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Petitioner: HABIB CREDIT AND EXCHANGE BANK LTD. VS Respondent: HAMALIYA TEXTILE MILLS (PVT.) JUDGMENT
Court Name: Lahore High Court Judge(s): Amir Alam Khan Title:HABIB CREDIT AND EXCHANGE BANK LTD. vs HAMALIYA TEXTILE MILLS (PVT.)
JUDGMENT
Reported As: PLD 2000 Lahore 391 Result: Order accordingly Judgment JUDGMENT The petitioner, who purchased the assets of the company under liquidation, seeks direction that the Sub-Registrar of the area be directed to register the sale certificate in relation to land only of the said Mill or in the alternative, it is prayed that a separate sale certificate be issued in relation to land, machinery and equipment by treating them independent and distinct properties. 2. The facts forming background of the present application are that the petitioner made a composite bill of Rs,102 million allegedly for three sets of assets of Himaliya Textile Mills (Pvt.) Limited. According to the petitioner the aforesaid assets comprised land, building, machinery and equipment and the bid was bifurcated in respect of each as under:-- (i) Land Rs,2.5 million (ii) Building Rs,2.0 million (iii) Machinery and equipment. Rs,97.5 million Total: Rs,102 million The bid as offered was accepted on 30-4-1999 where after the petitioner filed C.M. No,1545-L of 1999 for the issuance of sale certificate which application was accepted, resultantly, the requisite sale certificate was ordered to be issued after adherence to the formalities as prescribed by law. It appears that the sale certificate was prepared and handed over to the Chief Executive of A.J. Spinning Mills on 24-7-1999. The petitioner then filed another application (C.M. No,1814-L-99) thereby seeking direction to the Tehsildar, Tehsil Ferozewala, District Sheikhupura to register the certificate of sale and make an entry in his "Bahi" in that regard and it was during the hearing of this petition that it transpired that the stamps as required under the law have not been affixed to
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the sale certificate, therefore, it was directed that the same be affixed before its presentation to the Registrar concerned. It was finally reported on 10-11-1999 that the requisite stamps have been affixed on the sale certificate, consequently direction was issued to the Sub-Registrar of the area to register the same. Simultaneously Tehsildar, Ferozewala District Sheikhupura was also directed to enter and attest mutation in the name of the purchaser. The sale certificate was refused to be registered by the Registrar and the reason therefor is not disclosed on the file. It was then that the purchaser filed yet another application (C.M. No,2368-L- 1999) thereby praying that the Registering Officer (Sub-Registrar) be directed to register the certificate of sale in relation to the land only one and in the alternative separate certificates of sale be issued in relation to land, machinery and equipment so that three matters be kept separate and distinct. 3. The question as to whether three distinct sale certificates could be issued in regard to the sale of land, building, machinery and equipment was entertained by me whereupon learned counsel for the petitioner was heard at quite some length and judgment was reserved. However, while dictating judgment it occurred to me that the sale certificate issued by the Company Bench of this Court may not be required to be stamped for Article 18 ordains that sale certificate issued by Civil Court or Revenue Court or a Revenue Officer only is required to be stamped under the said Article. The expression 'Court' and 'officer' as described in Article 18 opened another door as to whether the Company Bench of this Court acts as Civil Court in relation to issuance of sale certificate and as there were judgments available under Order 21, Rule 94, C.P.C., therefore, I decided to have full debate on the subject and in that exercise, I called upon all the counsel in the case as also Mr. Saleem Sehgal and Faisal Islam to assist me on the question as amicus curiae vide my order dated 10-12-1999. Mr. Ali Zafar opened the debate with reference to section 333 of the Companies Ordinance, 1984 whereby powers of official liquidator have been described. Sub-clause (f) of subsection (1) of section 333 ibid reads as under:-- The Liquidator in a winding up of the Court shall have power with the sanction either of the Court or of committee of inspection:-- (a)............... (b).............. (c).............. (d).............. (e).............. (f) to sell the movable and immovable property and things in auction of the company by public auction or private contract, with power to transfer the whole thereof to any person or company or to sell the same in parcels. It was argued with reference to clause 'f' afore-noted that the High Court while giving sanction to the sale made by the liquidator under section 333 of the Ordinance may also require the liquidator to follow the procedure as provided under Order XXI, Rule 94, C.P.C. And in particular require a sale certificate to be obtained from the Court or alternatively leave it to the liquidator to sell the assets directly through public auction or private contract. In amplification, it was argued that if the first course is adopted, the High Court may issue a sale certificate and then the question would arise as to payment of stamp duty on the said sale certificate. It was then argued that the Company Bench of the High Court does not act as Civil Court, therefore, no stamp is required to be affixed on the sale certificate.. Reference was made to section 7 of the Companies Ordinance and to the rule of law laid down in Ch. Muhammad Azam Cheema v. Province of Punjab and others (1997 CLC 970 at page 975); Brother Steel Mills Ltd. And others v. Mian Ilyas Miraj and 14 others (PLD 1996 SC 543 at page 555) to contend that the proceedings under the Companies Ordinance are initiated in the
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High Court as a Court of first instance and while exercising such jurisdiction it has the characteristic and attributes of original jurisdiction. It was further submitted that the High Court is not a Civil Court and in fact is quite distinct from the Civil Court. Mr. Ali. Zafar, Advocate went on to maintain that it is quite clear from the wordings of section 7 of the Companies Ordinance, 1984, where a distinction has been made between the Company Bench of this Court and Civil Court. It was further maintained that even under the C.P.C. a distinction has been maintained between the Civil Court, District Court; High Court and Supreme Court. Reference was also made to. "Mian Ejaz Siddiqui and others v. Mst. Kaneez Begum and 2 others" (1992 CLC 1658 at page 1662). It was then argued that section 3 of the C.P.C. Demarcates the jurisdiction of High Court and the Civil Court and as a matter of fact High Court is the Appellate Court of the Civil Court. Cases of "Eastern Company (Pvt.) Ltd., Lahore and 2 others v. Mst. Gul Begum and 7 others PLD 1980 Lah. 69; Ahmad Khan v. The Chief Justice and the Judges of the High Court, West Pakistan through the Registrar, High Court of West Pakistan, Lahore etc." (PLD 1968 SC 171) were referred and relied. Lastly, it was urged that although High Court has both civil and criminal jurisdiction but it does not mean that High Court while exercising the powers of civil nature becomes a Civil Court and that Civil Courts are the Courts which are created under the West Pakistan Civil Courts Ordinance, 1962 and in the said Ordinance High Court has been dealt as any entity separate from the Civil Courts. The argument was concluded that in the event that the procedure under Order XXI, Rule 94, C.P.C. Is directed to be followed by the Official Liquidator, a sale certificate may also be required to be issued by the Company Bench of this Court but since it does not act as Civil Court or Revenue Court of revenue officer, therefore, no stamp duty is required to be affixed on the sale certificate. As far the registration it is enough that the copy thereof is placed in Book No,1 of the Sub-Registrar of the area as is ordained by subsection (2) of section 89. Alternatively, it was argued that if the Court chooses that the sale-deed be executed by the Liquidator in favour of the purchaser in accordance with sub-clause (f) of subsection (1) of section 333 of the Companies Ordinance, -1984, all The formalities required for the execution of the conveyance deed such as stamp etc. -and the registration thereof shall have to be adhered to. Mr. Saleem Sehgal, Advocate who was called upon as amicus curiae argued that an order of winding up of the company operates in favour of all the creditors as if made on the joint petition of such creditors and once the order of winding up is made, the Official Liquidator is required to take into custody all the property of the company ordered to be wound up and all the property and assets of the company are deemed to be in the custody of the Court as from the date of order of winding up of the company. The liquidator has the power with the sanction either of the Court or the committee of the inspection to sell the property of the company by auction or private contract who is further empowered to transfer the whole thereof to any person or company or to sell the same in parcels but subject to general or special direction of the Court, the Liquidator has also power to do all acts and execute in the name and on behalf of the company all deeds, receipts and all other documents and for that purpose to use, when necessary, the company's seal. It, therefore, flows from the provisions of sections 318, 330(1), 330(4), 333(1) (f) that a company under winding up continues to be a company for all purposes till its dissolution. However, from the date of commencement of winding up of a company, the Official Liquidator is deemed to have taken over the management of the company and it is so ordained in section 402. It was argued that Rules 237 and 238 of the Companies (Court) Rules, 1977 may also be referred with advantage in connection with the sale concluded by the Official Liquidator. 4. Having referred to the various provisions of the Companies Ordinance, 1984 as afore-noted, it was maintained that even during the winding up of the company, it continues to exist as a company but it does not have its directors, its Chief Executive instead Official Liquidator manages
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the same and the assets of the company are deemed to be in trust with the Court while the physical custody of such assets is taken over by the Official Liquidator. On the strength of above-quoted law, it was argued that the sale of the assets of the company is to be concluded by the Official Liquidator like any other ordinary conveyance and formalities in regard thereto are to be fulfilled by the purchaser. Mr. Saleem Sehgal, Advocate however, did not agree with Mr. Ali Zafar that a sale certificate can also be issued if the Court chooses or directs to follow the procedure as envisaged under Order XXI, Rules 90 to 94, C.P.C. He maintained that Order XXI deals with the execution of decrees and orders, therefore, it has no nexus with the sale transaction under the Companies Ordinance, 1984 for there the Official Liquidator is duly empowered under section 333 of the Companies Ordinance, 1984 to conclude the sale on behalf of the company in favour of the purchaser. It was submitted that the 5 cases mentioned in this regard have arisen out of banking matters wherein in the execution of the decrees passed by the banking Courts the issuance of sale certificate came under consideration. Mr. Saleem Sehgal, Advocate, however, referred to sections 355 and 479 of the Companies Ordinance whereby it is provided that any order made by the Court under the Ordinance is to be enforced in the same manner as a decree made by a Court in a suit. It was argued that in an eventuality as such Order XXI, C.P.C. May be applied and a sale certificate will have to be issued under Rule 94 of Order 21 but not in a case of sale by the Official Liquidator. 6. Mr. Faisal Islam, Advocate who was also called upon to assist this Court having referred to section 402 of the Companies Ordinance, 1984 argued that despite winding up order of the company, the company continues in existence while the management thereof vests in the Official Liquidator. Section 333 of the Ordinance authorises the Official Liquidator to sell the movable and immovable property of the company and for that purpose to execute all deeds on behalf of the company. Reliance was placed on Sarbaz -Cement Ltd. Through Manager v. Bankers Equity Ltd. And 6 others 1996 SCMR 88 to support the above said view that Official Liquidator has power under section 333 to sell the property of the company under liquidation. It was emphatically maintained that there is no case-law available either by the superior Courts of Pakistan or India thereby supporting the view that the sale certificate can be issued in the liquidation proceedings. Reference was also made to Mian Saleem-ud-Din and others v. Major Jameel Akhtar Pervaiz and others 1988 SCMR 1717 wherein reference was made to a. Sale agreement incorporating certain terms and conditions. It was argued on the basis thereof that an oblique reference can be found to a sale-deed for the deed of sale agreement can only be executed if a conveyance is required to be executed. It was then that reference to the following cases from the Indian jurisdiction was made to submit that the execution of the deed by the Official Liquidator has been discussed in the cases noted below:-- (1) N. Babu Jarrardhanam v. Golden Films (P) Ltd. And another Indian Company Cases (1993) Volume 73, p.455 relevant portion at page 458-D. (2) Syndicate Bank v. Field Star Lyde Industries P. Ltd. And another Indian Company Cases (1995) Vol. 83, p.687 relevant portions at pages 691-E and 696-F. It was held in Specialty Traders v. Firdous Textile Mills Ltd. 1987 CLC 2109 that rules 64 to 73 and 89 to 92 of Order XXI, C.P.C. Are not attracted in the case of public auction by the High Court in winding up proceedings. It would be seen that Rule 94 is attracted only when a sale becomes absolute in terms of Rule 92, therefore, the question of sale certificate pursuant to public auction in a winding up proceedings was ruled out altogether. He concluded his argument with reference to the case of Abdul Qayyum Khan v. Government of Punjab and others PLD 1995 Lah. 205 wherein at page 218 it has been observed: "needless to add that High Court while exercising ordinary original civil jurisdiction to try a suit and while hearing an appeal arisen from a suit which has always been held to be continuation of the suit itself would also fall within the ambit of the terms of the Civil Court.
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7. It was argued on the basis of the observation as referred to above that the sale made through public auction of properties of any person or company except of a company against which winding up order had been made, the High Court is required to issue a sale certificate in favour of the auction-purchaser and if such a sale certificate is issued, it would attract stamp duty as per Article 18 of the Stamp Act as the High Court would be considered as a Civil Court as per Abdul Qayyum's case noted supra. 8. It would be noted that the petitioner had initially prayed for a direction to the Registrar of the area to register the certificate of sale issued to him in relation to the land only and in the alternative had prayed that separate certificates for sale be issued to him in relation to land, machinery and equipment as according to him the three matters aforementioned were distinct and separate but the case as argued by the original counsel, amicus curiae as also the counsel for the petitioner himself was entirely different for ' excepting for Mr. Ali Zafar all of them argued that no sale certificate is required to be issued in the case of sale of the assets of the company under liquidation. Mr. Ali Zafar also argued that if the Court chooses to follow the procedure as prescribed in Rule 94 of Order XXI then in that case a certificate of sale is required to be issued but he too, like others argued in the alternative that as per provisions contained in sub-clause (f) of subsection (1) of section 333 of the Companies Ordinance, 1984, a conveyance is required to be executed by the Official Liquidator in favour of the purchaser subject to solution either of the Court or of the committee of inspection. It flows from the scheme of the Ordinance itself that the company which is ordered to be wound up remains alive and operative for all intent and purposes till it is dissolved by the order of the Court. The only exception being that the management of the company remains no more in field and instead Official Liquidator takes over the affairs of the company. The Legislature in its wisdom did not leave it there for it ordained that every asset of the company should be sold by the Official Liquidator who would not only execute document in regard thereto but also can use the seal of the company for the said purpose. The field is obviously occupied by the express provisions of the Ordinance leaving no room for the Court to choose to exercise its discretionary powers thereby directing that procedure of rule 94 of Order XXI be followed. Mr. Faisal Islam rightly relied on the rule laid down in the case of Sarbaz Cement Ltd. Noted (supra) wherein it is observed as follows:-- S.333---Powers of Official Liquidator---Scope---Official Liquidator has been vested with powers to sell the movable and immovable property and things in action of the company by public auction or private contract with power to transfer the whole thereof to any person or company or to sell the same in parcels---Such powers, of the Official Liquidator are subject to the sanction, either of the Court or of the Committee of Inspection as the case may be---Where the terms and conditions asking for bids published in different newspapers clearly indicated that offers of the sale of the assets etc. Were subject to acceptance by the Court, and Court had not yet accepted the offer of the higher bidder, no right, held, could be said to have vested in the said bidder to enforce the sale in its favour--- Court had complete discretion to sanction the sale or not---Such discretion of the Court was to be exercised judiciously having regard to the interest of the company and its creditors---Directions of Court for fresh offer in the interest of company and creditors was thus in consonance of law. Section- 333' of the Companies Ordinance, 1984 defines powers of the Official Liquidator. According to clause (1) thereof the Official Liquidator has been vested with the powers: "to sell the movable and immovable property and things in action, of the company by public auction or private contract, with power to transfer the whole whereof to any person or company or to sell the same in parcels." But such powers of the Official Liquidator are subject to the sanction either of the Court or of the Committee of Inspection (as the case may be), as is further indicated by the said section."
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Again there is much force in the argument of Mr. Saleem Sehgal that Rule 94 of Order XXI pertains to the execution of the decree while sale by the Official Liquidator under the umbrella of the Court is to be concluded and executed by the Official Liquidator during the winding up proceedings. The two procedures do not have nexus with each other as proceedings in winding up cannot be taken to be in the nature of proceedings in execution of decree. It is yet another reason that no sale certificate is required to be issued in the case. Both Mr. Saleem Sehgal and Mr. Faisal Islam, Advocates were unanimous that the procedure as to issuance of sale certificate can only be adopted in the case or order made by the Court under sections 355 and 489 of the Ordinance for the same are to be enforced in the same manner as a decree made by the Court in a suit. In such eventuality the execution will follow as normal course and during the execution of any order if some sale is made, then Rule 94 of Order XXI would be applicable. It is, thus, obvious that no sale certificate is required to be issued in the case of sale concluded by the Official Liquidator during the course of liquidation proceedings of a company for it is only a sale-deed or conveyance is to be executed by the Official Liquidator as ordained by sub-clause (f) of subsection (1) of section 333 of the Companies Ordinance, 1984. 9. I appreciate the valuable assistance rendered by Mr. Saleem Sehgal and Mr. Faisal Islam as also Mr. Ali Zafar and Mr. M.S. Baqir, Advocates for triggering, the dispute and for its evolvement. 10. The one aspect of the question having been determined Mr. M.S. Baqir, Advocate was called upon to argue his particular case. 11. Mr. M.S. Baqir, Advocate in his turn argued that the total burden of his application apart, it may be appreciated that now that conveyance is to be executed by the. Official Liquidator with the sanction of the Court, he may be permitted to execute the sale-deed in regard to land and building while in regard to sale of machinery, he may be permitted to execute a receipt under the Sale of Goods Act, for it is only a sale in regard to movables. Again the argument required deeper probe for the immovable property as defined in the Transfer of Property Act (Act IV of 1882) and the Registration (Act XVI of 1908) is to be looked into to understand the meaning and scope of immovable property. Immovable property as defined in Transfer of Property Act reads as follows: "Immovable property does not include standing timber, growing crops of grass." By virtue of section 4 of the Transfer of Property Act, the chapter and section of Transfer of Property Act which relate to contract shall be taken as 'a part of Contract Act, 1872 and section 54, paragraphs 2 and 3, 59, 107 and 123 shall be read as supplement to the Registration Act, 1908. Section 54 of the Transfer of Property Act deals with the sale which reads as under:-- 54. Sale defined.--Sale is a transfer of ownership in exchange for a price paid or promised or part- paid and part-promised. Sale how made.--Such transfer, in the case of tangible immovable property of the value of one hundred rupees and upwards, or in the case of a reversion or other intangible thing, can be made only by a registered instrument. In the case of tangible immovable property, of a value less than one hundred rupees, such transfer may be made either by a registered instrument or by delivery of the property. Delivery of tangible immovable property takes place when the seller places the buyer, or such person as he directs in possession of the property. Contract of sale.-A contract for the sale of immovable property is a contract that a sale of such property shall take place on terms settled between the parties. It does not of itself create any interest in or charge on such property. Section 59 deals with the mortgage by deposit of title deeds which is required s, to be registered. Section 107 deals with the contract of lease for more than one year or reserving an yearly rent, it is also required to be made by registered instrument. Similarly, section 123 deals with contract of gift which too is required to be registered. In all the sections noted above, immovable property form
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the subject-matter of the contract which requires registration, therefore, the provisions of the said section are to be read as supplemental to the Registration Act, 1908. The Registration Act, on the other hand, defines immovable property as follows:-- (6) "Immovable property" includes land, building, benefits to arise out of land and things attached to the earth, or permanently fastened to anything attached to the earth, hereditary allowance, rights to ways, lights, ferries and fisheries but does not include- (a) standing timber, growing crops or grass whether immediate severance thereof, is intended or not; (b) fruit upon and juice in trees whether in existence or to grow in future; and (c) machinery embedded on or attached to the earth, when dealt with apart from the land. Mr. M.S.Baqir, Advocate conceded that there cannot be a separate sale-deed or conveyance in regard to land and building for the both are to be treated as immovable property and as one unit, therefore, the sale-deed in regard thereto is to be executed by treating the land and building as one unit. It was, however, argued by him that the machinery installed in the mill cannot be taken to be attached to earth or permanently fasten to anything attached to the earth because it is movable and can be removed therefrom and if sub-clause (1) of subsection (6) of section 2 of the Registration Act, 1908 is read in conjunction with the sub-clause (c) of the subsection ibid, it would be abundantly clear that machinery embedded on or attached to earth when dealt with apart from the land cannot be…
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