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Ms. Agha appealed in the high court. The division bench of the Sindh High Court reversed the decision. United Liners and 4 others appealed in the Supreme Court of Pakistan against the decision of the High Court
Petitioners Case
Article 40 : No share shall be transferred to a person who is not a member so long as any member is willing to purchase the same OR any person selected by the Board of Directors as one whom it is desirable in the interests of the Company to admit to membership is likewise so willing. State Bank of Pakistan approved the transaction of transfer of shares cementing the validity of the transaction.
Petitioners Case
The High court has erred In its decision Reliance on Lal Khan v. Ghulam Muhammad (1973 SCMR 252) Halsburys Laws of England Vol.6
Respondents Case
Mr. Astbury J. in Hickman v. Kent & Romney Marsh Sheepbreeders Association (1915) observed: The Articles of Association are simply a contract as between the shareholders inter se in respect of their rights as shareholders. They are the deed of partnership by which the shareholders agree inter se. Article 40 cannot be read in isolation
Respondents Case
Article 41: The proposing transferor shall give notice in writing to the Company of his willingness to sell shares Article 42: The Company shall within 2 calendar months find a member or person willing to purchase the shares
Article 45: If the Company is unable to do so within the time prescribed, the proposing transferor shall be at libery to sell the shares
Respondents Case
Article 46: Shares specified in any notice in pursuant to Clause 41 shall be offered to members. Pre-Emptive Rights : Introduction to Law by L.H. Leigh, V.H. Joffe and D.Goldber An example of the type, a relatively common restriction on transfers, is a clause in the articles giving pre-emptive rights to other members to acquire shares of a member who desires to sell all or part of his holdings. Such restrictions are perfectly lawful
JUDGMENT
Questions