ORDERSH. AZMAT SAEED, J. - This application had been filed under Section 319 of the Companies Ordinance, 1984, by Mst. Riffat Saeed, claiming to be a contributory of. The Company under liquidation seeking a stay of the winding up proceedings and determination of the legal title of the property bearing No. 348/18, G.T. Road, Daroghawala, Lahore, purportedly owned by the Company as well as the legal status of the alleged shareholders of the Company and their respective shares.
2. Brief facts leading to the filing of this application are that one Abdul Rasheed Mughal, filed a petition under Section 305/309 of the Companies Ordinance, 1984 for the winding up of M/s. ECSA
(PK) Itd., (hereinafter the company), It was contended in the said application that the shareholders of the Company had through a resolution to seek winding up of the Company as there was no possibility of the Company carrying out its objects. And in this behalf had authorized the said Abdul Rahseed Mughal to initiate appropriate proceedings before this Court.
3. This Court vide order dated 1.10.2004 issued notice both through the ordinary course and through citation in the Press. No one entered appearance to contest the petition for winding up.
Consequently, vide order dated 7.12.2004, order for winding up was passed by this Court. The Joint Official Liquidators were appointed, who were directed to take over the assets of the Company, It appears from the record that the only asset of the Company is the property situated at 348/18, G.T.
Road, Daroghawala, Lahore, In compliance of order of this Court, the J.Q.Ls. Took possession of the said property and it was discovered that certain goods were stored thereat, In respect whereof- applications were filed by certain parties claiming that they had rented out the premises and variously stored the said, articles. The matter was gone into and eventually the said third parties were permitted to remove the articles owned by them as it was a unanimous stand of the parties including the ex-Management that the said articles did not belong to the Cpmpany. However, the ex-Management categorically took the stand that the Company had- not rented out the premises to anybody, It appeared that one Muhammad Saeed, the husband of the present applicant and one of the shareholders had rented out parts and parcels of the premises and the consideration thereof had been retained by him and not made available to the Company or its other shareholders:
4. Subsequently, this Court directed the -sale of the said property of the Company situate at 348/18 - G.T. Road, Daroghawala, Lahore, and an advertisement in this behalf was prepared for approval.
An evaluator was appointed to determine the value of the property so as to facilitate the determination of its reserve price for the purposes of its auction. Jn the backdrop of the above facts, the present application has been filed contending there in that the applicant is a contributory of the company owning one share, It is further contended that after the incorporation of the company and the original allotment of the share a subsequent allotment had been made which is illegal, It is further contended that the said property in question purportedly owned by the Company sought .To be sold actually belonged to one Haji Ghulam Nabi, deceased, the father-in- law of the petitioner and the founder of the Company, hence, cannot be sold by this Court while exercising jurisdiction under the Companies Ordinance, 1984. In this behalf reference has been made to a family settlement, In the above context, it has been prayed that the winding up proceedings be stayed by this Court in terms of Section 319 of the Companies Ordinance, 1984.
5. The application has been opposed by the ex-parte Management including the original petitioner as well as the JOLs. It is contended that the application in mala fide. 1he petitioner has no locus standiio maintain the application, It is contended that the applicatidns premature as the questions of the quantum to shareholding of the petitioner would become relevant at the time of the distribution of the funds raised through the sale of the asset of the Company which, cannot be postponed or stayed on the ground of the alleged claim of the applicant, In this behalf, it is further contended that the share-holding pattern of the Company in essence reflects the proportion at division of the share amongst the heirs of the Haji Ghulam Nabi in consonance with the personal law of inheritance and the family settlement referred to by the applicant.
6. The instant application has been filed invoking jurisdiction and the powers of this Court under Section 319 of the Companies Ordinance 1984, which reads as under:- "Power of Court to stay winding up., etc.- (1) The Court may at any time not later than three years after 'an order for winding up, on the application of any- creditor or contributory or of the registrar or the Commission or a person authorized by it, and on proof to the satisfaction of the Court that all proceedings in relation to the winding up ought to be stayed, withdrawn, cancelled or revoked, make an order accordingly, on such terms and conditions as the Court thinks fit.
(2) On any application under sub-section (1), the Court may before making an order, require the Official Liquidator to furnish to the Court a report with respect to any facts or matters which are in his opinion relevant to the with respect to any facts or matters which are n his opinion relevant to the application.
(3) A copy of every order made under sub-section (1) shall forthwith be forwarded by the Court to the registrar, who shall make a minute of the order in his books relating to the company."
6. A perusal of the aforesaid statutory provision reveals that the nature extent the mode of exercise of powers conferred thereby have not been speIt out in any great detail. An over view of the judicial precedent in this behalf reveals that the established principles of the English jurisdiction in this behalf have by and large been fpllowed. In the case reported as Messrs Consolidated Exports Itd.
Vs. Messrs Dyer Textile and Printing Mills Itd. (PLD 1984 Karachi 541). The relevant extract from the HALSBURY'S Laws of England was quoted and the principles enunciated thereby, followed. Similarly, Calcutta High Court in the following judgments also followed the said principles:-
(i) . AIR (36) 1949 Calcutta in re; East India Cotton Mills Itd.
(ii) Nikanta Kolay vs. The Official Liquidator (AIR 1996 Calcutta 1.71):
7. The nature, extent and the principles for exercise of the powers to stay winding up proceedings as set out in HALSBURY'S Laws of England, Fourth Edition 1996 Reissue Volume 7 (3) reads as follows:-- "2662. Exercise of power to stay winding-up proceedings, In the exercise of its jurisdiction to stay the Court will refuse to act upon, the mere assent of the creditors in the matter, and will consider whether what is proposed is for their benefit, and also whether the stay will be conducive or detrimental to commercial morality the Court will have regard to the following facts:-
(1) that directors have not complied with their- statutory duties as to giving information to the Official Receiver or furnishing a statement of affairs;
(2) that there has been an undisclosed agreement between the promoter and the vendor to the company as to the participation by the promoter in fully-paid shares forming the consideration for the purchase of property by the company on its formation;
(3) that the promoter has made gift of fully-paid shares to the directors; and
(4) ; that there are any other matters connected with the promotion, formation or failure of the company or the conduct of its business or affairs, which appear to the Court to require investigation."
8. The principle for exercise of powers invoked by the instant application has also been dilated upon in the judgment reported as Mahabir Prasad Agarwalla vs. Ashkaran Chattar Singh, (1980-81)
85 CWN 557 at 581, 582, (as 'reproduced in AIR 1996 Calcutta 171) in the following terms:-
(1) if the Court is satisfied on the materials before it that the application is bonafide;
(2) the Court would be guided by the principles and. Definitely come to the finding that theprinciples are applicable to the facts of a particular case;
(3) mere consent of all the creditors for stay of winding-up is not enough;
(4) the offer to pay in full or make satisfactory provisions for the payment of the creditors is not enough;
(5) Court will consider the interest of commercial morality 'and not merely the wishes of the creditors and contributories;
(6) Court will refuse an order if there is evidence of misfeasance or of irregularity demanding investigation;
(7) a firm and accepted proposal for satisfying all the creditors must be before the Court with material particulars;
(8) the jurisdiction for stay can be used only to allow in proper circumstances of resumption of the business of the Company;
(9) the Court is to consider whether the proposal for revival of the company is for benefit of the creditors but also whether the stay will be conducive or detrimental to commercial morality and to the interest of the public-at- large;
(10) before making any order Court must see whether the exrDirectors have complied with their statutory duties as to giving information to the Official Liquidator by furnishing the statement of affairs; and
(11) and any other relevant fact which the Court, thinks fit to be considered for granting or not granting the stay having regard to the particular facts of a particular case.
9. A winding up order is passed for reason or cause contemplated by law e.g. Inability of the company to pay its debts, failure to commence business within one year from its incorporation, carrying on business not authorized. By its memorandum, a special resolution has been passed by its members for its, winding up etc. And a close and careful analysis of the statuary provision (Section 319) and the aforequoted judicial precedent reveal that in essence a power has been conferred upon the Court to .Stay winding up proceedings on an application of a person or party mentioned in the said provision and within the period Specified therein where it is proved to the satisfaction of the Court that the cause for the winding up order has disappeared or is likely to disappear, In other words, the mischief prompting the winding up order has been set at right or the company or its shareholders are able and willing to set it right either by arrangements, compromise or settlement and a proposal in this behalf for the revival of the Company is submitted to the Court. Usually, such proposal' would include an arrangement or settlement with the creditors especially if the winding up order has been passed on account of the inability of the company and its debts. The power conferred is primarily to consider a proposal for revival. Of the Company and an eventual revocation or withdrawal of the winding up order. This is also evident from the wording of the statutory provision (the Section 319) whereby the word stay has been used alongwith withdrawn, cancelled or revoked, with reference to the winding up order. It is no coincidence that such power and jurisdiction has been exercised by this Court and by the apex Court to consider and approve arrangements for payment of debts, and revocation of winding up order. Some of such case in our jurisdiction include Mst. Dilshad Hussain v. PICIC and others (NLR 1985 SCJ 515), National Bank of Pakistan vs. The Punjab National Silk Mills Itd. And two others (1985 MLD 2963) and Messrs Consolidated Exports Itd. Vs. Messrs Dyer Textile and Printing Mills Itd. (PLD 1984 Karachi 541).
10. It is equally clear that powers Conferred are discretionary in nature and can only be exercised in furtherance of commercial morality and after bona fldes of the parties have been established on the record. Such powers will not be exercised to permit the cover up any mail fences illegality or irregularity in the conduct of the affairs of the company.
11. In the instant application it is not the case of the petitioner that the cause resuIting in the winding up order has disappeared or is not seeking an order for revocation of winding up order but merely prays that the winding up proceedings be stayed and investigation be carried out to adjudicate upon the allegations made by the applicant as to the title of the property purportedly owned by the Company sought to be sold in auction and to determine the illegality or otherwise of allocation of share amongst the shareholders. Such contentions raised are beyond the scope and ambit of the powers conferred under Section 319 of Companies Ordinance, 1984, upon this Court, which cannot b,e interpreted to provide an opportunity to a contributory or share holder etc. To seek investigation and determination of collateral issues.
12. No doubt during the course of proceedings following the winding up orders issued and disputes may arise requiring the Court to pause and determine the same before proceeding further. Such ancillary issues are to be deaIt with in accordance with the Companies Ordinance, 1984 and the Companies (Court) Rules, 1997 that too at the proper stage and upon an application of a person clothed with the locus standi to raise such issues.
12A. The applicant claims to owmone share out of a total of 105,900 shares only she has raised an issue as to the title of the company to the property proposed, to be sold but admittedly does not claim any right therein. Her husband apparently had control over the said property of the Company and had derived financial benefits therefrom to the exclusion of the company and the other shareholders. This application is obviously mala fide and has been filed to subvert the process of the law, more particularly, the sale of the property of the company. When and if any bona fide claimant to the said property -objects to the sale such objection can and will be deaIt with in accordance with law. Similarly, the question of the respective shares of the shareholders is also premature and would only arise when the property of the company has been sold and when and if the funds realized therefrom are to be distributed to the persons entitled thereto.
13. In view of the above, it is clear and obvious that the instant application is not only misconceived but also not bona fide, contention raised therein cannot form the basis for stay of winding up proceedings or for postponing the sale of the property, as is the intention of the applicant.
Outstanding matters, if any, can and will be deaIt with, determined and adjudicated upon in due course in accordance with law as and when the occasion arises. Consequently, this application being without any merits is hereby dismisse.