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.2 for seeking/obtaining sanct ion of this Court to a Scheme of Arrangement and for merger/amalgamat ion between Messrs Fazal Cloth Mills Ltd (FCML) (the Petitioner No.1)
("Transferee Company") and Messrs Fazal Weaving Mills Ltd (FWML) (the Petitioner No.2) ("Transferor Company").
2. The short and precise facts are that the Petitioner No.1 is a public limited company with an authorized share capital of Rs.700,000,000/- divided into 70,000,000 ordinary shares of Rs.10/- out of which 30,000,000 ordinary shares are issued and fully paid and remaining are un-issued. Similarly , the Petitioner No.2 is a public limited company with an authorized share capita l of Rs.300,000,000/- divided into 30,000 ,000 ordinary shares of Rs.10/- out of which 25,000,000 ordinary shares are issued and fully paid and remaining are un-issued.
3. Along with this petition, Scheme of Arrangement in terms of sections 279 to 282 of the Act between the Petitioner No.1 and the Petitioner No.2 and respective shareholders is also attached as Annex-P .
4. The principle object of the Scheme is to ensure and effect the merger/amalga mation of FWML into FCML as mentioned under Article 4(a) which reads as follows: "to ensure and effect the merger/amalgamation of FWML into FCML through transfer and vesting in FCML of the undertaking and business of FWML together will all property , assets, rights liabilities and obligations of every description of FWML against set-off of the equity investment against issued, subsc ribed and paid-up share capital of FWML by FCML without any further act or deed or document being required to be executed, registered or filed in respect of such transfer , vesting, merger , amalgamation and/or assumption."
5. Learned counsel for the Petitioners pointed out the copies of the Resolutions passed by the Board of Directors of the Petitioners Nos.1 and 2 whereby the schemes were sanctioned. In the closing moments, the learned counsel contended that basically the Scheme of Arrangement envisages transfer and vesting in FCML of the undertaking and business of FWML together with all property , assets, rights liabilities and obligations of every description of FWML
6. The Additional Registrar of Companies , Companies Registration Office, Lahore in response to the main petition filed report and parawaise comments on behalf of Securities and Exchange Com mission of Pakistan (SECP) by stating that SECP has no objection to the instant scheme of arrangement however , 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 the Petitioners have to submit NOCs from their secure creditors, however , revise af fidavits may be submitted before the Court for its satisfaction.
7. Mr. Adil Bandial, Advocate filed C.M. No.01 of 2019 on behalf of the SNGPL with regard to protection of rights and interest of the SNGPL being unsecured creditor to the proposed Scheme. The said application was replied by the Petitioners wherein they stated that though outstanding liability has already been secured however , they undertake to discharge their liability with reference to SNGPL's outstanding liability in accordance with the determination of pending litigation inter se in accordance with the Scheme of Merger .
8. In response, learned counsel for the Petitioners stated that they have removed objection of the Respondent with regard to submission of NOCs of the secured creditors' by filing C.M. No.02 of 2019.
9. After filing of the petition, this Court vide order dated 30.01.2019 directed that notices be issued in national newspapers namely "Dawn " and "Nawa-i-W aqt" for the purpose of informing general public about the Scheme proposing merger/amalgamation of the Petitioners and inviting objections to the Scheme 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, the Competition Commission of Pakistan and to the creditors of the Petitioner companies as per list of creditors attached with the petition.
10. The said order also directed that Extra-ordinary Meetings of the Petitioners' company be convened for presenting the proposed scheme to their shareholders for sanctioning of the same or otherwise. M/s Aurengzeb Mirza and Ch. Sultan Mehmood, Advo cates were appointed as Joint Chairm en to supervise extra-ordinary meetings of the shareholders of the Petitioners Company with directions to file their report on the proceedings of aforesaid meeting.
11. In compliance with the aforesaid order by the Court, public notices in Daily "News " and "Nawa-i-W aqt" on 22.06.2019 were issued respectively; copies whereof are available on record.
12. In response to the Court query regarding the approval from Competition Commission of Pakistan, the learned counsel replied that the approval of the Competition Commission of Pakistan is not required for the subject merger under the Competition Act, 2010 as the Petitioners are exempted from the same. He referred to Regulation 5(1)(ii) of the Competition (Merger Control) Regulations, 2016, which provides that "a transaction in which a holding company (whether incorporated in or outside Pakistan), merges, amalgamates, combines or ventures jointly with its subsidiary or the subsidiaries thereof ..." is exempt from filing a pre-merger notification and obtaining the approval of the Competition Commission of Pakistan. He maintained that the Petitioner No.2 wholly owned subsidiary of the Petitioner No. 1, resultantly , the Petition ers and the merger envisaged under the Scheme of Arrangement falls within the ambit of exemption provided under Regulation 5(1)(ii).
13. The Chairpersons of the general meeting of the Petitioners submitted their report under Rule 57 of the Company (Court) Rules, 1997 on 03.04.2019 which is duly supported by the relevant record. According to the report, the Extraordinary General Meeting of the Petitioners was convened on 09.03.2019 at Fatima Group Office, 110-E Khayban-e-Jinnah, Defence Chowk, Lahore. The notices of the meeting were issued by the Petitioners company to their shareholders as well as by publication in the Daily "Dawn" and "Business Recorder " on 25.02.2019. The copies of the dispatched notices and names of the shareholders as well as the notices published in the aforementioned newspapers are mentioned in and attached to the Chairp ersons' report. The attendance sheet of shareholders of the Petitioners have also been placed on record which shows the participation and voting of 100% shareholders of the Petitioner No.1 and the Petitioner No.2. The approved Scheme of Merger is annexed as "Annex-D" with the report of Chairpersons.
14. The merger contemplated under the Scheme of Arrangement would have significant benefits for the Petitioners' companies and their respective stakeholders, which are stipulated in the Scheme of Arrangement.
15. Pursuant to order dated 30.01.2019, reports along with the resolutions passed in the meetings under section 279(2) of the Act have been submitted. For the ease of reference, the nucleus of resolution is reproduced as under:- "RESOL VED UNANIMOUSL Y THAT the Scheme of Compromises, Arrangements and Reconstruction under sections 279 to 283 and 285 of the Companies Act, 2017 (the "Scheme') among the Fazal Cloth Mills Limited
(FCML) and its Members and Fazal Weaving Mills Limited (FWML) and its Members as placed before the Meeting, for inter alia, the amalgamation/ merger of FWML and its members with and into FCML and its members, as detailed in the Scheme and vesting of the entire undertakings including the assets and liabilities of FWML with and into FCML, in accordance with the Scheme be and is hereby , agreed, approved and adopted subject to any modification(s) or conditions as may be required/imposed by the honourable Lahor e High Court, Lahore, and/or the Securities and Exchange Commission of Pakistan and/or Competition Commission of Pakistan".
16. So for as the observation by the SECP relating to section 279(2) of the Act is concerned, it is evident from perusal of Chairpersons' report that 100% of the shareholders of the Petitioners were present at the extraordinary general meeting who voted, unanimously consented and approved proposed Scheme of Arrangement for merger/amalgamation of the Petitioner No.2 into the Petitioner No. 1.
17. 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. It has been 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.
18. Since the Petitioner No.2 is wholly owned subsidiary of the Petitioner No. 1, therefore under the Scheme of Arrangement, the Petitioners are exempted from pre-merger notification provided under Regulation 5(1)(ii).
Furthermore, the liability of the SNGPL is secured in view of undertaking given by the Petitioners, mentioned above.
19. In the present case, all the shareholde rs of the transferee company have unanimously approved the scheme of merger/ amalgamation. Since the scheme of merger/amalgamation has been approved unanimously , there is no reason to interfere with their business decision.
20. In view of the forgoing reasons, there remains no impediment to grant and sanc tion of the Scheme of Merger of Petitioner No.2 company into Petitioner No.1. Accordingly , this petition is allowe d and the Scheme attached at Annex-P with the report of Chairpersons M/s Aurengzeb Mirza and Ch. Sultan Mehmood, Advocates is hereby sanctioned in terms thereof.