' Instant petition under sections 284 to 289 of the Companies Ordinance, has been moved by Messrs Shakar Ganj Mills Limited and Crescent Ujala Limited with their addresses given in the title of the petition, praying their merger/ amalgamation inter se, after unanimous approval of their respective Board of Directors, in this behalf. Petitioner No,1, public limited company, is involved in manufacturing/producing different varieties of sugar and allied products producible out of sugar cane. It has an authorized share capital of Rs,1.00 Billion divided into 50,000,000 ordinary shares of Rs,10 each and 50,000,000 preference shares of 10% each. The paid-up of capital of petitioner No,1 is Rs,29,286,270 divided into 29,286,027 ordinary shares of Rs,10 each.
2. Petitioner No,2 is also a public limited company primarily engaged in business of cotton spinning and manufacture of garments etc., with an authorized capital of Rs,300 millions divided into 30,000,000 ordinary share of Rs,10 with paid of capital of Rs,251,500,000 divided into Rs,25,150,000 ordinary shares of Rs,10 each.
3. Merger/amalgamation, inter petitioners seeks sanction of this Court, inter alia, on the grounds that in case of permission of merger, a single unit will reduce the administrative/overhead cost and will increase more profit, besides effective administrative' control over the units of both the petitioners, presently being run separately. According to the petitioners, amalgamation would result in better credit arrangements and would multiply the arrangements for obtaining loans and other credit facilities will be reduced. Merger is claimed to be for better opportunities for the petitioners for the improvement and modernization, besides reduction in Annual General meeting, decrease in Members of Board of Directors and taxation rates etc.
4. On application of the petitioners, this Court vide order dated 26-7-2004 ordered convening of joint meeting of both the petitioners, seeking approval of their amalgamation/merger, including their members/Contributors/Creditors/Bankers etc. For 17-8-2004 at 11.00 a.m. At the premises of Shakarganj Mills Limited, Unit No,6, Happy Homes, 38-A-3, Main Gulberg, Lahore to be presided over by Messrs Muhammad Umar Farooq and Muhammad Kaleem Khurshid, Advocates, Lahore, as local commissioners who were required to submit their report after general body meeting of both the companies. A public notice was also ordered to be issued in daily newspapers, Urdu Lahore "Jang" and English Lahore "The Nation" inviting objections from the public at large, sharers, creditors, bankers, Registrar Companies SECB and the Stock Exchanges with which these companies are enlisted. Consequent to the order of this Court, general body meeting of both the companies was held on 17-8-2004 and both the above-named Advocates presiding it and have submitted their report, informing that in spite of public notice published as noted above, none appeared before them except Mr. M. H. Khan, a shareholder of Shakarganj Mills Limited to the extent of 0.01% of the total share capital and expressed his reservations regarding merger claimed by the petitioners, at the close of the meeting.
5. Relevant portions of the report of the local commissioners read as under: "The Special Resolution seeking merger of Crescent Ujala Limited into Shakarganj Mills Limited was read out by company secretary to the shareholders. The same, Annexed as R-5, was unanimously approved by all the attending shareholders. The shareholders accordingly approved the Scheme of Merger as presented before them.
' The meeting was then concluded."
"The Special Resolution seeking merger of Crescent Ujala Limited into Shakarganj Mills Limited was read out by the company secretary before the shareholders present in the meeting. The same, Annexed as R-7, was unanimously approved by the shareholders present in the meeting holding 85.47% of the total share capital of Shakarganj Mills Limited. The shareholders accordingly approved the Scheme as presented before them.
' The meeting was then brought to an end."
"The undersigned report that the Scheme of merger, Annexed as R-8 has been approved by the shareholders of petitioners Nos.1 and 2."
6. Mr. M. H. Khan who had shown his reservations before the learned local commissioners, at the close of the meeting, also appeared before this Court on 29-9-2004 and was given time to file his reasons in writing in opposition of the proposed merger. The objections filed by Mr. M.H. Khan, inter alia, are that the prayed merger is unnatural as the field of work of the petitioners are poles apart and there is nothing common between the two industries except that their Chief Executives are real brothers. According to him Crescent Ujala Limited is running in loss and after merger, its shareholders will become entitled to dividend and 'out of earnings of Shakarganj Mills Limited and they will also be entitled to its reserves/ unappropriated profit. Mr. M. H. Khan also compared the paid-up capital of both the petitioners and seriously doubted the audit reports showing profit of Crescent Ujala Limited at Rs,3.52.
7. Learned counsel appearing on behalf of the petitioners opposed the objections raised by Mr. M.
H. Khan who with 2990 shares of Shakarganj Mills Limited is said to be holding shares to the extent of 0.01% of its total shares. An offer to Mr. M. H. Khan was made by the petitioners to purchase his shares at the highest value of Rs,55.95 per share, but the same was refused. It was urged that such a share holding, does not confer a right to oppose the merger concurred by the major shareholders and to control the decisions of the company without having participated in general meeting of Shakarganj Mills Limited. Replying to the objections, raised to the audit report of the petitioners, it Was claimed that the auditors of Shakarganj Mills Limited i,e, Messrs Riaz A. Company, chartered accountants, are involved in auditing the accounts of petitioner No, 1 for the last five years whereas Messrs Anjum Asim Shahid Chartered Accountants are auditing the accounts of Crescent Ujala Limited for last three years but the petitioner never objected to their audit reports. It was also asserted that both the auditors above-named are chartered accountants and their credibility and reputation, ranks them in top ten companies of the country. It was also pointed out that Mr. M. H. Khan never filed any complaint to the Chartered Accountants' Association or Security and Exchange Commission regarding incorrect preparation of audit reports. It was further submitted on behalf of the petitioners that in anticipation of merger, value of the shares of petitioner No,1 has increased by Rs,3, pending the petition whereas the Stock markets have shown loss, over all.
8. I have minutely considered the objections of Mr. M. H. Khan and reply given by the learned counsel for the petitioners. Undeniably the objector hold only 0.01% of the total share holding of Shakarganj Mills Limited whereas sections 284, 285 A and 287 of the Companies Ordinance, only acknowledge right of 3/4th majority of the members of the company to make a choice of handling the affairs of the company. As noted in the factual part of this order, 99.99 shareholders of Crescent Ujala Mills Limited and 85.47% shareholders Shakarganj Mills Limited have concurred to the proposed scheme of merger. This ratio is so high that it is a command for the small shareholders, like the objector who opposed with a small share in the equity of petitioner No 1. If the objections of Mr. M. H. Khan are accepted it would amount to allowing him to sit in judgment against the wishes of shareholders, in excess of the ratio given by the above-referred provisions of law i,e, 3/4th and thus, this course is not either lawful or justifiably on the basis of any canon known for administration of justice. The objector cannot be given a right to disapprove the scheme or to suggest any alternative method by holding so a small share. Holding. Law regarding sanction to the scheme of merger is settled and earlier in the cases of Messrs Pakistan Cement Limited (2002 CLD 1392); Kohinoor Raiwind Mills Limited through Chief Executive v. Kohinoor Gujar Khan Mills and others (2002 CLD 1314) and in the matter of Pakistan Water Bottlers (Pvt.) Limited and 2 others (2003 CLD 1634), it was laid down that Court while considering the scheme of merger, has to see it as a whole and to determine whether it is just and fair. During this exercise, deeper investigation into every limb of scheme was not approved and it was observed that the objector has to show mala fides and unfairness of the scheme and those pre-requisites should be fair. In the instant case, the objector could not show his right to control the affairs of a company with his small share holding, in opposition to the will of 85.47% shareholders. It is too late in the day to say that audit reports of the two Chartered Accountants are fake and that too, without any basis logic and proof.
Such bald objections, without complaint against the Chartered Accountants before any competent forum and without raising any such objection in the general meeting of the companies, cannot be allowed to sustain. Increase in the value of share of petitioner No,1 in anticipation of merger of both the companies' in spite of depression in the stock markets, is a proof is proved of the fact that there is nothing bad in the proposed 'merger. I consequently turn down the objections of a small shareholder for the reasons noted above.
9. Joint Registrar, SECP has filed parawise comments to the petition in hand wherein they principally agreed to the merger proposed. Creditors and Bankers of both the companies have no objections to the scheme under consideration and the material on record including the report of the local commissioners, who chaired the joint meeting of both the companies, after a public notice, I feel that creation of single company after merger, will thrust upon business of the company more effectively would save the administrative expenses/over-head charges, will enhance their profit, will improve the functioning/operations of manufacturing of production and will also make the credit arrangement even more smoother. In this manner, re-organization of capital through amalgamation will be to the advantage of the shareholders, creditors and employees jointly, as well as, severally. I accordingly, sanction the proposed scheme of merger/amalgamation of both the companies' w,e,f, 2-10-2004 and in result thereof, the petitioner No,2 shall stand dissolved and will cease to exist from this date as independent entity, as prayed.
10. This petition is accordingly accepted and an order of merger/ amalgamation of the petitioner No,2 in petitioner No,1 is passed. Disposed of. Copy of this order shall be communicated to the Registrar Companies, Joint Registrar SECB, Stock Exchanges, Creditors and Bankers of both the merged companies, their Directors and shareholders through citation in newspapers and ordinary course of process, at the expense of the petitioner No, 1.