1. JUDGMENT NADEEM AZHAR SIDDIQI, J. - The petitioner has . Filed this petition under Section 305 of the Companies Ordinance, 1984 for winding-up of M/s. Al-Abbas Cement Industries Limited.
2. The facts necessary for disposal of this case are that the petitioner alongwith others entered into a share purchase agreement with Mr. Shunaid Qureshi and Mr. Abdul Ghani to sell 52.5% of their share-holding in a company named Essa Cement Industries Limited for a consideration of Rs.
3. 60,00,00,000/- (Rupees six hundred million). The purchasers agreed to repay and adjust the sponsors loan to the sellers within six months from January 20, 2006. The sponsors loan was reflected in the balance sheet as of June, 2005, September, 2005 and March 31, 2006 under the heading "Non Current Liabilities" and long term loan.
4. Letters were written to the respondent to correct the accounts but the letters were not acknowledged. The respondent published false accounts and the sole purpose of not showing the correct status of the sponsors loan is that the respondent is virtually bankrupt and is unable to pay the outstanding amount and mark-up as agreed, It was further stated that since there was a default in payment, as such, a statutory notice under Section 306 of the Companies Ordinance, 1984 was served but neither the respondent made the payment nor offered any reasonable explanation, It was pleaded in the petition that a sum of Rs. 29,85,91,000/- is due and payable by the respondent to the petitioner and an amount of Rs. 74,64,775/- has accrued as mark-up as on March 31, 2007. It was further stated that the respondent is commercially insolvent and is unable to pay the huge debts and it is just and equitable that the respondent be wound-up.
5. The respondent has filed counter-affidavit in which it was stated that the respondent is not party to the Share Purchase Agreement and that the percentage of the shareholding in the respondent- company of the petitioner is only 10.91% and that the obligation under the Share Purchase Agreement to adjust the sponsors loan was relatable to the purchasers and sellers alone not the respondent, It was further stated that notice dated 26.4.2007 was received but the same was so absurd and it was decided to ignore it. It was denied that respondent was insolvent, It was further stated that payment, could not be made for the lack of determination of amount to be said due to intransigent attitude of the petitioner and the matter was referred to arbitration and on refusal of the petitioner to accept the appointment of arbitrator the purchaser filed application under Section 20 of the Arbitration Act, 1940, being Suit No 521 of 2007 for appointment of arbitrator to determine the principal amount to be paid by the respondent. The respondent has denied that a sum of Rs.
6. 29,85.91,000/- is payable as it is yet to be determined through arbitration. The respondent denied that it is commercially insolvent and submitted that the financial health of the Company is evident from the fact that respondent made a declaration of issuance of right shares of Rs. 68,56,68,600/- and that the petitioner has subscribed the right shares for Rs. 7,20,42,620/- on 22.6.2007 after filing the petition.
7. M. Sohail Muzaffar, learned counsel for the petitioner, submits that under Share Purchase Agreement the petitioner sold 52.5% shares comprising of 2,00,00,000/-, ordinary shares amounting to Rs. 20,00,00,000/- which consideration of Rs. 60,00,00,000/- which the respondent is unable to pay inspite, of service of notice. He further submits that respondent is commercially insolvent and is not in a position to satisfy its liabilities and it will be just and proper to order for winding-8p the respondent-company. The learned counsel relied upon the following reported cases:-
(1) M/s. Glorex Textile Ltd., Karachi Vs. M/s. Investment Corporation of Pakistan and others (1999 SCM R 1850).
(2) M/s. AH Woollen Mills Ltd. Vs. Industrial Development Bank of Pakistan and others (PLD 1990 SC 763).
(3) Industrial Development Bank of Pakistan Vs. Modern Poultry Farm Limited (1990 CLC 1030).
(4) M/s. Habib Bank Ltd. Vs. M/s. Golden Plastic (Pvt.) Ltd. (1991 M LD 124).
8. Mr. Shaiq Usmani, learned counsel for the respondent, submits that the petitioner owns only /10.91% shares and cannot file this petition. He further submits that the amount is payable to the petitioner subject to adjustment of sponsors loan as provided in the agreement and there is a bona fide dispute between the parties in this regard for which an application for appointment of arbitrator has been filed in Court. He further submits that unless the amount is determined it cannot be said that the respondent is unable to pay its debts and it is not just and equitable to wind-up a commercially and financially sound company who has recently issued rights shares subscribed by the petitioner also. The learned counsel relied upon the following reported cases:-
(1) London and Parts Banking Corporation ((1874) 19E.Q. 444).
(2) The Company Vs. Rameshwar Singh (AIR 1920 Calcutta 1004).
9. I have heard the learned counsel for the parties and perused the record made available before me.
10. In terms of agreement Annexure 'A' to the petition the , petitioner sold her shares to Mr. Shunaid Qureshi and Mr. Abdul Ghani (hereinafter referred to as the purchaser of shares) against consideration of Rs. 60,00,00,000/-. This agreement was entered into between the petitioner and the above two persons. Clause 6 of the agreement under the heading 'Post Closing Obligations and Arrangements' provided that purchaser shall procure the company to repay and adjust sponsors loans within a period of six months. Clause 6.1(c) provided for payment of mark-up in case of default in payment. The agreement does not provide a clear amount which is payable by the respondent-company. This non-mentioning clear amount in the agreement create dispute between the parties, It appears that there is a bona fide dispute between the parties regarding the payment/adjustment of sponsors loan and mark-up accrued thereon. The purchaser has already filed application for appointment of Arbitrator. For winding-up of a company on the ground that the company is unable to pay its debts, it is necessary that amount is determined and is not disputed, It . Appears that evidence is required to determine the liability of the company and interference under this section will not be justified. The petitioner has given the amount payable by the respondent to the petitioner but no basis for calculating the amosite was given in the petition.
11. The respondent has also disputed that the payment of mark-up is not the responsibility of the company. The other aspect of the case is that the shares were purchased by Mr. Shunaid Qureshi and Mr. Abdul Ghani and the purchasers are liable to pay the consideration to the petitioner. The respondent is not a party or signatory to the agreement and in terms of agreement is liable to pay/adjust sponsors loan. The respondent-company appears to be financially and commercially sound as recently the rights shares were issued which was subscribed by the general public in the sum of Rs. 32,27,81,177/- and by the sponsors in the sum of Rs. 35,35,98,000/- and the petitioner has also subscribed for right shares of Rs. 7,20,42,000/-. This shows that respondent is commercially and financially sound and is capable for doing business.
12. The petition for winding-up of a company is not maintainable to pressurise the company to pay its debts. The Hon'ble Supreme Court in the reported case of M/s. AH Woollen Mills Ltd. Supra held that the company was running in loss and the mill of the company was closed and is commercially insolvent. This is not the case of the petitioner. The respondent has recently issued right shares and the petitioner has also subscribed the right shares. If a company is not commercially solvent why the petitioner has subscribed its shares, It appears that to pressurise the company to pay the amount to the petitioner this petition has been filed, In the case of M/s. AH Woolen Mills supra the Hon'ble Court has further held as under:- "In this case the High Court has come to the conclusion for the reasons stated in the judgment, that it was just and equitable, that the appellant be wound-up. The discretion has been properly exercised for the company was Undisputedly running in loss year after year and the mills of the company was closed since 1983. Therefore, it was commercially insolvent, In re: Punjab Flying Club Ltd. (AIR 1993 Lah. 301), it was observed that a company may be rich, yet it may be commercially insolvent. The real criterion is whether it could meet its liabilities and in this respect it was held in a petition under Section 162 of the Companies Act, 1913 that the Court has to see whether company is commercially insolvent i.e. Whether it is unable to meet its current demands although the assets when realized may exceed its liabilities. If the company is commercially insolvent it may be wound- up. Reference may also be made to People's Bank of India Ltd. v. Narian Das and others (31 PR 1914), wherein it was observed by Mr. Justice Rattigan, that "where a Banking Company has to admit that it has in all its branches suspended business, and that it must inevitably go into liquidation, and that its only hope of salvation is that a new Company may be formed to take its place, such Banking Company is not merely 'plainly and commercially' but also 'technically' insolvent and a Court would be fully justified in taking action under Section 134 in appointing a Provincial Liquidator, notwithstanding that the petition for compulsory winding-up was opposed by the Directors of the Company concerned."
13. In the English judgment cited by Mr. Shaiq Usmani it was held as under:- "It is very obvious on reading that enactment, that the word "neglected" is not necessarily equivalent to the word "omitted". Negligence is a term which. Is well known to the law* Negligence is paying a debt on demand, as I understand it is omitting to pay without reasonable excuse. Mere omission by itself does not amount to negligence. Therefore, I should hold, upon the words of the statute, that where a debt is bona fide disputed by the debtor, and the debtor alleges, for example, that the demand for goods sold and delivered is excessive, and says that he, the debtor, is willing to pay such sum as he is either advised by competent valuers to pay, or as he himself considers a fair sum for the goods, then in that case he has not neglected to pay, and is not within the wording of the statute."
14. In the judgment of Indian jurisdiction cited by Mr. Shaiq Usmani it was held as under:- "In this case the company alleged there was a bona fide dispute and they were willing to pay what was found due on the taking of an account. Now in this case we do not think it is necessary for us to decide finally whether there is a "disputed claim" in fact; it is sufficient for us to say that it appears to the Court (1) that on the materials before it there is ground for supposing that there is a bona fide dispute as to a substantial part of the debt on which the winding-up petition was based; and
(2) that the company is solvent. Under such circumstances the proper course is a suit; that course the respondent did adopt; and the suit which he instituted to recover the amount due to him has in fact been postponed until after the hearing of the suit by the company against him and his co- directors; under these circumstances we do not think that an order for winding-up the company ought to have been made on the petition until the litigation involved in the two above-mentioned suits had been disposed of."
15. This petition has been filed on the ground that company is unable to pay its debt arid that it is just and equitable that the company should be wound-up Subsection (2) of Section 314 of the Companies Ordinance. 1984 provides that when the petition is presented on the ground that it is just and equitable that the company should be wound-up, the Court may refuse to make ah order of winding-up, if it is of opinion that some other remedy is available to the petitioner and that they are acting unreasonably in seeking to have the company wound-up instead of pursuing that other remedy, In this case the alternate remedy by way of arbitration is available to petitioner and the petitioner can recover the amount after its determination through arbitration proceedings.
16. In view of the above discussion since there is a bona fide dispute between the parties regarding the quantum of amount and the purchasers have filed application for appointment of an arbitrator it cannot be conclusively said that the company is unable to pay its debts. Furthermore, the company is not commercially insolvent and alternate remedy is available to the petitioner it will not be just and equitable to order wind-up the company.
17. The petition is, therefore, dismissed with no order as to costs.