Civil Miscellaneous Nos.447/L, 621/L, 439/L and 622/L of 2000 This order shall dispose of the Civil Miscellaneous aforenoted for common controversy is involved therein and even otherwise these applications are supplementary to each other. The first application to point of time (Civil .Miscellaneous No.447-L of 2000) has been filed under section 319 of the Companies Ordinance, 1984 by Messrs Johar Industries (Private) Limited with the prayer that the winding up order in regard to the company under liquidation, dated 22-2-1999 be withdrawn and revoked and the scheme or rehabilitation through restructuring and change of management as offered by the contributories be implemented. The second application (Civil Miscellaneous No.621-L of 2000) under section 338(5) of the Companies Ordinance read with rule 3 of the Companies Court Rules, 1997 has been tiled by the contributories alongwith an affidavit from Mr. Naeem--ud-Din Qamar Sahaf, Director Messrs Johar Industries (Private) Limited with the prayer that the sale and order, dated 2-5-2000 be recalled and set aside.
The petitions afore-noted have been resisted by almost all ,the creditors as also the JOLs.
2. The relevant facts for the disposal of above-said petitions are that Messrs Shahdin Limited (hereinafter referred to as company) was sought to be wound up initially by Messrs PICIC, the petitioner in C.O. No.23 of 1996 and subsequently by Messrs National Bank of Pakistan in C.O. No.64 of 1996. The company was ultimately wound up vide order, dated 22-2-1999, resultantly, the JOLs assumed the charge of the assets and properties of the company and proceeded to sell the same under the orders of the Court. Public notices were issued in the Daily "DAWN" and "JANG" thereby inviting bids for the purchase of the company. Consequent thereupon, report No.7 was submitted by the JOLs thereby reporting that 8 persons were interested to buy the assets of the company whereafter a spree was started whereby opportunities were given to the competing bidders to match their bids before the Court as well as before the JOLs and finally a bid of the amount of Rs.16.25 million as offered by Mir Afzal Khan Afridi, was accepted and approved on 2-5-2000: Needless to add that all concerned agreed to the sale price as offered by the bidders.
3. At the stage afore-noted Messrs Johar Industries (Private) Limited (hereinafter referred to as applicant) tiled first application under section 319 of the Companies Ordinance, 1984 thereby praying that the winding up order, dated 22-2-1996 be withdrawn and revoked and simultaneously offered a scheme for rehabilitation through restructuring and change of management which was sought to be implemented under the orders of the Court. It was submitted that the assets and properties of the company have been sold for a paltry sum, which is not enough to meet the claims of the creditors and the applicant, who are creditors, share-holders/contributories of the company have succeeded in locating an investor who is prepared, willing and able to take the assets of the company for a total consideration of Rs.120 million, the split up of which was also enumerated in that it was submitted that the said investor is prepared to make down payment of Rs.18 million and the balance payment over the next 10 years in 20 equal by-annual instalments. It was then submitted that scheme of restructuring through change of management and ownership is in the best interest of all concerned as is obvious from the very fact that the down payment being offered by the application is more than the accepted and approved price for the sale of the company.
The above-said application was pending awaiting determination and realising that in consequence of the winding up order, sale has also been approved and confirmed, the applicant filed another application thereby praying setting aside of the sale order as also the order approving the sale, dated 2-5-2000 on the ground of irregularities. It was maintained that the sale in pursuance of the advertisement having not been approved, a fresh date for public auction should have been settled rather than to hold a restricted auction in the chambers of the JOLs and in the open Court, thus, the entire proceedings culminating into sale were vitiated. The price as accepted by the Court was termed to be grossly inadequate. The principle underlying the phrase Custodia legis was, invoked to submit that due care and caution had not been taken inasmuch as the interests of the creditors as also that of the contributories were not properly protected.
Alongwith the applications certain ancillary prayers were also made which form subject-matter of C.M. No.441 and 622-L-2000.
4. The applications afore-referred were resisted by the creditors as also the liquidators, who inter alia maintained that from the bare reading of the contents of applicant's first application, it is obvious that the contributories or the share-holders have not come forward to make any offer rather than it is some third party who has allegedly come to help the share-holders/ contributories in reviving the unit. It was submitted that the credentials of this third party are neither disclosed nor known and that the Directors failed to furnish statement of affairs as required under section 328 of the Companies Ordinance, 1984. Even no record was made available or could be found by the liquidators. The stock registers were also not available so as to known as to what was the original machinery installed at the mill premises and to verify that the same is still available or not; the contributories did not come forward to help the JOLs in locating the assets and properties of the company and that his non-cooperative attitude is enough to decline the offer being made by the applicant. It was then asserted that the sale of the assets and properties of the company was duly advertised but nobody came forward to object thereto nor the alleged contributories have participated thereto and that the sale having been confirmed and approved by the Court, the same could not be set at naught by suggesting or offering a restructuring scheme by the contributories muchless by a third party. The purchaser also filed a separate reply thereby submitting that the winding up petition was pending, since 1996 but the winding up order was passed in the year 1999 and that the sale was confirmed thereafter while important parts of the machinery installed at the mill premises were found missing and that all precautions were taken by the JOLs as well as the Court before approving the sale and if the application of the kind is accepted, it would definitely frustrate the purpose of administration of justice. All in all, the offer as contained in the original application as also supplementary application were termed to be mala tide, illegal and not sustainable.
5. I have heard the learned counsel for the parties at some length. It would be noted that the down payment being offered by the applicant is only marginally above the sale price accepted by the Court. The balance amount is offered to be paid within 10 years and that too in by-annual instalments. It would be discernible from the package offered by the applicant that on making the down payment, the possession of the mill shall be handed over to the applicant, who would virtually then accommodate certain third parties alongwith him. What would be the relationship between the third parties and the applicant is really not understandable nor it has been disclosed in the application tiled in this behalf. Interestingly enough, it has not been disclosed as to who is the person who has come to invest that amount and then what would be the working relationship between him and the applicant. The Directors of the company did not furnish statement of affairs nor any record of the company was made available to the JOLs. Needless to add that probably an application under section 410 of the Companies Ordinance is also pending in regard to the allegation that certain parts of the machinery were removed by the Directors/contributories. The winding up order of the company was accepted by the contributories without any demur and in spite of advertisement in the newspapers they did not raise even a little finger and having acquiesced in the proceedings being taken by the JOLs for the sale of assets and properties of the company did not object to the same until after the sale had been confirmed by the Court. The concept of judicial sales has remained subject7matter in the various judgments passed by the various Courts and in the case of Hudaybia Textile Mills Ltd. And others v. Allied Bank of Pakistan Ltd.
And others PLD 1987 SC 512, it was held as under-- "Though the Court was vested with the wide discretion to choose any mode of execution of the decree, it however, cannot refuse confirmation of sale on any ground it chooses is without substance. Judicial discretion vested by statutory provisions cannot be construed in such a manner as it will arm the Court with arbitrary powers and would inevitably destroy the public confidence in the stability of the judicial sales. The Court would be. Wrong in refusing confirmation on the ground that after the sale the decree-had been satisfied. Even otherwise once the Court had made up its mind to execute the decree by attachment and sale by public auction, as long as the order so directing was in the field, the discretion vesting in it Under section 8(3) of the Ordinance stood exhausted and a particular course of proceedings was brought into motion which had to culminate in a result contemplated by legal principles, and this course could not 'be diverted on the assumption that the executing Court had discretion to choose any mode of execution In the premises the question of confirmation was to be regulated either by the, C.P.C. Or equitable principles under the provisions thereof or on general principles." .
It was a case where the decree holders and the judgment-debtors compromised with each other but in the meanwhile the sale of the attached property had taken place when it was argued that the sale may not be confirmed because the decree-holders and the judgment-debtors have settled their dispute yet it was observed that if such a plea is accepted it would tend to destroy the public confidence in the stability of judicial sales. The observation is one of wisdom and must always be kept in mind for the proceedings of the judicial sales are held under the umbrella of the Court inasmuch as the total steps taken towards such a sale are so taken under the orders passed by the Court, therefore, the concept of stability of judicial sales is nothing but the sanctity attached to the commitment of the Court.
6. In the instant case the alleged contributories/share-holders have come forward with a proposal which too is to be fulfilled by a third party and on the strength thereof they are seeking to stall the winding up proceedings as also setting aside of the judicial sale which is neither legal nor justified.
As far the argument that the proposed offer would not only help the creditors but also be beneficial for the contributories/share-holders, suffice it to observe here that apart from the two contracting parties, in the matter of judicial sales, the interest of public at large and commercial morality is also to be considered for if the sale is to be set aside simply on the basis of better offer, it would give leverage to all the contracting parties in the country to proceed to annul or rescind their commitments if they get better offer than the one settled/accepted by them. This would definitely lead to absurd results inasmuch as it would tend to develop a culture in the mind of a common man that if the judicial sale can be set aside on receiving a better offer why cannot a common man refuse to abide by his commitments if a better offer is received by him. It is, thus, reasonable to conclude that one should remain bound by his commitment be it a case of common man or a Court. Again, the Courts are meant to enforce the contracts and see to it that the parties remain bound by their commitments unless there be a case of exception, therefore, the adjudicator, who enforces the contract between the parties should also remain bound by its commitments and that is spirit behind the judicial sales. Additionally, the judicial sales should carry with them the concept and notion of firm commitments for it is not only to see the benefit of the creditors but also whether the rescission or annulment thereof will be conducive or detrimental to commercial morality and to the interest of public at large. The Court while processing a sale or confirm the same is expected to act as a prudent common man/commercial person. Viewed from whatever angle, I am not persuaded to set at naught the total proceedings culminating in the judicial sale.
7. Learned counsel for the applicant tried in vain to distinguish the judgment rendered in the case of Hudaybia Textile Mills Ltd. And others noted (supra) and had also submitted some case-law whereby the sales were set aside on the ground of irregularities committed during the proceedings thereof. In amplification of his argument, he submitted that the proceedings of the sale were not conducted in a transparent manner inasmuch as the competing bidders were allowed to match their bids in the chambers of the JOLs or in the open Court while, according to him, the bid having not been approved, the sale should have been ordered to be re-advertised for it must always be conducted by way of an open auction rather than restricted auction. This argument has not impressed me. It is matter of record which forms subject-matter of Report No.7 of the JOLs that 8 bidders offered their bids in relation to the assets of the company. The two bidders, who approached the Court evinced intention to match their bids. They were allowed to do so but then the highest bid was not acceptable to the major creditor namely PICK, who wanted to obtain instructions from its headquarters. It was on the adjourned date that the highest bid was accepted by the representative of the PICIC who also happened to be the Joint Official Liquidator. The whole process, to my mind, was transparent and in continuation of the advertisement, therefore, it could not be maintained that the sale was concluded by way of restricted auction in the chambers or in the Court. The bidders having offered their bid in response to the advertisement continued to compete with each other till such time that one of the bid was accepted by the JOLs and approved by the Court. The objections are, therefore, repelled.
8. In result, the main applications (Civil Miscellaneous No.447 and 621-L of 2000) alongwith ancillary applications (Civil Miscellaneous Nds.437 and 622-L of 2001) are hereby dismissed.