Bangladesh Machine Tools Ltd. Vs. Power Backbones & ors., 2018(1) LNJ 245

Case No: Company Matter No. 180 of 2017

Judge: Md. Rezaul Hasan, J.

Court: High Court Division,

Advocate: Mr. A.S.M. Shahriar Kabir, Mr. Shafique Ahmed Senior Advocate,

Citation: 2018(1) LNJ 245

Case Year: 2017

Appellant: Bangladesh Machine Tools Factory Limited.

Respondent: Power Backbones Limited and others

Subject: Company Act

Delivery Date: 2018-06-03

HIGH COURT DIVISION

(STATUTORY ORIGINAL JURISDICTION)

Md. Reazul Hasan, J

 

Judgment on

31.10.2017

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Bangladesh Machine Tools Factory Limited.

...Petitioner

-Versus-

Power Backbones Limited and others

...Respondents

Company Act (XVIII of 1994)

Sections 92 (1)(b) and 97

Without investing any money or acquiring any paid up share in their names they have become directors of the PBL, quite against the purport and intent of the provisions of clause (b) of sub-section (1) of section 92 and section 97 of the Act, that require that the directors should have paid up share in their own name to be qualified for holding the position of and to continue as the director of a company. The underlying reason in requiring paid up shares in the name of directors is that, a company cannot be left in the hands of the persons who do not have any paid up share or investment, in kind or in cash, in the company and such persons cannot be expected to act in the interest of the company. (emphasis added).   . . .(21)

Company Act (XVIII of 1994)

Section 241 (II)(b) and (VI)

A company, in my considered opinion, formed for the purpose of trade or earning profit, but having no share capital of its own, or a company where the directors are not required to hold any paid up share in their name to be qualified as a directors or where there is no provision (or any practical scope) to make call on unpaid shares is, evidently, a sinister mechanism. Therefore, in such a case, the corporate veil should be lifted, if so required, to find the actual culprits in order to bring them to book and such a company should be wound up so that it cannot create further disorder in the arena of trade and commerce, moreso, by defeating the intent of law. In addition, when such a company does not call or hold any Board Meeting, nor prepare any profit and loss account or the audited balance sheet or the director’s report for placing before the AGM or where the directors withdraw money in the name of profit, from the account of the company, without approval of dividend in any AGM or where the company  has no paid up capital and no call can be made on unpaid shares or where the directors are found guilty of gross violation of statute or the AOA or have committed serious breach of their fiduciary duties then, probably, there should remain no option, but to pass an order for winding up with appropriate directions for recovery of the assets and/or documents of the company and, when justified, to ensure punishment for committing offences defined in the law. Accordingly, the petition is allowed and the company is hereby wound up as per provisions of clause (ii) and (vi) of section 241 of the Companies Act, 1994, though the company is also liable to be wound up under clause (IV), subject to the result of the Civil Miscellaneous Petition No.1454 of 2017. Mr. Brigadier General Md. Mohiuddin Siddiquee, Director Finance of BMTF, performing functions as the provisional liquidator is hereby appointed as “the Official Liquidator” of the Power Backbones Limited in accordance with the Company Act, 1994 and the Companies Rules, 2009.       . . . (23 and 25)

Mr. A.S.M. Shahriar Kabir with

Ms. Shamima Akhter with

Ms. Zareen Rahman, Advocates.

. . . For the petitioner.

Mr. Shafique Ahmed Senior Advocate with

Mr. A.F.M. Mesbahuddin Ahmed Senior Advocate with

Mr. Mohammad Shafiqur Rahman with

Mr. Mahbub Shafique, Advocates.

..…For the Respondent Nos. 2-5.

JUDGMENT

Md. Rezaul Hasan, J: This is an application filed under section 241 read with section 245 of the Companies Act, 1994 (the Act). Let the supplementary affidavits do form part of the main petition.

2.            The facts, relevant for disposal of this matter is that, the Petitioner is a public company limited by shares, incorporated under the laws of Bangladesh. It is engaged in the business of manufacturing tools and machineries, etc for meeting the local needs. It is a state owned company run, operated and managed by Bangladesh Army from 2000. The Government of Bangladesh published gazette notification in this matter and thereafter handed over the Petitioner’s company from Ministry of Industry to Bangladesh Army and then onwards Bangladesh Army is engaged in different productive business scheme to make the company profitable; that, as part of the business, on 03.11.2013 the Petitioner signed a memorandum of agreement with the respondent No.1 to 4 to establish a poll factory in the BMTF premises and according to the terms of the said agreement, the petitioner and respondent No.1 to 4 formed a company called Power Backbones Limited on 10.12.2013 and duly incorporated in the Registrar Joint Stock Companies, Dhaka; (Annexure-A); that, the Respondent No. 1 is a private company, limited by shares; that, Respondent No.2 to 5 are the directors of the Respondent No.1 company; that the company has been incorporated for producing pre-stretched concrete poles to be supplied mostly in the public sector. The authorized capital of the company is 10,00,00,000 taka and respondents No. 2 to 5 holds 85% shares of the company and the petitioner hold the remaining 15% shares of the company; that the petitioner and the respondent No. 2 signed a Memorandum of Agreement on 03.11.2013; that according to clause 6 of the said agreement, the paid up capital of the company would be taka 10 crore; that on 10.12.2013, the petitioner and the respondent Nos.  2-5 incorporated the respondent No. 1 company; that according to the Articles of Association  and Memorandum of Association of the company, the paid up capital was determined at Tk. 10 crore; that the respondent Nos. 2-5 in violation of the Articles of Association  and Memorandum of Association and clause 6 of the Memorandum of Agreement did not pay any paid up capital, neither at the time of formation of the respondent No. 1 company nor afterwards; that on 01.04.2014, the respondent No. 1 company opened a bank account with the Trust Bank Limited and the account was operated till 03.12.2015; that during this time, the respondent Nos. 2-5 did not deposit any amount as paid capital; that the respondent Nos. 2-5 knowingly and intentionally misrepresented with the respondent No. 1 company by not paying the paid up capital into the account of the company; that these actions of the respondent Nos. 2-5 amounts to breach of the contract. As such, for just and equitable ground, the respondent No. 1 company is liable to be wind up; that the clause 8 of the said agreement stated that the respondent Nos. 2-5 should set up the poles factory at their own cost and clause 11 of the said agreement stated that the respondent Nos. 2-5 will construct the production shade, inspection room, warehouse etc. at their own cost; that the audit report of the company was published on 31.08.2015 for the first time and in the said report [paragraph No. 5(a) and (b)] stated that the respondent No. 1 company borrowed money from the petitioner for an amount of Tk. 3,50,00,000/= for constructing the said factory and for processing material purpose, borrowed an amount of Tk. 7,69,42,970 which is a gross violation of the said agreement; that the audit report also showed that the respondent Nos. 2-5 did not pay the paid up capital of Tk. 10 crore according to the said agreement; that the true fact is that, the petitioner constructed the factory at its own cost to run and operate the business. As such, respondent Nos. 2-5 did not invest any single penny for the construction of the factory and procuring the raw materials. Therefore, on just and equitable ground, the respondent No.1 company should be wound up; that according to clause 21 of the Memorandum of Agreement, the respondent Nos. 2-5 after setting up the industry may borrow up to an amount of maximum Tk. 5,00,00,000/- from the petitioner as working capital; that by violating the term of the said agreement, the respondent Nos. 2-5 fraudulently had withdrawn an amount of Tk. 11,19,42,970/- even before setting up the factory; that for vacillating everything, the respondent Nos. 2-5 by their fraudulent actions took unfair advantages which amounts to a criminal breach of trust. As such, for just and equitable ground, the respondent No.1 company should wind up; that on 10.08.2015, the respondent Nos. 2-4 resigned from the post of Chairman, Managing Director and Director respectively; that the company did not have any Managing Director or Chairman to call for or hold any AGM or any Board Meeting in accordance to the Articles and Memorandum of Association. As such, for just and equitable ground, the respondent No.1 company may be wind up; that the respondent Nos. 2-5 held 85% share of the respondent No.1 company and respondent Nos. 2-4 are the Chairman, Managing Director and Director respectively; that the respondent Nos. 2-4 never called up for the share capital and also never paid the paid up capital at any later date; as such, for just and equitable ground, the respondent No.1 company is liable to be wind up; that the factory office of the respondent No.1 company was BMTF, Shimultoly, Joyedpur, Gazipur, Bangladesh and the corporate office was House -104 (1st Floor), Mosque Road, old DOHS, Banani, Dhaka, all the documents of the respondent No.1 Company were kept in the corporate office of the company; that on 10.08.2015, the respondent Nos. 2, 3 and 4 resigned from their respective post of Chairman, Managing Director and Director, that at the time of resignation, the respondent Nos. 2, 3 and 4 did not hand over any document of the respondent No.1 company to the petitioner, that afterwards the petitioner was only able to recover the document kept in the factory office and the respondent Nos. 2, 3 and 4 destroyed all the documents that were kept in the corporate office and were never been found, which is again a criminal breach of trust by the respondent Nos. 2, 3 and 4; that the petitioner requested several times to produce those documents kept in the corporate office, but the petitioner failed to recover any such document from the respondent Nos. 2, 3 and 4; as such, for just an equitable ground, the respondent No.1 company is also liable to be wind up; that although the Respondent No.1 was incorporated in 10.12.2013, it has miserably failed to hold general meetings as per section 81 of the Companies Act 1994 and also failed to file the statutory annual return before the office of the Respondent No.6 and as such, it would be just and equitable to wind up the Respondent No.1 by an order of this Court; that under section 96 of Companies Act 1994, it is a mandatory requirement to hold board meetings in every three months and at least 4 meetings are to be held in a year; that the respondent  No.1 company did not hold any such board meetings and as such, it would be just and equitable to wind up the Respondent  No.1 by an order of this Court; that all the directors signed Form 117 and also executed the share transfer and therefore the number of directors became less than two and as such, it would be just and equitable to wind up the respondent  No.1 by an order of this Court; that the Respondent  No.1 company has no Managing Director to function its activities and the Managing Director has neither called upon or arranged for any board meetings nor arranged for any proper book keeping of the company; that, no bank account has been maintained nor any audit account has been prepared since the creation of the Respondent  No.1 company and as such, it will be just and equitable to wind up the Respondent No.1 by an order of this Court; that, it is further stated that the Respondent  No.1 does not have any liability to any firm or financial institution and as such, it will be just and equitable to wind up the Respondent  No.1 by an order of this Court.

3.            Hence, this petition.

4.            The respondent Nos. 2-5 have filed affidavit-in-opposition along with supplementary affidavit, which shall form part of the affidavit-in-opposition. Their case, in brief, are that, the petitioner Bangladesh Machine Tools Factory Limited executed and registered a Memorandum of Agreement with respondent No. 3, Chairman, Power Backbones Ltd. being deed No. 86 dated 13.11.2013 for a period of 10 (ten) years; that for the betterment of the company the respondents executed affidavit, application and form 117, which is not  accepted and  considered by the Register of Joint  Stock Companies and Firms and the registered agreement is still in force between the parties as such the instant application is liable to be disallowed with cost; that clause-27 of the registered Memorandum of Agreement stated that, the 1st party (petitioner) shall receive the sales proceeds from the buyers of the product. On receipt of the sales proceeds, the 1st party after keeping their portion of profit as per this agreement and after deducting loan if taken by the Power Backbones Ltd. will pay the rest amount to the Power Backbones Ltd. As such, the allegations brought against the respondents is false, concocted, therefore the instant application is not maintainable; that it is stated that in august 2015, Respondent No.1 PBL received news that the REB would float a tender for purchasing SPC Poles under Direct Procurement Method (DPM) for Khulna Project and in this respect to be eligible to participate in such tender, it is implied rule that the Government of Bangladesh has to have at least 51% share in the bidding company. However, in the instant case, the Petitioner BMTF (which is a state owned Company) only has 15% share in Respondent No. 1, Power Backbones Ltd. (PBL), as such, the Power Backbones Ltd. (PBL) was not eligible to participate in the said tender floated by the REB under Direct Procurement Method. That, in such backdrop upon a verbal agreement the shareholders and Directors of Power Backbones Ltd. (PBL) agreed to transfer shares in favour of BMTF in order to increase the share of BMTF in the Power Backbones Ltd. (PBL) up to 85 % to enable the  Power Backbones Ltd. (PBL) to participate and secure award of the tender floated by the REB under Direct Procurement Method,  but the petitioner without disclosing the same filed the instant application, therefore the instant application is not maintainable. It has been further stated in the supplementary affidavit that, the petitioner, BMTF authority on 23.01.2016 taken over all Documents /File/Office equipments of Respondent’s Power Backbones Ltd, as such it is quite difficult for the respondents side to produce details document in connection with their business affairs; that from item 2 (e) of the Minutes of Directors Meeting of Power Backbones Ltd. (PBL)  held in conference room at 1130 hours on 21 October, 2015, it is clearly stated that, “Chairman  PBL said that, PBL has invested 22 crore to start the production and locking system was arranged to secure BMTF’s profit.” It has also been stated that the petitioner filed another Company Matter being No. 194 of 2017 under section 43 the Companies Act, 1994 and after hearing both the parties, the Court on. 22.10.2017 was pleased to pass a Judgment  and order allowing the application under section 43 the Companies Act,1994 along with a direction to appoint Arbitrator, being aggrieved by and dissatisfied with the judgment, allowing the application under section 43 the Companies Act,1994, the respondents preferred Civil Miscellaneous Petition being No. 1454 of 2017 before the Hon’ble Appellate Division for stay operation of the impugned Judgment and order dated 22.10.2017 passed by the High Court Division in Company Matter No.194 of 2017, so far as it relates to the order of rectification the register of shares showing the petitioner-respondents as share holder of  85,00,000 shares in the company since 10.08.2015 in place of respondents- petitioners by allowing the application under section 43 of Companies Act, 1994 and after hearing the same on 25.10.2017 the Hon’ble Judge-in-Chamber was pleased to pass an order as follows,  “Stay, as prayed for, is granted for 6 (six) weeks. In the meantime, the petitioners are directed to file regular leave petition”.

5.            Mr. A.S.M. Shahriar Kabir, Ms. Shamima Akhter and Ms. Zareen Rahman have appeared on behalf of the petitioner. Having placed the petition, the learned Advocates for the petitioner 1st of all submit that, the respondent No. 1 company (PBL) was incorporated on 10.12.2013, but it has miserably failed to hold it’s annual general meeting (AGM) as required by sub-section (1) of section 81 of the Act. He further submits that even the respondent Nos. 2 to 5 did not call any meeting of board of directors as mandated by section 96 of the Act. He next submits that, the act of withdrawal of Tk. 11,19,42,970/= from the account of PBL, in the name of dividend, is a clear breach of trust. The learned Advocate also submits that the respondent Nos. 2-5 committed a serious breach of their fiduciary duties imposed by law and had run the affairs of the company in clear violation of the provisions of law and of the Articles of Association (AOA) as well as they have acted to secure their personal gain at the cost and expense of BMTF. The learned Advocate further submits that, the respondent Nos. 2-5, having transferred their 100% shares to BMTF, resigned on 10.08.2015, from the post of Chairman, Managing Director and directors respectively and on the same day passed a board resolution (Annexure-C series) and thereafter, no Chairman or Managing Director, or board and the member of directors have reduced below two, i.e. below the statutory level. Hence, he prays that the respondent No. 1 company is liable to be wound up and the petition be allowed.

6.            Mr. Mahbub Shafique, Mr. Mohammad Shafiqur Rahman, the learned Advocates appeared on behalf of the respondents. They submit that the Article 49 of the Articles of Association of the company, Power Backbones Ltd. provides for Arbitration and Claus No. 31 of the registered agreement deed dated 13.11.2013 also provides for Arbitration in the case of disagreement, dispute or differences between the parties. But, without referring the dispute to arbitration the petitioner cannot come before this Court, hence this petition is not maintainable. Learned Advocate next proceeds that, clause-27 of the registered Memorandum of Agreement stated that, the 1st party (petitioner) shall receive the sales proceeds from the buyers of the product. On receipt of the sales precedes, the 1st party, after keeping their portion of profit as per this agreement and after deducting loan if taken by the Power Backbones Ltd., will pay the rest amount to the Power Backbones Ltd. As such, the allegations brought against the respondents are false, concocted, therefore the instant application is not maintainable. It has also been argued that in august 2015, the Board of Directors of the Respondent No.1 company (PBL) received news that in order to participate in a tender floated by REB, the PBL had to have at least 50% Government shares in it. Hence, in order to increase the share of BMTF in the Power Backbones Ltd. (PBL) up to 85 %, to enable it to participate in the said tender, the respondent Nos.2-5 have agreed to transfer their shares to the petitioner BMTF. It has further been argued that the petitioner, BMTF authority, on 23.01.2016, taken over all Documents /File/Office equipments of Respondent’s Power Backbones Ltd. as such it is quite difficult for the respondents side to produce details document in connection with their business affairs. The learned Advocate next submits that, it will be evident from item 2 (e) of the Minutes of Directors Meeting of Power Backbones Ltd. (PBL) held on 21 October, 2015, that,  PBL has invested 22 crore to start the production and locking system was arranged to secure BMTF’s profit. He continues that the petitioner filed another Company Matter being No. 194 of 2017 under section 43 the Companies Act, 1994 and after hearing both the parties, the Court on. 22.10.2017 was pleased to pass a Judgment  and order allowing the application under section 43 the Companies Act,1994 along with a direction to appoint Arbitrator, being aggrieved by and dissatisfied with the judgment, allowing the application under section 43 the Companies Act,1994, the respondents preferred Civil Miscellaneous Petition being No. 1454 of 2017 before the Hon’ble Appellate Division for stay operation of the impugned Judgment and order dated 22.10.2017 passed by the High Court Division in Company Matter No.194 of 2017 so far as it relates to the order of rectification the register of shares showing the petitioner-respondents as share holder of  85,00,000 shares in the company since 10.08.2015 in place of respondents- petitioners by allowing the application under section 43 of Companies Act, 1994 and after hearing the same on 25.10.2017 the Hon’ble Judge-in-Chamber was pleased to pass an order as follows,  “Stay, as prayed for, is granted for 6 (six) weeks. In the meantime, the petitioners are directed to file regular leave petition”.  Hence, the ground taken on transfer of 85,00,000 shares of the respondent Nos. 2-5 is not sustainable and that minimum statutory number of directors have not fallen below the statutory requirement. Hence, this is not a fit case for this Hon’ble Court to pass an order of winding up, he concludes.

7.            I have heard the learned Advocates for both sides, perused the petition, the affidavits and other materials in the record.

8.            It has to be noted first that, a company runs and manages its business through it’s board of directors (i.e. the respondent Nos. 2-5 in this case), who are primarily and ultimately responsible to run and manage the affairs of the company in accordance with the provisions of law and of its Articles of Association (AOA) and, amongst other statutory duties, to place the profit and loss account, the balance sheet, the director’s report and the audit report in the AGM, to be held in each year, for consideration by the members (shareholders).

9.            As stipulated in section 210(6) of the Act, the ‘first auditor’ shall be appointed by the Board within one month of the registration of the company. Thereafter, as mandated by section 210(1), the auditor shall be appointed and their remuneration shall be fixed in each AGM, by the shareholders (members), against specific agenda to be placed as per notice of the AGM.

10.        Though this company (PBL) was incorporated on 10.12.2013, and the first auditor appears to have been appointed by the Board, however, no AGM was called by the respondent No. 3 or 4, as required by section 81(1) and due for the calendar years 2014, 2015 and 2016.

11.        The respondent Nos. 2-5, as directors, were legally bound to call and hold the AGMs of the PBL, for the calendar years 2014, 2015 and 2016, as mandated by section 81(1) of the Act and also to place, in each AGM, the balance sheet together with the profit and loss account as required under section 183(1) of the Act, along with the board of director’s report as stipulated by section 184(1). These statutory duties, cast upon the board of directors (the respondent Nos. 2-5 in this case) are to be strictly complied with inasmuch as these are not matters left to the discretion, caprice or whims of the Board of Directors. These are the mandatory requirements to be complied with by a company, so that the affairs of the company should be managed and run transparently and in accordance with the provisions of the Companies Act, 1994, under which the company (PBL) has been incorporated. It has to be made clear by this Court that a company itself owns its business, not it’s directors or shareholders. A company is neither a proprietorship concern, nor a partnership firm of its director(s).

12.        I find that, the respondent Nos. 2-5, occupying the position of the directors of respondent No. 1 company (PBL), and being in full control of the PBL board and being wholly responsible to ensure statutory compliance, have deliberately abstained from complying with the statutory duties imposed upon them under sections 81(1), 110(1), 183(1), 184(1) and 190 of the Act and that has resulted in the concealment and suppression of the financial and other state of affairs of the company (PBL).

13.        Besides, it has been recorded in the Audit Report dated 31.08.2015 that, the respondent Nos. 2-5 was not holding even the quarterly board meeting as required by section 96 of the Act and the auditors have recommended, in their report to hold board meetings regularly as well as to adjust the PBL loans. However, there is nothing on record to show that the respondent Nos. 2-5 have made any provisions even for liquidating its debts thereby, exposing its creditors to bad debts.    

14.        I hold that, in the absence of any approval of dividend in any AGM, the act of withdrawal of Tk. 11,19,42,970/= from the account of PBL by the Respondent Nos.2 to 5, in the name of dividend, as stated in the petition, was neither permissible, nor authorized by law. The petitioner has therefore, made the allegation of committing breach of trust against the respondent Nos. 2-5.

15.        The respondent Nos. 2-5 have thus committed serious breach of their fiduciary as well as their statutory duties in the manner above mentioned, and had run the affairs of the company in flagrant violation of the aforesaid provisions of the Act and of the Articles of Association (AOA) of the company, and they have apparently acted to secure their personal gain at the cost and expense of BMTF.

16.        I also find that, as per clause 16 of the MOA dated 13.11.2013 (Annexure-1), the respondents Nos. 2 to 5 were to make 100% investment, in the account of the PBL, at the initial stage, in consideration for issuing 85,00,000 number of shares in their name and the paid up capital of the PBL was fixed at Tk. 10/= (ten) crore at the initial stage, vide clause 6 of the MOA dated 13.11.2013. Besides, as per clause 8 of the MOA, the  respondent Nos. 2-5 have undertaken to bear entire cost to set up a Spun Pre-Stress Concrete Poles Industry at the premises of the 1st party BMTF.

17.        It is also on record that as agreed in the Memorandum of Association, Mr. Gulam Sarwar (Respondent No. 2) had agreed to subscribe for 55,00,000 (fifty five lac) shares, respondent No. 3 Md. Abdul Alim agreed to subscribe for 15,00,000 (fifteen lac) shares, respondent No. 4 Daizy Hassan agreed to subscribe for 10,00,000 (ten lac) shares and the respondent No. 5 Nasima Ahmed agreed to subscribe for 5,00,000 (five lac) shares, vide Memorandum of Association of the PBL (Annexure-A). But they have neither made any investment in the PBL as per clause 8, 11 or 16 of the MOA dated 13.11.2013 (Annexure-1), nor paid any single taka against 85,00,000 shares issued to them in view of their promise and as recorded made in clause 8, 11 or 16 of the MOA dated 13.11.2013.

18.        The audit report for the year ended on 31.08.2015, annexed to the supplementary affidavit of respondent Nos. 2-5 (Annexure: 4-A), does not show that these respondents have invested any money in the account of the PBL. On the contrary,  against serial No. 5 of the audit report, it has been recorded that BMTF (petitioner) has paid a short term cash loan of Tk. 3,50,00,000/= (three crore fifty lac) to PBL and it (petitioner) has also paid a short term LC loan amounting to Tk. 7,69,42,970 to PBL. Besides, against clause (e) of serial No. 5 of the audit report, it has also been recorded that, BMTF had arranged for a bank guarantee to finance the business of the respondent No. 1 company (PBL), but there is nothing on record to show that the respondent Nos. 2-5 have had paid or subscribed any money against their shares or to show that they have made any investment in the PBL account, as per clause 8, 11 and 16 of he MOA. As such, evidently the PBL was set up and had started it’s business with the loan provided by the BMTF

19.        The learned Advocate for the respondents had prayed for adjournment on 29.10.2017 to submit proof of investment, pursuant to a query made from the Bench as to whether the respondents had any documents to prove payment of any money and/or investment in PBL. Though they have filed a supplementary affidavit on 30.10.2017 annexing photo copies of some cheques and a resolution dated 21.10.2015, however, none of these documents prove making payment of any share money or making any investment by the respondents against their 85,00,000 shares or as per clause 8,11 or 16 of the MOA. They have, thus, failed to show that they have paid any share money or have made any investment pursuant to clause 8, 11 and 16 of the MOA. Rather, I find that the cheques (Annexure-6 series), enclosed with the supplementary affidavit dated 30.10.2017, are evidence of transaction done between PBL and BMTF and Polli Bidut Somity. These are not evidence of payment of any money to the account of PBL as against the 85,00,000 shares given to these respondents or of any investment made by them in the PBL. On the other hand, minutes dated 05.11.2015 (Annexure- 7) is the minutes of a board meeting of PBL and in paragraph No. 2(e) of the minutes, it has been recorded that the PBL has invested 22 crore taka to start production on the factory. But, the PBL is an entity distinct from the Respondent Nos. 2-5. Therefore, payment of Tk. 22 crore by PBL ( even if it were true) is not the money paid by or on account of the respondent Nos. 2-5 against their shares or as paid up capital to PBL. However, there is no record in the Audit Report that the PBL has paid Tk. 22 crore to start production as noted in the said minutes, rather paragraph-4(b) of the Audit Report shows that BMTF is the sole investor in the PBL. This Audit Report has been filed by and relied upon by both sides. Thus, these respondents have deliberately tried to mislead the Court on the issue of paying share money and making investment as required of them under clause 8, 11 and 16 of the MOA. Indeed, nothing has been placed before this Court, either with the supplementary affidavit or with the affidavit in opposition, to show that the respondent Nos. 2-5 have invested a single taka as paid up capital  or have made any investment as agreed to in the MOA dated 13.11.2013.

20.        Besides, the contention of the respondents that, all documents of the company remained in the custody of the petitioner (BMTF) is totally false, inasmuch as the corporate office was, admittedly, situated at House No. 104 (1st Floor), Mosque Road, Old DOHS, Banani, Dhaka. Moreover, the documents, if there was any, to prove payment of share money, in cash or through banking channel, must lie with the respondents as well as with their bank and should have been reflected in the audit report. But, neither the audit report, nor any other document on record proves this contention of the respondent Nos. 2-5. The respondent Nos.2-5, being in the Board, were the custodian of all documents as per law and they are responsible to safely keep, maintain and produce them. The allegation of the petitioner is that, the respondent Nos. 3, 4 and 5 (the Chairman, Managing Director and Director, respectively) though had resigned from their offices, they however, did not handover any document to the petitioner, inspite of demand made by the latter. The petitioner could recover only those documents as were kept in the factory at Joydevpur. I find this allegation as well founded.  

21.        The company was under control of the respondent Nos. 2-5, who were majority in the board as well as in the company. Notably, another unprecedented and peculiar aspect of this cases is that, the respondent Nos. 2-5, not having paid a single taka as share money, they were holding 85,00,000 number of shares, issued to them as wholly unpaid shares. These respondent Nos. 2-4, who are shown to be a director in article 24 of the AOA, in fact, does not hold any paid up shares, in their name, in the company. As such, without investing any money or acquiring any paid up share in their names they have become directors of the PBL, quite against the purport and intent of the provisions of clause (b) of sub-section (1) of section 92 and section 97 of the Act, that require that the directors should have paid up share in their own name to be qualified for holding the position of and to continue as the director of a company. The underlying reason in requiring paid up shares in the name of directors is that, a company cannot be left in the hands of the persons who do not have any paid up share or investment, in kind or in cash, in the company and such persons cannot be expected to act in the interest of the company. (emphasis added).

22.        Another most apprehensive situation, deliberately contrived, is that, the respondent Nos. 2-5 are majority and are controlling the board, hence, there is no way or means to compel them to pay money against their 85,00,000 numbers of unpaid shares, by way of making call on their unpaid shares, since these respondent Nos.2-5 having 100% control in the board, they would not make any call on the unpaid shares. This is a clear case of fraud on the company, in particular on the petitioner, who is the sole investor in the PBL.

23.        A company, in my considered opinion, formed for the purpose of trade or earning profit, but having no share capital of its own, or a company where the directors are not required to hold any paid up share in their name to be qualified as a directors or where there is no provision (or any practical scope) to make call on unpaid shares is, evidently, a sinister mechanism. Therefore, in such a case, the corporate veil should be lifted, if so required, to find the actual culprits in order to bring them to book and such a company should be wound up so that it cannot create further disorder in the arena of trade and commerce, moreso, by defeating the intent of law. In addition, when such a company does not call or hold any Board Meeting, nor prepare any profit and loss account or the audited balance sheet or the director’s report for placing before the AGM or where the directors withdraw money in the name of profit, from the account of the company, without approval of dividend in any AGM or where the company  has no paid up capital and no call can be made on unpaid shares or where the directors are found guilty of gross violation of statute or the AOA or have committed serious breach of their fiduciary duties then, probably, there should remain no option, but to pass an order for winding up with appropriate directions for recovery of the assets and/or documents of the company and, when justified, to ensure punishment for committing offences defined in the law.

24.        I prima-facie find that, the respondent Nos.2-5 have induced the petitioner (BMTF) and obtained its consent to sign the Memorandum of Association of the PBL, by making false promises in clause Nos. 8, 11 and 16 of the Memorandum of Agreement dated 13.11.2013 (Annexure-1) hence, the MOA dated 13.11.2015 is questionable for want of consideration and for obtaining consent of BMTF representatives by resorting to by fraud.

25.        In view of the deliberation recorded above, I find merit in this petition and I am of opinion that the respondent No.1 Power Backbones Company Limited should be wind up with a appropriate directions.

O R D E R 

         In the result, the petition is allowed and the company is hereby wound up as per provisions of clause (ii) and (vi) of section 241 of the Companies Act, 1994, though the company is also liable to be wound up under clause (IV), subject to the result of the Civil Miscellaneous Petition No.1454 of 2017.

(A)        Accordingly it is ordered-

(1)   the petitioner or his Advocate shall send to the Registrar of Companies a notice of this order, in Form No. 18, to enable him to notify the Official Receiver about this judgment and order, as required by Rule 75 of the Companies Rules, 2009. (Since the Official Receiver himself is not appointed as the liquidator.)

(2)   Mr. Brigadier General Md. Mohiuddin Siddiquee, Director Finance of BMTF, performing functions as the provisional liquidator is hereby appointed as “the Official Liquidator” of the Power Backbones Limited (herein after referred to as the company), as per Rule 76 of the Companies Rules, 2009.

(3)         The Official Liquidator is hereby directed -

(i)           to advertise, as required by Rules 76 and 133, the order of liquidation to submit claims giving 14 days time, with adequate proof (vide Rules 133 to 147), from the claimants, if any, in two national daily news papers, one in English and another in Bangla, in the locality where the registered office or the principal place of business of the company is situated.

(ii)         to inform this order of winding up by issuing notice upon the company, as required by Rule 77 (since company is not the petitioner and did not appear in this matter) and to all parties/banks dealing with the company.

(iii)       to open a bank account with the Sonali Bank Limited, Supreme Court Branch, Dhaka, in the name of the “Official Liquidator of PBL (in liquidation)”, as required by Rule 103,

(iv)       to maintain all books, records and accounts as required under the provisions of the Companies Act and the Rule 110 of the Companies Rules, 2009 showing all assets and liabilities of the company.

(v)         to submit quarterly reports, of the accounts of the company, to the Court, till it’s dissolution or otherwise ordered by this Court.

(vi)       to exercise his powers and discretion, vested in him under section 262 of the Act, with due regard being had to interest of the company, its creditors and contributories and subject to the control of the Court.

(vii)     to prepare and to furnish before this Court a list of all contributorlares i.e. list of persons who owns such shares in the company that are not paid up or fully paid up (subject to this Court’s right to rectify the same, if so required according to law)

(viii)   to submit his statement/report, further and/or supplementary statement/ reported, to this Court, as required by section 259 of the Act, read with Rules 119 and 120, as soon as practicable upon receiving the statement of affairs to be filed under section 258 (since winding up order has been made).

(4)         The Official Liquidator is directed to take into custody all movable (by marking an inventory) and immovable properties of the company, if any, including the title deeds and to dispose of the same, as permitted by section 262 of the Act, with prior sanction of this court (vide Rules 168 to 170), and to use the sale proceeds, if any, towards settling the liabilities of the petitioner company, if any, in the manner prescribed by Rules 148 to 162 and regard being had to the provisions of section 325 concerning preferential payment as well as to show separately the list of secured and unsecured creditors, if any, giving their name, particulars and the amount of their claim, in two columns, one showing the principal sum and another showing the interest, if any, the last column showing the total seem claimed. He shall, to that end, submit application accordingly for disbursement of the assets, to allow the cost and expenses incurred and also showing the assets, liabilities cash, if any, at hand.

(5)         The company is directed to submit verified statements of affairs in duplicate, signed by the Chief Executive Officers (or M.D.) or the chief Financial Officer/Head of Accounts (if any) or by authorized person of the company to the aforesaid official liquidator, as required under the provisions of section 258 of the Act, within 21 (twenty-one) days from the date of winding up order or from the date of sending this record to company section, whichever is occurred later.

(6)         The company or its Managing Director or the CEO or the Chief Financial Officer shall furnish the name of the bankers of the company, giving account numbers, enclosing statement of accounts, name of the signatories and also enclosing authenticated copies of the resolution regarding operation of the bank accounts, within the time limit prescribed in the proceeding paragraph.

(7)         The persons named at preceding paragraph No. (6) and/or the official in charge of the estate, if any, of the company shall give particulars of and shall handover all title deeds of immovable and movable properties of the company (if any), all books kept as per section 181 of Act, the audit report, all other books, registers, vouchers, receipts, bills, invoices and all documents relating to and evidencing the dealings and/or  transactions made by/with the company, the minutes book, salary sheet, bank statements etc.  and such other or further documents as may be called for by the liquidator to the official liquidator within the same time limit prescribed in the proceeding paragraph, and

(8)         Since the Official Liquidator is permitted by law to take into custody all assets and properties of his company, as per provisions of section 262, so the concerned bank manager(s) and the Managing Director(s) or the authorized person of the company is/are directed to open a bank account in the name of official liquidator and to hand over specimen card, forthwith on demand being made, to the official liquidator to transfer the amount to the account maintained by the official liquidator, on his signing necessary papers, and also to hand over cheque book so that the official liquidator can bear all necessary cost and expenses incurred in the process of winding up and to pay the salaries, rents, bills, wages, dues etcetra, if any, and also to handover statement of accounts and such other documents as the company itself was entitled to.

(9)         The petitioner company or its authorized person shall submit an affidavit of compliance as regards directions Nos. 5 to 7 within one week thereafter.

(10)     The Company, the members of the board, all share-holders/contributors are hereby restrained to operate bank accounts, to remove or transfer or encumbers any moveable or immovable properties of the company including, but not limited to, the vehicles, equipment, machineries etcetra of the company and not to remove any documents without leave of the court.

(11)     The official Liquidator shall follow and comply with all such provisions, laid down in the Act and the Rules, as are applicable in the process of winding up and he shall be solely responsible for the default, if any, committed in the process of winding up. He shall not withdraw any amount more than that may be required to meet the lawful and reasonable cost and expenses and/or to settle the lawful claims and/or to distribute the surplus assets amongst the cortributories, if any, as per law and with prior sanction of the court. Besides, he shall bring, in writing, to the knowledge of the court all facts that are material to ensure compliance of the provisions law and to protect-interest of the creditors, claimants, contributories and the company, as the case may be.

(12)     The Official Liquidator shall, if he deems fit and proper, cause audit and inspection in respect of the company’s accounts, stocks and other affairs and shall pay the cost and expenses from the assets of the company.

(13)     He shall also make calls on the shares issued to respondent Nos. 2-5, if they are found to be unpaid shares.

(14)     The Official Liquidator shall take all such actions as may be necessary to recover the assets, deeds, documents and debts of the company.

(15)     He shall, if advisable, initiate and/or continue prosecution and/or other proceeding and shall represent the company (in liquidation) in all proceedings in which it is party and he shall have authority to appoint advocates and to pay the legal costs and expenses from the assets of the company.

(16)     The matter of the dissolution of the company will be considered only after receiving and considering the statements/affidavit of facts and/or compliance to be submitted by the official liquidator, pursuant to the directions given above.

(17)     The above named Official Liquidator shall receive Tk, 1,00,000/= (one lac) as the provisional liquidator, as per order dated 23.05.2017. Now, having considered the extent and volume of works, assigned to herein above, the remuneration of the Official Liquidator, as per provisions of section 256(3) read with Rule 131, is re-fixed (in addition to his remuneration as Provisional Liquidator) at Tk. 8,00,000/= (eight lac), of which 50% shall be paid, within 2(two) weeks and the rest 50% will be paid upon dissolution of the company. The petitioner shall to submit an affidavit of compliance within the next 1(one) week thereafter, subject to which this order will be effective.

         Let a copy of this judgment and order be sent to the Official Receiver.

Ed.