Compromise and arrangement approval depends on members present and voting, with sanction possible if the scheme is fair and lawful.

Section 391(2) of the Companies Act, 1956 requires approval by a majority in number representing three-fourths in value of the creditors or members present and voting, and the "present and voting" requirement cannot be expanded into a three-fourths test of the entire class. The scheme discussed was treated as validly approved by the requisite majorities of equity shareholders, preference shareholders, bondholders and deposit holders, with non-attendance not amounting to dissent. The commentary also notes that a compromise or arrangement may be sanctioned even if it involves sale of assets, use of SLR securities, deferred repayment or waiver of post-appointed-date interest, provided it is fair, reasonable, bona fide and not contrary to public policy.

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Issues: Whether the scheme of compromise and arrangement was approved by the requisite statutory majority and whether it could be sanctioned despite objections based on the Reserve Bank of India Act, 1934 and the Companies Act, 1956.

Analysis: The statutory test under section 391(2) of the Companies Act, 1956 requires approval by a majority in number representing three-fourths in value of the creditors or members present and voting, and the words "present and voting" cannot be ignored by reading in a requirement of three-fourths of the total class. On the facts, the scheme was approved by the requisite majority of equity shareholders, preference shareholders, bond holders and deposit holders. Absence from the meeting did not amount to dissent, and the class meetings were held pursuant to the Court's orders. The Court also held that the scheme was not invalid merely because it contemplated sale of assets, use of SLR securities, deferred repayment and waiver of post-appointed-date interest, since the Court's power to sanction a compromise or arrangement is not barred merely because the scheme overrides otherwise applicable statutory obligations, so long as the statutory requirements are met and the scheme is fair, just, reasonable and not contrary to public policy. The objections of the Registrar of Companies, the Reserve Bank of India and the dissenting creditors were found insufficient to show illegality, fraud or unfairness.

Conclusion: The scheme was held to have been validly approved by the statutory majority and to be fit for sanction.

Ratio Decidendi: Under section 391(2) of the Companies Act, 1956, the requisite majority is computed from the members or creditors present and voting, and a scheme of compromise or arrangement may be sanctioned if it is fair, reasonable, bona fide and not contrary to public policy, even if it departs from ordinary repayment obligations, provided the Court's supervisory requirements are satisfied.

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