' This petition under section 305 of the Companies Ordinance, 1984 seeks winding up of the respondent-Company inter alia on the ground of its inability to pay its creditors including the petitioners-Company.
2. It is claimed that the petitioner-Aeroflot Russian International Airlines entered into three agreements for wet leasing of the aircrafts of different kinds. These three agreements are claimed to have been executed on 9-1-1993 and 14-9-1993 under which the aircrafts of different kinds were actually delivered to the respondent-Company on 20-3-1993, April, 1993, 17-9-1993 and 20-9-1993.
According to the petitioner as per para. 6.1.2 of the three leasing agreements the respondent was required to pay leasing charges and additional leasing charges to the petitioner while as per para. 7.1.4 in these agreements the respondent-Company undertook to pay medical expenses of the crew members of these aircrafts. However, according to the petitioner, the respondent failed to fulfil the responsibility. Therefore, per statement of accounts US $ 7,064,181 became payable at the time of filing of the petition. A notice for termination of lease is claimed to have been given on December 21, 1993. However, allegedly even thereafter since the respondent-Company failed to make good payment, the leasing agreements were finally terminated on the night between January 22/23 of 1994. It is also stated that after termination of the lease again a demand for the aforesaid lease money was duly conveyed to the respondent-Company which despite having admitted its liability remained adamant to discharge the same. Accordingly it is claimed that the existing and probable assets of the respondent-Company being grossly insufficient to meet its existing liabilities, it needs to be wound up.
3. The respondent in its written statement challenged the status of the petitioner-Company as also the competency of the alleged attorney to file the winding up proceedings. It is stated that the petitioner cannot seek winding up of the respondent-Company inasmuch as it was a joint venture between the parties and the petitioner-Company which held 49% shares in the respondent- Company was duly represented on the Board of Directors through two nominated Directors. As far the claim of default in payment of release rentals it is stated that lease agreements were executed in terms of clause 31 of the Pre-incorporation Agreement evidencing inter alia the following:- "The Company shall not be charged lease rentals during the first three months of each lease. The first three months lease rent shall be reimbursed to Aeroflot from the Company's revenue during the next six months. Aeroflot will also be bound to provide the best equipment and Aircraft on lease to the Company to ensure break-down and maintenance time. The Board of Directors of the Company may call for a reduction in the lease rentals if the operation of the Company or the market competition require such reduction."
4. It is pleaded that in view of the above clause it was only the Board of the Directors of respondent-Company (which included the two Directors from the petitioner-Company) who were competent to decide if the Company was generating sufficient profits to enable it to pay the lease rentals. It is also stated that the respondent-Company sustained substantial losses due to the prevailing market conditions as also the illegal denial of International Routes to it by the Government of Pakistan. Further that it was for that reason that Board of Directors decided that no lease rentals need be paid and that only running expenses including salaries of the cabin crew should be paid which was actually done. The notice containing demand of the lease rentals and the visit of the head of the Legal Department of the petitioner-Company to Pakistan in that connection is also denied.
5. On the other hand, it is claimed that the gentleman representing the petitioner-Company came to Pakistan only to pressurize for a greater representation of the petitioner Company on the Board of Directors of the respondent-Company. It is claimed that the letter of termination of lease agreement, dated December 21, 1993 was a violation of the lease agreements and in fact the illegal termination had resulted into further losses to the respondent-company. Lastly it is stated that the respondent-Company has substantial claims against the Civil Aviation Authority and the matter still being under consideration at various levels in the Government of Pakistan, respondent- Company cannot be said to be unable to pay its liabilities. In support of the submissions, copies of findings of Board of Review, dated 19-9-1997, a copy of Office Memorandum of the National Assembly Secretariat dated 23-12-1998, another Office Memo. Dated 9th January, 1999 and minutes of the meeting of the Sub-Committee Meeting of PAC, dated 4th March, 1999 are relied upon by the respondent. Reference is also made to some other communications issued by the National Assembly Secretariat and Ministry of Law Justice and Human Rights, Government of Pakistan, dated 21st May, 1999 and 1 1 the May, 1999. It is suggested that the respondent-company has strong case against the Civil Aviation Authority and that its success will not only result in restoration of the licence to operate flights but also payment of substantial funds as damages. It is also claimed that cross claims by Civil Aviation Authority and the respondent-Company being in the process of arbitration, an order of winding up of the respondent-Company may not be made. It is also stated that the revival of licence of the respondent-Company also being under consideration of the Federal Government a winding up order at this stage will hardly be of any help to the petitioner-Company as well as the other creditors as the Company at this time does not own any substantial assets.
6. Heard the learned counsel for the parties.
7. Learned counsel for the respondent claims that in view of the existence of a bona fide dispute between the two companies qua the entitlement of the petitioner to lease rentals the prayer for winding up cannot succeed. In support of his submission that a winding up petition cannot be a substitute for a suit for recovery, learned counsel relies upon re: Satyaranzu v. Guntur Cotton, Jute and Paper Mills Co. Ltd. (AIR 1925 Madras 199) and Ulbrichts we Gas MBH Austria v. Ulbrachts (Pakistan) (Pvt.) Ltd. PLD 1992 Karachi 249).
8. Having heard the learned counsel for the parties I am persuaded to agree that the respondent- Company has not been able to put up a legally acceptable defence to the prayer for winding up.
The execution of three lease agreements has not been denied. The contention that these agreements were controlled by the aforesaid paras. Of pre-incorporation agreement does not find support from the recitals of the three documents nor there appears to be any intention of the petitioner-Company to postpone the rentals for indefinite period. The three agreements contained sufficient details of the lease and the paras. Referred to above certainly support the contention of the petitioner with regard to payment schedule of the leased aircrafts. The legal objection against the competency of the petition and the attorney are also vague and uncertain. The contention that it was a joint venture even if accepted as correct will not make the case of the respondent- Company any better. The two companies being independent legal persons, one may go for the winding up of the other if the conditions given in section 305 of the Companies Ordinance, 1984 are satisfied.
9. From the defence taken up in the written statement and the arguments advanced at the bar, it appears clear that the respondent-Company does owe the aforesaid amount to the petitioner.
Also that no funds sufficient to discharge that liability are available with it. The Company admits and it is supported by the inventory prepared by the Provisional Manager appointed by this Court that total assets of the respondent-Company are too small to be considered sufficient to discharge its liabilities toward the petitioner let alone the other creditors. If optimism qualifies to be taken as assets then the respondent-Company is apparently the most viable enterprise in the Country. After cancellation of its licence and initiation of proceedings by Civil Aviation Authority for recovery of huge amounts, the company made a counter-claim of millions of rupees. It is still hopeful not only to win these millions but also to get the licence restored to enable it to again operate in the country and internationally. The future appears bright to the Company. However, in the given situation and the lapse of intervening period no one can possibly share at optimism.
10. The provisions of section 305 contemplate the ability or otherwise of a Company to pay debt as on the time of filing of the petition. These provisions do not leave any room for optimism that hay days will at last dawn and all financial and other hardships will disappear miraculously. In real world it does not happen so. Even if it does happen after these years no legal or moral rule requires a creditor to wait for the ideal days that the respondent-Company is dreaming about. It is almost admitted that presently the respondent-Company is unable to
11. Therefore, the prayer for winding-up is allowed. The respondent-Company is directed to be wound-up immediately. Mr. Hameed Malik and Mr. Munir Badar, Advocates/official liquidators (appointed on 14-5-1997 on passing of earlier. Order of winding-up which was subsequently set aside by the Hon'ble Supreme Court of Pakistan on 8-12-1998 in Civil Appeal No,1393 of 1997) will proceed to take over the assets as well as the books of the Company and to proceed with the winding-up according to law.
12. To come up on 21-5-2002. revisions by the competent authorities. Therefore, it is advisable to consult the official sources or legal professionals for the most up-to-date and accurate information.