' This is a winding up petition filed by one of the shareholders prayer for the winding up of the respondent No,1 Company. According to the facts stated in the petition and subsequent pleadings, the respondent No,1 Company was incorporated on 30-9-1995 with a capital of Rs,1,000,000 divided into 10,000 shares of Rs,100 each. The principal object of the Company was to carry on the business of manufacturers, vendors and dealers in articles made from plastic abonite, celluloid and other materials etc. Article 36 of the Articles of Association of the Company shows the petitioner, respondents Nos.2 to 4 and one Allauddin (since deceased) as the fast Directors of the Company.
The petitioner and the deceased Allauddin are stated to be real brotheRs, The petitioner has contended that on the death of his brother Allauddin (who was the Managing Director of the Company at the time of his death) he was appointed as the Managing Director of the Company with effect from 3-8-1993. The petitioner further contends that he as well as his brother were the Managing Director on paper only and Mr. Sirajuddin (respondent No,3) was actually running the Company as the de fecto Managing Director and hence the petitioner instead of being the Managing Director was not being associated with the affairs of the Company.
2. The petitioner has also raised various allegations of diversion of funds and mismanagement of the Company. The petition also states that the Company is making losses and is unable to pay its debts and has not declared any dividend for the last nine yeaRs,
3. In the reply statement the respondents have denied all the allegations raised in the petition. The respondents contend that the present petition is a counterblast to Suit No,409 of 1996 pending on the Original Side of this Court. They have further contended that the petitioner has been all along associated with the management of the Company and have also levelled counter-allegations of misappropriation of funds by the petitioner as well as his son. Mr. Raisuddin who was once employed with the Company and is also a share-holder to the extent of 50 shares.
4. The petitioner filed a rejoinder affidavit to the reply statement filed by the respondents refusing the counter-allegations. In this rejoinder the petitioner, for the first time, stated that he is illiterate and can only affix his signatures in English and cannot read or write in English language. This was the basis of his further contention that he was always signing the documents without understanding them.
5. The petitioner and the respondents have raised various allegations and counter-allegations against each other by way of affidavits, counter-affidavits and affidavits-in-rejoinder, however, none of the parties have opted to cross-examine the other.
6. I have heard the learned counsel for the parties at length and have perused the case-law relied upon at the bar. In my view the only question for determination in this petition is whether the petitioner has been able to establish that the Company can be wound up on any of the grounds enumerated in section 305 of the Companies Ordinance, 1984.
7. The grounds raised in the petition relate to Clause (e) and sub-clauses (iii) through (v) of Clause
(f) of section 305. Furthermore it is to be considered as to whether it would be just and equitable to wind up the Company in the circumstances of the case.
8. Clause (e) of section 305 relates to the inability of the Company to pay its debts. The petitioner has not been able to place any material on record to show the Company's inability to pay its debts except a bare allegation in the petition. The current liabilities (at the relevant time) as shown in the balance sheet of the Company have been relied upon by the petitioner to raise the allegation.
However, neither the petition nor the Balance-Sheet shows that any liabilities are over due or that any of the creditors have initiated any proceedings for the recovery of such dues. Habib Bank Limited, which is shown as the largest creditor, of the Company has entered appearance in the proceedings but has not supported the allegations of the petitioner. Instead a letter dated April 23, 1996 from Habib Bank Limited was placed on record by the respondents, which shows that the running finance limit of the Company has been renewed.
9. The petitioner has also alleged that the Company owes substantial amounts as contribution to the Employees Provident Fund. The Employees Union has moved an application being C.M. A.
No,2587 of 1997 for impleading the same as a party which was disallowed vide order dated 4- 61998. A perusal of the application however, clearly shows that the Employees Union opposed the winding up of the Company in un-equivocal terms and did not express any anxiety as to the Provident Fund dues.
10. The respondents have contended that the Company is a going concern and its assets far exceed its liabilities. The respondents have also filed a number of documents including its latest balance sheet to establish this fact as well as to show that the Company is a going concern.
11. The learned counsel for the petitioner, during the course of his arguments, has relied upon a number of case-laws reported as well as un-reported to establish that it is the commercial insolvency of a company which is the determining factor of its inability to pay its debts and not its fixed assets. The reliance has been placed by the learned counsel on the cases of Messrs Platinum Insurance Company Limited, Karachi v. Daewoo Corporation, Shaikhupura PLD 1999 SC 1; Habib Bank Limited v. Hamza Board Mills Limited and others PLD 1996 Lah. 633; PICIC v. Messrs Indus Steel Pipe Limited 1993 MLD 94; Tripura Administration v. Tripura State Bank Limited AIR 1959 Tripura 41; Re Tweed Garages Ltd. 1962 All ER 121; and an unreported judgment passed by my learned brother Mushtaq Ahmed Memon, J. In PICIC v. Electric Lamp Manufacturers of Pakistan Limited JM No,3 of 1993.
12. The learned counsel for the respondents on the other hand relies upon almost same number of case-law to establish that petitioner has been unable to show that the company is commercially insolvent or has been unable to pay its debt and the present petition cannot be allowed since the same is a device to force the Company and its share-holders to yield to the demands of the petitioner. ##TE# The learned counsel has relied upon the cases of Pakistan Industrial Credit and Investment Corporation Ltd. v. Bawany Industries PLD 1998 Kar. 45 Muzaffar Abbas Malik and 2 others v. Messrs Pakistan PVC Ltd. PLD 1998 Kar. 71; United Bank Limited v. Golden Textile Mills Limited PLD 1998 Kar. 330; Messrs Metito Arabia Industries Limited v. Messrs Gammon (Pakistan) Limited 1997 CLC 230; Investment Corporation of Pakistan v. Messrs Charagh un Engineering Limited PLD 1997 Kar. 504; Hamza Board Mills case, supra Messrs Central Cotton Mills Limited v. Gulzar Ahmed and 8 others PLD 1992 Kar. 29; MRs, Sabiha Shahid Raza v. Ahmed Construction Company (Pvt.) Ltd.
PLD 1990 Kar.
191.
13. In my view, in the absence of any material on record and any support from the creditors of the Company the petitioner's allegation with regard to the Company cannot be wound up on this ground.
14. The next contention of the petitioner is that the respondents Nos.2 to 4, in collusion with each other, have mismanaged the affairs of the Company causing losses to the Company and have used the funds of the Company for their own benefit. The petitioner has also contended that he is being excluded from the management of the Company and hence being oppressed.
15. The learned counsel for the petitioner has argued that the Company was established from its beginning was being run as a partnership and hence the principles for the dissolution of partnership should be applied in the present case for the winding up of the Company. He further contends that relations between the share-holders have become embittered and strained and it is therefore not possible to conduct the business of the Company in accordance with law and to the benefit of the share-holdeRs, In support of his arguments the learned counsel for the petitioner has relied upon the cases of Ladli Parsad Jaiswal v. The Kanal Distillery Ltd. PLD 1965 SC 221; Muhammad Shabbir Khan and others v. Muhammad Anwar 1988 CLC 1955; Messrs Nagina Limited v. Usman Hussain and others 1987 CLC 2263 and Mansoor Ali Bandeali v. Narine Food Industries Limited 1985 CLC 1239.
16. The respondents have refused all the allegations of the petitioner in their reply statement as well as subsequent pleading filed by them. The respondents contended that petitioner was always associated with the management and have never raised any objection. Furthermore the petitioner has also remained the Managing Director of the Company and has been signing the Balance- Sheets of the Company during his tenure as such. The respondents have vehemently denied the petitioner's contention that he is an illiterate person and have contended that he is a literate person and has been employed with the All India Radio before the Independence of Pakistan and afterwards has been a teacher. The petitioner has denied this assertion of the respondents.
17. The learned counsel for the respondent has argued that the respondent No,1 is a limited Company and has to be managed in accordance with the mandate of the majority and a mere disagreement of minority share-holder with the majority does not warrant winding up of the Company. The learned counsel further submits that there has been no violation of the provisions of law or the memorandum and articles of association of the Company and the parawise comments filed by the Joint Registrar of the Companies confirm this position. In support of this proposition the learned counsel has placed reliance on the cases of Feroz-ud-Din and 6 others v Pakistan Hotel Developers Limited and 7 others PLD 1996 Kar. 300; in Re Alliance Motors (Pvt.) Limited 1996 CLC 525; Ulbricht's Wsw. GES M.B.H., Austria v. Ulbricht's (Pakistan) (Pvt.) Limited PLD 1992 Kar. 249; Manzoor Ali Bandeali, supra; Rajahumndry Electric Supply Corporation Ltd. v. A Nageshwara Rao and others AIR 1965 SC 213; in Re Sulekha Works Ltd AIR 1965 Cal. 98 and in Re Cine Industries and Recording Co.
Ltd. AIR 1942 Bombay 231.
18. It is the burden of the petitioner to substantiate its allegations by reliable evidence in order to shift the burden on to the respondents to controvert the petitioner's assertions. As observed earlier, the parties have remained contended to raise allegations and counter-allegations none of the parties have chosen to cross-examine various persons swearing affidavits raising such allegations and counter-allegations. In my view therefore, the petitioner has been unable to make out a case for winding up of the Company in terms of sub-clause (iii) through (v) of clause (f) of section 305.
19. Finally it is to be seen as to whether it is just and equitable, in the circumstances of the case, to wind up the Company.
20. The petitioner is the single largest share-holder holding 3117 shares which constitute approximately 31% of the total paid up capital of the Company comprising 10,000 shares. The rest of the shares are held by 30 other share-holders (including the petitioner's son) and their share holding range from 25 shares of 1081 shares. None of these share-holders has supported the winding up of the Company instead a majority of them have filed affidavits showing their satisfaction with the management of the Company and have opposed the winding up of the Company. None of the creditors as observed above, have come up to support the present petition.
21. The petitioner has alleged that the Company has not declared any dividend for nine years preceding the filing of the petition. The respondents, with their reply statement have filed a statement of losses and profits of the Company from its inception till 1996, which has not been controverted by the petitioner. This statement clearly shows that during this span of 40 years the Company has been consistently making profits with the exception of 9 yeaRs, Out of these 9 years, for 3 years the petitioner's brother (late Allauddin) was the Managing Director and in one year the petitioner himself was the Managing Dfrector. During this period neither the petitioner nor any of the other share-holders, have ever raised a complaint on any forum with regard to the management of the Company. Furthermore the respondents have stated that the losses during 1993-95 occurred on account of law and order situation in the city which seems plausible since it is public knowledge that during this time the city was paralyzed with strikes for most part of the year.
A perusal of the latest balance sheets placed on record by the Company shows that the Company has reduced its losses to a considerable extent and have been carrying on its business and paying its dues as well as the salaries and bonus to the staff.
22. As far the declaration of dividends, the same is in the discretion of the Board of Directors and in the circumstances of the present case there is nothing on the record to show that such discretion was not properly exercised.
23. The other allegations levelled by the parties only show that the relations between the parties are not congenial and nothing more. The cause seems to be filing of Suit No,409 of 1996 and removal of the petitioner from the Managing Directorship of the Company 1 would refrain from giving any observations with regard to the filing of Suit No,409 of 1996 as the same would be decided on its own merits. As far the Managing Directorship the petitioner has no vested right to remain the Chief Executive of the Company and it appears from the record that various share- holders have been holding this position in relations. In any case if the petitioner had any grievance as to holding of the general meeting or the Board of Directors meeting and other procedural requirements attached thereto, then the curative remedies were available to him under the Companies Ordinance, 1984. The petitioner's filing of the winding up petition instead of the appropriate alternative remedies available strengthens the respondent's contention that the present petition has been filed as a counter-blast to the aforesaid suit and hence not bona fide.
24. Furthermore, the petitioner, having been a Director and share-holder of the Company was always in a position to raise his voice or initiate other appropriate proceedings against plea of being illustrate even if accepted, does not support his contention of being ignorant all along as he has not disclosed any special source of information which only now enlightened him of all the fact stated in various pleadings filed by him.
25. The case-law relied upon by the petitioner's counsel does not apply in the present case on account of the distinguishing features of the circumstances of each case and hence of no help to the petitioner.
26. It would also be pertinent to mention here that section 320 of the Companies Ordinance, 1984 requires this Court to have regard to the wishes of the creditors and contributors in all matters relating to the winding upon a Company. In the present case none of the creditors and share- holders (other than the petitioner himself) has supported the winding up petition. The petitioner had initially relied upon a letter from one of the share-holders namely, Muhammad Swal been showing his dissatisfaction regarding the management of the Company. The said share-holder, however, disowned the aforesaid letter and opposed the winding up petition through his affidavit filed in this Court. I find it difficult to prefer the wishes of one share-holder as opposed to the remaining share-holders having an overwhelming majority of nearly 69%.
27. To conclude it would not be just equitable in the present case to wind up the Company and accordingly the present petition is dismissed and all interim orders shall stand vacated. The parties shall bear their won costs.