Sanctioned scheme under Section 153 binds decree-holders; execution cannot be resisted by collateral attack on procedural irregularities.

A scheme of arrangement sanctioned under Section 153, when the sanctioning court had jurisdiction, operates as a binding judicial pronouncement on listed creditors and decree-holders; therefore an executing court must give effect to the sanctioned scheme. Procedural irregularities or failure to convene particular decree-holders do not permit a collateral attack in execution proceedings unless the sanctioning order is shown to be without jurisdiction. Objections to irregularities must be pursued by appropriate proceedings to set aside or modify the sanctioning order, not by resisting execution.

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Issues: (i) Whether a decree-holder who obtained a decree before a scheme of arrangement was sanctioned under Section 153 of the Companies Act is bound by that court-sanctioned scheme and thereby barred from executing his decree.

Analysis: The issue arises where a company in financial difficulty entered into a proposed scheme of arrangement under Section 153, notice of which was served on depositors; subsequently the depositor obtained a decree and later the High Court sanctioned a scheme described as binding on depositors (including those shown in the company books). The question for the executing court is whether it may refuse execution on the ground that decree-holders were not separately convened or that procedural irregularities attended the sanction. A sanctioned scheme under Section 153, when validly within the jurisdiction of the sanctioning court, has the force of a judicial pronouncement; defects amounting to irregularity in procedure do not necessarily render the sanctioned order void. Where the sanctioning court had jurisdiction, objections to irregularities in the sanctioning process must be remedied by appropriate proceedings to set aside or modify the sanctioning order rather than by collateral attack in execution proceedings.

Conclusion: The decree-holder is bound by the scheme sanctioned under Section 153 and cannot, in execution proceedings, challenge the scheme on grounds of procedural irregularity which do not show the sanctioning order to be without jurisdiction; the executing court must obey the sanctioned scheme.

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