S. MUHAMMAD DIN & SONS and anothers vs ALLIED BANK OF PAKISTAN, BANK

ABDUL SHAKURUL SALAM, J.---This is an appeal against an order of the learned Company Judge of the Lahore High Court in C.O. No, 40 of 1975, daetd 22-4-1990.

1. Relevant facts are that S. Muhammad Din & Sons Limited filed an application 11-12-1975 under section 153 and 153-A of the Companies Act, 1913 for reconstruction/re-organisation of the company, the parallel provision being 287 of the Companies Ordinance, 1984. During the course of proceedings an order was passed by the learned Judge on 9-7-1987 wherein learned counsel appearing for the Creditor Banks i.e, Allied Bank of Pakistan and Habib Bank. Ltd. Respondent No,2 stated that they had "no objection to the bifurcation/reorganization of S. Muhammad Din and Sons (Private) Ltd. Into four companies as indicated in the order dated 12-4-1987 provided the following conditions are fulfilled:--- (A)-1. United Bank Limited is paid 5% of the amount outstanding as on 30-6-1987 as down payment. II. Habib Bank Limited is paid rupees five lacs as down payment. III. Allied Bank of Pakistan is paid rupees three lacs in cash as down payment and another sum of rupees three lacs is allowed to be realized by the sale of pledged goods.

(B)-I. The balance remaining payable to each of the Banks will be paid in five years in equal quarterly instalments. II. On the outstanding amount, the interest will accrue at the rate of 14%.

III. The bifurcated Companies will furnish adequate security to each of the creditor Banks for securing the amount respectively payable to them by mortgaging/pledging the immovable and movable properties to the satisfaction of Banks.

IV. In case of default in payment of any three instalments, the entire amount shall become due in lump sum and it shall be recoverable from the security furnished."

The learned Judge observed as follows:-- "2. These conditions are acceptable to the share-holders/directors. The companies which on re- organization are to come into existence are as under:--

(1) S. Muhammad Din & Sons (Rahim Private) Limited.

(2) S. Muhammad Din & Sons (Aziz Private) Limited.

(3) S. Muhammad Din & Sons (Majid Idress Private) Limited.

(4) S. Muhammad Din & Sons (Nazir Private) Ltd.

3. The one-fourth of the amount payable to the Banks will be, paid by S. Muhammad Din & Sons (Rahim Private) Limited whereas the other three companies will pay the balance amount in the following ratio:- S. Muhammad Din & Sons (Aziz Private)

Limited25% S. Muhammad Din & Sons (Majid Idress) 39.7% S. Muhammad Din & Sons (Nazir Private)

Limited.10.3%

4. The aforestated four bifurcated companies will pay the amount in cash as down payment as well as furnish securities to the respective Banks by 30th December, 1987.

5. S.A. Rahim will approach Habib Bank Limited and United Bank Limited to the extent of liability of S. Muhammad Din & Sons (Rahim Private) Limited. S.M. Idris, S.M. Majid, S.A. Aziz and S.A. Nazir will discharge their liabilities by fulfilling the aforenoted conditions of Allied Bank of Pakistan and Habib Bank Limited to the extent of their liabilities. The bifurcated companies may however, make adjustment inter se for liquidating the liability towards the Banks. It may also be clarified that in case any relief is allowed by the Banking Council or Government of the Pakistan, the Banks will, of course, give necessary adjustment accordingly.

6. The suits filed by the creditor-Banks will of course be withdrawn as and when the down payment is made by the parties and the amount outstanding stands secured by furnishing the securities."

2. On 22-4-1990 the learned Company Judge passed the following order:-- "Kh. Muhammad Habibullah has invited my attention to C.M. No,479/L-89 and prays that the same may be disposed of today. He submits that the company is ready to pay the amount due to the Banks but there are certain errors in the accounts of the Banks and therefore, before making payment to the banks, the company would like the accounts to be checked by any Chartered Accountant or by any one to be appointed by this Court.

Learned counsel for the Banks do not agree to the rechecking of the accounts. Their plea is that the consent order was passed on 9-7-1987 without any reservation and it is no longer open to the company to seek rechecking of the accounts. In pursuance of the consent order, the Allied Bank had agreed to withdraw the suit and if the company is not going to abide by the compromise reached by the parties, the compromise may be set at naught and the Allied Bank allowed to proceed with the suit. They also doubt the bona fides of the company by saying that the company has not paid a single instalment. Khawaja Muhammad Habibullah, however, states that the company has paid instalments which are incorporated in the record.

Mr. Aftab Ahmad Khan, Advocate has referred to the portion of the order, dated 9-7-1987, which clearly indicates that the company had admitted its liabilities to the extent of named amount.

According to him, they now want to reopen the matter in the garb of rechecking of the accounts with the Banks.

I have gone through the order, dated 9-7-1987 and find that the agreement entered into beween them is without any reservation whatsoever.

In view of what has gone above, I am not inclined to allow the company to recheck the accounts with the Banks. They are bound to go by the terms referred to above and they shall act accordingly.

In case they do not Set in accordance with the agreement, appropriate order will be passed in the light of the relevant law. The C.M. Is disposed of accordingly."

3. The appellants have filed a direct appeal against the aforesaid order under section 10 of the Companies Ordinance, 1984. The learned counsel contends that checking should have been allowed and interest at quarterly interval cannot be claimed by the Banks.

4. Learned counsel appearing for the Allied Bank Limited respondent No,1 raised a preliminary objection that the appeal before this Court is not competent because the order appealed against has not been passed in proceedings where the Company had been ordered to be wound up.

5. In reply the learned counsel for the appellants submitted that during the course of the hearing of the application for reconstruction/reorganization the original company has been wound up.

6. Relevant provision is as follows:--- Appeals against Court orders: "Notwithstanding anything contained in any other law, an appeal against any order, decision or judgment of the Court under this Ordinance shall lie to the Supreme Court where the company ordered to be wound up has a paid-up share capital of not less than one million rupees...."

7. Contention of the learned counsel for the respondents is valid as an appeal against an order of a learned Company Judge is only competent where an order or decision has been made in proceedings when the company has already been ordered to be wound up. In the case in hand there is no order of winding up of the company. The application out of which these proceedings arise was filed for reconstruction/re-organization. For such purposes provision A is provided in Part-IX whereas the provision for winding up is in the Part XI of the aforementioned Ordinance 1984.

The two set of provisions are separate and distinct. Therefore, appeal against the impugned order is not competent. Hence, it is dismissed.