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Issues Involved:
1. Fixing a time limit for entertaining applications under section 391(1) of the Companies Act, 1956. 2. Imposing a condition on proposers to obtain statutory sanctions within a specified time limit. Detailed Analysis: Fixing a Time Limit for Entertaining Applications: The court considered whether a time limit should be fixed for entertaining any application under section 391(1) of the Companies Act, 1956, for schemes of amalgamation, arrangement, and compromise. The court noted that section 391(1) confers discretionary power on the court to order meetings of creditors or members to consider such schemes. While discretion must be exercised judicially, the court can adopt rules or policies to guide its discretion, especially to avoid protracted proceedings that may harm the interests of the company, its creditors, and public interest. The court emphasized the need to balance individual rights against collective rights and public interest. Given the company's dire financial state, mounting losses, and the cessation of its manufacturing activities, the court found it necessary to impose a reasonable time limit to prevent indefinite delays in the company's reconstruction. The court decided to fix August 31, 1979, as the final date for entertaining applications under section 391(1), ensuring advance public intimation through advertisements in specified newspapers. Imposing a Condition for Obtaining Statutory Sanctions: The court considered whether to impose a condition on proposers of schemes to obtain necessary statutory approvals, consents, and sanctions within a specified time limit. The court noted that such pre-conditions are common in schemes of amalgamation, arrangement, and compromise, and obtaining these approvals is often time-consuming. To avoid indefinite delays in the company's reconstruction and restarting its manufacturing unit, the court found it necessary to impose a time limit for obtaining these approvals. The court decided to allow a period of six months from August 31, 1979, for proposers to obtain the requisite statutory approvals, consents, declarations, and sanctions. This condition would apply to all schemes proposed, ensuring that the reconstruction process is not stalled indefinitely. The court also directed that the advertisement issued by the provisional liquidator should include intimation about this condition. Reservations on Time Limits: The court acknowledged the parties' agreement on the power to impose time limits and the desirability of doing so in this case. However, some parties suggested that the court should reserve the power to relax these time limits under certain conditions. The court decided to reserve the power to relax the time limits only in cases of marginal over-stepping due to exceptional circumstances or extraordinary situations where all schemes are likely to fail. This reservation ensures that the primary objective of imposing time limits is not defeated. Conclusion: The court ordered the imposition of a time limit for entertaining applications under section 391(1) and a condition for obtaining statutory sanctions within six months. The provisional liquidator was directed to publish advertisements informing interested parties of these decisions. The court reserved the power to relax the time limits under specific circumstances to ensure flexibility without compromising the primary objective of timely reconstruction of the company.
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