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Petitioner: Additional. Registrar Of Companies VS Respondent: M.G. Realtors (Pvt.) Limited and 9 JUDGMENT
Court Name: Lahore High Court Judge(s): Shams Mehmood Mirza Title:Additional. Registrar Of Companies vs M.G. Realtors (Pvt.) Limited and 9
JUDGMENT
Reported As: 2021 CLD 1158 Result: Petition allowed Judgment JUDGMENT C.M. No. 6 of 2015 and Main Case SHAMS MEHMOOD MIRZA, J.---This winding up petition was filed by the Additional Registrar of Companies against respondent No.1 Company under section 305 read with section 465(3) of the Companies Ordinance, 1984 (the Ordinance ). This judgment shall also decide Civil Original No.1 of 2007 Joint Registrar of Companies v. M.G. Hertz and others and Civil Original No2 of 2007 titled Joint Registrar of Companies v. Asia Challenge Investment and others as facts of all the three cases are intermingled and are identical in nature. 2. Basic facts leading up to the filing of the present petition as well as connected petitions are as follows. Respondent No. I company (M.G. Realtors ) was incorporated on 15.12.1994. Its main purpose was construction of bridges, roads, spillways, highways, reservoirs, airports, seaports and structure of all description etc. In the year 1995, the Federal Government approved "Islamabad New City. Project" (the Project ) within the territorial jurisdiction of Islamabad City Territory . The Project was conceived as a public private partnership. M.G. Realtors entered into a Joint Venture Agreement on 22.05.1995 (NHA JV Agreement ) with Ministry of Housihg and Works, Government of Pakistan and National Highway Authority (NHA). For the purpose of developing, planning and designing the Project, it was proposed that over a total area of 20000 Kanals be acquired in 3 phases in the following manner: Phase-I: 6,000 kanals within 03 months Phase-II: 6,000 kanals within 06 months
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Phase- III:8,000 kanals within 1 year Respondent No.1 company in Civil. Original No.1 of 2007 namely M.G. Hertz (Pvt.) Limited (M.G. Hertz ) also entered into a Joint Venture Agreement dated 24.08.1995 (CDA JV Agreement ) with Capital Development Authority (CDA) for development of the Project. Under the terms of CDA JV Agreement, M.G. Hertz undertook to procure 7500 Kanals of land on the terms mentioned in the said agreement. The two joint venture agreements shall henceforth collectively be referred to as JV Agreements. In terms of NHA JV Agreement, 100% financing was to be provided by M.G. Realtors and it was also responsible for providing 750 Kanal freehold land to National Housing Authority/respondent No.6 as. security . 'The land of the proposed project was acquired through firms and private individuals. A similar arrangement was made in CDA JV Agreement. Advertisement campaign for the Project was carried out in national press and general public was influenced/invited to invest in the Project although the land had not been acquired by the two companies and the requisite NOC was not obtained from CDA/respondent No.5. Be that as it may, the two companies starting collecting money from the general public in July 1995. In fact, M.G. Realtors applied to CDA/respondent No.5 for NOC on 20.08.1995 and a conditional approval was granted on 25.03.1996 which was valid only for 30 days subject to the terms and conditions contained therein. In connection with the JV Agreement, an agreement to sell was executed with State Life Insurance Corporation of Pakistan (SLIC ) on 30.06.1996 which paid an amount of Rs.209,533,320/- for purchase of 800 residential and 200 commercial plots in the Project even though the land by then had not yet been acquired by the two companies. 3. The Cabinet Committee as also the then Ehtasab Cell took notice of the fraudul ent affairs of the two companies in December 1997 whereafter A.G. Ferguson, a firm of Chartered Accountants, was appointed to conduct the forensic audit of the affairs of the said companies. The report prepared by A. G. Ferguson unearthed fraudulent activities and embezzlement by the management of the two companies, the details whereof are given in paragraphs 18 to 21 of the petitions. Consequently , FIR No.6 of 1997 was lodged with the Federal Investigation Agency . 4. M.G. Realtors then entered into an agreement dated 17.02.1998 with Nationa l Highway Authority/respondent No.6 and Asia Challenge Investment (Pte) Limited/respondent No.8 (hereinafter referred to as Asia Challenge ). In terms of the said agreement, amongst other , the Project was to be taken over by Asia Challenge and the funds obtained from SICL and general public were to be returned by it. The project was to be renamed as Soan City . 5. The Economic Coordination Committee of the Cabinet (ECC ) in its meeting held on 24.08.2004 constituted a committee ( the ECC Committee ) comprising of the following persons to review the case of the Project. (i) Deputy Chairman, Planning Commission; (ii) Attorney-General for Pakistan; (iii) Secretary , Ministry of Housing and W orks; and (iv) Secretary , Finance Division. The ECC Committee after inquiring into the matter gave its recommendations which are reproduced as under: (a) the companies may be got declared as defaulters. (b) official liquidators may be got appointed for disposing off the properties and utilizing sale proceeds for payment to affectees. (c) NAB to initiate criminal proceedings. 6. The Registrar of Companies filed a reference with the Securities and Exchange Commission of Pakistan (SECP ) under Section 309 (b) of the Ordinance whereafter a show cause notice dated 20.04.2006 issued by SECP was served on M.G. Realtors , which was not responded to by it. The necessary permission was accordingly granted on 08.05.2006 for filing the present winding up petition. A similar notice was issued to M.G. Hertz and after its failure to respond to the said notice, permission was also granted to file the winding up petition against it. 7. The grounds on which winding up of the two companies was sought included the intent of the sponsors of the companies to indulge in fraudulent activities and to embezzle the funds of the general public. It was also alleged that the companies got engaged in business activities, which were not authorized by their Memorandum and
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Articles of Association. The companies, it was furthermore alleged, were unable to pay their debts and admitted liabilities. The petitions also stated that the two companies failed to hold their Annu al General Meetings since 2000 and also failed to maintain their accounts and carry out audits. 8. After institution of this petition, this Court issued notices to M.G. Realtors on 26.07.2006. As M.G. Realtors refused to accept notice and did not enter appearance, ex-parte proceeding s were ordered against it on 28.09.2006. This Court on 06.11.2006 appointed the Provisional Manager for taking over the affairs of M.G. Realtors. Taking note of the fraud committed by M.G. Realtors on the general public, this Court ordered the Provisional Manager to undertake the process for demarcation of the land of the Project acquired by the two companies. This Court once again passe d orders on 11.09.2007 for appointment of another Provisional Manager . The ex-management of the Company filed C.M. No.73 of 2009 for recalling the order of appointment of joint Provisional Managers which was dismissed as withdrawn on 25.02.2009. 9. The Provisional Managers on 01.03.201 1 filed the list of claimants. On 20.11.201 1, this Court directed the Provisional Managers to submit a comprehensive report regarding: (a) progress of the case from inception till date; (b) endeavours made by the Provisional Managers for locating the record of properties and steps taken by them for demarcation and efforts made by them for seeking possession thereof; (c) litigation carried out by the ex- Management of the Company after appointment of Provisional Managers without seeking permission of this Court. 10. It would also be in order if reference is made to some of the reports filed by the Provisional Managers from time to time to ascertain the progress made by them in not only locating the scatte red properties acquired by the Company but the steps taken and efforts made by them for perfecting the title of the properties of the Project and seeking their partition. Report No. 1 Through this report, the Provisional Managers gave details about the pending cases by and against the two companies. Report No. 2 This report filed by the Provisional Managers mentioned the progress about the demarcation of the properties and the claims filed before the National Accountability Bureau. Report No. 4 The Court was informed about the claim of Asif Enterprises and Maqsood Brothers, the two entities who had supplied land to the Company pursuant to an Agreement. Asif Enterprises and Maqsood Brothers were thus impleaded as respondents Nos.10 and 1 1 respectively . Report No. 5 The details of the meeting of the stakeholders are given in this report It was also informed that the directors of the Company have absconded. Report Nos. 6 and 7 The provisional managers gave the list of claimants from whom money had been taken by the Company as well as revival plan given by respondents Nos.2 to 4. Report No. 9: This report listed out the details about the tampering of the record of the Company by the ex-management. Report Nos. 16 and 17 This report mentions the details of the settlement between the Company , respondents Nos.10 and 11 and IBECHS. The relevant particulars of report No.16 are mentioned in report No.18, which are detailed below . 11. The ex-management of M.G. Realtors filed C.M. No.6 of 2015 for bringing an end to the current proceedings and for rejection of the petition on the ground that the assets of the company far exceed its liabilities and as such the ground for winding up was not made out. During the course of arguments, it transpired that certain litigation had been initiated by the ex-management and Asif Enterprises after the appointment of the Provisional Managers in respect to the land the Project without seeking prior permission/leave of this Court. The Provisional Managers were accordingly directed to file a self-contained report on 20.1 1.2015. The said order reads as under:
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Learned provisional Managers are directed to submit a comprehensive report stating therein the progress of this case right from its inception till date. The said report shall also narrate the endeavors made by the learned Provisional Managers for locating the record of the properties, seeking their demarcation and efforts made for seeking possession of the properties. They shall also highlight in the said report the litigation which was carried out and defended by the ex-management of the respondent No.1 company after the appointment of provisional managers and without seeking permission of this Court. 12. Pursuant to the afore-mentioned order , the Provisional Managers filed report No.18. This is the most important report and, therefore, the material points brought forth through it shall be detailed hereunder: a. The land for Islamabad New City Project was procured through 02 Firms as well as through AOP, ASIF Enterprises and Maqsood Brothers. The land so purchased was entered into the Revenue Record in the name of CDA JV as well as NHA JV. At the time of appointment of the Provis ional Managers no record whatsoever was available with regard to the lands and properties of the three Companies involved in the Islamabad New City Project. The Provisional Managers had a series of meetings with the senior officers of CDA, NHA, NAB, ICT in order to retrieve the relevant documents / record of Islamabad New City Project. As per the winding up petition filed by SECP , the land of the Islamabad New City Project was scattered in thirteen different villages and was barren and rocky and some of the land was underneath River Sawaan and that mostly partial Khasra numbers were purchased. Land of the project was also not in the possession of the Company nor handed over to NHA. Land included in Haqooq Shamlat Deh (Hawai) was purchased which was not even demarcated or divided amongst the shareholders of respective Mouzas. The division of the land was as under: Total Land Purchased:5888 Kanals and 06 Marlas. Total Haqooq Shamlat:8474 Kanals and 08 Marlas TOTAL LAND): 14362 Kanals and 14 Marlas d. This Court ordered on 11.06.2007 "To resolve Na solution and t& safeguard the investment of innocent citizens, it is decided that demarcation of land and its possession be determined at the first instance" This Court further ordered that the CDA and NHA will jointly get the land demarcated. ADC (R) was directed to extend necessary help and finalize the process of demarcation and possession without delay . e. Pursuant to the orders of this Court, the Provisional Managers had a series of meetings with ICT. The Deputy Commissioner Islamabad also ordered the officers of 1CT to arrange and provide the official Revenue Record to the Provisional Managers. The record so obtained was submitted before this Court. The Provisional Managers held detailed meetings with the officers of NAB, NHA, CDA, ICT and Police to get the first ever demarcation of the Islamabad New City Project land in August 2007. With the joint efforts of all the departments concerned, the tedious task of demarcation of the project lands was made possible. The matter of partition of land in Joint ownership was brought up to the notice of this Court and after seeking direction from this, Court, the process of partition of Project land was set in motion by the Revenue Authorities. Under the orders of this Court, the Provisional Managers retrieved the details of the claimant/investors from NAB, CDA, NHA and FIA. These authorities provided the particulars of the claimants. ASIF Enterprises also filed its claims in the form of copies of Provisional Allotment Letters. h. Ex-Management had also submitted its Revival plan along with documents in support thereof. i. The complete list of lands (Mouza wise) as received from ICT was submitted before this Honorable Court. According to ADCG ICT, out of total of 14192 kanals of land, 8914 kanals land is Shamlat Deh whereas the remaining 5888 kanal land had ownerships status. Total land transferred in the name of CDA JV and NHA JV was 27870 kanals out of which 14065 kanals was under approved mutations and mutations of 13805 kanals had been cancelled from 1996 to date.
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First Nishandehi/Demarcation of the land of the project was made in 2007 under the orders of this Court and thereafter this Court in 2009 directed the ICT authorities for partition of the land. The status of land changed after partition. k. On initiation of the process of re-de marcation and possession, there were threats and hindrances from occupants, co-owners and as such this Court allowed the appointments of 05 Security Guards to guard, Patrol and station at Islamabad New City Project land. l. First ever of fice of the Islamabad New City Project was built with the permission of this Hon'ble Court. m. During the process of taking over possession of the INC Project land, it was revealed that 326 Kanals of land of the INC Project was under the possession of Intelligence Bureau Employees Housing Society (IBECHS). IBECHS admitted its possession over the land in question and stated that it had entered into an agreement to sell with regard to the land in question with ASIF Enterprises in 2007 i.e. after the appoin tment of Provisional Managers. IBECHS furthermore submitted that the land in question was inadvertently taken into possession by it due to misunderstanding and that as the said land is now included in the development area of Gulberg Islamabad, a project of IBECHS, therefore in lieu thereof IBECHS may be allowed to compensate the Islamabad New City Project. After meetings with IBECHS by the Provisional Managers under the orders of this Court, an understanding was reached between the parties for transfer of fully developed plots and accordingly an Exchange Deed was executed between the Provisional Managers and IBECHS. As per the Exchange Deed, IBECHS provided 82 files of fully developed plots in Gulberg Residencia, a project of IBECHS and in lieu thereof 326 Kanals of INC Project land was transferred in the name of IBECHS. n. As per the contents of the Petition, NAB Reference and Ferguson Report, the liabilities of the Companies include the following amounts General Public:Rs.8.30 Million SLIC: Rs.210.000 Million In addition thereto, Asif Enterprises is also a claimant. o. The assets of the companies include the following: (i) Physical possession of almost 3500 kanals of Land in dif ferent Mouzas. 10,000 kanals is under Shamlat land. (ii) 82 files of Gulberg Residencia Islamabad, project of IBECHS are in possession of undersigned Provisional Mangers. (iii) Amount retrieved by the efforts of Provisional Managers from various Financial Institutions in the sum of Rs.20.000 Million along with interest. (iv) The site office of INC Project was constructed on the main Japan Road, which consists of 2 Office rooms, 2 stores, kitchen, bathrooms, 2 Guard Rooms. A Transformer was also purcha sed and installed from IESCO authorities to provide electricity to the of fice and security guards. p. Respondents Nos. 11 and 12 i.e. ASIF Enterprises and Maqsood Brother claim that they procured land for the companies but the price was not paid to them. Respondents Nos. 11 and 12 and ex-Management of the Companies filed different cases against each other with regard to their respective claims as far back as 1998, which litigation was pending for adjudication before different courts. in March 2015, respondents Nos.1 1 and 12 and the ex-Management reached an out of Court settlement Agreement to resolve their long outstanding disputes and claims, which agreement was filed through C.M.A. in F.A.O. 34/2010 and in I.C.A. 125/2000. Vide order dated 19.03.2015, the said Agreement was made part of Court/Judicial' Record and the learned Islamabad High Court disposed of both the cases between the said parties. As, per terms of the Settlement Agreement, the claim of respondents Nos.10 and 11 over 7950 kanals of Land of INC Project was accepted and admitted by the ex-Management of MG Realtors and MG Hertz. As per terms and conditions of the Agreement, IBECHS has agreed to clear/adjust the liabilities of ex- Management of M.G. Realtors and M.G. Hertz in regard to the general public, SLIC and that of ASIF Enterprises. IBECHS also agreed to pay the consideration of 7950 Kanals of land respondents Nos. 11 and 12 which land stands in the name of M.G. Realtors/NHA JV. After the receipt of the agreed consideration, respondents Nos. 11 and 12 will transfer their entire
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right/claim in the said 7950 kanals in favour of IBECHS. As per the terms of the Agreement, the parties agreed that the terms thereof shall become effective only when this Court shall pass decision on the liabilities of general public, interest accrued and claim of SLIC. It was also decided that after payment of all the liabilities, the properties of INC Project will be transferred in favor IBECHS. r. In continuation of the IBECHS proposal, IBECHS submitted a Pay Order No 1429878, dated 06-072015 from MCB Aabpara Branch Islamabad, amou nting to Rs 83 million for payment of liabilities of the general public on behalf of M.G. Realtors and M.G. Hertz Pvt. Ltd. to the Provisional Managers, which has submitted in the official account pursuant to the order of this Court. s. IBECHS also submitted before this Court through an application that after payment of General public Liability (in original) it is also ready to settle the liability against SLIC and also submitted 03 checque to pay off the SLIC liability . The matter of liability of SLIC has not been settled so far as the SLIC is claiming huge amounts over and above its claim as interest. SLIC has also obtained a decree against NHA from the civil courts at Islamabad and has also filed its execution application, which is pending before the civil court. SLIC cannot claim the same relief from different fora. SLIC should either pursue the execution of its Decree or get claim amount from this Court. Ex- Management admitted the claim of SLIC in original in its application to stop winding up process. 13. While addressing arguments on C.M. No.6 of 2015, the learned counsel for Asif Enterprises and Maqsood Brothers stated that M.G. Realtors and M.G. Hertz were selected by the CDA under the National Housing Policy and accordingly the JV Agreements were executed. The JV Agreements were subsequently superseded by another joint venture agreement executed between M.G. Hertz, CDA and Asia Challen ge on 07.07.1996. M.G. Hertz entered into an agreement with Messrs Rai Farms on 06.12.1995 for procuring 2000'Kanal whereas M.G. Realtors executed agreement with Messrs Barkat and Co. on 14.12.1996 for purchas ing 1000 Kanal land. Through agreements dated 09.05.1997 Messrs Rai Farms and Messrs Barkat & Co. assigned their rights and liabilities under the agreements dated 06.12.1995 and 14.12.1996 in favour of Messrs Asif Enterprises and Maqsood and Brothers (Pvt.) Limited. Asia Challenge also entered into agreement with Messrs Asif Enterprises and Messrs Maqsood and Brothers (Pvt.) Limited on 09.05.1997 for procuring 9500 Kanal of land. Both Messrs Asif Enterprises and Messrs Maqsood and Brothers (Pvt.) Limited procured and transferred land in favour of M.G. Hertz and M.G. Realtors (Pvt.) Limited without receiving any sale consideration. As the project was abandoned, Messrs Asif Enterprises and Messrs Maqsood and Brothers (Pvt.) Limited filed Writ Petition No.2232 of 1999 at the Rawalpindi Bench of this Court which was disposed of on 01.08.2000 with the observations that Messrs Asif Enterprises and Messrs Maqsood and Brothers (Pvt.) Limited had stepped into shoes of Asia Challenge, Messrs Rai Farms and Messrs Barkat Ali & Co. by virtue of agreement dated 09.05.1997 and have become owners of land measuring 5472 Kanal. Against the said orders, I.C.A. No.125 of 2000 was filed which was disposed of on 26.10.2002 with a direction to Secretary Ministry of Interior to appoint members of the committee for resolution of disputes between the parties. The committee required Messrs Asif Enterprises to procure a 'NOC' from the competent authority of Singapore as Asia Challenge had alrea dy been declared insolvent. The need ful was done and letter dated 25.11.2004 was procured from the Insolvency and Public Trustee's Office, Singapore. Subsequently at the asking of Capital Development Authority , Asif Enterprises once again procured letter dated 25.11.2008 issued by the Insolvency and Public Trustee's Office, Singapore. Despite the production of aforementioned letters, the land in question could not be transferred in the name of Asif Enterprises. The ex-management of the companies filed two applications bearing C.Ms. Nos.71 1 and 712 of 2011 in I.C.A. No.125 of 2000 and C.Ms. Nos.90 and 91 of 2011 in F.A.O. No.34 of 2010 in which a settlement was arrived at between Asif Enterprises and Maqsood and Brothers (Pvt.) Limited and the ex-management whereby ownership rights of Asif Enterpri ses and Maqsood and Brothers (Pvt.) Limited over the land in question was acknowledged. The details of the said land are mentioned in the third schedule of the supplementary deed. It was, therefore, contended that Asif Enterprises and Maqsood. and Brothers (Pvt.) Limited have become owners of the said land as no party to the present proceedings has raised any dispute in regard thereto. It was furthermore submitted that 91 % of the said land falls in the case filed against M.G. Hertz in respect of which the official liquidator has already filed report No.18 in which it is categorically stated that no claim exists against the said company .
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14. The Provisional Managers in order to assess the claims made by Asif Enterprises and. Maqsood Brothers went to Singapore to ascertain the status of Asia Challenge. In this regard, they filed reports Nos.20 and 21, the relevant points whereof are noted hereunder: Report No. 20 a. Asia Challenge Investment (Pte) Limited was incorporated as a private limited company under section 19(4) of the Companies Act, CAP. 50 on 07.12.1995 as Company No 199508691E, by the Registrar of Companies and. Business of Republic of Singapore by its promoters Mr . Chan Wing Khei and Mr . Sim Cheng Chye. b. As per the record of SECP , Asia Challenge filed the documents for registration of its branch office in Pakistan on 13.06.1997 before the Company Registration of fice of SECP at Islamabad and it was registered on 17.1 1.1997. c. As per the contents of the petition, Asia Challenge was wound up on 27.08.199 9 by the competent Authority at Singapore. d. In terms of section 458 of the Ordinance, if a foreign company ceases to have place of business in Pakistan, it is required to give notice to the registrar of…
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