Jazib Hussain

l1f17llbh0008
Section A
Company law assignment

Outline of the content of the case

1. A Synopsis of case

2. Facts of the case

 Adequately detailed background
3. Issues framed

4. Arguments submitted by Learned Councils

5. Judgement of the Court

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6. Dictum of the judgement

7. My brief opinion

Synopsis of Case
Being very much brief, it could be abstracted that in a nutshell, this case is all about the restitution of the
company’s property under section 144 CPC. For that it is must that this section 144 stands applicable to the
situation of present case. However, as per the facts the applicants are not people to be entitled to have assets
back but the Company as a independent entity. And in fact what the applicants claimed and tried to say,
suggests another different situation. So this owed the applicants to have the application dismissed.

Facts
Applicants, the members of Schon family who hold majority shares in National Fibers Limited Company and so are
majority shareholders thereof has filed a suit against -C.M.A. 390 of 2009. Applicants filed application that is for
restitution of the company's property under section 144 of CPC. This is the property which has been put for sell in an
auction. In this way, the property has been sold and its prescribed proceedings are in the way to complete execution.
The only remaining thing has been that is disbursement of sale. In this meantime, the application has been filed.
However, this present application has been scathingly opposed by the auction purchaser and the company’ creditors.

Background

 Out of what it is said as the intertwisted circumstances and multiple proceedings the present C.M.A
has been filed.
 Firstly, HBL filed the suit out of which the present execution proceedings arose, that is Suit B-
85/2000. It was filed against the Company as the sole defendant.
 The suit was decreed ex parte and HBL was the decree holder. That decree now vests in the National
Bank of Pakistan ("NBP").
 Secondly, the former National Development Finance Corporation ("NDFC") had filed a petition
against the Company and others (including the applicants) under section 290 of the Companies
Ordinance, 1984.
 This petition is material for present purposes. Because as NDFC has long since been absorbed into
NBP.
 And the petitioners therein were the minority shareholders of the Company.
 On 4-12-1997, By way of an interim order Court at its please replaced the management prevailed and
appointed NDFC's nominee as the chief executive till further orders for serving the proposed
advancement of the interests of the company and all related to it.

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 But results came adverse as none of the proposed ever came about. No funds were provided and the
Company was, essentially, left to die commercially.
 Thereafter, Suit B-85 of 2000 was filed by HBL against the Company.
 The suit proceeded against the Company ex parte, and was so decreed, as prayed, on 7-12-2000.
 Similarly, the writ of attachment was issued on 26-3-2001 and the Court appointed its Nazeer as
receiver of the Company's property with directions to sell the same.
 Two rounds of the auction of property took place on being fail of first owing to backing out of one
and in the second round, the offer of the present auction purchaser was accepted on 18-3-2002 and on
29-4-2002 the sale was confirmed.
 The auction purchaser has paid the price (amounting to Rs. 452.5 million or thereabouts) and has been
put in possession.
 Meanwhile, the applicants filed an application in Ex 36/2001 on 20-6-2001. In a nutshell, as per 12(2)
CPC, application was decided by order dated 25-10-2001, and was dismissed.
 Against this dismissal, the applicants preferred an appeal, being Sp. H.C.A. 291/2001, which was
filed on 30-10-2001. This all was done so that the attention of court can be brought in this issue
during the first round of auction/sale on 29-04-2002.
 The sale of Company’s property was decreed in favour of the present auction purchaser.
 But on 7-8-2002, on an application made by the applicants, Court ordered in J.M 39/1997 that the
company’s property not to be disbursed.
 J.M. 39/1997 was ultimately decreed by order dated 3-12-2004.By the order, the Company's board of
directors, as had existed before the order of 4-12-1997 was "revived".
 But the petitioners (i.e., NDFC and others) did not oppose this, and it was expressly noted in the order
that this "concession" was made by them "as the company no longer has any tangible assets".
 As regards the interim order of 7-8-2002, it was noted by the Court that it was stated that there was a
possibility of a compromise.
 Reference was also made to Sp. HCA 291/2001. Keeping these factors and the submissions of learned
counsel in mind, the Court ordered as follows:
"In the circumstances, the order dated 7-8-2002 to remain intact till the final disposal of
the said appeal or for a period of three months from today whichever is earlier. Subject to the above,
the Petition is dismissed as not pressed".
 The applicants while regarding the disbursement (or otherwise) of the sale proceeds, they made an
application in Sp. H.C.A. 291/2001 looking to have any disbursement stayed and so the order made in
favour of the applicants dated 22-3-2005.
 Thereafter, on 25-4-2008, a compromise application (C.M.A. 615/2008) was presented in Sp. H.C.A.
291/2001. This sought to compromise the matter between the applicants (who were of course the
appellants), NBP and the Company in terms as therein stated.
 This application was disposed off in terms of an order dated 7-10-2008.
Agreement of Schon Family with NAB
Copy of document consisting agreement which Schon Family entered into with NAB was
annexed to the aforementioned application.
The application was revealed as that the Schon family (i.e., the applicants) had entered into
an agreement on 25-10-2005 with the National Accountability Bureau (NAB). A copy of the
agreement was annexed to the application. In this agreement, both the applicants ( the Schon Family
and the creditors of various companies came to a settlement or compromise. In this settlement or
compromise the said family on the basis of payment of amount reading Rs. 1.225 Billion Rupees
would receive a unit in its ownership and afterwards referring to various creditors of the company in
order to get back the vacant possession of the project came to pose an offer paying collectively to all
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creditors a total sum of Rs. 475.125 million which is 5% above what is received for this project. It was
stated that this offer had been accepted by the creditors following prescribed terms and conditions of
the compromise. "Schon Family" being handed over the vacant and peaceful possession of entire
assets of National Fibres Limited and receiving the vacant possession of Messrs National Fibres
Limited."

Clause 8 of the compromise, which bore the heading "condition precedent", needs to be set out in full:

"The parties agree that upon acceptance of this compromise, the decree in Suit B-85 of 2000 and Suit
No.B-79 of 2001 shall stand fully satisfied and be reversed with consent of the parties hereto and the Decree
holder-NBP hereby consents and agrees that any amount received from any Bidder/Auction Purchaser by the
Commissioner for sale shall be returned and vacant possession of all the assets of National Fibres Limited
will be handed over to the "Schon Family".

Issues framed in this case

Learned counsel for the applicants relied upon three grounds in support of the
application.

1. Firstly, it was contended that whether the sale was void by reason of section 410 of the Companies
Ordinance.
2. Secondly, it was contended that whether the compromise recorded in Sp. H.C.A. 291/2001 is legally
able to set aside the decree ordering sale of Company’s property or get it reversed.
3. Thirdly, it was contended that since the auction purchaser had, at all material times, knowledge of the
challenge to the decree, whether it could be set aside as his position was not of a bona fide purchaser
for value without notice.

Three arguments posed by the learned Council for the

applicants.
1. The winding up of company shall be void and so the sale to the present auction
purchaser to be declared void as to the consequential relief in relation to the
company’s property.

In favour of his case under section 410 of the Companies Ordinance, learned counsel referred to section 294
thereof. This provides as follows: "In relation to an application under section 290, sections 410 to 415
shall mutatis mutandis apply as they apply in respect of winding up". Referring to the section 290
proceedings filed by NDFC against the Company, i.e., J.M. 39/1997, learned counsel relied on the order
dated 4-12-1997 made therein (see above). By this order the Court replaced the management prevailed and
appointed NDFC's nominee as the chief executive till further orders for serving the proposed advancement of

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the interests of the company and all related to it. But results came adverse as none of the proposed ever came
about. No funds were provided and the Company was, essentially, left to die commercially.

Learned counsel presented the submission that after the handover to NDFC, it ensured that the subsequently
filed Suit B-85/2000 was not defended or contested, which led to the (present) ex parte decree in favour of
HBL. So it is clear here that NDFC facilitated the creditors and not the Company. And the execution
proceedings (Ex 36/2001) were filed owing to this order comprising ex parte decree which led to the sale now
under contention. Since the Company had been stripped of its property, NDFC then not press J.M. 39/1997,
which was ultimately dismissed as not pressed on 3-12-2004. When the Court made the order of 4-12-1997
directing that the then management be displaced, NDFC was allowed to take over the Company because it
had undertaken to provide the necessary financing as would lead to a revival of the latter. This however,
never came about. Learned counsel submitted that the order of 4-12-1997 was a substantial order, the making
of which brought section 294 and hence section 410 into play. Section 410 provides in material part as
follows:

"410. Avoidance of certain attachments, executions, etc.---(1) Where any company is being
wound up by or subject to the supervision of the Court, any attachment, distress or execution put in
force without leave of the Court against the estate or effects or any sale held without leave of the Court
of any of the properties of the company after the commencement of the winding up shall be void."

(Subsection (2) reveals only that the section does not stand pertinent to be applied to proceedings by
the Government.) It was deemed that since section 410 was, by virtue of section 294, to apply "mutatis
mutandis" to section 290 proceedings, and the former applied "after the commencement of the winding up",
and a winding up was contended to commence on the date when the winding up petition was presented
(section 311), section 294 became applicable in the last when a substantive order in relation to the affairs and
management of the company was made under section 290. In the present case, that was the order of 4-12-
1997, already referred to above. From that date, section 410 became applicable and any attachment of or
execution on or sale of the Company's property thereafter without the permission of the Court was
void. "The Court" here meant the Court while exercising its jurisdiction under the Companies Ordinance.
Since admittedly no such permission had been obtained the entire sale/auction proceedings of the
Company's property in Ex. 36/2001, which were of course after 4-12-1997, were void. Learned counsel
submitted that section 294 could be applied even if it was in pending pertaining to its proceedings towards
execution of the petition under section 290. In resort to support to his argument or principal evidence
regarding the applicability of section 294 learned counsel counted certain case-law into account which will
be deemed at the appropriate stage below. It was held on the just aforesaid ground that the sale to the present
auction purchaser had therefore to be proclaimed void, with consequential relief in relation to the Company's
property.

2. The position of auction purchaser was not of a bona fide purchaser for value.

As regards his other grounds, learned counsel submitted that the auction purchaser had full knowledge
at all material times of the challenge to the decree under which the sale/auction was proceeding. In this regard
reference was made to the order dated 2-11-2001 in Ex. 36/2001. It was submitted that on that date the
present auction purchaser was represented before the Court, and the order specifically noted that it was
brought to the Court's attention that the applicants had filed Sp. HCA 291/2001 challenging the dismissal of
their application under section 12(2), C.P.C. in terms as stated above. Reference was also made to the order
dated 7-2-2002 in Ex. 36/2001, as also to the order dated 18-3-2002. On the latter date the auction purchaser
was declared the successful bidder. The applicants were again represented before the Court and the order
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noted their appeal (i.e., Sp. HCA 291/2001). Learned counsel submitted that the rule of caveat emptor also
applied to sales in execution proceedings. Auction purchaser should have considered it as he was aware of
this challenging bid legally, personally etc. Now, in the very proceedings of which the auction purchaser
throughout had notice and knowledge, i.e., Sp. H.C.A. 291 of 2001, the decree had been reversed via the
compromise recorded by order dated 7-10-2008. The auction purchaser had therefore to deal with the
aftermaths and could not be let to claim that he was a bona fide purchaser of the Company's property, who
stayed untouched by the reversal of the decree.

3. The compromise recorded in Sp. H.C.A. 291/2001 is able to set aside the decree
ordering sale of Company’s property and gets it reversed or revived.

In relation to section 144, C.P.C. itself, learned counsel alluded in detail to the compromise that had been
decreed in Sp. HCA 291/2001. Learned counsel made the submission that the decree had been explicitly
reversed in particular, and this was reason serving to hold the section 144 fully applicable. Tending towards
the scope of section 144, learned counsel submitted his reasoning while referring to a case law as mentioned
ahead that it conferred vast powers on the Court and had to be interpreted and applied accordingly. The gist
of the section was that an act of the court could not prejudice or cause injury to anyone and that the Court was
bound to give such directions and make all necessary orders as resulted in the restoration of the situation that
had been brought about by the decree that had been reversed. Restitution followed automatically. Learned
counsel prayed that the application be allowed and the sale set aside, which consequential relief to
follow accordingly.

Arguments presented by learned Council for the auction

purchaser.
1. The compromise did not at all affect the sale proceedings in the execution.

Learned counsel for the auction purchaser opposed the application. Learned counsel submitted that,
keeping in mind the relief sought in the application, two points required consideration. Firstly, what was the
effect of the compromise decree in Sp. HCA 291/2001 that was said to have reversed the decree in execution?
Learned counsel contended that the compromise did not at all affect the sale proceedings in the execution.
Indeed, his case was that the applicants had never opposed the sale as such; their only issue, if at all any, had
been with the manner of the sale. Secondly, it was submitted that a reversal of a decree did not necessarily
mean or lead to a reversal of any sale under the decree. Referring first to the decree as made in Suit B-
85/2000, learned counsel submitted that there had never, as such, been an appeal against the decree itself. It
will be recalled that the applicants had first filed an application ("first application") in the execution
proceedings (Ex. 36/2001), which was directed to be transferred to the suit and was then substituted by the
application under section 12(2), C.P.C. (that was dismissed, leading to Sp HCA 291/2001). Learned counsel
referred to the first application and to another application filed in the suit, under Order I, Rule 10, C.P.C.
Learned counsel submitted that both these applications were not pressed by the applicants, and were
dismissed as such in the suit by order dated 5-10-2001. Learned counsel then referred to the application under
section 12(2), C.P.C. as filed in the suit and to its dismissal, as just noted. Learned counsel also referred to
various orders in the execution proceedings, while the sale/auction was underway. He referred in particular to
the order dated 18-3-2002, where it was recorded as follows: "Mr. Mahmood A. Khan, Advocate for the
Intervener [i.e., the applicants] ... makes a statement at the bar that if the property is divided then it would
fetch more price. According to him this is the only objection which he likes to place before this Court. His
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objection is acknowledged." Learned counsel submitted that the stance taken by the applicants kept changing
and no consistent position was adopted. Reference in this context was also made to para 14 of the affidavit in
support of the first application. Learned counsel submitted that although the auction purchaser has paid the
entire sale price and the sale has been confirmed by the Court, no appeal was filed nor any challenge mounted
to any of these matters or any order relevent thereto.

2. The sale in the present case was not disputed but rather recognized

Referring to the proceedings in Sp HCA 291/2001, learned counsel submitted that those proceedings in
fact reinforced the point that the applicants had consented to the sale. Reference was made to para 6 of the
"grounds" of the memo of appeal, as well as the prayer therein. In the former, the objection taken by the
applicants was the property had not been sold in a "professional manner and as such the recovery from the
sale of the property in [piecemeal] form or by dividing the immoveable property into small plots can be
increased substantially". The relief sought in the appeal was that the decree be set aside or varied "to the
extent of the actual outstanding and that the property should be sold in a manner whereby all persons having
any interest in the property of the [Company] will be benefited to its maximum". This, learned counsel
submitted, clearly showed that the applicants were only interested in and concerned with the manner in which
the decree was executed. Learned counsel referred to the agreement dated 25-10-2005 that had been arrived at
between the Schon family and NAB. Reference was also made to an addendum, dated 18-7-2008, to the
agreement. Clause 6 of the addendum provided as follows: "In the event of sale of any asset mentioned in the
Agreement as a result of any act of any bank, and other creditors the proceeds of sale shall be considered as
full and final settlement of liabilities of Schon Family and its directors in respect of assets". Thus, learned
counsel contended, the sale in the present case was not disputed but rather recognized and its effect on the
settlement or compromise specifically provided for. Referring to the compromise application that was filed in
Sp HCA 291/2001, which led to the order of 7-10-2008 and the compromise decree, learned counsel relied on
clause 8 thereof and to the observations in the order (set out above) to submit that the rights of the auction
purchaser were recognized and preserved. It was submitted that the compromise decree could not be used to
upset the sale proceedings and the rights that had accrued to the auction purchaser.

3. Section 144, C.P.C. had no application to the facts and circumstances at

hand.

Continuing with his submissions, learned counsel referred to the objections filed by the auction
purchaser to the present application and submitted that the factory/undertaking that had been disposed off was
being operated. It was submitted that section 144, C.P.C. had no application to the facts and circumstances at
hand. Learned counsel emphasized that all that the applicants were aggrieved of was the manner in which the
property was disposed off, and nothing else. As regards the averment that the auction purchaser had
knowledge of the applicants' various applications, it was submitted that that could not affect the auction
purchaser's position or rights. In support of his various submissions, learned counsel relied on case-law,
which it is not necessary to set out at this stage. Learned counsel submitted that no case had been made out by
the applicants and that the application ought therefore to be dismissed.

Argument posed by learned Council for ABL.

1. There was no application for restitution in relation to the Bank's decree but
regarding its (ABL) own execution proceedings on its decree.
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Learned counsel for ABL, submitted that it had filed a recovery suit against the Company and its
directors (i.e., the applicants) as guarantors. That suit had been decreed ex pane. The Bank was a secured
creditor and it had a mortgage decree in its favor. There was no application for restitution or otherwise in
relation to the Bank's decree. ABL had filed its own execution proceedings on its decree, in which certain
proceedings had been taken. It was submitted that rights had accrued to the Bank, which could not now be
defeated and certainly not by means of the application at hand. It was prayed that the application be
dismissed.

Argument posed by learned Council for NBP.

1. Matter had been compromised to the extent what the dispute was between the
applicants and the auction purchaser.

Learned counsel for NBP submitted that the dispute at present was between the applicants and the
auction purchaser. Insofar as NBP was concerned, the matter had been compromised as per the compromise
decree in Sp HCA 291/2001.

Reply to the learned Council for ABL by the learned Council for applicants
(Rebuttal).

The application filed by ABL was not allowed; it was not entitled and so its stand had no
bearing on the disposal of the application.

Availing himself of his right of reply, Learned counsel for the applicants made submission that as for as
ABL was professing, its claim was based on section 73, C.P.C. and it would be deserved, if at all to anything,
if the application was disallowed. Therefore, its stand had no bearing on the disposal of the application. As
regards the auction purchaser, learned counsel submitted that the sale in the execution proceedings was
dependent on the decree and was consequential thereon, and that had been disposed off by the compromise
reached and recorded in Sp. HCA 291/2001. Therefore, section 144, C.P.C. was fully attracted in the facts
and circumstances of the present case. The only question was whether the decree had been varied or reversed,
which question had to be answered in the affirmative. The compromise had expressly and specifically
reversed the decree. The section was not concerned with, nor could its operation or effect be nullified by, any
sale in consequence of execution proceedings. It was submitted that an appeal was a continuation of the trial
proceedings and any proceedings under section 12(2), C.P.C. also had to be so regarded. Such an application
had to be filed in the suit in which the decree was made. It was emphasized that the auction purchaser all
along had full knowledge and notice of the appeal, and he carried the burden of proving that he had acted
bona fide. As regards the statements made (including those recorded in various orders) regarding the manner
of the sale of the property, that did not amount to consent to the decree or any sale in terms thereof. The
appeal had remained pending at all material times, and as recorded in the compromise (and therefore entered
in the compromise decree), the decree in the suit had been reversed as a result thereof.

Order of the court along with the dictum and ratio

decidendi behind this dismissal of application.
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Keeping hearing of learned counsel into account as above, and analyzing the record and considering the case-
law on what learned Council relied on. Court deemed it fit to first set out section 144, C.P.C.:

"144. Application for restitution.--- (1) Where and in so far as a decree is varied or reversed the
Court of first instance shall on the application of any party entitled to any benefit by way of restitution
or otherwise, cause such restitution to be made as will, so far as may be, place the parties in the position
which they would have occupied but for such decree of such part thereof as has been varied or
reversed; and, for this purpose, the Court may make any orders, including orders for the refund of
costs and for the payment of interest, damages, compensation and mesne profits, which are properly
consequential on such variation or reversal.

(2) No suit shall be instituted for the purpose of obtaining any restitution or other relief which could be
obtained by application under subsection (1)."

Judge while holding this order or judgement begins with the objection taken to the sale on the basis of
section 294 read with section 410 of the Companies Ordinance. Section 410 obviously relates to winding up
and is dealt with those provisions that apply to every mode of winding up. The rationale behind the rule is
well known, and has been explained as follows in a leading treatise (McPherson's Law of Company
Liquidation, 3rd ed. (2013), pg. 400):

"The principal object of the statutory scheme which regulates winding up is to ensure that the
property of an insolvent company shall, on its winding up, be applied according to the statutory scheme
and once that is done for the assets to be applied in satisfaction of corporate liabilities equally. Quite
obviously it is totally inconsistent with this policy that creditors should retain the right of enforcing
their claims in the ordinary way, and it is with the object of preventing the scramble for assets which
would otherwise ensue that section 128(1) expressly declares void any attachment, sequestration,
distress or execution put in force against the property of the company after the commencement of
winding up." (Emphasis supplied; internal citations omitted)

Section 410 applies only in fact, when the company is being wound up. It applies at its commencement. And
its commencement appears when there is a petition for its winding up has been presented. It does not apply if
the petition seeking winding up is, e.g., dismissed, either in contested proceedings or on being allowed to be
withdrawn.

The section that applies mutatis mutandis in relation to section 290 proceedings is section 294.

So here it seems prima facie that section 410 can apply in relation to a petition under section 290 only if such
petition comes out to be successful and the role of Court comes in terms thereof to exercise it. But if the
petition is dismissed, this said section must not tend to be applied either in contested proceedings or on being
allowed to be withdrawn. Similarly that was happened to the petition at hand, J.M. 39/1997. It will be looked
back on that it was dismissed as not pressed on 3-12-2004.

Court in its order addressing the first argument of learned

Council for applicants and it was the first framed issue too.
Learned counsel for the applicants however submitted that section 294 applied even if the proceedings of
section 290 are in pending, no matter if a substantive order was made by the Court. It was in this manner, and
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relying on the order of 4-12-1997, that it was contended that section 410 applied. Because that order was in
the journey to its complete execution when the auction/sale proceedings took place, so it was submitted that
the same didn’t qualify as valid but void.

Cases on which Learned Council for applicants relied on are given below and
also addressed by Learned Judge.
1. To help proof his submissions, learned counsel relied on three judgments of the Lahore High Court, all of
the same learned single Judge, and reported as Registrar of Companies v. Taj Company Ltd. 1993
CLC 1413, In the matter of Taj Company (Muhammad Yousaf applicant) 1994 CLC 403 and In re: Taj
Company Ltd. 1994 CLC 2197.

In these cases against Taj Company a petition under section 290 had been filed by the Registrar of
Companies. The decisions were given in quick succession, being handed down on 27-2-1993, 26-3-1993 and
22-9-1993 respectively.

 In the first mentioned case proceedings under sections 412 and 413 (both made applicable by section
294) were set against certain directors of the Taj Company and it was when the proceedings of
section 290 were in field.
 The first case appeared as precedent to the second case and so followed on this.
 The third order did not as such deal with any of the sections made applicable by section 294 and need
not therefore be considered.

2. Learned counsel also relied on a decision of a learned Division Bench of this Court, National Bank of
Pakistan v. Banking Tribunal No. 1 and others PLD 1994 Kar. 358. Interestingly, that case also arose
in relation to the Taj Company. In this case a suit was brought by NBP against the company under the
then applicable law relating to recovery of loans and finances, during their pendency in the banking
tribunal at Karachi

It was inferred by the learned Division Bench that there was not anything such as prejudice to the
bank and was a procedural step as required, namely acquiring leave from the Lahore High Court. It was
noticed that "the Banking Tribunal, on any line of reasoning, was bound to give effect to the observations of
the High Court at Lahore concerning the respondent-Company" (pg. 362). It was also noted as follows: "... no
harm is likely to be caused to the [bank] if it approaches the Lahore High Court for requisite
permission to proceed before the Tribunal; if such permission is granted the dispute would end and, if
not, the controversy should take the [bank] to the Supreme Court, where the same can best be
resolved" (pg 363).

3. Learned counsel for the applicants also relied on a decision of a learned single Judge of this Court,
Shaheen Foundation v. Capital F.M. (Pvt.) Ltd. 2002 CLD 188. Three petitions, under section 290,
were disposed off by the common judgment. The petitions were dismissed. Learned counsel relied on
certain passages from pp. 210-212, where the learned single Judge considered the scope and nature of
proceedings under section 290. Reference was there made inter alia, to the judgments cited above.

When the sections made applicable by section 294 (i.e., sections 410 to 415) are considered it is to be noted
that each applies only if a company is ordered to be wound up (or, as the case may be, is otherwise in winding
up). However, as is obvious, the sections cannot apply if the winding up petition is dismissed.
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As per what learned judge says here that the answer to this question lies in that the sections are to apply
"mutatis mutandis". This phrase is of course well known to the law. It means: "the necessary changes
having been made". Section 294 thus recognizes that sections 410 to 415 may not, ought not, or cannot (as
the case may be) apply to section 290 proceedings as they stand. So this is all proved by what the observation
of learned Division Bench exposed of.

The learned Division Bench while holding view that serves the present purposes of the case, declares an
important difference between a winding up on the one hand, and section 290 proceedings on the other.
Keeping section 410, as applicable to section 290 via section 294, therefore gives discretionary powers to the
Court at two levels. Firstly, it is none other than Court that decides whether the applicability of section is to
be arisen at all, Secondly, even if court decides it so applying section, it retains the further power of, in effect,
keeping the section's operation to stoppage for the time being in respect of specific cases owing to unsatisfied
conditions.

In this case, the Court never chose to exercise the power conferred upon it by section 410 read with
section 294. It follows that the objection to the sale taken on this basis cannot be accepted. The ground taken
must, with respect, be rejected.

This following cases the learned Council relied on as to infer the vast scope of section
144

4. Learned Judge here turns to contemplate section 144, C.P.C., under which restitution is aspired or sought.
Learned counsel for the applicants relied on Abdul Bari v. Muhammad Rasheed Khan 1995 SCMR
851, Zubaida Bai v. IInd Rent Controller Karachi and another PLD 1981 Kar. 82 (DB) ("Zubaida
Bai"), Meraj Din v. Ghulam Muhammad PLD 1965 Lah. 374 (SB), Lakhsmi Narayan and others v.
Surath Lal Chakraborti and others PLD 1964 Dacca 177 (SB) and Badaruddin v. Maniruddin PLD
1961 Dacca 686 (SB) to explain what was submitted was the vast scope of section 144 and the powers
thereby conferred. In particular learned counsel emphasized a passage at pp. 377-378 from the decision of
the Lahore High Court, and the following sentence: "The restitution has to follow automatically from
the fact that the order is reversed on appeal and in such a case the duty is cast upon the Court to
put the parties back to their original position" (emphasized by learned counsel).

Learned Judge addressing this aforementioned submission of learned Council for

applicants.

It may also be noted that the following passage from Zubaida Bai case, where the learned Division Bench
observed as follows: "The power of restitution is not derived from section 144 of the Code of Civil
Procedure as the power of Court to direct restitution [vests] in the Court itself. Section 144 merely
specifies one of the methods by which the right of restitution can be enforced. The fundamental
principle of law is that act of Court should not injure any person. It is the duty of the Court to order
restoration where circumstances so demand and to restore the parties to the same position they were in
prior to the order that has been varied or reversed" (pp. 83-4; emphasis supplied). (I may note that I
have inserted the word "vests" since in my view, with respect, in the absence of this (or an equivalent)
word the sentence is incomplete.)

The learned Judge in this Case finally summing up this argument by saying following
two very pivotal points:
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After taking into account the above mentioned point in particular, learned Judge came up with the view that
section 144 can’t have any application in the facts and circumstances of the present case. Since firstly, in his
view the section cannot and ought not to apply to a decree being "varied" or "reversed" by a compromise
arrived at, even if it is before, and is recorded by, an appellate court, and secondly, even if the section does so
apply, it cannot and ought not to apply to the "compromise" at hand. As the first point suggests the
fundamental principle on which restitution bears a stand or base: an act of the court should not cause injury
to any party.

As what is pertinent to the present situation of issue, the distinction is clear: the decree being "varied" or
"reversed" is what we say an act of the court, whereas, the compromise poses as is an act of the parties. No
doubt there is a decree in the latter case, but that is only "the compromise agreement to which the Judge's
order has been superadded".

The spirit of restitution is exactly that it amends the damage inflicted by the erroneous decree. But that
erroneous decree must be the result that caused by judicial decision or determination. However, The court
ensures the correction of its made error, but it is only for the court itself to determine that such an error was
made but not anyone else. Moreover, The private bargain (i.e., compromise) may well put an end to the
decree. But that is not the same thing at all as holding or inferring that the decree done away with was an error
of the court.

It is clear from this passage that what is being referred to throughout are the successive judicial determinations
whereby an error is made (at first instance or perhaps even at an intermediate level), which it then recognized
and rectified (either, as the case may be, at the intermediate or the final level), and then the court sorts out, by
way of restitution, the matter of any injury caused.

Heeding at the compromise factor serving to the reversal of decree, it will be recalled that clause 8
recorded that on account thereof, the decree stood "fully satisfied and ... reversed". Now, this surely rises an
anomalous situation. Because, if the decree is "fully satisfied", then what is the thing left to reverse;
obviously it is nothing, apparently if the decree is set to reverse, it is then not satisfied. So unequivocally, it
creates confusion which is infact nothing but purports to bring about a deliberate contrivance. It is recognition
that, in reality, what was happening was simply (and only) a compromise that sought to satisfy the decree.
However, by the time the compromise came about, the Company's property had been sold in the auction
proceedings and the price had been received from the auction purchaser who had been put in possession. To
get around this "problem", the compromise added the words "and be reversed" in order to create some basis
for invoking restitution by making an application under section 144.

Secondly, there a question arises that are the applicants entitled to restitution under section 144 on the basis
of the compromise decree? The answers would be swung in negative. Because,

 It will be recalled that while the applicants were (or are) the majority shareholders of the Company,
they were never party to Suit B-85/2000.
 And, it is one of the fundamental principles of company law that a company is an independent official
person and it is a person having its own right, distinct from its shareholders. However, reference may
be made to a decision cited by learned counsel for the applicants (in another context), Anjum
Rasheed and others v. Shehzad and others 2007 CLD 1210, where a learned Division Bench of this
Court observed as follows: "... [a] company is a separate entity distinct from its Director and no
shareholders/or Director of a company can be said to be the owner of any particular piece of a
property in which the company has an interest. Such distinction has to be clearly observed between
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the company as a legal entity and its rights on the one hand and individually shareholders and their
right[s] on the other...." (pg. 1225).

When the compromise decree is examined and the "restitution" sought on its basis considered, it is quite clear
that what is to happen is for the Company's property is to be transferred to the Schon family, i.e., the
applicants. However, if such a result were to obtain, that would not be restitution at all. It would be the
creation of an entirely new situation. A reversal of the decree ought to result in the Company, in its own right
and as the party to Suit B-85/2000, being restored to its original position, i.e., for its property to revert to it.
However, this result would never come about. What would happen is that other persons (the applicants), who
are (to use the technical term) strangers to the suit, would be "restored" to the position to which the Company
would be entitled.

Obitar dicta of the judgement hold by Learned Judge is specified here

 While bringing the application of applicants to the dismissal, the learned Judge set forth reasoning that
is revealed as that the principle of restitution (and in any case section 144) does not, and ought not, to
apply to a compromise decree, and that the restitution actually being sought is in fact not a reversion
to or restoration of the status quo ante but the creation of a new situation, this application cannot
succeed. Section 144 cannot, does not and ought not to apply.
 Moreover, the Learned judge put forward content reading as regards of inference that arrived at it is
not necessary for me to consider the other ground taken by learned counsel for the applicants, that the
auction purchaser had knowledge of Sp. HCA 291/2001 and therefore was not a bona fide purchaser
for value without notice. The case law cited and relied upon by the contesting sides in this regard does
not therefore need to be considered.

In the sight of the vision of the Learned judge, for all of the reasons as expressed above, this application
cannot tend to success. It is therefore hereby dismissed.

My Opinion
 I opine that this case has been really stood precedent to the cases comprising the dispute of restitution
of the company’s property. The vision, the learned Judge posed is very much standing compliance
with what I hold. Because the section 144 doesn’t apply in this scenario as the applicants are not
entitled to get the right under this section. However, it is the discretion of the court whether to apply it
or lay it at side temporarily in that situation. So if it decides so as applying it, there is a maxim:
 The maxim "Actus Curiae neminem gravabit", which means that the act of the Court shall
prejudice no-one, becomes applicable in such a case. In such a situation the Court is under an
obligation to undo the wrong done to a party by the act of the Court.
 Section 410 applies only in fact, when the company is being wound up. It applies at its
commencement. And its commencement appears when there is a petition for its winding up has been
presented. It does not apply if the petition seeking winding up is, e.g., dismissed, either in contested
proceedings or on being allowed to be withdrawn.
 So, it is agreeable that the stance of applicants was creating new situation. As the claimed restitution
was for the Schon family but not the company.

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