Recall of sanctioned scheme of arrangement requires proved fraud or material suppression; alleged injunction breach did not invalidate the transfer.

A sanctioned scheme of arrangement can be recalled only on proof of fraud or legally material suppression, exercised sparingly under the court's inherent powers. Pending shareholder disputes were not treated as mandatory disclosure for sanction, and where the objector knew of the dispute, participated in the meetings, and the scheme was approved by the requisite majority, no fraud or misleading non-disclosure was established. A scheme and related share transfer are not invalidated by alleged breach of interim injunctions unless a subsisting restraint is shown to have been violated; completed transfer before the relevant date and later status quo orders defeated the challenge.

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Issues: (i) Whether the sanction already granted to the scheme of arrangement could be recalled on the ground of fraud or suppression of material facts; (ii) Whether the scheme and the transfer of shares were vitiated for having been undertaken in violation of interim injunction orders.

Issue (i): Whether the sanction already granted to the scheme of arrangement could be recalled on the ground of fraud or suppression of material facts.

Analysis: The application invoked the inherent powers of the Court under the Companies (Court) Rules, 1959. Such power can be exercised only sparingly and a sanctioned order may be recalled only if a proven fraud is shown. The Court found that disclosure of pending litigation between rival shareholder groups was not a mandatory material disclosure for the purposes of sanctioning the scheme. The objector was aware of the disputes, participated in the meetings, and the scheme had been approved by the requisite majority. On these facts, no fraud or misleading suppression sufficient to vitiate the sanction was established.

Conclusion: The sanction could not be recalled on the ground of fraud or non-disclosure.

Issue (ii): Whether the scheme and the transfer of shares were vitiated for having been undertaken in violation of interim injunction orders.

Analysis: The Court found that the relevant share transfer had been completed before the decisive date relied upon by the objector, and the interim restraint orders had either not been extended for the relevant period or had later been superseded by subsequent orders directing maintenance of status quo as on a later date. The objector had not earlier alleged violation, and the circumstances showed acceptance and acquiescence to the transfer. The scheme of arrangement and the related share transfers were therefore not shown to have breached subsisting injunctions.

Conclusion: The scheme and the share transfer were not invalidated by any violation of interim injunction orders.

Final Conclusion: The application failed on both the alleged grounds and the previously sanctioned scheme of arrangement was left undisturbed.

Ratio Decidendi: A sanctioned scheme of arrangement can be recalled only on proof of fraud or legally material suppression, and a mere inter se shareholder dispute or unproved allegation of injunction breach does not justify recall where the scheme has been approved by the requisite majority and the material transfer is not shown to violate a subsisting restraint.

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