JAWWAD S. KHAWAJA, J.~ On 24.6.1998 Sunshine Cloth Ltd., was ordered to be wound up by the Court. During the course of the winding up proceedings the assets of the Company (In Liquidation) were sold. One sueding machine and one washing/bleaching/dyeing machine which National Development Leasing Corporation (NDLC) had bought from and leased back to the Company were also sold by the Joint Official Liquidators alongwith the assets of the Company. The sale of these two machines, it appears, was effected with the concurrence of NDLC which claims entitlement to the proceeds of the sale of the said machines.
2. This application has been moved by Muslim Commercial Bank Limited (MCB) which claims that it is exclusively entitled to the sale proceeds arising from the sale of the aforesaid two machines. The Bank's claim is asserted on the basis that it held an exclusive charge over the said machines, It has also been asserted by MCB that the sale and lease back agreement executed between the Company and NDLC is ineffectual and void as the same was against the terms of the charge documents whereby a security interest was created in favour of MCB over all assets of the Company including the two machines referred to above.
3. NLDC has disputed the claim of MCB to the sale proceeds arising from the sale of the machines in question. In addition to the dispute as to the merits of MCB's claim, NDLC has also raised a preliminary objection to the maintainability of the present application on the ground that this Court, in winding up proceedings, is not vested with jurisdiction to decide the dispute between MCB and NDLC. It has, firstly, been asserted on behalf of NDLC that the machines referred to above were sold by the Company to NDLC much before the commencement of the winding up proceedings and, as such, were not the property of the Company at the time of the commencement of the winding up proceedings. The controversy, according to NDLC, is between MCB and NDLC and does not involve any subsisting right or interest of the Company in the said machines.
4. It has also been asserted on behalf of NDLC that NDLC has obtained a decree dated 3.2.1998 from this Court against the Company (In Liquidation) which entitles NDLC to sell the said machines in satisfaction of the aforesaid decree. The effect of the aforesaid decree, it is urged, cannot be nullified in the present proceedings, It has, thirdly, been argued on behalf of NDLC that the Liquidators had accepted NDLC's claim regarding the two machines in question while MCB did not challenge such decision.
5. It is clear from the competing claims of MCB and NDLC noted above that the dispute between them relates, in essence, to their respective civil rights inters and does not involve the company in any legally material way.
6. Initially, on a previous date of hearing, learned counsel for MCB had argued that this Court could exercise jurisdiction in determining the aforesaid dispute between MCB and NDLC under the provisions of Section 391 of the Companies Ordinance. The relevant provisions of Section 391 read as under:-- "The liquidator or any contributory of creditor may apply to the Court:--
(a) to determine any question arising in the winding up of a company: or
(b) ........................................ "
7. Learned counsel for NDLC had, in response, drawn the attention of the Court to section 383 of the Companies Ordinance which provides that Sections 384 to 395 shall only apply to a voluntary winding up of a Company whether by members or creditors of such Company. The winding up of Sunshine Cloth Ltd., as noted above, is by the Court, It is, therefore, clear that the provisions of Section 391 have no application to these proceedings.
8. In the circumstances, learned counsel for MCB had sought time to examine the law further, on the question of this Court's jurisdiction to decide the dispute which the said Bank has with NDLC.
Today learned counsel has referred to the provisions of Sections 316 and 333 of the Companies Ordinance and while doing so has urged the Court to construe the said statutory provisions in a broad and liberal manner to enable it to assume jurisdiction in the matter, In order to appreciate the submissions of learned counsel for MCB, it would be useful to reproduce and examine the relevant parts of Sections 316 and 333 of the Companies Ordinance which read as under:-- "316. Suits stayed on winding up order:-
(1) ..................................................
(2) The Court which is winding up the Company shall, notwithstanding anything contained in any law for the time being in force, have jurisdiction to entertain, or dispose of, any suit or proceeding by or against the Company.
(3) Any suit or proceeding by or against the Company which is pending in any Court other than that in which the winding up of the Company is proceeding may, notwithstanding anything contained in any other law for the time being in force, be transferred to and disposed of by the Court."
"333. Power of Official Liquidator.-- (1) The liquidator in a winding up by the Court shall have power, with the sanction either of the Court or of the committee of inspection:-
(a) ...........................................................
(b) ................................................
(c) .....................................
(d) to make any compromise or arrangement with creditors or persons claiming to be creditors, or having or alleging themselves to have any claim, present or future, certain or contingent, ascertained or sounding only in damages against the company, or whereby the company may be rendered liable;
(e) to compromise all calls and liabilities to calls, debts and liabilities capable of resulting in debts, and all claims, present or future, certain or contingent, ascertained or sounding only in damages, subsisting or supposed to subsist between the company and a contributory or alleged contributory or other debtor or person apprehending liability to the company, and all . Questions in any way relating to or affecting the assets or the winding up of the company, on such terms as may be agreed, and take any security for the discharge of any such calls, debt, liability or claim and give a complete discharge in respect thereof."
9. Sub-sections (2) and (3) of Section 316 reproduced above are clear and unambiguous. This Court would have the jurisdiction to decide any suit or proceeding by or against a Company (In Liquidation). Likewise, any such suit or proceeding, which may be pending before any other Court, may be transferred to and disposed of by this Court in winding up proceedings. However, the condition precedent to the exercise of jurisdiction by this Court in subsections (2) and (3) of Section 316 of the Companies Ordinance, is that the suit or proceeding would have to be either by or against the Company (In Liquidation). Where the dispute is between third party contestants inter se, as in the present case, this Court would not have jurisdiction in the matter. I am not in any doubt that the dispute in the present case is between MCB on the one hand and the NDLC on the other.
The Company has no take in the said dispute and is at most a peripheral player having divested itself of title in the machines. The mere fact that the Company had created a charge (the validity and enforceability of which is disputed by NDLC) over the machines while it held title to the same, does not make the Company a disputant. This is also clear from the fact that the Company neither disputes the sale favouring NDLC nor does it deny execution of the charge documents in favour of MCB. Learned counsel for MCB himself, realizing the weakness of his contention, did not argue the same with a lot of vigour.
10. He did, however, press into service the provisions of Section 33(1 )(e) of the Companies Ordinance, In particular, he pointed out that the words "and all questions in any way relating to or affecting the assets or winding up of the Company" which had been used in the law, should be liberally construed in order to enable this Court to decide disputes between third parties, including competing creditors, laying claim to the sale proceeds of the assets of a Company being wound up. This argument of learned counsel for MCB. I am afraid, is devoid of merit. Firstly, it does not take account of the context in which the aforesaid words have been used, It is clear from a bare reading of clause (e) of sub-section (1) of section 333 that the words relied upon by learned counsel relate to calls and debts between the Company, its debtors and contributories. The said wording cannot, on any principle of statutory interpretation, be taken out of the context in which it has been placed.
Secondly, it is to be noted that if at all the legislature had intended matters such as the present contention between MCB and NDLC to be resolved by a liquidator, it would have made express provision in Section 33 for such purpose or may, to better effect, have included such matters within the ambit of Clause (d) of sub-section (1) of Section 333 of the Ordinance. This having not been done, it is not for this Court to interpret Section 333 in a manner which goes against the apparent legislative intend. Thirdly, in my opinion, a liquidator of a Company can have no power to determine the competing civil rights of two creditors inter se, of a Company being wound up. Such matter squarely falls within the domain of a competent Civil Court whose jurisdiction can only be taken away by express and unambiguous statutory provisions. No such provisions have been referred to by learned counsel for MCB.
11. While responding to the arguments of learned counsel for MCB, it was contended by learned counsel for NDLC that the mere fact that provisions similar to Section 391 of the Companies Ordinance, had not been incorporated in the relevant Chapter relating to the winding up of Companies by the Court, was a clear manifestation of the legislative intent that disputes between competing creditors, as in the present case, fell outside the jurisdiction of this Court. This argument has much merit. If indeed the legislature had intended to invest this Court with jurisdiction in such matter, a provision similar to Section 391 of the Ordinance could have been included in the Chapter of the Ordinance relating to the winding up of companies by the court.
12. The objection to the jurisdiction of this Court raised on behalf of NDLC is also supported by case- law cited by learned counsel for NDLC. He referred to the case titled Nawab Shah Electric Supply Company Ltd. Vs. Hariram S. Ahuja and others (AIR 1947 Sindh 31) and to the case titled Sree Krishan Jute Mills Ltd. Mothey Krishna Rao (AIR 1947 Madras 322) to advance his plea. I have gone through the cited precedents and note that the same do support the argument that this Court lacks jurisdiction to adjudicate the present contention between MCB and NDLC.
13. Learned counsel for NDLC submitted that the intention of the legislature could be gathered from other related provisions of the law also. He. Argued that even disputes arising between a Company being wound up and a third party relating to title and civil rights, fell within the jurisdiction of the ordinary Civil Courts, In support of this argument, he referred to the case titled Hansraj and others Vs. Official Liquidators, Dehra Dun Musoorie Electric Tramway^Go. Ltd. (AIR 1929 Allahabad 353) in which the provisions of the Companies Act, 1913. Corresponding to the provisions of the Companies Ordinance, 1 984 have been interpreted. The argument of learned counsel for NDLC is well-founded and finds support in the precedent case cited by him.
14. Additionally, even from the provisions of subsections (2) and (3) of Section 316 of the Companies Ordinance, it is clear that suits by or against Companies which are being wound up by the Court, fall within the jurisdiction of the Courts of ordinary jurisdiction although this Court can choose to invoke the aforesaid statutory provision to decide such disputes itself.
15. For the reasons discussed above, I find that this Court, in the present proceedings while exercising special jurisdiction under the Companies Ordinance, has no jurisdiction to decide the present dispute between MCB and NDLC. This application is, therefore, dismissed.
C.M. 369/2001
16. This C.M. Is also dismissed for the reasons set out in the order of even date passed in C.M. No. 370/2001.
For MCB: Nauman Akram Raja, Advocate.
For the Respondent: Tariq Ramai Qazi, Advocate.
Muhammad Aslam Nagi, Advocate/Official Liquidator.
Report No. 26.
JAWWAD S. KHAWAJA, J.- Learned counsel for M.C.B, states that an amount of approximately Rs.
87,0, 000/- is lying with the liquidators after the satisfaction of all claims against the company. He therefore, contend that the said amount be ordered to be released to M.C.B.
2. In response, the learned liquidator points out that there were certain claimants such as WAPDA and other Government departments. However, by means of order dated 28.5.2001 such claimants have been held not to be entitled to any preference over the claims of M.C.M. The learned liquidator states that some of the concerned creditors such as WAPDA and the Sales Tax Department have preferred appeals against the said order which are pending adjudication, In this view of the matter, he states that the amount available with the liquidators may only be paid to M.C.B, upon M.C.B, furnishing reasonable security and/or undertaking assuring the return of the said amount if the order dated 28.5.2001 is set aside resulting in the claims of WAPDA and the Sales Tax Department being allowed.
3. The liquidator and M.C.B, should, therefore, come to some arrangement as to the undertaking and/or security to be furnished to the Court by M.C.B, to secure the eventuality where M.C.B, might have to repay some amount received by it in the winding up of the company (in Liquidation).
4. Relist on 14.1.2002.