Sanction of compromise schemes denied where disclosure is inadequate and the proposal is infeasible, leading to compulsory winding up.

Sanction of the directors' scheme under Section 153 was refused because the proposal was not a genuine reconstruction, lacked full and accurate disclosure, and was infeasible and unjust to creditors; the company's provisional liquidators reported liabilities exceeding realizable assets, significant irrecoverable advances to directors and associates, undisclosed branch positions, and misleading representations at meetings. The consequence is rejection of the scheme, enforcement of compulsory winding up and dismissal of the appeals.

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Issues: Whether the scheme presented by the directors under Section 153 of the Indian Companies Act should be sanctioned by the Court or rejected with a compulsory winding up directed.

Analysis: The Court examined the scheme and the company's financial position, including the provisional liquidators' report showing liabilities exceeding realisable assets and large irrecoverable advances to directors and their associates. The Court considered that shareholder and creditor approvals are persuasive but not binding; the Court must determine whether a scheme is fair, reasonable and feasible in light of full and accurate disclosure. The scheme before the Court was not a reconstruction but a protracted voluntary liquidation that would give depositors only partial recovery, ignored non-depositor creditors, relied on a nonexistent reserve fund entry, and was supported by meetings after circulation of misleading representations. Additional concerns included undisclosed branch positions, alleged post-appointment withdrawals, and significant bad advances. Taken together these factors rendered the scheme infeasible and unjust to creditors and inappropriate for sanction.

Conclusion: The scheme is rejected and the order for compulsory winding up is to be enforced; the appeals are dismissed.

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