ORDER ALI NAWAZ CHOWHAN, J.-- This order shall dispose of C.O. No. 69/2000, C.O. No. 67/2001 and all concerned matters with these.
2. Ch. Muhammad Hussain, petitioner in C.O. No. 69/2000, is a Director of M/s. Khiali Paper & Board Mills (Pvt.) Ltd., Gujranwala, which is a Private Limited Company and incorporated on 6.3.1991. He is asking for winding up of this Company on grounds to be mentioned later on.
3. Whereas, through C.O. No. 67/2001 Muhammad Rafique petitioner claims himself to be a Director of the Company and has moved this petition under Section 290 of the Companies Ordinance, 1984, against the alleged mismanagement, it was stated that the affairs of the Company were being conducted in a fraudulent and oppressive manner. That the decisions were being taken arbitrarily by Ch. Muhammad Hussain (petitioner in C.O. No. 69/2000) and the other Director Muhammad Hanif. Both of whom were treating the Company as their personal private property and were showing a treatment to the petitioner as if he was a. Stranger, in Ground 'C' it was said that land measuring 15 kanals owned by the Company has been enclosed by Ch. Muhammad Hussain, respondent for his personal use. The three old manufacturing units which were located in 15 kanals of land, were sold as a scrap by him and respondents Nos. 4 and 5 (son and wife of this respondent). That the said land could not have been leased out to anyone without consent of the Board or other Directors and Members. However, this petitioner opposed the winding up of the Company as was prayed by Ch. Muhammad Hussain (petitioner in C.O. No. 69/2000) while stating that it would be destructive and against the interest of the Company and its Share-holders. His main theory was that the control of the Board of Directors may be made more effective through their active participation in the activities of the Company while exercising their democratic and legal rights during Board meetings.
4. Whereas, Ch. Muhammad Hussain came forward with his grounds asking for winding up of the Company. According to him, although the Company was incorporated, it never became functional.
That it was unable to liquidate its liabilities and pay its debts. That it never conducted its business under the Companies Ordinance, 1984, its Article or Memorandum of Association. He alleged that Muhammad Hanif, one of the Directors, was running the concern as a one man show under the nomenclature of "Hanif Rough Board", who was now engaged in the business of exporting manpower abroad while using the name of the Company without seriously attending to manufacturing and production for which the Company was made, it was also said that the Company has failed to discharge its liability under an outstanding decree which is placed at page 208 of the petition.
5. There is opposition with respect to winding up not only coming through the statement in C.O. No. 67/2001 filed by Muhammad Rafique, a Director, but also through the C.M. No. 114-172001 filed by National Bank of Pakistan stating that the petition for winding up has been submitted with mala fide intention to defraud the creditors including the National Bank of Pakistan, who had filed a suit for recovery of a huge sum of money Which has been decreed. Referring to the decree of the Banking Court, it was stated that this decree no longer subsisted. Became the case has been remanded to the Banking Court for hearing the National Bank of Pakistan and some others. While the liabilities of the Directors of this Company to certain extent had been upheld and maintained.
6. In paragraphs Nos. 2 to 5 of its petition, the National Bank of Pakistan went on to state:-- "2. That the petitioner has placed on record only the document relating to some other firm, it is not correct that the respondent No. 1 has not functioned from its incorporation, the Company is working since its inception and has been submitting his Income Tax Returns to the Income Tax Department.
They have, also been paying income tax. Recently the Income Tax Officer has sent a notice dated 25.11.2000 showing a demand of Rs. 10,28,544/- against the respondent (copy attached).
3. That the so-called agreement to sell the land measuring 11 kanals and 5-1/2 marlas dated 24.4.1991 is also inadmissible and is shown as fictitious. On the fact of it, it is a fictitious document and it does not transfer any title. Nevertheless, this document is liable to be impounded under the Stamp Act as it not stamped according to law.
4. That the National Bank of Pakistan will suffer irreparable loss it the winding up of the Company is ordered.
5. That the National Bank of Pakistan reserved the right to submit new additional grounds alongwith document for the dismissal of winding up petition."
7.Commonly this Court was informed that originally these were three private companies owned by three real brothers Muhammad Rafique, Muhammad Hanif and Muhammad Hussain having the following names: (1) Anees Rough Board Industry; (2) Hanif Rough Board Industry; and (3) Hussain Industries. That these were merged together not because of any order of the Company Judge but because of a private arrangement and whereafter the name of Khiali Paper & Board Mills (Pvt.) Ltd.
Was adopted by the merged companies who took over all the assets of three units.
8. This factual position is also stated in paragraph 3 of the petition filed by Ch. Muhammad Hussain.
9. This Court has been further informed that the Company has settled all its outstanding dues with the State Bank of Pakistan under BPD Circular No. 29 of October 15, 2002 and was committing no default on the taxation side for payment of tax.
10. Mr. Tariq Kamal Qazi, Advocate for petitioner Ch. Muhammad Rafique stated that when the National Bank of Pakistan was certifying that the Company was viable, had assets and can, through functioning, discharge its liabilities and was opposing the winding up because, according to the National Bank of Pakistan, the aim at winding up was to defraud the creditors, the petition for winding up be dismissed and the rights of the Directors protected as has been prayed in C.O. No. 67/2001..
11. The order for winding up should not be taken as a readily available relief. The desire being that the industry flourished instead of getting close down creating multiple problems pertaining to income and employment.
12. The National Bank of Pakistan has made a statement through C.M. No. 114/2001 in its capacity as a Creditor while stating that the Company still had credibility and viability and that, therefore,' seeking a relief for winding up of this Company under Section 305 of the Companies Ordinance, 1984 was neither just nor an equitable remedy. As the winding up order would unfairly prejudice the National Bank of Pakistan as a Creditor. The same position is taken by the Directors, who have moved an application under Section 290 of the Companies Ordinance, 1984.
13. For a relief under Section 290 of the Companies Ordinance, 1984, it has to be shown that the conduct of the management lacked in probity, it was prejudicial to the interest of the petitioner in the exercise of the legal and propriety rights as Share-holders which, in fact, is the case of the petitioner Rafique and without any cogent rebuttal. Reference in this connection is also made to the case of Needle Industry (India) Ltd. (AIR 1981 S.C. 1298).
14. This Court also finds that there is a loss of mutual trust inter se the parties and this is causing inharmonious working of the Company and the purpose of the law is to put an end to oppression and mismanagement in the interest of the Share-holders of the Company. Reference in this connection may be made to the following cases:--
(i) Daultat Makanmal Luthria v. Keshav S. Naik, . (1992) 3 Comp LJ 119 (CLB).
(ii) Narain Dast (K.) v. Bristol Grill (P.P.) Ltd., (1997) 90 Com Cases 79 (CLB--N. Delhi)
15. So, this Court is to ensure that the mismanagement, which is being commonly reported, was curbed and the Company functioned democratically, according to norms, its Articles of Association, in oppressively and its interest and property were fully safeguarded.
16. On one hand, this Court wishes the management to flourish and to stand on its feet and resolve its dispute in a corporate style, but on the other hand this Court sees past failures, quarrels and bitterness between the brothers, therefore, it feels that a person be appointed in the shape of a "Ome Bueno" or an "Ombudsman" for this Company to be a check in the way of mismanagement, to be a catalyst for smooth and democratic functioning of the Board of Directors, to act as a buffer inter se the brothers and for safeguarding the interest of the Company vis-a-vis its land and property and for reporting back to this Court any act of tort on the part of the management or Directors.
17. For this purpose, I wish to appoint Syed Aal-e- Ahmad, Advocate, a former Commissioner and retired Member Board of Revenue, to be a Ome Bueno/Ombudsman for this Company for ensuring what has been stated above and having the following authorities:-- That he visited the Company Officer after duly informing the Directors, inspected the record and advised the Directors to proceed in accordance with law. He shall also took account of the assets of the Company and inspect its book and will listen to the complaints of the Directors and try to resolve issues domestically between the Directors. The Ome Bueno shall report and misdeed or abuse of authority or commission of any act of oppression by any one to this Court. -
18. He shall function for a period of six months as from today because of the belief that by then the house shall be put to an order and keeping in view the nature of his work, his sweep and his periodical visits, it is proper that a sum of Rs. 90,000/- be fixed as his fee for this entire period.
However, if he incurs other minor expenses for performance of his duty, the Company shall also pay the same to him. The Company is directed to pay him an amount of Rs. 90,000/- immediately against a receipt. Mr. Aal-e-Ahmad Advocate shall be submitting a monthly report to this Court as well and will send a copy to the Registrar Joint Stock Companies of the same. The Registrar Joint Stock Companies shall render all assistance to him for performance of his function, in case he needed any police help, this too shall be afforded by the authorities.
19. He should now proceed with his task after receiving his fee and carry on the inspection of the record, assets of the Company and start meeting with the management and the Directors. A Abobakar be sent to him immediately by the office so that he becomes functional at once.
20. The matter stands disposed of.