Public deposit protections limit compromise schemes; transferred proceedings stay under the original company law framework.

A compromise and arrangement scheme could not be used to dilute the special statutory protections governing public deposits, because fixed deposit holders form a separate protected class under the deposit regime and their rights cannot be recast under the general scheme provisions. The challenge to the scheme therefore failed on that ground. After transfer of the proceedings, the matter remained to be decided under the Companies Act, 1956 as originally filed, and the transfer did not convert it into a fresh proceeding under the Companies Act, 2013. SEBI's absence did not vitiate the order, since the Regional Director and Central Government were the relevant authorities for objections in such proceedings.

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Issues: (i) Whether a compromise and arrangement scheme with fixed deposit holders could be sanctioned under Sections 391 and 394 of the Companies Act, 1956 in view of the statutory regime governing public deposits under Section 58A of that Act. (ii) Whether, after transfer of the proceedings, the matter had to be decided under the Companies Act, 2013 and whether the absence of SEBI hearing vitiated the order.

Issue (i): Whether a compromise and arrangement scheme with fixed deposit holders could be sanctioned under Sections 391 and 394 of the Companies Act, 1956 in view of the statutory regime governing public deposits under Section 58A of that Act.

Analysis: Fixed deposit holders were treated as a separate class of creditors governed by a specific protective provision for public deposits. The statutory scheme for acceptance and repayment of deposits was held to be a special regime intended to safeguard depositors and could not be diluted by recasting the deposit liability as a compromise under the general compromise and arrangement provisions. The Court relied on the settled position that such depositors stand outside a proposal for compromise where the effect would be to nullify the statutory remedies and protections available to them.

Conclusion: The scheme with fixed deposit holders was not legally sustainable and its rejection was upheld.

Issue (ii): Whether, after transfer of the proceedings, the matter had to be decided under the Companies Act, 2013 and whether the absence of SEBI hearing vitiated the order.

Analysis: The petition had been instituted under the Companies Act, 1956, and the transfer of pending proceedings did not convert it into a fresh petition under the Companies Act, 2013. The proceedings were to be decided in the framework in which they were originally filed. The Court also held that SEBI had no determinative role in a scheme under Sections 391 and 394 of the Companies Act, 1956, while the Regional Director and Central Government were the proper authorities to place objections before the Tribunal. The Tribunal's order was therefore not vitiated on jurisdictional or procedural grounds.

Conclusion: The challenge based on the Companies Act, 2013 and SEBI participation failed.

Final Conclusion: The Tribunal's decision rejecting the scheme was affirmed, the appeal failed, and the consequential reliefs granted by the Tribunal remained operative.

Ratio Decidendi: A scheme of compromise and arrangement cannot be used to override a special statutory regime protecting public depositors, and proceedings transferred from the old company law regime must be decided within the legal framework under which they were originally instituted unless the statute expressly provides otherwise.

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