1. SAEEDUZZAMAN SIDDIQUI, CJ.---This appeal under section 10(2) of the Companies Ordinance, 1984 is directed against the orders, date 8-8-1991, 0-8-1991 and 15-8-1991 passed on three Misc.
2. Applications moved the respondents before the learned Company Judge in J.M. No.56/91 filed under section 305 read with sections 290 and 152 of the Companies Ordinance 1984. In order to understand the present controversy it is necessary to state here the following facts: A petition for winding up of the company known as Central Cotton Mills Limited, a public limited company, was filed by the respondents before the Company Judge under section 305 read with sections 290 and 152 of the Companies Ordinance, 1984 (hereinafter to be referred as "the Ordinance only for the sake of convenience), with the following prayer:- "It is therefore, prayed on behalf of the petitioner that this Hon'ble Court may be pleased to pass an order: (a)for the winding up of the Company; (b)for the appointment of an official liquidator; (c)for the appointment of a provisional liquidator; (d)for a change in the management of the company; (e)for the regulation of the conduct of the Company in the future in such manner as this Hon'ble Court may deem fit; (f)for an order protecting and restoring the rights and entitlements of the petitioners in relation to shareholding and management rights; And also pass an order granting; (g)Such other relief to which the petitioners may be entitled; and (h)Costs".
3. Along with the petition, the respondents submitted two Miscellaneous applications bearing C-M- AS. NO-2235 and 2236 of 1991. In the first noted application the respondents prayed for appointment of a provisional manager/liquidator to manage and run the affairs of appellant No.1, with a further Prayer that pending such appointment, an officer of the Court be appointed to make inventory of the company's assets including stock of finished and raw-material, plant and machinery and company's record, all the books and registers maintained by the company including the minute book of directors' and shareholders' meetings, stock register and register of finished and raw-material of plant and machinery. The respondents also prayed that some interim arrangement by way of appointment of receiver for regulating the conduct of the affairs of appellant No.1 be also made. In the second mentioned application a prayer was made for publication of the notice of winding up petition in English and Urdu Newspapers as provided in Rule 781 of the Sindh Chief Court Rules (OS). The learned Company Judge, ordered notice of both the above applications to appellants for 13-8-1991, but at the same time appointed official assignee as the "provisional manager" with direction to prepare inventory of goods and record of the company mentioned in the said application. From the report of the official assignee/provisional manager dated 13-8-1991 it appears that about three days' time was consumed in preparing the inventory in terms of the ad-interim order, dated 8-8-1991. On 13-8-1991 when the matter came before the learned Company Judge only counsel for the respondents and the "provisional manager" appointed by the Court were present but no one was present on behalf of the appellants. The learned Company Judge, accordingly, deferred the consideration of office reference dated 8-8-1991 to 27-8-1991, brought on record the report of "provisional manager", sanctioned his fee, issued notices of C.M.A. No.2236/91 to Registrar of Joint Stock Companies, and directed notice of another application bearing No.2323/91 filed by the respondents in Court on that date under section 3 o the Contempt of Court Act to appellant No.2 for 27-8-1991 with direction t appear personally on that date. The grievance of the appellants before us is that on the aforesaid date (13- 8-1991) the matter was taken up by the learned Company Judge out of turn early in the morning without waiting for the appellants' counsel who had already riled power on 12-8-1991 and was busy before another bench. The matter accordingly stood adjourned to 27-8-1991 for hearing of C.MA.
4. No.2235/91, office reference dated 8-8-1991 and CMA No.2323/91. It appears that on 15-8-1991 the respondents moved CMA No.2289/91 seeking directions against Habib Bank Limited and United Ban Limited to produce and rile before the Court the pledged/hypothecated record relating to the Company as well as the record of the bank borrowings an sought urgent chamber order thereon.
5. The learned Company Judge while issuing notice of this application (CMA No. 2289/91) to Habib Bank Limited and United Bank Limited for 21-8-1991 directed them to produce the pledged/hypothecated record relating to Central Cotton Mills Limited before the official assignee.
6. The appellants have challenged the above mentioned three order dated 8-8-1991, 13-8-1991 and 15-8-1991, passed by the learned Company Judge in the above appeal.
7. On 20th August, 1991, when the appeal came up for Katcha Peshi in presence of the counsel for the appellants and the respondents, we directed the office to put up this case along with the R&P of J.M. No.56 of 1991, as several documents to which reference was made during the course of preliminary arguments were not available on record before us. We accordingly heard the learned counsel for the appellants and the respondents at length and indicate to them that this appeal would be disposed of as a final hearing case. Mr. S. S. Pirzada and Mr. Pervez Hassan, for appellants Nos.1 and 2 respectively, ver: vehemently contended that the winding up petition filed by the respondent under section 305 r/w sections 290 and 152 of the Companies Ordinance was an action in terrorem against the Company as a counter blast to the proceedings of Suit No.227/91 earlier instituted by appellants in this Court against Naveed Textile Mills Limited in which all the respondents were interested as shareholders and directors. It was also contended by the learned counsel for the appellants that the petition under section 290 of the Ordinance was wholly misconceived as the respondents on their own showing did not hold 20% of the issued share capital of the Company which is a prerequisite qualification for riling of such a petition. It is also contended by the learned counsel for the appellants that the reliefs under sections 305 and 290 of the Ordinance being totally different and diverse in nature could not be claimed in the same petition and, therefore, for that reason also the petition is misconceived. With regard to the mention of section 152 of the Ordinance in the title of the petition riled by the respondents, the contention of the appellants is that reference to section 152 of the Ordinance is wholly misplaced as the proceedings under section 152 have nothing to do with the proceedings either under section 305 or section 290 of the Ordinance. On merits the learned counsel for the appellants challenged the above mentioned three orders passed by the learned Company Judge as arbitrary and in excess of jurisdiction.
8. It is contended by the learned counsel that orders of such extreme nature could not be passed by the learned Judge in Chambers under the provisions of the Companies Ordinance, without issuing notice to the appellants and hearing them. It is very strongly urged that appellant No.1 is commercially sound concern and appointment of a "provisional manager" without hearing the appellants Ls likely to effect -adversely the good name and reputation of the Company in the commercial circles.
9. Mr. Khalid Anwer, learned counsel for the respondents while defending the three orders passed by the learned Company Judge raised a preliminary objection that the appeal was not maintainable as it was preferred against the three orders passed on three different dates, which required filing of three separate appeals. It is also contended by the learned counsel for the respondents that although in the order, dated 8-8-199.1 the official Assignee, who was appointed to prepare the inventory of the goods and record of the company, was described as the "provisional manager", but in fact he was to perform only the duties of Commissioner for a very limited purpose. It is also contended by the learned counsel that the other two orders passed by the learned Company Judge on 13-8-1991 and 15-8-1991 respectively were also innocuous in nature, as by passing these orders no prejudice, was caused to the appellants.
10. Before considering the appeal on merits, we would like to first dispose of the preliminary objection raised by Mr. Khalid Anwer, the learned counsel for the respondents, that the appeal is incompetent as only one appeal is filed against three different orders.
11. It is true that the impugned orders were passed on three different dates against which three different appeals should have been preferred. Under the Rules, but for this reason alone the appellants cannot be non-suited. The three orders impugned in the above appeal arise out of the same subject-- matter in a single proceedings and as such it is more convenient to deal with them together. It is not disputed that if the appellants would have preference three appeals against the impugned orders, all the appeals could be heard together and decided by a single order. The learned counsel for the respondents is also unable to show that any prejudice was caused to the respondents in their defense by the fact that instead of three appeals the appellants preferred one single appeal against three different orders In the absence of any prejudice to the respondents, the objection raised by the learned counsel is a mere technicality, which cannot defeat the proceedings. It 1 is a well-settled law that technicalities cannot override the paramount consideration of doing justice between the parties. As the appeal riled by the appellants was within time we would only direct the office to assess the amount of court-fee which could have been payable in respect of three appeals and recover the difference from the appellants. The preliminary objection is accordingly disposed of.
12. We now take up the appeal on merits. The first contention of the learned counsel for the appellants jointly is that the petition filed by the respondents praying for winding up of appellant No.1 was wholly misconceived, not maintainable and was filed as a retaliatory action to terrorize the appellant to abandon or give up their earlier proceedings of suit instituted in this Court against the respondents. The respondents on the other hand contend that the suit filed by the appellants is against a different Company and there is no nexus between the suit instituted by the appellants and the winding up proceedings filed by the respondents. We do not consider it appropriate to go into this controversy in this appeal as the main proceedings are still pending and no final order has been passed thereon by the Company Judge. The interim orders challenged in this appeal are also not final and appellants will be at liberty to raise any objection available to them before the learned Company Judge when these orders are taken up for confirmation. We will, therefore, here confine ourselves to the examination, of the validity of the impugned orders, which have been passed as an ad-interim measure without notice to appellants. The first order in the series was passed on 8-8-1991 by which the official assignee was appointed as 'provisional manager' of the Company with directions to prepare an inventory of the stock and assets of the Company which were mentioned in C.M.A. No.2235/91. The appointment of provisional manager in the course of winding up proceedings is governed under section 325 of the Companies Ordinance, 1984 which reads as follows:-- "325.Appointment and powers of provisional manager (1)At any time after the presentation of winding up petition and before the making of a winding up order the Court may appoint a person eligible for appointment as official liquidator under section 321 to be provisional manager.
13. (2)Before appointing a provisional manager ' the Court shall give notice to the company and afford to it a reasonable opportunity to make its representations, if any unless, for special reasons to be recorded, the Court thinks fit to dispense with such notice.
14. (3)Where a provisional manager is appointed by the Court, the Court may limit and restrict his powers by the order appointing him or by a subsequent order; but otherwise he shall have the same powers as a liquidator.
15. (4)Unless the Court directs otherwise the provisional manager shall cease to hold office as provisional manager on the winding up order being made."
16. It is quite clear from reading the above provision that under subsection (1),of section 325 of the Ordinance the Company Judge may appoint a provisional manager of a Company in respect whereof a winding up petition has been presented before him pending order of winding up of that Company and appointment of official liquidator. However, the power to appoint provisional manager in winding up cases cannot be exercised lightly, as the provisional manager appointed by the Court under this section has the same powers as an official liquidator appointed by the Court consequent upon an order of winding up of the Company, unless the Court at the time of appointment of provisional manager specifies the extent of the powers of provisional manager. As the appointment of "provisional manager" is fraught with serious and drastic consequences for a running Company, the Legislature as a safeguard has .9 provided in section 325(2) ibid that before appointing the provisional manager, the Court shall hear and afford an opportunity to the Company to make its representation against such appointment. No doubt in cases of extreme urgency and in extraordinary circumstances where Court is of the opinion that by giving the notice to the respondents, the object of appointment of 11 provisional manager will be defeated, it can dispense with such notice but in that case the Court must record its reasons for this extraordinary measure in the order. From reading of the impugned order dated 8-8-1991 it is quite clear that the learned Judge while appointing the provisional manager of appellant No. I gave no reasons whatsoever for dispensing with the notice contemplated under section 325(2) of the Ordinance, which alone could give him jurisdiction to make the appointment of provisional manager. We are, therefore, of the view that in the absence of special reasons which justified appointment of expert provisional manager of Company and which the learned Judge was bound to record in his order, the appointment of provisional manager could not be sustained in law. However, the learned counsel for the respondents contended before us that in fact the appointment of the official assignee as the provisional manager of the company was a misnomer as the duties required to be performed by the official assignee were limited to the extent of preparation of the inventory of the goods and stocks of the company and nothing beyond them. It is accordingly contended by Mr. Khalid Anwer that the appointment of official Assignee may be treated as the appointment of a Commissioner for preparation of inventory only and not as a provisional manager contemplated under section 325 of the Ordinance. From the tenure of the order, dated 8-8-1991 it appears to us that the purpose of the appointment of official assignee in the case was only to prepare a list of the inventory of the assets and stocks of the Company and that he was not to act as a provisional manager of the Company contemplated under section 325 of the Ordinance. We have also noticed the fact that the order, dated 8-8-1991 has been carried out and the inventory prepared by the official assignment has been taken on the record by the learned Judge. In these circumstances we modify the order, dated 8-8-1.991 to the extent that the official assignee shall be deemed to have been appointed only as a Commissioner for preparation of inventory and his appointment as the "provisional manager" without notice to the appellants was not justified in law. Accordingly C.M.A. No.2235 of 1991 shall be deemed to be pending which will be disposed of in accordance with the law.
17. The second order challenged by the appellants in the above appeal is dated 13-8-1991. From the R&P of J.M. No.56 of 1991 we find that the name of Mr. Muhammad Ali Sayeed appears on the cover of the file as counsel for appellants and his power on behalf of the appellants was riled in the office on 12-8-1991. In these circumstances it would have been appropriate if the learned Judge would have passed the order, dated 13-8-1991 after hearing the appellants' counsel. However, after going through the order, dated 13-8-1991 we find that nothing adverse has been said against the appellants in the above order. It is clear from reading of the order, dated 13-8-1991 that the consideration of the office reference dated 8-8-1991, in which office had sought permission of the Court for advertising the petition for winding up, in accordance with rule 781 of the Sindh Chief Court Rules (OS), was deferred to 27-8-1991 without making any observation. Similarly the report submitted by the official assignee in pursuance of the interim order dated 8-8-1991 was simply taken on record with a further direction that a sum of Rs. 5,000 is sanctioned as the fee of the official liquidator. With regard to C.M.A. No.2236/91 in which the respondents had prayed for advertising the notice of winding up petition in Urdu and English Newspapers the Court ordered notice to the Registrar of Joint Stocks Companies. On the contempt application against the appellants which was presented by the respondents in Court on 13-8-1991 the learned Judge ordered notice to appellants for 27-8-1991, with direction to respondent No.2 to be present in Court on that date. None of these directions could cause any prejudice to the appellants. We are, therefore, of the view that no interference is called for with the order, dated 13-8-1991 except for the clarification that if the appellants have any objection to the report of official assignee they will be free to raise it before the learned Company Judge, who will hear and dispose of the same in accordance with the law.
18. We now come to the last order in the case, which has been passed on C.M.A. No.2289/91. This order was passed in Chambers on an application presented by the respondents before the adjourned date of hearing without notice to the appellants. It is pertinent to mention here that on 13-8-1991 when the matter came up in Court before the learned Company Judge all the facts which are alleged in C.M.A. No.2289/91 were in the knowledge of respondents but the hearing of the case was allowed to be postponed to 27-8-1991 without any objection from the respondents. After hearing of the case was postponed to 27-8-1991, the petitioner presented C.M.A. No.2289 of 1991 alleging that the official assignee during preparation of inventory had noticed certain facts which he mentioned in his report and which show that all the record of the company was not produced before him for the purposes of preparation of complete inventory and prayed that the two bankers of the appellants, namely, Habib Bank Limited and United Bank Limited, be directed to produce the pledged/hypothecated record relating to the Company as well as the record of the bank borrowings. This application was called in Chambers on an, urgent motion and the learned Judge without issuing any notice of the application to the appellants directed the bankers of the appellants to produce the documents mentioned in the application before the official assignee.
19. The order, dated 15-8-1991 cannot be upheld for more than one reason. Firstly, the order, dated 15- 8-1991 shows that notice of application was ordered only to the two banks and not to the appellants who were vitally affected by the order. Secondly, the order dated 15-8-1991, does not show the reason which made it necessary for the learned Judge to pass expert order without hearing the parties, especially when the case already stood adjourned to 27-8-1991, after appearance of the appellants/respondents. Thirdly, all the facts alleged in C.M.A. No.2289 of 1991 were in the knowledge of the respondents on 13-8-1991 when the case was called in Court but it was allowed to be adjourned and immediately thereafter application was filed for seeking expert Chamber orders for which no justification existed in the circumstances of the case. In our view the learned Company Judge while entertaining the above application in Chambers after appellants/respondents had appeared in the case and the hearing was adjourned to 27-8-1991 should have issued notice to appellants before passing any order thereon. In any case in the impugned order the learned Judge failed to show any extraordinary emergent circumstances, which justified passing of an expert order in Chambers, especially when the respondents had already put in appearance in the case and the case stood adjourned to a specific date. Learned counsel for the appellants rightly contended that in view of the earlier order of the Court appointing provisional manager of the Company, the order, dated 15-8-1991 directing the appellants' bankers to submit the documents relating to pledge/hypothecation stocks of appellants, is capable of seriously affecting the working of the appellants which is a commercially sound company. We are also of the view that as an inventory of the stock of the appellants was already prepared at the instance of respondents, there was no justification for passing of an expert Chamber order against the bankers of the appellants for production of pledge/hypothecation record of the stock. The learned Judge in Chamber should have heard the appellants and the banks before granting this application. We are informed that the documents ordered by the learned Company Judge to be produced before the official Assignee have been produced in this appeal which arc kept in a sealed cover. As we have reached the conclusion that there was no justification for passing expert order, dated 15-8-1991 for production of these documents we direct that these documents may be returned to the respective banks if they ask for the same. Accordingly C.M.A. No.2289/91 shall be deemed to be pending before the learned Company Judge which will be disposed of after hearing the parties in accordance with law.
20. In conclusion, the appeal against the orders dated 8-8-1991 and 15- 1991 is allowed to the extent indicated above while it is dismissed against order, dated 13-8-1991. There will be no order as to costs in the circumstances of the case.
21. AA./C-228/K