2003 C L D 293

 
[Karachi]
 
Before Mushir Alam, J
 
ENGRO CHEMICAL PAKISTAN LIMITED---Plaintiff
 
Versus
 
MUHAMMAD HUSSAIN DAWOOD and 5 others- -Defendants
 
Suit No.273 of 2000 decided on 22nd August, 2002.
 
(a) Specific Relief Act (I of 1877)---
 
--Ss. 42, 54 & 55---Civil Procedure Code (V of 1908), S.9-- Companies Ordinance (XLVII of
1984), S.263---Securities and Exchange Commission of Pakistan Act (XLII of 1997), Ss.17 &
20---Suit for declaration, injunction and rendition of accounts---Acquisition of shares of
plaintiff-company by defendants-companies in a bid of hostile take over of plaintiff---Plaintiff
filed suit challenging the legality and propriety of such acquisition of its shares---Defendants
objected to the maintainability of suit on the ground that plaintiff for such wrong could avail
remedy provided under S.263 of Companies Ordinance, 1984---Validity-- Investigation into
affairs of defendants---Investigation of affairs of defendant-companies could only be made by
Securities and Exchange Commission, only at the motion of certain percentage of members of
any particular company affairs of which were sought to be investigated or on report of Registrar
of Companies---Plaintiff-company was neither holding any share in any of defendants companies
nor there was any report by the Registrar---Jurisdiction of Securities and Stock Exchange
Commission under S.263 of Companies Ordinance, 1984 in such circumstances, could not be set
in motion.
 
(b) Tort---
 
---- Wrong or breach of any penal law---Remedy of person wronged or injured against
wrong-doer, stated.
 
A wrong or breach of any penal provision of law may give rise to both penal consequences as
well as civil liability.
 
In some cases, one person may be personally liable for penal consequences, while other persons
may be held vicariously liable for civil liability arising out of same wrong. Even a situation may
arise, where a person wronged or injured may not be interested to prosecute wrongdoer for penal
consequences, but may be interested to enforce civil liability. In such a situation, a person can
neither be denied injunctive relief against apprehended wrong or repetition of wrong nor can be
non-suited and denied compensation and/or damages that might have been sustained as an
aftermath or as a consequence of a wrong, which may otherwise also entail penal consequences.
 
(c) Specific Relief Act (I of 1877)---
 
----Ss.42, 54 & 55---Civil Procedure Code (V of 1908), S.9-- Companies Ordinance (XLVII of
1984), S.208---Securities and Exchange Commission of Pakistan Act (XLII of 1997). Ss. 17 &
20---Monopolies and Restrictive Trade Practices (Control and Prevention) Ordinance (V of
1970), S.20-- Central Depositories Act (XIX of 1997), S.27---Foreign Exchange Regulation Act
(VII of 1947), S.23---Suit for declaration, injunction and rendition of accounts-- Acquisition of
shares of plaintiff-company by defendants companies in a bid of hostile take over of
plaintiff---Plaintiff filed suit challenging such acquisition of its shares as being violative of
provisions of Companies Ordinance, 1984. Monopolies and Restrictive Trade Practices (Control
and Prevention) Ordinance 1970, Central Depositories Act. 1997, Foreign Exchange Regulation
Act, 1947 and Securities and Exchange Commission of Pakistan Act, 1997-- Defendants
objected to maintainability of suit on the ground that remedy of plaintiff was available before
Securities and Exchange Commission of Pakistan and not through a civil
suit---Validity---Remedy as against penal provisions indeed was available under such
enactments, but there was no remedy against civil liabilities that had ensued as a consequence of
breach of penal provisions to a party, who had suffered at the hands of wrongdoer---Neither there
was any legislation nor self-regulatory code nor any regulations had been framed by Securities
and Exchange Commission of Pakistan to regulate the issues and matters relating to or arising
out of transactions relating to substantial acquisition of shares by one company in a bid to take
over and/or to acquire management or control of another company---Civil Court had jurisdiction
to scrutinize legality and propriety of such transactions and resultant civil obligation and
liabilities that might have been contracted by defendants out of transaction of acquisition of
shares alleged to be in breach of various enactments ---Suit was maintainable.
1999 CLC 1795; 1990 CLC 1008; 1988 CLC 1186: 1988 CLC 123; 1979 CLD 857; PLD 1949
Lah. 301: PLD 1978 Kar. 612; 1982 PLC 592: AIR 1963 SC 1547; AIR 1965 SC 338; AIR 1956
Bom. 649; PLD 1960 SC 113: PLD 1964 SC 673; Securities and Exchange Commission
Pakistan v. Mian Nisar Ellahi and others Civil Petitions Nos.2502 to 2504 of 2001; PLD 1985
Kar. 481; PLD 1969 Kar. 474: 1999 CLC 795: Integrated Technologies and Systems Ltd. v.
Interconnect Pakistan (Pvt.) Ltd. 2001 CLC 2019: PLD 1968 SC 381: PLD 1997 SC 3; 1999
CLC 1989; AIR 1947 Mad. 322 and AIR 1967 All. 118 ref.
 
(d) Civil Procedure Code (V of 1908)---
 
----S.9---Specific Relief Act (I of 1877), S.7---Jurisdiction of Civil Court could not be invoked to
seek mere enforcement of penal laws.
 
(e) Civil Procedure Code (V of 1908)---
 
----S. 9---Jurisdiction of Civil Court---Scope---Civil Court teas jurisdiction to decide all suits of
civil nature.
 
(f) Specific Relief Act (Iof 1877)---
 
----S.7---Civil Procedure Code (V of 1908), S.9---Wrong or breach of a penal law---Remedies
available to aggrieved person---Kinds of---Jurisdiction of Civil Court---Scope.
 
A wrong or breach of a penal law may entail both, a criminal liability as well as civil obligation.
In case of penal or criminal liability, cognizance is taken and wrong-doer is prosecuted and tried
by specialized Courts, Authorities or Tribunals constituted or established under relevant
enactments. In case, where a civil injury is sustained by a person on account of wrongful act or
as an incidence of breach of penal provision committed by another then it is on account of
resultant civil injury caused to a person or his property giving rise to civil liability against
wrong-doer, the jurisdiction of Civil Court rests. Civil Court will not take upon itself the
responsibility to take cognizance, try and prosecute a penal offence, except a quasi criminal
offence or wrong like contempt of Court. However, Civil Court will not hesitate to redress civil
injury and enforce civil liability arising out of penal breach or wrong against a wrongdoer.  
 
(g) Companies Ordinance (XLVII of 1984)---
 
--Ss.7 & 152---Civil Procedure Code (V of 1908), S.9-- Securities and Exchange Commission of
Pakistan Act (XLII 1997), S.20---Complicated and disputed question---jurisdiction of High
Court---Scope---High Court on the strength of S.7 of the Companies Ordinance, 1984, had
jurisdiction to adjudicate and decide controversies arising in relation thereto, in respect of which
no jurisdiction was conferred on any other authority like Joint Registrar.
 
Registrar or Securities and Exchange Commission---Where intricate questions of law and facts
were involved, despite summary jurisdiction conferred, Civil Court would be competent to
resolve such complicated and disputed question arising therefrom, such as issue relating to
rectification of share register under S.152 of the Companies Ordinance, 1984.
 
Makhdoom Ali Khan for Plaintiff.
 
Abdul Hafeez Pirzada for Defendant No. 1.
 
Mr. Mujtaba for Defendant No.2.
 
Qazi Faez Essa for Defendant No.3.
 
Arshad Tayabally for Defendant No.4.
 
Zahid F. Ebrahim for Defendant No.5.
 
Aijaz Ahmad for Defendant No.6.
 
Dates of hearing: 23rd, 24th and 28th May, 2002.
 
 
ORDER
 
Plaintiff is a Public Limited Company incorporated in 1965 under the laws of Pakistan and filed
the instant suit for declaration, injunction and rendition of accounts.
 
Facts, in brief, are that, plaintiff-company is one of the leading Urea and Fertilizer Producer in
Pakistan, originally sponsored by ESSO (later Exxon Corporation) before adopting present attire
it was ESSO Pakistan Ltd. It is averred, at the relevant time, it represented largest foreign
investment and in 1980's the Exxon Corporation decided to disinvest its interest in the plaintiffs
company. The employees of the plaintiff alongwith its other companies acquired 75% of the
equity gave its present name 'Engro Chemical Pakistan Limited'. Plaintiffs is also venturing in
Petro Chemical business with a substantial investment. Grievance of the plaintiff as raised in the
suit against the defendant No.1 and defendant No.2, who is also producer of urea fertilizers and
is one of the arch rival of the plaintiff-company. Defendants Nos. 2 to 4 are said to be managed
and controlled by defendant No.1. Plaintiff Maims that the defendants quietly accumulated the
plaintiffs shares from the Stock Exchange in a manner so as to embark a hostile take over of the
plaintiff which acquisition of the shares by the defendant No.1 directly or indirectly claimed to
be against Public Policy. Foreign Exchange Regulations Act, 1947 (hereinafter referred to as the
"F.E.R.A. Act of 1947", Companies Ordinance, 1984 and Monopolies and Restrictive Trade
Practices (Control and Prevention) Ordinance, 1970 and so also against the public policy.
Plaintiff apprehending further acquisition of its shares would lead influence and change of its
policy in the management and Board of Directors which according to the pleadings against the
Principal of good governance of the company. In the foregoing backdrop, the plaintiff have
claimed following reliefs:
 
(1) Declaration that the shares of the plaintiff acquired by the defendants 1-5 have been acquired
in violation of the provisions of law and public policy as mentioned in the foregoing paragraphs.
 
(2) Permanent injunction restraining the defendants Nos. 1--5 and any other company of the
Hussain Dawood Group from acquiring any further shares of the plaintiff and from exercising
and receiving any rights and benefits accruing from the shares acquired by them in violation of
law, including the rights to receive dividends, bonus and right shares and voting at shareholder
meetings.
 
(3) Permanent injunction restraining the defendants 1--5 from seeking election of themselves or
their nominees, employees, representatives or agents as Directors to the Board of the plaintiff
directly or indirectly for their benefit and in violation of fiduciary obligations to the plaintiff.
 
(4) For a mandatory injunction directing that the defendants Nos. 1--5 divest and sell in the open
market all shares in the plaintiff-company acquired by them.
 
(5) For preliminary decree for rendition of accounts to the plaintiff by the defendants Nos. 1--5
of all profits earned by them in trading in shares of the plaintiff and payment to the plaintiff of
such profits which the plaintiff tentatively estimates at Rs.500 Million.
 
(6) Appropriate orders/penalties against defendants 1--5 for violating the provisions of sections
206, 208, 209 and 220 to 224 of the Companies Ordinance, 1984.
 
(7) Any other, further or additional relief which this Honourable Court may deem fit in the facts
and circumstances of this case.
 
(8) Cost of the suit.
 
In the suit plaintiff has filed an application i.e. C.M.A. No. 1388 of 2000 under Order 39, rules 1
and. 2, Civil Procedure Code seeking interim relief in the nature of relief mentioned at serial
No.2 in the prayer clause. By order dated 25-2-2000 while ordering notices to, the defendants
meanwhile, defendants Nos.1 to 5 were restrained from exercising any right or receiving any
benefit whatsoever accruing from the shares already acquired by them and voting on the basis of
shares or the shareholders meeting. Defendants were further restrained from purchasing any
share of the plaintiff in violation of law. Such ad interim order was confirmed on the statement of
all the parties concerned without prejudice to their respective contentions. Suit was ordered to be
disposed within 6 months vide order dated 8-3-2000. Written statements were filed with the
assistance of all the learned counsel concerned as many as 37 issues were framed on 13-8-2001.
On the application of the defendant No.1 i.e. C.M.A. No.6217 of 2001 seeking hearing of
preliminary issues, which according to the defendants, would decide the controversy without
recording of the evidence. The Court vide order dated 17-9-2001 following issues treated as
preliminary issues:--
 
 
"(1) Whether the suit is maintainable?
 
(2) Whether this Court has jurisdiction in respect of alleged violation of the provisions of the
Companies Ordinance, 1984, Central Depositories Act, 1997, Foreign Exchange Regulation Act,
1947 and Monopolies and Restrictive Trade Practice (Control and Prevention) Ordinance, 1976?
 
(3) Whether this Court has jurisdiction under section 9 of the Civil Procedure Code, 1908 in
respect of the subject-matter of this suit?"
 
It was ordered that the parties may be heard first on he point of jurisdiction vested in this Court
and thereafter of proceed further. If it is held that, this Court has jurisdiction to proceed with the
case. Resultantly, the case has come up for hearing of the aforementioned preliminary issues.
 
Mr. Abdul Hafeez Pirzada, learned senior counsel for defendant No. 1 contended that it is merely
an apprehensive suit, none of the shareholders have come to the Court and only the company has
complained of hostile take over. He further contends that essentially the plaintiff has pleaded
purported violation of various laws by the defendant No. 1 in acquiring shareholding in the
plaintiff company. Violation plead are in respect of the provisions of Companies Ordinance,
1984, Monopolies and Restrictive Trade Practice (Control and Prevention) Ordinance, 1970,
F.E.R.A. Act, 1947, Central Depositories Act, 1997 and Securities and Exchange Commission of
Pakistan Act, 1997. Learned counsel took me through previous provisions of the Companies
Ordinance, 1984, which are alleged to have been violated by the defendants. First violation
complained of is under section 208 of the Companies Ordinance, 1984, which regulates the
manner of investment in associated company and undertaking. According to the learned counsel,
violation, if any, is punishable under subsection (5) of section 208, adjudication of offence is
provided for under section 476(1)(b) of the Ordinance, 1984, against the decision whereof, an
appeal is provided under section 477 (1)(c), thereof, the remedy is further stretched to appeal
under section 485 before this Court. He, however, contends that the grievance urged regarding
violation of section 208, if any, effective remedy manner and mechanism is sufficiently provided
for under the Companies Ordinance, 1984. He, therefore, urged that the suit in respect thereof is
not maintainable. Likewise he took me to the alleged violation of sections 209, 196, 220, 221.
222, 223 and 224 of the Companies Ordinance. Violation of the above-referred provisions is
cognizable in original jurisdiction by the Sub-Registrar, Registrar of the Companies and appeal
thereof is provided before the Registrar, Securities and Exchange Commission of Pakistan, as the
case may be, further remedy by way of appeal before this Court is available. In a manner similar
as detailed in respect of violation of section 208 of Companies Ordinance, 1984, above. Mr.
Abdul Hafeez Pirzada, learned senior counsel, then took me to paras. 10 to 17 of the plaint
outlining the violation of "F.E.R.A." The violation of section 23 is thereof complained. He
contends that, Tribunal under the Act of 1947 has been constituted, the Act itself provide for the
procedures and penalty that may be imposed on violation of any of the provision of the Act of
1947. Mr. Pirzada, drew my attention to paras. 39 to 41 of the plaint giving an account of alleged
violation made by the defendants under the Monopolies and Restrictive Trade Practice (Control
and Prevention) Ordinance, 1970. He argued that the penalty is laid down under section 20
thereof a specialized forum is established under the Act to deal with the complaint for the
violation of the Ordinance, 1970, authority therein, is vested with powers both that of Civil and
Criminal Courts appeal again is provided against any decision to the High Court. With regards to
the Securities and Exchange Commission of Pakistan Act. 1999, it was contended that, now
Securities and Exchange Commission has been established which has taken over all the functions
and the jurisdiction of the Corporate Law Authority constituted under the Companies Ordinance,
1984. Ample powers and jurisdiction are vested in such Commission to decide and take decision
in respect of the matter complained of. Highlighting the above provisions allegedly violated by
the defendants and the remedy provided against such violation in the relevant law itself, it was
urged that, all the laws referred to above are cognizable in original jurisdiction conferred on the
authority constituted and established in each Act, with appellate forum culminating in this Court.
It was urged that the plaintiff is neither the shareholder in any of the defendants-company it is
more like a probono publico litigation as the plaintiff-company has filed the suit through its
management and not through its shareholders as is usually done. Mr. Prizada contended that
company in its own capacity is not affected by the shares that may be held by any person. It was
further contended that present suit is by surrogate plaintiff. He urged that the alleged hostile
takeover is not against the company but, against the shareholders who are not before this Court.
It was contended that this Court in its ordinary plenary jurisdiction cannot sit and decide the
controversy in suit. According to him, Specialized Forums and Tribunals have been established
under the relevant statute to take cognizance of all the alleged violations raised in the suit, action,
if any, can be taken against the defendants under relevant laws, this Court cannot investigate into
such offence which falls within the domain of such Specialized Forums. In furtherance of his
arguments, he contends that the prayer No. 1 is not part of private law no personal rights of the
plaintiff-company were infringed nor any rights of the company vis-a-vis violation thereof
against the defendants is recognized under the law. As far as prayers Nos.2 to 5 are concerned, it
was urged that the same relates to the violation of a Public Law this Court will not impose
penalty even if it comes to a conclusion that prima facie the violation has been made. Mr.
Pirzada urged that where the statute creates right and also provides for enforcement then the
jurisdiction of Civil Court is barred. It was argued that the Act which is required to be done by a
nominated Authority cannot be undertaken to be performed by any other person. To further
augment of his arguments, he has drawn support from section 9 of Civil Procedure Code, 1908
which provides that Civil Court have jurisdiction in respect of all the matters that may be before
it unless expressly or impliedly bar. According to him, express bar is contained as for instance if
there be any ouster or baring clause in any statute like for instance section 273 of Cantonments
Act and similar provisions in various other laws, which provision specifically bars the
jurisdiction of the Civil Court in cases where the forum/authority established thereunder is
conferred jurisdiction to decide on controversy. According to him, implied bar would apply in
cases where the rights and remedies are specifically provided for in a particular enactment, the
jurisdiction of Civil Court is impliedly barred. In support of his contentions, he has heavily relied
upon the following case-laws:
 
(1) 1999 CLC 1795; (2) 1990 CLC 1008; (3) 1988 CLC 1186; (4) 1988 CLC 123; (5) 1979 CLC
857; (6) PLD 1949 Lahore 301; (7) PLD 1978 Karachi 612; (8) 1982 PLC 592; (9) AIR 1963 SC
1547; (10) AIR 1965 SC 338; (11) AIR 1956 Bombay 649; (12) PLD 1960 SC 113; (13) PLD
1964 SC 673; and (14) unreported judgment in Civil Petitions Nos.2502 to 2504 of 2001 titled as
Securities and Exchange Commission of Pakistan v. Mian Nisar Ellahi and others.
 
Mr. Mujtaba, Advocate appearing for defendant No.2, Mr. Qazi Faez Essa, Advocate for
defendant No.3, Mr. Arshad Tayabally, Advocate for defendant No.4 adopted the arguments
advanced by Mr. Abdul Hafeez Pirzada. Mr. Zahid F. Ebrahim, Advocate for defendant No.5,
while adopting the arguments of Mr. Pirzada further contends hat in view of section 263 of the
Companies Ordinance, 1984 the Commission can carry out the investigation against any
company on the complaint of any person.
 
Mr. Makhdoom Ali Khan, learned senior counsel for the plaintiff contended that the consent
issues were settled on 13-8-2001 and issues mostly are mixed question of facts and law including
the question of locus standi is covered under Issue No.6, therefore, it will not be appropriate at
this juncture to embark and decide the question of locus standi as has been ventured by Mr.
Pirzada. Accordingly, he argued that the Court will only confine itself to the preliminary issues
only. He contended that originally under the Common Law claims relating to the affairs of the
company were taken to the Court by the company itself but progressively such norms have
undergone change and provisions were grafted under the law whereby the shareholders could
bring the grievance before the Court and in Pakistan also section 290 of the Companies
Ordinance, 1984 gives such right to a specified numbers of the shareholders. As to the objections
of Mr. Pirzada that the case has been filed by the company and not the shareholders. It was
contended that prima facie Court will only see the ostensible authority of a person to bring an
action and will not go behind such authority under the doctrine indoor management as
expounded in PLD 1985 Karachi 481, PLD 1969 Karachi 474 and 1999 CLC 795. Learned
counsel for the plaintiff argued that as far as penal consequences are concerned, law provides
mechanism for taking action; however, such law can be set into motion at the behest of a
particular percentage of shareholders on the basis of resolution passed by the company, on the
direction of the Court and/or on its own motion. As far as the remedies under the F.E.R.A. Act,
1947 are concerned, it was argued that cognizance is taken only on a representation by a person
'who has been authorized by the State Bank of Pakistan and Federal Government. According to
the learned counsel, none of the grievance urged in the suit could be remedied by any of the
functionaries created under the special enactment. Therefore, this Court has jurisdiction. In
support of his contention, he has relied upon the case reported as Integrated Technologies and
Systems Ltd. v. Interconnect Pakistan (Pvt.) Ltd. (2001 CLC 2019). Mr. Makhdoom Ali Khan,
learned counsel contends that the plaintiff is not a shareholder in any of the defendants
companies, therefore has no right to seek winding-up under section 290. The grievance urged can
only be redressed by this Court. According to him, even if the defendants are punished under the
penal provisions the injury caused to the plaintiff can only be remedied by bringing an action
before the Civil Court. He contends that where the Civil and Criminal remedies emanate out of
same action and there is no-mechanism to provide for the remedy of a civil grievance then same
can be urged before the Court, unless there is specific bar under special enactment Civil Court
will always have jurisdiction. In support of his contention, he relied upon the case-laws as
reported in PLD 1968 SC 381, PLD 1997 SC 3, 1999 CLC 1989, AIR 1947 Madras 322 and AIR
1967 Allahabad 118.
 
Issue No. I
 
Adverting to Issue No. 1, regarding maintainability of the suit. It may be observed that the
plaintiff has challenged the acquisition of its share by the defendants. Allegations in the plaint by
and large is against the purported bid of hostile take-over of the plaintiff by the defendant No.2
in particular and by the other defendants who it is averred, are the front companies and otherwise
under his influence and control.
 
Mr. Abdul Hafeez Pirzada, learned senior counsel, strenuously and meticulously took me to each
and every breach of various provisions of different enactments and highlighted the penal
consequences thereof and remedy against such wrongs, as discussed in the narrative above. To
emphasize that, remedy against each wrong is provided under different provisions of various
enactments, which remedy in most of the cases extends to High Court as well. He, therefore,
contends that where such remedy is available instant suit is not maintainable.
 
All the other counsel adopted the arguments of Mr. Pirzada, Mr. Zahid Ibrahim, counsel
appearing for Dawood Foundation, the defendant No.5, further augmented by saying that
plaintiff could have recourse to remedy provided under section 263 of the Companies Ordinance,
1984.
 
Adverting first to the contention of Mr. Zahid Ibrahim. It may be observed that investigation of
affairs of the defendants-companies could only be made by SECP, only at the motion of certain
percentage of members of any particular company affairs of which are sought to be investigated
or on the report by the Registrar of the Companies. In this case neither the plaintiffs-company is
said to be a member or alleged to be holding any share in arty of the defendant's-companies nor,
there is any report by the Registrar, therefore, jurisdiction of the SECP under section 263 of the
Companies Ordinance; 1984, cannot be set in motion.
 
Contention of learned counsel for the defendants that since remedy against each breach has since
been provided under relevant laws, therefore, remedy if any lies before the authority and or
forum specifically provided thereunder and not by way of suit, therefore, the suit is not
maintainable. Arguments in the first sight appear to be persuasive. It may be observed that a
wrong or breach of any penal provisions may give rise to both, penal consequences as well as
civil liability. For example trespass is a penal offence, a person committing trespass may be
prosecuted under the Penal Code of Pakistan. At the same time it may give rise to civil action for
possession and damages. Libellous publication is also an offence under the Penal Code; it may
also give rise to civil action for damages. In both the cited situation even injunctive relief can be
obtained by bringing suit for injunctive reliefs against apprehended dispossession and threatened
trespass and so also against publication of libellous publication (see section 55, illustration (e) of
Specific Relief Act). Even causing death by rash and negligent driving entails both criminal
prosecution and civil liability. Even in some cases where one person who may be personally
liable for the penal consequences other persons may be held vicariously liable for the civil
liability arising out of same wrong. Even a situation may arise where a person wronged or
injured may not be interested to prosecute wrongdoer for the penal consequences but may be
interested to enforce civil liability. In such a situation, a person can neither be denied injunctive
relief against apprehended wrong or repetition of wrong nor, can be non- suited and denied
compensation and/or damages that might have been stained as an aftermath or as a consequence
of a wrong which may otherwise, also entail penal consequences.
 
Learned counsel for-he defendants have relied upon judgment rendered in Civil Petitions
Nos.2502 to 2504 of 2001 viz. Securities and Exchange Commission of Pakistan v. Mian Nisar
Elahi, to contend that remedy if any lies before SECP and not by separate proceedings. Fact in
said case were that a show-cause notice was issued to the respondents therein by the SECP to
show cause why they may not be prosecuted for the alleged violation of section 17. Such notices
were challenged before the High Court. It was in such context held that remedy lies before the
SECP. It may be observed that remedy as against penal provisions indeed is available under the
enactments referred to by the counsel for the defendants, but there is no remedy against the civil
liabilities that have ensued as a consequence of breach of penal provisions to party who had
suffered at the hands of wrongdoer.
 
None of the defendants' counsel were able to point out any provision under relevant laws that
may extend any remedy against the alleged wrongful acquisition of shares in plaintiffs'-company
or as it is said incorporate parlance against hostile take-over. I have already dealt with acquisition
of shares and hostile take-over in somewhat detail in the case of Admajee Insurance Company
(supra).
 
Since, in Pakistan unlike other countries of the world, there is neither any legislation nor,
self-regulatory code nor any regulations have been framed by the SECP to regulate the issue and
matter relating to or arising out of transactions relating to substantial acquisition of shares by one
company in a bid to take-over and/or to acquire the management or control of another company,
therefore, under circumstances, in my humble opinion, this Court has jurisdiction to scrutinize
the legality and propriety of such transactions.
 
Contention of Mr. Abdul Hafeez Pirzada, learned senior counsel that plaintiff, a company .has no
business to ventilate grievance as to who may hold its share. If at all, it was contended, it is
prerogative of the shareholders of a company who may apprehend injury of any kind that may
arise out of acquisition of shares in their company by any other person. It was contended that the
plaintiff is a surrogate plaintiff, therefore, plaintiff has no locus standi to challenge such
transaction. This is indeed very pertinent question. But the fact remains as rightly pointed out by
Mr. Makhdoom Ali Khan, learned counsel for the plaintiff that issue of locus standi is altogether
a different question, that cannot be adverted to at this juncture, as same is covered by Issue No.6
framed by the Court which reads as follows:
 
"Whether the plaintiff can file a suit against its shareholder (s)?"
 
It may be pointed out that out of as many as 37 issues framed by the Court, at the motion of
learned senior counsel for the defendant, Court vide order dated 17-9-2001 setout three issues
reproduced above, as preliminary issues. In this view of the matter, any comment as to the locus
standi of the plaintiff will certainly prejudice the case of either party. Therefore, I refrain from
commenting on said point. It will, however, be open to defendants to raise such plea when
occasion to argue on such issue may arise.
 
A suit for declaration that share transfer agreement was illegal and contrary to article of
association and consequential injunctive relief was entertained, in a case reported as Yousaf A.
Mitha v. Aboo Baker (PLD 1980 Karachi 492).
 
In another Suit No.347 of 2002 v. Adamjee Insurance and others v. Muslim Commercial Bank
Ltd. and others attending to the question of hostile take-over, it was held:
 
"Fact that SECP, under given circumstances has authority to pass orders when the company's
affairs are under its investigations, this Court under circumstances of the case has jurisdiction to
examine the vires of transaction of acquisition of shares by MCB and others subject-matter of the
suit."
 
For the foregoing reasons. I am of the view that the suit to question the proprietary of acquisition
of shares or in other words against hostile take-over in absence of any legislative enactment,
rules or, regulation is maintainable. Issue is answered accordingly.
 
Issue No.2
 
Mr. Abdul Hafeez Pirzada, learned senior counsel for the defendant strenuously argued that
whatever plaintiff has complained of in the plaint are breach of various provisions of different
enactments, as detailed in the narrative above. It is true that, the plaintiff has given a detail
account of acquisition of shares in the plaintiff company by the defendants in purported breach
of various provisions under different enactments. In the wake of such allegations relief is
couched in prayer clause No.6, reproduced above.
 
It is true that, jurisdiction of Civil Court cannot be invoked to seek mere enforcement of penal
laws (see section 7 of the Specific Relief Act). Jurisdiction of Civil Court under section 9 of the
Code of Civil Procedure, 1908 extends to try suits of civil nature. As already observed, while
deciding Issue No. 1 that, a wrong or breach of a penal law may entail both, a criminal liability
as well as civil obligation. In case of penal or criminal liability, cognizance is taken and
wrongdoer is prosecuted and tried by specialized Courts, Authorities or Tribunal constituted or
established under relevant enactments. In case where a civil injury is sustained by a person on
account of wrongful act or as an incidence of breach of penal provision committed by another,
then it is on account of resultant civil injury caused to a person or his property giving rise to civil
liability against the wrongdoer the jurisdiction of Civil Court rests. Civil Court itself will not take
upon itself the responsibility to take cognizance, try and prosecute a penal offence, except
quasi-criminal offence or wrong like contempt of Court. However, Civil Court will not hesitate
to redress civil injury and enforce civil liability arising out of penal breach or wrong, against a
wrongdoer, as already discussed while deciding Issue No. 1. Issue is decided accordingly.
 
Issue No.3
 
Now adverting to third issue, relating to jurisdiction of this Court. It was contended by Mr.
Abdul Hafeez Pirzada, learned senior counsel for the defendant that by virtue of section 7 of the
Companies Ordinance, 1984, it is only the Company Court that may hear this matter and since
this Court has not been nominated by the Honourable Chief Justice, therefore, this Bench not
being a company Bench cannot hear this case. Arguments are fallacious. High Court on the
strength of section 7 of the Companies Ordinance, 1984, has jurisdiction to adjudicate and decide
the controversies that may arise in relation thereto, in respect of which no jurisdiction is
conferred on any other authority like the Joint Registrar, Registrar or the SECP as the case may
be. Even in cases where intricate question of facts and laws are involved, despite summary
jurisdiction conferred. Civil Court is considered competent to resolve the complicated and
disputed question arising therefrom. For instance issues relating to shares and rectification of
share register under section 152 of the Companies Ordinance, 1984.
 
As already held above Civil Court has the jurisdiction to decide all civil suits of civil nature.
 
It is indeed up to the authority constituted under various enactments, as detailed by learned
counsel for the defendants and discussed in the narrative above, to take cognizance of the
offences and penal breaches allegedly committed by the defendants in their pursuit to acquire
share in the plaintiffs company. This Court, as held above, will only examine the proprietary and
vires of transaction of a acquisition of shares in the plaintiff-company by the defendants and
resultant civil obligations and liabilities that might have been contracted by the defendants out of
transaction of acquiring shares said to be in breach of various enactments. Therefore, in my
humble view as held in the case of Adamjee Insurance Company Ltd. (supra) this Court has
jurisdiction to decide the controversies raised in the suit. Issue replied accordingly.
 
S.A.K./E-18/K Order accordingly.