| Case ID |
f7e3ac6c-d320-4355-a58b-c50d0857ce2d |
| Body |
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| Case Number |
J.M. No. 54 of 2002 |
| Decision Date |
Apr 25, 2006 |
| Hearing Date |
Mar 21, 2006 |
| Decision |
The Sindh High Court dismissed the petition seeking approval for the scheme of arrangement proposed by Caravan East Fabrics Limited, which aimed to convert the principal dues of secured and unsecured creditors into equity while waiving mark-up. The Court found that the scheme was patently unfair to the secured creditors, who held decrees against the company and were not adequately represented in the joint meeting called to approve the scheme. The majority of creditors present at the meeting included several unsecured creditors, which compromised the interests of the secured creditors. The Court emphasized that the interests of all classes of creditors must be treated equitably and that a proper distinction between classes must be maintained in any meeting called for such approvals. The lack of proper adherence to legal requirements and the potential prejudice against secured creditors led to the decision being rendered void. |
| Summary |
The case of Caravan East Fabrics Limited v. Askari Commercial Bank Ltd. and Albaraka Islamic Bank Ltd. revolves around a petition filed under the Companies Ordinance, 1984, seeking the court's approval for a proposed scheme of arrangement to convert debts into equity. The petition was heard by the Sindh High Court, presided over by Justice Mushir Alam. The core issue was the fairness of the scheme towards secured creditors, who were significantly outnumbered by unsecured creditors at the meeting convened to discuss the scheme. The court underscored the necessity of equitable treatment and due process in meetings involving different classes of creditors. The ruling reiterated that the courts must ensure that all statutory requirements are met, particularly when creditors' rights are at stake. The decision serves as a critical reference for future cases involving creditor arrangements and corporate restructuring, emphasizing the importance of transparency and fairness in such proceedings. |
| Court |
Sindh High Court
|
| Entities Involved |
Caravan East Fabrics Limited,
Askari Commercial Bank Ltd.,
Albaraka Islamic Bank Ltd.
|
| Judges |
Mushir Alam
|
| Lawyers |
Asim Mansoor,
Arshad Tayebally
|
| Petitioners |
Caravan East Fabrics Limited
|
| Respondents |
Askari Commercial Bank Ltd.,
Albaraka Islamic Bank Ltd.
|
| Citations |
2006 SLD 389,
2006 CLD 895
|
| Other Citations |
Guha and Manikganj Trading and Banking Company v. Madhabendra Kumar Shakla and another AIR 1936 Cal. 162,
Kohinoor Raiwand Mills Ltd. v. Kohinoor Gujar Khan Mills 2002 CLD 1314,
Re-Hunza Central Textile and Woollen Mills Ltd. PLD 1976 Lah. 851,
Hamadul Haq v. Taj Company 1991 MLD 841,
Re: Lipton Pakistan Ltd. 1991 CLC 818
|
| Laws Involved |
Companies Ordinance, 1984
|
| Sections |
Preamble,
284
|