This is a petition under Section 97 of the Companies Ordinance, 1984 seeking confirmation of a resolution reduction of share capital of the Company. Notices were issued to shareholders as well as secured creditors. Notices were published in daily 'News" and "Nawa-e-Waqt" in accordance with the requirements of law. Except the Securities and Exchange Commission of Pakistan, no one has entered appearance to oppose the petition, No objection has been raised by any of the secured creditors.
2. The petitioner/Company was incorporated on 3.7.1970 as a Public Limited Company under the Companies Act, 1913 (now Companies Ordinance. 1984). It is engaged in business of establishing, promoting, running factories and mills to carry on the business of spinning, weaving and manufacturing and dealing in cotton or cotton ginning or fibrous substances. It has its rdgistered office at Kashan-eYousaf, Khawaja Street, Chakwal.
3. The petitioner has an authorized capital of Rs,500,000,000/- (Rupees Five Hundred Million) divided into 50,000,000 ordinary shares of Rs,10/- each.
4. In terms of Article 27 of the Articles of Association of the petitioner/Company, it has the power, subject to confirmation by the Court and provisions of Sections 96 to 107 of the Companies Ordinance, 1984, by special resolution to reduce its capital by paying of the capital or canceling capital which has been lost or is unrepresented by available assets or otherwise, as may seem expedient. It has been pointed out that the petitioner/Company has sustained losses of Rs,240,482,855/- mainly on account of high financial costs and operating losses. The Board of Directors of the petitioner/Company in its meeting held on 07.09.2011, recommended 50% reduction in the paid up capital of the petitioner/Company by reducing nominal value of each share from Rs,10/- to Rs,5/- in order to set off the accumulated losses of the capital.
5. The shareholders of the Company passed the following resolution in accordance with Section 2(1)(36) of the Companies Ordinance. 1984, in a meeting which is validly convened and held as Annual General Meeting on 29.09.2011 after notice dated 07.09.2011 containing the Special Resolution was sent to the shareholders with the Annual Report of the petitioner/Company. The said notice is also published in daily "Naw-e-Waqt" and "Nation" on 08.09.2011 as per requirement of the Ordinance. The contents of the resolution are reproduced below;-- "RESOLVED that the paid up capital of the Company be and is hereby reduced (subject to the requirements of the Companies Ordinance, 1984) by canceling the issued and paid up capital of the Company which has been lost or is unrepresented by its available assets to the extent of fifty percent (50%), that is Rs,5/- (Rupees five) on each of the issued shares of the Company and reducing the nominal value thereof to Rs,5/- (Rupees five) each.
FURTHER RESOLVED that the figures and words "Rs, 500,000,000/- (Rupees Five hundred million) divided into 50,000,000 (Fifty million) ordinary shares of Rs,10/-, appearing in Clause V of the Memorandum of Association of the Company be and are hereby substituted by the figures and words "Rs,500,000,000/- (Rupees Five hundred million) divided into 100,000,000 (one hundred million) ordinary shares of Rs,5/- (Rupees five) each", FURTHER RESOLVED that the figures and words "Rs,500,000,000/- (Rupees Five hundred million) divided into 50,000,000 (Fifty million) ordinary shares of Rs,10/- each', appearing in Clause 4 of the Articles of Association of the Company be and are hereby substituted by the figures and words "Rs,500,000,000/- (Rupees Five hundred million) divided into 100,000,000 (one hundred million) ordinary shares of Rs,5/- "(Rupees five) each".
FURTHER RESOLVED that Khawaja Muhammad Kaleem, Director and Mr. Muhammad Jahangir Khan Company Secretary of the Company (the "Authorized Officers") be and is hereby authorized by and on behalf of the Company to singly do all acts, deeds and things and to take all necessary steps to complete all legal formalities, to file all necessary documents and to appear before all relevant authorities, including the High Court and Supreme Court of Pakistan, the Securities and Exchange Commission of Pakistan and Karachi Stock Exchange or any other competent body and/or authority in connection with the reduction of the capital of the Company. The Authorized Officers are further authorized to file a petition before the Court seeking confirmation of the special resolution passed for reduction of the share capital and to take all steps facilitating the said confirmation. The Authorized Officers shall have the power to consent on behalf of all concerned to any modifications or additions to the subject resolution (s) or to any condition, which the Court may think, fit to impose. The Authorized Officers are further authorized to issue letters, sign documents and to do all other incidental acts, deeds and things as may be considered appropriate by him in his better judgment in order to achieve the objectives of this resolution, including engagement of legal counsel for the purposes of representing the Company before all relevant authorities, including the Court, Securities and Exchange Commission of Pakistan and/or any other competent body and/or authority and to take all further actions in this regard as may be prescribed by the Court or otherwise."
6. In compliance of the provisions of Section 172 of the Ordinance, the petitioner/Company also filed a Special Resolution in Form-XXVI dated 10.10.2011 with the Companies Registration Office.
7. An extract of the minute books showing proceedings of the Annual General Meeting at which the aforesaid Special Resolution was passed is annexed with the petition and has been examined by this Court.
8. The learned counsel for the petitioner submits that the proposed reduction of share capital of the petitioner/Company neither involves any diminution of liability in respect of the unpaid share capital nor payment of any shareholder of any unpaid capital. It is designed to work justly and equitably amongst the shareholders of the petitioner/Company and will not adversely affect the interests of members of the public, if any, who may be induced to take up the petitioner/Company's share. He further points out that creditors are not affected in any manner by the proposed reduction in the share capital in terms of the Special Resolution. The existing value of the petitioner/Company's assets is not affected by the proposed reduction.
9. The minutes proposed to be registered under Section 102(1) of the Companies Ordinance are as follows:-- The paid up capital of the Company be and is hereby reduced (subject to the requirements of the Companies Ordinance, 1984) by canceling the issued and paid up capital of the Company which has been lost or is unrepresented by its available assets to the extent of fifty percent (50%), that is Rs,5/- (Rupees five) on each of the issued shares of the Company and reducing the nominal value thereof to Rs,5/- (Rupees five) each.
The figures and words "Rs,500,000,000/- (Rupees Five Hundred million) divided into 50,000,000 (Fifty million) ordinary shares of Rs,10/- each", appearing in Clause V of the Memorandum of Association of the Company be and are hereby substituted by the figures and words "Rs,500,000,000/- (Rupees Five hundred million) divided into 100,000,000 (one hundred million) ordinary shares of Rs 5/- (Rupees five) each".
The figures and words 'Rs, 500,000,000/- (Rupees Five hundred million) divided into 50,000,000 (Fifty million) ordinary shares of Rs,10/- each", appearing in Clause 4 of the Articles of Association of the Company be and are hereby substituted by the figures and words "Rs,500,000,000/- (Rupees Five hundred million) divided into 100,000,000 (one hundred million) ordinary shares of Rs,5/- (Rupees five) each"
10.The learned counsel for SECP has raised an objection that since the Company is registered, with SECP at Islamabad, therefore, this Court lacks jurisdiction to entertain this matter.
11.Section 7 of the Companies Ordinance, 1984, provides that the Court having jurisdiction under the Ordinance shall be the High Court having jurisdiction in the place at which the registered office of the company is situated. Admittedly, the registered office of the company is situated at Kashana- e-Yousaf Khawaja Street, Chakwal. District Chakwal falls within the territorial jurisdiction of this Court. The contention of the learned counsel for SECP that since the company is registered with the Islamabad Office of SECP, therefore, this Court lacks jurisdiction has no force. Therefore, the objection regarding territorial jurisdiction is misconceived and is rejected.
12. Despite notice sent through courier service as well as published in the daily "Nawa-e-Waqt" and "News", on 23.11.2011 and 24:11.2011 respectively, no one has entered appearance on behalf of the shareholders or creditors to oppose this petition for reduction of capital pursuant to the aforementioned Special Resolution. Habib Metropolitan Bank Limited which is the only institutional creditor of the petitioner has issued an NOC dated September 18, 2012 stating that it has no objections against the proposed reduction in capital of the company. There is no legal or procedural impediment against confirmation of the Resolution. This Court therefore, confirms the Special Resolution with permission for reduction of share capital. The minutes proposed to be registered under Section 102(1) of the Companies Ordinance, 1984, reproduced above are also approved and permitted to be registered.
13.The Company is directed that it shall add to its name for a period of six months the words "and reduced pursuant to Section 98 of the Companies Ordinance, 1984". This petition is disposed of in the above terms.