1938 (1) TMI 20 - HC - Companies Law

Summary

Issues Involved:
1. Whether the decree-holder is bound by the scheme of arrangement sanctioned under Section 153 of the Companies Act.
2. Whether the decree-holder, originally a depositor, forms a separate class from other depositors.
3. Whether the absence of a separate meeting for decree-holders affects the validity of the scheme.
4. Whether the executing court can question the validity of the sanctioned scheme.

Detailed Analysis:

1. Whether the decree-holder is bound by the scheme of arrangement sanctioned under Section 153 of the Companies Act:
The primary issue in this case is whether the appellant, a decree-holder, is bound by a scheme of arrangement sanctioned by the High Court under Section 153 of the Companies Act. The scheme was intended to bind all depositors of the Dinajpur Loan Office, including those who had obtained decrees against the company. The court held that the sanctioned scheme is binding on the appellant as a decree-holder. The order sanctioning the scheme explicitly stated that it was binding on all depositors, including those who had obtained decrees. The court emphasized that the order had never been set aside or modified and thus remained binding.

2. Whether the decree-holder, originally a depositor, forms a separate class from other depositors:
The appellant contended that he should be considered a separate class of creditor, distinct from other depositors, because he had obtained a decree before the scheme was sanctioned. The court acknowledged that decree-holders do form a separate class from ordinary depositors. However, it was noted that the scheme was intended to include all creditors, including decree-holders, and that the appellant did not seek to modify or set aside the scheme when it was sanctioned.

3. Whether the absence of a separate meeting for decree-holders affects the validity of the scheme:
The appellant argued that the scheme should not bind him because there was no separate meeting for decree-holders. The court recognized that separate meetings for different classes of creditors are necessary to ensure fairness. However, the court also noted that the absence of such a meeting does not render the sanctioned scheme void. It was emphasized that the appellant had the opportunity to challenge the scheme at the time of its sanction but failed to do so.

4. Whether the executing court can question the validity of the sanctioned scheme:
The court held that once a scheme is sanctioned by the court, it has the force of a judicial pronouncement and cannot be questioned by the executing court. The proper remedy for any aggrieved party is to seek modification or setting aside of the scheme in appropriate proceedings. The court cited previous cases to support this view, emphasizing that the executing court must obey the sanctioned scheme unless it is shown to be without jurisdiction.

Conclusion:
The High Court dismissed the appeal, holding that the appellant is bound by the scheme of arrangement sanctioned under Section 153 of the Companies Act. The court affirmed that decree-holders form a separate class of creditors, but the absence of a separate meeting for them does not invalidate the scheme. The executing court cannot question the validity of the sanctioned scheme, and the appellant's remedy lies in seeking modification or setting aside of the scheme in appropriate proceedings. The appeal was dismissed with costs.