Compromise and arrangement availability for unregistered companies once winding up proceedings are instituted, permitting scheme sanction.

Section 153's remedy for compromise or arrangement is held applicable to unregistered companies once winding up proceedings have been instituted but before a formal winding up order is made; the statutory scheme limits "company" to those liable to be wound up, and Part IX treats unregistered companies as companies only upon being wound up, a phrase construed to include the period after commencement of winding up proceedings. The operative effect is that meetings and scheme procedures under the compromise provision may be validly invoked and a sanctioned scheme may follow while proceedings are pending.

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Issues: Whether Section 153 of the Indian Companies Act, 1913 (scheme of compromise or arrangement) is available in relation to an unregistered company at a stage prior to the making of an actual winding up order, where winding up proceedings have been instituted.

Analysis: Section 153 contains a special definition that confines the expression "company" for the purposes of that section to companies liable to be wound up under the Act; the general definition of "company" in Section 2 likewise refers to companies formed and registered under the Act. The expression "liable to be wound up" restricts application to companies exposed to winding up, the conditions for which are specified in Sections 162 and 203. Section 276 (part IX) provides that the provisions of that part apply to unregistered companies and empowers the Court or official Liquidator to exercise powers in relation to unregistered companies, but contains the proviso that an unregistered company shall not be deemed to be a company under the Act except in the event of its being wound up and then only to the extent provided by that part. The Court considered English authority interpreting the corresponding English provision (Budow v. Great Britain Mutual Life Assurance Society) and concluded that the phrase "in the event of its being wound up" has been authoritatively construed to include the period subsequent to the commencement of winding up proceedings but prior to the actual making of a winding up order. Applying that interpretation to Section 276 and related provisions of the Indian Act, and noting that winding up proceedings in the present case had been instituted and were pending, the Court held that the procedures under Section 153 may be invoked in respect of an unregistered company at that stage.

Conclusion: Section 153 of the Indian Companies Act, 1913 is available in relation to an unregistered company once winding up proceedings have been instituted and prior to the making of an actual winding up order; accordingly the compromise/arrangement meeting and the scheme proceedings under Section 153 in this case are competent and the scheme as amended is sanctioned.

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