Judgment : 1. The company petition has been filed by the petitioner company under Sections 391 to 394 of the Companies Act, 1956 to sanction the scheme of arrangement/compromise duly approved by the customers of the company in the meeting held on 22.11.2006. C. A. No. 1447 of 2007 This application has been filed praying to reject the Scheme of Arrangement as envisaged by the first respondent company in C.A. No. 1621 of 2006 and consequently direct them to place a fresh scheme arrangement taking into only the properties belonging to the first respondent company. C. A. No. 2267 of 2007 This application has been filed praying to reject the Scheme of Arrangement as envisaged by the first respondent company in C.A. No. 1621 of 2006 and consequently direct them to place a fresh Scheme of arrangement taking into account only the properties belonging to the first respondent company. 2. The brief facts are as under: C.P. No. 119 of 2007 has been filed by Maxworth Orchards (India) Ltd. under Sections 391 to 394 of the Companies Act, 1956 for sanctioning the Scheme of Arrangement/Compromise duly approved by the customers of the company in the meeting held on 22.11.2006. 3. The petitioner is Maxworth Orchars (India) Limited having its registered office at No. 9, Mahalingapuram Main Road, Mahalingapuram,Chennai600 034. 4. The company was incorporated on 15.2.1993 with the certificate of Registration No. 18-24404 of 1993 in the Registrar Office, Chennai. The authorised capital of the company is Rs. 12,00,00,000/-consisting of 1,20,00,000 equity shares of Rs. 10/-each. The issued and subscribed paid up capital of the company is Rs. 12,00,00,000/- consisting of 1,20,00,000 equity shares of Rs. 10/- each. 5. The company was incorporated with the main object namely: a) To acquire, purchase, lease, concession, grant license or otherwise lands to cultivate, to grow, produce or deal in plantation agricultural crops, vegetable, fruits and fruit products. Trees of all kinds, manage and sell the same both in India and abroad. b) To carry on business of agricultural, horticultural, floricultural, forestry related activities, to carry on business of farming, agriculture etc. c) To sell land with or without trees, plants, agricultural, horticultural, floricultural produce in all its farms and market the same either in wholesale or retail in India and abroad. 6. b) To carry on business of agricultural, horticultural, floricultural, forestry related activities, to carry on business of farming, agriculture etc. c) To sell land with or without trees, plants, agricultural, horticultural, floricultural produce in all its farms and market the same either in wholesale or retail in India and abroad. 6. In the course of its business, the company had adopted various means to acquire and control over 20,326 acres of land in the states of Tamil Nadu, Andhra Pradesh, Mahrashtra, Madhya Pradesh and Uttar Pradesh. The object for acquisition of these lands was to enable the company to create plantation projects and to plot out these said projects lands in quarter, half, and one acre of plots within the said plantation projects and to sell the same to the customers. The process of acquisition of land was highly cumbersome and the company adopted the following methods to acquire the lands. a) Company nominated its employees as a Power Agent to negotiate and to deal with the land owners. The power of Attorney Agent/employee would acquire the land from the land owners by obtaining powers of attorney from the land owners and using the same, the said employee would execute the sale deeds within the project areas, in accordance with the investments of the customers namely quarter, half and one acre of land. b) In certain other cases, the employee would contact the land owners directly and would request the land owners to execute the sale deed in favour of the customers directly in respect of project. 7. In this process, the company was able to successfully launch as many as 199 projects in the States of aforesaid mentioned. The company also simultaneously with the customers entered into maintenance agreements by which the customers handed over possession on the land so conveyed to him/her back to the company to enable the company to carry out development of the plantation such as leveling, bunding, fencing etc. The company also took steps to provide access road, to each of the customers plots and dig bore wells, provide irrigation systems in the plantation for the purpose of maintenance of the plantations. The agreement was for a fixed period of time. 8. The company also took steps to provide access road, to each of the customers plots and dig bore wells, provide irrigation systems in the plantation for the purpose of maintenance of the plantations. The agreement was for a fixed period of time. 8. The salient features of the Maintenance Agreement were: “Clause 2(b): Access to schedule property: Maxworth or its nominees will arrange to provide reasonable access in the form of cart track or pathway or passage (hereinafter referred to as access area) to the schedule property to the extent possible so that the orchard owner will be able to reach the schedule property. The ownership over this access area will be held in the name of the Orchards owners of that areas and Maxworth or its nominees jointly. No individual orchard owner or Maxworth or its nominees shall claim exclusive right over this area so as to hinder or affect the right of passage to the orchard owners of the Scheme. The maintenance of the access area shall be the responsibility of Max worth or its nominees. Clause 8: Nature of possession in the hands of Maxworth: Maxworth shall have only the responsibility to develop the Schedule property into an Orchard and thereafter maintain the same by taking such care as practicable. Maxworth shall not have any right whatsoever over the schedule property or the trees grown thereon or the produce out of the same except to the extent mentioned in Clause 7(b) above. The possession of the schedule property to the given by the orchard owner to Maxworth is only for the limited purpose of developing the schedule property into an orchard and thereafter maintaining the same. Maxworth shall not have any right including right of enjoyment whatsoever over the schedule property as a tenant nor can Maxworth deemed to be a tenant. The Orchard owner shall have the right to remove Maxworth from the limited possession of the schedule property at any point of the time during the agreement period subject however to the provisions contained in Clause 25 below: Clause 31: Ownership of Property: The ownership by Orchard owner shall be limited to the schedule property registered in his favour together with the main crop standing on the schedule property and the lateral drip pipelines running on the schedule property. It is clearly understood between the parties that ownership of the irrigation system/drip irrigation system which includes wells, motor pumps, pipelines, water connection etc. electricity system including power lines, fittings and accessories and all other equipment, implements, things, systems, properties etc. whether permanent, semi-permanent, movable which are situated outside the schedule property or would be owned absolutely by Max worth.” 9. The Scheme offered by the company evinced a lot of interest and number of customers came forward and invested with the object of getting the small portion of land and yield from plantation that was being developed in that particular project. 10. In or about 1997, certain restrictions came to be passed by the Security Exchange Board of India and the Scheme was offered by the company were termed as collective investments scheme and further business could not be carried on and the business came to stand still. There was a mass exodus of the employee in the company and practically it led to a situation wherein the Company could not do any business further. Several unsecured creditors filed winding up petitions before this Court and the same are pending. With an object of reviving the company the promoter of the Company, Shri R. Subramanian, filed C.A. 63 of 2001 in this Court in which this Court was pleased to appoint Shri. K. Alagiriswami, Senior Advocate as Adminsitrator of the company to be in-charge of the affairs of the company an to overall oversee management of the company. Thereafter, by further Order dated 30.4.2001. Bail Associates, Chartered Accountants were appointed to have Special Audit for assets and liabilities of the company. 11. In the meanwhile, taking advantage of the fact that a lot of the information and record pertaining to the company was scattered in various locations such as Madurai, Pune, Delhi, some of the erstwhile employees, land owners and the third parties with fraudulent intent started dealing with the lands in which the company had jointly acquired interest. As and when the facts came to the attention and knowledge of the administrator in respect of the fraudulent sale transactions, the Administrator also from time to time filed proceedings before this Court and sought for direction to protect the assets of the company and its customers. 12. As and when the facts came to the attention and knowledge of the administrator in respect of the fraudulent sale transactions, the Administrator also from time to time filed proceedings before this Court and sought for direction to protect the assets of the company and its customers. 12. While the matters stood thus, at the instance of the Administrator, the company formulated the Scheme of Companies/Arrangements with its customers, creditors with the object of putting an end to the relation between the company and its customers/creditors once and for all. The aforesaid scheme was formulated by the company keeping in mind the following facts: a) Majority of the customers, creditors over a period of time had made request to the company for return of monies invested by them. b) Majority of the customers, did not have physical possession, control of the lands alleged to have been in any particular plantation. c) In the absence of the customers, the third parties were taking advantage of the situation and were indulging in land grabbing. d) The company did not possession the wherewithal to project the assets from said third parties and land grabbers. e) In respect of law plantations, some customers had formed associations and were managing the plantation to the exclusion of other customers and enjoying the yield from the same without e) “Group of customers” means any group of customers who collectively hold valid right, title or interest over not less than 50% of the lands in any given project promoted by the Company. f) “Pro rata formula” Amount paid by customer × Extent of land purchased by the customerAmount to be paid per agreement - Total land acquired in a project Now this Deed of Compromise witnessth as follows: 1) The company and its customers agree that all the sale deeds/agreements executed by and on behalf of the company in respect of the Orchard lands in the various projects shall be annulled and simultaneously the Provisional Liquidator shall take possession of the properties. 2) The company agrees that immediately upon sanction of this Scheme, on and from the appointed date, the provisional Liquidator or his nominee alone shall have the exclusive right to deal with the lands/properties in respect of the 199 projects promoted by the company. 2) The company agrees that immediately upon sanction of this Scheme, on and from the appointed date, the provisional Liquidator or his nominee alone shall have the exclusive right to deal with the lands/properties in respect of the 199 projects promoted by the company. 3) The company and the customers agree that upon sanction of this Scheme and on and from the effective date the Provisional Liquidator shall bring the properties in the 199 projects to sale separately by way of public auction. 4) The company and the customers agree that the Provisional Liquidator shall from out of the sale of the respective projects, pro-rata distribute the sale proceeds to such of those customers who had invested in the respective projects and retain reference to the other customers who had invested in the said plantation. 13. With an object of meeting of the above contingency, a Compromise Scheme/Arrangement came to be formulated and approved by the Board of the Company. The Board of Directors at the meeting held on 14.9.2006 authorised Mr. N. Ramesh to proceed with the filing of the necessary applications before this Court to obtain the views of the customers in a general meeting. The salient features of the Scheme of Arrangement/Compromise is as follows: 5. The customers agree that upon receipt of the amounts from the Provisional liquidator, the same shall be in full and final discharge of all or any claims by or against the company its directors or any of its “offers in default” and all claims shall stand discharged in full. 6. It is agreed that in the event of any project has been taken over by any group of customers or customer association and such group of customers or associations desire to retain the portion of the lands or the Orchards on their own, such association or group of customers shall be exempt from the ambit of the above Scheme but shall be obliged to give a full discharge certificate to the company and its customers and pay consideration to the Provisional Liquidator in respect of any excess unsold lands including common areas based on market value and the decision of the Provisional Liquidator shall be final in respect of arriving at the market value for such excess unsold lands and common areas. Provided, in the case of a group of customers seeking to retain the lands the company shall be entitled to identify and earmark a portion of the Orchard in proportion to the holdings of the group and demarcate the same and deal with the balance lands as a single unit in accordance with the terms of this Scheme without reference to the group of customers. The area so demarcated and handed over to the group of customers shall be the sole direction of the company. 7. The scheme shall become effective immediately upon the grant of sanction by this Court. 14. Pursuant to the same, the company filed C.A. No. 1621 of 2006 before this Court seeking directions for convening a Meeting of its customer creditors. Upon hearing the application by order dated 22.9.2006 this Court directed Shri K. Alagirisamy to act as the Chairman of the meeting of the customer creditors to be held on 22.11.2006 and to take appropriate steps to convene the said meeting and to file a report in respect of the said meeting to be held on 22.11.2006. 15. In accordance with the directions of this Court, the Chairman was appointed by this Court and directions were passed for issued of notice individually to the customers and further directions for paper publication in all India editions of Economic Times and Indian Express and Malai Murasu (Tamil Nadu), notifying the convening of the meeting of customers to be held at Srivaaru Venkatachalapathy Palace, LBR Garden Adayalampattu, Vanagaram, Ambattur Road,Chennai600 095 at 10.30 a.m. on 22.11.2006. 16. The notice was duly issued by the Chairman to the customers as available in the Register maintained by the company. The notice issued by the Chairman evinced a tremendous response and Company therefore filed C.A. No. 2017 of 2006 in C.A. No. 1621 of 2006 seeking for a direction to the Commissioner of Police to provide police protection for holding the meeting on 22.11.2006. On 14.11.2006, this Court allowed the said application and directed police protection to enable the smooth conduct of the meeting on 22.11.2006. 17. On 22.11.2006, the meeting was duly convened and held under the Chairmanship of Mr. Alagirisamy, Senior Advocate and the same was attended by 6,186 customer creditors from all over India with an entitlement to 4,329.50 acres of land. 17. On 22.11.2006, the meeting was duly convened and held under the Chairmanship of Mr. Alagirisamy, Senior Advocate and the same was attended by 6,186 customer creditors from all over India with an entitlement to 4,329.50 acres of land. The meeting was duly convened and held under the Chairmanship of Shri K. Alagirisamy, Senior Advocate who has filed a detailed report to this Court setting out events that had occurred during the meeting. At the meeting, an overwhelming majority of the customers wanted the scheme to be approved in the current form and a few of the customers wanted the scheme to be approved with certain modifications, while a miniscule minority of the customers wanted the scheme to be rejected. The result of the meeting was announced on the very same day by the Chairman and it was declared and the resolution was passed that the overwhelming majority of the customers are in favour of the Scheme being passed. It is further submitted that even after the completion of the meeting, the company is till date receiving various letters from its customers accepting the terms of the Scheme. 18. It is submitted that an overwhelming majority of the customers are in favour of the Scheme being approved while a miniscule minority customers, for their vested interest have rejected the scheme by voting against the same. 19. It is submitted that it will be in the best interest of the company and its customers and other unsecured creditors that as per the wishes of the majority the proposed scheme arrangement/compromise may be sanctioned by this Court. 20. Hence, the above petition has been filed for the aforesaid relief. 21. Notices were sent as per law and service has been completed. 22. Pursuant to service of notices, a number of objections were received. 23. C.A. No. 2267 of 2007 is filed by one of the Objectors praying to reject the Scheme of Arrangement and consequently direct the company to place a fresh Scheme of Arrangement taking into account only the properties belonging to the company. 24. This application has been filed by one Anand Seshadri who received a notice of the meeting and attended the meeting on 22.11.2006 raising objection to the Scheme. 25. 24. This application has been filed by one Anand Seshadri who received a notice of the meeting and attended the meeting on 22.11.2006 raising objection to the Scheme. 25. According to the above applicant, he is the owner of one acre of land comprised in S.No. 31/21, 32/17, 32/20, 32/19, 32/18, 32/26 and 32/16 Vengal Village, Tiruvallur Taluk in the Vengal Scheme promoted by the petitioner company having purchased the same by the sale deed dated 2.4.1996, registered as Doc. No. 536/1996 in the office of S.R.O., Arani. He has been in possession of the property since 1996 after having paid the entire sale consideration of Rs. 1,42,000/- As the land was allotted to him on 31.3.1995, he also entered into an agreement with the company for maintenance on 15.5.1995. 26. The applicant contends that Section 391 of Companies Act envisages the Scheme of Compromise with the companys creditors and members and it restricts itself to companys own assets. Whereas the Scheme proposed, involves a larger extent of properties not belonging to the company and hence the petition filed by the company under Section 391 is not maintainable. 27. He further states that the company has not submitted to all its customers, project-wise details of unsold, sold but registered exclusively owned by the company and the dues to various customers on account of not fulfilling its commitment by way of assured returns. The company has also not given reasons for not registering the lands for which it has already received consideration. The company has also not given reasons for not giving possession to its members and the company has also not provided the information of owners in a given project to enable the owners to form association by themselves and to manage the project collectively. 28. He also took objections for not giving the details of liabilities to creditors and the company is only trying to take advantage of the enormous increase in the property prices and thus take away the rights of lawful land owners like him. He asserts that the owners in each project have paid not only for the lands, but also for the infrastructure of roads/access and also for development of Orchards. Hence, he prayed for the rejection of the Scheme. 29. He asserts that the owners in each project have paid not only for the lands, but also for the infrastructure of roads/access and also for development of Orchards. Hence, he prayed for the rejection of the Scheme. 29. C.A. No. 1447 of 2007 has been filed by another Objector by name Saroj Ramakrishnan praying to reject the Scheme of Arrangement and to direct the company to place a fresh Scheme of Arrangement taking into account the properties belonging to the company. 30. In her affidavit, she has stated that she is the owner of 0.5 acre of land at Mudukur Scheme and paid the entire consideration and she has been the owner since 1993. She also attended the meeting held on 22.11.2006. 31. The applicant contends that as the Scheme involves to a large extent of properties not belonging to the company, it is not maintainable under Section 391 of the Companies Act. She has also raised similar objections which were raised by the applicant in C.A. No. 2267 of 2007. 32. One Max worth Orchards Investors Welfare Association (Western Region) submitted their objections to the Scheme through their counsel. 33. They also maintain that the Scheme does not come within the purview and ambit of Section 391 of the Act as the members of the Association are neither creditors of the petitioners company nor its members. The members of the Association have all paid full consideration to the petitioner company towards the land purchased by them and obtained proper conveyances. Even in the case of persons who have paid the entire sale consideration and who have not been given with a sale deed by the company, it is only open to the company to execute and register the sale deed and the company cannot take back the available pieces of land from them. As the petitioner company did not manage and develop the land properly, an association was formed by the land owners to protect and promote their welfare. Instead of settling the creditors of the company from and out of the companys properties, attempts are now being made to cause loss to the persons who acquired lands from the company. The entire amenities, pathway and other easement have been created by the company only out of the payments made by the purchasers and as such the company cannot claim any right over the same. The entire amenities, pathway and other easement have been created by the company only out of the payments made by the purchasers and as such the company cannot claim any right over the same. Hence, according to the association the Scheme is biased, unlawful and it is opposed to all principles of equity. 34. Another association by name Vengal (Maxworth) Farmland Owners Welfare Association filed their objections through their counsel, wherein, they have also stated that their members are the owners of the plots sold to them by the company and they are neither secured creditors nor unsecured customers of the company and they have nothing to do with the dispute between the company and its creditors/members. They also questioned the maintainability of the petition filed by the company under Section 391 of the Companies Act. They found fault with the notice dated 22.9.2006 sent by the company to their members before the meeting held on 22.9.2006, wherein according to them, the estimated current market value of the lands in their possession were not shown. They also contend that the cart track, passage, etc. are common areas and their members have also paid for these facilities and they cannot be taken over by the company from the members. Hence, they prayed for rejection of the petition. 35. Objections were also filed by eight persons from Andhra Pradesh who purchased lands in Nandigram Project, Mahaboob District through their counsel. 36. In the objection, they have stated that they are not unsecured creditors of the company. They have all paid the entire sales consideration and obtained sale deed in their favour. They also contend that the Scheme of Arrangement as envisaged under Section 391 is not maintainable. As the pathway and common area would be owned by the land owners along with the company jointly, none can claim any exclusive right over them. It is not open to the company to claim the same as their property and ask for market value as compensation. The petitioner company cannot compel them to give up their lands for settling their so called creditors. 37. The above objectors take exception to the non-disclosure of the companys pending criminal complaint filed against the company by SEBI as early as in July 2001. The petitioner company cannot compel them to give up their lands for settling their so called creditors. 37. The above objectors take exception to the non-disclosure of the companys pending criminal complaint filed against the company by SEBI as early as in July 2001. The SEBI filed a criminal complaint in C.C. No. 7298 of 2001 before XXIII Metropolitan Magistrate Court, Saidapet, Chennai against the company and its directors for having raised a sum of Rs. 150 Crores from general public and having not repaid the amount collected from the investors under various Scheme promoted by the company. The company has been charged for violation of Section 12(1B) of SEBI Act and regulation 5(1) read with Regulation 68(1), 68(2) and 73 and 74 of SEBI (collective Investment Scheme) Regulations 1999, which is punishable under Section 24(1) of the SEBI Act 1992. Therefore, the company is guilty of suppression of material facts before this Court. 38. The objectors further add that if the Court is inclined to approve the Scheme, necessary safeguards are to be incorporated to protect the interest of plot owners and the Scheme in the present form cannot be approved at all. 39. Further objection from a number of persons were received through their counsel wherein the maintainability of the petition under Section 391 is raised. It is contended by them that there is no public interest involved and the company cannot claim and exclusive right over the pathway and common area. They have the right of easements and they cannot be denied that right to have access to their property. 40. Heard Mr. Karthik Seshadri, learned counsel for the petitioner company in C.P. No. 119 of 2007, Mr. Aravind Datar, learned Senior counsel for Mudukur Maxworth Land Owners Welfare Association and Maxworth Orchards Investors Welfare Association, Mr. Aravind Subramaniam, learned counsel for Vengal (Maxworth) Farmland Owners Welfare Association, Mr. M.S. Sampath, learned counsel for some of the Objectors, Mr. P.B. Balaji, learned counsel for yet another group of objectors in C.A. No. 1447 of 2007 and Mr. P. Wilson, Assistant Solicitor General for the Regional Director. I have also gone though the documents and judgments referred to by them in support of their submissions. 41. Mr. M.S. Sampath, learned counsel for some of the Objectors, Mr. P.B. Balaji, learned counsel for yet another group of objectors in C.A. No. 1447 of 2007 and Mr. P. Wilson, Assistant Solicitor General for the Regional Director. I have also gone though the documents and judgments referred to by them in support of their submissions. 41. Mr. Aravind Dattar, the learned Senior Counsel for the Objectors submitted that the scheme itself is not maintainable under Section 391 of the Companies Act, as the objectors are neither the companys creditors nor its members. In support of this submission, the learned Senior Counsel relied on a decision of the Hon‘ble Supreme Court in S. K. Gupta and Another v. K. P. Jain and Another S. K. Gupta and Another v. K. P. Jain and Another S. K. Gupta and Another v. K. P. Jain and Another AIR 1979 SC 734 , : (1979) 3 SCC 54 :(1979) 49 Comp. Case SC 342. The learned Senior Counsel further relied on a decision of the Hon‘ble Supreme Court in Union of India v. Raman Iron Foundry AIR 1974 SC 1265 , : (1974) 2 SCC 231 to submit that sum would be due to the purchase when there is an existing obligation to pay it in praesenti. When there is an obligation to pay a sum of money at a future date, it is a debt owing but when the obligation to pay a sum of money in praesenti it is a debt due. Therefore, according to the learned Senior Counsel, the objectors cannot be called as the creditors of the company. The learned Senior Counsel further submitted that the common areas are commonly owned and even otherwise the land owners have easementary rights to have access to their lands. Therefore, under the guise of a scheme of arrangement, the land owners could not be compelled to pay for the common area. The learned Senior Counsel further pointed out that the transaction took place a long back and therefore they cannot be interfered with either under Section 531 or 536 of the companies act. 42. Mr. Aravind Subramaniam, the learned counsel for the Objector Association has also submitted that the petition under Section 391 is not maintainable and selling the members lands does not arise. 42. Mr. Aravind Subramaniam, the learned counsel for the Objector Association has also submitted that the petition under Section 391 is not maintainable and selling the members lands does not arise. He further pointed out that most of the members hold a valid title deeds and the agreement to maintain the farm lands is independent of the ownership of the lands. He charged the company with suppression of material facts in their notice dt. 22.9.2006 and according to him this notice did not show the estimated current market value of the lands in their possession and the current market value of these lands would be much high than the companys current liabilities. 43. Mr. M.S. Sampath, the learned counsel for the objectors, who own lands in nandigram Project, Mahaboob Nagar District submitted that the publication with regard to the meeting to be held on 22.11.2006 is defective and therefore a number of people who wanted to object could not do so. He took strong exception to the suppression of fact of the company by not disclosing the pending litigation initiated by SEBI against the company. 44. Mr. P.B. Balaji, the learned counsel who appeared for some of the Objectors, while adopting the argument of the learned Senior Counsel submitted that the scheme of arrangement filed under Section 391 is misconceived and the same cannot be approved by this Court. 45. Mr. Karthik Seshadri, the learned counsel for the petitioner company submitted that Objectors were certainly creditors within the meaning of Section 391 of the Companies Act and that a Scheme of Compromise could be entered into with the class of creditors who are all similarly placed. In support of this contention, the learned counsel relied on the decision In Re Camcol Ltd. In Re Camcol Ltd. In Re Camcol Ltd. (1995) BCC 1138 (Chancery Division) and submitted that Section 206 (1) of the 1940 Act in England and Section 391(1) of the Indian Companies Act are similar and therefore the ratio of the English judgment would be a very valuable assistance to hold that the Objectors are also the creditors. The learned counsel pointed out that as various employees of the company played of fraud of the company, the provisional liquidator filed a number of applications to set aside various fraudulent sales. The learned counsel pointed out that as various employees of the company played of fraud of the company, the provisional liquidator filed a number of applications to set aside various fraudulent sales. The Scheme is formulated for an overall benefit of these customers who have put in their hard earned money. The learned counsel submits that the scheme is in the interest of the company and he relied on the decision is in the interest of the company and he relies on the decision of the Hon‘ble Supreme Court in Miher H. Mafatlal v. Mafatlal Industries Limited AIR 1997 SC 506 , : (1997) 1 SCC 579 and Administrator, UTI v. Garware Polyster Limited AIR 2005 SC 2550, in this regard. The learned counsel pointed out that majority of creditors have approved the scheme realizing the practical difficulties and therefore the Scheme is a realistic solution to the adverse condition faced by the company and its customers. 46. I have considered the rival submissions carefully with regard to facts and citations. 47. The only point that arises for consideration is whether the scheme of Arrangement/Compromise approved by the customers of the company in the meeting held on 22.11.2006 is to be sanctioned or not. 48. The Objectors raised the common ground namely, such a scheme cannot be approved as they are neither creditors nor members of the company and in such circumstance, Section 391 of Companies Act will not apply to their case. 49. Section 391 of the Companies Act contemplates the power to compromise or make arrangement with creditors and members. Section 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 Tribunal may, on the application of the 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 Tribunal directs. (2) If a majority in number representing three-fourch in value of the creditors, or class of creditors, or may be, present and voting either in person or where proxies are allowed under the rules made under Section 643, by proxy, at the meeting, agree to any compromise or arrangement, the compromise or arrangement shall, if sanctioned by the Tribunal be binding on all the creditors, all the creditors of the class, all the members, or all the members of the class as the case may be, and also on the company, or in the case of a company which is being wound up, on the liquidator and contributories of the company. Provided that no order sanctioning any compromise or arrangement shall be made by the Tribunal is satisfied that the company or any other person by whom an application has been made under subsection (1) has disclosed to the Tribunal, by affidavit or otherwise, all material facts relating to the company, such as the latest financial position of the company, the latest auditors report on the accounts of the company, the pendency of any investigation proceedings in relation to the company under Section 235 to 251, and the like. (3) An order made by the Tribunal under sub-section (2) shall have no effect until a certified copy of the order has been filed with the Registrar. (4) A copy of every such shall be annexed to every copy of the memorandum of the company issued after the certified copy of the order has been filed as aforesaid, or in the case of a company not having a memorandum, to every copy so issued of the instrument constituting or defining the constitution of the company. (5) If default is made in complying with sub-section (4), the company, and every officer of the company who is n default, shall be punishable with fine which may extend to one hundred rupees for each copy in respect of which default is made. (6) The Tribunal may, at any time after an application has been made to it or continuation of any sit or proceeding against the company on such terms as the Tribunal thinks fit, until the application is finally disposed of.” 50. (6) The Tribunal may, at any time after an application has been made to it or continuation of any sit or proceeding against the company on such terms as the Tribunal thinks fit, until the application is finally disposed of.” 50. From the above, it is clear that a company or any creditor of the company or a member of the company can file an application for a proposed compromise or arrangement before the Court. If a majority in number representing 3/4th in value of the creditor or class of creditors or members or class of members are present and voting agreed to any compromise or arrangement such compromise or arrangement shall if sanctioned by the Court is binding on all the creditors and all the members. Before sanctioning any compromise or arrangement, the Court is to be satisfied that the company or any other person disclosed all material facts relating to the company, like the latest financial position, the latest auditors report, the pendency of any investigation proceedings etc. 51. Now, the question posted before the Court is whether the objectors who purchased the lands long back after paying the entire sale consideration are creditors of the company as per Section 391 of the Act. 52. In S. K. Gupta v. K. P. Jain ( supra) , the Hon‘ble Supreme Court held as under: “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 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 recorse to the procedure thereby prescribed the absence of that individual agreement by every scheme which would other wise be necessary to give it validity” (see J. K. (Bombay) P. Ltd. v. New Kaiser(I)Hind Spg. Wug. Co. The effect of the sanctioned scheme is “to supply by recorse to the procedure thereby prescribed the absence of that individual agreement by every scheme which would other wise be necessary to give it validity” (see J. K. (Bombay) P. Ltd. v. New Kaiser(I)Hind Spg. Wug. Co. Ltd. J. K. (Bombay) P. Ltd. v. New Kaiser(I)Hind Spg. Wug. Co. Ltd. J. K. (Bombay) P. Ltd. v. New Kaiser(I)Hind Spg. Wug. Co. Ltd. (1969) 2 SCR 866 , 891 ; (1970) 40 Comp. CSE 689 (SC). 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. 53. In the above judgment, the Hon‘ble Supreme Court while considering the question of moving an application under Section 391(1) held that only the creditor or member of that company or a liquidator in the case of the company being wound up is entitled to move an application proposing a compromise or arrangement. The Supreme Court further held that by necessary implication any one other than those specified in the section would not be entitled to move such an application. 54. In Union of India v. Raman Iron Foundary Union of India v. Raman Iron Foundary Union of India v. Raman Iron Foundary (supra) , the Hon‘ble Supreme Court held as under: “ 9. The first thing that strikes one on looking at Clause 18 is its heading which reads: “Recovery of sums Due.” It is true that a heading cannot control the interpretation of a clause if its meaning is otherwise plain and unambiguous, but it can certainly be referred to as indicating the general drift of the clause and affording a key to a better understanding of its meaning. The heading of Clause 18 clearly suggests that this clause is intended to deal with the subject of recovery of sums due. Now a sum would be due to the purchase when there is an existing obligation to pay it in prasenti. The heading of Clause 18 clearly suggests that this clause is intended to deal with the subject of recovery of sums due. Now a sum would be due to the purchase when there is an existing obligation to pay it in prasenti. It would be profitable in this connection to refer to the concept of a debt, for a sum due is the same thing as a debt due. The classical definition of debt is to be found in Webb v. Stenton whereby LINDLEY, L.J. Said “… a debt is a sum of money which is now payable or will become payable in the future by reason of a present obligation.” There must be debitum in praesenti; solvendum may be in praesenti or in futuro that is immaterial. There must be an existing obligation to pay a sum of money now or in future. The following passage from the judgment of the Supreme Court of California in People v. Argullo , which was approved by this Court in Kesoram Industries v. Commissioner of Wealth Tax , clearly brings out the essential characteristics of a debt: (at p. 702) Standing alone, the word debt is an applicable to a sum of money which has been promised at a future day as to a sum now due and payable. If we wish to distinguish between the two, we say of the former that it is a debt owing, and of the latter that is a debt due. This passage indicates that when there is an obligation to pay a sum of money at a future date, it is a debt owing but when the obligation is to pay a sum of money in praesenti, it is a debt due. A sum due would, therefore, mean a sum for which there is an existing obligation to pay in praesenti, or in other words, which is presently payable. Recovery of such sums is the subject matter of Clause 18 according to the heading. That is the dominant idea running through the entire Clause 18.” 55. A sum due would, therefore, mean a sum for which there is an existing obligation to pay in praesenti, or in other words, which is presently payable. Recovery of such sums is the subject matter of Clause 18 according to the heading. That is the dominant idea running through the entire Clause 18.” 55. In the light of the above two judgments of the Hon‘ble Supreme Court and in the facts and circumstance of the case, I am of the considered view that the objectors cannot be termed as creditors within the meaning of Section 391 and as such, I find force in the objection of the objectors that the petition filed by the company in C.P. No. 119 of 2007 is misconceived. 56. But the learned counsel for the company submitted that the objectors are in fact creditors within the meaning of Section 391, by drawing support from an English judgment In Re Camcol Ltd. In Re Camcol Ltd. In Re Camcol Ltd. (supra). A reading of the judgment would make it clear that the question involved in that case is whether future rent is capable of inclusion in company voluntary arrangement and whether landlord is not entitled to vote because minimum value of claim for future rents are not agreed. Only in that context the Chancery Division held as under: 1. The word ‘creditor‘ in Rule 171(1) included those, entitled to a right to a future payment under an existing valid instrument such as a lease. The argument to the contrary was based on the proposition that the word ‘creditor‘ had a natural or ordinary meaning which was narrow and only included those with presently enforceable claims. Although that was a possible meaning, it was not one which prevailed over other possible meanings notwithstanding the many indications to the contrary from the context and the purpose of the legislation. 2. There was no relevant difference between the legislation relation to individual and company voluntary arrangements and if had been held that future rent was capable of inclusion in an individual voluntary arrangement. (Doorbar v. Alltime Securities Ltd Doorbar v. Alltime Securities Ltd Doorbar v. Alltime Securities Ltd (1994) BCC 994. considered) 3. It was undisputed that both in bankrupty and winding up, claims to future rent were susceptible of being included as relevant claims. (Doorbar v. Alltime Securities Ltd Doorbar v. Alltime Securities Ltd Doorbar v. Alltime Securities Ltd (1994) BCC 994. considered) 3. It was undisputed that both in bankrupty and winding up, claims to future rent were susceptible of being included as relevant claims. Moreover, the power of a company with the approval of the Court to enter into schemes of arrangement under Section 425 of the companies Act 1985 extended to schemes of arrangement which affected the rights of creditors with debts payable in the future as well as those payable at present. It would be anomalous if company voluntary arrangements, which were intended to be an alternative to liquidation, and Section 425 compromise or arrangement did not have the same potential ambit. (Re. Midland Coal. Coke and Iron Co. Re. Midland Coal. Coke and Iron Co. Re. Midland Coal. Coke and Iron Co. (1895) 1 Ch 267 considered.) 4. Rule 1.17(3) did not require the creditor in question to agree to a minimum value being placed on the claim. If the creditor stayed away he could not say that the chairman had not agreed. Equally the rule did not say that the chairman had to put a value and tell the creditor before the meeting. ( Doorbar v. Alltime Securities Ltd Doorbar v. Alltime Securities Ltd Doorbar v. Alltime Securities Ltd (1994) BCC 994 . considered.) 5. It was not unfair within the meaning of Section 6 to make a differentiation between members of the class of creditors with future claims on the basis that some creditors would be paid in full so long as the asset in question was used to earn the profits envisaged by the voluntary arrangement while those whose assets were no longer so used were left to a divident in respect of their claim under the arrangement. As far as the landlord was concerned, if and so long as the premises were occupied by the company the rent would be paid full; once vacated the landlord would rank for a dividend in the proposals. The landlord had a right of forfeiture once the rent ceased to be paid in full. The proposals did not deprive him of that, so he was not without a remedy. 6. the applicant landlord was not accorded the same treatment so far as voting on its future right to rent was concerned as the other landlord. The landlord had a right of forfeiture once the rent ceased to be paid in full. The proposals did not deprive him of that, so he was not without a remedy. 6. the applicant landlord was not accorded the same treatment so far as voting on its future right to rent was concerned as the other landlord. However, it was not an irregularity not to give the landlord any particular voting rights if and so long as it claimed that future rent could not be included in the arrangement. It was not necessary to investigate how the other landlords claim was valued because if its vote left out altogether the result on the figures would have been the same.” 57. This decision in my view does not support the case of the petition that objectors are all creditors considering the fact that they are the absolute owners of the property holding valid documents after paying the entire sale consideration. 58. Now, coming to the merits of the scheme, it is stated by the petitioner company that various employees have played fraud on the company by misusing the powers of attorney and dealt with properties that were already transferred to customers. More than 20,000 customers invested in the development of Orchard and most of the customers do not know anything about the lands, its condition, location etc. The provisional liquidator on coming across several fraudulend transaction filed a number of applications to set aside those sales. Only to avoid all these unnecessary filing of cases and to protect the interest of the majority of the customers, the scheme is proposed by the company. 59. I am unable to accept the above reasoning of the petitioner company for proposing the scheme under consideration. 60. First of all, all the customers cannot be termed as creditors. Secondly, all the transactions cannot be described as fraudulent transactions. Therefore, if the scheme is sanctioned in its present form, it will amount to depriving the owners of their land, their title and possession of the property even though they have not committed illegality or fraud. Merely because the scheme is approved by the majority present in the meeting when a scheme is unreasonable and unfair, affecting the rights of various genuine people, this Court cannot affix its seal of approval on such scheme. 61. Merely because the scheme is approved by the majority present in the meeting when a scheme is unreasonable and unfair, affecting the rights of various genuine people, this Court cannot affix its seal of approval on such scheme. 61. The other contentions of the petitioner company is that this is the only practicable solution taking into consideration the realities and the difficulties of company. 62. In Miher H. Mafatlal v. Mafatlal Industries Ltd Miher H. Mafatlal v. Mafatlal Industries Ltd Miher H. Mafatlal v. Mafatlal Industries Ltd (supra). , the Hon‘ble Supreme Court while dealing with the ambit and scope of jurisdiction of the Companys Court held as follows: “In view of the aforesaid settled legal position, therefore, the scope and ambit of the jurisdiction of the Company Court has clearly got earmarked. The following broad contours of such jurisdiction have emerged: 1. The sanctioning Court has to see to it that all the requisite statutory procedure for supporting such a Scheme has been complied with and that the requisite meetings as contemplated by Section 391 (1)(a) have been held. 2. That the scheme put up for sanction of the Court is backed up by the requisite majority vote as required by Section 391, sub-section (2). 3. that the concerned meetings of the creditors or members or any class of them had the relevant material to enable the voters to arrive at an informed decision for approving the scheme in question. That the majority decision of the concerned class of voters is just and fair to the class as a whole so as to legitimately bind even the dissenting members of that class. 4. That all necessary material indicated by Section 393(1)(a) is placed before the voters at the concerned meetings as contemplated by Section 391, sub-section (1). 5. That all the requisite material contemplated by the proviso to sub-section (2) of Section 391 of the Act is placed before the Court by the concerned applicant seeking sanction for such a scheme and the Court gets satisfied about the same. 6. that the proposed scheme of compromise and arrangement is not found to be violative of any provision of law and is not contrary to public policy. 6. that the proposed scheme of compromise and arrangement is not found to be violative of any provision of law and is not contrary to public policy. For ascertaining the real purpose underlying the Scheme with a view to be satisfied on this aspect, the Court, if necessary, can pierce the veil of apparent corporate purpose underlying the scheme and can judiciously x-ray the same. 7. That the Company Court has also to satisfy itself that members or class of members or creditors or class of creditors, as the case may be, were acting bona fide and in good faith and were not coercing the minority in order to promote any interest adverse to that of the latter comprising of the same class whom they purported to represent. 8. That the scheme as a whole is also fond to be just, fair and reasonable from the point of view of prudent men of business taking a commercial decision beneficial to the class represented by them for whom the scheme is meant. 9. Once the aforesaid broad parameters about the requirement of a scheme for getting sanction of the Court are found to have been met, the Court will have no further jurisdiction to sit in appeal over the commercial wisdom of the majority of the class of persons who with their open eyes have given their approval to the scheme even if in the view of the Court there would be a better scheme for the company and its members or creditors for whom the scheme is framed. The Court cannot refuse to sanction such a scheme on that grounds as it would otherwise amount to the Court exercising appellate jurisdiction over the scheme rather than its supervisory jurisdiction. The aforesaid parameters of the scope and ambit of the jurisdiction of the Company Court which is called upon to sanction a Scheme of Compromise and Arrangement are not exhaustive but only broadly illustrative of the contours of the Courts jurisdiction.” 63. In the above judgment, the Supreme Court held that the sanctioning Court has to see whether the majority decision is just and fair to the class as a whole so as to legitimately bind even the dissenting members of that class. In the above judgment, the Supreme Court held that the sanctioning Court has to see whether the majority decision is just and fair to the class as a whole so as to legitimately bind even the dissenting members of that class. Further, the proposed scheme of compromise is not contrary to public policy and the company Court has to satisfy that the majority members were not coercing the minority in order to promote any interest adverse to the minority. Once the above requirements are found to have been met, the Company Court will have no further jurisdiction to sit in appeal over the commercial wisdom of the majority. 64. In the present case, the parameters enumerated in the above Supreme Court judgment are not found to have been met and therefore, I am not inclined to sanction the Scheme. 65. In Administrator, UTI v. Gareware Polyster Ltd Administrator, UTI v. Gareware Polyster Ltd Administrator, UTI v. Gareware Polyster Ltd ( supra) . , the Hon‘ble Supreme Court held as under: 32. Section 391 read with Section 393 of the Act postulate that where a compromise or arrangement is proposed any class of them; or between a company and its members or any class of them, the meetings of creditors or class of creditors or members or class of members who are concerned with such a scheme. In the event majority of the creditors representing three fourths in value of the creditors or class of creditors or members or class of members, as the case may be, present or voting either in person or by proxy at such a meeting accord their approval thereto thus put to vote, whereupon, the Court may consider thereto. Section 391(1)(a) enjoins that requisite information therefore should be placed for consideration before the voters, in terms whereof the creditors or class of creditors can take an informed decision in relation thereto. The Court, however, would not grant sanction to such a scheme only because the same reflects the will of the majority of the creditors or a class of them but it must consider all aspects of the matter so as to arrive just and reasonable and does not contravene public policy or any statutory provision. Such a care or caution is required tobe exercised by all Courts including the civil Court in terms of Order 23, Rule 1 of the Code of Civil Procedure.” 66. Such a care or caution is required tobe exercised by all Courts including the civil Court in terms of Order 23, Rule 1 of the Code of Civil Procedure.” 66. In this decision also the Supreme Court held that the Company Court would not grant sanction to the scheme only because the same reflects the will of the majority of the creditors, but it must consider all aspects of the matter so as to arrive at a finding that the Scheme is fair, just and reasonable and does not contravene the public policy or other statutory provisions. 67. It is true that in both the above judgments namely AIR 1987 SC 507(supra) and AIR 2005 SC 2526(supra), the Supreme Court held that for ascertaining the real purpose underlying the scheme with a view to be satisfied on this aspect, the Court, if necessary can pierce the veil of apparent corporate purpose underlying the Scheme and can judiciously x-ray the same. 68. Relying on these observations of the Supreme Court, the petitioner company contended that if the corporation veil is pierced and x-rayed, it will prove that the Scheme is in the interest of the majority customers and to nullify the illegal and fraudulent transactions that took place due to the fraudulent activities of the company. 69. I am unable to accept this submission also. When a scheme is proposed for an apparent real purpose, the same is to be fair, just and reasonable without affecting the interest of even the minority members. Therefore, necessary safeguards and proper classification ought to be provided in a Scheme and there cannot be only one classification on a sweeping allegation without considering the hardships that the bona fide persons would suffer. As I find no such classification or safeguards in the present Scheme to protect the interest of genuine persons, I find it difficult to approve the same. 70. As I find no such classification or safeguards in the present Scheme to protect the interest of genuine persons, I find it difficult to approve the same. 70. The other decision relied on by the learned counsel for the petitioner is the judgment of Karnataka High Court in In re., Kirloskar Electric Company Ltd. In re., Kirloskar Electric Company Ltd. In re., Kirloskar Electric Company Ltd. (2003) 116 CC 413 (Kant), wherein the Karnataka High Court held that substantial compliance rather than formal compliance meets the requirements of a statute and the doctrine of lifting the veil of incorporation and looking at the reality of the action of the members enables the Court to hold that the consent of the overwhelming majority of the shareholders outside the meeting is sufficient to show that the resolution was supported by all the members of the company. 71. In the above decision, the Karnataka High Court relied on the decision of the Supreme Court in Miher H. Mafatlal v. Mafatlal Industries Limited supra) and I have already dealt with the same in the above paras and therefore this decision is also not useful to the company to contend that the scheme is to be sustained. 72. That apart, a specific allegation was raised by the Objector who owns lands at the companys Nandigram Project, Mahaboob District, Andhra Pradesh that company is guilty of suppressing the fact that SEBI filed a criminal complaint against the company in C.C. No. 7298 of 2001 before XXIII Metropolitan Magistrate Court, Saidapet, Chennai. But no explanation was given by the petitioner company for not disclosing the same before this Court. Therefore, the petitioner company is guilty of suppressing a material fact which will go against the company in sanctioning the Scheme. 73. From the above factual and legal discussions, I find it difficult to approve the scheme proposed by the company in its present form which is detrimental to the interest of the persons like the objectors herein and therefore the same is rejected. However, it is open to the petitioner company to formulate a new Scheme with adequate safeguards to protect and promote the interest of the persons like the objectors.