Pakistan Industrial Credit and Investment Corporation Limited had filed a petition for liquidation of M/s. Ali Gul Khan, Packages Industries Limited which was accepted on 12-12-1987 and liquidation of the said Company was ordered and M/s. Tahir Abbas of PICK and Haji Maqsood Ahmad Advocate were appointed Joint Liquidators. The latter initiated proceedings in respect of liquidation of the Company. The United Bank Limited preferred a claim of Rs.6,22,700 against the Company. This amount was advanced as loan to the Company for which the latter had pledged stocks and spare parts worth Rs.6,91,665. The liquidators also took custody of the said stocks and spare parts and treated the United Bank as an ordinary creditor of the Company. They suggested the distribution of assets of the Company towards preferential payments mentioned in section 405 of the Companies Ordinance, 1984 and nothing was left for payment to the other creditors of the Company and as such they had not proposed any payment to the United Bank in their proposal made on 19-10-1988 in respect of the. Aforesaid secured loan. The United Bank filed the appeal in hand challenging the aforesaid proposal of the Joint Liquidators.
2.I have heard Mr. Hidayatullah Khan Advocate counsel for the United bank Limited and Haji Maqsood Ahmad Advocate one of the Joint Liquidators.
3. The learned counsel for the appellant stated that the loan of the United Bank given to the Company was secured by a pledge of stocks and spare parts worth Rs.6,91,665 and that the said loan should have been treated as a secured loan and should have been included in the preferential payments to be made from the assets of the Company. Mr. Hidayatullah Khan contended that the term "security" as defined in clause (b) of section 2 of the Capital Issues (Continuance of Control) Act, 1947 included instruments creating a charge or lien on the assets of the company. He also contended that the term "secured loan" had been defined in clause (m) of section 5 of the Banking Companies Ordinance, 1962 as follows:- "secured loan or advance" means a loan or advance made on the security of assets the market value of which is not any time less than the amount of such loan or advance, and "unsecured loan or advance" means a loan or advance not so secured, or that part of it which is not so secured."
His contention was that since the aforesaid debt of the Bank was a loan secured by the pledge of the goods, it was a secured loan and should have been included in the preferential payments under section 405 of the Companies Ordinance.
4. On the contrary Haji Maqsood Ahmad Advocate contended that the term "secured creditor" as defined in clause (e) of subsection (1) of section 2 of the Provincial Insolvency Act, 1920 did not include a pledge. His contention was that a pledge did not come within the definition of mortgage, charge or lien as mentioned in the aforesaid definition of secured creditor and the loan advanced by the United Bank had to be treated at par with the other loans and it did not become a preferential payment for the purposes of section 405 of the Companies Ordinance. He also contended that since the said pledge had not been registered with the Registrar of Joint Stock Companies under the provisions of section 121 of the Companies Ordinance, it was a void pledge and it could not be given any preferential treatment. He further contended that the price of stocks and spare parts which were pledged with the Bank had been assessed to Rs.1,15,000 by the auction purchaser and since this amount was less than the loan advanced to the Company, the charge was void under section 121 of the Companies Ordinance read with definition of the term "secured loan" specified in clause (m) of section 5 of the Banking Companies Ordinance, 1962 as reproduced above.
5. I have seriously considered the arguments advanced by Mr. Hidayatullah and Haji Maqsood Ahmad and I am of the considered opinion that the aforesaid loan advanced by the United Bank to the Company did not come within the definition of a secured loan as pledge is not included therein. Moreover, this charge was void because it had not been registered with the Registrar of Joint- A Stock Companies as provided in section 121 of the Companies Ordinance. It was, therefore, an ordinary loan and had to be treated at par with all other loans of such nature. It could not at all be treated as a preferential payment under section405 of the Companies Ordinance.
6. For the aforesaid reasons I do not find any merit in this application which is dismissed with no order as to costs.