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TMI Blog2007 (4) TMI 372X X X X Extracts X X X X X X X X Extracts X X X X ..... ire-purchase and equipment leasing company by the Reserve Bank of India. For the year ending 31-3-2002, the accumulated losses of the respondent-company stood at Rs. 105.85 crores. The appellants, who have invested a sum of Rs. 1.05 crores in several schemes floated by the respondent, had filed a petition for winding up of the respondent-company on the ground that it had become commercially insolvent as it was unable to pay the money due to them, in Company Petition No. 206 of 2002. The respondent on the other hand filed a petition for sanction of a scheme under sections 391, 392 and 393 read with section 394A of the Companies Act, 1956, in Company Petition No. 37 of 2003 Maharashtra Apex Corpn. Ltd. , In re [2005] 124 Comp. Cas. 637 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d shareholders of the company had not attended the meeting nor approved the scheme. That the purported approval of the scheme by a small section of the creditors and shareholders of the company cannot bind the large majority. 4. Counsel would submit that from a reading of section 391 of the Companies Act, 1956 (hereinafter called "the Act", for brevity), it can be said that the statutory requirement contemplates a quorum consisting of three-fourths of the value of all the shareholders and creditors of the company and not merely of those present and voting at the meeting. It is hence contended that the purported approval of the scheme is without reference to a mandatory requirement. 5. It is contended that the scheme propounded was i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 10. Per contra , counsel for the respondent would argue that insofar as the principal contention of the appellants is concerned, as regards the ap-proval of the scheme by majority, that it is a settled principle of law that the majority contemplated is that of the class of members or the creditors present and voting in the respective class meetings and the same cannot be disregarded by a miniscule minority of creditors who had not even taken steps to attend and vote at the meetings convened. The stand taken is misconceived and opposed to the plain language employed in section 391 of the Act. 11. Further, insofar as the scheme being engineered to defeat the interests of the creditors or others is concerned, it is contended, that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o approve a scheme will be as prescribed in the company s articles in relation to the particular class or body of shareholders concerned or in, for example, the trust deed relating to debenture stock. The majority in favour of the scheme must be a majority in number representing three-fourths in value of the creditors or class of creditors or members or class of members, as the case may be present and voting either in person or by proxy at the meeting. It should be noted that the majority is dual, in number and in value; a simple majority of those voting is sufficient whereas the three-fourths requirement relates to value. By way of illustration : ( A )All 1,000 members of a class holding 10,000 shares vote; of these, one member ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the appropriate majorities prescribed by section 206(2) and that all the relevant classes have given their consent. ( b ) Each class must have been fairly re-presented at the meetings : The court will look behind the majorities achieved for each resolution to ensure that each class is fairly represented. For instance, it will not usually be satisfied if only a very small number of votes are cast in total, either in person or by proxy. If following the examples above, not only the large shareholder, but many others as well, abstained from voting, so that the result was : In favour : 50 members holding 500 votes; Against : 40 members holding 100 votes; Abstaining : 910 members holding 9,400 votes; The scheme would be unlikely to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the order has been made, or, in the case of a company not having a memorandum, of every copy so issued of the instrument constituting or defining the constitution of the company. Default fines are prescribed for non-compliance." 14. It is to be observed that counsel for the appellants has canvassed the view under consideration notwithstanding the overwhelming authorities cited in apposition, primarily on the premise that the said authorities are not binding on this Court. We are not inclined to subscribe to the view of counsel of the appellants. It is to be seen that the Full Bench of the Punjab and Haryana High Court in Swift Formulations (P.) Ltd., In re [2004] 121 Comp. Cas. 27 1 , has referred to and relied upon the case of Kirlo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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