Compromise or Arrangement under section 391 and 394
67. Summons for directions to convene a meeting
An application under section 391(1) for an order convening a meeting of creditors and / or members or any class of them shall be by a Judge’s summons supported by an affidavit. A copy of the proposed compromise or arrangement shall be annexed to the affidavit as an exhibit thereto. Save as provided in rule 68 hereunder, the summons shall be moved ex parte. The summons shall be in Form No. 33, and the affidavit in support thereof in Form No. 34.
68. Service on company
Where the company is not the applicant, a copy of the summons and of the affidavit shall be served on the company, or, where the company is being wound-up, on its liquidator, not less than 14 days before the date fixed for the hearing of the summons.
69. Directions at hearing of summons
Upon the hearing of the summons or any adjourned hearing thereof, the Judge shall, unless he thinks fit for any reason to dismiss the summons, give such directions as he may think necessary in respect of the following matters: -
(1) determining the class or classes of creditors and/or of members whose meeting or meetings have to be held for considering the proposed compromise or arrangement;
(2) fixing the time and place of such meeting or meetings;
(3) appointing a Chairman or Chairmen for the meeting or meetings to be held, as the case may be;
(4) fixing the quorum and the procedure to be followed at the meeting or meetings, including voting by proxy;
(5) determining the values of the creditors and / or the members, or the creditors or members of any class, as the case may be, whose meetings have to be held;
(6) notice to be given of the meeting or meetings and the advertisement of such notice;
(7) the time within which the Chairman of the meeting is to report to the Court the result of the meetings; and such other matters as the Court may deem necessary.
The order made on the summons shall be in Form No. 35 with such variations as may be necessary.
70. Proxies
(1) Voting by proxy shall be permitted, provided a proxy in the prescribed form duly signed by the person entitled to attend and vote at the meeting is filed with the company at its registered office not later than 48 hours before the meeting.
(2) Where a body corporate which is a member or creditor (including holder of debentures) of a company authorizes any person to act as its representative at the meeting of the members or creditors of the company, or of any class of them, as the case may be, a copy of the resolution of the Board of Directors or other governing body of such body corporate authorizing such person to act as its representative at the meeting, and certified to be a true copy by a director, the manager, the secretary, or other authorized officer of such body corporate, shall be lodged with the company at its registered office not later than 48 hours before the meeting.
(3) Rules 227 to 229 of these rules relating to proxies shall also apply to proxies lodged under this rule.
71. Application for stay
An application under sub-section (6) of section 391 for stay of the commencement or continuation of any suit or proceeding against the company may be moved by a Judge’s summons ex parte, provided that where a petition for winding-up the company or a petition under section 397 or 398 is pending, notice of the application shall be given to the petitioner in such petition.
72. Application to vacate or vary order of stay
Where an order has been made staying the commencement or continuation of any suit or proceeding under sub-section (6) of section 391, any person aggrieved by such order may apply to the Court by a Judge’s summons to vacate or vary such order. Notice of the application shall be given to the applicant at whose instance the order of stay was made and to such other persons as the Court may direct.
73. Notice of meeting
The notice of meeting to be given to the creditors and / or members, or to the creditors or members of any class, as the case may be, shall be in Form No. 36, and shall be sent to them individually by the Chairman appointed for the meeting, or, if the Court so directs, by the company (or its Liquidator), or any other person as the Court may direct, by post under certificate of posting to their last known address not less than 21 clear days before the date fixed for the meeting. It shall be accompanied by a copy of the proposed compromise or arrangement and of the statement required to be furnished under section 393, and a form of proxy in Form No. 37.
74. Advertisement of the notice of meeting
The notice of the meeting shall be advertised in such newspapers and in such manner as the Judge may direct, not less than 21 clear days before the date fixed for the meeting. The advertisement shall be in Form No. 38.
75. Copy of compromise or arrangement to be furnished by the company
Every creditor or member entitled to attend the meeting shall be furnished by the company, free of charge and within 24 hours of a requisition being made for the same with a copy of the proposed compromise or arrangement together with a copy, of the statement required to be furnished under section 393, unless the same had been already furnished to such member or creditor.
76. Affidavit of service - The Chairman appointed for the meeting or the Company or other person directed to issue the advertisement and the notices of the meeting shall file an affidavit not less than 7 days before the date fixed for the holding of the meeting or the holding of the first of the meetings as the case may be, showing that the directions regarding the issue of notices and the advertisement have been duly complied with. In default thereof, the summons shall be posted before the Judge for such orders as he may think fit to make.
77. Result of the meeting to be decided by poll
The decisions of the meeting or meetings held in pursuance of the order made under rule 69 on all resolutions shall be ascertained only by taking a poll.
78. Report of the result of the meeting
The Chairman of the meeting, (or where there are separate meetings, the Chairman of each meeting) shall, within the time fixed by the Judge, or where no time has been fixed, with seven days after conclusion of the meeting, report the result thereof to the Court. The report shall state accurately the number of creditors or class of creditors or the number of members or class of members, as the case may be, who were present and who voted at the meeting either in person or by proxy, their individual values and the way they voted. The report shall be in Form No. 39.
79. Petition for confirming compromise or arrangement
Where the proposed compromise or arrangement is agreed to, with or without modification, as provided by sub-section (2) of section 391, the company, (or its liquidator, as the case may be) shall within 7 days of the filing of the report by the Chairman, present a petition to the Court for confirmation of the compromise or arrangement. The petition shall be in Form No. 40.
Where a compromise or arrangement is proposed for the purposes of or in connection with a scheme for the reconstruction of any company or companies, or for the amalgamation of any two or more companies, the petition shall pray for appropriate orders and directions under section 394.
Where the company fails to present the petition for confirmation of the compromise or arrangement as aforesaid, it shall be open to any creditor or contributory as the case may be, with the leave of the Court, to present and the company shall be liable for the costs thereof.
Where no petition for confirmation of the compromise or arrangement is presented, or where the compromise or arrangement has not been approved by the requisite majority under section 391(2) and consequently no petition for confirmation could be presented, the report of the Chairman as to the result of the meeting made under the preceding rule shall be placed for consideration before the Judge for such orders as may be necessary.
80. Date and notice of hearing
The Court shall fix a date for the hearing of the petition, and notice of the hearing shall be advertised in the same papers in which the notice of the meeting was advertised, or in such other papers as the Court may direct, not less than 10 days before the date fixed for the hearing.
81. Order on petition
Where the Court sanctions the compromised or arrangement, the order shall include such directions in regard to any matter and such modifications in the compromise or arrangement as the Judge may think fit to make for the proper working of the compromise or arrangement. The order shall direct that a certified copy of the same shall be filed with the Registrar of Companies within 14 days from the date of the order, or such other time as may be fixed by the Court. The order shall be in Form No. 41, with such variations as may be necessary.
82. Application for directions under section 394
Where the compromise or arrangement has been proposed for the purposes of or in connection with a scheme for the reconstruction of any company or companies or the amalgamation of any two or more companies, and the matters involved cannot be dealt with or dealt with adequately on the petition for sanction of the compromise or arrangement, an application shall be made to the Court under section 394, by a summons supported by affidavit, for directions of the Court as to the proceedings to be taken. Notice of the summons shall be given in such manner and to such persons as the Court may direct.
83. Directions at hearing of applications
Upon the hearing of the summons or upon any adjourned hearing thereof the Court may make such order or give such directions as it may think fit, as to the proceedings to be taken for the purpose of the reconstruction or amalgamation, as the case may be, including, where necessary, an inquiry as to the creditors of the transferor company and the securing of the debts and claims of any of the dissenting creditors in such manner as to the Court may seem just.
84. Order under section 394
An order made under section 394 shall be in Form No. 42 with such variation as the circumstances may require.
85. Compromise or arrangement involving reduction of capital
Where a proposed compromise or arrangement involves a reduction of capital of the company, the procedure prescribed by the Act and these Rules relating to the reduction of capital, and the requirement of the Act and these Rules in relation thereto, shall be complied with, before the compromise or arrangement so far as it relates to reduction of capital, is sanctioned.
86. Report on working of compromise or arrangement
At any time after the passing of the order sanctioning the compromise or arrangement, the Court may, either of its own motion or the application of any person interested, make an order directing the company, or, where the company is being wound-up, the liquidator, to submit to the Court within such time as the Court, may fix, a report on the working of the said compromise or arrangement. On a consideration of the report, the Court may pass such orders or give such directions as it may think fit.
87. Liberty
(1) The Company, or any creditor or member thereof, or in case of a company which is being wound-up, the liquidation, may, at any time after the passing of the order sanctioning the compromise or arrangement, apply to the Court for the determination of any question relating to the working of the compromise or arrangement.
(2) The application shall in the first instance be posted before the Court for directions as to the notices and the advertisement, if any to issue, as the Court may direct.
(3) The Court may, on such application, pass such orders and give such directions as it may think fit in regard to the matter, and may make such modifications in the compromise or arrangement as it may consider necessary for the proper working thereof, or pass such orders as it may think fit in the circumstances of the case.
227. Minor not to be appointed proxy
No person shall be appointed as a general or special proxy who is a minor.
227. Filing in proxy where creditor or contributory is blind or incapable –
The proxy of a creditor or a contributory blind or incapable of writing may be accepted if such creditor or a contributory has attached his signature or mark thereto in the presence of a witness who shall add to his signature, his description and address:
Provided that all insertions in the proxy are in the hand-writing of the witness and such witness shall have certified at the foot of the proxy that all such insertions have been made by him at the request and in the presence of the creditor or contributory before he attached his signature or mark.
229. Proxy of person not acquainted with English
The proxy of a creditor or contributory who does not know English may be accepted if it is executed in the manner prescribed in the last preceding rule and the witness certifies that it was explained to the creditor or contributory in the language known to him, and gives the creditor’s or contributory’s name in English below the signature.
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