' ALI SAIN DINO METLO, J.---Messrs Unity Modaraba Management (Pvt.) Ltd., a Modaraba company, managing 'Unity Modaraba', has challenged judgment dated 29-7-2008 of the Tribunal constituted under section 24 of the Modaraba Companies and Modarabas (Floatation and Control) Ordinance, 1980 (hereinafter referred to as Modaraba Ordinance,) directing to wind-up the Modaraba, a paid up fund of Rs,300,000,000.00, divided into 30,000,000.00 Modaraba Certificates. The Modaraba was wound-up mainly because the company could not control the recurring losses which had accumulated to more than 99% of the subscribed amount. Section 23(1)(ii)(b) of the Modaraba Ordinance, provides that the Tribunal, on an application made by the Registrar, shall windup Modaraba, if its accumulated losses exceed fifty per cent of the total amount subscribed by the holders of the Modaraba Certificates.
2. The magnitude of loss to the extent of more than 99% of the subscribed amount is admitted. The only point argued by the learned counsel for the appellant was that the proceedings before the Tribunal were invalid due to absence of previous sanction of the Securities and Exchange Commission of Pakistan (hereinafter referred to as Commission) and that the company should have been given a chance to improve the affairs of the Modaraba. In support of his contentions he referred to sections 309 read with section 503 of the Companies Ordinance, 1984 (hereinafter referred to as Companies Ordinance,) and the cases of Additional Registrar of Companies v.
Messrs Norrie Textile Mills Ltd. Reported in 2004 CLD 1109 (Karachi) and Karim Cotton Mills Ltd. v.
Executive Director (Enforcement and Monitoring) reported in 2006 CLD 339 (Securities and Exchange Commission of Pakistan).
3. There is no force in the contentions of the learned counsel. Permission of the Commission is not required for making application for winding-up Modaraba and a very long period of about six years after the service of show-cause notice was available, which the company did not avail to improve the worst affairs of the Modaraba.
4. Modaraba and Modaraba Company are two different things. Under section 2 of the Modaraba Ordinance, they have been separately defined: "Modaraba" means a business in which a person participates with his money and another with his efforts or skill or both his efforts and skill and shall include Unit Trust and Mutual Funds by whatever name called;" and "Modaraba Company" means a company engaged in the business of floating and managing Modaraba."
5. According to the section 12 of Modaraba Ordinance assets and liabilities of Modaraba shall be separate and distinct from those of the Modaraba Company.
6. Messrs Unity Modaraba Management (Pvt.) Limited, seemingly under a misconception, is treating itself and the Modaraba managed by it as one and the same thing. In paragraph 6 of the facts given in the memo. Of appeal, it has been mentioned:-- "The appellant sought time to revive the company and also sought permission of the respondent to inject funds or to allow merger with the other companies."
Under the Modaraba Ordinance, the respondent i,e, the Registrar has nothing to do with any permission for the revival of the company or its merger with any other company.
7. In paragraph (c) of the grounds in the memo. Of appeal it has been mentioned:-- "incurring losses more than fifty per cent is not good ground for winding-up of a company and then in Paragraph (d) of the grounds it has been mentioned:-- "That it has remained policy of Securities and Exchange Commission of Pakistan not to wind-up a company and to grant maximum time to revive the company as it has been the case reported in 2006 CLD 339. By same analogy the appellant should have been given one year minimum time 'to revive the company which was not allowed."
8. In response to the show-cause notice issued by the Registrar in 2002, the appellant had been seeking time on the ground that negotiations for the sale of the Modaraba and transfer of its management were being held with different companies and parties. However, despite passage of more than three years they could not do anything and, therefore, the Registrar had no alternative but to file the application under section 23 of the Modaraba Ordinance, for winding-up the Modaraba. The application was filed on 17-12-2005. Also during the pendency of proceedings before the Tribunal for a period of more than one and half year the company could not do anything. In such circumstances, it cannot be said that the company (appellant) was not given sufficient chance to improve, the affairs of Modaraba. More than enough time was available to the company to improve the affairs of the Modaraba. Indeed, the Registrar waited too much.
9. The arguments of the learned counsel for the appellant that Executive Director of the Company was in jail and, therefore, the affairs of the Modaraba could not be improved is also without substance, because losses were there even before his going to jail. After his release also, in April, 2006, he did not do anything. Moreover, he was not the only Director of the Company. The other Directors of the company were also there.
10. It is true that by virtue of section 503(1)(c) of the Companies Ordinance, ifs provisions have been adopted for Modaraba Companies and Modarabas, but its provisions, which are inconsistent with the provisions of the Modaraba Ordinance, have been expressly excepted. This shows that Modaraba Ordinance, has been given overriding effect in respect of the subjects expressly covered by it. Section 42 of the Modaraba Ordinance also provides that provisions of the Modaraba Ordinance shall have effect notwithstanding anything contained in the Companies Act, 1913, or any other law for the time being in force. Companies Ordinance, is the successor statute of the Companies Act and, therefore, in view of section 8 of the General Clauses Act, 1897, Companies Ordinance, which is a repealing and re-enacted statute, will have to be read in place of the Companies Act. It is thus clear that the provisions of Modaraba Ordinance, have overriding effect upon all other laws, including the Companies Ordinance. Sections 22, 23, 24, 25, 26, 27, 28, 29 and 30 of the Modaraba Ordinance, provide comprehensive grounds and procedure, including filing of appeal etc., regarding winding up Modarabas. The provisions of the Companies Ordinance, can be pressed into service only in respect of the subjects which are not covered by the Modaraba Ordinance. In presence of distinct, comprehensive, and self sufficient provisions in the Modaraba Ordinance, itself regarding winding up Modarabas, provisions of the adopted law i,e, the Companies Ordinance, cannot be resorted to.
11. The precedents cited by the learned counsel for the appellant relate to winding up of companies and not of Modarabas and, therefore, both are irrelevant. Moreover, in the case of Karim Cotton Mills Limited, the Commission had given time of only four months to the sponsor Directors of the Company to revive the company by injecting funds themselves or selling the company to some other sound business party, who should revive it during the said period of four months. The time of four months was given by the Commission, when the sponsor Directors of the Company had shown honesty and professionalism by purchasing shares of the minority shareholders at a price of Rs,16 as against their market price of Rs,1 per share and had also presented a plan for giving interest free loan of rupees five million to the company. In the present case the Directors of the Company have not done anything to show their bona fides. They have wasted six long years.
Indeed, the Registrar waited too much, which he should not have
12. It was for the above reasons that the appeal, being meritless, was dismissed by a short order passed on 2-9-2008.