Law: Companies Act, 2017

Section: 6(11), 279-283, 285, 11

Law: Constitution of Pakistan, 1973

Section: 37(d)

ORDER

The Court by invoking Section 6(11) of the Companies Act, 2017 (the “Act”) is going to decide this petition within five (05) weeks; less than the time of 120 days provided under the law in terms of judgment cited in FAUJI CEMENT COMPANY AND ASKARI CEMENT COMPANY versus SECURITIES AND  EXCHANGE  COMMISSION  OF  PAKISTAN  and  others
(2022 CLD 604) to give confidence to public and shareholders about the decision by the Board of Directors. This Court also through this merger petition will develop certain legal points in order to promote the companies being merged within time for the business purpose.
2.    This petition under Sections 279 to 283 read with Section 285 of the “Act” has been filed by authorized representative of the Petitioners for seeking/obtaining sanction of this Court to a Scheme of Arrangement and for merger between Fauji Fertilizer Company Limited (“Transferee Company”)/Petitioner No.1 and Fauji Fertilizer Bin Qasim Limited (“Transferor Company”)/Petitioner No.2 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.
3.    Briefly stated, the “Transferee Company”/Petitioner No.1 is a subsidiary of the Fauji Foundation which carries on business of manufacturing, producing, buying, selling, importing, exporting of chemical and fertilizers of all kinds alongwith investment in other fertilizers, chemical, cement, energy generation, food processing and banking operations. The “Transferee Company” is a public limited company with an authorized share capital of Rs.15,000,000,000/- divided into 1,500,000,000/- ordinary shares of Rs.10/- each which are fully subscribed and paid up. Similarly, the “Transferor Company”/Petitioner No.2 is manufacturing, purchasing and marketing of fertilizers. The “Transferor Company” is a public limited company with an authorized share capital of Rs.15,000,000,000/- divided into 1,500,000,000 ordinary shares of Rs.10/- each, out of which 1,291,252,857 ordinary shares have been issued and fully paid up.
A.    THE SCHEME OF ARRANGEMENT
4.    The short and precise facts are that alongwith this petition, the Petitioners have attached the Scheme of Arrangement (the “Scheme”)

in terms of Section 279 to 283 of the “Act” between them and their respective shareholders. The principal object of the “Scheme” is to amalgamate the entire undertaking of the “Transferor Company” to the “Transferee Company” by transferring to, merging with and vesting in “Transferee Company” the whole of the “Transferor Company”, including all assets, liabilities and obligations of the “Transferor Company” against the allotment and issue of the “Transferee Company” shares to the “Transferor Company” based on the swap ratio and dissolving the “Transferor Company” without winding up in accordance with the provisions of the “Scheme”.
B.    PETITIONERS’ SUBMISSIONS
5.    Learned counsel for the Petitioners Barrister Raja Jibran Tariq argued that before filing of this petition, all basic requirements mentioned in the “Act” and the Companies (Court) Rules, 1997 (the “Rules”) have been fulfilled and that too the Petitioners have obtained NOCs from all the secured creditors and obtained premerger notification under Section 11 of the “Act” from the “CCP”. Barrister Raja Jibran Tariq and Mikael Azmat Rahim also stated that the Court has developed sound principles on merger.
C.    REPORT    OF    THE    SECURITIES    AND    EXCHANGE COMMISSION OF PAKISTAN
6.    The Registrar of Companies, Companies Registration Office, Islamabad in response to the main petition filed report and parawaise comments on behalf of the “SECP” wherein observation with regard to non-submission of NOCs by the Petitioners their secured creditors have been raised as being still awaited. However, it has been requested that the Petitioners may be directed to solicit no objection certificates (NOC) from their secured creditors to be submitted before the Court for its satisfaction.
D.    REPORT OF THE COMPETITION COMMISSION OF PAKISTAN
7.    Report on behalf of the “CCP” was submitted on 13.11.2024 wherein it was stated that the “Transferee Company” approached the “CCP” on 29.08.2024 and submitted a pre-merger application and it was intimated by the “CCP” that the intended transaction is exempt

from filing pre-merger application in terms of Regulation 5(1)(i) and
(ii) of the Competition (Merger Control) Regulations, 2016 (the
“Regulations”).
E.    CREDITORS’ STANCE
8.    Mr. Mikael Azmat Rahim, Advocate argued that the merger petition was drafted as per requirement of the law and it also covered the issuance of NOCs from all the creditors as required under the commercial law i.e. the Securities and Exchange Commission of Pakistan Act, 1997 and the State Bank of Pakistan Act, 1956. He submitted that the issue of the NOC from the creditors has been carefully dealt with by the Petitioners as per the Scheme of Arrangement and also the reports of the Chairmen have been obtained in this regard. He refers to page No.1125 (Annexure-K18, Volume-IV) which shows the list of secure creditors of the Petitioner No.1 alongwith their NOCs, while list of secure creditors of the Petitioner No.2 is available at page No.1143 (Annexure-L, Volume- IV) alongwith their NOCs. He states that since this issue has already been acknowledged by the creditors in writing, there is no need to hold meetings of the creditors. Learned counsels, who are present in the Court today on behalf of different Banks, also submit that they have no objection if this merger petition is allowed.
F.    PROCEEDINGS BEFORE THE CHAIRMEN
9.    Pursuant to the direction issued by this Court vide order dated 08.10.2024, notices were issued to all the creditors within the parameters of the Article of Association of the Company and the company law. A meeting of the members/ shareholders of the Petitioners was convened on 14.11.2024 by complying with the requirements of Section 134(3) of the Act and other legal/codal requirements and notice of the said meeting, alongwith the Ballot Paper for voting through post and proxy form, were also published by way of public notices in the recognized newspapers. Queries were invited from the members, who also entered into discussion with, and raised questions to the Petitioner No.1’s management and ultimately, after a detailed deliberation, being fully addressed and satisfied, a resolution was passed (through postal ballot, e-voting and voting at

the meeting as per applicable laws) by the majority as per provisions of Section 279(2) of the “Act”. The members of the Petitioner No.1 voting in favour of said resolution, therefore, represented approximately 99.9928% in value of the shares held by the members, present in person or by proxy and voting at the meeting, as well as voting through e-voting and ballot paper by post/e-mail and during the meeting no members verbally raised any objections to the Scheme of Arrangement.
G.    PROCEEDINGS OF THE COURT
10.    Albeit no time frame is provided for merger in the company laws but this Court has held on different occasions that every authority or forum is bound by time specific legislation and has the mandate to decide the matter pending before it in a timely fashion, specifically the matters arising out of commercial issues. This Court first time in a commercial case reported as M.C.R. (PVT) LTD, FRANCHISEE OF PIZZA HUT versus MULTAN DEVELOPMENT
AUTHORITY and others (2021 CLD 639) held that it is the role of the Court to protect the foreign investors, which was subsequently further elaborated in the case of WAQAS AYUB versus ADEEL YAQUB etc. (2024 CLD 990) by holding that it is the duty of the Courts to promote the concept of Alternate Dispute Resolution (the “ADR”) by way of developing the confidence of the parties to adopt the “ADR” without lengthy litigation before the Courts, which practice would definitely strengthen the ecosystem of the “ADR” to promote foreign investment in Pakistan. The Courts and the “ADR” have symbiotic relationship with critical interdependence as the Supreme Court of Pakistan in various judgments has emphasized upon strengthening of the “ADR”, arbitration and mediation and has settled the principles that there should be minimal interference by the Courts in such process to make way for speedy, amicable, efficacious and expeditious resolution of arbitrable disputes. The Supreme Court of Pakistan has also given view in this regard in the case of TAISEI CORPORATION and another versus A.M. CONSTRUCTION COMPANY (PVT.) LTD. and another (2024 SCMR 640) by holding that “Arbitration thus embodies the principles of autonomy and

voluntariness, respecting the parties' freedom to design a process that best suits their needs. It reflects a philosophical shift towards self- governance in dispute resolution, allowing parties to choose their arbitrators and the applicable law, thereby creating a more tailored and potentially equitable outcome. The role of courts in the context of arbitration has therefore evolved with a trend towards minimal interference. More significant is the minimal interference in international commercial arbitration that stands as a cornerstone in the resolution of cross-border commercial disputes, offering a preferred alternative to litigation in national courts for businesses worldwide. One of the foundational aspects of international commercial arbitration is its emphasis on neutrality, expeditiousness, efficiency and the ability to provide solutions tailored to the needs of international business transactions. International commercial arbitration plays a crucial role in resolving disputes arising from cross-border trade and commerce, expeditiously and efficiently. The global view on international commercial arbitration is therefore overwhelmingly positive, with businesses and legal professionals alike recognizing its benefits over traditional litigation”. Moreover, this Court has also elaborated the provisions of the company law by making it clear that according of Section 6(11) of the Companies Act, 2017 every petition presented to a Company Judge is to be decided within one hundred and twenty days from the date of its presentation and under the provisions of Sub-Section (7) of this section, the Company Judge can fix a date and allocate time for hearing of the case in light of the judgment reported as Lt. General (Retd.) Mahmud Ahmad Akhtar and another versus M/s Allied Developers (Private) Limited and others (2022 CLD 718). For reference Section 6(11) of the Act is reproduced hereunder:
“6. Procedure of the Court and appeal.—(1)---

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(11) The petition presented before the Court shall be decided within a period of one hundred and twenty days from the date of presentation of the case and for this purpose the Court may, if it is in the interest of justice, conduct the proceedings on a day to day basis and if the Court deems fit it may impose costs which may extend to one hundred thousand rupees per day or such higher amount as the Court may determine against any party to the proceeding causing the delay.”