2002 PLP 978 (CLD)

‑‑‑‑S.402‑‑‑Winding‑up of order‑‑‑Suspension of such order by Supreme Court‑‑‑Setting aside of petition by Supreme Court‑‑‑Order of winding‑up of the Company was suspended by the Supreme Court vide interim order and later on the petition was dismissed with a result that the interim suspension was set aside‑‑‑Effect‑‑‑By dismissal of the petition by Supreme Court, the order of winding‑up had taken effect from the date the same was passed to commence the process of winding‑up of the Company. Nauman Akram Raja for Plaintiff. Pervaiz Akhtar Malik for Defendants. Civil Original Suit No. 116 titled "Hala Spinning Limited v. I.D.B.P." was filed on 16‑12‑2000 by a Public Limited Company i.e. Hala Spinning Limited. In para.l of the plaint, it was stated that the suit was filed through Mr. Tahir Jehangir, Chief Executive of the plaintiff‑company claiming due authorization. The nature of the suit was for declaration rendition of accounts, injunction and reversal of unlawful debits and for recovery of damages amounting to Rs.137,914,

701. The plaint was also signed by said Mr. Tahir Jehangir, Chief Executive of the Company.

2. Learned counsel for the defendant i.e. Industrial Development Bank of Pakistan (I.D.B.P.) raised a preliminary objection that upon winding‑up order by the learned Company Judge of this Court passed on 23‑12‑1999, this suit could not have been filed on 16‑12‑2000 by the Ex‑Chief Executive or any Member of the Board and that the suit could only be filed by joint O.Ls. in accordance with provisions of the Companies Ordinance. In this regard, learned counsel for the defendant relied upon proviso to section 402 of the Companies Ordinance, 1984.

3. Learned counsel for the plaintiff conversely argued that the winding‑up order was passed on 23‑12‑1999, but the same was suspended by the Hon'ble Supreme Court of Pakistan by an interim order dated 31‑12‑1999. It was also contended that though appeal was dismissed and stay was vacated on 6‑6‑2001, yet the suit filed during the currency of the suspension order of the Hon'ble Supreme Court of Pakistan was valid and proper and can continue. It was further contended that the present suit was filed on 16‑12‑2000 when the suspension order of the Hon'ble Supreme Court of Pakistan was in operation and after dismissal of the appeal, the only effect would be that section 316 read with section 317 of the Companies Ordinance will come into operation and O.Ls. after due permission, will take over the suit.

4. I have considered the arguments of the learned counsel for the parties and have also examined the record. It is an admitted position of the parties that winding‑up order was passed by the learned Company Judge of this Court on 23‑12‑1999 and thereby process of winding‑up of the plaintiff‑Company commenced. Further that on 31‑12‑1999, through an interim order operation of the judgment dated 23‑12‑1999 was suspended by the Hon'ble Supreme Court of Pakistan. And that the appeal was finally dismissed by the Hon'ble Supreme Court of Pakistan on 6‑6‑2001, thereby lifting interim order dated 31‑12‑199 as well. The only contention is that the suit filed during currency of the interim order dated 31‑12‑1999 could continue or not.

5. I am of the candid opinion that any suit filed by a Company after winding‑up order is incompetently and invalidly filed, if the same has been instituted by the Ex -Chief Executive or any Member of the Ex‑Management. In fact, the management of the company by automatic effect of winding up order loses the status as management and also the authority to represent the company in any manner whatsoever. Provisions of section 402 prescribe as under: "Status of companies being wound‑up, etc.‑‑‑A Company being wound‑up shall continue to be a company for all purposes till its final dissolution in accordance with the provisions of this Ordinance and unless otherwise specified, all provisions and requirements of this Ordinance relating to companies shall continue to apply mutatis mutandis in the case of companies being wound‑up: Provided that from the date of commencement of the winding‑up of a Company, the official liquidator or the liquidator shall be deemed to have taken the place of the Directors, Chief Executive and Managing Agents of the company as the case may be."

6. Under the express provisions reproduced above, from the date of winding‑up commencement of a Company, the Official Liquidators get substituted in place of the Directors, Chief Executive or Managing Agents, as the case may be. A question, however, arises as to whether authority of the Ex‑Management gets revived to represent the company in litigation or otherwise, upon interim suspension of the operation of winding‑up order upon an appeal.

7. The obvious nature of an interim order of suspension is that the same does not obliterate and set aside the order of winding‑up. The suspension of winding -up order may, through its effect, allow the Ex‑Management to exercise only day to day operation of the company for the purpose of facility but does not in fact allow it to commit, contract‑out, liquidate, frustrate or alienate Interests, assets and rights or liabilities of a Public Limited Company. If any such action is required to be taken, the same can only be done through seeking permission of the appellate Court like for filing of a case or entering into a long time contractual arrangement or transaction. If suspension of the operation of impugned order is interpreted to mean that all powers of the Ex -Management and the Ex‑Chief Executive are restored, in such a case, Ex‑Management/Ex‑Chief Executive can assume the powers of disposing of the assets of the company as well or to terminate effect or commit the interests of the Company in a manner prejudicial to its existence and substratum. The entire scheme of the Companies Ordinance is meant to protect the interest of the creditors and shareholders and not to put their interest at risk by interim arrangements. As such, any interim order of suspension of the operation of winding‑up order, in my humble view, cannot be taken to mean restoration of all embracing powers of the Ex‑Management, Ex‑Chief Executive or Ex‑Board of Directors. In this case, however, the process of winding‑up had commenced upon winding -up order dated 23‑12‑1999. Interim order of suspension was passed by Hon'ble Supreme Court of Pakistan on 31‑12‑1999 which did not effect reversal of the process of winding‑up. The interim suspension order of the Hon'ble Supreme Court, in essence, only suspended the powers and stayed the future acts of the joint Official Liquidators under winding‑up process. This order neither removed the official liquidators nor did it direct the revival of complete powers of the Ex‑Management.

8. However, through order dated 6‑6‑2001, winding‑up order dated 23‑12‑1999 of this Court was upheld by the Hon'ble Supreme Court of Pakistan. The obvious effect thereto is that order dated 23‑121999, if its legal validity, will be deemed to have taken effect from the date it was passed to commence the process of winding‑up of the Company.

9. In view of the above, I am of the opinion that the Ex‑Management or Ex‑Chief Executive had no authority to file the present suit. The same is, therefore, dismissed being invalidly and incompetently instituted by Ex‑Chief. Executive after commencement of winding‑up of the Company. The dismissal of the suit through this order shall, however, not debar the joint O.Ls. to refile competent and valid suit in accordance with law, if they so deemed appropriate, after observing all legal formalities thereto. Q.M.H./M.A.K./H‑79/L Suit dismissed.