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Judicial Miscellaneous No.45 of 1974, decided on 29th March, 1987.

‑‑‑S. 243‑‑Winding up of company‑‑Application praying that order of winding up passed by Court either be stayed absolutely or recalled and rescinded‑‑Petitioner who was unsecured creditor of the company and at whose instance winding up commenced was paid his claim in full and thus he was not keen to pursue case any further‑‑Income‑tax Department was also paid its dues in full‑‑Only secured creditor of company also entered into compromise with the company which provided for settlement of their claim against company to the satisfaction of all concerned‑‑Shareholders and contributories offered to place at the disposal of Official Liquidator adequate amount to meet 100 claim of preferential and unsecured creditors of company and offered to deposit in cash the claim of salaries/dues of the Staff and Workers of the Company and fee claimed by the Official Liquidator‑‑All these circumstances, held, fully justify for passing of an order by the Court which should have the effect of restoring the company in the position in which it was before the commencement of winding up.

‑‑‑S. 243‑‑Sind Chief Court Rules (O.S.), Rr. 928 & 935‑‑Recalling of order of winding up of company by Court‑‑Applicant had made out a strong case for recalling of order of winding up which was supported by Official Liquidator and secured creditors of company‑‑Court has power to recall and undo the order of winding up of a company, where winding up proceedings were not yet concluded and stage for declaring company as dissolved had not yet arrived.

The winding up of a company is to proceed in accordance with the provisions contained in Part V of the Act VII of 1913. Part V commences with section 155 and ends with section 247 ibid. A careful examination of the provisions contained in Part V (sections 155 to 247) will show that the ultimate result of the winding of proceedings is the dissolution of the company and until such time the company is dissolved, the winding up does not terminate or come to an end. The above conclusions also find support from Rules 928 and 935 of the Original Side Rules framed by Sind High Court under the Old Companies Act and which are applicable to winding up proceedings.

The Court is possessed of the power to declare the dissolution of a company as void within a period of 2 years of the date of dissolution either on an application of the liquidator of the company or of any other person who appears to the Court to be interested in such order on such terms and conditions as may appear to the Court to be fit. In the present case the winding up proceedings are still not concluded and the stage for declaring the company as dissolved has not yet arrived. If the Court can declare the order of dissolution of company as void within a period of two years of declaring it as dissolved, there is no reason why it cannot recall an order of winding up in an appropriate case which is a stage anterior to the dissolution of the Company.

Liaquat Merchant for Appellant.

Hassan A. Shaikh for Respondent.

Dates of hearing: 29th March, 1987.

The Contributories and the Shareholders of the company have filed this application under section 173 of the Old Companies Act, 1913 read with section 319/320 of the Companies Ordinance, 1984 with the prayer that the order of winding up passed by this Court in the above petition on 7‑4‑1975 may either be stayed absolutely and or in the alternative the same may be recalled and rescinded. It may be stated here that the above petition for winding up of the company, was presented by Messrs Consolidated Export Limited, an unsecured creditor of the company on the ground that the company is unable to pay its debts. The order for winding up was made on 7‑4‑1975 and the Official Assignee was appointed as the Official Liquidator. In the year 1979 an application was made on behalf of the Company for its revival and reconstruction but it was dismissed. Thereafter, in the year 1981 another application was submitted in the Court with a prayer to stay the proceedings of winding up in order to call a meeting of the Shareholders and Contributories of the company to ascertain their wishes with regard to a scheme for revival of Company which was submitted to the Court for approval. The Court on the above application stayed the winding up proceedings for a period of 3 months to enable the Shareholders and Contributories to hold the proposed meeting. Accordingly a meeting of the shareholders, creditors and contributories of the company was held on 31‑8‑1982 in which the scheme prepared for the reconstruction of the company was approved by them. Thereafter this scheme was placed in the Court for approval and by order dated 2‑6‑1984 the Court sanctioned it and the winding up proceedings were stayed for a period of two years subject to the following conditions:‑------

(a) That the applicants /shareholders shall satisfy the dues of the petitioners with interest at 10% per annum from the date of filing of petition till payment out of their own funds.

(b) Official Liquidator shall act as receiver of respondent company for a period of two years.

(c) Amount of Rs.24,15,677 claimed by the Income Tax Department shall be paid by the Official Liquidator/ Receiver subject to right of appeal or other proceedings if any by the Official Liquidator or Habib Bank Limited.

(d) Excise duty will be paid before commencement of business according to law.

(e) Production of books of the respondent‑company before the Official Liquidator and assistance in preparation of the statement of affairs of the company."

Learned counsel for the shareholders and contributories as well as the Official Liquidator state that the first 3 conditions of the above order have been complied in full. However, with regard to condition No.4 the Official Liquidator states that this claim falls in the category of the unsecured creditor and is to be dealt with alongside the claims of other unsecured creditors which he has already received in the case. With regard to the last condition of the order, dated 2‑6‑1984, the Official Liquidator states that it has not been complied with so far. The learned counsel for the shareholder and contributories states that the reasons for non‑compliance of this condition was solely the prolonged illness of the Ex‑Managing Director of the company. However, in the present circumstances and in view of the prayer made in the present application non‑compliance of this last condition is not of any significance in the case. Mr. Hassan A. Shaikh, learned counsel for the only secured creditor of the company namely, Messrs Habib Bank Limited, states that his client has no objection to the grant of the above application provided as agreed between the company and Habib Bank Limited a sum of Rs. one crore and seventy‑five lacs is paid to them and upon payment of that amount Habib Bank undertakes to release all the properties of the company including the shares of the shareholders from the charge/ mortgage. The learned counsel for the shareholders and contributories has made the following proposal in Court for settlement of the claim of secured and unsecured creditors of the company including a claim of salary/dues of workers and staff of company amounting to Rs.3,66,000 and a further sum of Rs.2,89,000 claimed by the Official Liquidator towards his fee:‑---

(i) That the shareholders and contributories of the company shall pay unconditionally a sum of Rs.1,75,00,000 to Messrs Habib Bank Limited (secured creditor) in full and final settlement of their claim, and upon payment of this amount Habib Bank Limited will release all the properties of the company which are under mortgage/charge including the shares of the shareholders and the contributories pledged with them.

(ii) That the shareholders and contributories shall deposit unconditionally with the 0/L the following amounts:

(a) Rs.3,66,000 for payment to the workers and staff of the Company.

(b) Rs.2,89,000 towards the fee of the 0/L in the above case.

(iii) That the shareholders and contributories will provide unconditional bank guarantee in favour of 0/L in the sum of Rs.86 lacs for the purposes of making 100% payment to the preferential and unsecured creditors of the company and if after such payments to preferential and unsecured creditors there is any residue out of the amount of Rs. 86 lacs the same may be refunded to the Company.

The Official Liquidator makes a statement before me that the amount of Rs.86 lacs agreed to be provided by the shareholders and the contributories of the company is quite sufficient to meet 100 claim of the excise duty mentioned in condition No.4 of order, dated 2‑6‑1984 and the preferential and unsecured claims of the creditors of the Company received by him in response to the notice issued under rule 858 of the Original Side Rules framed under the Companies Act. The Official Liquidator also states that the total claim of salaries and dues of the staff of Company and his fee in the case comes to Rs.3,66,000 and Rs.2,89,000 respectively. From the above‑stated facts it is quite clear that the petitioner who was an unsecured creditor of the Company and at whose instance the winding up commenced has been paid his claim in full with 10 interest from the date of winding up petition and as such he is not keen to pursue the case any further. The Income Tax Department has been paid their dues in full. The only secured creditor of the Company namely Messrs Habib Bank Limited has also entered into a compromise with the Company which provides for settlement of their claim against the Company to the satisfaction of all concerned. The shareholders and contributories have offered to place at the disposal of O/L adequate amount to meet 100% claim of preferential and unsecured creditors of the Company. They have also offered to deposit in cash the claim of salaries/dues of the staff and workers of the Company and the fee claimed by the Official Liquidator in the case. The above‑stated facts and circumstances fully justify for passing of an order by the Court which should have the effect of restoring the Company in the position in which it was before the commencement of the winding up. The only point which now remains to be considered is whether the Court is possessed of power to recall and undo the order of winding up made by it in such circumstances. To my mind the answer to it is provided sufficiently by section 243 of the Old Companies Act of 1913, which reads as follows:‑---

"243. (1) Where a company has been dissolved, the Court may at any time within two years of the date of the dissolution, on an application being made for the purpose by the liquidator of the company or by any other person who appears to the Court to be interested, make an order, upon such terms as the Court thinks fit, declaring the dissolution to have been void, and thereupon such proceedings may be taken as might have been taken if the company had not been dissolved.

(2) It shall be the duty of the person on whose application the order was made, within twenty‑one days after the making of the order, to file with the Registrar a certified copy of the order, and if that person fails so to do, he shall be liable to a fine not exceeding fifty rupees for every day during which the default continues."

It will be seen that the winding up of a Company is to proceed in accordance with the provisions contained in Part V of the Old Act. Part V commences with section 155 and end with section 247 ibid. A careful examination of the provisions contained in Part V (sections 155 to 247) will show that the ultimate result of the winding of proceedings is the dissolution of the company and until such time the company is dissolved, the winding up does not terminate or come to an end. The above conclusions also find support from Rules 928 and 935 of the Original Side Rules framed by Sind High Court under the Old Companies Act and which are applicable to winding up proceedings. These rules reads as under:‑---

"928. The winding up of a company shall for the purposes of section 244 of the Act be deemed to be concluded‑‑--

(a) in the case of a winding up by the Court, at the date on which the order dissolving the company has been reported by the Official Liquidator to the Registrar of Joint Stock Companies under section 194 (2) of the Act;

(b) in the case of a voluntary winding up or a winding up subject to the supervision of the Court, at the date on which the company shall be deemed to be dissolved under section 208‑E or 209‑H of the Act provided that if at such date there are undistributed funds of the company in the hands or under the control of the Official Liquidator, the winding up shall not be deemed to be concluded until such funds have been distributed or properly disposed of."

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"935...Upon termination of the proceedings for winding up of a company the Official Liquidator shall file his final accounts into Court. Upon such final accounts being passed in accordance with the provisions of this Chapter and after payment in the manner provided in the next rule of the balance in his hands as certified by the officer who passed the accounts, the Official Liquidator may apply for direction as to dissolution."

It is quite clear from reading of section 243 of the Act that the Court is possessed of the power to declare the dissolution of a company as void within a period of 2 years of the date of dissolution either on an application of the liquidator of the company or of any other person who appears to the Court to be interested in such order on such terms and condition as may appear to the Court to be fit. In the case before me 'the winding up proceedings are still not concluded and the stage for declaring the company as dissolved has not yet arrived. If the Court can declare the order of dissolution of company as void within a period of two years of declaring it as dissolved, there is no reason why it cannot recall an order of winding in an appropriate case which. is stage anterior to the dissolution of the Company. In the case before, I on facts the applicants have made out a strong case for recalling of the order of winding up which is supported by the Official Liquidator as well as the secured creditor of the company. I therefore, pass the following conditional order in the case:--

That within six months of the date of the order the applicants shall:

(i) Pay to Habib Bank (the secured creditor) a sum of Rs.1,75,00,000 in full and final settlement of their claim and upon payment of this amount all the assets of the Company including the shares of the shareholders shall stand released from the charge/mortgage in favour of Habib Bank Limited by the Company;

(ii) That the applicant shall deposit in Court in cash with the Official Liquidator a sum of Rs.3,66,000 towards the claim of salaries and dues of the staff and workers of the Company;

(iii) That the applicant shall also deposit in cash a sum of Rs.2,89,000 towards the fee of Official Liquidator, and

(iv) That the applicants shall provide an unconditional bank guarantee in favour of Official Liquidator in the sum of Rs.86 lacs out of which the Official shall pay in full the claim of preferential and unsecured creditors of the company after due verification of their claim in accordance with the law and after such payment if there is any residue the same shall be restored to the Applicants/ Company.

That upon fulfilment of the above‑stated conditions by the applicant the order of winding up of the Company passed on 7‑4‑1975 shall stand rescinded/ recalled and the applicants will be entitled to notify accordingly to the Registrar of Joint Stock Company. In the event of failure on the part of applicant to fulfil all or any of the above‑mentioned conditions, the winding up shall proceed and concluded as required by law.

M.B.A/C‑7/K Order accordingly.

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