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TMI Blog1985 (8) TMI 297X X X X Extracts X X X X X X X X Extracts X X X X ..... d capital. The preference shares are of one category, viz., 5,000, 7¾% preference shares of Rs. 1,000 each. The bank rate having risen considerably, the preference shareholders made requests to the company to remedy the situation by increasing the rate of the dividend payable and more particularly as the terms of the issue of the said preference shares did not provide for the redemption thereof. The board of directors of the petitioner-company thereupon decided to cancel the said preference shares and instead issue to the members of the petitioner-company holding preference shares, secured non-convertible debentures of Rs. 100 each bearing interest at the rate of 12% per annum payable half-yearly. They also decided to draw up a schem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... har Committee's Report and in view of the meetings held of the shareholders and in view of the balance-sheet of the company, the court may dispense with the procedure under section 101 of the Companies Act and approve the reduction of capital. On this application, this court examined the fiscal health of the company by scrutinizing the balance-sheets and took into consideration the resolutions passed both by the company's preference shareholders and the company's ordinary shareholders as also the fact that the issue of the intended debentures was subject to the sanction and approval of the Controller of Capital Issues and subject to the petitioner company obtaining orders from all the authorities concerned with the issue of debentures. Orde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts. The court cannot confirm a conditional reduction." Mr. Bulchandani submitted that in this case the petitioner company had failed to follow the procedure under section 101 and was hence not entitled to relief for the reduction of its capital. I am unable to accept this contention. The said section itself provides that the procedure may be dispensed with by the court if it thinks fit and proper. In the present case, as stated earlier, it was only after scrutinizing the fiscal health of the company and considering the ramifications of the scheme and considering the resolutions passed by the shareholders that an order was passed dispensing with the procedure under section 101. Furthermore, barring making a submission, Mr. Bulchandani has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ral Electrical Corporation Ltd. [1960] 30 Comp. Cas. 367 (Cal.); AIR 1960 Cal 637, and the observations in another case in In re Chowgule & Co. P. Ltd. [1972] TLR 2163. Mr. Bulchandani urged that in view of this, the petitioner would not be entitled to come under section 391 and hence no relief can be granted on this score. I am unable to accept this contention. The word "arrangement" as set out in section 390(b) is an inclusive definition and contemplates all arrangements and not only reorganisation of the share capital. This is all the more clear, because the word used is "includes". Coming to the case of Hindustan Commercial Bank Ltd. v. Hindustan General Electrical Corporation Ltd. [1960] 30 Comp. Cas. 367 (Cal.); AIR 1960 Cal 637, I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ition for confirmation of conversion, I do not see how the entire scheme could be regarded as a compromise or arrangement between the petitioner and its creditors or between the petitioner and its members. It is true that in view of the provisions of section 390(b) of the Act, the expression 'arrangement' occurring in section 391 includes a reorganisation of the share capital of the company by the consolidation of shares of different classes, or by the division of shares into shares of different classes, or by both those methods, but the word 'arrangement' used in the section means something analogous in some sense to a compromise and a compromise necessarily implies two parties. In the instant case, there is only one party to the proceedin ..... X X X X Extracts X X X X X X X X Extracts X X X X
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