Section 279 — Compromise with creditors and members

(1) Where a
compromise or arrangement is proposed between a company and its creditors or
any class of them, or between the company and its members or any class of them,
the Commission may, on the application of the company or of any creditor or
member of the company or, in the case of a company being wound up, of the
liquidator, order a meeting of the creditors or class of creditors, or of the members
of the company or class of members, as the case may be, to be called, held and
conducted in such manner as the Commission directs.

(2) If a majority in number representing three -fourths i n value of the
creditors or class of creditors, or members, as the case may be, present and voting
either in person or, where proxies are allowed, by proxy at the meeting, agree to
any compromise or arrangement, the compromise or arrangement shall, if
sanctioned by the Commission be binding on the company, all its creditors, all the
members, the liquidators and the contributories of the company, as the case may
be:

Provided that no order sanctioning any compromise or arrangement shall be
made by the Commis sion unless the Commission is satisfied that the company or
any other person by whom an application has been made under sub-section (1) has
disclosed to the Commission, by affidavit or otherwise, all material facts relating
to the company, such as the financial position of the company, the auditor's report
on the latest accounts of the company, the pendency of any investigation
proceedings in relation to the company and the like.

(3) A copy of the order under sub-section (2) sanctioning the
compromise or arrangement duly certified by an authorised officer of the
Commission shall be forwarded to the registrar within seven days from the date of
the order.
(4) A copy of the order under sub-section (2) shall be annexed to every
copy of the memorandum of the company issued after the order has been made 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) The Court may, at any time after an application has been made to
the Commission under this section, stay the commencement or continuation of any
suit or proceeding until final disposal of the application.

(6) In this section the expression "company" means any company liable
to be wound up under this Act and the expression "arrangement" includes a re -
organisation of the share-capital of the company by the consolidation of shares of
different classes or by the division of shares into shares of different classes or by
both those methods, and for the purposes of this section unsecured creditors who
may have filed suits or obtained decrees shall be deemed to be of the same class as
other unsecured creditors.

(7) Any contravention or default in complying with requirements of
sub-section (4) shall be an offence liable to a penalty of level 1 on the standard
scale.