1. ORDER MUHAMMAD ALI MAZHAR, J. - The matter was fixed for argument of learned counsel for the plaintiff on the point whether the suit against the defendant No. 1 is maintainable without fulfilling the requirements of subsection (1) of Section 316 of the Companies Ordinance, 1984. On 14.5.2010, the learned counsel for the defendant No. 2 to 8 had argued that the principal liability rests upon the defendant No. 1 who has already been declared ex parte. The learned counsel further argued that the defendant No. 1 is under liquidation, therefore, application for leave to defend should have been filed by the Official Liquidator, which he has failed to do and the adverse consequences are likely to be faced by the defendants No. 2 to 8 in the capacity of guarantors. On notice to the learned Official Assignee, he appeared on 10th August, 2010 and submitted that by virtue of an order dated 10.3.2005, passed in J.M. No. 54/2003, he was appointed Official Liquidator and proceedings were commenced and after a period of two months from the date of winding up order, the plaintiff has filed the present suit in this Court which is not maintainable for want of prior leave of Company Judge under Section 316 of the Companies Ordinance, 1984. For the sake of convenience. Section 316 of the Companies Ordinance, 1984 is reproduced as under:-- "316. Suits stayed on winding up order.-(1) When a winding up order has been made or a provisional manager has been appointed, no suit or other legal proceeding shall be proceeded with or commenced against the company except by leave of the Court, and subject to such terms as the Court may impose.
(2) The Court which is winding up the company shall, notwithstanding anything contained in any other law for the time being in force, have jurisdiction to entertain, or dispose of, any suit or proceeding by or against the company.
(3) Any suit or proceeding by or against the company which is pending in any Court other than that in which the winding up of the company is proceeding may, notwithstanding anything contained in any other law for the time being in force, be transferred to and disposed of by the Court".
2. Learned counsel for the plaintiff invited my attention to a statement filed in this Court on 24th August, 2007 by the earlier counsel for the plaintiff. Alongwith this statement, copy of C.M.A. No. 487/2007 is attached which was moved by the plaintiff in J.M.No. 54/2003 for seeking permission of leaned Company Judge under Section 316 of the Companies Ordinance, 1984. In paragraph No. 4 of the application, it was mentioned that in view of the restrain as envisaged under Section 316, sub-section (1) of the Companies Ordinance, the suit against the company in liquidation cannot proceed in the Banking Court without the permission of the Court. The learned Judge of this Court vide order dated 25.5.2007 observed in the order that Habib Bank Limited seeks permission of this Court to proceed with the Banking Suit No. B-17/2005 pending in this Court as the respondent company which has been ordered to be wound up who is also one of the defendants in the suit.
3. With the aforesaid observations, the application was allowed subject to all just exceptions. Learned counsel for the plaintiff argued that though the suit was filed after winding up order but objection in connection with Section 316 of the Companies Ordinance was already complied with and this Court had already granted leave therefore, at this stage, there is no rational or logical justification to raise this objection at this belated stage. In support of his arguments, he relied upon a judgment reported in A.I.R. 1930 Allahabad 503 (People's Industrial Bank Limited v. Ram Chandar Shukul & others) in which the division bench of Allahabad High Court considered Section 171 of the Companies Act, 1913 and held that when leave was granted, pending the suit, the leave is not to be treated as nullity and the suit cannot be dismissed on the ground that before its commencement no leave was obtained. The facts of the aforesaid reported judgment from Indian jurisdiction are distinguishable to the facts and circumstances of this case. First of all, in the said pending suit referred to in the AIR judgment, the Liquidator was already a party. The people's Industrial Bank went into liquidation being wound up under the supervision of the Court. An order to pay certain amount was passed by the Company Judge against one Chandra Bali Shukula and Mst.
4. Annupuma. The sons of Chandra Bali instituted a suit to obtain a declaration that the order was not binding on them as Chandra Bali was already dead at the date of the order. The liquidator was party to the suit and he raised the objection that prior filing the suit, no leave was obtained. The Court observed that dismissal of suit after the leave has been granted would be a pure technicality and would serve no useful purpose to anybody. Neither the Court has discussed the implication of legal provision nor assigned any reason or findings as to why the legal provision which makes the prior leave mandatory could not be adhered to but it was simply held that non-applying the prior leave is pure technicality. I do not think that in the above judgment any question of law was decided to append any persuasive value.
5. In rebuttal, the learned Official Assignee argued that the defendant No. 1 was not sued through liquidator and in spite of full knowledge of winding up order, no efforts were made by the plaintiff to join the official liquidator in the proceedings. Winding up order was passed on 03.3.2005, the plaintiff had filed present suit on 28.5.2005, the application for seeking leave in J.M. 54/2003 was moved on 05.4.2007 and order on C.M.A. No. 487/2007 was passed on 25.5.2007. He also argued that the order of the learned Single Judge- is very clear that the application was granted subject to all just exceptions.
6. Learned counsel for the defendants No. 2 to 8 has argued that the provision of prior leave as envisaged under Section 316 of the Companies Ordinance, 1984 is unambiguous and a mandatory requirement of law. No suit can commence after winding up order without prior leave of the Court.
7. The leave granted by the learned Company Judge of this Court was not unconditional but subject to all just exceptions, therefore, the grant of leave can be questioned keeping in view the express provision of law which was not followed by the plaintiff.
8. The bare bones of the matter lead to me a conclusion that the leave in J.M. No. 54/2003 was granted subject to all just exceptions which means that parties were not prevented or precluded from raising this legal objection. Another important aspect which cannot be lost sight that in the application moved by the plaintiff under Section 316 of the Companies Ordinance, it was nowhere mentioned that the suit was instituted after passing the winding up order. In the application, the plaintiff being an intervener simply mentioned that suit without leave cannot be proceeded.
9. Section 316 of Companies Ordinance, 1984, deals two different circumstances and conditions that no suit or other legal proceeding "shall be proceeded with or commenced" against the company except by leave of the Court. First condition relates to the pending suit at the time of passing of winding up order and second condition relates to a fresh suit which may commence after winding up order. In both the circumstances, it is mandatory for the plaintiff to seek leave of the Court. The case of the plaintiff squarely covered under the later condition attached with sub-section (1) of Section 316 of the Companies Ordinance, 1984. Since it is an admitted fact that the suit was filed after passing of the winding up order therefore, the prior leave was necessary which prima facie lacks in this case. I do not think that non-applying prior leave is merely a technical objection, therefore, the plaintiff may be allowed to first commence the suit and then apply for leave of the Court. If the non compliance of a mandatory provision of statute is ignored, it will tantamount to transgress the express provision of law and will also be against the spirit of legislation. Statutes is to be construed as to make it workable and any construction which defeat main scheme of Act is to be avoided. It is the duty of the Court to interpret the law as it stands and it is cardinal principle of interpretation that redundancy must not be attributed unnecessary to the legislature. I would like to quote a judgment reported in 2002 CLD 137 (Afshan Ahmed v. HBL Limited and another), in which this Court has held that Court should not act in a manner by which the object of a statute is defeated and the same is rendered nugatory. In another judgment, reported in 2002 SCM R 1747 (Director Industries, Govt, of NWFP v. Nowshera Engineering Company), the honourable Supreme Court has held that Courts are not concerned with the consequences of interpretation, however, drastic or inconvenient the result may be, because function of the Court is interpretation and not legislation. Purpose of interpretation of a statutory provision is to ascertain the true intention of the Legislature, which has, of necessity, to be gathered from the words used by the Legislature itself. If those words are clear and unmistakable, then they cannot be given any meaning other than that which they carry in their ordinary grammatical sense.
10. The Official Liquidator is official of the Court having definite powers conferred upon him under the Companies Ordinance, 1984. The Official Liquidator representing a company is in so different position from anyone else against whom a stranger or third party makes a claim. His only duty is to consider and if he thinks fit as an admissible claim to admit and if he thinks it inadmissible claim to reject it. At this juncture, I would like to quote a judgment reported in PLD 2002 S.C. 1100 (United Bank Limited v. Pakistan Industrial Credit & Investment Corporation), the Hon'ble Supreme Court has held that the official liquidator has got ample powers to take steps for the efficient winding up of the company so as to create a balance among the interest of the parties according to law and the rules. In a winding up, the liquidator acts not merely for creditor but for contributories and for the company also. A liquidator is an agent employed for the purpose of winding up of the company. In some respects he is a trustee but he is not a trustee for each individual creditor see Knowles v. Scott (1891) 1 Ch. 717 at p. 723. His principal duties are to take possession of assets, to make out the requisite lists of contributories and creditors, to have disputed cases adjudicated upon, to realize the assets subject to the control of the Court in certain matters and to apply the proceeds in payment of the company debts and liabilities in due course of administration, and having done that, to divide the surplus amongst the contributories and to adjust their rights. Any proceedings necessary for the protection of the property are taken by the liquidator in the name of the company, unless the Court has made a vesting order, in which case he can sue in his official name in respect of property vested in him by the order. He can institute or defend any suit with the sanction of the Court and he can take any other legal proceedings,Civil or criminal, also with such sanction. The powers of official liquidator are provided under Section 333 of the Companies Ordinance, 1984 with the sanction either of the Court or of the committee of inspection including powers to institute or defend any suit, action, prosecution or other legal proceeding, civil or criminal in the name and on behalf of the company, to carry on the business of the company so far as may be necessary for the beneficial winding up thereof and to pay any classes of creditors in full.
11. The purpose of creating a concept or provision of prior leave under Section 316 of the Companies Ordinance is meant for the benefit of party who wants to commence the suit or other legal proceedings so that the company under winding up may be represented through the official liquidator to answer and defend the claim. The order sheet of this suit transpires that objection for non-compliance of Section 316 of the Companies Ordinance, 1984 was first time raised by Mr. Mushtaq A. Memon, Advocate on 31st October, 2005 on which date this Court observed that the effect of Section 316 of the Companies Ordinance will be considered after the clarification from the Official Liquidator and on 27th August, 2008, the defendant No. 1 was declared ex parte.
12. The learned Company Judge granted leave in the year 2007 subject to all just exceptions and no unconditional leave was granted, for that reason, the legal implication of non-obtaining prior leave is open to debate. Since the suit was commenced after winding up order but without prior leave, therefore, in all conscience, I am of the considered view that suit against the defendant No. I is not maintainable which is dismissed accordingly.
13. The plaintiff has filed the suit for recovery of Rs. 33,53,55,000/- against the defendants. The defendants No. 2 to 8 are the guarantors who have already filed leave to defend application. The copies of indenture of Guarantee and counter-guarantee allegedly signed by the defendants No. 2 to 8 are also attached with the plaint. Under Clause "c" of Section 2 of the Financial Institutions (Recovery of Finances) Ordinance, 2001, the definition of customer means a person to whom finance has . Been extended by a financial institution includes a person on whose behalf a guarantee or letter of credit has been issued by a financial institution as well as a surety or an indemnifier. Section 128 of the Contract Act, 1872 provides that the liability of the surety is co- extensive with that of the principal debtor unless it is otherwise provided by the contract. In the judgment reported in 2005 SCM R 72 (Rafique Hazquel v. Bank Alflah Ltd.), the honourable Supreme Court in a banking matter was held that the liability of the guarantor is co-extensive with that of principal debtor in terms of Section 128 of the Contract Act the petitioner is equally liable to make payment that even in terms of letter of guarantee tendered before the Bank at the time of grant of loan the petitioner is liable to make payment and that the guarantor is a customer in terms of Section 2(c) of the Financial Institutions (Recovery of Finances) Ordinance XLVI of 2001. The application for leave to defend filed by the defendants No. 2 to 8 is pending adjudication which will be decided on its own merits, however, if the plaintiff deems fit, it may also lodge its claim to the official liquidator against the defendant No. 1 in accordance with law.
14. Office is directed to fix all pending applications on the next date of hearing.