1. The scheme prepared by the company administrator under section 261 shall be placed before the creditors of the sick company in a meeting convened for their approval by the company administrator within the period of sixty days from his appointment, which may be extended by the Tribunal up to a period not exceeding one hundred twenty days
2. The company administrator shall convene separate meetings of secured and unsecured creditors of the sick company and if the scheme is approved by the unsecured creditors representing one-fourth in value of the amount owed by the company to such creditors and the secured creditors, representing three-fourths in value of the amount outstanding against financial assistance disbursed by such creditors to the sick company, the company administrator shall submit the scheme before the Tribunal for sanctioning the scheme:
Provided that: where the scheme relates to amalgamation of the sick company with any other company, such scheme shall, in addition to the approval of the creditors of the sick company under this sub-section, be laid before the general meeting of both the companies for approval by their respective shareholders and no such scheme shall be proceeded with unless it has been approved, with or without modification, by a special resolution passed by the shareholders of that company.
i. The scheme prepared by the company administrator shall be examined by the Tribunal and a copy of the scheme with modification, if any, made by the Tribunal shall be sent, in draft, to the sick company and the company administrator and in the case of amalgamation, also to any other company concerned, and the Tribunal may publish or cause to be published the draft scheme in brief in such daily newspapers as the Tribunal may consider necessary, for suggestions and objections, if any, within such period as the Tribunal may specify.
ii. The complete draft scheme shall be kept at the place where registered office of the company is situated or at such places as mentioned in the advertisement.
iii. The Tribunal may make such modifications, if any, in the draft scheme as it may consider necessary in the light of the suggestions and objections received from the sick company and the company administrator and also from the transferee company and any other company concerned in the amalgamation and from any shareholder or any creditors or employees of such companies.
4. On the receipt of the scheme under sub-section (3 ), the Tribunal shall within sixty days there from, after satisfying that the scheme had been validly approved in accordance with this section, pass an order sanctioning such scheme.
5. Where a sanctioned scheme provides for the transfer of any property or liability of the sick company to any other company or person or where such scheme provides for the transfer of any property or liability of any other company or person in favour of the sick company, then, by virtue of, and to the extent provided in, the scheme, on and from the date of coming into operation of the sanctioned scheme or any provision thereof, the property shall be transferred to, and vest in, and the liability shall become the liability of, such other company or person or, as the case may be, the sick company.
6. The Tribunal may review any sanctioned scheme and make such modifications, as it may deem fit, or may by order in writing direct company administrator, to prepare a fresh scheme providing for such measures as the company administrator may consider necessary.
7. The sanction accorded by the Tribunal under sub-section (4 ) shall be conclusive evidence that all the requirements of the scheme relating to the reconstruction or amalgamation or any other measure specified therein have been complied with and a copy of the sanctioned scheme certified in writing by an officer of the Tribunal to be a true copy thereof shall in all legal proceedings be admitted as evidence.
8. A copy of the sanctioned scheme referred to in sub-section (4 ) shall be filed with the Registrar by the sick company within a period of thirty days from the date of receipt of a copy thereof.
Legal Commentary & Landmark Judgments: Section 262
Section 262 historically regulated the sanctioning of revival and rehabilitation schemes by the Tribunal; omitted by the Insolvency and Bankruptcy Code, 2016, its sanctioning process was replaced by the approval of resolution plans under Section 31 of the IBC.
In plan sanction proceedings before the NCLT, ensure all mandatory certificates from the Resolution Professional are placed on record confirming compliance with Section 30(2) IBC, thereby limiting the Tribunal's inquiry and insulating the order against appellate challenges.