1989 PLP 1323 (CLC)

This is a petition under section 287 of Companies Ordinance, 1984, said to have been inadvertently filed under sections 96, 97, 284, 285 and 288 of Companies Ordinance, 1984. It was jointly moved by M/s. Southern Gas Company Limited, petitioner No.l, and M/s. Sui Gas Transmission Company Limited, petitioner No.2, for sanction of merger/amalgamation/re‑organization of the said two companies under the name and style of M/s. Sui Southern Gas Company Limited. In the first phase of Government decision, M/s. Karachi Gas Company and M/s. Indus Gas Company, were ordered to be amalgamated/merged under the name and style of Southern Gas Company Limited, who are petitioner No.l herein, vide judgment dated 27‑5‑1986 passed by the High Court of Sind in J.M. No.46/1984. In the second phase, the two petitioners are to be amalgamated/merged under the name of Sui Southern Gas Company Limited and this petition deals with their proposed amalgamation/merger.

2. The petitioners have enclosed with the petition Annexure `A', which is the proposed scheme for amalgamation/merger of the petitioners pursuant to the decision of the Government of Pakistan read with directive dated 29‑10‑1986 vide Annexure `D' to the petition. Enclosed with the petition are also resolutions passed by the respective Board of Directors of the petitioners Aas Annexures E/1 and E/2 respectively. The scheme of amalgamation/merger as contained in Annexure `A' was presented to the share‑holders at Extraordinary General Meetings held by each petitioner‑company separately on 31‑5‑1988 and by Special Resolutions being Annexures 'L' & 'M' respectively to the petition, the scheme of amalgamation/merger was duly passed. The two petitioner companies have also obtained vide Annexures P/1 to P/8 and Q/1 to Q/9 respectively to the petition‑No Objection Certificates from their respective creditors named in para 16 of the petition, to the Scheme of Amalgamation /Merger of the two petitioner companies. It is stated that permission from the Controller of Capital Issues, Government of Pakistan (Annexure `K' to the petition) has been obtained on the basis of which the share capital of the petitioners shall be re‑structured as per break‑up value of the shares as on 30‑6‑1987. Among other things, the merged company shall take over all assets, properties and liabilities of the petitioner companies. The merged company shall be listed with the Karachi and Lahore Stock Exchanges and its registered office shall be situated at State Life Building No.2‑A, Wallace Road, I.I. Chundrigar Road, Karachi.

4. Under the Scheme of Amalgamation/Merger, it is proposed and undertaken by the petitioners that their officers, executives, employees and workers shall become the officers, executives, employees and workers of the merged/amalgamated company, namely, Sui Southern Gas Company Limited on the existing terms and conditions. It was, however, specifically undertaken by them in para 13 of the petition that "the wages and facilities of subordinate staff and workers .shall be governed by the respective peace agreements during the validity of existing agreements with the respective collective bargaining agents. If there be any necessity of any change or amendment, it shall be negotiated with the concerned collective bargaining agents."

5. Notice of the proposed Scheme of Mergers/Amalgamation was published in the Government Gazette and also in the daily newspapers. Similarly, notice was also issued to Deputy Registrar of Joint Stock Companies Sind and also affixed on the Court Notice Board and at the principal place of business of the companies. In response to the notices, written statement has been filed by the Joint Registrar of Companies stating that the Corporate Law Authority on principle has no objections to the scheme of merger although certain formalities have not been complied with by the petitioners. Mr. Khalid M. Ishaque, learned counsel for the petitioners, urged before me that the petitioners shall as soon as possible undertake to comply with the formalities referred to by the Deputy Registrar, Joint Stock Companies, Sind. Other, parties, who were interested in these proceedings were the two workers unions being the collective bargaining agents of the two petitioners represented through their advocates, namely, Mr. Mirza Muhammad Kazim for petitioner No.l and Mr. Shamsuddiri Khalid, Advocate for petitioner No.2. Both the employees unions of the petitioners have vehemently opposed this petition, inter alia, on the following grounds:‑ (a) The respective collective bargaining agents shall lose their separate legal entity after merger. (b) The merger shall affect the seniority of the workers. (c) The Scheme of Amalgamation/Merger does not ensure best of terms or' equal treatment to all workers as certain benefits enjoyed by workers of one company are not available to the workers of other company. (d) There will be one establishment and consequently there will be one bargaining unit for all practical purposes. (e) The constitution of the respective trade unions of the units will have to be amended in ‑complete consonance with the new structure of the company. (f) The workers of the petitioners are governed by the Essential Service Maintenance Act and their term of service is extended after every six months through the Official Gazette and Labour Court, cannot redress their grievances. (g) The scheme purports to give approval of allotment of shares to old share‑holders and the workers are deprived to obtain shares and participation in the management. The chief concern of both the workers' union is that the effect of order of amalgamation/merger will be to frustrate the entire scheme for representation and safeguard of workers as contained in Industrial Relations Ordinance, 1969. It was contended that both the workers unions owe their existence as collective bargaining agents by virtue of section 22 of I.R.O. and have emerged as separate and distinct legal entities. The proposed amalgamation/merger of the two petitioner Companies is nothing but seeking an order for dissolution of the workers' union under a law other than governing the workers. In a situation like this, it was argued by the learned counsel for workers' union that the High Court may invoke its jurisdiction under Article 199 of the Constitution of the Islamic Republic of Pakistan, 1973. Learned counsel, however, were unable to cite any case law where a company‑law Judge in a petition for winding up or otherwise in a company matter either suo motu or otherwise may invoke jurisdiction under Article 199 of the Constitution.

6. Mr. Khalid M. Ishaque, learned counsel for petitioners, drew my attention to peace agreements of workers, union with the respective petitioner companies which are on record. According to him, the relationship between the petitioners and their employees shall be regulated by the said peace agreements, in the presence of which the worker unions are estopped from challenging the petition. In any case it was urged by him that merger of the petitioner‑companies will not result into less favourable conditions of service. On the contrary, there will be better prospects for all the workers. It was further urged by him that both the petitioner‑companies function under the Essential Services and are regulated under the Monopoly and Restricted Trade Practices (Control and Prevention) Ordinance, 1970. The objection regarding issue of bonus shares raised by workers unions is ill‑founded and vague. Bonus shares arc issued in accordance with law and shall not affect the lawful rights of the workers. It was, however, conceded by Mr. Khalid M. Ishaque, learned counsel for petitioners, that from the date of merger both the companies shall cease to exist as two separate legal entities and in their place Sui Southern Gas Company Limited shall come into existence which shall conduct the business operations through its three units, namely, "A", "B" & "C" respectively. In a situation like this, it will be open to the workers' union to apply to the National Industrial Relations Commission under section 22EE for determination and certification as respective collective bargaining units in the said establishment and also for their determination and certification as collective bargaining agents for their units in accordance with section 22 of Industrial Relations Ordinance. Mr. Khalid M. Ishaque frankly admitted that the proceedings under section 22EE of I.R.O. of 1969 might suspend their representation for sometime, but the petitioners have undertaken to treat both the workers union as separate units and shall stand by their commitments. The merged company no doubt would function as one establishment but it would comprise of three unit. Their employees shall continue to enjoy the terms of service and benefits applicable to them as per their respective agreements/settlements and/or directions of NIRC. He further undertook on behalf of the petitioners that every effort shall be made to support any move under section 22EE to determine and certify, collective bargaining units of their establishment and to determine and certify bargaining agent for each unit. Lastly the wages privileges and safeguards provided for by both the petitioners shall not be withdrawn as undertaken m para (13) of the petition and further even if the peace agreements with the two workers' unions have lapsed or shall have lapsed, the petitioners shall remain bound by them till proceedings under section 22EE arc finalized and new peace agreements come into force. The petitioners have taken necessary steps to implement phase II of the decision of the Government for merger and amalgamation of the two petitioner‑companies. There is also an undertaking by the petitioner‑companies that upon merger/amalgamation they shall not act prejudicial to the legal rights of the workers. I accordingly approve the meetings held by both the petitioner‑companies in exercise of the scheme of A amalgamation and grant the petition as prayed in sub‑paras (ii), (iv), (v), (vi) & (vii) of para 21 resultantly sanctioning the scheme for the amalgamation/merger of the two petitioner companies into a new company by the name of Sui Southern Gas Company Limited. A.A./S‑352/K Order accordingly.