Law: Companies Act, 2017

Section: 279, 280–283, 285(5) & 285(8)

Law: Companies (Court) Rules, 1997

Section: 55, 57, 61, 19

Case Summary

The petitioner, Arzoo Textile Mills Limited, filed a Company Petition under Sections 279, 280–283 and 285(5) of the Companies Act, 2017, seeking the Court's sanction of a Scheme of Arrangement for restructuring and settling its liabilities towards secured creditors (Sukuk holders). The company argued that due to financial difficulties, it defaulted on its obligations, and the proposed scheme was formulated to revive the company as a going concern, avoid liquidation, and protect the interests of creditors, shareholders, employees, and other stakeholders.

The Scheme was approved by the requisite statutory majority of members and secured creditors after meetings convened under the Court's directions. The only objection came from the National Bank of Pakistan (NBP), which neither voted in favour of the Scheme nor issued a No Objection Certificate (NOC). The SECP did not object to the Scheme but requested the Court to ensure that NBP's secured rights were not unlawfully prejudiced.

The High Court held that under Section 279 of the Companies Act, 2017, once a Scheme of Arrangement is approved by the prescribed statutory majority and found to be fair, lawful, and bona fide, it becomes binding on all creditors, including dissenting or abstaining creditors. Since all statutory requirements had been fulfilled and the Scheme was neither illegal nor unfair, the Court sanctioned the Scheme while clarifying that the rights of dissenting creditors would remain protected in accordance with the sanctioned Scheme and applicable law.