1990 (5) TMI 187 - HC - Companies Law

Summary

Issues Involved:
1. Locus standi of the applicants to file the application under rule 79 of the Companies (Court) Rules, 1959.
2. Validity of the creditors' and shareholders' meetings and the resolutions passed therein.
3. Jurisdiction of the chairman to allow statutory creditors to vote for higher credits.
4. Requirement to disclose the latest financial position of the company.
5. Confirmation of the scheme of arrangement under section 391(2) of the Companies Act, 1956.

Issue-wise Detailed Analysis:

1. Locus Standi of the Applicants:
The applicants, Shri A. K. Misra and Braham Arenja, sought permission to file a petition for sanction of the scheme of revival of the company under rule 79 of the Companies (Court) Rules, 1959. The respondents argued that the applicants lacked locus standi as their names were not specifically listed as creditors, nor had they exercised any votes. However, the court noted that an earlier order dated May 20, 1987, directed the official liquidator to substitute the names of Misra and Arenja in the register of members and treat them as creditors. The official liquidator had admitted the transfer of 15,000 shares to Misra and Arenja, thus validating their status as creditors and members. Consequently, the court held that the applicants were competent to file the application under rule 79.

2. Validity of the Creditors' and Shareholders' Meetings:
The meetings of the creditors and shareholders were convened as per the court's directions and held on July 16, 1988. During these meetings, two resolutions were moved, modifying the scheme of arrangement. Resolution No. 1, moved by the applicant Braham Arenja, was passed by an overwhelming majority of 93.93%, while Resolution No. 2, supported by Shri H. L. Seth, was defeated. The respondents contended that the scheme was not approved by the requisite majority, but the court deferred this determination to the confirmation stage of the scheme under section 391(2).

3. Jurisdiction of the Chairman to Allow Statutory Creditors to Vote for Higher Credits:
The applicants argued that the chairman had no jurisdiction to allow statutory creditors to vote for higher credits than those listed by the official liquidator. The court noted that the chairman's actions contradicted the court's earlier order, which specified that only the members and creditors listed by the official liquidator were entitled to vote. This issue was also deferred for detailed consideration at the time of confirming the scheme.

4. Requirement to Disclose the Latest Financial Position:
The respondents argued that the latest financial position of the company must be disclosed via an affidavit by the propounder of the scheme. The court acknowledged this requirement but deferred its consideration to the confirmation stage of the scheme. The court noted that the financial position had been disclosed in the petition under section 391(2).

5. Confirmation of the Scheme of Arrangement:
The court emphasized that the merits of the scheme, including whether it was approved by the requisite majority and the jurisdiction of the chairman to allow higher credits, would be determined at the time of confirming the scheme under section 391(2). The court directed that the notice be published in specified newspapers for the hearing on July 18, 1990, to consider the confirmation of the scheme in Company Petition No. 131 of 1988.

Conclusion:
The court allowed the application, being Company Application No. 2439 of 1988, and directed the publication of notice for the hearing on the confirmation of the scheme of arrangement. The detailed consideration of the objections and the confirmation of the scheme were deferred to the hearing of Company Petition No. 131 of 1988.