Holding

An application for directions under Section 391(1) is to be moved ex‑parte pursuant to Rule 67, and no prior hearing of creditors or members is required before the court issues the summons.

Summary

The appellants, Chembra Orchard Produce Ltd. and others, filed applications under Section 391(1) of the Companies Act, 1956 seeking a court order to convene meetings of creditors and members for a proposed amalgamation scheme. The Karnataka High Court held that such applications must be heard with the parties present before granting directions, and set aside the ex‑parte summons. On appeal, the Supreme Court examined Rule 67 of the Companies (Court) Rules, 1959, which expressly mandates that summons for directions be moved ex‑parte, and held that no prior hearing of creditors or members is required at this preliminary stage. The Court emphasized that the judge must still satisfy the checklist in Rule 69 to ensure the genuineness and bonafides of the application, but natural‑justice concerns do not arise. Consequently, the High Court's order was set aside and the appeals were allowed. The decision clarifies the procedural mechanics for initiating scheme meetings under the Companies Act.

Issues considered

Whether an application under Section 391(1) of the Companies Act, 1956 for directions to convene a meeting of creditors and members must be heard ex‑parte as mandated by Rule 67 of the Companies (Court) Rules, 1959.

Legislation cited

Companies Act, 1956s. 391, s. 393, s. 394, s. 643
Companies (Court) Rules, 1959s. 67, s. 68, s. 69, s. 73, s. 74, s. 75, s. 76

Subjects

Companies ActSection 391Scheme of amalgamationEx‑parte summonsRule 67Natural justiceCreditor meetingCorporate restructuring

Judgment

[2008] 17 S.C.R. 45

CHEMBRA ORCHARD PRODUCE LTD. & ORS. A
1 v.
REGIONAL DIRECTOR OF COMPANY AFFAIRS & ANR.
(Civil Appeal Nos. 7115-7120 of 2008)

DECEMBER 4, 2008
8
[S.H. KAPADIA AND AFTAB ALAM, JJ.]

COMPANIES ACT, 1956:

s. 3_91(1) - Application seeking directions to convene a c
meeting of creditors and members to consider Scheme of
~ amalgamation - Ex-parte hearing of -Propriety of - HELD:
Application for an order for meeting is a preliminary step at
the threshold stage whereat it is not necessary for company
to give notice of hearing to the creditors, members and D
shareholders - When r. 67 categorically states that summons
for directions shall be moved ex-parte, the question of
prejudice or rule of natural justice does not come into play
- However, while issuing such summons Court is required to
apply its mind to check list indicated in r. 69 and it needs to E
be prima facie satisfied about genuineness and bona tides
of application - After summons for directions are issued,
when meeting is ordered to be convened, requirements of rr.
73, 74 and 76 are to be complied with - Companies (Court)
Rules, 1959 - rr. 67' and 69 - Natural justice - Opportunity
F
t of hearing.

Miheer H. Mafatlal v. Mafatlal Industries Ltd. 1997 (1)
sec 579; relied on ..
Sakamari Steel & Alloys Ltd. In re.: 51 Company Cases G
page 266, approved .
.,
.
Hind Auto Inda Ltd. v. Mis Premier Motors (P) Ltd. AIR
1970 Allahabad 165, distinguished.
~

/
45 H

ii(._
I
46 SUPREME COURT REPORTS [2008] 17 S.C.R.
·e
j

A Palmer's Company Law, referred to.

..
Case Law Reference:
1997 (t) sec 579 relied on para 8

B 51 Company Cases page 266 approved para 9
AIR 1970 Allahabad 165 ·distinguished para 11
CIVIL APPELLATE JURISDICTION : Civil Appeal No.
7115-7120 of 2008.
c From the Judgment and Order dated 20.8.2007 of the High .
Court of Karnataka at Bangalore in C.A. Nos. 354 to 359 of
2003.
Shyam Divan, Shamik Sanjawala, Srinivasa Raghavan
D and Meenakshi Arora for the Appellants.

The following Order .of the Court was delivered:

ORDER

E 1. Leave granted.
2. The short question which arises for determination in
these Civil Appeals is whether ari application filed by the
Company under Section 391(1) of the Companies Act, 1956
F (for short the '1956 Act') seeking directions to convene a
meeting of creditors and members to consider a scheme of ..
amalgamation is required to be heard and decided ex-parte
as· per Rule 67 of the Companies (Court) Rules, 1959?

3. To answer the above question we need to quote
G hereinbelow the relevant Rules.

"Rule 2(9) 'Judge's summons' means a summons
returnable before the Judge in Chambers or1 in Court.

H

~-
CHEMBRA ORCHARD PRODUCE LTD. & ORS. v. 47
"? REGIONAL DIRECTOR OF COMPANY AFFAIRS & ANR.

67. Summons for directions to convene a meeting. - An A
application under section 391(1) for an order convening a
meeting of creditors and/ or members or any class of them
shall be by a Judge's summons supported by an affidavit.
A copy of the proposed compromise or arrangement shall
be annexed to the affidavit as an exhibit thereto. Save as B
provided in rule 68 hereunder, the summons shall be
moved ex parte. The summons shall be in Form No. 33,
and the affidavit in support thereof in Form No. 34.
68. Service on company- Where the company is not the
applicant, a copy of the summons and of the affidavit shall c
be served on the company, or, where the company is
being wound-up, on its liquidator, not less than 14 days
before the date fixed for the hearing of the summons.
69. Directions at hearing of summons.- Upon the hearing D
of the summons or any adjourned hearing thereof, the
Judge shall, unless he thinks fit for any reason to dismiss
~
the summons, give such directions as he may think
necessary in respect of the following matters: -
E
(1) determining the class or classes of creditors
and/or of members whose meeting or meetings
have to be held for considering the proposed
compromise or arrangement;
.
(2) fixing the time and place of such meeting or F
-+
meetings;

(3) appointing a chairman or chairmen for the
meeting or meetings to be held, as the case may
be; G
(4) fixing the quorum and the procedure to be
., followed at the meeting or meetings, including voting
by proxy;
,, '

(5) determining the values of the cr~ditors and/or H
~
48 SUPREME COURT REPORTS [2008] 17 S.C.R.

A the members, or the creditors or members of any
class, ·as the case may be, whose meetings have
to be held;

(6) notice to be given of the meeting or meetings
and the advertisement of such notice;

(7) the time within which the Chairman of the
meeting is to report to the Court the result of the
meeting; and such other matters as the Court may )...
deem necessary.
c
The order made on the summons shall be in Form No. 35
with such variations as may be necessary."

D 73. Notice of meeting. - The notice of the meeting ·to be
given to the creditors and/or members, or to the creditors
or members of any class, as the case may be, shall be in
~-
Form No. 36, and shall be sent to them individually by the
Chairman appointed for the meeting, or, if the Court so
E directs, by the company (or its Liquidator}, or any other
person as the Court may direct, by post under certificate
of posting to their last known address not less than 21
clear days before the date fixed for the meeting. It shall be
accompanied by a copy of the proposed compromise or
F arrangement and of the statement required to be furnished
_..
under section 393, and a form of proxy in Form No. 37.

. 74. Advertisement of the notice of meeting.- The notice
of the meeting shall be adverti~ed in such newspapers and
in such manner as the Judge may direct, not less than 21
G clear days before the date fixed for the meeting. The
advertisement shall be in Form No. 38.
)-

75. Copy of compromise or arrangement to be furnished
by the company.- Every creditor or member entitled to ~
1-1 attend the meeting shall be furnished by the company, free '
~
CHEMBRA ORCHARD PRODUCE LTD. & ORS. v. 49
llllllii. REGIONAL DIRECTOR OF COMPANY AFFAIRS & ANR.

of charge and within 24 hours of a requisition being made A
for the same, with a copy of the proposed compromise or
arrangement together with a copy of the statement
required to be furnished under section 393, unless the
same had been already furnished to such member or
creditor.· 8
76. Affidavit of service.- The Chairman appointed for the
meeting or the Company or other person directed to issue
the advertisement and the notices of the meeting shall file
an affidavit not less than 7 days before the date fixed for
the holding of the meeting or the holding of the first of the c
meetings, as the case may be, showing that the directions
regarding the issue of notices and the advertisement have
been duly complied with. In default thereof, the summons
shall be posted before the Judge for such orders as he
may think fit to make. D

+

79. Petition for confirming compromise or arrangement.-
Where the proposed compromise or arrangement is
E
agreed to, with or without modification, as provided by sub-
section (2) of section 391, the company, (or its Liquidator,
as the case may be), shall, within 7 days of the filing of
the report by the Chairman, present a petition to the Court
for confirmation of the compromise or arrangement. The
i petition shall b~Jn Form No. 40. F

Where a compromise or arrangement is proposed
for the purposes of or in connection with a scheme for the
reconstruction of any company or companies, or for the
amalgamation of any two or more companies, the petition G
shall pray for appropriate orders and directions under
~ section 394.
......
, Where the company fails to present the petition for
confirmation of the compromise or arrangement as
H
50 SUPREME COURT REPORTS · [2008] 17 S.C.R.

A aforesaid, it shall be open. to any creditor. or contributory
as the case may:be, with the leave of the Court, to present ··'
the petition and the Company shall be 1iable for the costs
thereof. L · '

-· i

B , Where no petition for confirmation of the
compromise or arrangement is presented, or where the
· compromise or arrangement has not been approved by the
requisite majority under section 391 (2) and consequently
no petition for confirmation could be presented, the report
6f the Chairman as to the result of the meeting made under
c the preceding rule shall be placed forconsideration before
the Judge for such orders as may be necessary .
. .
80. Date and notice of hearing.-The Court s~all fix a date
for the hearing of the petition, and notice of the hearing
D shall be advertised in the same papers in which the notice
of the meeting was advertised; or in such other papers as
the Court may direct, not less than 10 days before the date
fixed for the hearing."

We also quote hereinbelow Form No.33 and Form No.34:-
E
FORM NO. 33 ,,
[See Rule 67)
[Heading as in Form No. 1)
Company Application No.: .............. of 19.... .
F ............... Applicant(s)
'
Summons for Directions to Convene a Meeting
under section 391

Let all parties concerned attend the Judge in Chambers
on .. :.. ,......... day, the ............ day of ........ 19... at .............. .
G
o'c'lock. in the . ......... .. ... noon on the hearing of an
application of the abovenamed· company (or of the
applicant(s)·abovenamed) for an order (that a meeting (or
separate meetings) be held at ............... of (Here enter the
creditors or class of creditors, e.g., debenture-holders,
H
CHEMBRA ORCHARD PRODUCE LTD. & ORS. v. 51
REGIONAL DIRECTOR OF COMPANY AFFAIRS & ANR.

"f
other secured creditors, unsecured creditors, etc., or the A
members or class of members, e.g., preference
-.,. shareholders, equity shareholders, etc. of which class or
classes, the meeting have to be held) of the above
company, for the purpose of considering, and if thought fit,
approving, with or without modification, a scheme of B
compromise or arrangement proposed to be made
between the company and the said [here mention the
creditors or class of creditors or members, or the class
of members] of the said company.
And that directions may be given as to the method
c
of convening, holding and conducting the said meeting(s)
and as to the notices and advertisements to be issued.
c'xJ And that a chairman (or chairmen) may be appointed
ct7 of the said meeting(s), who shall report the result there of D
&3
.,
-N to the Court.
Advocate for the applicant(s)
Registrar.

The affidavit of... ............ will be used in support of the E
summons.

[Note:--Where the company is not the applicant, the
summons should be served on the company, or, where it
" is being wound-up, on its liquidator.]"
~ F
"FORM NO. 34
[See Rule 67)
[Heading as in Form No. 1)
Company Application No ..........:····· of 19.....
............... Applicant(s). G
Affidavit in Support of Summons
I

" I, ............... of etc., solemnly affirm and say as follows:-

1. I am the managing director/secretary/director/
.............. ./of the said company, (or an auditor of the said H
52 SUPREME COURT REPORTS [2008) 17 S.C.R.

"'
A company authorised by the directors to make this affidavit/
~
or liquidator of the said company in liquidatio.n).
,_L...
[Where the application is not by the company or its
liquidator, but by a member or creditor the above
paragraph should be suitably altered.]
B
2. The company was incorporated on ............... 19.....
The document now produced and shown to me is a printed
j.-
copy of the memorandum, and articfes of association of
the said company, and also contains copies of all the
c special resolutions which have been passed am~ are now
in force.

3. -The registered office of the company is situated ·
at...............
D 4. The capital of the company is Rs ................ )I-

divided into ............... (here set out the classes of shares
issued and the amounts paid up on each share). 4

5. The objects of the company are set out in the
E memorandum of association annexed hereto. They are
briefly (here set out the main objects in brief).

6. The company comm.enced the business
')
.of............... (e.g., hides and skins, etc.) and has been
carrying on the same since ............... ,,
F 'y

7. [Here set out in separate paragraphs the
circumstances that have necessitated the proposed
compromise or arrangement, the objects sought to be
achieved by it, the terms of the compromise or
G arrangement, and the effect if any, of the compromise or
arrangement on the material interests of the directors,
managing director, managing agent, secretaries and r
treasurers or the manager of the company, and where the
compromise or arrangement affects the interests of the
H debenture holders, its effect on the material interests of the
CHEMBRA ORCHARD PRODUCE LTD. & ORS. v. 53
- REGIONAL DIRECTOR OF COMPANY AFFAIRS & ANR.

trustees of the debenture trust deed. A copy of the A
proposed compromise or arrangement should be marked
.... as an exhibit and annexed to the affidavit] .

8. [Here set out the class of creditors or members
with whom the compromise or arrangement is to be made; B
where the arrangement is between the company and its
members, it should be stated whether any creditors or class
of creditors are likely to be affected by it.]

9. It is necessary that a meeting (or meetings) of the
creditors/members (if the meeting is to be only ofa class c
of creditors or a class of members, it should be so stated)
should be called to consider and approve the proposed
compromise or arrangement.

10. It is suggested that the meeting (or meetings) D
may be held at the premises of the registered office of the
company or at such other place as may be determined by
:.. the Court, and on such date(s) and at such time(s) as this
Court may direct; and that a chairman may be appointed
for the meeting (or for each of the meetings) to be held.
E
11. It is suggested that notice of the proposed
.. • compromise or arrangement and of the meeting may be
published once in (here set out the newspapers) and in
such other manner as the Court may direct.
F
'\
12. It is prayed that necessary directions may be
given as to the issue and publication of notices and the
convening, holding and conducting of the meeting(s)
• proposed above .
(

Solemnly affirmed, etc. G

..., (Sd.)X.Y .
-i Before me
....f
(Sd.) ........................
Commissioner for Oaths". H
54 SUPREME COURT REPORTS [2008] 17 S.C.R.
.....
A 4. The appellant -Company moved Company Application
Nos. 354 to 359 of 2003 before the Karnataka High Court on
17th April, 2003 under Sections 391 to 394 of the Companies
Act, 1956 in the form of Judge's Summons for Directions
t

...
supported by an affidavit to hold a meeting of shareholders and
B members to consider the proposed scheme of amalgamation.
The applications were filed stating that the applicant had
entered into the said Scheme under which it was proposed to
amalgamate appellant Nos. 1 to 5 into the 6th appellant - y
. Company. This proposed Scheme of Amalgamation· was in fact
c approved by the Board C?f Directors vide Resolution dated 15th
February, 2003 stating that the amalgamation would result in
economy. of scale., l_n accordance with Rule 67, Judge's
Summons for Directions regarding holding of meetings was
moved ex-parte.
D 5. When the Company Application regarding holding of
meeting came before the Company Judge on 15th March,
2004, a. query was raised as to whether it was not necessary ~
to hear the share-holders and creditors before issuing
directions for holding meeting of share.;.holders and creditors.
E Appellant contended that Rule 67, quoted above, did not
contemplate the hearing of any person, including share-holders
and creditors, before issuing directions for holding of meetings.
1-
'
6. By impugned judgment dated August 20, 2007, the
F Division Bench of the Karnataka High Court on reference >
~

).
answered the above question of law stating that hearing of all
parties was ·necessary before the Company Court could issue
directions to convene a meeting under Section 391(1) of the
Companies Act and that an ex-parte order in that.connection
could not be passed. It is this order which is under challeng~.
G
' )-
7. At the outset, it may be stated that the Companies
(Court) Rules, 1959 are enacted in exercise of the powers
., )

conferred by Section 643(1)(2) of the Companies Act, 1956.
They have force of an Act passed by the·Parliament. The·said
,_
H Rules 1959 have statutory force of law. The said Rule 67 in
"
CHEMBRA ORCHARD PRODUCE LTD. & ORS. v. 55
REGIONAL DIRECTOR OF COMPANY AFFAIRS & ANR.

unequivocal terms states that an application under Section A
391(1) for an order for convening a meeting of creditors and/
..... or members or any class of them shall be by a Judge's
Summons supported by an affidavit. Rule 67 further requires
the proposed compromise or arrangement to be annexed to
the affidavit as an exhibit. Rule 67 is, however, subject to Rule B
68 (which deals with a case where the Company is not the
applicant). If one reads Rule 67 with Form 33 and Form 34,
one find that essentially the Court while issuing such summons
is required to apply its mind to 'checklist indicated in Rule 69
and it needs to be prima facie satisfied about the genuineness c
and bonafides of the application. One aspect needs to be
highlighted. Hearing of the Motion ex-parte does not mean that
the Court had not to apply its mind or that the Court is not
. required prima facie to be satisfied about the genuineness or
bonafides. However, it is a preliminary step. One more aspect
D
needs to be mentioned. If hearing is required to be given to
contributors, creditors and share-holders, then the entire
:... scheme of Section 391 (which is a Code by itself) would
become unworkable. Further, when Rule 67 categorically states
that Summons for Directions shall be moved ex-parte, the
question of prejudice or rule of natural justice does not come E
into play. However, there is a rationale for stating that the
Summons shall be moved ex-parte and that rationale is that it
is an Application for an Order for Meeting as a preliminary step
at the threshold stage and at that stage it is not necessary for
._,,, the Company to give notice of hearing to the creditors, F
.-,.._
members and share-holders (see: Palmer's Company Law) .
Further, if one examines Rule 67 in the context of Rule 73, one
finds that after Summons for Direction are issued as and when
the meeting is ordered to be convened, the notice of the
meeting is required to be given to the creditors and/or G
members or such other classes enumerated in Rule 73.
~
Similarly, under Rule 74 advertisement of the notice of meeting
is also required to be published in such newspapers and in
such manner as the Judge may direct. This is to be supported
by affidavit of service under Rule 76. H
56 SUPREME COURT REPORTS [2008] 17 S.C.R.

A 8; The analysis of the above Rules indicates that there is
a clear dichotomy between the threshold stage of issuance of
directions to convene a meeting and the subsequent stage of
a notice of meeting which is contemplated by Rule 73 and "for
that precise reason Rule 67 states that the summons shall be
B moved ex-parte.

9. Our view is supported by various judgments of this Court
and the High Courts. As far as the scheme of Sections 391 to
394-of the Companies Act is concerned, we quote hereinbelow
Paragraph 28 of the judgment of this Court in the case of
C Miheer H. Mafat/al v. Mafatlal Industries Ltd. reported in 1997
(1) sec 579:

"28. The relevant provisions '6,t the Companies Act,
1956 are found in Chapter V of Part VI dealing with
o "Arbitration, Compromises, Arrangements and
Reconstructions". In the present proceedings we will be
concerned with Sections 391 and 393 of the Act. The
relevant provisions thereof read as' under:

"391. (1) Where a compromise or arrangement is
E proposed-

(a between a company and its creditors or any
class of them; or

F (b) between a company and its members or any
class of them; the Court may, on the
,.-
application of the company or of any creditor
or member of the company, or in the case of
a company which is being wound up, of the
liquidator, order a meeting of the creditors or
G
class of creditors, or of the members or.class
of members, as the case may be, to be
called, held and conducted in such manner
as the Court directs.
H (2) If a majority in number representing three-fourths
CHEMBRA ORCHARD PRODUCE LTD. & ORS. v. 57
REGIONAL DIRECTOR OF COMPANY AFFAIRS & ANR.

in value of the creditors, or class of creditors, or A
members, or Class of members as .the case may
be, present and voting either in person or, where
proxies are allowed under the rules made under
Section 643, by proxy, at the meeting, agree to any
compromise or arrangement, the compromise or B
arrangement shall, if sanctioned by the Court, be
binding on all the creditors, all the creditors of the
class, all the members, or all the members of the
class, as the case may be, and also on the
company, or, in the case of a company which is C
being wound up, on the liquidator and contributories
of the company:

Provided that no order sanctioning any compromise
or arrangement shall be made by the Court unless the
Court is satisfied that the company or any other person by D
whom an application has been made under sub-section
(1) has disclosed to the Court, by affidavit or otherwise,
:'f.-
all material facts relating to the company, such as the latest
financial position of the company, the latest auditor's report
on the accounts of the company, the pendency of any E
investigation proceedings in relation to the company under
Sections 235 to 251, and the like.

393. (1) Where a meeting of creditors or any class of F
creditors, or of members or any class of members, is
called under Section 391,-

(a) with every notice calling the meeting which is sent
to a creditor or member, there shall be sent also a G
statement setting forth the terms of the compromise or .
arrangement and explaining its effect, and in particular,
' stating any material interests of the directors, managing
directors, managing agents: secretaries and treasurers or
manager of the company, whether in their capacity as such H
58 SUPREME COURT REPORTS [2008) 17 S.C.R.
e
A or as members or creditors of the company or otherwise,
and the effect on those interests, of the compromise or
arrangement,. if, and insofar as, it is different from the effect
on the like interests of other persons; and

(b) ·in" every notice calling the meeting which is given
B
by advertisement, there shall be included either such a
statement as aforesaid or a notification of the place at
which and the manner in which creditors or members
entitled· to attend the meeting may obtain copies of such
a statement as aforesaid.
c
The aforesaid provisions of the Act show that
compromise or arrangement can be proposed between a
company and its creditors or any class of them or between
a company and its members or any class of them. Such a
D compromise would also take in its sweep any scheme of
amalgamation/merger of one company with another. When
such a scheme is put forward by a company for the
sanction of the Court in the first instance the Court has to ...
direct holding of meetings of creditors or class of creditors
E or members or class of members who are concerned with
such a scheme and once the majority in number
representing three-fourths in value of creditors or class of
creditors or members or class of members, as the case
may be, present or voting either in person or by proxy at
F such a meeting accord their approval to any compromise
or arrangement thus put· to vote, and once such ~-

compromise is sanctioned by the Court, it would be
binding to all .creditors or class of creditors or members
or class of members, as the case may be, which would
also necessarily mean that even to dissenting creditors or
G
class of creditors or dissenting members or class of
-members such sanctioned scheme would remain binding.
Before sanctioning such a scheme even though approved ;-
by a majority of the concerned creditors or members the
Court has to be satisfied that the company or any other
H
CHEMBRA ORCHARD PRODUCE LTD. & ORS. v. 59
REGIONAL DIRECTOR OF COMPANY AFFAIRS & ANR.

person moving such an application for sanction under sub- A
section (2) of Section 391 has disclosed all the relevant
matters mentioned in the proviso to sub-section (2) of that
section. So far as the meetings of the creditors or
members, or their respective classes for whom the
Scheme is proposed are concerned, it is enjoined by 8
Section 391 (1 )(a) that the requisite information as
contemplated by the said provision is also required to be
placed for consideration of the voters concerned so that ·
~
the parties concerned before whom the scheme is placed
for voting can take an informed and objective decision c
whether to vote for the scheme or against it. On a conjoint

-· reading of the relevant provisions of Sections 391 and 393
it becomes at once clear that the Company Court which
is called upon to sanction such a scheme has not merely
to go by the ipse dixit of the majority of the shareholders
D
or creditors or their respective classes who might have
voted in favour of the scheme by requisite majority but the
Court has to consider the pros and cons of the scheme
with a view to finding out whether the scheme is fair, just
-• and reasonable and is not contrary to any provisions of law
and it does not violate any public policy. This is implicit in E
the very concept of compromise or arrangement which is
required to receive the imprimatur of a court of law. No court
of law would ever countenance any scheme of compromise
• or arrangement arrived at between the parties and which
might be supported by the requisite majority if the Court F
1
finds that it.is an unconscionable or an illegal scheme or
is otherwise unfair or unjust to the class of shareholders
or creditors for whom it is meant. Consequently it cannot
be said that a Company Court before whom an application
is moved for sanctioning such a scheme which might have G
got the requisite majority support of the creditors or
., members or any class of them for whom the scheme is
mooted by the company concerned, has to act merely as
4 a rubber stamp and must almost automatically put its seal
of approval on such a scheme. It is trite to say that once H
60 SUPREME COURT REPORTS [2008] 17 S.C.R.

A the scheme gets sanctioned by the Court it would bind even
the dissenting minority shareholders or creditors.
Therefore, the fairness of the scheme qua them also has
to be kept in view by the Company Court while putting its
seal of approval on the scheme concerned placed for its
B sanction. It is, of course, true that so far as the Company
Court is concerned as per the statutory provisions of
Sections 391 and 393 of the Act the question of voidability
•
'
of the scheme will have to be judged subject to the rider
that a scheme sanctioned by majority will remain binding
c to a dissenting minority of creditors or members, as the
case may be, even though they have not consented to such
a scheme and to that extent absence of their consent will
·have no effect on the scheme. It can be postulated that
even in case of such a scheme of compromise and
arrangement put up for sanction of a Company Court it will
D
have to be seen whether the proposed scheme is lawful
and just and fair to the whole class of creditors or members
including the dissenting minority to whom it is offered for
approval and which has been approved by such class of
persons with requisite majority vote."
E
10. In the case of Sakamari Steel & Alloys Ltd. reported
in 51 Company Cases page 266, the learned Single Judge of
the Bombay High Court held that Section 391(1)"is not a sign- I
post but a check-post whereat it is a duty of the Court to •
F examine the genuineness and the bonafides ofthe Scheme for
itself.

11. A reading of the above judgment would, '.therefore, show
that at the stage of issuance of Summons for Directions to
G convene a meeting, though the Company Judge has to apply
its mind, prima facie, on the genuineness of the Scheme,
basically the entire exercise is to verify whether the numerous I-
conditions prescribed In Rule 69 are satisfied read with Form .
33 and Form 34.
•
,H 12. In the impugned judgment, reliance is placed on the
CHEM BRA ORCHARD PRODUCE LTD. & ORS. v. 61
REGIONAL DIRECTOR OF COMPANY AFFAIRS & ANR.

earlier judgment of the Allahabad High Court in the case of Hind A
Auto lndo Ltd. v. Mis Premier Motors (P) Ltd. reported in AIR
1970 Allahabad 165, From a bare reading of that judgment we
find that the said case related to interpretation of Section 394A
of the Companies Act with which we are not concerned in this
case. Be that as it may, there are observations in the said B
judgment, with respect, with which we do not agree, both on
the interpretation of Rule 67 and 69 on one hand as also on
the basis of the practical effect of the interpretation given by
the High Court in the present case. If at the threshold stage of
directions to convene a meeting hearing is required to be given c
to the members as held in the impugned judgment the scheme
of the Companies (Court) Rules 1959 will become unworkable.
For the above reasons, with respect, we disagree with the view
expressed by the Allahabad High Court in the case of Hind
Auto Inda Ltd. (supra) and we agree with the judgment of the
0
Bombay High Court in the case of Sakamari Steel & Alloys
Ltd. (supra).

13. For the aforestated reasons, we allow these civil
appeals. Consequently, the impugned judgment is set aside
with no order as to costs. E

R.P. Appeals allowed.

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