Scheme of arrangement procedure: court may relax convening formalities, but cannot dispense with the statutory shareholders' meeting.

In a scheme of arrangement under section 391 of the Companies Act, 1956, the Court may relax procedural formalities for convening and holding shareholders' meetings, including notice and advertisement, where justice so requires and the statute is not overridden. The power to regulate the manner of the meeting is broad, but it does not extend to dispensing with a statutory meeting requirement itself. Because the shareholders' meeting is a mandatory step for considering the scheme, it cannot be omitted altogether, although the meeting may be conducted informally with simplified procedure.

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Issues: Whether, in proceedings for a scheme of arrangement under section 391 of the Companies Act, 1956, the Court could dispense with the shareholders' meeting altogether and, in any event, dispense with the procedural formalities for convening and holding the meeting.

Analysis: Section 391 empowers the Court to direct a meeting to be held in such manner as it thinks fit, and the allied procedural rules recognise the Court's power to regulate practice and prevent abuse of process. On that basis, the Court may relax procedural formalities such as notice, advertisement and other convening requirements where the circumstances justify such relaxation and justice so requires. However, the Court cannot dispense with a requirement imposed by the statute itself. Since the meeting of shareholders is a statutory step for considering the proposed scheme, it cannot be omitted altogether, even if the meeting may be informal and the procedural steps may be simplified.

Conclusion: The request to dispense with the shareholders' meeting was rejected, but the Court permitted dispensation of convening formalities and issued directions for holding the meetings and reporting the result.

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