LAHORE, July 22: The Lahore High Court has served notices on all seven Ittefaq Group of Industries' families to explain if they supported the sale of four of its steel units for the payment of bank loans obtained by the Sharif family.
Justice Nasim Sikandar on Wednesday issued notices to the families for July 30 upon the receipt of the report of a three-member committee that the Al-Rehmat Group of Companies from Faisalabad purchased the Ittefaq Foundries and the Brothers Steel at Kot Lakhpat, the Ittefaq Brothers at Shahdara and the Ilyas Enterprises on Bund Road for Rs2.159 billion.
The committee submitted the report on July 7 this year, saying the Al-Rehmat Group had already deposited an amount of Rs200 million and pledged to pay the balance in 15 months.
The committee was appointed by the LHC on July 8, 1998, for the evaluation and disposal of the industrial units on the petitions of eight banks, who had advanced to the family a collective industrial loan of Rs3.11 billion and were seeking its recovery.
About 50 per cent of the loan was advanced by the National Bank of Pakistan. The Habib Bank, United Bank, Muslim Commercial Bank, Bank of Punjab, Agricultural Development Bank of Pakistan, ICP and the Punjab Modarba were also creditors. All loans were obtained between 1982 and 1988.
The banks and other development financial institutions filed suits for the recovery of loans with the Banking Tribunal in 1988. In March 1995 and Jan 1996, the tribunal decreed against the Sharifs who were directed to pay the loan within 15 days.
The former ruling family, however, challenged the decree in the LHC, which constituted a three-member committee for the disposal of assets and payment of bank loans. The committee took over the physical possession of the units after the second Nawaz Sharif government was dismissed in October 1999.
It sold the property on July 7 and before that it sold through auction the stock of raw material and finished goods for Rs3.76 million in March 2002, and 128 vehicles for Rs1.65 million in September that year.
The Ittefaq Group of Industries was owned by seven families, which with the passage of time managed 16 industries in steel, textile, sugar and engineering sectors. Of them, Mian Muhammad Sharif, the father of Nawaz Sharif and Shahbaz Sharif, and Mian Merajdin are alive. Mian Muhammad Shafi, Mian Sirajdin, Mian Farooq Barkat, Mian Muhammad Yousaf and Mian Muhammad Bashir have died.
They are the owners of the Ittefaq Foundries, the Ittefaq Brothers, the Brothers Steel, the Ilyas Enterprises and the Farooq Mills in the steel division, the Ittefaq Textile Mills, the Brothers Textile Mills, the Khalid Siraj Textile Mills, the Ramzan Bakhsh Textile Mills, the Barkat Textile Mills and the Abdul Aziz Textile Mills in the textile division.
They also owned the Ittefaq Sugar Mills, the Brothers Sugar Mills, the Ramzan Sugar Mills, the Ittefaq Group Services and the Khalid Siraj Industries. Besides, they set up an independent Sharif Group of Industries, which is running the Hudaibiya Papers Mills, the Hudaibiya Engineering Mills, the Hamza Paper and Board Mills, the Chaudhry Sugar Mills, and the Mehran Ramzan Textile Mills. All these industries came up between 1985 and 1988.
OBJECTION: Meanwhile, the family of Mian Merajdin has filed an application with the LHC, raising objections to the constitution of the committee and the sale of four steel division units.
Filed through advocate Syed Mansoor Ali Shah, the plea has challenged the setting up of the committee submitting that section 284(2) of the Companies Ordinance, 1984, under which it was set up, provided alternatives for restructuring and ultimate revival of the steel units.
The order to the committee for the disposal amounted to liquidation of the units, which was unlawful. It submitted that the sale and winding up of the units under a company required the appointment of a court liquidator for public auction of assets through proper advertisement, and no such procedure was completed.
It also challenged the committee's disposing of the company's raw material and finished goods as well as vehicles on the grounds that it had no such mandate.
Another objection raised by the family was that the evaluation of the assets was got done by the committee in 1998 and the property shown was worth Rs1.795 billion. The committee did not get a second evaluation of the property, though prices of real estate and machinery had registered a steep rise in six years.
The family questioned the sale of the assets to the Al-Rehmat Group of Companies on the plea that the financial record of the group was not got examined by experts and shareholders.
The Merajdin family has been at odds with the Sharifs who, the former claims, distributed corporate assets shares among all other families except them. The distribution of assets among the families was done in 1991 and, according to Mr Merajdin's family, it was not given an equitable share.
The family filed a petition with the LHC in January 1997, seeking a fair distribution of the corporate assets. The petition is pending for adjudication.