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Civil Appeal No. 3 of 1958, decided on 24th January 1958.
(On appeal from the Order dated 3rd October 1957 of the High Court of West Pakistan, Lahore, in Writ Petition No. 1074 of 1957).
Special leave to appeal‑Granted to consider whether High Court, in dismissing a writ petition, exercised its discretion judicially so as to constitute a proper disposal of the petition.
Limits of jurisdic tion of High Court---‑Determination of, initially exclusively in hands of High Court.
The determination of the limits of the jurisdiction of the High Court under Article 170 of the Constitution is a matter which initially lies exclusively in the hands of the High Court.
Where question of the limits of High Court's jurisdiction under Article 170, Constitution of Pakistan had arisen before the High Court on the respondent's objection but no decision was given upon it the petition having been dismissed for another reason, the Supreme Court declined to allow counsel to address any elaborate argument on this point, observing that it was a matter of importance that the above‑mentioned principle should be preserved.
Art. 170---‑Writ jurisdiction ----To be exercised with judicial discretion.
Where a writ petition was dismissed solely because one of the parties‑the petitioners‑having first entered into an agreement with the opposite parties (which agreement was recorded in Court) to settle the dispute by a certain procedure, later applied for a clarification of the terms of agreement and upon the application for clarification being rejected by the High Court without notice to the other party, presented another application seeking leave to resile from the compromise whereupon the writ petition itself was dismissed.
Held, that the dismissal of the application seeking clarifi cation of the agreement was not a proper disposal of the matter before the Court.
Summary denial to petitioners of their relief, on the ground that they had sought a clarification of a point in the agreement, was not a proper exercise, in the judicial sense, of the discre tion vested in the Court.
There was not sufficient indication for holding that the first application for clarification was not made in good faith.
The Supreme Court set aside both the orders of the High Court and ordered the case to be returned for the High Court to deal with the first application according to law.
Disposal of by compromise‑Whether practice approvable (Quarae).
Mahmud Ali, Ataullah Sajjad and Nasim Hasan Shah, Advocates, Supreme Court, instructed by Amjad Hussain, Attorney for Appellants.
A. K. Brohi, Senior Advocate, Supreme Court and Ved Vayas, Advocate, Supreme Court of India, (Khurshid Ahmad, Advocate, Supreme Court with them) instructed by M. Siddiq, Attorney for Respondents.
Dates of hearing : 23rd and 24th January 1958.
This appeal from an order of a Division Bench of the High Court of West Pakistan, dismissing a peti tion for a writ of mandamus or other appropriate writ, is brought before us by special leave granted to the appellants, Sh. Maqbool Elahi. Mian Muhammad Fazil and Mr. Abdul Majid Mufti. The relief sought in the writ petition was in respect of certain proceedings of the 16th September 1957, of a meeting of the Board of Directors of the West Punjab Steel Corpora tion Ltd., as a result of which Sh. Maqbool Elahi and Mian Muhammad Fazil were removed from the office of Directors, and Mr. Abdul Majid Mufti was suspended from his office of Secretary, of the said Corporation. A third person named Sh. Muhammad Umar Khan was also deprived of his office of Director at the same meeting, but he did not join as a peti tioner before the High Court, and was instead added in the list of respondents. The petitioners complained that the matter of the disqualification which was held against them was not included in the agenda for the meeting. It was brought up without notice, and was bound upon the mere reading of a complaint by one M. Fazal Muhammad that certain firms in which the three ousted Directors had an interest had entered into contracts for the purchase of goods from the Corporation without the consent of the Directors, and it was averred that there had been contravention of section 86‑F of the Companies Act, 1913 and by virtue of section 86‑I (1) (h) of the same Act, the said Directors had vacated their offices. Legal opinion obtained from a lawyer was read in support and without further proceedings the Chairman declared that the three Directors in question had ceased to hold that office. Forthwith, three other persons were co‑opted in their place. In the course of the same meeting, an order was made suspending Mr. Abdul Majid Mufti from his office of Secretary on the ground that certain allegations had been made against him, and another person was nominated to take immediate charge of the office and relevant papers and other materials. Also at the same meeting, it was decided that an earlier resolution of the 6th September 1957, approving the allotment of 1000 shares in the Corporation was illegal, and it was therefore cancelled. The substance of the order sought from the High Court was the imposition of restraints upon the exercising of functions con nected with the Corporation by the persons who as a result of the meeting of 16th September 1957, had become Directors of the Company, and restoration of Mr. Abdul Majid Mufti to the office of Secretary, together with authorization of Messrs Maqbool Elahi, Muhammad Fazil and Muhammad Umar Khan to act as Directors and to Mr. Abdul Majid Mufti to act as Secretary, without restraint.
The petition was resisted on a number of grounds. It was contended that no writ could lie against a private party, that the proper party to take a matter affecting the internal manage ment of a company before a Court, was the company itself, that there was an alternative remedy y way of suit, and that the persons appointed as Directors on 16th September 1957, enjoyed the support of a large majority of the share‑holders. The facts alleged with reference to the meeting in question were traversed to a considerable extent. With particular reference to the claim on behalf of Mr. Abdul Majid Mufti, mention was made in detail of the allegations which had been received against him. Grounds were also stated in justification of the cancellation of the resolution of the 6th September 1957, concerning the allotment of 1000 shares.
The proceedings in the case before the High Court exhibit a high degree of expedition. The matters complained of having occurred on the 16th September 1957, the writ petition was instituted on the 20th September 1957 and on the same day, an admission order was made, together with an interim order whereby the Directors appointed on the 16th September 1957, were directed to refrain from functioning as such Directors, and were enjoined not to interfere with those Directors who were competent to act as such prior to the 16th September 1957, or with Mr. Abdul Majid Mufti in his capacity of Secretary. On the 25th September 1957, the case came up before another Division Bench, and at a hearing two days later this Bench recorded an order which may be reproduced with advantage;----
"The parties have arrived at the following agreement :‑---
A meeting of the shareholders of the Company shall be convened under the directions of the Court, the Chairman of which shall be a non‑share‑holder to be appointed by the Court. A resolution shall be moved at this meeting as to whether Sh. Maqbool Elahi, Mr. Muhammad Fazil and Sardar Muhammad Umar Khan should continue as Directors of the Company or not. If the share‑holders decide that they should continue no further resolution will be moved. But if they decide that they shall not continue as Directors, a further resolution shall be moved as to whether Messrs C. M. Latif, Fazal Muhammad and Muhammad Safdar Khan shall act as Directors of the Company or not. The parties will accept the decision of the share‑holders as to who is to continue in office as a Director.
The question as to whether the holders of 1000 shares alleged to have been allotted on the 6th September 1957 (whose names are mentioned in the return of allotment attached to the affidavit of Mr. C. M. Latif filed today), are entitled to vote at the meeting to be convened under the orders of Court shall be decided by Court. The Court shall be deciding this question for the purpose of, this petition only.
The respondent No. 7 is not present. The petitioners undertake to produce him on Tuesday for his signatures on this agreement. The case shall, therefore, come up on Thursday for the hearing of this question. All the peti tioners and respondents present in Court shall sign this agreement."
In token of consent the order was signed by counsel for all interested parties.
On the 3rd of October 1957, the petitioners made an appli cation whereby they sought clarification of a very important matter arising out of the agreement recorded on the 27th Sep tember. The question was whether, when the matter was ref erred back to the shareholders, the retention of Messrs Maqbul Elahi, Muhammad Fazil and Muhammad Umar Khan as Direc tors was to be decided by a simple majority of the shareholders and whether, in case the resolution went against them, the legal requirement of a three‑fourths majority for removal of a Director was to be observed. It was stated in the application that when the draft of the compromise was read out by the Court on 27th September the counsel for the applicants had requested that instead of the words "should continue" the words "should be removed" be substituted, because that was actually the intention of the applicants, and the Court had observed at that time that it meant the same thing, while the counsel for the respondents had also agreed that the words bore the same sense. The application went on to say that it was feared that complications might arise at the meeting which had been ordered by the High Court and a reference back to the Court for clarification might become necessary. The applicants declared that they had "agreed only for a reference to the shareholders for the removal of the Directors concerned, which matter can be decided under the law by a three‑fourth majority of the shareholders present at the meeting." There fore, they asked that the wording of the compromise should be corrected so as to make it clear that the first resolution before the meeting would raise "the question whether Sh. Maqbool Elahi. Muhammad Fazil and Sardar Muhammad Umar Khan should be removed from the Directorship of the Corporation." It was expressly said that the reference was made "in order to bring the compromise in conformity with the intention of the parties and to avoid any ambiguity and difficulty."
The application was rejected by means of an order which bears the signature of only one learned judge of the Division Bench namely Mr. Justice Akhlaque Husain. The order reads as follows:‑--
"We have not the slightest doubt that this application is an attempt to go behind the agreement between the parties and that it is in flagrant contravention of what the peti tioners, their two counsels, and this Court understood, and intended to, at the time of the agreement. No objection was raised to the language of our order earlier and this application is merely an after‑thought. The petition is dismissed."
There upon, and without any delay, the petitioners filed a further application, which they had ready in their possession seeking leave to resile from the compromise, because the applicants had that day applied for correction of the compro mise recorded on the 27th September 1957, "on the ground that its present wording does not so very clearly represent the intention of the parties" and the Court "has refused to grant that application."
It may be noted that the first application presented on the 3rd October 1957, was dismissed without notice to the opposite party, or even to the counsel. In view of the assertion in the application that on the 27th September, the Court as well as the respondents' counsel had observed that the intention of the agreement of that date, in the relevant respect, was to obtain from the shareholders an opinion on the point whether the three ousted Directors should be removed from office, it might have been expected that an opportunity would have been allowed to the counsel for the opposite party to state whether he supported or controverted the assertion. It is not quite clear to us what the learned judges in the High Court meant when they said that the first application of the 3rd October was to flagrant contravention of what the petitioners, their two counsels, and this Court understood, and intended to, at the time of the agreement." In their application, the peti tioners had stated in clear terms what they had understood was the meaning of the agreement, in the relevant respect. In the absence of anything on the record which would have the effect of constituting an acceptance by the petitioners of one or the other interpretation, which would of course have to be con temporaneous with the making of the agreement and its recording by the Court, it was, in our opinion, somewhat difficult for any person other than the petitioners to declare what they had understood, when indeed there was an ambi guity. The position might easily have been made quite clear in this respect, if the learned Judges had declared in their order on the first application what the Court had "understood or intended to" i.e. whether, if the three ousted Directors were to remain ousted, their ouster would require to be confirmed by a simple majority or by a three‑fourths majority at the shareholders' meeting.
The relevant law provides that a Director may be removed by an extraordinary resolution viz., one passed by a three‑fourths majority. It has been pressed before us by Mr. Brohi on behalf of the respondents that, in the event of in ousted Director suing for his reinstatement, the Court dealing with the matter could in law refuse the relief, if a simple majority of the shareholders was against his being restored to his office. Mr. Brohi urged that that was what the learned judges of the High Court had in mind when they said that the application for clarification in a certain sense, calculated to afford greater protection to the ousted Directors, was "in flagrant contravention of what this Court understood and intended to at the time of the agreement."
Now, it seems to us that in asking this Court to ascertain and declare what the learned Judges of the High Court "under stood and intended to", the same risk of error is involved as in the declaration by the learned judges of "what the peti tioners understood and intended to". It was for the learned Judges themselves to state, when the question was raised before them, and it was alleged that on the 27th September they had themselves observed that by the expression should not continue" the same thing was meant as by the words "should be removed", whether they had in fact made any such observation, and, irrespective of that, what exactly it was that they had meant, i.e. whether the resolution of the share holders, in case it was unfavourable to the ousted Directors, should be passed by a three‑fourths majority, or by a simple majority. They could have made their meaning clear in a very few words and if they had done so they would have avoided a serious risk of their order for a shareholders' meeting proving abortive, as was suggested in the first petition of the 3rd October. In declining to furnish the desired clarification, and leaving the agreement in the same form of words, without resolving the difficulty which had been raised, without allow ing it even to take the shape of a dispute inter partes and without contradicting the assertion regarding their own observation made solemnly before them in a formal proceeding signed by the petitioners as well as by their counsel, the learned judges were in fact, insisting upon the implementation of an executory order based upon a purported agreement, which was challenged in an important respect, and which, on account of this challenge was likely to prove abortive.
When however, the second application was placed before the learned Judges, they proceeded to make an order as below :‑----
"Learned counsel has now made another application which was already with him ready to be filed in case of an adverse order on the first application praying for leave to withdraw from the compromise.
In view of the attitude taken up by the petitioners we refuse to proceed further with his main writ petition and we dismiss it accordingly with costs. Let the petitioners seek their remedy if any in the Civil Court. The interim order of this Court, dated the 20th September 1957, is hereby vacated and the Minute Book taken by the petitioners in pursuance of that order shall be returned by them to the police forthwith."
In order of this Court granting leave to appeal against the dismissal of the Writ Petition, it was stated that inter alia, one question which arose for consideration was "whether the order passed by the High Court dismissing the petition filed by Sh. Maqbool Elahi, Mian Muhammad Fazil and Abdul Majid Mufti was a proper and judicial disposal of the matter before A the learned judges" on the ground that while the order was one which the learned judges were empowered to make in their discretion, it needed to be considered "whether that discretion was exercised judicially, so as to constitute a proper disposal of the case in the eye of the law."
Mr. Brohi for the respondents has attempted to argue that the order of dismissal is a proper order because the relief sought in the petition was not a proper relief to be granted within the writ jurisdiction. He also contended, in the alter native, that the orders made by the learned Judges should be interpreted as containing a declaration that a decision of the shareholders by a simple majority that the three ousted Direc tors "should not continue" in office, would be sufficient confirmation of the ouster, and that in refusing to make this clarification and directing that the agreement should be implemented in the words in which it had been recorded, the learned judges had taken the only appropriate action that was possible in the case. Therefore, the order dismissing the Writ Petition because of the refusal of the petitioners ‑to be bound by the view of the agreement taken by the learned judges was in itself a proper order.
We do not find it necessary, and we do not think it desir able, to say anything on the question whether the matter raised by the petition of the 20th September 1957, lay within the writ jurisdiction. The point was raised in the case by the respondents in the High Court, but no decision was given upon it. The determination of the limits of the jurisdiction of the High Court under Article 170 of the Constitution is a matter which initially lies exclusively in the hands of the High Court. We consider it to be a matter of importance that this principle should be preserved, and we therefore declined to allow Mr. Brohi to present any elaborate argument on the point.
As to the second argument of Mr. Brohi, we think that it is undeniable that the point of clarification raised in the first petition of the 3rd October was one of substantial importance, based upon a tangible doubt. As we have observed already, that doubt could have been easily resolved by making an issue of the matter between the parties in case the respondents did not accept the allegation of facts contained in the petition, and thereafter proceeding to resolve the issue on the basis of evi dence or otherwise, and the Court's own recollection and record of what had passed between the parties and what had fallen from the Court at the time when the agreement was reduced into writing. The dismissal of that application upon a declaration by the Court of "what the petitioners understood and intended to" which declaration was directly contrary to what the petitioners themselves were stating, in a formal signed proceeding, to have been their own appreciation of the matter, was not, in our opinion (and we say so with all due respect to the learned judges) a proper disposal of the matter.
We must not be thought to say anything in approval or otherwise of the practice of disposal of Writ Petitions by the method of executory compromise. That is a matter which has not been agitated before us and we prefer not to express any opinion upon it. But once the mode had been adopted and the learned judges were firm in their intention that the com promise should be implemented, we consider that a clarification of the meaning of an ambiguous term of the agreement could reasonably be sought by an affected party. So far from such a move being regarded as an attempt to frustrate the agreement, it should be interpreted as a step in aid of securing proper and more expeditious implementation of the compromise. It is hardly necessary to say that no good could possibly result from enforcing a purported agreement between the parties to a litigation when there was before the Court a serious allegation by one of the parties which might, if investigated in due form, have led to the conclusion that on a point which was capable of more than one interpretation, the parties were not in fact ad idem.
The final order made in the High Court contains the clear suggestion that the writ petition was dismissed because they petitioners had sought a clarification of such a point in the compromise to which they had appended their names. In the view which we take, the summary denial to the petitioners of the relief which they claimed, on this particular ground, was not a proper exercise, in the judicial sense, of the discretion vested in the Court. Some emphasis was laid by Mr. Brohi in his argument upon the fact that the petitioners had ready with them an application to be permitted to withdraw from the compromise in case their petition for clarification was refused. It was contended that this showed that the petitioners intended to create a situation by means of their first application, which would enable them to frustrate the compromise. We have noted already that the proceedings in the case in Court as well as by the Corporation were marked by a high degree of expe dition, and in that view it is possible to explain the action of the petitioners as being taken .to avoid further delay in case their application for clarification, itself intended as a step in aid of the implementation of the compromise, proved to be unsuccessful. We note that in respect of each of the two applications of the 3rd October, it would have been perfectly appropriate for the Court to proceed by way of a notice to the opposite party. Therefore, we are unable to find in the action complained of by Mr. Brohi, a sufficient indication for holding that the first application for clarification was not made in good faith.
For these reasons we allow this petition, and setting aside both orders of the 3rd October 1957, we direct that the case be returned to the High Court to deal with the first application of that date made by the petitioners after proper notice to the G respondents and to proceed further with the matter with all possible expedition as required by law. The parties will be their own costs.
A. H. Petition allowed.
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