High Court To Conduct Trials In Company Matters
The most beautiful aspect of law is that it keeps on evolving with time. A practice which may be a law at one time may be set aside and may have no legal implications at another time. Many of the well settled principles of law have been turned over by this evolutionary and adaptive nature of law.
One of these well settled principles is that the superior judiciary namely High Courts and the Supreme Court do not conduct trial proceedings. Trial which includes framing of issues, recording of evidence etc. falls within the exclusive jurisdiction of the trial courts. Also, it is commonly believed that superior courts do not ponder over factual controversies. But a recent judgment titled Javed Amir vs. United Foam Industries (Pvt.) Ltd. cited as 2016 SCMR 213 has modified this principle of law and now the High Court, while exercising company jurisdiction, can record evidence and decide factual controversies as well.
In this particular case, the learned Company Judge while attending proceedings under Section 152 of the Companies Ordinance, referred the matter to the Security and Exchange Commission of Pakistan to appoint an inspector for investigation into the affairs of the company. The matter was raised in intra-court appeal and the division bench set aside the judgment of the Company Judge directing the parties to approach the civil court to resolve their dispute as the dispute was pertaining to factual questions which fell beyond the jurisdiction of the Company Judge.
The matter then went up to the honourable Supreme Court. The question before the Supreme Court was whether a court having jurisdiction under the Companies Ordinance can undertake the exercise of recording oral/documentary evidence and decide disputed questions of fact in an application under section 152 (rectification of the register) of the Ordinance in view of restriction contained under section 9(3) (the restriction of summary procedure) of the Ordinance.
The honorable Supreme Court held that Section 9(3) does not in any way curtail the power of the court to record oral evidence or receive documentary evidence. The court went on to say that all the matters pertaining to companies, irrespective of factual controversy being involved, are to be tried by a court having jurisdiction under the Companies Ordinance 1984.
It has been stated by the court in clear words that the “mere insertion of the term summary procedure does not debar a Company Judge from receiving evidence in cases where factual controversy is involved”.
Additionally, the court clarified that the Company Judge had erred in referring the matter of investigation to the inspector since it was already within the jurisdiction of the Company Judge. Since the objects of Section 152 of the Companies Ordinance cannot be fully achieved without entering into the questions of facts, the court held that “there is no legal bar for a Company Court to enter into factual inquiry, framing of issues for determination and recording of oral as well as documentary evidence in coming to the just conclusion of the case”.
Before this judgment the matters involving factual controversies were either referred to the inspector appointed by SECP or to the civil courts for trial and the recording of evidence. Amongst the many case laws on this point is 2015 CLD 569 [First IBL Modaraba vs. Mrs. Rana Azhar Sayed] in which the High Court held that this court’s jurisdiction was liable to be exercised where the legal title of applicant was clear and there was no disputed question as to the facts requiring recording of evidence.
This latest judgment, 2016 SCMR 213 which is also reported as 2016 CLD 393 Supreme Court, has not only established the jurisdiction of the Company Judge but has also changed the very notion of summary procedure. Generally it was presumed that the framing of issues, recording of evidence, etc. are not a part of the summary procedure but in this judgment, the court has clearly stated that summary procedure is no bar to the recording of oral/documentary evidence and the court should adopt the methodology which it deems fit to reach to a fair and just conclusion.
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Note: Where it is mentioned that the judgment in Javed Amir’s case changed the well-settled principle of law that superior judiciary do not ponder over factual controversies, please note that the High Court of Sindh has original civil jurisdiction in all cases where the amount of relief/damages exceeds 1.5 crores. This civil jurisdiction also covers those cases that fall under the ambit of banking. That may not have been the well-settled principle of law as every HC has its rules and it can set the pecuniary jurisdiction itself. One may refer to http://www.sindhhighcourt.gov.pk/jurisdiction.php