' SADIQ HUSSAIN BHATTI, J.---The petitioner, being aggrieved by an order dated 11-5-2011 passed in Suit No,663 of 2002 by the III Civil Judge and Judicial Magistrate, Karachi, West, on an application under section 316 of Companies Ordinance, 1984 filed in the said suit, has filed the present petition praying that further proceedings in the said suit against the petitioner be stayed.
2. Succinctly, facts of the case are that the petitioner is a company duly incorporated under law of Pakistan carrying on the business of shipping agency at Karachi and was the local shipping agents of a foreign shipping company, namely, Messrs Hani Shipping Panama S.A (hereinafter referred to as "the said company"). During the agency of the said company a number of ships of the said company called at Karachi Port to discharge their cargo of edible oil and during these visits of the ships of the said company there were various incidents of short landing of cargo for which claims were lodged and suits filed in various Courts by the consignees of the cargo against the said company as well as the petitioners as their agents. The said company was unable to pay its debts and as such J. Misc. No,30 of 2005 was filed in the companies Jurisdictions of this Court for winding up of the said company. Vide order dated 30-5-2006 passed by a learned single Judge of this Court, the said J.Misc. Was allowed and the said company was ordered to be wound up. In consequence of the order of winding up of the said company dated 30-5-2006 and in view of provisions of section 316 of the Companies Ordinance, 1984, the plaintiffs in various suits pending in various Courts applied for leave of the court and such leave was granted to them to proceed with their respective suits. However, no such permission was obtain by the plaintiff in Suit No, 663 of 2002, pending before III Civil Judge which was filed by respondent herein against the petitioner and the said company. Therefore, the petitioner filed an application under section 316 of the Companies Ordinance in the said suit praying that in view of the winding up order dated 30-5-2006 passed in J. Misc. No, 30 of 2005 in respect of the said company, further proceedings in the suit may be stayed. This application was dismissed by the III Civil Judge, Karachi West vide his order dated 11-5- 2011. Having no other adequate remedy to challenge the said order, the petitioner has filed the present petition to assail the same.
3. Notices through all modes as well as courier service and pasting were made but none from the respondent appeared. In order to reach a just and fair conclusion, this Court thought it prudent to appoint Mr. Abid S. Zuberi, Advocate, as amicus curiae.
4. Mr. Abid Zuberi, while addressing the Court as amicus curiae, submitted that the purpose of section 316 of the Companies Ordinance is to prevent litigation against a company in winding up before different Courts and through different persons as after a company is ordered to be wound up all assets of the company would come, under the control of the Court and the management of the company would vest with liquidator. Therefore, a suit in which liability was not yet determined could not be proceeded without leave of the Company Judge who has ordered winding up of the company. He also stated that subsection (1) of section 316 of the Ordinance caters to a situation where winding up has been passed and a manager has been appointed and subsection (3) of the said section is attracted where winding up petition is pending. He states that Adamjee Insurance should have filed an application under section 316 of the Ordinance seeking permission of the Court for proceeding with the suit. He stated that the Civil Judge was not justified in dismissing the application of the petitioner. The learned counsel submitted that once a winding up order has been passed by the Company Judge in respect of a company, no suit could be filed or proceeded with without permission of Court.
5. According to the learned amicus curiae the Court below had ignored the condition of subsection
(3) of section 316 of Companies Ordinance, 1984 that after having knowledge of the winding up of Messrs Hani Shipping Panama S.A. The company by virtue of Order passed in J.Misc No,30 of 2005 dated 3-5-2005, it was necessary for the plaintiff in the suit to have obtained necessary permission for continuing the proceedings in the suit. He also submitted that under section 316 of the Ordinance a suit pending against a company whose winding up has been ordered by the company can proceed only in the Court which has passed the order of winding up of the company and not before any other Court unless such permission has been obtained.
6. According to the learned amicus curiae the learned Court below also failed to appreciate the provisions of section 55 of Customs Act, 1969 in as much as he has failed to appreciate that liability of an agent for loss or damage to the cargo, who enters the vessel in the port is a secondary liability, the primary liability being that of the Principle which in this case is the said company, consequently, if the suit cannot proceed against the principal, it can also not proceed against the agent i.e, the petitioner because otherwise it will lead to an anomalous situation where an agent could be held liable when the principal is not. The learned amicus curiae in support of his arguments, relied upon case-laws reported in PLD 1994 Karachi 358, 2002 CLD 512 (Karachi), 2001 MLD 1708 (Karachi) and 2009 CLD 1662 (Lahore).
7. The learned advocate for the petitioner adopted the above arguments and stated that the learned amicus curiae has also contended the same view which have been impugned in the petition and as such the instant petition may be allowed and the honourable Court may be pleased to set aside order dated 11-5-2011 passed by the III Civil Judge, Karachi West, in Suit No,663 of 2002 and the proceedings in the said Suit against the petitioner and the said company (the defendants Nos.1 and 2 respectively) in the said suit, may be stayed.
8. We have heard the arguments and perused the record. Before proceeding any further we would like to place on record our deep appreciation for the able assistance rendered by the learned amicus curiae in this case.
9. From the facts revealed above, it transpires that respondent No,1 filed Suit No,633 of 2002 against one Hani Shipping Panama and its agent Messrs Gac Pakistan (Pvt.) Limited on account of short landing of goods. While this suit was pending, Hani Shipping was ordered to be wound up vide order dated 3-5-2006 passed in J. Misc. No, 30 of 2005. The petitioner filed an application under section 316 of the Companies Ordinance; 1984 with the prayer that further proceedings in the suit may be stayed till leave was obtained from the court for continuing with the same. This application was dismissed by the Court below on account of following discussions:-- "I have heard learned counsel for both parties and have gone through the record as well as relevant provision of law, it appears that Hon'ble High Court vide order dated 30-5-2006 in Misc.
Appl. No,3 of 2006 was pleased to pass order of winding up of the company Messrs Hani Shipping Co., and appointed Official Assignee of the Hon'ble High Court as liquidator, but in the said order there is nothing mentioned about the present suit which have been filed in 2002 and same is not stayed by the Hon'ble High Court, in ordedated 3-5-2006, so also subsection (3) of section 316 of the Companies Ordinance are reproduced as under: ' 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.
' Moreover, subsection (2) of the section 55 of the Customs Act, envisaged that an agent delivering a declaration under clause (d) of subsection (1) shall be liable to all penalties which might be imposed on the person incharge of such conveyance under clause 24 of the Table under subsection (1) of section 156 and an agent delivering a declaration under clause (e) of subsection
(1) shall be bound to discharge all claims referred to in such declaration.
' Furthermore, declaration under section 55 of Customs Act, shows that agent is liable for any penalty imposed under section 156(24)(i)(ii) in respect of any goods entered in the import manifest of the vessel."
' In consequence to the above discussion over the legal and factual circumstances, I am of the view that claim of the plaintiff is yet to be established, therefore, the disposal of the case on merits is necessary and suit is not stayed by any specific order. Hence, the application filed by the defendants Nos.1 and 2 is dismissed with no order as to costs."
10. Thus, it would be seen that the application was dismissed on two grounds: (i) that vide order dated 3-5-2006 the proceedings in the' suit have not been stayed, and (ii) under subsection (2) of section 55 of the Customs Act, 1969, an agent shall be liable to discharge all claims referred to in the declaration under clause (d) of subsection (1) of section 55 of the said Act.
11. Before discussing merits of the case, it would be advantageous if section 316 of the Companies Ordinance is reproduced, the same reads 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. 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."
12. Subsection (1) of section 316 of the Ordinance caters to a situation where a winding up order has been made or a provisional manager has been appointed then no suit or other proceedings can be proceeded with or commenced against the company in respect of which the winding up order has been passed. Subsection (2) ibid relates to jurisdiction of the Court and it expressly bars any other court to entertain, or dispose of any suit or proceeding by or against a company in winding up. Subsection (3) of the said section deals with a situation where though winding up order has not been passed but winding up proceedings in respect of the company are pending.
13. When subsections (1) and (3) of the above quoted ,section 316 of the Ordinance are read in juxtaposition, it will transpire that when a winding up order has been made or a provisional manager has been appointed in respect of a company no suit or legal proceeding shall be proceeded with or commenced against such company and that any suit or proceeding by or against such company which is pending in any court other than that in which the 'winding up of the company is proceedings, shall be transferred to and disposed of by such Court.
14. As per provisions of section 311 of the Ordinance, the Court. At any time after presentation of the petition for winding up i.e, before making an order for winding up of the company, upon the application of the company itself or by any creditor or contributory of the company, can pass an order restraining any suit or proceeding against the company on such terms and conditions as the Court thinks fit. Therefore, as soon as a petition for winding up of the company is presented, the Court can pass an order restraining any suit or proceeding against the company.
15. Clause (11) of section 2 of the Companies Ordinance defines "the Court" in the following terms:- "The court" means the court having jurisdiction under this ordinance.
' Whereas section 7 of the Ordinance which defines the jurisdiction of the Court read as-- "7. Jurisdiction of the court: (1) The court having jurisdiction under this ordinance shall be the High Court having jurisdiction in the place at which the registhred office of the company is situate; ' Provided that the Federal Government may, by notification in the official Gazette and subject to such exercise all or any of the jurisdiction by this empower any 'civil court to exercise all or any of the jurisdiction by this ordinance conferred upon the court, and in that case such court shall, as regard the jurisdiction so conferred, by the court in respect of companions having their registered office within the territorial jurisdiction of such court.
16. Thus, plain reading of subsection (1) of section 7 of the Ordinance clearly shows in winding up matters the jurisdiction vests in the High Court unless such jurisdiction is specifically conferred under the proviso to this section by the Government on any District Court. It is not the case of the defendant that any such jurisdiction was specifically conferred on any Court other than the High Court.
17. The cumulative effect of the above quoted provisions of law is that whenever a winding up petition is presented and an order of winding up has been passed therein or a provisional manager has been appointed, than no suit or other proceedings shall be proceeded with or initiated against the said company except by leave of the 'Court' as defined in section 7 of the Ordinance. Beside this the proceeding may, notwithstanding anything contained in any *other law for the time being in force, be transferred to and disposed of by the 'Court', except by leave of the 'Court', and subject to such terms as the 'Court' may put in force. The Court here means the Company Judge.
18. In the case of National Bank of Pakistan v. Banking Tribunal No,1 and others (PLD 1994 Kar. 358), a Division Bench of this Court held as under:-- "It would be, obvious on a plain reading of the section that it is not only in a situation where a winding up order has been passed that the preclusion to proceed against the company, before Courts other than the Court in which winding up proceedings are pending, applies. It is also when a provisional manager for the company has been appointed that the same result would follow.
There is little on record before us to indicate that no such provisional manager has been appointed in respect of respondent No,2 company. In fact. Mr. Muhammad Nazar Khan, who appeared before the Tribunal, has been referred to in the impugned order as the Administrator of the respondent No,2 company and for all that we know the word "administrator" may have been used as the equivalent of a 'provisional manager". According to the memo, of petition itself the Lahore High Court has appointed a Board of Administrators of which Mr. Muhammad Naazar Khan is one. At any event, based on the rules of interpretation the singular being deemed to include the plural (in a statute) a provisional manager under section 316 of the Companies Ordinance, can include a board or committee of such managers.
19. In the case of Pakistan Industrial Leasing Corporation v. Sunrise Textile Mills (2009 CLD 1662) major shareholders and ex-directors of a company in liquidation filed an application for staying the operation of order dated 9-9-2008 till the reference under section 29-A of the National Accountability Ordinance, 1999 is decided. The intention of the applicants was to stay the proceedings of auction carried out in consequence of the winding up of the company and to reach a settlement with NAB. A learned single Judge of the Lahore High Court declined to stay the proceedings. But first, he dilated upon the term "winding up" in the following terms:- "5. "Winding up" is' a term used for proceeding by which a company is dissolved. This process is also called as "liquidation proceedings". The assets of the company in these proceedings are disposed of, debt is realized and the liability of the company towards its creditors is paid off out of realized assets. The surplus if any is distributed to the members and contributory proportionately.
In short winding up is legal process, by which an incorporated company is brought to an end. The consequences of winding up order are that all the assets of the company come under the control of the Court and the management of the company vests with liquidator instead of Directors and the Chief Executive. The transfer and disposition of property of the company by anyone, except by the liquidator, is prohibited and the law renders any such transaction as void. When the winding up order has been passed, no suit or proceedings against the company can commence against the company, except with the leave of Court. The Court (company Judge) where the winding up proceedings are pending, has the jurisdiction, within the contemplation of section 316 of the Companies Ordinance, 1984, to entertain and dispose of any suit or proceedings, by or against the company. Even pending proceedings by or against the company stand transferred to the company Court. The object of section 316 of Ordinance, 1984, is to accelerate disposal of winding up proceedings, cheap and summary remedy in respect of claims for and against the company, and to save unnecessary litigation. The provisions of Companies Ordinance, 1984 are special and will prevail over other laws. The company Court exercises a wide jurisdiction over all matters relating to the company in the process of winding up. The matter relating to a company in winding up are to be adjudicated before one Court and the wisdom behind this provision is that company should be dissolved finally, without complication."
' Thereafter, the learned single Judge held as under and dismissed the application:-- ' The applicant seeks stay of instant proceedings, till final decision of reference under section 25-A of the National Accountability Ordinance, 1999. This course is not legally permissible and the same offends the provisions of Company Law, especially section 316 of Ordinance, 1984. The winding up proceedings are pending since -1995. Any delay will unfairly prejudice the rights of creditor.
Section 320 of Ordinance , 1984, requires that regards has to be given to wishes of creditors.
(Emphasis supplied).
20. In the case of Industrial Development Bank of Pakistan v. Bahwalpur Board Mills Limited (2001 MLD 1708), it was held as under:-- "7. In view of the facts as discussed, above, it is established that a winding-up proceedings of Messrs Taj Company Limited commenced much prior to filing of the present proceedings and that respondent No, 1 is declared by the Lahore High Court to be controlled and beneficially owned by the said Messrs Taj Company Limited against which no appeal was filed which has attained finality. It is also an admitted position that the representatives of petitioner are appearing before the learned Company Judge at Lahore. It is provided under section 316 of the Ordinance, 1984 that no suit or any other legal proceedings shall be proceeded with or commenced against such Company for which winding-up order has been made or a Provisional Manager has been appointed except by Leave of the Court and subject to such terms as the said Court may impose.
The present proceedings are filed for recovery of money under section 39 .Of the Industrial Development Bank of Pakistan Ordinance, 1961, which in my considered view falls within the term "other legal proceedings", and, therefore, is liable to be stayed till leave, as provided under section 316 of the Ordinance, 1984: is obtained." (emphasis supplied).
21. So far as the observations of the Civil Judge are concerned that in the order of winding up of the said company nothing is mentioned about the present suit, suffice it to say that as and when it was brought to the notice of the Civil Court that a winding up order has been passed against the defendant, the proceedings ought to have been stayed and the plaintiff should have been asked to approach the Court for permission to proceed with the suit. As held in the case of Pakistan Industrial Leasing Corporation's case (supra), when the winding up order has been made the Court making the winding up order (i.e, the Company Judge) has the jurisdiction, within the contemplation of section 316 of the Ordinance, to entertain and dispose of any suit , by or against the company and even pending proceedings by or against the company stand transferred to the Company Court.
22. It is a fundamental' principle of law that where the law requires something to be done in a particular manner it must be done in that manner or not at all. Reliance in this regard may be placed on 2000 SCMR 1720.
23. The Civil Judge also referred to section 55(2) of the Customs Act, 1969 while dismissing the application of the petitioner filed under section 316 of the Companies Ordinance. Section 55(2) of the said Act reads as under:-- "55. Power to reuse port -clearance to vessels or permission for departure to other conveyance. -
(a) Not relevant.
(b) An agent delivering a declaration under clause (d) of subsection (1) shall be liable to all penalties which might be imposed on the person-in-charge of such conveyance under clause 24 of the Table under subsection (1) of section 156 and an agent delivering a declaration under clause (e) of subsection (1) shall be bound to discharge all claims referred to in such declaration.
24. In our opinion, the Civil Judge erred by referring to section 50 of the Customs Act, 1969 for the reasons adequately discussed in the case of Mackinnons Mackenzai and Co. Of Pakistan (Pvt.) Ltd. v. The Eastern Federal Union Insurance Company Limited and others (2002 CLD 779) as under:- "The effect of the declaration under section 55(d)(e) has been specified under section 55(2) of the Act. The agent will be liable to pay all the penalties specified above and shall also be liable to satisfy the claim relating to short delivery or damage to import cargo in terms of declaration.
However, such satisfaction of the claim is subject to the condition specified in section 55(1)(e) of the Act that agents liability will arise only after the damages or short delivery is established. The agent's liability is not independent of his principal. It is coextensive with the carrier and unless the claim is admitted, before holding agent liable the claimant should establish his claim for damages or short delivery against carrier."
25. Now,, the question for determination is whether if the suit is stayed against the company which has been ordered to be wound up, the same can proceed against the agent? This question was answered the case of Crescent Sugar Mills and Distillery Ltd. v. American Export Isbrandt Inc. (PLD 1983 Karachi 29) in the following words:- "In the present case it is admitted that the carrier Principal debtor has been ordered to be wound up under the Companies Ordinance, official liquidator having been appointed. The applicant having co- extensive liability and no personal liability. Proceedings against the Principal in absence of the permission under section 316 of the Ordinance cannot be maintained. No step could have been taken without permission of the Company Judge under section 316. The underlying principle is that property remains vested with company but the liquidator is the trustee for the benefit of all the creditors and B therefore, one creditor cannot be placed at an advantageous position and permitted to derive the benefit to the exclusion of other creditors.
Once the suit and proceedings being not maintainable against the carrier for want of permission, the fact of proved liability against the carrier does not arise to saddle agent with co-extensive liability, which is not independent and personal one."
26. Thus, neither the suit can proceed against the said company for the reason that the same has been ordered to be wound up and in pursuance thereof, in view of section 316 of the Ordinance, the suit has to, be stayed against the said company till permission is obtained from the Company Judge ordering the winding up of the company, to proceed with the J suit and nor it can proceed against the petitioner for the reasons that once the suit and proceedings were found not maintainable against the carrier for want of permission, the fact of proved liability against the carrier does not arise to saddle the agent with co-extensive liability, which is not independent and personal one.
27. In the present case, it is evident that the Civil Judge completely ignored the provisions of section 316 of the Companies Ordinance and rejected the application for K staying the proceedings on ground which had no nexus with the case.
28. In view of the above discussion, we are of the opinion that the proceedings in the suit were liable to be stayed till such time that the requisite permission was obtained from the Court for proceeding with the suit. Accordingly, this petition ,is allowed, the impugned order is set aside and the suit is stayed. The plaintiff, however, will be at liberty to approach the Company Judge for permission to proceed with the suit.