Grant Thornton Anjum Rahman through Imran Afzal Vs Registrar of Firms etc.

Stereo. H C J D A 38 Judgment Sheet

IN THE LAHORE HIGH COURT, LAHORE

JUDICIAL DEPARTMENT

W.P. No.59103 of 2024

Grant Thornton Anjum Rahman through its Partner Mr. Imran Afzal.

Vs.

Registrar of Firms and another.

JUDGMENT

Date of Hearing 31.3.2026 Petitioner by M/s Shahab Bakht Pirzada, Ahmad Nisar Khan, Saffi ul Hassan and Syed Hassan Dawood, Advocates.

Respondent No.1 Rana Arfan Ali, Assistant Attorney by General, Muhammad Azam Chughtai, Assistant Advocate General, Mr.

Anwaar Hussain, Assistant Advocate General.

Respondent No.2 M/s Asghar Leghari, Syed Asad by Hussain Rizvi and Ahmar Waseem Malik, Advocates.

MALIK MUHAMMAD AWAIS KHALID, J., The petitioner has filed instant constitutional petition with the following prayer:-

1.Declare that the Impugned Order is illegal and liable to be set aside: and

2.Direct respondent No.1 to record the changes in the composition of the Petitioner and amendment in the Partnership Deed in accordance with the notices, dated 19.01.2022 and 02.03.2023, remove the names of respondent No.2, Mr. Asad Feroze, and Mr. Sohaib Waseem from the record of the Petitioner with Respondent No.1.

2.Brief facts of the case are that petitioner is a chartered accountancy partnership firm, registered under the Partnership Act, 1932 (the Act) and is also registered with the Institute of Chartered Accountants of Pakistan (ICAP). Respondent No. 2 being signatory to the Partnership Deed was expelled from the firm by the Executive Committee, exercising its power under

Clause 15 of the Partnership Deed. On 01.03.2023 termination/expulsion letter was issued to him. Thereafter, as per Section 63(1) of the Act read with Rule 4 of the Punjab Partnership (Registration of Firm) Rule 1932 (the Rules), later another notice dated 02.03.2023 was issued to respondent No.1 accompanied by copies of expulsion letter along with amendment deed dated 02.03.2023 informing with regard to the resolution of the remaining partners of the petitioner to expel respondent No.2 from the firm. Respondent No.1 responded stating that since respondent No. 2 has informed him regarding an ongoing dispute between the partners and an ongoing suit (i.e.

Suit No. 290/2020 before the Sindh High Court), therefore, the petitioner should approach the Respondent No.1 after the "matter is resolved by the partners through their will or court of competent jurisdiction". In response, petitioner through its letter, dated 27.09.2023, protested the refusal of respondent No. 1 to record the change in the constitution of the firm citing Section 63(1) of the Act and Rule 4 of the Rules explained that any protest by a partner was to be recorded in red ink pursuant to Rule 7 of the Rules. In reply, respondent No.1 through its letter, dated 11.10.2023 again refused to record the changes. Upon which petitioner through its legal counsel, replied to the letter dated 11.10.2023 issued by respondent No. 1, through the letter, dated 07.11.2023 again explained the clear language of Section 63(1) of the Act and Rules 4 and 7 of the Rules, which placed a legal obligation on Respondent No. 1 to record the changes in the petitioner as intimated with the contention that no injunctive

order was in field at the time of the notice, dated 02.03.2023.

Respondent No. 1 issued a notice, dated 30.11.2023, to respondent No. 2. Feeling aggrieved petitioner filed writ petition before this Court whereby vide order dated 13.3.2024 direction was issued to respondent No.1 to redress grievance of the petitioner. In compliance of said order, respondent No.1 passed impugned order dated 21.5.2024. Hence, this writ petition.

3.Learned counsel for the petitioner submits that the expulsion letter at first was suspended by the Single Judge of Sindh High Court and ex-parte order has been set aside through reported judgment in case of Khaliq ur Rehman Vs. Ahsan Usman Laliwala (2024 SLJ 468); relies on the judgment of Bombay High Court where there were 13 partners out of which 08 who expelled one of the Member after issuing notice to him but the court held that the said notice must be recorded in the concerned register by the Registrar and relies on the judgment of High Court of Kerala titled K.M. Ahammed Nizar Flat No.504 Vs. The Registrar of Partnership, K.M. Muhammad Sherieff, K.M. Thahira, K.M. Moideen Kunhi, Mrs. S.L.P. Kunhibi, K.M.

Arifa (Lnind 2014 KER 9406) where it was held that the Registrar cannot investigate the expulsion notice but he is only authorized to record it in the register; relies on the judgment of Madras High Court titled Jeevandas Laljee & Son Vs. State of Tamil Nadu Rep by the Secretary to Government & another (Lnind 2008 MAD 68) where it was held that with respect to partner having been expelled, there was no need to obtain his signature and further relies on Clause of the Partnership Deed.

4.Learned counsel for the respondent No.2 submits that Clause 14-D is only a substantive policy which does not confer powers for expulsion; the form does not disclose the date of Retiring Member of the Executive Committee; that variation does not fall under Section 63 of the Act; this writ petition being mandamus in nature is not maintainable as there is no law to which the Registrar has to follow.

5.Learned Law Officer submits that the said policy for termination and expulsion dated 26th November, 2019 has been challenged in Sindh High Court in the Suit No.290 of 2020;

further submits that the respondents were expelled on 1st March,

6.In rebuttal, learned counsel for the petitioner submits that the executive committee is fully competent under the deed to expel any of the retired person; further relies on the memo of understanding and submits that said expulsion letter is signed by the remaining members of the executive committee; expulsion letter is in the field by virtue of the order of Sindh High Court in reported Judgment of Khaliq ur Rehman supra; Relies on the rules 4 & 7 of the Partnership deed showing that variation can be made under the law according to needs; further submits that under rule 7, Registrar is only authorized to record protest and not to withhold the said incorporation.

7.Arguments heard. Record perused.

8.The petitioner initially worked under the name and style of M/s. Anjum Asim & company was registered under the provisions of the Partnership Act, 1932 vide form-C No.1333 of

the year 1983-1984 dated 25.3.1984 between two partners.

Afterwards multiple changes were applied by the partners accordingly certificates were issued. Name of the firm was changed to M/s. Grant Thornton Anjum Rehman on 10.3.2015.

Section 33 of the Act is relevant with regard to Exclusion of a Partner which is reproduced as under:-

“33. Exclusion of a partner.– (1) A partner may not be expelled from a firm by any majority of the partners, saves in the exercise in good faith of powers conferred by contract between the partners.”

One partner i.e. respondent No.2 refused to cooperate and signing requirements effecting operations of the petitioner, after show cause notice he was expelled/ terminated in strict compliance of law and further applied for changes on prescribed Form-V. In this regard clauses 7, 8 & 15 of the Partnership deed dated 13.9.2002 are relevant and reproduced as under:-

7.The decision of the Firm, regarding all important matters pertaining to the constitution, working and management of the Firm, shall be taken with unanimous consent of the EXCO. In case of any dissention, it will be resolved with the majority view of the EXCO. All such decision shall be expressed in the form of a resolutions, signed by the aforesaid. The decision of EXCO shall be taken by majority votes, with each member of the EXCO having one vote and the National Managing Partner having a casting vote in case of a tie.

8.The EXCO may decide to take new partners or establish business relationship with other individuals and concerns as would be in the larger interest of the Firm keeping in view the regulations of Institute of Chartered Accountants of Pakistan.

15.The EXCO shall determine the retirement, incapacity, expulsion and pension policy and procedure of the Firm from time to time.

As per Expulsion Policy of the petitioner, a partner may be terminated or expelled by the Executive Committee. Relevant

portion of 1.1(g)(h) of the same are reproduced for ready reference:

g) is found to have committed an act detrimental to the Partner or Partners or the Firm or the Business of the firm or in any way is against or violates any provision of the Partnership Act 1932 (the "Act") or the Partnership Deeds or the Memorandum of Understanding dated 22 August 2002 (the "MOU") the Chartered Accountants Ordinance, 1961 including all directives of the Council, Firms policies or procedures or Grant Thornton International Policies, alerts and pronouncements.

(h)Any partner that engages in any other professional business, practice or activity outside the Firm's business, practice or activity will be deemed to be guilty of misconduct. For the purposes of this clause, 'professional business, practice or activity' includes, but is not in any way limited to, any business, practice or activity, whether or not for monetary or individual benefit, which may deprive the firm, and/or its partners, of revenue

Notice for expulsion/termination of respondent No.2 was issued to him and notices alongwith expulsion/termination letter was issued/ submitted to respondent No.1/ Registrar to incorporate changes in the record of petitioner firm but the same was not included by passing the impugned order.

Section 63 of the Act deals with powers of the Registrar in case of recording changes in firm or dissolution thereof which is reproduced for ready reference:-

63.Recording of changes in and dissolution of a firm.– (1) When a change occurs in the constitution of a registered firm any incoming, continuing or outgoing partner, and when a registered firm is dissolved any person who was a partner immediately before the dissolution, or the agent of any such partner or person specially authorized in this behalf, may give notice to the Registrar of such change or dissolution, specifying the date thereof; and the Registrar shall, make a record of the notice in the entry relating to the firm in the Register of Firms, and shall file the notice along with the statement relating to the firm filed under section 59.

Perusal of partnership deed of the petitioner and section 63 of the Act in juxta position, it transpires when a change occurs in the record of registered firm regarding any incoming, continuing or outgoing partner, it may give notice to the Registrar of such change specifying the date thereof, the Registrar shall make a record of the notice in the entry relating to that firm in the Register of Firms and shall file the notice along with the statement relating to the firm filed under section 59. The word ‘shall’ has been mentioned therefore mandatory and not discretionary, subject to law.

9.Under the scheme of the Act particularly Sections 62 and 63, read with Rule 4 of the Rules, any alteration in the constitution of a firm, including the retirement or expulsion of a partner, is required to be notified to the Registrar in the prescribed form within the stipulated period. Upon such notice, the duty of the respondent No.1/ Registrar is further governed by Rule 6, which mandates amendment of entries in the Register of Firms, and Rule 7, which specifically provides where any person disputes an entry, the Registrar shall merely record such protest without adjudicating upon it. This statutory framework clearly demonstrates that the Registrar performs a ministerial function of recording changes. The judicial position is consistent with this scheme. In the case of Messrs United Cotton Factory Hyderabad Vs. Ahmad Khan [PLD 1960 Karachi (W.P.) 774], it was held that upon receipt of notice of change, the Registrar is required to make a record thereof in the Register, reflecting the administrative nature of his duty. Likewise, in Haji Sardar Khan

Vs. Registrar of Firm (Societies) and others (PLD 1998 Peshawar 40), it was observed that the Registrar is not concerned with disputes regarding rights of partners and may only examine the genuineness of documents placed before him, without entering into substantive questions of validity. Further, in the case of Muhammad Younus and others Vs. Venue Gurdas Advani and others (2015 CLD 390), entries in the Register of Firms and certificates issued by the Registrar were held to carry a presumption of correctness and constitute conclusive evidence unless set aside by a competent Court. Although the Registrar may endorse the line ‘subject to the pending litigation’. The statutory importance of recording changes in the constitution of a firm has also been recognized in case of The Commissioner of Income-Tax Rawalpindi Zone Rawalpindi Vs. Messrs Ahmad Shafi & Bros. (1980 PTD 331), wherein it was reiterated that upon notice of change, the Registrar is to record the same in the register, reinforcing the mandatory and procedural character of such entry. In the case of Ali Muhammad Vs. Mirza Muhammad Hussain Beg (PLD 1968 Lahore 712), while dealing with the scheme of Section 69, underscores the legal significance of entries in the Register of Firms and the requirement that rights under partnership must align with such recorded status. As the matter in hand is that respondent No.2 has filed suit before Sindh High Court against the said expulsion/ termination. Initially learned Single Bench of the High Court of Sindh suspended the operation of Expulsion/Termination Letter dated 1.3.2023. The said order

was assailed by filing an appeal No.248 of 2023 before learned Division Bench and the injunctive order passed by learned Single Bench was set aside vide reported judgment Khaliq ur Rehman Vs. Ahsan Usman Laliwala (2024 SLJ 468) meaning thereby no restraining order is in the field but respondent No.1 has refused to incorporate expulsion notice through impugned order. Hence, the notice to record changes be considered in the light of detailed discussion supra under Articles 4, 9, 10A & 18 of the Constitution of the Islamic Republic of Pakistan 1973.

Consequently, the impugned order is set aside and respondent No.1 is directed to incorporate the expulsion letter in the record of the petitioner-firm according to the scheme of law highlighted ibid while adhering to the Khaliq ur Rehman case supra to sustain the corporate structure.

10.Instant writ petition stands allowed in above terms.

(Malik Muhammad Awais Khalid)

JUDGE

Approved for reporting.

Judge.

Naeem*