Sanctioned scheme of arrangement superseded earlier repayment direction, removing the basis for a prima facie section 58A(9) breach.

A complaint for alleged non-compliance with an earlier repayment direction under the Companies Act, 1956 could not be sustained after the same repayment scheme was merged into a later scheme of arrangement sanctioned by the High Court under sections 391 and 394. The sanctioned scheme operated with statutory force and superseded the earlier Company Law Board-directed arrangement, and repayments were in fact made under the later scheme. In that setting, the factual basis for a prima facie breach of section 58A(9) did not survive, making the summoning order vulnerable and the complaint liable to quashing.

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Issues: Whether the complaint and summoning order could be sustained when the scheme of repayment earlier approved by the Company Law Board had merged in a later scheme of arrangement sanctioned by the High Court, and whether such merger negatived any prima facie contravention of section 58A(9) of the Companies Act, 1956.

Analysis: The petitioners were proceeded against for alleged non-compliance with the Company Law Board's order directing repayment of matured deposits. Before the complaint was filed, however, the company had already moved the High Court for sanction of a restructuring and arrangement scheme under sections 391 and 394 of the Companies Act, 1956, and the Regional Director had informed the Court that the earlier scheme was proposed to be implemented as part of the new arrangement. The later scheme was sanctioned by the High Court, and the parties acted upon it by making repayments. The scheme sanctioned by the Court operated with statutory force and supplanted the earlier arrangement directed by the Company Law Board. In these circumstances, the factual foundation for alleging a deliberate or prima facie breach of section 58A(9) did not survive.

Conclusion: The complaint could not be sustained against the petitioners, and the summoning order was liable to be set aside; the petitioners were entitled to discharge and quashing of the complaint.

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