Civil Miscellaneous Application No,2122 of 1998 is the second application under Order VI, Rule 17 read with section 151 of the Code of Civil Procedure (hereinafter referred to as C.P, C.) seeding amendments in the proposed scheme of arrangement which has been filed as Annexure "A".
Earlier, another identical application bearing Civil Miscellaneous Application No,2108 of 1998, filed by the petitioner was heard on 4-12-1998 and verbally granted. Through the said application, the petitioners have sought amendments to the effect that the word 'Private' appearing in the name of petitioner No,2, P.T.A be deleted as the same has been converted into a public limited company in furtherance of the scheme of arrangement. The second major amendment sought was in the definition of the T.F.C. Security as appearing in the scheme of arrangement (Annexure "A") filed with the petition. It was argued by Mr. Badar F. Vellani that all these proposed amendments are in consonance with the scheme of arrangement and have been proposed with the consent of the members of both the petitioners. In the second application (Civil Miscellaneous Application No,2122 of 1998), the petitioners are seeking further amendments in Annexure "A" in order to update the list of financial debt. In support of this application, resolutions of both the companies have been filed.
Since the proposed amendments are strictly in accordance with the scheme of arrangement initially proposed vide Annexure ' A' to the petition, I grant the same. Petitioners are directed to file amended scheme of arrangement which will be taken up on record as Annexure "A71". Such amended Annexure 'A-1' to be filed within two days. Petitioners are further permitted to file amended memo, of title within two days, Mr. Radar F. Vellani is permitted to amend his petition by hand in order to incorporate all the above amendments.
2. This petition is jointly filed by Messrs ICI Pakistan Ltd. (herein referred to as ICI) and Pakistan P.T.A.
(Pvt.) Ltd. (hereinafter referred to as P.T.A.) for approval of scheme of arrangement as provided under sections 284 and 287 of the Companies Ordinance, 1984 (hereinafter referred to as the Ordinance, 1984) with the following prayers:--
(a) an order under section 284(2) of the Companies Ordinance, 1984 sanctioning the Scheme of Arrangement as set forth in Annexure "A-1" hereto so as to make the Scheme binding on the petitioner No,1 and its members, creditors and its T.F.C. holders, and on the petitioner No,2 and its members;
(b) the following orders under section 287 of the Companies Ordinance, 1984, namely:
(i) an order under section 287(1)(a) of the Companies Ordinance, 1984 transferring to and vesting in the petitioner No,2 the P.T.A. Undertaking of the petitioner No,1 as more particularly described in paragraph 1 of the Scheme of Arrangement as set forth in "Annexure A-I" hereto, all as subsisting immediately preceding the Completion Date as defined in the Scheme;
(ii) an order under section 287(1)(b) of the Companies Ordinance, 1984 directing the petitioner No,2 to allot to the petitioner No,1 within thirty (30) days of the Completion Date as defined in the Scheme in accordance with its terms 403,750,000 ordinary shares of the nominal value of Rs,10 credited as fully paid up in the petitioner No,2 and to pay to the Petitioner No,1 on or before 31st December, 1998 or such later date as the boards of directors of the petitioner No,1 and petitioner No,2 may agree ("Final Date") the equivalent in Pakistan Rupees of the sum of United States Dollars eighty five million (US $ 85,000,000) failing which to allot to the petitioner No,1 within sixty days of the Final Date 403,750,000 ordinary shares of the nominal value of Rs, 10 each credited as fully paid up on the petitioner No,2;
(iii) an order under section 287(1)(c) of the Companies Ordinance, 1984 directing that all suits, appeals, arbitrations, Governmental investigations and other legal proceedings instituted by or against petitioner No,1 in respect of the P.T.A. Undertaking pending immediately before the Completion Date (except as excluded by clause (D) of paragraph 1 of the Scheme) shall be treated as suits, appeals and legal proceedings by or against the petitioner No,2 and may be continued, prosecuted and enforced by or against the petitioner No,2 accordingly;
(iv) an order under section 287(1)(1) of the Companies Ordinance, 1984 directing that as regards the T.F.Cs. of the petitioner No,1 these T.F.Cs. shall be deemed to be term finance certificates issued by the petitioner No,2 and that the petitioner No,2 and the respondent shall, within four months from the completion date in substitution of the Security Trust Deed, dated 12th September, 1996 execute and register a Restated Security Trust Deed containing like provisions as nearly as the circumstances permit to substitute for the T.F.C. Security (as defined in the Scheme) a security over the assets of the petitioner No,2 pari passu with the security subsisting or to be created over those assets in favour of others providing Financial Facilities/Debt (as defined in the Scheme) to the petitioner No,2, such substantial security comprising a mortgage by deposit of title deeds over the immovable property of the petitioner No,2, namely the P.T.A. Plant and the leasehold land on which it is constructed and inclusive of all plant machinery and equipment installed therein, and that until the substitution aforesaid are effected the Security Trust Deed, dated 12th September, 1996 and the T.F.C. Security shall remain in full force and effect, and that upon the execution and registration of the Restated Security Trust Deed and the creation by the petitioner No,2 in favour of the respondent of the mortgage security, (i) the respondent, the T.F.C. holders and the petitioner No,1 shall stand discharged of their respective rights and obligations arising under the Security Trust Deed, dated 12th September, 1996 and in respect of the T.F.C. Security and (ii) all properties and assets of the petitioner No,1 shall stand released and discharged from and be free of the said security subsisting thereon.
(c) Such further or other order or orders as may seem just and proper to this Honourable Court.
3. Notice of this petition was published in the gazette of Pakistan as well as in Sindh Government Gazette. Notice was also published in daily Dawn, Karachi, Business Recorder, Karachi, Daily Jang, Karachi, the Nation, Lahore and The News, Islamabad all dated 10-6-1998 and in Nawa-e-Waqt, Lahore and daily Jang (Urdu), Islamabad both dated 11-6-1998. Notice was also issued to the Registrar Joint Stock Companies. Thus, the provisions of Rule 781 of Sindh Chief Courts Rules (O.S.) were fully complied with.
4. The petitioners have also filed an application (C.M.A. No,1003 of 1998) seeding directions as contemplated in Rules 953 and 954 of Sindh Chief Court Rules (0.S.) which was again published in daily newspapers. On 18-6-1998, this application was granted and consequently meetings of the shareholders of both the petitioners were held. Notice of the meeting was also given vide publicity in newspapers, namely, Dawn, Karachi, Business Recorder, Karachi, Jang (Urdu), Karachi, the Nation, Lahore, Nawa-e-Waqt (Urdu), Lahore, The News, Islamabad and daily Jang (Urdu), Islamabad, all dated 15-71998.
5. Meeting of the share-holders of ICI was held on 12-8-1998 where 81.28% of the shareholders in value were present either in person or by way of proxy. Out of those present, 99.97% voted in favour of the resolution tabled in favour of the Scheme of Arrangement. In case of the petitioner No,2, P.T.A., 100% shareholders participated and voted in favour of the Scheme of Arrangement. The petitioners have filed reports of the Chief Executive of petitioner No,1 and the Chairman of petitioner No,2 which are available on record and which endorse the above facts.
6. On 21-9-1998, the Joint Registrar of Companies, Karachi filed a statement pursuant to the notice issued by this Court to the following effect:--
(1) in pursuance of the specific provisions of section 284 read with section 286 of the Companies Ordinance, 1984, petitioner No,1 may be directed to hold separate meetings of creditors and T.F.C. holder so as to seek their agreement to the proposed "Scheme of Arrangement";
(2) With a view to ascertaining the valuation of P.T.A. project, petitioner No,1 may, with the approval of the Honourable Court, appoint an independent firm of Chartered Accountants to make current valuation of assets and properties of P.T.A. project to be transferred to the petitioner No,2 so as to ascertain the exact consideration for such transfer; and
(3) petitioner No,1 may also be directed to provide a certificate from its auditors to the Honourable Court to the effect that the whole amount raised through T.F.Cs. had been utilized for P.T.A. project and no portion thereof was used for any other purpose."
7. In respect of the first objection from the office of Joint Registrar of Companies, Karachi, it was contended by Mr. Badar F. Vellani that there is no need of holding such meeting of creditors, firstly, because the petitioners have already filed the separate letters from these creditors and, secondly, because it is not the mandatory requirement of section 284(2) of the Ordinance, 1984. He has placed reliance on the cases S.M. Holding Finance (Pvt.) Ltd. v. Maisoor Machineries Manufacturers Ltd. (1993) 78 Company Cases 432 and Mehmood Textile Mills Ltd. etc. v. Registrar Joint Stock Companies NLR 1993 UC (Civil)
49. The rule laid down in both the abovementioned cases was followed by a learned Single Judge of this Court Mushtaque A. Memon, J. in J.M. No,25 of 1998 (In the matter of Pakistan Industrial Promoters (Pvt. Ltd.). In the first case of S.M. Holding Finance (supra), one of the objections raised on behalf of unsecured creditors was that the consent of those unsecured creditors was not obtained. Reference was made to subsection (2) to section 391 of the Indian Companies Act which is same as subsection (2) to section 284 of the Ordinance, 1984. It was held by a learned Single Judge of Karnataka High Court that subsection (2) to section 391 is not in negative form whereas the proviso to subsection (2) to section 391 is in negative form and, therefore, except for the proviso subsection (2) is not prohibitory in character and it could be treated as merely permissive. It was held that section 391(2) of the Indian Companies Act appears to be directory in nature. In the case of Mehmood Textile Mills (supra), a learned Single Judge of Lahore High Court, Fazal Karim, J. (as his Lordship then was) considered the provisions of section 284 of the Companies Ordinance, 1984 in reference to the consent of creditors and held, inter alia, that it is not necessary to call a meeting of the creditors as provided in section 284. Same view was followed by a learned Single Judge of this Court in the unreported case of Pakistan Industrial Promoters (Pvt.) Ltd. Perusal of subsection (2) to section 284 of the Ordinance, 1984 will show that the basic requirement of this provision is that there should be majority of members representing 3/4th in value of either creditors or class of creditors or members present in person or through proxy at the time voting in respect of any compromise or arrangement proposed and once such compromise or arrangement is carried by the majority of 3/4th in value such compromise or arrangement, if sanctioned by the Court, will be binding on all the creditors or class of creditors and on all members or class of members. This provision of law does not make it mandatory to hold meeting of creditors when once members of a company have approved, by a 3/4th majority, any scheme of arrangement. The only requirement of this provision is that prior to placing a scheme before the Court for its approval, such scheme should have been approved by a 3/4th majority of either of the class as mentioned in subsection (2) of section 284 and not the entire category of the persons. Thus, it does not make it obligatory on the Court to order holding of meeting of creditors after any scheme is duly approved by the absolute majority of the share-holders but is discretionary which is to be exercised in a just manner. In the instant case, I have been shown written consent of the creditors. It was argued that there is no need of holding separate meeting of the creditors when their opinions are on record.
8. It was submitted by Mr. Badar F. Vallani that there are three categories of creditors. The first one is T.F.C. and the other two classes are P.T.A. and non-P.T.A. creditors which have been disclosed in Annexures "I" and "J" filed with the petition. In respect of T.F.C., 93.4% in value have consented. In respect of P.T.A. creditors the percentage is 81.475 and in respect of non-P.T.A. creditors it is 99.472%. Keeping in view all these figures and the case-law cited above, I am of the considered view that neither there is any need nor any reason to convene the meeting of the creditors or T.F.O.
Holders.
9. In respect of the second objection of the Joint Registrar of Companies, Karachi, it is contended by Mr. Badar F. Vallani that once an assessment of the valuation is accepted by a 3/4th majority of share-holders, it is not necessary to hold fresh assessment of the valuation of P.T.A. , project.
Learned counsel has further argued that it is not the requirement of law 'which makes revaluation of the project necessary prior to grant of sanction of the Scheme by the Court. The Court, in the instant proceedings, is required, to see the interest and rights of all concerned. However, the leaned counsel for the petitioners has filed today the valuation report prepared by Messrs Razzak Umerani & Company which may be kept on record. In view of the above circumstances, I am again of the view that there is no need for re-ascertaining the valuation of the P.T.A. project.
10. The third objection of the Joint Registrar of Companies is in respect of calling a fresh certificate from the auditors to the extent that the whole amount raised through issuance of T.F.Cs. had been utilised for P.T.A. project and that no other portion thereof was used for any other purpose. In reply to this objection, Mr. Badar F. Villain has filed a certificate of Messrs A.E. Ferguson & Company declaring that the whole amount raised through issue of Term Finance Certificate had been utilised for the P.T.A. project and that no portion thereof was used for any other purpose. Let the statement of learned counsel and the certificate be kept on record. This has satisfied the third objection of the Assistant Registrar, Joint Stock Companies as mentioned hereinabove.
11. On the last date of hearing, learned counsel for respondent, Mr. Ajazul Ahsan extended .his no objection to grant of this petition. Even today, Mr. A Masood Anwar Ausaf has endorsed that statement. This is the first type of schema- proposed. Previously, there were certain schemes of arrangement for amalgamation and de-merger processed. But for the first time such scheme is proposed through which a new company is being established which is P.T.A. to take over a part of undertaking of ICI. It was contended by Mr. Badar F. Vallani that the principles laid down for sanctioning scheme of any compromise or amalgamation would be fully attracted in such circumstances and those principles are firstly, it should be in the interest of the share-holders and, secondly, the interest of creditors. He has pointed out that the scheme of arrangement (Annexure "A-1") fully covers the interest of all concerned. He has also referred to the cases in re: Sidhpur Mills Co. Ltd. AIR 1962 Gujarat 305 and Navjivan Mills Co. Ltd., Kalol, In re: Kohinoor Mills Co. Ltd. Bombay 1972 (42) Company Cases 265. Both these cases were considered by me in the case of Brooke Bond Pakistan Ltd. and another v. Aslam Bin Ibrahim and another 1997 CLC 1873 where it was held inter alia while granting a scheme of arrangement as provided in section 284/287 of the Ordinance, 1984 that it is to be seen whether such scheme is fair, reasonable and in public and national interest.
12. I have heard the learned counsel for the parties at length and have also gone through the petition, documents and the case-law cited at Bar. I have also considered objections raised by the Joint Registrar of Companies. In no manner the proposed scheme of arrangement (now Annexure "A-1) to the petition) appears to be unjust or unreasonable or against the interest of any concerned or against the public or national interest. Accordingly, the same is granted in view of the prayers as mentioned in Para. 2 of this judgment.