Companies can challenge winding-up orders, rules Supreme Court

July 10, 2024 (MLN): The Supreme Court of Pakistan has ruled in favor of companies facing winding-up orders, affirming their right to challenge such orders issued against them.

The ruling comes in response to petitions filed by Tanveer Cotton Mills (Pvt.) Ltd. and Tanveer Spinning & Weaving Mills (Pvt.) to appear against a consolidated judgment of a Company Bench of the Lahore High Court, dated June 17, 2021.

By the impugned judgment, the Company Bench allowed the petitions of the creditors, Summit Bank Ltd. and MCB Bank Ltd., for winding up the petitioner-companies and appointed official liquidators to manage the affairs of the petitioner-companies until the conclusion of the winding-up proceedings.

The case hinged on whether a company that has been ordered to be wound up can challenge the winding-up order in its name through its board of directors or the chief executive officer.

The Supreme Court concluded that companies retain the legal standing to appeal such orders, emphasizing their status as separate legal entities.

“A company is a separate juristic person, distinct from its directors and shareholders. When every person has a right to appeal a judgment, decree or order made against him, a company, which is also a person, cannot be treated differently,” the court order reads.

A winding-up petition is filed against a company. The winding-up order is made against the company. The company is thus a person aggrieved by such an order. Therefore, a company against which a winding-up order is passed does have the right to appeal it, it added.

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