2005 PLP 1818 (CLD)

SYED HAMID ALI SHAH, J.

Brief facts giving rise to this appeal are that the affectees of Taj Company formed and registered an association for their welfare" with the name and style of Anjuman-e-Behbood-e-Mutassarin-e-Taj Company. They filed petition under sections 284 to 287 i.e. C.O. No.9 of 1998, seeking therein the sanction of scheme of rearrangement, with regard to the management of Company. The scheme was proposed mainly for the transfer of the management to the unsecured creditors subsequent to their agreement to swap their claims for shareholding in the respondent-Company or alternately the transfer of the assets of the company, to a company to be set up by unsecured creditors. The petition (C.O. 9 of 1998) was filed, when other two petitions i.e. C.O. No.45 of 1990 under section 290 of the Companies Ordinance, 1984 and C.O. No. 12 of 1997 under section 305 for winding up of the Company (both filed by the Joint Registrar of Companies), were pending. The order for the winding up of the Company was passed in the latter petition on 18-5-1998. The Court appointed three joint Official Liquidators who took over the assets as well as the record of the Company. The petition remained pending for a considerable long time without any order passed on it, unit 12-2-2002, when it was held that the proposed scheme of arrangement be presented in a meeting before the unsecured creditors of the company. Various modes of holding the meeting were considered on different dates and ultimately the learned Company Judge vide order dated 17-7-2002 ordered the holding of a meeting of the affectees/creditors of the Company for the consideration of the scheme of arrangement.

2. The learned Company Judge, provided guidelines for holding of the meeting, after appointing Mr. Azmat Saeed Sheikh, Advocate, (as he then was) as Chairman of the meeting. The meeting was held on 15-9-2002 and the report by the Chairman was submitted within stipulated period of two weeks. The appellant filed the objections through C.M. No.877 of 2002, seeking therein the declaration that proceedings and result of the meeting be declared illegal, as the appointed Chairman had not followed the directions given by the Court, in holding the meeting. The report by the appointed Chairman reveals that the proposed scheme was rejected by 65.51% and was approved by 33.03% voters, representing the amount of deposits of Rs.261,851,837 and Rs. 132,022,837 respectively. The scheme was not accepted by the simple majority of affectees/creditors, while section 284(2) provides the approval of scheme by 3/4th majority. Learned Judge in Chamber overruled the objections and dismissed C.M. No.877 of 2002 with costs. Hence this appeal.

3. Learned counsel for the appellant has contended that the Court imposed certain conditions vide order dated 17-7-2002 and provided guidelines for the holding of the meeting but the meeting was not held in terms of the directions and guidelines. He stated that the voters were allowed to pole their votes without any scrutiny. It was further submitted by referring to the definition of word 'meeting' in `Law Lexicon', Volume-II page 144 and Corpus Juris Secondun Volume 57 at page 1044 that the meeting in question as conducted by the appointed Chairman does not qualify to be a meeting. Further added that the basic requirement of meeting is, coming together of persons for the purposes of discussion and acting upon some matter or matters in which the members have common interest. While the impugned meeting lacked a necessary ingredient of a meeting, viz the opportunity to the members/ participants for discussion on the agenda, therefore, the meeting under reference is no meeting in the eyes of law.

4. We have heard learned counsel for the appellant and perused the record.

5. The perusal of the record reveals that the notices of the meeting were published in newspapers with wide publicity i.e. daily Jang, Nawa-e-Waqt and the News. The voters mentioned in the list provided by the administrator, were issued notices through pre-stamped envelopes under postal certificates. The voters, who were thousands in number, came from various parts of the country to attend the meeting. They were given the ballot papers, after proper scrutiny of papers. They were allowed in the batches of 20 affectees at a time to cast their votes. There was unruly crowd, who disrupted polling but it was the ideal arrangement of the Chairman that situation was handled and polling continued till the end of the day. The learned Judge in Chamber has held that the meeting was conducted in the manner as directed by the Court in its order dated 17-7-2002. We find from the record that the meeting was held according to the guidelines, in the best possible manner, in the existing circumstances and find no justification to set at naught the whole proceedings of the meeting simply on the ground that there was slight or negligible deviation.

6. There is another aspect of the matter that the scheme of arrangement is not liable to be approved or sanctioned, only on the ground that the resolution to this effect has been passed by 3/4th majority. The Court does not sit merely to register the decision of the meeting. ' The Court before sanctioning a scheme has to examine and satisfy itself whether the proposed scheme is fair and reasonable, taking into consideration all the material facts, interest of all the classes and the bona fide of the petitioner. The Honourable Sindh High Court in the case of Lipton Pakistan Ltd. reported as 1989 CLC 818, has dealt with this question in the following manner:-- " ..(iii)Lastly, in exercising its discretion under sections 284 and 287, the Court is not merely acting as a rubber stamp. It is the function of the Court to see the background and object of the scheme, is a reasonable one and if the Court so finds it is not for the Court to interfere with the collective wisdom of the members of the Company. When once the Court finds that the scheme is fair one, then it is for the objector to convincingly show that the scheme is unfair and that, therefore, the Court should exercise the discretion to reject the scheme, not withstanding the views of a very large majority of the members shareholders that the scheme is a fair one."

7. There are other classes of creditors in the Company, specially the secured creditors comprising of Banking Companies and other DFIs. The proposed scheme is silent with regard to the rights and interests of this class. A scheme protecting the rights and interests of only one class at the altar of the interests of other classes in a company, is not required to be approved by the Court. While holding so we find support from the judgments in the English jurisdiction. In the case of Empire Mining Company (1890) 44 Ch.D 402 the proposed scheme was declined as the shareholders were given advantage of payment in full with 13s per share as against payment to the unsecured creditors full in cash. In another case Barrow Haemalite Stell Company 39 Ch.D 582 the scheme of arrangement depriving the debenture holders of their security, was refused. The Court in the case of Griffith v. Paget 5 Ch.D 894 declared the scheme of arrangement, ignoring rights of debenture holders (who were preference shareholders), as invalid.

8. The scheme of arrangement proposed by the appellant is silent with regard to the safeguard of the interests of other classes specially the secured creditors. Such scheme is unfair and unreasonable, therefore, we are not inclined to interfere and unsettle the judgment passed by the learned Single Judge in Chamber. We are also conscious of the fact that the proposed scheme has not been approved by the affectees themselves and the winding up proceedings have already taken a longer course, the proposed scheme, in such circumstances, will enhance the agony of all the creditors who have already suffered immense loss.

9. For the foregoing reasons we do not find any merit in this appeal, which is hereby dismissed in limine. M.H. /A-591 /L Appeal dismissed.