TMI Blog1966 (1) TMI 46X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. "391 Power to compromise or make arrangements with creditors and members. (1) Where a compromise or arrangement is proposed ( a )between a company and its creditors or any class of them; or ( b )between a company and its members or any class of them ; the court may, on the application of the company or of any creditor or member of the company, or, in the case of a company which is being wound up, of the liquidator, order a meeting of the creditors or class of creditors, or of the members or class of members, as the case may be, to be called, held and conducted in such manner as the court directs. (2) If a majority in number representing three-fourths in value of the creditors, or class of creditors, or members, or class of members, as the case may be, present and voting either in person or, where prox ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ink necessary in respect of the following matters: ( i )determining the class or classes of creditors and/or members whose meeting or meetings have to be held for considering the proposed compromise or arrangement; ( ii )fixing the time and place of such meeting or meetings; ( iii )appointing a chairman or chairmen for the meeting or meetings to be held, as the case may be ; ( iv )fixing the quorum and the procedure to be followed at the meeting or meetings, including voting by proxy ; ( v )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; ( vi )notice to be given of the meeting or meetings and the advertisement of such notice; ( vii )the time within which the chairman of the meeting is to report to the court the result of the meeting; and such other matters as the court may deem necessary . Rule 71 . 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 und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 391 must be given to the Central Government. This section envisages an application at the initial stage for obtaining the court's directions for convening a meeting of the creditors or the members. The application is made under sub-section (1) of section 391. A second application has also to be made under sub-section (2) of section 391 by the party proposing the compromise or arrangement for sanction by the court after the meeting has been held. There may also be an application for stay or continuation of suits or proceedings. According to Mr. Das, the Central Government should have notice of all these applications. Mr. Das says that at the initial stage the court may either dismiss the summons or give directions for a meeting. In either event, the court exercises a judicial discretion. And, in the exercise of the discretion, section 394A contemplates that consideration is to be given to any representation that the Central Government may make. Learned counsel particularly drew my attention to some of the directions that the court may give under rule 69 at the hearing of the summons. The court, for instance, has to fix the time and place of the meeting or meetings. The court has to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vation of this right and creates a conflict between itself and the law which existed prior to its incorporation. In a case like this, it is the duty of the court to try to avoid such conflict and adopt, if possible, the rule of harmonious construction. The rule is that when there are in an enactment two provisions, which cannot be reconciled with each other, they should be so interpreted that, if possible, effect could be given to both (vide Raj Krushna Bose v. Binod Kanungo [1954] SCR 913 and Venkataramana Devaru v. State of Mysore [1958] SCR 895) . The only way to avoid this conflict between section 391 and the rules framed thereunder, on the one hand, and section 394A, on the other, is to hold that notice is to be given to the Central Government before the court sanctions a compromise or arrangement on an application under section 391(2). Rule 80 of the Companies (Court) Rules, 1959, or any other rule framed under section 391(2) does not create any bar to this notice as the court has no obligation to make any order or give any directions of a conclusive nature on an application moved ex parte. It seems to me that the purpose of enacting section 394A was that the cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dministration of Dalmia-Jain Companies. The relevant portion of this paragraph is as follows: "Section 400 of the Companies Act should be suitably amended to provide for issue of notice to, and consideration of the representations, if any, submitted by the Central Government, by the court before it passes the final orders on an application made to it under sections 391 to 394." Section 400 of the Companies Act provides for notice to the Central Government of applications under sections 397 and 398. Instead of amending this section to include applications under section 391 or 394, Parliament, it appears, has enacted the new section 394A. As this new section has been based on paragraph 46 of the Commission's Report, the intention obviously was that, before passing any final order under section 391 or 394, the court would give notice to the Central Government. I have already said that the Statement of Objects and Reasons merely gives to the court the historical background of a piece of legislation ; but the conclusion which I have arrived at, namely, that notice of an application under section 391(2) only has to be given to the Central Government, appears to be in conformity w ..... X X X X Extracts X X X X X X X X Extracts X X X X
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