Law: Companies Ordinance, 1984

Section: 305,309

Companies Ordinance (XLVII of 1984)--Ss. 305 & 309 Petition for winding up of company for its inability to pay its liabilities towards banks; for the reasons that its substratum had extinguished and it had failed to function and run the business and stood closed for the last so many years; and that it would be better to wind up the company as none of its shareholders was in a position to invest money to run its affairs Creditor Banks resisted the petition on the ground' that company owned large sums to its bankers Suit for recovery of money filed by creditor Bank was pending before Banking Court Creditor Bank had also obtained a decree against petitioners/directors from High Court at England Petitioners floated a company abroad and made fictitious exports to it in order to retain huge amounts of foreign exchange abroad ¬Petitioners had stated in their petition that most of the exports made to the company abroad proved to be total loss and funds of the company had gone down the drain ---According to creditor Bank, if the veil of incorporation was lifted, then petitioners/ directors would emerge as owners and beneficiaries of both the companies sought to be wound up and the one incorporated by them abroad Petitioners could not rebut all such facts ¬Petitioners/Directors had moved the petition in order to create a legal defense against the decree already passed against the Company sought to be wound up or in the suits for recovery pending before different Courts Winding up of company in such circumstances would not be just and equitable High Court rejected the petition. JUDGMENT The petitioners who are directors of Messrs Khurshid Brother (Pvt.) Limited, Faisalabad seek its winding up mainly on three grounds. Firstly, that the Company is bankrupt and is unable to pay its liabilities towards banks. Secondly, that the substratum of the Company has extinguished and it has failed to function and run the business and stands closed for the last so many years. Thirdly, that it would be better that the company is wound up as none of the shareholders is in a position to invest money to run its affairs. 2. On presentation of the petition for winding up oft 24 11 1993,…

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