1998 PLP 1533 (SCMR)

SH. RIAZ AHMAD, J.

This appeal under section 10 of the Companies Ordinance, 1984 (hereinafter called the Ordinance) has been filed to assail the judgment impugned dated 12-8-1997 delivered by a learned Single Judge of the Sindh High Court whereby the appellant company was ordered to be wound up under sections 305 and 309 of the Ordinance and the official assignee was appointed as official liquidator.

2. The facts in brief giving rise to the institution of petition against the appellant company by the respondent banking company are as under:-- The appellant company is a public limited company with its registered office situated at Dr. Mehmood Hussain Road, Karachi. As per short term investment agreement dated 3-2-1986 and long term investment agreement dated 24-4-1986 the appellant company obtained from the respondent loans of Rs.13 million and Rs.98,26,000 respectively to invest the same in its project. In lieu of the said loan and for due performance of the terms and conditions of the aforesaid agreements, the appellant company executed sponsors/directors joint guarantee dated 22-4-1986, resolution of the Board of Directors dated 5-1-1986 and 30-3-1986. The appellant company also submitted no objection certificate from the Pakistan Industrial Credit and Investment Corporation dated 3-4-1986. The appellant company also submitted Form XVIII reflecting the particulars of mortgage under section 127 of the Ordinance, certificate of registration of mortgage issued by the Deputy Registrar, Joint Stock Companies, memorandum confirming deposit of title deeds, letter for hypothecation of the plant. machinery and equipment and deed of floating charge. According to the terms and conditions of the agreement, the amount of loan was repayable in - six monthly instalments commencing from 1-1-1988. The rate of mark-up was fixed and agreed to by the appellant company at 22 paisas per one thousand rupees per annum subject to rebate of 7% in case payment was made on due dates. On 8-1-1996 the respondent banking company, the creditors sought winding up of the appellant company under sections 305 and 309 of the Ordinance on the ground that the appellant company failed to abide by the agreements inasmuch as it had defaulted in repayment of the loan in monthly instalments amounting to Rs:6,25,47,

436. The respondent banking company also contended that in view of the heavy financial liabilities, the substratum of the appellant company has disappeared and it was also urged that the appellant company had violated the terms and conditions of the agreements and the trust deed, and therefore, it was just and equitable to wind up the appellant company.

3. The appellant company contested the application for its winding up and it was averred on behalf of it that the petition was not maintainable for want of service of statutory notice under section 306 of the Ordinance. The appellant company further contended that relationship of creditor and debtor did not exist between the appellant and the respondent because no loan had been provided. The appellant company, however, conceded the execution of the finance agreement dated 3-2-1986 and it was contended that the said loan was advanced as investment towards the cost of project in lieu of the terms finance certificate as stipulated in the aforesaid agreement and in this view of the matter, according to the appellant company,. the loss was necessarily to be shared by 'the respondent company The appellant company also contended that the losses which have occurred were beyond the control of the human beings and due to various other reasons, such as political expediency, law and order and other factors, the appellant company had suffered the also which should also be shared by the respondent company on account , of finance term agreements and the investment made by it.

4. All these contentions were repelled in the High Court and in our view rightly so because none of these contentions has any force. Before us it was reiterated that the petition for winding up of the appellant company was not maintainable because the statutory notice as envisaged by section 306 of the Ordinance had not been served upon the appellant company. It was contended that the appellant company had changed its registered office, and therefore, they have no knowledge about the issuance or receipt of any notice and accordingly the presumption to be raised under section 306 was not available. Section 306 of the Companies Ordinance reads as under:-- "

306. Company Mien deemed unable to pay its debts.--(1) A company shall be deemed to be unable to pay its debts-- (a) if a creditor, by assignment or otherwise, to whom the company is indebted in a sum exceeding one per cent. of its paid-up capital or fifty thousand rupees, whichever is less, than due, has served on the company, by causing the same to be delivered by registered post or otherwise,, at its registered office, a demand under his hand requiring the company to pay the sum so due and the company has for thirty days thereafter, neglected to pay the sum, or to secure or compound for it to the reasonable satisfaction of the creditor; or (d) if execution or other process issued on a decree or order of any Court or any other competent Authority in favour of a creditor of the company is returned unsatisfied in whole or in part; or (c) if it is 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 liabilitiqs of the company. (2) The demand referred to in clause (a) of subsection (1) shall be deemed to have been duly given under the hand of the oreditor if it is signed by an agent or legal adviser duly authorised on his behalf, or in We case of a firm if it is Signed by such agent or legal adviser or by any member of the firm on behalf of the firm." It was, however, conceded before us that the Change of address was only communicated to the Registrar, Joint Stock Companies and not to the respondent, a banking company.

5. It was further contended before us that the respondent is not a banking company,, and therefore, not enjoying the status of a banking company the petition for winding up did not lie at the behest of the respondent, and therefore, the petitioner under sections 305 and 309 of the Ordinance was liable to be rejected.

6. We have heard both the learned counsel for the appellant and the respondent at length. The learned counsel for the respondent drew our attention to the resolution of the Board of Directors and also the schedule of re-payment, trust deed as well as number of other documents, which revealed that the appellant company was maintaining its registered office at Dr. Mahmood Hussain Road, PECHS, Karachi and not at Nurpur as it was contended before us. Assuming that the Registrar, Joint Stock Companies had been intimated about the change of address of the registered office, the appellant company while doing so was also bound to intimate change of address to the respondent as well. Not having done so, for all intents and purposes, the respondent company had to communicate with the appellant company at the Karachi address.

7. In the light of this circumstance, we are of view that in fact a notice through registered post, acknowledgement due was sent to the appellant company and under the General Clauses Act, it will be presumed to have been received by the addressee. It is also pertinent to mention that in view of the correspondence to which our attention was drawn, till 1994 the Karachi address was considered as the correct address of the appellant company as its registered office. Furthermore, our attention was also drawn to the provision of notice in the investment agreement dated 24-4-1986. Article 8 provided for miscellaneous items. The provision with regard to the service of notice agreed to by the appellant company and the respondents runs as under:-- "Any notice, or request permitted to be given or made under this Agreement to the I.C.P. or to the company shall be in writing, such notice or request shall be deemed to have been duly given or made when it is delivered by hand or sent by registered post in a pre-paid letter addressed to the party concerned at its registered office or such other address as the party concerned shall have designated by notice to the giver of the notice or maker of the request."

8. It is obvious that under this Article, it was an obligation of the appellant company to have intimated change of address. Not having done so, as already observed by us, the respondent company had no other option but to serve the notice at the Karachi address. Notice having been received by the e appellant company and by failure on the part of the appellant company to discharge its liability within the statutory period of the notice, presumption was rightly raised and the appellant company will be deemed to be unable to pay the, debt.

9. We have also considered the contention raised on behalf of the appellant company to the effect that the respondent was not a banking company, and therefore, the petition for winding up made by it was not maintainable. We are unable to agree with the learned counsel for the appellant because not only under the Banking Companies (Recovery of Loans) Ordinance, 1979 as well as in the schedule to the Banking Tribunals Ordinance, 1984, in its section 2(4) and item 3 to the Schedule to the said Ordinance, the respondent company is listed as a banking company, and therefore, the petition for winding up made by the l respondent company was maintainable. 10 It is unintelligible to us as to how money advanced to the appellant company by the respondent company was not a loan. All the documents and agreements executed between the parties which we have perused, leave no room to doubt that it was a loan. Our attention was also drawn to the definition of finance as provided by section 2(e) of the Banking Tribunals Ordinance, 1984, which reads as under:-- "(c) 'finance' includes an accommodation or facility under a system which is not based on interest but provided on the basis of participation in profit and loss, mark-up or mark-down in price, hire-purchase, lease, rent-sharing, licensing, charge or fee of any kind, purchase and also of any property, including commodities, patents, designs, trade marks and copyrights, bills of exchange, promissory notes or other instruments with or without buy-back arrangement by a seller, participation term certificate, musharkia certificate, modaraba certificate, term finance certificate or -any other mode other than an accommodation or facility based on interest and also includes guarantees, indemnities and any other obligation, whether fund based or non-fund based, and any accommodation or facility the real beneficiary whereof is a person other than the person to whom or in whose name it was provided." Thus, the participation term certificate is finance and in our view the participation term certificate is nothing but debenture as defined in section 2(12) of (lie Ordinance. Furthermore, debenture is acknowledgement of .loan, and therefore, it is obvious that the money advanced to the appellant company was nothing but a loan. Furthermore. in law a petition for winding up by a debenture holder is also competent and maintainable. We are fortified in this view by the .judgments reported as Emperor v Lexmon Bharmaji AIR 1946 Bomaby 18), Madanlal Fakirchand Dudhediya v. Changdeo Sugar Mills Ltd. (AIR 1958 Bombay 491), Calcutta Safe Deposit Co. Ltd. v. Ranjit Mathuradas Sampat (AIR 1971 Calcutta 78) and Bachharaj Factories Ltd. v. Hirjee Mills Ltd. (AIR 1955 Bombay 355).

11. In this view of the matter, we are of the view that in fact the respondent had advanced a loan to the appellant company for its project and the appellant company having acknowledged the receipt of the same and also having agreed to abide by the repayment schedule in 6 monthly instalments, had miserably failed to discharge its liability, and therefore, the respondent company was justified in moving the petitioner for winding up of the appellant company and the impugned order whereby the appellant company was wound up has been passed in accordance with law and furthermore, it was also just and equitable to do so.

12. For the foregoing reasons, this appeal fails and is hereby dismissed with no order as to costs. A.A./S-69/S Appeal dismissed.