The court has the discretion to sanction a compromise or arrangement under Section 391(2) of the Companies Act, and may protect dissenting creditors by amending the scheme.

( 1 ) THIS petition is filed under Section 391 (2) of the Companies Act by the petitioner M/s. S. m. holding finance private limited, who is the petitioner in the matter of Mysore machinery manufacturers limited (in liquidation ).

( 2 ) THE object of the petition is to obtain sanction of the court to a compromise or arrangement whereby the debts of the company (in liquidation) i. e. , secured, preferential and unsecured and wages of labour are discharged. That apart, the shareholders of the company (in liquidation) will be repaid their share holding.

( 3 ) IT is averred that the company was incorporated under the then Mysore Companies Act 18 of 1938 on 23-9-1946 with a nominal capital of Rs. 100,00,000/- divided into 10,00,000 equity shares of Rs. 10/- each, of which 5,00,000 equity shares were issued and Rs. 10/- was paid up on each share issued.

( 4 ) THE objects for which the company was formed are set out in the company's memorandum of association. In brief they are: (i) to carry on the business of iron founders, mechanical engineers and manufacturers of agricultural implements and textile machinery, etc. , (ii) to carry on the business of structural engineering, general jobbing, casting and machining works, the manufacture of malleable castings for vaccum brakes, and other fittings for the railways and other commercial purposes.

( 5 ) THE company commenced the business since 1946-47. All through, it had poor performance. As per the printed annual report of the company made for the year ending 31-12-1982, the accumulate loss of the company was about Rs. 61,52 lakhs, as against the paid up capital and free reserves of Rs. 9. 10 lakhs. There was no provision made in the balance sheet towards certain statutory claims and liabilities for the earlier period. The industrial relations were also disturbing with several industrial disputes pending in labour court and industrial tribunal for adjudication. The labour union representing workmen had at that time submitted a charter of demands for revision of wage scales and other demands. The labour atmosphere was not good. The then existing management was not keen in continuing the affairs of the company. At this juncture viz. , During early 1983 there was change in management. Consequently, a new board of directors was formed which included several professionals in the field of textile engineering, marketing and law. Mr. S. m. shetty, industrialist was appointed as the chairman of the company. After the new team took over the management, a comprehensive plan for rehabilitation and revival was drawn up involving modernising the then infrastructure and diversion into additional fields. As a part of the plan, the new management pumped in fresh investment of Rs. 41 lakhs by way of increasing the paid up capital of the company and secured additional financial limits from consortium of bankers amounting to about Rs. 200 lakhs offering personal guarantee of the chairman and his wife. In order to maintain cordial industrial relations and to raise productivity, the company entered into several settlements with the workers on various pending issues. A team of experienced professional managers were inducted to ensure the revival of the company. As a part of its expansion, modernisation and diversification programme, the company expanded the product range. Several new models of looms such as underpick loom and a new silk loom (japanese type) were introduced. Work on the development of automatie and semi-automatic loom was also commenced. The company also increased the scope of fabrication shop by taking up orders for mild steel fabrication and processing machines such as poly vinyl chloride coating plant. Likewise, the foundry department was equipped with several new machines such as shot blasting machine, storage bunkers, sand storage hopper, cupola, etc. Similarly, the machine shop was strengthened by installing a new gear hobbing machine, h. m. t. drilling machine, vertical mi