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Issues: (i) Whether an unregistered foreign company could be brought within section 153 of the Indian Companies Act and whether the court had jurisdiction to entertain the application by creditors before and after a winding-up order. (ii) Whether, in the circumstances of a foreign company with parallel liquidation proceedings, this court should direct meetings of creditors and shareholders to consider the proposed scheme of arrangement. (iii) Whether the objections to the proposed scheme were so fundamental that the court should refuse to circulate it and decline to convene meetings.
Issue (i): Whether an unregistered foreign company could be brought within section 153 of the Indian Companies Act and whether the court had jurisdiction to entertain the application by creditors before and after a winding-up order.
Analysis: The provision was treated as applicable both to a going company and to a company in liquidation. An unregistered foreign company was held to fall within the expression "company liable to be wound up", and the word "court" was construed contextually so that the provision would not be rendered ineffective for such a company. The application was also held maintainable at the instance of creditors, not merely the liquidator, even after a winding-up order.
Conclusion: The application under section 153 was maintainable and the court had jurisdiction to entertain it.
Issue (ii): Whether, in the circumstances of a foreign company with parallel liquidation proceedings, this court should direct meetings of creditors and shareholders to consider the proposed scheme of arrangement.
Analysis: The court held that parallel proceedings in different jurisdictions did not bar a scheme being initiated in this court. The scheme could be proposed and tested before the creditors, with the understanding that effectiveness on the whole concern would depend on adoption by the other courts concerned. The statutory power was viewed as designed to ascertain the wishes of creditors and members, and the court emphasised that the scheme should be considered on correct and updated information.
Conclusion: Directions for meetings of creditors and shareholders were warranted.
Issue (iii): Whether the objections to the proposed scheme were so fundamental that the court should refuse to circulate it and decline to convene meetings.
Analysis: The objections, including alleged impracticability, alleged unfairness to creditors, and doubts about the financial basis of the proposal, were held not to justify rejection at the proposal stage. Most objections were capable of modification by the creditors themselves. The court therefore required a further report from the liquidators and, once the updated financial material showed the scheme's basis was not untenable, directed that the scheme be placed before the creditors and shareholders.
Conclusion: The scheme was not rejected at the threshold and was ordered to be circulated for consideration.
Final Conclusion: The judgment sustained the court's jurisdiction over the foreign company, recognised creditor standing under the compromise provision, and directed that the proposed reconstruction scheme be considered by meetings of the relevant classes on the basis of updated financial information.
Ratio Decidendi: A foreign unregistered company liable to be wound up can be treated as within the compromise provision, and the court should not refuse to convene meetings unless the proposed scheme is illegal or incapable of meaningful modification.
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