1. ' KHALID ALI Z. QAZI, J.---Through this petition under sections 284 to 288 along with all other enabling provisions of the Companies Ordinance, 1984, the petitioners have prayed that an order under section 287(1)(a) of the Companies Ordinance, 1984 may be passed transferring to and vesting in the petitioner No,1 the whole undertaking, assets, properties of the petitioner No,2 as more particularly described in the Scheme as set forth in Annexure 'G' to the petition. Along with petition Scheme of Arrangement for merger of the petitioners company were also filed. The object of the Scheme is to merge the petitioner No,2 into petitioner No,1 through transferring and vesting in the petitioner No,1 of the whole undertaking of Lilley International (Pvt.) Ltd. The petitioner No,2 together with all the assets and liabilities.
2. After filing of the petition, on 22-7-2008 learned counsel for the petitioner has filed a statement that as per order of this Court, general meeting of Usman Textile Mills Ltd. And Lilley International (Pvt.) Ltd. Was held and shareholders of both the petitioners have approved "The Scheme". Minutes of meeting of both the companies are annexed along with the statement. The members of both the petitioners resolved as under:-- "Resolved that the shareholders have complete confidence in the Directors and whatever they are doing is in the best interest of the shareholders."
2. ' Mr. Shafiq Ahmed learned counsel for the petitioners has submitted that the petitioners have submitted that they have agreed and entered into a Scheme of Arrangement for the proposed merger of the petitioner No,2 into petition No,1. The Scheme of Arrangements has been filed giving details of the merger. The petitioners have also filed the minutes of the meetings held between the petitioners along with the statement dated 22-7-2008.
3. ' Notice of this petition was published in Daily Dawn and Daily Jang on 8-5-2008. Notice was also published in the Gazette of Pakistan on 21-5-2008. Notice was served upon the Joint Registrar, Securities and Exchange Commission of Pakistan.
4. ' In response to the notice issued to Registrar Joint Stocks of Companies has filed their comments explaining therein the details of capital and arrangement of merger and following objections to the proposed Scheme of Arrangements for the amalgamation of the petitioners' companies have been raised:--
(a) The swa p ratio as per the "Scheme of Arrangement for Merger" between petitioner No,1 and petitioner No,2 has been calculated only on the basis of net asset value of shares of petitioners Nos.1 and 2 as on 30-6-2007. The swa p ratio should be calculated on preferred valuation method i,e, weighted average of net assets future earnings and market values.
(b) The Auditors of petitioner No,2, in their report on the accounts for 30-6-2007, have qualified the following assets of the petitioner No,2 Company on the ground that the same have been estimated by the management.
(i) Fixed assets costing Rs, 4,196 million (including cost of land amounting Rs,80 million, Plant and Machinery and other fixed assets amounting to Rs,4,106 out of the total fixed assets of petitioner No,2 costing Rs, 4,198 million; and
(ii) Contract work in progress, stores and spares and, trade debtors amounting to Rs,2,092 million.
5. Since a substantial part of the assets of petitioner No,2 have been qualified by its Auditors, the same may have a significant impact on the swap ratio. It is in the best interest of the shareholders of petitioner No,1 that the above stated assets of petitioner No,2 should be valued by an independent evaluator and the swa p ratio should be adjusted accordingly.
(c) The Auditors of petitioner No,2 have also qualified their report on accounts for the year ended 30-6-2007 for non-provisioning of interest on the amount payable to Messrs Shahbaz Cement Limited in the following words:-- "As stated in note 10 to the financial statements, the company acquired fixed assets from Messrs Shahbaz Cement Limited amounting to Rs,294.731 million on June 30, 2007. However, no interest has been provided on this balance as agreed between. Shahbaz Cement Limited and Lilley International (Pvt.) Limited. The agreement and terms of payment between Shahbaz Cement Limited and Lilley International (Private) Limited were in process of finalization to the date of our audit."
(d) The "Scheme of Arrangement for Merger" between petitioner No,1 and petitioner No,2, the authorized and paid up capital of petitioner No,2 has been stated as Rs,5 billion and Rs,4,953 million receptively. However as per record and the annual audited accounts of petitioner No,2 for June 30,2007 its authorized and paid up capital is Rs,10 million and Rs,9 million respectively.
6. Mr. Shafiq Ahmed learned counsel for the petitioners in reply to the objections raised by Additional Registrar of Companies submits that all the objections raised relate to the factual position, which will not affect the amalgamation/merger of the petitioners. He further submits that all the liabilities of petitioner No,2 have already been taken by the petitioner No,1, therefore, no prejudice will be caused if this petition is allowed. In support of his submission, learned counsel has placed reliance upon the cases reported in 2002 CLD 872; 2005 CLD 93 and 2007 CLD 900.
7. ' In view of the above, it appears that all the formalities have been completed and there is no impediment for allowing this petition.
8. ' In the circumstances, the Scheme of Arrangements for proposed merger is approved and the petition is allowed as prayed and the petitioner No,2 is merged with petitioner No, 1.