' Petitioners who are the consortium of Development Financial Istitutions and commercial banks seek an order for winding up of the respondents company under the provisions of sections 305 and 309 of the Companies Ordinance, 1984 (hereinafter referred to as Ordinance) in the following circumstances:
2. Respondents are a public limited company registered under the Ordinance, in 1984 in terms of conditions as contained in the investment agreement and underwriting-cum-investment agreement both, dated 21-10-1984 executed between the parties. Respondents obtained a local currency loan of Rs,34,00,000 and Rs,33,60,000 at the guaranteed rate of profit at 17% per annum together with the value of Praticipation Term Certificates (PTCs) payable in half-yearly instalments.
The amounts invested by the petitioners have been incorporated in paragraphs 4 (a) and (b) of the petition. For due performance of the terms and conditions of the loan agreement, respondents company executed a trust-deed, dated 28-1-1985 for securing the Syndicate Investment duly registered with the Assistant Registrar, Joint Stock Companies on the same date. Under Schedule 2 of the said trust-deed, respondents created mortgage, first charge and first floating charge mentioned therein on all the present and future assets of the company to secure the loan which was duly registered. According to the petitioners, the investments were repayable in fixed instalments on specified dates as mentioned in Schedule-I and Schedule-H appended to the agreement, dated 21-10-1984. According to these schedules instalments were payable to the petitioners with effect from 30-12-1987 and last instalment was payable on 30-6-1994. It is further the case of the petitioners that the respondents agreed to pay half-yearly profits at the rate of 8- 1/2% in case of default in the repayment of investments or any instalment thereof from due dates.
As the respondents despite repeated 'demands failed and neglected to pay instalments on due dates with the result that on 3-8-1993 they were served with a legal notice under section 306 of the Ordinance calling upon them to pay outstanding amount as on 30-6-1993 within fifteen days but without any response, hence this petition. According to the petitioners, total liability outstanding against the respondents as on 30-6-1993 comes to Rs,69,50,976.42. The grounds for winding-up the company are (1) inability to pay its debts; (2) in view of heavy financial liabilities substratum of the respondents company seems to have disappeared; (3) respondents have violated the terms and conditions of the loan agreement and trust-deed and suppressed the material facts with ulterior motives; (4) that there is no likelihood of the assets and properties of the company being saved except by an order of winding-up and lasatly (5) that it is just and equitable to wind-up the company.
3. Respondents company filed a counter-affidavit to the petition stating that the petitioners are not the creditors whether secured or otherwise and that the company is not indebted to them in any manner. While admitting agreements Annexures "B" and "C" to the petition, it is the case of the respondents that the petitioners have made an investment of redeemable capital in the company on profit and loss sharing basis. They have admitted entitlement of the petitioners to profit of 17% but only in the event of profits made by the company in a financial year. They have denied all other allegations and the loan agreement.
4. At the hearing, it was contended that though the company was required to start its commercial production within one year of its incorporation, commercial production did not take place till 1-1- 1987 which amounts to violation of the provisions of the Ordinance. This fact has not been disputed but it is said that the company in the initial stage of its commencement had to face a number of snags with the result that commercial production was delayed. It was next contended that the company did not issue annual report and no copy was sent to the petitioners but the respondents counsel pointed out copies of the annual reports filed in Court for the years 1988 to 1993 stating that copies were in fact sent to the petitioners/DFIS.
5. Mr. Anwar Muhammad Khan, learned counsel for the petitioners laid much emphasis on non- payment of the instalments by the company to the petitioners as undertaken in the agreement of investment but learned counsel for respondents is of the view that the petitioners having joined the company as investors on profit and loss basis, these instalments were payable only after two years of the commencement of commercial production. There is no warrant for this proposition as the agreement on the face of it does not support the view expressed at the Bar by the learned counsel.
Assuming for the sake of argument that the respondents company suffered losses and was unable to pay profits as undertaken in para. 2.03 of the agreement. It is admitted in the annual report for the year 1988 that in fact the company had earned profits which admittedly were not distributed and no payment was made to the petitioners. Clause (b) of the para. 2.03 lays down that the company shall at the end of each half-year, provisionally pay to each PTC holder within thirty days of the close of its half-yearly accounts, 50% of the profit agreed to in clause (a) i,e,, at the rate of 7-1/2%. In case the payment is not made within thirty days as above, the payment shall be made without claiming the rebate i,e,, at the rate of 8-1/2%. This half-yearly payment shall be adjusted against the profit annually payable on the PTCs. In the event of the company undergoing any loss or making reduced profits after finalization of the annual account, the PTC holders shall refund the provisional payment of profits made as above or any portion thereof. Obviously and admittedly no payment of profits was made by the company to the petitioners as well as other shareholders. Learned counsel for the respondents company further referred to para. 2.04 dealing with the losses incurred by the company in any accounting year. This para. Says that in the event of the company undergoing loss in any accounting year under the provision of para. 2.03 shall not apply but (a) the losses occasioned will first be adjusted against the existing reserves, if any; (b) PTC holders shall share after adjustment in clause (a), the balance loss in the same proportion as their outstanding PTCs have with the paid-up capital of the company; (c) after having determined the proportion of loss to be shared by PTC holders, the company shall reduce the outstanding amount of PTCs of the nearest maturity or maturities by the amount of such loss and shall issue within ninety days of the close of its financial year allotment letters in respect of convertible shares in favour of PTC holders of such lace value as is equal to the amount of loss shared by them; (d) company shall issue convertible share certificates to respective PTC holders in lieu of allotment letters already issued within ninety days from issue of allotment letters or maximum 180 days from close of its financial year. These convertible shares shall rank pari passu with the ordinary shares in all respects including voting rights, rights of transfer, right of subscription for right issues and bonus shares.
6. In the face of unequivocal terms employed in para. 2.03 reference to para. 2.04 is totally uncalled for. The following para. Shall apply only in the event of company suffering losses and even in that event company is required to issue convertible shares to its respective shareholders which were admittedly not issued in the case in hand. b. It was admitted at the Bar that the company earned profits in the accounting year 1991 also but the profits were not distributed among the shareholders including the petitioners for the reason that in the preceding years company suffered losses. Be that as it may, the facts and circumstances clearly indicate that the company has failed to pay its debts to the creditors. In the circumstances, I am of the considered view that the affairs of the company cannot be run as required by mandatory provisions of the Ordinance. It is, therefore, just and equitable to direct winding-up of the company, which is ordered accordingly. Official Assignee is appointed as Official Liquidator to take over the affairs of the company.