Order Sheet
IN THE HIGH COURT OF SINDH KARACHI
J. Misc. No. 27 of 2012
|
Date |
Order with signature of Judge |
For hearing of Main Petition :
Petitioner : Joint Registrar of Companies (SECP)
through none.
Respondent : Whitebay Limited,
through Mr. Khurram Rasheed, advocate.
Date of hearing : 01.12.2015.
O R D E R
NADEEM AKHTAR, J. – This petition has been filed the Joint Registrar of Companies, Security and Exchange Commission of Pakistan under Section 305 read with Section 309 of the Companies Ordinance, 1984 (‘the Ordinance’), and Rule 75 of the Companies (Court) Rules, 1997, for winding up of the respondent-company ; namely, Whitebay Limited (‘the company’).
2. The company was incorporated on 13.05.2004 under the Ordinance as a public limited company in the name and style of ‘AMZ Ventures Limited’ having its registered office at Karachi, and its shares were listed on the Karachi Stock Exchange in December 2004. The name of the company was subsequently changed to its above mentioned present name after complying with the necessary requirements under the Ordinance. It is stated that the authorized capital of the company is Rs.1,000,000,000.00 divided into 100,000,000 ordinary shares of Rs.10.00 each, and its paid up capital as per the last available accounts for the year ended 31.10.2009 is Rs.300,000,000.00. It is further stated that the main objects of the company for which it was incorporated were to invest its capital and other monies in the purchase or upon the security of shares, stocks, debentures, debentures stock, bonds, mortgages, obligations and securities, and to carry on whatsoever business in respect of the above.
3. The petitioner is seeking winding-up of the company on the following grounds :
a. The company has failed to hold its annual general meetings since 2010 and to lay therein annual audited accounts for the financial years 2010, 2011 and 2012 as required under Sections 158 and 232 of the Ordinance.
b. The company has suspended its business since the year 2009.
c. The company is conducting its business in a manner oppressive to its members or minority shareholders.
d. The company is run by persons who have failed to maintain proper and true accounts.
e. The company is managed by persons who have refused to act in accordance with the requirements of the memorandum or articles of association.
f. The company has failed to appoint its auditors for the years 2010, 2011 and 2012.
g. The company has not held elections of its directors since 2011.
h. The company has failed to file annual audited accounts with the petitioner / SECP after the year 2009, that is, for the years 2010, 2011 and 2012.
i. The company has not filed the annual returns specially on Form-A, for the years 2010, 2011 and 2012 with the petitioner / SECP.
j. The financial statement of the company for the year ended June 30, 2006 indicates that the company’s expenses reached a peak in the period of July to August 2005 and it suffered a net loss of Rs.18.106 million.
k. In view of the above losses, the directors have not declared any dividend or bonus payout to the shareholders of the company.
l. M/S Anjum Asim Shahid Rahman Chartered Accountants, the independent auditors of AMZ Access (Pvt.) Ltd., fully owned subsidiary of the company / AMZ Ventures Limited, in their audited report indicated a bad financial position of the company and also drew attention to not making provisions for the impairment against the company’s investment in AMZ Access Inc.
m. The company’s license to operate as a venture capital company issued by SECP expired on 23 June 2008. As such, the company exists just on papers and there is no hope for its revival by the management.
4. It is contended that before filing the present petition, sanction in terms of Section 309(b) of the Ordinance was sought by the petitioner from SECP, and before granting such sanction, a show cause notice dated 22.04.2013 was issued by SECP to the company to appear and show cause as to why sanction may not be granted to the petitioner for filing a petition for its winding up before this Court. It is stated that no reply to such notice was submitted by the company nor did any one appear on its behalf before SECP to show cause or to offer any explanation although a last chance was also given to the company by SECP after issuing the show cause notice.
The case of the petitioner, which is a financial institution, is that the company has failed to repay the finance facilities granted to it by the petitioner, and has committed default in respect thereof. In view of the said default, the amount payable by the company to the petitioner is Rs.767,760,401.00. In addition to the said amount payable to the petitioner, the company owes a huge amount of Rs.794,200,865.65 to five other financial institutions. The total amount payable by the company to all the financial institutions, including the petitioner, is Rs.1,561,961,266.65. As per the latest CIB report of the State Bank of Pakistan, the total outstanding of the company to various financial institutions is Rs.8,421,603,138.00. The petitioner has placed on record a report dated 25.11.2013, issued by the State Bank of Pakistan’s Consumer Protection Department, which confirms that the amount under litigation in respect of the company is Rs.178,755,567,976.00.
2. C.M.A. No.05/2013 has been filed by the petitioner praying that the Board of Directors of the company be restrained from functioning in such capacity with immediate effect. In C.M.A. No.06/2013, the petitioner has prayed that an official liquidator be appointed to take over the affairs and management of the company with immediate effect. Ad-interim orders to the above effect have also been sought by the petitioner.
3. Learned counsel for the petitioner points out that a notice under Section 306 of the Ordinance was issued by the petitioner on 12.10.2012, calling upon the company to pay the outstanding amount of Pak Rs.767,646,401.00, but the said notice was neither acknowledged nor has the outstanding amount been settled by the company. He submits that in view of the above, the liability towards the petitioner stands admitted by the company. It is urged by the learned counsel that the material placed before the Court by the petitioner is sufficient to show that the company is unable to pay its debts ; the company was conceived for and has been carrying on unlawful and fraudulent activities ; and, is run and managed by persons who fail to maintain proper and true accounts, commit fraud, misfeasance and malfeasance in relation to the company. It is further urged by the learned counsel that, in view of the grounds urged in this petition, the company is liable to be wound-up by appointing an official liquidator in respect thereof with immediate effect. In support of his submissions, Mr. Kazim Hasan referred to the Annual Report of the company for the financial year ended on 30.06.2012, and relied upon the case of Hala Spinning Mills Ltd. V/S International Finance Corporation and another, 2002 SCMR 450.
4. Notice of the listed applications and this petition was ordered on 06.02.2013, which was issued by the office on 02.03.2013 to the company and to the Additional Registrar, Securities and Exchange Commission of Pakistan, Karachi. As per the bailiff’s report dated 22.03.2013, the notice was duly served on the company on 05.03.2013. Notice was also sent to the company through TCS and registered post on 19.03.2013, and was published in the daily ‘The NEWS’ on 08.03.2013 and the daily ‘JANG’ on 09.03.2013. Notice of this petition was also published in the Gazette of Pakistan Part-VI. Para-wise comments dated 19.04.2013 were filed on 30.05.2013 by the Joint Registrar of Companies, Company Registration Office, Karachi, Securities and Exchange Commission of Pakistan, wherein it is stated that the Court may pass such order as may be deemed fit in this matter. No objection whatsoever has been received from any quarter to oppose this petition. No counter affidavit or objections have been filed till this date by the company either in reply to the listed applications or to the main petition. Today when the matter was taken up for hearing, Mr. Adnan Iqbal Chaudhry advocate made a statement that he was holding brief on behalf of Mr. Salman Butt advocate. He requested that the matter may be adjourned as Mr. Salman Butt advocate would be filing his power on behalf of the company. As the company was duly served on 05.03.2013, that is about 9½ months ago, and no step has been taken by it so far to contest this matter or even to engage a counsel for such purpose, the request made today for adjournment on this ground at this belated stage, is absolutely unjustified and unreasonable.
5. It is a well-established principle that in the event of failure to pay debt in accordance with the statutory notice of demand under Section 306 of the Ordinance, insolvency was to be presumed though it could also be proved in other ways. In the instant case, as the company has neither responded to the notice of demand issued by the petitioner, nor has the petitioner’s debt been cleared, statutory presumption as to the commercial insolvency of the company has been created.
6. I have examined the Annual Report of the company for the financial year ended on 30.06.2012, which reveals as under :
a) In Clause (g) of their “Report to the Members” at page 11, the Auditors of the company have reported that “…… the company incurred a net loss of Rupees 9,288,406,176 during the year ended June 30, 2012 and as of that date, the company’s current liabilities exceeds(!) its current assets by Rupees 6,225,593,721. These conditions, along with other matters as explained in note 1.3 indicate the existence of a material uncertainty that may cast significant doubt about the company’s ability to continue as a going concern……”.
b) In the Balance Sheet at page 12, the authorized capital of the company has been shown as Rs.300,000,000 ; and, the issued, subscribed and paid up capital has been shown as Rs.189,838,990. A huge amount of Rs.8,515,922,408 has been shown as the “current liabilities” of the company, which are more than four times the amount of the paid up capital and about 2½ times the amount of the authorized capital. The said current liabilities include inter alia Rs.1,379,876,446 on account of “trade and other payables”, Rs.6,054,722,175 towards “short term borrowings”, and Rs.969,375,725 towards “current portion of non current liabilities”.
c) At page 13, the value of the “current assets” of the company has been shown as Rs.2,290,328,687, which is about four times less than the “current liabilities” of Rs.8,515,922,408 of the company, shown and admitted in the Balance Sheet.
d) At page 14, the total loss of the company before taxation for the year ended 30.06.2012 was Rs.9,411,033,972.00, resulting in a loss of Rs.489.28 per share.
e) Page 17 reveals that the company has a total negative equity of Rs.6,831,837,101.00.
f) In Note 1.3 on page 18, the management of the company has admitted that the company is not able to sustain its normal operations ; has liabilities that exceed its current assets by Rs.6.226 billion ; and, may be unable to realize its assets and discharge its liabilities in the normal course of business.
6. In the case of Hala Spinning Mills Ltd. relied upon by the learned counsel for the petitioner, it was held inter alia by the Hon’ble Supreme Court that on the basis of statement of account and balance sheet duly audited by the auditor of the company opinion can be formed that the company is financially solvent to clear its liability or otherwise ; as a consequence whereof, winding-up petition can be disposed of accordingly ; and, if it is impossible to carry on business of the company except at loss and there is no reasonable hope that the object of trading at profit can be achieved and probable assets are insufficient to meet the existing liability, then winding-up of the company becomes inevitable. Here I would like to refer to the case of Messrs Ali Woolen Mills V/S Industrial Development Bank of Pakistan and 3 others, PLD 1990 Supreme Court 762, wherein the Hon’ble Supreme Court was pleased to hold that what the Court is required to see is whether the company is commercially insolvent, that is, whether it is unable to pay its current demand, though its assets when realized might exceed its liabilities. As observed above, in the instant case the current liabilities of the company are more than four times the amount of its paid up capital and about 2½ times the amount of its authorized capital, and the value of its current assets is about four times less than its current liabilities.
7. The above disclosure by the company and its Auditors in the latest accounts regarding the financial position of the company is extremely alarming. The Auditors have reported that the company incurred a net loss of Rs.9,288,406,176 during the year that ended on 30.06.2012 ; as of that date, the company’s current liabilities exceeded its current assets by Rupees 6,225,593,721 ; and, there exists material uncertainty and significant doubt about the company’s ability to continue as a going concern. It has come on record that the current liabilities of the company are more than four times the amount of its paid up capital and about 2½ times the amount of its authorized capital ; the value of the current assets of the company is about four times less than its current liabilities ; the company has a total negative equity of Rs.6,831,837,101 ; and, the total loss sustained by the company before taxation for the year, ended on 30.06.2012, has resulted in a loss of Rs.489.28 per share. The State Bank of Pakistan has also confirmed that a gigantic amount, of Rs.178,755,567,976, is under litigation in respect of the company. The above indicators are more than sufficient to show that the company has miserably failed to survive as a going concern despite enormous borrowings of Rs.8,421,603,138.00 from various financial institutions, including the petitioners. In such a sorry state of affairs, had the management of the company been acting in a prudent, sincere and bonafide manner, it ought to have voluntarily resolved long ago that the company should be wound up in order to avoid further losses to the shareholders and creditors.
8. From the material available on record, I am convinced that the company has ceased to be a going concern ; it is cripplingly indebted to a number of creditors, including the petitioners ; it has become commercially insolvent and is unable to pay its debts ; its paid up capital has been completely wiped out ; there appears not even the remotest possibility of its revival ; its further existence or continuance would only multiply its liabilities to the detriment of its creditors and shareholders ; and, its winding-up has become inevitable. As observed above, no objection to this petition has been received from any quarter, and statutory presumption as to the commercial insolvency of the company has been created. Therefore, the listed applications and the main petition are allowed as prayed, and the respondent company Gulistan Textile Mills Limited is hereby ordered to be wound-up. The Official Assignee is appointed as the official liquidator, who in the first instance, shall take over complete charge and control of the affairs and assets of the company. He shall perform all such duties and functions and shall exercise all such powers as required under the law. As the mills of the company are situated at Bahawalpur, Vehari and Sheikhupura, the official liquidator shall be authorized to seek assistance of such persons at the said places as he may deem fit and proper in the best interest of the creditors and shareholders, and for the expeditious winding-up of the company.
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