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High Court Appeals Nos.45 and 50 of 1986, decided on 2nd December, 1986.
---O.XXXIX, Rr.l & 2--Suit wherein no perpetual injunction claimed- No justification for grant of temporary injunction in such a case particularly where temporary injunction goes beyond the relief claimed.
Marghub Siddiqi v. Hamid Ahmed Khan and 2 others 1974 SCMR 519 and Ghazi Naseeruddin v. Hashim Dawood and others P L D 1962 Kar. 55 ref.
---O.XL,R.1--Receiver, appointment of--Prima facie case to be established by placing material on record to justify appointment of Receiver--Object for which Receiver is appointed and injunction granted is to maintain status quo and preserve property for benefit of party who ultimately succeeds--Where title to the property is disputed a Receiver cannot be appointed (till dispute decided) and the person bona fide in possession deprived of the property.
Sh.Manzoor Ahmad and others v. Shaukat Soap Factory Ltd. and others 1985 C L C 2778; Marshall v. Charteris (1920) 1 Ch. D 520 and Ataur Rahman Alvi's case 1974 S C M R 54 ref.
---O.XXXIX, Rr.l, 2 b 3--Temporary injunction--Notice to opposite -party--Though in appropriate cases ad interim injunction may be granted without notice but final order in any case could not be made without hearing or giving opportunity of being heard to the other party.
Khalid Anwar and Qadir Sayeed for Appellants (in H.C.A. NO-45 of 1986 and for Respondents Nos.3 to 5 in H.C. Appeal No.50 of 1986).
Muhammad Naeem for Appellants(in H.C.A. No.50 of 1986).
Mansoor Ahmed Khan for Respondents Nos.1 and 2 (in both Appeals).
Dates of hearing: 20th and 21st October, 1986.
--This appeal has been preferred against the order dated 9-2-1986 passed in Suit No.419 of 1985 whereby a learned Judge (O.S.) of the Court on the two applications filed by the respondents/plaintiffs under Order XXXIX, Rules 1 and 2, C.P.C. granted the reliefs reproduced below:-
"...grant the injunction to restrain the third defendant from carrying on business under the name of Messrs Muhammad Bakhsh International Limited."
The injunction granted as above however was suspended by the learned Single Judge:
"for a period of one month to enable it to take necessary steps to change its registered name."
It was further ordered:-
"The ad interim order passed on the 3rd December, 1985 will continue, I appoint Mr.Syed Abbas Zia as Receiver and direct him to make inventory and initial the books, papers, account books, ledger books and documents including the statutory books and also get complete information from the third defendant as well as their chartered accountants specially all past, current and subsisting business, transactions contracts and supplies made by the defendants 1, 2 and 3 I direct the Directors, Secretary and the Chartered Accountant to obey and carry out all orders of the Receiver. The seventh defendant is directed not to make any payment to the first and third defendants till the disposal of the suit and to deposit with the Receiver. I also direct the twelfth defendant to disclose all the information regarding establishing letters of credit through it. The Receiver will be at liberty in case of any doubt, difficulty or dispute to apply before this Court with notice to all the parties for appropriate direction and orders whenever he thinks it fit and necessary.
The remuneration of the Receiver will be paid out of the funds of the Company."
The ad interim order passed on 3-12-1985 which by the impugned order was continued (with which none of the parties are aggrieved) for sake of reference is reproduced below:-
"In the interest of justice I appoint Mr. Syed Abbas Zia Advocate as Receiver to take over all books, of accounts and records of plaintiff No.1. The defendants Nos.1 and 2 are directed to hand over all the books of accounts, records. documents to the receiver. The receiver is further directed to probe into all the contracts entered into by the defendant No.1 on behalf of the plaintiff No.1 during the period 2-7-1982 upto 30-5-1983. The plaintiffs are directed to pay tentatively Rs.5,000 as Receiver's fee."
2. (i) In order to appreciate the arguments advanced by the learned counsel for the parties at the hearing of this appeal it would he relevant to refer here briefly to the facts leading to the filing of the suit by the respondents.
Admittedly the plaintiff No.1, a private company, was set up with a capital of Rs.40,000 divided into 4,000 shares, each of the nominal value of Rs.10, which were owned by the following persons:
| S. No | Name of the First Share Holders and Directors. | No. of shares held |
| (1) | Aziz Wali Muhammad the plaintiff No. 2 | 1,000 |
| (2) | Azhar Wali Muhammad the defen dant No.1. | 1,000 |
| (3) | Zafar Ara Begum the defendant No. 2. | 1,000 |
| (4) | Chaudhry Chiraghdin (the deceased). | 1,000" |
The shares held by Chaudhry Chiraghdin, on his death, were inherited by his heirs and consequent to subsequent transfers in June, 1976, the share holdings of the parties in the plaintiff No.1 company were as follows:-
(i) The appellants Nos.1 and 2 75% Shares.
(ii) The respondent No. 2/
i.e. the plaintiff No.2 ..25% Shares.
The business of the plaintiff No.1 company consisted mainly of developing and promoting of business agencies and to act as agents of local and foreign principals and in particular to effect defence and other supplies.
(ii) Differences arose between the share-holders which finally were resolved by agreement dated 2-7-1982. This agreement, between the parties continues to subsist and governs the relations between the parties thereto.
Pursuant to and acting upon the said agreement, the defendant (i.e. the appellants Nos.1 and 2):-
(i) handed over possession of the immovable properties bearing No.23, West Wharf Road, Karachi, and No.30-A Pakistan Employees Co-operative Housing Society Karachi to the plaintiffs.
(ii) Almost all the liabilities of plaintiff No.1 totalling Rs.30, 94, 869 (except to the extent of a meagre amount) Rs.67,000 were cleared by the defendants Nos.1 and 2.
(iii) Purusant to the same agreement dated 2-7-1982, the appellants Nos.1 and 2 (defendants Nos.1 and 2) after 31-5-1983, started business dealing as agents in respect of agencies /business mentioned in Annexure 'B' to the said agreement.
These defendants alongwith other share-holders formed a company on 24-10-1982 which company since after 31-5-1983 is carrying on the business of agencies with the foreign principals as shown in Annexure 'B' to the above agreement.
(iii) To the knowledge of the plaintiffs the business of agencies with the principals named in Annexure ' B' to the agreement dated 2-7-1982 was continued to be carried on since after 31-5-1983 by the appellant No.3 (Muhammad Bakhsh International Limited) which was formed in October, 1982 but no objection to the same was taken by the respondents or any of them for almost over two years. None of the parties also took any step for the winding up of the plaintiff No.2 (company namely, Muhammad Bux & Sons Ltd.) wherein all the shares in May 1984 stood transferred to the plaintiff No. 2/his nominees.
(iv) For the first time, however, on 6-7-1983 i.e. after almost a year of making of the agreement of 2-7-1982 the plaintiff No.1 through his Advocate served notice upon the appellant No.1, wherein after giving history of the formation of the respondent No.2 company and various agreements culminating in the execution of the agreement dated 2-7-1982 and referring to some of the differences called upon the appellant No.1/defendant No.1 as follows:-
"I, therefore, through this letter request you to specifically perform your obligations under the agreement dated 2nd July, 1982 within 30 days from the receipt of this letter failing which my client shall be constrained to institute proceedings before the competent Court of law as well as inform the F.I.A., State Bank and other agencies for the violation of laws committed by you at your risk as to cost and consequences which may please be noted."
In spite of the harshly worded legal notice and the knowledge of the fact that the appellants Nos.1 and 2 (alongwith other share-holders) had already formed the new Company (the appellant No.3) and were carrying on business with principals named in Annexure 'B' and continued to earn commission, the respondent No.1 and/or the respondents did not call upon the appellants or any of them to stop doing business in the name of the newly-formed Company (the appellant No.3) and/or dealing with the agencies mentioned in Annexure 'B' to the agreement dated 2-7-1982. On the contrary the grievance made about business of agencies was that the appellant No.1:-
" failed to hand over the agencies/ business to my client as stated in the Annexure 'C' to the Agreement."
(v) Here notice may be taken of a further development which took place. The appellants Nos.1 and 2 on 22-5-1984, informed the respondent No.1 as a director, that they had agreed to resign from the respondent No. 1 company and accordingly requested him to forward the necessary share certificates by mail for transfer of the shares to respondent No.2/or his nominee subject to execution of 'agreement of amendment' which was enclosed with the said letter. The said Agreement of Amendment, expressly provided that the terms and conditions of agreement dated 2-7-1982 shall remain in force fully operative and effective without change or amendment whatsoever except and to the extent provided therein (i.e. the Agreement Amendment). The partial amendment made by the said Agreement (which recited that it was with the consent of all the persons who were parties to the agreement dated 2-7-1982) provided that:
"Mr.Azhar Wali Muhammad and Mrs.Zafar Ara Begum will resign from the Company known as Muhammad Bakhah & Sons Ltd., 23 West Wharf Road, Karachi with effect from 1st July, 1984."
This agreement duly signed by Azhar Wali Muhammad and Mrs. Zafar Ara Begum was delivered to the defendant No.1 who however, did not return the said deed executed by him but got the shares transferred in his own name or names of his nominees.
(vi) However, no differences and/or disputes and/or objections on account of any alleged non-performance of any obligation on behalf of the appellants Nos.1 and 2 and/or to; the formation of the new company (appellant No.3) and/or to its carrying on separate business by the appellants with the principles named in Annexure 'B' to the agreement of 2-7-1982, were raised.
At this stage it can be said that prima facie from the respondent No.1 company the appellants Nos.1 and 2 had withdrawn their interest and that this was pursuant to the agreement dated 2-7-1982, as amended by agreement dated 23-5-1984.
3. After the events briefly narrated above had taken place, it appears that the parties continued with their own separate businesses to the knowledge of each other, the appellants having acquired exclusively the agencies as per Annexure 'B' to the agreement dated 2-7-1982 while to the respondent belonged exclusively the agencies/ business as per Annexure 'C' to the said agreement.
4. However, after a lapse of 3 years of the making of the agreement of 2-7-1982, the respondents filed Suit No.419/85 wherein after referring to the agreement dated 2-7-1982, the validity of which was not disputed, alleged that the appellants Nos.1 and 2 had committed breach of various covenants of the said agreement dated 2-7-1982 as mentioned in paras 4.01 to 4.02 and further pleaded that the appellants who had neglected, refused and failed to perform the solemn obligations /covenants under the agreement dated 2-7-1982 and that "it transpired" that the defendants Nos.1 and 2 had channelised in persuading, collusive association with all the prin25pals of the plaintiff No.1/appellant No.1 managed to get the appellant No.3 registered as supplier/contractor/tenders with the defendants Nos.4 to 6 (Defence Stores Purchase Organisation). It was also pleaded that the registration as supplier of the appellant No.3 was in breach of regulations of defendants Nos.4 to 6 and ab initu illegal. It was therefore, pleaded that all business of the appellants Nos.1 to 3 with defendants Nos.4, 5 and 6 not permitted by regulations of Government of Pakistan and the law, such business are liable to be restrained forthwith by the Court.
Inter alia it was also alleged that defendants Nos.7 to 11 have colluded with appellants Nos.1, 2 and 3 and are liable to render accounts of all supplies made, contracts entered into, business otherwise transacted and payments by way of commission made or due or payable to the respondent No.1 as the amounts shall be deemed to have been paid in trust for the plaintiff No.1/appellant No.1 and that the said defendants Nos.7 to 11 are liable to render accounts since the beginning of 1973 until date and hereafter in respect of any or all payments due, payable or made on account of any reason to the appellant No.1/and or defendants Nos.1, 2 and 3 (i.e- the appellants Nos.1 to 3) and how and to whom and when, such accounts/amounts are to remain payable to the appellant No.1 and if paid are deemed to be received in trust by the appellants for the plaintiffs/respondents.
In the plaint in para 9.06 the respondent claimed various declarations inter alia as to their right to be agents of all the foreign suppliers (defendants Nos.7 to 11) and those also mentioned in the list annexed to the agreement dated 2-7-1982, referred in pars. 16 of the said agreement. Prayer was also made for grant of direction that the foreign suppliers, as per list Annexure 'B' may not appoint any other person or company as their agent in Pakistan and keep in force the exclusive agency with the plaintiff No.1/appellant No.1. Reliefs have also been claimed for rendition of accounts.
It may be noted here that though the allegations in the plaint as well as reliefs claimed were in exhaustive terms, neither any plea of nor any relief on the basis of alleged "passing off" in any manner was made or prayed for in the plaint nor any direction or injunction was sought in the plaint so as to restrain the carrying on of any business in the name of the appellant No.3.
5. Alongwith the plaint on 1-7-1985 an application (CMA. No.2053/85) was filed under Order XXXIX, Rules 1 and 2, CPC, Order 46 Rule 1 read with Section 151, CPC wherein prayer was also made directing the defendant No.12/National Bank of Pakistan to stay the operation of all L/Cs opened by the defendants Nos.4 to 6 or any of them in favour of defendants Nos.7 to 11 or any of them, restrain the said bank from making any payment of commission and/or any other payment to the appellant in respect thereof. Injunction was also sought to restrain the appellant from entering into any contract, transaction of business with the Defence Purchase Depart ment of the Government of Pakistan through the defendants No.4 to 6 or otherwise in respect of the goods and/or supplies or manufacture of the principals of the respondent No.1, namely, the defendants No.7 to 11 in the list annexed to the agreement dated 2-7-1982 by reference to para 16 of the said agreement. A number of other prayers have also been made in the application one of which was for the appointment of Receiver of the appellant No.3 inter alia in respect of all its past/present/future business as also the business of the appellants No.1 and 2 and direct the appellants No.1 to 3 to hand over all the books and records of the plaintiff No.1/respondent No.1 and the defendant No.3/the appellant No.3 to the Receiver appointed hereunder with all powers under Order 40, C.P. C. with direction to submit them to the Chartered Accountants namely M/s. Rafiq Tumbi Associates. A number of other directions have also been sought in the application to compel the appellants and other defendants to disclose to the Receiver all past, present and subsisting business, contracts, transactions supplies made or to be made by the appellants or any of them or through them to any person, company, Government, organization or any other since the inception of plaintiff No.1/respondent No.1 and the appellant No.3 to disclose their local and foreign bank accounts and give a statements of commission received or receivable.
6. After notice to the appellants No.1 to 3 of the above application (CMA No.2053/85) the learned Single Judge on 3-12-1985, on conclusion of the arguments, reserved the order to be announced, and while doing so the learned Judge appointed Mr. Syed Abbas Zia as Receiver to take over all the books of accounts and records of the respondent No.1. The appellants No.1 and 2 were also directed to hand over all the books and records to the said Receiver who was directed to probe into all the contracts entered into by the respondent No.1 on behalf of the plaintiff No.1/respondent No.1 during the period 2-7-1982 upto 30th May. 1983.
Before the order could be announced another application CMA No.4508/85 was moved on behalf of the respondent on 12-12-1985 which was described as supplementary/ additional application under Order 39 Rules 1 and 2, CPC read with Order 40 rule 1 and Section 151, CPC, wherein after referring to the ad interim order passed on 3-12-1985 a new plea was raised that the appellant No.3 had been fraudulently promoted, incorporated and established and was making fraudulently dealings and that it was given a similar name to pass off for the original/real company namely, the respondent No.1/plaintiff No.1 and that such fraudulently similar name and promotion of such device of fraud was by the directors of the respondent No.1, namely, the appellants No.1 and 2 while working and holding the office of the directors of the respondent No. l/plaintiff No. 1, and making various other allegations prayed that the Receiver be empowered be selected to take charge of the business, management and affairs of the appellant No.3/defendant No.3 and the powers of the Board of the Director/ Directors/ Managing Director of the defendant No.1 and the appellant No.3 be made subordinate to the Receiver and to hand over all the records of the appellant No. 3/defendant No. 3 to the Receiver in respect of all its dealings. Prayer was also made that the defendant Nos.4 to 6 be restrained from making any payment or to accept any order from the appellants No.1 to 3 or any of them in respect of orders placed or intended to be placed on defendants No.7 to 11 or any of them and to restrain the defendants No.7 to 11 from accepting any order from the appellants or any of them.
7. After hearing the learned Advocates for the appellants and respondents No.1 and 2 but without any notice to any of the other defendants the learned Judge (O.S.) passed the impugned order which has been reproduced above.
8. Being aggrieved by the impugned order the appellants No.1 to 3/defendants No.1 to 3 have filed High Court Appeal No.45/86. A separate High Court Appeal No.50/86 has also been filed by M/s. Bell Hellicopter Textron Inc. the defendant No.7. Both these appeals have been ordered to be heard together and accordingly were fixed before us for disposal.
9. We have heard the learned Advocates appearing in both the appeals and after going through the impugned order and the records we are disposing of both the appeals.
10. In the impugned order the learned Single Judge has reiterated the following principles based upon the case-law cited before him:-
(i)... there exists a sort of fiduciary relationship between the directors and the company and that the law requires the directors to deal with the monies and properties of the company as trustees.
(ii) .that the Court will, as with trustees, not allow a director to retain any profit which he may make by virtue of the fact that he is a director. He will be liable to the company for that profit."
(iii) I find no provision in the Companies Act which excludes the jurisdiction of a Court to appoint a Receiver, though since the Companies Act, 1913 and the Companies Ordinance, 1984 make provision for dealing with circumstances in which a company is mismanaged, it should not be necessary in the vast majority of cases to appoint a Receiver. It might even improper to do so in certain circumstances. My attention has been drawn to a number of instances in which receivers lave been appointed...
(iv) ...There is case-law to indicate, that if a company has already been registered it can be restrained from carrying on business in the registered name .There are numerous other cases wherein similar injunctions have been granted. In case, an injunction is granted against a limited company which has already been registered time is given as a matter of course . to get its name changed. Otherwise, the injunction is usually in the form of a restraint order .......not to carry on business under the impugned name "
The legal principles reproduced above have not been disputed by the learned counsel for the appellant. Applicability of these principles to the present case however has been disputed.
11. We accordingly proceed to consider propriety and legality of the impugned order on which the learned Advocates for the 1arties have addressed us.
(i) The learned Single Judge passed ad interim order on 3-12-1985 whereby Mr. Syed Abbas Zia Advocate was appointed as Receiver with powers to take over all the books of accounts and records of plaintiff No.1/respondent No.1 and the appellants No.1 and 2 were erected to hand over the said books of accounts, records, documents to the said Receiver. Receiver was further directed to probe into all the accounts entered into by the defendant No.1/appellant No.1 on behalf of the plaintiff No.1/respondent No.1 during the period 2nd July 1982 to 30th May, 1983.
To the above order and directions, given in the ad interim order dated 3-12-1985, Mr. Khalid Anwar, counsel for the appellants stated that his clients have no grievance. The learned counsel, further stated that in obedience to the direction thus given was obeyed and whatever books of accounts and records of the respondent No.2 were with the appellants have already been handed over to the Receiver and that the same are lying with him, and that the appellants would have no objection even if the Receiver probes into the said accounts and that if any information is required in respect of the said accounts the appellants shall have no objection to co-operate. His plea was that there is nothing worth to be looked into as the matter stood finalised, yet the appellants are not contesting the directions given as above.
(ii) The directions given in the impugned order:-
" ...to restrain the third defendant (now the appellant No.3) from carrying on business under the name of Messrs Muhammad Bakhsh International Ltd."
have been challenged as not justified on the material on record.
We have considered the arguments advanced and we find that no relief by way of permanent injunction has been claimed in the suit for restraining the defendant No.3/ the appellant No.3 (company) from carrying on business in its own name (i.e. Messrs Muhammad Bukhsh International Ltd). Mansoor Ahmed Khan, the learned Advocate for the respondents was expressly called upon by us to point out if any such prayer for grant of permanent injunction has been made in the plaint against the appellant No.3. He was unable to do so. In such state of facts, we may usefully refer to the case of Marghub Siddiqi v. Hamid Ahmed Khan and 2 others (1974 S C M R 519), wherein the Hon'ble Supreme Court of Pakistan was pleased to lay down the following principle: -
"...that in a suit where no perpetual injunction is claimed no question of granting ad interim injunction can possibly arise."
Having observed as above it was held:-
"In the present case, the application for ad interim injunction should have failed on this ground alone."
In the light of the principle laid down as above by the Hon'ble Supreme Court of Pakistan we find no justification to the grant of temporary injunction restraining the appellant No.3 from carrying on business under the name of Muhammad Bukhsh International Ltd. as no perpetual injunction has been claimed in the suit.
For the above reasons alone injunction granted as above is liable to be vacated.
We are also of the opinion that on the principle laid down in the case of Marghub Siddiqui (ibid) the direction given to the appellant No.3 to change its registered name cannot be sustained. We may also refer here with advantage to the case of Ghazi Naseeruddin v. Hashim Dawood and others P L D 1962 Kar. 55 wherein the learned Judge (Mr.Justice Wahiduddin as he then was) observed that temporary injunction cannot be issued which goes beyond the reliefs claimed in the suit.
It may be observed here in the case of, Marghub Siddiqui v. Hamid Ahmed Khan (ibid) the Honourable Supreme Court observed that the trial Court in that case exceeded its jurisdiction by deciding the question of validity of the resolution finally. The injunction granted as directions given to the appellant No.3 in our opinion put an end the Company/appellant No.3 finally at the interlocutory stage, which is not justified on the facts and law.
(iii) Appointment of Receiver.
The learned Advocate for the respondents in support of the relief granted appointing the Receiver with the directions as given in the impugned order, reiterated his arguments advanced before the learned Single Judge and submitted that the Court has jurisdiction to appoint Receiver of a Company and referred to the following observations of the learned Single Judge wherein after observing that there is no provision in the Companies Act which excludes the jurisdiction of a Court to appoint a Receiver it was observed:-
"..though since the Companies Act, 1913 and the Companies Ordinance, 1984 make provision for dealing with circumstances in which a company is mismanaged, it should not be necessary in the vast majority of cases to appoint a receiver. It might even be improper to do so in certain circumstances. My attention has been drawn to a number of instances in which Receivers have been appointed and although the particular case that I am here considering does not tall within one of the categories of cases in which Receivers have been appointed by Courts, I think this is a case in which, if the allegations are accepted, the appointment of a Receiver would be the most satisfactory way of dealing with the temporary difficulty that exists during the pendency of the suit. If the allegations of plaintiff be true the business of defendant No.3 shall be deemed to be the business of plaintiff No.1 and seek in their suit to have it declared that all the business of defendant No.3 shall be the business of the plaintiff No.1. Therefore, in my view it is possible in suitable cases under the Companies Act as well as under the Companies Ordinance to appoint Receiver who may take up the business of a company and the management of its property and its affairs pending the decision of the Court in this suit."
Having observed as above the learned Single Judge proceeded to appoint the Receiver on the following consideration:--
"At this stage it appears to me that there is not only prima facie case made out by the plaintiff but a very serious question which is analogous to fraud, wrongful acts on the part of the first defendant has been disclosed and very serious question as to the interpretation of the agreements, articles and provisions of the Companies Ordinance, are to be gone into. The allegation that the first defendant diverting business in the third defendant of which he has been and is one of the directors, makes out a prima facie case at this stage for an interim order. The administration of the third defendant cannot be left in the hands o the first defendant against whom serious allegations have been made in the plaint which appears to be prima facie, maintainable and the balance of convenience appears to me to be in favour of proper order to be made for the protection of the company's books, assets and funds until further order."
Having considered the arguments of the learned counsel for the parties we find ourselves unable to agree with the learned counsel for the respondent that the appointment of Receiver of the appellant No.3 company could be justified. The grievance made that the respondent No.3 company has wrongfully adopted the name which is analogous'/to fraud and wrongful acts on the part of the appellant No.1. We have already found that no relief in respect of the incorporation of the appellant with its registered name has been prayed for in the plaint. Adoption of this name by the appellant No.3 cannot therefore, be agitated in support of appointment of Receiver by using, however, strong or serious allegations or language. As to the plea that serious questions invoking interpretation of the agreement, articles and provisions of the Companies Ordinance are required to be gone into, we may observe that nothing was shown to us at the hearing that any such interpretation is involved or that for such reason Receiver of different Co. could be appointed. There is nothing on record that the appellant No.1 diverted business in the third company of which he is one of the directors or that administration of the third defendant /appellant No.2 cannot be left in the hands of the first appellant.
Apart from bare allegations made in the plaint and/or the applications which have been rebutted, we find that no evidence much less even prima facie evidence has been placed on record to justify the interference with the business of the appellant No.3 or to show that appellant No.1 diverted any business of the plaintiff No.2 to the appellant No.3 company. It is obvious to us that bare allegations made, however, strong in expression may be, cannot take place of prima facie case to be established by placing material on record to justify appointment of Receiver.
12. Here it may be observed that the only controversy as to business to be carried on related to the business of agencies which have been enumerated in Annexures 'B' and 'C' to the agreement dated 2-7-1982. The grievance of the respondents is that the appellants have taken over and are dealing with the agencies/ business mentioned in Annexure 'B' to the above-referred agreement dated 2-7-1982 exclusively. This grievance of the respondent is ill-founded inasmuch as the appellants acquired a right to do so since after 31-5-1983 under the said agreement as provided in clause 16(f). Mr.Mansoor Ahmed Khan, the learned counsel for the respondents, submitted that this the appellants could not have done unless the other terms of the said agreement are carried out. The other conditions which according to Mr. Mansoor Ahmed Khan, which are to be carried out and still remain unfulfilled are:
(i) The two properties one in P.E.C.H.S. and other in West Wharf areas have not been transferred to the respondents by execution of registered deeds.
(ii) The accounts of the respondent No.1 company have not yet been settled by the appellant No.1, and
(iii) The liabilities of the respondent No.1 company mentioned in the agreement dated 2-7-1982, have not been cleared by the appellant No. 1.
13. As regards the first objection at the hearing Mr. Khalid Anwar, learned counsel, for the appellants submitted that possession of the properties referred to above have already been delivered to the respondent No.1/the plaintiff No.1 and that its profits are also being enjoyed by him. He further submitted that there is no delay or default on the part of the defendant/the appellants in executing the registered sale-deed and that they are ever ready to do so even now. He argued that the delay in getting the deeds registered is due to the conduct of the plaintiffs/the respondents themselves.
14. Mr. Khalid Anwar, as to the second and third objections, that out of the total liabilities, which amount to Rs.30,94,869 submitted as disclosed in Annexure 'A/1' to the agreement dated 2-7-1982, the entire amount has been paid off except a meagre amount of Rs.67,000 and which also would be paid in due course and that the plaintiff have no reason to feel to be burdened with it. He further submitted that no other item or default on the part of the appellants in the matter of accounts has been pointed out specifically. Neither the Receiver in whose possession the books and documents of the respondent No.2/the plaintiff No.1 company were delivered as far back as 3-12-1985, nor the plaintiffs have been able to show any default or defalcation or any items of which accounts is to be rendered. The allegations made are vague in nature and with the object of merely creating a dispute for the sake of pretence and that no amount or amounts are payable on account. We put it to Mr.Mansoor Ahmed Khan that if any account is to be settled appropriate direction may be given by us but he did not respond favourably. The plaintiffs cannot on the pretext get an order which amounts to grant of preliminary decree nor authority can be conferred upon the Receiver to probe into the accounts and make inquiries as directed.
15. It is settled law that the defendant No.3/the appellant No.3 is a separate distinct legal entity, different from the respondent No.2/the plaintiff No.2 company. It has been shown that the appellant No.3 company has been formed with the capital/monies of any of the respondents. It has not been denied before us that in the appellant No.3 company, besides only the appellants No.1 and 2 there are other share-holders also who are not parties to this suit. There is no justification to seek the appointment of Receiver of an independent company formed in accordance with the law and which is carrying on its own independent business of agencies with foreign principals under independent agreements. Even the agreement dated 2-7-1982, expressly provided that the "agencies/business" mentioned in Annexure 'B' to the said agreement shall exclusively belong to the appellants No.1 & 2 for their own benefits after 31st May 1983. In the face of such explicit clause in the agreement between the parties there in hardly any justification for the plaintiffs to seek the appointment of a receiver of the said businesses carrying on since after May 1983 by the appellant No.3, independently of the respondent, on their own in the ordinary course of business particularly when in the said company the respondents are not share-holders. On the other hand these respondents are carrying on their own independent business under the agreement dated 2-7-1982. From the respondent No.2 (company) the appellant No.1, by an Agreement of Amendment, has withdrawn and Shares have been got transferred by respondent No.1 is his own/nominees names, Mr. Khalid Anwar offered to file statement showing quantum of business done by appellant No.3 every month but this was also not acceptable to the respondents. In these circumstances, we find that the appointment of a Receiver of the respondent No.3, could not be justified the view taken by us as above finds support from the case of Sh.Manzoor Ahmed and others v. Shaukat Soap Factory Ltd. and others 1985 C L C 2778 wherein refusing the prayer made seeking appointment of Receiver the learned Judge held;
"The de facto position obtaining at the moment is that the petitioners are in exclusive possession and control of the Modern Soap Industries Limited whereas respondents 2 to 9 enjoy similar position vis-a-vis Shaukat Soap Factory Limited. The petitioners are enjoying the income of Modern Soap Industries Limited to the exclusion of respondent 2 to 9. One of the objects of the Settlement and arbitration proceedings was none else than the distribution of the family concerns among the parties. When the petitioners are themselves running Modern Soap Industries Limited, in which the respondents are also share-holders, to the exclusion of the respondents, they cannot in equity ask for the appointment of Official Receiver of Shaukat Soap Factory Limited whose de facto control is in the hands of respondents 1 to 9. It cannot be said that the petitioners have been completely excluded from the management of the family concerns. Consequently there does not appear any justification for appointment of Official Receiver of respondent No.1."
16. The object for which in our opinion, a receiver is appointed and injunction is granted, is to maintain status quo and preserve the property for the benefit of the party who ultimately succeeds. However, we find that the directions as given and the order made, could neither be justified on the principle of preserving the business nor on the ground of protecting the property to be available for the plaintiffs or defendants whoever may ultimately succeed. It is obvious to us that the appointment of receiver with the directions given to him and the injunction which has been granted would completely destroy the appellants/the defendants for which there is no justification. It is also not shown to us that the foreign principals otherwise are ready and willing to deal with the plaintiffs/the respondents.
17. At this stage it cannot be ignored that the appellant No.3 is carrying on the business of which Receiver was sought to be appointed since after May, 1983 to the knowledge of the respondents/ plaintiffs and that no suit or other proceedings was initiated by the respondents seeking appointment of Receiver or injunction except for the first time by filing of the suit in this Court on 1-7-1985, i.e. almost after three (3) years of the making of the agreement dated 2-7-1982.
I may here refer to the case of Marshall v. Charteris (1920) 1 Ch. D 520. In the cited case the learned Judge (EVE, J.) as to the appointment of Receiver inter alia observed as follows:
"...It imposes on the defendant at a stage of the action before any pleading has been delivered the obligation of disclosing the title under which she claims and requires her to defend that title or at least to displace the plaintiff's title without the protection afforded in cases where the action comes on to be heard in the ordinary way after pleadings, and the other usual steps in the action, including discovery; finally it puts the Court in this difficulty, that the substantial issue in the action may, by this procedure, be determined in some degree upon evidence admissible on an interlocutory application but properly open to objection at the trial."
Reference may also be made here to the case of Mr. Ataur Rahman Alvi 1974 S C M R. 54 wherein the Hon'ble Supreme Court while dismissing the petit' .n for leave to appeal against the order refusing to appoint a Receiver held:-
"...His title to the properties was disputed and therefore until the dispute was decided he could not ask for a receiver to be appointed and the person bona fide in possession deprived of the properties."
On the principles which have been enunciated in the above, cited cases we find that the appointment of Receiver with the directions given to him reproduced above and the further directions given to the defendant No.7 (Messrs Bell Helicopter Textron Inc. Dept.) not to make any payment to the appellant No.1 and the third appellant till the disposal of the suit and to deposit the same with the Receiver are not justified on the facts and circumstances of the case as alleged in the plaint and the affidavits.
18. We may here also now take up the case of Messrs Bell Helicopter Textron Inc. (High Court Appeal No.50/86) in which the appellant has pleaded that order restraining the said appellant from making any payment to the appellants Nos.1 and 3 till the disposal of the suit with further direction to deposit the amounts with the Receiver was passed without any notice or giving opportunity of being heard to the said appellant.
The grievance made above by the learned counsel for the appellant in High Court Appeal No.50 of 1986 is justified as even in accordance with the provisions of Order 39, Rule 3, C.P. C. before granting an injunction a notice is required to be given to the opposite party. Though in appropriate cases ad interim injunction may be granted without notice but the final order in any case could not be made without hearing or giving opportunity of being heard. The order giving directions to the defendant No.7 appellant in H . C . A. No.50/86 (Bell Helicopter Textron Inc), therefore, is in violation of rule 3 of Order XXXIX, C.P.C. as well as principle of natural justice and therefore, cannot be sustained.
19. The upshot of the above discussion is that interim order dated 3-12-1985 is maintained as none of the parties has made any grievance against the same. However, the order passed on 9-2-1986, appointing the receiver granting of injunction and other directions given therein is vacated and while doings so in the interest of justice we direct Mr.S.Abbas Zia, Advocate to prepare inventory of the books of accounts of appellant No.3 and initial the same, so as to be available, as and when required by the Court.
K.B.A./A-119/K Appeals allowed.
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