Supervisory powers under a sanctioned scheme cannot rewrite the scheme or import private arrangements contrary to public resource controls.

The Supreme Court explained that Section 392 of the Companies Act permits continuing supervision of a sanctioned scheme to remove working impediments, but not to rewrite its basic terms or import undisclosed private arrangements. A private memorandum of understanding, executed outside the corporate process and not approved by shareholders, could not become a binding term of the scheme. Gas-supply agreements also could not override governmental approval, the utilisation policy or the PSC, because the contractor had no physical share in natural gas. "Suitable arrangement" therefore meant an arrangement consistent with the scheme, the PSC and government policy, to be worked out by renegotiation.

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Issues: (i) Whether the company application under Section 392 of the Companies Act, 1956 was maintainable and the Court could supervise the sanctioned scheme; (ii) Whether the private memorandum of understanding was binding on the company and could be read into the scheme as the basis of the gas-supply arrangement; (iii) Whether the gas-supply master agreement and gas sale purchase agreement could override governmental approval, the utilization policy and the PSC, and whether the contractor obtained a physical share in natural gas; (iv) What is the correct meaning of "suitable arrangement" under the scheme.

Issue (i): Whether the company application under Section 392 of the Companies Act, 1956 was maintainable and the Court could supervise the sanctioned scheme.

Analysis: Section 392 confers a continuing supervisory power to remove impediments in working a sanctioned scheme, but not to rewrite the scheme or alter its basic fabric. The Court may make only such changes as are necessary for proper working of the arrangement. A substantive substitution of the scheme, or incorporation of terms never disclosed to shareholders, lies beyond that jurisdiction.

Conclusion: The application was maintainable, but the Court could not rewrite the scheme or import new substantive terms into it.

Issue (ii): Whether the private memorandum of understanding was binding on the company and could be read into the scheme as the basis of the gas-supply arrangement.

Analysis: The memorandum of understanding was a private family arrangement executed outside the corporate domain. It was not approved by shareholders, was not part of the sanctioned scheme, and the board acted independently in formulating the scheme. Though the memorandum may serve as an external aid to understand the background, it cannot displace the language of the scheme or become binding on the company merely because it preceded the reorganisation.

Conclusion: The memorandum of understanding was not legally binding on the company and could not be incorporated into the scheme as a controlling term.

Issue (iii): Whether the gas-supply master agreement and gas sale purchase agreement could override governmental approval, the utilization policy and the PSC, and whether the contractor obtained a physical share in natural gas.

Analysis: Natural gas from the relevant offshore block vested in the Union and was subject to constitutional and statutory control. Under the PSC, the contractor's entitlement was to the value realised from sale of petroleum, not to a physical share of gas. The Government retained power to frame a utilisation policy and to approve the price formula before sale. Private arrangements could not defeat the Government's supervisory role over a scarce national resource or negate the effect of the PSC.

Conclusion: The gas-supply agreements could not prevail over governmental approval, utilisation policy, or the PSC, and no physical share in the gas vested in the contractor.

Issue (iv): What is the correct meaning of "suitable arrangement" under the scheme.

Analysis: "Suitable arrangement" had to be construed broadly in light of the interests of both corporate groups, the rights of shareholders, the Government's powers under the PSC, the utilisation policy and broader national interest. The expression did not mean that the commercial terms in the memorandum of understanding automatically became binding, nor did it authorise the Court to create a new bargain. The matter had to be worked out through renegotiation within the governing public-law and contractual framework.

Conclusion: "Suitable arrangement" meant an arrangement conforming to the scheme, the PSC and governmental policy, not the private memorandum of understanding.

Final Conclusion: The impugned orders of the High Court were set aside. The parties were directed to renegotiate the gas-supply arrangement without importing the memorandum of understanding, and only within the framework of governmental policy, price approval, quantity allocation and tenure under the PSC.

Ratio Decidendi: A court exercising supervisory powers over a sanctioned scheme may facilitate its working, but cannot rewrite the scheme by importing undisclosed private arrangements or by compelling terms that conflict with constitutional control over natural resources, the governing PSC and the Government's approved utilisation policy.

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