1. This petition under sections 305 and 309 of the Companies Ordinance, 1984 is filed with the prayer for winding up of the company incorporated under the name and style of Spencer and Co.
2. (Pakistan) Ltd., by one of its creditors M/s. Smith Kline and French of Pakistan Limited. The petition is filed only on the ground of inability of the respondent-company to pay its deposits. Before institution of the winding up petition the petitioner by notice dated 2nd November, 1987 called upon the respondent to pay a sum of Rs. 2,320,985.30 claimed to be due against them within 30 days of the receipt of notice. A copy of the notice is filed as Annexure B to the Petition. In reply to the above notice, the respondent company vide their letter dated 1st February, 1987 stated that out of the balance payable to the petitioner amounting to Rs. 2,63.88,824.27 as on 30-11-1986, the respondent was only liable for an amount of Rs.6,28,55,51 as on the date of that letter amongst other, the respondent-company claimed adjustment of an amount of Rs.19,53,492 from the amount claimed by the petitioner on account of sales made to a company known as Drug Deal Agency. Mr. EA.
3. Nomani, the learned counsel for the petitioner stated at the hearing of this petition that it is only this amount of Rs. 19,53,492 which is unpaid and outstanding against the respondent. It is, therefore, only this amount which is now the subject matter of dispute between the parties. Before filing of the petition there was protracted correspondence between the parties in respect of this disputed amount but the matter could not be settled. 1n their counter-affidavit to the petition the respondent denied their liability to the above amount as follows:- "13. That the contents of para 2 of the petition are denied. It is denied that an amount of Rs.
4. 2,320,985.30 or any other sum is due from the Respondent to the petitioner as on 17-9-1987 or on any other date as price of goods supplied or otherwise. It is also denied that a sum of Rs. 335,540 or an) other sum is due as interest from 27-11-1986 to 8-12-1987. The main disputed amount relates to the supply of stocks to Drug Deal Agency for which orders were booked directly by SK&F staff and the Respondent is not solely responsible for the same. In fact, the Respondent has already filed a suit in the High Court against the said Agency for the recovery of Rs. 19,53,492. The entries and amount shown as due in the statement of account (Annexure A to the petition) are denied as being incorrect and misleading. It is submitted that in reply to the petitioner's letter dated 15-6-1987 (Annexure CC to the petition) the Respondent by its letter dated 16-6-1987 (Annexure DD to the petition) informed the petitioner that according to the respondent, a sum of Rs. 628,506 was outstanding which was paid on 7-2-1987. The Respondent, however, stated that it would further check the statements of account supplied by the petitioner. On 27-7-1987 the Respondent after due verification sent a statement of account showing a balance of Rs. 489,801.75 as outstanding in favour of the petitioner. It was also pointed out by the Respondent in its letter that for some of the debit notes of the Respondent which were not. Traceable by the petitioner and were missing at their end, the Respondent is not to be blamed. A list of debit notes totalling Rs. 1,103,105.17 together with copies of the debit notes were also forwarded by the Respondent with its letter dated 27-7- 1987 (Annexure EE to the petition) on 16-9-1987 the Respondent by its letter of the said date (Annexure GG to the petition) enclosed a cheque for Rs. 450,005.75 in full and final settlement of the accounts of the petitioner. With this letter the Respondent also enclosed photo-copies of the invoices No.6849 and 6851 totalling Rs. 1,953,492 for products supplied to M/s. Drug Deal Agency. On payment of Rs. 450,005.75 (the receipt of which executed by the petitioner Annexure 'II' to the petition) the accounts were settled in full and final and nothing remained outstanding against the respondent. The petitioner though received this amount but disputed the same.
5. The contention of the learned counsel for the petitioner is that the liability for payment of the aforesaid amount of Rs. 19,53,492 was never in dispute. It is contended that this amount related to a sale made by respondent company in the year 1984 and at no point of tine they disputed their liability to pay this amount to the petitioner and as such their present defence that they are not liable for the same as the said sale was made by the petitioner is based on a false plea. It is accordingly contended that the petitioner has made out a case for an order of winding up of respondent. Learned counsel for the respondent on the other hand contends that the disputed sale of drugs to M/s. Drug Deal Agency in the year 1984 was at the instance of the petitioner and as such the liability for that amour is not entirely on the respondent's company. Learned counsel for the responder: accordingly contended that as there is a bona fide dispute with regard to the liability of the amount of Rs. 19,35,492 between the respondent and the petition company the petition for winding up is totally misconceived. It is also contended by the learned counsel for the respondent that the company is commercially solvent and has assets far in excess of his alleged liability and for this reason alone an order of winding up of the company can he made even if it is proved that it is liable for the claim. In support of his contention that where a company has asses far in excess of his alleged liability it cannot be ordered to be wound up on the ground of its inability to pay its debits even if it refuses to pay an admitted debit the learned counsel relied on the cases of (1) M/s. Adage Advertising, Lahore M/s. International Ltd., Lahore (1970 SCMR 184), (2)
6. Mullah Abdullabhai an, Lathers v. Saria Rope (Mills Ltd. P I. D 1971 Kar. 597 (3) Muhammad Akbar -- associated Bank Corporation of India AIR 1951 Bom. 386, (4) B.V. Light Railways v. Union of India AIR 1954 Cal. 499 and (5) M/s. Khyber Textile Mill Limited v. M/s. Allied Textile Mills Ltd. PLJ 1979 Kar.
295. None of the cited cases support the contention of the learned counsel for the respondent that ever where the debit is admitted and the un-willingness of the company is proved the order of winding up cannot be made if the company is found to be commercially solvent and has assets enough to meet its alleged liability. In my humble view the ratio decidendi in the above cases is that where a company denies its liability to particular debt which is the basis for an order of winding up, and the Court finds that the denial of liability is bona fide and is based on substantial grounds, then is such circumstances, no order of winding of the company will be made by the Court as the winding up proceedings are not a substitute for recovery of disputed debt for which normal procedure of recovery is prescribed by way of suit. In the case before me it is an admitted positions that the amount of Rs. 19,53,492 related to the sale of drugs by respondent to M/s. Drug Deal Agency in the year 1984. It is also quite clear from the material oar record that in respect of this very amount the respondent company has already instituted a civil snit in this Court against the defaulting party. In fact in one of the letters addressed to the Director of Marketing A the petitioner's company by the Managing Director of the respondent company dated 3rd March, 1987 (Annexure Z to the petition) the liability for this amount was admitted by the respondent company but its payment was postponed only on the ground of pendency of Court proceedings instituted by the company against the defaulters. It will be useful to reproduce here the letter dated 3rd march, 1987 addressed by the Managing Director of the respondent to the petitioner Director of Marketing in this regard which reads as follows:-- "Dear Mr. Farooq Hadi, 3rd March 1987.
7. This refers to Mr. Douglas Sydney's Letter, dated 19th February, 1987 regarding Amount due from M/s. Drug Deal for supplies of SK&F products to them. He advised me, therefore his departure for the U.K., that a reply should be sent to you.
8. As a routine all big deals for your products were booked by your field staff and we supplied the stock on the assurance that the payment will be received in normal course on due dates. Similar was the case for supplies to Drug Deal and, therefore, your sales staff is equally involved in the Drug Deal.
9. When your field staff could not help us to recover this amount we were left with no alternative but to file a suit against the party which is sub judice.
10. Upto the time when we had business relations with you, we had not demanded this amount as we hoped that the Court decision will be in our favour. Since we have now parted company we have withheld the amount till the case is decided by the Court of law. We assure you that as soon as the case is decided we will pay the amount to you.
11. Yours sincerely, (Sd.)
12. (S. Hashim Raza, 3-3-1987 Managing Director:"
13. A reading of the last paragraph of the letter clearly establishes that the liability for the above amount was never in dispute and in fact the respondent company had already initiated proceedings for recovery of this very amount from the defaulting party in the year 1984. It is also clear that this amount was withheld by the respondent company as a tactics to bring pressure on the petitioner. I am, therefore, of the view that the respondent company has deliberately failed to pay the amount of Rs. 19,53,492 to the petitioner for which they were not only liable to pay legally but for which they had admitted their liability to the petitioner. However, keeping in view the fact that the respondent company is a public limited company and has sufficient assets to meet its liability towards the above amount I enquired from the learned counsel for the respondent if his clients are willing to deposit the above amount in Court which is claimed by the petitioner. The learned counsel obtained an adjournment in the case until recess and after recess made a statement that his clients are willing to deposit this amount within three months from today subject to the condition that they are allowed to contest their liability to pay this amount in appropriate proceedings. In view of the above statement made by the learned counsel for the respondent in Court I will make a conditional order for winding up of the company in the following terms:- That the respondent-company is ordered to be wound up and Official Assignee is appointed as the Official Liquidator of the company subject to the condition that this order will not be given effect to for a period of two months, from today. In case the respondent-company deposits the amount of Rs. 19,53,492 in Court within this period this amount may be withdrawn by the petitioner--- company from the Court and this petition shall be deemed to have been refused. In case this amount is not deposited within the aforesaid period the order of winding up will take effect and further proceedings for winding up of the company shall be taken by the official liquidator in accordance with law. As I have reached the conclusion that an order of winding up is to be made in this case I direct the petitioner to deposit the costs of publication of notice of petition under Rule 781 of Original side within three days from the date of this order. The petitioner shall also deposit a sum of Rs. 3,000 tentatively towards the fee of the official liquidator on expiry of two months period from the date of this order, if the respondent failed to comply with the terms of this order. The petitioner shall also be entitled to the costs of this petition against the respondent.
14. M.Y.H./S-298/K Conditional winding up order passed.