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Suit No. 164 of 1960, decided on 8th January 1962.
Recast after hearing full arguments in case with concurrence of parties‑Civil Procedure Code (V of 1908), O. XIV, r. 5.
‑Exhibited without formal proof with consent of parties‑Evidence Act (I of 1872), S. 64.
Amendment‑Admission of fact sought to be deleted by amendment‑Late stage‑Application disallowed‑Civil Procedure Code (V of 1908), O. VI, r. 17. [p. 410]C
Custodian declaring only 75% of shareholders and property of company to be evacuee, the remaining 25% to be non‑evacuee‑Civil Court not competent to declare company as a whole evacuee by virtue of S. 2(2) (e) ‑ Existence of company wiped out after Custodian's declaration ‑ Company Law no longer applicable‑Shareholder shares not only in dividend but also in assets of company‑[Seth Jassumal v. The Central Government, the Rehabilitation Department and another P L D 1961 S C 206 considered].
Renewal of lease by one of several lessees‑Accrues for benefit of all co‑lessee.
Suit for‑Co‑owner may sue other co‑owners for rendition of accounts.
Ibadat Yar Khan for Plaintiffs.
H. B. Tyabji for Defendants 1 & 2.
H. A. Shaikh for Defendant 2.
S. A. W. Aseem for Defendant 3.
Dates of hearing: 13th, 14th, 15th, 19th and 20th December 1961
This is a suit by Mrs. Farbati L. Sitlani and her two sons for rendition of account against the three defendants and injunction against defendants Nos. I and 2 to restrain them from excluding the plaintiffs from the management of the Palace Cinema or interfering with the plaintiffs right to control the business jointly with the defendants.
2. The facts which have given rise to this suit are that a joint stock company was formed and given the name of Universal Theatres Limited. Its Memorandum and Articles of Assoication are Exh. 62. It was registered under the Companies Act, 191;, vide the certificate of registration (Exh. 52) dated the 9th of December 1942. Seth Lekhraj Chuhermal Sitlani, the late husband of the plaintiff No. 1, and the father of plaintiffs Nos. 2 and 3, was admittedly its Managing Director. The Company started and carried on several business ventures, but in this suit we are concerned with the Palace Cinema, or Palace Theatre only, which stands on a plot of land situated adjacent to the Metropole Hotel, Karachi. This plot of land was taken on lease by the Company from Messrs Edu1jee Dinshaw, who are managers of the property of certain persons, and the buildings and equipment of the Cinema were erected and installed by the Company. The plot was for the first time taken on lease for five years in 1939, and the buildings were erected fully or partly during the subsistence of that lease. On the 25th of May 1943, a fresh unregistered lease deed was executed (Exh. 18) for a period of five years with an option to the lessees to renew it for a further period of five years. It contained a term relating to the removal of the structures, to which references have been made during arguments by counsel for the defendants; therefore I reproduce the term here. It is as follows
" that on the expiry of the lease if the lessees have fulfilled all the terms and conditions of the lease or made good any breach committed by them prior thereto and in no other case the lessors will allow the lessees to remove the structures on the demised premises, and to enable the lessees so to do the lessees shall be entitled to remain in occupation for a further time not exceeding three months as they may require on their paying the monthly rent hereby reserved provided also that the lessees shall be entitled to remove the structures at any time on their paying rent upto the entire period hereby demised."
On the 13th of February 1948 the period of the lease was extended for ten years by a letter written by Messrs Eduljee Dinshaw (Exh. 51).
3. This extension was made after the Partition of India, which took place in 1947, and on the 18th of November 1949, Mr. Akbar Hussain, Custodian of Evacuee Property, Sind and' Federal Capital Karachi, ordered (Exh. 10) in appeal as follows:‑
"The joint stock company of Universal Theatres Ltd., is evacuee property to the extent of three fourths which is the property of the shares held by evacuees . . . . As I have said at least three fourths of the concern of the Universal Theatres is evacuee property . . . . . The Custodian may take possession of property when more than half of it is evacuee property. I do not consider it necessary, however, to take over the properties of the Universal Theatres Ltd., if the appellant (L. C. Sitlani) undertakes to manage the concern on behalf of the Custodian and to render full accounts and to credit the evacuee share of the profits to the Custodian's account. He must furnish security for Rs. 75,000 within a week if he is to continue the management of the Palace."
The language of the above order is to be noted carefully, because counsel for the defendants built up an argument on its basis to contend that although 75% shares of the company was also declared to be evacuee property yet the whole company was also declared to be evacuee property and therefore the entire Palace Cinema, and not only three fourths of the Cinema was evacuee property. This contention is obviously wrong. I may point out here that at the time when the order was made Pakistan (Administration of Evacuee Property) Ordinance XY of 1949 was in force and contained no provision relating to corporations or joint stock companies, but section 10 of it contained a provision that‑
"if the greater part of such property, reckoned according to the value of the whole, is held by or on behalf of those of such persons who are evacuees, the Custodian may take possession, and assume control and management of the whole of such property."
Sitlani managed the Cinema on behalf of the Custodian until he died on the 28th of December 1950. After his death, according to paragraph 5 of the plaint, the contents of which have not been specifically or legally adequately denied by the defendants, his widow, plaintiff No. 1, took charge of the Cinema for herself and on behalf of her minor sons. She was not able to carry on the management for long, because as a result of various orders the management was handed over to other persons. The plaintiffs protested against it and on the 19th of April 1952, Mr. Faiyaz Ali ordered (Exh. 11), as the Custodian of Evacuee Property, as follows :‑
"Mrs. Sitlani who with her sons holds four annas non evacuee share in the Palace Cinema will be treated individually as a member of the General Body and in the matter of management will have the same right as belongs to the allottee members of the General Body. She has been given this right as representative of the heirs of Mr. Sitlani."
In the last quarter of 1954, defendant No. 3 became the managing allottee of the Cinema, and a few days after it, on the 22nd of September 1954 entered into an agreement (Exh. 29) with defendant No. 1 through its proprietor, defendant No. 2, by which defendant No. 1 was given the right to use the premises for carrying on business, improve its equipment, meet expenses, pay the amount due to the Rehabilitation Authorities as the shares of the allottees and plaintiff No. 1. Moreover, defendant No. 1 was given the right to remove the improvements made by it if defendant No. 3 failed to obtain an order from the Custodian creating a charge on the property of the Palace Cinema for the money so spent by it. Plaintiffs' share of the, income was apparently not paid because on the 25th of November 1954; the Assistant Rehabilitation Commissioner, Karachi, ordered vide Exh. 38, as follows:‑
"The amount of 25% share of profit of the Palace Cinema pertaining to the non‑evacuee share should be paid to the owner of the non‑evacuee share of the concern i.e., Mrs. P. L. Sitlani in usual monthly instalments as in the case of the allot ment of the remaining 75%, evacuee share of the Cinema." The plaintiff objected to the arrangement made by defendant No. 3 with defendants Nos. 1 and 2 on the ground that defendants Nos. 1 and 2 were outsiders to whom defendant No. 3 could not sub‑lease the Cinema in his capacity of a managing allottee, but the Karachi Rehabilitation Board found, vide the minutes of its meeting, dated the 6th of December 1954 (Exh. 30) as follows
"The representation of Mrs. P. L. Sitlani owner of 0‑4‑0 as. non‑evacuee share of the Palace Cinema, Karachi, in respect of the alleged sub‑lease of the Cinema by the managing allottee Nasir Ahmed Khan to an outsider and the installation of new machinery etc., was considered. It was found that the managing allottee did not sublet the cinema; but had only taken a financier to run the Cinema efficiently. The Board did not see any objection to the managing allottee taking a financier. The Board further accepted the proposal contained in the note dated 22‑11‑1955 of K. B. Fazlul Karim Khan.. It was also found that it was necessary to replace the old machinery and renovate the upholstry of the sofas etc., which the managing allottee had done. It was further decided that since it had been complained by Mrs. Sitlani that the machinery taken out from the Cinema would deteriorate and lose its value it may be handed over to the Custodian who may sell it and pay 1 /4th share of the sale‑proceeds to Mrs. Sitlani, non‑evacuee owner of that much share. The remaining amount may be credited to the evacuee account.
The Board further ordered that provision had already been made for payment of 1/4th share of the profit of the Cinema to its non‑evacuee owner Mrs. P. L. Sitlani ; it should regularly be paid to her by the managing allottee like other sleeping allottees."
The words italicised by me in the above quotation disclose the view of the Rehabilitation Board with regard to the status of the plaintiffs and the relationship of defendants Nos. 1 and 2 with defendant No. 3. No other terms contained in the agreement (Exh. 29) that was made by the defendants among themselves can be taken to have been accepted by the Rehabilitation Board or to have become binding on that Board or the plaintiffs. Moreover, the Custodian never created a charge as was contemplated in the agreement. Under the arrangement as approved by the Board defendant No. 3 was the managing allottee, defendants Nos. 1 and 2 were the financiers and the plaintiffs were the owners of the non‑evacuee property of Universal Theatres in the Palace Cinema.
4. But defendants Nos. 1 and 2 had far‑reaching plans in mind. Immediately after acquiring the status of financiers, they tried to by‑pass the Rehabilitation Authorities as well as the allottees by negotiating with the lessors of the plot of land to become the lessees themselves. The reply of the lessors to defendant No. 1, dated the 28th of February 1955 (Exh. 24) contains the terms of the proposal which the parties had in mind as well as refers to the difficulties that were in the way according to the lessors. The first paragraph of the letter is important from this point of view and runs as follows:‑
"With reference to the conversation we have had with you regarding your proposal for leasing out to you the above mentioned premises, we have to state that these premises were agreed to be let out by us to the Universal Theatres Ltd., for a period of 10 years commencing from 13th February 1948. No Lease Deed, however, was registered and in the meantime the Custodian's Department declared 0‑12‑0 as. share of the tenancy rights of Universal Theatres Ltd. as evacuee property and 0‑4‑0 as. share to be non‑evacuee. There being no registered deed in existence, notice dated 30th October 1954 was served on the Custodian by our lawyers claiming that the premises were held on monthly tenancy, terminating the tenancy, and asking for possession being handed over, but no action has so far been taken by us. The Rehabilitation Department have allotted the premises for two years ending with December 1956 to certain allottees from whom you have taken over the premises by way of fixed hire, and are now in possession. A portion of the premises at the corner of Mereweather Road has been allotted to Burmah Shell and construction of a petrol pump was started by them. We now confirm the following arrangements made with you, namely:"
It is to be noted that the lessors were aware and admitted that one‑fourth of the tenancy rights of the Universal Theatres Ltd., were non‑evacuee property, that the lease deed being an un registered document created monthly tenancy only and that the lessors had given a notice terminating the tenancy to the Custodian only who had taken over the management of the entire Cinema, but in whom only three fourths of the superstructure, equipment and tenancy rights vested, but had abandoned all efforts to follow up even that notice. They admittedly continued to receive rent after giving the notice.
5. Having obtained the concurrence of the lessors to their proposal, subject as it was to the difficulties pointed out by them in the above paragraph, defendants Nos. 1 and 2 planned to buy up the evacuee property on the terms summarised by them in their letter dated the 4th of May 1957 (Exh. 31) to the Secretary, Ministry of Refugees and Rehabilitation, Government of Pakistan, Karachi, as follows :‑
"With a view, therefore, to meet the exigency envisaged above we respectfully lay before your good-self the following pro positions
(a) That we be allowed to pay to the Rehabilitation Board the rent in full for the unexpired period in advance in lump sum so that the allottees may continue to get their share undisturbed and without any break.
(b) That the Cinema be made over to us as a set‑off . against the amount we have so far spent.
(c) That we are prepared to deposit the entire rent up to 31‑1‑1958 with the Rehabilitation Board as soon as we are called upon to do so,"
Two days after the above letter, on the 6th of May 1957, the lessors supported the above proposal also by writing a letter (Exh. 19) directly to the Secretary Ministry of Refugees and Rehabilitation, Government of Pakistan, as follows
"with reference to the letter dated the 4th of May 1957 (Exh. 31) to you from Messrs H. Hussain & Co., we have no objection if Messrs H. Hussain & Co., pay the allottees the sum due in advance and if possession of the Cinema is formally handed over to them on our behalf."
I should point out here that this letter was written by the lessors in complete disregard of the difficulties which they had in mind according to their letter (Exh. 24) to defendants Nos. 1 and 2. After writing the letter dated the 4th of May 1957, (Exh. 31) to the Ministry, Defendants Nos. 1 and 2 apparently found that their proposal to buy the property "as a set‑off against the amount" spent by them could not be accepted even by those who might have been willing to help them, because it amounted to buying the structures and equipment of the Cinema, together with the additions and improvements made by themselves, for nothing except merely for the fact that they had allegedly made those additions and improvements. This realization apparently led them to write another letter, dated the 15th of July 1957 (Exh. 32) to the Secretary, Ministry of Refugees and Rehabilitation, Government of Pakistan in continuation of their previous letter, and to offer Rs. 30,000 out of which Rs. 18,000 were meant to be the price of the buildings and structures and Rs. 12,000 for the machinery and furniture. The amended proposal immediately found favour with the authorities. The Secretary consulted the Rehabilitation Commissioner, who after consulting the Custodian, wrote to the Secretary on the 29th of July 1957 (Exh. 17) as follows
"There appears to be no objection in allowing Messrs Hussain & Co., to purchase the said structure etc., for Rs. 30,000 in view of the fact that. they have made huge investments in carrying out major repairs and air‑conditioning the cinema building and re‑equipping it with the latest type of machinery, provided that
(a) They pay in advance @ Rs. 6,000 per month for the remaining period of the lease as agreed to by the managing allottee.
(b) They obtain a "no objection" certificate from the landlord in respect of the evacuee deal. The Rehabilitation Department, the Custodian or the Central Government shall not be responsible if the landlord raises any objection later.
(c) They will also negotiate with the owner of the 4 annas non‑evacuee share of the concern and directly settle the disposal of the said share with that owner.
(d) They will apply to the Custodian in the proper manner under Act XII of 1957 for the purchase of said structure etc., who is the competent authority to allow the same with the previous approval of the Central Government,"
The Secretary treated the contents of the above letter as a proposal from the Rehabilitation Commissioner and within three days conveyed his acceptance of it by his letter dated the 1st of August 1957 (Exh. 16). The acceptance of the offer of Rs. 30,000 along with the first three conditions contained in the letter of the Rehabilitation Commissioner was conveyed by the Deputy Rehabilitation Commissioner, Karachi, by his letter dated the 12th of August 1957 (Exh. 33) to Defendant No. 1. In the last paragraph of the letter it was, however, made clear that the Custodian of Evacuee Property, Karachi, was empowered to dispose of evacuee property only with the approval of the Central Government, and the defendant was advised‑
"to make a formal application with the concurrence of the managing allottee in this respect to the Custodian and obtain his orders."
The word formal' is noteworthy. On the fourth day of this letter, the concurrence of the managing allottee whose connection with defendants Nos. I and 2 were close, was conveyed to the Custodian directly in his letter dated the 16th of November 1957 (Exh. 34).
The "formal. application", as advised by the Deputy Rehabi litation Commissioner (vide Exh. 33) was apparently made to the Custodian and accepted. It was probably accepted as a matter of course, because defendant No. 2's letter dated the 6th of February 1958 (Exh. 26), shows that the Custodian ordered the payment by a cheque of the whole amount of Rs. 30,000. If defendants Nos. 1 and 2 had paid that amount to the Custodian, there would have been an end of the troubles of defendants Nos. 1 and 2 because ‑the Custodian in that case would have dealt directly with the plaintiffs, but defendant No. 2, the proprietor of defendant No. 1, proved to be too keen a business man to pay even that amount and wrote to the Rehabilitation
Commissioner in his letter (Exh. 26) for obtaining a reduction in it, as follows
"The Hon. Custodian has asked us to give a cheque of Rs. 30,000 instead of Rs. 22,500 as your share which is clearly mentioned in our above letter (probably, Exh. 32, in which 25 per cent. of the amount was shown as payable to Mrs. Sitlani) which was accepted by the Board."
The Rehabilitation Commissioner lost no time in coming to the aid of defendant No. 2 and wrote to the Custodian on the 7th of February 1958 (Exh. 20), as follows
"It has been represented by Messrs Hussain & Company that it is not clear in the letter referred to above that the accepted offer of Rs. 30,000 by the Government is for the entire 0‑16‑0 annas share including the 4 annas non‑evacuee share. It is therefore to inform you that the amount of Rs. 30,000 includes 4 annas non‑evacuee share also. As such Messrs Hussain & Co. are required to pay only Rs. 22,500 (Rupees twenty‑two thousand and five hundred) towards the price of 12 annas structure fittings etc. As regards the remaining 4 annas non‑evacuee share they have to settle the bargain with the non‑evacuee owner to which this Department will not be a party."
Mark the words "have to settle the bargain" in the last sentence, because defendants Nos. 1 and 2 have been vainly trying in this suit to get rid of its consequences, though they are merely a repetition of one of the conditions of sale which was conveyed to the defendants, vide Exh. 33. The Custodian fully realised the mistake he had made in ordering the payment of Rs. 30,000 to the Department and wrote back on the 11/12th of February 1958 (Exh. 15) to say that neither he nor the Government had any right to deal with the non‑evacuee part, which was one- fourth of the whole property. The major part of the letter is important, which I reproduce here
"One fourth share in the structure, fittings etc., of the Palace Cinema being non‑evacuee, you, I and the Government cannot fix any value for the same. It is left entirely between the non‑evacuee owner and Messrs Hussain & Co. to settle up price of that one‑fourth share. The owner may sell it for Rs. 7,500 or Rs. 7‑5‑0 to Messrs Hussain & Co. and with that we have no concern. I, therefore, take it that Rs. 22,500 have been fixed as the price for 3/4 share of the property in question and I will be ready to accept the same from Messrs Hussain & Co.
But Messrs Hussain & Co. have made an application to me to the effect that the Chairman, West Pakistan Industries Rehabilitation Board has accepted this deal on three conditions, one of which is as follows
You will also negotiate with the owner of 4 annas non -evacuee share of the concern and directly settle the disposal of the said share with that owner'."
On the 4th of March 1958, defendants Nos. 1 and 2 offered to pay (vide their application, Exh. 35) Rs. 22,500 towards the price "of the three‑fourth share of the superstructure, furniture, fittings etc. of the Palace Cinema". On the 12th of March 1958, the Custodian requested the Rehabilitation Commissioner in his letter (Exh. 21) to‑
"accept Rs. 22,500 as the price of 3/4th share of the super structure of the Palace Cinema, when the same is deposited by the applicants Messrs Hussain & Co."
The amount was paid, for which the Assistant Rehabilitation Commissioner (Rent) Karachi issued a receipt (Exh. 22) dated the 13th of June 1958.
6. Having purchased three‑fourths of the superstructures and equipment of the Palace Cinema, defendants Nos. 1 and 2 obtained a confirmation from the lessors, vide their letter dated the 10th of November 1958 (Exh. 25) that they were agreeable to lease out to the defendants the plot on which the Palace Cinema was situated for a period of 15 years from the 1st of February 1958. This date is important, because by taking the new lease from this date defendants Nos. 1 and 2 have left undisturbed and impliedly admitted the tenancy rights of Universal Theatres Ltd. up to the 31st of January 1958. Up to the 31st of January 1958, the tenancy created by the lease deed Exh. 18 and extended by the lessors in favour of Universal Theatres Ltd., vide their letter (Exh. 51) has subsisted without a semblance that the monthly tenancy admitted by the landlords in their previous letter (Exh. 24) was ever terminated. Moreover, the agreement to lease the plot to the defendants for a period of 15 years did not materialise in the form of a registered lease deed for about three years after the date of Exh. 25.
7. On the 25th of May 1960, the Settlement Commissioner, Karachi, executed a deed of conveyance relating to
"three‑fourth share of all buildings and out‑houses, super structure, furniture, fixtures and fittings and all things appertaining thereto or connected therewith etc."
In consideration of Rs. 22,500 paid by defendants Nos. 1 and 2. The deed is Exh. 23. It leaves no doubt that defendants Nos. 1 and 2 have purchased no right, title or interest in one‑fourth of the buildings, out‑houses, superstructure, furniture, fixtures, fittings and other things appertaining thereto or connected therewith, irrespective of whether that one‑fourth part was evacuee or non‑evacuee property. Moreover, they have not negotiated, settled with and paid the price of this one‑fourth share to the plaintiffs, although the need for this was pointed out more than once by the Rehabilitation Authorities and the Custodian, vide Exhs. 17, 33 and 15, and was fully known to those defendants as their own application (Exh. 35) shows. On the contrary, their stand has been, and is (paragraphs 19 and 28 of their written statement) that the plaintiffs are not entitled to get anything except Rs. 7,500 as the price of their property.
8. On the 5th of August 1960, plaintiff No. 1 gave a legal notice to defendant No. 1 alleging in it that the defendant had neither rendered account of the business done or expenses incurred by the defendant towards the maintenance and improve ment of the property, nor had paid anything to her as her share of the profits. She claimed a right to participate in the business, the 12 annas share of which had been purchased by the defendants, on the ground that the Evacuee Laws had ceased to be in force. She also called upon the defendants to render account of the business done and profits gained from January 1958. Her sons adopted the notice by their letter dated the 9th of August 1960, (Exh. 14). The defendants gave no reply to the notice and the plaintiffs instituted this suit on the 14th of September 1960.
9. Defendant No. 3 submitted his written statement on the 28th of October 1960, and subsequently defendants Nos. 1 and 2 submitted their joint written statement dated the 4th of April 1961. Issues were framed on the 22nd May 1961. After this, on the 17th of August 1961, defendants Nos. 1 and 2 got a registered lease deed executed by the lessors (Exh. 27) in favour of defendant No. 1. By this lease deed, the lessors have leased the plot of land only on which the Palace Cinema is situated and not any part of the superstructures. This is noteworthy because counsel for the defendants have advanced arguments that in virtue of the failure of Universal Theatres Ltd, to remove the superstructures in terms of the lease deed (Exh. 18,. the relevant portion of which has been reproduced above and does not support this contention), their right to the buildings and structures has been forfeited. The latest lease deed (Exh. 27) proves that the lessors have no such claim to make. On the contrary, they have protected themselves against all claims of the plaintiffs by inserting clause 2 (b) in the lease deed (Exh. 27), which is as follows :‑
"The lessees hereby covenant and undertake to settle all claims made against the lessors in respect of any assets or right of Universal Theaters, Ltd., by any share‑holder, allottee or the Rehabilitation Department or the Custodian's Department, in respect of any dealings with any of the said persons or depart ments, and to make all payments that may be necessary in this behalf, and in particular all claims relating to the non evacuee shares in Universal Theatres Ltd. and other rights or claims of Mrs. L. C. Sitlani."
In contrast to this, defendants Nos. 1 and 2 have agreed with the lessors (clause 2 (e) of the lease deed, Exh. 27) that on the termi nation of the lease all buildings and structures, including that part which they have not purchased will‑‑
"revert to the lessors as their absolute property free from any claim or right of the lessees",
but that they can purchase (clause 5 (b) of the lease deed Exh. 27) the land within fifteen years at the rate of Rs. 160 per square yard, and that if they do so they will become,
"the owners of the plot hereby demised together with all buildings and structures"
including that part which they have not purchased. This means that they have recognised no interest of the plaintiffs in the tenancy rights to which the lessors have referred in their letter (Exh. 24) and no interest in the buildings, structures, though the interest of the plaintiffs in them was repeatedly admitted by the predecessors‑in‑interest of defendants Nos. 1 and 2 vide Exhs. 11, 15,17,20,30,33 and 38.
10. It was necessary to state the facts at length and to make a few obvious comments on them as these facts can be better appreciated by stating them fully. The plaintiffs and defendants Nos. 1 and 2 have also laid emphasis on facts by devoting the major parts of the plaint and the written statement to them. Moreover, defendants Nos. 1 and 2 have complained in paragraph 2 of their written statement that the facts stated by the plaintiffs are incomplete and misleading. Now, I am in a position to refer to the material pleadings of the parties which will be easily understood without the necessity of referring to the details set out above.
11. Stated briefly the plaintiffs' claim for rendition of account and injunction to restrain defendants Nos. 1 and 2 from excluding the plaintiffs from the management of the Cinema is based, according to the amended plaint, on the following grounds:‑
(1) The plaintiffs are the owners and proprietors of 25 per cent. of the buildings, machinery, furniture, business, goodwill and all assets of the Palace Cinema (Paragraphs 2 and 5 of the plaint). Defendants Nos. 1 and 2 have become owners of three‑fourth share in the Cinema by purchasing it from the Ministry of Refugees and Rehabilitation and Custodian (paragraph 13 of the plaint).
(2) The defendants have the possession of the Cinema because the Rehabilitation Authorities gave it to them in exercise of the powers which were conferred on the Authority by the Evacuee Laws (paragraph 18 of the plaint).
(3) Defendants Nos. 1 and 2 are liable to pay the plaintiffs' share of profits and render account as co‑sharers as well as in virtue of express and implied agreements to do so (paragraphs 16 and 17 of the plaint).
(4) The three defendants have paid nothing from June 1957, and sent wrong accounts on 2‑9‑1959 up to 31‑1‑1958 with a cheque for Rs. 504. The accounts have not been accepted by the plaintiffs (paragraphs 14 and 15 of the plaint).
(5) The Authorities have now refused to intervene; hence this suit (paragraphs 19 and 20 of the plaint).
12. Defendants Nos. 1 and 2 have resisted the claim of the plaintiffs, according to their second written statement, dated the 4th of April 1961, on the following grounds :‑
(i) It is admitted that under the orders of the Custodian and Rehabilitation Authorities‑
"the plaintiffs were entitled to 1/4th of the properties and profits of the concern" (paragraph 1(d) of their written statement).
but the (joint ) business of the Cinema was "co‑terminous" with the lease (Exh. 18 read with Exh. 51) which expired on the 31st of January 1958 ; therefore, the interest of the allottees and the plaintiffs in the concern has terminated on that date and that business has also "ended" (paragraphs 3, 4 and 17 of their written statement).
(ii) The plaintiffs can have no claim in the buildings and structures of the Cinema because under the above‑mentioned lease the lessees were to remove all buildings and structures within three months of the expiry of the lease, but they have failed to do so (paragraph 5 of the written statement).
(iii) The plaintiffs are not entitled to claim anything now (para graph 28 of the written statement) except Rs. 7,500 (paragraph 19 of the written statement) because the Authorities have valued the entire Cinema at Rs. 30,000 (paragraphs 10 to 12 of the written statement). They have received from defendants Nos. 1 and 2 Rs. 22,500 and relinquished the possession of the whole Cinema (paragraphs 15 and 16 of the written statement) leaving Rs.7,500 in the hands of these defendants the plaintiffs' share of the price which the defendants are pre pared to pay to the plaintiffs (paragraph 19 of the written statement).
(iv) There is no agreement of partnership between the plaintiffs and defendants Nos. 1 and 2. These defendants are running the business "on their own" and not as "co‑sharers" (paragraphs 24 and 25 of the written statement).
Defendants Nos. 1 and 2 have never paid anything to the plaintiffs but made payments to the managing allottee and the Rehabilitation Authorities. These defendants are under no liability to make payments or render account to the plaintiffs (paragraphs 22 and 23 of the written statement).
13. The defences of the managing allottee (defendant No. 3) are that :‑
(a) he has managed the Cinema from 18‑9‑1954 to 31‑1‑1958 on behalf of the Rehabilitation Authorities and made payments for them and under their directions without any liability towards the plaintiffs. The plaintiffs' claim for their dues, if any, should be against the Rehabilitation Board (paragraphs 2, 6, 7 and 9 of the written statement)
(b) payments were stopped by him when the Income‑tax Authorities ordered him to do so (paragraph 5 of the written statement).
14. The above pleadings raise the following issues only, although fifteen rather discursive issues were framed on the suggestion of counsel for the parties on 22‑5‑1961 :‑
(1) Whether the plaintiffs are entitled to claim rendition of account from the defendants from January 1957, to 31‑1‑1958
(2) Whether the plaintiffs are entitled to claim rendition of account from defendants Nos. 1 and 2 from 1‑2‑1958 onwards
(3) Whether the tenancy rights created by Exh. 18 read with Exh. 51 have come to an end on 31‑1‑1958
(4) If issue No. 3 is decided in favour of the defendants, whether the joint business of the Cinema was co‑terminous with the lease and has, therefore, come to an end
(5) Whether the plaintiffs can have no claim in the buildings and structures because of the failure of the lessees to remove the buildings and structures within three months after 31‑1‑1958
(6) Whether the valuation made by the Authorities is binding on the plaintiffs and the plaintiffs cannot claim anything from defendants Nos. 1 and 2 except Rs. 7,500
(7) If the decision of issues Nos. 5 and 6 is in favour of the plaintiffs, are they co‑owners and as such entitled to participate to the management of the Cinema
(8) Relief.
On 14‑12‑1961, I wanted to recast the issues that were framed on 22‑5‑1961, after the case was stated by counsel for the parties, but vide my order of that date, at the request of Mr. Tyabji, A had postponed to do so at the conclusion of full arguments which have been addressed by four counsel. The above issues have been accordingly framed by me now. As this procedure was adopted at the request of the senior most counsel without objection from other counsel, they can have no grievance on that account. Counsel for defendants Nos. 1 and 2 at least can have) no grievance because at the time of stating their case, they had disclosed the contentions they wanted to raise. Those, contentions fall within the above issues. Counsel have addressed arguments accordingly and have in their own style covered the entire field of discussion, except, in so far as I was able to understand them, Issue No. 4. The omission is understandable because I am unable to see how defendants Nos. 1 and 2 could support this issue, if the plaintiffs are co‑owners with them in the buildings, structures, equipment, goodwill and business of the Palace Cinema.
15. Before adverting to their arguments, I may mention that no oral evidence has been led by the parties. All documents produced by them have been exhibited by consent without formal proof. This was mainly the result of what was concede by Mr. Tyabji on behalf of defendants Nos. 1 and 2, on the 8th of December 1961. On that date a plaintiffs' application dated the 6th of December 1961, carne up for hearing. The plaintiffs had alleged in that application that‑
"the defendant with a view to present a fait accompli to the Court and defeat the very purpose and object of the suit, has already demolished a substantial portion of the "Pucca" ,joint property. He has demolished several other constructions and has started new constructions on the land. These constructions are progressing and foundations have already been dug. The defendant is negotiating with the prospective tenants for letting out the show‑rooms and shops he is now constructing after demolishing the joint property.
That on 24‑11‑1961 the plaintiff moved an application for appointment of Receiver and in the meantime for an injunction."
The prayer which the plaintiffs' counsel made was that the application for the appointment of Receiver be heard at an early date and that ad interim injunction be issued to maintain status quo. Mr. Tyabji did not submit a written reply to the application but opposed it on the ground that no harm could be done to the plaintiffs by the demolition and construction of buildings or by agreements made by defendants Nos. 1 and 2 because‑
"If for any reason the Court comes to the conclusion that they (i.e., the plaintiffs) have interest in the property, then the agreements made, alterations effected and the rights and obliga tions created will accrue for the benefit of the plaintiffs in proportion to their share that may be found in the property."
In view of this admission made conditionally on the interest of the plaintiffs being found in the property, I dismissed the appli cation of the plaintiffs.
16. It became clear that the main question for decision was a short one. Counsel agreed that a very short date could be fixed for the hearing of the case. T therefore fixed the 14th of December 1961 on which date, Mr. Tyabji made an application on behalf of defendants Nos. 1 and 2 for substituting paragraph 1 (d) of the written statement, so as to eliminate from it the admission that‑
"the plaintiffs were entitled to 1/4th of the properties and profits of the concern."
Mr. Ibadat Yar Khan for the plaintiffs opposed the application on the grounds that (1) he had received a copy of it just at that moment ; (2) that the application Nvas very belated and that (3) a fact admitted in pleadings could not be treated as admitted merely because the party wished to get rid of the admission. The application on the face of it lacked bona fides and was made merely to get out of the situation created by the admission of their plaintiff's' right made by Mr. Tyabji on the 8th of December 1961 subject to only one condition which condition was filled by paragraph 1 (d) of his clients' written statement itself. These defendants had admitted the plaintiffs' title "to 1/4th of the properties and profits of the concern" in paragraph 1 (d) of their. written statement dated the 23rd of November 1960 and had repeated is in their second written statement dated the 4th of April 1961. This admission was therefore made deliberately and, obviously in view of the facts of the case and orders made by the. Rehabilitation Authorities and the Custodian to which references have been made above. The application for amendment was very belated also, but I postponed its decision in order to have the benefit of hearing counsel for the parties on the case as a whole. I have the advantage now of having fully heard counsel and find no reason whatsoever to allow the amendment. The application is accordingly dismissed hereby.
17. Reverting now to the contentions raised by counsel for the defendants and arguments addressed by them, I would like to give their summaries first and then to examine them.
18. Mr. Tyabji's stand was that on the expiry of the lease (Exh. 18 read with Exh. 51) and with the failure of the lessees to remove the buildings and structures from the plot of land, the interest in them, if any, of the share‑holders of the company (Universal Theatres Limited), who could have no interest under the Company Law in the assets of the company, has vanished. During his lengthy address counsel further argued that the Custodian has declared (vide Exh. 10) the 25%. shares only held by Sitlani to be non‑evacuee property but has not declared the corresponding one‑fourth of the property of the company to be non‑evacuee property. The whole company, according to counsel, was declared an evacuee person which was a separate entity from the share‑holders and therefore all the property of the Company which is a juristic person became evacuee property, but Sitlani as a share‑holder and the plaintiffs as his successors‑in -interest have nothing to do with it. These arguments of counsel cover issues Nos. 3, 5 and 7.
19. Mr. Tyabji is counsel for defendants Nos. 1 and 2, but Mr. Hassan Shaikh has also addressed arguments on behalf of defendant No, 2 without objection from me. He, added firstly, that the share‑holders of the company (Universal Theatres Limited) were bound by the Memorandum and Articles of Association of the Company which limited their interest to the dividends of the company only. They could, therefore, claim no interest in the assets of the company. Secondly, the Custodian had taken over the management of the whole company, representing all those who were interested in the company, and could bind them by his valuation of its assets. The Custodian has valued the assets of the company and the plaintiffs are bound by that valuation; therefore, they can claim nothing more than Rs. 7,500. While elaborating this argument, counsel contended that in virtue of clause (e) of subsection (2) of section 2 of Ordinance XV of 1949 which was inserted in the Ordinance in 1951, every Company of which more than 50% share‑holders were evacuees became an evacuee company. As 75Y. of the share holders of the Universal Theatres Limited were declared by the Custodian to be Evacuees the company as a whole was an evacuee person in law. The Custodian has declared (vide Exh. 10) that "the joint stock company of Universal Theatres Limited is evacuee property to the extent of 3/4th which is the property of the shares held by evacuees", but a formal declaration by the Custodian that the Company was as a whole an evacuee person was unnecessary because the law operates automatically as pointed out by the Supreme Court in Seth Jassumal v. The Central Government, the Rehabilitation Department and another (P L D 1961 S C 206). Counsel argued that I had to give effect to the law and treat the company as an evacuee person and all its property as evacuee property. These arguments of counsel cover issues Nos. 6 and 7.
20. Thirdly, he argued that defendants Nos. 1 and 2 were not accountable to the plaintiffs as there was no privity of contract and no fiduciary relationship between them. This argument relates to issues Nos. 1 and 2. On issue No. 1 Mr. Aseem for defendant No. 3 has addressed concise and neat arguments. I shall examine these two issues later and take up issues Nos. 3 and 5 to 7 now to consider them in the light of the above‑mentioned arguments of Mr. Tyabji and Mr. Hassan Shaikh.
21. 1 may state at once that the Supreme Court has not held either expressly or impliedly, that by giving effect to clause (3) of subsection (2) of section 2 of Ordinance No. XV of 1949, it is possible for the Civil Courts to declare or treat any person as an evacuee person inconsistently with or without a declaration made by the Custodian. The Civil Courts have no jurisdiction to do so and even the Custodian has lost the authority to declare any person or property to be an evacuee person or property in virtue of section 3 of the Pakistan (Admi nistration of Evacuee Property) Act, 1957. I have reproduced the relevant part of the Custodian's order dated the 18th off November 1949, (Exh. 10) which leaves no doubt that only 3/4th of the property of Universal Theatres Limited was declared to be evacuee property. On the 11th or 12th of February 1958, the custodian made it clear (Exh. 15) that "1/4th share in the structures, fittings etc. of the Palace Cinema" was non‑evacuee property. I repeatedly pointed out to learned counsel for defendants Nos. 1 and 2 that it was not possible for me to hold differently but they persisted in their efforts to convince me to the contrary with the object of depriving the plaintiffs of their proprietary rights in the buildings, structures, equipment, goodwill and the business of the Palace Cinema.
22. They exercised their ingenuity in trying to make use of the Company Law for arriving at the conclusion that Sitlani being a share‑holder of 25% shares in Universal Theatres Limited, he and his successors‑in‑interest could have no interest in the assets of the Company ; but the Custodian and the Rehabilitation Authorities have made it abundantly clear that 1/4th of the property of the Palace Cinema is the property of the plaintiffs. This view is not only the necessary legal consequence of the manner in which Universal Theatres limited was treated and dealt with by them but amounts further to an admission of the predecessors‑in‑interest of defendants Nos. I and 2 who have purchased 3/4th of the property of the Palace Cinema subject to the condition that 1/4th of that property was the property of the plaintiffs. The attempts made by counsel to press into use the Company Law cannot be said to be the result of ignor ance of that law and therefore must be taken to be attempts to deliberately ignore its correct application or, to be precise, its inapplicability. It is true that the share‑holders of a company are not the owners of its assets so long as it is alive and functioning, but they are entitled to a proportionate share in its assets when it is wound up or defunct. Mr. Hassan Shaikb conceded this but argued that Universal Theatres Limited was neither wound up nor a defunct company, because the procedure to wind it up has never been followed, and because its name has not been struck off by the Registrar in terms of section 247 of the Companies Act. In other words, according to him, a company cannot be in fact defunct, obsolete and dead unless the procedure prescribed in the section has been followed. In this case 75% of the share‑holders and 75% of the property of the company were declared to be evacuee persons and property (Exh. 10). This evacuee property vested in the Custodian and therefore the Company was deprived of its ownership. Moreover, the evacuee property in the Palace Cinema has been sold to defendants Nos. 1 and 2 (Exh. 23). The remaining 25% of the shares were held by Sitlani who was declared to be a non evacuee person and 25% of the property of the Company, including the same proportion of its property in the Palace Cinema, was declared to be non‑evacuee property of Sitlani and his successors‑in‑interest (Exhs. 10 and 15). If in these circum stances we still talk of share‑holders then from the point of view of the Company Law there cannot be said to have been more than two share‑holders of the Company from the order of the Custodian dated the 18th of November 1949 (Exh. 10) until the death of Sitlani. After his death, the shares held by him were not recognised by the company to have devolved on the plaintiffs and were not transferred to their names. Thus after the death of Sitlani and the withdrawal of the Custodian from the scene without relinquishing the shares which vested in him, there is no share‑holder of the Company. Counsel for defendants Nos. 1 and 2 have however been generous to recognise the plaintiffs to be share‑holders of the company and to admit that they were entitled to receive dividends. As to dividends, it is clear that the company made profits from the Palace Cinema because its income was received and distributed b, the Rehabilitation Authorities but no dividend was ever declared by the company in terms of its Articles of Association.' No meetings of the company could be held during the last 12 years but if a meeting of the company could be called now and was held to‑day, the share‑holders entitled to attend it, according to the stand taken by counsel for defendants Nos. 1 and 2 qua the plaintiffs will be the plaintiffs only with full powers to decide everything as they liked. If their right to do so is conceded, as it should be on the basis of the stand taken by counsel for defendants Nos. 1 and 2, then the plaintiffs are entitled to declare and get dividends themselves and do not have to request defen dants Nos. 1 and 2 to give their share of the profits. Further, if the plaintiffs have the rights of a share‑holder and the company is not a defunct company, then under the Company Law it stands to reason that the plaintiffs should be able to question the proprietary rights of defendants Nos. 1 and 2 in that property of the company which has been sold to them because it has neither been sold by the company nor have its proceeds been received by the company. These are some of the considera tions which show that the more you try to apply the Company Law to the existing situation the more you are drawn into dabbling in absurdities. The true situation is that the Evacuee Laws, which have been operative in supersession of the Company Law, have wiped off the existence of the company and the Palace Cinema is now partly the property of the plaintiffs and partly of defendants Nos. 1 and 2. To contend, in these circumstances, that the Company Law is applicable is neither true to facts nor correct according to law nor in conformity with reason.
23. Mr. Hassan Shaikh's argument that the Custodian had the power to evaluate the entire property of the Palace Cinema and could bind the plaintiffs by the evaluation made by him need not be examined because the Custodian had said on the 11th or 12th of February 1958 (Exh. 15) that "it is left entirely between the non‑evacuee owner and Messrs Hussain & Co. (defendant No. 1) to settle up the price of that 1/4th share." Moreover, defendants Nos. 1 and 2 have purchased 3/4th part of the property of the Palace Cinema subject to the condition, as stated by themselves in their application (Exh. 35), that "you (they) will also negotiate with the owner of four annas of the evacuee concern and settle the said share with that owner."
24. The plaintiffs must be held to be the owners of 1/4th of the buildings, structures, equipment, goodwill and business of the Palace Cinema. This has been admitted by defendants Nos. 1 and 2 in paragraph 1 (d) of their written statement. More over, Mr. Tyabji conceded on the 8th of December 1961, that in these circumstances "the agreements made, the alterations effected and the rights and obligations created accrued for the benefit of the plaintiffs in proportion to their share" and was able on account of the admission to get the application of the plaintiffs for the maintenance of status quo rejected. The co‑ownership of the plaintiffs combined with the admission makes the case of the plaintiffs unassailable. Further, owing to the dismissal of the plaintiffs application in virtue of the admission, defendants Nos. I and 2 are estopped from resiling from the admission.
25. Mr. Tyabji did not try to resile from it but Mr. Hassan Shaikh referred to paragraph 2328 at page 1093 of Woodfall on Landlord and Tenant, 25th Edition, under the heading "Renewal by persons jointly interested" which supports the plaintiffs contention and tried to distinguish it. The paragraph is as follows :‑
"If one of several persons jointly interested in a lease renews it in his own name he will hold the renewed lease in trust for the others according to the respective shares. And if a person jointly interested with an infant renews and the renewed lease turns out not to be beneficial, the person renewing must bear the loss himself ; if it turns out to be beneficial,) the infant can claim his share of the benefit derived.' Similarly if a partner renews a lease of the partnership property in his own name, he will usually be held to hold it as a trustee for the other partners, but this cannot be taken as being inevitably and invariably the case."
Counsel contended that this Proposition of law was not applicable to the facts of this case because the Custodian had surrendered the lease (Exh. 18 read with Exh. 51), in virtue of the facts that the proposal made by defendants Nos. 1 and 2 for taking the plot of land on lease directly from the lessors as well as the agreement of the lessors to do so was accepted by the Ministry, Rehabilitation Department and the Custodian. It was a part of the proposal that‑
"You (defendant No. 1) obtain no objection certificate from the landlord in respect of the deed. The Rehabilitation Department, the Custodian or the Central Government shall not be responsible if the landlord raises objection later."
There was no mention in it of the rights of the plaintiffs. This omission is the proof, according to counsel, that the Custodian abandoned the tenancy rights of the plaintiff which he could on behalf of the company.
26. This argument disregards the fact that the Custodian has completely excluded from the deal the 1/4th non‑evacuee property of the plaintiffs vide his letter Exh. 15. Moreover, as pointed out above, the lease created by Exh. 18 read with Exh. 51 was a monthly tenancy and has never been terminated. The 1/4th of that tenancy right was non‑evacuee property, as admitted by the lessors themselves in their letter (Exh. 24), and therefore, continued to be the property of the plaintiffs. The lessors were aware of this when they executed the new lease deed (Exh. 27) and have protected themselves by throwing the entire responsibility for all consequences arising from it by inserting in it clause 2 (b) (reproduced above). The distinction which Mr. Hassan Shaikh has tried to draw therefore does not exist.
27. I may mention, in order to take into consideration all that has been said on behalf of defendants Nos. 1 and 2, that Mr. Tyabji tried to argue that the Custodian has declared (Exh. 10) the shares only held by Sitlani in Universal Theatres Limited to be non‑evacuee property and has not declared the corresponding 1/4th of the property of that company to be non -evacuee property, but whatever possibility of creating a doubt in this regard there was has been subsequently removed by the Custodian (Exh. 15). Mr. Tyabji stated with the authority, which he has, of being an Ex‑Chief Judge of the Sind Chief Court that the order of the Custodian declaring 1/4th of the property of the company only as non‑evacuee property vide Exhs. 10 and 15 was illegal in view of clause (e) of sub section (2) of section 2 of Ordinance XV of 1949, and that none of those who have dealt with this case including Mr. Muhammad Bakhsh, an ex‑Judge of this Court, and Mr. Faiyaz Ali, the late and respected Attorney‑General of Pakistan, knew Company Law enough so as to apply it correctly to the situations which were dealt with by them. This observation of counsel could create no other impression on me except amuse me because supposing for the sake of argument that the order of the Custodian is illegal, but not without jurisdiction, I can neither correct nor disregard it, an4, because I myself do not know Company Law enough to be able to accept the propositions advanced by counsel.
28. I would like to add here one more word. Supposing for the sake of argument that Sitlani and his successors‑in -interest have no interest in 1/4th of the property of the Palace Cinema, it does not mean that defendants Nos. 1 and 2 can claim to be its owners. If the entire property, and not the 3/4th only which these defendants have purchased, was evacuee property, then what these defendants have not purchased vested in the Custodian who has said (Exh. 15) that it belongs to the plaintiffs. These defendants, therefore, have no right to question it.
29. Lastly, I invite attention to the inconsistencies that exist in the arguments advanced by counsel for defendants Nos. 1 and 2.
30. My conclusion is that issues Nos. 3 to 7 should be decided against defendants Nos. 1 and 2, and I do so.
31. Issue No. 1 can be disposed of with the help of the arguments advanced by Mr. Aseem on behalf of defendant No. 3. He pointed out that the Palace Cinema was managed on behalf of the Rehabilitation Authorities up to the 31st of January 1958. Whatever payments were made on their account. There was no liability of the defendants to pay any money to the plaintiffs or to render account to the plaintiffs of the business that was being carried on. Moreover, the Rehabilitation Authorities had directed that fixed sums of money be paid to the plaintiff. The plaintiffs therefore, cannot claim more than those fixed amounts. In these circumstances the form of the suit could not be for rendition of accounts but for the recovery of a specific amount. Both objections are correct and counsel for the plaintiffs had no answer to them excepting that the plaintiffs have succeeded in a suit for the recovery of money from the managing allottee in a Subordinate Court. This answer is no refutation of the objections. Issue No. 1 is accordingly decided against the plaintiffs.
32. The liability of defendants Nos. 1 and 2 to render account to the plaintiffs from the 1st of February 1958, onwards is however to be decided on different considerations. It is true that there is no proof that these defendants in any manner agreed to pay any share of the income to the plaintiffs and that there is no partnership among them, but the plaintiffs are co -owners to the extent of 1/4th of the buildings, structures, equip ment, goodwill and business of the Palace Cinema and defen dants Nos. 1 and 2 are in possession and control of the whole property, without the consent of the plaintiffs, from the 1st of February 1958. Their possession of the property which they obtained in virtue of the orders made by the Custodian and the Rehabilitation Authorities continues although those Authorities have severed their connection with the property and those orders are no longer operative. As co‑owners defendants Nos. 1 and 2 are liable to render account to plaintiffs from the 1st off February 1958. Issue No. 2 is therefore decided in favour of the plaintiffs.
33. The overall conclusion is that the suit is dismissed with costs against defendant No. 3, and a preliminary decree for rendition of account from the 1st of February 1958, is given to the plaintiffs against defendants Nos. 1 and 2. The Official Assignee is appointed as Commissioner to check the accounts and make the necessary investigations relating thereto and to report within three months. The plaintiffs are directed to deposit Rs. 1,000 tentatively within 10 days towards the fee and charges of the Commissioner. Further, injunction is granted against defendants Nos. '1 and 2 as prayed in paragraph 24 (2) of the plaint. Defendants Nos. 1 and 2 shall pay the costs of the suit to the extent it is against them to the plaintiffs.
A. H.
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