BANGESWARI COTTON MILLS LTD Vs. STATE

JUDGEMENT

(1.) This is an application under Section 391 of the Companies Act, 1956. The petition has not yet been admitted and a question has been raised as to whether notice of this application, under Section 394A, should be given to the Central Government before any order is made. Section 394A has been introduced by the Companies (Amendment) Act, 1965, which received the assent of the President on 25th September, 1965, and was published in the Gazette of India on 27th September, 1965. The section runs thus:

(2.) As the point is of first impression and the application under Section 391 is at the moment being moved ex parte, I requested Mr. B. Das, the learned junior standing counsel, to assist me in this matter. I am grateful to Mr. Das and his learned junior, Mr. Basak, for the help they have given to me in coming to my conclusions. Before I proceed any further, it is necessary to set out the relevant provisions of Section 391 of the Act.

(3.) The procedure, therefore, in the case of a compromise or arrangement with creditors or members is that an application is first made to the court for convening a meeting to consider the proposal. After the meeting has accepted the proposal by the requisite majority, a second application to the court is necessary for the court's approval of the compromise or arrangement. The court has also the power of granting interim stay of suits or proceedings.