MAHMOOD AHMED KHAN, J.---This is High Court Appeal filed under section 3(1) of the Law Reforms Ordinance, 1972 arising from the Judgment/Order dated 04.01.2016 as passed by the learned Company Judge of this Court in J. M. No,09 of 2013 wherein present Appellant was the Petitioner.
2. It is stated in the Memo of Appeal that the Appellant is a Company incorporated in the British Virgin islands and is represented in Pakistan through its Senior Officer providing services in Seismic Exploration Data Processing/Reprocessing, Interpretation and Software Marketing for Oil and Gas Sector and other business activities worldwide. The appellant entered into an understanding with the Respondent No,1 for 2D Seismic Data Processing services in respect of work allocated to the Respondent No,1 by the Government of Pakistan i,e, one for Kunerr Block and another for Jherrick Block for US$166,106.18 and US$130,340.06 respectively totaling US$296,446.24. The required service were provided and invoiced on 24.03.2009 to be paid within 30 days. The Petitioner was informed through letter dated 28.04.2009 by the Respondent No,1 that due to financial crunch and atypical circumstances the same could not be paid and as such suggested that settlement be made against shares of the Respondent No, l's Company for the value equivalent to the invoice, however this was not agreed and the said invoices remained unpaid despite meetings from the years 2009 to 2012. The Petitioner is convinced that the Respondent No,1 as such is not capable of paying the invoiced amount and the present proceeding was filed on 26.03.2013 under sections 305, 306, 309 of the Companies Ordinance, 1984. It is claimed by the Appellant that the Respondent No,1 is unable to pay its debts and that the said Respondent-Company has lost its substratum.
3. It is further stated that by an earlier order of the learned Company Judge dated 11.04.2014 it was held that the claim of the Appellant is time barred, which was challenged by way of Appeal wherein the learned Division Bench of this Court vide order dated 29.04.2014 was pleased to set- aside the same and the case was remanded for hearing afresh with the directions "to decide the application for winding up of the company on merits, after providing complete opportunity of being heard to the Respondents and also to decide the ground of limitation afresh after taking into consideration the entire material produced by the parties, particularly, the email dated 27.09.2011 at page-109 as Annexure "I" of the instant appeal, which has also been filed as Annexures "C" by the Respondent along with their reply."
4. The Respondent No,1 filed a Review Application to the said order and the same was reviewed with a little variation "that the learned Company Judge might be at liberty to take up the question of limitation first while deciding the case on merits". The learned Company Judge finally announced the order on 04.01.2016 upholding that the debt of the Appellant is not time-barred, however the Winding-Up Petition was dismissed on the ground that the non-payment of the debt not being unequivocally admitted is a bona fide dispute.
5. The grounds as taken up in the matter by the Appellant are that the impugned order is against the law, facts on record, based upon the surmises and conjectures as the same are not sustainable in the eyes of law and caused on account of serious misreading, non-reading, mis-- appreciation and non-appreciation of evidence on record /facts and law. It has further been claimed that it has wrongly been held that admission is not unequivocal and that a bona fide dispute is present. The counsel for the Appellant further relies upon the meaning of the word "debt", and alleges that the impugned order has been passed in a haste, without due diligence and has further not considered the element of termination of contract and thus the same is in violation of the principles laid down by the honourable Supreme Court of Pakistan as such is ineffective and without any force. It is further alleged that the impugned order is erroneous and the same is based upon pick and choose and has failed to take judicial notice in presence of admission as to the contract, thus causing miscarriage of justice. As to the debt it is also alleged that the learned Single Judge was misled by the other side. The memo also refers to the alleged failure of the Respondent No,1 to bring evidence/ material in support of its claim and that departure from the pleadings is present on part of the said Respondent. It is further alleged that the Respondent No,1 only made a sweeping statement without any legal and evidentiary qualification, as such learned Single Judge has not rightly treated the said Respondent to be commercially solvent. It is further stated that the principle shareholder of the Respondent No,1 is now the defunct KASB Bank, put under moratorium in November 2014 by the State Bank of Pakistan for incurring huge losses which ultimately resulted in the said bank being sold to the Bank Islami in May 2015. Lastly it is stated that the contentions of the learned counsel were not entertained and properly appreciated in respect to the Respondent No,1 being financially unable to sustain the purpose of its business.
6. In failure of appearance on part of the Respondent No,1 in the normal course of service, notices were served through publications and the service was held good on 05.04.2017. The Respondent No,2 (S.E.C.P.) on the earlier date of hearing was specifically directed to file its report in the matter and the concerned senior officer was called for personal attendance as the report on record along with the representative present was unable to give any detail/s. The said report dated 25-4-2017 duly signed by Mr. Muhammad Naeem Khan-Additional Registrar Companies, Incharge Company Registration Office, Karachi SECP stands filed and taken on record, relevant portions of which are as under; "2. That as per last Form-A made up to 29th September 2014 the Authorized Share Capital of the Respondent Company is (i) Class A Shares Rs,500,000,000 divided into 500,000,000 shares of Rs,1/- each and (ii) Class B Shares Rs,1,500,000,000/- divided into 150,000,000 shares of Rs,10 each.
Whereas Paid up Capital of Respondent Company is (i) Class A Shares Rs,149,999,970/- divided into 149,000,970 shares of Rs,1/- each and (ii) Class B Shares Rs, 1,135,756,030/- divided into 1,13,575,603 shares of Rs,10/-.
3. That as per Form-A made up to 20th September, 2014 the Respondent Company has reported four Directors namely (i) Mr. Ashraf Muhammad Hayat, CEO, (ii) Syed Waseem-ul-Haq Haqqi, (iii)
Mr. Muneer Kamal and (iv) Mr. Muzaffar Ali Shah Bukhari. However, Company filed Form-29 dated 17.12.2014 reporting resignation of Mr. Ashraf Muhammad Hayat CEO w.e.f 26.11.2014 and in his place appointment of Mr. Muhammad Anwar Mughal as CEO w.e.f 26.11.2014. Respondent Company filed Form-29 dated 2.3.2016 wherein Syed Waseem-ul-Haq Haqqi Director and Mr. Muneer Kamal Director reported to resign w,ef, 1.2.2016. The Respondent Company filed another Form-29 dated 2.3.2016 wherein Mr. Muzaffar Ali Shah Bukhari, Director reported to resign w,ef, 2.3.2016. The Respondent Company also filed two separate Forms-29 both dated 9.2.2016 wherein Mr. Muhammad Anwar Mughal reported to resign from the post of CEO w.e.f 10.9.2015 and Mr. Osama Ahmed reported to resign from the post of Company Secretary/ Chief Financial Officer w.e.f 14.10.2015. Hence, the Respondent Company currently has no Chief Executive Officer, Director, Chief Financial Officer and Company Secretary.
4. That the Respondent Company also filed Form-3 dated 9th January 2015, according to which Bank Islami Pakistan Limited (BIPL) holds 15.94% Class A shares and 3.70% Class B shares in the Respondent Company. These shares were held by the KASB Bank Limited prior to amalgamation of KASB Bank Limited into BIPL on 7th May 2015. Thus the Bank Islami Pakistan Limited is a shareholder of Respondent Company having total effective holding of 43.23% of the issued capital of the Respondent Company (direct holding 19.64% and indirect holding of 23.59%).
5. That the last filed financial statements by the Company is for the year ended 31.12.2013. The financial statements were audited by A. F. Ferguson and Co., (Engagement Partner: Mr. Waqas A.
Sheikh). The auditors had expressed a clean audit report on the financial statements in its Audit Report dated 08.09.2014.
It is further submitted that on review of the last filed financial statements of the Respondent Company, it was noted that the Company had incurred a loss of Rs,495 million in the year ended 2013 (2012: Rs,13 million). The loss mainly pertains to the write-off of Pre-Commercial Discovery Exploration Expenditure amounting Rs,484 million during the year 2013. It is further submitted that the financial statements depict that the Current Liabilities of the Company as on the year end was Rs,217.3 million and Current Assets were Rs,69.7 million. Accordingly, the Current Liabilities of the Company exceeds its Current Assets by Rs,147.6 million. On further examination of the financial statements, it is revealed that the Current Liabilities mainly represents: a. An amount of Rs,89.4 million due to KASB Bank Limited in respect of the short-term running finance facility obtained from the bank, including the markup thereon. The facility expired on 31.03.2013 and is secured by lien on the Company's deposits, bank account and properties held with the bank. As per the last Form-A, filed by the Company, KASB Bank Limited holds 7.7% of the shares in the Company; hence, it is a principal shareholder and a related party of the Company. b. An amount of Rs,13.6 million due to KASB International Limited as Company, KASB International Limited holds 33% of the shares in the Company; hence, it is a related party of the Company. c. An amount of Rs,103.6 million clue to South Asia Geophysical Services (SAGEO) Appellant against provision of 2D seismic data processing and reprocessing services. As per the financial statements (note-16.1) SAGEO raised a demand notice for settlement of outstanding liability and had initiated winding up proceedings against the Company, appeal thereto is pending adjudication.
It is further submitted that in order to settle the liabilities due to KASB Bank Limited, the Company in it Board of Directors meeting resolved to dispose of the Company's land and building secured against the liability and had made a separate disclosure of the carrying amount of land and building in its financial statements under the heading "Non-Current Assets held for sale".
Subsequent to the year ended December 2013, on 13.06.2014, the land and building was sold at an amount of Rs,80.1 million and the proceeds of which were used fully to settle the liability due to KASB Bank Limited. Since the Company has not filed financial statements for the year ended 2014- 2015 and 2016, the Company's status of settlement amounts due to KASB International Limited and South Asia Geophysical Services are not known.
6. That vide its letter dated 1.4.2016 the Bank Islami Pakistan Limited requested the Answering Respondent to inspect the books of accounts and other books and papers of the Respondent Company in terms of Section 231 of the Companies Ordinance, 1984 inter alia on the ground that the Respondent Company deliberately did not over (could have been cover) the agenda items in the EGM requisitioned by the Bank, Accounts of the Company have not been audited by the auditors of the Company since 2014, the computerized accounting system of the Company has admittedly crashed and the record is reportedly available in raw form and entire management including all the Directors/CEO has resigned from the office and there is no functional Board to handle the affairs of the Company. The competent Authority in exercise of the powers conferred under section 231 of the Companies Ordinance, 1984 the Answering Respondent passed an Inspection Order on 10th June 2016 and constituted inspection team comprising of two officers to inspect the books of accounts and other books and papers of the Respondent Company.
7. That in compliance of Inspection Order dated 10.06.2016 the Inspection Team conducted the Inspection of the Respondent Company on 11.07.2016. The Inspection Team found that Company had no Board of Directors and no staff to facilitate the inspection and it was further observed by the inspection team during its visit of the premises if Respondent Company that the books of accounts/appears (may have been papers) were dumped in a scattered form and thus conducted that inspection was not possible. The Inspection Team further concluded that the Respondent Company prima facie not in operation and its office is closed and non-operational, no management/board of directors exist, no response from the Company Secretary and CFO who were responsible for maintaining books of account or any other director received and Inspection Team and recommended winding up of the Company under section 305 of the Companies Ordinance, 1984.
8. The competent Authority is in process of initiating legal proceedings against the Respondent Company in the competent Court of law."
(Underlining for emphasis only)
7. Learned counsel for the Appellant apart from the grounds taken in the memo, contended that in the matter it has not been considered by the Learned Company Judge that no actual dispute as to the financial outstanding could be raised by the Respondent No,1 as none was ever present and even otherwise the alleged dispute if any was only for a minor amount as such the Appellant was covered and well qualified to be a creditor as required under the section 306 of the Companies Ordinance 1984 by virtue of the undisputed portion.
He has relied upon 1993 CLC 642 (National Development Finance Corporation v. Fazal Sugal Mills Ltd.), 2006 CLD 227 (Faisal Bank Limited through Attorney v. Tram Ghee Mills (Pvt.) Ltd.), 2008 CLD 1343 (Eridania (Suisse) Sa v. Rajby International (Pvt.) Ltd.), 2003 CLD (Karachi) 1075 (M/s. Aeroflot Russian International Airlines v. M/s. Gerry's International (Private) Ltd., (1999) Supreme Court Cases 382 (No Citation Found) -- Calcutta High Court In Dalhousie Jute Co. Ltd. Mulchand Lakshmi Chand on 26 September, 1980 Available at http, /Indiakanoon. Org /Doc/ 973407/, PLD 1999 Supreme Court 1 (M/s. Platinum Insurance Company Limited Karachi through Managing Director v.
Daewoo Corporation, Shaikupura through Director, Administration and Finance), 2002 CLD 1487 (Hala Spinning Mills Ltd. v. International Finance Corporation and another), PLD 1996 Lahore 633 (Habib Bank Ltd. v. Hamza Board Mills and others), 1999 MLD (Karachi) 2609 (Investment Corporation of Pakistan (I. C. P) v. M/s. Sindh Tech. Industries Limited), 1999 MLD (Karachi) 3195 (M/s. Pan Century Edible Oils SDN/BHD through Authorized Representative v. M/s. Fatima Enterprises Ltd.), 1993 M LD 94 (PICIC v. M/s. Indus Steel Pipe Pte.), 2001 M LD 1885 (The Pakistan Industrial Credit and Investment Corporation Limited v. M/s. Electric Lamp Manufacturers of Pakistan Limited), 2003 CLD 211 (M/s. Aeroflot Russian International Airlines through Manager v. M/S Gerry's International (Private) Ltd.), 2005 SCM R 1450 (Ibrahim Shamsi and 2 others v. Bashir Ahmed Memon and another), 2005 SCM R 1458 (Muhammad Riaz and another v. Ghulam Nabi and another), 2005 CLD 1624 (Ibrahim Shamsi and 2 others v. Bashir Ahmed Memon and another), 2014 CLD 1482 Sindh (United Bank Limited v. Gulistan Textile Mills Limited), 2005 CLD 151 (Lahore) (Sabir Ahmad and others v. Najma Sugar Mills), 2005 CLD 159 (Lahore) (Nazir Muhammad v. Customs Central Excise and Sales Tax (Appellate) Tribunal, Islamabad and another), 2002 SCM R 450 (SC)
(Hala Spinning Mills Ltd. v. International Finance Corporation and another), 2002 SCM R 468 (SC)
(Abdul Hamid Mian v. Muhammad Nawaz Kasuri), PLD 1990 Supreme Court 768 (Trade and Industry Publications Limited v. Industrial Development Bank of Pakistan), PLD 1985 Karachi 193 (In Re: Synthetic Chemicals Co. Ltd. Karachi), PLD 1990 Supreme Court 763 (M/s. Ali Woolen Mills Ltd. v.
Industrial Development Bank of Pakistan and 3 others), 1993 CLC 642 (Karachi) (National Development Finance Corporation v. Fazal Sugar Mills Ltd.), 1993 CLC 649 (Lahore) (Javaid Hussain Sheikh v. Mst. Fahmida Qaiser), 2006 CLD 227 (Lahore) (Faysal Bank Limited v. Iram Ghee Mills (Pvt.)
Ltd.), 2006 CLD 232 (Karachi) (Marianne Khan v. National Bank of Pakistan and others), 2003 CLD 1075 (Karachi) (M/s. Aeroflot Russian International Airlines v. M/s. Gerry's International (Private)
Ltd.), PLD 1999 Supreme Court 1 (M/s. Platinum Insurance Company Limited Karachi through Managing Director v. Daewoo Corporation, Shaikhupura through Director Administration and Finance), PLD 1999 Supreme Court 25 (Miss. Akhtar Qureshi v. Nisar Ahmed), 2002 CLD 1487 (SC)
Hala Spinning Mills Ltd. v. International Finance Corporation and another), PLD 1996 Lahore 633 (Habib Bank Ltd. v. Hamza Board Mills and others), 1999 M LD 2609 (Karachi) (Investment Corporation of Pakistan (I.C.P.) v. M/s. Sindh Tech. Industries Limited), 1999 M LD 2612 (Lahore)
(Muhammad Amir and another v. Province of Punjab through Collector, District Khushab and 2 others), 1999 M LD 3195 (Lahore) (BCCI through Habib Bank Limited v. Hamaliya Textile Mills (Pvt.)
Ltd.), 1999 MLD 3199 (Khuda Bux Chandio v. Sattar and others), 2008 CLD 1343 (Karachi) (Eridania (Suisee) Sa v. Rajby International (Pvt.) Ltd.), 2008 CLD 1347 (Karachi) (Rana Muneer Ahmed and another v. Al-Zamin Leasing Modraba), 1993 M LD 94 (Karachi) (PICIC v. M/s. Indus Steel Pipe Ltd.), 1993 M LD 104 (Karachi) (Pakistan Defence Officers Housing Authority v. Abdur Rehman and another), 2001 M LD 1885 (Karachi) (The Pakistan Industrial Credit and Investment Corporation Limited v. M/s. Electric Lamp Manufacturers of Pakistan Limited), 2001 M LD 1890 (Peshawar)
(Roshan Din and another v. The State and another), 2015 SCM R 1550 (SC) (M/s. MFMY Industries Ltd. and others v. Federation of Pakistan through Ministry of Commerce and others).
8. Ms. Naheed Parveen, D.A.G. has supported and adopted the arguments of Respondent No,2.
9. Having heard the learned counsel for the Appellant, D.A.G and the Respondent No,2 and having perused the record and the cases sighted at the bar, it is observed that the amount claimed by the Petitioner against the Respondent No,1 stood in the sum of US$296,446.24 and in this respect by correspondence dated 7th December, 2011 the Respondent No,1 agreed to settle the matter at a discount of 50% (Annexure "E" page 595 of the petition) however the Petitioner offered only a discount of 2% which is confirmed by the e-mail dated 23-2-2012 (Annexure J), page 603 of the petition) as such the minimum requirement of the applicable law i,e, Companies Ordinance 1984, section 306 being 'sum exceeding one per cent of its paid-up capital or fifty thousand rupees, whichever is less" stands complied with, prima facie (subject to rebuttal i,e, any reasonable explanation that may come up however none found in the record) as brought forward before the learned Company Judge, even if the 50% as admittedly is considered let alone the 2% as was offered. The non-payment of the outstanding as such is a red flag raised, which can only be overlooked after satisfaction of a reasonable financial health of the Respondent No,1, in respect to which no material has come forward and the same is also absent in the impugned order. A deliberation to the reasonable financial health of the corporate body is liable to be considered along with the quality of admission of the said claim as even in case of liquidation, the amount of claim does not become payable outright but is to be accepted and approved by the management/liquidator and the Company Judge respectively, as the case may.
10. In light of the foregoing as brought on record without any rebuttal the current liabilities of the Company on the year ended 2013 stand in the sum of Rs,217.3 Million and assets at Rs,69.7 Million only, the liabilities exceeding the current assets by Rs,147.6 Million. We in the circumstances find that the Respondent. No,1 Company has lost its substratum, as such it is in the interest of everyone concerned that the Respondent No,1 be wound up. While passing this order we are conscious of not only the non-participation of the Respondent No,1 before us but also the present stage being that of the appeal, however in view of the severity of report cited above, we find ourselves with no other available option. We however do not appreciate the lack/quality of assistance as provided to the learned Single Judge and as to earlier formal comments of the said Respondent No, 2 before this bench also.
Consequently, the instant High Court Appeal is allowed and it is ordered that the Respondent No,1 Company be wound up, Official Assignee is appointed as its liquidator. Needless to state that other necessary legal requirements would also follow in accordance with law.