Section 392 supervisory power allows bona fide interested persons to seek workable modifications of a sanctioned company scheme.

Section 392 of the Companies Act, 1956 gives the court continuing supervisory power after sanction of a compromise or arrangement, and that wider post-sanction jurisdiction is not confined to members, creditors or a liquidator. An application for modification may be maintained by any person with a sufficient, bona fide interest in the company's affairs, and procedural rules cannot narrow that statutory scope. The term "modify" is broad enough to include additions and omissions needed for the proper working of the scheme. On that basis, substitution of the original sponsor by another bona fide and capable person may be ordered where necessary to make the scheme workable.

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Issues: (i) Whether an application under section 392 of the Companies Act, 1956, for modification of a sanctioned scheme could be maintained by persons who were neither members nor creditors of the company but were otherwise interested in its affairs; (ii) Whether substitution of the original sponsor of a sanctioned scheme by another person could be ordered as a permissible modification under section 392.

Issue (i): Whether an application under section 392 of the Companies Act, 1956, for modification of a sanctioned scheme could be maintained by persons who were neither members nor creditors of the company but were otherwise interested in its affairs.

Analysis: Section 391 restricts the initiation of a compromise or arrangement to members, creditors, or a liquidator, but section 392 operates at a later stage and confers continuing supervisory power on the court after sanction of the scheme. The expression used in section 392 is wider, namely, "any person interested in the affairs of the company", and the provision also authorises the court to act on its own motion. That wider language cannot be cut down by importing the limitations found in section 391. Rule 87 of the Companies (Court) Rules, 1959 is procedural and cannot narrow the statutory power.

Conclusion: The application was maintainable by persons having a sufficient and bona fide interest in the affairs of the company, even though they were not members or creditors.

Issue (ii): Whether substitution of the original sponsor of a sanctioned scheme by another person could be ordered as a permissible modification under section 392.

Analysis: The word "modify" in section 392 must be read with the inclusive definition in section 2(29), which states that it includes additions and omissions. In the context of section 392, modification may therefore extend to changes necessary for the proper working of the compromise or arrangement. The scheme is essentially between the company and its creditors or members, and the sponsor is not its basic legal core. If the substituted person is bona fide, capable, and suitably interested, the court may, in exercise of its supervisory power, substitute one sponsor for another where that is necessary to make the scheme workable.

Conclusion: Substitution of the sponsor was within the scope of modification under section 392 and could validly be ordered on the facts.

Final Conclusion: The High Court's order was reversed and the company judge's order allowing substitution of the appellants as sponsors of the scheme was restored.

Ratio Decidendi: Section 392 confers a wide supervisory power on the court to make additions, omissions, directions, and other changes necessary for the proper working of a sanctioned compromise or arrangement, and that power may be invoked by any bona fide person sufficiently interested in the affairs of the company.

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