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TMI Blog1982 (2) TMI 234X X X X Extracts X X X X X X X X Extracts X X X X ..... de over to the respondent on hire-purchase basis certain machinery and it was a creditor of the respondent when the said scheme was sanctioned. Clause 5B of the said scheme provided as under: "The outstandings payable to National Small Industries Corporation will be paid at the rate of Rs. 20,000 per month commencing after from the date of handing over the possession of the factory and the withdrawal of the receivers." The State Bank of India was a secured creditor of the respondent and was also entitled to a payment of its dues under the said scheme. There is no dispute that the respondent had paid to the appellant an aggregate sum of Rs. 2,80,199.67 in payment of the said outstandings to the appellant. The first of such payment appears to have been made on 21st January, 1971, and the last payment on 7th September, 1972: The appellant, however, claimed from the respondent a further sum of Rs. 1,03,499.95, inter alia , on account of additional interest and penal interest. Particulars of the said claim of the appellant are set out in para. 15 of the petition made by the appellant in the court below, relevant portion whereof reads as under : "The company in terms of the said ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... val of the various institutions concerned to the terms and conditions of their letter of intent. The next letter is dated 13th June, 1975, written by the appellant to the IRCI, inter alia , informing IRCI that nearly Rs. 90,000 was due and payable by the respondent hirer towards principal and interest to the appellant and the appellant intended to file a suit immediately. The next letter is dated the 18th July, 1975, from the respondent to the appellant requesting the appellant to release the charge of the extrusion plant in view of the fact that all the arrear amount pertaining to principal as well as normal interests had been already paid off to the appellant according to the said scheme. On the 29th July, 1975, IRCI wrote to the respondent for being enlightened as to the dues of (the respondent to) the appellant, as the appellant represented that nearly Rs. 90,000 was still due and payable by the respondent towards principal and interest while the respondent's contention was that all arrear amount pertaining to principal as well as normal interest had already been paid according to the said scheme. Thereafter, by a letter dated 30th/31st October, 1975, IRCI wrote to the appella ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ompany be directed to return the said machinery and equipment described in annexure 'B' hereof to your petitioner". The learned judge of the court below disposed of the said application by an order dated 19th May, 1977, appealed against in the manner following : "It is ordered that upon the said respondent company paying a sum of rupees ten thousand to the said applicant company within a month from the date hereof there will be no order on this application. And it is further ordered that in default of the payment of the said sum of Rupees ten thousand within the time aforesaid the said applicant company shall be relieved from the scheme sanctioned by the order dated the sixteenth day of March in the year one thousand nine hundred and seventy by this court and that the said applicant company shall be at liberty to file a suit against the said respondent company". Mr. Tarun K. Basu, appearing for the appellant, urged that the appellant made the application in the court below under section 392 of the Companies Act, 1956. Under clause ( a ) of sub-section (1) of section 392, the court had jurisdiction to supervise the compromise or arrangement, and, under clause ( b ) the court m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the said scheme could not be varied or modified or set aside in the absence of any notice to the other parties to the scheme whose rights are likely to be affected by any variation or modification or setting aside of the scheme. Thus, the application in the court below and consequently the appeal was not maintainable. An advertisement should have been issued informing the creditors and other parties who are bound by the scheme before the scheme was varied or modified or cancelled. It was next urged that in the petition in the court below neither sufficient particulars were given nor any statement of accounts was disclosed as to the mode and method of calculation of the alleged penal interest or additional interest claimed by the appellant. The alleged particulars given in para 15 of the petition do not give any details and set out only lump sum amounts without any basis thereof. There is no satisfactory evidence before the court that the said amount was or is actually due or payable by the respondent. In any event, the alleged claim for such interest being penal in nature, the court would refuse to enforce the same. The rate of interest charged as penal interest could not be t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ry, 1973, when the alleged cause of action for the application herein accrued to the appellant but the judges' summons in the said application was taken out on the 1st March, 1977, that is, long after the expiry of the period of limitation. The said application was, therefore, hopelessly barred by limitation. The contention was that even if leave is granted by this court to the appellant to exercise its rights under the hire purchase agreement any application that might be made by the appellant to enforce such right pursuant to such leave would be barred by limitation. It was lastly urged that the petition in the court below made by the appellant was demurrable. There is no averment in the petition that the scheme was unworkable. Only averments that were made in support of the said application were to be found in paras. 17 and 20 of the petition but that was only with regard to the alleged failure or neglect of the respondent in honouring its obligations under clause 5B of the said scheme in paying off the outstandings of the appellant. The allegation made in para. 20 that the said scheme is being used by the respondent as a shield to evade payment of the lawful claims of its credi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ning Weaving Co. Ltd. reported in [1970] 40 Comp. Cas. 689; [1970] 1 Com. LJ 151; AIR 1970 SC 1041. Here, the Supreme Court observed as follows (at p. 1054 of AIR and at pp. 706, 711 of 40 Comp. Cas.): "Under section 392 of the Act the High Court which has sanctioned the scheme has the power to supervise the carrying out of it and to give directions with regard to any matter or to make modifications in it as it may consider necessary for its proper working. But if the court is satisfied that the scheme cannot be worked satisfactorily with or without modifications, it can either suo motu or on an application by any person interested in the company's affairs order its winding up sub-section (2) of section 391 of the Act allows the decision of the majority prescribed therein to bind the minority of creditors and shareholders and it is for that reason that a scheme is said to have statutory operation and cannot be varied by the shareholders or the creditors unless such variation is sanctioned by the court. The effect, therefore, of a scheme between a company and its creditors is that so long as it is carried out by the company by regular payment in terms of the scheme a creditor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of such report the court might pass such orders or give such directions as it might think fit. Although the said application was made by the appellant the court did not ask for any such report but nevertheless the court had power to make such orders or give such directions as it might think fit. Thus, the court could make the orders or any of the orders which were all in the alternative as prayed for by the appellant. Under sub-rule (1) of rule 87 of the said Rules, the appellant had liberty to apply to the court for the determination of any question relating to the working of the said scheme. Under sub-rule (2) of the said rule, such application was to be posted before the court for directions as to issue of notices and advertisement as the court might direct and under sub-rule (3) the court had power to give such directions and to make such modifications to the scheme as it might consider necessary for the proper working thereof or pass such other orders as it might think fit in the circumstances of the case. Thus, there was no question of issue of any notice or any advertisement unless the court so directed, which the court did not direct in this case. Thus under section 392 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... doubt, in para. 20 of the petition in the court below the appellant had pleaded for a winding-up of the respondent on the ground that the said scheme could not be worked out due to the failure or neglect or laches of the respondent and the said scheme was being used by the respondent as a shield to evade payment of the lawful claims of its creditors but there are no particulars as to who are the creditors apart from the appellant whose lawful dues have not been paid by the respondent. There are also no particulars or grounds, apart from the allegation of failure or neglect or laches of the respondent to pay the claim made by the' appellant, as to how and on what grounds the said scheme has become unworkable. A mere allegation without particulars or grounds that the scheme cannot be worked out or has become unworkable is not sufficient to induce the court to make an order for winding up under sub-section (2) of section 392 of the Companies Act, 1956. The petitioner has to satisfy the court that the scheme cannot be satisfactorily worked out with or without a modification being made thereto and only then the court would make such an order. Here, the claim of the appellant is serious ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ave been satisfied as to the validity of the claim of the appellant and he, therefore, made the order directing payment by the respondent of a sum of Rs. 10,000 with a default clause. No order for payment was asked for by the appellant. Therefore, there was no scope for making any order for payment. Secondly, if the learned judge was satisfied as to the validity of the claim of the appellant he should have made an order for payment of the entire claim. There is neither any basis nor any reason for reduction of the claim to a paltry sum of Rs. 10,000 only. On the view that we have taken, it is not necessary to go into or decide the various other points raised and urged by the parties in this appeal. If a default has been committed by the respondent in payment of the dues of the appellant in terms of the scheme, we do not find that clause 10 of the said scheme would be a bar in the way of the appellant to take appropriate proceeding against the respondent for the recovery of such dues. Clause 10 would be attracted, in our view, in the matter of commencement of any proceeding by a creditor bound by the scheme so long as the respondent would honour and make payment in accordance with ..... X X X X Extracts X X X X X X X X Extracts X X X X
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