D A SWAMY Vs. INDIA METERS LIMITED

JUDGEMENT

(1.) THIS appeal has to be disposed of mainly on the ground whether the unsecured creditors were legally classified as one group and thus there has been compliance with the requirements of section 391 of the Companies Act in accepting the compromise for the revival of the company. It is not in dispute before us that in C. P. No. 59 of 1982, a petition was filed in the fond hope of reviving the company and the court appointed, in the course of the said proceeding, one Mr. T. P. Nagarajan, who happened to be one of the directors of the company to be the chairman to conduct the meeting of unsecured creditors. He submitted a report to this court stating, inter alia, that such a meeting was held on September 15, 1982, at 11 a.m. at Palmgrove, 5, Kodambakkam High Road, Madras, and that the meeting was attended either in person or by proxy by 363 members of unsecured creditors, the value of their debt amounting to Rs. 36, 85, 539.09 as per the company's books of account as on March 31.1981. The resolution put to vote at the said meeting was as follows : "Resolved that the compromise or arrangement proposed by India Meters Ltd., Madras-600 006, vide Company Application No. 370 of 1982 on the file of the High Court of Judicature, Tamil Nadu, and placed before the meeting and initialled for identification by the chairman be and is hereby approved." *

(2.) SOME of the creditors sought clarification as to why the same scheme of compromise or arrangement proposed by the company, vide Company Application No. 242 of 1982 on the file of this court was presented once again to the unsecured creditors without any modification whatsoever. According to the chairman, it was explained to them that the scheme of compromise presented earlier was approved by the equity and preference shareholders and secured creditors at the meeting held on June 19, 1982. The unsecured creditors by value accepted the scheme. Since the required number of unsecured creditors did not accept, if the requirement of the Act was not satisfied, and the company moved an application in C. A. No. 370 of 1982 giving another opportunity to the unsecured creditors to consider the scheme having regard to the fact that the number of persons present at the end of the meeting was far less than the persons present at the commencement of the meeting. Shanmukham J. ordered on July 30, 1982, that the meeting of the unsecured creditors be convened to consider the scheme again.The report further states how certain amendments were proposed and they were turned down as none of them secured the requisite majority at the meeting and, thereafter, when the resolution was put to vote : "193. Unsecured creditors valuing Rs. 23, 77, 612.81 voted for the resolution while 73 persons valuing Rs. 6, 18, 057. 67 voted against the resolution. The final resolution obtained 72.55% majority in number and 78.66% majority in value." * The number of creditors present in the meeting as shown, however, in the report was as follows : "Present Nos. Value (Rs.) Fixed deposits 169 6, 34, 700.00 Loan 130 4, 81, 500.00 Hundis 26 2, 30, 500.00 Suppliers and others 38 23, 38, 839.09 363 36, 85, 539.09" * Four unsecured creditors, however, filed their objections stating, inter alia, that the very classification of the creditors into two broad categories, secured and unsecured, is not correct and, in so far as unsecured creditors are concerned, fixed deposit holders were differently treated from loan receipt holders and others, foreign creditors completely placed on a different footing from that of the local creditors and yet all the unsecured creditors were together asked to examine the proposal and vote either for or against the scheme proposed by the company. Besides this general objection, there has been some specific objections saying. "the creditors for whom better proposals were given would naturally defeat the other lawful claims of less fortunate creditors. To illustrate this, I may be permitted to mention the treatment given to Osaki Electric Co. Ltd., Japan, an unsecured creditor. The entire debt due to the said firm has to be paid in full, both principal and interest under the scheme and no sacrifice is proposed at all." *

(3.) ACCORDING to these unsecured creditors, proxies played havoc and played a role adverse to the interest of those who gave these proxies and listed as follows : "The following illustrations will clearly explain this aspect of the matter. Amendment No. 1 brought forward by one of the unsecured creditors was for the benefit of loan receipt holders. That amendment was to provide equal treatment to the loan receipt holders along with the fixed deposit holders. It would have been natural that all the loan receipt holders who were present either in person or proxy, voted for this amendment since it provided better treatment and more advantageous. But this was defeated by the very same loan receipt holders. It appears that 43 loan receipt holders valuing Rs. 1, 48, 000 voted against this amendment. Number two brought forward by no less a person than the Financial Adviser and Chief Controller of Accounts of TANSI. This amendment was certainly for the benefit of sundry creditors for goods supplied and services rendered. As per the amendment, the debt due to those unsecured creditors who had supplied goods and rendered service to the company should be paid in full. If this amendment also was voted against by other type of creditors, one can understand the class fight. But it was voted against by the very same sundry creditors which can be seen from the report filed by the chairman." *