Compromise in pending winding-up proceedings can extend to an unregistered company before a formal winding-up order is made.

Sections governing compromise or arrangement in winding-up proceedings applied to an unregistered company once winding-up proceedings had been initiated, even though no formal winding-up order had yet been made. The court read the winding-up machinery and its ancillary powers as extending to that stage, relying on the corresponding English interpretation adopted in substantially similar statutory language. On that construction, the compromise application was competent. The proposed scheme was then amended to protect excluded creditors and the interests of creditors generally, and the amended scheme was sanctioned.

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Issues: Whether sections governing a scheme of compromise or arrangement under the Companies Act, 1913 were applicable to an unregistered company while winding-up proceedings were pending, and whether the proposed scheme could be sanctioned.

Analysis: The application for compromise was made after a winding-up petition had been filed and while the proceedings were still pending. The provision dealing with compromise or arrangement applied to a company liable to be wound up, and the provision concerning unregistered companies was read as extending the winding-up machinery, and the ancillary powers attached to it, to the stage before an actual winding-up order. The construction adopted was supported by the authoritative interpretation given to the corresponding English provision, and that interpretation was treated as governing the Indian enactment because the language had been substantially adopted from it. On that basis, the proceedings taken under the compromise provision were held to be competent. The proposed scheme was then considered and amended to protect excluded creditors and the interests of creditors generally before approval.

Conclusion: The compromise proceedings against the unregistered bank were competent, and the amended scheme was sanctioned.

Ratio Decidendi: Provisions authorising compromise or arrangement in winding-up proceedings apply to an unregistered company once winding-up proceedings have been initiated, even before a formal winding-up order is made.

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