KHALID ALI Z. QAZI, J. - This petition seeks the sanction of this Court under Section 284 read with Section 287 of the Companies Ordinance, 1984 to a Scheme of Arrangement dated 29th August, 2008 and certain facilitating orders under* Section 287 of the Companies Ordinance, 1984. The petitioners Nos. 1 and 2 are unlisted companies. As per. Memo, of petition the Scheme of Arrangement involves the amalgamation of the petitioner No. 1 and the petitioner No. 2 by the transfer to and vesting in the petitioner No. 2 of the entire undertaking of the petitioner No. 1 (inclusive of all properties, assets, rights, liabilities and obligations of the petitioner No. 1), the issue of shares of the petitioner No. 2 to the Members of the petitioner No. 1, and the, dissolution without winding up of the petitioner No; 1.
2. Under the Scheme of Arrangement "Annexure A" to the petition at page 55", one the Scheme of Arrangement is sanctioned by this Court and it becomes effective in accordance with its terms:-
(a) all the properties, assets, rights, liabilities and obligations of every, description of the petitioner I No. 1 (which are described in detail in paragraph 1 thereof) will transfer to and vest in the petitioner No. 2, and in the case of properties and assets subject to any and all existing mortgages, charges and encumbrances;
(b) the petitioner No. 2 is required to issue shares of the petitioner No. 2 to the members of y petitioner No. 1 in respect of shares held by it in the petitioner No. 1; all at a date to be determined in accordance with the Scheme of Arrangement, such that for every 428 shares of Rs. 10 each of petitioner No. 1 there shall be issued 1 share of Rs. 10 of petitioner No. 2 the Scheme of Arrangement also makes provision for the issuance and delivery of share certificates of the petitioner No. 2 after allotment of its shares;
(c) the petitioner No. 1 will at a date to be determined in accordance with the Scheme of Arrangement be dissolved without winding up;
(d) all litigation filed by or against the petitioner No. 1 which may be pending will be continued by or against, as the case may be, the petitioner No. 2
(e) the amalgamation of the petitioners will be treated as having taken place with effect from 00:00 hours on 1st January, 2008 and since that date the businesses carried on by the petitioner No. 1 will have been carried on in trust for and for the benefit of the amalgamated company.
3. The amalgamation of the petitioners its accordance with the terms of the Scheme of Arrangement does not diminish or in any way affect the rights and [ securities of the creditors of any of the petitioners. The debts and liabilities of the petitioner No. 1 will be transferred to the petitioner No. 2 and shall be treated as those of, and will be discharged by, the petitioner No. 2. The creditors of the petitioner No. 2 remain such creditors of the petitioner No. 2. The interests of the employees of the petitioner No. 1 are fully protected under the Scheme of Arrangement. All employees of the petitioner No. 1 who accept employment with the petitioner No. 2 shall become employees of the petitioner No. 2 on the same terms and, conditions as are applicable to their employment with the petitioner No. 1, as the case may be. The proportion in which the shares of the petitioner No. 2 are to be allotted under the Scheme of Arrangement to the petitioner No. V as has been recommended by A.F. Ferguson & Co., Chartered Accountants "Annexure F" to the petition at page 539.
4. The Scheme of Arrangement was approved by the Boards of Directors of each of the petitioners on 29th August, 2008 "Annexures B/1 & B/2" to the petition at pages 81 and 83. The petition was filed on 4th December, 2008 along with the interlocutory application, being CMA 1067 of 2008, for convening separate meetings of the members of the petitioner No. 1 and the members of the petitioner No. 2 under Section 284 of the Companies Ordinance for approving, adopting and agreeing to, the Scheme of Arrangement.
5. In compliance with Rule 781 of the Sindh Chief Court Rules (Original Side) and Rule 19 of the Companies (Court) Rules, 1997 notices of the filing of the petition and the prayer in the petition, and notices in regard to CMA No. 1067 of 2008 were published in the Gazette of Pakistan, Part VI, dated 31.12.2008, the Sindh Government Gazette, Part II, dated 18.12.2008, daily 'Dawn', 'Business Recorder' and 'Jang',. Karachi on-13.12.2008. Notices of the petition and CMA No. 1067 of 2008 were served on the Registrar of Companies on 11.12.2008 in accordance with the provisions of Section 288 of the Companies Ordinance, 1984.
6. In pursuant to and in accordance with the Competition (Merger Control) Regulations, 2007, the petitioner No. 2 filed an application before the Competition Commission of Pakistan ("CCP") seeking the no-objection certificate for the merger of the petitioner No. 1 with petitioner No. 2. During the hearing on 13.1.2009 of CMA No. 1067 seeking directions of this Court for holding separate meetings of the members of each of the petitioners for the approval of the Scheme of Arrangement dated 29.8.2008, my learned brother Justice Gulzar Ahmad, J. Directed the petitioners to file an affidavit relating to a brief history of the earlier merger petition (bearing Judicial Miscellaneous Application No. 29 of 2001) which was filed on ,30.5,2001 in this Court by the petitioners and the outcome thereof and of the application filed in that petition after the issuance of the judgment and of High Court Appeal No. 187 of 2007 filed by the petitioners, In this connection, the Petitioners on 4.3.2009 filed an affidavit setting out a brief history of the earlier proposed merger. A copy of the said affidavit was also sent to the Registrar of Companies.
7. By order dated 13.1.2009, this Court (on CMA No. 1067 of 2008) directed the petitioners to convene and hold separate meetings of the members of each of the petitioners to consider and if thought fit to approve adopt and agree to the Scheme of Arrangement for the amalgamation of the- petitioner No/ 1 with the petitioner No. 2, and ordered Iqbal Bengali, the Chief Executive/Managing Director of the petitioners Nos. 1 and 2 to chair the separate meetings of each of the petitioners and directed the Chairman to report the results thereof to the Court. Thereafter, notices dated 21.1.2008, for the separate meetings of each of the petitioners were dispatched to the members of each of the petitioners.
8. Mr. Badaruddin F. Vellani, learned counsel for the petitioners, informs that the meeting of the Members of the petitioner No. 1 was held on t3.2.2008 at 3:00 p.Rn. At S.I. T.E., Karachi and the meeting of the Members of the petitioner No. 2 was held on the same day and at the same place at 4:00 p.m. Iqbal Bengali chaired both of these meetings and for the purposes of polling appointed A.F. Ferguson & Co., Chartered Accountants as scrutineers. Iqbal Bengali submitted his report on 18.2.2009 as Chairman of the meetings as required by Rule 955 of the Sindh Chief ^ Court Rules and rule 57 of the Companies (Court) Rules, 1997. The following were the results of the polling at the separate extraordinary general meetings of each of the petitioners:--
(i) members of the petitioner No. 1 voting in favour of the resolution agreeing, approving and adopting the Scheme pf Arrangement represented 100% in value of the shares held by the members present in person or by proxy and voting at the meeting.
Members of the petitioner No. 2 voting in favour of the resolution agreeing, approving and adopting the Scheme of Arrangement represented 100% in value of the shares held by the members present in person or by proxy and voting at the meeting;
9. It is further submitted by the learned counsel for the petitioners that prior to the filing of the petition, each of the petitioners approached their respective creditors as at 31.8.2008 to obtain their consent to the proposed amalgamation. A.F. Ferguson & Co., Chartered Accountants, verified the list of creditors and the consents received by each of the petitioners. This list and the certificates issued by A.F. Ferguson & Co. Have been filed as Annexures H and I to the petition. The unsecured- trade creditors' consents received by each of the petitioners were as follows: * Petitioner No. 1 - 98.84% "Annexure H" to the petition at page 551] - * Petitioner No. 2 - 99.50% "Annexure I" to the petition at page 567.
As regards the secured finance and trade creditors and the unsecured finance creditors of the petitioners Nos. 1 and 2, both the petitioners do not owe any amounts to any such creditors, as at 31.8.2008.
10. In view of the creditors' consents received by the petitioners, there is no occasion for convening or holding meetings of the creditors to seek their approval to the Scheme of Arrangement. Further, the Scheme of Arrangement does not diminish or adversely affect any of the creditors or their securities, these are all preserved by the Scheme of Arrangement. Reliance is placed on the following cases:--
1. NLR 1993 UC (Civil) 49 at 51 paragraphs 5 and 6 - Mahmood Textile Mills Limited v. Registrar Joint Stock Companies.
2. (1980) 50 Company Cases 785 at 794-795 Andhra Pradesh - Vijaya Durga Cotton Trading Limited v. Nava Bharat Enterprises (P) Limited.
3. J.M. No.25 of 1998 - Pakistan Industrial Promoters (Private) Limited and Lever Brothers Pakistan Limited order dated 9th October, 1998 passed in CMA No. 1582 of 1998.
11. Statements of the total number of employees of the petitioner No. 1 who by the time of the filing the petition had consented to the transfer of their respective employments to the petitioner No. 2 are set but in "Annexure G/1" and "Annexure G/2" of the petition at pages 545 and 549. 100% employees have consented to the transfer of their employment.
12. Th$ para wise comments of the Registrar of Companies, Securities and Exchange Commission of Pakistan dated 3.3.2009 confirmed that the Registrar. Had no objections to the merger being sanctioned by this Court, subject to no objections being received from the creditors of each of the petitioners, who according to the Registrar had secured charges against the assets of the petitioners. A list of such creditors was attached to the comments.
13. Upon perusal of the para wise comments filed by the Registrar of Companies, it appeared that the records maintained by the Registrar of Companies relating to? Petitioner No. 1 had not been rectified as the list contained in Annexure A to the aforesaid para wise comments include details of charges which have been either vacated or, modified. The above was brought to the attention of the Additional Registrar of Companies, Karachi, and accordingly the ' records maintained by the Registrar of. Companies relating to petitioner No. 1 have been rectified in confirmation of such rectification, the Additional Registrar of Companies, Company Registration Office, Karachi, has on 31.3.2009 filed a Corrigendum to the para wise comments filed on 3.3.2009, reflecting the current position of the secured creditors of petitioner No. 1.
14. The petitioners or 6.3.2009 filed their affidavit- in-rejoinder in response to the para wise comments and to the Corrigendum to the para wise comments of the Registrar stating inter alia that as at 31.8.2008, being the date with reference to which the list of creditors was prepared, there were no outstanding amounts owing by the petitioner No. 1 or the petitioner No. 2 to the banks which were cited in the para wise comments filed by the Registrar. Notwithstanding this fact, the petitioners had obtained consents from these banks to the merger. As per record the petitioner No. 1 has obtained consents from Standard Chartered Bank Limited and Habib Bank Limited. As regards ANZ Grindlays Bank, in the year 2000 ANZ Grindlays Bank changed its name to Standard Chartered Grindlays Bank Limited and subsequently in the year 2002, the entire undertaking in Pakistan of Standard Chartered Grindlays Bank Limited was amalgamated with Standard Chartered Bank, and subsequently Standard Chartered. Bank was merged into I Standard Chartered Bank (Pakistan)
Limited, Standard Chartered Bank '(Pakistan) Limited has given its consent to the merger. As regards Bank of America, this Bank was acquired by Union Bank Limited, which was subsequently acquired by Standard Chartered Bank (Pakistan) Limited, and the petitioner No. ,1 has obtained consent from Standard Chartered Bank (Pakistan) Limited. The petitioner No. 2 has Obtained consents. From Standard Chartered Bank (Pakistan) Limited, Annexure PDCL-4, Deustche Bank AG, Annexure 4 PDCL-5 Citibank, Annexure PDCL-6 and J.S. Bank Limited, Annexure PDCL-7. Learned counsel for the petitioners further states that the petitioners with respect to charges created in favour of Bank of America, ABN Amro Bank N.V. And Allegement Bank Nederland N.V.
15. The Scheme of Arrangement has been approved by more than the requisite majority required by Section 284(2), both in case of members and in the case of creditors. Ail financial- and other relevant information (including last audited-accounts) of the petitioner No. 1 and petitioner No. 2 have been disclosed.
16. Learned counsel for the petitioners further submits that there are no investigations or the like pending in relation to any of the petitioners under Sections 263 to 282 or any other provisions of the Companies Ordinance or under any previous Companies Act. As such, all requirements as laid down in Section 284 have been complied with.
17. I have heard the arguments of learned counsel for the petitioner and perused the material available on record and also perused the law and relevant case-law on the subject.
18. I have been able to lay my hand in respect of sanction of scheme of arrangement on the following judgments:-
(1) 2009 CLD 82 in the matter of Usman Textile Mills Limited.
(2) 1989 CLC 818 in the matter of Lipton and another.
(3) J.M. No. 25 of 1998 in the matter of Pakistan Industrial Promoters (Private) Limited and Lever Brothers Pakistan Limited order dated 30th April, 1999],
(4) J.M. No. 05 of 2002 in the matter of 'Abbott Laboratories (Pakistan) Limited and Knoll Pharmaceuticals Ltd.
(5) 1997 CLC 1873 in the matter of Brooke Bond Pakistan Limited v. Aslam Bin Ibrahim.
(6) J.M. No. 2 of 2002 - Smith Kline & French of Pakistan, Beecham Pakistan (Private) Limited and Glaxo Welcome Pakistan Limited.
(7) JAM'S. No. 6. Of 2006 - Pakistan Paper sack Corporation Limited, Khyber Papers Private Limited and Thai Limited.
(8) J.M. No. 23 of 2006 - Pharmacic Pakistan . (Private) Limited and Parke, Davis & Company, Limited.
19. I am, therefore, satisfied with the scheme of arrangement, adopted in the instant case is fair and reasonable.
20. To sum up, the scheme has been approved and accepted by an overwhelming majority of the members, present in number and in value, of the two petitioners at the two meetings held separately under orders of this Court. The schema of amalgamation has been found to be fair and reasonable on a consideration of the various factors which are necessary to be taken into consideration by the Chartered Accountants of both the companies. There is no allegation that the books of accounts are not reliable. No grounds have been suggested why the report of' the Chartered Accountants should not be accepted. There is no allegation of lack of bona tides on the part of the majority of the members, or the minority has been overridden and coerced into accepting the scheme of arrangements.
21. In the result, the petition succeeds and sanction is acceded to the proposed scheme of amalgamation. As per scheme of amalgamation, the amalgamation was to come into effect from 1,1.2008. In the , result, I pass the following orders:--
(a) an order under Section 284(2.) of the 4 Companies Ordinance sanctioning the Scheme of Arrangement as set forth in "Annexure A" hereto so as to make the Scheme binding on the petitioner No. 1 and its members and on the petitioner No. 2 and its members;
(b) the following orders under Section 287 of the Companies Ordinance so as to take effect at the same time as the order sanctioning the Scheme takes effect in accordance with Section 284(3)" of the Companies Ordinance, namely:
(i) an order under Section 287(1 )(a) of the Companies Ordinance transferring to and vesting in the petitioner No. 2 the whole undertaking of the petitioner No. 1 together with all its properties, assets, rights, liabilities and obligations of every description including those described in paragraph 1 of the Scheme as set forth in "Annexure A" hereto;
(ii) an order under Section 287(1)(b) of the Companies Ordinances directional the petitioner No. 2 to issue and allot ordinary shares of Rs. 10 each of the petitioner No. 2 credited as fully paid up, to the PLL Qualifying Shareholders (as defined in the Scheme) as at the Record Date (as defined in the Scheme) such 4 that in respect of every 428 ordinary shares of Rs. 10 each in the petitioner No. 1 held by each PLL Qualifying Shareholders there shall be allotted 1 ordinary share of Rs. 10 credited as fully paid up in the petitioner No. 2 and directing that the determination of the PLL Qualifying Shareholders and their respective entitlements to the shares in the petitioner No. 2, the treatment of fractional entitlements and the allotment of such shares and delivery of share certificates by the petitioner No. 2 shall be in accordance with paragraphs 5, 6, 7 and 9 of the Scheme;
(iii) an order under Section 287(1 )(f) of the Companies Ordinance directing that the share certificates issued by the petitioner No. 1 in respect of the shares of the petitioner No. 1 shall as at the Record Date (as defined in the Scheme) stand cancelled;
(iv) an order under Section 287(1 )(c) of the Companies Ordinance directing that all legal proceedings Instituted by or against the petitioner No. 1 which may be pending shall be continued by or . Against the petitioner No. 2;
(v) an order under Section 287(1 )(d) of the Companies Ordinance declaring the dissolution, without winding up, of the petitioner No. 1 so as to take effect from the Record Date (as defined in the Scheme);
(vi) an order under Section 287(1 )(f) of the Companies Ordinance declaring and directing that in accordance with paragraph 3 of the Scheme the amalgamation and the transfer to and vesting in the petitioner No. 2 of the PLL Undertaking (as defined in the Scheme) shall be treated as having taken effect from 00:00 hours 'on the 1st day Of January, 2008 and as from that time and until the Completion Date (as defined in the Scheme), the PLL Undertaking shall be deemed to have been carried on by the petitioner No. 1 for and on account and for the benefit of the petitioner No. 2.