Court scrutiny of a company scheme requires more than majority approval; procedural compliance and fairness to creditors remain essential.

Sanction of a scheme of arrangement under sections 153 and 153-A of the Indian Companies Act required independent court scrutiny despite approval by the requisite majority of depositors and members. The court had to confirm compliance with statutory requirements, its own directions, proper convening and conduct of meetings, and whether the scheme was a reasonable arrangement fairly serving the company and its creditors. On the facts, the meetings were properly held and procedural requirements were met; the creditors' acceptance of a write-off was not lightly to be disturbed. The scheme was sanctioned with modifications and conditions, subject to judicial supervision of the management.

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Issues: Whether the scheme of arrangement under sections 153 and 153-A of the Indian Companies Act should be sanctioned, and whether it was in the interest of the company and its creditors.

Analysis: The scheme had been approved by the requisite majority in the meetings of depositors and members, but court sanction was still necessary because such approval does not operate automatically. The Court must verify compliance with statutory requirements and its own directions, consider whether the meetings were properly convened and conducted, and determine whether the scheme is a reasonable one that fairly serves the interests of the company and the creditors. On the facts, the meetings were properly held, the statutory and procedural requirements had been complied with, and the creditors' decision to accept a write-off could not be lightly disturbed. Although the Court expressed doubt about the prospects of revival, it accepted that the directors were serious about keeping the bank alive and that the present management should continue under judicial supervision.

Conclusion: The scheme was sanctioned with modifications and conditions, in favour of the petitioner bank.

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