1994 PLP 403 (CLC)

2. The reason for making this application to this Court is that proceedings instituted by the Registrar of Companies under section 290 of the Companies Ordinance, 1984, are pending in this Court. It may be pointed out that proceedings under section 290 are resorted to when it is complained that affairs of the Company are being conducted in an unlawful or fraudulent manner or in a manner not provided for in, the Memorandum of the Company or in manner oppressive to the members or creditors or are being conducted in manner prejudicial to the public interest. Moreover, sections 410 to 415, which provide for determination of liability, civil and criminal, of the Directors etc. of the Company with a view to recover the ascertained amount of liability, have been made applicable in relation to the application submitted under section 290 of the Ordinance. Such a determination under these sections is to be made in accordance with procedure laid down in section 9 of the Ordinance.

3. The Registrar submitted application/statement of allegations under sections 412, 413 and other provisions of the Companies Ordinance, 1984, for determination and enforcement of civil and criminal liability of some of the working Directors. The liability of four working Directors has been determined after detailed proceedings. Their liability having been determined and on account of non‑payment of the amount so determined, order of detention in civil prison was passed. Ch. Ali Muhammad, Sh. Muhammad Saleem and Ashraf Parvez, three ex‑Directors were arrested pursuant to the detention warrants so issued and are undergoing detention in civil revision. Amjad Hussain Khokhar, ex‑Director, has not yet been shifted to the prison as statedly he stands admitted in a private hospital at Karachi due to heart ailment. He has, however, been taken into custody. These four Directors were also sentenced to suffer simple imprisonment for two years each under section 413 of the Ordinance for fraudulent conduct of business of the Company. This Court in these proceedings which are essentially of summary nature, could take cognizance of offences falling within the purview of section 413, Companies Ordinance, 1984. Other offences alleged to have been B committed by these Directors under the Companies Ordinance as well as under the Pakistan Penal Code of which this Court is not competent to take cognizance, are the subject‑matter of complaints submitted by the Registrar of Companies to the Sessions Judge, Lahore. These complaints require to be pursued and prosecuted diligently so that the accused, if any, on proof thereof are punished properly and adequately.

4. As regards financial affairs of the Company it will be noted that almost all the properties owned by the company were mortgaged with different banks and financial institutions in order to secure loans obtained by the Tai Company or its subsidiaries or by the Companies constituted by friends and relatives of the ex‑Directors. The encumbrances and liens created over these properties for securing loans obtained by companies of friends and relatives have been brought to an end and properties got released. The banks which granted loans were approached with the request to waive off the mark‑up and with the intervention of the then Government, the banks agreed to waive off mark‑up provided the principal amount of loan is paid to them. The principal amount of loan payable is Rs.9,34,20,

381. This amount, however, could not be paid as the properties could not be disposed of. The amount of mark‑up which has been agreed to be waived off in case of payment of principal amount of loan has risen to Rs.5,20,01,

253. It is also pertinent to mention that huge amounts were receivable by the Company for the last many years from its debtors. All‑out efforts were made to recover these debts. The main business of the Company is publication of Holy Qur'an and other religious books. This business of the Company stood suspended when proceedings under section 290 of the Ordinance were filed in this Court. The Press and Sale Depot and other properties of the Company at Karachi had been taken over by the works and the management was not even in a position to enter the premises. This Court not only retrieved the possession from unauthorised hands but also, through the Board of Administrators, commenced its business operations. The printing of Holy Qur'an and religious books was re‑started and the total amount now available with the company in its bank account on account of recoveries as well as sale of its publications stand at 450 lac approximately. By commencement of business operation through working of the printing presses it has been established that the main business of the Company is a profitable business and these operations can be taken over by any intending purchaser safely and with confidence provided the burden of the depositors is off‑loaded. The most unfortunate feature of the past operations of the Company is that the ex‑Management since prior to partition started receiving deposits from members of the public on the promise to pay profit of 18%, 20% or even at the rate of 22%. The more stressing feature is that on taking over of the Company by the Board of Administrators it was found that proper record of these deposits was not available. The Board of Administrators assigned the job of preparation of record to S.M. Masood and Company, Chartered Accountants. The investigation launched and the record prepared and later computerised showed that a sum of Rs.2,55,01,20,754 was the amount of deposits received. If the amount which these depositors have received in the shape of profit for all these years is deducted which comes to Rs.1,20,48,21,137 the amount of deposits net payable would come to Rs.1,34,52,99,617. 6.As against this financial liability towards depositors and Rs.9,34,20,381 payable to banks, the value of the property owned by the company comes to Rs.50,10,00,

000. It is, therefore, apparent that the properties belonging to the Company and its subsidiaries are not sufficient to pay to the creditors their amount even after deducting the amount of profit already received by them. The company stopped paying interest to the depositors in the year 1990. The question of payment of any amount towards satisfaction of these claims at this moment does not arise as the Board of Administrators has not been able to formed any purchaser of the business as well as of the properties of the Company and its subsidiary companies. It may be noted that despite vast publicity costing Rs.40,000 made for sale of Shah Din Building situated at Shahrah‑e‑Quaid‑e Azam, Lahore not a single offer was received. It was because of this situation that the Board of Administrators approached the Bait‑ul‑Mal authorities to take over through purchase its main business, presses and the related properties of the Company. Such proposal has not materialised till date: It may also be mentioned that some renowned business houses and other likely purchasers were also approached for the purpose but these efforts have not been fruitful.

7. The affectees have during the pendency of these proceedings made all efforts to politicise the issue and though some statements expressing sympathies with them were made by personalities in the helm of affairs but no proposal whatsoever has been submitted to this Court. These affectees should realise that politicising the issue is not going to help them. The reason being that the depositors have at best been cheated and the amount advanced by them to the Company has been embezzled. Any person who has been cheated by someone obviously cannot ask the Government to make good the loss or to pay him the amount of which he has been cheated. The plea at best available to them is that the Government should come to their rescue as its agencies failed to take adequate measures to curb fraudulent conduct of business by the Company. The Government should also intervene as these people have been defrauded in the name of Holy Qur'an. These people need relief. The question is what measures can be adopted to extend relief to defrauded people especially orphans, widows and destitute persons. The measures for affording relief to the affectees that can be suggested are as under:‑‑ (1) The main business of the Company i.e. printing and sale of Holy Qur'an and religious books can be taken over by a body to be constituted under the authority of the Government. Funds can be provided from Bait‑ul‑Mal or by constituting a special fund inviting public to contribute to the fund for the sake of continuity of publication of Holy Qur'an and religious books. Shares can be floated for sale at a premium. The business of the Company, as has been indicated above, is a profitable business as profit has been earned by running it with limited resources; (2) Depositors should be paid out of the money so collected after adjusting the amount of interest which they have already received as so‑called profit; (3) Even if new fund is not to be constituted as suggested, new Board of Directors be constituted by the share‑holders with two nominees of the Court/Government to run the business of the Company and to dispose of the properties not needed for running its business of publication and sale of. Holy Qur'an and religious books. The depositors can be paid out of the amount so becoming available; (4) The amount so becoming available can be paid to the depositors by creating priority to the vlaims up to the value of three lacs of rupees or in respect of claims of widows, orphans, persons of old age and destitutes. These claimants/depositors Will have to be paid on pro rata basis depending on the amount available with the Company. Priori in the above manner can only be accorded if suitable amendment in law is made as otherwise the provisions of the Companies Ordinance as they presently stand‑ do not permit making payment on prior basis to orphans. widows etc. (5) Banks can be asked to advance money equal to the sale price of the properties on the security of those very properties and the amount so advanced be made payable after sale of the property; (6) Banks should be requested to waive off loans treating them as bad debts, as the banks must have already provided for such a contingency.

8. This Court cannot afford relief to the affectees unless and until it finds buyers of the properties owned by the Taj Company and its subsidiaries which relief will also have to be limited to the extent of the amount available with it after sale of properties. Obviously pendency these proceedings in no way places any restriction whatsoever on the ‑Government or it authorities to come out with any scheme of relief to the Taj Company affectees. Whatever legal proceedings could be taken by this Court against the ex‑Management have been taken; their liability has been determined and on account of their failure to clear this liability they have been ordered to be detained in civil prison. Keeping in view the facts, circumstances and the law all possible options which the Government can resort to in accordance with law have been indicated. It is now for the Government to choose as to how and in what manner it considers best to help the affectees. Nonetheless if the Government is of the view that these proceedings in any way debar it to act, Registrar of Companies, a Government functionary, who instituted these proceedings, can be instructed to withdraw the same. The application of Muhammad Yousuf stands disposed of accordingly. H.B.T./M‑1219/L Order accordingly.