SHAMS MEHMOOD MIRZA, J.--- This winding up petition was filed by the Additional Registrar of Companies against respondent No. 1 Company under section 305 read with section 465(3) of the Companies Ordinance, 1984 (the Ordinance ).
This judgment shall also decide Civil Original No. 1 of 2007 Joint Registrar of Companies v. M.G. Hertz etc. and Civil Original No. 2 of 2007 titled Joint Registrar of Companies v. Asia Challenge Investment etc. as facts of all the three cases are intermingled and are identical in nature.
2. Basic facts leading up to the filing of the present petition as well as connected petitions are as follows.
Respondent No. I company (M.G. Realtors ) was incorporated on 15.12.1994. Its main purpose was construction of bridges, roads, spillways, highways, reservoirs, airports, seaports and structure of all description etc. In the year 1995, the Federal Government approved Islamabad New City Project" (the Project ) within the territorial jurisdiction of Islamabad City Territory . The Project was conceived as a public private partnership. M.G. Realtors entered into a Joint Venture Agreement on 22.05.1995 (NHA JV Agreement ) with Ministry of Housing and Works, Government of Pakistan and National Highway Authority (NHA ). For the purpose of developing, planning and designing the Project, it was proposed that over a total area of 20000 Kanals be acquired in 3 phases in the following manner:--- Phase-1: 6,000 kanals within 03 months Phase-II: 6,000 kanals within 06 months Phase-Ill: 8,000 kanals within 1 year Respondent No 1 company in Civil Original No 1 of 2007 namely M.G. Hertz (Pvt.) Limited (M.G. Hertz ) also entered into a Joint Venture Agreement dated 24.08.1995 (CDA JV Agreement ) with Capital Development Authority (CDA ) for development of the Project. Under the terms of CDA JV Agreement, M.G. Hertz undertook to procure 7500 Kanals of land on the terms mentioned in the said agreement.
The two joint venture agreements shall henceforth collectively be referred to as JV Agreements.
In terms of NHA JV Agreement, 100% financing was to be provided by M.G. Realtors and it was also responsible for providing 750 Kanal freehold land to National Housing Authority/respondent No. 6 as security . The land of the proposed project was acquired through firms and private individuals. A similar arrangement was made in CDA JV Agreement. Advertisement campaign for the Project was carried out in national press and general public was influenced/invited to invest in the Project although the land had not been acquired by the two companies and the requisite NOC was not obtained from CDA/respondent No. 5. Be that as it may, the two companies starting collecting money from the general public in July 1995. In fact, M.G. Realtors applied to CDA/respondent No. 5 for NOC on 20.08.1995 and a conditional approval was granted on 25.03.1996 which was valid only for 30 days subject to the terms and conditions contained therein. in connection with the JV Agreement, an agreement to sell was executed with State Life Insurance Corporation of Pakistan (SICL ) on 30.06.1996 which paid an amount of Rs.
209,533,320/- for purchase of 800 residen tial and 200 commercial plots in the Project even though the land by then had not yet been acquired by the two companies.
3. The Cabinet Committee as also the then Ehtasab Cell took notice of the fraudul ent affairs of the two companies in December 1997 whereafter A.G. Ferguson, a firm of Chartered Accountants, was appointed to conduct the forensic audit of the affairs of the said companies. The report prepared by A.G. Ferguson unearthed fraudulent activities and embezzlement by the management of the two companies, the details whereof are given in paragraphs 18 to 21 of the petitions. Consequently , FIR No. 6 of 1997 was lodged with the Federal Investigation Agency .
4. M.G. Realtors then entered into an agreement dated 17.02.1998 with National Highway Authority/respondent No. 6 and Asia Challenge Investment (Pte) Limited/respondent No. 8 (hereinafter referred to as Asia Challenge ). In terms of the said agreement, amongst other , the Project was to be taken over by Asia Challenge and the funds obtained from SICL and general public were to be returned by it. The project was to be renamed as Soan City .
5. The Economic Coordination Committee of the Cabinet (ECC ) in its meeting held on 24.08.2004 constituted a committee (the ECC Committee) comprising of the following persons to review the case of the Project.
(i) Deputy Chairman, Planning Commission;
(ii) Attorney-General for Pakistan;
(iii) Secretary , Ministry of Housing and Works; and
(iv) Secretary , Finance Division.
The ECC Committee after inquiring into the matter gave its recommendations which are reproduced as under:--- the companies may be got declared as defaulters.
(by official liquidators may be got appointed for disposing of the properties and utilizing sale proceeds for payment to affectees.
(c) NAB to initiate criminal proceedings..
6. The Registrar of Companies filed a reference with the Securities and Exchange Commission of Pakistan (SECP ) under Section 309(b) of the Ordinance whereafter a show-cause notice dated 20.04.2006 issued by. SECP was served on M.G. Realtors, which was not responded to by it. The necessary permission was accordingly granted on 08.05.2006 for filing the present winding up petition. A similar notice was issued to M.G. Hertz and after its failure to respond to the said notice, permission was also granted to file the winding up petition against it.
7. The grounds on which winding up of the two companies was sought included the intent of the sponsors of the companies to indulge in fraudulent activities and to embezzle the funds of the general public. It was also alleged that the companies got engaged in business activities, which were not authorized by their Memorandum and Articles of Association. The companies, it was furthermore alleged, were unable to debts and admitted liabilities.
The petitions also stated that the two companies failed to hold their Annual General Meetings since 2000 and also failed to maintain their accounts and carry out audits.
8. After institution of this petition, this Court issued notices to M.G. Realtors on 26.07.2006. As M.G. Realtors refused to accept notice and did not enter appearance, ex-parte proceeding s were ordered against it on 28.09.2006. This Court on 06.11.2006 appointed the Provisional Manager for taking over the affairs of M.G.
Realtors. Taking note of the fraud committed by M.G. Realtors on the general public, this Court ordered the Provisional Manager to undertake the process for demarcation of the land of the Project acquired by the two companies. This Court once again passe d orders on 11.09.2007 for appointment of another Provisional Manager .
The ex-management of the Company filed C.M. No 73 of 2009 for recalling the order of appointment of joint Provisional Managers which was dismissed as withdrawn on 25.02.2009.
9. The Provisional Managers on 01.03.201 1 filed the list of claimants. On 20.11.201 1, this Court directed the Provisional Managers to submit a comprehensive report regarding: (a) progress of the case from inception till date;
(b) endeavours made by the Provisional Managers for locating the record of properties and steps taken by them for demarcation and efforts made by them for seeking possession thereof; (c) litigation carried out by the ex- Management of the Company after appointment of Provisional Managers without seeking permission of this Court.
10. It would also be in order if reference is made to some of the reports filed by the Provisional Managers from time to time to ascertain the progress made by them in not only locating the scattered properties acquired by the Company but the steps taken and efforts made by them for perfecting the title of the properties of the Project and seeking their partition.
Report No. 1 Through this report, the Provisional Managers gave details about the pending cases by and against the two companies.
Report No. 2 This report filed by the Provisional Managers mentioned the progress about the demarcation of the properties and the claims filed before the National Accountability Bureau.
Report No. 4 The Court was informed about the claim of Asif Enterprises and Maqsood Brothers, the two entities who had supplied land to the Company pursuant to an Agreement. Asif Enterprises and Maqsood Brothers were thus impleaded as respondents No. 10 and 1 1 respectively .
Report No. 5 The details of the meeting of the stakeholders are given in this report. It was also informed that the directors of the Company have absconded.
Report No. 6 & 7 The provisional managers gave the list of claimants from whom money had been taken by the Company as well as revival plan given by respondents No. 2 to 4.
Report No. 9 This report listed out the details about the tampering of the record of the Company by the ex-management.
Reports No. 16 & 17 This report mentions the details of the settlement between the Company , respondents No 10 and 11 and BECHS.
The relevant particulars of report No. 16 are mentioned in report No. 18, which are detailed below .
11. The ex-management of M.G. Realtors filed C.M. No. 6 of 2015 for bringing an end to the current proceedings and for rejection of the petition on the ground that the assets of the company far exceed its liabilities and as such the ground for winding up was not made out. During the course of arguments, it transpired that certain litigation had been initiated by the ex-management and Asif Enterprises after the appointment of the Provisional Managers in respect to the land the Project without seeking prior permission/leave of this Court. The Provisional Managers were accordingly directed to file a self-contained report on 20.1 1.2015. The said order reads as under:--- Learned Provisional Managers are directed to submit a comprehensive report stating therein the progress of this case right from its inception till date. The said report shall also narrate the endeavors made by the learned Provisional Managers for locating the record of the properties, seeking their demarcation and efforts made for seeking possession of the properties. They shall also highlight in the said report the litigation which was carried out and defended by the ex-management of the respondent No. 1 company after the appointment of provisional managers and without seeking permission of this Court.
12. Pursuant to the afore-mentioned order, the Provisional Managers filed report No. 18. This is the most important report and, therefore, the material points brought forth through it shall be detailed hereunder:--- a. The land for Islamabad New City Project was procured through 02 Firms as well as through AOP, ASIF Enterprises & Maqsood Brothers. The land so purchased was entered into the Revenue Record in the name of CDA JV as well as NHA JV. b. At the time of appointment of the Provisional Managers no record whatsoever was available with regard to the lands and properties of the three Companies involved in the Islamabad New City Project. The Provisional Managers had a series of meetings with the senior officers of CDA, NHA, NAB, ICT in order to retrieve the relevant documents/record of Islamabad New City Project. c. As per the winding up petition filed by SECP , the land of the Islamabad New City Project was scattered in thirteen different villages and was barren and rocky and some of the land was underneath River Sawaan and that mostly partial Khasra numbers were purch ased. Land of the project was also not in the possession of the Company nor handed over to NHA. Land included in Hagooq Shamlat Deh (Hawai) was purchased which was not even demarcated or divided amongst the shareholders of respective Mouzas. The division of the land was as under:--- Total Land Purchased:5888 Kanals & 06 Marlas Total Hagooq Shamlat:8474 Kanals & 08 Marlas Total Land: 14362 Kanals & 14 Marlas d. This Court ordered on 11.06.2007 "To resolve a solution and to safeguard the investment of innocent citizens, it is decided that demarcation of land and its possession be determined at the first instance" This Court further ordered that the CDA & NHA will jointly get the land demarcated. ADC (R) was directed to extend necessary help and finalize the process of demarcation and possession without delay . e. Pursuant to the orders of this Court, the Provisional Managers had a series of meetings with ICT. The Deputy Commissioner Islamabad also ordered the officers of ICT to arrange, and provide the official Revenue Record to the Provisional Managers. The record so obtained was submitted before this Court. The Provisional Managers held detailed meetings with the officers of NAB, NHA, CDA,. ICT & Police to get the, first ever demarcation of the Islamabad New City Project land in August 2007.With the joint efforts of all the departments concerned, the tedious task of demarcation of the project lands was made possible. f. The matter of partition of land in Joint ownership was brought up to the notice of this Court and after seeking direction from this Court, the process of partition of Project land was set in motion by the: Revenue Authorities. g. Under the orders of this Court, the Provisional Managers retrieved the details of the claimant/investors from NAB, CDA, NHA & FIA. These authorities provided the particulars of the claimants. ASH' Enterprises also filed its claims in the form of copies of Provisional Allotment letters. h. Ex-Management had also submitted its Revival plan alongwith documents in support thereof. i. The complete list of lands (Mouza wise) as received from ICT was submitted before this Honourable Court.
According to ADCG ICT, out of total of 14192 kanals of land, 8914 kanals land is Shamlat Deh whereas the remaining 5888 kanals land had ownerships statu s. Total land transferred in the name of CDA JV and NHA JV was 27870 kanals out of which 14065 kanals was under approved mutations and muta tions of 13805 kanals had been cancelled from 1996 to-date. j. First Nishandehi/Demarcation of the land of the project was made in 2007 under the orders of this Court and thereafter this Court in 2009 directed the ICT authorities for partition of the land. The status of land changed after partition. k. On initiation of the process of re-de marcation and possession, there were threats and hindrances from occupants, co-owners and as such this Court allowed the appointments of 05 Security Guards to guard, Patrol and station at Islamabad New City Project land.
First ever of fice of the Islamabad New City Project was built with the permission of this Hon'ble Court. m. During the process of taking over possession of the INC Project land, it was revealed that 326 Kanals of land of the INC Project was under the possession of Intelligence Bureau Employees Housing Society (IBECHS). IBECHS admitted its possession over the land in question and stated that it had entered into an agreement to sell with regard to the land in question with ASIF Enterprises in 2007 i.e. after the appoin tment of Provisional Managers.
IBECHS furthermore submitted that the land in question was inadvertently taken into possession by it due to misunderstanding and that as the said land is now included in the development area of Gulberg Islamabad, a project of IBECHS, therefore in lieu thereof IBECHS may be allowed to compensate the Islamabad New City Project. After meetings with IBECHS by the Provisional Managers under the orders of this Court, an understanding was reached between the parties for transfer of fully developed plots and accordingly an Exchange Deed was executed between the Provisional Managers and IBECHS. As per the Exchange Deed, IBECHS provided 82 files of fully developed plots in Gulberg Residencia, a project of IBECHS and in lieu thereof 326 Kanals of INC Project land was transferred in the name of IBECHS. n. As per the contents of the Petition, NAB Reference & Ferguson Report, the liabilities of the Companies include the following amounts: General Public:Rs. 8.30 Million SLIC: Rs. 210.000 Million In addition thereto, Asif Enterprises is also a claimant. o. The assets of the companies include the following:--
(i) Physical possession of almost 3500 kanals of land in dif ferent Mouzas. 10,000 kanals is under Shamlat land.
(ii) 82 files of Gulberg Residencia Islamabad, project of IBECHS are in possession of undersigned Provisional Managers.
(iii) Amount retrieved by the efforts of Provisional Managers from various Financial Institutions in the sum of Rs.
20.000 Million alongwith interest.
(iv) The site office of INC Project was constructed on the main Japan Road, which consists of 2 Office rooms, 2 stores, kitchen, bathrooms, 2 Guard Rooms. A Transformer was also purcha sed and installed from IESCO authorities to provide electricity to the of fice and security guards.
P. Respondents No 11 & 12 i.e. ASIF Enterprises & Maqsood Brother claim that they procured land for the companies but the price was not paid to them. Respondents No. 11 & 12 and ex-Management at the Companies filed different cases against each other with regard to their respective claims as far back as 1998, which litigation was pending for adjudication before different Courts. In March 2015, respondents No. 11 and 12 and the ex- Management reached an out of Court settlement Agreement to resolve their long outstanding disputes and claims, which agreement was filed through CMA in FAO 34/2010 and in ICA 125/2000. Vide order dated 19.03.2015, the said Agreement was made part of Court/Judicial Record and the learned Islamabad High Court disposed of both the cases between the said parties.
As per terms of the Settlement Agreement, the claim of respondents No. 10 and 11 over 7950 kanals of Land of INC Project was accepted and admitted by the ex-Management of MG Realtors & MG Hertz: As per terms and conditions of the Agreement, IBECHS has agreed to clear/adjust the liabilities of ex-Management of MG Realtors & MG Hertz in regard to the general public, SLIC and that of ASIF Enterprises. IBECHS also agreed to pay the consideration of 7950 Kanals of land respondent No. 11 & 12 which land stands in the name of MG Realtors/NHA JV. After the receipt of the agreed consideration, respondents No. 11 & 12 will transfer their entire right/claim in the said 7950 kanals in favour of IBECHS. As per the terms of the Agreement, the parties agreed that the terms thereof shall become effective only when this Court shall pass decision on the liabilities of general public, interest accrued and claim of SLIC. It was also decided that after payment of all the liabilities, the properties of INC Project will be transferred in favour of IBECHS. r. In continuation of the IBECHS proposal, IBECHS submitted a Pay Order No. 1429878, dated 06-07-2015 from MCB Aabpara-Branch Islamabad, amount to Rs. 83 Million for payment of liabilities of the general public on behalf of MG Realtors & MG Hertz Pvt. Ltd. to the Provisional Managers, which has submitted in the official account pursuant to the order of this Court. s. IBECHS also submitted before this Court through an application that after payment of General public liability (in original) it is also ready to settle the liability against SLIC and also submitted 03 cheques to pay off the SLIC liability . The matter of liability of SLIC has not been settled so far as the SLIC is claiming huge amounts over and above its claim as interest. SLIC has also obtained a decree against NHA from the civil, Courts at Islamabad and has also filed its execution application, which. is lending before the civil Court. SLIC cannot claim the same relief from different fora. SLIC should either pursue the execution of its Decree or get claim amount from this Court. Ex- Management admitted the claim of SL IC in original in its application to stop winding up process.
13. While addressing arguments on C.M. No. 6 of 2015, the learned counsel for Asif Enterprises and Maqsood Brothers stated that M.G. Realtors and M.G. Hertz were selected by the CDA under the National Housing Policy and accordingly the JV Agreements were executed. The JV Agreements were subsequently superseded by another joint venture agreement executed between M.G. Hertz, CDA and. Asia Challenge on 07.07.1996. M.G. Hertz entered into an agreement with Messrs Rai Farms on 06.12.1995 for procuring 2000 Kanal whereas M.G. Realtors executed agreement with Messrs Barkat & Co. on 14.12.1996 for purchasi ng 1000 Kanal land. Through agreements dated 09.05.1997 Messrs Rai Farms and Messrs Barkat & Co. assigned their rights and liabilities under the agreements dated 06.12.1995 and 14.12.1996 in favour of Messrs Asif Enterprises and Maqsood and Brothers (Pvt.) Limited. Asia Challenge also entered into agreement with Messrs Asif Enterprises and Messrs Maqsood and Brothers (Pvt.) Limited on 09.05.1997 for procuring 9500 Kanal of land. Both Messrs Asif Enterprises and Messrs Maqsood and Brothers (Pvt.) Limited procured and transferred land in favour of M.G. Hertz and M.G.
Realtors (Pvt.) Limited without receiving any sale consideration. As the project was abandoned, Messrs Asif Enterprises and Messrs Maqsood and Brothers (Pvt.) Limited filed writ petition No. 2232 of 1999 at the Rawalpindi Bench of this Court which was disposed of on 01.08.2000 with the observations that Messrs Asif Enterprises and Messrs Maqsood and Brothers (Pvt.) Limited had stepped into shoes of Asia Challenge, Messrs Rai Farms and Messs Barkat Ali & Co. by virtue of agreement dated 09.05.1997 and have become owners of land measuring 5472 Kanal. Against the said orders. ICA No. 125 of 2000 was filed which was disposed of on 26.10.2002 with a direction to Secretary Ministry of Interior to appoint members of the committee for resolution of disputes between the parties.
The committee required Messrs Asif Enterprises to procure a NOC from the competent authority of Singapore as Asia Challenge had already been declared insolvent. The needful was done and letter dated 25.11.2004 was procured from the Insolvency and Public Trustee's Office, Singapore. Subsequently at the asking of Capital Development Authority , Asif Enterprises once again procured letter dated 25.11.2008 issued by the Insolvency & Public Trustee's Office, Singapore. Despite the production of afore-mentioned letters, the land in question could not be transferred in the name of Asif Enterprises. The ex-management of the companies filed two applications bearing CM qos. 71 land 712 of 2011 in ICA No. 125 of 2000 and CMs No. 90 and 91 of 2011 in FAO No. 34 of 2010 in which a settlement was arrived at between Asif Enterprises and Maqsood and Brothers (Pvt.) Limited and the ex- management whereby ownership rights of Asif Enterprises and Maqsood and Brothers (Pvt.) Limited over the land in question was acknowledged. The details of the said land are mentioned in the third schedule of the supplementary deed. It was, therefore, contended that Asif Enterprises and Maqs ood and Brothers (Pvt.) Limited have become owners of the said land as no party to the present proceedings has raised any dispute in regard thereto. It was furthermore submitted that 91% of the said land falls in the case filed against M.G. Hertz in respect of which the official liquidator has already filed report No. 18 in which it is categorically stated that no claim exists against the said company .
14. The Provisional Managers in order to assess the claims made by Asif Enterprises and Maqsood Brothers went to Singapore to ascertain the status of Asia Challenge. In this regard, they filed reports No. 20 and 21, the relevant points whereof are noted hereunder:--- Report No. 20 a. Asia Challenge Investment (Pte) Limited was incorporated as a private limited company under Section 19(4) of the Companies Act, CAP. 50 on 07.12.1995 as Company No. 199508691E, by the Registrar of Companies and Business of Republic of Singapore by its promoters Mr . Chan Wing Khei & Mr . Sim Cheng Chye. b. As per the record of SECP , Asia Challenge filed the documents for registration of its branch office in Pakistan on 13.06.1997 before the Company Registration of fice of SECP at Islamabad and it was registered on 17.1 1.1997. c. As per the contents of the petition, Asia Challenge was wound up on 27.08.199 9 by the competent Authority at Singapore. d. In terms of Section 458, of the Ordinance, if a foreign company ceases to have place of business in Pakistan, it is required to give notice to the registrar of companies at least 30 days before it intends to cease to have any place of business in Pakistan on prescribed Form 46 and to publish a notice of such intention at least in two daily newspapers circulating in the Province(s) in which such place(s) of business is situated. All obligations of the company to deliver documents to the registrar concerned ceases from the date of such intention to cease to have any place of business in Pakistan, except that such foreign company does not have any other place of business in Pakistan. e. As per requirements of Companies Ordinance, 1984 if a foreign company having an established place of business in Pakistan goes into liquidation in the country of its incorporation, it is required to: (a) give notice to the registrar concerned within 30 days; (b) simultaneously publish a notice at least in two daily newspapers circulating in the Province or Provinces or the part of Pakistan not forming part of a Province, as the case may be, in which its place or places of business are situated (c) furnish to the registrar concerned all returns relating to the liquidation and the liquidation account in respect of such portion of the company's affairs as relates to its business in Pakistan, within thirty days of the conclusion of the liquidation proceedings; and (d) publish a statement on every invoice, order , letter paper , bill head, notice of other publications in Pakistan that the company is being wound up in the country of its incorporation. f. In some of the documents and files, the name of company under winding up has been mentioned as Asia Challenge Pakistan (Pvt.) Limited. In order to get the clear understanding and to obtain the official version from the record of SECP , the Provisional Managers had asked for the provision of certified copies of Statutory Returns/corporate record of Asia Challenge Investment (Pte) Limited and Asia Challenge Pakistan (Pvt.) Limited.
SECP vide office letter dated 30.03.2016 responded that Asia Challenge Investment (Pte) Limited is registered as a foreign company with SECP . It was also communicated to the Provisional Manage rs that no company in the name of Asia Challenge Pakistan (Pvt.) Limited is registered with SECP . g. Dr. Naeem Niazi, the authorized representative also submitted the documents of authorization in his favour from the Directors of Asia Challenge Investmen t (Pte) Limited. The Deed of Authority was issued by Mr. Tan Chin Ming, Ex-Director of the Foreign Company .
Report No. 21 a. In order to get the official verifications of documents regarding the company . the Provisional Manager visited the office of Accountancy & Corporate Regulatory Authority Singapore. The Provisional Manager was officially informed by the authorized dealing officers that Asia Challenge Investment (Pte) was incorporated in 1996 and that its name was struck of f on 09.04.2004 by the ACRA on account of winding up filed by the claimant of the said company b. The Provisional Manager was provided documents of the company after payment of official charges. The official details of the company's are as following:--
(i) Name of the Company: Asia Challenge Investment (Pte) Limited
(ii) Registration No. 199508691E
(iii) Date of Registration: 07.12.1995
(iv) Country of Incorporation: Singapore
(v) Type of Company: Private Limited
(vi) Registered of fice Address: 61 C New Bridge Road, APG Building, Singapore 059406
(vii) Status: Name Struck of f on 09.04.2004
(viii) Auditors: YAP BOB PIN & Company
(ix) Directors: Chia Kim Chee & Tan Chin Ming
(x) Share Holders: Apec Resources PTE L TD-300,000 S$ Fulltech Development L TD-700,000 S$
(xi) Last AGM held on 20.01.1999
(xi) Last Annual Return filed on 20.01.1999
(xiii) Last Accounts filed on 31.12.1997
(xiv) Litigation: Winding up filed by Fujtta Corporation on 01.06.1999. c. The Provisional Manager obtained the official copies of last Audited Accounts of the company which were filed on 31.12.1996 and according to the official record were never filed thereafter . As per the audited accounts as signed and verified by the External Auditors of the company and as per statutory requirement under the Companies Act of Singapore, the following was stated regarding the company:--- i. Principal activity of the company is that of Investment Holding company . ii. No acquisition since incorporation. iii. Loss for the period S$ 419,732. iv. APG Holding PTE LTD., registered in Singapore, is the holding company of ASIA Challenge Investment (Pte)
Limited. v. Salient features of the Balance Sheet.
Fixed Assets: S$36,919 CDA-MG HER TZ JV worth isS-$4,856,639 Current Assets: S$ 47,1 11 Debts: S$ 24,755 Cash at Bank: S$ 71866 Current Liabilities: S$ 6,307 Amount owed to Holding Company: S$ 3,661,137 Loss: S$ 419,733 e. The Provisional Managers also visited the Ministry of Law, Singapore to inquire about the legal status of the Company from the Insolvency & Public Trustees Office and had detailed discussions and meetings with the concerned Law Officers of Ministry of Law Singapore. According to the record as maintained by Ministry of Law regarding and Law Officers Jaganathan, Chua Min Ji and Tan Hui Emily have confirmed the fact that the winding up of Asia Challenge was filed in Court and eventually the said company had been struck off by ACRA in 2004. The officials of Law Ministry stated that as per official record winding up petition was filed against the said company for non-payment of debts claimed by another company . It was also confirmed that the Directors of the Company had not disclosed that the company had any real assets. It was also confirmed from the official record that, the Company held no assets what-soever anywhere in the world. The Law Officers of Ministry of Law verified and confirmed that Ministry of Law Singapore had written in its official letter No OR 80319/2004 dated 25.11.2004 that Ministry of Law has no objections with regard to the return of Documents.
15. It would also be relevant to set out some of the salient features of the agreement executed between M.G.
Realtors, M.G. Hertz, Asif Enterprises and IBECI-IS in July, 2015. The, parties to the said agreement in the recital acknowledged that the land which was subject-matter of the two JV Agreements was scattered and un-partitioned.
It was furthermore acknowledged that earlier the rights and liabilities in respect of the Project were transferred to Asia Challenge through two agreements. Asia Challenge,, however , failed to fulfill its obligations under the said agreements. In term of the agreement executed in July 2015; M.G. Realtors, M.G. Hertz withdrew their claim over land measuring 7950 Kanals mentioned in schedule III of the said agreement subject to the terms and conditions contained therein which included its subsequent transfer by Asif Enterprises in favour of IBECHS.. Asif Enterprises also undertook to surrender all its rights in respect of the NOC issued by the official liquidator in Singapore in favour of M.G. Realtors (Pvt.) Limited and M.G. Hertz (Pvt.) Limited in respect of the balance land (mentioned in schedules I & II of the said agreement) except land measuring 7950 Kanals. M.G. Realtors (Pvt.) Limited and M.G.
Hertz (Pvt.) Limited furthermore undertook to transfer land mentioned in schedules & II of the agreement in favour of IBECHS which was made liable to discharge the liability of general public, SLIC and other approved claims against the two companies.
16. From the above resume of facts and the reports of the Provisional Managers, the following facts could be gathered.
(a) M.G. Realtors and M.G. Hertz entered into JV Agreements. The properties acquired through various persons and entities including. Asif Enterprises for the Project were entered in the name of Joint V entures.
(b) The ex-management of both the companies without acquiring the land and obtaining NOC from CDA fraudulently started receiving money from the general public and through NHA also received on enormous amount from SLIC. (c) When the fraud perpetrated by both the companies was unearthed, the Project was agreed to be handed over to Asia Challenge through agreements dated 17.01.1998 and 17.02.1998 entered between the companies, CDA, NHA and Asia Challenge.
(d) The land acquired for the Project was scattered in 13 villages with mostly inchoate title. A major chunk of land was that of Haqooq Shamlat Deh (Hawai) which was not even demarcated. The land purchased for the Project was not , even under the possession of the companies.
(e) The Provisional Managers under the orders of this Court and with the help of the local administration retrieved the possession of the land as also its title documents. Similarly , the partition of the land which was under joint Khata was also carried out by the Provisional Managers.
(I) The ex-management of the two companies allegedly did not pay the sale consideration of the land acquired for. the two companies. The two companies were also not able to develop the Project or to pay back the money received by them from the general public and SLIC.
(g) The ex-management of the compan ies entered into another settlement agreement in July 2015 with Asif Enterprises and IBECHS. Under the said agreement; the ex-management of the two companies relinquished their right over 7950 Kanals of land in favour of Asif. Enterprises for its onward transfer in favour of IBECHS. The two companies also agreed to transfer the balance land in favour of IBECHS which agreed to clear the liabilities of the two companies in respect of the general public, SLIC and that of Asif Enterprises and other claimants.
17. In regard to the amount received from SLIC. CDA in its reply stated as follows:--- The payment was made to DG/NHA (Iqba Ahmad) who was working in dual capacity as DG/N.H.A and chairman Joint venture titled as NHA Housing Scheme Zone-S Islamabad and amount Rs. 209533320/- through cheque No. 23717608 dated 03.07.1996 and cheque No. 25440558 dated 16.10.1996 was deposited: Subsequently Iqbal Ahmad, D.G./NHA, opened a new account No. 5247013 in city Bank Islamabad and deposited the subject amount in the said account on 29.10.1996 and 15.07.1997 respectively . On the same date Iqbal Ahmad transferred the subject amount to the joint account No. 550101014 (in the City Bank Islamabad) of NHA Housing Scheme Zones to be operated by said Iqbal Ahmad as Chairman and Zahid Shafique (presently claiming to revive the scheme) a M.D. of NHA Housing Scheme Zone-S. After this both Iqbal Ahmad and Zahid Shafique transferred the subject amount of Rs. 209533320/- to the Private Joint account of Tahir Sarfraz Khan Niazi and Syed Sultan Ali in their account No. 520943015 City Bank Blue Area, Islamabad on 21.7.1997 and 20.10.1997 respectively by Internal Credit of City Bank Blue Area Islamabad and thus the whole amount was embezzled through the above mechanism.
Similar allegations of misappropriation of funds were also made in the two petitions against the ex-management of two companies.
18. Since inception of this petition as well as connected petitions, the written statement was not filed by the companies and their management till date. The two companies also did not file any objections on the various reports filed by the Provisional Managers.
19. It is quite evident from the resume of facts noted above that the two companies tried to relinquish their rights over the land in favour of Asia Challenge and later on in favour of Asif Enterprises and IBECHS as they were not in a position to discharge their liabilities towards the general public, SLIC and persons and entities from whom the land was acquired. This aspect of the matter shall shortly be adverted to. Similarly , the purpose for which the two JV Agreements were executed and for which land was acquired miserably failed.
The title of the land acquired for the purposes of the two JV Agreements was perfected under the orders of this Court and "Nishandahi" and partition proceedings were was carried out under the orders of this Court. The possession of the land of the profit was also taken over by the Provisional Managers with the aid of the local administration. In short, the land of the Project, the subject-matter of the two JV Agreements, was brought in its present form and shape by the untiring efforts of the Provisional Managers spanning over a number of years. The ex-management of the two companies feeling it convenient now that the land was retrieved from the possession of the owners, identified, partitioned and its title perfected filed the application alleging that the assets of the companies were more than its liabilities and thus sought dismissal of the petitions. It is, however , clear from the record that both the companies had relinquished their rights over the Project in favour of Asia Challenge and subsequently in favour of Asif Enterprises and IBECHS as they were not in a position to pay of the liabilities of general public, SLIC and the persons and entities from whom the land for the Project was procured. It is furthermore established that the two comp anies fraudulently deceived the general public and SLIC by taking money from them at a time when even the land of the Project had not yet been procured and the requisite NOC was also not obtained from CDA. The reply to the petitions was not filed by the two companies and, therefore, the averments made in the petitions went un-rebutted. Be that as it may, the two companies are non-functional for over a decade now and the entire Project was taken over by the Provisional Managers under the orders of this Court who have 'made substantial progress in locating and retrieving the land as noted above. It is thus clear that the substratum of the two companies had vanished and gone at the time of the presenting of the winding up petitions. In the case of In re: Synthetic Chemicals Co. Ltd., Karachi PLD 1985 Karachi it was held as follows:-- It may be stated that the substratum of a company must be deemed to be gone when (a) the subject-matter of the company is gone, or (b) the object for which it was incorporated has substantially failed, or (c) it is impossible to carry on the business of the company except at a loss, (d) the existing and, probable assets are insuf ficient to meet the existing liabilities.
The preponderance of the authorities on the subject is that if the Court arrives at the conclusion and makes a determination that the main object of the company has substantially failed or where the substratum of the company is gone, it will consider it just and equitable to wind up the company and shall pass an order to that effect. In the present case, the grounds for winding up as asserted in the petitions have been established by the petitioner . Both the companies are thus liable to be wound up.
20. We may now deal with the arrangements made between the ex-management of the two companies, Asif Enterprises and IBECHS. In the present case, the Provisional Manager was appointed on 06.11.2006 by this Court for taking over the properties of the company . The material portion of the order reads as under:--- Learned counsel for the petitioner submits that in the meanwhile a provisional manager be appointed under section 325 of the Ordinance so that he may take charge of the several immovable properties belonging to the respondent company and present a report thereon for further proceedings to be taken in this petition. The submission made has weight. The properties and assets of the respondent company need to be inspected, tabulated, and evaluated and reported for the purpose of any further proceedings in relation to the responde nt company . It is accordingly so ordered. Mr . Ahmad Arslan, Deputy Registrar , SECP , Lahore is appointed as provisional manager
21. By the terms of section 316 of the Ordinance, once the provisional manager is 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. In terms of section 325 of the Ordinance, the provisional manager shall have the same powers as a liquidator . Section 330 of the Ordinance furthermore provides that the provisional manager shall take into his custody or under his control, all the books and papers, property , effects and actionable claims belonging to or to which the comp any is or appears to be entitled. The combined reading of all the afore- mentioned provisions bring out the clear intention of the law that once the provisional manager is appointed by the Court, the property of the company and its affairs together with all actionable claims stand transferred to and vest in the provisional manager appointed by the Court and are treated in the eyes of law as property in custodia legis.
The position of the provisional manager is that of a receiver appointed for the purpose of acquiring and retaining the possession of the property and assets of the company and who acts subject to and in accordance with the directions of the Court given from time to time.
22. Notwithstanding the clear prohibition contained in section 316 of the Ordinance, the ex-management of the two companies went ahead and executed agreements dealing with the land of this Project. The agreement executed by the ex-management of the two companie s in July 2015 had no legal validity and no right had come to vest in Asif Enterprises or IBECHS over the land in question by its terms. The position of Asif Enterprises is merely that of an unpaid seller . In that capacity , it shall be a claimant of the amounts that it is found entitled to receive after due scrutiny .
23. In regard to the litigation that ensued between the ex-management of the two companies and Asif Enterprises and Maqsood Brothers and the orders passed therein, suffice it to state that by virtue of section 316 of the Ordinance, the said litigation could not have continued after the appointment of the provisional manager without the leave of this Court. It appears that the Courts seized of the matters were not made aware of the appointment of the Provisional Managers by this Court. In S.R. Muthuswami Gounder and Ors. v. Official Liquidator decided on 23rd September , 1969, it was held by the Madras High Court as under:--- The words "commence" and "institution" appear to be synonymous. In Ponnuswarni v. Kaliaperumal it was held that a suit commences with the presentation of the plaint. The same view was taken by a Bench of the Lahore High Court in People's Bank of Northern India Ltd v. fatehchand & Co. Ltd The word "commenced" occurring in Section 446 of the Companies Act has to be understood in the light of the expression "shall be proceeded with" occurring in the same section. The expression "shall be proceeded with" is intended to cover the case of those suits or other legal proceedings which were pending at the time of the liquidation proceedings. In respect of these proceedings, the legislature has enacted that they should not be proceeded with until the leave of the Court is obtained, and such proceedings shall remain pending till such leave is granted. But as regards new suit or proceeding to be instituted, the legislature has used the word "commenced" and it has enacted that such commencement shall not be made until the leave of the Court is granted. To hold that "commencement" would take place only after the issue of process would mean that if a plaint is presented, it could be taken on file and kept till the issue of process. To hold that such presentation and taking on file is not barred under Section 446 would virtually render the provision nugatory .
A sale held in contravention of section 171 of the then Companies Act, 1913 was held to be voidable at the instance of the liquidator [see Ashutosh Sikdar v. Behari Lal Kirtania (1908) I.L.R. 35 Cal. 61; (1907) 6 C.L.J.
320), Baldeo Narain v. United Bank Ltd. (A.I.R. 1916 Pat. 47) and Sri Nilkantha Narain Singh v. Probhat Kumar Lala] . In the result, this Court has no hesitation to hold that orders passed in the litigation between the parties after the appointment of provisional manager are voidable and liable to be set aside.
24. In regard to Asia Challenge, the Provisional Managers have already establish ed that it was wound up by the relevant Authority in Singapore on 27.08.1999. The irrefutable evidence in this regard has been brought on the record by the Provisional Managers on which there is no dispute. Even Asif Enterprises admit that Asia Challenge is no longer in existence. Asif Enterprises claims to have received NOC from the liquidator of Asia Challenge in regard to the rights Asia Challenge had over the Project and the land belonging to it. Asif Enterprises obtained letter dated 25.11.2004 from the Insolvency & Public Trustee's Office, Singapore wherein it was clearly stated that "In the Statement of Affairs filed with the Official Receiver , the director had not disclosed that the Company had real assets to be realized We confirmed that the Company has no claims to the properties that form the subject-matter in the Writ No. 2232/99 filed in the High Court of Lahore." Without going into the legality and veracity of such a claim, it has already been made clear above that any title, right claim asserted over the land of the Project by any of the parties on the basis of agreement executed in July 2015 is void as the said agreement was executed after the appointment of the provisional managers. This aspect of the matter shall be decided in view of the documents including the audited accounts procured by the Provisional Managers from Accountancy & Corporate Regulatory Authority , Singapore after the appointment of of ficial liquidators.
25. Winding up petition i.e. Civil Original No. 2/2007 was purportedly filed against Asia Challenge Investment (Pvt.)
Limited, which the provisional manager discovered from information received from SECP was a non-existent company . Even if the petition is taken to have been filed against Asia Challenge Investment (Pte) Limited, it has already been wound up and struck off in the country of its incorporation/origin i.e. Singapore. Civil Original No. 2 of 2007 has thus wrongly been filed and is liable to be dismissed.
26. In the result, the present petition as well connected Civil Original No. 1 of 2007 are allowed. The two companies namely M.G. Realtors (Pvt.) Limited and M.G. Hertz (Pvt.) Limited are accordingly ordered to be wound up. Mr. Ahmad Arslan and Mr. Awais Touseef Rana, Advocates, who are already acting as Provisional Managers are appointed as of ficial liquidators.
27. The official liquidators are directed to immediately open up the liquidation account in any first class bank and transfer all the amounts that are in their possession as provisional managers to the said account. The expenses of the auction shall be met with from the liquidation account. The official liquidators shall also take over all the assets, property , effects and the books and papers of M.G. Realtors and M.G. Hertz. The security to be furnished by the official liquidators is hereby dispensed with.
28. The directors, shareholders, promoters and secretary of M.G. Realtors (Pvt.) Limited and M.G. Hertz (Pvt.)
Limited shall within a period of 21 days submit to the joint official liquidators a statement of affairs of the said companies in the prescribed form stating therein all the particulars mentioned in Section 328 of the Ordinance. The said statement shall be supported by a duly sworn -af fidavit of the afore-mentioned persons.
29. The official liquidators shall also submit a preliminary report to this Court in terms of Section 329 of the Companies Ordinance, 1984 after they have been furnished the statement of af fairs as mentioned above.
30. The official liquidators are directed to forthwith file appropriate applications before the Courts in which settlement agreement was filed by ex-m anagement of the two companies togeth er with Asif Enterprises etc. for recalling of the said orders.
31. The official liquidators shall also submit a comprehensive report for disposal of the assets of M.G. Realtors (Pvt.) Limited and M.G. Hertz (Pvt.) Limited and for inviting claims from the general public and other claimants on the next date of hearing.
32. Office is directed to send a copy of this order to the Official Liquidators. Now to come up for hearing on 02.10.2018 .
C.M. No. 6 of 2015 is accordingly dismissed. All the pending applications shall stand disposed of.