1986 PLP 2933 (CLC)

(iv) an unregistered company shall, for the purposes of this Act, be deemed to be unable to pay its debts‑‑ (a) if a creditor, by assignment or otherwise, to whom the company is indebited in a sum exceeding five hundred rupees then due has served on the company, by leaving at its principal place of business, or by delivering to the secretary, or some director, manager or principal officer of the company, or by otherwise serving in such manner as the Court may approve or direct, a demand under his hand requiring the company to pay the sum so due, and the company has for three weeks after the service of the demand neglected to pay the sum or to secure or compound for it to the satisfaction of the creditor; (b) if any suit or other legal proceeding has been instituted against any debt member for any or demand due, or claimed to be due from the company or from him in his character of member And notice in writing of the institution of the suit or other legal proceeding having been served on the company by leaving the same at its principal place of business or by delivering it to the secretary, or some director, manager or principal officer of the company or by otherwise serving the same in such manner as the Court may approve or direct, the company has not within ten days after service of the notice paid, secured or compounded for the debt or demand or procured the suit or other legal proceeding to be stayed, or indemnified the defendant to his reasonable satisfaction against the suit or other legal proceeding, and against all costs, damages and expenses to be incurred by him by reason of the same; (c) if execution or other process issued on a decree or order obtained in any Court in favour of a creditor against the company or any member thereof as such, or any person authorised to be used as nominal defendant on behalf of the company, is returned 'unsatisfied; and (d) if it is otherwise proved to the satisfaction of the Court that the company is unable to pay its debts. (2) Nothing in this Part shall affect the operation of any enactment which provides for any partnership, association or company being wound up, or being wound up as a company or as an unregistered company, under any enactment repealed by this Act, except that references in any such first mentioned enactment to any such repealed enactment shall be read as references to the corresponding provision (if any) of this Act (3) Where a company incorporated outside Pakistan ‑which' has been carrying on business in Pakistan ceases to carry on business in Pakistan it may be wound up as an unregistered company under this Part, notwithstanding that it has been dissolved or otherwise ceased to exist as a company under or by virtue of the laws of the company under which it was incorporated." The corresponding provision in the Companies Ordinance, 1984 is section 444 and the main difference in the two provisions is in subsection (1)(iv)(b) of the two sections. In the Companies Act, 1913 this provision reads as follows:‑‑ "If it is otherwise proved to the satisfaction of the Court that a company is unable to pay its debts." In the Companies Ordinance, 1984 the provision is worded as follows:‑‑ "If it is otherwise proved to the satisfaction of the Court that the company is unable to pay its debts; and, in determining whether a company is unable to pay its debts, the Court shall take into account the contingent and prospective liabilities of the company and its solvency." Under section 508 of the Companies Ordinance, 1984, the laws mentioned in the 7th Schedule were repealed and Companies Act, 1913 is one of such laws. Subsection (2) of section 508 Provides that provisions of section 508 shall not prejudice general application of section 6 of the General Clauses Act, 1897 with regard to the effect of repeals specified in the 7th Schedule. The saving provision is section 510 in the Companies Ordinance, 1984 and it reads as follows:‑‑ "

510. Savings.‑‑Save as otherwise specifically provided, nothing in this Ordinance, or any repeal effected thereby, shall affect or be deemed to affect anything done, action taken, investigation or proceedings commenced, order, rule, regulation, appointment, conveyance, mortgage, deed, document or agreement made, fee directed, resolution passed, direction given, proceedings taken or instrument executed or issued, under or in pursuance of any law repealed or amended by this Ordinance and any such thing, action, investigation, proceedings, order, rule, regulation, appointment, conveyance, mortgage, deed, document, agreement, fee, resolution, direction, proceedings or instrument shall, if in force at the commencement of this Ordinance and not inconsistent with any of the provisions of this Ordinance, continue to be in force, and have effect as if it were respectively done, taken, commenced, made, directed, passed, given, executed or issued under this Ordinance or the law as amended by this Ordinance."

6. The present winding‑up petition did not abate on the repeal of the Companies Act, 1913 in view of the provisions of sections 508(2) and 510 of the Companies Ordinance, 1984. There is no inconsistency in the two relevant provisions relating to winding‑up of unregistered companies viz. section 271 of the Companies Act, 1913 and section 444 of the Companies Ordinance, 1984 and accordingly this petition for winding‑up shall be deemed to have been filed under the provisions of the 1984 Companies Ordinance.

7. The main arguments on behalf of the learned counsel for the petitioner and the intervenor were addressed on the maintainability of this petition. As has been noticed, on behalf of the intervenor, three main contentions were raised by Mr. J.H. Rahimtoola in this regard. Firstly, it was argued that the respondent‑company has no carried on business in Pakistan and has no place of business here. Secondly, it was contended that the respondent‑company has no assets in Pakistan, and, thirdly, it was submitted that the petitioner is not a creditor or even a prospective or contingent creditor of the respondent‑company.

8. In regard to the objection raised on behalf of the intervenor that the respondent‑company has no place of business in Pakistan and has not carried on business in Pakistan, it was submitted by Mr. Kamal Azfar, learned counsel for the petitioner, that the respondent company has been carrying on business in Pakistan at least since December, 1956 when the petitioner was appointed agent of the company and in the course of its business the respondent‑company has been engaged in, the carriage of goods by sea from and to the Port of Karachi and has earned freight at Karachi. According to the petitioner, for more than 22 years, from 1956 to 1978, the respondent‑company has carried on business at the Port of Karachi through the petitioner when the petitioner was their agent and thereafter, through the intervenor. According to Mr. Kamal Azfar, in the capacity of such agent, the intervenor receives, maintains and disburses amounts due and owing to the respondent‑company from such freight operations carried out by the respondent‑company from and to the Port of Karachi. On the other hand it was argued by Mr. J.H. Rahimtoola, learned counsel for the intervenor that the respondent‑company has not carried on any business in Pakistan and that it had never had nor has any place of business in Pakistan. According to learned counsel, the petitioner carried on their own business of shipping agents and so also the intervenor, and during the course of their business, the petitioner as well as the intervenor have acted as shipping agents of the respondent‑company which did not amount to carrying on of business by respondent‑company in Pakistan. Mr. J.H. Rahimtoola also referred to two judgments from the English jurisdiction in support of his contention that the respondent company has not carried on any business in Pakistan. Learned counsel cited In re: Tovarishestvo Manufactur Liudvig v. Rabenek (1944) 1 Ch.

404. This was a case where a creditor of a Russian Company having its principal place of business at Moscow presented a petition in England for winding‑up of the company and a question arose whether the Court in England had jurisdiction to make a winding‑up order. It had been brought on record that for nearly 9 years directors of the said Russian company came to England and transacted its business at a hotel in England. It was held that during the material periods the hotel was the place of business of the Russian company in England and the directors had carried on business there from within the meaning of section 338(1) of the English Companies Act, 1929 (the provision relating to the winding up of unregistered companies) and that the Court in England had jurisdiction to make an order for winding‑up of the Russian Company. Mr. Rahimtoola had relied upon certain observations that had been made in this judgment by Cohen, J. In the judgment, reference was made to the following dictum of Romer L.J. in the case of Dunlop Pneumatic Tyre Co. v. A.G. fur Motor and Motorfahrzeugbau Vorm. Cudell a C. (1902) 1 KB 342:‑‑ "The result of the authorities appears to me to be that, if for a substantial period of time business is carried on by a foreign corporation at a fixed place‑of business in this country, through some person, who there carries on the corporation's business as their representative and not merely his own independent business, then for that period the company must be considered as resident within the jurisdiction for the purpose of service of a writ." Cohen, J. considered this a reasonable test to apply under section 338(1) of the English Companies Act, 1929. Cohen, J. was also of the view that an established place of business was not a necessary ingredient in founding jurisdiction in such winding up petitions. The other judgment relied upon by Mr. J. H . Rahimtoola was In re Lloyd Generale Italiano (1885) 29 Ch. D.

219. Pearson, J., who wrote the judgment, was of the view that the Court had no jurisdiction. He observed:‑‑ "This company is established at Geneva, and it carries on business there. It has agents in England and nothing but agents, and it has carried on business here through those agents, in the same way as foreign merchants often carry on business in this country by means of agents. The jurisdiction to wind up a company is a purely statutory one under the Companies Acts. If I were to adopt Mr. Farwell's arguments, I must come to the conclusion that, in every case in which a foreign company has had any dealings in this country‑‑whether the company is established in China, or Japan, or Australia‑‑there is jurisdiction to order it to be wound up. I am decidedly of the opinion that the Act is confined to English companies and foreign companies carrying on business in England with, so to speak, a residence of their own‑‑a branch office‑‑in this country. In the cases which have been cited of orders made to wind up foreign companies, the companies had an office in England, but that is not so in the present case. I have no jurisdiction at all, and I must dismiss the petition with costs." The grounds, for which an unregistered company including a foreign company can be wound up by the Court, are contained in section 444 of 'the Companies Ordinance, 1984 (previously section 271 of the Companies Act, 1913). Under subsection (1)(iii) of section 444 it is provided that the circumstances, in which an unregistered company may be wound up, are:‑‑ (a) If the company is dissolved or has ceased to carry on the business or is carrying on business only for the purposes of winding‑up its affairs; (b) If the company is unable to pay its debts; and (c) If the Court is of the opinion that it is just and equitable that company should be wound up. Apart from these three grounds, a foreign company can also ‑be wound up on the ground contained in subsection (iii) of section 444, which reads as follows:‑‑ "Where a company incorporated outside Pakistan, which has been carrying on business in Pakistan, ceases to carry on business in Pakistan, it may be wound up as an unregistered company under this Part, notwithstanding that it has been dissolved or otherwise ceases to exist as a company under or by virtue of the laws of the country, under which it was incorporated." In my view, for maintaining a petition for winding up of an unregistered company (including a foreign company), for any one or more of the grounds mentioned in subsection (1)(111) of section 444, it is not required that the concerned company should have been carrying on business in Pakistan or has an office or a place of business in Pakistan. However, for maintaining a winding‑up petition of a foreign company under subsection (3) of section 444 of the Companies Ordinance, 1984, it is required that the concerned foreign company had been carrying on business in Pakistan. This is apparent from the wordings of subsection (3) of section 444 itself. There is no such requirement if the petition for winding up is made on any of the grounds mentioned in subsection (1)(iii). Such requirement is not spelt out from the wordings of subsection (1)(iii) of section

444. There are other requirements for maintaining a winding‑up petition of an unregistered company including a foreign company under section 444 of the Companies Ordinance, 1984 (previously section 271 of the Companies Act, 1913), and these are that the concerned company has assets in Pakistan and that the petitioner is a creditor of the concerned company. I may here refer to the judgment of Megarry, J. in the case of Re Compania Merabello San Nicholas SA (1972) 3 A E R 448, in which he has summarized the evolution of the law on the subject. Megarry, J. was dealing with a winding‑up petition under section 399 of the English Companies Act, 1948, which corresponds to section 444 of the Companies Ordinance, 1984 and section 271 of the Companies Act, 1913. It was held by Megarry, J. that for the Court, who had jurisdiction to make a winding‑up order in respect of a foreign company, it was not necessary for it to be established either that the company had a place of business within the jurisdiction or that it had ever carried on business there, unless the petition was based on the circumstances that the company had ceased to carry on business or was carrying on business only to wind up its affairs. According to Megarry, J., it was sufficient to found jurisdiction to show that the company had some asset or assets within the jurisdiction and that there were one or more persons concerned in the proper distribution of the assets, over whom the jurisdiction was exercisable and that such assets did not have to be of a commercial nature or assets, which indicated that the company had formerly carried on business within the jurisdiction. According to Megarry, J. the assets could be of any nature and did not require to be assets, which would be distributable to creditors by the liquidator in the winding‑up and it was sufficient if by the making of the winding‑up order the assets would be of benefit to a creditor or creditors in some other way. It was observed that the jurisdiction or the Court would, however, be excluded if it was shown that there was no reasonable possibility of benefit accruing to creditors from the making of a winding‑up order. I am in complete agreement with the enunciation of law by Megarry, J. I have also compared the provisions of sections 399 and 400 of the English Companies Act, 1948 with section 444 of the Companies Ordinance, 1984 and section 271 of the Companies Act, 1913 and I find no material difference in the provisions. Mr. J.H. Rahimtoola had argued that subsection (1)(i) of section 444 requires that a winding‑up petition of an unregistered company can be maintained only if such company has a place of business in p6kistan. The aforesaid subsection is as follows:‑‑ "An unregistered company shall, for the purpose of determining the Court having jurisdiction in the matter of the winding up, be deemed. to be registered in the province where its principal place of business is situate or if it has a principal place of business situate in more than one provinces, then in each province, where it has a place of business, and the principal place of business situate in the province in which proceedings are being instituted, shall, for all the purposes of the winding up, be deemed to be the registered office of the company." Corresponding provision in the English Companies Act is subsections (2) and (3) of section 399 and subsection (3) reads as follows: ‑‑ "An unregistered company shall, for the purpose of determining the Court having jurisdiction in the matter of the winding up, be deemed to be registered in England or Scotland or if it has a principal place of business situate in both countries to be registered in both countries, and the principal place of business situate in that part of Great Britain, in which proceedings are being instituted, shall, for all the purposes of the winding up, be deemed to be the registered office of the company." On this provision, Megarry, J. observed as follows:‑‑ "These provisions, it will be observed, are dealing with the distribution of jurisdiction within the United Kingdom according to the part or parts of the United Kingdom, in which there is a principal place of business. Subsections say nothing about companies with no principal place of business within the United Kingdom and they do not exclude the jurisdiction conferred by section 399(1) (equivalent of section 444(1)(iii) of the Pakistan Companies Ordinance, 1984) in such cases. In other words, I can see in the subsections nothing to exclude the jurisdiction conferred by section 399(1) if the company in question has no principal place of business in the United Kingdom: the subsections do no more than regulate which Courts within the United Kingdom are to have jurisdiction in the case of those companies which have a principal place of business within the United Kingdom." I am again in complete agreement with Megarry, J. In my view 'also subsection (1)(i) of section 444 of the Companies Ordinance, 1984, deals with the distribution of jurisdiction within Pakistan. This subsection says nothing about foreign companies with no principal place of business within Pakistan and it does not exclude the jurisdiction conferred on the Court by subsection (1)(iii) of section 444 of the Companies Ordinance, 1984.

9. In para. 15 of the memo of the petition the grounds are mentioned for which winding‑up order of the respondent‑company has been sought and these are the grounds mentioned in section 271(1)(iii) of the Companies Act. 1913 which corresponds to section 444(1)(iii) of the Companies Ordinance, 1984. Winding‑up has not been sought under subsection 3 of section 271 of the Companies Act, 1913 (section 444(3) of the Companies Ordinance, 1984) , and as such for maintaining the present winding‑up petition it was not necessary to establish that respondent‑company had been carrying on business in Pakistan. I do not subscribe to the view expressed in the judgments cited by Mr J.H. Rahimtoola, Darned counsel for the intervenor that for maintaining a winding‑up petition. of an unregistered company it was necessary to establish that the company had been carrying on business in Pakistan. As observed earlier, this is required to be established only where the petition is filed on the grounds mentioned in subsection (3) of section 271 to section 444 of the Companies Ordinance, 1984 (previously section 271(3) of the Companies Act, 1913).

10. As observed earlier, the two requirements for maintaining a winding‑up petition of unregistered company are that the company has assets in Pakistan and that the petitioner is a creditor of the company. The case of the petitioner is that the respondent‑company has assets in Pakistan, whereas the intervenor has averred that the respondent‑company has no assets in Pakistan. On the question as to what are "assets" and on the nature of assets, Messrs Kamal Azfar and Umar Hayat Tiwana, learned counsel for the petitioner, referred to the following judgments from the English jurisdiction:‑‑ Dairen Kisen Kabushiki and others v. Shiang Kee (1941) 70 Lloyd's List Law Reports 51; In re Tovarishestvo Manufactur Liudvig Rabenek (1944)

1. Ch. 404; Banque Des Marchands De Moscou (Koupetschesky) v. Kindersley and another (1951) 1 Ch. 112; Re Compania Merabello San Nicholas Sa (1972) 3 A E R 448 and Re Eloc Electro‑Optieck and Communicatie BV (1981) 2 A E R 1111. Main reliance was placed on the last two judgments. Reference has already been made in some detail to the Merabello case. The other judgment, on which main reliance was placed by the learned counsel for the petitioner is (1981) 2 A E R 1111, where it was held that although there had to be assets of a foreign company within the jurisdiction and also a reasonable possibility of benefit accruing to the petitioning creditor from the making of a winding‑up order before the Court had jurisdiction to make a winding‑up order in respect of such a company, (i) the assets could be of any nature and did not have to be in the company's ownership, and could, therefore, come from a source outside the company and (ii) benefit likely to accrue to the petitioning creditor did not have to be obtained through the liquidator. There is no difficulty in the present case as regards the question of assets. The petitioner had averred (in the counter‑affidavit, dated 21‑10‑1984 of the General Manager of the petitioner) that there are 111 containers belonging to the respondent‑company and lying in M.I. Yard, West Wharf, Karachi, of the value of Rs.16,65,

000. The respondent company has not made any appearance in this petition and as such in so far as the respondent‑company is concerned, this allegation goes uncontroverted. In para. 8 of the affidavit‑in‑reply, dated 23‑10‑1985 of the Managing Director of the intervenor it is stated that the said containers belong to different leasing companies and certain other parties, whose hire charges were not paid by the respondent‑company. Even if the containers were not exclusively owned by the respondent‑company but had been leased out to the respondent‑company by leasing companies, the respondent‑company would have interest in the said containers. And then it is yet to be determined whether any amount is owned by the intervenor to the respondent‑company‑‑the allegation of the petitioner is that over three million rupees of the respondent‑company are held by the intervenor‑‑or it is the respondent‑company, who owes money to the intervenor as alleged by the intervenor. On the state of the record it cannot be said that the respondent‑company has no assets in Pakistan. In any case in so far as the creditors are concerned, there is a reasonable possibility of benefit accruing to the petitioner and other creditors in case a winding‑up order is made as observed in (1981) 2 A E R 1111.

11. The only other point raised by Mr. J.H. Rahimtoola, and which requires consideration, is whether the petitioner is a creditor of the respondent‑company. According to the memo of this winding‑up petition, in 45 suits filed by cargo under‑writers and consignees in Karachi Port against the respondent‑company for cargo damage and for short delivery, the petitioner has also been joined as a defendant and the plaintiffs have also prayed for passing decrees against the petitioner in all these 45 suits. According to the petitioner, the total claims filed against the petitioner and the respondent‑company in these 45 suits amount to Rs.2,319,830.27. It has been argued by Mr. J.H. Rahimtoola that the petitioner company is not responsible under the law for payment of any claim made in the aforesaid 45 suits. According to the learned counsel, it is only the respondent company, which car. be held liable, and the petitioner, as shipping agents, on the basis of the declaration filed by the petitioner pursuant to section 55(1)(e) of the Customs Act, cannot be held liable. In this context learned counsel referred to two judgments of this Court. The first is the judgment in the case of Burjorejee Cowasjee & Go. Ltd. v. Habib Insurance Co. Ltd. P L D 1975 Kar. 194 and the other is the case of Eastern Shipping Company v. Newzealand Insurance Co. Ltd. 1982 C L C 1914. In the earlier case reported in P L D 1975 Kar. 194, it was observed by Dr. I. Mahmud, J. as follows:‑‑ "Finally Mr. Pasha's further submissions are that the Customs' declaration signed by a ship's agent is a statutory guarantee and has been taken in the interest of the consginees, who as beneficiaries, may use the agent personally under section 230 of the Contract Act without also suing the carrier as principal. In my view, both submissions are misconceived. In the first place the declaration in terms is not a guarantee. Nor can there be a guarantee in the absence of a principal debtor. In the second place, as the consignee is not a party to the declaration there can be no question of it being a contract under which the agent is presumed to be personally bound to him under section 230, Contract Act." In the other judgment reported in 1982 C L C 1914, K.A. Ghani, J. referred to the aforesaid dictum of Dr. I. Mahmud, J., that as the consignee is not a party to the declaration there can be no question of it being a contract under which the agent is presumed to be personally bound to him under section 230 of the Contract Act. There is, however, another judgment of another learned Single Judge of this Court and that is in the case of Crescent Sugar Mills & Distillery Ltd. v. American Export Isbrandt Sen Inc. P L D 1983 Kar.

29. In this judgment it was held by Saleem Akhtar, J. that the effect of the declarations filed in writing by the shipping agents under the Customs Act is that the agent is liable to pay all the penalties imposed by the port authorities and is also liable to satisfy the claims relating to short delivery and damage to import cargo as specified in the concerned declarations. It was further observed that the shipping agents' liability will arise only after the damage or short delivery is established and, therefore, the agent's liability is not independent of his principal but is co‑extensive with the carrier and unless the claim is admitted, before holding the agent liable, the claimant should establish his claim for damage or short delivery against the carrier. On the basis of the view taken by I. Mahmud, J. the petitioner will perhaps not be liable on the accleration filed by them with the Customs authorities but on the basis of the view taken by Saleem Akhtar, the petitioner's liability will be co‑extensive with the respondent‑company. Admittedly the petitioner is co‑defendant alongwith respondent‑company in 45 suits and the claims in the 45 suits amount to over rupees two millions. In case decrees are passed against the petitioner in the aforesaid 45 suits, they will have a right of indemnity against the respondent‑company. The petitioners are, therefore, contingent or prospective creditors of the respondent‑company. Reference may also be made here to a judgment cited by Mr. Kamal Azfar. It is In re Manufacturing Co. 11 Bombay Law Reporter 1302. In this judgment the term "creditor" used in section 181 of the Indian Companies Act, 1882 was interpreted to mean a creditor, to whom money is owed by the company where he can claim immediate payment of that debt or where he has a right to demand payment as deferred by the agreement with the company to a future time. It was observed that the term creditor used in section 131 of the Indian Companies Act, 1882 did not limit its meaning to include a creditor to whom R debit is due at the date of the petition and who can demand immediate payment from the company. (Quaid‑e‑Azam Mohammad Ali Jinnah appeared for one of the creditors).

12. In my view, therefore, this winding up petition was competently filed and this Court has jurisdiction to entertain the petition. It has been shown and this Court is satisfied on the basis of the record that the respondent‑company is unable to pay its debts. The respondent‑company has to be wound up. Winding up order will protect the interest of all the creditors as the assets of the respondent‑company will be protected for distribution among the creditors found entitled to them.

13. There are some miscellaneous applications pending in this petition. C . M . A . No. 1086 of 1984 had become infructuous as observed earlier in pare 2 of this judgment. C.M.A. No. 2001 of 1985 filed by the petitioner is dismissed. The affidavit, dated 20‑11‑1985 of one S. Asghar Hussain Zaidi has not been taken into consideration. C.M.A. No. 1003 of 1984 had been filed by the petitioner for appointment of a provisional liquidator. This application has also become infructuous, and disposed of as such, as the main winding up petition is being granted and an official liquidator is being appointed. C.M.A. No. 1085 of 1984 was filed by the intervenor for dismissal of the winding up petition. As the winding up petition is being granted, C.M.A. No. 1085 of 1984 is dismissed. C . M . A . No. 1026 of 1984 filed by petitioner is dismissed. The petitioner is, however, free to file their claim against the respondent‑company with the Official liquidator.

14. J. M. No. 16 of 1984 is granted and the foreign company, Hellenic Lines Limited, is ordered to be wound up as an unregistered company under the provisions of the Companies Ordinance, 1984. The Registrar of this Court is appointed Official Liquidator of the respondent‑company with all powers and is directed to perform all such functions and take all such proceedings as are required under the provisions of the Companies Ordinance, 1984. Initially a sum of Rs.7,500 will be deposited in the Court by the petitioner towards the fee of the Official Liquidator. The intervenor will pay to the petitioner costs of this petition. A . A . Petition accepted.