Sankar Prasad Mitra, J. - (1.) This is an application under Section 391 of the Companies Act, 1956. The petition has not yet been admitted and a question has been raised as to whether notice of this application, under Section 394A, should be given to the Central Government before any order is made. Section 394A has been introduced by the Companies (Amendment) Act, 1965, which received the assent of the President on 25th September, 1965, and was published in the Gazette of India on 27th September, 1965. The section runs thus: "The court shall give notice of every application made to it under Section 391 or 394 to the Central Government, and shall take into consideration the representations, if any, made to it by that Government before passing any order under any of these sections."
(2.) As the point is of first impression and the application under Section 391 is at the moment being moved ex parte, I requested Mr. B. Das, the learned junior standing counsel, to assist me in this matter. I am grateful to Mr. Das and his learned junior, Mr. Basak, for the help they have given to me in coming to my conclusions. Before I proceed any further, it is necessary to set out the relevant provisions of Section 391 of the Act. " 39- Power to compromise or make arrangements with creditors and members.--(1) Where a compromise or arrangement is proposed-- (a) between a company and its creditors or any class of them; or (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 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. (2) If 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, 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 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 being wound up, on the liquidator and the contributories of the company............ (6) The court may, at any time after an application has been made to it under this section, stay the commencement or continuation of any suit or proceeding against the company on such terms as the court thinks fit, until the application is finally disposed of."
(3.) The procedure, therefore, in the case of a compromise or arrangement with creditors or members is that an application is first made to the court for convening a meeting to consider the proposal. After the meeting has accepted the proposal by the requisite majority, a second application to the court is necessary for the court's approval of the compromise or arrangement. The court has also the power of granting interim stay of suits or proceedings.;