1934 (5) TMI 16 - HC - Companies Law

Court sets aside order modifying arrangement under Companies Act, emphasizing party consent in scheme modifications.

Mihirendra Kishore Dutt Versus Brahmanbaria Loan Co. Ltd.

The Court allowed the appeal and set aside the order sanctioning the modified scheme of arrangement under Section 153 of the Companies Act. It held that ... Compromise and arrangement Issues:- Sanction of a scheme of arrangement under Section 153 of the Companies Act- Authority of the Court to impose conditions or modifications on the scheme without consent- Comparison with relevant case law on the Court's power to modify schemesAnalysis:The judgment pertains to an appeal from an order sanctioning a scheme of arrangement under Section 153 of the Companies Act. The scheme was proposed by a company and a body of creditors, aiming to address the company's financial difficulties. The Court, in this case, had the authority to order a meeting of creditors to vote on the proposed arrangement. If a majority representing three-fourths in value of the creditors agree to the compromise, it becomes binding on all parties involved. The scheme in question underwent modifications before being presented for sanction, leading to opposition from certain creditors, including the appellant.The Court initially refused to sanction the scheme but later reversed its decision, imposing a time limit and additional conditions not agreed upon by the parties. The appellant contended that the Court exceeded its authority by unilaterally adding conditions to the scheme without consent. The appellant's argument was supported by legal precedent indicating that in the absence of provisions empowering someone to assent to modifications, the Court cannot impose conditions that alter the scheme fundamentally. The Court cited a case where modifications were only sanctioned because the liquidator was present and agreed to them.Ultimately, the Court held that without the consent of the parties involved, especially the unrepresented creditors, it was improper for the Court to impose modifications on the scheme. The appeal was allowed, setting aside the order sanctioning the modified scheme. Costs were awarded to the appellants against the company, with the Comilla Union Bank's costs to be added to their claim. The judgment reaffirmed the principle that the Court cannot unilaterally alter a scheme of arrangement without the consent of the parties, as established by relevant case law and legal precedents.In a concurring opinion, Lort-Williams, J., agreed with the analysis and decision of the Court, emphasizing the importance of party consent in modifying schemes of arrangement under the Companies Act.