Fixed depositors' statutory protections cannot be overridden by a compromise scheme under company law, and non-compliance was not excused.

Non-compliance with directions to convene creditors' meetings under section 391 of the Companies Act, 1956 was not condoned where the company's explanation was found unsatisfactory, its reliance on later reconstruction proposals was treated as an afterthought, and the Court considered the conduct lacking in bona fides. The Court also held that fixed depositors form a distinct class protected by the separate statutory regime under sections 58A and 58B and the Companies (Acceptance of Deposits) Rules, 1975. A compromise or reconstruction scheme under section 391 could not dilute or override those deposit protections, and no workable basis was shown for dealing with the deposit liabilities.

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Issues: (i) Whether the company's non-compliance with the earlier directions to convene creditors' meetings under section 391 of the Companies Act, 1956 could be condoned. (ii) Whether the company could be permitted to initiate a fresh proposal or modify the existing scheme so as to include fixed depositors governed by section 58A of the Companies Act, 1956 and the Companies (Acceptance of Deposits) Rules, 1975.

Issue (i): Whether the company's non-compliance with the earlier directions to convene creditors' meetings under section 391 of the Companies Act, 1956 could be condoned.

Analysis: The earlier order had required the convening of meetings of secured and unsecured creditors, but the company did not carry out the directions and instead relied on later developments to explain the omission. The Court held that the explanation was unsatisfactory. The matter involved a large body of creditors and several winding-up petitions were pending. The Court found that the reliance on the later reconstruction proposal was an after-thought and that the company's conduct lacked bona fides. In such proceedings, the Court stressed that it must be slow to condone non-compliance where the process of the Court is being used to obtain time and keep creditors at bay.

Conclusion: The non-compliance was not condoned and the relief was refused.

Issue (ii): Whether the company could be permitted to initiate a fresh proposal or modify the existing scheme so as to include fixed depositors governed by section 58A of the Companies Act, 1956 and the Companies (Acceptance of Deposits) Rules, 1975.

Analysis: The Court held that fixed depositors constitute a distinct class of creditors with rights materially different from trade or sundry creditors. Sections 58A and 58B, together with the Companies (Acceptance of Deposits) Rules, 1975, impose a separate statutory regime designed to secure repayment of deposits and to protect depositors through mandatory repayment obligations, liquid asset requirements, and penal consequences. A compromise scheme under section 391 could not be used to dilute or override those statutory protections. On the materials before it, the company was already in admitted breach of the deposit provisions, and the proposed reconstruction did not show a workable basis for dealing with the deposit liabilities.

Conclusion: The company was not permitted to initiate a fresh proposal or modify the existing scheme in so far as it involved the claims of fixed depositors.

Final Conclusion: The application failed in full, as the Court declined to excuse the company's default and held that the depositors protected by the statutory deposit regime could not be brought within the proposed compromise or reconstruction scheme.

Ratio Decidendi: A scheme of compromise under section 391 of the Companies Act, 1956 cannot be used to defeat the separate statutory rights of fixed depositors protected by section 58A and the Companies (Acceptance of Deposits) Rules, 1975, and ex parte directions for convening meetings will not be mechanically maintained where the applicant acts without bona fides and abuses the process of the Court.

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