1. After having heard the learned counsel for the parties, the parties have tendered minutes of the order signed by the learned counsel in terms of which they have no objection to the order being passed. However, before doing so, we propose to give short-reasoned order in this case.
2. A few facts that are of some relevance are as under :
On November 21, 1980, a judge's summons for direction under s. 391 of the Companies Act was taken out by respondent No. 2 herein, M/s. Centron Industrial Alliance Ltd. (hereinafter referred to as 'Centron'), for sanction of the scheme of amalgamation of the company with Broke Bond India Ltd. On the said summons, the court directed that the scheme be advertised and a meeting of the shareholders and the creditor, both secured and unsecured, of the company be held. On January 26, 1981, the scheme was advertised in the Times of India. At the meeting held January 27, 1981, to consider the scheme as directed by the court, the scheme was approved by 97.30% of the shareholders, 100% of the secured creditors and 98.50% of the unsecured creditors. Thereupon the company filed before the company judge on March 6, 1981, a petition being Company Petition No. 84 of 1981 for sanctioning the said scheme.
3. During the time the said scheme was being considered at the meeting, an alternative scheme was proposed under which one Harbans Lal Malhotra & Sons Ltd., who were competitors in trade of the company, were to take over on lease the factory premises of the company. However, the said alternative scheme was rejected by the directors and the two secured creditors of the petitioner company as not being advantageous to the company.
4. Simultaneously, the company made an application to the Central Government for the approval of the said scheme under the provisions of s. 23 of the Monopolies and Restrictive Trade Practices Act, 1969 (hereinafter referred to as 'the MRTP Act'). The petitioner company's said application was strongly opposed by the Malhotras, while it was strongly supported by the secured creditors. The Central Government by its order dated January 21, 1982, granted its approval to the said scheme. The Malhotras then by Special Leave Application No. 1753 of 1982 moved the Supreme Court against the order of the Central Government dated January, 21, 1982. The Supreme Court, however, by its order dated March 12, 1982, declined to stay further proceedings in any of the High Courts or any authority but ordered that any order passed would be subject to the result of the appeals. It also directed that in the event of either of the High Courts sanctioning the scheme of amalgamation, the judgment will not take effect for a period of four weeks.
5. After the said order of the Supreme Court was passed, one Pravin Kantilal Vakil, who is appellant No. 1 in this case, as a shareholder of the company, lodged a requisition dated May 28, 1982, signed by the requisite number of shareholders at the registered office of the company for holding an extraordinary general meeting of the company on July 9, 1982, to consider and if found fit to pass the following resolution :
'Resolved that the company renegotiate with Brooke Bond India Ltd. and/or examine alternate scheme(s) in the interest of the company and for the purpose FURTHER RESOLVED that the company should withdraw Petition No. 84 of 1981 filed in the High Court in Bombay from the date of this resolution.'
6. The directors of the petitioner company, therefore, issued to the shareholders of the company a notice of the said extraordinary general meeting as called by the requisitionists to be held on July 9, 1982, to consider and if thought fit to pass the above mentioned resolution. The notice was also accompanied by an explanatory statement given by the requisitionists.
7. Before the said meeting was held, one Bhagwandas Kapadia, another shareholder of the company, filed a suit, being Suit No. 3652 of 1983, in the City Civil Court, Bombay for an injunction restraining the company from holding the said extraordinary general meeting. In the said suit, he also took out a notice of motion for a similar relief. The court, however, dismissed the notice of motion and refused to grant any injunction. Thereafter, the first respondent herein, Mrs. Rohini Save, also a shareholder of the company, took out the judge's summons in the company's said petition, being Company Petition No. 84 of 1981, for sanctioning the said amalgamation scheme and for an injunction against the petitioner company from holding the said requisitioned extraordinary general meeting and transaction there at the business set out in the said notice. The said judge's summons came to dismissed by Mrs. Sujata Manohar J., by her judgment and order dated August 13/16, 1982 against which this appeal has been filed.
8. On the basis on which the matter appears to have been argued before the learned judge, the learned judge found that the notice of the meeting showed that the meeting was basically called to make the company withdraw Company Petition No. 84 of 1981, pending before the court for sanctioning of the scheme of amalgamation with Brooke Bond India Ltd. and make the company resell from the approval already given to the scheme as the reading of the said notice showed that the last proposed resolution, viz., withdrawal of the petition for sanction of the scheme pending before the court, was for the purpose of passing the earlier two resolutions. On that basis, the learned judge held that so long as the petition was before the court for sanctioning the scheme and the court was seized of the matter, the company cannot be compelled to resell from its statutory obligation and, therefore, the requisition was misconceived. The learned judge, therefore, granted an injunction against the company from holding the said meeting for considering all the three proposed resolution as mentioned in the said notice.
9. However, at the hearing before us, the learned counsel for the appellants did not press this appeal in so far as the order of injunction related to the last two proposed resolutions, viz, (1) 'Resolution to examine alternative scheme(s) in the interest of the company, and (2) a resolution that the company should withdraw Petition No. 84 of 1981, filed in the High Court in Bombay from the date of this Resolution.' The lower court's order so far as it restrains the company from considering at the meeting the said two resolutions would, therefore, stand confirmed.
10. In view of the appeal not being pressed as regards the last two resolutions mentioned in the said notice, the only part of the order that could survive for consideration would be the holding of the said meeting for passing the first resolution, viz., to renegotiate with Brooke Bond India Ltd.
11. If one reads the said resolution, viz., to renegotiate with Brooke Bond India Ltd., as stated in the notice, which as it is, in broader terms, along with that part of the explanatory note relating to the said resolution, it was clear that what was sought to be discussed at the said meeting was the renegotiation of only a term in the scheme of amalgamation with Brooke Bond India Ltd., viz., the proposed share exchange ratio of one share of the Brooke Bond India Ltd., to five shares of the company, as the same was, according to the requisitionist, not fair and equitable to the shareholders of the company for the reasons mentioned in the explanatory note. It was, therefore, clear that what the shareholders were seeking to do by proposing the said resolution was to discuss only the modification to the scheme already before the court for sanction in Company Petition No. 84 of 1981. The question was whether the court can prevent the shareholders from doing so on the ground that a scheme of amalgamation was already pending before the court for sanction.
12. Sections 391 and 392 of the Companies Act, 1956, read with r. 79 of the Companies (Court) Rules, 1959, provide for the sanction by the court of a scheme of arrangement or compromise.
13. Under s. 391(1), where a compromise or arrangement is proposed, the court may, on the application of a company or of any creditor or member of the company, order a meeting of the creditors or class of creditors, or of members or class of members, as the case may be, to be called, held and conducted in such manner as the court directs. Admittedly, in this case, on the summons for direction taken out by the company, such a meeting was held on the direction of court at which the shareholders and creditors of the company both secured and unsecured, had overwhelmingly approved of the Scheme.
14. Then the next step under r. 79 of the Companies (Court) Rules was that when the proposed arrangement or compromise was approved at the said meeting with or without modification, the company (or its liquidator, as the case may be) was required within seven days of the filing of the report to the chairman, to present a compromise or arrangement and the court after hearing the parties concerned proceeds to sanction the compromise. In this case, the company has presented a petition to the court being Company Petition No. 84 of 1981, for sanction of the said scheme as approved by the shareholders and creditors of the company, which is pending before the court.
15. Under s. 391(2), on such petition being presented, it was the court who is to sanction the scheme.
16. Section 392 of the Companies Act gives wide powers to the court to give such directions in regard to any matter or make such modification in the compromise or arrangement as it may consider necessary for the proper working of the compromise or arrangement, arrived at. It is not disputed that under the said section 392 any such modification in the scheme could be considered by the court even at the instance of any shareholder.
17. In that event, a mere discussion by the shareholders at a properly requisitioned meeting about the proposed modification to the scheme pending before the court for sanction and if approved, passing a resolution to that effect, would not by itself affect either the scheme or the court's powers to consider the modification and sanction the scheme with or without modification.
18. On the basis that at the properly requisitioned meeting, the shareholders were to discuss and if necessary to approve by resolution only a modification to the scheme pending sanction before the court, in our view, there was nothing either in the Companies Act or Rules made thereunder empowering the court to prevent the company from doing so.
19. Since the company has now agreed to restrict the holding of the requisitioned meeting, which it is not disputed, is properly requisitioned only to the consideration of the first resolution, viz., to renegotiate with Brooke Bond India Ltd. read with the part of the explanatory note connected therewith, the court would not be justified in preventing them from doing so.
20. In the view that we are taking, it was not necessary to consider the further contention of Shri Parekh, the learned counsel for the appellant, that the company court had no jurisdiction or had no power to deal with this question.
21. With this, the order in the appeal would be in terms of the minutes of the order signed by the counsel for the parties and handed in.