' RUSTAM S. SIDHWA, J.---This is an appeal by the Ghee Corporation of Pakistan and another appellants against the judgment of a learned Single Judge of the Lahore High Court dated 13-11- 1979 accepting the Writ Petition No,1355 of 1975 tiled by Sh. Abdul Haq & Sons Ltd. Respondent No,1.
2. The brief facts of the case are that by an agreement of lease dated 30-6-1973 made between the Crescent Factory Ltd. And Sh. Abdul Haq and Sons Ltd. The former Company leased the Vegetable Ghee Mills, New Unit, situate in Chichawatni, to the latter Company for a period of 11 months commencing from 1-7-1973 and ending on 31-5-1974. The rent was fixed at the rate of Rs, 1,15,000 per quarter (namely three months). The lessee Company assumed full responsibility for payment of all taxes, levies and fees on its income, profits, production and operations.
3. The Hydrogenated Vegetable Oil Industry (Control and Development) Ordinance, XIX of 1973 was promulgated on 2-9-1973 by the Government of Pakistan with a view to regulate the operation and future development of the Hydrogenated Vegetable Oil Industry so as to maintain at reasonable prices supplies essential to the life of the community while safeguarding the interests of the small investors in the industry and to provide for matters connected therewith or incidental thereto. The said Ordinance was substituted by Act LXV of 1973 later bearing the same name.
4. Section 5 of this Ordinance empowered the Federal Government to take over the management of any establishment, to acquire the whole or a portion of the shares or the proprietary interests of such Company in such establishment. Section 6 empowered the Federal Government, after making an order under section 5, to appoint a Managing Director in respect of such establishment.
In the case of establishments where action has been taken under section 6, the Federal Government was further empowered by section 7 to bring into existence a Board of Management for such establishment or class of establishments.
5. The Government delegated its power under section 5 to the Provincial Government and by a notification issued on 14-9-1973 the Crescent Factory Ltd. Old and New Units, Chichawatni, in relation to its vegetable ghee mills, was declared to have been taken over by the Government. This notification was published in the Punjab Gazette, dated 19-9-1973 and this concern was mentioned at serial No,10. Both the old and new units of the vegetable ghee mills at Chichawatni were the subject of the take over. Consequent upon the take over, the entire effects of the Crescent Factory Limited on the premises of the Mills alongwith all the property of the respondent lessee lying in the New Unit was also taken over. A Managing Director for the Crescent Factory Ltd. Was appointed under the orders.
6. The respondent Company felt aggrieved by the action taken by the Government and filed a Writ Petition No,1009 of 1974 challenging the action by which the Mill was taken over as well as all other consequential actions affecting the interests, rights and properties of the respondent-Company.
The High Court called for a report on this petition and the authorities submitted that the respondent-Company was a lessee and was entitled to be compensated. They undertook to finalise the compensation payable to the respondent-Company after the audit was completed. In view of this statement, the respondent-Company withdrew the Writ Petition on 9-7-1974.
7. During the negotiations that took place between the representatives of the appellants and the respondent-Company regarding payment of compensation to the latter with regard to its various claims including that for goods, material, machinery and cash that belonged to it i.e, the lessee- Company, and were lying in the taken over establishment when the same was nationalised, differences developed again. The respondent thereupon filed another Writ Petition No,1355 of 1975 challenging the right of the Government to take over the property belonging to the respondent lessee and pleaded in the alternative that they were entitled to compensation for claims and properties which belonged to them in accordance with ordinary law of the land and not as that provided by section 14 read with the Schedule to the Hydrogenated Vegetable Oil Industry (Control and Development) Act, LXV of 1973 (hereinafter to be referred to as "the Ace). A learned Single Judge of the High Court accepted the Writ Petition on 13-11-1979. As regards the question whether the Government could take over the property of the respondent lessee, the learned Judge held that as in the earlier writ petition the status of the respondent-Company as lessee had been decided, the said Company was now estopped from reopening the question again. As regards the question of compensation, the learned Single Judge held that the same was payable in accordance with ordinary law of the land.
8. Being aggrieved by the above judgment the appellants petitioned this Court for leave to appeal, which leave was granted as in a similar petition C.P. 365 of 1982 leave had already been granted for consideration of the same question.
9. We have heard the arguments of the learned counsel for the appellants and the contesting respondent and have perused the record. The first question of dispute between the parties is as to the method of compensation. According to the learned counsel for the appellants, section 14, read with the Schedule to the Act, deals with the matter. According to the learned counsel for the respondent, the said provisions of the law are not applicable to the respondent lessee, but are intended to govern compensation payable to the owners of the mills whose establishments have been acquired under section 5 of the Act. On its behalf it is contended that the ordinary law prevails. The second point of dispute is as regards two loans. On behalf of the appellants it is urged that two loans/overdrafts standing against the mills, namely, one of Rs,40,00,000 obtained from the National Bank of Pakistan and the other of Rs,30,00,000 obtained from the United Bank, are liabilities of the lessee Company, which liabilities have to be taken over by the respondent lessee, but which it is refusing to accept. On behalf of the respondent lessee it is submitted that these two loans were actually taken by the Crescent Factory Ltd. i.e, the establishment which was nationalised, and they are therefore not liable to repay the said loans.
10. Under section 5(1) of the Act, the Federal Government could, by an order, take over the management of any establishment and as from the date of such order the previous management stood divested of such management. Under section 2(f) of the Act, the expression "establishment" meant any company, firm, concern, institution or enterprise the whole or any part of the undertaking of which pertained to the industry and included any related office, shop, factory, godown, yard, stocks and stores, wherever they were. In the present case, the Crescent Factory Ltd., which was a Company was notified for take over under section 5(1) of the Act. Thus, the Government was entitled to take over the management of the Company, i.e, the whole or any part of the undertaking of which pertained to the ghee industry, including any related office, shop, factory, godown, yard, stocks and stores, wherever they were. So whatever stocks or goods were situate within the premises of the Company taken over, whether they belonged to the Company or to third parties, the management of the same was taken over by the Government. Again, under clause (a) of subsection (1) of section 5 of the Act, no sooner the order under this section was issued, the previous management stood divested of such management. Under section 2(j) of the Act, the expression "previous management" in relation to an establishment meant the person, Board of Directors or other body or authority in whom or in which the management of the establishment vested immediately before the appointment of the Managing Director by the Government. Thus, the lessee Company stood divested of the management of the taken over undertaking. The full management, therefore, vested in the Government.
11. Apart from the take over of the management of the Crescent Factory Ltd. The acquisition of its proprietary rights was dealt with by clauses (b) and (c) of subsection (1) of section 5 of the Act.
Since the nationalised establishment was a Company, clause (b) of subsection (1) of section 5 applied. Under this provision, Government could acquire the whole or a portion of the shares from all or any of the shareholders of such Company, and as from the date of such order the shares so acquired vested in the Federal Government. Under section 14, where inter alia the Federal Government acquired a portion of the shares of the shareholders of any nationalised Company, it had to acquire the same within a period of 90 days on payment of such compensation as was to be determined by the. Federal Government on the basis of the principles set out in the Schedule. In the instant case the nationalised company was the Crescent Factory Ltd. New Unit, Chichawatni, whose undertaking pertained to the ghee industry. What was actually acquired was a little over 50% of the shares from all or some of the shareholders of the said Company. The Schedule to the Act starts with the words "Principles and the manner for payment of compensation in respect of the shares or proprietary interests of an establishment acquired by the Federal Government". The Schedule to the Act was alone applicable for the determination of the value of this partial shareholding which had been acquired. The Schedule to the Act emphatically does not cover the basis on which compensation can be worked out in respect of the claims which ordinary creditors, like the respondent lessee, may have had against the Government, arising out of the nationalisation of the establishment.
12. The claim of the respondent Company is like that of any ordinary creditor, to be determined in accordance with the ordinary law. In Pakistan Shipping Corporation v. Rustam F. Cowasjee (1989 SCMR 1332), a partnership firm, owning and running a shipping line, was nationalised. Apart from inter alia claiming the net worth value of their partnership business as compensation, as provided by the Schedule to the Pakistan Maritime Shipping (Regulation and Control) Act XVIII of 1974, the partners also claimed the advances made by them to their partnership firm over and above their alleged shares. Before the High Court appellate Bench it was contended on behalf of the Federal Government that a creditor liable to be paid under section 19 of the Act did not include a creditor who happened to be a partner. Since the definition of the word "creditor" was "any person" to whom a managed establishment owed any amount of money, the High Court held that the definition could not exclude a partner and it allowed the claim, holding it would be thoroughly unjust to admit a debt and not pay the same. The Supreme Court affirmed this finding, though it disallowed the interest that had been granted on the loans. In the instant case the definition of the word "creditor" is the same and a lessee who is due compensation, does not fall outside the definition and his claim is to be adjudged according to the ordinary law. Though under section 5(1) read with section 2(f) of the Act, the take over of the management of the establishment would include the take over of all stocks, stores, goods, machinery, etc., of all third parties as well, apart from that of the nationalised establishment, it is obvious that whilst working out the compensation payable to the nationalised establishment under section 14 of the Act, read with the principles laid down in the Schedule therein, such of the stocks, stores, goods, machinery, etc., as did not legally belong to or had not been acquired or purchased by the nationalised establishment for valuable consideration before the take over, would not be treated as belonging to the nationalised establishment, but as belonging to the third parties, who had claims thereto, for which they would be entitled to compensation under the ordinary law as creditors. Their entitlement to compensation cannot be worked out on break-up value, net worth value or time value, according to the Schedule, as urged on behalf of the appellants. As lessee, if the property and title in certain stocks, stores, goods, machinery, etc., remained with it, it was not that of the lessor Company. The Federal Government and/or the appellants are therefore liable to pay compensation to the respondent-Company for loss, if any claimed, arising to it by the premature termination of its lease and for all its stocks, stores, raw materials, goods, machinery, etc., which belonged to it and which were on the premises and which were taken over by the Federal Government on the date of nationalisation, such compensation being assessable according to the ordinary law, less any liabilities under the terms of the lease or by operation of law or otherwise as were due and payable by the respondent- Company to the nationalised establishment on the date of nationalisation, including any which arose later and related to the period of lease or became otherwise payable by it. This being a matter of accounting, we will leave it to the auditors, depending upon what claims were made and what were found legitimately due.
13. As regards the alleged liabilities of the respondent-Company with regard to the two loans/overdrafts of Rs,40,00,000 and Rs, 30,00,000 which are due and payable to the nationalised establishment, the said matter was not urged in arguments before the High Court nor dealt with by the learned Single Judge and we would not like to give any opinion in the matter, as this matter is basically one of accounts and will have to be sorted out by the auditors.
14. For the foregoing reasons, there is no merit in this appeal, which is dismissed with costs.