' NADEEM AZHAR SIDDIQUI, J.---The petitioner h filed this petition for winding up of the respondent.
The groin is for winding up as pleaded in the petition are as under:-
1. On December 21, 1999 the respondent availed a syndicate finance from the petitioner, Bank Alfalah Limited, and Saudi Pak Commercial Bank Limited formerly existing as Prudential Commercial Bank Limited in the amount of Rs,165,000,000.
2. In respect of the Finance Facility granted by the petitioner and availed by the respondent, the following amounts are outstanding, due and payable by the respondent to the petitioner, as of May 31, 2004:-- Facility Amount Forced Tod Rs,11,419,892.34 Mark-up Receivable (RF and FAPC I and II)14,462,753.00 FAPC Part I Rs,29,697,000.00 FAPC Part II Rs,25,000,000.00 Total Rs,80,579,645.34
3. The petitioner sent several demands and reminders for repayment of the outstanding amounts.
Finally a legal notice dated July 24, 2003 was sent on behalf of petitioner and Bank Alfalah Limited, and Saudi Pak Commercial Bank Limited under the terms of section 306 of the Companies Ordinance, 1984.
4. The respondent is unable to pay its debts and in view of the inability of the respondent to meet its liabilities and make payment of its dues and debts to the petitioner, or to otherwise function as a company, it is proper, necessary, convenient and equitable and in the interest of justice, that the respondent be wound up under the Orders of this Honourable Court.
5. The respondent has filed counter-affidavit to the petition and refuted the allegations as under:-- ' The respondent denied that an amount of Rs,80,579,645.34 is due from the respondent to the petitioner. The petitioner has exaggerated the amount in order to put the respondent in disability position in payment of their lawful dues. The petitioner has failed to file any statement of account to justify the amount claimed in the petition. It is not understood as to how forced TOD of Rs,11,419,892.34 is being claimed as such facility was not applied for. Nor is there any justification of charging the mark-up receivable" in the amount of Rs,14,462,753. No mark-up can be charged unless there is an agreement of mark-up. There is no mark-up agreement between the parties.
6. The respondent further pleaded that certain amount was deposited with the petitioner which was not credited to their account and that the respondent is ready and willing to discharge the lawful dues of the petitioner, if any, in such easy instalments as may be determined by this Honourable Court. The respondent is functioning as a Company and is making payment of all its electric bills and labour charges. The respondent is making payment to its labour in the region of Rs,150,000 per month. The respondent has also challenged the authority of the persons who have instituted the proceedings and have signed the petition by saying that it is denied that the petition has been filed with lawful authority.
7. No rejoinder affidavit has been filed by the petitioner. Controverting the factual dispute raised by the respondent.
8. Mr. Arshad Tayebaly, learned counsel for the petitioner, contended as under:--
(1) The respondent has not denied the facility of loan obtained by it from the petitioner.
(2) When a notice provided under section 306 is served upon the respondent and was not complied with it is deemed that the respondent is unable to pay its debts.
(3) Once the respondent has not disputed the correctness of the outstanding amount in response to legal notice the amount cannot be disputed while filing the reply of the petition.
(4) He further submits that in a petition for winding up the Court is not required to determine the outstanding amount and it is sufficient that amount is due and not paid.
(5) Mr. Arshad Tayebaly contended that the petition was filed by authorized officers who were duly authorized by the President and the Company Secretary of the petitioner under the authority given to them by the Board Resolution dated March 17, 2001. He at the hearing stage produced the copy of resolution and general power of attorney executed on behalf of Gulf Commercial Bank Limited in favour of Mr. Muhammad Bilal Shaikh, Chief Executive/President of the Bank.
9. In support of his contention Mr. Arshad Tayebaly relied upon the following judgments:--
(1) Pakistan Industrial Credit and Investment Corp( tion Limited v. Messrs Indus Steel Pipe Limited 199; WILD 94;
(2) Messrs Aeroflot Russian International Airlines through Manager v. Messrs Sgerry's International (Private) Ltd. 2003 CLD 1075;
(3) Muzaffar Abbas Malik and 2 others v. Messrs Pakistan PVC Ltd. PLD 1998 Karachi 71;
(4) Industrial Development Bank of Pakistan v. Modern Poultry Farm Limited 1990 CLC 1030;
(5) Parke Davis and Co. Ltd. Karachi v. Bliss and Co. Ltd. Karachi PLD 1982 Karachi 94;
(6) Trade and Industry Publications Limited v. Industrial Development Bank of Pakistan PLD 1990 SC 768;
(7) Habib Bank Ltd. v. Hamza Board Mills and others PLD 1996 Lahore 633;
(8) Messrs Industrial Development Bank of Pakistan v. Messrs Sarela Cement Limited Company 1993 CLC 1540;
(9) International Finance Corporation, Washington D.C. 20433 USA v. Hala Spinning Ltd. Gulberg II, Lahore PLD 2000 Lahore 323; (10)Messrs Sindh Glass Industries Ltd. Karachi v. Messrs National Development Finance Corporation, Karachi and 2 others PLD 1996 SC 601; (11)Federation of Pakistan v. The Standard Insurance Company Ltd. Karachi PLD 1986 Karachi 409; (12)Banque Indosuez v. Jet Travels Limited and 4 others 1991 CLC 446.
10. On the other hand Mr. Ahmed Hussain Rana contended as 'under:-
(1) The petition was filed unauthorizedly by unauthorized person as no resolution passed by the Board of Directors has been placed on record and objected the filing of the resolution and the power of attorney at hearing stage. He submits that he cannot be taken by surprise.
(2) The claim of the petitioner is doubtful and not bona fide and that the petitioner has inflated the demand making it impossible for the respondent to pay its liability if any. He further submits that the amount claimed in the notice and in the petition is not in conformity with each other.
(3) He further submits that once it is established that there is a genuine dispute between the parties, the Court remains under legal obligation to form an opinion under Clause (h) of section 305 of Companies Ordinance (XLVII) of 1984, whether it is just and equitable that the company should be wound up.
(4) The learned counsel also placed on record vide statement dated 19-11-2005 two orders of, division Bench of this Court by which the appeals filed by the respondent against the two other members of the syndicate from whom the respondent has obtained financial facilities were admitted to regular hearing wherein respondent contended that mark- up has been allowed upon the renewed financial limits when admittedly no new finance was given to the respondent.
11 Learned counsel for the respondent relied upon the following reported judgments:--
(1) Khan Iftikhar Hussain Khan of Mamdot v. Messrs Ghulam Nabi Corporation Ltd., Lahore PLD 1971 SC 550;
(2) Messrs Taurus Securities Limited v. Arif Saigol and others 2002 CLD 1665;
(3) National Bank of Pakistan and others v. Karachi Development Authority and others PLD 1999 Karachi 260;
(4) Investment Corporation of Pakistan and (tilers v. Messrs Ajax Industries 2004 CLD 1733;
(5) Messrs Gulf Air v. Messrs Shakil Air Express (Pvt ) Ltd. PLD 2003 Karachi 156;
(6) Abdul Rahim and 2 others v. Messrs United Bank .Ltd. Of Pakistan PLD 1997 Karachi 62;
(7) Government of Pakistan v. Premier Sugar M ill and others PLD 1991 Lahore 381;
(8) Messrs Adage Advertising, Lahore v. Messrs Shezan International Ltd., Lahore 1970 SCMR 184;
(9) Mulla Abdullabhai and 9 others v. Saria Rope Mills Ltd. PLD 1971 Karachi 597;
(10) Messrs Khyber Textile Mills Ltd. v. Messrs Allied Textile Mills Ltd. 1989 CLC 1167;
(11) Messrs Metito Arabia Industries Limited v. Messrs Gammon (Pakistan) Limited 1997 CLC 230;
(12) Investment Corporation of Pakistan v. Messrs Charagh Sons Engineering Limited PLD 1997 Karachi 504;
(13) Bank of Credit and Commerce International v. Duty Free Shops (Pvt.) Ltd., Karachi 1999 MLD 3260;
(14) Messrs Habib Bank Ltd. v. Messrs Golden Plastic (Pvt.) Ltd. 1991 MLD 124;
(15) Ehsan Ullah v. Zarai Taraqiati Bank Limited 2005 CLD 1442;
(16) Mushtaq Ahmed Vohra v. Crescent Investment Bank Limited 2005 CLD 444;
(17) Messrs Industrial Development Bank of Pakistan v. Messrs Sarela Cement Limited 1993 CLC 1540.
12. I first take up the objection of the learned counsel for the respondent with regard to filing of the petition on the basis of power of attorneys without resolution of the Board as the same will go to the route of the case and the maintainability of this petition is dependent upon this very issue.
13. The contention of the learned counsel for the respondent is that mere power of attorney is not sufficient and in any case the decision with regard to filing of the case is to be taken by the Board of the Directors and not the officers. He further submits that the power of attorneys produced were executed to run the day to day affairs of the petitioner. He further submits that the extract from the minutes of the petitioner is of no help to the petitioner as no decision was taken by the Board with regard to the filing of the instant petition or authorizing the attorneys to take decision with regard to institution of legal proceedings.
14. In reply the learned counsel for the petitioner submits that Board has appointed the Chief Executive Officer/President of the petitioner as attorney of the bank and authorized him to delegate his powers to the officers of the bank and refer clause 71 of the power of attorney. He submits that in presence of the duly executed power of attorney under the authority of the bank no resolution is required.
15. The question before me is whether the officers who are vested with certain powers under the power of attorneys are also authorized to take decision with regard to filing of the proceedings or the power of attorney is only gives powers to initiate legal proceedings after the decision of the Board of Directors. The power of attorneys are silent in this regard and no power with regard to taking decision of instituting the proceeding is appearing in the power of attorney. The learned counsel for the petitioner also failed to show that under the articles of association the officers are authorized to take decision with regard to institution of legal proceedings.
16. The first case cited by the learned counsel for the respondent is the famous case of Khan Iftikhar Hussain Khan of Mamdot v. Messrs Ghulam Nabi Corporation Ltd.. Lahore PLD 1971 SC 550. In this case the resolution was produced but not accepted as the same was not validly passed and it was held that the suit was not competently instituted. The other case referred by the learned counsel for the respondent is Messrs Taurus Securities Limited v. Arif Saigol and others 2002 CLD 1665. The relevant para.13 of the judgment is reproduced below:-- "On perusal of the documents annexed with the plaint, I find that the suit has been instituted by one Abid Naqvi who claims to be the acting Managing Director of the plaintiff who has verified the pleadings and signed the plaint on the basis of a General Power of Attorney purporting to have been executed in his favour by Nader Morshed and Sahibzada M. Arshad. The position of the above-said two gentlemen who executed the power of attorney is not ascertainable. Neither the resolution of the Board nor the memorandum and articles of the company have been exhibited or produced in order to ascertain as to whether the persons who executed power of attorney in favour of the said Abid Naqvi, in fact, possessed the authority to delegate/re-delegate the powers for instituting the suit."
17. The other judgment cited by the learned counsel for the respondent is National Bank of Pakistan and others v. Karachi Development Authority and others PLD 1999 Karachi 260. The relevant portion appearing on page 274 is reproduced below:-- "The lapse does not, in my judgment, change the position since the alleged authorized attorneys have not themselves been examined as witnesses and in any event, the burden to show that the suits have been filed by authorized -attorneys is upon the plaintiffs. Mere existence of clause empowering the attorneys to initiate proceedings in the power of attorney in the absence of Articles and Association and exercise of authority in terms thereof, does not stand the test prescribed in the judgment reported in PLD 1997 Kar.
62. The unfortunate conclusion which I am constrained to record is that the plaintiffs have failed to show that the suits are instituted by persons duly authorized in this behalf or are maintainable."
18. The other judgment cited by the learned counsel for the respondent is Investment Corporation of Pakistan and others v. Messrs Ajax Industries 2004 CLD 1733. The relevant portion appearing at page 1740 is reproduced below:-- "18. Apart from above, the petition is additionally marred by an inherent infirmity. The petitioners are Banking Companies. None of the signatories to the petition claiming to be the officers of the respective petitioner banks have filed a single document to show that any decision was taken by the Board of Directors of the Banks to initiate the proceedings against the company. Even there is no evidence to show that the signatories to the petition were duly authorized persons having authority of whatever kind to sign the petition, to verify the pleadings and to institute the instant petition on behalf of the petitioner banks.
19. The petition is thus, not maintainable and liable to be dismissed. The same is accordingly dismissed."
19. The other judgment cited by the learned counsel for the respondent is Abdul Rahim and 2 others v. Messrs United Bank Limited of Pakistan PLD 1997 Karachi 62. The relevant portion appearing at page 110 is reproduced below:--
(ii) "for a suit to be valid it had to be shown that firstly, it was verified and signed by the proper person in terms of Order 29, rule 1, C.P.C. And secondly, it was instituted by a competent person having the power and authority to do so;
(iii) in case there is default in compliance of Order 29, rule 1 the same is not a fatal defect and can be cued even after the suit has been instituted (See All India Reporter Limited v. Ram Chandar Dhondo Datar AIR 1961 Born. 292;
(iv) however, in case there is any defect in institution of the suit i,e, it is instituted unauthorisedly and incompetently the said defect remains incurable even by a subsequent ratification (See Punjab Lives Lock and Saleh Hayat, referred supra)."
20. The upshot of the above judgments are that the objection regarding competence to institute the proceedings could only be decided after reference to the articles of association of the company from where it had to be seen as to whether the person delegating the power was competent to delegate such powers to the persons instituting the proceedings. The company had to act in accordance with the articles and it was the provisions of the Articles which reminded as to which person the power to institute legal proceedings had. It is now well settled that when a company is instituting legal proceeding it had to establish that the proceeding has been instituted competently and authorisedly.
21. Even in case of persons instituting the proceedings having power of attorneys in their favour have to prove that they are duly authorized to institute the proceedings and this can only be done by referring to the articles of association which was not produced in this case.
22. I have also considered the resolution dated 17 3-2001 which reads as under:-- "Extract from the minutes of the 26th Meeting of the Board of Directors of PICIC Commercial Bank Limited held on 17th March, 2001.
' General power of attorney in favour of the incharge/ CEO ' The Board considered Chief Officer's memorandum dated 13th March, 2001 and approved the execution of a Power of Attorney, on the same lines as approved for Mr. Badr-ud-Din Khan (former CEO), in favour of Mr. Muhammad Ali Khoja, Incharge of the Bank, effective 26th February, 2001, under the signatures of Mr. Towfiq Habib Chinoy and Dr. Wasim Azhar.
' The Board further approved that after the appointment of new Chief Executive Officer and on his assuming charge of CEO's Office, a fresh Power of Attorney, duly reviewed and revised (if necessary) be executed in his favour.
' Authority to execute sub-powers of attorney to officers.
' The Board considered Chief Operating Officer's Memorandum dated 12th March, 2001 and authorized Mr. Muhammad Bilal Sheikh, Director/Chief Operating Officer and Mr. Rahat Saeed Khan, Secretary to affix common seal of the Company to any and all sub-powers of attorney executed in favour of other officers of the Bank.
' The Board further approved that after the appointment of new CEO and on his assuming charge of CEO's office, he shall sign the Power of Attorney along with the Company Secretary Attested (Sd.)
Rahat Saeed Khan Company Secretary."
23. Although the resolution was typed on the letter-head of PICIC Commercial Bank Limited but, in fact, it was passed when the PICIC Bank was not in existence and the name of the Bank was Gulf Commercial Bank Limited and the then Board of Directors passed a resolution dated 17-3-2001 authorizing Mr. Taufiq Habib Chinoy and Dr. Waseem Azhar to execute the power of attorney in favour of new CEO and in the same resolution Mr. Muhammad Bilal Shaikh Director/Chief Operating Officer and Mr. Rahat Saeed Khan, Secretary were authorized to affix the common seal of the company on all sub-powers of attorney executed in favour of other officers of the bank and further authorized the new CEO and the Company Secretary to sign the power of attorney executed in favour of other officers of the bank. This resolution only speaks that CEO and Secretary is authorized to sign the power of attorney but does not speak about taking decision with regard to filing of the legal proceedings. From the resolution it is also clear that on appointment of every new CEO new power of attorney is to be executed in his favour and in turn he along with Secretary will execute power of attorney in favour of other officers of the bank. A power of attorney executed in favour of CEO will come to an end on his leaving the office of CEO and he is ceased to exercise any powers of CEO vested under him and all such powers delegated by him to the officers also ceased to exist and the officers cannot exercise powers under a power of attorney ceased to exist. There is nothing on record to show that on 16-6-2004 when the proceedings were initiated who were the CEO and Secretary of the petitioner and that the power of attorney produced in this proceedings were signed by the CEO and Secretary holding office on 16-6-2004.
24. I also want to quote a passage from the judgment reported as Abdul Rahim v. UBL PLD 1997 Karachi 62 to the effect that reference to articles of association is necessary to determine whether the powers were conferred on real person or artificial person or body, which reads as under:- "---By deduction, the factum of competence and authority to institute legal proceedings would also have to be determined strictly in consonance with the articles of the company. Such interpretation would also be in consonance with Muhammad Siddiq and Central Bank of India wherein it has been categorically stated that where the competence to institute legal action is challenged reference has to be necessarily envisaged to the articles. Where articles of the Company confer power of a particular person or Director to institute legal action and that person or Director institutes the suit there can be no additional requirement of a resolution of the Board of Directors for the simple reason that such power is to be exercisable by a real person. However, where the power of institute the suit is conferred upon an artificial person or body e.g. The Board of Directors or a committee (as in Premier Sugar Mills supra) the requirement to produce and prove the resolution passed by that artificial person or body cannot be dispensed with since such a person can only take decision as a body through a resolution passed in a duly convened meeting and not otherwise. The above principles would also become applicable in the case of delegation or sub-delegation of powers i,e, in case the delegator is a real person (when articles confer the powers to institute legal action on a real person) all that would be required would be to scrutinize the articles and then the power of attorney to see whether it has been properly executed and confers the power so claimed. There would be no requirement to produce or prove the resolution from the Board of Directors in this regard. If on the other hand, the delegator is an artificial person/body (when the articles confer the power to institute legal action on e.g. The Board of Directors or some committee) the resolution passed by that artificial person/body i,e, the Board/ Committee shall become indispensable. However, there would be no requirement to produce or prove a separate power of attorney. In this backdrop we would venture to reconcile Muhammad Siddiq, Iftikhar Mamdot and Central Bank of India by presuming that in Muhammad Siddiq and Central Bank of India the articles conferred the power to institute or defend legal proceedings to a real person i,e, a Director. Thus the requirement to produce or prove a resolution from the Board of Directors was dispensed with. However, in Iftikhar Mamdot the articles conferred the power to institute or defend legal proceedings upon an artificial person/body i,e, the Board of Directors in view whereof the requirement to produce and prove the resolution thereof authorizing institution of the suit was found to be indispensable."
25. The learned counsel for the petitioner relied upon the case of Banque Indosuez v. Jet Travels Limited and 4 others 1991 CLC 446 wherein the learned Single Judge of this Court held that so far as the resolution by the bank is concerned, it is not necessary to produce the same before the Court at the time of filing of the suit, with due respect and regard to the learned author of the judgment I cannot subscribe the view for the simple reason that the judgment of the larger Bench of the same Court as well as Supreme Court are contrary to the findings of the learned author.
26. The burden to show that the petition was filed by the authorized attorney was upon the petitioner and the petitioner has failed to discharge this burden. The ratio of the above referred judgments appears to be that in case there is any defect in institution of the proceeding i,e, it has been instituted unauthorisedly and incompetently the said defect was incurable. In this case neither any resolution passed by the Board of Directors has been produced nor articles of association has been filed to scrutinize whether the power of attorneys were properly executed and confer the powers as claimed.
27. From the discussion based on the case-law, referred hereinabove I came to the conclusion that the petition has been filed by incompetent persons which is not maintainable and is liable to be dismissed.
28. Since I have held the petition is not maintainable being filed by unauthorized persons, the discussion on the merits of the case is not necessary.
29. Before parting with this judgment I want to make it clear that the petitioner would not in any manner be prevented from pursuing other remedies if available to them under the law before the appropriate forum.
30. In view of the above the petition is dismissed with no order as to cost along with C.M.A. No,1569 of 2004.