A.S.A. Nur Vs. Registrar of Joint Stock Companies, Dacca, 33 DLR (AD) (1981) 315

Case No: Civil Appeal No. 20 of 1980

Judge: Badrul Haider Chowdhury,

Court: Appellate Division ,,

Advocate: Amirul Islam,,

Citation: 33 DLR (AD) (1981) 315

Case Year: 1981

Appellant: A.S.A. Nur

Respondent: Registrar of Joint Stock Companies, Dacca

Subject: Company Matter, Business and Commercial Law,

Delivery Date: 1980-11-24

Supreme Court of Bangladesh
Appellate Division
(Civil)
 
Present:
Kemaluddin Hossain, CJ.
Fazle Munim, J.
Ruhul Islam, J.
Badrul Haider Chowdhury, .J
Shahabuddin Ahmed, J.
 
A.S.A. Nur
………..Appellant.
Vs.
Registrar of Joint Stock Companies, Dacca
………. Respondents
 
Judgment
November 24, 1980.
 
Companies Act (VII of 1913)
Section 79
A member of a company which has separate legal entity is entitled to apply to the Court under sec 79(3) for calling an appeal general meeting.
 
Lawyers Involved:
Amirul Islam, Advocate, instructed by Md, Aftab Hossain, Advocate-on-Record—For the Appellant.
Ex-parte—For the Respondent.
 
Civil Appeal No. 20 of 1980.
(From the Judgment and Order dated 30.4.79 passed by the High Court Division in Company Matter No. 10 of 1979.)
 
JUDGMENT
Badrul Haider Chowdhury J.
 
1.         Leave was granted to consider whether Jamuna Oil Com­pany Ltd., a private limited company incor­porated under the Companies Act, 1913 is re­quired to hold the Annual General Meeting of the Members, or is a special type of 'one-member Company' established under section 8(2) of the Petroleum Act of 1974 and that Bangladesh Petroleum Corporation virtually being the only member it cannot hold any mee­ting with the appellant who is an employee and a nominee-shareholder of the Bangladesh Petroleum Corporation.
 
2.         The appellant filed an application un­der sections 79(3) and 76 of the Companies Act, 1913 for condonation of delay in holding the Annual General Meeting of Jamuna Oil Company Limited for the years 1976, 1977 and 1978 in the High Court Division and the High Court Division after bearing rejected the application on the finding that the relevant provisions of sections 76 and 79 of the  Com­panies Act are not applicable to such special One Member Company like Jamuna Oil Co. Ltd. and the decision of Bangladesh Petroleum Corporation in any way at the administrative level, shall be the decision of Jamuna Oil Company Limited for the purpose of its man­agement.
 
3.         The relevant facts which led to the for­mation of the Company are as follows:—
 
(a) Pakistan National Oils Limited was a Company registered in Pakistan which, inter alia, carried on business of distribution and marketing of petroleum products in the territories now comprising Bangladesh.
 
(b) After emergence of Bangladesh all business and assets of the said Pakis­tan National Oil Limited vested in the Government of the People's Republic of Bangladesh under the Bangladesh Aban­doned Properties (Control, Management and Disposal) Order, 1972 (P.O. No. 16 of 1972).
 
(c) The Bangladesh Oil and Gas-Corporation also known as "Petro-Bangla" in exercise of the powers vested in it by section 8 2) of Petroleum Act, 1974(Act No. LXIX of 1974) establi­shed a private limited company in the name and style of Jamuna Oil Company Limited under the Companies Act, 1913. The company was incorporated on 12th day of March. 1975 and a Certificate of incorporation No. 181—C4522 of 1974-75 was issued by the Registrar of Joint Stock Companies of Bangladesh.
 
(d) As required by the Companies Act for the formation of a Private Limi­ted Company, there were two subscribers Dr. Habibur Rahman, Chairman, Petro Bangla and Mr. S A. Azim, Director, Petro Bangla to the Memorandum and Articles of Association of the Com­pany.
 
Article 4 of the Articles of Association of the Company states that the Company is to be a private company and the number of mem­bers of the company for the time being would not exceed 50 (fifty).
 
4.         Prior to the transfer and acquisition of the properties, rights, interests and assets of Pakistan National Oil Limited by the said Jamuna Oil Company, an Ordinance, namely, Bangladesh Petroleum Corporation Ordinance 1976 (Ordinance No. LXXXVIII of 1976) was passed by which all the properties, rights, in­terests and assets of Pakistan National Oil Limited were vested in Bangladesh Petroleum Corporation under section 31 (c) of the said Ordinance.
 
5.         With the passing of Bangladesh Petro­leum Corporation's Ordinance, 1976 and the vesting of the properties and business of Pakis­tan National Oil in Bangladesh Petroleum Corporation the Articles of Association of Jamuna Oil Company had to be amended so that the powers and function of Petro-Bangla-viz-a-viz the company would be taken over and exercised by the Bangladesh Petroleum Corporation.
Two shares held by Dr. Habibur Rahman and S.A. Azim were transferred to Bangladesh Petroleum Corporation and the applicant respectively.
 
6.         An agreement was reached between Bangladesh Petroleum Corporation and Jamu­na Oil Company Ltd. whereby the Corpora­tion would transfer all properties and assets of Pakistan National Oils Limited vested in it to the said Company against issue of shares to the Corporation.
 
7.         Due to certain circumstances it was not possible to call the Annual General Meet­ing of the Company within the stipulated time and the appellant as a shareholder filed an application before the High Court Division for condonation of delay in holding the Ann­ual General Meeting. But the application was rejected by the High Court Division on the ground that Jamuna Oil Company Ltd. is a Special One Member Company established under section 8(2) of the Petroleum Act, 1974 and, therefore, the relevant provision of sec­tions 76 and 79 of the Companies Act was not applicable to it.
 
8.         Mr. Aminul Islam, learned Counsel submitted that the High Court Division has erred in arriving at the findings that Jamuna Oil Company is not a private limited compa­ny under the Companies Act but a special type of One Member Company under section 8(2) of the Petroleum Act, 1974, He submitted that Bangladesh Petroleum Corporation and the Company are separate and distinct person in the eye of law and therefore the Jamuna Oil Company are required to hold annual general meeting under the Companies Act, 1913.
 
9.         The contention has substance. Jamuna Oil Company was established by Petro-Bangla (Bangladesh Oil and Gas Corporation) “in exercise of the powers vested in it by section 8(2) of the Petroleum Act" with the main objective of "marketing petroleum products" It was duly incorporated on 12.3.75 as a pri­vate limited company. Article 3B of the Me memorandum  of Association of the Company states the object for which the company was established, namely, to take over all the pro­perties, rights, interests and assets of "Pakistan National Oil Company Ltd." which attained the character of an 'abandoned company'. Under section 31 of Bangladesh Petroleum Corporation Ordinance 1976 certain functions and lights were transferred to the Petroleum Corporation. By virtue of such transfer the share holding interests of Jamuna Oil Com­pany were represented by the Petroleum Cor­poration and its Secretary, Mr, A.S.A Nur, the appellant in this case. Thus there are only 2 shareholders of the Jamuna Oil Company. The High Court Division considered that A. S. A. Nur is a shareholder as he is the Secretary of the Corporation. It, therefore, took the view that Jamuna Oil Company for all practical purposes is 'One Member Company. The error lies here. Mr. Nur is mere ex-officio shareholder and he is a share-holder in the capacity of being the Secretary of the Cor­poration. He will cease to be a share-holder of the company when he ceases to be the Secretary and under the law he is obliged to execute a deed of transfer to the Secretary of the Corporation whoever may be the indi­vidual holding such post: Only because the overwhelming share-holding interest of the company is vested with Petroleum Corpora­tion that would not make the company a One Member Company.
 
10.       Section 8. Bangladesh Petroleum Act, 1974 read originally as follows:—
 
"(1) All rights and powers or the Go­vernment under this Act or the rules made thereunder shall, subject to such condition as may be specified by the Government by order  notified in the Official Gazette, be exercisable also by the Corporation "
(2) For the purpose of exploration, de­velopment, exploitation, production, processing refining or marketing of petroleum or for the effective exercise of any of its rights and powers the Corporation may. With the previous approval of the Government, establish companies, either wholly owned by it or jointly with any other person, incor­porated under the Companies Act, 1913 of 1913."
 
These Provisions were amended by Ordi­nance No. LIV of 1976 on 8.7.76 and anew section was substituted which reads as follows:
 
"The Government may by order in writing delegate to the Bangladesh Oil and Gas Corporation i.e. Petrobangla, or to any other Government Agency subject to ''such conditions" if any, as may be specified therein, such of its rights and powers under this Act or the rules made thereunder as may be speci­fied."
 
11.       The legislative change shows that the Government revised its policy. Originally feasibility of establishing companies either wholly owned by it or generally with any other person was contemplated by the Act. As already noticed that Jamuna Oil Com­pany was incorporated in March 1975 but subsequently the Government policy changed and only Petrobangla or any other Govern­ment Agency was given the right of marke­ting of the petroleum. This change of policy was responsible for the inactivity of the Jamu­na Oil Company and the company did not transact any business throughout this period. However, it seems, the Government has given a second look to the matter in 1976. The petroleum Corporation Ordinance was passed and Bangladesh Petroleum Corporation was established. Formation of Companies "for carrying out the purposes of the Ordinance" has been the policy and the Corporation has been allowed to hold shares in such companies and permit any person whether or not a Bangla­deshi national to hold shares therein. Section 24 provides that notwithstanding the provi­sion of the Companies Act. The Corporation may amend, alter or modify the Memoran­dum and Articles, of Association of any com­pany wholly owned by it whereas section. 18 provided that the corporation' may with the previous approval of the Government sponsor formation of new companies and it can hold shares in such companies and jointly with any person whether or not a Bangladeshi National to hold shares therein. One of the functions of the Corporation is "to supervise, co-ordinate and control the affairs of the enterprises". “Enterprise" as defined in section 2(e) means "any firm or company engaged in any activity related to the proceedings, (sic) refining, binding or marketing of petroleum including its import, export, purchase, storage sale or distribution" The Corporation has been given the function to act as managing agent or to enter into management or any ot­her agreement or contract with any firmer company. Thus the provision shows that the Government decided to allow the private enterprises to operate in the field and Jamu­na Oil Company was established with the main objective of marketing Petroleum Products. The Government allowed the private sector to operate in this limited field and such policy can be adopted when the Government decides to go for mixed economy. That was precisely done in this matter. Jamuna Oil Company is such a com­pany with its limited objectives of marketing petroleum. It is, therefore, erroneous to con­sider such company as a one-man company. This company has a distinct legal entity in the eye of law.
12. In the case Ebbw Vale UDC vs. South Wales Traffic Area Licening Authority (1951) 2 KB 366 the Court of Appeal held that wholly owned subsidiary of the British Trans­port Commission was a separate legal entity. In that case the shares of an omnibus com­pany which provided passenger road services in a district in South Wales were, by virtue of power contained in the Transport Act, 1947 acquired by the British Transport Commission which held all save two shares in it The omnibus company applied to the licensing authority for permission to increase the fares but the Ebbw Vale UDC objected on the ground that as the services provided by the Company were, in fact, provided by the British Transport Commission, the licensing authority had no jurisdiction to hear the application. The Court of Appeal held that the omnibus company had retained its character as a sepa­rate legal entity and did not act as agent of the Commission. Cohen. L.J. observed:
 
"It is quite plain that Parliament when it passed this Act had in mind the gene­ral rule of law which have referred as laid down in Soloman V. Soloman & Co. and many other cases, that a subsidiary company is not the agent of the parent company but is an entirely separate enti­ty Its acts are not the acts of the parent company, and this parent company is not responsible for its acts or defaults, in the absence of special provisions in some contract between the parties.”
 
13.       The learned Company Judge observed that company was for all practical purposes one man company and therefore it would be useless to hold general meeting. This view is also incorrect.
 
14.       In Palmers Company aw the conse­quences of reduction of number of members below legal minimum has been considered. The following passage is illuminating-
 
"Even if the number of members falls below that required by statute, the com­pany continues to have a separate corpo­rate existence. This fact can be a source of considerable embarrassment, particu­larly in a private company, for it may happen that all the directors die and only one shareholder remains, so that it is impossible under the company's article for the company to continue to function, since there are no directors to act on behalf of the company or to convene a general meeting. On occasion a company may even be left with no directors or shareholders alive, but the company does not hereby cease to exist. In this case section 131(2) or 135 (1) may some­times provide procedure to break the deadlock: under the former provision, if at least one member applies, the De­partment of Trade may call or direct the holding of a general meeting, if default is made in holding the annual general meeting, and under the latter provision the court, of its own motion or on the application of any director or member having a vote, may order a general meet­ing to be called. It is impracticable to call a meeting in the manner prescribed by the article or the Act. Further, if there are no directors, even an unautho­rised person may act on behalf of the company and his act may later be ratified by subsequently appointed directors or the general meeting, if the company is in winding up, even the liquidator may ratify; the ratification has retroactive effect."
 
Palmers' Company Law, Vol I, page 152 (22nd Ed).

15. In the Companies Act 1913, the aforesaid contingency is contemplated and section 79(3) reads as under:
 
"If for any reason it is impracticable to call a meeting of a company in any manner in which meetings of that com­pany may be called or to conduct the meetings of the company in manner prescribed by the articles or this Act, the Court may either of its own motion or on the application of any director of the company or any member of the company who would be entitled to vote at the meeting order a meeting of the company to be called, held and conducted in such manner as the court thinks fit, and where any such order is given may give such ancillary or consequential directions as it thinks expedient, and any meeting called, held and conducted in accordance with any such order shall for all purposes be deemed to be a meeting of the com­pany duly called, held and conducted.”
 
16.       To revert to the facts, we find, Mr. Nur, the petitioner is a member of the Com­pany by virtue of his office and   since the company has a separate legal entity, he can apply to the court invoking section 79 (3) for calling such meeting and the-meeting "shall for all purposes be deemed to be a meeting of the Company."
 
17.       The High Court Division observed that sections 76 and 79 are not applicable to such special one member company like Jamuna Oil Co Ltd. and further the decision of Bang­ladesh Petroleum Corporation in any way in the administrative level shall be the decision of Jamuna Oil Co. Ltd. for the purpose of its management. With great respect, there is no legislative support for such conclusion. The law has not exempted the Jamuna Oil Co. Ltd. from the provision of the Companies Act. Had it been the case the legislature would have said so.
 
18.       In this view of the matter, we are of the opinion that Jamuna Oil Co. Ltd. is a private Company having a separate legal entity and therefore it is required by section 76 of the Companies Act to hold its annual general meeting and since it could not do so, the appellant who is a member of the Company has a right to file the application under section 79(3) of the Act.
 
           In the result, therefore, this Appeal is allo­wed. The judgments of the learned Company Judge and the Division Bench are set aside. The case is remitted back to the Company Judge for disposal of the matter in accordance with law.
 
There will be no order as to costs.
 
Ed.