1983 (10) TMI 221 - HC - Companies Law

Summary

Issues involved: Petition u/s 391 of the Companies Act, 1956 for sanction of a scheme of arrangement approved by creditors and shareholders.

Details of the Judgment:

The petition was moved by a company for sanction of a scheme of arrangement approved by creditors and shareholders. The company faced difficulties from inception, including being defrauded in 1963 and disputes with shareholders. The company was indebted to Grindlays Bank Ltd. and had suffered losses. Meetings of shareholders and creditors were held, approving the scheme. The main creditor was a concern of the managing director. Some creditors opposed the scheme, claiming it was collusive and designed to cheat genuine creditors. The respondents had decrees against the company and opposed the scheme vehemently.

The court noted that the petition was delayed and should have been filed within seven days of the report by the chairman. The court also found that the company failed to disclose all material facts, including the latest financial position. The court deemed the petition mala fide and motivated to defeat the claims of certain creditors. The court observed that the company was making profits and had no justifiable reason to disown the claims of the genuine creditors. The court rejected the scheme and dismissed the petition under section 391 of the Companies Act.

In conclusion, the court found the scheme to be mala fide and primarily aimed at defeating the claims of genuine creditors. The court rejected the scheme and dismissed the petition under section 391 of the Companies Act, emphasizing the importance of disclosing all material facts and considering the financial position of the company.