Individual creditor relief during pending scheme sanction allowed, with unpaid principal ordered and further interest refused.

Pending sanction of a scheme of arrangement, individual creditor claims are not barred in principle, and the court may exercise its inherent power to grant limited equitable relief where hardship is shown. The proposed scheme does not bind dissenting or individual creditors until court sanction is granted, but there is no statutory bar to entertaining a payment application in appropriate cases. In hardship circumstances, the court may direct payment of the unpaid principal within a fixed time while declining further interest and any penalty.

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Issues: (i) Whether individual creditors could seek direction for payment while an application for sanction of a scheme of arrangement under the Companies Act was pending. (ii) Whether the applicants were entitled to further payment, including whether interest should be dispensed with and penalty imposed.

Issue (i): Whether individual creditors could seek direction for payment while an application for sanction of a scheme of arrangement under the Companies Act was pending.

Analysis: A compromise or arrangement approved by the majority of creditors becomes binding only after sanction by the Court. Until sanction is granted, the proposed scheme does not bind dissenting or individual creditors. Although individual payment requests would ordinarily await the outcome of the sanction petition, the Court retained power to entertain such an application in appropriate cases, and no statutory bar excluded that jurisdiction. The Court held that its inherent power to do complete justice remained available where the facts warranted departure from the normal course.

Conclusion: The application was maintainable and the Court could grant directions despite the pending scheme-sanction proceedings.

Issue (ii): Whether the applicants were entitled to further payment, including whether interest should be dispensed with and penalty imposed.

Analysis: The applicants were elderly and suffering from serious ailments, and the record showed genuine urgency and hardship. Special provision had already been made in the earlier regulatory order for hardship cases. Having regard to the amount already paid, the unpaid balance of the maturity amount, and the pendency of the scheme proceedings, the Court considered that equitable relief would be sufficient if the remaining principal was paid within a fixed time. The claim for further interest was declined in the circumstances, and no basis was found for imposing penalty.

Conclusion: The applicants were entitled only to payment of the unpaid principal amount, without further interest, and the prayer for penalty was rejected.

Final Conclusion: Relief was granted to the applicants by directing payment of the remaining maturity amount, while limiting the relief to the unpaid principal and declining additional interest and penalty.

Ratio Decidendi: Pending sanction of a scheme of arrangement, individual creditor claims are not barred in principle, and the Court may grant limited equitable relief in extraordinary hardship cases by exercising its inherent power to do complete justice.

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