' MUNIB AKHTAR, J.---This application for interim injunctive relief raises the interesting and important question whether a person can be restrained from presenting a winding up petition against a company. The issue arises in the following circumstances.
2. The defendant ("DHA") entered into an agreement with Meinhardt (Singapore) Pte. Ltd.
("Meinhardt") on or about 27-9-2004, a company registered in Singapore, to develop a project by the name of "Creek Marina" on land owned by the defendant. The plaintiff, a Pakistani Company, was incorporated in terms, and for purposes, of the project. A number of agreements were entered into, one of which was a lease deed that was executed on 5-5-2005 between the plaintiff and the defendant ("Lease Deed"). Disputes subsequently arose between the parties (including Meinhardt), which led to litigation and several suits were filed. In particular, DHA filed Suit 525/2011 in this Court, in which the defendants were the present plaiptiff, Meinhardt and certain other persons. Certain applications for interim relief were also filed, and these were disposed of by me by means of an order dated 15-7-2011 ("Earlier Order"). As presently relevant, the following extracts from the Earlier Order may be reproduced (the defendants Nos.1 and 2 referred to therein being the present plaintiff and Meinhardt respectively):- "(2) The plaintiff is the Pakistan Defence Officers Housing Authority, otherwise known as DHA (and hereinafter so referred). It appears that on or about 27-9-2004 ["Main Agreement"], an agreement was entered into between the plaintiff and the defendant No,2... [T]his agreement was in relation to a high-end residential housing project, which was to be constructed on land belonging to the plaintiff and for which purpose; the plaintiff was to get certain consideration.... One of the provisions of the agreement was that the defendant No,2 would incorporate a special purpose vehicle (SPV) in Pakistan through which the project would be carried out. That SPV is the defendant No,1, which was incorporated on or about 7-2-2005. Thereafter, the lease deed dated 5-5-2005 was executed between the plaintiff, the defendant No,1 and the defendant No,2 whereby the plaintiff made available the land for the purposes of the housing project. On the same date, the Main Agreement was amended by an addendum (hereinafter referred to as the "First Addendum"). Subsequently, on or about 4-6-2009, the Main Agreement was amended yet again by another addendum (hereinafter referred to as the "Second Addendum")....
(3) Learned counsel for the plaintiff submitted that pursuant to the Main Agreement and upon the land made available by the plaintiff as noted above, the housing project was launched by the defendant No,1 under the name of "Creek Marina Project" on or about 11-9-2005. The advertisement of the project expressly claimed that it was a DHA approved project. Learned counsel submitted that bookings for apartments in the project were made both in Pakistan and abroad and the project met with huge success, with the result that about 768 apartments, worth around Rs,3 Billion, were successfully booked by allottees.... The primary grievance of the plaintiff, as submitted by learned counsel, is that after the launch of the project, although work did begin, it has since stalled, and the milestones contemplated for the project were never met by the defendants. Learned counsel submitted that there were many grave and serious breaches of the Main Agreement and in particular, despite repeated efforts in this regard by the plaintiff, no proper accounting was ever given for the monies that had been collected from the general public on account of the apartments booked by them. Learned counsel contended that there was a grave and serious apprehension that there had been a siphoning off of the funds that had been obtained from the public and that, for all extents and purposes, the defendants (and in particular the defendants Nos.1 and 2) had abandoned the project. Learned counsel further submitted that a number of allottees had already filed suits against the defendants, which were pending adjudication in this Court. Learned counsel further submitted, that the audited accounts for the year ending 30-6- 2009, which is the last year for which such accounts of the defendant No,1 were available, showed that it had made huge losses and according to him, even a bare perusal of these accounts showed that grave and serious financial irregularities had been committed....
(4) Continuing with his submissions, learned counsel submitted that one fact which in particular had required the immediate filing of the suit, and the seeking of interim relief, was that the defendant No,1 had developed certain disputes and differences with the contractors who had been appointed for the project. The contractors had given three bank guarantees in favour of the defendant No,1 and when the latter sought encashment of the same the contractors filed a suit in this Court. Although it appears that initially certain interim orders were made, the said orders were eventually amended or modified to the extent that two of the guarantees, amounting to over Rs,750 million, could be encashed. [The decision is now available at PLD 2011 Karachi 304] The guarantees were duly encashed and the proceeds deposited in the first instance in the account of the defendant No,1 with the defendant No,5, Habib Bank Ltd. Learned counsel for the plaintiff contended that instead of using these funds for the purposes of the project, the defendants instead intended to spirit away the same by taking the money offshore. Necessary instructions in this regard had already been given to the defendant No,5, and the situation had only been saved in the nick of time on account of ad interim orders made by the Court in this suit. Learned counsel contended this spoke volumes about the status of the project and the fraudulent and unlawful manner in which the defendants were conducting themselves. He submitted that there was a grave and serious apprehension that the project would never be completed by the defendants to the manifest loss, harm and injury of the plaintiff and the allottees....
(6) Learned counsel for defendants Nos.1 and 2 strongly opposed the grant of any interim relief to the plaintiff, and prayed, in support of the application moved by him, that the ad interim orders be recalled.... [Llearned counsel denied that there had been any violation of the terms of the Main Agreement. He submitted that when the relevant provisions thereof were read along with the two amending agreements, the correct position became abundantly clear. His case was that the reason for the delay in the completion of the project was on account of the plaintiffs non- cooperative attitude, which had been made public, and as a result of which the public at large had, without justification, lost faith in the project. Thus, according to learned counsel, the blame in this regard lay squarely at the plaintiff s door. Learned counsel further submitted in this context that it was clearly contemplated that bank financing would be obtained for the project, and that the defendants had lined up such financing to the tune of about Rs,2 billion, but it could not materialize on account of the plaintiffs attitude. Learned counsel further contended that by reason of the negligence and failure of third party contractors, the project had been materially affected and a huge loss had been sustained. Learned counsel's case was that despite all these factors, the defendants were committed to the project and to the completion thereof and he denied altogether any contention that the project had been abandoned. As regards the allegation of the siphoning off of the funds, learned counsel submitted that the audited accounts for the defendant No,1 for 2010 had been prepared and would be duly dispatched to the plaintiff. His case however, was that even in respect of the accounts for the year 2009, which had been relied on by the learned counsel for the plaintiff, the correct position was that the said accounts had not been qualified in any manner by the auditors who were a well-known and reputable firm. Learned counsel submitted that the inferences and conclusions drawn by the plaintiff from the accounts were entirely unwarranted. No specific example or instance had been given of the alleged siphoning off of funds and only vague and generalized assertions had been made in this regard. As regards the amount received on encashment of the contractors' bank guarantees, learned counsel candidly conceded that instructions had indeed being given to transfer this amount from the account of the defendant No,1 to that of the defendant No,3 [an associated company]. However, he submitted that as was clear from the remittance instructions given in this regard, and placed on record, the funds were being transferred to an onshore rupee account. He candidly stated that the reason for this was to protect the money from being blocked on account of any interim orders that may be made in any pending litigation, and the reason for that, according to learned counsel, was that the defendant No,1 desired to have the money freely available for purposes of utilizing it on the project.
He stated on instructions that the defendants would be satisfied with any interim arrangement that may be made by the Court with regard to this money, as long as it could be utilized for the project.
Learned counsel denied absolutely any abandonment of the project by the defendants...."
' After considering the matter, I gave detailed directions to the parties and to the extent presently relevant, those directions (contained in pare 18 of the Earlier Order) were as follows:-- "(a) The funds lying in the account of the defendant No,1 with the defendant No,5 [the bank, Habib Bank Ltd.] shall continue to remain in the said account and shall be dealt with as hereinafter stated.
(b) ...............
(c) By the 20th of each month the defendant No,1 shall submit a budget for the next coming month in respect of expenditures and outlays to be incurred and made by it in respect of the project and shall identify the sources (including the bank accounts herein referred) from which such expenditures and outlays are to be met and such budget shall be certified by the auditors of the defendant No,l.
(d) By the 25th of each month the plaintiff shall communicate to the defendant No,1 any objections to any item in the proposed budget and shall also specify exactly why, according to the plaintiff, the proposed outlay or expenditure is not for the purposes of the project and all such objections shall be certified by a reputable firm of chartered accountants to be engaged by the plaintiff at its own cost for the time being, but the plaintiff may be reimbursed by the defendants Nos.1 and 2 if the Court subsequently so deems appropriate.
(e) In case any objection is taken as above, the auditors of the defendant No,1 and the chartered accountants acting for the plaintiff, and the concerned officers of the plaintiff and the defendant No,1 shall meet immediately to resolve the situation. In case they are unable to do so, then a reference may be made to the Court, but the parties are put to notice that heavy costs, payable immediately, will be imposed in respect of each objection (such costs being not less than Rs,25,000 for each objection) on the party found, as the case may be, to have raised or resisted the same without reasonable cause.
(f) On and from the first day of the month for which the budget has been proposed and scrutinized as above, the defendant No,1 may make payments from the accounts referred to herein above (payments in respect of outlays objected to being subject to the foregoing), and shall in respect of each such payment provide to the plaintiff details of the same duly certified by its auditors and supported by copies of bank statement(s) by the 7th of the next succeeding month.
(g) If any payments in respect of any monthly budget are to be made to the defendants Nos.2 to 4 or to any entity controlled by any of these defendants or associated with them then such payments shall be made into a special foreign currency account to be opened onshore with the defendant No,5 by the defendant No, 1 and disbursement from this account shall not be made without the prior orders of the Court.
(h) The defendant No,5 shall, in respect of the last mentioned account, and on a monthly basis, file a statement showing the inflows into such account and, in the case of any outflows, shall certify that the same were made only after receipt of the written orders of the Court.
(i) - (1) ......
3. Learned counsel for the plaintiff submitted that the plaintiff was faithfully adhering to the directions given as above, making all efforts to proceed with and complete the project. However, the defendant kept raising frivolous objections to the budgets presented by the plaintiff, taking issue with almost every item thereof. Learned counsel submitted that an amount in excess of Rs, 1 Billion was still lying with Habib Bank Ltd. In the account referred to above, which was to be, and was being, utilized for purposes of the project.
4. Learned counsel further submitted that the defendant served a , notice under section 306 of the Companies Ordinance, 1984 on the plaintiff on or about 15-9-2011. The notice relied on the second addendum to the agreement dated 27-9-2004 (as noted in para 2 of the Earlier Order, reproduced above), and in particular, the following addition that was made to the latter agreement by means of the said addendum:-- "CMPL shall buy back 75% of DHA's share of sellable area by payment of PKR One Billion to DHA from its own resources which is to be affected upon finalization of financing agreement after collateralization of the Land in accordance with this Second Addendum to Agreement. Clause 1 of the Lease Deed dated 5th May, 2005 regarding 15% sellable area would also be read in conjunction with this clause."
"CMPL" referred to the plaintiff, which was party to the second addendum. The second addendum also provided that the plaintiff was to pay the aforesaid amount of Rs,1 ' Billion to the defendant "within 18 months of date of signing of this Second Addendum to Agreement dated 27th September, 2004". The second addendum was executed on or about 4-6-2009. It is to be noted that clause 1 of the Lease Deed stated that the land was being given on lease by the defendant to the plaintiff in consideration of the premium and the ground rent as therein specified, as also "15% of the net floor area in CM Project".
5. The defendant's notice stated that more than 18 months had passed since the signing of the second addendum, but the amount of Rs,1 Billion still remained unpaid. The plaintiff was called upon to pay this amount (as also certain other amounts referred to in the notice) within 30 days, failing which a winding up petition would be presented against the plaintiff by the defendant.
6. Learned counsel for the plaintiff submitted that a reply was given to the defendant's notice on or about 14-10-2011, in which the various allegations made were denied, and it was specifically denied that there was any liability to pay the amount claimed by the defendant. Thus, the defendant was not a creditor of the plaintiff in any manner, including in particular, for the purposes of a winding up petition. Learned counsel submitted that the notice under section 306 was a mala fide abuse of statutory provisions, and the notice had been served with the ulterior motive of putting pressure on the plaintiff. The amount claimed was in any case bona fide disputed, and the matter could not be resolved by means of the summary procedure that applied under the Companies Ordinance. The notice and threatened winding up petition were a gross abuse of the legal process, which was completely unwarranted, and the plaintiff was entitled to suitable injunctive relief, enjoining the defendant from presenting any such petition. Learned counsel relied on several decisions from various jurisdictions, considered below, to contend that the Court had ample jurisdiction and powers to restrain a party from presenting a meritless winding up petition. Learned counsel submitted that the mere presentation of such a petition would effectively destroy the plaintiff and completely eliminate any possibility of the project being completed by it He contended that this was in fact the real purpose behind the threatened winding up: to deliberately create and engineer such a situation that would allow the defendant to pretend that the plaintiff had failed to fulfill its obligations in respect of the project and enable the defendant to take it over for its own mala fide purposes.
7. Learned counsel for the defendant opposed the grant of any relief to the plaintiff. He submitted that the grant of interim relief to the plaintiff would be tantamount to decreeing the entire suit, which was impermissible. In this regard, he referred to the prayer clause of the suit. He also submitted that the Court had no jurisdiction to restrain the presentation of a winding up petition, since the plaintiff (which would be the respondent therein) would be able to raise all its objections and take all the grounds as taken in the suit in the winding up proceedings. Learned counsel submitted that the liability to pay the Rs, 1 Billion within the stipulated period was clear and undeniable, and admittedly, the plaintiff was in default and breach thereof. He denied that the debt was, or could be, bona fide disputed. Learned counsel further submitted that the various illegalities that had been committed by the plaintiff, and for which the defendant had been constrained to institute its aforementioned Suit 525/2011 were well established. The plaintiff was a company specifically established by agreement between the defendant and Meinhardt for purposes of the Creek Marina project, and thus the defendant was a person concerned with, and interested in, its formation and continuance. Learned counsel submitted that this gave the defendant an additional basis on which to present a winding up petition. In other words, its case was not limited simply to the amount of Rs,1 Billion being claimed by it. Learned counsel contended that no grounds had been shown as to why the defendant should be restrained from presenting a winding up petition, and the present application therefore merited dismissal.
8. I have heard learned counsel as above, examined the record with their assistance and considered the case-law relied upon. The first matter that requires consideration is whether this Court, on its original side, has the jurisdiction to restrain a person from presenting a winding up petition. Learned counsel for the plaintiff referred to a nuniber of decisions from different jurisdictions to submit that this question Ought to be answered in the affirmative. He started with English law and referred to Cadiz Waterworks Company v. Barnett (1874) LR 19 Eq.
182. It was there observed that if the court "sees a petition to wind up presented, not for a bona fide purpose of winding up the company, but for some collateral and sinister object, on that ground it will be dismissed with costs" (pg. 196), and it was held that a person could be restrained in such circumstances from presenting a petition for winding up. Learned counsel also referred to Ross & Craig v. Williamson [2006] EWHC 880 (Ch), Re a Company (No,8735 of 2006) [2006] EWHC 3299 and Moorside Investments Ltd. v. DAG. Construction Ltd. [2007] EWHC 3490 (Ch). In all of these cases, the defendant was restrained from presenting a winding up petition on the ground that the debt was bond fide disputed and the petition would be an abuse of the process. Reference may also be made to Mann v. Goldstein [1968] 2 All ER 769 and ICS Incorporation Ltd. v. Michael Wilson & Partners [2005] EWHC 404. In the first mentioned case, it was observed as follows (pp. 771 and 775):-- "It is well established that this court has jurisdiction to restrain the presentation or advertising of a winding-up petition and restrain all further proceedings on it. That jurisdiction is a facet of the court's inherent jurisdiction to prevent an abuse of the process of the court. It will be exercised where a winding-up application is presented, or prosecuted otherwise than in accordance with the legitimate purpose of such process.
' For my Part I would prefer to rest the jurisdiction directly on the comparatively simple propositions that a creditor's petition can only be presented by a creditor, that the winding-up jurisdiction is not for the purpose of deciding a disputed debt (that is, disputed on substantial and not insubstantial grounds), since, until a creditor is established as a creditor he is not entitled to present the petition and has no locus standi in the Companies Court; and that, therefore, to invoke the winding-up jurisdiction when .The debt is disputed (that is, on substantial grounds) or after it has become clear that it is so disputed is an abuse of the process of the court. ... Indeed, the prevention of the abuse of the process of the court is the very essence of the whole of this court's jurisdiction to restrain the presentation of a winding-up petition."
' In the second case, it was observed as follows:-- "87. The principles I have to apply are not in doubt. Where there is a substantial dispute as to the whole of the debt (or, in other formulations, a bona fide dispute or a dispute on substantial grounds), the court will not normally make a winding-up order, and I ought to restrain presentation of a winding-up petition, even if (in the context of a summary judgment application) the defence could be regarded as "shadowy." This is so even if it is otherwise shown that the company is insolvent."
There can therefore be no doubt that the jurisdiction to restrain the presentation of a winding up petition is well established in English law.
9. Learned counsel also referred to Metalform Asia Pte Ltd. v. Holland Leedon Pte Ltd. [2007] SGCA 6; [2007] 2 SLR (R) 268, a decision of the Singapore Court of Appeal, where Mann v. Goldstein was cited with approval at pg. 287 (para (62]). However, it is to be noted that this was a case where the company's defence was that it had a cross claim against the creditor for an amount greater than the latter's claim. That of course is not the situation at hand. The facts of the cited case were therefore rather different.
10. Learned counsel also referred to two decisions from Malaysia, being Westforrn Far East Sdn Bhd v. Connaught Heights Sdn Bhd and others [2010] 3 MIJ 459; [2009] MYCA 68 (Court of Appeal) and Multimedia Development Corp. Sdn Bhd v. Pembinaan Purcon Sdn Bhd [2006] 2 MIJ 653 tHigh Court). Learned counsel referred to the observations at pp. 487 to 489 of the Court of Appeal decision. But, with respect, that is from the judgment of Hishamudin, JCA, who partially dissented.
The majority decision was by Suriyadi, JCA (with whom Azhar Ma'ah, JCA agreed), who stated as follows (pp. 474-5 and 479):-- "[26] To rehash on the issue before us, it is the right of a would-be petitioner to apply for a winding up order in appropriate circumstances, as that is a statute conferred right. It may be restrained only in certain circumstances. To succeed, an injunction applicant must establish that the presentation of a winding up petition would be an abuse of the process of court. From the point of view of the presiding judge, before granting the injunction, he must address the issue whether he is satisfied that the evidence adduced before him has established a prima facie case ,of an abuse of the process of the court e.g. The debt is disputed... If the applicant of the injunction fails to establish that prima facie case then no injunction is granted. On the above reasoning, the guidelines of American Cynamide Co. v. Ethicon Ltd and Keet Gerald Francis v. Mohd Noor therefore would be out of sync with the current application, which seeks to stop proceedings in limine. It is my view too that the above principle would apply equally in an ex parte application for an injunction.
27. Granting of an injunction very much depends on the exercise of the discretion of the judge.
Whether the adduced prima facie evidence is sufficient for the court to exercise that discretion will depend on whether the grounds are clear and persuasive enough to satisfy the threshold level of a prima facie case. Sufficiency depends very much on the circumstances of each case.
40. From the totality of the evidence there was clearly a genuine dispute as to the debts in question as explained above, let alone the insolvency of the respondent was never established adequately. I was thus satisfied that the learned judge had exercised his discretion correctly in granting the order, not only for the ex parte, but also the inter-partes applications. As said above, an appellate court will rarely interfere with an exercise of discretion unless the trial judge has erred in law or if the trial judge has failed to take into account highly relevant considerations. Here I failed to detect that error."
' From the foregoing, it appears that the Malaysian Court of Appeal has preferred a somewhat restricted approach, recognizing that the right to apply for a winding up is granted by statute, and therefore there ought to be only a limited set of circumstances where the court will restrain a person from exercising such right. However, the jurisdiction, as such, to act in appropriate cases has undoubtedly been asserted.
11. Reference may also be made to the Australian jurisdiction, where it appears that certain statutory changes were made in the mid 1990's that give a comnanv which has been served with a demand by a creditor (i,e,, a demand equivalent to section 306 of the Companies Ordinance) a statutory right to have it set aside. Thus, the legislative framework in Australia may now be rather different. However, it is pertinent to refer to decisions prior to the statutory changes, and reference may be made to Fortuna Holdings Ltd. v. Deputy Commissioner of Taxation of the Commonwealth of Australia [1978] VicRp 9; [1978] VR 83, .a decision of the Supreme Court of Victoria (one of the Australian states) (available at: http: / /www. Austlii. Edu . Au / cgi-bin/ sinodisp/ au/cases/vic/VicRp/1978/9.Html?Query=). The plaintiffs before the court, sought interlocutory injunctions restraining the Deputy Commissioner from presenting winding up petitions against them, on the basis of demands for income tax that remained unpaid and outstanding. While on the facts, the Supreme Court concluded that the plaintiffs had been unable to make out a prima facie case and hence dismissed their applications for interim relief, the relevant and applicable principles were stated with clarity in the following terms (internal citations and references to case- law omitted): -- "Principle The submissions of the parties make it necessary for me to consider whether in this application the basis exists which would enable me to exercise a discretion to grant or refuse an interlocutory injunction, and if so, to consider the exercise of that discretion.
' When a court restrains the presentation of a winding up petition to that court it exercises part of its inherent jurisdiction to prevent abuse of its process...Usually a court acts against abuse of its process after proceedings have been commenced. Thus, existing proceedings may be stayed or dismissed, or documents delivered as a step in the proceedings may be struck out. This is done to relieve a party to the proceedings from an oppressive and damaging situation in which he has been placed through abuse of court process. The law has long recognized that with proceedings to wind up a company, intervention after the commencement of proceedings would often be too late to relieve the company of oppression and damage. The courts have recognized that irreparable damage may be done to a company merely through public knowledge of the presentation of a petition. Usually the damage flows from the loss of commercial reputation which results. The courts have also been conscious of the pressure which may be put on a company, by a person with a disputed claim against it, threatening to present a winding up petition unless the company meets his claim. While that threat exists, the company, in order to avoid the damage involved in the presentation of a petition, is pressed to meet the claim although it may have substantial and genuine grounds for regarding itself as not required to do so.
' The decisions of the courts have established the principle that the presentation of a winding up petition may be restrained by injunction where its presentation would amount to an abuse of the process of the court. The courts apply this principle similarly to restrain the advertisement of a petition already presented. The principle enables companies to be protected from threatened or apprehended oppression and damage from abuse of court process.
' The basis on which the courts have intervened in the cases cited by counsel, has been that presentation of a winding up petition might of itself cause irreparable damage to the company.
Given that basis, the application of the principle which entitles the courts to intervene to prevent abuse of process, depends on the existence of different elements in two distinct situations considered in the authorities. For convenience I will refer to the applications of the principle in the two situations as the first and second branches of the principle.
First Branch of Principle The first branch applies in cases where the presentation of the petition might produce irreparable damage to the company and where the proposed petition has no chance of success.... Cases where the first branch of the principle has been applied, have been cases where the petition was incapable of success as a matter of law, or as a matter of fact through lack of supporting evidence.
' I consider that there is a second branch of the principle which may apply in situations where the first branch does not.
' The second branch applies in cases where a petitioner proposing to present a petition has chosen to assert a disputed claim, by a procedure which might produce irreparable damage to the company, rather than by a suitable alternative procedure. It may apply in cases where the petition, if presented, has a chance , of success. In some cases both the first and the second branches of the principle apply.
' The authorities which have been discussed illustrate the distinction between the application of the first and second branches of the principle.
' The first branch applies to cases where the petitioner is incapable of success as a matter of law or through absence of supporting evidence. Where the petitioner is not entitled to present a petition or where the ground alleged is not a ground which can found a winding up order, the petition is incapable of success as a matter of law. If there is no sufficient evidence to establish an otherwise sufficient ground, the petition is incapable of success for that reason. Thus the first branch applies where the proposed petition cannot succeed.
' The -second branch applies to cases where there is a more suitable alternative means of resolving the dispute involved in a disputed claim against the company. They are not necessarily cases in which, as a matter of law or through absence of evidence, there is an inherent incapacity of success. They may be cases where the petitioner is entitled to present the petition, the ground is sufficient in law and there is evidence to support the ground. They are cases, though, where, due to the availability of the more suitable alternative remedy, the Court hearing the petition would in the circumstances, in the exercise of its discretion, decline to make a winding up order, at least while the circumstances remain as they are at the time of the application for an injunction. Thus the second branch applies where, because of the availability of a suitable alternative procedure, the petition is unlikely to succeed in the circumstances existing at the time.
' As a matter of convenience in discussing the issues before me. I have discussed and distinguished the application of two branches of the general principle under which courts may restrain the presentation of winding up petitions. The two branches cover the cases which have been cited to me.... It is not necessary to consider whether there are other applications of the principle."
' It will be noted that the court specifically noted that the principles enunciated by it were not intended to be exhaustive. It appears that this decision has been cited with approval and applied many times in Australian courts (both state and federal). In my view, the observations noted above conveniently encapsulate the principles and state the approach that may be taken by the Court when dealing, at the interlocutory stage, with an application seeking to restrain the defendant from presenting a winding up petition.
12. I now turn to consider the Indian jurisdiction, to which reference was not made by either of the learned counsel. It appears that in India, the matter has taken a rather different turn, and the Supreme Court, in Cotton Corporation of India v. United Industrial Bank AIR 1983 SC 1272; [1983] INSC 125, has held that a person cannot (or ought not) to be restrained from presenting a winding up petition. The court formulated the point in issue in the following terms:-- "A very narrow question which we propose to examine , in this appeal is: Whether in view of the provision contained in section 41(b) of the, Specific Relief Act, 1963 (Act' for short), the Court will have jurisdiction to grant an injunction restraining any person from instituting any proceeding in a court not subordinate to that from which the injunction is sought? The contention may be elaborated thus: Can a person be restrained by an injunction of the Court from instituting any proceeding which such person is otherwise entitled to institute in a court not subordinate to, that from which the injunction is sought? In the facts of the present case, the narrow question is whether the Corporation can be restrained by an injunction of the court from presenting a winding-up petition against the Bank? The High Court seems to hold that the Court has such powers in view of the provisions contained in 0.39 of the Code of Civil Procedure read with section 37 of the Specific Relief Act, 1963 or in exercise of the inherent powers of the Court under section 151 of the Code of Civil procedure." (para 5, pp. 1274-5)
' The Court then referred to section 41(b) of the (Indian) Specific Relief Act, 1963 and compared it with section 56(b) of the precedent legislation (which of course continues to apply in Pakistan). The former provision provides: "An injunction cannot be granted: ... (b) to restrain any person from instituting or prosecuting any proceeding in a court not subordinate to that from which the injunction is sought" (emphasis supplied). The latter provision is in the following terms: "Injunction cannot be granted: ... (b) to stay proceeding in a Court not subordinate to that from which the injunction is sought" (emphasis supplied). The difference between the two provisions is at once obvious. The Indian Supreme Court commented on the 'difference in the following terms (pp. 1275- 76):-- "It is implicit in this assumption and the language used in section 56(b) that the court could not grant injunction under section 56(b) of the repealed Act to stay proceeding in a court superior in hierarchy to the Court from which injunction is sought. But by judicial interpretation, a consensus was reached that as injunction acts in personum while the Court by its injunction cannot stay proceedings in a Court of superior jurisdiction; it could certainly by an injunction restrain a party before it from further prosecuting the proceeding in other courts may be superior or inferior in the hierarchy of courts... The Legislature took notice of this judicial interpretation and materially altered the language of the succeeding provision enacted in section 41(b)... The Legislature manifestly expressed its mind by enacting section 41(b) in such clear and unambiguous language that an injunction cannot be granted to restrain any person, the language takes care of injunction acting in personum, from instituting or prosecuting any proceeding in a court not subordinate to that from which injunction is sought. Section 41(b) denies to the court the jurisdiction to grant an injunction restraining any person from instituting or prosecuting any proceeding in a court which is not subordinate to the court from which the injunction is sought.... As a necessary corollary, it would follow that the court is precluded from granting an injunction restraining any person from instituting or prosecuting any proceeding in a court of coordinate, or superior jurisdiction. This change in language deliberately adopted by the Legislature after taking note of judicial vacillation has to be given full effect." (emphasis supplied)
' As is clear from the above passage, the reason that found favour with the Indian Supreme Court' does not apply in this country, and indeed, it is clear from the passage that as long as section 56(b) applied, the Indian Supreme Court would have concluded that the court did have the jurisdiction to make a restraining order in appropriate circumstances.
13. The second basis on which the. Indian Supreme Court concluded that a person ought not to be restrained from presenting a winding up petition was the (Indian) Companies (Court) Rules, 1959 ("Indian Mlles"). These rules are, in most respects, in pan materia the Companies (Court) Rules 1997 ("1997 Rules") that apply in Pakistan. Counsel for the company sought to be wound up (which, it may be noted, was in fact the respondent Bank) had urged that the winding up petition and its advertisement as per the Indian Rules would have:-- 46 certain serious consequences on the status, standing, financial viability and stability and operational efficiency of the company. Mr. Sen further urged that where the debt is bona fide disputed, a petition for winding-up is not an alternative to the suit to recover the same but may be a pressure tactic to obtain an unfair advantage and therefore, despite the provision contained in section. 41(b) the court must spell out a power in appropriate cases to injunct a person from filing a winding-up petition." (pg. 1281)
' The court referred to Rules 95 and 96 of the Indian Rules (which are in pan materia Rules 75 and 76 of the 1997 Rules) and repelled the contention in the following terms (pg. 1282):-- "It would appear at a glance that the petition has to come-up in Chambers before the company Judge and not in open Court, and the Rule confers a discretionary power on the judge not to give any directions at that stage but merely issue a notice to the company before giving directions. If upon receipt of such notice the company appears and satisfies the judge that the debt is bona fide disputed or the presentation of the petition is mala fide 'actuated by an ulterior motive or abuse of the process of the Court certainly the judge may decline to admit the petition and may direct the party presenting winding-up petition to prove its claim by a suit or any other manner. It is undoubtedly true that winding-up petition is not a recognised mode for recovery of debt and if the company is shown to be solvent and the debt is bona fide disputed, the Court generally is reluctant to admit the petition. Therefore, the power is conferred on the judge before whom the petition comes-up for admission to issue pre-admission notice to the company so that the company is not taken unaware and may appear and point out to the judge that the petitioner is actuated by an ulterior motive and presentation of the petition is a device to pressurise the company to submit to an unjust claim. This is a sufficient safeguard against mala fide action and the company would not suffer any consequences as apprehended, and the company can as well appear and ask for stay of further proceeding till the petitioner-creditor proves his debt by a regular suit. This is the jurisdiction of the Company Court and it cannot be restrained from exercising the same by some other court restraining the creditor from presenting a winding-up petition. There is sufficient built- in safeguard in the provisions of the Companies Act and the Rules framed thereunder which would save the company from any adverse consequences, if a petitioner actuated by an ulterior motive presents the petition."
' With respect, I do not find the reasoning and conclusion of the court persuasive. Experience shows that petitions of winding up are routinely ordered to be advertised without giving any opportunity to the company to contest the point in the manner described by the Indian Supreme Court.
Whatever may be its value in principle, in practice the Rule hardly ever provides the relief and safety to the company that has been found .Therein by the Indian Supreme Court. It is also to be noted that even if the publication of the advertisement is deferred and notice is first given to the company that is no guarantee that news of the filing of the winding up petition will not spread. Even if a whispering campaign is started that such a petition has been presented or even a single creditor comes to know of the petition, the company's situation can rapidly deteriorate and its position may unravel quickly. I cannot, with respect, find or discover the safeguards in the provisions of the 1997 Rules that, in their Indian version, gave such comfort to the Indian Supreme Court.
14. I have gone through the Indian decision in some detail because of the close parallels between the two jurisdictions. However, after having carefully considered the case-law noted above, I must, with respect, disagree with the conclusions arrived at by the Indian Supreme Court and accept the views that have found favour in other jurisdictions; In my view, there is ample jurisdiction vested in this Court on its original side to restrain, in appropriate circumstances, a person from presenting a petition for the winding up of a company. This conclusion is however, subject to two caveats. Firstly, I would clarify, that the jurisdiction is peculiar to this Court in the exercise of its original civil jurisdiction, and 'is not a jurisdiction that vests in the subordinate civil courts. The reason is that the jurisdiction under the Companies Ordinance is exercisable by the High Court and it would be wrong in principle and in any case inappropriate for a subordinate court to restrain a person from approaching this Court in the exercise of any jurisdiction vested in it. Secondly, even this Court may not have the jurisdiction to restrain a person from presenting a winding up petition in another High Court. However, since this point does not arise in the present case, this is only a tentative view.
15. As to how the jurisdiction is to be exercised, I am of the view that, especially in relation to interlocutory applications, the observations of the Supreme Court of Victoria in Fortuna Holdings (para 11 above) provide useful guidelines and principles that can be applied. However, as that court was itself careful to note, those observations are not exhaustive. I would also accept the observations of the Malaysian Court of Appeal (see para 10 above) that the Court must be careful in exercising the jurisdiction and it is only in certain (fairly limited) circumstances that a person ought to be restrained from presenting a winding up petition.
16. I now turn to apply the foregoing principles to the facts and circumstances of the present case.
Learned counsel for the defendant submitted that it was entitled to present the winding up petition also on the ground that, since the plaintiff had been created especially for the Creek Marina project, the defendant therefore had some connection with or interest in the plaintiff. This submission cannot be accepted. Section 309 specifies the persons who can present a winding up petition, and this list is exhaustive. As presently relevant, the defendant would either have to be a creditor or a contributory. The latter term is defined in section 300, and the defendant does not come within its ambit. Therefore, the only basis on which the defendant can present a winding up petition is as a creditor.
17. The basis on which the defendant claims to be a creditor of the plaintiff is as given in para 4 above, namely as being entitled to receive Rs,1 Billion by reason of the second addendum to the Main Agreement. In my view, it is doubtful whether this amount is payable in terms as claimed, i,e,, within 18 months of the signing of the second addendum. Learned counsel has presented this obligation in absolute terms. However, in my view, it is to be read contextually and in conjunction with the addition made to the Main Agreement, i,e,, upon "finalization of financing agreement after collateralization of the Land in accordance with this Second Addendum to Agreement". In other words, the obligation is conditional and contingent upon an eventuality that has not yet come to pass. Therefore, prima facie, the defendant is not yet a creditor of the plaintiff. I note that section 309 permits even a "contingent" or "prospective" creditor to present a winding up petition. However, the chances of success of a petition presented by such a creditor B are rather remote (and certainly remoter than an actual creditor), and a strong case indeed would have to be presented by such a creditor before a winding up order would be made. In my view, the present case does not cross the requisite threshold. I would therefore conclude that the first branch of the principle enunciated in Fortuna Holdings is applicable to the facts and circumstances of the present case.
18. In Fortuna Holdings, the court also made certain observations with regard to the question of harm being caused to the company, and observed as follows (emphasis supplied): "The basis of the exercise of the power to restrain the presentation or advertisement of a petition is the irreparable damage to the company which might be done to it by the mere presentation or advertisement of the petition. If there is a real risk a damage being done by the mere presentation or advertisement of the petition and the court presented with the petition would not, or would not until after clarification of a disputed claim, make a winding up order, the risk of damage may be avoided by restraining the presentation or advertisement of the petition. Usually the damage to be avoided is the damage to the company through the diminution or loss of its commercial creditworthiness resulting from public knowledge of the commencement of winding up proceedings. If there is no real risk that public knowledge of the presentation of a winding up petition would cause damage to a company the basis for restraining presentation of a petition is absent. There would usually be no real risk of damage to a company which has no commercial creditworthiness or to a company of a type, or with commercial activities of a type, unlikely to be affected by loss of public confidence in the company. The principle is usually stated as applying in cases where the presentation of a petition might produce irreparable damage to the company: In the passage in his judgment in Charles Forte Investments Ltd. v. Amanda, [19641 1 Ch 240, at pp. 257-8; 119631 2 All ER 940: Wilimer, LI, seems to have contemplated that something less than irreparable damage would suffice. In other cases the principle has been stated and applied without insistence that the damage be irreparable. If it is not essential that the damage be irreparable I consider that it would, at least, need to be damage which is significant and substantial."
It will be noted from the portion emphasized that even if the damage is not irreparable, the court may issue an appropriate injunction if it is at least significant and substantial. In my view, either of these thresholds is clearly crossed in the present case. The plaintiff is engaged in a high profile construction project in which hundreds of persons C have booked flats and apartments. There can be little doubt that the presentation of a winding up petition, and public knowledge of such a petition, would cause considerable diminution and loss to the plaintiff and its commercial activities would be seriously jeopardized on account of a loss of public confidence. Its position may be irrevocably compromised. There is therefore every likelihood that the damage caused to the plaintiff would be significant and substantial, if not irreparable.
19. There is another aspect that must also be taken into consideration. There are serious disputes between the parties and I have already had occasion to deal with some of them in the Earlier Order. In my view, keeping the history of the litigation in mind, and the surrounding facts and circumstances, the possibility cannot be ruled out that the proposed winding up petition may indeed be presented for reasons other than simply to enforce an undisputed debt. There are allegations and counter-allegations between the parties. It would seem that the project is moving along but the pace is being compromised by the differences that apparently keep cropping up. As to how the blame for this is to be apportioned, I do not say since it is not necessary for me to explore this aspect of the matter in any detail, and nothing said herein should be construed as laying the blame on one or the other party. What is important is a recognition that the possibility of the winding up petition being presented in order to assert pressure on the plaintiff or to gain some tactical advantage in the ongoing disputes, rather than simply to enforce an undisputed debt, cannot be ruled out. The winding up petition may well be tantamount to an abuse of the process.
This is another reason why I am of the view that this is an appropriate case for the exercise of jurisdiction by the Court.
20. Learned counsel for the defendant contended that grant of interim relief would be tantamount to grant of final relief, i,e,, decreeing the suit. In my view, the Court ought not to stay its hand if a proper case for interim relief is made out by reason of such possibility. The reason is that if learned counsel is correct, then the reverse can also be readily asserted: to refuse interim relief would be tantamount to dismissing the suit. In my view, the rule relied upon by learned counsel is simply a factor to be taken into consideration by the Court while deciding whether (and if so how, and to what extent) to grant interim relief. Depending on the facts and circumstances of the case, the factor would have greater or lesser weight. In my view, and on the facts of this case, the weight to be accorded to this factor is definitely on the lesser side.
21. Having taken into consideration all the relevant factors and the facts and circumstances of the case, I am of the view that the equities lie in favour of the plaintiff and against the defendant. A case for interim relief has been made out. Accordingly this application is allowed, and the defendant is restrained from presenting a winding up petition against the plaintiff on the basis of the claim as set forth in the notice of demand dated 15-9-2011.