Trellis Housing Finance Limited v. Muhammad Atif Hussain

Background

The respondent filed Civil Suit No. 160 of 2024 against the applicant, a housing finance company, for declaration, damages for breach of contract and permanent injunction. As recorded in the order, he claimed that while employed with the company, under its ESOP policy, an amount was deducted from his salary each month and in exchange he was given equity in the form of common shares, which were to be bought back. After he resigned or was terminated, he sued.

The company applied under Order VII Rule 11 CPC for rejection of the plaint. The trial court dismissed that application on 28.08.2024, and the company filed this civil revision.

The arguments

The company argued that there was no written acknowledgment or promise to buy back the shares, that the claim was barred because it related to conditions under the Companies Act, 2017 (including section 88) and SECP regulations of 2023, and that frivolous litigation should be nipped in the bud. The respondent argued that the dispute raised factual controversies that could only be resolved after evidence was recorded.

The Court's reasoning

Revisional jurisdiction. An order on an Order VII Rule 11 application is a "case decided" open to revision under section 115 CPC. But revision is aimed at jurisdictional errors, not at every error of law or fact; an order is not a nullity merely because it may breach some provision.

Order VII Rule 11. The plaint can be rejected only if, taking its contents as true, it is hit by one of the rule's clauses. Here the employment and the giving of shares were admitted; whether a buy-back obligation existed or was broken, and whether the claim was barred under section 88 of the Companies Act, 2017 or the regulations, were questions requiring evidence. These could be dealt with by framing issues.

The Court relied on the principle that cases should be decided on merits rather than procedural technicalities, quoting S.D.O./A.M., Hasht Nagri Sub-Division, PESCO v. Khawazan Zad (PLD 2023 SC 174), and on PLD 1964 SC 97, 2004 CLC 231, 1995 MLD 985 and 1994 SCMR 818.

Outcome

The revision was dismissed, with the parties left to bear their own costs, and pending applications were dismissed as infructuous. The suit continues before the trial court.

Why it matters

Employee share schemes can lead to disputes when employment ends. This order shows that where the facts about the scheme and any buy-back promise are disputed, a court is unlikely to throw out the employee's suit at the threshold; the questions go to trial.