Reciprocal obligations in sanctioned compromises must be examined before enforcing surrender and conveyance under company supervision powers.

A sanctioned compromise recorded the appellant's personal undertaking to give up rights in disputed property and hand over vacant possession; the surrender was not made conditional on prior payment, though the payment and surrender obligations were reciprocal. In proceedings under section 392 of the Companies Act, 1956, the court's supervisory power extends to implementation of both sides of the compromise, and it cannot enforce only one party's obligations without examining whether the other party was ready and willing to perform its own reciprocal promises. The order directing sale and execution of conveyance without that enquiry was unsustainable, and the matter was remitted for fresh disposal.

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Issues: (i) whether the appellant was personally bound by the settlement and had agreed to give up his rights in the disputed property; (ii) whether the appellant's undertaking to surrender the property was contingent upon payment of Rs. 2,05,000 by the company; (iii) whether, in proceedings under section 392 of the Companies Act, 1956, the court could direct sale of the property and compel execution of the conveyance without examining whether the company was ready and willing to perform its reciprocal obligations under the compromise.

Issue (i): whether the appellant was personally bound by the settlement and had agreed to give up his rights in the disputed property.

Analysis: The settlement expressly recorded that the appellant agreed to give up all his rights in the property and to hand over vacant possession. The recital was not confined to his capacity as a shareholder. The undertaking related to his personal rights in the property, and the compromise was approved on that footing.

Conclusion: The appellant was personally bound by the settlement and had agreed to surrender his rights in the property.

Issue (ii): whether the appellant's undertaking to surrender the property was contingent upon payment of Rs. 2,05,000 by the company.

Analysis: The language of the settlement showed that the surrender was to operate forthwith, while payment of Rs. 2,05,000 was to be made in such manner as the chairman of the board considered fit, or adjusted against another contemplated transaction. The payment clause was not made a condition precedent to surrender, but the promises were reciprocal and formed the consideration for each other.

Conclusion: The appellant's undertaking was not contingent upon prior payment of Rs. 2,05,000, though the promises were reciprocal.

Issue (iii): whether, in proceedings under section 392 of the Companies Act, 1956, the court could direct sale of the property and compel execution of the conveyance without examining whether the company was ready and willing to perform its reciprocal obligations under the compromise.

Analysis: Section 392 confers power to supervise implementation of a sanctioned compromise and to issue directions for its proper working. That power extends to both sides of the compromise. The court could not enforce only the appellant's side while leaving the company's obligations wholly unexamined, especially where the two sets of promises were interconnected and not shown to have been performed or even offered to be performed by the company.

Conclusion: The order directing sale and execution of the conveyance without examining the company's reciprocal performance could not be sustained.

Final Conclusion: The appeal succeeded, the order of the company judge was set aside, and the matter was sent back for fresh disposal after considering both sides of the compromise.

Ratio Decidendi: In supervising a sanctioned compromise under section 392 of the Companies Act, 1956, the court must consider and, where necessary, direct performance of the reciprocal obligations of both parties and cannot enforce one side of the settlement while ignoring the other.

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