Rainbow Denim Ltd. v. Rama Petrochemicals Ltd. (SC) BS185890
SUPREME COURT OF INDIA

Before:-S.P. Bharucha and Y.K. Sabharwal, JJ.

Civil Appeal No. 7039 of 2000, Arising out of SLP (C) No. 13272 of 2000. D/d. 1.12.2000.

Rainbow Denim Ltd. - Appellant

Versus

Rama Petrochemicals Ltd. - Respondent

Companies Act, 1956, Section 394 - Scheme of arrangement - Appellant approached a learned Company Judge of the High Court seeking permission to dispense with the calling of meetings of shareholders and creditors for the purposes of approving a scheme of arrangement between the appellant and the respondent Company - Company Judge declined to make such order but he made observations that affect the viability of that proposed scheme - Held that, appropriate time for the Company Judge to consider the scheme is subsequent to approval thereof by shareholders and creditors of the Company - Order of Company Judge set aside and liberty given to the appellant Company to move the High Court for directions for calling meetings of its shareholders and creditors for the purposes of considering the approving the scheme.

[Para 5]

ORDER

S.P. Bharucha, J. - IA No. 2 is allowed.

2. Leave granted.

3. The appellant approached a learned Company Judge of the High Court at Chandigarh seeking permission to dispense with the calling of meetings of shareholders and creditors for the purposes of approving a scheme of arrangement between the appellant and the respondent Company. The learned Company Judge declined to make such order but he made observations that affect the viability of that proposed scheme. The appellant carried the matter in appeal before a Division Bench of the High Court. The Division Bench dismissed the appeal but gave liberty to the appellant to file fresh applications before the learned Company Judge for approval of the scheme.

4. Learned counsel for the appellant points out that if the judgment and order of the learned Company Judge remains in operation, no useful purpose would be served by any fresh application for approval.

5. The appropriate time for the Company Judge to consider the scheme is subsequent to approval thereof by the shareholders and creditors of the appellant Company. Therefore, the order of the learned Company Judge and the order under appeal must be set aside and liberty given to the appellant Company to move the High Court for directions for calling meetings of its shareholders and creditors for the purposes of considering and approving the scheme. Once that has been done, a further application will be required to be made before the learned Company Judge. That would be the appropriate time for the learned Company Judge to consider the scheme.

6. The appeal is disposed of accordingly.

7. No order as to costs.

Appeal disposed of.