Notice and hearing under company compromise procedure extend to preliminary applications, with procedural discretion to regulate service.

Notice under section 394A was held to extend to every application under section 391, including an application under section 391(1) before directions are issued to convene a meeting, so notice to the Central Government is required at that stage. The court also held that shareholders whose interests may be affected are entitled to notice and hearing before such directions are made, as they are necessary parties to the preliminary stage of the jurisdiction. The court further recognised a procedural discretion to regulate service in the interests of convenience and expedition, including dispensing with service of the supporting affidavit on shareholders.

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Issues: (i) Whether notice of an application under section 391(1) of the Companies Act, 1956 must be given to the Central Government before directions are issued to convene a meeting; (ii) Whether the shareholders are entitled to notice and hearing at the stage of an application under section 391(1); (iii) Whether the court may regulate service of notice and dispense with copies of the supporting affidavit in the interest of convenience and expedition.

Issue (i): Whether notice of an application under section 391(1) of the Companies Act, 1956 must be given to the Central Government before directions are issued to convene a meeting.

Analysis: The expression used in section 394A is every application made to the court under section 391 or 394. The language was treated as comprehensive and not confined to a later petition under section 391(2). The procedural rules governing applications by summons and by petition did not justify cutting down the statutory mandate. The court also held that the absence of a specific rule on notice to the Central Government did not create a conflict with the statute.

Conclusion: Notice to the Central Government is required at the stage of an application under section 391(1).

Issue (ii): Whether the shareholders are entitled to notice and hearing at the stage of an application under section 391(1).

Analysis: The court held that the hearing on summons under the relevant rules necessarily involves consideration of matters affecting the interests and convenience of the shareholders whose meetings may be ordered. In the absence of a clear statutory exclusion, the nature of the jurisdiction under section 391(1) required that persons directly interested in the proposed meeting be heard before directions are made. The shareholders were treated as necessary parties for the preliminary stage.

Conclusion: The shareholders are entitled to notice and hearing before directions are issued under section 391(1).

Issue (iii): Whether the court may regulate service of notice and dispense with copies of the supporting affidavit in the interest of convenience and expedition.

Analysis: The rules governing service were treated as flexible enough to permit adaptation by the court. Since the supporting affidavit was lengthy and service on numerous shareholders could cause delay and expense, the court exercised its procedural discretion to simplify service while preserving notice to the interested parties.

Conclusion: The court may regulate service and dispense with service of the supporting affidavit on the shareholders.

Final Conclusion: The preliminary objections were rejected in substance, and the application was directed to proceed with notice to the Central Government and to the shareholders, subject to procedural directions on service.

Ratio Decidendi: Where the statute directs notice of every application under section 391 or 394, the mandate extends to all applications under section 391(1), and interested shareholders are entitled to be heard at the stage when the court decides whether to convene the meeting.

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