# ils4 S. k. GUPTA & ANR· v. K. P. JAIN & ANR - **Citation:** [1979] 2 S.C.R. 1184 - **Court:** Supreme Court of India - **Decided:** 1979-01-30 - **Bench:** P. S. Kailasam, 0. A. Desai, A. D. Koshal - **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/ils4-s-k-gupta-anr-v-k-p-jain-anr-7483 - **Pages:** 22 ## Headnote Con1panies Act, 1956 (1 of 1956) Ss. 391 and 392--Scope of--V111ission of the original spo11sor arid substituting another whether J;:oufd chan!}e the 'basic fabric' of the schen1e. Words & Phrases-'Modify' a11d '111odifications'-lvlea11i11:; of. The Companies Act, 1956 by s. 391 enables a member or a creditor of the company or a company which is being wound up, its liquidator, to make. an application to the court proposing a compromise c:r arrangement between the company and its creditors or any class of them or between the company and its n1embers or any class of them and seeking directions of the court to convene a meeting of each class of creditors and/or each clo.ss of members to v.·hom the compromise or nrrangement is offered. On the court giving the directions, the n1eeting \Vould be convened in which the proposed scheme of compron1ise and/or arrangement would be submitted for consideration and each class will have to vote upon it and if the schen1e is accepted by a majority in nun1ber representing three fourths in value of the creditors or members or class of members as the cuse may be, present and voting either in person or where proxy is allowed by proxy, such approved sl'.'heme has to be placed before the court for sanction of the court as envisageJ ins. 391(2). Under s. 392 of the Act, the High Court which has sanctioned the sche1nc has the power to supervise the carrying out of it and to give directions in regard to any tnatter or to make modifications in it as it may consider necessary ,/._ for its proper working. But if the court is satisfied that the scheme cannot -- work satisfactorily with or without modifications, it can either suo motu or on an application of any person interested in the con1pany's affairs order its \1.'inding up. The holding company proposed a scheme of con1pron1ise/arrangen1ent bet\\'een its subsidiary and the unsecured creditors of the subsidiary company. After obtaining the approval of the shareholders the holding company obtained the sanction of the co1npuny court. A large number of shares in the subsidiary compl.\ny held by it and its claim for a sum of Rs. 23 lacs rec.overable from the subsidiary company were tran-;- ferred by the holding company to the appellant~. The appellants then applied to the court to make lln , Allowing the appeal, HELD : 1. Though a large number of prov1s1ons of the Companie! Act, 1956 are in pari n1ateria with the provisions of Companies Act, 1948 of the. U.K. there is no provision analogous to s. 392 in the U.K. Act. The court unrler the U.K. Act has no power to n1odify the. scheme eith~r at the time when it is offered for its 5an,,;tion or at any time subsequent thereio. Th~· Parliament has in its wisdom, conferred a power of wide amplitude. on the IEgh Court in India to provide for its continuous supervision of the carrying out of compromise and/or arrangement and also the consequential power to mt:1k~ the supervision effective by removing the hitches, obstacles or 'impedirnents in the working of compromise or arrangement by confe_rring pov:cr to give such directions for the proper ¥/orking of tbe compromise and /or arrangen1ent. [1193 D-F] This power of widest amplitude being conferred on the Hi~h Court is a basic departure from the schen1e of the U.K. Act in which provision analogOU5 to s. 392 is absent. The sponsors of the scheme unde;r s. 206 of the U.K. Acl have tried to get over the difficulty by taking power in the scheme of con1promise or arrangen1ent to make alterations and modifications as proposed by the court. [1195 CJ In the instant case the scheme is essentially a con1prornise between the co1npany and its unsecured creditors. The scheme v.·hen sanctioned does not merely operate as an agreement between the parties but has st('\tutory force and is binding not only on the company but even dissenting · creditors or metnbers, as the c.lase may be. [119"4 B-C] J. K. (Bon1bay) P\·t. Ltd. v. Nelv Kaiser-I-Hind Spg. & WFg. Co. LJtl • .y, Ors. etc., [1969] 2 SCR 866 at 891; referred to. A B c D E F G 1186 SUPREME COURT REPORTS (J 979] 2 S.C.R. 2. Section 391(1) by Ol specific and positive prov1s1on prescribes who can moYe an application under it. Only the creditor or n1ember of that company or a liquidator in the case of a company being \vound up is entitled to move au application proposing a compromise or arrangement. By necessary inlplication any one other than those specified in the section would not be entitled. to move such an application. [1194 DJ 3. Sub-section (2) of s. 392 provides the legislati\'e exposition as to who 1...an move the court for taking action under s. 392. Reference to s. 391 in sub-s. (2) of s. 392 n1ercly indicates \vhich con1prornise or arrangen1ent can be brought b6.Wre the court for taking action under s. 392. The reference to s. 391 in sub-section (2) of s. 392 does not mean that all the limitations nr restrictions on the right of an individual to move the cburt while propos~ ino a scheme of compromise or arrangement have to be read in sub·s. (2) increly because s. 391 is referred to therein. Unlike s. 391, s. 392 does not specify that a member or a creditor or in the case of a company being wound up, its liquidator, alone can move the court under s. 392. The legislature uses the expression 'any person, interested in the nffairs of the company' y,:hich has \Vider denotation than a member or creditor or liquidator of a company. The ambit of the power to act under s. 392(2) is demonstr:.it!:d by the provision that the court can suo·n1otu ttct to take action as contemplated by s. 392(1) or it may act on an application of any person interested in the affairs of the company. [1195 F-H] Mansukhla/ v. M. V. Shah, [1976] 46 Company cases 279 at 290-291; referred to. 4. If the court can suo 1notu act, it is immaterial as to who drew the attention of the court to a situation which necessitated court's intervention. \Vhere the power is conferred on the court to take action on its own motion, the informaticn emanating from whatever source whi...:h calls for court's atten· tion can as \\'ell be obtained from any person without questioning his credentials, n1oving Mt application drawing attention of the court to a situation where it must act. The court may decline to act at the instance of a busy body but if the action proposed to be taken is justified, valid, legal or called for the capacity or credentials of· the person 'h'ho brought the situation calling fof court's intervention is hardly rdcv::1nt nor \vould it invalidate the resultant action only on that ground. \Vhen sub-s. (2) confers po\ver on the court to act on it'l o\vn n1otion, the question of locus standi hardly arises. [1197 C-EJ In the instant cuse while cxan1ining the question of focus standi after considering the provisions contained in sub-s. (2) the High Court wholly overlooked the important provision therein contained. that the I-Jigh Court can act on its own n1otion. [1197 F] 5. E\'en though section 391 ltl·nd 392 are con1plcmentary they operate at different stages and have to be harmoniously read. [1197 G-H] 6. \Vinding up n1eaning civil death of a company, must be the ultin1a.te resort of the court. A living ~'orkable scheme infusing life into a sick uni1 .H is generally to be preferred to civil death of the company. There is no \V:;i.rrant for circumscribing the expression •on the application of tany person inierested in the affairs of the company as to limit it to a member or a S. K. GUPTA V. K. P. JAIN I I 87 creditor. If the legislature used the expression 'member or creditor' in A s. 391(1) and yet used an expression of wider denotation 'any person interested in the affairs of the company,' in s. 392(2), the legislative intention is dearly expcsed in that any such person interested in the affairs of the company need not be limited or restricted to refer to a member or creditor. [1198 G-1199 A} fn the instant case, there is enough evidence on record that as between the holding con1pany and the appellants the sale of shares is complete, and that tile debt owed by the subsidiary to holding company has been assigned by the holding company to the appellants. The appellants therefore have requisite \nteres~ both in the subsidiary company and the scheme in respect of it, so . us to enable them to maintain an application under s. 392(2), as being persons nterested in the affairs of the company, and therefore the application for " edification by them is maintainable. [1200 B-CJ 7. The High Court was in error in holding that the appellants had no focu.~ standi to maintain un application under s. 392(1). The words 'modify' :ind 'modification' have been defined in s. 2(29) of the Act to include the n1aking of additions and omissions. Section 2(1) defines 'altered' and 'alteration' to include 'making of additions and omissions', while 'variation' i~ defined in s. 2(31) to include 'abrogation'. The definition of cognate words is noted to arrive at a true meaning of the word 'modification'. The noticeable feature is that it is an inclusive definition, and where in a definition clause the v;'ord '1'"1·-:lude' is used, it is so done in order to enlarge the meaning of the words or r hrases occuring in the body of the statute and when it is so used, these words or phrases must be construed b.s comprehending not only such things 'vhich they signify according to their natural import, but also those things which the interpretation clau'\e declares that they shall include. [1200 H, 1201 D-G, H-1202 BJ Dilworth v. Con1missio11er of Stamps, [1899] AC 99 at 105; Jobbins v. Middlesex County Council, [1949] 1 KB 142; Indira Nehru Gandhi v. i_ Raj Narain (1975) Suppl. SCC I at 97; Kclira Sin~h v. Genda Lal, (1976] , I SCC 304 at 309; Cox v. Hakes, (1890] 15 AC 506; referred to. 8. AccorO.ing to the definition 'modify' and 'modification' \vould include the making of additions and omissions. In the context of s. 392 'modification' would mean addition to the scheme of compromise and/or arrangen1ent or omission therefrom solely for the purpose of making it workable. [1203 B] 9. The High Court misdirected itself when it resorted to dictionaries for the meaning of the expression 'modification' in s. 392 when the said term \Vas defined in s. 2(29) of the Act itself. (1203 A] In the instant case, the schen1e is one by which a compromise is offered • to the unsecured creditors of the company and whoever cornes in as sponsor would be bound by it. Omission of the original sponsor and subst!tut[ng •- 01.nother one would not therefore, change the 'basic f• .. bric' of the ~chen1e. [1203 El 10. The court on which G duty is cast bys. 392(1) to supervise the working of compromise/arrangement must examine the bona fides of the person applying to be substituted as sponsor, his capacity, his ability, his interest ~- qua the company and other relevant considerations before substituting one sponsor for another. In a given case la'll application n1ay be reject~d if the B c D E F G H 1188 SUPREME COURT REPORTS (1979] 2 S.C.R. A court is of the opinion that the sponsor is not one \Vho can be trusted \Vith the implementation of the scheme. (1204 A-C1 B c In the instant case the appellants have applied for substituting them a!i &ponsors of the scheme in place of the holding company. They claim to have purchased 44,000 shares out of 80.000 issued and subscribed equity &hares of the con1pany. The sponsor hns t:'lken an assign1nent of a debt of Rs. 23 lacs \Vhich the subsidiary company owed to the holding company from t11e · holding company. The only objector is respondent holding 1,000 equity shares representing 1.25 per cent of the issued and subscribed capital. In pursuance to the court's order notice in the newspaper v.la-s inserted ca1ling · for objection to the app1ic8.tion for substitution/n1odification. None including the petitioning creditor except the respondent lodged such an objection. ) l"hc appellnnts agreed to implement the sche1ne and undertook to provide_......._ R'l. 3 lacs as liquid finance for implementation. The appellants therefore have a subsisting lu1d vital interest in the fate and future of the subsidiary company and they are the appropriate persons v,rho could and should be substituted in place of the original sponsor and there is no· objection to granting their application. [1204 D-F, 1205 E, BJ D CIVIL APPELLATE JURISDICTION : Civil Appeal No. 1217 o! 1976. Appeal by Special Leave from the Judgment and Order dated 16-7-1976 of the Delhi High Court in Company Appeal No. 15/76. Y. S. Chitale, K. R. Khaitan, B. Mohan, and Praveen Kumar for E the Appellants. F G H I'. R. Mridul, R. L. Roshan, H. K. Pw·i and Vijai K. Bahl for Respondent No. 1. Pramod Dayal and S. K. Gupta for Respondent No. 2. R. M. Gupta and K. N. Bhat for Intervener/Dena Bank. The Judgment of the Court was delivered by DESAI, J.-A private sector sick unit, Indian Hardware Industries Ltd. ('IHI' for short). engaged in manufacture of builders' hardware. now in a state of suspended animatlon since 1971, awaits the outcome of this appeal for infusion of life into it simultaneously providing a ray of hope to primarily the workmen who were rendered jobless and the unsecured and secured creditors whose hard earned money is locked up in it. A few facts will put the problem raised in this appeal in focus and proper perspective. M/s. Delhi Flour Mills Ltd. ('DFM' for short) was the holding company of which IHI was the subsidiary. Somewhere by the fall of 1971 functioning of IHI came to a halt and the huge debt was mountin¥ up with the spiralin~ of interest, • • • • • ·f' • ~ s. K. GUPTA V, K. P. JAIN (Desai, J.) 1189 As the shares of DFM were closely held by relations of respondent A No. 1 referred to as 'Jain group' and as there were fratricidal disputes in Jain family culminating into a litigation in 'the High Court of Delhi, IHI languished for want of attention. In the meantime M/s. Indian Smelting & Refining Co. Ltd. ('petitioning creditor' for short) filed a winding up petition against IHI in 1975 alleging that IHI was heavily indebted and was unable to pay its debts as and when they became due. After the dispute in the Jain family was resolved somewhere in 1974, a situation emerged in which one R. P. Jain and the members of his family acquired controlling interest in the holding company DFM. Once R. P. Jain came into saddle, the DFM as holding company proposed a scheme of compromise/ arrangement between IHI and its unsecured creditors and after the scheme was approved, the proponent of the scheme submitted Company Petition No. 86/74. to the Company Court for according sanction to the scheme and by Order dated 15th October 1975 the scheme was sanctioned. Sometime after the scheme was sanctioned, DFM transferred its 44,000 shares of IHI and its claim to the tune of Rs. 23 lacs recoverable from IHI, to the present appellants S. K. Gupta and ·Mrs. Dropadi Gupta (referred to as 'appellants' hereafter). Thereafter the appellants filed Company Application No. 193/76 requesting .the Court to make appropriate modification and/or granting further direction for effectively implementing the scheme sanctioned by B c D the Court in respect of IHI by substituting the appellants in place of E . DFM as proponents of the scheme and imposing upon them the liability to implement the scheme under the supervision of the Court. A little while before this application was moved, respondent K. P. Jain filed Company Application No. 190/76 purporting to be under s. 392 of the Companies Act, 1956, inviting the Court for the reasons mentioned in the application to hold that the scheme sanctioned by the Court cannot be worked satisfactorily with or without modification and therefore an order winding up the Company should be made. F The Company Judge by his two orders in the two aforementioned applications dated 26th April 1976 granted the application of the G appellants and modified the scheme by substituting the appellants as proponents of !_he scheme and simultaneously rejected the application of the respondent K. P. Jain for winding up the Company. Respondent Jain preferred two appeals being Company Appeals Nos. 15 and 15/76 under s .483 of the Companies Act. Both these H appeals came up before a Division Bench of the Delhi High Court, and they were disposed of by a common judgment. The Division A B c D E F G 1190 SUPREME COURT REPORTS [1979] 2 s.c.R. Bench was of the opinion that substitution of a new propounder in a scheme already sanctioned by the. Court in place of the original propounder of the scheme was a change of a basic nature which would not be comprehended in the expression 'modification' as under s. 392 and, therefore, the Company Judge could not have granted such a substitution of the propounder of the scheme without referring back the proposed modified scheme to the creditors who had approved the original scheme. It was further of the opinion that though the transfer of 44,000 shares of IHI held by DFM in favour of the appellants may be complete as between the transferor and the transferee, the same would not clothe the appellants with the right of a . member unless their names were put on the register of members~. maintained by IHI and that the same having not been done, the appellants were not members of IHL It was further of the opinion :.( that the debt owed by IHI to DFM was not assigned according to law in favour of the appellants and, therefore, they were not creditors, and in view of the language of s. 391 of the Companies Act, the appellants being neither members nor creditors of IHI, had no locus standi to move an application under s. 392 for modification of the scheme because in the opinion of the Court s. 391 controls s. 392 and either a member or a creditor or in the case of a company being wound up, a liquidator alone can file an application for modification. In accordance with this opinion, the appeal preferred by respondent No. 1 being Company Appeal No. 15/76 challenging the order of the CQmpany Judge which granted modification/substitution of appellants as proponents was allowed and the.application of the appe!lants for substitution was rejected. The Division Bench dismissed Company Appeal No. 16/76 pre--1_ ferred by respondent Jain against the order of the Company Judge refusing to make an order for winding up of the Company observing that even while dismissing the application for substitution of the present appellants, the Court was not in :.i positon to come to an affirmative finding that the scheme cannot be satisfactorily worked with or without modification and the matter should be left to the Company Judge as to what future course of action should be taken in the matter. The appellants preferred the present appeal by special leave against the decision of the Division Bench in Company Appeal No. 15/76 by which their application for substitution/modification was H rejected. Mr. S. S. Ray, learned counsel for the appellants urged that the Court committed a basic error in holding that the application for + r • ) • • J. • s. K. GUPTA v. K. P. JAIN (Desai, J.) 1191 substitutiou/modification was not maintainable because the appellants A were neither members nor creditors of the Company, IHI, thereby importing a narrower concept in respect of the locus standi of the present appellants to move the Court under s. 392 which restrictive approach would run counter to the power of widest amplitude conferred on the Court, namely, even to make modification suo motu or B on the application of a person interested in the affairs of the Company. He further urged that the appellate Court clearly misdirected itself when it went in search of the meaning of the expression 'modification' in s. 392 by ransacking dictionaries completely overlooking the fact that in s. 2(29) of the Companies Act the words 'modify' and 'modification' have been defined and it is a well known canon of construction that unless the context otherwise requires, the definition of an expression given in a statute shall govern the meaning of the expression wherever used in the same statute. It was urged that the words "modify' and 'modification' for the purpose of s. 392 would include the making of additions and omissions and according to him additions and omissions in the context of s. 392 would and could only mean additions and omissions to the sanctioned scheme because s. 392 operates at a stage subsequent to the sanctioning of the scheme under s. 391 (2). It was further urged that if the words 'modify' and 'modification'! would include additions and omissions, the Court would have plenary power to substitute one proponent for the other if in the opinion of the Court the scheme cannot be worked satisfactorily without the necessary modification and in all such cases it would be imprudent tp hold that the Court will have to fall back to the cumbersome procedure of s. 391 over again delaying for a considerable period the vital requirement of restarting a sick unit. It was submitted that the Court committed a fallacy in importing the concept of Constitution while interpreting a provision of the Companies Act. Mr. Lal Narain Sinha on the other hand on behalf of the respondents, while conceding that in an emergency the Court can act on the application of any person, ordinarily the Court would act . on the application of a member or creditor of the Company and in this blurred area some light is shed by the provision contained in Rule 87 of the Companies (Court) Rules, 1959. Proceeding further, it was urged that ss. 391 and 392 constitute a code and, therefore, if there was a qualification for proposing a scheme under s. 391, the same qualification should be read in s. 392 and any other approach would be self-defeating. It was submitted that viewed from· this angle, only a member or a creditor can maintain an application under s. 392 and as the appellants are neither members nor c D E F G H A c D E F G 1192 SUPREME COURT•REPORTS [1979] 2 s.c.R. creditors of the Company, they :have no locus standi to maintain the petition. He further urged that putting .too wide a construction on :·the expression 'modification' in s. 392 (2) would lead to such . a startling result as could not have been within the contemplation of the ·legislature and that, therefore, in order to arrive at a true meaning of word 'modification', the Court should bear in mind the purpose and object behind using the expression or enacting the provision in which the expression is found. It was also contended that substitution of the original sponsor amounts to repudiation of the contract which the scheme represents between the proponent of the scheme and the Ccimpany and another person cannot be substituted in place of the original contracting party without the consent or affirmance L of the second party to the contract and hence such a thing cannot be :brought about by way of a modification under s. 392 .. The word 'modification' or 'modify', therefore, should be given a restricted :meaning looking to· the context in which it is used in s. 392 as has been done by the High Court. Principal contentions advanced on either side turn upon the right to make an application and the power of the Court to grant an application under s. 392 of the Companies Act. Section 392 finds its place in Chapter V of the Companies Act bearing fascicules 'Arbitration, Compromise, Arrangements and Reconstructions'. Section 391 enables a member or a creditor of the Company or a Company which is being wound up, its liquidator, to make an application to the Court proposing a compromise or arrangement between the company and its creditors or any class of them or between the Company and its members or any class of them and seeking directions of the Court to convene a meeting of each class of creditors ._,( and/ or each class of members to whom the compromise or arrangement is offered. On the Court's giving the directions, the meeting would be convened in which the proposed scheme of compromise and/or arrangement would be submitted for consideration and each class will have to vote upon it and if the scheme is accepted by a majority in number representing three fourths in value of the creditors or members or class of members as the case may be, present and voting either in person or ·where proxy is allowed, by proxy, such approved· scheme . has to ·be· placed before the Court for sanction of the Court as envisaged ins. 391(2). Then comes .s. 392 which may be reproduced .in extenso : "392. Power of High Court.to enforce compromises and arrangements-(L) Where1a High.Court makes an order .under i.ection 391,,sanctioning-a co.mpromise :or an.ruiiu,gement.in respect..of.a .. cOl:lilPl:llypit- ' • ' • • • ) • s. K. GUPTA v. -K. P. JAIN (Desai, I.) 1193 (a) shall have power to supervise the carrying out of the A compromise or arrangement; and (b) may, at any time of making such order or at any time thereafter, give such directions in regard to any matter or make such modifications in the compromise or arrangement as .it may consider necessary for the proper working of the compromise or arrangement. (2) If the Court aforesaid is satisfied that a compromise <>r arrangement sanctioned nnder section 391 cannot be worked satisfactorily with or without modifications it may, ,either on its own motion or on the application of any person interested in the affairs of the company, make an order winding up the company, and such an order shall be deemed to be an order made under section 433 of this Act". At the outset it may be mentioned that though a large number of provisions of the Companies Act, 1956, are in pari materia with the provisions of Companies Act, 1948, of the U.K. ('U.K. Act' for short), there is no provision analogous to s. 392 in the U.K. Act. The Court under the U.K. Act has no power to modify the scheme either at the time when it is offered for its sanction or at any time subsequent thereto. The Parliament lias in its wisdom, conferred a power of wide amplitude on the High Court in India to provide for its continuous supervision of the carrying out of compromise and/or arrangement and also the consequential power to make the supervision effective by removing the hitches, obstacles or impediments in the working of com- .prqmise or arrangement by conferring power to give such direction in regard to any matter or for making such modification in the compromise or arrangement as it may consider necessary for the proper working of the compromise and/or arrangement. Sub-s. (2) confers power on the Court to .act under s. 392 either on its own motion or on the application of any person interested in the affairs of the company. What falls for consideration is the true meaning of the expression 'on the a,pplkation of any person interested in the affairs of the company'. B D E I!' The High Court was of the opinion that the appellants have no .G locus stanili to maintain an application for modification/substitution of themselves as proponents of the scheme with a liability to implement 'the -scbeine as they were neither members nor creditors of the Company and according to the High Court, if a scheme of compromise or arrange- · mertt cannot be ·proposed by any one except a member or creditor ipso •facto, an application for modification of such scheme sanctioned JI 'by the ·Court untler s. 391(2) could ·not be made by any one other than a member or a creditor. 1194 SUPREME COURT REPORTS [1979] 2 s.c.R. A Section 391 envisages a compromise or arrangement being proposed for consideration by members and/or creditors of a Company liable to be wound up under the Companies Act, 1956. Compromise or arrangement has to be between creditors and/or members of the Company and the Company, as the case may be. It was always open to the Company to offer a compromise to any of the creditors or enter into arrangement with each of the members. The scheme in this case is essentially a compromise between the company and its unsecured creditors. The scheme when sanctioned does not merely operate as an agreement between the parties but has statutory force and is binding not only on the company but even dissenting creditors or members, as the case may be. The effect of the sanctioned scheme is "to supply by recourse to the procedure thereby prescribed the absence of that individual agreement by every member of the class to be bound by the scheme which would otherwise be necessary to give it validity" (see J. K. (Bombay) Pvt. Ltd., v. New Kaiser-I-Hind Spg. & Wvg. Co. Ltd. & Ors. etc.('). Further section 391(1) itself by a specific and positive provision prescribes who can move an application under it. Only the creditor or member of that company or a liquidator in the case of a company being wound up is entitled to move an application proposing a compromise or arrangement. By necessary implication any one other than those specified in the section would not be entitled to move such an application. B c D E When a scheme is being considered by the Court, in all its ramifications, for according its sanction, it would not be possible to comprehend all situations, eventualities and exigencies that may arise while implementing the scheme. When a detailed compromise and/or arrangement is worked out, hitches and impediments may arise and if there was no provision like the one in s. 392, the only obvious alterF native would be to follow the cumbersome procedure as provided in s. 391 (1), viz., again by approaching the class of creditors or members to whom the compromise and/or arrangement was offered to accord their sanction to the steps to be taken for removing such hitches and impediments. This would be unduly cumbersome and time consuming G JI and, therefore, the legislature in its wisdom conferred power of widest amplitude on the High Court under s. 392 not only to give directions but to make such modification in the compromise and/or arrangement ·as the Court may consider necessary, the only limit on the power of the Court being that such directions can be given and modifications can be made for the proper working of the compromise and/ or arrangement. The purpose underlying s. 392 is to provide for effective working of the compromise and/or arrangement once sanctioned and [1969] 2 S.C.R. 866 at 891. ' ( • ,,L ( • y s. K. GUPTA v. K. P. JAIN (Desai, J.) 1195 over which the Court must exercise continuous supervision[see s. 392(1)], and if over a period there may arise obstacles, difficulties or impediments, to remove them, again, not for any other purpose but for the proper working of the compromise and/or arrangement. This power either to give directions to overcome the difficulties or if the provisions of the scheme themselves create an impediment, to modify the provision to the extent necessary, can only be exercised so as to provide for smooth working of the compromise and/ or arrangement. A B To effectuate this purpose the power of widest amplitude has been conferred on the High Court and this is a basic departure from the scheme of the U.K. Act in which provision analogous to s. 392 is absent. The sponsors of the scheme under s. 206 of the U.K. Act C have tried to get over the difficulty by taking power in the scheme of compromise or arrangement to make alterations and modifications as proposed by the Court. But the Legislature foreseeing that a complex or complicated scheme of compromise or arrangement spread over a long period may face unforeseen and unanticipated obstacles, has conferred power of widest . amplitude on the Court to give directions and if necessary, to modify the scheme for the proper working of the compromise or arrangement. The only limitation on the power of the Court, as already mentioned, is that all such directions that the Court may consider appropriate to give or make such modifications in the scheme, must be for the proper working of the compromise and/ or arrangement. Sub-section (2) provides the legislative exposition as to who can move the Court for taking action under s. 392. Reference to s. 391 in sub-s. (2) of s. 392 merely indicates which compromise or arrangement can be brought before the Court for taking action under s. 392. The reference to s. 391 does not mean that all the limitations or restrictions on the right of an individual to move the Court while proposing a scheme of compromise or arrangement have to be read in sub-s. (2) merely because s. 391 is referred to therein. Unlike section 391, s. 392 does not specify that a member or creditor or in the case of a company being wound up, its liquidator, can move the Court under s. 392. On the other hand, the legislature uses the expression 'any person interested in the affairs of the company' which has wider denotation than a member or creditor or liquidator of a company. In fact, the ambit of the power to act under s. 392(2) can be gauged from the fact that the Court can suo motu act to take action as contemplated bys. 392(1) or it may act on an application of any person interested in the affairs of the Company. D E F G H A B c D E F G H 1196 SUPREME COURT REPORTS [1979] 2 s.c.R. In this context the observations of the Gujarat High Court, extracted hereunder, in Mansukhlal v. M. V. Shah,(') can be referred to with advantage as it precisely lays bare the ambit and width of Court's power under section 392 : "The framers of the company law in India have conferred statutory powers ou the High Court to make such modifications in the compromise or arrangement as the Court may consider necessary for the proper working of the compromise and arrangement. The power of the widest amplitude has been conferred on the court under section 392(1) (b) and the width and the magnitude of the power can be gauged from the langnage employed in section 3 92 (1 )(a) which confers a sort of a supervisory role on the court during tlje period the scheme of compromise or arrangement is being implemented. Reading clauses (a) and (b) of sub-section (1) of section 392, it appears that Parliament did not want the court to be functns officio as soon as the scheme of compromise and arrangement is sanctioned by it. The Court has a continuing supervision over the implementation of compromise and arrangement. Unenvisaged, unanticipated, unforeseen or even unimaginable hitches, obstruction and impediments may arise in the course of implementation of a scheme of compromise and arrangement and if on every such occasion, sponsors have to go back to the parties concerned for seeking their approval for a modification and then seek the approval of the court, it would be a long-drawn out, protracted, time-consuming process with no gnarantee of result and the whole scheme of compromise and arrangement may be mutilated in the process. Parliament has, therefore thought it fit to trust the wisdom of the court rather than go back to the interested parties. If the parties have several times to decide the modification with the democratic process, the good part of an election machinery apart, the dirt may step in, the conflicting interests may be bought and sold, ·and, in the process, the whole scheme of compromise and arrangement may be jettisoned. In order, therefore, to gnard against this eventuality and situation, which is clearly envisageable, Parliament has conferred power on the court, not only to make modifications even at the time of sanctioning the scheme, but at any time thereafter during the period the scheme is being implemented. Conceding that, before the Court sanctions the scheme, it partakes the character of an emerging contract between the (!) (1976) 46 Company Cases 297 at 290-291. ( .. L ( • • .. .L • • • + 5. K. GUPTA v. K. P. JAIN (Desai, J.) 1197 company and the creditors and members; once the court approves it, it becomes a statutorily enforceable contract even on dissidents, with power in the court to modify, amend or correct or revise the contract the outer periphery or the limit . on the power being that, after testing it on thes anvil of probabilities, surronnding circumstances and the prevalent slate of affairs, it can be done for the proper working of the compromise and arrangement, and subject to this limit on the Court's power, the power seems to be absolute and of the widest amplitude and it would be unwise to curtail it by process of interpretation". If the Court can suo motu act, it is immaterial as to who drew the attention of the Court to a situation which necessitated Court's intervention. Where the power is conferred on the Court to take action on its own motion the information emanating from whatever source which calls for Court's attention can as well be obtained from any person without questioning his credentials, moving an application drawing attention of the Court to a situation where it must act. Undoubtedly, the Court may decline to act at the instance of a busy body but if the action proposed to be taken is justified, valid, legal or called for, the capacity or credentials of the person who brought A c D the situation calling for Court's intervention is hardly relevant nor E would it invalidate the resultant action only on that ground. Therefore, when sub-s. (2) confers power on the Court to act on its own motion, the question of locus standi hardly arises. The High Court while examining the question of locus standi, after combing the provision contained in sub-s. (2), wholly overlooked the important provision therein contained that the High Court can act on its own motion. It was, however, said in passing that sub-s.