' By this application tinder section 173 read with section 239 of the Companies Act, 1913 (hereinafter called the Act), 12 persons (hereinafter called the applicants) named therein claiming to be the contributories/shareholders have prayed for an order staying the winding up proceedings and/or the operation of the order of sale of the Mills, dated 27-9-1981 and have further prayed for ascertaining views and wishes of the shareholders/ contributories and for a direction for holding a meeting of shareholders/ contributories and creditors under the Chairmanship of Official Liquidator, who is also the Official Assignee, Karachi and report. It is also prayed therein to examine and consider and/or reconsider the scheme, dated 16-5-1981 and to sanction the said scheme.
2- On 31-5-1982, ad Interim order was passed staying the proceedings for a period of three months.
Thereafter, a meeting of the share-holders/ contributories was convened by the Official Liquidator who submitted his report, according to which, in pursuance of the order of the Court inter alia a meeting was held on 14-7-1982 wherein the parties present sought certain clarifications of the scheme from the contributories/share-holders and at the request of the contributories/share- holders, the meeting was adjourned to 7-8-1982 to enable them to give further clarifications in respect of the point raised.
3. At the adjourned meeting held on 28-8-1982 following Advocates or persons were present, when the scheme was rejected.
(1) Mr. J. H. Rahimtoola, Advocate for Habib Bank Ltd.
(2) Mr. Muzaffar Hussain, Advocate for Central Excise and Land Customs.
(3) Mr. Yousuf Rafi Advocate for the workers.
(4) Mr. Zafar B..Jwa, Advocate for K. E. S. Corporation Ltd.
(5) Mr. Mushtaq Ahmed, Sub-Inspector, Excise and Taxation Department, 'P' Division.
(6) Mr. Hassan Bhai for Staff union.
(7) Mr. Ahmed son of Allah Bux. Contributory.
(8) Mr. Ismail Merchant Advocate on behalf of Mr. Liaquat. H. Merchant Advocate for the contributories/share-holders."
4. It seems that meanwhile contributories/share-holders submitted their revised scheme, dated 21- 8-1982, consideration whereof was adjourned at the request of the learned counsel for Habib Bank Ltd., who it may be stated, are the secured creditors, for 31-8-1982, when the following Advocates and persons were present. *(1) Mr. J. H. Rahimtoola, Advocate for Habib Bank.
(2) Mr. Muzafar Husain, Advocate for Central Excise and Land Customs.
(3) Mr. Zaffar Bhajwa, Advocate for Karachi Electric Supply Corporation.
(4) Mr. Shabiul Hasan Zaidi, Inspector, Income-tax Office, Circle-1.
(5) Mr. Mushtaq Ahmed, Sub-Inspector, Excise and Taxation Department, (P) Division.
(6) Mr. Sattar Chinoy for Chinoy Co.
(7) Mr. Muhammad Suleman, Warrant Executive Officer, K. M. Corporation.
(8) Mr. Hasan Bhai for Staff Union Contributories
(9) Mr. Ahmed son of Allahbux
(10) Mr. Abdul Dyer ' Mr. Liaquat H. Merchant, Advocate for Share-holders/contributories.
5. At this meeting, after some amendments in the revised scheme, the same was approved. The scheme as amended provides : "(1) The shareholders/contributories of the respondent-Company shall deposit in this Hon'ble Court the entire claim of the petitioner in J. Misc. Application No, 45 of 1975, namely, Rs, 2.58,000 and which amount may be withdrawn by the petitioner subject to proof of its claim before the Official Assignee, Karachi.
(2) The amount lying in deposit with the Official Liquidator/Official Assignee being the sale- proceeds of goods pledged to Habib Bank Ltd., and sold under orders of the Court together with - Interest accrued thereon shall be paid to Habib Bank Ltd. Habib Bank Ltd. Shall pay a sum of Rs, 25,00,000 (Rs, Twenty-five lass) out of the same to the management of the respondent-Company, or in such other manner directed by the Court, for payment to the workers/ employees/staff members of the respondent-Company in full and final settlement of their claim against the company for their outstanding legal dues. The balance shall be appropriated by Habib Bank Ltd. In partial satisfaction of its outstanding claim as a secured creditor of the respondent-Company.
(3) The respondent-Company through the Official Liquidator has preferred an appeal against the ex parte assessm ent order by the Income-tax Department. This appeal and all further legal proceedings shall he pursued in accordance with law. Any liability established under law shall be met and paid by the respondent-Company.
(4) That the order for sale of the assets and properties of the respondent-Company be stayed and possession and control of the respondent-Company with all its assets and properties be handed over to the shareholders/contributories, subject to the mortgage/hypothecation/ pledge charge of Habib Bank Ltd. Further control, operations and decisions with ragard to the respondent-Company shall be carried out by the shareholders/contributories in consultation with Habib Bank Limited.
(5) The respondent Company shall also assume liability for payment of all claims established against it in law by the creditors. The claims presently filed with the Official Assignee is as per Annexure "A" hereto, except the claim of workers/employees/staff members who shall be paid Rs, 25,00,000 in full and final satisfaction. The ratio of payment to be worked out amicably by the said workers/ employees/staff members jointly with their counsel.
(6) That J. Misc. Application No, 45 of 1974 be disposed of by an appropriate order of this Hon'ble High Court of Sind at Karachi."
6. I heard Mr. Liaquat Merchant for the share-holders/contributories, Mr. J. H. Rahimtoola, for Habib Bank Ltd., Mr. Yousuf Rafi for the workers, Mr. Khalid Anwar for the petitioner, Mr. A. A. Dareshani for Income-tax Departmept, Mr. Muzaffar Hassan, for Excise Department and Mr. Hassan Bhai for the Staff Union.
' Messrs J. H. Rahimtoola and Yousuf Rafi Advocates support the scheme while Mr. Khalid. Anwar opposes the same.
' Mr. A. A. Dareshani Advocate for Income-tax Department opposed the scheme.
' Mr. Muzaffar Hokin took the stand' that he would not have objection to the acceptance of the scheme if the dues of the Excise Department are cleared before the mills start production.
' Mr. Khalid Anwer has raised the following contentions in opposition of the scheme.
(1) That the application under section 173 read with section 239 9f the Act is not maintainable,
(2) That the scheme does not fall within the ambit of section 173 of the Act.
(3) That the application is mala fide.
' Mr. A. A. Dareshani opposed the scheme on the ground that substantial amount was outstanding against the company in liquidation.
7. I would first deal with the objections of Mr. Khalid Anwar.
8. Taking up the first objection of Mr. Khalid Anwar first that the application is not maintainaole, learned counsel submitted that the application could be maintained under section 173 of the Act for staying the winding up of the proceeding; only by the creditors or contributories but the applicants are neither the creditors nor the contributories and that it is also not maintainable under section 239 as under the said section it is only the wishes of the cieditors or contributories which are to be ascertained and the present application is not by any creditors or contributories.
' It is further submitted that this application is in the nature of review application as a similar application made earlier (C. M. A. 593 of 1980) was dismissed on 27-9-1981.
9. Now, considering submission, it may first be stated that the applicants have described themselves in the application as the contributories and share-holders.
10. The term "contributory' bas been defined in section 158 of the Act as follows :- "The term 'contributory' means every person liable to contribute to the assets of a company in the event of its being wound up, and, in all -proceedings for determining and in all proceedings prior to the final determination of the persons who are to be deemed contributories, includes any person alleged to be a contributory."
11. According to the Halsbury's Laws of England, 4th Edition, paragraph 1212 p. 700, the term "contributory" includes for the purposes of all proceedings for determining, and also all proceedings prior to the final determination of the persons who are to be deemed contributories, - any person alleged to be a contributory. (Emphasis supplied).
12. Since the applicants themselves alleged that they are contributories therefore, according to the definition quoted above they are deemed to be, contributory. In any case since every share-holder -of the Company is primarily liable to contribute, subject to the Proviso limiting the amount which he can be called upon to pay, a holder of fully paid up shares is a contributory.
' Reliance is placed on Re : National Savings Association (1), Re Anglesea Colliery Co. (2), Re : Driffiled Gas Light Co. (3) ; Re: Aidall Ltd. (4), which were cited by Mr. Liaquat Merchant.
13. Buckley also in his book entitled 'Buckley on the Companies Act, Edition 10, in the notes to section 170 of that Act at p. 401 has opined as follows : "A holder of fully paid shares is a contributory within the meaning of the Act when all debts have been paid, a call may be made upon {{FOOT NOTE}}
(1) (1866) 1 Ch. App. 547 (2) (1866) 1 Ch. App. 555
(3) (1898) 1 Ch. App. 451 (4) (1933) Ch. 323 {{FOOT NOTE}} ' the party paid share-holders to adjust the rights between them and the fully paid share-holders."
14. I may also refer to an Indian decision in Narayandas Girhardas v. P & 0 Banking Corporation Ltd., Madras (1), wherein a Division Bench of Madras High Court has ruled that fully paid-up share- holders are the contributories without any qualification and reliance was placed on the English case of In re : Anglesea Colliery Co. (2), and a passage from the judgment delivered by Vice- Chancellor Wood was quoted, which reads as follows : "No doubt the argument is a fair one. You who have fully paid up your shares are not contributories, and therefore, your rights cannot be required to be adjusted ; you have paid your 5 per share, and having fully paid up the amount, it is unnecessary to adjust your rights although if there are any share-holders who have paid only 4-19-6 they will in that state of circumstances, have a claim to have their rights adjusted. The result would be that those who paid in full would have no voice .Or controlling power in disposing of the assets ; and these being distributed, the company is dissolved. They would, therefore, have no remedy whatever. I think that is not the scope of the Act. It appears to me that the sound construction of the Act requires that there should be given to that word `contributory' the effect of providing for the final adjustment of the rights of all persons, who, if their shares were not paid up, would be in the position of contributing members."
' On appeal In re : Anglesea Colliery Co. Turner, L. Expressed the same opinion at page 560 of the report.
' It reads : "Now it seems to me to be clear, beyond all doubt, that the purpose of the Act is, inter alia to adjust the rights of all the members of companies which should be wound up under it. Indeed, I do not see now the rights of those members who have not paid up in full could be adjusted without the rights of those members who have paid up in full being taken into account.",
15. Reference may also be made to Re Phoenix Oil and Transport Co. Ltd. (3) in which, among others, Re Anglesea Colliery Co. Was followed. Although this judgment is under the Companies Act, 1948 but the definition of `contributory' given in section 213 of this Act is the same as given in section 158 of the Companies Act, 1913 and the earlier English Companies Act.
16. I may also refer to the opinion of Maugham, J., In re Aidall Limited who while discussing the various sections of the English Companies Act, made the following observations which will more or less apply to the various sections of the Companies Act, 1913 although the numbers of sections of the Act here are different.
"It is unfortunate that in this Act, and in the Acts which it supersedes, the term 'contributory' is used in a large number of places, not as limited to holders of partly paid shares, but as including holders of fully paid shares in the company. In the series of sections 123 to 128, which are headed with the word 'contributories' {{FOOT NOTE}}
(1) AIR 1934 Mad. 476 (2) (1866) 2 Eq. 379
(3) (1957) 3 All E R 218 {{FOOT NOTE}} ' I am of the opinion that the word `contributories' is used in the narrow sense namely, the holders of partly paid shares ; but when we pass from that series of sections to the later series, for instance, those headed `Winding-up by Court', those headed 'Liquidators' those headed `Committee of Inspection', and, ' finally, those headed `Ordinary Powers of Court' in which sections 164 and 165 are found, it is clear that the word `contributories' is really used as synonymous with the word `members'. In section 137 which deals with the parties who may apply to the Court for winding-up a company, it is obvious that a contributory includes a holder of fully paid up shares. In section 138 word 'contributory' again must be used in the same wide sense. In section 144 which deals with the power of the Court to stay the winding up it is again obvious that `contributory' includes the holder of fully paid up shares. In section 145 the well-known section which provides that the Court may, as to all matters relating to a winding-up have regard to the wishes of the creditors or the contributories, as proved to it by any sufficient evidence, it is plain that `contributories' has the wider meaning. The same is true as regards section 147, subsection (6) ; it is true as regards the meetings of contributories mentioned in section 152 ; it is true as regards the payments referred to in section 154 ; it is true as regards section 157, which includes a reference to adjusting the rights of the contributories amongst others. Again, in section 158 the directions that may be given by contributories at general meeting must include directions given by fully paid up share-holders, and the same is true as regards subsection (2) of that section. Section 160 refers to a committee of creditors and contributories of the company, and 'contributories' there cannot be limited to people who are the holders of partly paid shares. Among the sections headed `Ordinary Powers of the Court' there are again a number of sections in which the word `contributories' must be used in the wider sense ; for instance, in sections 166, 167, 168, 170 and 173 ; and I might add that one may go on through other sections of the Act which are expressed in the same was, e.g. Sections 191 193, 197, 219, 220, which are all sections which use the word `Contributory' as synonymous with the word `member'."
' In the present application the applicants have also claimed to be the shareholders which claim has not been denied and further they themselves alleged to be the contributories.
17. Taking up the further submission of Mr. Khalid Anwar that by the present application the share- holders/contributories are seeking review of the earlier order whereby the previous scheme submitted by the shareholders/contributories was rejected, it seems that some necessary facts may be stated here.
(i) On 17-5-1981, Mr. Afzal Nabi has submitted a scheme (being C. M. A. No, 593 of 1980), purported to be under section 173 of the Companies Act, 1913, and office was directed to scrutinize the same and if the same was found in order, the office was further directed to issue notice to all the interested parties. The Scheme provided as follows :-
(a) Out of the money in hand of the Official Liquidator the amount may be given to the applicants for running the business of the Company under the direct supervision and control of the secured creditors and/or representatives of any other creditors as this Hon'ble Court deems fit.
(b)After differing expenses in running the mill partially or wholely the entire amount will be credited in the Bank for the benefit of all creditors according to the priorities and that by this process `InshaAllah' creditors' claims will be satisfied within a very short period.
(c) Calling of meeting will be necessary to consider my suggestion/ Scheme and/or to consider any other appropriate ways and means by which the secured and unsecured creditors get their lawful money back."
(ii) On 2-6-1981, when the matter came up before the Court of Mr. J. H. Rahimtoola learned counsel for the Habib Bank Ltd., stated tbat the Habib Bank Ltd., was not prepared to act as Receiver of the company as proposed in the scheme. He further stated that the scheme was not acceptable unless and until the provision is made in the scheme for settlement of the claim of the workmen and the petitioner. Mr. Yousuf Rafi learned counsel for the workmen and Mr. All Amjad learned counsel for other employees did not agree with the proposed scheme for the reasons that the scheme did not make any provision for the settlement of the claim of the workmen and other employees.
18. However, the present scheme not only provides for satisfaction of the claims of the petitioner and workmen but also has their support. Moreover, Habib Bank who are the only secured creditors have also supported it. Therefore, the two schemes are substantially different and the submission that by the present application the share-holders/contributories a re seeking review of the earlier order has not much force in it.
18-A. Now, taking up the second submission that the scheme does not fall within the ambit of section 173 of the Companies Act, 1913, it may be stated that under section 173 of the Companies Act, 1913. The Court has powers to stay the winding up proceedings altogether or on such terms and conditions as it thinks fit. Even, otherwise, the present contributories could also move the Court for stay of the winding up proceedings and ascertaining the views and wishes of the share-holders etc. Under section 239 of the Companies Act. 1913, I may here quote a passage from Halsbury's Laws of England, 4th Edn. p. 779 frequently a stay is applied for in pursuance of a scheme of arrangement sanctioned by the Court Re: Stephen Walters & Sons Ltd. (1) ; Re- Western of Canada Oil, Lands and Works Co. (2) ; Re: Lyric Syndicate Ltd. (3). Since a meeting of the creditors was called and wishes of the creditors were ascertained and since most of the creditors particularly, the seemed creditors namely, Habib Bank Ltd. Have supported the present scheme, I am, therefore, of the opinion that the provisions of sections 173, 216 and 239 of the Companies Act, 1913 are attracted and the application thereunder is maintainable.
19. 1 also find it in the public interest if the winding up proceedings are stayed to allow the respondents an opportunity to run their textile mills a this course.. Would not only benefit the economy of the country but would also provide employment to a large number of workmen. It will not be out of place to mention that the Government has financially supported the sick textile mills under its various schemes. I was informed at the bar that {{FOOT NOTE}}
(1) (1926) 70 Sol. Jo 953 (2) (1874) W N 148
(3) (1900) 17 T L R 162 {{FOOT NOTE}} ' respondents Mill was the largest textile Mill before its closure in the private sector, having 1,612 workers out of which 1,264 workers have filed the claims and would be benefited by the present scheme.
20. Now, considering the question of mala fide it may be stated that Mr. Khalid Anwar submitted that the present management had withdrawn a sum of Rs, 1 crore contrary to the provision of section 86-G of the Companies Act, 1913 and that the directors have not filed the statement of affairs of the company and that by the order, dated 8-12-1975, a fine of Rs, 100 per day was imposed on the ex-Managing Director of the Company for every day till the filing of the statement of affairs of the Company.
21. As regard to the claim that the directors had withdrawn a sum of Re. 1 crore I have not sufficient evidence to come to that finding, ' As regard the question of not filing the statement of affairs of the Company as required under section 177-A of the Companies Act, 1913, Haji Bhai Dyer filed an affidavit before the Official Liquidator which has now been placed on the present record to which no reply has been filed. The contents of this affidavit may be reproduced in extenso.
"I, Haji Bhai Dyer son of Noor Muhammad. Muslim adult, resident of Karachi, do hereby solemnly affirm as follows I. That I am the ex-Managing Director of the Company in liquidation in the above matter. II. That I have read the application filed by the petitioner Consolidated Exports Limited entitled as C. M. A. No, 24 of 1978, and my reply to the same is as follows :-
(1) I do not deny that this Hon'ble Court by its order, dated 8th December, 1975, directed me to pay a fine of Rs, 5,300 for delay in filing the statement of the rate of Rs, 100 per day for every subsequent delay thereafter was required to be paid. However, I deny the contents of para. 4 of the application.
I have paid and deposited with the Nazir of Court the sum of Rs, 5,300.
(2) As regards para. 5 of the application, I say that the allegations made therein are totally false.
The averment that I have failed to file the statement of affairs to cover the fact that 1 and my family members have illegally withdrawn over a crore of rupees from the funds of the company is based on mere conjecture and is not supported by any evidence. The allegation is mala fide.
(3) That I had set forth in detail the reasons of my failure to file statement of affairs in my counter- affidavit filed in respect of report of the official assignee, dated 3-4-1976, and I crave leave that the contents of that counter-affidavit may be treated as a part of this affidavit.
(4) I further say that the penal provisions- of- section 177-A are attracted where the person required- to file the statement of affairs wilfully makes delay in-complying with the requirements of the said section. I deny that-my_ default has been wilful. I submit that during 1970 I fell seriously ill - and since then I was unable to discharge my day to day responsibilities as Managing Director. I say that the Company in liquidation was a private concern and its day to day affairs were managed by my deceased brother Allah Bukhsh Dyer and other Directors. I say that I had lost complete touch with the events at the mill on account of my serious illness.
(5) That the application of winding up of the Company was made under section 162 of the Companies Act on 2nd October, 1974 at the time when 1 was seriously sick. However, the document used to be forwarded to my house for my signatures. I say that the order of winding up of the said Company was passed on 7-4-1975, on which day the Counsel appointed by the Company failed to appear in Court, I was only made aware of the order of liquidation after it has been passed and that too through the official liquidator. However, even then the state of my health did not permit me to actively pursue the affairs of the company.
(6) That during the period of my illness the entire affairs of the company were being managed by my late brother other Directors and one Noor Muhammad, who was the Accountant of the Company. Inasmuch as I was required to file statement of affairs, I asked the said Noor Muhammad to prepare the accounts of the Company. Noor Muhammad, however, died in the course of preparation of statement of affairs. Thereupon, I engaged one Omer Bhai as Accountant on 26-1-1976, but he could not prepare the accounts in the absence of necessary documents.
(7) I say that when the mill was taken over by official assignee, I was sick and all the Books of Accounts were at the Mill premises. There were some papers in my custody but these papers were the ones that were brought to my house from time to time by Noor Muhammad to obtain my signatures inasmuch as I was recuperating at home.
(8) I say that I have no assets of my own and that I am in acute financial distress with no means of livelihood and it has been consequently not possible for me to pay the fine of Rs, 100 per day.
(9) I say that under subsection (4) of section 177-A the Official Liquidator was required to pay costs and expenses for the preparation of the accounts but despite my repeated requests, he has failed to do so. In fact I had paid the aforesaid Omer Bhai Rs, 3,500 from my own pocket. Even that payment caused considerable strain on my financial resources.
(10) That the averment that I any wilfully concealing information in order to cover up irregularities is false. In fact it was I who had informed this Hon'ble Court by my affidavit, dated 27-10-1975 of the assets and liabilities of the company that were in my knowledge. As far as I know the loans in favour of the sister corporations were made prior to 1970, at the time when my brother Ghani Bhai was running the affairs of the Company in the Liquidation. All Directors were share-holders in, the sister corporation. If I were attempting to cover up the fact that payments were made to the sister corporations, I would have omitted to mention the same. In fact I have at all times insisted that the sister companies should be made to account for all the moneys that they have received from the company under liquidation.
(11) I say that this Hon'ble Court may be pleased to direct the Official Assignee to engage an Auditor or Accountant to complete the Books of Accounts of the company and I am prepared to co- operate and give all the information that I have in respect thereof.
(12) I say that 1 am the person who is suffering the greatest prejudice by the prolongation of these proceedings. I would welcome day to day proceedings so that this matter may be resolved."
22. Further, Umer A. Dyer has also filed additional affidavit, wherein he stated that : 2.................................
3.................................
4. That Ex-Managing Director Haji Bhai Dyer is a very sick person aged over 75 years and is under treatment of Dr. Shareef of the National Institute of Cardiovascular Diseases. I say that Haji Bhai Dyer is physically and mentally incapable of giving any instructions in respect of affairs and has been advised against any physical or mental strain. I am producing herewith medical certificate issued by Dr, M. Shareef.
5.
6.
23. However, Mr. Khalid Anwar relied on the following passage in Halsbury's Laws of England, 4th Edn., page 779.
1376. Exercise of Power to Stay Winding up Proceedings.
' In the exercise of its jurisdiction to stay, the Court, so far as possible, acts upon the principles applicable in exercising jurisdiction to rescind a receiving order or annul aft adjudication in bankruptcy against an individual. (Re Telescriptor Syndicate Ltd. (1903) 2 Ch. 174; and see Bankruptcy, Vol. 3 paras. 417-422). The Court refuses, therefore, to act upon the mere assent of the creditors in the matter, and considers not only whether what is proposed is for their benefit, but also whether the stay will be conducive or detrimental to commercial morality and to the interests of the public at large. In particular, the Court will have regard to the following acts ; (1) that directors have not complied with statutory duties as to giving information to the official receiver or furnishing a statement of affairs ; (2) that there has been an undisclosed agreement between the promoter and the vendor to the company as to the participation by the promoter in fully-paid shares forming the consideration for the purchase of property by the company on its formation ;
(3) that the promoter has made gifts of fully paid shares to the directors ; (4) that there are any other matters connected with the promotion, formation or failure of the company, or the conduct of its business or affairs which appear to the Court to require investigation (Re: Telescriptor Syndicate Ltd. (1903) 2 Ch.
174. The same principles are apparently applicable whether the company has or has not invited the, public to subscribe for its shares except, possibly, in the case of a private company, where all the share-holders have full knowledge of what has been done."
24. Now, analysing the above-quoted paragraph in the light of the facts of the present case, it is true that mere assent of the creditors to the scheme and the fact that the scheme might benefit them, are not by themselves sufficient to stay the winding up proceedings. The other facts mentioned in the above-quoted paragraph from Halsbury's Laws of England, have to be taken into consideration. There is no doubt that the Ex Managing Director has not filed the statement of affairs of the company but he has explained the circumstances which have been mentioned herein before in detail. It is nobody's case that there has been any undisclosed agreement between the promoters and the vendors as mentioned in the above-quoted paragraph or that the promoters had made gift of any full paid-up share to the directors. Nor any other matter connected with the promotion, formation or failure of the company or conduct of its business or affairs has been brought to the notice of the Court which could require investigation excepting the allegation that about Rs, 1 crore were withdrawn by the directors/share-holders of the company, which allegation has been denied. As all the creditors including the secured creditors except the petitioners and Income-tax Department, has assented to the scheme, if the interest of the petitioners and the Income-tax Department is safeguarded, the interest the public interest in my view would outweigh the consideration of alleged withdrawal of Rs, 1 crore for which a condition could be imposed for submission of the required statement of affairs of the respondents for submission or preparation of statement as required by law. Indeed it may not be out of place to mention that at one stage the petitioners had expressed that they would not oppose the scheme provided they were paid their dues with interest at 14 per cent. Per annum and the balance of the goods sold to them are delivered to them. The shareholders/directors have expressed willingness to pay the dues with such interest as would be determined by the Court. But the other matter, namely, claim with regard to delivery of balance of goods is yet to be determined judicially for which a separate application has been filed.
25. Now, so far as the Income-tax Department's claim of Rs, 1,07,42,250 is concerned the assessm ent orders under which the claim is made have been set aside and fresh assessment orders have yet to be made. However, it was submitted by Mr. A. A. Dareshani that still the Income- tax liability of Rs, 24,15,677 is outstanding against the respondents. It appears that this liability has arisen for the assessm ent year 1978-79 to 1983-84 in the following circumstances. Certain properties of the respondents were sold pursuant to the order of the Court and the sale-proceeds thereof were deposited by the Official Liquidator with the Bank which earned, interest thereon. The Habib Bank Ltd., claimed this amount as they claimed that the goods sold were pledged with them and as secured creditors they are entitled to receive the same and if any income is accrued thereon, they, it was asserted on their behalf, would account for the same and pay tax if any, thereon. I think the interest of the Income-tax Department would be safeguarded by imposing condition with regard to the same while staying the winding up proceedings.
26. I, therefore, sanction the scheme and stay the winding up proceedings for two years on the following conditions :-
(1) That the applicants/share-holders shall satisfy the dues of the petitioners with interest at 10 per cent per annum from the date of filing of the petition till payment of dues out of their own funds within two months from the date hereof. This condition I am imposing because payment should not be made out of the assets of the respondent-Company on which Habib Bank Ltd., has first charge as secured creditors, as otherwise the petitioner would have undue preference over the other creditors.
(2) The Official Liquidator shall act as receiver of the respondent for a period of two years for which I have stayed the winding upproceedings for the purpose of implementation of the scheme.
(3) The amount of Rs, 24,15,677 claimed by the Income-tax Department shall be paid by the Official Liquidator/Receiver subject to right of appeal or other proceedings, if any, by the Official Liquidator or the Habib. Bank Ltd., and order passed thereon.
(4) Excise dues would be paid before the commencement of the business according to law.
(5) Ex-Managing Director and/or the applicants/share-holders/contributories shall produce the books of the respondent-Company within one month before the Official Liquidator and assist him in the preparation of the statement of affairs and shall sign the same. revisions by the competent authorities. Therefore, it is advisable to consult the official sources or legal professionals for the most up-to-date and accurate information.