Full Judgment Text & Judicial Ruling

P L D 2024 Lahore 315 Before Jawad Hassan, J NETHERLANDS FINANCIERINGS MAATSCHAPPIJ VOOR ONTWIKKELINGSLANDEN N.V. (F.M.O.)---Petitioner Versus MORGAH VALLEY LIMITED and SECP---Respondents Civil Original No. 08 of 1989, decided on 20th December, 2022.* (a) Civil Procedure Code (V of 1908)--- ----S. 89-A, O. IX-A & IX-B---Alternative Dispute Resolution Act (XX of 2017), S. 2 (i)---Mediation---Object, purpose and scope---Mediation is used to settle contract, interpersonal and human resource conflicts---Mediation involves intervention of a third person, or mediator, into a dispute to assist parties in negotiating jointly acceptable resolution of issues in conflict---Mediator meets with the parties at a neutral location where parties can discuss the dispute and explore a variety of solutions---Each party is encouraged to be open and candid about its own point of view---Mediator, as a neutral third party, can view a dispute objectively and assist the parties in considering alternatives and options that they might not have considered---Mediator is neutral and does not stand for personal benefit from the terms of settlement, and is impartial in that he or she does not have a preconceived bias about how the conflict should be resolved---Mediation is a process where parties meet with mutually selected impartial and neutral person who assists them in negotiation of their differences---Such process brings in hope of getting parties to discuss settlement through a trustworthy and skilled mediator who encourages settlement freeing up valuable court time and resources. (b) Companies Act (XIX of 2017)--- ----Ss. 6, 276 & 277---Companies (Mediation and Conciliation) Regulations, 2018, Reglns. 3, 4, 9, 10 & 11---Company dispute---Mediation---Company Judge, duty of---Dispute between the parties was non-payment of loan amount extended by petitioner company to respondent company---High Court persuaded the parties to settle their dispute through mediation---Validity---Due to ever growing economic activism, stimulation and expansion of international investment, trade entities are eagerly and consistently falling in interactions, deals and transactions, not only with local citizens but with foreign business communities as well---In course thereof, parties aspire certain securities safeguarding and protecting their investments, interests and rights as well as guaranteeing resolution of trade/commercial/corporate disputes at the earliest and at the lowest costs of time and money, that too, under the umbrella of law---Using mediation as a technique to resolve trade/commercial/corporate disputes has now been transformed in a global movement---It is duty of Company Judge to protect interest of company and minimize adverse effect to it---Based on the strong principles to safeguard the interest of company and to resolve corporate dispute developed by Supreme Court in various judgments, provisions of Ss. 276 & 277 of Companies Act, 2017, can be invoked in order to protect interest of company and the Court can initiate process of Early Neutral-Party Evaluation ( ENE ) and then mediation---Parties are encouraged throughout the litigation process to attempt to settle disputes, for good reason, and such decision may encourage more litigants to explore settlement possibilities before being ordered to do so by the court---Mediation outcomes not only save time and money of parties, but it also reduces load of work in Courts as well as it is the most updated way on resolutions based on the divine culture of peace ---Issue between the parties pertained only claim of debt amount, which issue stood settled in the way that receipt of amount was admitted by petitioner---Disputed debt claim stood thoroughly satisfied and there was no justification for winding up the Company in such a scenario---Petition was disposed of accordingly. Daniels v The Commissioner of Police for the Metropolis [2005] EWCA Civ 1312; Faisal Zafar and another v. Siraj-ud-Din and 4 others, GENOME Pharmaceuticals and SECP 2024 CLD 1; M.C.R. (Pvt.) Ltd., Franchisee of Pizza Hut v. Multan Development Authority and others 2021 CLD 639; Federation of Pakistan and others v. Attock Petroleum Ltd. Islamabad 2007 SCMR 1095; The Additional Registrar Company v. Al-Qaim Sugar Mills Ltd. 2021 CLD 931; Saudi Pak Industrial and Agricultural Investment Company Ltd. v. Chenab Limited 2020 CLD 339; Messrs U.I.G. (Pvt.) Limited through Director and 3 others v. Muhammad Imran Qureshi 2011 CLC 758; Messrs Alstom Power Generation through Ashfaq Ahmad v. Pakistan Water and Power Development Authority through Chairman and another PLD 2007 Lah. 581; Atlantic Pipe Corp. (304 F.3d 135 (1st Cir. 2002); African-American Slave Descendants Litigation MLD No.1491, Lead Case No.02 C 7764 (307 F. Supp. 2d 977 (N.D. Ill. 2004); Messrs Afcons Infra Ltd. and another v. Messrs Cherian Varkey Constn (2010 (8) SCC 24); Pitamber B Ruchandani v. Arti Bharatbhai Ruchandani and 5 (O.J.Appeal No. 7 of 2014); James Churchill v. Merthyr Tydfil County Borough Council [2023] EWCA Civ 1416; Halsey v. Milton Keynes General NHS Trust [2004] 1 WLR 3002; Kelly v. Miller and others [2014] EWCA Civ 1151; Wright v. Michael Wright Supplies Ltd [2013] EWCA Civ 234; Ghaith v Indesit Company UK Ltd. [2012] EWCA Civ 642; DK (Iraq) v. Secretary of State for the Home Department [2008] EWCA Civ 1169; Ezsias v. Welsh Ministers [2008] EWCA Civ 874; R (on the application of) v. Birmingham East and North Primary Care Trust [2008] EWCA Civ 465; Burchell v. Bullard and others [2005] EWCA Civ 358; Day v. Day [2002] EWCA Civ 1842; Circuits Ltd. v. Coates Brothers Plc [2002] EWCA Civ 333; Lt. General (Retd.) Mahmud Ahmad Akhtar and another v. Messrs Allied Developers (Private) Limited and others 2022 CLD 718; Shaheen Merchant v. Federation of Pakistan and others 2021 PTD 2126; Ms. Shehla Zia and others v. WAPDA PLD 1994 SC 693; D. G. Khan Cement Company Ltd. v. Government of Punjab through Chief Secretary, Lahore and others 2021 SCMR 834; Messrs Bahria Town (Pvt.) Ltd. through Manager (Operations) v. District Consumer Court, Rawalpindi and 2 others PLD 2022 Lah. 488; Ch. Fayyaz Hussain v. Province of Punjab and others PLD 2022 Lah. 1; The Additional Registrar Company v. Al-Qaim Textile Mills Limited 2021 CLD 931; Messrs Jet Green (Pvt.) Limited v. Federation of Pakistan and others PLD 2021 Lah. 770; Saif Ur Rehman Khan v. Securities and Exchange Commission of Pakistan (SECP) through Chairman and 2 others 2022 CLD 1460 and Tariq Iqbal Malik v. Messrs Multiplierz Group Pvt. Ltd. and 4 others 2022 CLD 468 rel.

Anwar Kamal, Senior Advocate Supreme Court with Muhammad Umar Khan Vardaq, Advocate Supreme Court for Petitioner. Malik Qamar Afzal, Advocate Supreme Court with Malik Shahriyar Qamar Afzal, Raja Asad Iqbal Sati and Usman Jillani and Barrister Zainab Nasir along with Nasir Jabbar Khan for Respondent. Muzaffar Ahmad Mirza, Executive Director, Legal Affairs with Adeel Peter and Hassnain Raza, SPP for SECP. Malik Amjad Ali, Additional Advocate General. M. Kamal Hassan, ENE Mediator with M. Bilal Riaz and Barrister Mian Sheraz Javaid. Ch. Ali Abbas, Advocate for IDBL Bank with Officials of Bank namely Faizan Khan, Officer Grade-II, IDBL and Zargham Shah. Sadique Akbar Abbasi, Advocate Supreme Court for NBP. Attiq-ur-Rehman Kiani, Advocate Supreme Court, Official Liquidator (Applicant in C.Ms. Nos. 7 and 8 of 2022) Syed Bulent Sohail and Zarmeeneh Rahim. Malik Aneeq Ali Khatana, Barrister S.M. Hafeez Shah. Rashid Mehmood, Civil Judge 1st Class/Research Officer Lahore High Court (Rawalpindi Bench). Date of hearing: 20th December, 2022. Each will have to accept that those who live by the sword must risk dying by the sword as well. That is the inevitable risk of litigation . What can the court do to prevent what, to those outside the litigation, may seem like an unseemly, or at least uncommercial, squabble? We can and we do encourage mediation, the earlier the better. It does have an extraordinary knack of producing compromise, even where the parties appear, at the start, to be intractably opposed.1 (Sir Alan H. Ward, Judge, Court of Appeals, England & Wales) JUDGMENT JAWAD HASSAN, J.---Pursuant to short order dated 20.12.2022, this petition was disposed of in terms of settlement agreement (Mark-A) with the reasons to be recorded later which are now being recorded through this judgment. 2. After passing of aforesaid order, on 08.04.2023 the parties filed an application to confirm the payment made to the Petitioner and other creditors. On 23.02.2024 C.M.No.08 2024 was filed by Mr. Anwar Kamal, Sr. ASC and Mr. Muhammad Umer Khan Vardag, Advocate for placing on record relevant documents i.e. Compromise/Settlement dated 21.08.2023 executed between the IDBL and consortium banks with Nasir Jabbar Khan, shareholder/director of the Company according to which payment has also been made to all other creditors. Besides two receipts of first and second installment (Annex-B) along with loan clearance certificate as per clause 3 of abovestated compromise are also attached. The above said Compromise/Settlement is made part of this file as Mark-B. This application is allowed subject to all just and legal exceptions. Another C.M.No.07 of 2024 was filed by ENE Mediator namely Muhammad Kamal Hassan, Advocate for confirming the completion and conclusion of disputes between the parties according to which all amounts and dues have been paid by the Respondent to the Petitioner and there remains nothing outstanding in this regard. This application is also allowed. I. OVERTURE 3. This detailed order is intended to decide this longstanding dispute of four (04) decades continuing amongst the parties in relation to agreement executed between Netherlands Financierings Maatschappij Voor Ontwikkelingslanden N.V. (F.M.O.) (the Petitioner ), the Dutch Development Bank and the Morgah Valley Limited (the Company ) way back forty-two (42) years on 26.03.1982 in relation whereto instant petition was brought in the year 1989 that was hanging fire due to non-payment of loan i.e. DFI 1,001,704.50 by the Company to the Petitioner which have now finally been paid/received by the concerned party through process of mediation by this Court. This process strengthens the confidence of foreign investors which in the case in hand is the Petitioner , the Dutch Development Bank structured as a bilateral private-sector international financial institution, who has received the amount from the Company based on the principles of Doctrine of Expeditious Resolution of Corporate Disputes through Mediation developed by this Court in Faisal Zafar and another v. Siraj-ud-Din and 4 others, GENOME Pharmaceuticals and SECP (2024 CLD 1). Furthermore, this Court while establishing the Commercial Courts in Punjab as referred in M.C.R. (Pvt.) Ltd., Franchisee of Pizza Hut v. Multan Development Authority and others (2021 CLD 639) has held that it is the duty of the Courts in Pakistan to see the rights of the parties and to protect their interest in order to build confidence of investors in Pakistan . The mediation and ADR for the purpose of resolution of corporate and tax disputes has consistently been encouraged and insisted by the Supreme Court of Pakistan, in order to avoid unnecessary delay, in resolving such disputes as well as to safe precious time of Courts and expenses of parties. In said regard Supreme Court of Pakistan has held in Federation of Pakistan and others v. Attock Petroleum Ltd. Islamabad (2007 SCMR 1095) that The centuries old traditional method of settlement of private dispute through negotiation is not only familiar in the modern world, but this voluntary scheme for settlement of tax dispute through mediation and negotiation is an effective method to be followed. II. CONTEXT 4. Brief facts of the case are that the Petitioner , vide agreement dated 26.03.1982 and subject to P.M.O. General Condition to loan agreements, lent Dutch Florins 815,865.03 to the Company that was secured by hypothecation of all the machinery and equipment by creating floating charge over all the assets, properties and goodwill of the Company by means of agreement dated 20.02.1983 (the Agreement ). It was registered with the Registrar of the Joint Stock Companies on 22.02.1983 according to which the Company had to pay back loan in installments of DFl 56,250 every six months. However, the Company failed to make payments despite several reminders. Vide letter dated 01.10.1989, the Petitioner served a notice under Section 306 of the Companies Ordinance, 1984 (the Ordinance ) calling upon the Company to pay back within 30 days the due amount i.e. DFl 1,001,704.50 being the principal and the interest due on the said date in accordance with the terms of the Agreement . The Company was duly intimated that in case the amount is not paid within the said 30 days, winding up proceedings shall be initiated. On failure to repay loan amount by the Company , winding up petition was filed and, after hearing the parties, winding up order was passed vide order dated 11.07.2003 (the Winding Up Order ), against which Civil Appeal No.1239/2003 was preferred, but the same was dismissed in default by the Supreme Court of Pakistan on 23.02.2006, hence, execution proceedings were conducted before this Court and Official Liquidator (OL) was also appointed, but thus far not a single penny has been paid to the Petitioner since the approval of the loan pursuant to the Agreement . On 18.10.2018, this Court noted that Raja Shahzad Zulqarnain, Official Liquidator (OL) was not interested in performing his functions, therefore, the order of his appointment was recalled and Mr. Attique-ur-Rehman Kiani, Advocate was appointed as OL for the said purpose. Until the mediation process in 2022, not a single penny was paid to the Petitioner by the Company , hence, this Court adopted the approach of mediation to resolve the issue between the parties keeping in view international image of Pakistan s financial institutions for future investment and financing which is crucial these days. III. PETITIONER S SUBMISSIONS 5. Messrs Anwar Kamal, Sr. ASC and Muhammad Umar Khan Vardaq, Advocate submitted that in the Winding Up Order only four months time was given to the Company for payment of Rs.3.2 million and now almost two decades have been lapsed, therefore, they vehemently objected to the revival of the Company . They submitted that the Company had filed an appeal before the Supreme Court of Pakistan, which was dismissed for non-prosecution as well. Mr. Anwar Kamal, Sr. ASC added that this petition was filed under the provisions of the Ordinance which has now been repealed through enactment of The Companies Act, 2017 and agrees with approach of mediation for the payment of claimed amount and in this regard he sought instructions from his client for such mediation to resolve longstanding issue. He put much emphasis that mediation is a new concept in Pakistan for betterment of ADR which is more effective, time efficient and less expensive. IV. RESPONDENT S SUBMISSIONS. 6. Malik Qamar Afzal, ASC learned counsel for the Company submitted that they approached the Securities Exchange Commission of Pakistan (the SECP ) for revival of the Company and also requested for recalling of the Winding Up Order in the light of the judgments of this Court reported in The Additional Registrar Company v. Al-Qaim Sugar Mills Ltd. (2021 CLD 931) and Saudi Pak Industrial and Agricultural Investment Company Ltd. v. Chenab Limited (2020 CLD 339), relevant part thereof reads as: 31. Similarly, it is apparent from the above cited case laws that winding up is the last thing that the court would do and not the first thing that the court would do having regard to its impact and consequences, including (a) closing down of a unit which produces some goods or provides some services; (b) loss of employment of numerous persons and resulting grave hardship to the members of families of such employees; (c) loss of revenue to the State by way of collection that the State could hope to make on account of customs or excise duties, sales tax, Income Tax, etc. The effect of winding up must be considered -putting an end to the business or an industry or an entrepreneurship -and the court should not be too keen or too anxious to continue winding up of a company and must give weightage if there is any possibility of resurrecting the company. Learned counsel for the Company further adds that pursuant to the Winding Up Order , the Company has agreed to pay Rs.3.2 million to the Petitioner . The relevant part is reproduced as under: In terms of observations/directions made by the Hon ble Chief Justice Ajmal Mian (as his Lordship then was) in the cited case of Messrs Glorix Textile Mills Ltd (1999 SCMR 1850), it is observed that in case the respondent agrees to pay the said amount of Rs.32,00,000/- to the Petitioner, it may make proper application before this Court but this will be permissible only for a period of four months commencing 1.8.2003. In response thereto, learned counsel for the Petitioner Mr. Muhammad Umar Khan Vardaq, Advocate submitted that the Petitioner provided finance to the Company in foreign exchange, therefore, the Petitioner does not accept the offer made by learned counsel for the Company . V. SUBMISSIONS MADE BY THE SECP 7. Mr. Adeel Peter, Advocate for the SECP stated that they have already submitted report, which depicts that the Company vide letter dated 04.02.2022 has filed statutory forms pertaining to year 2017-2021 along with Form-39 and 26 for converting the Company into active status and report of special resolution in that regard, however, the same have not been processed due to the pendency of this petition. 8. Arguments heard. Record perused. VI. PROCEEDINGS OF THE COURT 9. In resolving the dispute, on 15.02.2022, Malik Qamar Afzal, ASC for the Company filed C.M.No.10/2022 along with Pay Order (dated 11.02.2022) of Rs.3.2 Million in the name of the Petitioner for settlement of the credit amount; a copy thereof was handed over to learned counsel for the Petitioner . It was noted that during pendency of this petition, the SECP was arrayed as party to the proceedings and on direction of this Court, the SECP filed various documents showing current status of the Company , including the fact whether any asset of the Company has been charged with the SECP or not. The case was called to resolve this matter amicably by paying the amount to the Petitioner with the exchange rate and also to conclude all other matters pending before various Courts because under the Companies Act, 2017 (the Act ) the Court has to safeguard the rights of the creditors as the Act provides alternate mechanism for amicable resolution of the corporate disputes. In order to settle the corporate dispute, this Court has already passed various judgments avoiding the winding up for the betterment of the Company and the creditors by developing the jurisprudence of commercial morality in Pakistan. Therefore, to resolve this corporate dispute pending before this Court since 1989, both the parties were directed to settle the matter after consultation with their clients and seeking instructions from them, keeping in mind the fact that the winding up petition was filed on 08.12.1989 and in paragraphs 6 to 8 of the petition, the Petitioner has mentioned the date of the agreement as 26.03.1982 and amount to be paid to the Company and its reminder before the winding up, however, it is to be noted that the Winding Up Order passed by this Court under the Ordinance (since repealed) was to the extent of amount of Rs.3.2 Million, which was then appealed under Section 10 of the Ordinance before the Supreme Court of Pakistan in Civil Appeal No.1239/2003, but the same was dismissed in default vide order dated 23.02.2006. 10. Pertinent to mention here that pursuant to the aforementioned winding up, the Company filed a petition to recall the Winding Up Order , which was contested by the Petitioner by filing all the relevant documents, including the aforesaid order of the Supreme Court of Pakistan. The matter has not been resolved so far and despite appointment of the Official Liquidator, not a single penny has been paid to the Petitioner . In the judgment reported as M.C.R. (Pvt.) Ltd., Franchisee of Pizza Hut v. Multan Development Authority and others (2021 CLD 639), this Court has already discussed the issue of foreign investment and the role of foreign investors in Pakistan. Relevant paragraph No.29 of the said judgment is reproduced hereunder for ease of the matter:- 29. Since the Pizza Hut is an international chain and entered into lease agreement with WASA, it is the duty of the Courts in Pakistan to see the rights of the parties and to protect their interest in order to build confidence of investors in Pakistan but at the same time the interest of government functionaries has also to be examined regarding financial interest of the Government. The learned Civil/Commercial Court is, therefore, directed to decide the case expeditiously but not later than 60 days from the receipt of copy of this judgment in accordance with law. 11. Therefore, in order to proceed further in the matter for amicable settlement between the parties, learned counsel for the parties were directed to convene first negotiation meeting on 22.02.2022 at the mutually agreed convenient place by focusing on the following:- (i) Amount paid by the Petitioner to the Company directly under the winding up petition and the documents appended with and mentioned in the petition (in Paragraphs 5 to 7); (ii) Time, date and exchange rate of the amount paid and current exchange rate of Dutch Guilder; (iii) Properties of the Company charged with the SECP ; (iv) Pending cases between each other before this Court and other Courts; (v) A draft of the settlement between the parties with the token of Rs.3.2 million, Pay Order of which has already been filed by the Respondent along with C.M.No.10/2022 to show his willingness to pay the debt for the anti-winding up order, as already delivered by this Court in Saudi Pak Industrial and Agricultural Investment Company Ltd. v. Chenab Limited (2020 CLD 339) and The Additional Registrar Company v. Al-Qaim Sugar Mills Ltd. (2021 CLD 339). 12. Pursuant to the order dated 15.02.2022, Mr. Muhammad Kamal Hassan Advocate/ENE Mediator submitted the minutes of meetings of the parties and counsel, convened on 22.02.2022 at SECP Head Office, Islamabad. Mr. Usman Jillani, Advocate for counsel for the Company also submitted an OFFER FOR SETTLEMENT of Global Disputes between the parties, which was made part of record. To avoid further delay the case was fixed for 01.03.2022. In the meanwhile, learned counsel for parties had been allowed to amend the offer made by the Company to narrow down the settlement. 13. On 06.10.2022, pursuant to Early Neutral-Party Evaluation (the ENE ) made as per the preamble of the Act , which states that the Act has been enacted for the expeditious resolution of corporate disputes, read with the provisions of Sections 6 and 277-278 of the Act , the parties had a meeting as reflected from order dated 10.02.2022 and they had proposed the first negotiation on 22.02.2022. In order to resolve the issue once for all, under the ENE , keeping in view the fact that matter is pending since 1989 and it only relates to the signing of agreement(s) in the year 1982, about 40 years ago, as earlier noted by this Court in order dated 15.02.2022, more time was granted to the parties for its amicable resolution. Then, on 23.02.2022, it was informed to the Court that the matter was still not resolved, hence, by invoking powers of the Company Judge under Sections 277 and 278 of the Act on 23.02.2022, Mr. Kamal Hassan, Advocate was appointed as ENE Mediator who submitted his report regarding laws pertaining to money trail for the amount of Rs.6,240,000/- deposited in this Court by the Company as a settlement amount. 14. On 04.03.2022, Malik Qamar Afzal, ASC for the Company submitted revised settlement agreement dated 04.03.2022, which was made part of record as Mark-C. It is important to mention here that the Company had already submitted first offer for settlement on 23.02.2022, which is on record as Mark-A and Mr. Muhammad Kamal Hassan, Advocate (on Court s call) has submitted the minutes of meetings of the Parties and counsel, convened on 22.02.2022 at SECP Head Office, Islamabad, which is on record as Mark-B. 15. Malik Qamar Afzal, ASC stated that for the purpose of transparency, to avoid any apprehension of money laundering and to satisfy the requirement of Financial Action Task Force (FATF), SECP as well as National Bank of Pakistan (NBP), the Company has removed all the anxiety of the Petitioner by annexing money trail record/documents with the revised settlement agreement (Mark-C). 16. Malik Qamar Afzal, ASC further submitted that pursuant to the…

Read the unabridged text and precedent citation network on Al Wakeelo Legal Research Platform.

Related Legal Research & Directories

• Browse all judgments from Lahore High Court
• Search Pakistani statutes: Constitution of Pakistan 1973, PPC, CrPC, CPC & Family Laws
• Analyze this case with Al Wakeelo AI Legal Assistant