Recall of sanctioned scheme requires proof of fraud or material suppression; pending shareholder disputes alone do not vitiate approval.

Recall of a sanctioned scheme of arrangement requires clear proof of fraud or material suppression, and inherent powers to set aside approval are exercised sparingly. Pending shareholder disputes do not, by themselves, require disclosure of every disagreement where the affected parties were aware of the litigation and participated in the meetings. On the facts noted, no misleading non-disclosure was established, and the allegation of fraud failed. The claimed breach of interim injunctions also was not made out because the relevant share transfer had occurred before the operative injunction dates or when the orders were not in force. The application for recall of the sanction was dismissed as misconceived and without merit.

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Issues: (i) whether the sanction to the Scheme of Arrangement was liable to be recalled for alleged non-disclosure of material facts and fraud on the Court; (ii) whether the Scheme and the transfer of shares were sanctioned in violation of interim injunction orders.

Issue (i): whether the sanction to the Scheme of Arrangement was liable to be recalled for alleged non-disclosure of material facts and fraud on the Court.

Analysis: The application sought recall of the sanction order under the inherent powers of the Court. Such power can be exercised only sparingly and only where fraud is clearly established. The Court held that section 393(1)(a) of the Companies Act, 1956 does not require disclosure of every pending dispute between shareholders and that the objector, who was aware of the litigation and participated in the meetings, had not shown that the shareholders were misled. In the circumstances, no proven fraud or material suppression was made out.

Conclusion: The plea of fraud and non-disclosure was rejected and the sanction order was not liable to be recalled on that ground.

Issue (ii): whether the Scheme and the transfer of shares were sanctioned in violation of interim injunction orders.

Analysis: On the facts found, the relevant share transfer had taken place before the operative injunction dates relied upon by the objector, the later orders were either not in force for the relevant period or had become infructuous, and the objector had not earlier pursued any allegation of violation. The Court therefore held that the Scheme of Arrangement and the share transfers were not shown to have been effected in breach of binding interim orders.

Conclusion: The allegation of violation of injunction was not accepted.

Final Conclusion: The objector failed to establish any ground warranting recall of the sanctioned Scheme, and the application was dismissed as misconceived and without merit.

Ratio Decidendi: Recall of a sanctioned scheme is justified only on proof of fraud or material suppression of facts, and pending inter se shareholder disputes do not, by themselves, vitiate approval of a scheme where the shareholders have acted with knowledge and the scheme is otherwise just, fair and reasonable.

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