1988 (2) TMI 415 - HC - Companies Law

Issues Involved:
1. Legality of the winding-up order dated August 8, 1978.
2. Sanctioning of a scheme of compromise and arrangement between creditors and Sahu Minerals and Properties Ltd.
3. Compliance with statutory provisions and fairness of the scheme.
4. Objections raised by the official liquidator and the Regional Director.
5. Feasibility and workability of the proposed scheme.

Issue-wise Detailed Analysis:

1. Legality of the winding-up order dated August 8, 1978:
The petitioners contended that the winding-up order against Sahu Minerals and Properties Ltd. was illegal due to non-compliance with statutory requirements. Specifically, they argued that under sections 28 and 32 of the Coking Coal Mines (Nationalisation) Act, 1972, and the Coal Mines (Nationalisation) Act, 1973, no winding-up proceedings could be initiated without the previous sanction of the Central Government, which was not obtained. Additionally, the winding-up petition filed under section 439(5) read with section 433(c) of the Companies Act, 1956, required prior sanction from the Regional Director, Company Law Board, which was also not obtained. The court found that the mandatory provisions were not observed, rendering the winding-up proceedings and the subsequent order invalid.

2. Sanctioning of a scheme of compromise and arrangement between creditors and Sahu Minerals and Properties Ltd.:
The petitioners filed an application under section 391(2) of the Companies Act, 1956, for sanctioning a scheme of compromise and arrangement. A draft scheme was presented, and a meeting of creditors, debenture-holders, and shareholders was convened. The scheme was unanimously approved with minor modifications. The court emphasized that before sanctioning any scheme, it must be satisfied that statutory provisions are complied with, the class or classes are fairly represented, and the arrangement is such that a man of business would reasonably approve.

3. Compliance with statutory provisions and fairness of the scheme:
The court examined whether the petition was filed in accordance with the Companies Act and the Companies (Court) Rules, 1959. It was found that the petitioner had filed the petition correctly, disclosed all material particulars, and provided the latest financial position of the company. The scheme was discussed in detail during the meeting, and all concerned parties approved it. The court concluded that the scheme was fair, reasonable, and not mala fide, as there were no allegations of misdeeds by the directors.

4. Objections raised by the official liquidator and the Regional Director:
The official liquidator opposed the scheme, arguing that it was vague, unjustified, and unworkable. The Regional Director also raised objections, stating that the application was not filed in the prescribed form and lacked disclosure of all material facts. Additionally, the scheme was deemed discriminatory as it proposed full payment to some secured creditors while offering only 20% to unsecured creditors. The petitioner responded that there was no infirmity in the petition, and all required particulars were disclosed. The court found the objections unsubstantiated and upheld the petitioner's compliance with statutory requirements.

5. Feasibility and workability of the proposed scheme:
The court assessed the feasibility and workability of the scheme, considering the petitioner's proposal to revive the company's business and settle creditors' dues in installments. The scheme was found to be fair, reasonable, and based on correct information. The court concluded that the scheme was feasible and workable, meeting all necessary requirements for sanctioning.

Conclusion:
The court sanctioned the scheme of compromise and arrangement, declaring it binding on all creditors, shareholders, debenture-holders, and members of the company. A committee was constituted to oversee the implementation of the scheme, and the official liquidator was directed to return possession of the company's properties. The court also provided for ongoing supervision and allowed interested parties to seek further directions as necessary.

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