Law: Companies Ordinance, 1984

Section: 305,309,319

Companies Ordinance (XLVII of 1984)--Ss. 319, 305 & 309---Application seeking stay of winding up proceedings, etc.---Powers of High Court under S.319, Companies Ordinance, 1984---Nature, extent, mode and principles for exercise of such powers elucidated. A perusal of S.319 of the Companies Ordinance, 1984 reveals that the nature, extent and the mode of exercise of powers conferred thereby have not been spelt out in any great detail. An overview of the judicial precedents in this behalf reveals that the established principles of the English jurisdiction have, by and large, been followed. In the exercise of its jurisdiction to stay the winding up proceedings the Court will refuse to act upon the mere assent of the creditors in the matter, and will consider whether what is proposed is for their benefit, and also whether the stay will be conducive or detrimental to commercial morality and to the interests of the public at large. In particular, the Court will have regard to the following facts:- (1) that directors have not complied with their statutory duties as to giving information to the official receiver or furnishing a statement of affairs; (2) that there has been an undisclosed agreement between the promoter and the vendor to the company as to the participation by the promoter in fully-paid shares forming the consideration for the purchase of property by the company on its formation: (3) that the promoter has made gifts of fully-paid shares to the directors; (4) that there are any other matters connected with the promotion, formation or failure of the company or the conduct of its business or affairs, which appear to the Court to require investigation. Following are the principles for exercise of powers under S.319 of the Companies Ordinance, 1984:- (1) if the Court is satisfied on the materials before it that the application is bona fide; (2) the Court would be guided by the principles and definitely come to the finding that the principles are applicable to the facts of a particular case; (3) mere consent of all the creditors for stay of winding up is not enough; (4) the offer to pay in full or make satisfactory provisions for the payment to the creditors…

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