HIGH COURT OF KARNATAKA

B.S. Kyatanagoudar

v.

Maharashtra Apex Corporation Ltd.

R.Gururajan and Anand Byrareddy, jj.

O.S.A. No. 4 of 2005

April 18, 2007

Section 391 of the Companies Act, 1956 - Compromise and arrangement - Whether majority of members contemplated by section 391 is a majority in number present and voting at meeting-Held, yes - Whether majority is dual in number and in value; a simple majority of those voting is sufficient, whereas ‘three-fourths’ requirement relates to value - Held, yes

FACTS

The appellant filed a petition for winding up of the respondent-company on the ground that it had become commercially insolvent as it was unable to pay the money due to it. The respondent, on the other hand, filed a petition for sanction of a scheme, inter alia, under section 391. The Company Court allowed the respondent’s said petition and dismissed the one filed by the appellant. In the instant appeal before the Division Bench, the appellant contended, inter alia, that the three fourth of the value of the respondent’s creditors and shareholders had not attended the meeting nor approved the scheme; that the purported approval of the scheme by a small section of the creditors and shareholders cannot bind the large majority; that from a reading of section 391 it can be said that the statutory requirement contemplates a quorum consisting of three-fourths of the value of all the shareholders and creditors of the company and not merely of those present and voting at the meeting; and that the Company Court, while placing reliance on the decision in the case of Swift Formulations (P.) Ltd., In re [2004] 53 SCL 433 Punj. & Har.) had failed to appreciate that the Full Bench in that judgment had no occasion to consider those aspects raised by the appellant.

HELD

It was to be observed that the appellant had canvassed the view under consideration notwithstanding the overwhelming authorities cited in apposition, primarily on the premise that the said authorities were not binding on the High Court. That view of the appellants could not be subscribed to. It was to be seen that the Full Bench of the Punjab and Haryana High Court in Swift Formulations (P.) Ltd.’s case (supra) had referred to and relied upon the case of Kirloskar Electric Co. Ltd., In re [2003] 43 SCL 186 (Kar.), decided by the High Court and again referred to in the impugned order. The view taken by the Single Judge in that regard, was to be affirmed. The majority of the members contemplated is a majority in number present and voting at the meeting. The majority is dual in number and in value; a simple majority of those voting is sufficient, whereas the ‘three-fourths’ requirement relates to the value. [Para 14]

Insofar as the other incidental contentions of the appellant were concerned the same had been adequately addressed by the Single Judge and were aptly decided, there was no infirmity in the reasoning thereto. Hence, it was unnecessary to discuss the same at length. Accordingly, the appeal would stand dismissed. [Para 15]