'YAHYA AFRIDI, J.---Through this common order, this Court shall dispose of the following six applications, as they arise out of common questions of law and facts. The particulars of the said applications are as under; I. C.M. NO-20-P/2014 in C.C. NO-8/1999.
(Application for revival of liquidation petition)
2.C.M. NO-21-P/2014 in C.C. NO-9/1999.
(Application for revival of liquidation petition.)
3.C.M NO-6-P/2015 in C.C. NO-8/1999.
(Application for setting aside judgment and order dated 20.2.2015) with
4. C.M NO-12-P/2015 in C.C. NO-8/1999.
(Application for Ad-Interim Relief.)
5. C.M NO-7-P/2015 in C.C. NO-9/1999.
(Application for setting aside judgment and order dated 20.2.2015).
6.C.M NO-13-P/2015 in C.C. NO-09/1999.
(Application for ad-interim relief.)
FACTS.
2. The brief and essential facts, in chronological order, leading to the aforementioned applications are as follows; 9.7.2001.
'A winding up order of M/s. Sumiffo Medical Industries (Pvt.) Limited and M/s. Sumiffo Plastic Industries (Pvt.) Limited ("Companies") was passed by this Court on an application filed by Habib Bank Limited ("Creditor").
3.7.2006.
'A settlement was entered between the former management of Companies and the Creditor.
Consequently, the winding up proceedings of the Companies were stayed.
10.12.2007.
'The winding up proceedings were restored by the Company Judge, as the terms of settlement were not fulfilled by the former management of the Companies.
21.3.2011.
'Messrs Pakistan Disposal Syringes (Pvt.) Limited ("added Company") filed applications for impleadment, in both the petitions, and the said applications were disposed of in terms that; "All the above discussions would reflect that the applicant is a person who has got a direct interest in the assets of the company under liquidation as admittedly he is in the active possession of the company and is running the company at the spot with no intervention of Ex- Management. So, in these circumstances, his status appears to be more than a necessary party, hence this CM is allowed. His name be entered as a respondent along side the other respondents in both petitions i.e, C. C. No,8 and C. C. No,
9. Of 1999, hence this C.M. Is allowed in the above terms. The applicant so impleaded is also directed to make the payments in the Bank as committed by him today. "
20.12.2013.
'This Court disposed of the winding up petition in terms of the settlement arrived at between the Creditor and the impleaded Company duly supported and endorsed by the worthy liquidator ("Settlement") in terms that; "In term of direction of this Hon'ble Court, we have agreed to settle the payment of outstanding settled amount as per following details payable within a period of three years with effect from 1st January, 2014 as per following details:- Liabilities settled in July............... Rs,26.200 Million.
Down paym ent................................. Rs, 5.240 Amount received upto 31.6.2013......................................... Rs, 5.500 Total paym ent received................. Rs,10.740 Remaining installment Payable (35).................................... Rs, 0.430 Last single installment will be............................................... Rs,0.410 'The above settlement subject to regular payment of monthly installment payable on or before 5th date of every calendar month. In case of default of two installments, the above package will be withdrawn and actual liability will be determined and recoverable with accrued mark up and cost of funds from the old/new management inter alia through sale and auction of mortgaged and other properties.
Sd/- Aftab lqbal, Head ARM, Habib Bank Limited.
Sd/- Muhammad lqbal of MIS Pakistan Disposal Syringes.
Verified by Sd/- Abdul Raul Rohaila, Advocate Habib Bank Limited.
Sd/- Fida Gul, Advocate MIS Pakistan Disposal Syringes.
Countersigned Sd/- Syed Sabz Ali Shah, Advocate Official Liquidator."
'In view of the settlement/compromise arrived at between the parties, reproduced above and placed on file, both these petitions are disposed of in terms thereof along with all the C.Ms. ".
13.6.2014.
'The Creditor moved applications (C.M. NO-20-P/2014 in C.C. NO-8/1999 and C.M. NO-21-P/2014 in C.C. No,9/1999) for restoration of the winding up petitions.
03.10.2014.
'The added Company could not be served, as its management was reportedly avoiding service.
Hence, the Chief Executive of the added Company was served through SHO Police Station, Faqir Abad, Peshawar.
31.10.2014.
'The worthy counsel for the added Company sought an adjournment.
7.11.2014.
'The worthy counsel for the added Company again sought an adjournment.
19.12.2014 30.12.2014.
'The worthy counsel for the added Company did not appear and the cases were adjourned 20.2.2015.
'The worthy counsel for the added Company was absent and C.M. NO-20-P/2014 and C.M. NO-21- P/2014 filed by the Creditor were accepted ex pane, and the liquidation proceedings were revived in C.C. No,-8/1999 and C.C. No,-9/1999.
18.4.2015.
Report No,3 in C.C. NO-08/1999.
Report No,3 in C.C. NO-09/1999.
'These are reports filed by the worthy liquidator. The worthy liquidator has shown his inability to enter the premises of the Companies, as the same were double locked and there were none to respond to his calls to open the gates. Thus, the liquidator could not takeover physical possession and control of the Companies.
APPLICATIONS.
3. Let us now move on to the six applications filed in the present petitions.
C.M NO-6-P/2014 in C.C. NO-8/1999 and C.M. NO-7-P/2014 in C.C. NO-9/1999.
'These applications, filed by the added Company, are for setting aside the orders of this Court dated 20.2.2015, wherein it is asserted that its representative appeared in Court at 10.00 am and found that the applications of the Creditor-Bank for revival of the winding up proceeding had been accepted. The said application has been supported by a personal affidavit of Muhammad Iqbal, Chief Executive of the added respondent. This application has been contested by the Creditor- Bank by filing counter affidavit denying the assertions made by the added Company. The same has been duly supported by a personal affidavit of Asmatullah Jan, Litigation Head of the Creditor- Bank.
'The record is very clear regarding the casual conduct of the added Company, as its management was not only avoiding service but also delaying the proceedings of this Court, despite being provided with ample opportunity of hearing with short dates of their convenience. However, the dictates of justice demand that as the matter in dispute relates to valuable rights of the parties, the same be decided on merit. Thus, this Court sets aside its ex parte order dated 20.2.2015. In this regard, the added Company were earlier directed to also file their replies to the application of the Creditor-Bank for revival of the winding up petition.
'Accordingly, the C.M. NO-6-P/2014 in C.C. NO-8/1999 and C.M. NO-7-P/2014 in C.C. NO-9/1999 are allowed in the above terms.
C.M. NO-20-P/2014 in C.C. NO-8/1999, and C.M. NO-21-P/2014 in C.C. NO-9/1999.
'These are the applications filed by the Creditor- Bank for revival of the liquidation proceedings, essentially on the ground that the added respondents have not paid any installment, as per terms of the Settlement. The added Company has filed its written reply, raising preliminary Objections regarding the maintainability of the petition and the jurisdiction of this Court to proceed with the matter. On the factual front, the added Company has based the missing assets of the Companies to be the reason, which led to the default in repayment of installments fixed in the Settlement. It was further added that after the Settlement, the liabilities of the Companies were to be determined by a competent Court of law, and not this Court. And, only thereafter, the Creditor-Bank or the liquidator could move for the revival of the liquidation proceedings of the Companies. The Ex- Management of the Companies also filed their written replies seeking to be absolved of all liabilities, as they had sold their interest in the Companies to the added Company.
C.M. NO-12-P/2015 in C.C. NO-8/1999 and C.M. NO-13-P/2015 in C.C. NO-9/1999.
'These are the applications filed by the added Company for restraining the liquidator from proceeding with the liquidation process.
PRELIMINARY OBJECTIONS.
4. As far as the preliminary objection raised by the added Company regarding the jurisdiction of this Court, it is noted that the authority of this Court is very much clear to approve an arrangement under section 284 of the Companies Ordinance, 1984 ("Ordinance"). The jurisdiction of the Company Judge, after sanctioning the arrangement, is retained under section 285 of the Ordinance, to ensure that the same is "satisfactorily workable" and in cases, where the Company Judge is satisfied that it cannot be carried out, the Court can undo the sanctioned arrangement by an order, which is deemed to be an order of winding up of the Company under section 305 ibid. The relevant provisions of sections 284 and 285 of the Ordinance, read as follows; "284. power to compromise with creditors and members.
(1) Where a compromise or arrangement is proposed between a company and its creditors or any class of them, or between the company and its members or any class of them, the Court may, on the application in a summary way of the company or of any creditor or member of the company or, in the case of a company being wound up, of the liquidator, order a meeting of the creditors or class of creditors, or of the member of the company or class of members, as the case may be, to be called, held and conducted in such manner as the Court directs.
285. Power of Court to enforce compromises and arrangements.
(I). Where the Court makes an order under section 284 sanctioning a compromise or an arrangement in respect of a company, it may, at the time of making such order or at any time thereafter, give such directions in regard to any matter or make such modifications in the compromise or arrangement as it may consider necessary for the proper working of the compromise or arrangement.
(2). If the Court is satisfied that a compromise or arrangement sanctioned under section 284 cannot be worked satisfactorily with or without modification, it may either of its own motion or on the application of the registrar or any person interested in the affairs of the company, make an order winding up the company, and such an order shall be deemed to be an order made under section 305. "
(emphasis provided)
5. Let us consider the terms of the Settlement. In essence, the Settlement provided for the added Company to carry on business of the Companies and on doing so, repay the Creditor Bank in installments. The worthy liquidator approved the terms agreed therein, as he has duly countersigned the same. Thus, all interested parties were on board; the liquidator, the Creditor Bank and the added Company. In view of the consensus ad-idem, the arrangement agreed upon in the Settlement substantially complied with the condition precedent for the Court to approve the same under section 284 of the Ordinance. Similarly, the failure of the added Company to fulfill its obligation, in making due payments agreed upon in the Settlement, gave a valid cause of action to the Creditor Bank and the liquidator to seek the revival of the winding up proceedings of the Companies from this Court under subsection (2) of section 285 of the Ordinance.
6. The authority of the Court to set aside the sanctioned arrangement ordered under section 284 of the Ordinance, in case the same cannot be satisfactorily carried out, and for the said order being deemed a winding up order of the Company is not a recent development. In fact, similar, if not identical, provisions were provided in the earlier enactments leading up to the Ordinance. In this regard, reference can be made to section 392(2) of the Companies Act, 1913, and Indian Companies Act, 1956. The scope and extent of the jurisdiction of the Court to exercise its jurisdiction provided under the said provisions came up for hearing in Capital Assets Leasing Corporation's case (2003 CLD 1713), wherein it was explained that the jurisdiction of the Company Judge under the Ordinance was retained even after sanctioning a scheme under section 284 ibid, in terms that; "After sanctioning the scheme of amalgamation, the only jurisdiction this Court has under section 285 of the Companies Ordinance, 1984, is that;
(i) It can give directions in regard to any matter;
(ii) Make any modifications in the arrangement as it may consider necessary for its working;
(iii) If the scheme is not workable satisfactorily with or without modification, this Court suo motu or on the application of the Registrar or any person interested in the affairs of the company, make an order for winding up the company and it shall be deemed to be an order made under section 305 of the Companies Ordinance, 1984. "
'In similar circumstances, in the Indian jurisdiction, where the Indian Companies Act, 1956, provides an identical provision as in section 284 has discussed the jurisdiction of the Company Court in D.S. Venkatraman's case (1977 47 Comp. Case. 352 (Bom.), wherein it was explained that; "The purpose of subsection (2) of section 392 is that where the Court is satisfied that a scheme sanctioned under section 391 cannot be satisfactorily accomplished, the Court ought to wind up such a company. The fact that parliament equips the Court with power to come into action on its own motion indicates that the Court should not allow the sanctioned schemes to drag on. Where the Court finds to its satisfaction that a sanctioned scheme cannot be worked out satisfactorily with or without modifications being made in it, the Court must close that chapter by winding up. "
7. Now, reverting back to the provisions contained in sections 284 and 285 of the Ordinance, it is noted that the same clearly provides jurisdiction to a Company Judge to not only sanction an arrangement, but also to ensure its compliance and award dire consequences in case of its violation. What is most striking to note is that the legislature has, by a deeming provision, declared the order passed by Company Judge on the failure of the sanctioned arrangement to be an order of winding up of the said company. Thus, the jurisdiction of the Company Judge, to pass an order reviving the winding up proceedings, is very much provided under subsection (2) of section 285. In the circumstances, the contention of the worthy counsel objecting to the jurisdiction of this Court is misconceived being contrary to the expressed provision of the law.
8. It was also vehemently argued by the worthy counsel for the added Company that the parties had agreed in the Settlement for the determination of the liabilities by a competent Court and not by this Court. And further, that only after determination of the liabilities, the Creditor Bank could approach this Court for revival of the winding up proceedings. This Court is not in consonance with the said submissions. Firstly, the stipulation in the Settlement for determination of liabilities of Companies does not expressly divest the jurisdiction of this Court to proceed in the matter.
Secondly, even if it is read to impliedly exclude the jurisdiction of this Court, as provided under subsection (2) of section 285, it would to that extent be void. It is by now, settled principle of interpretation of written instruments that, any provision therein, which is contrary to an enactment would to that extent be void. In fact, Section 6 of the Ordinance, clearly declares the provisions of the Ordinance to prevail over, inter alio, any provision contained in any contract. The conflicting provision, has been stated to be void in terms that: "6. Ordinance to override memorandum, articles, etc. save as otherwise expressly provided herein;
(b) Any provision contained in the memorandum, articles, agreement or resolution aforesaid shall, to the extent to which it is repugnant to the aforesaid provisions of this Ordinance, become or be void, as the case may be. "
(emphasis provided)
J.II. Farrar in Company Law, has very comprehensively explained the powers and duties of a liquidator in terms that; "The basic duty of the liquidator in all types of liquidation is to collect in and realize the Company's property The liquidator possession in this respect is analogous to the director's, except that he should display a higher degree of skill and care where he is a professional man employed for reward. A liquidator in a compulsory winding up is an officer of the Court and must behave in an impartial manner. There is a similar duty on the liquidator in a voluntary winding up although he is not an officer of the Court. A liquidator is agent for the Company and can bind the Company without incurring personal liability and he is a trustee for the Creditors as a general body in the sense that the assets constitute a fund to be administered by him for the benefit of all persons interested in the winding up As such, he must not;
(I) Act in bad faith or for an improper purpose;
(2) Fetter his discretion;
(3) Allow a conflict of interest and duty. "
9. More relevant to the issue in hand is section 333 of the Ordinance, which expressly provides the powers and functions of a liquidator. Now, keeping in view the terms of the Settlement, it, is noted that the approval to the same by the worthy liquidator falls within the powers vested in him under clause (b) of subsection (1) of section 333 ibid, which provides; "333. Powers of official liquidator.
(1) The liquidator in a winding up by the Court shall have power, with the sanction either of the Court or the committee of inspection,
(b) To carry on the business of the company so far as may be necessary for the beneficial winding up thereof. "
(emphasis provided)
'As discussed above, the main objective apparent from the terms of the Settlement was the recovery of the liabilities of the Companies and not for the added Company to utilize the assets of Companies for its own gain or profit. The terms of the Settlement do not reflect any mala fide on the part of the liquidator. In such circumstances, the Settlement would surely fall within the purview of the business of the Companies, necessary for its beneficial winding up. This fact of the liquidator's power and function was discussed by Sir George Jessel, M.R. In Re Wreck Recovery & Salvage Co., (1880), 15 Ch. D. 353), wherein the authority of the liquidator was discussed in terms that; "Now the word "necessary" means that it must not be merely beneficial but something more, though the necessity must be determined by the Court, having regard to all the circumstances of the case. It does not of course, mean that no other course would be possible. Then it must be for the "beneficial winding up" of the business of the Company not with a view to its continuance. "
(emphasis provided)
'The restricted view taken in the above case was revisited by Simonds, J. In Re-Great Eastern Electric Co., Ltd's case [(1941) 1 All E.R. 409], wherein it was opined that; "On the whole, then, I have come to the conclusion that the liquidator properly exercised his statutory power of carrying on the business with a view to the beneficial winding up of the company. It is possible that, had he been endowed with greater foresight, he might have acted differently, but I do not think that Sir George Jessri. MR, meant by the words which I have cited that an objective standard should be set up after the event and the conduct of the liquidator judged by this. It is sufficient if he bona fide and reasonably forms the opinion that the carrying on of the business is necessary for the beneficial winding up of the company. His reasonable opinion, like that of other men, may be falsified by events. "
This aspect of the powers of the liquidator and as explained in the aforementioned two cases was discussed by J.H. Farrar in Company Law, wherein it was observed that; "One of the most important decisions the liquidator will have to take is whether to keep the company's business going and if so, for how long. It should be noted that the liquidator may only do so, so far as may be necessary for the beneficial winding up of the business. This has been interpreted to mean he may do so if this may be expected to produce a better return for the creditors but not if the object is to seek to continue or resuscitate the business for the benefit of the members. "
10. The role of a Company Judge to sanction an arrangement or a compromise, as provided under section 284 of the Ordinance, is not that of a silent spectator, but of a vigilant supervisor, who is to ensure that the scheme seeking sanction of the Court, is valid, reasonable, bona fide and thus, protects the interest of the creditors and the contributories. The scope and extent of the jurisdiction of a Company Judge under section 284 of the Ordinance, has earlier been discussed in numerous cases, however, in Anjuman Bhahbood-e-Mutassrin Taj Company's case (2005 CLD 1818), the matter was very aptly discussed in terms that; "The Court does not sit merely to register the decision of the meeting. The Court before sanctioning a scheme has to examine and satisfy itself whether the proposed scheme is fair and reasonable, taking into consideration all the material facts, interest of all the classes and the bona fide of the petitioner. The Honourable Sindh High Court in the case of Lipton Pakistan Ltd. Reported as 1989 CLC 818, has dealt with this question in the following manner,.
"...(iii) Lastly, in exercising its discretion under sections 284 and 287, the Court is not merely acting as a rubber stamp. It is the function of the Court to see the background and object of the scheme, is a reasonable one and if the Court so finds it is not for the Court to interfere with the collective wisdom of the members of the Company. When once the Court finds that the scheme is fair one, then it is for the objector to convincingly show that the scheme is unfair and that, therefore, the Court should exercise the discretion to reject the scheme, notwithstanding the views of a very large majority of the members shareholders that the scheme is a fair one."
' A scheme protecting the rights and interests of only one class at the altar of the interests of other classes in a company, is not required to be approved by the Court. While holding so we find support from the judgments in the English jurisdiction. In the case of Empire Mining Company (1890) 44 Ch.D 402 the proposed scheme was declined as the shareholders were given advantage of payment in full with 13s per share as against payment to the unsecured creditors full in cash. In another case Barrow Haemalite Steil Company 39 Ch.D 582 the scheme of arrangement depriving the debenture holders of their security, was refused. The Court in the case of Griffith v. Paget 5 Ch.D 894 declared the scheme of arrangement, ignoring rights of debenture holders, who were preference shareholders, as invalid. "
11. Now, to sum up, the action of the worthy liquidator in the present case, when he approved the terms of the Settlement, is valid and legal, as he has considered all the necessary requirements and addressed the same before rendering his said approval. The most important being his bona fide.
12. What is also important to note is that the jurisdiction of the Company Judge is maintained to have a supervisory role over the powers and functions of the Liquidator, as is provided in subsection (3) of section 333. The said provision reads; "The exercise by the liquidator in a winding up by the Court of the powers conferred by this section shall be subject to the control of the Court, and any creditor or contributory or the registrar may apply to the Court with respect to any exercise or proposed exercise of any of the said powers. "
'Accordingly, in this background, this Court found the terms of the Settlement to be beneficial for the winding up of the Companies and thus approved the same.
13. Viewed from every angle, it is noted that the legislature has vested a supervisory role in the Company Judge, inter alia, to ensure the preservation of the assets of the Company under liquidation and to safeguard the interest of the creditors. In this regard, the Ordinance has provided express jurisdiction in the Company Judge to not only sanction and approve the arrangements or the steps taken by the liquidator necessary for the beneficial winding up, but also to ensure that the terms settled therein are complied with and on its failure, the assets of the Company are preserved under the control of the Company Judge.
14. In view of the above, this Court is not in consonance with the preliminary objections raised by the added respondents relating to the maintainability of the applications filed by the Creditor and the jurisdiction of this Court to entertain the said applications to seek the revival of the winding up proceedings.
15. Moving on to the allegation of mala fide attributed to the Creditor Bank and the liquidator, it is noted that they, despite their repeated insistence for prompt payment of installments in terms of the Settlement, have been unable to obtain any positive response from the added Company.
Furthermore, the conduct of the added Company in the present proceedings, as highlighted above, also belies their stance of imputing mala fide upon the creditor and the worthy liquidator.
16. Most importantly, no cogent reason has been rendered by the added Company for non- payment of the terms of the Settlement, and for this Court to provide any further indulgence to the added Company to continue in retaining the possession of the Companies.
17. Accordingly, for the reasons stated hereinabove, this Court would allow C.M No,20-P/2014 in C.C.
No,08/1999 and C.M No,21-P/2014 in C.C. No,9/1999 for revival of the liquidation proceedings of the Companies and consequently, C.M No,12-P/2015 in C.C. No,8/1999 and C.M No,13-P/2015 in C.C.
No,9/1999 filed by the added Company for restraining the liquidator to proceed with the winding up proceedings of the Companies are dismissed.
18. The worthy liquidator shall forthwith take physical possession of the Companies and prepare inventory of the moveable and immoveable assets therein and submit his reports in C.C. Nos.8 and 9 of 1999 and submit the same before the next date of hearing. The worthy Deputy Commissioner and the District Police Officer, Swabi, are to assist the worthy liquidator, Mr. Sabz Ali Shah, in taking over and maintaining the possession of the Companies, situated in the SDA Industrial Estate, Gadoon Amazai, Swabi, as stated herein above. Adjourned to 11.4.2016.