Section 391 of the Companies Act, 1956

1) Locus of persons to challenge the scheme under Sec 391 of the companies Act
Meghal Homes (P) Ltd v Shree Niwas Girni KK Samiti [(2007) 7 SCC 753]:
Creditors, contributories or debenture-holders of a company can challenge the scheme
under Sec 391 of the Companies Act. Persons not contemplated under sec 391 but
associated with the original scheme who have taken actions prejudicial to themselves in
pursuance thereof before it had been set aside such persons would have the requisite
locus standi.
Followed in: a) Reliance Natural Resources Ltd v Reliance Industries Ltd [(2010) 7 SCC 1]
b) ARC Holdings Ltd. V Rishra Steel Ltd & Ors. CA No. 567 of 2011

2) When a scheme can be stated to be fraudulent?
Miheer H Mafatlal v Mafatlal Industries Ltd [(1997) 1 SCC 579]:
Factors to be considered by the Court in granting sanctions:-
Creditors or Members must, on the basis of relevant material, arrive at an
informed decision for approving scheme.
Scheme should be just, fair and reasonable to the whole class of the creditors or
members including the dissenting minority and should not be illegal,
unconscionable, unfair or violative of any public policy.
Followed in: a) Reliance Natural Resources Ltd v Reliance Industries Ltd [(2010) 7 SCC 1]
b) Wartsila India Ltd v Janak Mathuradas [(2011) 1 Bom CR 600]
Hindustan Lever Employees Union v Hindustan Lever Ltd. [(1955) SUPP (1) SCC 499]:
Tests and considerations for determining the schemes:-
When schemes are neither violative of any statutory provisions nor against govt.
policy, it is not against public interest.
When the scheme caused no prejudice to the workers of the transferor
company, nor any mala fides, fraud or illegality shown and the scheme approved
by the overwhelming majority of shareholders, it must be sanctioned.