JAWAD HASSAN, J.--- This petition under sections 279 to 282 of the Companies Act, 2017 (the "Act") has been filed by authorized representative of the Petitioner No.1 for seeking/obtaining sanction of this Court to a Scheme of Arrangement for bifurcation of restaurant/poultry business of the Petitioner No.1 (Roomi Foods (Pvt.) Ltd.) ("RFPL") (the "Transferor Company") into the Petitioner No.2 (Passion Foods (Pvt) Ltd.) ("PFPL")
(the "Transferee Company") and the Petitioner No.3 (Roomi Poultry (Pvt.) Ltd.) ("RPPL") (the "Transferee Company").
2. The short and precise facts are that the Petitioner No.1 is a private limited company with an authorized share capital of Rs.500 million divided into 50,000,000 shares of Rs.10/- each while its issued, subscribed and paid up capital is Rs.500 million divided into 50,000,000 ordinary shares of Rs.10/- each. Similarly, the Petitioner No.2 is a private limited company with an authorized share capital of Rs.10,000,000/- divided into 1,000,000 (one million) ordinary shares of Rs.10/- each as it does not have any assets or liabilities apart from Rs.4,000,000/- as paid up capital. Likewise, the Petitioner No.3 is a private limited company with an authorized share capital of Rs.10,000,000/- divided into 1,000,000 (one million) ordinary shares of Rs.10/- each as it does not have any assets or liabilities apart from Rs.2,000,000/- as paid up capital.
3. Along with this petition, Scheme of Arrangement in terms of section 282 of the Act between the Petitioners and respective shareholders is also attached as Annex-A.
4. The principal object of the Scheme is to provide division of business of the Petitioner No.1 by separating restaurant business into the Petitioners No.2 and poultry business into the Petitioner No.3.
5. Learned counsel for the Petitioners states that the Petitioner No.1 is doing business of restaurant and poultry and through present petition, the Petitioner No.1 wants to transfer his restaurant business to the Petitioner No.2 and poultry business to the Petitioner No.3 and in order to streamline commercial business, they have prepared Scheme of Arrangement for bifurcation of business. He has referred Annex-H, copy of audited accounts with Auditor's report issued by Fazal Mahmood and Company, Chartered Accountants, showing the net worth of the Petitioners and basis of share swap arrangement. He also pointed out the copies of the Resolutions passed by the Board of Directors of the Petitioners whereby the schemes were sanctioned.
6. The Joint Registrar of Companies, Companies Registration Office, Abdali Road, Multan in response to the main petition filed report and parawaise comments on behalf of Securities and Exchange Commission of Pakistan (SECP) wherein it was observed that (i) as per subsection (2) of section 279 of the Act, it is required that a majority in number representing three-forth in value of the members of the Petitioners, present and voting either in person or, where proxies are allowed, by proxy at the meeting, agree to the Scheme of Arrangement.
Further observed (ii) that existing shareholding pattern of the Petitioner No.1 as identified in Article 11 "Share Swap Arrangement" of the instant Scheme of Arrangement does not correspond to that identified in Form-A dated 28.10.2019. It was next observed (iii) that as per Form-3 dated 25.07.2019 filed by the Petitioner No.1, 4,000,000 ordinary shares of Rs.10/- each have been allotted, increasing the paid-up capital to Rs.500,000,000/- from Rs.460 000,000/- However, the audited special purpose financial statements for the year ended June 30, 2019 reflect the increased paid-up share capital of Rs.500,000,000/-
7. In response, learned counsel for the Petitioners stated they have removed all the objections which are mentioned in rejoinder to report. and parawise comments submitted by the Respondent.
8. After filing of the petition, this Court vide order dated 06.02.2020 directed that notices be issued in national dailies namely "Dawn" and "Nawa-e-Waqt" for the purpose of informing general public about the scheme and inviting objections from members and creditors of the Petitioners as well as from any person having interest in the affairs of the Petitioners. In addition, notices were also directed to be issued to the Securities and Exchange Commission of Pakistan and to the creditors of the Petitioner companies as per list of creditors attached with the petition.
9. In compliance with the aforesaid order by the Court, public notices issued in Dailies "Dawn" and "Nawa-e- Waqt" on 10.02.2020 were issued respectively; copies whereof are available on record.
10. On 14.01.2020, it was pointed out by learned counsel for the Petitioners that Scheme of Arrangement has already been approved in Extra Ordinary General Meetings of the Company held on 07.08.2019 and 03.10.2019; therefore, holding of meetings by the Petitioners afresh would be unnecessary. He relied on "Fatima Sugar Mills Ltd. and others" (2014 CLD 26).
11. The Petitioners have placed on record No Objection Certificate ("NOCs") issued by the creditors of the Petitioners.
12. Learned counsel for the Respondents Meezan Bank and United Bank Limited has no objection to the sanction of Scheme of Arrangement. NOCs on behalf of the creditors' bank have already been placed on record.
13. AS a result, the observation by the SECP relating to section 279(2) of the Act is concerned, it is evident from perusal of resolution of respective Board of Directors of the Petitioners that the Scheme of Arrangement has unanimously been consented and approved by the Board of Directors, Shareholders as well as by Creditors on 07.08.2019 and subsequently, the same was considered and approved in EOGM held on 03.10.2019.
14. Another observation of SECP with regard to soliciting NOCs from the secured creditors stands cured as all the secured creditors have given their NOCs to the mentioned Scheme.
15. As far as observation/comment of SECP taken in ground (ii) of the parawise comments is concerned, the Petitioners in their rejoinder have stated that due to death of one of shareholder namely Khawaja Mahammad Masood on 12.05.2019, MOU was executed on 04.07.2019 in order to devolve the shares w.e.f. 26.06.2019 and at that time SECP refused to accept Form-A reflecting the distribution of shares on the basis of MOU. The Petitioner No.1 was not obliged to file Special return to Rectify the Data in view of section 465(4) of the Act as the change of shareholding upon the death of Khawaja Muhammad Masood is less than 25%. However, as per instructions of SECP, the Petitioners obtained Succession Certificate from the Court of law and they were advised to file the same along with the Annual Return during October, 2020. It has held in "Dewan Salman Fiber v. Dhan Fibers Limited" (PLD 2001 Lahore 230) that where required majority of the members of both of the company has approved the resolution of merger of both the companies the sanction for merger could not be withheld unless it was shown that same was unfair, unreasonable or against the national interest. It was further observed that the shareholders were best judges of their interest and were better informed with the market trends than the Court, which was least equipped in evaluating such trends. It has been held in the case of "Gadoon Textile Mills Limited and 2 others" (2015 CLD 2010) that determination of the consideration, including the commercial aspect of the merger along with manner of the swap ratio, is primarily and subsequently the prerogative of the members of the respective companies. It was further held that the financial or any other advantage or disadvantage in a corresponding ratio are divided but not in a manner which could deprive any of the shareholders as the proposed scheme is based on the principle that each shareholder would get its respective share in terms of percentage that is in collective business.
16. In the present case, all the Petitioners have unanimously approved the scheme of arrangement and, therefore, have approved the share swap arrangement. Since the scheme of arrangement and consequently the share swap arrangement has been approved unanimously, there is no reason why their business decision should be interfered with and the Court should therefore proceed on the basis that share swap arrangement as approved by the shareholders of the transferor company is the fair ratio of exchange. Further, in absence of any challenge from the shareholders of the transferor and transferee company, who are primarily and exclusively to question the share swap arrangement, the same has to be considered as fair and reasonable.
17. In view of the forgoing reasons, there remains no impediment to grant and sanction of the Scheme of Arrangement of Petitioner No.1 Company into Petitioner No.2 and the Petitioner No.3. Accordingly, this petition is allowed and the Scheme attached at Annex-A is hereby sanctioned in terms thereof.