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Justice delayed & wrongdoers’ profitability

A recent five-member judgment of the Supreme Court has settled an important question of Pakistani company law. It has also exposed a deeper weakness in our justice system: even when fraud is ultimately defeated, the victim may receive no meaningful compensation for the years consumed in recovering what was unlawfully taken.

In Abdul Razzaq v Registrar of Companies, Securities and Exchange Commission of Pakistan and others, Civil Appeal No. 125 of 2025, decided on April 22, 2026, the Court held that the passage of time could not protect a fraudulent entry in a company’s register of members.

The ruling affirms Naila Naeem Younus v Indus Services Limited (2022 SCMR 1171), under which a petition for rectification of the register under section 126 of the Companies Act, 2017 is not barred by limitation where shares have been taken through fraud.

The decision is legally compelling. The register of members determines who owns shares, receives dividends, votes at meetings and exercises corporate control. A fraudulent alteration is therefore not a technical defect. It can amount to stealing ownership through manipulation of the company’s official record.

The Court has rightly refused to allow deception to become title merely because it remained concealed for several years. Fraud is usually designed to remain undiscovered. Applying a rigid limitation period in favour of the person concealing it would reward the very conduct that the law is meant to prevent.

The judgment also resolves the uncertainty arising from Bentonite Pakistan Limited v Bankers Equity Limited (2023 SCMR 1353), in which observations had suggested that Article 181 of the Limitation Act could apply to company-law proceedings. The larger bench has clarified that a rectification petition is not an “application” governed by that provision.

This doctrinal clarity is welcome. The harder question is what justice means after the fraud has lasted for years.

A person fraudulently deprived of shares may lose dividends, voting rights, managerial control and participation in rights or bonus issues. The wrongdoer may meanwhile control the company, use its assets and finance the litigation from benefits derived through the disputed shareholding.

After 10 or 20 years, an order restoring the shares may correct the register. It does not necessarily compensate the victim.

This problem extends far beyond company law. In Pakistan, fraudulent possession and prolonged litigation often operate together. Land, inheritance, commercial assets and corporate rights are appropriated through false documents or manipulated records.

Once challenged, the beneficiary denies everything, seeks adjournments, produces further documents and carries the matter through every available forum.

Delay becomes a business strategy. The wrongdoer retains the asset while the victim pays to recover it. Even after losing, the wrongdoer may be required only to return property that never lawfully belonged to him. Nominal costs do little to alter this calculation.

A rational legal system must ensure that fraud and frivolous litigation are economically unattractive. Otherwise, the expected gain from wrongdoing remains greater than its expected cost.

Pakistan needs to move towards a genuine cost-based justice system. This does not mean obstructing access to courts or punishing honest litigants who fail to prove a bona fide claim. It means distinguishing genuine disputes from proceedings maintained through deliberate falsehood, concealment, forged documents or tactical delay.

The Code of Civil Procedure, 1908 provides for costs, and the federal Costs of Litigation Act, 2017 recognises actual, adjournment and special costs in specified circumstances. The larger principle should be applied far more effectively: an innocent litigant should not be forced to finance the other side’s abuse of judicial process. Where fraud is established, courts should ordinarily consider restoration of all benefits obtained from the disputed property, interest for the period of deprivation, realistic legal expenses and enhanced costs where false or vexatious pleas prolonged the case.

In corporate cases, this could include an account of dividends, bonus and rights shares, remuneration obtained through control, and other measurable benefits flowing from the fraudulent entry. Section 126(4) also permits referral of fraudulent conduct for proceedings under section 127. Such referrals should be made where the evidence warrants them.

The constitutional dimension should not be ignored. Article 10A of the Constitution guarantees fair trial and due process, while Articles 23 and 24 protect property. A right restored after decades, without compensation for its prolonged deprivation, is only partially vindicated.

The Supreme Court has correctly ruled that fraud cannot shelter behind the calendar. Our jurisprudence must now adopt the accompanying principle that fraud cannot profit from the judicial calendar either.

Justice must do more than correct an entry after years of litigation. It must remove the financial benefit of wrongdoing, compensate the victim as far as reasonably possible and impose realistic costs on those who misuse courts to preserve the proceeds of fraud. Only then will delayed justice cease to be an investment for the wrongdoer.

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Dr. Ikramul Haq, Advocate Supreme Court, Adjunct Faculty at Lahore University of Management Sciences (LUMS), member Advisory Board and Visiting Senior Fellow of Pakistan Institute of Development Economics (PIDE), holds an LLD in tax laws. He was full-time journalist from 1979 to 1984 with Viewpoint and Dawn. He also served Civil Services of Pakistan from 1984 to 1996.

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