This petition for winding up of M/s. Shahabuddin & Sons under section 305 read with section 444 of the Companies Ordinance, 1984, has been riled on the grounds that the substratum of the respondent has disappeared and that it has failed to pay any interest on the money, deposited with it by the petitioner, from May, 1988, ownwards or to refund the money or any part thereof. It is alleged in the petition that the respondent is a family business" concern composed of Mr. Shahabuddin and his sons and is du unregistered company. it is further alleged that the object of the respondents has not been set out in any document but their objective was doing business with funds provided by small investors on assurance of profit to be paid by the respondents to such investors; that about a dozen innocent persons like the ,petitioner have invested their money with the respondents and that the respondents have thus, conceived and brought forth an unregistered company.
2. Mr. Atash Mirza, the learned counsel for the petitioner, submitted that several other persons, who have invested money with respondent, have supported the petition and the number of those persons along with the petitioner and the respondent is more than seven so that they constitute an ,association' and hence an unregistered company within the meaning of section 443 of the Ordinance, which provides as follows:-- For the purpose of this part, the expression 'unregistered Company' shall not include a railway company incorporated by Act of Parliament of the United Kingdom or by a Pakistani law,. Nor a Company registered under any previous Companies Act or under this Ordinance, but save as aforesaid shall include any partnership, association or company consisting of more than seven members."
The word 'association' has not been defined but Mr. Mirza relying on the case of Commissioner of Income Tax v. Indira Balkrishna (1960) 39 ITR 1546 submitted that when two or more persons get together for a common action, it becomes an association. The word "association" also occurs in Section 14 of the Ordinance, which provides, inter alia, that no "Association" consisting of more than twenty persons shall be formed for the purpose of carrying on any business that has for its object the acquisition of gain by the association or-- any members thereof unless it is registered as a company. The provision is similar to the provisions of section 4(2) of the repealed Companies Act, 1913. A question as to the meaning of the word 'association' in section 4(2) of the Act of 1913 arose in the, case of Panchena Manchu Nayar v. Gadinhare Kumarrnchath Padmanablian Nayar (ILR 20 Madras 68) where a contract was entered into between, on the Pne hand, proprietors of a lottery and, on the other hand, several ticket-holders individually. It was held by a Division Bench of the Madras High Court that:-- "to constitute an association within the meaning of the section the existence of a legal relation between more than twenty persons giving rise to joint rights or obligations or mutual rights and duties is absolutely necessary. Otherwise it is a mere conglomeration ofpersons But not an 'association"'. and, on the facts of that case, it was found that the only persons associated with each other in the sense of possessing joint rights or being subject to joint obligations or of having mutual rights and duties were the proprietors of the lottery while the remaining ticket-holders were entire strangers who had entered into no contract whatever with each other. It was therefore, held that there was no 'association' among the proprietors of the lottery and the other ticket-holders. The same question came up before a Full Bench of Madras High Court in the case of Neclamega Sastri v.
Appiah Sastri (ILR 29 Madras' 477) and the principle enuniciated in ILR 20 Madras 68 was approved; and the decision in the Full Bench case was followed in the case of G.K. Naidu v. C.K. Mouleswar (AIR 1962 AP 406).
3. According to the New Webster Dictionary of the English language the word "association" means a ".Society the members of which arc united by mutual interests or for a common purpose" and according to Chamber's Twentieth Century Dictionary, it means "a society of persons joined to promote some object". It will be seen that the meaning given to the word "association" in the judgments mentioned above and in the dictionaries is substantially the same.
4. It is true that in section 14 of the Ordinance, the 'association' that I is contemplated is one which has for its object the acquisition of gain while section 443 of the Ordinance is concerned with an "association" simpliciter without any reference to its object, but that difference in no way affects the meaning to be given to the word "association" because while section 443 applies to an 'association' whatever its object while the provisions of section 14 of the Ordinance would be attracted only if the association's object is acquisition of gain.
5. It is quite clear that, on the facts disclosed in the present case, the respondent is not an "association" and, therefore, not an "unregistered Company'. Admittedly, the petitioner himself as well as the several persons who have filed affidavits supporting the petition are creditors of the respondent. The petitioner himself has filed no documents to show the terms and conditions on which he 'invested money with the respondent but the persons supporting the petition have filed copies of individual contract of investment between them respectively and the respondent. The terms of that contract show that it is merely an agreement whereby a certain sum of money has been invested with the respondent for a period of twelve months, renewable by mutual consent and withdrawable on sixty days' notice in writing; and that respondent is liable to pay the agreed profit on the amount of the investment. The contract, thus, discloses a relationship of only a creditor and a debtor between the respondent, on the one hand, and each individual investor on the other hand. But what is more important is that there is nothing in those contracts or indeed in the affidavits filed in the case to show any relationship between the petitioner, the respondent and the other investors or any joint rights or obligations or mutual rights or liabilities between them; and there is no evidence of any common purpose, interest or object. The object of the respondent apparently was to obtain money from investors and to use it for his own business in which the latter had no participation in any manner; while the object of each-of the investors, including the petitioner was to invest this money with the respondent and to earn profit thereon irrespective of what use the respondent made of the money.
6. It remains to be observe ' d that the contention of Mr. Mirza that the alleged 'association' consists of more than seven persons is not borne out by the material on the record. According to him the respondent is a family business concern consisting of Shahabuddin and his sons as suggested by the name of the firm; and because the word "sons" is used it is implied that there must be at least two sons so that there are three members of the firm, who along with the petitioner and the five investors supporting the petition aggregate to more than seven persons. The respondent has, in his counter-- affidavit, asserted that he is the sole proprietor of the business. Neither the names nor the number of the sons of Shahabuddin allegedly associated with him has been disclosed and, in any case, merely because the title of ' the respondent is Shahabuddin & Sons it does not follow that the sons of Shahabuddin are associated in the business of the respondent.
These are the reasons for the short order made on the 3rd February,