1. TANVIR AHMED KHAN, J.---This appeal with leave of the Court is directed against the order dated 15-4-1993 passed by a learned Division Bench of the High Court of Sindh, Karachi, whereby H.C.A.
2. No,5 of 1993 filed by the appellant under section 10(2) of the Companies Ordinance, 1984 (hereinafter referred to as the Ordinance), was dismissed maintaining the order dated 2-11-1992 of the learned Company Judge dismissing the appellant/Es application for recalling the order dated 11-12-1991 for encashment of Bank guarantee furnished by it. The facts briefly stated are that respondent No,1, Pakistan Industrial Credit and Investment Corporation Limited (PICIC), extended a credit facility to respondent No,2 on the basis of purchase and sale agreement dated 29-6-1986 whereby respondent No,1 purchased the machinery from the supplier at the contract price of Rs,1,41,00,000 and respondent No,2 agreed to purchase the said machinery from PICIC for Rs,2,20,71,000 in accordance with the terms of the aforesaid agreement, whereunder repayment was to be made in 27 quarterly instalments commencing from 1-10-1986.
3. Respondent No,2, as a security to the aforesaid credit facility granted by respondent No,1, deposited certain documents with the latter. The appellant issued investment bank guarantee at the asking of respondent No, 2 in favour of PICIC on 15-6-1986. The original period of this guarantee was twelve months. However, it was extended from time to time and remained in force up to 16-6-1990. Respondent No,1 PICIC filed a petition for winding-up under sections 305 and 309 of the Ordinance bearing No, J. Miscellaneous Application 41 of 1990 in the High Court of Sindh at Karachi. A learned Single Judge through his order dated 5-12-1990 accepted the petition with a direction to the official liquidator to take charge of the affairs of the company. In view of these proceedings respondent No,1 PICIC sent to the official liquidator respondent No,2 on 3-8-1991 the investment bank guarantee and other share certificates for their enforcement. The official liquidator filed a reference on 12-9- 1991. The learned Single Judge through an order dated 11-12-1991 directed that the official liquidator should sell the shares in the stock market and get the bank guarantee encashed. With these observations the reference filed by the official liquidator/assignee was disposed of. The appellant filed a petition for review of the earlier order dated 11-12-1991 whereby direction for encashment of Bank guarantee was made. A further argument was advanced that since the investment guarantee was extended up to 16-6-1990, as such there was no valid and binding guarantee on 11-12-1991 the day the learned Judge passed the order, therefore, the impugned direction for its encashment could not have been made. The learned Company Judge through a detailed order dated 2-11-1992 rejected this plea and maintained his earlier order passed on 11-12-1991. The appellant filed an appeal assailing the aforesaid order, which has been dismissed by a learned Division Bench of the High Court of Sindh through the order dated 15-4-1993, impugned herein. Hence, this appeal with leave of the Court.
4. We have considered the contentions raised by the learned counsel for the parties and have perused the entire documents placed on record with their assistance. The leave in this case was granted on 1-8-1993 to consider, whether the official liquidator should have lodged the claim under the Bank guarantee up to 16-6-1990 i,e, the last extended validity date or he should have encashed the Bank guarantee on 11-12-1991 when the learned Company Judge accepted the official liquidator's reference. There are three parties as envisaged by section 126 of the Contract Act in a contract of guarantee i,e, the creditor the surety and the principal-debtor. In the case in hand, PICIC is the creditor while the Bank guarantee was provided by the United Bank Limited, the surety in the present case. This guarantee has been executed for the benefit of respondent No,2, Fazal Vanaspati Limited, now under liquidation. The essence of the guarantee is that the guarantor has agreed to discharge the liability of the debtor if the latter fails in performing his liability. It all depends upon the terms of the guarantee. The guarantor cannot be made liable beyond the terms of his guarantee. Whatever the guarantor has undertaken, the same has to be performed. Admittedly the guarantee was executed by the appellant-Bank, the satisfaction of the same cannot be avoided on mere technicalities.
5. Prudential Commercial Bank Limited v. Hydari Ghee Industries Limited and others (1999 MDD 1694). To appreciate the controversy between the parties, it would be appropriate to reproduce the relevant portion of the bank guarantee executed on 15-6-1986 which is in the following terms:-- "(iii)In order to ensure that the funds required to be invested by the borrower in the project will be forthcoming without any hindrance or delay, you have required to borrowers either actually to raise their paid-up capital up to the stipulated level or to furnish a bank guarantee in respect of the said requirement or a part thereof.
(iv) The borrowers have to raise their paid-up capital to the extent of Rs,6.750 million and they have requested us to furnish a guarantee that the amount of Rs,6.750 million will be duly paid-up in the capital of the borrowers, and we as bankers of the borrowers have agreed to furnish such a guarantee. Now, therefore, we do hereby guarantee that borrowers shall as and when required by you and in any case, within twelve months from the date hereof further raise their paid-up capital to Rs,6.750 million and in the event of failure on their part to comply therewith within the stipulated time we do hereby agree and undertake to deposit an amount of Rs,6.750 million with you on the expiry of the period of twelve months from the date hereof without further reference from you and as and when demanded by you for subscription in the capital of the borrowers and investment in the project, provided that the amount of our liability hereunder will stand reduced to the extent the borrowers raise their paid-up capital as aforesaid. We do hereby further agree that you may without notice to us grant time and/or other indulgence to the borrowers without affecting the liability hereby created."
6. The liability of the guarantor depends on the language of the guarantee. The terms of the guarantee would demonstrate how far the guarantor has bound itself to indemnify the creditor.
7. The guarantee may be absolute or conditional. The latter may be dependent on the performance of a condition by either party within the terms of the guarantee. A reading of the aforementioned terms of the guarantee demonstrates that the same was executed on 15-6-1986 by the appellant. It is reflected from the perusal thereof that the appellant had undertaken to pay an amount of Rs,6.750 million to the creditor i,e, PICIC. According to the terms of the guarantee if the borrower fails to raise capital within the stipulated period, in that eventuality, the appellant is duty bound to pay a sum of Rs,6,750 million. No condition whatsoever was attached for the performance of the creditor before making a demand. We have also noticed that this guarantee was extended from time to time. The first extension was accorded by the appellant on 14-6-1987 which is in the following terms:-- "Our Bank Guarantee No, ALR/142/86 dated 15-6-1986 for Rs,6,750,000 favouring yourselves on behalf of M/s. Fazal Vanaspati Limited. At the request of M/s. Fazal Vanaspati Limited, Karachi, we, United Bank Limited, Al-Rehman Branch, Karachi, do hereby extend validity of our captioned Bank Guarantee up to 15-6-1988. All other terms and conditions of the guarantee will remain unchanged." The second and third extensions in similar terms respectively were allowed by the appellant on 14- 6-987 and 15-6-1988. The last extension granted by the appellant was to expire on 16-6-1990. The time limit was for the borrower and the PICIC could demand at any time. It was the borrower who had to raise the capital. On his failure to liquidate his liability, the appellant was to provide the amount according to the terms of the bank guarantee. There is no evidence on record that the borrower had raised the capital as envisaged in the bank guarantee. Throughout this period the borrower did not raise capital. There is nothing in the bank guarantee which the creditor i,e, PICIC has to perform before making the demand. The time limit in the guarantee was for the borrower to raise the capital within the stipulated period, failure whereof has given unconditional right to the PICIC for encashment of bank guarantee. The outer limit of 16-6-1990 after third extension was for the company i,e, respondent No,2. There being no time limit for the PICIC, as such the direction given by the Company Judge cannot be frustrated on that score The other ground that separate suits should have been filed for encashment of bank guarantee and the learned Company Judge had no jurisdiction to order for the encashment of the same in liquidation proceedings is devoid of any force. Section 316 of the Ordinance has given the Company Judge overriding powers for disposing of any matter germane to the winding-up proceedings. The principal object of winding-up of a company is to realize its property and its liabilities are discharged in accordance with law. The official liquidator who is an officer of the Court is appointed by the Company Judge who looks after and supervises the interests of all the parties concerned in a liquidation of a company. He is a trustee not only for the creditor but for the company under liquidation as well. He has to safeguard the interests of all the parties for the efficient performance of his duties. He is to take possession of movable and immovable properties of the company. Section 333 of the Ordinance has given wide powers to the official liquidator which are exercised by him under the supervision of Company Judge who has been authorised to issue such directions. Section 333 of the Ordinance reads, as under:--.
8. "333. Powers 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) to institute or defend any suit, action, prosecution or other legal proceeding, civil or criminal in the name and on behalf of the company;
(b) to carry on the business of the company so far as may be necessary for the beneficial winding- up thereof;
(c) to pay any classes of creditors in full;
(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 damaging 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;
(f) to sell the movable and immovable property and things in action of the company by public auction or private contract, with power to transfer the whole thereof to any person or company or to sell the same in parcels.
(2) Subject to any general or special direction of the Court or of the committee of inspection, the liquidator in winding-up by the Court shall have power--
(a) to do all acts and to execute, in the name and on behalf of the company, all deeds, receipts and other documents and for that purpose to use, when necessary, the company's seal;
(b) to prove, rank and claim in the bankruptcy, insolvency or sequestration of any contributory for any balance against his estate, and to receive dividends in the bankruptcy, insolvency or sequestration in respect of that balance, as a separate debt due from the bankrupt or insolvent, and rateably with the other separate creditors;
(c) to draw, accept, make and endorse any bill of exchange or promissory note in the name and on behalf of the company, with the same effect with respect to the liability of the company as if the bill or note had been drawn, accepted, made or endorsed by or on behalf of the company in the course of its business;
(d) to raise on the security of the assets of the company any money requisite;
(e) to take out in his official name letters of administration to any decreased contributory and to do in his official name any other act necessary for obtaining payment of any money due from a contributory or his estate which cannot be conveniently done in the name of the company and in all such cases the money due shall, for the purposes of enabling the liquidator to take out the letters of administration or recover the money, be deemed to be due to the liquidator himself;
(f) to appoint an agent to do any business which the liquidator is unable to do himself; and
(g) to do all such other acts and things as may be necessary for winding-up the affairs of the company and distributing its assets.
(3) The exercise by the liquidator in a winding-up by Court of the powers conferred by this section shall be subject to the control of the Court, and any creditor or contributory or the register may apply to the Court with respect to any exercise or proposed exercise of any of the said powers."
9. A reading of above section brings us to an irresistible conclusion that the official liquidator has got ample powers to take steps for the efficient winding-up of the company so as to create a balance among the interest of the parties according to law and the rules. Reference in this regard is made to Discount Bank of India Ltd., Delhi v. Triloki Nath and others (AIR 1953 Punjab 145) wherein the duties/functions of official liquidator are mentioned in the following terms:-- "In a winding-up the liquidator acts not merely for creditors but for contributories and for the company also. A liquidator is an agent employed for the purpose of winding-up of the company. In some respects he is a trustee; but he is not a trustee for each individual creditor; see -- 'Knowles v.
10. Scott', (1891) 1 Ch. 717 at p.723. His principal duties are to take possession of assets, to make out the requisite lists of contributories and of creditors, to have disputed cases adjudicated upon, to realize the assets subject to the control of the Court in certain matters and to apply the proceeds in payment of the company debts and liabilities in due course of administration, and, having done that, to divide the surplus amongst the contributories and to adjust their rights. According to Palmer's Company Law, page 414, any proceedings necessary for the protection of the property are taken by the liquidator in the name of the company, unless the Court has made a vesting order, in which case he can sue in his official name in respect of property vested in him by the order. Under section 179, he can institute or defend any suit with the sanction of the Court and he can take any other legal proceedings, civil or criminal, also with such sanction." Since in this case the bank guarantee was got executed for the benefit of the company under liquidation by the appellant, as such the same cannot be frustrated by putting up technicalities so as to thwart the efficient performance of the liquidator. What is permissible for the Courts of general jurisdiction in the interest of justice, fair play and equity when there is no statutory bar, is also permissible for the Company Judge so as to spare the parties from the ordeal of rushing from one forum to another for the redressal of their grievance. It has been held time and again that all legal formalities are to safeguard the paramount interest of justice. In the present case pushing the creditor for the encashment of bank guarantee through a civil suit would simply be generating multiplicity of litigation which is not the mandate of law. The guarantor in this case particularly the bank cannot avoid its liability on all these technicalities. Reference in this regard is made to Manager, Jammu and Kashmir, State Property in Pakistan v. Khuda Yar and another (PLD 1975 SC 678) where the learned Judges of this Court stated that mere technicalities unless offering insurmountable hurdle should not be allowed to defeat the ends of justice. They reiterated the earlier observations made by learned Judge, Kaikaus, J., in Imtiaz Ahmad v. Ghulam Ali (PLD 1963 SC 382) which are as under:-- "I must confess that having dealt with technicalities for more than forty years, out of which thirty years are at the Bar, I do not feel much impressed with them. I think the proper place of procedure in any system of administration of justice is to help and not to thwart the grant to the people of their rights. All technicalities have to be avoided unless it be essential to comply with them on ground of public policy. The English system of administration of justice on which our own is based may be to a certain extent technical but we are not to take from that system its defect. Any system which by giving effect to the form and not to the substance defects substantive rights is defective to that extent. The ideal must always be a system that, gives to every person what is his."
11. Apart from this, the plea of jurisdiction was not raised by the appellant as the appellant fully participated in the proceedings. Now it would be too late in the day to turn round and to say that the Company Judge did not have the jurisdiction in the matter. Reference in this regard is made to Ghulam Mohi-ud-Din v. Chief Settlement Commissioner (Pakistan), Lahore and others (PLD 1964 SC 875) where it was held as under:- "The principle upon which the writ is refused in such cases is not that jurisdiction has been conferred on the Tribunal concerned by waiver and acquiescence but, that even though the impugned order is without jurisdiction the person seeking to have it quashed should not be granted that discretionary relief as he had stood by and allowed the Tribunal to usurp a jurisdiction which it did not possess knowing that the Tribunal concerned was committing such an illegality in consequence of something done by that person himself." Resultantly, for what has been stated above, the instant appeal being without any force is hereby dismissed. However, there will be no order as to costs.