2006 (8) TMI 327 - HC - Companies Law

Summary

Issues: Application under Section 391 of the Companies Act, 1956 for direction on convening meeting of secured creditors and approval of scheme of compromise.

The judgment involves an application under Section 391 of the Companies Act, 1956, where the applicant, a company seeking direction on convening a meeting of its secured creditors to consider and approve a scheme of compromise. The applicant company, previously named Modern Suitings (P.) Ltd., restructured its activities and became Modern Denim Ltd. The applicant's financial position, authorized capital, and main objects were detailed in the application. Due to debt servicing issues, the company proposed a scheme of compromise to settle debts and prevent insolvency, benefiting both the company and creditors. The proposed scheme was approved by the company's Board and submitted with the application. No pending proceedings under relevant sections of the Companies Act were reported.

The Court, after hearing the applicant's counsel and reviewing the application, ordered the meeting of secured creditors to be convened and held on a specified date. The Court directed the advertisement of the meeting at least 21 days prior, along with the scheme details and proxy forms. Notices were to be sent to secured creditors in advance. The advocates for the applicant were instructed to file necessary documents with the Court within the stipulated time. A Chairman was appointed for the meeting, with the applicant required to deposit a specified amount towards the Chairman's remuneration. The Chairman was tasked with issuing the advertisement and notices for the meeting.

Provisions were made for the quorum, allowing proxy voting with prescribed forms. The valuation of secured creditors was to be based on the company's books, with the Chairman empowered to resolve disputes. The Chairman was directed to report the meeting's outcome to the Court within seven days, verified by affidavit. The judgment concluded by disposing of the application in accordance with the provided directions.