' This order will dispose of the petitioners' application under section 175 of the Companies Act, 1913, for appointment of Official Liquidator of Shaukat Soap Factory Limited, Gujranwala, respondent No.
1. At the very outset of addressing arguments the learned counsel for the petitioners submitted that he would be satisfied with the appointment of an Official Receiver of respondent No. 1 for whose winding up the petitioners have moved this Court. Petitioners 2 to 4 are the sons of petitioner 1.
Petitioners 1, 5 to 7, respondents 2 and 10 are brothers.
' Respondent 3 is the son of respondent 2. Respondent 4 is the widow and respondents 5 to 9 are the sons of the late Abdul Hamid who was brother of petitioners 1, 5 to 7 and respondents 2 and 10.
2. The petitioners and respondents 2 to 10 were share-holders of the private limited companies, Shaukat Soap Factory and Modern Soap Industries, Gujranwala, and partners of the firm running Kashmir Ice Factory and Rachna Chemical Industries, Gujranwala. They formed themselves into three groups in the following fashion:-- 'Party No. 1: Respondents 4 to 9. Party No. 2: Respondents 2 and 3. Party No. 3: Petitioners.
' In order to resolve certain disputes that arose they reached on the 26th June, 1983, the agreement of settlement which is incorporated in Annexure 'E' to the main petition. Vide arbitration agreement found at Annexure 'F' concluded on the 12th January, 1984, they referred their differences to the arbitration of Sheikh Ghulam Rasul and Sheikh Muhammad Azam who gave their award (Annexure 'G') on the 2nd June, 1984. According to respondents the parties realized after the announcement of award that some of the requirements were unfair and the following persons were appointed mutually agreed mediators at the initiation of the petitioners: Abdul Qayyum Mir, Muhammad Riaz, Malik Shaukat Ali, Advocate, and Syed Shahzad Nazir. As the respondents contend the mediators negotiated with the parties and succeeded to bring about modification of the award with the object of effecting complete separation between the parties which the award had failed to achieve. Annexure 'H' (filed with the reply of respondents 2 and 3) represents the result of mediation signed by the mediators on the 22nd December, 1984. The petitioners, however, deny that they had consented to mediation.
3. The following extract from Annexure 'E' gives picture of the settlement arrived at between the parties on the 26th June, 1983.
"That the parties Nos. 1 and 2 have agreed to dis-invest their shares of business interest from Modern Soap Industries. S.I.E. Gujranwala, and Kashmir Ice Factory, Kacha Eminabadi Road, Gujranwala, and their disinvested shares shall be transferred in respect of the abovesaid units/concerns in favour of party No.
3. The party No. 3 has Also agreed to disinvest their actual valued shares from Shaukat Soap Factory, Tehri Sansi, Gujranwala and Shaukat Oil Mills, Kacha Eminabadi Road, Gujranwala, and they shall transfer this share in favour of parties Nos. 1 and 2 due to this transfer of shares value as calculated in the light of the record and mutual discussion shall be as under.
The share holdings in Shaukat Soap Factory will be of party No. 1 as 70%, party No. 2, 20% and party No. 3 as 10% by virtue of that Shaukat Oil Mills shall stand delinked with Shaukat Soap Factory and thus the business of Shaukat Oil Mills, shall be surrendered in favour of the party No.
2. The party No. 3 will have no participation in the management of the both above said concerns, i.e. Shaukat Soap Factory and Shaukat Oil Mills. The parties Nos. 1 and 2 shall collect the profits and loss and they will keep their own shares and transmit the share of party No. 3 in accordance with his share holdings.
' That due to the above said transfer the parties Nos. 1 and 2 shall have no concern whatsoever with the Modern Soap Industries and Kashmir Ice Factory as such all the management and share holding/interest shall be of party No. 3.
' That the Rachna Industries shall remain with the party No. 1 and he will have exclusive control and management over it whatsoever."
4. The operative portion of the arbitration award dealing with various matters runs as under:-- "(i) that the earlier agreement, dated 26-8-1983 shall be the basis of this award and shall be considered to be a part of it.
(ii) that in connection with implementation of the said above agreement, dated 26-6-1983 the party No. 1 shall disinvest their 950 shares from Modern Soap Industries and transfer the same in favour of party No..
3. Similarly party No. 2 who is having 150 shares in Modern Soap Industries shall disinvest the same and transfer the same in favour of party No.
3. As seen party No. 3 shall be exclusive owner of Modern Soap Industries. Parties Nos. 1 and 2 who have 15% shares each in Kashmir Ice Factory shall surrender their shares in favour of party No.
3. Consequently Kashmir Ice Factory shall be owned exclusively by Party No.
3. The area of land of Kashmir Ice Factory shall be 3 Kanals 1 Marla.
(iii) That party No. 3 has 2023 shares in Shaukat Soap Factory Ltd. Likewise Kashmir Ice Factory also has 500 shares in Shaukat Soap Factory. Kashmir Ice Factory has exclusively fallen to the share of party No.
3. Thus party No. 3 has 2023 shares in the Shaukat Soap Factory. Party No. 3 surrender their 1803. 5 shares in favour of party No. 1 and 226 shares in favour of party No. 2 and retain 403.5 shares with them. As such party No. 1 shall possess 3450.5 shares including their own 1651 shares, party No.2, 987 shares and party No. 3, 493.5 shares in Shaukat Soap Factory Ltd.
(iv) Party No. 2 who has relinquished their 16% shares in Kashmir Ice Factory shall own Shaukat Oil Mills in lieu of their relinquished shares. As the Oil Mills is now having no passage, therefore, party No. 3 shall arrange a passage 15 feet wide for the said Oil Mills.
(v) In lieu of 15% shares in Kashmir Ice Factory and in lieu of their 19% shares in Modern Soap Industries and in lieu of their interest in Shaukat Oil Mills, Party No. 1 has now been given 70% shares in Shaukat Soap Factory. Thus party No. 1 is left with no interest in any other establishment except Shaukat Soap Factory (70% shares) and Rachna Chemical Industries which shall be exclusively owned by party No. 1.
(vi) Monaco Enterprises is exclusively owned and managed by Sh. Muhammad Yousaf son of Sh.
Abdul Ghani. None of the parties Nos. 1 to 3 shall have any claim of compensation whatsoever, against Monaco Enterprises or its sole proprietor Sh. Muhammad Yousaf aforesaid. All parties to the agreement, dated 26-6-1983 had clearly stated that Monaco Enterprises was exclusively owned by Sh. Muhammad Yousaf aforesaid.
(vii) That as the Show room situated at Bazar Almarian, Gujranwala, does not form part of the abovesaid business concerns and falls in the business of Monaco Enterprises, therefore, its question of vacation or compensation does not arise in favour of any party.
(viii) That the Head Office situated at Bazar Thanawala, Gujranwala, is occupied by party No.
3. It had been used earlier by all the business concerns jointly. As party No. 3 is having larger shares (2/3 shares) in joint family business, it is hereby considered expedient in the larger interest of all concerned that party No. 3 shall compensate parties 1 and 2 to the extent of their shares in the entire business. The revenue record shows that site of the office does not belong to the parties of any business establishment owned by them. It actually vests in Non-Muslim Auqaf Department.
Anyhow its user and the superstructure has to be evaluated in terms of money to fix the share of compensation to be awarded to parties Nos. 1 and 2. After carefully considering the matter, we fix the total value of the office at Rs.4,50,000. The share of parties Nos. 1 and 2 comes to Rs.1,50,000. It shall be accounted for while determining the overall compensation payable to the parties or to any one of them. Party No. 3 shall continue occupying the office exclusively.
(ix) That as the Modern Soap Industries Ltd. and Shaukat Soap Factory Ltd. have separated, therefore, they shall not use the trade names of each other's various brands. The following brands shall belong henceforth exclusively to each undertaking as shown below:-- ' Shaukat Soap Factory Ltd.
(1) Shaukat Soap. (2) Shaukat Special.
(3) Shaukat Super. (4) Shaukat Soap with Star.
(5) Shaukat Soap with two Stars. 'Modern Soap Industries.
(1) Machhli Marka Soap. (2) Awami Soap.
(3) Modern Soap. (4) Modern Super.
(5) Sulistan Super. (6) K. 2 Soap.
(7) Golden Super. (8) Modern 555.
(9) No.
252. (10) Shoe Cut Soap.
(x) That party No. 3 alleged that Sikandar Soap Factory is a separate concern and should be treated as disputed. We found that it is a part of Shaukat Soap Factory Ltd., therefore, cannot be treated as disputed property.
(xi) That party No. 3 has also referred the matter of old sanchas and karahas lying at Shaukat Soap Factory Ltd. and Rachna Chemical Industries and claim that they are joint property. We hold that these assets belong to Shaukat Soap Factory Ltd., and Rachna Chemical Industries. These shall, therefore, continue to belong to Shaukat Soap Factory. As regards 40 caskets (tanchies) belonging to Modern Soap Industries but lying in the premises of Shaukat Soap Factory, these shall be returned to Modern Soap Industries.
(xii) That the party No. 3 can withdraw cash guarantees given on behalf of Shaukat Soap Factory Ltd., and Rachna Chemical Industries. However, equitable mortgage guarantees shall not be withdrawn.
(xiii) That party No. 3 has 10% interest in Shaukat Soap Factory. They shall have access to the books in accordance with law and shall be entitled to share profit and loss in accordance with law or any special agreement between the parties in this regard.
(xiv) So far no accounts have been rendered for the year 1983 (calendar year). For the convenience of the parties and in order to avoid confusion and litigation, it has been decided that the profit and loss for the year 1983 shall be the same as for the preceding year, i.e. 1982. This shall also apply to the period of the year 1984 till this award is actually implemented. The ratio according to which the profit/loss shall be distributed among the parties for the above said period shall be as below:-- Party No.
1. 70%--74% = 62% (Share in the Ice Factory).
Party No.
2. Nil (as he is enjoying the usufruct of Ice Factory).
Party No.
3. The remaining 374%. As far as the accounts books of this period are concerned, their preparation shall be the responsibility of party No.3.
(xv) That after hearing the parties at length and after going through the entire record and pursuing the various family agreements, it has been decided that in lieu of the transfer of shares and in lieu of surrendering management and control of Shaukat Soap Factory Limited, Rachna Chemical Industries and Shaukat Oil Mills to the parties Nos. 1 and 2 and in lieu of previous outstanding amounts, party No. 1 shall pay a compensation of Rs.4,89,528 to party No.
3. This of course shall be subject to deduction of Rs.1,50,000 payable to party Nos. 1 and 2 as compensation for the Head Office.
(xvi) That as party No. 2 is still occupying the Kashmir Ice Factory, it is directed that it should be handed over to party No. 3 immediately but not later than 30th June, 1984. If party No. 2 fails to do so within the time prescribed, it shall be deemed that party No. 2 has disinvested 20% share from Shaukat Soap Factory and it left with no interest therein, consequently party No. 2 will have 40% shares in the Kashmir Ice Factory in lieu of 30% disinvested shares in Shaukat Soap Factory Ltd.
Party No. 1 shall also have 15% and party No. 3, 45% shares in the said Kashmir Ice Factory. Thus, party No. 1 shall be left with 62% shares in and party No. 3 shall have 37% shares in the same. In this situation party No. 1 shall have 3 Directors and party No. 3 shall have 2 Directors. However, Managing Director shall be from party No. 1.
(xvii) During the Arbitration proceedings, Sh. Mushtaq Ahmad son of Sh. Abdul Ghani, approached the arbitrators and prayed that his 12% shares in the Shaukat Soap Factory be traced. The record shows that in the year 1978, Sh. Mushtaq Ahmad had 12% shares in the said Shaukat Soap Factory Ltd. His 61% shares were transferred in 1979 in favour of party No. 1 and 51% shares in favour of party No. 3 apparently without any lawful sanction. We are constrained to remark, that this dispute being outside the scope of reference, we can only advise Sh. Mushtaq Ahmad to take up the matter with the parties Nos. 1 to 3 at personal level or at any other forum of his own choice.
(xviii)After party No. 2 has transferred the possession of Kashmir Ice Factory to party No. 3, all the parties to the reference shall undertake the implementation of this award simultaneously. All concerned shall take all necessary steps to disinvest their shares in a given undertaking and transfer the same to the others in accordance with this award.
(xix) After the needful has been done, the present management shall take all necessary steps to transfer the management and control of Shaukat Soap Factory to party No. 1".
5. The outcome of the efforts of the mediators set out in Annexure H' is reproduced below:--[URDU TEXT]
6. The position regarding holding of shares by the parties in respondent company after agreement of settlement, arbitration award and mediation is summed up as follows:-- {{TABLE}} "Share position as per agreement of settlement, dated the 23rd June, 1983.
Party No.
1. Respondents 4 to 9 70% Party No. 2 Respondents 2 to 3 20% Party No.
3. Petitioners 10% As per award, dated the 2nd June, 1984.
Position in case the possession of Kashmir Ice Factory is given to the petitioners by respondents 1 and 3.
Party No. 1 Respondents 4 to 9 70% Party No. 2 Respondents 2 to 3 20% Party No. 3 Petitioners 10% Alternate position.
If the possession of Kashmir Ice Factory is not given to party No. 3 (petitioners).
Party No. 1 Respondents 4 to 9 62% Party No. 2 Respondents 2 to 3 Nil Party No. 3 Petitioners 37% As per mediation dated the 22nd December, 1984.
Party No. 1 Respondents 4 to 9 80% Party No. 2 Respondents 2 to 3 20% Party No. 3 Petitioners Nil {{TABLE}}
7. On the 26th May, 1985, the petitioners moved application for winding up of respondent 1 on the grounds chief among them being--which were urged in support of the prayer for appointment of Official Receiver--that the petitioners had been excluded from the management of the company, that there had come into existence a state of deadlock between the members and that there was justifiable lack of confidence in the management. The company was alleged by the petitioners to have ceased to be operative and to have become a dead entity and its property was being pilfered, mismanaged and misappropriated.
8. Respondents 1 to 9 gave a lie to the petitioners' allegations. They maintained that the company was well managed, prosperous and earning profits. Respondents 1 to 9 referred to balance-sheets and various other documents of the company indicating that it was quite prosperous and earned substantial profits. They opposed the petitioners' move for appointment of Official Receiver.
9. Respondent 10 sided with the petitioners.
10. The learned counsel for the petitioners contended that the mere fact that the company was prosperous was not in itself sufficient to prevent the Court from appointing Official Receiver. The learned counsel, referring to the well-settled rule quoted in Ladli Prasad Jaiswal v. Karnal Distilly Co.
Limited PLD 1965 SC 221, A. Rustom v. Karum Silk Mills Ltd. PLD 1975 Kar. 40 and Mansoor Ali Bandeali v. Marne Food Industries Ltd. 1985 CLC 1239, submitted that a share-holder of a private limited company could seek winding up of the company on the grounds listed below, which were available to a partner for getting a firm dissolved,--
(i) exclusion of partner from the management of the firm;
(ii) existence of a state of deadlock between the partner; and
(iii) justifiable lack of confidence in the management.
' Identifying the case of the petitioners with that of the partner covered by the above grounds the learned counsel pointed out that the petitioners had been excluded from the management of respondent, that they being not on speaking terms with respondents 2 to 9, with whom serious disputes had already arisen, there had come into being a state of deadlock between them and they lacked confidence in the management of respondents 2 to 9 who were in control of and were running respondent 1. He pleaded that in such circumstances the petitioners had a good prima facie case and following what had been laid down in Maqbool Ellahi v. Rasul and Company Limited PLD 1970 Lah. 539, Muhammad Arjumand Malik v. Abdul Ghani PLD 1967 Kar. 44 and Eastern Company (Private) Ltd, Lahore v. Gul Begum PLD 1980 Lah. 69, the Official Receiver ought to be appointed to take charge of respondent 1.
11. The learned counsel for the contesting respondents contended that the respondents were running respondent 1 in accordance with the settlement reached between the parties, the arbitration award and the result of efforts of the mediators. They pointed out that the petitioners were in the exclusive control and management of the Modern Soap Industries, one of the concerns in which the parties had joint interest. They asserted, and it is a fact, that respondent 1 paid income-tax of no less than Rs.1,00,000 during the current year; the profits of the ensuing year are expected to be high. Citing the decisions reported as Khan Salah-ud-Din Khan v. Frontier Sugar Mills and Distillery Limited PLD 1957 W.P. Lah. 844 and Muhammad Ismail v. Pakpor Ceramics Limited PLD 1973 Kar. 491, they opposed the appointment of the Official Receiver. However, the learned counsel made an offer that their clients were prepared to file with the Court every month the statement of respondent l's income and expenditure.
12. The de facto position obtaining at the moment is that the petitioners are in exclusive possession and control of the Modern Soap Industries Limited whereas respondents 2 to 9 enjoy similar position vis-a-vis Shaukat Soap Factory Limited. The petitioners are enjoying the income of Modern Soap Industries Limited to the exclusion of respondents 2 to 9. One of the objects of the settlement and arbitration proceedings was none else than the distribution of the family concerns among the parties. When the petitioners are themselves running Modern Soap Industries Limited, in which the respondents are also share-holders, to the exclusion of the respondents, they cannot in equity ask for the A appointment of Official Receiver of Shaukat Soap Factory Limited whose de facto control is in the hands of respondents 1 to 9. It cannot be said that the petitioners have been completely excluded from the management of the family concerns. Consequently there does not appear any justification for appointment of Official Receiver of respondent 1. Nevertheless, respondents 1 to 9 are directed to file in this Court monthly statements of the income and expenditure of respondent 1.
Each monthly statement will be filed by the 10th of the next month. The prayer for appointment of Official Receiver is not accepted. This disposes of C.M. No. 288-L of 1985. 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.