This is a petition under sections 305 and 309 of the Companies Ordinance, 1984 (hereinafter referred to as the Ordinance), for winding up of the respondent company for the main reason that it is unable to pay the debt amounting to Rs,31,747,016 despite issuance of statutory notice under section 306 of the Ordinance calling upon them to pay the amount due and payable by the Company.
2.Precisely the case of the petitioner syndicate is that in terms of a short Term Agreement .Dated 17-10-1989, petitioner advanced a sum of Rs,18.5 million against the issuance of term Finance Certificates by the respondent Company. As against such advance, the petitioners were issued Term Finance Certificates by the Company which as per clause 5.01 shall at all times rank pari passu with each other and shall be treated uniformly in all matters pertaining to them. This amount was redeemable on demand and with profit due thereon up to 31-12-1992 out of the proceeds of the public issue to make the respondent Company a public limited for which approval was accorded by the Controller of Capital Issues vide letter dated 10-4-1991. In the petition it is urged that a statutory notice under section 306 of the Ordinance was set on 23-8-1994, but without any response, hence the petition.
3. In the counter-affidavit, filed on behalf of the respondent Company, various pleas have been raised including the circumstance that for the reasons best known to the State Bank of Pakistan, it came to the conclusions that the finance given to the respondent Company was not utilised for the installation of the machinery which had been locally manufactured. State Bank, therefore, deducted an account of Rs,20,052,403.79 from the Industrial Development Bank of Pakistan, who in turn deducted the same from the respondent Company vide letter by the I.D.B.P. Dated 16-5-1992. It is maintained that this amount was purportedly deducted by the State Bank of Pakistan as penalty on account of the allegation that such machinery was installed at the respondent's project which did not comply with the L.M.M. Scheme. It is maintained that the respondent Company has filed Suit No,93 of 1995 against the I.D.B.P. And State Bank of Pakistan for accounts, specific performance of contract, injunction and damages in the sum of Rs,150,000,000 which is pending decision, but this Court has passed an ad interim order of stay in favour of the respondent being the plaintiff in the aforesaid suit. While the Controller of Capital Issues permitted offer of public issue of shares by the Company, it did not take place for the reason that requisite consent/N.O.Cs. From the respondent's creditors did not come forward. Besides it is urged that the nature of the agreement between the respondent and I.D.B.P. Recognised the necessity of making a public offer of the shares which was prevented by the aforesaid I.D.B.P. And State Bank of Pakistan. It is further pointed out that the petitioner committed breach of the agreement by delaying the payment of investment amount on the days undertaken under the agreement. In fact the petitioner had undertaken to make payment by 1-10-1989 whereas they made first payment to the respondent on 22-4-1990 and the last payment on 23-10-1991 which further delayed the Company from going into a public limited through offer of public shares. The respondent categorically denied the receipt of statutory notice as claimed in the petition and took the position that the petition has been filed mala fide and on wild allegations which have the least support of law and that the respondent Company is functioning smoothly and it has never lost its substratum. Their assets far exceed their liabilities and it cannot be urged that they have been unable to pay the debt due against them.
4.At the hearing Mr. Nizam Ali Khan referred to the copy of the statutory notice sent to the respondent and contended that the said notice having been despatched by registered post is deemed to have been received by the respondent since it was addressed correctly. In law there is a presumption of receipt of a letter sent by post and the presumption is stronger in the case of a letter sent by registered post addressed correctly, but such presumption stands rebutted by statement of the respondent on oath who categorically denied and disputed the receipt of statutory notice, which circumstance is not further rebutted by way of any affidavit-in-rejoinder. In all fairness the petitioner should have produced the Acknowledgment Due Receipt in token of service of the statutory notice, and at least the postal registration receipt evidencing the despatch of notice by registered post, but the same was not done though the petition has been pending in this Court since 17-4-1995.
5. In case the petitioners were serious in their stand that statutory notice was duly served on the respondent Company after the filing of the counter-affidavit, it was incumbent and obligatory upon them either to file an affidavitin-rejoinder, in order to controvert the position taken by the respondent Company, or at least to submit a valid document to show that such notice had been sent by registered post as contended. In the circumstances, I am entitled in law to infer that the notice was not served on the respondent Company. But to my mind, even the non-service of notice on the respondent is of no consequence, as it is directory in nature, and there, are no adverse consequences, in case a notice is either not given, or if given, not served on the debtor. What I am able to understand from the provisions contained in section 306 of the Ordinance with regard to the service of the statutory notice is that, in case such notice is not responded within 30 days, or if the Company has not settled the debt, or compounded the dispute with the creditor, it shall be deemed to be unable to pay the debt on demand and due against it. At any event this circumstance is not at all fatal to the maintainability of the petition itself, which can be heard and decided on its own merits.
6. On merits it is urged on behalf of the respondent that the statements of account evidencing the debt amount of Rs,31,747,016 have not been filed. In fact it is not so. Mr. Nizam Ali Khan has rightly pointed out clause 2.02(i) which reads as under:-- "2.02(i) The Company has agreed to purchase the Investment Property from the Syndicate for a sum of Rs,31,747,016 (Rupees thirty one million seven hundred forty seven thousand and sixteen only) (hereinafter referred to as the 'Purchase Price') which amount shall be paid by the Company to the Members in the following proportion on or before 31-12-1992 or earlier in lump sum out of the proceeds of public issue, if such issue is made before the aforesaid date:-- ICP Rs,7,931,754 NBP Rs,5,953,814 HBL Rs,5,953,814 UBL Rs,5,953,814 MCBRs,3,570,292 ABL Rs,2,383,528 Rs,31,747,016
7. No doubt, there is a stipulation that this amount was payable by the Company by 31-12-1992 or earlier, but it is conditioned by the clause that such amount shall be paid out of the proceeds of public issue if made before the aforesaid date. Obviously the respondent was prevented by circumstances narrated above from offering public issue for subscription with the result that they were not in a position to pay up this amount out of the proceeds of the public issue as stipulated in the aforesaid clause.
8.As to the financial soundness, and health of the Company/respondent, it has been stated on oath that during the period of 11 months i,e, from 7-1-1996 to 7-11-1996 after the filing of this petition they have paid a sum of Rs,3,127,676 to the Government of Pakistan by way of income tax, a sum of Rs,13,249,486 to the Federal Government during a period of five months from 18-7-1996 to 19-12- 1996 towards sales tax. Besides, they have also made payment of electricity charges during the period from 21-3-1996 till 19-12-1996 i,e, nine months a sum of Rs,2,056,911.54 to the K.E.S.C. And thus the total payment of income tax, sales tax and electricity charges comes to Rs,18,434,073. This statement is supported by copies of the tax payment receipts, and challans deposited in the National Bank of Pakistan and have not been rebutted so far. In the face of this assertion and on the basis of such unequivocal statement of the respondent, the assets and properties of the respondent Company far exceed its liabilities and it is difficult to subscribe to the view that the respondent Company is unable to pay its debt which could not be paid for the circumstances beyond their control as explained hereinabove.
9.In my view there is a clear distinction between 'inability of a company to pay and 'refusal to pay a debt'. In the present case a plausible defence is made out, explaining the circumstances for which the respondent was unable to pay the amount due within the stipulated period and it cannot be said that it has lost its liquidity or that it is commercially insolvent so as to be wound up. The spirit of law is to encourage and save the institutions rather than to destroy them by winding up orders.
In the circumstances, I am convinced that no case is made out for winding up of the Company, and it is neither just, nor convenient to direct winding up.
The petition is accordingly dismissed.