24-05-2025
- Business
- Business Recorder
Summary procedure: Applying Sec 9 (3) of Companies Ordinance should be fair and just: SC
ISLAMABAD: The Supreme Court ruled that Section 9 (3) of the Companies Ordinance, though allows summary procedure, but it should be fair and just, ensuring equal opportunities for the contesting parties.
A three-judge bench, headed by Chief Justice Yahya Afridi and comprising Justice Amin-ud-Din Khan and Justice Ayesha A Malik delivered the judgment against the decision of Sindh High Court (SHC).
The bench by majority of 2-1 set aside the impugned judgments of the SHC dated 16.09.2019 and the Company Judge dated 05.07.2012. Justice Ayesha disagreed with the majority opinion and wrote separate note.
The basic facts are that a dispute arose between the partners of Ofspace Private Limited – Shah Group (Reza A. Shah and Neelofar Shah) and Khan Group (Alamgir Khan and Sajjida Naeem) over company's shares. Shah Group held 44 per cent shares and the Khan Group 56 per cent shares in the Company.
On 15 January 1999, Alamgir Khan of Khan Group transferred the 30 per cent shares held by him to his brother, Sher Asfandyar Khan.
The Shah Group contends that this transfer was in violation of the two Shareholders' Agreements, which, according to them, governed the shareholding structure and management of the Company.
Shah Group brought the dispute before the Company Judge under Sections 290 and 291 of the Companies Ordinance, 1984, who after examining the matter, ruled in favour of the Shah Group, holding that the transfer of shares was in contravention of the agreed framework. This decision was subsequently upheld by the Division Bench of the Sindh High Court in appeal. The Khan Group challenged these findings before the apex court.
The contention of the Khan Group was that the Shareholders' Agreements were neither independently authenticated nor validly executed and that they contain forged signatures. It was also argued that the Company judge erred in adopting summary procedure under Section 9 of the Companies Ordinance, and that too, despite the existence of complex and disputed factual issues.
It also alleged that the secondary evidence was admitted improperly, without fulfilling the requirements prescribed under Article 76 of the Qanoon-e-Shahadat Order, 1984 for the admissibility of secondary evidence.
The 30-page judgment, authored by CJP Afridi, noted that the reference to 'summary procedure' in Section 9 (3) does not deprive the Company Judge of the authority to receive and assess evidence, where the nature of the dispute so requires. It; however, said that Section 9 of the Companies Ordinance is not to be interpreted in a manner that overrides fundamental principles of fairness, particularly where intricate factual disputes arise.
The Court observed that the present case is not a mere matter of contractual enforcement but one where the very authenticity of the Shareholders' Agreements is in dispute.
The judgment said that such allegations require procedural safeguards, including oral testimony, forensic examination, and cross-examination, none of which were undertaken by the courts leading to the impugned judgment. The omission of these safeguards raises serious concerns regarding fairness and due process, particularly in a case where the validity of the underlying documents is directly contested.
The Court noted that the Company Judge and the Division Bench of the SHC exercised discretion in a manner inconsistent with the well-settled legal principles governing the admissibility of documentary evidence. It said that the courts must exercise strict scrutiny when admitting secondary evidence, particularly where the authenticity of the primary document is in question.
The judgment noted that the Company Judge treated the Shareholders' Agreements as genuine without subjecting them to the level of scrutiny ordinarily required in cases where forgery and fabrication are alleged.
The decision of the Company Judge to accept the Shareholders' Agreements as valid, despite the categorical challenge made thereto by Khan Group to their authenticity, therefore raises the question of whether summary jurisdiction was exercised in a manner that ensured a just and equitable resolution of the dispute.
The discretion of the Company Judge in treating the Shareholders' Agreements as genuine was exercised in disregard of established legal principles, given the absence of a proper evidentiary inquiry. The Division Bench, in upholding this finding, failed to recognise the procedural and substantive irregularities in the adjudication of the case.
Copyright Business Recorder, 2025
