Jurisdiction and Procedure in Corporate Disputes

The Supreme Court of Pakistan's decision in Mian Javed Amir and Others vs. United Foam Industries (Pvt) Ltd. (2016 SCMR 213) addresses significant issues concerning the jurisdiction and procedural powers of Company Courts under the Companies Ordinance, 1984. The case revolves around disputes related to the alleged illegal transfer of shares and the appropriate forum for resolving such conflicts.

Background:

The dispute arose between Mian Javed Amir and others (the appellants) and United Foam Industries (Pvt) Ltd. (the respondents) over the alleged unauthorized transfer of shares. The appellants, who owned 38% of the company’s shares, alleged that the respondents manipulated the records to falsely show that the appellants had transferred their shares.

The appellants sought the winding up of the company and rectification of the shareholder register under Sections 305 and 152 of the Companies Ordinance, 1984. The Company Judge referred the matter to the Securities and Exchange Commission of Pakistan (SECP) for the appointment of an Inspector to investigate the claims. However, the Lahore High Court set aside this order, directing the parties to resolve their disputes in civil courts.

Key Issues:

Jurisdiction of the Company Court vs. Civil Court: The primary issue was whether the Company Court under the Companies Ordinance, 1984, could adjudicate disputes involving serious factual controversies or whether such matters should be resolved by civil courts.

Appointment of an Inspector under Sections 263 and 265: The case questioned the appropriateness of the Company Judge’s order directing the SECP to appoint an Inspector to investigate the allegations of share manipulation and fraud.

Summary Procedure under Section 9(3) of the Companies Ordinance: The interpretation of the "summary procedure" mandated by Section 9(3) of the Ordinance was critical in determining whether the Company Court could record oral and documentary evidence to resolve the dispute.

Case Law and Statutory Interpretation: The appellants argued that the Companies Ordinance provided a special procedure for addressing company-related disputes, which should take precedence over civil litigation. They cited several cases, including Mian Miraj Din vs. Brothers Steel Mills (1996 CLC 516) and Attock Refinery Ltd. vs. SECP (PLD 2010 SC 946), to support their position that the Company Court had the authority to investigate and resolve such disputes. The respondents, however, contended that the disputes involved complex factual issues that required a full trial, which could only be conducted by a civil court.

Court’s Conclusion: The Supreme Court ruled in favor of the appellants, holding that the Company Court had the jurisdiction to resolve the disputes, including the power to record evidence and make determinations on factual controversies. The Court emphasized that Section 9(3) of the Companies Ordinance, which mandates a summary procedure, does not prevent the Company Court from conducting a thorough investigation, including the recording of evidence when necessary.

The Court also clarified that the appointment of an Inspector under Sections 263 and 265 is within the SECP’s purview, but the ultimate responsibility for resolving disputes about share transfers and winding up lies with the Company Judge.

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