' SALMAN HAMID, J.---This petition for winding up of Bambino (Pvt.) Limited (Respondent) under sections 305 and 309 of Companies Ordinance, 1984 (Ordinance 1984) was preferred by Mr. Zulfiqar Hussain, Mrs. Shenaz Sheikh and Mr. Ali Zayyad (Petitioners).
1. Petitioner No,1 and his ', late brother Shaikh Imtiaz Hussain (Deceased) entered into an agreement dated 28-6-1978 for transfer of shares of the respondent along with Western Export. Limited, whereby 1855 shares each were transferred in the name of petitioner No,1 and the deceased and 3310 shares were transferred to Western Export Limited. In or about 1981 the shares of Western Export Limited were also acquired by the petitioner No,1 and the deceased. With this acquisition petitioners' holding in respondent came to 37.52% and that of the deceased and his family at 62.48%.
2. It was the case '4!f the petitioners that' the deceased and his family members at their (Petitioners') back; without their knowledge or consent amended the Articles of Association of the respondent in 1994 after purported annual general meeting in which Mr. Sheikh Kashif Imtiaz was appointed as director of the; respondent at which time, he (Sheikh Kashif Imtiaz) had no share holding in the respondent. Single share of the respondent was transferred in his name, first time, in 1997. It was further mentioned that the appointment of Mr. Adeel Imtiaz and Mrs. Nasreen Imtiaz was also without consent' or knowledge of the' petitioners and without holding meeting of the shareholders and elections in such respect. Thus, these appointments were contrary to the Articles of Association of the respondent and in violation of the provisions of Ordinance, 1984.
3. It was contended that the petitioners are resident of Lahore and until February, 2001 the deceased controlled the affairs of the respondent which the petitioners out of respect endured and tolerated as he (Deceased) was the elder brother of petitioner No,
1. Since July 14, 1980, it was urged by the petitioners, that no notice of board or general meeting was served and/or received by them (Petitioners), which again, was in violation of the provisions of Ordinance, 1984 and contrary to the Articles of Association of the respondent. Petitioners asserted that no annual general meeting was ever' called since the above date (July 1980) and that the affairs of the respondent have been managed in a sole proprietorship like manner and/or akin to partnership concern.
4. According to the petitioners, the books of accounts etc. Have been in custody and control of Mr. Sheikh Kashif Imtiaz, which again, was in grave violation of the provisions of Ordinance 1984 and that of Articles of Association of the respondent. It was further mentioned that the petitioners have been restricted from inspecting the accounts and audit of the respondent.
5. Mala fide of Sheikh Kashif Imtiaz were highlighted by stating that appointments of the petitioners Nos.1 and 2 were deleted from the list of directors, evident from Form A, submitted in the year 2003 to the Security and Exchange Commission of Pakistan (SECP) to deprive them (Petitioners Nos.1 and 2) from the rights and privileges as directors of the respondent. Upon acquiring knowledge in such respect, they (petitioners Nos.1 and 2) immediately protested, whereafter their names were inserted in the list of directors. It was also mentioned by the petitioners that their salaries as directors of the respondent have not been paid since July, 2010. Gul Latif and Co. Chartered accountants, were informed of this situation so that it may not be reflected in the books of accounts of the respondent that the salaries have been paid.
6. It was also alleged that the deceased and Mr. Sheikh Kashif Imtiaz in connivance with his other family members have availed financial facilities without resolution of the board of directors of the respondent and that assets of the respondent have been offered as security towards such finances and that such finances have not been mentioned in the books of accounts of the respondent. Details of such finances were disclosed in paragraphs 15(a) to 15(c) of the petition.
7. The petitioners, before this petition attempted to resolve the dispute. Despite all out efforts, no fruitful results could be achieved. There is a complete deadlock. Under the circumstance, it was asserted that it is not possible to run the respondent in accordance with the provisions of Ordinance 1984 as well as Articles of Association of the respondent.
8. After presentation of the petition, notices were ordered and issued to the respondent through bailiff, courier, publication and official gazette. The record shows that the respondent was served.
Despite service, there is no response, reply or rebuttal by the respondent.
9. It was mentioned in the petition that the respondent is incurring losses every year and its auditors have also expressed their opinion that there is material uncertainty about the respondent's ability to continue as a going concern.
10. In their comments, S.E.C.P. Had confirmed and verified the contents of the petition as true and correct. It was further mentioned by S.E.C.P. That as per Form A up to 31-10-2003, the names of the petitioners Nos.1 and 2 were not shown in the list of directors but the respondent subsequently filed revised Form for the years, reflecting the names of the petitioners Nos.1 and 2 but it has not been registered inasmuch as that it has not responded to the observation of the S.E.C.P.
11. It has also come on record that Sheikh Kashif Imtiaz is a defaulter of financial institutions and recovery proceedings are pending before the. Courts of competent jurisdictions and it has been apprehended by the petitioners that the assets of respondent would be sold towards recovery and satisfaction for payment of these finances though neither the respondent has obtained any facility(ies) for its own purpose nor it is the beneficiary thereof.
12. Learned counsel for the petitioners in order to substantiate its claim of winding up of respondent, relied upon various case-law which included the case of Ladali Prasad Jaiswal v. The Karnal Distiller Co. Ltd. (PLD 1965 SC 221), wherein the Hon'ble Supreme Court of Pakistan held that in a case of a private limited company, the tendency of the courts has uniformly being to treat it more or less as a partnership concern and to apply the same principles in the winding up of a private limited company as would entail a partner to have a partnership firm dissolved. In the case in hand, from the narration of petition (not rebutted by the respondent) that the respondent was/is being run by two brothers (now one deceased) and their family members in the likes of a firm. It has also come on record that there was a complete deadlock between the two group and/or the two families, branches of one and the same tree with the result that the dominating branch of the tree has prevailed upon the weak one, whereby the rights of the weaker side have been usurped by the mightier ones. In the reported precedent (PLD 1965 SC 221), it was further held by the Hon'ble apex Court that commonly the exclusion of a partner from the management of the firm and the existence of deadlock between the partners or justifiable lack of confidence in the management was just and proper ground for dissolving a private limited company.
13. The other case that was cited by the learned counsel for the petitioners was of Mst. Qamar Loan and 5 others v. Kashmirian (Pvt.) Ltd. And 6 others (PLD 1997 Karachi 376), wherein the High Court of Sindh held that there being a complete deadlock in relation to the conduct of affairs of the company between the parties for a considerable period of time and that the affairs of the company are not conducted in accordance with the provisions of the Ordinance nor are likely to be conducted in consonance with the provision of Ordinance 1984, it would be just and equitable that the company is wound up. Similarly, in the case of Muhammad Shabbir Khan and others v.
Muhammad Anwar (1988 CLC 1955) again the same High Court held that where there was complete mistrust between directors and where there was deadlock in company, then on account of such mistrust, the only principle applicable is the dissolution of partnership and that such principle therefore be applied for the dissolution of a company. Yet, in another citation, relied upon by the learned counsel for the petitioners, i,e,, Mst. Khursheed Ismail and others v. Uni Chem Corporation (Pvt.) Ltd. And others (1996 CLC 1863) again this High Court held that where the directors of a company and/or the company is found committing several acts of omissions and commissions, is liable to be wound up under various provisions of section 305 of the Ordinance 1984 when it also came on record, in that case, that the company was really a partnership firm and that the petitioner in that company had been excluded from the management of the company and that there was a complete The petitioners, before this petition attempted to resolve the dispute. Despite all out efforts, no fruitful results could be achieved. There is a complete deadlock.
Under the circumstance, it was asserted that it is not possible to run the respondent in accordance with the provisions of Ordinance 1984 as well as Articles of Association of the respondent.
7. After presentation of the petition, notices were ordered and issued to the respondent through bailiff, courier, publication and official gazette. The record shows that the respondent was served.
Despite service, there is no response, reply or rebuttal by the respondent.
8. It was mentioned in the petition that the respondent is incurring losses every year and its auditors have also expressed their opinion that there is material uncertainty about the respondent's ability to continue as a going concern.
9. In their comments, S.E.C.P. Had confirmed and verified the contents of the petition as true and correct. It was further mentioned by S.E.C.P. That as per Form A up to 31-10-2003, the names of the petitioners Nos.1 and 2 were not shown in the list of directors but the respondent subsequently filed revised Form for the years, reflecting the names of the petitioners Nos.1 and 2 but it has not been registered inasmuch as that it has not responded to the observation of the S.E.C.P.
10. It has also come on record that Sheikh Kashif Imtiaz is a defaulter of financial institutions and recover3 proceedings are pending before the Courts of competen jurisdictions and it has been apprehended by the petitioner that the assets of respondent would be sold towards recover and satisfaction for payment of these finances though neithe the respondent has obtained any facility
(ies) for its owl purpose nor it is the beneficiary thereof.
11. Learned counsel for the petitioners in order t substantiates its claim of winding up of respondent; relied upon various case-laws which included the case of Lada Prasad Jaiswal v. The Karnal Distiller Co. Ltd. (PL 1965 SC 221), wherein the Hon'ble Supreme Court Pakistan held that in a case of a private limited company, tl tendency of the courts has uniformly being to treat it more less as a partnership concern and to apply the san principles in the winding up of a private limited company would entail a partner to have a partnership firm. Dissolved. In the case in hand, from the narration of petition (not rebutted by the respondent) that the respondent was/is being run by two brothers (now one deceased) and their family members in the likes of a firm. It has also come on record that there was a complete deadlock between the two group and the two families, branches of one and the same tree with the result that the dominating branch of the tree has prevailed upon the weak one, whereby the rights of the weaker side have been usurped by the mightier ones. In the reported precedent (PLD 1965 SC 221), it was further held by the Hon'ble apex Court that commonly the exclusion of a partner from the management of the firm and the existence of deadlock between the partners or justifiable lack of confidence in the management was just and proper ground for dissolving a private limited company.
13. The other case that was cited by the learned counsel for the petitioners was of Mst. Qamar Loan and 5 others v. Kashmirian (Pvt.) Ltd. And 6 others (PLD 1997 Karachi 376), wherein the High COurt of Sindh held that there being a complete deadlock in relation to the conduct of affairs of the company between the parties for a considerable period of time and that the affairs of the company are not conducted in accordance with the provisions of the Ordinance nor are likely to be conducted in consonance with the provision of Ordinance 1984, it would be just and equitable that the company is wound up. Similarly, in the case of Muhammad Shabbir Khan and others v.
Muhammad Anwar (1988 CLC 1955) again the same High Court held that where there was complete mistrust between [directors and where there was deadlock in company, then on account of such mistrust, the only principle applicable is the dissolution of partnership and that such principle therefore applied for the dissolution of .a company. Yet, in another 'citation, relied upon by the P.31earned counsel for the petitioners, i.e deadlock amongst the parties. Winding up was found to be just and equitable.
14. In the case of Nagina Films Ltd. v. Osman Hussain and others (1987 CLC 2263), yet another case cited by the learned counsel for the petitioners, a Division Bench of this court after examining various case-law on the issue as to whether family business converted into private limited company and that company is formed by members of more than one family, whether Petition for winding up of private limited company could be ordered; applying the principles of dissolution of a partnership firm. After examining all the case law, the Division Bench of this Court in paragraph 16 of the cited judgment observed as under:--
(i) That in a particular case the principles of dissolution of partnership may be applied if the apparent structure of the company is not the real structure and on piercing the veil it is found that in reality it is a partnership.
(ii) That general the exclusion of a partner from the management of the firm, existing of a state of dead lock between the partners or justifiable lack of confidence in the management have been regarded as just and proper grounds for dissolving a private limited company.
(iii) That when the members of a Company had entered into membership of the Company on the basis of personal relationship involving mutual confidence or an understanding as to the extent to which each of the member was to participate in the management of the company exclusion of any member from the management in breach of the above understanding from the management in breach of the aboy understanding would entail the grant of winding u petition.
(iv)
(v)
(vi)
(vii) Where one director purports by means of irregular to acquire complete control of the company to excl other director or directors from the management it be just and equitable that the company be wound up
15. Learned counsel for the petitioners realizing the strength of shareholding of the petitioners in the respondent, relied upon the case of Mansoor Ali Bandeali v. Marine Foods Industries Ltd. And others (1985 CLC 1239), wherein this Court observed that the petitioners owing only 1/5th shareholding of the company and there being only three directors of the board of directors and if such company is to be treated as a partnership firm for purposes of winding up, then petitioners' case for winding up under the just and equitable clause will stand proved if it is established that the petitioner has been excluded from the management of the company. In the case under discussion, this Court dealt with the rights of the majority to exclude the minority from the management of private limited company by relying (1973) AC 360, (Ebrahim's case) wherein it was held that the limited company was more than a legal entity and the rights, expectations and obligations of the individuals behind it inter se were not necessarily merged in a structure and it was open to the Court, subject to the exercise of legal rights of equitable considerations of a personal character, arising between individuals which may be inequitable to insist on legal right or to exercise them in a particular way.
The case under discussion further went on to venture about the participation of the shareholders in the management of the company and held that where on lifting of the veil of incorporation, it is found that in fact the structure of the company was in reality is that of a partnership, it would be inequitable for the majority shareholders to exclude the minority shareholders from the management of the company and as such on exercise of the legal rights of the majority under the Companies Act to exclude the minority from the management of the company, the minority would be entitled o maintain a petition for winding up of company.
16. The learned counsel for the petitioners to show that spite service, respondent having not come forward and no buttal/denial having been filed in shape of objections or fidavit or counter affidavits, the contents of the petition be emend to be true and correct and acceptable, relied upon han Khan v. Province of Sindh and others (PLD 2003 rachis 691) and Mehmood-ul-Hassan and another v. Baig lustries Pvt. And others (1997 CLC 1577) wherein a vision Bench and single Judge respectively of this court le to the conclusion that the statement of facts and law le in a winding up petition having not been rebutted or end, a case for winding up was fully made out.
17. To substantiate the argument that the respondent is incurring losses every year and that its auditors have also expressed their opinion that there is material uncertainty about the respondent's ability to continue as a going concern, with the result that the respondent's substratum has also gone and therefore it is liable to be wound up, relied upon Sheikh Mazhar Ali v.
Lasani Straw Board Mills Pvt. Ltd. And 4 others (2003 CLD 1494), wherein it was held that the company having suspended its business and that there is no reasonable hope in future that the objects of trading, with profit, will be revived and that the parties have misappropriate), funds/property of the company whereby its substratum disappeared, winding up order' was passed. It was considered just and equitable.
18. Looking at the above state of affairs of respondent and the fact that despite service the respondent has not come forward to dispute or deny the allegations, as raised in the petition and looking in to the precedents, cited this court is left with no choice but to order ' winding up of the respondent which would be just and equitable. The Official Assignee Karachi is appointed as Official Liquidator of the respondent with powers to him under the Ordinance 1984 to deal with the respondent and take further actions according to law.