' The petitioner-Bank has prayed for winding up order against respondent-Company under section 305 of the Companies Ordinance, 1984 (hereinafter referred as Ordinance) as well as for appointment of official liquidator on the averments that Company is commercially insolvent and is unable to pay its huge outstanding dues.
1. It is the case of the petitioner that vide Finance agreements dated 22nd October, 1983, 6th May, 1985, 30th June 1986 and 18th September 1988, loans in the local currency to the tune of Rs,2.4 million, Rs,7.5 million, Rs,22.70 million and Rs,61,289,000 respectively were extended to respondent on agreed interest, but in spite of the demands made vide notice dated 25th March 1992, and 14th May 1992, the Company has failed to discharge its liability and presently a total amount in the sum of Rs,85,999,020 in the Pakistani currency is outstanding against it.
2. On the institution of proceedings process as required under the law was ordered to be issued for the respondent-Company but none appeared on its behalf, as such it was decided to proceed against the Company ex parte vide order dated 17th December, 1992.
3. Mr. A.I. Chundrigar learned counsel appeared on behalf of petitioner and urged that as the respondent-Company has gone commercially insolvent because it had not issued its dividends for the last many yeaRs, The respondent-Company is also lying closed and there are no prospects in future to run the business at profit. The respondent despite of service failed to appear to defend the petition thus inference be drawn that whatever has been stated in the petition is correct and true and while adopting the summary procedure orders as have been solicited in the prayer clause of the petition be passed.
3-A. I have heard the learned counsel and with his assistance record of the case has been parused carefully. In view of the facts and circumstances available on record following points are formulated for determination:--
(i) Whether in summary/ex parte proceedings without adhering to the normal course of law a judicial order can be passed against the respondent-Company?
(ii) Whether statutory notice under section 305 of the Ordinance has been served at the registered office address?
(iii) Whether respondent-Company is commercially insolvent and it would be just and equitable to pass against it winding up order?
4. Mr. I.A. Chundrigar, Advocate stated that as the respondent- Company is not contesting the petition, therefore, the averments made therein duly sworn on affidavit be accepted as true and there being no controversial point requiring determination the winding up order as has been prayed for be passed in the interest of justice.
' Under section 9(3) of the Ordinance, the Court seized with .The matter, has been empowered to follow the summary procedure. No doubt by adopting summary proceedings a lengthy procedure provided under the Civil Procedure Code can only be curtailed. However, to effectively decide the matter Courts A are under obligation to carefully apply their judicial mind, so the cases are disposed of by an intelligent judicial act and if need be the point for determination be also noted down in the pecuniar circumstances of the case, evidence be also recorded and thereafter on the basis of material produced in support of contentions the dispute should be resolved. The Courts are not under legal obligation to grant relief even in ex parte proceedings merely on the basis of the plaint. Although according to Order IX, rule 6(1), C.P.C. a decree can be passed without recording evidence if the opposite side is being proceeded ex parte provided summons are duly served. Even this provision of the law does not cast bounden obligation on the Court to pass a decree because prominently therein the word 'may' has been used which confers a directry judicial discretion on the Court for granting relief and the rule mentioned hereinabove if not applied with caution, there would be apprehension that the plaintiff or petitioner may succeed in getting ex parte 1 order/decree on the basis of the facts which may not be found true.
' It is the case of the petitioner that statutory notice dated 25th March 1992, was duly served at the registered office of the respondent-Company which was followed by another notice dated 14th May 1992. The register cover envelope was returned unserved thus the presumption may be drawn that the service of the notice has duly been effected and respondent has failed to repay the outstanding debts.
' Under section 306 of the Ordinance the creditor is supposed to deliver the notice by registered post or otherwise at the Registered Office of the Company to repay the outstanding amounts and if Company has neglected within 30 days after the receipt of the notice to pay the dues or to secure or compound for it to the reasonable satisfaction of the creditor, it would be deemed that Company is unable to discharge its liability. In this context firstly it is to be seen that whether at all the notices referred hereinabove were duly delivered at the address of the Registered Office which has been mentioned in the petition as follows:-- "Kolpur Darwaza, District Kalat, Balochistan."
' The learned counsel stated that memorandum and Article of Association of the respondent- Company is available on record which contains the above address of Registered Office. I have gone through the said document which does not contain the address of the Registered Office. As far as service of the statutory notice is concerned that has got great significance because on the basis of the service of notice it would be presumed, that the respondent-Company is unable to discharge its debts as has been enumerated under section 305 of the Ordinance hence the procedure laid down for effecting service has to be followed strictly because any violation thereof can entail serious consequences; including the winding up of the Company, therefore, convincing evidence has to be produced before the Court to establish that notice was duly served. In this context I may further mention that the Postal Receipt bearing No,320 filed alongwith the notice also does not indicate that it was sent on the address of the Registered Office stated hereinabove.
4-A. As per section 27 of the General Clauses Act, 1897, the postal service can be held good provided the letter containing the documents to be served at proper address was sent by registered post, unless contrary it is proved. In C the case in hand the notice was neither sent on the proper address i,e, registered office of the respondent nor it was posted on the address which according to the petitioner was the address of the registered Office, therefore, inescapable conclusion is that the statutory requirement of the law has not been fulfilled.
5. Learned counsel then argued that substratum of the Company has gone, because the factory has been closed for a number of years and it has been most slack in repayment and has appearently not declared any dividend for a few years and in spite of the legal notice the dues of the petitioner have not been paid, therefore, it is firmly established that the respondent is unable to pay the debts and it is just and equitable in the circumstances that the respondent-Company should be wound up. He further stated that respondent is plainly insolvent as its liabilities also greatly exceeds its assets and it lacks liquidity etc. The contention has been reiterated by the learned counsel from para. No,23 of the petition which is reproduced hereinbelow:-- "The respondent has been most slack in repayment and has apparently not declared any dividends for a few years on the ground that it has been suffering losses. The factory of the respondent has been closed for a number of yeaRs, In spite of the said legal notices dated 25-3- 1992, and 14-5-1992, the respondent has not settled the dues payable to the petitioner and, therefore, it is firmly established that the respondent is unable to pay the debts and that it is just and equitable under the circumstances of the case that the respondent-Company should be wound up. The respondent is plainly insolvent as its liabilities also greatly exceed its assets and above all the respondent lacks liquidity. In these proceedings, in any case, the quantum of assets need not be considered but it is relevant whether the respondent can meet and it does meet the demands from time to time in respect of the finances granted by the petitioner. The substratum of the business has dis-appeared and it is not reasonably possible for the respondent to carry on business except at further great loss."
' To substantiate the plea he placed reliance on Messrs Ali Woollen Mills Limited v. Industrial Development Bank of Pakistan (PLD 1990 SC 763) and emphasized that in this report Ali Woollen Mill was also closed for a number of years and the Hon'ble Supreme Court concluded that the Company was not commercially solvent nor there was any reasonable chance of its doing business in near future at a profit and it was found just and equitable to wind up the Company. In the instant case as far as the fact that the respondent-Company is closed for quite a number of years is concerned, that has not been established by producing any evidence. It is admitted position that petitioner has instituted instant proceedings through one Agha S.K. Alam Shah, who according to the counsel is Grade-IT Officer at Karachi, Perhaps he had not even visited the Company before filing affidavit of the facts. As it has already been discussed that the summary procedure is to be followed in deciding such like petitions but even then burden remains on the party claiming the relief to prove its contention through evidence or convincing unrebutted material. This aspect of the case can also be glanced from another angle i,e, if the respondent has not declared any dividends for a few years or was making the losses in the business then what was the necessity to extend financial assistance which was meant for expansion of the business and raising the construction of the building etc. This fact is indicative from the finance agreements dated 22nd October 1983, 6th May 1985, 20th June 1986, and 18th September 1988. As far as the rule laid down in the reported judgment by the Hon'ble Supreme Court is concerned I am in respectful agreement but facts and circumstances of that case are altogether different from the instant case. As such, the petitioner cannot take any help from it.
6. It is important to mention here that before passing the final order of winding up against any Company the Court remains under legal obligation to form an opinion under section 305, Clause H, that whether it is just and equitable that the Company should be wound up. The expression just and equitable has not been defined in the Ordinance but such opinion can be formed keeping in view that the Company has become commercially insolvent and there are no chances of its future prospects, therefore, it would be proper to issue the orders of its winding-up. In this context following tests are to be applied to determine whether the Company commercially is solvent or insolvent:- -
(I) Whether the substratum of the Company is deemed to be gone?
(ii) Whether the object for which it is incorporated had substantially failed?
(iii) Whether it is impossible to carry on the business of the company except at a loss?
(iv) There is no reasonable hope that the object of the trading at a profit can be achieved.
(v) The existing and probable assets are insufficient to meet the existing liability.
' The instant case could have been tested at the touchstone of above tests if the convincing evidence has been produced at the time of hearing, as such, in absence of the evidence it is not possible to determine that the respondent-Company is commercially insolvent and there are not chances of its future prospects. I may note here that about the assets of the Company no valuation certificate has been annexed so much so, when the financial assistance was extended even at that time no proper survey was carried out. Surprisingly while executing hypothecation and mortgage agreements the list of the machinery and the immovable property whatsoever was supplied by the respondent that was accepted as a true without even bothering to get it verified regarding its quantity or valuation. It is also noted that in all the finance agreements the same immovable and movable property was hypothecated and mortgaged and the valuation of the land on which the factory has been constructed was shown exorbitantly high on every occasion without consulting the officials of the revenue department. The Court is also duty bound to watch the interest of the creditors as well as the members of the Company before passing the order of its winding up. In this case the petitioner-Bank is not only the creditor of respondent because previously a petition of winding up being number 1 of 1992, was filed with the identical prayer by the M/s. Banker's Equity Limited, Habib Bank Limited, United Bank Limited, M.C.B. And that was dismissed vide order dated 12th April 1992.
' In the instant petition, the Bankers Equity and others have also not been joined even as pro forma respondents thus in the absence of those creditors it would not be just and proper to wind up the company. Besides it is to be observed that prima facie there is no evidence on record to make the assessm ent of assets owned by the respondent-Company, therefore, it was difficult to hold that to what extent the claim of each creditor shall be satisfied, if the Company is ordered to be wound up.
7. Before parting with the judgment it is observed that alternate remedy is available to the creditor for the recovery of outstanding amount by way of instituting civil suit, therefore, on this account as well no case is made out.
' Resultantly keeping in view the aforesaid discussion I am inclined to hold that there is no substance in the petition which is accordingly dismissed. revisions by the competent authorities. Therefore, it is advisable to consult the official sources or legal professionals for the most up-to-date and accurate information.