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Issues Involved:
1. Approval of the scheme of arrangement/compromise proposed by the Petitioner under sections 391 and 394 of the Companies Act, 1956. 2. Opposition to the scheme of arrangement/compromise by another shareholder. 3. Proposal of a modified scheme of arrangement/compromise by the opposing shareholder. 4. Compliance with the statutory requirements under section 391(2) of the Companies Act, 1956. 5. Allegations of fraud and misappropriation by the Petitioner. Issue-wise Detailed Analysis: 1. Approval of the Scheme of Arrangement/Compromise Proposed by the Petitioner: The Petitioner, a shareholder and erstwhile Managing Director of the Respondent Company in liquidation, proposed a scheme of arrangement/compromise under sections 391 and 394 of the Companies Act, 1956. The scheme aimed to revive the Company by infusing fresh capital, relocating the manufacturing unit, selling land and buildings to defray relocation costs, repaying creditors within a year, increasing equity capital, issuing secured debentures, and modernizing the manufacturing process. The scheme was approved by 2/3rd of the shareholders and 84.17% of the creditors present and voting. 2. Opposition to the Scheme by Another Shareholder: Another shareholder, who is also the founder Director of the Company, opposed the scheme, filing CA No. 665 of 2001. The opposition argued that the scheme was not approved by the requisite majority of shareholders and creditors, and alleged that the Petitioner had committed fraud and misappropriation of Company assets. The opposing shareholder also claimed that the Petitioner conspired to remove him from his position and that the Company was doing well until the Petitioner took over. 3. Proposal of a Modified Scheme by the Opposing Shareholder: The opposing shareholder proposed a modified scheme in CA No. 539 of 2002, arguing that it was more beneficial to all shareholders, creditors, and workers. The modified scheme included higher valuations for the Company's assets, full payment to workmen, and a proposal to shift the plant to a location with lower electricity costs. The modified scheme also offered to buy out the shares of the Petitioner and his family at Rs. 200 per share. 4. Compliance with Statutory Requirements: The Court examined whether the scheme proposed by the Petitioner complied with section 391(2) of the Companies Act, which requires approval by a majority in number representing three-fourths in value of the creditors or members present and voting. The scheme proposed by the Petitioner did not receive the requisite three-fourths majority from the shareholders. Additionally, the creditors' meeting did not classify different classes of creditors separately, which is a statutory requirement. 5. Allegations of Fraud and Misappropriation: The opposing shareholder alleged that the Petitioner had removed valuable machinery from the Company and shifted it to his own unit. There were also discrepancies in the statement of affairs filed by the Petitioner, including undervaluation of assets and omission of certain liabilities. These allegations were supported by the workers, who also opposed the scheme on the grounds that separate meetings for different classes of creditors were not called. Court's Conclusion: The Court found that the scheme proposed by the Petitioner was not in compliance with the statutory requirements of section 391(2) and was neither equitable nor beneficial to all members and creditors. The Court noted that the Petitioner undervalued the Company's assets and proposed a scheme that primarily benefited himself and his associates. The modified scheme proposed by the opposing shareholder, although more beneficial, also required approval by the requisite majority, which it did not have. Consequently, the Court dismissed the Company Petition and CA No. 539 of 2002, while allowing CA No. 665 of 2001, thus rejecting the scheme proposed by the Petitioner. Final Order: The Company Petition and CA No. 539 of 2002 are dismissed, and CA No. 665 of 2001 is allowed. No costs.
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