HAZIQUL KHAIRI, J.- By this order I propose to dispose of two applications bearing C.M.A. No. 3624/91 and C.M.A. No. 724/92 filed by two applicants, namely, Fazal Corporation Private Limited and Firdous Spinning & Weaving Mills Private Limited. In the first named application, the applicants have prayed for recalling the order dated 11.12.1991 whereas in the second application they have prayed for stay of the operation of the said order dated 11.12.1991 pending the hearing of the final decision, in the former application.
2. It may be stated here that on 11.12.1991 the matter was fixed for hearing of Official Liquidator's Reference No.3, as well as for hearing of C.M.A. No. 279/91 In the said Reference the Official Liquidator had stated that the petitioner, namely, M/s P.I.C.I.C. Has deposited certain shares and Bank Guarantees with him with request that necessary orders may be obtained for disposal of shares in the stock market. In CMA. No. 279/91 the applicants therein, namely, Aftab Ahmed, a shareholder of the respondent company as well as M/s Fazal Corporation and Firdous Spinning & Weaving Mills Limited, creditors of the respondent company, who are also applicants in both C.M.As. No. 3624/91 and 724/92, had prayed for stay of winding up proceeding with request to permit them and the respondent company in winding up to submit a scheme of reorganization and rescheduling the payment to the petitioner. However, when the Official Liquidator's said Reference No:3 and the hearing of C.M.A. No. 279/91 came up for hearing on 11.12.1991 learned counsel for the petitioner as well as the Official Liquidator and counsel for the said three applicants were present and the following order was passed on the Official Liquidator's said reference:- " By consent it is ordered that the Official Liquidator shall soli the shares in the Stock market and get the Bank Guarantee encashed. Official Liquidator's Reference stands disposed off."
3. It may be stated here that the CMA. No. 279/91 was subsequently dismissed on 21.4.1993 being not pressed by Mr. Mohsin Tayebally, advocate for the said three applicants.
4. Now reverting to C.M.A. No. 3624/91 and C.M.A. No. 724/92, the main thrust of the arguments of Mr. Mohsin Tayebally learned counsel for the applicants is that the shares held by the petitioner belonged to applicants and are not the assets of the company in liquidation, as such, the petitioner is not entitled to have the said shares sold in these proceedings. It was urged by him that only course available to the petitioner is to enforce its right against the alleged pledge of the shares of the applicants and for encashment of the Guarantees furnished by the applicant by way of a separate suit. According to him, if these shares of the applicants companies are allowed to be sold and the guarantees are allowed to be encashed in the winding up proceedings of the respondent company, it would be in flagrant violation of Companies Ordinance and due process of law.
5. In reply, Mr. J.H. Rehmatullah learned counsel for the Official Liquidator first brought to my notice the provisions of Section 404 of the Companies Ordinance, 1984 under which insolvency rules are made applicable in winding up of insolvent company. For the sake of convenience Section 404 may be reproduced as follows:- "404. Application of insolvency rules in winding up of insolvent companies. In the winding up of an insolvent company the same rules shall prevail and be observed with regard to the respective rights of secured and unsecured creditors and to debts provable and to the valuation of annuities and future contingent liabilities as are in force for the time being under the law of insolvency with respect to the estates of persons adjudged insolvent; and all persons who in any such case would be entitled to prove for and receive dividend out of the assets of the company may come in under the winding up, and make such claims against the company as they respectively are entitled to by virtue of this section."
6. Learned counsel then made reference to Rules 9, 10, 11 and 12 of IInd Schedule to the Insolvency (Capital of the Federation and Dacca) Act 1909 which specifically relate to secured creditors and may be reproduced as follows:- "9. If a secured creditor realizes his security, he may prove for the balance due to him, after deducting the net amount realised.
10. If a secured creditor surrenders his security to the official assignee for the general benefit of the creditors, he may prove for his whole debt.
11. If a secured creditor does not either realize or surrender his security, he shall, before ranking for dividend, state in his proof the particulars of his security, the date when it was given and the value at which he assesses it, and shall be entitled to receive a dividend only in respect of the balance due to him after deducting the value so assessed.
12. (1) Where a security is so valued the official assignee may at any time redeem it on payment to the creditor of the assessed value.
(2) If the official assignee is dissatisfied with the value at which a security is assessed, he may require that the property comprised in any security so valued be offered for sale at such times and on such terms and conditions as may be agreed on between the creditor and the official assignee, or as, in default of agreement, the Court may direct. If the sale is by public auction, the creditor, or the official assignee on behalf of the estate, may bid or purchase: Provided that the creditor may at any time, by notice in writing, require the official assignee to elect whether he will or will not exercise his power of redeeming the security or requiring it to be realized, and if the official assignee does not, within six months after receiving the notice, signify in writing to the creditor his election to exercise the power, he shall not be entitled to exercise it; and the equity of redemption, or any other interest in the property comprised in the security which is vested in the official assignee, shall vest in the creditor, and the amount of his debt shall be reduced by the amount at which the security has been valued."
7. A bare reading of Section 404 of the Companies Ordinance, 1984 leaves no doubt that the Insolvency Rules have been specifically made applicable to the insolvent companies in winding up which shall prevail and be observed, inter-alia, in relation to the respective rights of secured creditors of the company. In the present case the petitioner who is a secured creditor has surrendered his security to the official assignee/official liquidator in terms of Rule 10 of 2nd Schedule to the Insolvency (Capital of the Federation & Dacca) Act 1909 to enable him to proceed in the manner provided under Rule 12 thereof. It is not a case where the petitioner does not either realize or surrender his security to the official Assignees in terms of Rule 11 in which case he is entitled to receive a dividend only in respect of the balance due to him after deducting the value assessed. He^p the official Assignee may either redeem the security on payment to the creditor of assessed value or he may as per Rule 12(2) require that the property comprised in any security so valued may be offered for sale. What is pertinent to note is that there was no necessity of invoking the proviso to Rule 12 requiring the official Assignee/official Liquidator to elect whether he will or will not exercise the power of redeeming the security or requiring it to be realized as on 16.12.1991 by consent it was ordered that the official Liquidator shall sell the share in the stock market and get the Bank Guarantee encashed." Admittedly learned counsel for applicants Mr. Mohsin Tayebally was also then a party to the said consent order on behalf of two of the three present applicants, namely, Fazal Corporation and Firdous Spinning & Weaving Mills Limited. Apart from this, if the three applicants were really interested that the pledged shares may not be sold or the Bank Guarantee may not encashed, they could have taken necessary steps for the past many years.
8. The contention of Mr. Mohsin Tayyab Ali learned counsel for the applicant that pledge of shares and Bank Guarantees in favour of the Company in winding up cannot be termed as Assets of the Company and for this reason the official assignee has no jurisdiction to sell the pledged shares or to get the Bank Guarantees encashed is disputed by the learned counsel for the Company, Mr. J.H.
Rehmatullah according to whom assets of a company is winding up includes both moveable and immovable property. He first referred to the definition of moveable property under Section 2(7) of the Sale of Goods Act which is as follows: "Goods" means every kind of moveable property other than actionable claim and money, and includes "electricity, water, gas, stock and shares, growing crops, grass and things attached to or forming part of the land which are agreed to be served before sale or under the contract of sale;
9. Next he referred to the Black's Law Dictionary Sixth Edition, P. 117 where assets has been defined as follows:- "Assets: Property of all kinds, real and personal, tangible and intangible, including, inter alia, for certain purposes, patents and causes of action which belong to any person including a corporation and the estate of a decedent. The entire property of a person, association, corporation, or estate that is applicable or subject to the payment of his or her or its debts."
10. No doubt the petitioner as Pawnee is in possession of shares in question as security for repayment of the debt but their position is different from an ordinary Pawnee under Section 176 of the Contract Act under which a Pawnee has a right to sell the pledged goods only after giving the Pawnor reasonable notice of sale. The petitioner in the present case is not an ordinary Pawnee but is the holder of a duly executed blank transfer deed of the shares by the Pawnor, the effect of which, firstly, is that the latter has waived his right to be given a notice under Section 176 of the Contract Act by the petitioner Pawnee and secondly he has given further unfettered right to the Pawnee to own or transfer the ownership of shares to any one. Similarly Bank Guarantee might be as good as cash but it is not cash. I am therefore of the view that the pledged shares coupled with transfer deed and Bank Guarantees in favour of the Company are assets of the Company.
In the result both the applications are dismissed.