' TARIQ SHAMIM, J.--- C M No,124 of 2007 and C.M. No, 508-L of 2006. Through these applications, the Ex-Management has prayed for calculation of amounts specified in para.6 of the petition i,e, the depreciated value of the assets in 2000, versus the depreciated and available assets for the re- auction. Further, prayer has been made for recovery from Messrs Hashir Textile Mills Limited, the amount of depreciation caused since the handing over of the assets of Messrs Mohib Textile Mills Limited to Messrs Hashir Textile Mills Limited after adjusting the amount they had paid against the set aside auction.
2. By order dated 24th October, 2005 this Court appointed Messrs Mazhar All Khan and Ejaz Hussain Rathore, Chartered Accountants, to determine the value of the project, the detailed report dated 10-12-2005 was submitted by the said evaluators and the value of the land, building, plant and machinery of the Mills was determined at Rs,1,705,949,964. The Joint Official Liquidators after due deliberation and after considering the evaluation of land, building, plant and machinery as made by Messrs Haseem Associates (Pvt.) Ltd. Fixed the assets of the Mills at Rs, 1,700,000,000. Thus, with minor reduction in the value as assessed by the evaluators and Messrs Haseeb Associates (Pvt.)
Ltd., the report of 10th December, 2005 referred to above was accepted by. The Joint Official Liquidators which as stated earlier was not objected to the applicants despite being afforded ample opportunity. The allegations levelled in the instant applications arid the apprehensions expressed by the applicant therein are without any basis particularly as the assets of the company are functional, operational and marketable on account of supervision by the Joint t Official Liquidators. The arrangement regarding management of assets of the Mills under the supervision of the Joint Official Liquidator is in consonance with the mandate of the honourable Supreme Court of Pakistan as enunciated in the judgment dated 24th April, 2005 reported as 2005 SCM R 1237. The only purpose for preferring the applications can be. None other than to delay and frustrate the proceedings being carried out in compliance with the orders of the Honourable Supreme Court in the judgment referred to above.
' These petitions being misconceived stand dismissed. C.M. No,64 of 2008
3. Through this C.M. The applicant Ex-Management has expressed its desire to purchase the assets of the Mills on terms and conditions mentioned in para. 3 of the petition. Prayer has been made for the sale of assets of Messrs Mohib Textile Mills Ltd. To the applicant after determination of liabilities in accordance with SBP Circular No,29 of 2002. Mr. Salman Akram Raja, Advocate while appearing on behalf of the applicant on 5-9-2008 argued that the applicant was qualified' to purchase the assets of Messrs Mohib Textile Mills Limited on terms and conditions mentioned therein including determination of liability in terms of SBP Circular No,29, dated 15th October, 2002. It has been noticed that the Committee constituted under SBP Circular No,29 had earlier declined the request made by the applicant. Further, the applicant did not rely upon SBP Circular No,29, dated 15-10- 2002 during its subsistence. At this stage the benefit is not available to the applicant. It is further pointed out that the applicant did not offer any bid in the earlier two attempts to auction the assets of Messrs Mohib Textile Mills Limited. Even otherwise, the terms and conditions mentioned in para.3 of the application and in particular those embodied in sub-para. (d) cannot be accepted. In fact the applicant has no locus standi to make such an offer as it would be against the judgment of the honourable Supreme Court of Pakistan referred to earlier in this order.
4. Mr. Salman Akram Raja, Advocate, also contended, in the alternative, that after the sale in favour of Messrs Hashir Textile Mills Limited had been set aside by the Honourable apex Court, they stood relegated to the status of a mere tenant and after determining their liability towards rental of the Mills from the year, 2000 till date, Mr. Asif Saigol be allowed to retain the Mills upon payment of the amount paid/invested by the said auction-purchaser less the amount of rental. According to the learned counsel, he is fortified in his submission by the decision of the Honourable Supreme Court reported as Hudaybia Textile Mills Ltd. And others v. Allied Bank of Pakistan Ltd. And others PLD 1987 Supreme Court 512. Having carefully gone through the cited judgment, I have not been able to find anything therein to support the contention of Mr. Salman Akram Raja, Advocate. Firstly, the decision was rendered in a case under the Banking Companies (Recovery of Loans) Ordinance (No,XIX) 1979 and not in a winding up matter under the Companies Ordinance, 1984. Secondly, before the sale was confirmed in the cited case, a learned Single Judge of this Court had set aside the sale of land and buildings of Hudaybia Textile Mills (Pvt.) Limited in favour of one Rao Muhammad Suleman, the auction purchaser. Therefore, no question arose as to the rights of the auction purchaser like those of Messrs Hashir Textile Mills Limited who, besides payment of auction price, have made huge investments to which reference will be made later on. In the cited case, appeal filed by the auction purchaser succeeded before a learned Division Bench of this Court which having confirmed the sale of the properties of the said company, the latter approached the Honourable Supreme Court.
Wile dismissing the appeal of the company their lordships made the following observations:- "In this context the argument that since the Court was vested with the wide discretion to choose any mode of execution of the decree, it can likewise refuse confirmation of sale on any ground it chooses, is without substance. Judicial discretion vested by statutory provisions cannot be construed, in such a manner as it will arm the Court with arbitrary powers and would inevitably destroy the public confidence in the stability of the judicial sales as pointed out by the American Jurisprudence. Therefore, on facts as well as on principle the learned Single Judge went wrong in refusing confirmation on the ground that after the sale the decree had been satisfied. Even otherwise once the Court, had made up its mind to execute the decree by attachment and sale by public auction, as long as the order so directing was in the field, the discretion vesting in it under section 8(3) of the Ordinance stood exhausted and a particular course of proceedings was brought into motion which had to culminate in a result contemplated by the legal principles, and this course could not be diverted on the assumption that the executing Court had discretion to choose any mode of execution. In the premises the question of confirmation was to be regulated either by the C.P.C. Or equitable principles under the provisions thereof or on general principles as pointed out above. From any angle the refusal of confirmation by the learned Single Judge is unsustainable and the auction-purchaser was entitled, in the circumstances of the case to the confirmation of the auction sale."
' It may be reiterated that since in that case the sold assets were not handed over to the auction- purchaser, no question arose as to the rights of the purchaser consequent upon the sale having been set aside. However, in United Bank Limited v. Messrs A.Z. Hasmi (Pvt.) Ltd. 2000 CLC 1438, a learned Division Bench of Sindh High Court at Karachi, after referring to the afore-quoted passage from the judgment of the Honourable apex Court, observed as follows:-- "In the instant case admittedly there are no allegations of any malpractice, irregularities or fraud in the process of auction conducted by the trial Court. Even the judgment-debtors have not come forward to question the legality of such auction proceedings. After payment of full bid money, and confirmation of sale, the auction-purchasers have acquired valuable rights in the property which cannot be disturbed at this stage."
So far as the earlier auction in the present case is concerned, no wrong doing, malpractice or fraud had been attributed either to the then JOLs or to the auction-purchaser, except that neither reserve price was fixed nor wide publicity was given by the JOLs. Moreover, on behalf of the Ex- Management it was represented that there were individuals and Companies ready to offer much more price than the amount for which the assets of the Mills had been sold. On these considerations, and with a view to securing more money for the benefit of the creditors, their lordships of the Supreme Court were pleased to set aside the sale in favour of Hashir Textile Mills Limited, with direction to re-auction of the assets of the Mills. Be that as it may, in post-remand proceedings, the then learned Company Judge (Mr. Justice Mian Hamid Farooq, as his Lordship then was, now an Honourable Judge of the Supreme. Court of Pakistan) was pleased to pass inter alia the following order as far back as on 26-6-2006:-- "3. All the learned counsel except Mr. Salman Akram Raja, Advocate (representing ex- Management) state that since, Mills is a running concern, therefore, it would be in the fitness of things if the management and administration of the Mills be not disturbed and the existing management may be allowed to run the Mills, otherwise it will lead to numerous complications and the Mills which is earning profits, may go in losses or completely closed down. Mr. Salman Akram Raja, Advocate submits that a committee may be constituted, including a Textile Engineer, which may be directed to take over possession of the Mills from the buyers (in whose favour sale was set aside by the honourable Supreme Court of Pakistan) as they have no justification to retain the possession and run the mills.
(4) I have heard the learned counsel and examined the available record. In the present set of circumstances, it appears appropriate, in order to comply with the afore-narrated judgment of the Honourable Supreme Court of Pakistan, that the Sale Committee also comprising of representatives of PICIC and National Bank of Pakistan may be constituted, which arrange for the sale of Mills/assets of the company and also to supervise affairs of the Mills."
' Neither the Ex-Management nor anyone else has assailed the aforementioned order during the last more than two years. Needless to add that the "Sale Committee" (later on described as "Joint Official Liquidators") continuously supervised the affairs of the Mills and have said nothing against Messrs Hashir Textile Mills Limited in running the Mills. As mentioned earlier, the auction-purchaser had paid/invested huge amounts. They had thus acquired valuable rights and cannot be relegated to the position of a tenant. The contention being devoid of force is repelled.
' For what has been stated above this petition has no merits which stands dismissed.
C.M. No,17 of 2008
5. Through this petition Messrs Hashir Textile Mills has made a formal bid for the purchase of assets of the company as ordered by this Court on 19-12-2007. Liquidation proceedings were initiated against Mohib Textile Mills Limited by the unpaid creditors as well as the Mills on account of its inability to pay the creditors. The petitions were accepted and Mohib Textile Mills Ltd. Was wound up by this Court by the order dated 7-10-1998 passed in C.O. Nos.98, 100 and 103 of 1998, 123, 125 of 1996 and 80 of 1997. Joint Official Liquidators were appointed who under the directions of this Court held auction of the assets of the Mill and on the basis of Report No,38 of 2004 its assets were sold and delivered to Hashir Textile Mills Limited. The sale confirmed by this Court vide order dated 22- 9-2000 and 10-11-2000 was challenged before the Honourable Supreme Court of Pakistan by the unsecured creditors and ex-Management of the company. The sale was set aside and a direction was given to the company Judge of this Court which is reproduced hereunder:-- "By majority of two to one, Civil Appeal No,1540 of 2001 and also Civil Petition No,124-L of 2004 (after conversation into appeal), are accepted, the impugned orders dated 22-9-2000 and 10-11-2000 are set aside and the case is remanded to the High Court, with direction that the assets of the appellant-company be put to resale through auction. The learned company Bench of Lahore High Court shall keep the market value in view and same, in the given attending circumstances, shall be fixed as reserve price. It shall of course, .Be at liberty to make such arrangements and take such measures for management and administration etc. Of the Mills during interregnum as it may consider appropriate for the best interest of the company and the creditors."
6. Post remand, in compliance with the orders of the Honourable Supreme Court a Sale Committee was constituted comprising of the Joint Official Liquidators including Mr. Ghulam Haider the representative of the only secured creditor i,e, Pakistan Industrial Credit and Investment Corporation (PICIC). At present, under the directions of this Court duly recorded in the order dated 26-6-2006 the affairs of the Mills are being run by the Joint Official Liquidators in liaison with Hashir Textile Mills Limited. In further compliance with the orders of the Honourable Supreme Court an independent evaluation of the assets of the Mills as they existed was carried out by the evaluators namely Messrs Mazhar Ali Khan and Ejaz Hussain Rathore, Chartered Accountants. According to the report filed in the Court by the Auditors the existing assets of the Mills were evaluated, at Rs,1.74 billions. Subsequently, based upon the evaluation report and after hearing all concerned, reserve price of the assets of the Mill was fixed at Rs,2.00 billion for the purposes of auction vide order dated 11-4-2007. On the basis thereof the auction proceedings were initiated. All legal requirements and pre-requisites were observed whereafter the bids were invited through wide domestic and international publicity. The Report No,46 filed by the Joint Official Liquidators reveals that only one bid was received from Messrs Zahra Textiles (Pvt.) Ltd. Which was for the amount of Rs, 2.00 billions.
However, the same was fettered with a number of conditions duly highlighted in the said report.
The bid being invalid was not accepted by the Joint Official Liquidators as it was only an offer that contained altogether new conditions which were repugnant to the terms and conditions of the auction approved by this Court. It was, however, opined by the Joint Official Liquidators that lack of response to the auction, was on account of prevailing general recession in the textile industry, which had caused closure of a number of spinning units in the past several months. It was, therefore, proposed that last opportunity be provided to the Joint Official Liquidators to make a fresh attempt of auction at a reserve price of Rs,1.74 billions based upon the evaluation report as on 10-11-2005 submitted by Messrs Mazhar Ali Khan and Ejaz Hussain Rathore, Chartered Accountants.
While conceding to the demand made by the Joint Official Liquidators this Court vide order dated 25-6-2007 allowed another opportunity to the Joint Official Liquidators to make a last attempt for sale of the assets of the Mills through re-auction. After hearing the parties and in conformity with request made by the Joint Official Liquidators the reserve price of the assets of the Mills was lowered from Rs,200 billions to Rs,1.6 billions so as to attract prospective buyers. Once again there was total lack of response from the prospective buyers despite wide publicity etc. However, an offer/proposal was made by Messrs Zahra Textiles (Pvt.) Ltd. For payment of Rs,1.568 billions in instalments over a period of 126 months. This proposal being invalid was also rejected by the Joint Official Liquidators. The Report No, 49 was submitted in this Court highlighting the reasons for lack of interest on the part of the prospective buyers. Para No,11 of the report is reproduced hereunder:-- "That in the opinion of the Joint Official Liquidators, the lack of public interest in the sale of the Mills is due to acute recession in the textile industry of Pakistan, particularly, the spinning sector. As per newspaper reports during the last 6-7 months as many as 130 spinning units have been closed down Report published in daily "Business Recorder" dated 4-7-2007 is Annex-H. It is also reported that the short cotton crop size has resulted in higher prices of lint and is a main reason for high cost of production. A few days back the cost of cotton lint was Rs,3225 per maund, which has further aggravated the situation. The high in-puts are said to have made the spinning sector non- profitable for the time being. The current uncertainties in the country also might have kept the prospective bidder away. It is, however, expected that this temporary slump will most probably fade away in few months."
7. The said report was filed after two unsuccessful attempts by the Joint Official Liquidators to sell through auction the assets of the company. The report was signed by two Official Liquidators.
However, Mr. Ghulam Haider, the representative of PICIC, the only secured creditor, did not sign the same. The proposal made by the two Official Liquidators for making an attempt for sale of assets of the company through instalments was considered by this Court in the light of reply and objections and turned down vide order dated 19-12-2007. In the said order it was directed that the parties interested to file any bid for assets could do so before the next date of hearing. With the exception of Messrs Hashir Textile Mills Ltd. Neither the creditors nor the Ex-Management or anyone else made any bid for purchase of assets of the Mills. Through the instant application (C.M. No,17 of 2008) Messrs Hasher Textile Mills Limited has made a bid for the purchase of, assets of Mohan Textile Mills Limited at Rs,1.692 billions, the amount invested by it. Para.3 of the C.M. Which is relevant in the said regard is reproduced hereunder:-- "That the applicant had undeniably paid/Made investment in the Mills at least as follows:-- Description Amounts Payments made to JOLs (As per report No.38 of 2004 submitted by the JOILs)1,265,445,625 Payment made to Leasing Companies (As per invoices attached, issued by the Leasing Companies)120,000,000 Additions made by Hashir Textile Mills Ltd.
(As permitted by Honorable Lahore High Court)306,921,000 Grand Total 1,692,366,625
8. It would be pertinent to mention here that Mr. Muhammad Asif Saigol who represents the Ex- management and National Bank of Pakistan the contesting unsecured creditor were afforded innumerable opportunities to provide better offer than one made by Hasher Textile Mills Limited. At one stage in the course of arguments/Hashir Textile Mills Limited made an offer to Mr. Muhammad as if Saigol and the creditors' that it would withdraw its bid if they were willing to return the amount invested by it. However, the offer was not accepted by any one. From the foregoing discussion, it is evident that all attempts made by the Joint Official Liquidators for sale of assets of the company through auction have failed. The mandate of the Honourable Supreme Court to sell the assets of the company through auction has been carried out in letter and spirit as two unsuccessful attempts were made in the said regard .After fulfilling all legal requirements and prerequisites including wide publicity and fixing of the reserve price. In the present economic crisis when the country is on the verge of being declared a defaulter and in view of power shortages from which no respite is on the horizon there is hardly any possibility of any prospective buyer coming forward to purchase the assets of the company. The reserve price has already been reduced and any further reduction in the same would militate against the interest of all concerned. Insofar as Messrs Hashir Textile Mills Limited is concerned, it is the solitary buyer in the field which has made an offer in excess of the reserve price fixed by this Court earlier. As to the amount claimed by Messrs Hashir Textile Mills Limited invested by it in Messrs Mohib Textile Mills Limited is concerned, the same stands verified by the evaluation report of Messrs Mazhar Ali Khan and Ejaz Hussain Rathore, Chartered Accountants in their report dated 10-11-2005. The extent of invest made by Messrs Hashir Textile Mills Limited, the detail of which has been provided hereinabove, is not disputed by the Joint Official Liquidators. It is pointed out that Hashir Textile Mills Limited had firstly filed C.M. No,570-L of 2005. Again, a similar application (C.M. No,446-L of 2006) was filed. The learned Joint Official Liquidators after inspection of the Mills had expressed inter alia the following view in their reply to auction-purchaser's C.M. No,446-L of 2006.
"The additions made by the petitioner if segregated at this stage, will make the Mills inoperational and as such cannot be sold, therefore, the Mills have to be sold as it is, and whatever additions are alleged and proved to have been made by the petitioner shall be duly accounted for and cost thereof will be paid to the petitioner from the sale proceeds."
Although during the last three years, two attempts have been made by the learned Joint Official Liquidators for re-sale of the assets, yet they have remained unsuccessful in attracting any impressive buyer.
9. The plea of Hashir Textile Mills Limited that because of persistent advertisements and wide publicity for sale of the Mills, it has suffered tremendously in its reputation, consequently one of the Units of the Mills had to be closed down, is also worth special notice. When the assets of the Mills were first sold in the year 2000, the investment chances in Textile Industry were quite dreary. The Mills was lying idle, having been closed about four years prior thereto; i,e,, in May, 1996. Reportedly, the assets of the Mills had been stolen away in abundance. Despite that the assets consisting of the land, building and machinery were sold for Rs,1,081,000,000. After taking over possession, Hashir Textile Mills Limited had admittedly incurred expenditure of Rs,586,796,531 towards price of leased assets, mark-up paid to the creditors of Mohib Textile Mills Limited and payment made to WAPDA for restoration of electricity. Besides, Hashir Textile Mills Limited has claimed to have invested no less than Rs,263,871,906 on addition of fixed assets. It is nobody's case that if the stolen parts of the existing machinery had not been made available and the junk machinery had not been replaced, the Mills could become operational by any other means. Needless to mention that this court had given permission vide order dated the 2nd of December, 2002 for sale of obsolete/old items. As mentioned above, the learned Joint Official Liquidators have expressed the view that if the additions made by Hashir Textile Mills Limited were segregated, the Mills would become in- operational and incapable of sale. It was submitted on behalf of Hasher Textile Mills Limited that at the time of sale of the Project in the year, 2000, the roads were totally destroyed, and various parts of the buildings were also damaged, consequently it had to get the roads and buildings re- constructed and repaired; that the economic depression was much deep-rooted, chaotic and frustrated at the time of earlier sale of the Project in the year, 2000, whereas the Mills is in vibrant running condition and the fact that it has failed to fetch more price establishes beyond doubt that it was sold at much better price in the year, 2000. During the last seven years, there has been escalation at least in the value of land and building. When the Mills was operational and no Unit was closed, Messrs Haseeb Associates (Pvt.) Limited determined its value at Rs,1,705,949,964 and Messrs Mazhar Ali Khan and Ejaz Hussain Rathore, Chartered Accountants valued it at Rs,2,079,515,271. Even if the claim of Messrs Hast Textile Mills Limited is drastically reduced, it would not be possible to bring the same down to an amount less Rs,1,692,366,625. I wonder wherefrom that amount will come when the learned Joint Official Liquidators have not been able to sell the Mills even for Rs,1.60 billion. In the circumstances, there appears absolutely no possibility of the Project fetching a price sufficient to compensate and pay off even the claim of Hashir Textile Mills Limited. To keep the matter pending for an indefinite period in the false hope that situation may improve will be tantamount to simply reducing the existing funds available in the liquidation account. As stated earlier the prevailing acute general recession in the Spinning Sector of Textile Industry, has resulted in the closure of about 130 Spinning Units as reported in the Business Recorder of July 4, 2007. Moreover, because of no relief having been given to this Industry in the Budget for the financial year, 2007-2008, as per Report of learned Joint Official Liquidators, the Spinning Sector has become "non-profitable". In the prevailing circumstances, there does not appear any likelihood of the slump fading away in the near future.
10. As per learned Joint Official Liquidators, presently the Mills is no more a viable or profitable business undertaking. It may be added here that only Hashir Textile Mills Limited has objected to the proposal of the learned Joint Official Liquidators for re-auction, on terms which may suit the prospective customer alone and none else. If the Mills is sold on the terms now suggested by the learned Joint Official Liquidators it will be tantamount to robbing one to pay the other. In the circumstances, it will neither be in the interest of justice nor for the benefit of any party/creditors to keep the sword hanging indefinitely, speculating that the situation may improve to an extent of attracting customers who may be ready to pay more than the claim of hasher Textile Mills Limited.
The proposal of the learned Joint Official Liquidators to wait and see for a few months and then to re-commence the process of auction once again, by extending latitude and more favourable terms to the prospective buyers in the matter of payment of the bid money, being not in the interest of justice, is not acceptable. Even PICIC, the only secured creditor, in its reply to Report No,49 has taken the following stance:-- "That in spite of best efforts, the JOLs have not been able to sell the textile mills on the terms and conditions approved by the Honourable court. The bid of Rs,1.600 billion submitted by Zahra Textiles (Pvt.) Ltd. On deferred basis is less than the bid of Rs,1,081 billion already paid by Green House Spinning Mills and Harrapa Textile Mills on the doctrine of time money value and in fact the bid of Rs,1.081 billion made by Green House Spinning Mills and the Harrapa Textile Mills is the highest bid received for the sale of the textile mills. It is in the interest of justice and equity that the previous sale of the Mills at Rs,1081.000 Million in favour of the previous purchasers, Green House Spinning Mills Ltd. And Harappa Textile Mills Ltd. Which was confirmed by the Honourable Company Bench on 22-9-2000 may kindly be approved and the previous purchasers may kindly be allowed to have the textile mills against the bid amount already paid by them. It is submitted that this arrangement will be in the interest of the textile industry because it will keep the mills running."
"In view of the foregoing and in the interest of justice and equity it is prayed that the textile mills may kindly be sold to the previous purchasers i,e, Green House Spinning Mills Ltd. And Harappa Textile Mills Ltd. At the previous bid amount of Rs,1.081 billion which has already been paid by them.
The learned Joint Official Liquidators have tried their best but all their efforts in the right direction having borne no fruit, let the matter now come to an end. In the circumstances, this court is left with no opinion, but to allow C.M. No,17 of 2008, consequently the bid of Messrs Hashir Textile Mills Limited, made through the said petition, is hereby accepted. Resultantly, Mohib Textile Mills Limited stands hereby dissolved. The necessary steps stipulated by, section 350 of the Companies Ordinance, 1984, and rules 246 to 248 of the Companies (Court) Rules, 1997, shall follow.
Main case and C.M. No,435 of 2008.
' Through this application, Malik Muhammad Hussain, etc., have claimed commission on account of sale of the assets of the Mills. Let it come up for further proceedings on the 26th of September, 2008, along with the main case for consequential orders.