Civil Appeal No 1217 of 1976
Appeal by Special Leave from the Judgment and Order dated 16 7 1976 of the Delhi High Court in Company Appeal No 1576
Y section Chitale K R Khaitan B Mohan and Praveen Kumar for the Appellants
P R Mridul R L Roshan H K Puri and Vijai K Bahl for Respondent No 1
Pramod Dayal and section K Gupta for Respondent No 2
R M Gupta and K N Bhat for IntervenerDena Bank
A few facts will put the problem raised in this appeal in focus and proper perspective
Ms 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 mounting up with the spiraling of interest
1189 As the shares of DFM were closely held by relations of respondent 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 Ms 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 compromisearrangement between IHI and its unsecured creditors and after the scheme was approved the proponent of the scheme submitted Company Petition No 8674 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 44000 shares of IHI and its claim to the tune of Rs 23 lacs recoverable from IHI to the present appellants section K Gupta and Mrs Dropadi Gupta referred to as appellants  hereafter
Thereafter the appellants filed Company Application No 19376 requesting the Court to make appropriate modification andor granting further direction for effectively implementing the scheme sanctioned by the Court in respect of IHI by substituting the appellants in place of 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 19076 purporting to be under section 392 of the  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
The Company Judge by his two orders in the two aforementioned applications dated 26th April 1976 granted the application of the appellants and modified the scheme by substituting the appellants as proponents of the 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 1576 under section 483 of the 
Both these appeals came up before a Division Bench of the Delhi High Court and they were disposed of by a common judgment
The Division 1190 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 section 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 44000 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 IHI
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 section 391 of the  the appellants being neither members nor creditors of IHI had no locus standi to move an application under section 392 for modification of the scheme because in the opinion of the Court section 391 controls section 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 1576 challenging the order of the Company Judge which granted modificationsubstitution of appellants as proponents was allowed and the application of the appellants for substitution was rejected
The Division Bench dismissed Company Appeal No 1676 preferred 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 a position 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 1576 by which their application for substitutionmodification was rejected
Mr section section Ray learned counsel for the appellants urged that the Court committed a basic error in holding that the application for 1191 substitutionmodification was not maintainable because the appellants 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 section 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 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 section 392 by ransacking dictionaries completely overlooking the fact that in section 229 of the 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 section 392 would include the making of additions and omissions and according to him additions and omissions in the context of section 392 would and could only mean additions and omissions to the sanctioned scheme because section 392 operates at a stage subsequent to the sanctioning of the scheme under section 3912
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 to hold that the Court will have to fall back to the cumbersome procedure of section 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 
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 sections 391 and 392 constitute a code and therefore if there was a qualification for proposing a scheme under section 391 the same qualification should be read in section 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 section 392 and as the appellants are neither members nor 1192 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 section 3922 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 Company and another person cannot be substituted in place of the original contracting party without the consent or affirmance of the second party to the contract and hence such a thing cannot be brought about by way of a modification under section 392
The word modification  or modify  therefore should be given a restricted meaning looking to the context in which it is used in section 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 section 392 of the 
Section 392 finds its place in Chapter V of the 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 andor 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 andor 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 in section 3912
Then comes section 392 which may be reproduced in extenso 392
Power of High Court to enforce compromises and arrangements 1 Where a High Court makes an order under section 391 sanctioning a compromise or an arrangement in respect of a company it 1193 a shall have power to supervise the carrying out of the 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 or arrangement sanctioned under 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  are in pari materia with the provisions of Companies Act 1948 of the UK  UK Act  for short there is no provision analogous to section 392 in the UK Act
The Court under the UK 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 has 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 andor arrangement and also the consequential power to make the supervision effective by removing the hitches obstacles or impediments in the working of compromise 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 andor arrangement
Sub section
2 confers power on the Court to act under section 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 application of any person interested in the affairs of the company 
The High Court was of the opinion that the appellants have no locus standi to maintain an application for modificationsubstitution of themselves as proponents of the scheme with a liability to implement the scheme as they were neither members nor creditors of the Company and according to the High Court if a scheme of compromise or arrangement cannot be proposed by any one except a member or creditor ipso facto an application for modification of such scheme sanctioned by the Court under section 3912 could not be made by any one other than a member or a creditor
1194 Section 391 envisages a compromise or arrangement being proposed for consideration by members andor creditors of a Company liable to be wound up under the 
Compromise or arrangement has to be between creditors andor 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 vs New Kaiser I Hind Spg
 Wvg
Co Ltd  Ors
etc1
Further section 3911 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
When a scheme is being considered by the Court in all its ramifications for according its sanction it would not be possible to com prehend all situations eventualities and exigencies that may arise while implementing the scheme
When a detailed compromise andor arrangement is worked out hitches and impediments may arise and if there was no provision like the one in section 392 the only obvious alternative would be to follow the cumbersome procedure as provided in section 3911 viz again by approaching the class of creditors or members to whom the compromise andor 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 and therefore the legislature in its wisdom conferred power of widest amplitude on the High Court under section 392 not only to give directions but to make such modification in the compromise andor 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 andor arrangement
The purpose underlying section 392 is to provide for effective working of the compromise andor arrangement once sanctioned and 1195 over which the Court must exercise continuous supervisionsee section 3921 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 andor 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 andor arrangement
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 UK Act in which provision analogous to section 392 is absent
The sponsors of the scheme under section 206 of the UK Act 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 andor arrangement
Sub section 2 provides the legislative exposition as to who can move the Court for taking action under section 392
Reference to section 391 in sub section
2 of section 392 merely indicates which compromise or arrangement can be brought before the Court for taking action under section 392
The reference to section 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 section
2 merely because section 391 is referred to therein
Unlike section 391 section 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 section 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 section 3922 can be gauged from the fact that the Court can suo motu act to take action as contemplated by section 3921 or it may act on an application of any person interested in the affairs of the Company
1196 In this context the observations of the Gujarat High Court extracted hereunder in Mansukhlal vs M V Shah1 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 on 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 3921 b and the width and the magnitude of the power can be gauged from the language employed in section 392 1 a which confers a sort of a supervisory role on the court during the 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 functus 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 guarantee 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 guard 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 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 this anvil of probabilities surrounding circumstances and the prevalent state 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 the situation calling for Court s intervention is hardly relevant nor would it invalidate the resultant action only on that ground
Therefore when sub section
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 section
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 section
2 enables the Court to wind up the Company and therefore the Court may act on its own motion or on the application of any person interested in the affairs of the company not for modifying the scheme or for any directions but for winding up the company
But when the Court is required to act under section 3921 the limitations and restrictions imposed upon the Court under section 3911 must be read in section 3921 because the sections are complimentary to each other
This submission overlooks the two different stages at which sections 391 and 392 operate though they may be complimentary to each other
Two sub sections of section 392 have to be harmoniously read and sub section
2 clearly indicates the power of Court to take action suo motu while taking action under sub section
Again this approach is inconsistent with the language employed in section 3922 in that the Court can wind up the company 1198 under section 3922 if and only it is satisfied that the compromise andor arrangement sanctioned by it cannot be satisfactorily worked with or without modifications
The Court has to reach an affirmative conclusion before acting under section 3922 that the compromise andor arrangement cannot be worked satisfactorily with or without modification see J K Bombay P Ltd supra
It follows as a corollary that if the compromise or arrangement can be worked as it is or by making modifications the Court will have no power to wind up the Company under section 3922
Now if the arrangement or compromise can be worked with or without modification the Court must undertake the exercise to find out what modifications are necessary to make the compromise or arrangement workable and that it can do so on its own motion or on the application of any person interested in the affairs of the Company
If such be the power conferred on the Court it is difficult to entertain the submission that an application for directions or modification cannot be entertained except when made by a member or creditor
It would whittle down the power of the Court in that it cannot do so on its own motion
Mr Sinha referred to Rule 87 of Companies Court Rules and urged that it throws some light on the question as to at whose instance the Court can act under section 392
The rule is procedural in character and at any rate the rule cannot circumscribe the power conferred by the section
Hence rule 87 is of no assistance
Assuming that the Court would not act on its own the next question is could it act under section 3921 on the application of any person interested in the affairs of the Company  Now if the Court under section 3922 can order winding up of the company on the application of any person interested in the affairs of the company who need not be a member or a creditor we fail to see how the Court cannot act on the application of such a person interested in the affairs of the Company either to give directions or to make modifications so as to make the compromise or arrangement workable
Winding up meaning civil death of a company must be the ultimate resort of the Court
A living workable scheme infusing life into a sick unit is generally to be preferred to civil death of the company
There is therefore no warrant for circumscribing the expression on the application of any person interested in the affairs of the company  as to limit it to member or creditor
If the legislature used the expression member or creditor  in section 3911 and yet used an expression of wider denotation any person interested in the affairs of the company  the legislative intention is clearly exposed in that any such person interested in the affairs of the company need not be limited or restricted to refer to a 1199 member or creditor
It would therefore be necessary to ascertain whether the appellants would be comprehended in the expression any person interested in the affairs of the company 
At one stage there was a threatened long argument to ascertain whether the appellants have become the members of the company or are the creditors of the company
The appellants contended that they and their friends have purchased 44000 equity shares of IHI from its former holder DFM and they have also taken an assignment of the debt in the amount of Rs 23 lacs owned by IHI to DFM from DFM
Respondent Jain contended that the assignment is not valid as it fails to comply with section 130 of the Transfer of Property Act and as the names of the appellants are not put on the register of IHI they have not acquired the status of member of IHI and therefore they being neither creditors nor members of IHI they have no locus standi to maintain the application under section 392
The stand taken by respondent Jain in this behalf is wholly ambivalent
Sometime after the scheme was sanctioned on 15th October 1975 the appellants assert that they purchased the 44000 equity shares of IHI from DFM and they simultaneously took assignment of the debt
Thereafter respondent Jain filed Company Application No 19076 in which he sought a direction under section 3922 for winding up the Company
In inviting the Court to grant his prayer for winding up the Company the averment made is that since the sanction of the scheme by the Court DFM has sold its interest to Shri section K Gupta and others who wanted to operate the scheme as if they were the substitutes for DFM
Another averment is that DFM was not entitled to sell its shares because it was the propounder of the scheme
Therefore the raison d etre for moving the application under section 3922 was the sale of shares of IHI held by DFM to the appellants
When the appellants filed Company Application No 19376 under section 3921 in order to show their newly acquired or subsisting interest in the scheme so as to enable them to move the application under section 392 it was averred that the appellants have purchased 41800 shares of IHI from DFM and the balance of holding of DFM to the tune of 2200 equity shares have been purchased by the nominee of the appellants
It is further averred that the amount standing in the name of DFM in the books of IHI also been taken over by the appellants
While replying to these averments in the application respondent K P Jain in para 16 of his counter affidavit dated 29th March 1976 has stated that there is some understanding or agreement between the Delhi Flour Mills Co Ltd and Shri section K Gupta for the sale of the shares held by Delhi Flour Mills Co Ltd in the IHI and I have referred to 1200 it in my application CA
19076 
If the very alleged sale of the shares by DFM to the appellants gave cause of action to respondent Jain to maintain an application under section 3922 praying for an order for winding up of the company what greater ambivalence could it disclose when it was contended on his behalf that the sale has not taken place  There is enough evidence on record as is evident from the affidavit filed by DFM that as between DFM and the appellants the sale is complete
Similarly there is evidence in the affidavit that the debt owned by IHI to DFM has been assigned by DFM to the appellants
In the face of this express position adopted by Jain would it not clothe the appellants with necessary interest both in the company IHI and the scheme in respect of it so as to enable them to maintain an application under section 3922  Appellants are certainly persons interested in the affairs of the company
For this additional reason the application for modification by them is certainly maintainable
In the aforementioned circumstances we are not inclined to examine a very serious contention raised by Mr Mridul who appeared at a later stage of hearing for the respondent Jain that unless names of the appellants are put on the register of IHI they do not become members and as the assignment on which the appellants rely does not comply with the requirements of section 130 of the Transfer of Property Act the assignee s title to the debt assigned has not become complete and therefore the appellants are not creditors of IHI
We may in passing say that the factum of assignment or the sale of shares was never seriously questioned but we are prepared to proceed on the assumption that even if it be so in the circumstances herein discussed and the ambivalence of respondent Jain the appellants could certainly be said to be persons sufficiently interested both in the company IHI and the scheme in respect of it so as to be able to maintain an application under section 3921
Lastly in this connection it must be remembered that if DFM whose scheme was sanctioned and not challenged by respondent Jain started implementing the scheme and after getting into the saddle by constituting the Board of Directors as desired by it it could have transferred its shares to appellants and appellants could have as well taken over management and implemented the scheme and no one at any rate Respondent Jain holding only 1000 equity shares ie 125 of the issued capital could have objected to it
The objection at this stage is equally futile
Therefore with respect the High Court was in error in holding that the appellants had no locus standi to maintain an application under section 3921
The next important contention is that the sponsor or propounder of a scheme is such an integral part of the whole scheme or an impor 1201 tant element of the basic structure  of the scheme that its substitution changes alters or amends the scheme in almost its entirety and such a thing cannot be done by way of modification under section 392
The word modification  must be given according to the respondent and according to the High Court a restricted and narrow meaning
The High Court after reaching the conclusion that propounder of a scheme is the very life blood and soul of the scheme and on his going out the scheme itself becomes lifeless and inert  proceeded to examine the connotation of the word modification  as used in section 392 and after referring to various dictionary meanings reached a conclusion that the context and setting in which the word is used it would only means a small adjustment a minor or slight change a qualification or limitation alteration of a subordinate character and substitution of a sponsor of a scheme is of such a vital nature altering in the opinion of the High Court the basic structure  of the scheme that such a three dimensional change would not be comprehended in the word modification  as used in section 392
In reaching this conclusion the High Court referred to the meaning assigned to the word modify  in various dictionaries such as Webster Black s Law Dictionary et el
Unfortunately the High Court completely overlooked the obvious that the words modify  and modification  have been defined in section 229 of the as under 2
Definitions In this Act unless the context otherwise requires 29 Modify and modification shall include the making of additions and omissions
It may also be mentioned that section 21 defines altered  and alteration  to include making of additions and omissions while variation  is defined in section 231 to include abrogation 
The definition of cognate words is noted by us to arrive at a true meaning of the word modification 
The High Court nowhere refers in its judgment to the definition of modify  and modification  given in the very statute and proceeded to examine the content and meaning of the word used in a provision in the same statute which unless the context otherwise requires must bear the same meaning as set out in the definition section
The noticeable feature of this definition is that it is inclusive definition and where in a definition clause the word include  is used it is 1202 so done in order to enlarge the meaning of the words or phrases occurring in the body of the statute and when it is so used these words or phrases must be construed as comprehending not only such things which they signify according to their natural import but also those things which the interpretation clause declares that they shall include see Dilworth vs Commissioner of Stamps
Where in a definition section of a statute a word is defined to mean a certain thing wherever that word is used in that statute it shall mean what is stated in the definition unless the context otherwise requires
But where the definition is an inclusive definition the word not only bears its ordinary popular and natural sense whenever that would be applicable but it also bears its extended statutory meaning
At any rate such expansive definition should be so construed as not cutting down the enacting provisions of an Act unless the phrase is absolutely clear in having opposite effect see Jobbins vs Middlesex County Council
where the definition of an expression in a definition clause is preceded by the words unless the context otherwise requires  normally the definition given in the section should be applied and given effect to but this normal rule may however be departed from if there be something in the context to show that the definition should not be applied see Khanna J in Indira Nehru Gandhi vs Raj Narain
It would thus appear that ordinarily one has to adhere to the definition and if it is an expansive definition the same should be adhered to
The frame of any definition more often than not is capable of being made flexible but the precision and certainty in law requires that it should not be made loose and kept tight as far as possible see Kalva Singh vs Genda Lal
Is there anything in the context and setting in which the word modification  is used in section 392 to indicate that the legislature has not used the expression assigning the meaning to the word as set out in the definition clause At least nothing was pointed out to us
Undoubtedly as pointed out by Lord Hershell in Cox vs Hakes that for the purpose of construing any enactment it is right to look not only at the provision immediately under construction but at any others found in connection with it which may throw light upon it and afford an indication that general words employed in it were not intended to 1203 be applied without some limitation
Even with this caution we find nothing in section 392 or reading s392 with section 391 to cut down and restrict the meaning as has been attempted by the High Court completely ignoring the definition section
According to the definition modify  and modification  would include the making of additions and omissions
In the context of section 392 modification  would mean addition to the scheme of compromise andor arrangement or omission therefrom solely for the purpose of making it workable
Reading section 392 by substituting the definition of the word modification  in its place if something can be omitted or something can be added to a scheme of compromise by the Court on its own motion or on the application of a person interested in the affairs of the company for the proper working of the compromise andor arrangement we see no justification for cutting down its meaning by a process of interpretation and thereby whittle down the power of the Court to deal with the scheme of a compromise andor arrangement for the purpose of making it workable in course of its continued supervision as ordained by section 392 1
Strictly speaking omission of the original sponsor and substituting another one would not change the basic fabric  of the scheme
The scheme in this case is one by which a compromise is offered to the unsecured creditors of the company and whoever comes in as sponsor would be bound by it
Undoubtedly a sponsor of the scheme enjoys an important place in the scheme of compromise andor arrangement but basically the scheme is between the company and its creditors or any class of them or the company and its members or any class of them and not between the sponsor of the scheme and the creditor or member
The scheme represents a contract sanctified by Court s approval between the company and the creditors andor members of the company
The company may as well be in charge of directors and the implementation of the scheme may come through the agency of directors but that would not lead to the conclusion that during the working of the scheme the directors cannot be changed
If the scheme has to be ultimately implemented by the company as part of its contract and yet its directors can be changed according to its Articles of Association we see no difference in the situation where a sponsor is required to be changed in the facts and circumstances of a case
Therefore it is not possible to accept the submission that as and by way of modification one sponsor of a scheme cannot be substituted for another sponsor
1204 We may not be understood to say for a moment that the Court can appoint any one as sponsor
The Court on which a duty is cast by section 3921 to exercise continuous supervision over the working of the compromise andor arrangement must in order to effectively discharge its duty 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 an application may be rejected as the Court is of the opinion that the sponsor is not one who can be trusted with the implementation of the scheme but that is entirely a different thing from saying that the Court has no power to make such a substitution as and by way of modification of a compromise or arrangement
Now to the facts of the case
The appellants have applied for substituting them as sponsors of the scheme in place of DFM
They claim to have purchased 44000 shares out of 80000 issued and subscribed equity shares of the company
As stated earlier between the transferor and transferee of the shares the transfer of the shares is complete and not even seriously objected to by the respondent as pointed out hereinbefore
The sponsor has taken an assignment of a debt of Rs 23 lacs which IHI owed to DFM from the creditor DFM
A gain as between the transferor and transferee the assignment is complete
The only objector is respondent holding 1000 equity shares representing 125 per cent of the issued and subscribed capital
An advertisement was directed to be inserted by the order of the Court in newspapers in respect of the application for substitution modification made by the appellants inviting every one interested in the company or in the scheme of compromise andor arrangement to come and lodge objection if it was so desired against substitutionmodification prayed by the appellants
None including the petitioning creditor except the respondent Jain has lodged such an objection
This procedure was also followed by the Gujarat High Court in Mansukhlal s supra case and by referring to that part of the judgment the High Court held that judgment itself is an authority for the proposition that substitution of the sponsor is a vital change of a basic nature and cannot be ordered by the Court acting under section 392 and must be referred to a meeting of the creditors or members
With respect this is not a fair reading of the judgment
At pages 290 291 the scope and ambit of the power of the Court under section 392 has been precisely set out and it is concluded that the power to modify would comprehend the power to substitute one sponsor for the other if he is found otherwise fit and competent
As an additional string to the bow it was observed as it 1205 is being done here also that no one has come forward to object to the substitution and that would further strengthen the hands of the Court
Such observation cannot be construed to mean that the Court lacks the power to make such a modification without reference back to the creditors andor members as the case may be
In the background of these unimpeachable facts the conclusion is inescapable that the appellants have a subsisting and vital interest in the fate and future of IHI and they are the appropriate persons who could and should be substituted in place of the original sponsor
In passing it was said that the fate of the company should not be placed in the hands of the appellants and the lack of bona fides of the appellants becomes discernible from the fact that they tooth and nail opposed the very scheme which they now seek to implement
This is hardly a relevant consideration
A creditor may come and oppose a scheme being implemented by some person and yet may be interested in taking over the affairs of the company
This could hardly be treated as a disqualification of the appellants
Lastly it may be mentioned that the appellants agree to implement the scheme
They undertake to bring Rs 3 lacs as liquid finance for implementing the scheme
The question of the know how was examined by the company Judge who has accepted their fitness to run the business and nothing was pointed out to us to depart from the same
Therefore viewed from any angle we see no objection to granting the application of the appellants for substitutionmodification as sponsors of the scheme
Accordingly the judgment of the Division Bench dated 16th July 1976 in Company Appeal No 1576 is set aside and the order of the Company Judge dated 26th April 1976 in Company Application No 19376 is restored with costs throghout
NVK Appeal allowed


Summary:
The by 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 andor each class of members to whom the compromise or arrangement is offered
On the court giving the directions the meeting would be convened in which the proposed scheme of compromise andor 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 in section 3912
Under section 392 of the Act the High Court which has sanctioned the scheme has the power to supervise the carrying out of it and to give directions in regard to any matter 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 company s affairs order its winding up
The holding company proposed a scheme of compromisearrangement between 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 company court
A large number of shares in the subsidiary company held by it and its claim for a sum of Rs 23 lacs recoverable from the subsidiary company were transferred by the holding company to the appellants
The appellants then applied to the court to make an appropriate modification andor grant further direction for implementing the scheme sanctioned by the court in respect of the subsidiary company by substituting them the appellants in place of the holding company as proponents of the scheme
The respondent in the mean while made an application to the company court under section 392 of the to hold that the scheme sanctioned by the court could not work satisfactorily with or without modification and that therefore the court should 1185 make an order of winding up
The company judge allowed substitution of the appellants as proponents of the scheme and rejected the respondents  application for winding up of the subsidiary company
On appeal by the respondents under section 483 of the a Division Bench held 1 that since the substitution of a new propounder in a scheme sanctioned by the court in place of the original propounder was a change of a basic nature which would not be comprehended within the meaning of the expression modification in section 392 and therefore the company judge could not have granted substitution of the propounder of the scheme without referring the proposed modified scheme to the creditors who approved the original scheme 2 that since the transfer of the shares in favour of the appellants had not been effected in the company s registers the appellants were not members of the subsidiary 3 that the debt owed by the subsidiary to the holding company was not assigned according to law in favour of the appellants and therefore they were not creditors and 4 that not being either members or creditors of the subsidiary the appellants had no locus standi to move an application under section 392 for the modification of the scheme
On the question whether the court had power to grant an application under section 392 of the Act
Allowing the appeal  HELD 1
Though a large number of provisions of the are in pari materia with the provisions of Companies Act 1948 of the UK there is no provision analogous to section 392 in the UK Act
The court under the UK 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 has 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 andor arrangement and also the consequential power to make the supervision effective by removing the hitches obstacles or impediments in the working of compromise or arrangement by conferring power to give such directions for the proper working of the compromise andor arrangement
1193 D F This power of widest amplitude being conferred on the High Court is a basic departure from the scheme of the UK Act in which provision analogous to section 392 is absent
The sponsors of the scheme under section 206 of the UK Act 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
1195 C In the instant case the scheme 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 cause may be
1194 B C JK Bombay Pvt Ltd vs New Kaiser I Hind Spg
 Wvg
Co Ltd  Ors
 at 891 referred to
1186 2
Section 3911 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
1194 D 3
Sub section 2 of section 392 provides the legislative exposition as to who can move the court for taking action under section 392
Reference to section 391 in sub section 2 of section 392 merely indicates which compromise or arrangement can be brought before the court for taking action under section 392
The reference to section 391 in sub section 2 of section 392 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 section
2 merely because section 391 is referred to therein
Unlike section 391 section 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 section 392
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
The ambit of the power to act under section 3922 is demonstrated by the provision that the court can suo motu act to take action as contemplated by section 3921 or it may act on an application of any person interested in the affairs of the company
1195 F H Mansukhlal vs M V Shah 1976 46 Company cases 279 at 290 291 referred to
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
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 the situation calling for court s intervention is hardly relevant nor would it invalidate the resultant action only on that ground
When sub section
2 confers power on the court to act on its own motion the question of locus standi hardly arises
1197 C E In the instant case while examining the question of locus standi after considering the provisions contained in sub section
2 the High Court wholly over looked the important provision therein contained that the High Court can act on its own motion
1197 F 5
Even though section 391 and 392 are complementary they operate at different stages and have to be harmoniously read
1197 G H 6
Winding up meaning civil death of a company must be the ultimate resort of the court
A living workable scheme infusing life into a sick unit is generally to be preferred to civil death of the company
There is no warrant for circumscribing the expression on the application of any person interested in the affairs of the company as to limit it to a member or a 1187 creditor
If the legislature used the expression member or creditor  in section 3911 and yet used an expression of wider denotation any person interested in the affairs of the company  in section 3922 the legislative intention is clearly exposed 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 In the instant case there is enough evidence on record that as between the holding company and the appellants the sale of shares is complete and that the debt owed by the subsidiary to holding company has been assigned by the holding company to the appellants
The appellants therefore have requisite interest both in the subsidiary company and the scheme in respect of it so as to enable them to maintain an application under section 3922 as being persons interested in the affairs of the company and therefore the application for modification by them is maintainable
1200 B C 7
The High Court was in error in holding that the appellants had no locus standi to maintain an application under section 3921
The words modify  and modification  have been defined in section 229 of the Act to include the making of additions and omissions
Section 21 defines altered  and alteration  to include making of additions and omissions  while variation  is defined in section 231 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 he word include  is used it is so done in order to enlarge the meaning of the words or phrases occurring in the body of the statute and when it is so used these words or phrases must be construed as comprehending not only such things which they signify according to their natural import but also those things which the interpretation clause declares that they shall include
1200 H 1201 D G H 1202 B Dilworth vs Commissioner of Stamps 1899 AC 99 at 105 Jobbins vs Middlesex County Council  Indira Nehru Gandhi vs Raj Narain at 97 Kalva Singh vs Genda Lal  at 309 Cox vs Hakes  referred to
According to the definition modify  and modification  would include the making of additions and omissions
In the context of section 392 modification  would mean addition to the scheme of compromise andor arrangement 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 section 392 when the said term was defined in section 229 of the Act itself
1203 A In the instant case the scheme is one by which a compromise is offered to the unsecured creditors of the company and whoever comes in as sponsor would be bound by it
Omission of the original sponsor and substituting another one would not therefore change the basic fubric  of the scheme
1203 E 10
The court on which a duty is cast by section 3921 to supervise the working of compromisearrangement 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 an application may be rejected if the 1188 court is of the opinion that the sponsor is not one who can be trusted with the implementation of the scheme
1204 A C In the instant case the appellants have applied for substituting them as sponsors of the scheme in place of the holding company
They claim to have purchased 44000 shares out of 80000 issued and subscribed equity shares of the company
The sponsor has taken an assignment of a debt of Rs 23 lacs which the subsidiary company owed to the holding company from the holding company
The only objector is respondent holding 1000 equity shares representing 125 per cent of the issued and subscribed capital
In pursuance to the court s order notice in the newspaper was inserted calling for objection to the application for substitutionmodification
None including the petitioning creditor except the respondent lodged such an objection
The appellants agreed to implement the scheme and undertook to provide Rs 3 lacs as liquid finance for implementation
The appellants therefore have a subsisting and vital interest in the fate and future of the subsidiary company and they are the appropriate persons who 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 B