' MUNIB AKHTAR, J.---The petitioner seeks the winding up of the respondent company on the ground that it is unable to pay its debts. The petitioner is owed certain sums of money, which remain unpaid or otherwise not satisfied despite a notice dated 23-1-2013 under section 306 of the Companies Ordinance, 1984 having been served on the respondent. The petition was presented on 26-3-2013 and arises in the following circumstances.
2. The respondent is a company engaged in the business, inter alia, of carrying out geological, geophysical and other surveys for the exploration of oil and gas. It appears that in such surveys a huge amount of data is generated, which needs to be properly processed and analyzed. The petitioner is the Pakistani branch of a foreign company incorporated in the British Virgin Islands and is engaged in the business of seismic exploration data processing/reprocessing and interpretation and the marketing of such software to companies in the oil and gas sectors. The Pakistani branch is registered with the SECP under Part XIV of the Companies Ordinance.
3. Learned counsel for the petitioner submitted that the petitioner and the respondent entered into two contracts, one on 6-2-2008 and the other on 13-5-2009, whereby the petitioner agreed to provide certain services for 2D land seismic data processing and reprocessing, as more particularly described in the said contracts. The two contracts are stated, as presently relevant, to be the same in all material respects. Learned counsel submitted that it was agreed that the remuneration payable to the petitioner for the services rendered under the contracts was to be USD 166,106.18 and USD 130,340.06 respectively. The services having been provided, the petitioner submitted two invoices, both dated 24-3-2009, for payment of the aforesaid amounts. Learned counsel drew attention to clause 4 of each contract which provided that if the respondent sought to raise any dispute regarding any payment, this had to be done within 30 days, failing which the payment had to be made within 30 days from the date of receipt of the invoice. It was submitted that no dispute was raised by the respondent within the time provided by the contracts and hence the amounts aforesaid became payable on or about 24-4-2009.
4. Learned counsel submitted that the aforesaid amounts have remained unpaid since that time.
Despite correspondence between the parties and several attempts by the petitioner, the respondent has failed to make payment on one pretext or another. This led, eventually, to the issuance of a legal notice by the petitioner under section 306 of the Companies Ordinance dated 23-1-2013. The debts not having been settled within the 30 days stipulated period, learned counsel submitted that the respondent was to be deemed unable to pay its debts. Thereafter, the present petition was filed on 26-3-2013. Learned counsel submitted that the essential facts were undisputed. The debts had not been paid and there was no bona fide dispute in relation thereto. As the respondent was deemed unable to pay its debts, it was liable to be wound up under section
305. It was prayed accordingly.
5. Learned counsel for the respondent opposed the making of any winding up order. It was submitted that the debts were bona fide disputed. Learned counsel referred to clause 2 of the contracts, which specified the nature of the work to be performed by the petitioner. Article 6 of the "General Conditions" appended to the contracts was also relied upon. This related to the standard of performance required of the petitioner. Learned counsel submitted that the petitioner was in breach of these contractual obligations, since the data processing undertaken by it was woefully inadequate and below standard. Reference was made to a number of emails and other correspondence exchanged between the parties in 2010 (placed on record by the respondent) in which, it was submitted, the respondent had repeatedly made its position clear to the petitioner.
However, the respondent's genuine grievances were never redressed. Eventually, the respondent had to engage another company to process the data, and learned counsel submitted that the results of that exercise were satisfactory, thus establishing the contractually delinquent manner in which the petitioner had acted. The petitioner was only entitled to payment if the services had been properly rendered in terms as required under the contracts. This it had manifestly failed to do.
Thus, the debts were bona fide in dispute and there could be no winding up of the respondent in such circumstances. If at all, the petitioner could either initiate arbitration proceedings under the contracts or file a recovery suit in the civil courts.
6. Exercising his right of reply, learned counsel strongly contested that there had been any breach by the petitioner of its obligations under the contracts. He emphasized that the petitioner had provided the services bargained for. The so-called dispute sought to be raised by the respondent was merely an excuse to refuse payment. Learned counsel further submitted that the petitioner had processed the data in relation to 103 "lines". The so-called dispute, even if valid (which was strongly denied) was only in relation to one "line". The rest of the data processing had not been disputed. It was submitted that in such circumstances, the so-called dispute, even on the respondent's showing, could not be regarded as bona fide. Furthermore, if the respondent had genuinely disputed the manner in which the petitioner had performed its obligations, it would have taken suitable action, e.g., by way of arbitration. This never happened nor had the respondent disputed the invoices when submitted. This further confirmed the petitioner's case that there was no bona fide dispute.
7. At the time of the hearing of the petition, I noticed that prima facie the debts appeared to have become barred by limitation by the time the petition was presented, since more than three years had elapsed. It is also expressly stated in both the legal notice and the petition (see para 14 thereof) that "more than three (3) years have passed since the petitioner... Submitted the invoices to the respondent". I therefore asked learned counsel for the petitioner to assist me with regard to the maintainability of the petition in such circumstances since it appeared to me that if a debt is barred by limitation, a winding up order could not be made against the -debtor company on the ground of its inability to pay the debt (on a deemed basis or otherwise). Learned counsel submitted that there was correspondence between the parties which was an acknowledgement of liability within the meaning of section 19 of the Limitation Act, 1908, with the result that a fresh period of limitation was to be computed from each such acknowledgement and hence the debts were not time barred when the petition was presented. Learned counsel relied in this regard on two letters, dated 28-4-2009 and 2-2-2010, from the respondent to the petitioner and also to a letter dated 7-12-2011, from the petitioner to the respondent.
8. At the conclusion of the hearing, I permitted learned counsel to file written synopses; and both did so relying therein on certain case-law as well.
9. I have heard learned counsel as above, examined the record and considered the case-law relied Upon. I first take up the point of limitation. Section 306 of the Companies Ordinance provides in material part as follows:--
306. Company when deemed unable to pay* its debts.---(1) A company shall be deemed to be unable to pay its debts--
(a) If a creditor ... To whom the company is indebted in a sum exceeding one per cent of its paid- up capital of fifty thousand rupees, whichever is less, then, due, has served on the company, by causing the same to be delivered by registered post or otherwise, at its registered office, a demand under his hand requiring the company to pay the sum so due and the company has for thirty days thereafter neglected to pay the sum, or to secure or compound for it to the reasonable satisfaction of the creditor; ...
(2) The demand referred to in clause (a) of subsection (1) shall be deemed to have been duly given under the hand of the creditor if it is signed by an agent or legal adviser duly authorised on his behalf, or in the case of a firm if it is signed by such agent or legal adviser or by any member of the firm on behalf of the firm."
' Section 305(e) provides that a company may be wound up if is unable to pay its debts.
10. The question that requires consideration is whether a valid notice under section 306 can be issued to a company in respect of a debt that, on the date of the notice, is time barred? Can a company be deemed unable to pay its debts on the basis of such a notice? This leads to the more general question: can a company be ordered to be wound up on a debt that is time barred as on the date of the presentation of the winding up petition? What of a debt that is not time barred when the notice under section 306 is issued, but becomes barred by limitation by the time the petition for winding up is presented? To these questions, the answer appears to be that a notice under section 306 cannot be validly issued on a time barred debt and therefore a company cannot, on such debt, be deemed unable to pay its debts. Furthermore, the debt must be within the period of limitation when the petition for winding up is presented, and if not, the company cannot be wound up on such a debt. It therefore necessarily follows that if a debt is not time barred when a notice under section 306 is issued, thereby triggering the deeming provision of that section, but the debt is so barred by the time the petition is presented, the company still cannot be wound up on the ground that it is unable to pay its debts.
11. The foregoing position appears to be well settled in the case-law. Reference may be made to Indian decisions reported as Interactive Media and Communication Solution Private Limited v. GO Airlines Limited (2013) 199 DLT 267 (also available at www.Indiankanoon.Org), Mosenthals Wool and Mohair S.A. Pty. Ltd. v. C.L. Jain Woolens Mills P. Ltd. (2013) 179 Comp. Cas. 174 (P&H), Gurdino Jiwatram Kukreja v. Eastern Mining & Allied Industries Ltd. (2004) 121 Comp. Cas. 762 (Gau), Mazboot Packers and Engineers Co. v. Himachal Pradesh Horticulture Produce Marketing and Processing Corporation Ltd. (1999) 95 Comp. Cas. 579 (HP) and Vijayalakshmi Art Productions v. Vijaya Productions P. Ltd. (1997) 88 Comp. Cas. 353 (Mad). In the first mentioned decision, a learned Division Bench of the Delhi High Court cited with approval the following passage from an earlier single Bench decision of that High Court reported as Niyogi Offset Printing Press Litnited v. Doctor Morepen Limited (2009) 149 Comp. Cas. 467, 476:- "The claim of the petitioner for recovery of the amount has become barred by time. If the petitioner files a suit for recovery of the said amount, the suit will be dismissed as barred by time. If the claim of the petitioner to recover the amount has become barred by time, it will not be appropriate to initiate the process of winding up of the respondent company. Under section 433(e) of the Companies Act, 1956 the machinery for winding up can not be allowed to be utilized merely as a means for realizing debts due from a company which is also barred by time. Consequently there are no grounds to initiate the winding up proceedings against the respondent company. The petition, therefore, is without merit is liable to be dismissed. The petition, therefore, is dismissed."
' In the last mentioned decision, the Madras High Court observed as follows (pp. 356-7):- "In the summary enquiry under section 433 at the stage of admission before deciding as to whether winding up proceedings should be initiated the court to ascertain whether, inter alia, the claim made by the creditor is barred by limitation or whether it is legally enforceable. If the claim made by the creditor is on the face of it not one which can be enforced, it is unnecessary to examine as to whether the claim is a genuine claim, and as to whether the respondent has a bona fide and reasonable defence on the merits to the claim. The right to apply for winding up under section 439(b) is a right conferred on the credits and not on any person, however anxious that person may be, to have the company wound up.
' It is the duty of the court to dismiss claims made beyond the prescribed period of limitation, as provided in section 3 of the Limitation Act. If on the basis of the case set up, and the documents relied upon by the petitioner, the claim is barred by time, the court is not required to adjudicate on the merits of the same."
12. In England, the same position obtains: see the decision of the Court of Appeal in Ridgeway Motors (Isieworth) Ltd v. Aits Ltd. [2005] EWCA Civ 92, [2005] 2 All ER 304 where at [35] (pg. 313), the following general observation was made in relation to a petition for winding up presented by an ordinary creditor: "If the debt is statute barred at the time of the presentation of the winding up petition, the petitioner is not at that date a 'creditor' of the company and has no standing under section 124 of the Insolvency Act 1986 to present a petition in that capacity" (per Mummery, L,J). An ordinary creditor would certainly include an unsecured creditor in the same position such as the petitioner.
13. In my view the law in this country is and ought to be regarded as being the same; no Pakistani decision to contrary effect has been shown. Both the debts sought to be relied upon in the present case became barred by limitation on or about 24-4-2012. Thus, prima facie they were time barred both when the legal notice under section 306 was issued (23-1-2013) and when the petition was presented (26-3-2013), unless there was a fresh period of limitation that ought to be computed from any intervening date. This is of course what learned counsel for the petitioner has sought to establish and it is this aspect which must now be considered. As noted above, learned counsel has submitted that the petitioner has the benefit of section 19 of the Limitation Act, and has relied on three documents in this regard: two letters from the respondent dated 28-4-2009 and 2-2-2010 respectively, and one from the petitioner to the respondent, dated 7-12-2011. Insofar as the first letter is concerned, it need not detain me since even if it is an acknowledgement of liability from which a fresh period of limitation is to be computed, time would still expire on 28-4-2012, i.e,, well before the issuance of the legal notice and the presentation of the petition. If the second letter is considered an acknowledgement of liability (which, in my view, is the case) and a fresh period of limitation is computed from the date thereof, time would expire an 2-2-2013. Now, insofar as the legal notice under section 306 is concerned, that would be within the period of limitation as so extended. However, by the time the petition came to be presented (26-3-2013), limitation would have run out. Therefore, in my view, the respondent's letter of 2-2-2010 also does not advance the petitioner's case. It is pertinent to note that under section 19, the fresh period is computed from the date the acknowledgment was signed, which would be 2-2-2010 in respect of the document being considered, and not any other date. This leaves only the letter of 7-12-2011. If it is indeed an acknowledgement of liability within the meaning of section 19 then of course the period of limitation stood extended to well beyond the dates on which the legal notice was issued and the petition for winding up presented. Having considered the document, in my view it cannot however be so regarded. This is for the simple reason that it is a letter from the petitioner (i.e, the creditor) to the respondent. (i.e,, the debtor). However, the acknowledgment of liability under section 19 must be from the debtor and not the creditor and signed by the former. This is clear from a bare reading of section 19 and is even otherwise obvious. In my view therefore none of the documents relied upon by learned counsel for the petitioner extend the period of limitation beyond the date of presentation of the petition. Thus, the period of limitation expired before the relevant date(s) and hence the present petition, based on time barred debts, is not maintainable and is 'liable to be dismissed.
14. The case-law relied upon by learned counsel for the petitioner may now be considered, insofar as the issue of limitation is concerned. Learned counsel relied on M. G. Kaclir & Co. v. Abdul Latif PLD 1970 Kar. 708 (DB) and Province of West Pakistan v. Makhdoom Mohamed PLD 1961 (WP) Kar. 722 (DB). The principles enunciated in these decisions in relation to section 19 of the Limitation Act are not in dispute. However, these principles have in the end to be applied to the specific document(s) being relied upon, and those documents in the present facts and circumstances have been considered herein above. Therefore, these decisions do not advance the petitioner's case in any material respect.
15. Since I have concluded that the debts being relied upon were barred by limitation and a winding petition based on such debts is liable to be dismissed, it is not necessary for me to consider the question whether or not the debts are (as claimed by the respondent and contested by the petitioner) bona fide in dispute. The petition fails at the threshold and is liable to be dismisses as such. It is also not necessary therefore for me to consider in any detail the case-law relied upon by both sides in relation to this issue.
16. For the reasons herein above stated I am of the view that this petition must fail. Accordingly, winding up of the respondent company is refused and the petition is hereby dismissed.