KHALIL-UR-REHMAN KHAN, J.--1, M/s. Taj Company Limited, through its Board of Administrators, have filed this Constitution petition for declaring the sale of the machinery in question through public auction by Custom! Authorities to respondent No. 4 and its consequential alleged sale to M/s. Malik Board and Paper Industries (Pvt.) Ltd. Respondent No. 5, as illegal, without lawful authority and mala fide.
2. The relevant facts briefly stated are that the machinery contained in twenty-eight packages was imported under two consignments dated 5th July, 1988 and 17th October, 1988. The import value of the two consignments based on the importer's declaration was Rs. 1,71,27,299. The Customs Authorities, as were of the view that contravention of I.T.C. Had taken place, initiated adjudication proceedings. Meanwhile bonding of both the consignments was allowed in C.P.F. Bond, Bund Road, Lahore in September and November, 1988, respectively. The goods remained in bond till April, 1992 when after issuing a general notice to the importers to have the bonded goods released, the machinery in question was put to auction for sale. It is pertinent to note that the reserve price of the machinery in question was fixed by the Customs authorities at Rs. 2,39,73,103 by adding into the declared value the Government duties and taxes. Five auctions were held under the aforesaid general notice as under:- S. No. Date Highest bid offered
1. 24.11.1991 Rs. 12,80,000
2. 21.12.1991 Rs. 12,00,000
3. 24.02.1992 Rs. 25,00,000
4. 23.03.1992 Rs. 26,00,000
5. 25.03.1992 Rs. 35,01,000 These bids were rejected considering the same to be very low. It was claimed by the Customs Authorities that a notice dated 19.3.1992 under section 111 of the Customs Act was issued through registered post and another notice dated 8th April, 1992 under section 112 of the Act was also addressed to the Bahawalpur Board Mills at its mills located at 31 KM Sheikhupura Road, Lahore, but in spite of these notices the Mills did not request release of the goods. After rejecting the bid of Rs.35,01,000 the Collector appears to have referred the matter to the Committee for reappraisal of the value of these consignments and the said Committee vide its report dated 9th April, 1992, reappraised the value of the goods at Rs. 98,00.000, including the duty payable. Thereafter the sixth auction was held on 12th April, 1992, in which Kh. Wasim Hameed respondent No. 4, gave the highest bid of Rs. 26.00.000. As this bid was also low the Department statedly entered into negotiations with Kh. Wasim Hameed who ultimately offered to pay Rs. 32,00,000 on 21st April, 1992. This offer was accepted the same day without giving thought to the fact that previously the highest bid of Rs.
35,01,000 had been rejected on 25th March, 1992 and at that time negotiations were not held with the said highest bidder. The machinery of the two consignments was delivered to Kh. Wasim Hameed on 27th April, 1992 who, it is alleged, sold the same to respondent No. 5 for Rs. 62,00,000. It is also pertinent to note that respondent No. 5 had itself participated in the first auction held on 24th November, 1991, in which auction the highest bid offered was of Rs. 12,80,000. The case of respondent No. 5 was that after the said bid it did not pursue the matter further and waited for the said machinery to be purchased by Kh. Wasim Hameed from whom the respondent-Company statedly purchased the said machinery for Rs. 62,00,000 on 3rd May, 1992. It may be noted that on Plantation of the learned counsel for respondent No. 5, its name as Malik Board and the array of the respondents.
3. The other relevant features are that Bahawalpur Paper and Board Mills is subsidiary of Taj Co. Ltd.
Petitioner as the Bahawalpur Board Mills is entirely owned by the Taj | Company. The Registrar of Companies instituted an application under section 290 of the Companies Ordinance on 17th December, 1990 (C.O. 45-90) and this Court vide order dated 19th December, 1990 took cognizance of the matter. This Court on 22nd May, 1991, clarified that Bahawalpur Board Mills and Taj Printing and Packaging Industries (Pvt.) Limited are directly controlled and beneficially owned by Taj Company. These are as such subsidiary Companies within the meaning of section 3 of the Companies Ordinance, 1984 and the Board of management appointed under section 290 of the Ordinance is, therefore, entitled to look after and manage the affairs of the subsidiary companies.
The Bahawalpur Board A Mills was lying sealed under the Orders of the High Court passed in W.P.
6303-90 and C.O. 45 of 1990, and as such no authorised agent of the Mills was available at the mills premises to receive the notice, if any, issued by any authority. The notice dated 8th April, 1992, under section 112 of the . Customs Act reached the Board of Administrators on 25th April, 1992.
Before that an application dated 12th February, 1992 of the Taj Co. On behalf of the Bahawalpur Board Mills was addressed to the Collector Customs, Custom House, Lahore, requesting him to supply certain documents which were needed for submission to the State Bank of Pakistan in respect of the machinery Lying in the bonded warehouse. In this letter he was informed that the Bahawalpur Paper and Board Mills is owned by the Taj Company Limited, the management of which in turn has gone under the supervision of the Lahore ! High Court. It was also added that the previous management has been superseded and that the aforesaid documents, the copies of which had been requested, were not available on account of shifting of the office of the Mills.
Another letter dated 10th March, 1992 was also apparently received by the Project Director, Customs Public Bonded Warehouse who informed the Bahawalpur Board Mills that the machinery has been lying in the Customs Public Bonded Warehouse, Bund Road, Lahore. The Member, Board of Administrators then vide application dated 5th May, 1992, requested the Assistant Collector to recall the sale proceedings and to retrieve the machinery sold as the same had been sold without any notice. It was also asserted that in any case the properties of the Taj Co. And its subsidiary companies having gone under the j management of the Company Judge, could not be sold without seeking permission from the Company Judge. The Board of Administrators of the Taj Company then filed the present Constitution petition.
4. This Court vide order dated 31st May, 1992, directed the Superintendent of Police, Sheikhupura, to inspect the premises of the respondent-Company and secure the machinery contained in 28 cartons/packets by sealing them in the said premises. These cartons were thereafter sealed and as per leamed counsel for the respondent-Company are lying in sealed position intact and secure.
5. The position taken by each of the respondents during the hearing may now be noted. The Customs Authorities in their written statement took up the position that firstly general notices were issued in the press requiring the importers to have the goods released and as the importers failed to get them released the same were put to auction. The machinery in question was put to auction six times. The bids offered at the first i.e auctions Were rejected as the same were very low and that in the sixth auction held on 12th April, 1992 a bid of Rs. 26,00,000 was increased to Rs. 32,00,000 during negotiations. This bid was of Kh. Wasim Hameed, respondent No. 4. The Customs Authorities also asserted that request to recall the auction made vide application dated 5th May, 1992 could not be accepted as the same was made much after the acceptance of the auction. All other facts as to the valuation of the goods stand admitted. The Customs Authorities in their written statement however, did not deny the receipt of application dated 12th February, 1992. It was however, added that in this application intention was not shown as to when and how the goods lying in the warehouse would be cleared by the importers. It, therefore, stands admitted that they had the knowledge much before the holding of 3rd, 4th, 5th and 6th auction that Bahawalpur Board Mills was the subsidiary of Taj Company Limited and that the management of these companies had been superseded and that proceedings under the Companies Ordinance were pending before the High Court (Company Judge).
6. Kh. Wasim Hameed, respondent No. 4 in his written statement took up the position that he was acting throughout for and on behalf of Malik Board & Paper Industries respondent, No. 5. It was added that though ostensibly it was he who was the successful bidder/purchaser, however, he was a benami of respondent No. 5 who had financed the entire deal; that he had no means to participate or to enter into such a big deal and the means were provided by respondent No. 5 and that he was no more than a show boy. On 8th July, 1992, during hearing Malik Muzaffar Ahmed, Managing Director of Malik Board and Paper Industries, respondent No. 5, stated that he had paid Rs. 62,00,000 at different times to Kh. Wasim Hameed respondent out of which Rs. 33,00,000 were deposited with the Customs Authorities, and that in case Kh. Wasim Hameed makes a statement on oath that he did not receive sixty-two lac rupees from him he is prepared to forego the balance amount of Rs. 29,00,000 as the other amount stands deposited with the Customs Department. He added that in the alternative he will take oath to the effect that he had paid sixty- two lac rupees to Kh. Wasim Hameed if it is acceptable to him. In view of the above offer learned counsel for Kh.
Wasim Hameed was directed to produce him on 13th July, 1992 so as to find out whether he is prepared to accept the offer of Malik Muzaffar Ahmad, Managing Director of respondent No. 5. Kh.
Wasim Hameed then appeared on 13th July, 1992, and accepted the said offer and accordingly his statement on oath was recorded. Kh. Wasim Hameed on Holy Qur'an stated that he had received Rs. 62,00,000 from Malik Muzaffar as price of the machinery taken from the Customs Authorities; that he had been doing whatever he was being told by Malik Muzaffar Ahmad. He added that Malik Muzaffar Ahmad had told him that if there was any profit he will give share of the same to him; that Rs. 33,00,000 were deposited with the Customs Authorities, Malik Muzaffar Ahmad got executed two stamp papers from him one for Rs. 62,00,000 and the other for Rs. 35,00,000 photo copies of both the stamp papers marked A and B were produced by him. He added that Malik Muzaffar Ahmad had taken back draft of Rs. 15,00,000 and rest of the amount was paid to the persons as directed by Malik Muzaffar Ahmad, and that he was only a show boy of Malik Muzaffar Ahmad, who received the delivery of the machinery from the Customs Authorities direct. Rs. 6,00,000 were paid to Kabarias namely Malik Yousaf to desist them from giving competitive bids. Another pay order of Rs.
8,00,000 was also received back by Malik Muzaffar Ahmad and that no money was paid to customs officials through him. As Kh. Wasim Hameed had made the aforesaid depositions which were in addition to the matter of receiving Rs. 62,00,000. Malik Muzaffar Ahmad was also given an opportunity to make a statement. So statement of Malik Muzaffar Ahmad was also recorded. He inter alia stated that he had given different pay orders as on account of non- fulfilment of deals as initially struck he had received some pay orders however, each time he had been delivering the pay orders, the amount lying with Kh. Wasim Hameed got decreased. He also stated that the pay orders were made initially on one and the same date and those drafts were being returned to him on different dates. Firstly he was returned draft of Rs. 15,00,000 then of Rs. 8,00,000 and then he was asked to deliver the Bank draft of Rs. 4,00,000 which was then delivered by him. According to him the terms of the deal were that Rs. 27,00,000 were to be paid on the very next day on the delivery of the machinery and another instalment of Rs. 5,00,000 was to be paid after delivery of the machinery and balance amount was payable in three equal instalments. He added that Kh. Zubair of Pak Punjab Carpet was named as surety by Kh. Waseem Hameed, respondent No. 4.
I do not feel the necessity to go into the details of the deal which was struck between Kh. Wasim Hameed, respondent No. 4 and Malik Board and Paper Industries, respondent No. 5, in view of the order that I propose to pass in this petition and as a result of that order respondent No. 5 may have to initiate proper proceedings for recovery of the amount, if any, paid to respondent No. 4 under the said deal. It is, however, inferable that respondent No. 5 had knowledge of these auctions all through and it is also surprising that he instead of himself offering the bid put up Kh. Wasim Hameed to make the deal with the Customs Authorities. Be that as it may, the auction held by the Customs Authorities is not sustainable in the I circumstances noted above. It was due to these circumstances j that the learned Deputy Attorney-General conceded on 26th ! October, 1992, that the auction held of the machinery in ! Question cannot be sustainable in law, in view of the fact that B ' the management of the Bahawalpur Board Mills as well as of : the Taj Company Limited under the order of the Company : Judge vested in the Board of Administrators. Neither any reference was made by the Customs Authorities including the Collector Customs to the Board of Administrators nor to the ' High Court (the Company Judge).The plea that in the application dated 12th February, 1992 it was not stated as to what measures were being taken to have the goods released cannot furnish justification for not applying to the Court (Company Judge) for seeking permission to sell the machinery in question. Again in the i.e auctions previously held the highest bid of Rs. 35,01,000 was not accepted but after the sixth auction bid of Rs. 32,00,000 was accepted through private negotiations. In case the private negotiations were to be held the Customs Authorities acting bona i.e should have asked the highest bidder to at least match the highest bid offered at the last auction or joined the highest bidder of the fifth auction in the negotiations.
7. For all the reasons given above, the act of putting the machinery in question in auction for sale, the auction held and the acceptance of the bid of respondent No. 4 are, declared to have been done, held and accepted illegally and unauthorisedly. The effect of the above declaration is that the alleged sale by Kh. Wasim Hameed, respondent No. 4 to Malik Board and Paper Industries (Pvt.)
Ltd. Respondent No. 5 is also declared as unauthorised and ineffective to pass title in the said machinery as respondent No. 5 having admittedly provided the finance was in fact the real party offering the bids and Kh. Wasim Hameed respondent No. 4 was lending his name and was acting for and on behalf of respondent No. 5. However, the question as to what is the liability of Kh. Wasim Hameed respondent No. 4 qua respondent No. 5 is left open to be determined in appropriate proceedings initiated, if any, by the concerned party.
8. The auction having been held to be illegal the machinery which is lying sealed at the premises of respondent No. 5 shall be retrieved and taken possession of by the Collector of Customs in the presence of representatives of the petitioner and respondent No. 5 by preparing a proper inventory and on payment of necessary dues the lame shall be released to the petitioner-company. 0n retrieval of all the machinery sum of Rs.
32,00,000 as has been admitted to be the money provided by respondent No. 5 shall be refunded to it. The writ petition stands disposed of accordingly. The parties are left to bear their own cost.