HOMI CAWASJI BHARUCHA Vs. ARJUN PRASAD

JUDGEMENT

(1.) This appeal is presented on behalf of Homi Cawasji Bharucha and 43 other appellants against the order of Mr. Justice Jamuar dated the 4th January, 1956 in Company Act Case No. 3 of 1951.

(2.) The history of the case is important. On the 22nd of July, 1952, respondent No. 1, Arjun Prasad who was a shareholder of the Company made an application under Section 153 of the Indian Companies Act, proposing a scheme for reconstruction of the Company in liquidation. On the 6th of October, 1953, respondent No. 1 was directed to arrange by the Court for holding separate meetings of (1) the debenture-holders and other secured creditors, (2) the unsecured creditors, (3) the preference shareholders, and (4) the ordinary shareholders. The meetings were fixed to be held on the 9th and 10 of November, 1953. The first three meetings were held on the 9th and 10th of November, 1953. But on the 10th of November, 1953, respondent No. 1 made an application to the Court that the meeting of the ordinary shareholders be postponed because there was a dispute between him and the Central Bank of India with regard to the title to about Rs. 8 lacs worth of shares and also as to which party had the right of exercising his vote. The meeting was adjourned by the Court to the 12th of December, 1953, and later on there was another order of the Court dated the 12th of January, 1954 adjourning the meeting sine die. The dispute between the respondent No. 1 and the Central Bank of India as regards the transfer of Rupees eight lacs worth of shares was decided by the Company Judge on the 22nd of January, 1954 and that decision was confirmed by a Bench of this Court on Letters Patent Appeal on the 8th of November, 1954. On the 6th of May, 1955, respondent No. 1 prayed that the postponed meeting of the shareholders may be held. The Court directed that the meeting should be held on the 26th of June, 1955 and on that date the meeting of ordinary shareholders was duly held. On the 14th of October, 1955, respondent No. 1 made another application seeking the direction of the Court for holding fresh meetings of preference shareholders and of ordinary shareholders for consideration of a modified scheme of reconstruction. On the 18th of October, 1955, the Court directed that the meetings of the ordinary shareholders and of preference shareholders should be held on the 27th of November, 1955. There was a direction by the Court that notices should be sent under certificate of posting and that there should also be publication of the notice in two newspapers, namely, the Indian Nation and the Aryavarta. But the important point is that in this order of the 18th October, 1955, the learned Company Judge gave no direction as to the length of the notice. It appears that notices of the meetings were posted at Calcutta on the 10th of November 1955. It also appears that these notices were received by a number of share-holders at Bombay on the 16th of November, 1955 and onwards. On the 23rd of November, 1955, an application was filed by Hariyesh Daulatjada, one of the shareholders, challenging the validity of the meetings which were proposed to be held on the 27th of November, 1955. It was contended on his behalf that at least 21 days' notice was essential and in the absence of such notice, the meetings of the shareholders could not be validly held. There is also a letter sent to the Court purporting to be signed by twenty-five shareholders containing objection to the same effect. The matter was heard by Jamuar, J. on the 25th of November, 1955, and he made the following order:--

(3.) In support of this appeal Mr. Dutt put forward the submission that the proposed resolution for consideration at the meeting of the shareholders held on the 27th of November, 1955 was not purely a scheme for compromise falling under Section 153 of the Indian Companies Act, but the question of reduction of share capital was involved and so the special formalities prescribed by Section 81 of the Indian Companies Act should have been followed. The opposite view point was put forward by Mr. Lalnarain Sinha appearing on behalf of respondent No. 1. It was contended by Mr. Lalnarain Sinha that the provision of Section 153 of the Indian Companies Act was self-contained and that it was open to the Company Judge to give directions not only with regard to the place and time of the meeting but also with regard to length of notice to be given to the shareholders. It was submitted that the jurisdiction conferred by Section 153 was of a special character and the orders of the Court in exercise of its special jurisdiction would over-ride the provisions of Section 55 of the Companies Act. I do not think that this argument is right. On the contrary, I am satisfied that the special formalities required for a, resolution with respect to reduction of share capital under Section 55 of the Companies Act cannot be overriden by any direction of the Court given under Section 153 of the Indian Companies Act. It is manifest that Section 153 of the Indian Companies Act and Section 55 of the said Act deal with two separate class of special matters, and as a matter of construction I hold that both these special provisions are equally important and neither of the special provisions can be nullified or overriden by each other. It follows, therefore, that if there is a scheme or a proposed compromise which involves a dealing with reduction of share capital, the formalities prescribed not only by Section 153 bub also by Section 55 have got to be complied with. That is the view expressed by Younger, J. 'in Re White Pass and Yukon Rly. Co., Ltd., 1918 W. N. 323 (A)'. This case has been cited with express approval in Buck-ley on the Companies Act, 12th edition, page 414, where the following passage occurs: