ISLAMABAD: The Supreme Court declared that a company can enter into compromise or arrangement with its creditors or any class of them, subject to meeting of creditors or members of the company to be called, held and conducted in such manner as the Court may direct.
The judgment authored by Justice Aqeel Ahmed Abbasi said that from perusal of the provision of Section 284 read with Section 285 of the Companies Ordinance, 1984, it can be safely concluded that a company can enter into compromise or arrangement with its creditors or any class of them, and its members or any class of them, subject to meeting of creditors or members of the company to be called, held and conducted in such manner as the Court may direct.
He said that it further provides that if the majority in number representing three-fourth (3/4th) in value of the creditors or class of creditors, or members, as the case may be, present and voting either in person or, where proxies are allowed, by proxy at the meeting, agreed to any compromise or arrangement, then such compromise or arrangement shall, if sanctioned by the Court, be binding on all the creditors or the class of creditors, or, on all the members or class of members, and also on the company.
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However, such sanctioning of any compromise or arrangement between the company and its creditors and/ or members is subject to satisfaction of the Court, submission of the relevant documents and compliance of the provisions of law.
The Court noted that in the instant case, all the codal formalities appears to have been complied with, whereas, the objectors before the Sindh High Court (SHC) single judge, who are admittedly minor shareholders and unsecured creditors, could not point out any illegality or violation of the provisions of the Companies Ordinance, 1984, in the “Scheme of Arrangement” between the company and its creditors, nor could refer to any legal defect or procedural irregularity in the impugned order passed by the SHC single judge while sanctioning the “Scheme of Arrangement” in the instant case.
The apex court further observed that pursuant to the SHC the meeting of all the stakeholders including the creditors and members was held, wherein, 100 per cent shareholders of Respondent No.1 and 95.09 per cent in value of the secured creditors pursuant to vote at the meeting, consented to and also passed a resolution approving the “Scheme of Arrangement”, which fact alone is sufficient to reflect upon the will of the majority creditors/ shareholders while considering the Scheme of Arrangement as in the best interest of the company and its shareholders.
State Life Insurance Corporation of Pakistan, had filed a petition under Section 284 read with Section 285 of Companies Ordinance, 1984, against a single judge of SHC’s order 25-10-2021, wherein, the respondents prayed inter alia if required number of shareholders and creditors of Respondent No.1; i.e., M/s Nina Industries Limited (Public Company Limited by shares) approved the “Scheme of Arrangement” at their meetings called by the orders of the court on the respondent application made under Rule 55 of the Companies Code Rules 1997, and order under Section 284(2) of the Companies Ordinance, 1984, sanctioning the scheme of arrangement as set-forth in Annexure “D” to the petition, so as to make the scheme of arrangement binding on all person with respect to the respondent No.1 but not limited to the shareholders and creditors of Respondent No1 and further to pass all necessary orders under Section 287 of the Companies Ordinance, 1984, to give effect to the scheme of arrangement, was allowed vide impugned order.
The apex court upheld that the SHC single judge, while sanctioning the “Scheme of Arrangement” between the respondent No1 and its secured creditors, who are admittedly majority shareholders, does not suffer from any legal infirmity or procedural defect.
Copyright Business Recorder, 2025
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