IJAZ UL AHSAN, J.---Leave to appeal is sought against a judgment of the Lahore High Court dated 27.05.2017. Through this judgment, a winding up petition, filed by the petitioner against the respondents was dismissed.
2. The brief facts necessary for adjudication of this lis are that respondent No,1 is a limited company engaged in the business of production and sale of 'vegetable ghee'. It was nationalized on 02.09.1973 under the Hydrogenated Vegetable (Control and Development) Act, 1973.
3. The Petitioner having been set up to take over management of vegetable ghee units, took over the management of Respondent No, 1 . The board of directors of the company comprised of four directors nominated by the Federal Government and three elected by the minority shareholders.
4. In pursuance of the de-nationalization policy of the Federal Government, the company was privatized in terms of sale agreement dated 28.12.1992 in favour of Trade Lines (Respondent No,2).
Consequently, 51% shares of Respondent No,1 represented by 4,88,582 shares held by the petitioner were sold to Respondent No,2 at a price of Rs,85.10 per share. The management of the company was also taken over by Respondent No,2 on 05.01.1993. Possession of the factory was accordingly handed over to representatives of Respondent No,2.
5. It appears that possession of the Factory was forcibly taken over by workers of the company (Respondent No,1), who were allegedly acting on the instigation of the General Manager of the company who had been appointed by the Petitioner. Having lost possession and control of the Factory, Respondent No,2 instituted a suit for declaration, mandatory injunction and damages in the Civil Court of Lahore on 03.03.1994. Subsequently, in view of promulgation of the Privatization Commission Ordinance 2000, the original jurisdiction in disputes of this nature was conferred on the High Court. Consequently, the aforesaid suit was transferred to the Lahore High Court and was assigned C.O.S. No,260-1/1994. The record indicates that in the said suit, the dispute between the parties was, with consent of the parties referred to a sole arbitrator on 30.09.2005. The Arbitrator issued the award on 29.09.2007 which was subsequently made a rule of court.
6. It appears that while the suit filed by Respondent No,2 was pending, the petitioner filed a petition under section 309 read with sections 305, 306 and 314 of the Companies Ordinance 1984 seeking compulsory winding up of Respondent No,
1. The main grounds urged by the petitioner were that the Company was unable to pay its debts, it was unable to pay salaries of its employees, it had suspended its business since May 1993 and it was just and equitable to wind up the company.
7. When the petition was taken up for hearing on 28.04.2015 the High Court came to the conclusion that since an award had been announced on the basis of the dispute between the parties, which had been made a rule of court in C.O.S. No,260-1/1994, the winding up petition could not proceed.
The winding up petition was accordingly dismissed. Hence this petition.
8. The learned counsel for the Petitioner submits that the fact that the award has been made rule of the Court did not in any manner affect the merits/grounds set out in the winding up petition. He maintains that winding up was sought on the basis of inability to pay debts, nonpayment of salaries, suspension of business and it being just and equitable to wind up the company. None of the said grounds were decided by the award dated 29.05.2007. He maintains that the impugned order has been passed in haste without addressing the grounds and is against the law and facts of the case. The learned counsel for the respondents on the other hand has defended the impugned order.
9. Having heard the learned counsel for the parties and gone through the record we find that the Petitioner was, till 05.01.1993, in effective control of the company. Pursuant to privatization of the Company, 51% of the shares held by the Petitioner were sold to Respondent No,2 and management of the company was handed over to representatives of Respondent No,2 whose nominees were co-opted as directors. However, owing to the fact that the respondent No,2 was forcibly dispossessed of the factory and there were serious allegation of involvement of the General Manager appointed by the Petitioner, Respondent No,2 had to approach the Civil Court by filing a suit for declaration, injunction and damages, referring the above-noted dispute and other financial issues between the parties to a court of competent jurisdiction. The disputes between the parties ultimately ended up in arbitration in which an award was given which was made a rule of court in C.O.S. No,260-1/1994. We have been informed that the order making the .award a rule of Court has been challenged by way of a Regular First Appeal which is pending before the High Court. Be that as it may, the dispute relating to the implementation, interpretation and respective financial obligations under the privatization agreement dated 28.12.1992, which was the subject matter of the dispute between the parties and has a direct nexus with the financial health and viability of the company. It has finally been resolved through an arbitration award. It therefore appears to us that the winding up petition was not filed bona fide but as a pressure tactic. The timing of filing of the winding up petition and the dispute raised therein relate to the period when the petitioner was in control of the company. The viability of the company, its financial obligations and its further operation was dependent upon implementation of the Privatization Agreement dated 28.12.1992.
However, disputes arose between the parties which were referred to Arbitration and form the subject matter of the award. We are therefore convinced that the winding up petition had objects and purposes other than those for which the law relating to compulsory winding up has been enacted.
10. Further, it is evident from the record that till 05.01.1993 the Petitioner was in control of Respondent No,1 and few months after having giving up control, pursuant to a privatization agreement, it decided to file a winding up petition raising the grounds reproduced above. We are afraid that in the facts and circumstances narrated above, none of the grounds asserted for winding up were available to the petitioner specially as when disputes of various nature, directly arising out of the privatization agreement, were pending before a court of competent jurisdiction and were ultimately decided in arbitration through an award which was made a rule of court.
11. It is also significant to note that none of the other creditors has approached the Court seeking winding up of the company. Even otherwise, it is settled law that winding up proceedings cannot be used as a substitute to a recovery suit. Further, admittedly, the petitioner had consented to the disputes being referred to Arbitration. In these circumstances, a winding up petition was not competent. The petitioner was also estopped from filing the petition after having consented to getting its disputes resolved through arbitration and having freely participated in it without cavil, demure or protest. Finally, after the award was made a rule of Court the petitioner ceased to have locus standi as a creditor. Reference in this regard may usefully be made to Pakistan Industrial Credit and Investment Corporation, Ltd. v. Premium Rubber Belting and Manufacturing Co. Ltd., Karachi (PLD 1973 Karachi 326); Adage Advertising v. Shezan International Ltd. (1970 SCMR 184); Hashmi Can Company Limited v. K.K. & Co (Pvt.) Ltd. (1992 SCMR 1006) and Trade and Industry Publications Ltd. v. IDBP (PLD 1990 SC 768).
12. We therefore find that the learned High Court had valid reasons and lawful justification to hold that the petitioner could no longer seek winding up of Respondent No,1 and the winding up petition could not proceed. The learned counsel for the petitioner has not been able to convince us that the impugned order of the High Court suffers from any legal, procedural or jurisdictional error, defect or flaw that may require interference by this court in exercise of powers under Article 185(3) of the Constitution of Islamic Republic of Pakistan.
13. For reasons recorded above we do not find merit in this petition. It is accordingly dismissed.
Leave to appeal is refused.