1. ' International Multi Leasing Corporation Ltd. (IML) and Capital Assets Leasing Corporation Ltd.
2. (CALCORP) submitted joint petition under sections 284 to 288 of the Companies Ordinance, 1984 for sanctioning the scheme of arrangement/amalgamation of the two Companies. No objection was raised by any of the shareholders of the two Companies in the separate meetings held for ascertaining the bona fide of the scheme and the intention of the shareholders/members and creditors of the companies. Similarly none of the shareholders or creditors of either company filed any objections to the scheme of amalgamation before this Court. The following creditors submitted their no objection certificate regarding amalgamation:--
(i) Faisal Bank Ltd.
(ii) Pak-Libya Holding Company (Pvt.) Ltd.
(iii) National Bank of Pakistan.
(iv) Escorts. Investment Bank Ltd.
(v) The Bank of Punjab.
3. ' After following the statutory procedure the scheme of arrangement/ amalgamation of two companies was sanctioned by this Court on 4-3-2003. The parties to the scheme of arrangement for amalgamation or other persons interested therein were granted liberty to apply to this Court for further direction that may be necessary for the working of the arrangement. C.M. No,215-L of 2003 was filed for implementation of the scheme and the following prayer was made:-- "It is prayed on behalf of the petitioner No,1 that this Honourable Court may direct that:---
(1) The petitioner No,2 and its officers forthwith deliver possession to petitioner No,1 of all assets, books, record, documents, agreements of petitioner No,2 including assets described in clause 2 of Scheme of Arrangements since these items are now the property of petitioner No,1.
(2) The petitioner No,2 undertakes a book closure with respect to its shareholders and hand over a list of the names of its registered shareholders together with all necessary details in respect of such shareholders to petitioner No,1 so as to enable the petitioner No,1 to issue its fully paid-up ordinary shares to such shareholders at the swap ratio of 1:1 as required under the Scheme of Arrangement.
(3) Such further Order or Orders as may be deemed to be just and proper by this Honourable Court to secure that the amalgamation and merger of petitioners 1 and 2 is fully and effectively carried out as proposed in the said Scheme of Arrangement.
4. ' As urgent ad interim relief, it is prayed that the petitioner No,2 and all its officers and functionaries be restrained from dealing with or disposing of any assets described in clause 2 of the Scheme of Arrangement or from incurring any liabilities or otherwise undertaking any business on behalf of petitioner No,2"
5. ' Subsequently the Chief Executive of International Multi Leasing Corporation Ltd. Filed C.M. No,225-L of 2003 for the recall of the order dated 4-3-2003 sanctioning the scheme of arrangement for amalgamation of the two Companies, on the basis of a resolution passed by its Board of Directors on 4th March, 2003, the very date on which the scheme for amalgamation was sanctioned by this Court.
2. Mr. Saleem Sehgal, Advocate, the learned counsel for International Multi Leasing Corporation Ltd.
6. Contended that this Court had no jurisdiction to sanction the scheme of arrangement/amalgamation in view of the Companies (Second Amendment) Ordinance (CXXIII of 2002) which came into force on 15-11-2002. Under section 282-L(4) the scheme of amalgamation is to be submitted to the Security and Exchange Commission of Pakistan (SECP) for sanction. Under section 282-A, the provisions of Part VIII-A shall apply to Non-Banking Finance Companies (NBFCs) which include leasing companies. Both the Companies being NBFCs are thus regulated by Part VIII- A of the Companies Ordinance, 1984. Previously the leasing companies were governed by the Leasing Companies (Establishment and Regulations) Rules, 2000. He further submitted that unlike section 282-C of the Companies Ordinance, 1984 (the provision for amalgamation of NBFCs) and sections 47 and 48 of the Banking Companies Ordinance, 1962, there is no provision in the Companies Ordinance, 1984 for amalgamation of the two companies unless one company is a member or director of the other company. He argued that for the application of section 284(1) there has to be a compromise or arrangement between a company and its creditors or any class of them, or between the company and its members or class of them, in the instant case there was no such arrangement as such section 287 of the Ordinance of 1984 will also not apply. Learned counsel further submitted that this Court must retain the jurisdiction at three stages; (i) at the time of filing of the petition; (ii) during its pendency, and (iii) on the date of the decision. Learned counsel lastly submitted that this Court is not to act as post office. A Judge must bear all the laws of the country on the sleeves of his robe. The "due diligence" was not observed by the Directors of Capital Assets Leasing Corporation Ltd. As they had not disclosed the net value of the share of their company. They were under a duty to bring out all the facts to the knowledge of the Directors and shareholdes of International Multi Leasing Corporation Ltd. The principle of caveat emptor does not apply to the applicants. Reliance was placed on Federation of Pakistan v. Public at Large 1988 SCMR 2041. The net value of the share of the company was Rs,4 whereas the Directors of Capital Assets Leasing Corporation Ltd. Had claimed its break-up value at Rs,13.07. They had recently negotiated with the Escort Investment Bank for the sale of shares who undertook 'due diligence and after investigation came to the conclusion that, the value of the share of Capital Assets Leasing Corporation Ltd. Was blow Rs,4. The Directors of the said Company had only 2% of the shareholding and they had not disclosed their interest in Johnson and Philips Pakistan Ltd. And Shalimar Construction Co. Reliance was placed on 1991 MLD 841; In re: Lipton (Pakistan) Ltd. And another 1989 CLC 818; Brothers Steel Mills Ltd. And others V. Mian Ilyas Miraj and 14 others PLD 1996 SC 543 and Board of Intermediate and Secondary Education, Lahore through its Chairman and another. v. Mst.
7. Salma Afroze and 2 others PLD 1992 SC 263.
8. ' Conversely the learned counsel for the respondent submitted that the application for recall of the order was not maintainable. The resolution doe's not authorise the Chief Executive of IML to file the present petition. Similarly the legal action as mentioned in the resolution dated March 25, 2003 does not cover the present petition. Learned counsel further submitted that scheme was approved by the shareholders in a General Body Meeting, the same cannot be undone by Board of DirectoRs, He further submitted that the jurisdiction of this Court has not been ousted by section 282-L of the Ordinance of 1984 as it is without prejudice to the provisions contained in Part IX of the Ordinance and that no licence as envisaged in section 282-A of the Ordinance, has been granted by SECP. In the alternate he submitted that jurisdiction of this Court regarding already pending petitions was not ousted by the amending Ordinance, CXXIII of 2002. Reliance was placed on Aftabuddin Qureshi and another v. Mst. Rachel Joseph and another PLD 2001 SC 482; Muhammad Bashir and 2 others v.
9. Muhammad Firdaus and another PLD 1988 SC 232 and Governor, N.-W.F.P. And another v. Gul Naras Khan 1987 SCMR 1709. No-objections were ever raised by the shareholders or creditors at the time when the statutory meetings of both the companies were separately held or at the time of sanctioning of the Scheme'. The petition cannot be reargued on merits. Due diligence was observed by CALCORP.
3. I have considered the arguments of both the learned counsel and gone through the relevant provisions of the law. The contentions raised by Mr. Saleem Sehgal, Advocate, the learned counsel for the International Multi Leasing Corporation regarding jurisdiction of this Court are to be brushed aside simply on the ground that the same do not find mention in his petition for recall of the order.
10. It is well-settled by now that grounds not taken in the petition cannot be allowed to be urged during the arguments. The opposite-party cannot be taken by surprise. However, since the matter relates to the very jurisdiction of this Court, I intend to deal with the same.
11. ' The newly-added section 282-L by the Companies (Second Amendment) Ordinance (CXXIII of 2002) reads as under:-- "282-L. Procedure for amalgamation of NBFCs.---(1) Without prejudice to the provisions contained in Part IX of this Ordinance, NBFCs may be amalgamated with each other provided a scheme containing the terms of such amalgamation has been placed in draft before the shareholders of each of the NBFC concerned separately, and approved by a resolution passed by a majority in number representing two thirds in value of the shareholders of each of the said NBFCs, present either in person or by proxy at a meeting called for the purpose." (Underlining is mine).
12. (2)
13. (3)
14. (4)
15. (5)
16. (6)
17. ' The subsection opens with the phrase "without prejudice to the provisions contained in Part IX of this Ordinance". Part IX of the Ordinance, 1984 pertains to arbitration, compromises, arrangements, reconstruction and amalgamation of the Companies. Two third majority in value of the shareholders for passing a resolution approving a scheme of amalgamation is required by newly added section 282-L, whereas for the same purpose three fourth majority is needed under section 284 of the Companies Ordinance, 1984. This leaves not a scintilla of doubt in my mind that the jurisdiction of this Court has not been taken away by newly-added Part VIII-A (effective from 15-11- 2002) of the Companies Ordinance, 1984.
18. ' Objections were called for from the SECP even after coming into force of the amendment but no objections were raised by the SECP and rightly so as none were available to D Commission. As far as the jurisdiction of this Court is concerned, it is still intact and cannot be considered to have been ousted merely by implication. There is no specific provision in Part VIII-A excluding the jurisdiction of this Court. So strong a leaning ' now exists against construing a statute so as to oust or restrict the jurisdiction of the Court that unless very explicit words are used in the statute itself in that behalf such an intention should not normally be imputed to the Legislature. Exclusion of the jurisdiction of the Court is not to be readily inferred. See Muhammad Ismail and others v. The State PLD 1969 SC 241; A. Hamid v. Hussain Hyder, Chief. Settlement, and Rehabilitation Commissioner, West Pakistan, Lahore and another PLD 1971 Lahore 858; Muhammad Aslam v. The State PLD 1967 Lahore 810 and Raja Maula Dad Khan, Advocate v. West Pakistan Bar Council, Lahore and another PLD 1975 SC 469.
19. ' The next contention of the learned counsel that there is no provision in the Companies Ordinance, 1984 for amalgamation/merger of the two companies is devoid of any force. The scheme for transfer of shareholding of the transferor company to the transferee company and the transfer of the assets, rights and liabilities of one company to another is an arrangement between the company and its shareholders/creditoRs, This arrangement may pertain to the amalgamation of one company with the other under section 287 of the Companies Ordinance, 1984. The expression "amalgamation" includes in its fold an F arrangement or compromise between the company and its members or class of members for becoming the shareholders in another undertaking. The term "arrangement" is of wide import and cannot be given the restricted meanings as stated by the learned counsel. See Hindusthan Commercial Bank Ltd. v. Hindusthan General Electrical Corporation Ltd. AIR 1960 Calcutta 637; and in re: Patrakar Prakashan (Pvt.) Ltd. [1997] 13 SCL 33. In the case of Wild v. South African Supply and Cold Storage Co. (1904) 2 Ch. 268, it was observed as under:- "Now what is an amalgamation? An amalgamation involves, I think, a different idea. There you must have the rolling, somehow or other, of two concerns into one. You must weld two things together and arrive at an amalgam---a blending of two undertakings. It does not necessarily follow that the H whole of the two undertakings should pass---substantially they must pass---Nor need all the corporators be parties, although substantially all must be parties. The difference between reconstruction and amalgamation is that in the latter is involved the blending of two concerns one with the other, but not merely the continuance of one concern."
20. ' Similarly in para. 1539 of the Halsbury's Laws of England, 4th Edition it is stated as under:-- "Amalgamation is a blending of two or more existing undertakings into one undertaking, the shareholders of each blending company becoming substantially the shareholders in the company which is to carry on the blended undertakings."
21. ' Two or more companies are fused into one by merger, one is absorbed into another. Learned counsel that there is amalgamation of the companies Ordinance, 1984 is totally misconc provides:- - "287. Provisions for facilitating and amalgamation of companies.---(1) Where an application is made to the Court under section 284 for the sanctioning of a compromise or arrangement proposed between a company and any such person as are mentioned in that section, and it is shown to the Court that the compromise or arrangement has been proposed for the purposes of or in connection with a scheme for the re-construction of any company or compromise or the amalgamation of any two or more companies or the division of any company into two or more companies, and that under the scheme the whole or any part of, the undertaking, property or liabilities of any company concerned in the scheme (in this section referred to as a 'transferor company') is to be transferred to another company (in this section referred to as 'the transferee company'), the Court may, either by order, make provision for all or any of the following matters, namely:-- ' The bare reading of the said section reveals that where an application is made to the Court for sanctioning of an arrangement proposed between a company and any person mentioned in section 284 and it is shown to the Court that the arrangement has been proposed for the purposes of or in connection with a scheme for the amalgamation of any two or more companies or division of any company into two or more companies, the Court may, by order, make provision for all or any of the matters enumerated therein. Sections 284 to 287 of the Companies Ordinance, 1984 are similarly worded as sections 391 to 394 of the Indian Companies Act, 1956 and sections 425 to 427 of the English Companies Act, 1985. All amalgamations/mergers take effect under the said provisions. The contention of the learned counsel is totally misconceived.
22. ' As far as the other contentions are concerned they relate to the merits of the scheme. The scheme of amalgamation is not before this Court, the same has already been confirmed. No doubt this Court should not act as a post office or conduit but it will not view the scheme with a view to find out whether it is ideal scheme. It will not pick holes in it nor it will approach it in a carping spirit. See In re: Sidhpur Mills Co. Ltd. AIR 1962 Gujarat 305 and Dewan Salman Fibre Ltd., Islamabad v. Dhan Fibre Ltd., Rawalpindi PLD 2001 Lahore 230. The scheme must be reasonable, fair, bona fide and for the economic benefit of the merging companies. The petition for amalgamation had been widely advertised. The scheme of amalgamation had been approved by the overwhelming majority. No objections were raised either by any shareholder/member or creditor before the Chairman who presided over the meeting or before this Court. Small minority members of the either company who had not attended the Extraordinary General Meeting of their company in which motions for approval of amalgamation were passed had also chosen to remain absent in this Court. None creeped in to pick holes in the amalgamation scheme.
23. ' The scheme of amalgamation was sanctioned by the Court after considering all its aspects. The contention of the learned counsel that due diligence was not followed by the Directors of the Capital Assets Leasing Corporation Ltd. Does not hold water. The Directors have a duty to the N company and its shareholdeRs, No concealment in the balance-sheet and the Auditor's report has been found. Non-disclosure of the fact will not detract from the scheme in any way. The negotiations by the Capital Assets Leasing Corporation Ltd. With the Escorts Bank for its merger failed owing to the under valuation of the share of the Capital Assets Leasing Corporation Ltd. The scheme of amalgamation provided allotment of shares in a certain ratio which was arrived at after careful consideration by the two companies and their accountants and it was not alleged that the valuation of the assets was unfair or inequitable. Onus to prove the unreasonableness or unfairness is on those who object to it. See in Hindusthan General Electric Corporation Ltd. AIR 1959 Cal.
679. There is no reason to presume that the shareholders did not know what they were doing. No complaint was received about any lack of notice or lack of understanding of what the scheme was about. It was supported by the shareholdeRs, There was no allegation of lack of bona fide or coercion into existing scheme of amalgamation.
24. ' There is another aspect of the matter that on the very date when the scheme of amalgamation was confirmed by this Court, a resolution appears to have been passed by the Board of Directors at 11-00 a.m. Authorising the Chief Executive and Mr. Irfan Mehmood , Market Executive to represent/appeal on behalf of the company in all legal proceedings and for the preparation and filing of the recovery suits against the defaulters of the company. The said resolution does not, authorise the Chief Executive and the Market Executive to challenge the scheme of amalgamation.
25. Similarly another resolution appears to have been passed on March 25, 2003 authorizing the Chief Executive to initiate legal action in order to protect the interests of International Multi Leasing Corporation Ltd. shareholdeRs, The said resolution also does not empower him to apply for recall of the order dated 4-3-2003 sanctioning the scheme of amalgamation. The resolution passed by the Board of Directors cannot override the resolution passed by shareholders in a general body meeting.
4. Learned counsel for IML was questioned about the maintainability of the petition when confronted with the same he referred to section 285 of the Companies Ordinance, 1984. The said section pertains to only giving directions by this Court for making the scheme workable or to make such modifications in the arrangement as it may consider necessary for working of the same. The true effect of the amalgamation is that when two companies amalgamate and merge into one the transferor company loses its entity and it ceases to have its business. In the case of Saraswati Industrial Syndicate Ltd. v. C.I.T. Haryuana, Himachal Pradesh, Delhi-II, New Dehli AIR 1991 SC 70 it was observed as under:-- "The true effect and character of the amalgamation largely depends on the terms of the scheme of merger. But there can be any doubt that when two companies amalgamate and merge into one the transferor company loses its entity as it ceases to have its business."
26. ' Once the scheme of amalgamation is sanctioned by the Court, under section 284(2) of the Companies Ordinance, it is binding on all the creditors or the class of creditors or on the members or class of members, as the case may be, and also on the company. Unlike the winding up proceedings which the Court may, at any time not later than three years, after an order for winding up, has been made, withdraw, cancel or revoke the same under section 319(1) of the Companies Ordinance, there is no provision for withdrawal, cancellation or revocation of the order sanctioning the scheme of amalgamation. In the Palmers's Company Law, 24th Edition, it is stated that in an Australian case the Chief Commissioner of Pay Roll Tax v. Group Four Industries Pvt. Ltd. (1984) 1 NSWLR 680, the Court has decided that once an order sanctioning the scheme has become effective it was binding on all members and creditors despite any defect or irregularity.
27. ' After sanctioning the scheme of amalgamation, the only jurisdiction this Court has under section 285 of the Companies Ordinance, 1984 is that:--
(i) It can give directions in regard to any matter;
(ii) make any modifications in the arrangement as it may consider necessary for its working;
(iii) if the scheme is not workable satisfactorily with or without modification, this Court suo motu or on the application of the Registrar or any person interested in the affairs of the company, make an order for winding up the company and it shall be deemed to be an order made under section 305 of the Companies Ordinance, 1984.
28. ' I am not inclined to make an order for winding up the Company at this stage. C.M. No,225-L of 2002 is not maintainable and is dismissed. All applications for interim relief are also dismissed.
29. ' This Court is equipped with powers of widest amplitude to give necessary directions to the parties to the arrangement for the purpose of working of the scheme. The Court must make an attempt to make the scheme workable and to find out the modifications, if any, necessary to make scheme workable. Modifications include addition to the scheme of amalgamation or omission therefrom for the purposes of making it workable. I, therefore, give the following directions:--
(i) As consideration for the transfer to and vesting in CALCORP of the IML Undertaking, CALCORP shall issue at par and allot 5,400,000 new ordinary shares of CALCORP credited as fully paid-up shares to be allotted to every registered holders of the shares of IML on the basis of a swap ratio of one: one, that is, for every one (1) ordinary shares of Rs,10 each of IML held by a registered shareholder of IML, 1 (one) ordinary share of Rs,10 each of CALCORP shall be issued in the name of such registered shareholder. The aforesaid issuance and allotment of the shares shall be made by CALCORP within 30 days commencing June 20, 2003. CALCORP shall consolidate all factional shares, sell the same on the Stock Exchange and make payment of the proportionate amounts of the sale consideration so received to the members entitled thereto. The Board of Directors of CALCORP shall comprise of seven Directors in the ratio of 4 (CALCORP) and 3 (IML) to be elected in accordance with the provisions of the Companies Ordinance, 1984 as soon as possible. As interim measure all Bank accounts of CALCORP and IML shall be operated by the existing Directors of CALCORP. In future all decisions shall be taken by the Board of Directors elected as directed above.
(ii) All members whose names shall appear in the Register of Members of IML on November 15, 2002, maintained by SECP shall surrender their share certificates for cancellation thereof to CALCORP. In default, upon the new shares in the CALCORP being issued and allotted by it to the members of IML whose name shall appear on the Register of Members of IML on the date, as aforesaid, the share certificates in relation to the shares held by them in IML shall be deemed to have been cancelled.
(iii) All contracts, agreements; trusts, leases, conveyance, grants and instruments of transfer entered into by or subsisting in favour of IML upon being transferred to and vested in CALCORP shall remain in full force and effect. As if originally entered into by or granted in favour of CALCORP instead of IML, as the case may be, CALCORP may enforce all rights and shall perform all obligations and discharge all liabilities arising thereunder accordingly.
(iv) The debts, liabilities, claims against and the obligations of IML upon being transferred to and vested in CALCORP shall be treated as the debts, liabilities and claims against and the obligations of CALCORP as if originally incurred by CALCORP instead of IML. CALCORP shall pay and discharge all such debts and liabilities, shall satisfy all such claims and shall perform all such obligations accordingly.
(v) CALCORP shall take in employment all such employees of IML who have accepted employment with CALCORP in lieu to their employment with IML on the terms and conditions applicable to such employees at IML immediately preceding the completion date including the terms relating to entitlement upon termination of employment, that is, provident, gratuity and pension funds with the benefit of past employment in IML.
(vi) All suits, appeals and other legal proceedings instituted by or against IML and pending immediately before the completion date shall be treated as suits, appeals and legal proceedings by or against CALCORP and may be continued, prosecuted and enforced by or against CALCORP accordingly.
(vii) The IML shall stand dissolved without winding up on the date on which the ordinary shares of CALCORP are allotted to the holders of the ordinary shares of .IML in accordance with the scheme of amalgamation/ merger.
(viii) (viii) The entire undertaking of IML including all assets, properties, rights, the privileges, bank accounts, trade marks, patents and licences and all or any other assets, properties, rights, privileges, contracts, bank accounts, trade marks, patents and licences of IML are transferred to and stand vested in CALCORP.
5. The parties to the arrangement or other persons interested shall be at liberty to apply to this Court for further directions if need arises for the working of the arrangement. With the above directions C.M. No,215-L of 2003 stands disposed of. revisions by the competent authorities. Therefore, it is advisable to consult the official sources or legal professionals for the most up-to-date and accurate information.