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Issues Involved:
1. Rejection of the scheme of revival for Shree Niwas Cotton Mills Ltd. 2. Validity and feasibility of the proposed scheme. 3. Consideration of alternative schemes by interveners. 4. Legal provisions and principles governing the sanction of schemes under the Companies Act. Detailed Analysis: 1. Rejection of the Scheme of Revival for Shree Niwas Cotton Mills Ltd. The appeals arose from the judgment rejecting a scheme of revival for Shree Niwas Cotton Mills Ltd., which was approved by the majority of shareholders, creditors, and the workers' union. The learned Company Judge rejected the scheme, holding that it was not for the revival of the Company but for the disposal of its assets, and suggested that the Official Liquidator should dispose of the property instead. 2. Validity and Feasibility of the Proposed Scheme The scheme proposed by Somanis included the sale of mill land to pay off creditors and workers, with the remaining assets to be used for starting a viable industry in Maharashtra. The scheme was supported by secured creditors, including the State Bank of India and Punjab and Sind Bank, and offered significant benefits to workers, including a payment of Rs. 45 crores within a year. The Court noted that the scheme was not opposed by any interested party and emphasized that the court's role is to ensure statutory compliance and not to question the commercial wisdom of the majority. 3. Consideration of Alternative Schemes by Interveners Interveners, including builders like Meghal Homes and K. Raheja, proposed alternative schemes offering higher payments. However, the Court held that interveners, who were neither shareholders nor creditors, had no locus standi in the proceedings. The Court emphasized that the power to modify a scheme under section 392(2) is limited to ensuring the proper working of the compromise or arrangement and cannot be used to replace the original sponsor with a new one unless the original scheme becomes unworkable. 4. Legal Provisions and Principles Governing the Sanction of Schemes The Court referred to sections 391, 392, and 393 of the Companies Act, which govern the compromise or arrangement with creditors and members. The Court reiterated that its role is supervisory and not appellate, emphasizing the importance of commercial wisdom exercised by the majority. The principles laid down in Miheer H. Mafatlal v. Mafatlal Industries Ltd. and other relevant judgments were cited, underscoring that the Court should not interfere with the scheme approved by the majority unless it is found to be unfair, unjust, or against public policy. Conclusion: The appeals were allowed, and the impugned order of the learned Company Judge was set aside. The scheme proposed by Somanis, as modified, was sanctioned under section 392(2) read with section 394 of the Companies Act. The Court directed the deposit of Rs. 60 crores payable to the workers and outlined the process for its disbursement. The interveners' application for a stay of the order was rejected.
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