S. ANANDA REDDY, J. ( 1 ) COMMON ORDER :this Company petition is filed under Section 391, read with section 394 of the Companies Act, 1956 (hereinafter referred to as the Act ) seeking sanction of the scheme of arrangement/ compromise with the creditors of the respondent Company in liquidation; whereas ca No. 665 of 2001 is filed opposing the sanction of the scheme, and CA No. 539 of 2002 is filed seeking sanction of a modified scheme of arrangement/ compromise. As the Company Petition as well as the above Company Applications are interrelated, they are heard together and disposed of by this common order. ( 2 ) THE facts leading to filing of the above Company Petition and Company applications are as under: the Company Petition is filed by one of the shareholders, Mr. M. Sudhakar Gupta, who was the erstwhile Managing Director of the Respondent Company in liquidation, (hereinafter referred to as "the Petitioner ). According to the Petitioner, he is holding 9041 equity shares of Rs. 100/- each. The Company in liquidation was incorporated as a Private Limited Company on 19. 5. 1972. The founder member of the Company is mr. L. B. Prasada Rao, who is the applicant in the other abovementioned two Company applications (hereinafter referred to as the Applicant ). The authorised share capital of the Company in liquidation was Rs. 40 lakhs divided into 40,000 equity shares of rs. 100 each. The issued, subscribed and paid up capital of the Respondent Company is Rs. 30 lakhs divided into 30,000 equity shares of Rs. 100/- each. The share capital of the Company is held by 16 persons/ shareholders. The Company was incorporated with the main object of manufacturing and sale of refractories of all kinds. The Company also proposed to carry on business as dealers, distributors, merchants, exporters and importers of all kinds of refractories also. In addition, it was also proposed to carry on the business of finishers, polishers, galvanisers, electroplaters, anodises, enamellers, thermo plastic coaters, metalizers, metal solders, welders, painters, engravers, etc. , and also to carry on the business as manufacturers, assemblers, repairers, and dealers in all kinds of electro Thermic materials and electro thermal equipment etc. The Company in liquidation, after its incorporation, commenced its business operations of manufacturing and selling of Silicon Carbide. , and also to carry on the business as manufacturers, assemblers, repairers, and dealers in all kinds of electro Thermic materials and electro thermal equipment etc. The Company in liquidation, after its incorporation, commenced its business operations of manufacturing and selling of Silicon Carbide. In the course of its business, the Company has faced severe financial constraints for the reason that the product being manufactured by the Company requires high amounts of power and in view of frequent power cuts and load shedding during the period 1987-88, affecting the performance of the Company. As a result, the Company has become indebted to various parties, including M/s. Regency Ceramics Limited, which had approached this Court under Sections 433 and 434 of the Act by filing C. P. No. 7 of 1991, seeking winding up of the Company, at whose instance winding up orders were passed on 2-12-1993. It is stated that the petitioner, was the Managing Director from 1989 till winding up orders were passed. Further, the Petitioner has furnished personal guarantees to the secured creditors i. e. , andhra Pradesh State Financial Corporation and State Bank of Hyderabad on behalf of the Company in liquidation. The Petitioner being a shareholder of the Respondent company, who was in charge of day-to-day affairs and has a majority stake of l/3rd in terms of the total shareholding, is interested in reviving the Company. The same is desired to be achieved by a proper debt restructuring coupled with one time settlement of the dues, both to the secured and unsecured creditors. The Petitioner intends to achieve the same by adopting the procedure of repaying the dues to the creditors of the Company in liquidation, including the dues of the workers and other creditors, on one time settlement basis in addition to the secured creditors. The scheme of arrangement/compromise proposed by the Petitioner is in the interest of the secured creditors, unsecured creditors and employees of the Company. Upon sanction of the arrangement/ compromise, the operations of the Company can be carried on more advantageously and efficiently vis- a-vis the interest of the members and creditors of the Company. The Petitioner proposed to adopt the following method for revival of the Company in liquidation: (a) Infusing fresh capital of Rs. 142 lakhs by the Petitioner by himself and through his associates. The Petitioner proposed to adopt the following method for revival of the Company in liquidation: (a) Infusing fresh capital of Rs. 142 lakhs by the Petitioner by himself and through his associates. (b) Relocate the manufacturing unit/ plant presently situated at 7/4 KM Stone, nagarjuna Sagar Road, L. B. Nagar, hyderabad (the same is necessitated as the area at which the present unit is located has over a period of time been converted into a residential area and manufacturing activity cannot be continued in view of the guidelines of the pollution control authorities.) (C) To sell the land and buildings, to defray the cost of relocation of the plaint/unit and its revival. (d) To repay the secured and unsecured creditors within a period of one year from the date of sanction of the scheme by this Hon ble Court. (e) To increase the equity capital of the company and to issue secured debentures so as to maintain a debt equity ratio of 1: 1. 72. (f) Modernisation of manufacturing process so as to enhance the efficiency in terms of power consumption and optimal usage of plant and machinery. The cost of the rehabilitation scheme is as follows: ( 21 ) IF we examine the facts of the case in the light of the above decisions, though in the case of S. M. Holding Finance v. Mysore Machinery Mfrs. (supra) the karnataka High Court held that compliance of three-fourths majority is not mandatory, but, in fact in the said case also the facts shows that three-fourths majority has approved the scheme, though not by voting at the meeting of the creditors, but, subsequently by filing memos or affidavits before the Company Court. On the other hand, the Gujarat High Court held that the compliance with the statutory provisions is a must, which implies that the scheme proposed must be approved by three-fourths of the majority present and voted. In the present case, admittedly, in the meeting of the members-shareholders, the proposed arrangement/ compromise was not approved by three-fourths majority of the members present and voted. In the present case, admittedly, in the meeting of the members-shareholders, the proposed arrangement/ compromise was not approved by three-fourths majority of the members present and voted. Though it was claimed by the Petitioner that in the creditors meeting, the requisite three-fourths majority had approved, but the same is disputed by both the workmen as well as by the opposite party, claiming that different classes of creditors were called for in a single meeting and, in fact, if the creditors are separately classified and if their voting pattern is taken into account, though the secured creditors have approved with the requisite majority of three-fourths present and voting, but with reference to the preferential creditors as well as the unsecured creditors, it falls short of the requisite three-fourths majority. In addition, if the scheme as such is considered, whether it is equitable, reasonable, and any reasonable prudent person would approve the same, the answer must be in the negative. In fact, under the scheme of compromise or arrangement, the petitioner, who is a member of the Company in liquidation and erstwhile Managing director of the same, seeking approval to dispose of all the assets of the Company for a meager value of Rs. 70 lakhs, which he did not propose even to alter, when the opposite party had valued the same assets of land and buildings at Rs. 250 lakhs and stick to the value of Rs. 70 lakhs offered by him. Under the proposed scheme, the petitioner is not reviving the Unit, but only seeking permission to dispose of the assets of the Company and proposing to establish the Unit elsewhere. The Petitioner also did not show the existence or availability of any valuable machinery for the proposed re- location of the Unit. The Petitioner proposed to pay only 16. 27 lakhs to the workmen as against the dues of 24. 72 lakhs and is not even offering any employment to the workers in the new Unit. Therefore, the proposed scheme, on any aspect, could not be considered as a beneficial or equitable with reference to the concerned with the company in liquidation, except to benefit the sponsorers themselves. In fact, when the petitioner s scheme is compared with the modification scheme offered by the opposite party, the terms of the opposite party are better for acceptance. Therefore, the proposed scheme, on any aspect, could not be considered as a beneficial or equitable with reference to the concerned with the company in liquidation, except to benefit the sponsorers themselves. In fact, when the petitioner s scheme is compared with the modification scheme offered by the opposite party, the terms of the opposite party are better for acceptance. But, however, such scheme requires approval of the majority of the members as well as the creditors, as contemplated under Section 391 (2) and as there is no such approval with reference to the alternative scheme, this Court is not considering the acceptability of the said scheme. ( 22 ) COMING to the claim of the workmen as well as the opposite party that separate meetings of different class of creditors were not called for and therefore, the alleged approval of three-fourths of the value of the creditors present and voted, would not be taken into account, so as to represent different class of all creditors. According to the learned Counsel appearing for the workmen, the workmen have to be considered as a preferential creditors and out of them only 45% present and voted and approved the scheme. Similarly, with reference to the unsecured creditors only to the extent of 52% were present and voted and have approved the scheme proposed by the Petitioner. Therefore, there is no compliance of the provisions of section 391 (2) of the Act approving the scheme with the requisite majority of three-fourths. No doubt the judgments referred to earlier, as well as the provisions of section 391 (1) contemplate meeting of each class of creditors, not all classes of creditors together. In addition, it was the contention of the learned Counsel for the workmen as well as the opposite party that under the scheme proposed by the Petitioner, all the creditors are not treated equally, as different creditors are to be paid differently. Therefore, even on that ground also the meeting of the creditors called for as a single class is not in accordance with the provisions of the Act. ( 23 ) IN addition to the above, the opposite party filed complaints alleging that the Petitioner misappropriated certain of the assets of the Company and also committed forgery and fraud in obtaining the approval of the scheme in the creditors meeting, for which, in fact. ( 23 ) IN addition to the above, the opposite party filed complaints alleging that the Petitioner misappropriated certain of the assets of the Company and also committed forgery and fraud in obtaining the approval of the scheme in the creditors meeting, for which, in fact. separate complaints were filed, which are to be enquired into. ( 24 ) UNDER the above circumstances, this court is of the opinion that the scheme proposed by the Petitioner is not in compliance with the requirements of the provisions of Section 391 (2), and the said scheme is neither equitable nor beneficial to all the members as well as the creditors. ( 25 ) HENCE, the Company Petition and the CA No. 539 of 2002 are dismissed, while the CA No. 665 of 2001 is allowed. No