JUDGMENT- D.G. KARNIK, J.:---ICICI Limited (hereinafter called as 'Transferror Company') which is the applicant herein has proposed a scheme of arrangement by way of amalgamation/merger into ICICI Bank Limited (hereinafter called as 'Transferee Company').

2. By this petition under section 391 of the Companies Act, 1956, the applicant seeks a direction to convene a meeting of the equity share holders of the applicant company. No direction is sought to convene a meeting of the creditors or any class of the creditors of the applicant company. It was contended that merger of a company with another involves only an arrangement between the company and its members and as such it is not necessary to order convening of a meeting of the creditors or any class of them and it is not necessary to obtain their consent for the proposed amalgamation.

3. There are three types of arrangements which are common, namely, i) An arrangement between a company and its members; ii) An arrangement between a company and its creditors; and iii) A composite scheme in which the members as well as creditors of the company are part of a compromise or arrangement.

4. It was contended that in the case falling under the first type, namely, an arrangement between a company and its members, meeting of the creditors need not be convened irrespective of whether the creditors are thereby affected or not. It is this proposition which is required to be decided in the present case.

5. In order to test this proposition, it is necessary to look into the scheme of section 391 of the Companies Act. Under sub-section (1) of section 391, the company or its member or a creditor is required to make an application to the Court where a compromise or arrangement is proposed between the company and its members or creditors or any class of them. On such application being made, the Court may convene a meeting of the members or of the creditors or of any class of members or creditors, as the case may be. Word, “may” gives a discretion, to be judicially exercised, to the Court to convene a meeting or to dispense with the meeting.

6. Sub-section (2) of section 391 contemplates the sanction of compromise or arrangement by the Court, if the majority in number and 3/4th in value of the members/creditors attending the meeting approve the compromise or arrangement with the members and/or the creditors or any class of them. The proviso to sub-section (2) imposes a condition that Court must be satisfied that all material facts relating to the company are disclosed. The compromise or arrangement, if sanctioned by the Court, is to be binding on all the members and creditors.

7. Sub-section (3) of section 391 lays down that the compromise or arrangement (hereinafter referred to as 'the scheme') shall not be effective until a certified copy of the order of the Court has been filed with the Registrar. Sub-section (4) imposes a condition that the copy of the order of the Court shall be annexed to every copy of the memorandum of company issued after certified copy of the order is filed with the Registrar under sub-section (3). Sub-section (5) prescribes a penalty for not complying with sub-section (4). Sub-section (6) lays down that the Court, may order stay of the suits or proceedings against the company while the scheme is under consideration. Sub-section (7) makes a provision for an appeal against any order passed by the Court.

8. Under sub-section (2), the scheme can be sanctioned by the Court only if the majority in numbers of the members or creditors or the class of creditors, as the case may be, representing 3/4th in value of the members or creditors or a class of members or creditors, as the case may be, have agreed to scheme. Holding of a meeting of the creditors is thus a sine qua non for passing of an order sanctioning any arrangement between the company and the creditors.

9. In my opinion, where the arrangement is purely between the company and its members, not adversely affecting the cr

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