Post-sanction scheme modification under section 392 can include sponsor substitution when needed for workable implementation.

A sanctioned compromise and arrangement remains under the High Court's continuing supervision under section 392, and the court may make post-sanction modifications needed for proper working of the scheme. That power is wide enough to include substitution of the sponsor, because the sponsor's bona fides, technical competence and financial capacity can affect implementation. Where the affected creditors, shareholders, liquidator and employees consent, public notice draws no objection, and the proposed sponsor gives an unconditional undertaking with workable credentials, the modification may be accepted. The article explains that such changes are valid when they make the scheme practically executable and do not disclose any objectionable feature.

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Issues: (i) Whether the court, after sanctioning a scheme of compromise and arrangement, had power under section 392 to modify it, including substitution of the sponsor, for its proper working; (ii) Whether the proposed substitution of sponsors and connected changes could be accepted on the facts of the case.

Issue (i): Whether the court, after sanctioning a scheme of compromise and arrangement, had power under section 392 to modify it, including substitution of the sponsor, for its proper working.

Analysis: The scheme of compromise and arrangement is first considered by the creditors and members under section 391, but after sanction the court retains continuing supervision under section 392. The statutory power to give directions and to make modifications necessary for the proper working of the scheme is of wide amplitude. The court is not rendered functus officio on sanction of the scheme, and the power extends to post-sanction modification where implementation difficulties arise. A change in the sponsor may be a basic modification because the sponsor's personality, bona fides, technical competence, and financial capacity can materially affect approval and implementation of the scheme.

Conclusion: The court had power under section 392 to make the necessary modification, including substitution of the sponsor, for proper working of the scheme.

Issue (ii): Whether the proposed substitution of sponsors and connected changes could be accepted on the facts of the case.

Analysis: Consent to the proposed modification had been obtained from the major affected interests, including secured creditors, unsecured creditors representing the overwhelming bulk of the claim, shareholders representing the majority shareholding, the official liquidator, and the employees' representative. Public notice was also issued and no objection was received. The proposed sponsor gave an unconditional undertaking to implement the scheme, had financial standing and technical experience, and the modified board proposal appeared workable. The court found no objectionable feature in the proposed changes and considered that rejection would leave the scheme without practical implementation.

Conclusion: The proposed substitution and consequential changes were accepted and the modifications were granted.

Final Conclusion: The scheme was confirmed with the substituted sponsor and the consequential amendments, enabling implementation of the compromise and arrangement.

Ratio Decidendi: A sanctioned compromise or arrangement remains under the High Court's continuing supervision, and the court may make post-sanction modifications of even basic character, including substitution of the sponsor, if such change is necessary for the proper working of the scheme and is otherwise acceptable on the facts.

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