Sanctioned composition scheme binds decree-holders and bars execution of prior decrees against the company.

A sanctioned composition scheme under Section 153 of the Indian Companies Act bound all creditors of the company, including judgment-creditors, and therefore could bar execution of decrees obtained before the scheme. The Section 47 CPC objection succeeded because the prior date of the decrees did not prevent the composition from operating on them; otherwise the object of the scheme would be defeated. The execution proceedings could not continue, and the appeals were allowed with the execution cases dismissed.

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Issues: Whether a scheme of composition under Section 153 of the Indian Companies Act, once filed, sanctioned and passed by the creditors, barred execution proceedings on decrees obtained before the scheme.

Analysis: The objection under Section 47 of the Code of Civil Procedure turned on the legal effect of the composition scheme. The decrees sought to be executed had been passed before the scheme, but the scheme, once sanctioned in accordance with the Indian Companies Act, was held to apply to all creditors of the company, including judgment-creditors. The prior date of the decrees did not prevent the scheme from operating on them, because otherwise the object of the composition would be defeated.

Conclusion: The execution proceedings could not continue, and the objection of the judgment-debtor company succeeded.

Final Conclusion: The appeals were allowed and the execution cases were dismissed, as the sanctioned composition scheme displaced the decree-holders' right to pursue execution.

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