INVESTMENT CORPORATION OF PAKISTAN (I.C.P.) Versus AMERICAN MARBEL PRODUCTS LTD.
ORDER
1. This application was filed on 22‑11‑1994 by the petitioner under sections 305 and, 309 of the Companies Ordinance, 1984, praying for, the winding‑up of the respondent‑company, American Marbles Limited, as the said company has failed to repay its debts and as such due to heavy financial liabilities, the substratum of the respondent‑company has disappeared.
2. Notice of this petition was issued to the respondent as well as to the Registrar, Joint Stock Companies in response to which the respondent had filed preliminary legal objections to the grant of this petition.
3. Mr. Saalim Salam Ansari's first objection is that neither the petitioners are the 'Creditors' nor the respondent a 'Debtor' as defined under the Companies Ordinance, 1984 and as such the petition is not maintainable. His second objection is that the petition has been filed under sections 305 and 309 of the Companies Ordinance, while the ground in the petition is that the Company could not pay its debts.
4. The learned counsel for the respondent has contended that the agreement, dated 15‑5‑1985 (the Agreement), executed between the petitioners and the respondent, was based on profit and loss sharing as such the petitioners cannot claim to be the creditors. He referred to section 2.04 of the Agreement and submitted that this Agreement clearly provides that in case of failure of repayment, the company is liable to issue Participation Term Certificate ('pTC) to Investment Corporation of Pakistan (ICP) or the ' Syndicate' as collectively called.
5. Mr. Anwar Muhammad, the learned counsel for the petitioners, has relied on section 2.12 of the Agreement and contended that it clearly provides that until the entire principal sum of the Syndicate investment or the PTC, the profit thereon and all other dues hereunder or under the Trust Deed or any other document executed in this respect and paid in full to the satisfaction of the Syndicate or the concerned Member, the Company shall neither alienate nor create any encumbrance on any of its fixed assets except with the previous permission in writing of the Syndicate. He has also pointed out that on page 2 of the Agreement it is clearly provided that it is a loan, which is being advanced to the respondent‑company. Under this heading, the loan is described as Long Term PTCs as well as LFM Refinancing (SBP's Scheme). According to him, section 2.04 of the Agreement, referred to by the counsel for the respondent, is applicable only where the Company is undergoing losses but admittedly the Company, which came into existence as per its Certificate of Incorporation, on 10‑12‑1981, has never started production as such this section of the Agreement is not applicable in the present case.
6. I have heard both the counsel and have perused the Agreement and other documents.
7. Admittedly, the Syndicate agreed to invest an amount of Rupees nine million five hundred eighty‑eight thousand and in lieu of this investment it was agreed that the respondent‑company shall issue PTC in favour of each Member of the Syndicate in the amount agreed to be invested by it which PTCs shall include the amount of discount which is given in the Agreement. This of course relates to the arrangement which is made expecting the respondent‑company to start production as envisaged in the Agreement. Section 2.02 in unequivocal terms states that Syndicate investment and any accruals to it whether represented by the PTCs or otherwise, shall be secured by a first continuing mortgage of all present and future movable and immovable properties of the Company and its uncalled capital, if any; and continuing floating charge on its current assets. This first continuing mortgage has been defined as the 'mortgage' and will have the first charge on the said properties. It is further described that the mortgage and the charge shall rank pari passu with the mortgages, floating charges and hypothecation, if any, already existing in favour of the other creditors. It was also made incumbent on the company to obtain and furnish valid and proper consents of any such creditors for creation of such pari passu mortgage and charge to secure the sanctioned investment to the satisfaction of ICP. The company has further executed Demand Promissory Note, dated 12‑8‑1986 for the sum of Rs.1,000 million together with profits/mark‑up and fine. The signatures of these documents have not been denied. In my opinion, the petitioners herein, in every sense of the term, are creditors.
8. The contention of the learned counsel for the respondent that the petitioners are not creditors is misconceived and has no force. Under section 2.03 of the Agreement the condition for issuance of PTCs is only when the company fails to pay the profits within 60 days of the close of its financial year or if it is undergoing a loss in any accounting year. In the present case, the company has not, at all, started its production, not to talk of sustaining any loss and failure to pay the profits.
9. Section 305 of the Companies Ordinance reads as under:
10. "305. Circumstances in which company may be wound up by Court.‑‑ A company may be wound‑up by the Court‑‑‑
(a) ---------------------------------------------- Not relevant----------------------------------------------
(b) ---------------------------------------------- Not relevant----------------------------------------------
(c) if the company does not commence its business within a year from its incorporation or suspends its business for a whole year;
(d) ----------------------------------------------Not relevant----------------------------------------------
(e) if the company is unable to pay its debts."
11. Both the subsections are applicable in the present case and, as such, the objection raised on behalf of the respondent has no force.
12. In the circumstances, this application is granted, the Official Assignee is appointed as Official Liquidator to take over all the assets of the Company and is directed to proceed as provided under the rules.
13. A.A./I‑25/K Application granted.