Stay of criminal prosecutions under company compromise law is unavailable where the statutory power covers only civil and creditor-related proceedings.

Section 391(6) of the Companies Act, 1956 authorises a stay only of proceedings of a civil, pecuniary, or creditor-related character connected with a proposed compromise or arrangement. It does not extend to criminal prosecutions against the company or its officers, because criminal liability is independent of the compromise machinery and cannot be suspended merely by a pending scheme. Delay in seeking vacation of an ex parte stay order did not, on these facts, bar consideration of relief, as no fixed time limit controlled the application and the criminal proceedings were outside the scope of the stay. The compromise proceedings were allowed to continue subject to the modified terms.

---

---

Issues: (i) Whether the power under section 391(6) of the Companies Act, 1956 extends to staying or freezing criminal proceedings against the company and its officers. (ii) Whether delay in moving to vacate the ex parte stay order justified refusal of relief.

Issue (i): Whether the power under section 391(6) of the Companies Act, 1956 extends to staying or freezing criminal proceedings against the company and its officers.

Analysis: The provision permits stay of suit or proceeding against the company in aid of a proposed compromise or arrangement, but the statutory setting shows that the reference is to proceedings having a civil, pecuniary, or creditor-related character. The compromise machinery under section 391 is directed to civil liabilities and claims of creditors or members, not to prosecutions for offences or statutory violations. Criminal liability of the company and its officers is independent of the scheme and cannot be suspended merely because a compromise proposal is pending.

Conclusion: The power under section 391(6) does not extend to criminal proceedings. The stay against criminal prosecutions was liable to be vacated, in favour of the respondent.

Issue (ii): Whether delay in moving to vacate the ex parte stay order justified refusal of relief.

Analysis: Although there was delay, an ex parte order under the company-court rules remains operative until an aggrieved person seeks variation or vacation, and no fixed time limit controlled such an application in the circumstances. The delay was not treated as so gross as to bar consideration of the application, especially where the relief sought concerned criminal prosecutions that could not properly be covered by the stay order.

Conclusion: The delay did not defeat the application, and the court granted partial vacation of the stay order, in favour of the respondent.

Final Conclusion: The stay of criminal proceedings was lifted, while the order was otherwise only partially vacated, leaving the compromise proceedings to continue subject to the modified terms.

Ratio Decidendi: Section 391(6) authorises a stay only of proceedings of a civil and pecuniary nature connected with the compromise or arrangement, and it cannot be used to suspend criminal prosecutions against the company or its officers.

---