' This is an application asking for winding up of the Company under reference made under the provisions of section 305 read with sections 306/309 and section 325 of the Companies Ordinance, 1984. The precise ground taken is the inability of the Company to discharge his liabilities in fulfilment of a contract (and its addendum) inter se the parties. It is further stated that according to the balance sheet of the Company, it is not operateable. In paragraph 30 of the petition, it is said that the respondent-Company is commercially insolvent and, therefore, a Liquidator is to be appointed for taking over the assets of the Company and for selling the same so that the liabilities of the Company could be met from the income so derived out of the sale proceeds of the company.
2. From the respondent side, written statement has been filed and the main allegation being that the petition has been moved because of mala fides. Reference was also made to a civil suit said to be pending at Karachi filed by the respondent side for Specific Performance of a Contract against the petitioners and for recovery of damages. It was, therefore, said that until the suit at Karachi was adjudicated, this matter be kept pending.
3. In paragraph 10 of the written statement, it was said:-- "That the contents of para.10 are denied being false and misleading. The petitioners had claimed having completed 60% of the erection works. The respondent had accepted this claim in good faith. However, subsequent developments revealed that this claim of the petitioners, like all earlier claims, was false, misleading and bogus. The most important provision of the addendum to agreement dated 9th April, 2000 was the petitioner's commitment to complete the remaining erection/ commissioning work in all respects by 31st August, 2000 which the petitioners have omitted to state in a mala fide manner. It is pointed out that the petitioners failed to complete the works by 31st August, 2000. In fact, by the said date, the petitioners had completed only a very small portion of the work and that too, in 'a very substandard and unsatisfactory manner."
4. In paragraph 12 of the written statement, the case of the respondent side was that the petitioners had violated the terms and condition of the agreement. Whereas, in paragraph 16 of the written statement, the position with respect to the bounced cheques issued to the petitioners was taken as follows:-- "That the contents of para.16 are admitted to the extent of issue of the said post-dated cheques.
However, these cheques were issued upon the petitioners promise to deliver the ordered items before the dates of the said cheques. These cheques were issued on the assurance of the petitioners that the ordered fans were ready for delivery. However, upon the inspection, the respondent discovered that the fans said to be ready were only the casings of the fans. As the petitioners failed to abide by their commitment, the respondent had no option but to stop the payment of the said cheques. The petitioners act of presenting the cheques for payment without 'making the supplies as committed by them reflect the fraudulent conduct and mala fides of the petitioners. It may be further pointed out that the contracted item for which the said cheques had been issued has admittedly not being supplied by the petitioners till to date."
5. In paragraph 34 of the written statement, it was said that the respondent-Company was solvent and was able to pay its debts and there was no justification for winding up of the company.
6. Learned counsel for the petitioners side stated that for 11 years the respondent-Company remained nonfunctional and it was during the last year that it had started operating empirically and the balance-sheet reflected that there was a loss of over 4 crore. This balance-sheet is placed at page 137. It was an annexure appended with the written statement. The excerpt from the same is re-produced below:-- Note 2003 (Rupees) 2002 (Rupees)
Trial production sales Sugar 38,974,505 Molasses 6,890,460 45,864,965 Less: Trial production direct expenses 56,724,253 Sugarcane consumed 967,321 Expenses on procurement of raw material Transportation charges 2,433,132 Stores and spares consumed 24,255,813 Sales Tax 6,711,674 Loading and unloading charges 144,586 Stocking and restocking 258,000 expenses Removal expenses 927,246 Cess and surcharge 423,749 Fuel and power 24,099 92 869 867 Less WIP Closing stock (sugur and Molasses) 428,020 98,441,847 Trial run [profit/(loss) (45,576,882)
7. Reference is also made to paragraph 4 of the balance-sheet placed at page 129 with the written statement and an excerpt from it pertaining to long term loan is reflected below:-- "Long Term Loans From Banking Companies (Secured)
Banker (TFC) Equity Limited 4.1 65,057,000 65,057,000 Banker (LMM) Equity Limited 4.2 219,943,000 219,943,000 Habib Bank Limited (DF) 4.3 71,590,000 71,590,000 Islamic Investment Bank Limited. 4.4 30,000,000 30,000,000 National Bank of Pakistan 4.5 11,070,000 398,260,000 386,590,000 Director's Loan (Unsecured) 4.6 54,000,000 Mr. Shahid Iqbal 452,260,000 386,590,000"
8. According to the learned counsel, in the years 2002 and 2003 the Company has been securing bridge finance loans from Allied Bank Ltd. And a comparison shows that the loan has been increased in th'e year 2003. An excerpt from paragraph 5 of the balance-sheet is given below:-- "Bridge Finance Secured Allied Bank Limited (ABL)5.1 15,000,000 15,000,000 Long Term Venture Capital Musharika5.2 29,284,840 29,284,840 Less Current portion shown under current liabilities 44,284,840 44,284,840 44,284,840 (8,525,381) 35,759,459"
9. Further reference is also made to paragraph 6 of the statement in the balance-sheet to show that further loans were obtained both in the years 2002 and 2003 reflecting the following position which is an excerpt from these:- "Liability against Finance Lease.
Long Term Venture Capital Modaraba6.1 4,068,404 4,068,404 Inter Asia- Leasing Company Limited6.2 5,695,554 6,38. 354 MCB Kia Sportage 6.3 1,127,440 Citibank-Suzuki Cultus6.3 427,614 MCB-Suzuki Cultus 6.3 443,545 MCB-Suzuki Baleno 6.3 560,313 MCB-Toyota Corolla 2 OD6.3 912,063 13,234 933 10,450,758 Less Current portion shown under current (1,170,686)
Less Amount due but not paid (823,170) (5,416.047) (1,170 686 7,818,886 9 280 072"
10. Learned counsel while referring to these loans has stated categorically that there is nothing on record to suggest any repayment done against these loans by this Company.
11. Regarding the miscellaneous expenses which have been incurred over the previous years, Dr. Parvez Hassan, Advocate points towards paragraph 15 of the balance-sheet at page 135 of the file which shows miscellaneous expenses at Rs.522,412,166 for the year 2003 against Rs.383,786,280 for the previous year. Learned counsel states that this is an acknowledged liability as reflected in the balance-sheet and the statement given by the respondent in the written statement that it was a solvent company and what is alleged by the petitioners was incorrect, is belied by this figuration.
12. Learned counsel has referred to the additional rejoinder wherein he has mentioned about the long term liabilities and liabilities against the assets in the following term s: - - "Long term Liabilities: (Amount in Million)
36.955 388.486 416.544 Liabilities against Assets subject to lease finance:-- 2001 2002 2003 1.136 9.280 7.817"
13. Learned counsel further went on to say that a statutory notice having been given, there is presumption of truth attached regarding the inability to pay.
14. Learned counsel emphasized saying that on the basis of the figuration which he has referred to above, this was no longer viable project; that its substratum has gone; that it is unable to pay its debts; that after the issuance of the statutory notice, it was bound to establish by discharging the onus on it that it was commercially solvent and was in a position to meet its liabilities. That its inability to fulfil the requirements of the contract alongwith the addendum to the agreement vis-a- vis the petitioners, has further established its weak liquidity position. Learned counsel states that in view of these circumstances, this was a fit case where winding up has to be ordered and placed reliance on the following case-law: (1) Mazhar Ali v. Lasni Straw Board Mills 2003 CLD 1494; (2) Rauf B. Kadri v. State Bank of Pakistan 2002 CLD 1794; (3) Ali Woollen Mills v. IDBP PLD 1990 SC 763; (4)
PICIC v. Waseem Beverages Limited 2000 MLD 660 and (5) Messrs Bankers Equity Limited (BEL) v.
Balochistan Coasters Limited PLD 1997 Karachi 416.
15. On the question of the pendency of the civil suit, referred to above, in the Sindh High Court, it is said, that it was no bar and placed reliance on the cases of: (1) Platinum Insurance Company Limited v. Daewoo Corporation PLD 1999 SC 1; (2) BCCI v. Hamaliya Textile Mills 1999 MLD 3195; (3)
Habib Bank Ltd. v. Hamza Board Mills PLD 1996 Lahore 633; (4) UBL v. Pak Wheat Products Limited PLD 1970 Lahore 235; (5) IDBP v. Modern Poultry Farm 1990 CLC Karachi 1030 and (6) BCCI through Habib Bank Ltd. v. Hamaliya Textile Mills (Pvt.) Ltd.
1999 MLD 3195. In paragraph 8 of the judgment of the latter case i.e. BCCI v. Hamaliya Textile Mills 1999 MLD 3195, it was observed as follows:-- "It was next argued by the respondent's counsel that the petition was not maintainable as a suit has been filed for recovery of the same loan on the basis of which this petition has been instituted by the petitioner, before the Banking Court. However, learned counsel for the respondent is unable to show any law which bars the petitioner from seeking winding up of the company on the ground of its inability to pay the debts on account of pendency of suit for recovery of money. On the other hand, the Companies Ordinance, 1984 visualizes the situation where the suits have already been filed by or against the company and provides in section 316 that on order of winding up being passed the proceedings in the suit would be stayed. Reference may be made to Messrs Industrial Development Bank of Pakistan v. Messrs Trade and Industries Publications Limited 1989 MLD 374. Be that as it may, this discussion has now been academic inasmuch as the suit filed by the petitioner has since been decreed as mentioned above by this Court as Banking. Court on 8-7-1998."
16. ' In view of the arguments addressed and the record which is available having been seen and as there was no one on behalf of the respondent side to controvert the verbal arguments of the learned counsel for the petitioner, although the written statement and the other documents produced by the respondent side were gone through and as the respondent was also proceeded ex parte vide orders of this Court dated 19-10-2004 and as no one having appeared even today or yesterday. On behalf of the respondent and while keeping in view the orders of this Court dated 27- 9-2004, whereby it was directed that the final arguments shall take place on 19-10-2004, this Court allows the petition under section 305 of the Companies Ordinance, 1984, Therefore, consequently, Mr. Sittar Pingar, Advocate, C/o Liaqat Merchant & Co. Advocates, Karachi, is appointed as the Official Liquidator, who is directed to take over all the assets of the company as well as all its record into his possession and proceeded with the sale of the assets in accordance with law while submitting a fortnightly report on the action taken by him pursuant to this entrustment. The Official Liquidator shall be submitting a personal bond in the sum of rupees one hundred thousand immediately in the office.
18. The Official Liquidator shall not incur the expenses beyond Rs.10,000 without the permission of this Court and for enabling him to carry on with the day-to-day expenditure, the creditors are directed to deposit a sum of Rs.1,00,000 (Rupees one lac) in a National Bank of Pakistan Branch at Karachi so that the Official Liquidator may draw the amount from the account in accordance with what has been ordered above. The Official Liquidator may appoint guards for protecting the property and assets of the company and whose remuneration he will draw from the said amount with the permission of this Court. The Official Liquidator in the meanwhile will receive Rs.10,000 as his subsistence fee which will be adjustable from the overall commission due to him subsequently.
18. A copy of this order shall also be attached with the application for opening of the account with a branch of the National Bank of Pakistan at Karachi for compliance with respect to the directions laid in paragraph 17 of this judgment with respect to the withdrawal of the amount by the Liquidator.