Mr. Chow Wen Chang & ors. Vs. SF Winsome Fashion Ltd. & others, 3 LNJ (2014) 9

Case No: Company Matter No. 261 of 2012

Judge: Md. Rezaul Hasan,

Court: High Court Division,,

Advocate: Mr. Shamim Ahmed Mehedi,Ms. Tahniyad Aziz,Mr. Kamal-Ul-Alam,Ms. Shahanaj Akther,Mr. S. M. Atikur Rahaman,,

Citation: 3 LNJ (2014) 9

Case Year: 2014

Appellant: Mr. Chow Wen Chang & others

Respondent: SF Winsome Fashion Ltd. & others

Subject: Company Matter,

Delivery Date: 2013-07-24


HIGH COURT DIVISION
(STATUTORY ORIGINAL JURISDICTION)
 
Md. Rezaul Hasan, J.

Judgment
24th July, 2013
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Mr. Chow Wen Chang and others
... Petitioners
Vs.
SF Winsome Fashion Ltd. and others
.. Respondents.
 

Constitution of Bangladesh
Article 102
Foreign Exchange Regulation Act (VII of 1947)
Sections 21 and 23
The interpretation of section 21 of FERA, 1947, advanced by the learned advocate for the respondents 1, 3 to 5, I find that this is a pre-constitution legislation. There is no guideline in section 23 for exercising discretion in the matter of according or refusing permission, by Bangladesh Bank, to foreign investors. However, forum to examine the legality of such a provision like section 23 of FERA, is Article 102 of the Constitution. In any case, however, section 23 of the FERA, 1947 can not be interpreted in isolation of the Guideline for Foreign Exchange Transactions, Chapter- 9, section 1 and Bangladesh Bank Order, made with reference to Article VIII of the IMF Articles of Agreement dated 24.03.1994. Moreover, the Foreign Private Investment (Promotion and Protection) Act 1980 also provides for protection of foreign investment. So, the narrowest interpretation given by the learned advocate for the respondents 1,3 to 5, as regards section 23 of FERA 1947, is not only contrary to the intent and purport of the Foreign Exchange Transaction, but it is bound to affect the foreign investment in Bangladesh causing series prejudices to the national economy. Besides, Foreign Private Investment (Promotion and Protection) Act 1980, being a special law, his interpretation, tending to nullify the said Act, cannot be accepted. FERA, 1947 must be read with and subject to the Provisions of the said Act, 1980. Besides, admittedly, petitioner No. 2 is a citizen of Bangladesh; petitioner No. 1 is permitted as per aforesaid guideline and Bangladesh Bank Order to invest in Bangladesh in any industrial entity, either in the form of joint venture or as direct investment, provided that the investor itself/himself provides the entire fund so invested. . . .(12)

Companies Act (XVIII of 1994)
Sections 43 and 155
The Article of Association requires presence of two members to form a quorum in order to transact any business in any meeting of the board of directors or in any general meeting. It appears that neither any notice nor any regulation nor decision was taken either to increase the subscribed capital of the company or to transfer the landed properties of the company. Accordingly, the shares has been shown to have allotted in the names of respondents 3, 4 and 5 is   wholly illegal and ultra vires. The provisions of Article 6 and 31 of the Articles of Association is also contrary to the provision of section 155 of the Companies Act and they acquired no title in such shares. Since no meeting of the Board of directors was held to transfer the landed property of the company for which the respondent no 6 has not acquired any title and no title passes to the respondent no. 7 as transferee from respondent no. 6. Exercising the inherent power of this court all resolutions, if any, is ultra vires and the transfer deeds in question are void, illegal and are of no legal effect.

Admittedly, the petitioner Nos. 1 and 2, being two out of these three members of the board of directors, no quorum can be held in the absence of either of them. Having examined the record I find no notice, nor any resolution or decision is found in the materials on record, either to increase the subscribed capital of the company by making further allotment of 9500+500+500 shares or to transfer the above mentioned landed properties of the company (Respondent No. 1) to respondent No. 6. So, as disclosed by the materials on record, I find and hold that 9,500 shares has been shown to have allotted in the name of respondent No. 3 and 500 shares shown to have allotted to the respondent No.4 and another 500 shares shown to have allotted to respondent No. 5 is wholly illegal and ultra vires the provisions of Article 6 and 31 of the Articles of Association as well as contrary to the provisions of section 155 of the companies Act. The respondents No. 3, 4 or 5 have acquired no title in 9500+500+500 shares, shown to have allotted to them respectively. Hence, the Register of Members of the Respondent No.1 company is accordingly liable to be rectified by omitting these 9500, 500 and 500 shares shown to have allotted to and recorded in the name of respondent Nos. 3, 4 and 5 as well as by omitting their name from the Register of Members, so far as the disputed shares are concerned . . .(11)

There is no material on record to show that the company (Respondent No. 1) has ever taken any decision in any meeting to sell the landed property is question to respondent No. 6. So, selling the landed property by the respondent No. 3, which does not belong to him, is unauthorized and is beyond the power conferred under the Articles of Association, vide Article 6 and 31.  Respondent No. 3 cannot transfer the landed property of the company in a manner as if is a proprietorship concern or the property in question is his personal property and he cannot confer any title, in the said land, to respondent No.6 company that formed by him. So, the respondent No.7 cannot acquire any title from respondent No.6 in the landed property in question. Moreover, from the materials on record it is evident that the entire transaction of the landed property was fraudulent and the illegal and was done to secure unlawful gain to petitioner No. 1. Fraud vitiates everything . . .(14)
 
The respondents are directed to rectify the register of members by omitting 9,500 shares shown to have been allotted to respondent No. 3 and to omit the name of the respondent Nos. 4 and 5 alongwith 500 plus 500 shares shown to have allotted to them. I further declare, in exercise of the inherent jurisdiction vested in this court, that all the resolutions, if any, and the transfer of the landed property made by the respondent No. 3 in purported exercise of his power as Managing Director, or otherwise, is ultra vires and the transfer deeds No. 7806 dated 08.05.2011 and No. 11934/11 dated 21.7.2011/24.7.2011 are not binding upon the company. Hence, I do hereby declare the sale deed No. 7806 dated 08.05.2011 of the office of Sub-registrar Mawna and deed No. 11934/11 dated 21.7.2011/24.7.2011 of the office of the said sub-Registrar, Mawna, is void-ab-initio, illegal and are of no legal effect. The concerned office should cancel the aforesaid two deeds and should correct the khatian in the name of respondent No. 1 company and the officers of the concerned AC (land) shall receive LDT from the respondent No. 1 company. . . .(17)

Mr. Shamim Ahmed Mehedi, with
Ms. Tahniyad Aziz, Advocates
. . . For the petitioner

Mr. Kamal-Ul-Alam, with
Ms. Shahanaj Akther, advocates
. . . For the respondent Nos. 1, 3 to 5

Mr. S. M. Atikur Rahaman, Advocate
. . . For the Respondent No. 7

Company Matter No. 261 of 2012
 
JUDGMENT
Mr. Justice Md. Rezaul Hasan:
 
This is an application filed under section 43 of the Companies Act, 1994 (the Act).
 
Let the supplementary affidavit do from part of the substantive application.
 
It has been stated in the application, amongst others that the petitioner No. 1 is a shareholder-Director of the respondent No. 1 company holding 10,000 ordinary shares of Tk. 100 each. The petitioner No. 2 is also a shareholder-Director of the respondent No. 1 company holding 10,000 ordinary shares of Tk. 100 each.  The petitioner No.1 is a sponsor shareholder of the respondent No.1 company; that the respondent No. 1 is a private limited company incorporated under the Companies Act, 1994 (hereinafter referred to as 'the said Act'). The respondent No. 2 is the Registrar of Joint Stock Companies and Firms. The respondent No. 3 is a shareholder-Managing Director of the respondent No. 1 company. The respondent No.3 is also the shareholding-Managing Director of the respondent No.6 company. The respondent No. 4 is wife of the respondent No. 3. The respondent No. 5 is the relative to respondent No.3. The respondent No. 6 is a private limited company represented by its Managing Director M A Sadeq, i.e. the respondent No.3. The respondent No. 7 is an alleged subsequent purchaser of the properties belonging to respondent No. 1 company; that the petitioners filed this application for rectification of shares in the respondent No. 1 company since, firstly the respondent Nos. 3 to 5 purported to have been allocated with the shares of the respondent No.1 company in violation of law and the Articles of Association of the respondent No.1 company and as such the purported allocation of shares is non est and does not have any validity in the eyes of law; secondly the respondent No. 3 to 5 purported to have been allocated with the shares in the respondent No. 1 company without any consideration value and as such the issuance of the shares in their favour is void and also against the laws of the land; and thirdly all acts and/or decisions taken by the illegal shareholders, i.e. the respondent Nos. 3 to 5, holding the purportedly allocated 10500 shares have no binding effect on the respondent No.1 company; that the respondent No. 1 company was incorporated in the year 2009, vide certificate of registration No. C-74550 (2592) /09 with effect from 02.02.2009 under the Companies Act, 1994. As on the date of incorporation the authorized share capital of the respondent No. 1 company was Tk. 2,00,00,000.00 divided into 2,00,000 ordinary shares of Tk. 100.00 each. At the time of incorporation, the paid-up capital of the respondent No. 1 company was Tk. 30,00,000.00 divided into 30,000 shares of Tk. 100.00 each. Amongst others, the petitioner No. 1 and the respondent No. 3 were promoter-shareholders of the respondent No. 1 company. As on the day of incorporation the share structure of the respondent No. 1 company was as follows:
Sl. No. Name of the shareholders Number of shares
1. Mr. Chow Wen Chang 10000
2 Mohammad Abu Shadak 10000
3 Ms. Farah Shafi 10000
  Total 30000
 

that thereafter one of the sponsor shareholders, one Ms. Farah Shafi transferred her entire shares in favour of the petitioner No.2 and the petitioner No.2 was inducted into the company as a new shareholder. As on 22.04.2010, the total number of issued shares of the respondent No.1 company stood at 30,000 and the shareholding structure of the respondent No. 1 company was as follows:
 
Sl. No. Name of the shareholders Number of shares
1. Mr. Chow Wen Chang 10000
2 Mohammad Abu Shadak 10000
3 Mr. Hsu Chin Hua 10000
  Total 30000
 

that the respondent No. 1 company was formed, amongst other objectives, to set up, establish and run a Garment industry for the purpose of producing, manufacturing, preparing, processing of all kinds of garments materials. Subsequently, machineries, land measuring 45 decimal and 57.75 decimal with 20,000 sq.ft. semi-paka and steel shed building were procured locally vide registered Sale Deed no. 7851 dated 17.05.2010 and Sale Deed No. 7852 dated 17.05.2010 respectively; That after the incorporation, the respondent no.1 company was managed by the respondent no.3 as its Managing Director. All documents and register book were in the possession of the respondent no.3. At the end of 2010, when the petitioners enquired regarding the holding of AGM, suddenly the petitioners became aware that the respondent No.3 was selling the scheduled properties of respondent No. 1 company most illegally and in personal capacity without the sanction of the Board. The petitioners, seeking to uncover the illegal sale of the properties of the respondent No.1 company, came to find that the respondent No. 3 sold the properties of the respondent No.1 company to the respondent No. 6 company vide registered Sale Deed No. 7806 dated 08.05.2011. Thereafter, the respondent No. 3 as the Managing Director of the respondent No.6 company, most illegally and without good title, entered into another contract for the sale of properties belonging to the respondent No.1 company to the respondent No. 7 vide registered Sale Deed No. 11934/11 dated 21.07.2011/24.07.2011. In any event, in both cases there was no Board resolution for executing such contract; that to the utter surprise of the petitioners, it was later found that the respondent No.3, on his own initiative, submitted forged documents to the respondent No.2 for increasing paid up share capital and issued 9500 new ordinary shares of Tk. 100 each in his name and 1000 new ordinary shares of Tk. 100 each in the name of the respondent Nos. 4 and 5. Annual Summary of Share Capital for the year 2010 and Particulars of Directors dated 17.04.2011; that it is submitted that the increase of share capital by issuance of shares and allocation of shares to the respondent nos. 3 to 5 as well as appointment of the respondent Nos. 4 and 5 as directors, without issuing any notice, without Board Meeting, without any Extra-ordinary General Meeting (EGM) or consent of the petitioners, is a violation of section 155 of the Companies Act, 1994; that it is further submitted that section 18 of the Companies Act, 1994 provides that Schedule I of the said Act shall be applicable to the companies, provided that there is nothing in contrary in the Articles of Association. As per Regulation 41 of the Schedule I of the said Act, the directors of the respondent No.1 may increase the share capital only with special resolution adopted in general meeting. Therefore, since the petitioners were the only other shareholders prior to 20.05.2010 holding 66.6% of the total shareholding in respondent No.1 company and were never issued with any notice or attended any such general meeting, the issuance of the share capital without any resolution is illegal; that, moreover allocation of the new 10500 shares to the respondent Nos. 3, 4 and 5 without first offering them to the existing shareholders was in violation of section 155 of the said Act and the Regulation 42 of Schedule I of the said Act, where it was mandated that all newly issued shares shall be offered to the existing shareholders. And only if the existing shareholders decline to accept the shares offered, the directors may proceed to dispose of the share in any other manner as prescribed in the Articles of Association of the company; that the petitioner nos. 1 and 2 holding 66.6% of the total shareholding of the respondent No.1 company, there is no way the respondent No.3 alone can decide or authorise issuance of new shares and their allocation. The respondent No.3 cannot even appoint new directors on his own as he did on 20.05.2010 without giving notice to petitioner nos.1 and 2, and to conduct any EGM; that recently the petitioners found that the respondent no.3 caused the respondent No.2 to record the particulars of Directors, Manager and Managing Agents in a wrongful manner on the basis of forged documents. As on 22.04.2010, the total number of shares purportedly stood at 40,500 and allegedly the shareholding structure of the respondent No. 1 company was as follows:
 
Sl. No. Name of the shareholders Number of shares
1. Mr. Chow Wen Chang 10000
2 Mr. Hsu Chin Hua 10000
3 Mohammad Abu Shadak 19500
4 Ms. Luthfur Nahar Shilpe 500
5 Md. Ashikur Rahman Bhuiyan 500
  Total 40500
 

that the issuance of 10,500 shares in favour of the respondent Nos 3-5 were not done in accordance with law and hence the same is illegal. Pursuant to section 155 of the said Act and Article 11 of the Articles of Association of the respondent No.1 company, the increase of share capital by issuing new shares must be done with the sanction of the company in a General meeting. In addition, prior to issuance of the said shares, the existing shareholders should have been offered the newly issues shares in proportion to their respective shareholding. Moreover, Article 16 of the Articles of Association provides that the quorum necessary for holding a General Meeting is 2 (two) members present in person or by proxy. The respondent No.1 had 3 (three) shareholders. Two of them are the petitioners here and neither of them did receive any notice to attend any General Meeting. Hence, no proper General Meeting or Board Meeting could be held without the petitioners. Therefore, any purported General Meeting sanctioning the issuance of new shares are not valid and proper meeting in the eyes of law; that it is further submitted that failure to provide notice of General Meeting to the shareholders invalidates the proceedings of the meeting. Moreover, issuance of new shares to the outsiders without first offering the same to the existing shareholders also invalidates the issuance of shares. Hence, the issuance of new shares to the respondent Nos. 3-5 are illegal and as such, the share register of the respondent No. 1 company to that effect should be rectified; That the respondent No.3, fraudulently and with mala-fide intention, most illegally issued shares in favour of the respondent Nos. 3-5 without the sanction required by the Companies Act, 1994. After instating the names of the respondent Nos. 4-5 in the register of the respondent No. 1 company, the respondent No. 3 purportedly held illegal board meetings and without the proper quorum, took resolution for selling the property of the company to another company without the proper consideration. From the activities of the respondent No.3 it is apparent that  the sole purpose of the respondent No.3 to issue shares in favour of the respondent Nos.3-5, was to dilute the shares of the petitioners and to enable himself to dispose of the property of the respondent No.1 company in contrary to the interest of the respondent No.1 company. That is why the respondent No.3 transferred the property of the respondent No.6 where the respondent No.3 and his relatives has 100% shareholding. Subsequently, the respondent No.3 on behalf of the respondent No.6, transferred the said properties to the respondent No.7.
 
The respondent Nos. 1, 3 to 5 and 7 appeared in this matter and filed an affidavit in opposition denying all material allegations made in the application and further stating that with regard to the statements made in paragraph No. 18 of the petition it is stated that the petitioner No. 2, who is a foreign national, was neither present in Bangladesh on 29.10.2011, nor had he appointed the petitioner No. 1, a foreign national, as his Attorney, by swearing the alleged affidavit of Power of Attorney on 29.10.2011 before the Notary Public, Gazipur and as such it is apparent that the annexed Power of Attorney dated 29.10.2011 (Annexure-E) is a false and fabricated Power of Attorney; that it is stated that with a view to increase the financial strength of the respondent No. 1 company the directors of the respondent No. 1 company decided to increase the subscribed capital of the company by issuing of 10,500 further shares. That as no other shareholders was interested to purchase new shares the said 10,500 new shares were allotted in the name of the respondent No. 3 on 12.4.2010 in compliance with the provisions of Article 4 of the Articles of Association of the company and the relevant provisions of the Companies Act, 1994 and the return of allotment in Form-XV thereof was accordingly filed with the Registrar of Joint Stock Companies on 22.04.2010. That the respondent No. 3 with the approval of the Board of Directors and upon executing instruments of transfer of shares in Form-117, on 20.05.2010, duly transferred 500 shares in favour of his wife respondent No. 4 Ms. Lutfun Nahar Shilpe and 500 shares in favour of respondent No. 5 Ashiquer Rahman Bhuiyan and return in Form-X was accordingly filed with the registrar of Joint Stock Companies.
 
The respondent No. 7 has also appeared in this matter and submitted an affidavit in opposition denying all material allegation and further alleging that the respondent No. 6 company approached the respondent No. 7 and offered to sell land measuring 102.50 decimals situated in Mouza: Mawna, Upazila: Shreepur, District: Gazipur, which was purchased by the respondent No. 6 by a registered deed No. 7806/11 dated 08.05.2011, registered with the Sripur Sub-Registrar Office, Gazipur from the respondent No. 1 and the same being mutated in the name of the respondent No. 6 company, vide mutation case No. 3209/10-11 dated 05.06.2011 and the respondent No. 7 acting as the Managing Director of BDS Alliance Ltd purchased the said land, vide registered sale deed No. 11934/11 dated 24.7.2011 and mutated the same in the name of the company, vide mutation case No. 296/11-12 dated 25.09.2011. The respondent No. 7 purchased the said land as a bonafide purchaser for value and without any notice of any dispute in the internal management of the respondent No. 1 Company, which is the predecessor in title of the respondent No. 6. Moreover, it is submitted that the respondent No. 7 was neither in a position, nor required under law to see any dispute in the internal management of the respondent No. 1 company; that it is submitted that, as required under section 41 of the Transfer of property Act 1882, as a purchaser the respondent No. 7 had taken reasonable care to ascertain the title of the respondent No. 6 company to the scheduled company and had acted in good faith in purchasing the said property. As such the transfer of the property to respondent No. 7 shall not be void on the ground of any allegation of irregularity occurring in the transfer of property from respondent No. 1 company to respondent No. 6 company; that  since respondent No. 6 company was the seller of land to the respondent No. 7 company, who had only made aware itself as to the authorities and limitations of the directors/shareholders of the respondent No. 6 company, which is apparent on the face of its Memorandum of Association and Articles of Association, and being satisfied that there was appropriate authorization the respondent No.7 had entered into the registered sale deed, that the respondent No. 7 had never entered into any dealings and/or any business transactions with the respondent No. 1 company and it was not aware of any dispute in the internal management of the respondent No. 1 company and was a bonafide purchaser of the scheduled land from a different company i.e. respondent No. 6 company.
 
Learned advocate Mr. Shamim Ahmed Mehedi, appearing alongwith Ms. Tahniyad Aziz, appearing for the petitioner and having placed the petition submits that there were three members in the respondent no. 1 company  namely 1) Mr. Chow Wen Chang, 2) Mr. Mohammad Abu Shadak and 3) Ms. Farah Shafi, each holding 10,000 shares. Subsequently petitioner No. 2 purchased 10,000 shares of Ms. Farah Shafi. As such, on 16.11.2009 and at present, petitioner No. 1 and 2 are holding 20,000 shares i.e. 2/3rd shares of the company (respondent No.1) and the respondent No. 3, Managing Director, is holding only 10,000 shares i.e. 1/3rd shares in the company. The shareholding position and the date of transfer of shares to petitioner No. 2 has been duly reflected in Form-XII (particulars of directors) submitted with the Registrar of Joint Stock Companies and Firms (RJSC) on 22.4.2010 (Annexure-B). As such admittedly the petitioner Nos. 1 and 2 are jointly holding 2/3rd shares in the company and both of them are directors alongwith the respondent No. 3 in the said company. Next, referring to Article 6 and Article 31 of the Articles of Association (Annexure-A2) the learned advocate submits that in order to form a quorum for General Meeting, presence of 2(two) members are required as per article 6 and in order to form a quorum for any board meeting presence of 2 (two) directors is required as per Article 31 of the Articles of Association (AOA) of the company. But in the absence of and without holding any board meeting, and without issuing any notice upon the petitioners as required by section 95 of the Act, and in the absence of the quorum as required by Article 31 of the Articles of Association (AOA), taking any decision in the absence of any quorum or valid meetings by the respondent no.3 to increase the subscribed share capital of the company by issuing 9,500 further shares  in his own name and  further issuance of 1000  shares of Tk. 100/- each in the name of respondents Nos. 4 and 5, is most illegal, fraudulent and unauthorized as well as the same were done behind the back of two petitioners. However, he further submits that, the petitioner came to know about this fraudulent increase of subscribed capital by allotment of further  9,500 shares in the name of the respondent No. 3, allotment of  500 (five hundred) shares in the name of respondent No. 4 and further 500 (five hundred) in the name of respondent No. 5 after obtaining a certified copy of schedule-X (particulars of directors and summary of shares capital) and the name of shareholder (Annexure-C) from the office of the Registrar of Joint Stock Companies and have come to learn about this illegal, fraudulent, unauthorized and malafide increase of subscribed capital and allotment of further shares. The learned advocate next submits that the respondent No. 3 taking advantage of the trust reposed in him (as the Managing Director) by the two foreign shareholders, namely petitioner Nos. 1 and 2,  has committed breach of trust, abused  the authority and resorted to fraudulent practice in the manner aforesaid with motive to transfer a landed property admeasuring 102.75 decimals of land, purchased by the company,  vide  deeds No. 7851 dated 17.05.2010 and deed No. 7852 dated 17.05.2010.  The landed property owned by the company, vide two sale deeds No. 7851 dated 17.05.2010 and number 7852 dated 17.05.2010 respectively. But respondent No. 3 sold the said entire property of the company to respondent No. 6 company, vide a registered sale deed no. 7806 dated 8.5.2011, of which the respondent No. 3 himself is the Managing Director. Thereafter the respondent No. 3 using his company i.e. under the corporate veil of his own company (Respondent No. 6) has sold the said 102.75 decimals of land, by another sale deed No. 11934/11 dated 21.7.2011/24.7.2011 to respondent No.7 company, in order to perpetually grab the property of the company (respondent No.1) and to secure unlawful gain to himself. The learned advocate for the petitioner further submits that, since no board decision was ever taken in any board meeting or in any General Meeting and since no  meeting was ever called or held to increase the subscribed capital by allotting 9,500 shares to respondent No. 3 and then by allotting 500 shares to respondent No. 4 and by allotting another 500 shares to respondent No. 5, such purported increase and allotment are totally fraudulent, illegal and ultra vires, being contrary to the provision of section 115(1) of the Act and, as  such,  the increase and allotment of the entire 11,500 further shares in the name of respondent Nos. 3, 4 and 5 and recording their names in the Register of Members of the company in respect of those shares are  liable to be rectified by omitting 11,500 shares shown to have allotted to the respondent Nos. 3, 4 and 5 in the manner and aforesaid. The learned advocate also submits that even the allotment in question is illegal for violating the provisions of section 155(1) of the Act. He next, emphatically submits, that the transfer of property in the name of respondent No.6 company, in the absence of any resolution taken either in any board meeting or in any General Meeting is totally unauthorized,  ultra vires, fraudulent and void ab initio, since the property  belong to the company, so the respondent No. 3, 4 and 5 can not take any decision to transfer the properties of the respondent No.1 company. Accordingly, he has prayed that the resolution, if any, on the basis of which the land belonged to the company and the meetings (if any) held in the absence of the petitioner and without any notice or quorum, for allotment of further shares and to transfer the land of the company (respondent No.) are liable to be declared illegal and void ab initio inasmuch as the presence of respondent Nos. 4 and 5, who does not have any legal title in any shares, would not validate any decisions taken in any meeting to sell the company’s land, held and conducted without their presence of the petitioners. Accordingly, he has prayed for allowing the petition by granting the reliefs prayed for.
 
Learned advocate Mr. Kamal-Ul-Alam, appearing alongwith Ms. Shahanaj Akther, appearing for the respondent Nos. 1 and 3 to 5, on the other hand, mainly submits that the petitioners are Korean citizen, the Memorandum of Association of the company was signed on 18.1.2009, whereas the petitioner No. 2 has purchased the shares in respondent No. 1 company on 16.11.2009. Hence, this petition is not maintainable. He next submits that apparently both the petitioners have acquired the shares in the year 2009, but they do not have approval of Bangladesh Bank as required under section 21(3) of the Foreign Exchange Regulation Act (FERA), 1947. Hence subscription as well as  acquisition of shares by the petitioners, are totally illegal. In support of his contention he has referred to the decision reported in 13 DLR 419. He further submits that the question of transfer of property does not come within the ambit of section 43 for resolution by this court. Accordingly, he conclude that the instant petition is not maintainable in law.
 
Learned advocate Mr. S. M. Atikur Rahaman, appearing for the respondent No. 7, makes submission supporting the contention made in the affidavit in opposition, substance of which has been recorded herein above. His main contention is that the respondent No. 7 company has purchased the land from respondent No. 6 and that the respondent No. 7 is a bonafide purchasers for value. He also adopted the argument of Mr. Kamal ul Alam on the point that the question of transfer of land by the company does not come within the ambit of section 43 of the Act. Accordingly, he has prayed that, so far as prayer No. C of substantive application is concerned, no remedies is available against Respondent No.7.
 
In reply thereto, the learned advocate Mr. Shamim Ahmed submits that the petitioner No. 2 is a Bangladeshi citizen, vide the passport annexed. Next referring to Bangladesh Bank Guidelines for Foreign Exchange Transactions, Volume- 1, chapter 9, section 1, he further submits that foreign investors are free to make investment in Bangladesh in the industrial enterprises excepting a few reserved sectors. An industrial venture may be set up in collaboration with local investors or may even be wholly owned by the foreign investors. No permission of the Bangladesh Bank is required to set up such ventures, if the entrepreneurs use their own funds. He has also referred to a downloaded Bangladesh Bank order, made with reference to Article VIII of the IMF Articles of Agreement dated 24.03.1994, and submits that the foreign investors can set up in collaboration with local investors or may even set up wholly owned enterprise. No permission is needed to set up such enterprises if the entrepreneurs use their own funds.

As such, reading the Bangladesh Bank guideline for Foreign Exchange transaction, quoted above, and the Bangladesh Bank order made with reference to Article VIII of IMF Article of Agreement dated 24.03.1994, it is clear and an admitted position as well that the petitioner Nos. 1 and 2 are investors and they have invested money from their own fund. In such case, section 23 of FERA does not stand as a bar and should not be read leaving aside this relevant guidelines and the order referred to in the course of his submissions.

I have heard the learned advocates, perused the application alongwith the annexures, the affidavit in opposition filed by the respondents and others materials on record.

Having considered the material on record, I find that Article 6 as well as Article 31 of the Articles of Association (AOA) required presence of two members to from a quorum in order to transact any business in any meeting of the board of director or in any General Meeting. Admittedly, the petitioner Nos. 1 and 2, being two out of these three members of the board of directors, no quorum can be held in the absence of either of them. Having examined the record I find no notice, nor any resolution or decision is found in the materials on record, either to increase the subscribed capital of the company by making further allotment of 9500+500+500 shares or to transfer the above mentioned landed properties of the company (Respondent No. 1) to respondent No. 6. So, as disclosed by the materials on record, I find and hold that 9,500 shares has been shown to have allotted in the name of respondent No. 3 and 500 shares shown to have allotted to the respondent No.4 and another 500 shares shown to have allotted to respondent No. 5 is wholly illegal and ultra vires the provisions of Article 6 and 31 of the Articles of Association as well as contrary to the provisions of section 155 of the companies Act. The respondents No. 3, 4 or 5 have acquired no title in 9500+500+500 shares, shown to have allotted to them respectively. Hence, the Register of Members of the Respondent No.1 company is accordingly liable to be rectified by omitting these 9500, 500 and 500 shares shown to have allotted to and recorded in the name of respondent Nos. 3, 4 and 5 as well as by omitting their name from the Register of Members, so far as the disputed shares are concerned.
 
As regards, the interpretation of section 21 of FERA, 1947, advanced by the learned advocate Mr. Kamal ul Alam, I find that this is a pre-constitution legislation. I do not find any guideline in section 23 for exercising discretion in the matter of according or refusing permission, by Bangladesh Bank, to foreign investors. However, forum to examine the legality of such a provision like section 23 of FERA, is Article 102 of the Constitution. In any case, however, section 23 of the FERA, 1947 can not be interpreted in isolation of the Guideline for Foreign Exchange Transactions, Chapter- 9, section 1 and Bangladesh Bank order, made with reference to Article VIII of the IMF Articles of Agreement dated 24.03.1994. Moreover, the Foreign Private Investment (Promotion and Protection) Act 1980 also provides for protection of foreign investment. So, the narrowest  interpretation given by the learned advocate Mr. Kamal-ul-Alam, as regards section 23 of FERA 1947, is not only contrary to the intent and purport of the Foreign Exchange Transaction, but it is bound to affect the foreign investment in Bangladesh causing series prejudices to the national economy. Besides, Foreign Private Investment (Promotion and Protection) Act 1980, being  a special law, his interpretation, tending to nullify the said Act, cannot be accepted. FERA, 1947 must be read with and subject to the Provisions of the said Act, 1980. Besides, admittedly, petitioner No. 2 is a citizen of Bangladesh; petitioner No. 1 is permitted as per aforesaid guideline and Bangladesh Bank order to invest in Bangladesh in any industrial entity, either in the form of joint venture or as direct investment, provided that the investor itself/himself provides the entire fund so invested. The argument advance by the learned advocate Mr. Kamal-ul-Alam would have substance if the investment were made for any illegal purposes, for instances to finance  drug  trafficking, human trafficking, arms dealing etc, which is prohibited by law. Besides, his argument is contradictory and self-defeating, in the sense that there can not exist or be registered a one man company with respondent No. 3 alone. Hence, I consider the submission of the learned advocate Mr. Kamal-ul-Alam is not proper and is contrary to the intent and purport of the law governing foreign investment in this country.
 
I should also record that the affidavit in opposition, filed on behalf of the respondent No. 1 alongwith the respondent Nos. 3 to 5, is also not proper, because there is no board resolution in which either of the petitioners were present to form a quorum and to authorize filing affidavit in opposition, by authorizing respondent No. 3, to represent the respondent No. 1 company. So, the affidavit in opposition, so far as it relate to respondent No. 1, is totally unauthorized and is not to be considered as that of respondent No. 1.
 
Next, considering to the submission of respondent No. 7 as to whether the dispute regarding transfer of landed property comes within the ambit section 43 of the Companies Act. Short answer to this question is that, transfer of landed property does not come within the ambit of section 43 of the Act. Nor has the petitioner asked for any relief to declare the disputed sale as illegal. They have prayed for setting aside the resolution, adopted in any board meeting or in any general meeting, by respondent No. 1, in the absence of the petitioners or in the presence of the respondent Nos. 4 and 5 who are not members of the company and not qualified to be the members of the Board of Director. The land in question does not belong to respondent No. 3. Admittedly it belongs to the company (respondent No.1). There is no material on record to show that the company (Respondent No. 1) has ever taken any decision in any meeting to sell the landed property in question to respondent No. 6. So, selling the landed property by the respondent No. 3, which does not belong to him, is unauthorized and is beyond the power conferred under the Articles of Association, vide Article 6 and 31.  Respondent No. 3 cannot transfer the landed property of the company in a manner as if is a proprietorship concern or the property in question is his personal property and he cannot confer any title, in the said land, to respondent No.6 company that formed by him. So, the respondent No.7 cannot acquire any title from respondent No.6 in the landed property in question. Moreover, from the materials on record it is evident that the entire transaction of the landed property was fraudulent and the illegal and was done to secure unlawful gain to petitioner No. 1. Fraud vitiates everything. Besides, in such a case, the corporate veil is to be lifted to find out the real culprits and to undo the misdeed for ends of justice, in order to obviate harassment by dragging the company to multiplicity of proceedings, particularly when the cause of actions are inseperable and the cancellation of the fraudulent acts and deeds are inescable consequence of the court’s order setting aside the illegal allotment of shares. The principle exdebito justitiae is applicable in this case and the ends of justice require doing justice in its true sense. Hence, I find substance if submission in the learned advocate to pass an order in terms the prayers.
 
In view of the deliberation recorded above, I find merit in this application.
 
In the result the application is allowed.
 
The respondents are directed to rectify the register of members by omitting 9,500 shares shown to have been allotted to respondent No. 3 and to omit the name of the respondent Nos. 4 and 5 alongwith 500 plus 500 shares shown to have allotted to them. I further declare, in exercise of the inherent jurisdiction vested in this court, that all the resolutions, if any, and the transfer of the landed property made by the respondent No. 3 in purported exercise of his power as Managing Director, or otherwise, is ultra vires and the transfer deeds No. 7806 dated 08.05.2011 and No. 11934/11 dated 21.7.2011/24.7.2011 are not binding upon the company. Hence, I do hereby declare the sale deed No. 7806 dated 08.05.2011 of the office of Sub-registrar Mawna and deed No. 11934/11 dated 21.7.2011/24.7.2011 of the office of the said sub-Registrar, Mawna, is void-ab-initio, illegal and are of no legal effect. The concerned office should cancel the aforesaid two deeds and should correct the khatian in the name of respondent No. 1 company and the officers of the concerned AC (land) shall receive LDT from the respondent No. 1 company.
 
Let a copy of the judgment be sent to the Registrar of Joint Stock Companies and Firms and another copy of the judgment be sent to the Sub-Registrar, Mawna, Gazipur, for cancell-ation of sale deeds No. 7806 Dated 08.05.2011 and sale deed No. 11934/11 dated 21.7.2011 /24.7.2011 for ends of justice and in order to ensure that fraudulent transaction should not be allowed to be perpetuated by the court. Another copy be sent to the office of the concerned Assistant Commissioner (land) Mawna, Gazipur, for taking appropriate steps in accordance with this judgment.
 
The respondent No. 3 is directed to pay cost of taka 50,000/- to petition No. 1 and Tk. 50,000/- to petitioner No. 2 within 30 days.
 
Ed.