JAWAD HASSAN, J. This petition under sections 279 to 282 of the Companies Act, 2017 (the "Act") has been filed by the authorized representative of the Petitioners for seeking/obtaining sanction of this Court to a Scheme of Arrangement and for merger between ABB Power and Automation (Private) Limited ("Transferee Company") and ABB (Private) Limited ("Transferor Company") by seeking approval from Securities and Exchange Commission of Pakistan (the "SECP") and Competition Commission of Pakistan (the "CCP") which is mandatory requirement under the respective laws.
2. Briefly stated, the Petitioner No.1 is a private limited company with an authorized share capital of Rs.100,000,000/- divided into 1,000,000 ordinary shares of Rs.100/- each. Similarly, the Petitioner No.2 is a private limited company with an authorized share capital of Rs.45,000,000/- divided into 4,500,000 ordinary shares of Rs.10/- each.
3. Along with this petition, the Petitioners have attached the Scheme of Arrangement in terms of sections 279 to 283 of the Act between the Petitioners and their respective shareholders (the "Scheme"). The principal object of the Scheme is to combine the business interest of the Petitioners into one corporate entity as mentioned under Article 3 of the Scheme.
4. Mr. Usman Akram Sahi, ASC, learned counsel for the Petitioners pointed out the copies of the Resolutions passed by the Board of Directors of the Petitioners whereby the Scheme was sanctioned. In the closing moments, the learned counsel contended that basically the Scheme envisages to transfer to and vesting in the Petitioner No.1 of the whole undertaking of the Petitioner No.2 and to streamline the group structure and efficient administration.
5. The Additional Registrar of Companies, Companies Registration Office, Lahore in response to the main petition filed report and parawise comments on behalf of the SECP wherein certain objections have been raised which are as follows:- 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. ii. The Petitioner No. 1 has to submit NOCs from secure creditors before the Court for its satisfaction. iii. Appointed date as defined in the Scheme is 01.01.2021 which is the sanction date but the discretion was given to the Board of Directors of the Petitioners to modify the date as prior or subsequent to 01.01.2021. iv. The discretion provided under part D(4)(a) of the Scheme to the Board of Directors of the Petitioner No.1 correct or adjust the values of assets of the Petitioner Not be excluded. v. Part C(1)(a) of the Schemes state that all assets of the Petitioner No. 2 substituting immediately preceding the effective date shall be merged into the Petitioner No.1 whereas the values of assets and liabilities of the Petitioner No.2 to be transferred are determined as of 31.12.2020. vi. Part (D)(1) of the Scheme states that paid-up-capital of the Petitioner No.2 shall stand cancelled and stand transferred to Petitioner No.1 whereas accumulated/unappropriated profit of Petitioner No.2 shall stand merged with profit of Petitioner No.1 w.e.f. appointed date. vii. Costs and expenses of merger to be borne by the Petitioner No.1 shall be kept in the books of the Petitioner No.1 in a 'merger suspense' and these should strictly be in accordance with applicable laws and accounting standards. viii. Withdrawal from the Scheme or petition by the Petitioners should be subject to compliance to all applicable laws. ix. Audited financial statements of the Petitioner No.2 as of 31.12.2020 on Contingencies reflects pendency of multiple against the Petitioner No.2 before various forums thus the Petitioner No.1 may be directed to maintain proper record and specifically assume the responsibilities and/or liabilities arising out of or accruing from such legal proceedings.
6. In response, learned counsel for the Petitioners stated that they have removed aforesaid objections raised by the SECP.
7. Mr. Asghar Leghari, Advocate on behalf of CCP appeared and stated that this Court has already developed the jurisprudence by explaining the role of CCP in its judgment reported as "DILSONs (Private) Limited and others v. Securities and Exchange Commission of Pakistan and another"
(2017 CLD Lahore 1317) by holding that permission of CCP has to be taken before any order is passed. He further stated that CCP has already granted permission to the Petitioners vide letter dated 07.02.2021 (Annex-H of the petition at Page-222).
8. After filing of the petition, this Court vide order dated 12.07.2021 directed that notices be issued in national newspapers namely "The Dawn", "Business Recorder" and "fang" for the purpose of informing general public about the Scheme proposing merger 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 SECP and the CCP. Before institution of this petition, the Petitioners had a meeting of the Board of Directors on 11.04.2021 unanimously approving the Scheme therefore, requirement of fresh meeting was dispensed with as held by this Court in "Roomi Foods (Pvt.) Ltd. and others v.
Joint Registrar of Companies and others" (2020 CLD 900).
9. In response to the Court query regarding the approval from Competition Commission of Pakistan, Mr. Usman Akram Sahi, ASC, 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(1Xii) 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 exempted from filing a pre-merger notification and obtaining the approval of the Competition Commission of Pakistan. He maintained That the Petitioners are wholly owned subsidiary of ABB Asea Brown Boveri Limited, resultantly, the Petitioners and the merger envisaged under the Scheme of Arrangement falls within the ambit of exemption provided under Regulation 5(1)(ii).
10 It is noted that meetings of the Board of Directors of the Petitioners were convened on 16.04.2021 at their registered offices. The Petitioner No.1 in its meeting resolved as under:- "RESOLVED THAT the Scheme of arrangement for merger of ABB (Private) Limited into the Company is approved in principle, subject to final terms and conditions and necessary approvals. ."FURTHER RESOLVED THAT the Company shall take all necessary and required steps/actions (including making all applications) for obtaining sanction/approval from the High Court and the Competition Commission of Pakistan for merger of the Company and ABB (Private) Limited.
11. Similarly, the Petitioner. No.2 in 44 meeting held on 06.04.2021 resolved as under:--- "RESOLVED THAT the Scheme of arrangement for merger of the Company into ABB Power and Automation (Private) Limited is approved in principle, subject to final terms and conditions and necessary approvals.
"FURTHER RESOLVED TEAT the Company shall take all necessary and required steps/actions (including making all applications) for obtaining sanction/approval from the High Court and the Competition Commission of Pakistan for merger of the Company and ABB Power and Automation (Private) Limited.
12. So far as the objection No. i of the SECP relating to section 279(2) of the Act is concerned, it is evident from shareholders resolution who unanimously consented and approved proposed Scheme of Arrangement for merger of the Petitioner No.2 into the Petitioner No.1 in their meetings held on 28.05.2021 at their respective offices.
13. Objection No.ii 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. Coming to objection SECP in report and parawise comments has made reservation that discretion granted to Board of Directors of the Petitioners with regard to appointed date be excluded in order to avoid future misunderstandings. Part-A Clause 2(iii) read with Part-E Clause 1 of the Scheme clearly indicates the operative date of the Scheme shall be 01 January, 2021 and according to learned counsel for the Petitioners, Board of Directors, has not changed the date of effectiveness of the Scheme prior or subsequent to 01 January, 2021 and also this Court is not inclined to change the same as Board of Directors as well as Shareholders of the Petitioners have unanimously approved the same keeping in view their mode of business. Since the scheme of merger has been approved unanimously, there is no reason to interfere with their business decision. Reliance is placed in the matter of "International Complex Projects Limited and another" (2017 CLD 1468) wherein the Court has held that where a scheme of arrangement was found to be reasonable and fair, at such juncture, it was not duty or province of the Court to supplement or substitute its judgment against collective wisdom and intellect of all shareholders of the company involved. In response ..to objection No. iv, Part-D, Clause 3 of the Scheme speaks about conduct of business according to which all business activities of the Petitioner No.2 shall be deemed to have been held for an on behalf of the Petitioner No.1 and any change/alteration in the Scheme has effect from the appointed date upto the including dater Moreover, power to modification/amendment to the Scheme has also been given under. Part-E, Clause 3 of the scheme, hence this objection carries no weight. In response to objection No. V, the business activities of the Petitioner No.2 will be deemed to have been conducted by the Petitioner No.1 as is evident from the email attached with report and parawise comments and this fact has also been verified by, counsel for the Petitioners who stated that the Petitioner No.1 has been acting throughout since the appointed date of the Scheme as such this objection is responded accordingly. Responding to objection No.vi, Mr. Usman Akram Sahi, ASC, learned counsel for the Petitioners has stated that the Petitioners are wholly owned subsidiaries of ABB Parent Company, therefore, the issued, subscribed and paid-up capital of the Petitioner No:2 shall stand cancelled and the same shall stand transferred to the Petitioner No.1 w.e.f the appointed date in terms of Part-D Clause-1 of the Scheme. In response to objection No.vii, it has already been provided under Part-D, Clause 4(c) of the Scheme that costs of merger shall be borne by the Petitioner No.1 and same will be kept in a 'merger suspense' account and adjusted against general reserve in the book of the Petitioner No. 1. The counsel for the Petitioner has referred to email dated 11.10.2021 whereby the same objection has already been clarified. Moving to objection No. viii, it is noted that there is a joint Clause incorporated under Part E, Clause 3(d) of the Scheme and Mr. Usman Akram Sabi, ASC, learned counsel for the Petitioners stated that the Petitioners are not going to withdraw the merger as they have already accepted terms and conditions of the regulatory authority. Lastly, the objection No. ix raised by the SECP is with regard to legal proceedings. It is observed that the Petitioners have incorporated a specific clause under Part-C, Clause 3, according to which the Petitioner No.1 may initiate any ' legal proceedings in the manner provided in aforesaid clause. Therefore, this objection is responded accordingly.
14. 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.
15. Since the Petitioners are wholly owned subsidiary of ABB Asea Brown Boveri Limited and all the shareholders and Board of Directors of the Petitioners have unanimously approved the scheme of merger therefore, there is no reason to interfere with their business decision.
16. Being a sanctioning Court, the Court has noticed that all indispensable statutory benchmarks, requirements and formalities have been accomplished and adhered to by the Petitioners as envisioned under the relevant provisions of the law, including the holding/convening of the requisite meetings as contemplated under the relevant provisions and rules and the resolutions passed by the members have already been highlighted. The proposed scheme is not found to be violative of any provision of law and/or contrary to public policy but as a whole looks like evenhanded and serviceable from the point of view of a prudent man of business taking a commercial decision beneficial to the class represented by him for whom the scheme is meant.
Once the requirements of a scheme for getting sanction of the Court is found to have been met, the Court will have no further jurisdiction to sit in appeal over the commercial wisdom of the majority of the class of persons who with their open eyes have given their approval of the scheme.
There does not remain any objection to the scheme of arrangement and no mistake, conspicuous, detectable shortcoming or flaw has further been pointed out in the present matter. This Court has already allowed various mergers recently on the basis of consideration mentioned above, in "Roomi Foods Pvt. Ltd. v. Joint Registrar of Companies': (2020 CLD 900), "Messrs Fazal Cloth Mills Ltd. v. Messrs Fazal Weaving Mills Ltd." (2021 CLD 182), "Presson Descon International Pvt. Limited and others v. Joint Registrar of Companies" (2020 CLD 1128 = PLD 2020 Lahore 869) and "DILSONs (Private) Limited and others v. Securities and Exchange Commission of Pakistan awl another"
(2021 CLD 1317 Lahore) by holding that where a scheme of arrangement is found to be reasonable and fair, it is not duty or province of the Court to supplement or substitute its judgment against collective wisdom and intellect of all shareholders of the company involved.
17. In view of the forgoing reasons, there remains no impediment to grant and sanction of the Scheme of Merger of Petitioner No.2 into Petitioner No.1. Accordingly, this petition is allowed and the Scheme attached at Annex-A is hereby sanctioned in terms thereof.