The Bank of Punjab while acting on the advice of
the petitioner-company had stopped payment on the issuance of any cheque. The Bank of
Punjab had issued a slip on the presentation of the cheque by the complainant which was
alleged to be issued by the petitioner-company mentioning therein that "payment stopped
by the drawer", therefore, it was not dishonoured for the purposes of shortfall in the
balance amount for the fulfilment of an obligation.

6. In order to constitute an offence under section 489-F, P.P.C. all the necessary
ingredients mentioned in the language of section 489-F, P.P.C. are to be fulfilled. Section
489-F, P.P.C. is reproduced hereunder:--

"489-F, Dishonesty issuing a cheque. Whosoever dishonestly issues a cheque

towards re-payment of a loan or fulfilment of an obligation which is dishonoured
on presentation, shall be punishable with imprisonment which may extend to three
years, or with fine, or with both, unless he can establish, for which the burden of
proof shall rest on him, that he had made arrangement with his bank to ensure that
the cheque would be honoured and that the bank was at fault in not honouring the
cheque."

In the instant case petitioner-company had neither issued cheque for the purposes of
fulfilment of outstanding liability nor was it dishonoured on presentation for want of
insufficient funds. When the basic ingredients as mentioned in the language of section
489-F, P.P.C. are not fulfilled as per the facts and circumstance of this particular case,
therefore, offence under section 489-F, P.P.C. is not made out against the petitioner-
company as the petitioner-company had already lodged F.I.R. for the loss of the cheque
book and had also made written request to the chief Manager of the Bank of Punjab for
stopping payment on the presentation of stolen cheque book. Under the circumstances,
no mala fide intention of the petitioner is established whereas the petitioner-company had
taken precautionary measures by lodging F.I.R. regarding the loss of cheque book as well
as written a letter to the Chief Manager of the Bank of Punjab directing him to stop
payment from the account of the petitioner-company.

7. The Hon'ble Apex Court had time and again held in various judgments that when no
criminal case is made out against the accused persons then F.I.R. can sufficiently be
quashed. Since none of the necessary ingredients constituting an offence under section
489-F, P.P.C. are made out against the petitioner-company, therefore, all the offences
under which the petitioner is liable to be tried arc not made out against the petitioner-
company. As per the facts and circumstances mentioned above, I am convinced that the
case against the petitioner under section 489-F, P.P.C. or other relevant provisions of law
mentioned in F.I.R. No.1256 of 2007, registered at Police Station Civil Lines, Lahore is
not made out, as such the same is hereby quashed which was registered against the
petitioner-company with mala fide intentions.

H.B.T./W-4/L F.I.R. Quashed.

Page No. 3 of 3
2008 M L D 1400

[Lahore]

Before Mian Muhammad Najum-uz-Zaman and Rana Zahid Mahmood, JJ

ZUBAIR ALI KHAN---Petitioner

Versus

THE STATE and others---Respondents

Writ Petition No.674 of 2008, decided on 2nd April, 2008.

(a) National Accountability Ordinance (XVIII of 1999)---

----Ss.5 (n) & 9 (a)---Constitution of Pakistan (1973), Art.199---Constitutional petition---

Liability of accused---Determination---Directors of company---Effect---Report of
Chartered Accountant---Value---Plea raised by petitioner was that according to report of
Chartered Accountant, his liability was less than that of Chief Executive of the
company---Validity---Private limited company was alleged to be involved in corruption
and corrupt practices in terms of S. 9 (a) of National Accountability Ordinance, 1999,
with all enabling provisions of relevant law on the subject---Petitioner was one of the
Directors like co-accused who was Chief Executive of the company---Petitioner and co-
accused prima facie were jointly and severally liable for acts and omissions committed by
them during conduct of alleged illegal business of the company---Pecuniary advantage
was allegedly gained by petitioner and co-accused---Loss was caused to public/claimants
who made investments through huge sums on inducement given by petitioner and co-
accused---Distinction drawn by Chartered Accountant between liabilities of petitioner
and co-accused was a question which could be better answered by Trial Court after due
trial of accused---Petition was dismissed in circumstances.

(b) National Accountability Ordinance (XVIII of 1999)---

---Ss. 5 (n) & 9 (a)---Criminal Procedure Code (V of 1898), Ss.221 & 227---Constitution
of Pakistan (1973), Art. 199---Constitutional petition---Charge, amendment of---Liability
of accused---Report of Chartered Accountant---Petitioner and other directors of a private
limited company were alleged to have induced members of public at large and deprived
them of huge amounts by cheating---Trial Court framed charge against all accused

Page No. 1 of 3
persons showing total amount deposited by members of pubic at large---Petitioner filed
application before Trial Court for amendment of the charge on the ground that according
to report of Chartered Accountant, his liability was less than that of Chief Executive of
the company, therefore, he would be charged for that amount only but the application was
dismissed---Validity---Petitioner and co-accused, who were all running affairs of private
limited company/firm, were prima facie jointly and severally liable to the charge---
Perusal of charge against petitioner did not show that there was any ambiguity in charge
against co-accused or there were chances of his being misled from the charge itself---
Charge was the first notice to accused of accusation precisely against him levelled by
prosecution---High Court declined to take any exception to order passed by Trial Court---
Petition was dismissed in circumstances.

M.A. Maik and Sittar Sahjil for Petitioner.

Qazi Misbah ul Hassan, Special Prosecutor for NAB for Respondents.

ORDER

The petitioner who is an accused in Accountability Reference No.35 of 2005 pending trial
in the Court of Mr. Muhammad Saleem Qureshi, learned Judge Accountability Court
No.3, Lahore feels aggrieved against the dismissal of his application filed by him under
section 227, Cr.P.C. for amendment of the charge earlier framed against him and others
by learned Accountability Court on 2-4-2007 and the petitioner moved said application
for amendment in the charge on the ground that according to the report of the Chartered
Accountant a distinction was drawn between the liabilities of the accused persons
including the petitioner in said reference as according to the report Shahid Hassan Awan
co-accused being the Chief Executive of the Firm namely Messrs Bulls and Bears Private
Limited was saddled with the liability of Rs.64,77,03,740 equal to 2902919 U.S Dollars
as according to said report of the Chartered Accountant which was made part and parcel
of the reference against the petitioner and others including Shahid Hassan Awan and
included the personal liability of Shahid Hussain Awan whereas .the liability of firm
Messrs Bulls and Bears was calculated to be Rs.57,55,600 equal to 499470 U.S. Dollars.
However, learned trial Judge framed the charge against all the accused persons who are 5
in number including the present petitioner and also the principal accused Shahid Hassan
Awan though separately yet charged them individually for the total liability of Rs.1294
million equal to 7.803 million U.S. Dollars.

2. Learned counsel for the petitioner has submitted that learned trial judge has failed to
appreciate the facts of the case qua the liabilities of the accused persons and also failed to
draw distinction between the liability of principal accused namely Shahid Hussain Awan
who was the Chief Executive of the said firm and had also received huge sums of money
from the people in his personal capacity as well therefore, as he had also agreed to pay
through voluntary return plan vide his application, dated 24-11-2003, the liability
assessed against him by the Chartered Accountant namely Messrs Hassan Naeem and
Company who was deputed by NAB for verification of claims against the Firm of the
accused was much more than the petitioner and others yet learned trial Judge declined to
allow the application vide impugned order. Learned counsel submitted that learned trial
Judge in fact was misled by previous order passed by him on 13-9-2007 on the
application of Shahid Hassan Awan co-accused which was also dismissed and was an
application under section 227, Cr.P.C. for alteration in the charge and submitted that the

Page No. 2 of 3
application filed by the petitioner was first application whereas learned trial Judge was of
the view that petitioner had moved application under section 227, Cr.P.C. earlier as well.
It is submitted with vehemence that since the charge against the present petitioner is
ambiguous which does not give him a clear picture of the charge against him therefore,
the impugned order whereby the application of the petitioner has been dismissed is liable
to be set aside with a direction to the learned trial Judge to alter/amend the charge in
clear-cut terms regarding the liability of the petitioner in the reference against him..
Learned counsel has prayed for acceptance of the writ petition.

3. Learned Special Prosecutor for NAB has opposed the contentions and submitted that in
fact application has been moved with mala fide intention to prolong the trial and
submitted that earlier Shahid Hassan Awan co-accused also moved an application on the
same subject to learned trial Judge but the same was dismissed vide order, dated 13-9-
2007 and submitted that the report of Chartered Accountant was submitted with the
reference on the request of accused persons and submitted that since the petitioner was
Director of Messrs Bulls and Bears Private Limited firm along with co-accused including
Shahid Hassain Awan, therefore, they are jointly and severally liable to discharge their
liabilities and to answer the charge before the learned trial Judge. He therefore, submitted
that there is no merit in this petition, the same may be dismissed. Learned counsel also
submitted that no defect or error in the charge can vitiate the trial and referred to section
225, Cr. P.C. in this regard, however, submitted at the same time that even a perusal of
charge against the petitioner shows that there is no error material or otherwise in the
charge framed against the petitioner.

4. We have heard learned counsel for the petitioner and learned Special Prosecutor for
NAB and have gone through the impugned order with care. Messers Bulls and Bears
Private Limited Firm is alleged to be involved in corruption and corrupt practices in
terms of section 9(a) with all enabling provisions of relevant law on the subject i.e.
N.A.O 1997. Petitioner was one of the directors like co-accused of said Firm except
Shahid Hassan Awan who was the Chief Executive of the said Firm. Petitioner and co-
accused prima facie are jointly and severally liable for the acts and omissions done by
them during the conduct of alleged illegal business of said Firm whereby pecuniary
advantage was allegedly gained by the petitioner and co-accused and caused loss to the
public/claimants who made investments through huge sums in the company on the
inducement given by the petitioner and co-accused. The distinction drawn by the
Chartered Accountant between the liabilities of the petitioner and co-accused on one side
and on the other between Shahid Hassan Awan co-accused is a question which can be
better answered by learned trial Court after due trial of the accused. As observed earlier
petitioner and co-accused who were all running the affairs of said private company/firm
are prima facie jointly and severally liable to the charge. We do not find from the perusal
of the charge against the petitioner that there is any ambiguity in the charge against him
or there are chances of his misleading from the charge itself. Needless to mention that
charge is a first notice to the accused of the accusation precisely against him levelled by
the prosecution. It would not be out of place to mention here that the alleged principal co-
accused namely Shahid Hassan Awan earlier also moved a similar application to the
learned trial Judge for alteration and amendment in the charge but the same was also
dismissed vide order dated 13-9-2007 by the learned trial Court. It was the petitioner who
then moved this application to the learned trial Court. No exception can be taken to the
impugned order, which is perfectly legal. Writ petition is without merit and is therefore,
dismissed.

M.H./Z-13/L Petition dismissed.

Page No. 3 of 3
2008 C L D 1291

[Karachi]

Before Ali Sain Dino Metlo and Dr. Rana Muhammad Shamim, JJ

NATIONAL ENVIRONMENTAL CONSULTING, (PVT.) LTD. through Authorized

Officer---Applicant

Versus

Mirza KAMRAN BAIG and 2 others---Respondents

Criminal Revision No.127 of 2005, decided on 11th August, 2008.

Offences in Respect of Banks (Special Courts) Ordinance (IX of 1984)---

----Ss. 4 & 5---Banking Companies Ordinance (LVII of 1962), S.5(b)---Complaint,

dismissal of---Deposits of money in bank---Purpose---Deposits of money accepted by a
bank from members of public were for the purpose of bank's use in lending or investment
and not for the purpose of keeping them apart as trust money--Adjustment of money from
the account of petitioner against the credit card liability of the Chief Executive of its
associated company did not amount to criminal breach of trust---No exception could be
taken to the Order of the Trial Court dismissing the complaint.

S. Pakrashi and another v. Emperor AIR 1941 Cal. 713; Attorney-General of Canada and
another v. Attorney-General of the Province of Quebec and another AIR 1947 P.C. 44;
Gopesh Chandra Pal and another v. Nirmal Kumar Das Gupta AIR 1950 Calcutta 57 and
Santosh Kumar and another v. The King AIR 1952 Cal. 193 ref.

Muhammad Abdullah for Applicant.

Saalim Salam Ansari for Respondent No.1.

Jam Asif Mehmood for Respondent No.2.

Page No. 1 of 4
Rizwan Ahmed Siddiqui, D.A.-G. for Respondent No.3.

Date of hearing: 11th August, 2008.

JUDGMENT

ALI SAIN DINO METLO, J.----Two private limited companies, namely, National
Management Consultants (Pvt.) Ltd. and National Environmental Consulting (Pvt.)
Limited (the applicant), were maintaining their foreign currency accounts in ANZ
Grindlays Bank (now Standard Chartered Bank), I.I. Chandrigar Road, Karachi. Dr.
Junaid Ahmed was the Chief Executive of National Management Consultant (Pvt.) Ltd.
He was also one of the two directors of National Environmental Consulting (Pvt.) Ltd.
having '50% shares and power to operate its accounts singly.

2. On written application of Dr. Junaid Ahmed, in the capacity of Chief Executive of

National Management Consultants (Pvt.) Ltd., as well as of Syed Munawar Ali,
Accountant of the company, a Viza Credit Card, with credit limit of Rs.290,400, was
issued to him (Dr. Junaid Ahmed) by the Bank on 27-3-1997. The facility of finance was
regularly availed by him. However, in or about the year 2003 some differences arose
between him and the bank regarding repayment of the finance. Ultimately, on 26-2-2005,
the bank adjusted an amount of US Dollars 6361 from the account of the associated
company i.e. the applicant.

3. The applicant did not concede to the bank's lien (under section 171 of the Contract Act,
1872) on its money for adjusting debt of its associated company or its Chief Executive,
mainly on the ground that, in law, the two companies were two different legal entities. On
its protest, the amount was credited back to its account and the bank had to recover the
amount by filing suit in the Banking Court.

4. In addition, the applicant also filed a complaint in the Special Court (Offences in
Banks) Sindh at Karachi for punishing the Manager as well as the concerned Officer of
the Bank (respondents Nos. 1 and 2) for committing the offence of criminal breach of
trust. However, the Special Court, by its order, dated 7-10-2005, dismissed the complaint
by holding that the dispute was purely of civil nature and they had not committed any
offence. The applicant has challenged the order in the present revision.

5. The basic question involved in the case is: whether money deposited with a bank is
trust money, which the bank must preserve as trustee and not use, or a debt which the bank
must pay as a debtor to the depositor? If it is a debt, there can be no question of
prosecution for and breach of trust.

6. The question came for consideration before a Division Bench of Calcutta High Court,

Page No. 2 of 4
in the case of S. Pakrashi and another v. Emperor, reported in 1941 Calcutta 713. In the
opinion of their lordships, the liability of a banker in respect of a depositor's current
account was only to return to the depositor an equal sum of money and the money could
not be said to have been entrusted with the banker in the sense in which the word `entrust'
was used in sections 405 and 409, Penal Code.

7. Thereafter, the question came for consideration before the Privy Council, in the case of
Attorney-General of Canada and another v. Attorney-General of the Province of Quebec
and another, reported in AIR 1947 Privy Council 44. In the opinion of their lordships of
the Privy Council, the relationship of a banker and customer, who deposits money into
the bank, was the ordinary relationship of debtor and creditor. Their lordships held:--

'The obligation is matuum not commodatum. Once the deposit is made there
remains only a debt due from the banker to the customer."

8. The principle laid down in the above two cases was followed by SEN J. in the case of
Gopesh Chandra Pal and another v. Nirmal Kumar Das Gupta, reported in AIR 1950
Calcutta 57. The same learned Judge in another case re Santosh Kumar and another v.
The King reported in 1952 Calcutta 193, observed:--

'The relationship between a depositor and a bank is the simple relationship of a

creditor and a debtor. A depositor who deposits money in a bank in his current
account is nothing more than a creditor and it cannot be said that there has been
any entrustment to the bank for any particular purpose. The Bank is of course
liable to refund the money to the depositor when the depositor calls for it, but the
money deposited belongs to the bank and the bank is entitled to deal with it as it
likes."

9. In Pakistan, banks are functioning under the Banking Companies Ordinance, 1962.
Under its section 5(b) banking is defined as:---

"'Banking' means the accepting, for the purpose of lending or investment, of

deposits of money from the public, repayable on demand or otherwise, and
withdrawable by cheque, draft order or otherwise."

10. The above definition makes it abundantly clear that deposits of money accepted by a
bank from members of public are for the purpose of bank's use in lending or investment
and not for the purpose of keeping them apart as trust money.

11. In presence of- the above clear statutory provision and the judicial opinion, it cannot
be said that adjustment of money from the account of the applicant against the credit card
liability of the Chief Executive of its associated company amounted to criminal breach of
trust. Thus, no exception can be taken to the order of the trial Court dismissing the
complaint. It was for these reasons, that the revision, being meritless, was dismissed by a
short order passed on 11-8-2008.

Page No. 3 of 4
H.B.T./N-35/K Petition dismissed.

Page No. 4 of 4
2006 P Cr. L J 1095

[Karachi]

Before Ali Sain Dino Metlo, J

BURHAN-UD-DIN----Appellant

Versus

THE STATE and another----Respondents

Criminal Acquittal Appeal No.241 of 2005, decided on 20th February, 2006.

(a) Criminal Procedure Code (V of 1898)---

----S. 417---Penal Code (XLV of 1860), Ss.408 & 420---Appeal against acquittal---
Appellant, who was Finance Manager of a Company had appealed against judgment of
Trial Court whereby accused was acquitted from charge of cheating and criminal breach
of trust, punishable under Ss.420 and 408, P.P.C.---Allegation against accused was that he
joined the company as an apprentice in 1969 at a monthly salary of Rs.150 p.m., but had
amassed enormous wealth in his and his family's name and-was living in house worth
rupees one crore, furnished with high class furniture and fixture worth rupees forty lacs
and he had committed gross irregularities in purchases by making overpayments---None
of the witnesses had stated that accused owned or possessed wealth disproportionate to
his known sources of income and it had not been disclosed as to what property he owned
before and after joining the company---Accused, in circumstances, could not be said to
have owned or possessed property disproportionate to his known sources of income---No
provision of law was available under which doing of business by a private servant was an
offence---Liability, if any, of the accused regarding payment of money, being purely of
civil nature, could not be treated as criminal---General allegation was levelled against the
accused that he made purchases at higher rates than market rate as none of the witnesses
had disclosed the exact difference between prices of any particular two items or even the
total amount of difference---Prosecution had not claimed that cash memos., were false,
forged or flying---Negligence, however, grave, could not be equated to dishonest
intention---Accused was rightly acquitted, in circumstances---Contention of appellant for
remanding case was devoid of any force, as he was not able to show as to what material
evidence, necessary for just decision of case he wanted to bring on record, while he had
conceded that Investigating Agency had failed to collect sufficient evidence to prove the
charge---Remand of case, in circumstances would serve no purpose except to cause
unnecessary vexation to the accused---Criminal cases, at appellate stage were not
required to be remanded for re-investigation.

Page No. 1 of 5
Anwar Ahmed v. Mst. Nafis Bano 2005 SCMR 152; 2005 SCMR 364; PLD 1962 Lah.
492; PLD 1972 Pesh. 175; 2005 MLD 1409; PLD 1960 Lah. 822; PLD 1978 Kar. 610;
1971 SCMR 264 and 1975 PCr. LJ 1281 ref.

(b) Criminal trial---

----Case at appellate stage is not required to be remanded for reinvestigation.

M.A. Kazi for Appellant.

Abdullah Khan for the State.

Abdul Naeem Memon for Respondent No.2.

Date of hearing: 20th February, 2006.

JUDGMENT

ALI SAIN DINO METLO, J.---The appellant, Finance Manager of Muhammad Farooq
Textile Mills, Karachi, a limited company (hereinafter referred to as "the company" or
"the mill") has appealed against the judgment, dated 20-5-2005 of the Civil Judge and
First Class Magistrate IV, Malir, Karachi, acquitting the respondent No.2 (hereinafter
referred to as "the respondent") of the charges of cheating and criminal breach of trust by
a servant, punishable under A sections 420 and 408 of the Pakistan Penal Code, 1860.

2. Briefly, the facts, relevant for the purpose of present appeal, are that on 12-12-1998,
Munir Ahmed Ansari, Director Operations of the company (P.W.5) made a written
complaint to the Station House Officer (S.H.O.) of Police Station (P.S.) Sharafi Goth,
Karachi, alleging therein that the respondent, who had joined the company as an
apprentice in the year, 1969 at a monthly salary of Rs.150 and progressively achieved the
position of manager procurement and monthly salary of Rs.55,300, had amassed
enormous wealth in his and his family's name and was living in a house worth rupees one
crore furnished with high class furniture and fixtures worth rupees forty lacs. Further
alleging that the A audit made in 1998, revealed `gross irregularities in the prices paid,for
purchase versus market price, which ranged from 20% to 300% over-payments' and that
on being confronted, he promised to compensate the company. However, owing to his
evasive and non-cooperative conduct, the company, apprehending his abscondence,
reported the matter to police.

3. The S.H.O. endorsed the application to sub-Inspector Zarecn Khan on the same day,

Page No. 2 of 5
who returned back the application to the S.H.O. with his endorsement that the matter was
already under consideration of this Court in Criminal Petition No.442 of 1998 and any
action on the application might amount to contempt of Court. On this, the S.H.O.
directed, on 13-12-1998, to keep the application on record simply. Nevertheless, on 2-1-
1999, the contents of the application were incorporated in the book prescribed under
section 154 of the Code of Criminal Procedure, 1898, for recording informations relating
to the commission of cognizable offences, commonly called as first information reports
(F.I.Rs.), and after more than one year i.e. on 29-2-2000, the report of investigation
(charge-sheet) was filed before the Magistrate having jurisdiction, who took cognizance
of the case and conducted the trial. A formal charge for the commission of offences of
cheating and criminal breach of trust by a servant, punishable under sections 420 and 408
of the Pakistan Penal Code, 1860, was framed against the respondent, to which he
pleaded `not guilty' and the prosecution examined seven employees of the company and
two Police Officers, in all nine witnesses, namely, Muzzafar Iqbal, Security Supervisor
(P.W.1), Syed Luqman Ahmed, Assistant Senior Engineer (P.W.2), Asghar Ali, Executive
Accounts (P.W.3), Abdul Rasheed, Mechanical Engineer (P.W.4), complainant Munir
Ahmed Ansari, Director Operations (P.W.5), appellant Burhan-ud-Din, Manager, Finance
(P.W.6), Abdul Ghaffar, Manager Accounts (P.W.7), S.I.P. Muhammad Zarecn (P.W.8),
and Inspector Ali Ahmed (P.W.9). The respondent did not examine any witness in his
defence. However, the learned Magistrate acquitted him by holding that the prosecution
had miserably failed to bring home the charge against him.

4. At the very outset, on being confronted that, the offences of cheating and criminal
breach of trust being different, one cannot be convicted of the both, on same facts, Mr.
M.A. Kazi, learned counsel for the appellant, frankly conceded that there was no
allegation or any evidence to show that the respondent had committed the offence of
cheating. However, according to him, sufficient evidence was there to show that he was
guilty of criminal breach of trust. On being asked as to what specific amount was
misappropriated by him, he again frankly conceded that neither the allegation nor the
amount was specific. Nevertheless, according to him, the prosecution, by producing a
very large number of documents, had successfully proved that the respondent had
misappropriated a huge amount of money belonging to the company.

5. Mr. Abdullah Khan, learned State Counsel, did not support the appeal and contended
that the prosecution had simply made a castle in the air and except for the general
allegations there was no specific and definite evidence to prove the charge. Mr. Abdul
Naeem Memon the learned Advocate for the respondent argued that it was case of no
evidence and the respondent was rightly acquitted.

6. In order to properly appreciate the contentions raised in the appeal, entire evidence
was gone through. None of the witnesses has said that the respondent owned or
possessed wealth disproportionate to his known sources of income. Even it has not been
disclosed what property he owned before and after joining the company. Therefore, it
cannot be B said that he owned or possessed property disproportionate to his known
sources of income. On the contrary, out of the two main prosecution witnesses, namely,
P.W.6 and P.W.7, the former stated that employees of the company were not required to
disclose their assets to the company, and therefore, he had also not filed any list of his
assets at the time of joining the company.

7. Prosecution; through P.W.6 i.e. the present appellant, introduced a new story that the
respondent, while in service of the company, was also doing his own business under the
name of Eastern Enterprises and was making supplies of dyes and chemicals to the
company also and that a total amount of' Rs.262,760 was outstanding against him.
According to him, some of the goods, which were found not according to the
requirement of the company, were replaced by him but the price of the replaced goods
Page No. 3 of 5
was not adjusted. In this regard the witness himself admitted that an employee of the
company, being a private servant, could do his own business after his duty hours.
Indeed, there is no provision of law, like section 168 of the Pakistan Penal Code, 1860
(which is for public servants only), under which doing of business by a private servant
is an offence. The liability, if any, of the respondent regarding the payment of money,
being purely of civil nature, cannot be treated as criminal.

8. As regard the allegation of making purchases at rates higher than the market rate, the
prosecution has simply levelled a general allegation and none of the witnesses has
disclosed the exact difference between prices of any particular two items or even the
total amount of difference. lc It is not the case of prosecution that the cash memos were
fake, forged or flying. Prices vary with quality and also from market to market. This
was admitted by prosecution's own witnesses viz. P.W.2 and P.W.3.

9. Learned counsel for the appellant heavily relied upon the agreement Exh.12(20)
purported to have been executed by the respondent on 27-11-1998 i.e. just 15 days
before making the written complaint to police and other documents Exh. 12 (1 to 146)
and strenuously argued that the prosecution by producing such a large number of
documents had succeeded to prove its case. I am afraid, the contention is without any,
force. Quality of evidence is more important than its quantity. No evidence was
adduced to prove the documents according to the law i.e. Article 78 of Qanun-e-
Shahadat, 1984. The agreement, under which the respondent is shown to have
undertaken to pay compensation of rupees one crore for the loss the company suffered
on account of his negligence and lack of proper supervision, was produced by P.W.7
along with a bunch of 145 other documents without deposing a single word about it or
the other documents most of which are the cash memos issued by Eastern Enterprises.
He is not shown either as scribe or attesting witness of the agreement. The complainant
(P.W.5) stated that the respondent was detained in the mill on the direction of its
administration and he (complainant) had also taken efforts for his release. Abdul
Rasheed (P.W.4) also stated that the respondent was detained by the administration of
the mill on the direction of its owner Farooq Soomar. He further stated that Ahmed
Amir, another employee of the company, who was also detained in the mill on the
direction of Farooq Soomar, had lodged F.I.R. regarding his wrongful confinement. The
Investigating Officer (P.W.8) also stated that he had come to 'know that Farooq Soomar
and Ghaffar Chohan (P.W.7) had obtained signatures of the respondent on blank papers
and that the latter had told him that Farooq Soomar had kept him in illegal detention. To
a suggestion that it was within their knowledge that the respondent was falsely
implicated in the case, both the Investigating Officers evasively replied that it was not
within their knowledge, which fact alone speaks volumes against the whole prosecution
case. From this one can safely infer that both the officers were at least not satisfied with
the truth of the allegation and were aware of the company's taking law into its hands
and commission of illegal acts of unlawfully detaining its employees, including the
respondent. All these circumstances create a serious doubt not only regarding the
execution of the agreement but about the whole prosecution case and the very filing of
charge-sheet by the Investigating Officer seems to be for extraneous considerations.

10. Moreover, mere production of a document does not amount to its proof,
notwithstanding the omission on the part of opposite party to raise objection to its
production. As mentioned above the agreement was produced along with a bunch of other
document by P.W.7 even without taking its or any other document's name. In such
circumstances, mere omission on the part of the respondent to raise objection to their
production will not amount to their admission or proof, as production and proof of a
document are different and not same thing. For this view one may refer to the case of
Anwar Ahmed v. Mst. Nafis Bano reported in 2005 SCMR 152 where it has been held
that `non-objection at the first stage merely justifies the physical placement of a
document on record but does not at all tantamount to admitting contents, truth or
genuineness of such document, which remains always to be proved independent of such
admission' and that `simply because no objection was raised to the production of
document would not render the document as proved'. The precedents reported in 2005
Page No. 4 of 5
SCMR 364, PLD 1962 Lah. 492, PLD 1972 Pesh. 175 and 2005 MLD 1409 cited by
learned counsel for the appellant are not relevant to the facts of the present case. It will be
worthwhile to clarify that the agreement, even if it be assumed for the sake of argument
and not as a fact, that it was executed by the respondent, is of no help to the prosecution
case, inasmuch as it speaks of negligence and lack of supervision and not dishonest
misappropriation which always involves dishonest intention as a necessary ingredient.
Negligence, whatever great, cannot be equated to dishonest intention.

11. The contention of the appellant's counsel for remanding the case is also devoid of any
force, inasmuch as he was not able to show what was the evidence material and necessary
for just decision of the case he wanted to be brought on record. On the contrary he
candidly conceded that the investigating agency had failed to collect sufficient evidence
to prove the charge. In such circumstances, remand of case will serve no purpose except
to cause unnecessary vexation to the respondent. Criminal cases at appellate stage are not
required to be remanded for reinvestigation. The precedents reported in PLD 1960 Lah.
822; PLD 1978 Kar. 610, 1971 SCMR 264 and 1975 PCr.LJ 1281, cited by the appellant's
counsel have also no relevance to the facts of the present case.

12. For the aforesaid reasons, recorded now, the appeal, being meritless, was dismissed
on 20-2-2006 by a short order.

H.B.T./B-7/L Appeal dismissed.

Page No. 5 of 5
2004 Y L R 62

[Lahore]

Before Tassaduq Hussain Jilani and Bashir A. Mujahid, JJ

Mst. RIAZ QAYYUM and others---Petitioners

Versus

STATE and others---Respondents

Writ Petitions Nos.4991, 5583, 6963 and 8146 of 2003, heard on 21st July, 2003.

National Accountability Ordinance

(XVIII of 1999)-----

----Ss. 9 & 18---Constitution of Pakistan (1973), Art.199---Constitutional petition---

Reference against accused on the ground of corruption and corrupt practices---
Validity---Case of prosecution regarding References filed in the Accountability Court was
that accused (alleged manufacturer) alongwith co-accused officials prepared false reports
to the effect that accused in his factory had installed a machinery and that said unit had
in-house facility to manufacture special precision shafting of iron and alloy steel and on
the basis of said false report manufacturer was extended facility of S.R.O.510(1)91 dated
30-5-1991 and thereby was provided with a benefit of huge amount causing
corresponding loss to the Public Exchequer--- Collector Customs, who was also an
accused in the case, was asked to provide a list of machinery installed in the premises of
the factory who managed to send list of machinery duly verified by the accused officers
Committee, on the basis of said list confirmed that factory/company had sufficient
in-house facility to manufacture precision shafting of iron and alloy steel---
Accused/Collector Customs on the said report, sent second verification report endorsing
the claim of accused/owner of the factory/company that 31 machines had duly been
installed in its premises---Central Board of Revenue, in view of the reports, issued a
provisional certificate permitting the company factory to import 10, 000 Metric Tons
Square Billets under concessionary rate of Duties Taxes under S.R.O. 510(1)91 dated
30-5-1991 and the company/factory continued deriving benefit of said S.R.O. and
imported the raw material without payment of duties--Collector Custom (accused) was
asked by a letter to verify as to whether said company factory had any in-house facility of
manufacturing said goods and the accused sent the report which proved to be false on
which references had been made--Role of accused in his capacity as Superintendent.
Central Excise and Sales Tax, was that he alongwith co-accused carried out spot
inspection of the premises of the factory and on his report certificate was

Page No. 1 of 8
issued---Criminal liability of accused was no less than the co-accused---Constitutional
petitions against filing of references were dismissed.

Rashdeen Nawaz Kasuri for Petitioners.

M. Bilal Khan with Ali Tipu Khan for Respondents.

Date of hearing: 21st July, 2003.

JUDGMENT

TASSADUQ HUSSAIN JILANI, J.-------This judgment shall dispose of following

Constitutional petitions as they arise out of the same Reference No. 8 of 2003 filed by the
National Accountability Bureau and is pending before the Accountability Court,
Lahore:--

(i) Writ Petition No.4991 of 2003 (Mst. Riaz Qayyum v. The State etc.);

(ii) Writ Petition No.5583 of 2003 (Muhammad Aslant Bajwa v. The State etc.);

(iii) Writ Petition No.6963 of 2003 (Qazi Naseer Ahmad v. The State etc.); and

(iv) Writ Petition No.8146 of 2003 (Rashid Ahmad Khan v. The State etc.).

2. The case of the prosecution in the afore-referred Reference briefly stated is that the
afore-referred petitioners/accused, alongwith their co-accused, prepared fake reports to
the effect that the factory of accused No.1 on the above reference, has installed a
machinery and that the said unit had in-house facility to manufacture special precision
shafting of iron and alloy steel. On the basis of the said fake report, the so called
manufacturer was extended the facility of S. R.O. 510(1)91, dated 30th May, 1991 and
thereby provided with a benefit of Rs.1,43,80,23,112 with corresponding loss to the
public exchequer. It is alleged that the then Collector Customs, who is an accused in the
instant case, was asked to provide a list of machinery installed in the premises of the
company Messrs Irfan Seamless Pipe Industries (Pvt.) Limited, 338-G.T. Road.
Salamatpura, Lahore. He, in turn, directed Syed Tanvir Ahmad, Assistant Director
Customs to ensure compliance of the latter on 10-6-1992 sent a list of machinery duly
verified by accused Khurshid Hassan (since died), Qazi Naseer Ahmad, Retired Deputy
Superintendent Customs (petitioner in Writ' Petition No.6963 of 2003) and Muhammad
Aslam Bajwa, Retired Superintendent Customs (petitioner in Writ Petition No.5583 of
2003). This Committee confirmed that the Company had sufficient in-house facility to
manufacture special precision shafting of iron and alloy steel. On the receipt of the

Page No. 2 of 8
afore-referred report, the same Collector Customs sent second verification report
endorsing the claim of the accused Seth Nisar Ahmad (owner of the Company) that 31
machines had duly been installed in the premises. On the basis of the afore-referred
reports/verifications, the Central Board of Revenue issued provisional certificate
permitting the Company to import 10,000 Metric Tons Square Billets under
Concessionary Rate of Duties/Taxes under S.R.O. 510(1)91, dated 30th May, 1991.
Thereafter in August, 1992 a letter was sent to the same Collector Customs (accused) to
verify as to whether the company had any in-house facility of manufacturing seamless
pipes and special precision shafting of iron and alloy steel. A reminder was also sent but
both these letters remained unheeded and in the meanwhile the company continued
deriving the benefit of the afore-referred S.R.O. 510(I)91, dated 30th May, 1991 and
imported raw material without payment of duties. Yet another reminder was sent to the
Collector in question pursuant to which the said accused sent a report dated 8-2-1993
prepared by one Khalid Naseem, to which reference has been made in the reference, as
under:--

“........ It was reported by said Khalid Nasim that the factory was under
construction and the machinery was in the process of installation. He suggested
that the intention of the party should not be doubted. He further recorded that the
factory had an area of 28 Kanals and not 4 Kanals as alleged in the complaint.
This report, which was prepared in February, 1993 shows that even machinery
was not available with the Company in June or July, 1992, what-to speak of
in-house facility as had been earlier reported. This fact indicates that false survey
reports. Regarding availability of machinery and in house facility were prepared
by the aforenamed accused at Lahore and were sent to C.B.R., Islamabad on
10-6-1992 in collaboration with accused No.1, who was then the Chief Executive
of the Company. Even this report did not address itself to the basic issue raised in
C.B.R.'s. letter dated 29th August, 1992,. i.e. status of ISL for being manufacturer
of seamless pipes. The report prepared by said Khalid Nasim was received on
25th February, 1993. On 20 February, 1993 a new S.R.O. No.146(1)/93 was
issued. This S.R.O. No.146 (1)/93 was issued on the basis of a decision of the
E.C.C. of the Cabinet (Federal Government) whereby the categories of raw
materials which could be imported under concessionary rates under the previous
S.R.O. No.146(1)/93 was notified in supersession of the earlier S. R.O. 510(1)/91,
and in doing so, the area of its applicability was widened in such a manner as to
extent its benefits to even those companies which were not manufacturing
seamless pipes. As a result of this, accused No.1, was able to import caw material
without payment of duties/taxes etc. and that too against the invalid Provisional
Certificate which had been issued under S. R. O. 510(1)/91. The matter regarding
issuance of new S.R.O. 146(1)/93 and compliance of ECC decision is still being
investigated.

5. That on 21st July, 1993 a survey of the premises 'of the Company was
undertaken by deceased accused Khurshid Hassan, the then Superintendent,
'Survey and Rebate, Collectorate of Central Excise and Sales Tax, Lahore Survey
Report dated 7th August, 1993 prepared by deceased Khurshid Hassan,
Superintendent was countersigned by Sarfraz Ahmad Warraich, the then Assistant
Director, Survey and Rebate, Collectorate of Central Excise and Sales Tax,
Lahore and said Khalid Nasim. The survey was conducted to watch the
production and also determine the production and wastage. The report was signed
by all these persons except accused No.8, the then Technical Officer, Survey and
Rebate, Collectorate of Central Excise and Sales Tax, Lahore who deliberately
avoided to sign it. It was forwarded on 8th August, 1993 by accused No.7 in terms
of S.R.O. 510(1)/91 although, to his knowledge, this S.R.O. had already been
cancelled on 20th February, 1993. The report was factually incorrect and was
prepared to benefit the Company. "

Page No. 3 of 8
3. Learned counsel for petitioner (in Writ Petition No.4991 of 2003), submitted as
under:--

(i) That the Reference itself indicates that petitioner's husband Khalifa Abdul
Qayyum never signed the report on the basis of which the principal accused got
the benefit in question.

(ii) That there is nothing on record to indicate that the petitioner's conduct, in any
manner, caused loss to the public exchequer and benefit to co-accused.

(iii) That two signatories of the report have, not been made accused, hence this
reference is arbitrary and partial.

4. Learned counsel for petitioner (in Writ Petition No.5583 of 2003) made following
submissions:

(i) That the petitioner is not a signatory to the report on account of which the main
accused derived benefit.

(ii) That the petitioner is not a technical expert and cannot be saddled with the
criminal liability for an incorrect report submitted by a member of the Survey
Committee.

5. Learned counsel for petitioner (in Writ Petition No.6963 of 2003) contended as under:
--

(i) That the allegation that the petitioner, alongwith Khurshid Hassan and
Muhammad Aslam Bajwa visited the premises of the factory and prepared on
inventory of machinery which made it possible for the principal accused to obtain
pecuniary benefit, is factually not correct.

(ii) That the machinery which was shown in the inventory prepared by the co-accused
was in the process of installation, therefore, the report in question, on the face of
it, was factually incorrect.

6. Learned counsel for the petitioner in Writ Petition No.8146 of 2003, in support of this
petition, argued as under:--

(i) That the petitioner, at the relevant time, was posted as Superintendent, Central
Excise and Sales Tax, Lahore: The allegation against him is that he issued false

Page No. 4 of 8
 consumption certificate to the effect that the manufacturing unit of the co-accused
had consumed the, raw material for the manufacturing of seamless pipes. This
allegation is totally incorrect as the petitioner neither prepared report nor he
carried out any physical exercise.

(ii) That the petitioner is heart-patient and deserves to be released on bail.

7. Mr. M. Bilal Khan, learned counsel for National Accountability Bureau assisted by the
Investigating Officer opposed all these four petitions by making following submissions:--

(i) That there is documentary evidence to prove involvement of all the

petitioners/accused in the criminal transaction beyond doubt and no exception can
be taken to their arrest and detention.

(ii) That the petitioners/accused by abusing their official position caused loss to the
public exchequer to millions of rupees and derived pecuniary benefit out of it.

(iii) That each one of the petitioners had, at the relevant time, played a role in
providing benefit to the principal accused.

(iv) That the petitioners/accused, who are public servants, in league with the private
individuals prepared false reports. On complaint received, the matter was fully
investigated and having done so, the prosecution' has come to the conclusion that
the petitioners are fully involved in heinous offences and no case for bail is made
out.

8. We have heard learned counsel for the parties, have given anxious consideration to the
submission made at the bar and perused the record.

9. In Writ Petition No.4991 of 2003 (filed by, wife of accused Khalifa Abdul Qayyum), a
letter dated 8-8-1993 which was addressed by Shaukat Ali Bhatti, the then Collector of
Central Excise and Sales Tax Lahore to the Chief, Survey and Rebate, Central Board of
Revenue, Islamabad, reads as under:--

"GOVERNMENT OF PAKISTAN

COLLECTORATE OF CENTRAL

EXCISE AND SALES TAX,

CUSTOM HOUSE, LAHORE

Page No. 5 of 8
 C. No. 157-Industrial Survey/92/264

Dated: 8-8-1993

To,

The Chief

Survey and Rebate,

Central Board of Revenue,

Islamabad.

Sub: SURVEY REPORT IN RESPECT OF MESSRS IRFAN SEAMLESS PIPE

INDUSTRIES (PVT) LTD. LAHORE.

Kindly refer to Board's Letter C. No. 2(31)/S&R-I/92, dated 5-8-1992, on the

subject cited above.

2. The survey of Messrs. Irfan Seamless Pipe Industries (Pvt.) Limited, Lahore was
conducted by a survey team. Report submitted by the team is sent herewith for further
necessary action by the Board.

(Encl: (05))

(Sd.)

(SHAUKAT Ali BHATTI),

Collector".

This letter refers, to another Letter bearing No.C.No.2(3) S&R-I/92, dated 5-8-1992
which is part of the Reference and has been produced before this Court by the learned
counsel for the respondent National Accountability Bureau. Vide this letter, the Collector
(co-accused) sent a report prepared by team of three in which petitioner acted as the
technical expert. The report dated 25-8-1992 carried physical verification of the
machinery installed and other in-house facilities to manufacture special precision shafting
of iron and alloy steel. Learned counsel for the petitioner tried to wriggle out of the report
by submitting that neither her husband nor the co-accused derived any financial benefit
and, therefore, petitioner's husband could not be attributed any criminal intent. This
argument of the learned counsel for the petitioner is not tenable because Khalifa Abdul
Qayyum was admittedly, the technical expert. His opinion whether the Company had
in-house facility to manufacture special precision shafting of iron and alloy steel or not,
was crucial, The report prepared, prima facie, demonstrated that the petitioner's husband

Page No. 6 of 8
tried to mislead the Central Board of Revenue by signing false report. His detention,
therefore, cannot be termed as without lawful authority.

10. So far as Writ Petition No.5583 of 2003 filed by Muhammad Aslam Bajwa is
concerned, he, in his capacity as Superintendent, Survey and Rebate, Collectorate of
Central Excise and Sales Tax, Lahore, is a signatory to the inventory prepared regarding
the so-called machinery: installed in the premises of the factory in question. The
inventory is dated 10-6-1992 of the same date the Collector of Customs sent a letter to the
Central Board of Revenue to the following effect:-

“2 Superintendent, Mr. Khursheed Hasan, Survey and Rebate, Mr. Qazi Naseer
Ahmad, Deputy Superintendent (S&R) and Mr. Aslam Bajwa, Deputy
Superintendent (S&R) visited the premises of Messrs Irfan Seamless Pipe
Industries, Salamatpura, Lahore. They have reported that the unit has sufficient
in-house facility to manufacture special precision shafting of iron and alloy steel.
The list of machinery as verified by the staff is attached as Annexure ' I' ."

11. The company's correspondence with the Allied Bank Limited, Peshawar and other
documents, which are part of, the list of documents being relied upon by the prosecution
before the learned trial Court, indicated that the machinery had not been manufactured as
yet when the aforereferred report was sent regarding the in house facility of
manufacturing. Hence, there is prima facie, sufficient evidence to connect him with the
alleged offence.

12. Petitioner Qazi Naseer Ahmad (in Writ Petition No.6963 of 2003) also visited the
factory. He is signatory to the survey report and there is his handwritten note at page 410
of the paper book containing list of documents being relied upon by the prosecution to
the- effect that "I Naseer Ahmad visited the premises of Messrs Irfan Seamless Pipe
Industries (Pvt.) Limited, 338-G.T. Road, Sala matpura Lahore. It was found that they has
sufficient in-house facility to manufacture special precision shafting of iron and alloy
steel. The list of machinery installed in the mill is attached as Annexure 'A"'. Hence his
case is not different from Muhammad Aslam Bajwa accused.

13. Coming to the case of petitioner Rashid Ahmad Khan (in Writ Petition No.8146 of
2003). He is linked with the preparation and submission of consumption certificate
signed by the Assistant Collector Customs to the effect that Messrs Irfan Seamless Pipe
Industries (Pvt.) Limited. Lahore had used the raw material provided to it although
factually neither the machinery was in operation nor the raw material was utilized. The
role of petitioner in his capacity as Superintendent, Central Excise and Sales Tax was that
he alongwith others carried out the spot inspection of the premises of the factory. On the
report submitted by these officials, the Assistant Collector (Customs) Ms. Adila Rehman
issued the consumption certificate. His criminal liability, ex facie, is no less than the
petitioners/co-accused.

14. For what has been discussed above, we do not find any merit in all the four writ
petitions mentioned in para. 1 of this judgment which are hereby dismissed.

H.B.T./R-275/L Petitions dismissed.

Page No. 7 of 8
Page No. 8 of 8
1999 P Cr. L J 1648

[Karachi]

Before Mrs. Majida Razvi and Sarmad Jalal Osmany, JJ

MASOOD BAGHPATI and another---Applicants

Versus

THE STATE---Respondent

Criminal Bail Application No.885 of 1998, decided on 21st September, 1998.

Criminal Procedure Code (V of 1898)---

----S. 497(2)---Penal Code (XLV of 1860), S.406/420/109---Bail, grant of---. F.I.R.

relating to an offence committed in the year 1994-95 was lodged in the year 1998 without
having explained the delay---Dispute between the parties at the most could be of breach
of contract constituting a civil liability---Accused company having repaid a substantial
amount had no criminal intention to defraud the Bank, but had stopped repayment due to
compelling circumstances, for which the complainant Bank had already initiated civil
proceedings---Liability of the accused could only be determined after recording evidence
of the parties--Case against accused required further inquiry and they were admitted to
bail accordingly.

Jamot Ghulam Muhammad v. The State and another 1972 PCr.LJ 1130; Badaruddin v.
Mehr Ahmed Raza, Additional Sessions Judge, Jhang and 6 others PLD 1993 SC 399 and
Mian Jamsheed Hussain v. The State 1992 PCr.LJ 141 ref.

Azizullah K. Shaikh for Applicants.

Mamoon Hasan, Dy. A.-G. for the State alongwith Mirza Anwar Hussain., Zonal Chief,
A.B.L. assisted by Sohail Muzaffar, Advocate for the A. B. L.

Date of hearing: 10th September, 1998.

Page No. 1 of 4
JUDGMENT

MRS. MAJIDA RAZVI, J.--- This criminal bail application has been filed by two
applicants/accused who are managing director and director respectively of a company
known as Messrs Tristar Shipping Lines Ltd. They were arrested on 24-7-1998 in
pursuance of an F.I.R. No.27 of 1998 filed by the complainant-bank through their Zonal
Chief Mirza Anwar Hussain, A.B.L.

The brief facts are that Messrs Tristar Shipping Lines (the Company) applied to the Allied
Bank Ltd., the complainant herein for grant of loan/ opening of L.Cs. for the purchase of
ships. Four L.Cs. were opened by the said Bank on behalf of the company on the terms
and conditions given therein. Admittedly, the company after repaying the installments for
about two years in respect of the said four L.Cs. stopped repayment and as such, Suit No.
1591 of 1997 was filed by the complainant-bank against the company as well as its
directors for the recovery of the outstanding amount and subsequently the F.I.R. was also
lodged.

According to the F.I.R., the day of occurrence of the incidence is the year 1994-95. The
facts mentioned therein are similar to the ones we have mentioned hereinabove, however,
it has been alleged that the directors of the company after opening the L.Cs. to purchase
the ships said installments for some time and then stopped depositing installments with
the complainant bank and with a criminal intention made breach of trust and instead of
depositing the amounts with the complainant-bank deposited the same with another bank
namely Prudential Commercial Bank Ltd. As such complaint was filed under sections
406, 420 and 109, P.P.C.

Mr. Azizullah K. Shaikh, the learned counsel for the applicants/accused contended that
the applicants/accused entered into a finance agreement with the complainant-bank for
the purchase of ships and the terms and conditions are given in the L.Cs. itself. According
to him, the company, admittedly, paid the installments as provided under the L.Cs. for
about two years but failed to continue repayment due to disturbances and overall
economic conditions. According to him, the charge amount shown in the F.I.R. is
incorrect as the said amount i.e. US $10.850 (m) is the total amount for which the L.Cs.
were opened, out of which substantial amount has already been repaid and for the balance
the complainant/bank has already filed a suit for recovery of the liabilities of civil nature.
But to harass the applicants/accused and to put pressure on them the complainant-bank
has initiated criminal proceedings by lodging an F.I.R. He categorically denied that any
separate terms were settled between the parties except what is mentioned in the L.Cs.

Mr. Memnoon Hasan, the learned Dy.A.-G., contended that the bank had issued a
sanction letter, dated 10th March, 1994 according to which the company was bound to
deposit US $4500 per day equivalent to Rs.98.250 (m) as charges/freight charter hire of
the ship with the bank to build up monthly installment of US $99,000 to be remitted to
the supplier but the company failed to deposit the said freight charter hire with the
bank .and instead committed criminal breach of trust by depositing it with another bank
which resulted in lodging of F.I.R. under sections 406, P.P.C. and 420, P.P.C.

Page No. 2 of 4
We have heard both the counsel and have considered the points raised on behalf of the
parties. The four L.Cs. mentioned by the parties are not disputed nor the amounts
mentioned therein. It is also not disputed that US $4.63 (m) is the outstanding amount
against the company and applicants/ accused. The F.I.R. relates to an incidence of
1994-95 and no reason has been given for the delay in filing of the F.I.R. The
complainant-bank has already filed a suit for recovery of outstanding amounts which is
pending in this Court. We are of the considered opinion that in cases where recoveries are
to be made efforts of the lending agency should be more for recovery of its dues than to
punish parties in criminal proceedings. To bring an offence under purview of section 406
of P.P.C. the criminal intention of breach of trust must be present so also under section
420, P.P.C. In the present case, it has been established that the applicants/accused
continued to pay for about two years which negates the criminal breach of trust or
cheating. Then the acts of the complainant-bank itself is a proof that considering the
liability of the company and applicants/accused being that of civil nature the suit was
filed for the recovery of the outstanding amounts. It was only an afterthought act that
F.I.R. was lodged, thus, trying to convert the said civil liability into criminal liability. In
the case of Jamot Ghulam Muhammad v. The State and another 1972 PCr.LJ 1130 it was
observed that:--

"... It is here that a Court is called upon to act with circumspection and to exercise
the utmost care and caution before it is persuaded to employ its process for
compelling the attendance. This duty is heavier in private complaints which relate
to transactions apparently civil in nature. The tendency to view a criminal action
as a handy means to, constrain a person's conduct cannot be underscored."

In the present case, as we have observed hereinabove initially civil proceedings were
initiated against the company-and the present applicants/accused for recovery of the
outstanding amounts and subsequently, to put pressure on the party additional criminal
proceedings were initiated. We are clear in our mind that there is no element of mens red
in the offence which is alleged to have been committed by the present applicants/accused.
A perusal, of the F. I. R. has clearly established that the offence so alleged was committed
somewhere in 1994-95 but the complainant-bank lodged the complaint in 1998 and, as
such, even if the facts given therein are true there is an unexplained delay in filing of the
F.I.R. and the dispute at the most can be of breach of contract which would constitute a
civil liability. In the case of Badaruddin v. Mehr Ahmed Raza, Additional Sessions Judge,
Jhang and 6 others PLD 1993 SC 399 it was held that:--

"...There is no dispute about the fact that ingredients of criminal offences such as,
under sections 420, 406, 467 and 468, P.P.C. and other cognate offences are
similar as would appear in most cases of breach of contract. No doubt in such
cases both remedies on criminal as well as civil sides are available and can be
pressed into service but guide-lines in the case-law show that Civil Courts be
given preference and allowed to decide such disputed facts. In such
circumstances, it is the duty of the Criminal Court to act with circumspection and
exercise power with utmost care and caution before it is persuaded to employ its
process for compelling attendance."

In the case of Mian Jamsheed Hussain v. The State 1992 PCr.LJ 141 it was held that:--

"To establish the case under section 420, P.P.C. there must have been clear
evidence to the effect that the appellant had guilty mind from the very outset,
which evidence as observed earlier, is lacking in this case. In fact, a simple case of

Page No. 3 of 4
 breach of contract was turned into a criminal case just to put pressure upon the
appellant so that he may repay the loan. It may be added that the parties have
already resorted to civil litigation. We think that the general proposition of law is
well-settled that a broken promise by itself does not bring the case within the
mischief of cheating."

Under section 420, P.P.C. there is to be a clear evidence that accused had guilty mind to
defraud the other party from the very outset. In the present case, as admitted by the
complainant bank that the company and applicants/accused have repaid a substantial
amount, indicates that there was no criminal intention to defraud the bank but due to
compelling circumstances the company and applicants/accused stopped repayment for
which the complainant/bank had already initiated civil proceedings. Without going into
the merits of the case or as to the liability/outstanding against the applicants/accused as
the same can be determined only after evidence is led by the parties which is out of our
domain, in our opinion, it is a case of further enquiry. Under the circumstances, and due
to the unsatisfactory and lacking evidence to bring the case under the purview of sections
406 and 420, P.P.C. by a short order, dated 10-9-1998 we granted bail to the
applicants/accused on the terms and conditions mentioned therein.

N.H.Q./M-401/K

Bail allowed.

Page No. 4 of 4
1994 C L C 403

[Lahore]

_Before Khalil-ur-Rehman Khan, J

MUHAMMAD YOUSAF---Applicant

In the matter of TAJ COMPANY

Application in C.O No. 45 of 1990, decided on 26th March,

1993.

(a) Companies Ordinance (XLVII of 1984)---

---=Ss. 9, 290, 410 to 415---Proceedings under S. 290 of

Ordinance, 1984 were to be resorted to when it was
complained that affairs of Company were being conducted in
an unlawful or fraudulent manner or in a manner not provided
for in Memorandum of Company or in manner oppressive to
members or creditors or were being conducted in a manner
prejudicial to public interest--Ss. 410 to 415 which provided
for determination of liability, civil and criminal, of Directors of
Company with a view to recover ascertained amount of
liability, had been made applicable in relation to application
under S. 290---Such a determination under Ss. 410 to 415 of
the Ordinance was to be made in accordance with procedure
laid down in S. 9 of the Ordinance.

(b) Companies Ordinance (XI.VII of 1984)---

----Ss. 290 & 413---High Court in those proceedings which

were essentially of summary nature, could take cognizance of
offences falling within purview of Section 413 but was not
competent to take cognizance of other offences alleged to have
been committed by Directors under Companies Ordinance as
well as under Pakistan Penal Code:

(c) Companies Ordinance (XLVII of 1984)---

Page No. 1 of 6
----S. 290---High Court could not provide relief to affectees
who had lost their deposits in Company due to fraudulent
conduct of business by Company unless and until it found
buyers of properties owned by Company and its
subsidiaries---Such relief would also have to be limited to
extent of amount available with it after sale of those properties
---Pendency of those proceedings, however, in no way would
place any restriction whatsoever on Government or its
Authorities to come out with any scheme of relief to affectees
of Company-

Applicant in person. Muhammad Nazar Khan, Member,

B.O.A:

Date of hearing: 26th May, 1993.

ORDER

Muhammad Yousaf, applicant, who claims to be the President

of Taj Company Affectees, has in this application asserted that
the higher authorities of the Government whenever approached
come out with the excuse that they are not in a position to
afford any relief to the depositors of the; Taj Company as
proceedings relating to the Company are pending in the High
Court. It is added that he was so told by the Home Secretary,
Government of the Punjab as well as by certain Ministers of
the Federal Government in power from time to time. The relief
prayed for is that the Government of Pakistan be allowed to
take over Taj Company in any of their departments. Le,
Bait-ul-Mal or Ministry of Religious Affairs so that
Government may make arrangements to recover the amount
embezzled by the ex-Directors of the Company as adjudged by
this Court so as to afford full compensation to the
affectees/depositors.

2. The reason for making this application to this Court is that

proceedings instituted by the Registrar of Companies under
section 290 of the Companies Ordinance, 1984, are pending in
this Court. It may be pointed out that proceedings under section
290 are resorted to when it is complained that affairs of the
Company are being conducted in an unlawful or fraudulent
manner or in a manner not provided for in, the Memorandum
of the Company or in manner oppressive to the members or
creditors or are being conducted in manner prejudicial to the
public interest. Moreover, sections 410 to 415, which provide
for determination of liability, civil and criminal, of the
Directors etc. of the Company with a view to recover the
ascertained amount of liability, have been made applicable in
relation to the application submitted under section 290 of the

Page No. 2 of 6
Ordinance. Such a determination under these sections is to be
made in accordance with procedure laid down in section 9 of
the Ordinance.

3. The Registrar submitted application/statement of allegations

under sections 412, 413 and other provisions of the Companies
Ordinance, 1984, for determination and enforcement of civil
and criminal liability of some of the working Directors. The
liability of four working Directors has been determined after
detailed proceedings. Their liability having been determined
and on account of non-payment of the amount so determined,
order of detention in civil prison was passed. Ch. Ali
Muhammad, Sh. Muhammad Saleem and Ashraf Parvez, three
ex-Directors were arrested pursuant to the detention warrants
so issued and are undergoing detention in civil revision. Amjad
Hussain Khokhar, ex-Director, has not yet been shifted to the
prison as statedly he stands admitted in a private hospital at
Karachi due to heart ailment. He has, however, been taken into
custody. These four Directors were also sentenced to suffer
simple imprisonment for two years each under section 413 of
the Ordinance for fraudulent conduct of business of the
Company. This Court in these proceedings which are
essentially of summary nature, could take cognizance of
offences falling within the purview of section 413, Companies
Ordinance, 1984. Other offences alleged to have been B
committed by these Directors under the Companies Ordinance
as well as under the Pakistan Penal Code of which this Court is
not competent to take cognizance, are the subject-matter of
complaints submitted by the Registrar of Companies to the
Sessions Judge, Lahore. These complaints require to be
pursued and prosecuted diligently so that the accused, if any,
on proof thereof are punished properly and adequately.

4. As regards financial affairs of the Company it will be noted

that almost all the properties owned by the company were
mortgaged with different banks and financial institutions in
order to secure loans obtained by the Tai Company or its
subsidiaries or by the Companies constituted by friends and
relatives of the ex-Directors. The encumbrances and liens
created over these properties for securing loans obtained by
companies of friends and relatives have been brought to an end
and properties got released. The banks which granted loans
were approached with the request to waive off the mark-up and
with the intervention of the then Government, the banks agreed
to waive off mark-up provided the principal amount of loan is
paid to them. The principal amount of loan payable is
Rs.9,34,20,381. This amount, however, could not be paid as the
properties could not be disposed of. The amount of mark-up
which has been agreed to be waived off in case of payment of
principal amount of loan has risen to Rs.5,20,01,253.

It is also pertinent to mention that huge amounts were

receivable by the Company for the last many years from its
debtors. All-out efforts were made to recover these debts.

Page No. 3 of 6
The main business of the Company is publication of Holy
Qur'an and other religious books. This business of the
Company stood suspended when proceedings under section
290 of the Ordinance were filed in this Court. The Press and
Sale Depot and other properties of the Company at Karachi had
been taken over by the works and the management was not
even in a position to enter the premises. This Court not only
retrieved the possession from unauthorised hands but also,
through the Board of Administrators, commenced its business
operations. The printing of Holy Qur'an and religious books
was re-started and the total amount now available with the
company in its bank account on account of recoveries as well
as sale of its publications stand at 450 lac approximately. By
commencement of business operation through working of the
printing presses it has been established that the main business
of the Company is a profitable business and these operations
can be taken over by any intending purchaser safely and with
confidence provided the burden of the depositors is off-loaded.
The most unfortunate feature of the past operations of the
Company is that the ex-Management since prior to partition
started receiving deposits from members of the public on the
promise to pay profit of 18%, 20% or even at the rate of 22%.
The more stressing feature is that on taking over of the
Company by the Board of Administrators it was found that
proper record of these deposits was not available. The Board of
Administrators assigned the job of preparation of record to
S.M. Masood and Company, Chartered Accountants. The
investigation launched and the record prepared and later
computerised showed that a sum of Rs.2,55,01,20,754 was the
amount of deposits received. If the amount which these
depositors have received in the shape of profit for all these
years is deducted which comes to Rs.1,20,48,21,137 the
amount of deposits net payable would come to
Rs.1,34,52,99,617.

6.As against this financial liability towards depositors and

Rs.9,34,20,381 payable to banks, the value of the property
owned by the company comes to Rs.50,10,00,000. It is,
therefore, apparent that the properties belonging to the
Company and its subsidiaries are not sufficient to pay to the
creditors their amount even after deducting the amount of
profit already received by them. The company stopped paying
interest to the depositors in the year 1990. The question of
payment of any amount towards satisfaction of these claims at
this moment does not arise as the Board of Administrators has
not been able to formed any purchaser of the business as well
as of the properties of the Company and its subsidiary
companies. It may be noted that despite vast publicity costing
Rs.40,000 made for sale of Shah Din Building situated at
Shahrah-e-Quaid-eAzam, Lahore not a single offer was
received. It was because of this situation that the Board of
Administrators approached the Bait-ul-Mal authorities to take
over through purchase its main business, presses and the
related properties of the Company. Such proposal has not
materialised till date: It may also be mentioned that some
renowned business houses and other likely purchasers were
also approached for the purpose but these efforts have not been
fruitful.

Page No. 4 of 6
7. The affectees have during the pendency of these proceedings
made all efforts to politicise the issue and though some
statements expressing sympathies with them were made by
personalities in the helm of affairs but no proposal whatsoever
has been submitted to this Court. These affectees should realise
that politicising the issue is not going to help them. The reason
being that the depositors have at best been cheated and the
amount advanced by them to the Company has been
embezzled. Any person who has been cheated by someone
obviously cannot ask the Government to make good the loss or
to pay him the amount of which he has been cheated. The plea
at best available to them is that the Government should come to
their rescue as its agencies failed to take adequate measures to
curb fraudulent conduct of business by the Company. The
Government should also intervene as these people have been
defrauded in the name of Holy Qur'an. These people need
relief. The question is what measures can be adopted to extend
relief to defrauded people especially orphans, widows and
destitute persons. The measures for affording relief to the
affectees that can be suggested are as under:--

(1) The main business of the Company i.e. printing and

sale of Holy Qur'an and religious books can be taken over by a
body to be constituted under the authority of the Government.
Funds can be provided from Bait-ul-Mal or by constituting a
special fund inviting public to contribute to the fund for the
sake of continuity of publication of Holy Qur'an and religious
books. Shares can be floated for sale at a premium. The
business of the Company, as has been indicated above, is a
profitable business as profit has been earned by running it with
limited resources;

(2) Depositors should be paid out of the money so collected

after adjusting the amount of interest which they have already
received as so-called profit;

(3) Even if new fund is not to be constituted as suggested,

new Board of Directors be constituted by the share-holders
with two nominees of the Court/Government to run the
business of the Company and to dispose of the properties not
needed for running its business of publication and sale of. Holy
Qur'an and religious books. The depositors can be paid out of
the amount so becoming available;

(4) The amount so becoming available can be paid to the

depositors by creating priority to the vlaims up to the value of
three lacs of rupees or in respect of claims of widows, orphans,
persons of old age and destitutes. These claimants/depositors
Will have to be paid on pro rata basis depending on the amount
available with the Company. Priori

in the above manner can only be accorded if suitable

amendment in law is made as otherwise the provisions of the
Companies Ordinance as they presently stand- do not permit
making payment on prior basis to orphans. widows etc.
Page No. 5 of 6
(5) Banks can be asked to advance money equal to the sale
price of the properties on the security of those very properties
and the amount so advanced be made payable after sale of the
property;

(6) Banks should be requested to waive off loans treating

them as bad debts, as the banks must have already provided for
such a contingency.

8. This Court cannot afford relief to the affectees unless

and until it finds buyers of the properties owned by the Taj
Company and its subsidiaries which relief will also have to be
limited to the extent of the amount available with it after sale of
properties. Obviously pendency these proceedings in no way
places any restriction whatsoever on the -Government or it
authorities to come out with any scheme of relief to the Taj
Company affectees. Whatever legal proceedings could be taken
by this Court against the ex-Management have been taken;
their liability has been determined and on account of their
failure to clear this liability they have been ordered to be
detained in civil prison. Keeping in view the facts,
circumstances and the law all possible options which the
Government can resort to in accordance with law have been
indicated. It is now for the Government to choose as to how
and in what manner it considers best to help the affectees.
Nonetheless if the Government is of the view that these
proceedings in any way debar it to act, Registrar of Companies,
a Government functionary, who instituted these proceedings,
can be instructed to withdraw the same. The application of
Muhammad Yousuf stands disposed of accordingly.

H.B.T./M-1219/L
Order accordingly.

Page No. 6 of 6
1989 P Cr. L J 372

[Karachi]

Before Allahdino G. Memon, J

MERAJUDDIN AND MUHAMMAD ASHRAF, Directors, Messrs Pak. Skyland

(Pvt.) Ltd.--Applicant

versus

THE STATE- Respondent

Criminal Bail Application No. 641 of 1988, decided on 17th July, 1988.

Criminal Procedure Code (V of 1898)--

---S. 497--Penal Code (XLV of 1860), Ss. 406 & 420--Breach of trust by accused,
Director of a company, entrusted with huge amount of more than rupees one crore and
seventy lacs--Mere fact that liquidation proceedings had been initiated by three of the
investors of Company, held, would not absolve accused from criminal liability--Bail
declined to accused.

K.M. Nadeem for Applicant.

M.A.I. Qarni for the State.

Muhammad Ismail Baloch for the Complainant.

ORDER

Page No. 1 of 2
The applicant is facing trial under section 406/420, P.P.C. before the A.C.M., C.I.A.,
Centre, Karachi, on the allegation that he had committed breach of trust in respect of
more than rupees one crore and seventy lacs.

It has been contended by the learned counsel for the applicant that the amount in question
was invested by different persons and they were paid benefits by the applicant's firm for
one year. That the applicant has already refunded Rs.30,000 to the complainant. He has
further contended that liquidation proceedings by three of the investors have been
initiated in this Court, and therefore, it was not a case of criminal liability.

The learned counsel for the State. has opposed the grant of bail, on the ground that the
applicant and his associates had committed breach of trust in respect of more than rupees
one crore and seventy lacs and the persons who had paid the amount have been ruined.
That the co-accused are already absconding, and there was every possibility that the
applicant might abscond if he was released on bail. He has further contended that offence
will fall under section 409, P.P.C. which was punishable for imprisonment for life.

The learned counsel for the complainant has adopted the contentions raised by the
learned counsel for the State.

I have considered the contentions of the learned counsel. Mr. K.M. Nadeem has not
denied the allegation that the applicant and his partners were entrusted with more than
rupees one crore and seventy lacs. Admittedly the co-accused are still absconding. Mere
fact that liquidation proceedings have been initiated by three of the investors will not
absolve the applicant from the criminal liability. There are as many as 186 complaints
against the applicant and the co-accused. I am, therefore, of the considered view that
there is every possibility that the applicant might abscond if he is released on bail.

In view- of the above discussion I am of the considered view that the applicant is not
entitled to bail and the application is accordingly dismissed.

H.B.T./M-637/K Application dismissed.

Page No. 2 of 2
1982 P Cr. L 463

[Lahore]

Before Shaukat Ali, J

Mirza ISHTIAQ HUSSAIN -Petitioner versus

Syed ABDUL QADEER-Respondent

Criminal Miscellaneous No. 1372 of 1970.

(a) Penal Code (XLV of 1860)---

-- S. 11 read with S. 420-Company or body corporate, criminal liability of-Petitioner,

Managing Director of a firm, accused of cheating for having received Rs. 5,000 from
complainant as cash security, on behalf of his firm-Contention that petitioner having
received cheque in name of Company and deposited same in account of Company
element of mens rea on his part missing and as such no penal offence made out and at
best Company should have been prosecuted for alleged offence---Repelled---A corporate
body or company although not indictable for offences which can be committed only by a
human individual or for offences compulsorily punishable with imprisonment yet
complainant properly instituted against petitioner, in circumstances.-[Complainant].

State of Maharastra v. Messrs Syndicate Transport Co. (P) Ltd. and others A I R 1964
Bom. 195 ref.

(b) Criminal Procedure Code (V of 1898)---

-- S. 561---A---Quashment of proceedings---Questions whether money deposited is trust

or case one of cheating or no offence whatsoever made out yet to be determined by trial
Court After evidence adduced by parties---Extraordinary powers of High Court under S.
561-A, Cr. P. C., held, cannot be invoked to short circuit prosecution---Quashment of
proceedings declined, in circumstances.

Shamim Ahmad Mirza for Petitioner.

Page No. 1 of 4
Sh. Ziaullah for Respondent.

ORDER

This is an application by Syed Abdul Qadeer, Managing Director, Safety Sealers

(Eastern) Ltd., Karachi, under section 439/561-A read with section 526, Cr. P. C. The
applicant is being tried by the Sub-Divisional Magistrate, on charges under sections 406
and 420, P. P. C.

2. Briefly stated, the case of the complainant is that on the 9th of June, 1968, at Murree,
S. A. Qadeer accused appointed him as the agent of his company for Rawalpindi Zone for
the sale of its manufactured articles. In consequence, the complainant the same day
issued Cheque No. 343556, dated the 9th of June, 1968, in favour of Messrs Safety
Sealers Ltd. Karachi drawn on United Bank Ltd., Jalalpur Jattan, against his Account No.
322. It is alleged that the accused deposited this cheque in the Company's account -under
his signature and that the said amount was debited from the account of the complainant
and credited to that of the company of the accused. The case of the complainant further is
that the accused did not send him any material for sale. Therefore, the complainant
insisted for the refund of the money on which the accused issued Cheque No. H/10
737447, dated the 8th of November, 1968, drawn on National Bank of Pakistan, Nicol
Road Branch, Karachi, but the same when presented by the Bankers of the complainant
was dishonoured.

On the contrary, the petitioner in his petition has stated that Mirza Ishtiaq Hussain
approached him at Karachi in the month of June, 1968 for the agency of Roofing felts for
Rawalpindi and after the terms and conditions were settled the complainant was required
to deposit a sum of Rs. 5,000 as security whereupon be gave a cheque for Rs. 5,000. It is
alleged that before the supply of roofing felts could commence, the complainant wrote a
letter dated the 24th of August, 1968 to the petitioner requesting for the refund of the
security deposit amounting to Rs. 5,000 showing his inability to do felt stocking business,
whereupon the petitioner gave a cheque for Rs. 5,000 drawn on the National Bank of
Pakistan, Karachi, but before the cheque could be cashed the other directors of the
company were of the view that as the complainant has violated the terms and conditions
of the contract the amount of security should be forfeited.

It may be stated here that this petition was put up at Karachi Bench and was Lald on 5th
September, 1969, before the then learned Chief Justice Mr. Justice Wahiduddin Ahmad,
who directed the office at Karachi to transmit this petition to Lahore for disposal, and
also stayed the proceedings in the trial Court. After its registration at Lahore, this petition
was Lald before me on the 12th of January, 1970, and the learned counsel for the
petitioner, stated that the petition may be taken up in the presence of his client whereupon
the case was adjourned to the 20th of January, 1970. On that day the case was listed
before my learned brother M. M. Faruqui, J. and was adjourned for filling copies of the
complainant and the statements of the prosecution witnesses recorded by the Magistrate.

Page No. 2 of 4
Meanwhile, the complainant filed Cr. Misc. No. 1372 of 1970 which came up for hearing
before the learned Chief Justice, who passed the following order :-

"Counsel says that the proceedings of a criminal case which is pending at Murree, have
been stayed by the order of the previous Chief Justice, which was made at Karachi, it was
ordered that the application for quashment be heard at Lahore. This order was made in
September, 1969. Thereafter, on 23rd February, 1970, the application for quashing the
proceedings came up before a learned Single Judge of this Court, but could not proceed,
because copies of the complainant and statements of the prosecution witnesses were
required. Counsel says that the accused respondent was at Murree, therefore, the present
applicant, who is the complainant, has now produced the required certified copies and
requests that the application for quashment may be heard at an early date.

2. The application may be fixed for hearing in the end of the month. The complainant,
who is .the present applicant may appear, if he so desires."

3. Mr. Shamim Ahmad Mirza, learned counsel for the petitioner stoutly urged that there is
no mens rea on the part of the petitioner as be bad received the cheque in the name of the
Company and deposited the same in the account of the Company and later on, as the
complainant backed out from his commercial commitment to run the agency the
petitioner issued a cheque on behalf of the company in favour of the complainant, but as
the other directors of the company had objected to the issuance of the cheque the
petitioner caused the same to be dishonoured, and in case any penal offences is made out,
the Company as such should be prosecuted. It was further urged that the complainant had
issued the cheque at Karachi and the petitioner deposited the same for its collection at
Karachi and later on the cheque for the refund of the said amount was issued at Karachi,
therefore, the criminal Court at Murree had no jurisdiction to try this complainant. Mr.
Zia Ullah, learned counsel for the complainant contended that Murree Court had
jurisdiction to try the complainant as the entire deal between the complainant and the
accused took place at Chambers Hotel, Murree, where the accused was staying in those
days. He argued that person in offences where imprisonment is mandatory does not
include corporate body as a corporate body or a company cannot be indictable for
offences which can be committed only by a human individual or for offences which must
be punished with imprisonment. He cited State of Maharastra v. Messrs Syndicate
Transport Co. (P) Ltd. and others (A I R 1964 Born. 195). Paranjpe, J. in that judgment
observed :

"Indeed, he accepted such a qualification while conceding that a corporate body cannot
be indicted for offences like treason, murder, bigamy, perjury, rape etc. which can be
committed only by human individuals or for offences which are compulsorily punishable
with imprisonment. It would therefore, have to be held that despite the generality of the
definition of a person given in section 11 of the Indian Penal Code, a corporate body or a
company shall not be indictable for offences which can be committed only by a human
individual or for offences which must be punished with imprisonment. The offence of
cheating under section 420, Indian Penal Code shall be punished with imprisonment and
even Mr. Hardass accepted the position that a company cannot be prosecuted for that
offence, mandatorily involving a punishment of imprisonment. He, therefore, conceded
that the reference will have to be accepted so far as the charge of cheating under section
420, Indian Penal Code was concerned." The learned Judge further observed :…….a
company cannot be indictable for offence like bigamy, perjury, rape, etc. which can only
be committed by a human individual or for offences punishable with imprisonment or
corporal punishment. Barring these exceptions, a corporate body ought to be indictable
for criminal acts for omissions of its directors, or authorised agents or servants, whether
they involve mens rea or not provided they have acted or have purported to act under
authority of the corporate body or in pursuance of the aims or objects of the corporate
Page No. 3 of 4
body. The question whether a corporate body should or should not be liable for criminal
action resulting from the acts of some individual must depend on the nature of the offence
disclosed by the allegations in the complainant or in the charge-sheet, the relative
position of the officer or agent vis-a-vis the corporate body and the other relevant facts
and circumstances which could show that the corporate body, as such, meant or intended
to commit that act .........”

4. The above cited judgment clearly repels the argument raised at the Bar by the learned
counsel for the petitioner. Therefore, I am clear in my mind that the complainant has been
properly instituted against A its Managing Director. At this stage of the case on a cursory
examination of the facts it is not a case where it can be said that it would be a trial if
allowed to proceed or that a subject of the State is being harassed by illegal prosecution.
This Court is chary to interfere and normally refrains from interfering where the evidence
has not been recorded. The question whether it was trust, a case of cheating or no penal
offence has been made out can be determined after the evidence is adduced by the parties,
and it is for the trial Court to determine all these questions. It has been time and again
held by this Court that the extraordinary powers of this Court under section 561-A, Cr. P.
C. should not be an instrument in the hands of the accused to short circuit the
prosecution.

5. The result is that I find no substance in this petition so far as the prayer, for quashment
is concerned. As to the prayer for the transfer of the case counsel for both the parties
agree that the case may be transferred to any Court of competent jurisdiction at Lahore.
In consequence, I withdraw the case from the file of the S. D. M., Murree and transfer it
to the file of Assistant Commissioner, Lahore with a direction that he should either try the
case himself or transfer the same to some other Court of competent jurisdiction for trial
and disposal in accordance with law, The petition is disposed of accordingly.

Order accordingly

Page No. 4 of 4
1980 P Cr. L J 429

[Lahore]

Before Rustam S. Sidhwa, J

MUHAMMAD AYUB AND ANOTHER-Petitioners

versus

THE STATE-Respondent

Criminal Miscellaneous No. 266/Q of 1979, decided on 7th May, 1979.

(a) Penal Code (XLV of 1860)-----

S. 43-Scope of. The words of section 43, P. P. C. not only cover offences and acts
prohibited by law, 'but are wide enough to cover cases of breach of contract and those
arising out of common law or usage where a duty -is voluntarily' accepted as in the case
of a contract, or is imposed out of the relation in which persona stand towards each other
or towards the public to do something and the person criminally omits to perform that
duty, for each of these cases furnish a ground for a civil action for one or more relief.

Ganpat Subrao Kashyapi v. Emperor A I R 1934 Bom. 202 rel.

(b) reset Code (XLV or 1860)----

S. 304-A-Negligent act-Contention that expression 'negligent act' covers only cases of

omission to perform a statutory duty, held, not corral.

Expression 'negligent act' in section 304-A, p. p. C, covers cases where either under
contract, a person has taken upon himself a duty, or where statute law, common law or
usage impose a duty upon a person, tending to the protection and preservation of life and
that person through utter disregard for the life and safety of others, criminally omits to
perform that duty or performs it with gross negligence, and thus causes the death of
another. A higher degree of negligence than ordinarily required in civil cases is necessary

Page No. 1 of 6
to render a person guilty under section 304-A, P. P, C. In these circumstances, the
objection that the expression 'negligent act' in section 304-A, P. P. C. only covers cases of
omission to perform a statutory duty, is not correct.

Ganpat Subrao Kashyapi v. Emperor A I R 1934 Bom. 202; Om Parkash Tallak Chand v.
The State A I R 1959 Pb. 134; Stephen's Digest of Criminal Law, 5th Edn., Art. 234 and
Emperor v. Fazalur Rehman A I R 1930 Pat. 593 ref.

(c) Factories Act (XXV of 1934)---

---Ss. 26, 27, 31 & 71, Penal Code (XLV of 186o), S. 344-A and Criminal Procedure
Code (V of 1898), S. 561-A-Question whether company/mill or its employees legally
bound to keep worm or haudi covered and to employ only persons duly equipped and
trained for job and such persons clad in tight fitting clothes-Question relates to evidence-
Evidence in case not yet recorded-Such question, held, cannot be considered under S.
561-A, in circumstances of case.

(d) Penal Code (XLV of 1934)----

----S. 304-A-Liability of Directors or authorised agents or servants of a company-

Excepting offers which can only be committed by individuals or which only provide a
punishment of imprisonment a company can be indicted for criminal acts or omissions of
its Directors or authorised agents or servants, if shown to have acted or purported to have
acted under authority of company or in pursuance of its aims and objects--Directors and
servants of a Corporation, held, can be indicted for their criminal acts or omissions as
'persons' unless any special exception excludes them from liability in view of such
capacity.

State of Maharashtra v. Mears Syndicate Transport Co. Ltd. A I R 1964 Bom. 195;
Rafique Hussain v. Islam-ud-Din P L D 1977 Kar. 183 Teseo Supermarket Ltd. v. Nattras
(1971) 2 All E R 127 (H L) and Hayat v. Tire State 1971 P Cr. L J 541 ref.

(e) Factories Act (XXV of 1934)----

----Ss. 26, 27, 31 & 71; Penal Code (XLV of 1860), S. 304-A and Criminal Procedure
Code (V of 1898), S. 561-A-Whether petitioners were personally liable for non-
compliance of provisions of Factories Act and rules thereunder and any other law
governing running of factory-Whether such non-compliance by both or either of
petitioners was of such a high degree as to show disregard for life and safety of others
and was direct and proximate cause of death-Every non-compliance of statutory duty
does not make a person liable under S. 304-A-emission must be so gross or of such a high
degree as to be criminal and sufficient to show disregard for life and safety of others-
Such questions, held, can only be answered after prosecution and defence evidence
recorded-Mere fact that petitioners are Officers of a Corporation does not give them
immunity in respect of offence charged-Petition under S. 561-A dismissed in
circumstances of case.

Page No. 2 of 6
(f) Peed Code (XLV of 1860)----

----S. 304-A-Contrbutory negligence--Contention that worker was wearing along khes

which got entangled in worn: as such he was guilty of contributory negligence and not
petitioner-Held, contributory negligence cannot relieve petitioners of their liability-Such
contention may be urged for grant of lesser sentence.

N: Pervez A. Butter for Petitioner.

Khalil Ramday, Asstt, A.-G. for the State..

Date of hearing: 6th May, 1979.

JUDGMENT

This is a petition under section 561-A, Cr. P. C. by Muhammad Ayub and Nazir Ahmad
petitioners for quashment of criminal proceedings pending against them under section
3N-A, P. P. C., in the Court of Mr. Muhammad Akram Cheema, Magistrate Ist Class,
Ferozewala.

2. The brief facts of the case are that on 12-1-1978 one Muhammad Siddique, an
employee of Neamat Flour Mills Limited, situate on Lahore/ Sheikhupura road, died in
the said flour mill as a result of his khes (chador) getting entangled in the worm of the
machinery, the said worm not being covered. It was stated in the F.I. R. that if worm and
haudi of the mill had a proper cover, the accident would not have occurred and that in
addition thereto the said deceased workman who had been employed in the flour mill was
not property trained in his duties and even otherwise no responsible. Officer was present
around the machinery supervising the working of the mill. It was also alleged that the
death of the workman was the result of the petitioners or such other persons who had
failed to provide a proper cover to the words and the haudi and had taken into service the
deceased who was not properly trained for his duties. Notwithstanding the fact that the
heirs of the said deceased workman were paid compensation by the employer-company
under the Workmen's Compensation Act; 1923, the Police lodged a challan against
Muhammad Ayub and Nazir Ahmad, the Managing Director and Miller of the said flour
mill under section 304-A, P. P. C. Being aggrieved by the challan lodged by the Police
and the charge framed by the trial Magistrate, the petitioners preferred the present
petition for quashment of the criminal case instituted against them, which is now before
me for disposal.

3. The learned counsel for the petitioners made a number of submissions. First, he
submitted that the covering of the-worm or the 'haudi of the mill was not compulsory
according to law and, therefore, there was no illegal omission, that is to say, statutory
omission, on the part of his clients. It was submitted that the words 'negligent act'

Page No. 3 of 6
appearing in section 304-A, P. P. C. included an illegal omission and not an ordinary
omission and in this connection the definition of the word 'act' as appearing in section
3(2) of the Punjab General Clauses Act was referred to. It was urged that an illegal
omission only meant an omission to comply with statute law and that as there was no law
which compelled the worm and the haudi of the mill to be covered, there was no illegal
omission on the part of his clients. Second, it was submitted that the death of Muhammad
Siddique deceased was not the direct result of the negligent act of the petitioners and
unless it was the approximate and immediate cause of their omission, they were not
liable. Third, it was submitted that a corporation, its directors and/or servants were not
liable under the criminal law if the offence prescribed a sentence of imprisonment. In this
connection State of Maharashtra v. Messrs Syndicate Transport Co. Ltd. (A I R 1964
Bom.195), and para. 758 of Halsbury Laws of England, Volume VII (4th Edition) were
cited. And fourth and last, it was submitted that as the deceased Sadiq was wearing a long
khes (cheddar) which got entangled in the worm, as admitted in the F. I. R., he was guilty
of contributory negligence and, therefore, the petitioners were not liable. In the light of
these cumulative facts, it was prayed that the criminal. case deserved to be quashed.

4. The learned Assistant Advocate-General, who appeared for the State and strongly
opposed the petition, contended that under sub-clause (iii) of clause (d) of subsection (1)
and subsection (2) of section 26, subsection (1) of section 27 and clause (b) of subsection
(1) of section 31 of the Factories, Act, 1934, the petitioners were required to fence all
rotating and revolving machinery, including worms and shafts, and they were duty bound
to employ workmen as were properly trained and equipped in their duties and who were
clad in tight fitting clothes whilst on duty, which they did not do. 'He referred to rule 70
of the Factories Rules under which no person engaged in any work within reach of
unfenced transmission machinery was permitted to work whilst wearing loosely fitting
clothes. He also submitted that under section 60 of the Factories Act, both the occupier
and the manager of the factory were liable for due compliance of the provisions of the
Act. In the instant case, since the factory was a flour mill; the miller was obviously the
manager and in view of section 2 (f) of the Factories Act, the managing director was the
occupier as he had the ultimate control over the affairs of the factory. In these
circumstances, the involvement of both the petitioners, who were the miller and the
managing director of the mill, was justified in law. As regards the question whether death
arose as a result of the approximate and immediate cause of the petitioners' negligence, it
was submitted * that the said matter was a matter of evidence and could not be gone into
at this stage. As regards the objection that a corporation and its directors were not liable
to criminal proceedings if the offence imputed to them carried a sentence of
imprisonment, it was submitted that the corporation, as such, was not arrayed as an
accused,-but that petitioners Nos. 1 and'2, who were its managing director and miller
respectively, were arrayed and this was permissible in law. As regards the objection that
the petitioners were not liable in view of the contributory negligence of the due, it was
urged that this ipso facto did not relieve the petitioners from their criminal liability. In
these circumstances, it was prayed-that there was no case for interference and the petition
deserved to be dismissed.

5. The able arguments of both the learned counsel for the petitioners and the learned
Assistant Advocate-General, have engaged my attention deeply. The first question which
arises is whether the 'negligent act' referred to in section 304-A, P. P. C., in view of the
definition of the word 'act' as contained in section 32 of the Pakistan Penal Code and the
principle laid down in section 43 of the said Code, only covers failure to perform
statutory duties or also failure to perform duties imposed by contract and those which the
common law recognises as arising out of the relation in which persons stand towards each
or towards the public. The English law does not recognise any difference between a
person guilty of gross negligence on whom the law imposes a statutory duty and those on
whom there is no statutory duty but on whom contract or common law imposes a duty,
for the purposes of manslaughter. In Pakistan, section 32 of the Penal Code specifically
draws attention to the fact that in every part of the Penal Code. except where a contrary
intention appears from the context, words which refer to acts done extend also to illegal
omissions and section 43 of the said Code which defines the word 'illegal', clearly states
Page No. 4 of 6
that it is applicable to everything which is an offence or which is prohibited by law, or
which furnishes ground for a civil action. The words of section 43 not only cove offences
and acts prohibited by law, but are wide enough to cover cases of breach of contract and
those arising out of common law or usage where duty is voluntarily accepted, as in the
case of a contract, or is imposed on of the relation in which persons stand towards each
other or towards the public to do something and the person criminally omits to perform
the duty, for each of these cases furnish a ground for a civil action for one of ore relief.
Beaumont, C. J. in Ganpat Subrao Kashyapt v. Emperor (A I R 1934 Bom.202), held that
it was difficult to impose any limitation on the very wide words of section 43 and that in
his opinion, the section covered both breach of contract and tort. Tek Chand J. in Om
Parkas Tilluk Chand v. The State (A I R 1959 Pb.134) held that criminal law fastened a.
liability on persons who omitted to perform the duty required by law such as to provide
food, clothing, shelter, or medical aid to another. These duties arise out of common law,
though some have received statutory recognition. A person can be under a legal duty
whether by contract or by law, or by the act of taking charge, wrongfully or otherwise, of
another person to provide the necessaries of life for such other person, and can be
criminally responsible, if death is caused by the neglect of that duty. (See Stephen's
Digest of Criminal Law, 5th Edition, Article 234). The criminal liability of such a person
is, however, conditional on his capacity, means and -ability to perform the legal duty. The
case of Om Parkash Tillak Chand inter alia illustrates the principle that a criminal
omission to perform a duty that arises out of common law, can also be culpable; and
tortious wrongs are violation of common law duty. In Emperor v. Fazalur Rehman (A I R
1930 Pat.593), where a mukhtar was prosecuted for extortion for having threatened tire
prosecutor to put questions to him and the ladies of his household which were scandalous
and indecent in order to insult and annoy the prosecutor, unless the prosecutor paid some
money, Courtney- Terril, C. J., held that as the Court was otherwise forbidden to permit
scandalous and indecent questions being put to witnesses under sections 151 and 152 of
the Evidence Act, the mukhtar had by threatening to put such questions threatened to do
an act prohibited by law all these cases, therefore, show that the expression `negligent
act' in section 304-A, Cr. P. C. covers cases where either under contract, a person has
taken upon himself a duty, or where statute law, common law or usage imposes a duty
upon person, tending to the protection and preservation of life and that person through
utter disregard for the life and safety of others, criminally omits take perform that duty or
performs it with gross negligence, and thus causes the death of another. A higher degree
of negligence than ordinarily required in civil cases is necessary to render a person guilty
under section 304-A. P. P. C. In these circumstances, the objection of the learned counsel
for the petitioners that the expression `negligent act' in section 304-A, P. P. C. only covers
cases of omission to perform a statutory duty, is not correct, In the instant case, the
gravamen of the charge is that the petitioners we guilty in not keeping the worm and the
haudi of the mill properly covered and otherwise employing the deceased's services, even
though he was not properly equipped and trained for the job and did not wear tight fitting
clothes.. Sections 26, 27 and 31 of the Factories Act, 1934, have been pressed into service
by the learned Assistant Advocate-General in this connection. However, the question
whether the company/mill or its employees (and, for that matter, the petitioners in
particular) were legally bound to keep the worm or the 6audi covered and to only employ
persons who were duly equipped and trained for the job and were clad in high fitting
clothes, is a matter which relates to evidence and till such time that evidence is recorded
in the matter, it cannot be said whether the petitioner were personally responsible for the
performance of any statutory duty and. if so, whether they were guilty. of any illegal
omission thereof. As the occupier and manager, prima facie they appear to be liable, but
they can show under section 71 of the Factories Act, 1934, who actually was, if the were
not so. In this view of the matter, the first objection of the learned counsel for the
petitioners cannot be taken into consideration by me at this stage for purposes of deciding
this petition.

6. As regards the second objection taken by the learned counsel for the petitioners, the
position is .the same as that relating to the first. Till evidence is recorded it cannot be
determined whether death was the direct result of the negligent act or omission of the
petitioners and whether such act or omission was the proximate and immediate cause of
the death.

Page No. 5 of 6
7. As regards the third contention raised by the learned counsel for the petitioners,
namely, that a corporations, its directors and servants cannot tried for offences which only
involve the punishment of imprisonment, a since the offence under section 304-A, P. P. C.
only involves the sentence of imprisonment, the two petitioners cannot be tried at all for
the said offend. I think the law is fairly well settled now. Excepting offences which can
only be committed by individuals (such as, murder, treason, bigamy, rape etc.) o which
only provide a punishment of imprisonment, a company can be indicted for criminal acts
or omissions of its directors or authorised agents or servants, if it can be shown that they
have acted or purported to have acted under the authority of the company or in pursuance
of its aims and objects, In this connection, State of Maharashtra v. Syndicate Transport
Co,, Rafique Hussain v. Islam-ud-Din (P L D 1977 Kar. 183) and Tesco Supermarket Ltd.
v Nattras ((1971) 2 All E R 127 (H L)) may be referred. One thing is certain, namely, that
the corporation is not arrayed as an accused in the present case. However, directors and
servants of a corporation can be indicted for their criminal acts or omission. See Hayat v.
The. State (1971 P Cr. L J 541). As `persons' they are liable, unless any special exception
excludes tem from liability, in view of their capacity as such directors ' and servants. It is
for the trial Court to find whether petitioner No. 1, as the Managing Director of the flour
mill, had the ultimate control of the same, and whether petitioner No. 2, as the miller, was
in the established sense a manager of the said mill, within the meaning of section of the
Factories Act, so that both were personally liable for the compliant of the provisions of
the Factories Act and the rules thereunder and of any other law governing the running of
the said factory and whether the no compliance of any statutory act or rule by both or
either of the petitioners was of such a high degree as to show disregard for the life and
safety of/ others and was the direct and proximate cause of the death. Not every non-
compliance of a statutory duty would make a person liable under section 304-A, P. P. C.
The omission must be so gross or of such a high degree as to be criminal and sufficient to
show disregard for the life and safety others. All these questions can only be answered
after the prosecution and defence evidence is recorded. The mere fact that the petitioners
are Officers of a corporation does not give them any immunity in respect of t offence
charged.

8. As regards the last contention of the learned counsel for t petitioners, namely, that as
Sadiq deceased was wearing a long khes (chaddar) which got entangled in the worm, he
was guilty of contributory negligence and, therefore, the petitioners are not liable,
contributory negligence cannot relieve the petitioners of their liability. At best, it may be
urged for t grant of a lesser sentence.

9. For the foregoing reasons, I cannot interfere in this case section 561-A, Cr. P. C. This
petition is, therefore, dismissed.

Page No. 6 of 6
P L D 1958 Dacca 378

Before Rahman, J

In the matter of ELAHEE BAKSH & Co LTD.

In the matter of Matter No. 15 of 1957, decided on 10th January 1958.

Companies Act (VII of 1913), S. 281 (1) & (2)-High Court not competent to relieve
company of liability already incurred and for which criminal proceeding has already
been commenced--Only Court competent to grant relief is the Court hearing the criminal
case- Person seeking relief should disclose all facts before High Court.

Subsection (2) of section 281 of .the Companies Act is attracted only up to the
stage where no, proceeding has yet been commenced and the person who has committed
the default or is liable for the negligence may come: .up to the High Court for relief from
such liability in anticipation thereof but once the proceeding has been commenced, then
according to the provisions of subsection (1) of section 281, the only Court that has the
power to so relieve the defaulting person from such liability is the Court hearing the case.

The provisions of section 281 have been interpreted to relieve companies of their
negligence, carelessness or lack of caution provided the same were not committed with
any improper motive or fraudulent intention but were due to honest misapprehensions of
fact or ignorance in fact of the law or of the correct state of affairs. But in each case the
party seeking to be so relieved must make the fullest and most candid disclosure before
the High Court and in such an application a mere statement that the omission was
accidental or inadvertent; without giving with sufficient particularity the reasons for the
breach of the statutory duty imposed by the Act will not be sufficient.

In re' Gilt Edge Safety Glass, Limited L R (1940) 1 Ch. D 495 fol.

M. Hakim with Serajul Huq for Petitioner.

JUDGMENT

RAHMAN, J.-This is an application made by Messrs Elahee Bakhsh & Co, Ltd., a
Company under the Companies Act, having its registered office at 126, Sadarghat Road,
Chittagong, East Pakistan, for extension of time for filing the return of allotments in
respect of certain allotments of shares made by the said Company on the 7th of March
1953.

Page No. 1 of 1
 This Company is a private limited Company and its shareholders are the members
of the same family. It was incorporated on the 23rd of July 1951, with an authorised
capital of Rs. 10 lacs divided into 2,000 ordinary shares of Rs. 500 each with the object
mainly of acquiring and taking over the running business of the family which was a
partnership concern run under the name and style of Elahee Buksh & Co. The partners of
the said firm in July 1951, were five in number and they became the first directors of the
Company when the Company on the Ist of August 1951, took over the assets of the said
firm. 0On that day, out of the authorised capital of 10 lacs, shares to the extent of one lac
were allotted for cash and other than cash and, for the balance, an application for sanction
for allotment was made to the Controller of Capital Issues on the 7th of March 1952.
During the pendency of the application before the Controller, the then Managing Director
of the Company, one Haji Rashid Ahmed, suddenly died on the 2nd of December 1952.
Thereafter the affairs of the Company were in some sort of disorder for about a year
when his son, the present Managing Director, Muhammad Shabbir Ahmed, was
appointed the Managing Director in the place and stead of the said Haji Rashid Ahmed.

In the meantime, however, the Controller of Capital Issues granted the necessary
sanction on the 24th of December 1952, for the allotment of shares worth 9 lacs for
consideration other than cash, which meant really the assets of the partnership firm. In
pursuance of this sanction, the shares were allotted on the 7th of March 1953, to all the
share-holders of the Company except to deceased Haji Rashid Ahmed.

The present Managing Director states that thereafter in the 1st week of April
1953, he duly directed his Chief Accountant, one M. A. Bary, to file the allotment return
with the Registrar immediately but as the Chief Accountant was indisposed for some
time, nothing could be done until the early part of June 1953, when, it is alleged, some
allotment returns were filed by the said Accountant with the Registrar of Joint Stock
Companies. But unfortunately, due to oversight, the allotment returns in respect of the
allotment made in March 1953, were not included in the said return. Then the Managing
Director states that he again enquired from the said Accountant if he had filed the returns
as directed by him earlier and he was informed that the same had been done. In these
circumstances, the Managing Director was genuinely under the belief and impression that
his directions had been complied with and the returns had been filed. But to his dismay,
in the last week of November 1953, while going through the old papers of this Company,
he discovered that the allotment returns in respect of the same had not been filed at all.
He took his Accountant to task but was told that the Accountant was under some
mistaken belief that these returns need not be filed. He however, took steps for having the
same filed and ultimately on the 27th of November 1954, the same were filed with the
Registrar of Joint Stock Companies together with the usual fees for the said purpose.

It was in this state of affairs that in January 1957, to his utter surprise, he found
that a summons had been issued by the Court of the Sub-divisional Officer, North
Chittagong, summoning him and the other Directors of the Company to appear before
him and answer for the violation of the provisions of section 104 of the Companies Act.
Then, on making enquiries, he came to know that on the 4th of December 1954, the
Registrar had duly called upon them to move this Court and obtain an extension of time
for the filing of the said allotment returns. The said letter, however, it is stated, is not to
be found in the records of the Company and it never reached the petitioner. In these
circumstances, it is now prayed that time may be extended, as the failure to comply with
the provisions of section 104 was purely accidental and inadvertent and due to a mistake
of the Chief Accountant, and it is further said that it will be just and expedient to grant
such extension, particularly, as no one would be prejudiced thereby, as there is no
liquidation proceeding pending against the Company.

Page No. 2 of 1
 The statements in this petition are also supported by an affidavit filed by the said
M. A. Bary himself, affirmed at Chittagong on the 17th of July 1957. In this also it is
reiterated that he did in June 1953, file some papers with the Registrar of Joint Stock
Companies but, due to oversight and mistake, did not file the allotment returns in
question and that it was in November 1953, that the Managing Director, while going
through the old papers, discovered this mistake and took him to task. He also
corroborates the statement of the Managing Director that it was in April 1953, that he first
directed him to file the required allotments.

It must, however, be pointed out that there is some unfortunate error in the
petition itself because according to the annexure to the said petition, no returns appear to
have been filed in June 1953, at all but annexure `B' to the petition discloses that some
allotment returns were filed on the 27th of November 1954, and the receipts annexed in
annexure `C' show that the High Court's order and an affidavit were filed on the 8th of
June 1954. In these circumstances, it appears that even now both the Managing Director
and the Chief Accountant of the Company are under some misapprehension that they
filed any returns in 1953, as mentioned by them in their present petition and affidavit
filed in support thereof. Evidently nothing was done in 1953 and no explanation is
forthcoming with regard thereto. The receipts annexed to the affidavit show that perhaps
some proceeding was instituted in this Court and the order of this Court was filed with
the Registrar in June 1954.

Again, if the statement of the Managing Director is correct that he discovered the
omission in 1953, he does hot give any explanation as to why even then no return was
filed until the 27th of November 1954. It is clear, therefore, that on the showing of the
Company itself, there has been gross negligence on the part of both the Managing
Director and the Chief Accountant. It is true that in the petition it is stated that these
people are not fully acquainted with the relevant law and rules but even this does not
appear to- me very convincing, because, the Managing Director himself says that in April
1953, i.e., within a month of the allotment of the shares in March 1953, he asked his
Chief Accountant to file the allotment returns with the Registrar immediately. Now, under
section 104 of the Companies Act, the return is required to be filed within one month of
the allotment. This clearly indicates that the Managing Director, at any rate, knew of the
provisions of section 104 of the Companies Act and it was because of this that he directed
his Chief Accountant in April 1953, to file the necessary returns with the Registrar of
Joint Stock Companies of Chittagong. There is, however, this to be said that after he had
given directions he was perhaps, genuinely under the impression that his directions had
been complied with by the Chief Accountant who now admits that he did not comply
with them due to some mistaken belief that these particular returns need not be filed.

This application was admitted as long ago as the 29th of June 1957, and directions
were given to serve a copy thereof on the Registrar of Joint Stock Companies as also to
cause notices of the moving of this application to be advertised in various newspapers.
These directions of the Court have been duly complied with but the Registrar of Joint
Stock Companies has not come forward to oppose this application. I have no reason,
therefore, to doubt the statement of the Managing Director that he was under the
mistaken belief that his Accountant had complied with his directions given in April 1953,
and that the letter supposed to have been written by the Registrar on the 4th of December
1954, never reached him. Had it done so, he would have moved this Court much earlier.

Be that as it may, it is now apparent that proceedings under subsection (3) of

section 104 of the Companies Act have already been started against this Company in
respect of the violation committed by it. In these circumstances the question, arises that
even if I held that this was a fit case in which I should extend the time for filing the
allotment returns and even if I am satisfied that the delay was purely accidental or due to
Page No. 3 of 1
inadvertence, can I do so in such a manner as to relieve the Company of the liability
already incurred by it, and for which a criminal proceeding has already been started.
Power has been given to the Court hearing "the case" in respect of a proceeding for
negligence, default, breach of duty or breach of trust against a person to whom the
provisions of the Companies Act apply such as Directors of the Company, etc., to excuse
such person if it is satisfied that in respect of the negligence, default, breach of duty or
breach of trust, that person acted honestly and reasonably and he ought fairly to be
excused. This is provided in section 281 of the Companies Act. Subsection (2) thereof
also gives the person power to apply to `the Court' for relief even when he has reason to
apprehend that any claim will or might be made against him in respect of any such
negligence, default or breach of duty or breach of trust. Now the Court in this subsection
may be the Court having jurisdiction to wind up the Company, namely the High Court,
but it appears to me that subsection (2) of section 281 is attracted only upto the stage
where no proceeding has yet been commenced and the person who has committed the
default or is liable for the negligence may come up to this Court for relief for such
liability in anticipation thereof but once the proceeding has been, commenced, then
according to the provisions of subsection (1) of the said section 281, the only Court that
has the power to so relieve the defaulting person from such liability is the Court hearing
the case. In the present case, as I have already pointed out, the proceedings have already
been commenced in the Court of the Sub-divisional Officer, North Chittagong, and,
therefore, in respect of those proceedings the only Court which will, according to me,
have jurisdiction to relieve the defaulting person of that liability is that Court and that
Court alone.

In taking this view, I also find support from a decision in the case of In re Gilt
Edge Safety Glass, Limited (L R (1940) 1 Ch. D 495). In that case, certain persons who
had not the qualification to act as directors of the Company had acted as such directors
and, therefore, rendered themselves liable to pay the penalty imposed by the Companies
Act. A proceeding was commenced against such defaulting directors on the 6th of
October 1939, when summonses were served calling upon them to appear before the
Court of summary jurisdiction at Bow Street on the 16th of October 1939, to answer
information that they had on the 29th of June 1939, unlawfully acted as directors of the
company after the expiration of two months from the date of their appointments, contrary
to the provisions of section 141 of the English Companies Act of 1929. It further appears
that the Metropolitan Magistrate had then adjourned the case to enable the directors to
apply to the High Court of Justice for relief under the provisions of section 372 of the
said English Companies Act 1929. The provisions of the said section 372 of the English
Companies Act 1929 are substantially the same as the provisions of our section 281. In
that case, Crossman, J., took the same view that after the proceedings had been
commenced in the Court of the Magistrate, the only Court that had the jurisdiction under
subsection (2) of the said section 372, which is the same as subsection (1) of section 281
of our Companies Act, was the Court which hears the case in respect of the proceedings
already commenced before it arid that subsection (2) of the said section 372, which is
again similar to our subsection (2), was introduced in the Act to meet those cases when
proceedings have not been commenced but which will or may be commenced, and in
those cases only gives the High Court jurisdiction to grant relief from prospective
liability. In these circumstances, Crossman, J., while on the merits, took the view that the
directors in that case had acted honestly and reasonably and ought fairly to be excused
from all prospective liability in respect of their conduct, but nevertheless in the order that
he made he clarified that this shall not in any way relieve the petitioner before him in
respect of any order which may be obtained in the proceedings pending before the
Magistrate or from any liability which he may have incurred for acts done as a Director,
Chairman and Managing Director for which he would have been liable even if he had
been fully qualified. It is clear, therefore, that in the present case, too, if I am satisfied
that the delay in (he filing of the return was purely accidental and inadvertent and it is
just and equitable to grant relief, I can do so only with a similar reservation.

Now in the matter of The Chittagong Landing and Shipping Co. Ltd., decided by
me on the 24th of February 1956, I have already fully discussed the relevant law and
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indicated the circumstances in which this Court will exercise the jurisdiction given to it to
extend the time. It seems that the provisions of this section have been interpreted to
relieve companies of their negligence, carelessness or lack of caution provided the same
were not committed with any improper motive or fraudulent intention but were due to
honest misapprehensions of fact or ignorance in fact of the law or of the correct state of
affairs. But in each case the party seeking to be so relieved must make the fullest and B
most candid disclosure before this Court and in such an application a mere statement that
the omission was accidental or inadvertent, without giving with sufficient particularity
the reasons for the breach of the statutory duty imposed by the Act, will no be sufficient. I
have given a warning also in the said decision that unless applications made in future
comply with the directions there given, parties will find themselves in difficulty in getting
extentions of time from this Court.

Keeping these principles in view, I have carefully considered the facts disclosed
in the petition and the supporting affidavit before me. Whilst it cannot be said that the
fullest disclosure has been made in the present case, particularly with regard to the period
from April 1953 to November 1954, when the returns were in fact filed, yet, there is
nothing to indicate that the Company or the Managing Director or other Directors of the
Company did so with any base or improper motive. It is patent that no one was affected
by reason of the non-filing of the said return. It may well be that the Managing Director
took it for granted that his directions had been complied with by his Chief Accountant
and allowed the matter to rest at that until he discovered the returns still lying in his office
file. Even so, he was again negligent in not insisting upon the same being filed
immediately but allowed the matter to drift for another whole year until November 1954.
There is no explanation as to why this delay occurred. But this again is purely negligence,
I may even call it gross negligence on the part of the Managing Director and those vested
with the management of the Company. But even so, I am not in a position to say that this
was done with any dishonest or improper motive.

In the result, I have come to the conclusion that although the Managing Director
of the Company and the Chief Accountant of the Company were grossly negligent and
were not properly looking after the affairs of the Company, the non-filing of the returns at
least till November 1953, was .accidental and purely inadvertent due to the mistaken
belief on the part of the Managing Director that the same had in fact been filed and due to
the erroneous belief on the part of the Chief Accountant that those returns need not be
filed and thereafter it was sheer negligence on their part. I think, therefore, that this case
is just a case on the border line in which I may fairly exercise my discretion under the
proviso to subsection (3) of section 104 and relieve the Directors of the Company of their
negligence. I, therefore, grant the extension of time prayed for and permit the filing of the
returns but subject to the same limitations as were imposed by Crossman, J., in the case
of In re : Gilt Edge Safety Glass, Limited, namely, that nothing in this order contained
shall relieve the petitioner in .respect of any order which may be made, or obtained in the
proceeding now pending in the Court of the Sub-divisional Officer, North, V Chittagong.

That there has been gross negligence in the present case is clear and, as such, I
feel that those responsible for such negligence ought, to be penalised in some way or
other. Normally it has been my practice in a case where I find that there has been some
negligence not to make any such order extending time except upon certain terms and
conditions, namely, that the defaulting party should make some contribution to some
charity. In the present case, however, I am informed by the learned Counsel appearing on
behalf of this Company that it has made a very handsome contribution to a laudable
object, namely, the prevention of blindness in this country. I, therefore, impose no further
condition in the present case. The time for filing the allotment is extended upto a period
of two weeks from the date of the drawing up of this order subject to the reservation
above made.

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 The costs of this application will, however, in no event come out of the assets'of
the Company but out of the salary of the Chief Accountant, M. A. Bary, for it is clearly
his default in not complying with the directions of the Managing Director in April 1953,
which has necessitated all these proceedings.

Z. A. S.

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