2003 (3) TMI 545

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....referred to as the transferee company). 2. Initially, the Company Application No. 430 of 2002 was filed by the company for directions under section 391(1) of the Companies Act, 1956 (for short "the Act") regarding the meetings of the shareholders and creditors. By an order dated 13th September, 2002, the court dispensed with the holding of the meeting of the shareholders of the company on the ground that 100% of the equity shareholders of the company had accorded their consent to the scheme. The court also dispensed with the holding of the meeting of the creditors of the company in view of the averments made in paragraph No. 19 of the petition and the undertaking given by the company to issue individual notices to all its creditors atleast....

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.... to all the creditors, the court was persuaded to dispense with issuing of the notice to those unsecured creditors to whom the company owed a sum of less than Rs. 5,00,000. 5. The provisions regarding the compromises arrangements and recon-structions of companies are contained in chapter V of Part VI of the Act. They may be briefly summarised thus : A company which desires to enter into any arrangement with its members and/or creditors first makes an application to the court under sub-section 1 of section 391 of the Act for directions for convening of the meeting or meetings of the members and/or creditors as the case may be, for considering the proposed scheme of arrangement. On such an application, the court issues directions for conven....

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....y in number representing 3/4th in value of the creditors or class of creditors and/or members or class of members as the case may be. If the resolution granting approval to the scheme of arrangement is passed by more than 3/4th in value of the creditors but, is not carried by the majority in number of the creditors, the scheme would not be approved by the court. The majority in number of the creditors is provided in the section for safeguarding the interests of the large number of small creditors whose voice is often lost amongst small number of big creditors. The conditions of approval by majority in number and 3/4th in value of credit are cumula-tive. 7. It is noticed in more and more of the cases, that the applicant companies have been ....

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..... The company has given notice to only 7 creditors. The company has neither held a meeting of the creditors nor given notice to the majority in number of the creditors. Majority of the creditors are thus kept in the dark of the proposed scheme of arrangement. This is not in consonance with the object of sub-section (2) of section 391 of the Act which ordinarily requires approval by majority in number of the creditors representing more than 3/4th in value of the credit. When the court dispenses with the holding of the meeting of the creditors on the undertaking given by the company to give notice of hearing to all the creditors, the court assumes that the creditor to whom individual notice is issued would appear if he has any objections and ....