- (1.) A point has evolved at the instance of the court as to whether notice to the Central Government shall be given on an application under section 391(1) moved by way of judges summons, ex parte before issuing an order convening a meeting of the creditors or class of creditors or members or class of members as the case may be. The scheme is proposed for merger of the transferor-companies with a transferee-company, the salient features of which have been jotted down in paragraph 7 of the petition, which does not require an elaborate narration for the present purposes. Section 391 of the Companies Act, 1956 ('the Act') provides the sanctioning of the scheme by the court, provided the court is satisfied that an application made under the said provisions contains all disclosure of material facts relating to the company, namely, the latest financial position of the company, latest auditor's report on accounts of the company and pendency of any investigation proceeding in relation to the company. At the time of promulgating the Act, section 394A was not incorporated but was subsequently inserted by Act 31 of 1965 with effect from 15th October, 1965. By virtue of sub-sections (1) and (2) of section 643 of the Act, the Companies (Court) Rules, 1959 ('Court Rules') was framed by the Supreme Court of India and assumes the Act of Parliament. The said rule came into force on and from 1st day of October, 1959. Rules 67 and 68 of the Court Rules provide for moving the application by way of judges summons ex parte, unless an application is taken out other than the company. In such event, the copy of the summons and the affidavit in support of the said judges summons shall 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 hearing of the summons. Rule 69 of the Court Rules contains the provisions relating to the directions at the hearing of the judges summons which further provides that upon hearing on the day when it is moved ex parte or any adjourned dale, the court can dismiss the summons. One of the directions as enshrined under rule 69 of the said rules contains the fixation of time and place of meeting or meetings of the creditors or class of the creditors and/or member or the class of the members relating to the proposed compromise or arrangement.
(2.) Section 391(1) of the said Act requires the holding of the meeting of the creditors or class of the creditors or the class of the members whereas sub-section (2) requires the agreement to the compromise or arrangement by majority in number representing three-fourths in value of the creditors or class of creditors or members or class of members present and voting either in person or by proxy. I am not unmindful of the proposition of law that the court shall not sanction the scheme by the ipse dixit of the majority of the shareholders or creditors of their respective classes who voted in favour of the scheme unless the court examined the genuineness and bona fides of the scheme as held in Sakamari Steel & Alloys Ltd., In re., 1981 51 CompCas 266 (Bom.). It can be equally contended that section 394A which requires notice to be given to the Central Government of every applications made under section 391 or 394 does not put any fetter on the court in sanctioning the scheme upon looking into its representations or objections if it does not appear to be convincing. What is required under section 394A is that the court shall take into consideration the representation of the Central Government before passing any order under section 391 or 394 of the Act.
(3.) The sole question which arises in this matter relates to the stage at which the notice to the Central Government is to be given, whether at the initial stage of moving the judges summons ex parte or after direction for convening the meeting of the creditors or class of creditors or the members or its classes. There is no corresponding rules framed relating to section 394A of the said Act which was introduced subsequent to the framing of the Court Rules. Reliance could be directly made in this regard to a judgment rendered by this court in case of Bangeswari Cotton Mills Ltd., In re., 1967 37 CompCas 195 (Cal.) which clearly laid down that the notice to the Central Government on an application under section 391(1) of the Act is not required to be given at the stage of moving the judges summons before calling the meeting of the members or creditors or its classes. It has been further observed that "any order" occurring in section 394A should be read as "any final order". The interpretation was given by this court in the above noted case so to avoid the conflict between section 394A and the rules framed so as to render the provision workable.;