9911796707
TMI Blog1980 (3) TMI 190X X X X Extracts X X X X X X X X Extracts X X X X ..... f 1971 for winding up of the company. It was admitted for hearing in December, 1971, and citation was also issued in July. During the pendency of those proceedings, an application under section 391(2) of the Companies Act, 1956 (to be called "the Act"), was moved by the Delhi Flour Mills Co. Ltd. (D.F.M.) being Company Petition No. 86 of 1975. This scheme was sanctioned by the court on 15th October, 1975. Later on, by an order of 26th April, 1976, respondent No. 1 was substituted for the D.F.M. The Jain group took up the matter in appeal and the Division Bench, by its order of 16th July, 1976, set aside the order of substitution. Sri Gupta went in appeal to the Supreme Court, which by its order of 30th January, 1979, reported in S. K. Gupta v. K. P. Jain [1979] 49 Comp. Cas. 342, held that Gupta had sufficient locus standi to maintain an application for modification or substitution of the scheme and, therefore, allowed Gupta to be substituted as sponsor of the scheme. We may note that earlier the company judge had found that the only way in which the scheme could be supervised was to hold a general meeting of the company to appoint new directors. The reason was that there w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpany judge who is seized of the matter. At the time when the impugned order was passed, the learned company judge faced with the problem as to who should function as a board of directors and, in order to resolve the controversy, had directed the calling of an extraordinary general meeting of the company to elect an interim board of directors. As the Division Bench stayed the implementation of the impugned order, the directors never took up office. In the meanwhile the company judge has appointed a committee of management. It is, therefore, essential that a second look be given by the company judge to the impugned order and other developments. We say this because the impugned order of 1976 had directed the election of the interim board of directors till the next annual general meeting was held. Even if we were to dismiss the appeal, we would be reluctant to permit the directors elected in 1976 to function as the board. That eventually would seriously strain the implementation of the scheme, by limiting the direction of the company judge who is supervising the scheme. We were, therefore, inclined to dispose of the appeal with the clarification as above, so as to leave a free hand to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such modifications in the compromise or arrangement as it may consider necessary for the proper working of the compromise or arrangement. We cannot read any limitation in it so as to exclude the power to call a meeting of the company for the purpose of electing the directors if the court feels that it is necessary for the proper working of the scheme to know who are the real directors of the company. The amplitude of the power under section 392 is no longer in doubt. Section 392(1) confers powers of the widest amplitude on the High Court to give directions and if necessary to modify the scheme with the only limitation that such directions or modifications must be for the proper working of the compromise or arrangement. In S . K. Gupta v. K.P. Jain [1979] 49 Comp. Cas. 342 , 351; [1979] 3 SCC 54 (SC), the court further observed : "The purpose underlying section 392 is to provide for effective working of the compromise and/or arrangement once sanctioned and over which the court must exercise continuous supervision [see section 392(1)], and if over a period there may arise obstacles, difficulties or impediments, to remove them, again, not for any other purpose but for the prop ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat if the court felt the necessity of calling such a meeting, it would have to request the Company Law Board to call such a meeting. Mr. Roshan accepted the anomaly of the situation, but all that he could reply was that if there was a lacuna it was for the legislature to remove it. We do not accept that the legislature intended such a result because it is well-settled law that if an interpretation leads to absurdity and anomaly, the same must be avoided. The argument of Mr. Roshan is totally alien to our jurisprudence which gives finality to the jurisdiction of the court and which cannot be taken away unless the legislature has by express words so directed. There is nothing in section 186 which lays down that a company court which is supervising the scheme under section 392 cannot call a meeting of the company if it feels that it is necessary to do so for the proper supervision and implementation of the scheme. We cannot accept an interpretation which puts the court in the position of a supplicant before the Company Law Board. Such an interpretation runs counter to the power of the widest aptitude read into this provision by the above decision of the Supreme Court. So long as the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t or continuation of any suit or proceedings against the company on such terms as the court thinks fit, until the application is finally disposed of. Recognising the importance of a scheme in re-starting the business of a company, the Legislature aims at removing the normal legal constraints. Surely, it cannot be urged that after the scheme has been sanctioned and the same is being supervised by the court it should be held to be so helpless as not to be in a position even to call a meeting of the company which it feels is necessary to be called for the proper implementation and working of the scheme. To deny this power to the court would be to make section 391 and the supervision by the court an idle formality. Now, a look at the scheme shows that, apart from Dena Bank, a secured creditor, there are unsecured creditors to the amount of over 2.3 lakhs. The Delhi Flour Mill (which has now been substituted by the Gupta group, respondent) is to dispose of part or whole of the machines in the pressure die casting section and clear the debt of Dena Bank. If the sale amount is not enough, the Gupta group is to dispose of the whole or a part of the machines in the tool room section so as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the 1974 amendment) praying for the appointment of a chairman by the court for a meeting of the company which was proposed to be held. It appears that earlier a Munsif had passed an order of temporary injunction restraining the company from holding a meeting and hence the board had refused to call a meeting while the requisitionists had been insisting on holding a meeting. The High Court held that in the circumstances it cannot order the calling of a meeting which would violate the injunction issued by the Munsif and that the proper thing for the applicant would be to request the court for calling a meeting of the company which he had not done and, therefore, no relief could be given to him. Dealing with the aspect that the applicant should be allowed to amend the prayer for calling a meeting it was observed by way of obiter that now the power under section 186 was exercisable after February 1, 1975, by the Company Law Board and not by the court and also that no application or prayer had been filed before the High Court and, therefore, the relief cannot be given. It will be seen that the case has laid down that in normal circumstances an application for calling a meeting would have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e open to the learned judge either to implement these proceedings or to make any other direction that he considers necessary for the proper implementation of the scheme. We have in this appeal only decided a question of law, namely, that it is open to a learned judge to call a meeting of the company, if he feels it necessary for the proper implementation of the scheme. But that is not to be understood as in any way compelling the learned judge to accept the proceedings which take place in pursuance of the impugned order because we would want the learned judge to pass an order after taking into account the various events since then. We may mention that Mr. Mohan, learned counsel for the respondent, has offered that the committee of inspection which has been appointed by the learned judge may be deemed to be the board of directors so long as the scheme is being implemented and that it may not be necessary in that circumstance to elect a board of directors separately. Mr. Roshan was unable to subscribe to this. We are only making note of it for consideration by the learned judge. With these observations the appeal is disposed of. Parties through their counsel have been directed to a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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