TaxTMI 
TaxTMI 
2010 (8) TMI 186
X X X X Extracts X X X X
X X X X Extracts X X X X
....s incorporated under the provisions of the Companies Act, 1956 (for short 'the Act'). One of the objects of the petitioner-company is to take over the assets and liabilities of the respondent-company. 3. One of the objectors - M/s. Karnataka Food and Civil Supplies Corporation Limited filed Co. P. No. 82/1989 against the respondent-company for winding up under section 433(e) and (f) of the Act. During the pendency of Co. P. No. 82/1989, the Board for Industrial and Financial Reconstruction (for short 'the BIFR'), in case No. 127/1988, by its order dated 2-1-1996 under section 20(1) of the Sick Industrial Companies (Special Provisions) Act, 1985 recommended winding up of respondent-company. Consequently this Court vide order dated 31-10-1....
X X X X Extracts X X X X
X X X X Extracts X X X X
....bsp; The aforesaid provisions of the Act show that compromise or arrangement can be proposed between a company and its creditors or any class of them, or between a company and its members or any class of them. Such a compromise would also take in its sweep any scheme of amalgamation/merger of one company with another. When such a scheme is put forward by a company for the sanction of the Court in the first instance, the Court has to direct holding of meetings of creditors or class of creditors, or members or class of members who are concerned with such a scheme and once the majority in number representing three-fourths in value of creditors or class of creditors, or members or class of members, as the case may be, present or voting eithe....
X X X X Extracts X X X X
X X X X Extracts X X X X
....of the shareholders or creditors or their respective classes who might have voted in favour of the scheme by requisite majority but the Court has to consider the pros and cons of the scheme with a view to finding out whether the scheme is fair, just and reasonable and is not contrary to any provisions of law and it does not violate any public policy. This is implicit in the very concept of compromise or arrangement which is required to receive the imprimatur of a Court of law. No Court of law would ever countenance any scheme of compromise or arrangement arrived at between the parties and which might be supported by the requisite majority if the Court finds that it is an unconscionable or an illegal scheme or is otherwise unfair or unjust t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....luding the dissenting minority to whom it is offered for approval and which has been approved by such class of persons with requisite majority vote. 28A. However, further question remains whether the Court has jurisdiction like an appellate authority to minutely scrutinise the scheme and to arrive at an independent conclusion whether the scheme should be permitted to go through or not when the majority of the creditors or members of their respective classes have approved the scheme as required by section 391(2). On this aspect, the nature of compromise or arrangement between the company and the creditors and members has to be kept in view. It is the commercial wisdom of the parties to the scheme who have taken an informed decision about ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e meeting of secured creditor, that is, State Bank of Mysore was not held. On the other hand, a joint meeting of the secured creditor - State Bank of Mysore and the preferential creditors, that is, the workmen was held on 15-12-2003. In this meeting the secured creditor - the State Bank of Mysore participated and objected for the proposed revival scheme. Firstly, the meeting was in contravention of the directions issued by this Court in C.A. No. 1357/2000; secondly, the sole secured creditor - State Bank of Mysore opposed the revival scheme. This amounts to 100 per cent opposition to the revival scheme by the class of secured creditor. Therefore, the scheme of amalgamation proposed by the petitioner-company cannot be sanctioned by this Cour....