Sm.Bhagwanti v. New Bank Of India Ltd., Amritsar, Punjab & Haryana High Court, Judgment, Law, casemine.com

Precedent	Rule or Principle Cited For	Application by the Court
Re Bank of Mymensingh Gauripur, Ltd., 53 C.W.N. 143	Authority that once a scheme is sanctioned and perfected, the Court has no power to alter or modify the scheme; remedy is by appeal or fresh scheme.	Das C.J. relied on his earlier view to support the proposition that a sanctioning Court cannot later alter a scheme outside provisions in the Act.
Re London Chartered Bank of Australia (1893) 3 Ch. 540	Statement that a scheme under the 1870 Act is "an alternative mode of liquidation" substituting for a pending winding up.	Counsel relied on it to argue that S.153 schemes carry winding-up incidents; Bench examined and limited its application to schemes made in the course of pending winding up.
Madan Gopal v. Peoples Bank of Northern India Ltd., 16 Lah. 1029	Indian case citing Re London Chartered Bank to treat a scheme as alternative mode of winding up.	Bench observed that some Indian decisions applied the English dictum too broadly to schemes not in winding up and treated such reliance skeptically.
Subramania Ayyar v. Supparaya Pillai, AIR 1936 Mad. 424	Observation that Provincial Insolvency Act should follow English practice; used to support summary enforcement of compositions under insolvency statutes.	Bench treated part of the observation as obiter and held it did not support extending Companies Act powers; distinguished insolvency context from Companies Act scheme enforcement.
In re Dewangunj Bank and Industry Ltd., AIR 1935 Cal. 117	Instance where Court (single bench) allowed modification or intervention after scheme sanction (treated as correcting mistakes / granting relief).	Bench noted the decision but treated it as lacking principle and pointed out it was later implicitly questioned and is not persuasive to support general post‑sanction jurisdiction.
In re Jalpaiguri Banking and Trading Corporation Ltd., AIR 1936 Cal. 662	Single-bench order granting injunction to restrain execution after scheme sanction.	Bench noted absence of reasoned jurisdictional analysis in that judgment and did not treat it as establishing general rule of jurisdiction post‑sanction.
In re Mymensingh Loan Office Ltd., AIR 1937 Cal. 667	Lord-Williams J.: powers under Companies Act are strictly limited; Court cannot modify a sanctioned scheme without consent of those agreeing to it.	Bench relied on this authority as supporting the limited scope of S.153 and the inability to impose modifications post‑sanction.
Nokes v. Doncaster Amalgamated Colleries Ltd., (1940) A.C. 1014	Observation (Viscount Simon) about S.154 (English) and that dissolution under transfer provisions may not allow resurrection; implication that Part IV provisions do not ipso facto attract Part V winding up provisions.	Bench relied on Viscount Simon's observation to support the view that Part V (winding up) sections cannot be automatically applied to S.153 schemes not in winding up.
British India Corporation Ltd. v. Robert Menzies, AIR 1936 All. 568	Recognition that Courts have inherent jurisdiction to compel compliance with statutory obligations (e.g., compelling inspection of register) even if Act silent about certain enforcement steps.	Bench considered the case but held that its facts (compulsion to inspect register where statute empowered inspection) do not support a broad inherent jurisdiction to enforce schemes sanctioned under S.153.
Bowkett v. Pullers United Electric Works, (1923) 1 K.B. 160	Rule that an order sanctioning a scheme, once made, becomes binding upon creditors, liquidators, contributories; shareholder cannot later question validity.	Bench held this authority does not prevent challenge to a Court's asserted jurisdictional competence when a scheme purports to confer jurisdiction a Court lacks by law.
Kamlapat Moti Lal v. Union Indian Sugar Mills Co. Ltd., AIR 1929 P.C. 256	Privy Council on limits to modifications of scheme and need for shareholders' assent to substantive variations.	Bench cited to show Court cannot impose substantive amendments without proper procedure and assent; supports limited post‑sanction powers.
In re Natore Kamala Bank Ltd., AIR 1937 Cal. 124	Calcutta single-bench and Lord-Williams J. observations on modifying sanctioned schemes and limits on Court power to alter schemes.	Bench found the case did not decide jurisdictional issue and so provided limited assistance; cited the caution against post‑sanction modification without proper process.
Re Alabama, New Orleans, Texas and Pacific Ry. Co., (1891) 1 Ch. 213	Principles for Court when sanctioning schemes: verify statutory compliance, bona fides of majority, fairness to minority, commercial reasonableness.	Bench relied on Lindley L.J.'s exposition to define the Court's duty at sanction stage and emphasize that inquiry at sanction is about fairness, not adjudication of individual claims.
Sovereign Life Assurance Co. v. Dodd, (1892) 2 Q.B. 573	Case addressing class definition issues and whether different classes should have separate meetings under arrangement acts.	Bench noted it deals with distinguishing classes at the meeting stage, not as authority for post‑sanction adjudication of individual class membership by the sanctioning Court.
Booth v. Walkden Spinning and Manufacturing Co. Ltd., (1909) 2 K.B. 368	Discussed stay of execution vis-à-vis proposed scheme under English statute; observations about potential stay after full sanction.	Bench treated comments as obiter and not supporting a general post‑sanction stay power outside winding up context.
Rajshahi Banking Corporation v. Surabala Deb, 40 C.W.N. 1104	Held sanctioning Court had jurisdiction to entertain application to modify scheme to expunge words preventing a decree‑holder from executing his decree.	Bench recorded the decision but contrasted it with other authorities holding the opposite; did not treat it as controlling on the Full Bench's conclusions.
Re Travancore National and Quilon Bank Ltd., AIR 1939 Mad. 318	Some observations that scheme under S.153 provides an alternative mode of winding up.	Bench examined and rejected the extension of that proposition to support post‑sanction winding up powers for schemes not in actual winding up or not within S.153A/B.
Rudow v. Great Britain Mutual Life Assurance Society, (1881) 17 Ch.D. 600	Interpretation of provisions concerning application of Act to unregistered companies and scope of Part IV provisions.	Bench cited in support of a restrictive reading of "liable to be wound up" and to reject a broad reading that would import Part V incidents into S.153 generally.
Other Indian authorities cited (e.g., Mahindra Kishore Dutt v. Brahmanbaria Loan Co. Ltd., Premila Devi v. Peoples Bank of Northern India Ltd., various Calcutta/Bombay/Lahore decisions)	Various points: limits on Court to modify schemes, whether decree‑holders are bound, and differing local practices regarding post‑sanction orders.	Bench considered the authorities, highlighted conflicts among them, and used them to show that the prevailing correct position is a restrictive reading of S.153; where cases conflicted, the Full Bench followed reasoned authorities that limit post‑sanction jurisdiction.

Judgement

S. R. DAS C.J. - When I started taking up the liquidation matters as the Company Judge of this Court Ifound that there were pending a large number of applications or petitions by creditors of different banks working under different schemes sanctioned by this Court for payment of the installments that had fallen due under the scheme but not paid or for adjudicating upon their claim to priority as preferential creditors or for like reliefs. None of the banks, however, had actually gone into liquidations and none of the schemes had been sanctioned in course of winding up. These banks were and are going concerns but are now working under schemes sanctioned by the Court. Doubts arose in my mind as to whether, in such circumstances, the Court had any jurisdiction under the Indian Companies Act to entertain such summary applications by creditors on a mere petition to adjudicate upon their rights under the scheme or their claim that they are not bound by the scheme. On enquiry I was told that there was a clause in each of the schemes sanctioned by the Court authorising this Court to entertain such applications and that it had been the practice of the Court to do so. I was still dubious as to whether the requisite majority of the creditors and/or members of the company could, by inserting a clause in a scheme, confer jurisdiction on the Court which it did not otherwise possess or whether the Court itself by sanctioning such a scheme could usurp a jurisdiction not otherwise vested in it. In view of the prevailing practice of the Court which, I felt convinced, should not be lightly interfered with. I thought it right that this important question should be heard and decided by a larger Bench and accordingly the present Bench was constituted. We also thought fit to request the learned Advocate-General to give us his assistance as amicus curia which he has done in ample measure for which we are indeed indebted to him.

2. The first scheme to be sanctioned by this Court was the one relating to the New Bank of India, Limited. The scheme approved by the requisite majority of the members and creditors of that bank came up for final sanction before Achhru Ram, J. who was then the Company Judge. Paragraph 1 of the scheme as it emerged from the meetings was as follows:

"For the purposes of this scheme the word deposit includes Fixed Deposits, Banks own Cash Certificates Current Accounts, Deposits at Call, Savings Fund Accounts lying in Sundries, or in any other kind of Credit Accounts, Bank Drafts, Cash Orders, Pay Orders and documents of the like nature and amounts due to Bankers over and above the value of Government Securities lying with them against such deposits, after adjustment of loans as may be permissible under the law, if any, against any or all the deposits in the said accounts whether pledged specifically or not."

It will be noticed that the above definition of the word "deposit" was of extremely wide import. Certain classes of persons, who had purchased drafts issued by the bank in one of its branches on another of its branches, or who had to receive money from the bank in respect of hills entrusted with it for collection, claimed that they were not ordinary depositors but were really in the position of cestui que trust and as such entitled to payment in full in priority to ordinary depositors and creditors of the bank. These persons were naturally opposed to the scheme and particularly to the definition of the word "deposit" in para.1 of the scheme. To pacify them a clause was put in Para.3 of the scheme the material part of which was as follows:

"3. Notwithstanding any other provision in the scheme the following amounts shall be paid in full if they are obligatory to be paid under the law:

(a) * * * *

(b) * * * *

(d) The amount held by a competent Court to be payable in priority to other creditors."

The position was rather anomalous, for these persons came within the definition set forth in Para.1 and as such were bound by the scheme but notwithstanding this a provision was made in Para.3(d) for payment to them in full if it were so decided by a competent Court. The result was that in one breath the scheme said that these persons were bound to accept such payment and in such manner as was specified in the scheme but in another breath said that they would receive payment in full if a competent Court held that their claim was payable in priority to other creditor. It was at best a patch up compromise. When the scheme, as it emerged from the meetings, came up before the Court for sanction, some of these persons, we are told, appeared in Court and opposed the scheme. Apart from other objections which were open to all other dissenting creditors these persons could, at that stage, take the objection which was peculiar to them, namely, that they formed a separate class of creditors whose interests were in conflict with those of depositors and other ordinary creditors and that separate meetings should have been convened for them and that that not having been done they were not bound by the scheme and consequently the scheme should not be sanctioned. At that stage the Court was only to decide whether it should sanction the scheme with or without modification or reject the scheme and that being the only issue before the Court and the special objection I have mentioned having been raised, the Court had to consider the general question whether persons who claimed to hold bank drafts or whose bills had been collected by the bank constituted a well defined and a separate class of creditors so as to be entitled to claim separate meetings of their class and whether that not having been done the scheme could nevertheless be thrust on them or whether the scheme should be rejected out-right or should be modified so as to exclude that class from the operation of the scheme as it was empowered to do by the scheme itself. As I apprehend the position, it was not the duty of the Court, at that stage, to enquire and determine whether a particular person came within that particular class and as such entitled to payment in full in priority to ordinary creditors. Paragraph 1 embraced within its ambit all sorts of creditors and the real controversy raised was whether persons who held bank drafts or whose bills had been collected by the bank constituted a separate class and the Court had to decide that controversy only for the purpose of enabling it to make up its mind as to whether it should sanction the scheme or reject the scheme or suitably modify the scheme in exercise of the powers reserved to it. The question before the Court was not whether any of the persons claiming to come within that class was really within that class or what his individual rights were. The broad general question whether the persons who claimed and not who were then and there found to hold bank drafts or that their bills had been collected by the bank formed a separate class had to be decided then and there in order to enable the Court to decide whether it should accord or withhold its sanction. A decision on this question was necessary before the scheme could be sanctioned and, if I may say so with respect, it was wholly incongruous, illogical and wrong for the Court to give sanction to the scheme without deciding that question. But that is precisely what was done. At the hearing before the Court several modifications were proposed by the Court and accepted by the person authorised by the scheme to consent to such modifications. The modifications consisted in substituting the words " East Punjab High Court " for the words " a competent Court " in para.3(d) of the scheme and in inserting three new clauses at the end of the scheme which were in the following terms:

"15. Any creditor, any share-holder, any claimant or the Bank may apply to the High Court for directions and adjudications in matters arising out of the scheme including inter alia, questions of priorities, preferential payments and adjustments and the scheme shall be subject to such directions and adjudications.

16. The Bank shall furnish to the High Court, East Punjab, annual balance sheet with a report on the working of the scheme within one month from the formal adoption of the balance sheet.

17. The appointment of auditors shall be subject to the approval of the High Court of East Punjab and it shall be open to the Court to appoint any additional auditor or auditors."

We have been told that in all subsequent schemes same or similar clauses were inserted before they were sanctioned by the Court and the Court went on entertaining applications or mere petitions for adjudications upon all sorts of claims of priority or otherwise as matters arising out of the scheme.

3. When the several applications for adjudicating upon the rights of the parties under or arising out of the scheme or otherwise came up before me as the Company Judge it occurred to me, apart from the illogicality in postponing until after the sanction the decision on a question which had to be decided before the scheme, that, when a scheme is sanctioned otherwise than in winding up proceedings and the Court does not retain its powers as the winding up Court or when the scheme was not one for re-construction or amalgamation involving transfer of assets from one company to another or allotment of shares in the new company to the members of the old company or like questions, the Company Court could not, after it had once sanctioned the scheme, have any seisin over the scheme or the company and could not make any order subsequently in modification of the scheme or in implementation thereof. I may here very shortly state the reasons that occurred to me then:

(a) Parties cannot by consent confer jurisdiction on a Court, nor can a Court by consent of parties arrogate to itself jurisdiction which is not vested in it by law.

(b) When two Courts have concurrent jurisdictions parties may, by agreement, vest one of them with exclusive jurisdiction but parties cannot give jurisdiction to a Court which otherwise has no jurisdiction at all.

(c) This High Court has no original jurisdiction under the East Punjab High Court Order read with the Letters Patent of the Lahore High Court and, therefore it has to be examined, whether the Indian Companies Act gives this Court any special jurisdiction to entertain applications of the kind now before us involving the exercise of original jurisdiction.

(d) In re Bank of Mymensingh Gauripur, Ltd., 53 C.W.N. 143, I had myself held on the authorities therein mentioned that once a scheme had been sanctioned and the order of the Court had been perfected by being drawn up and filed on record the Court had no power to alter or modify the scheme and the remedy of the party aggrieved was by way of appeal or by way of a fresh scheme.

(e) Section 153(1) authorises the Court to give directions for holding and conducting meetings and it is obvious that these directions must in point of time be anterior to the sanction of the scheme. Section 153(2) only authorises the Court in its discretion to sanction the scheme. There is no power given to the Court by S.153 itself to make any order after once the scheme had been sanctioned.

(f) To facilitate the putting through of schemes of certain types, e.g., when it is a scheme for reconstruction or amalgamation, the legislature thought fit to vest special powers in the Court by introducing S.153A and S.153B. Under S.153A the Court may by the very order sanctioning the scheme or by a subsequent order make provision for all or any of the matters set forth in cls.(a) to (f) in Sub-S.(1) of that section. It will be noticed that these orders can only be made when the scheme is of the type mentioned in that section, from which fact and from the omission of any such provision from S.153 it must follow that in case of any other scheme the Court has no power after the scheme has been sanctioned to make any incidental, ancillary or consequential order.

(g) Where the Insolvency Court sanctions a scheme of composition between the insolvent and his creditors the Presidency Towns Insolvency Act by S.30 expressly reserves to the Insolvency Court sanctioning the scheme the power to enforce it and by S.31 authorises the Court to set aside the scheme and read judge the debtor as insolvent. There are no such provisions in S.153 or in any other section of the companies act which may be applicable to a scheme of the kind we are contemplating. This absence of provision in the Companies Act cannot but be regarded as significant.

(h) There may be difficulty in enforcing orders made by the Court on the applications that are now before us. Section 199, Companies Act, provides that any order made under the Act may be executed as if it were a decree of the Court. That section is in Part V which deals with winding up of companies and it may be questioned whether it applies to any order made otherwise than in winding up. But the section by its own terms is not limited in its application to orders made in winding up and assuming therefore that it may apply to all orders made under any section, yet it will not apply to any order that may be made on the applications before us because that order will not be made under any provision of the companies act but will be made under the provisions of a certain clause in the scheme. In short it will be an order under the scheme and not an order under the Act and, therefore, will not be enforceable under S.199 even if that section applies to an order made outside the winding up, for that section is limited to orders made under the Act. Why should the Court entertain an application when it will not be able to enforce the order made on such application in execution? If the party who obtains the order on such application has to file a suit to enforce the order, why should he not be relegated to ordinary proceedings for enforcing rights under or arising out of the scheme or even against it?"

Nothing that I have since heard has shaken my view that if the Court has sanctioned a scheme otherwise than in course of winding up and reserving its powers as the winding up Court or if the scheme does not fall within S.153A and S.153B the Court has no jurisdiction to entertain any application of the kind we have before us. Here I may very briefly state my reactions to the arguments ably advanced by learned counsel for the Bank and other persons who support the applications. If I am not dealing with the arguments in detail it is certainly not out of any disrespect for learned counsel or their arguments but only because my learned brothers have dealt with them fully and exhaustively in their carefully prepared judgments which, by their courtesy, I have had the opportunity of reading.

4. The main argument in support of these applications may be summarised as follows: Under S.153 a scheme may be proposed only in respect of companies liable to be wound up under the Companies Act. Companies are liable to be wound up under the Act only when one or more of the circumstances set forth in cl.6 of S.162 of the Act exist. In other words a scheme is permissible only when the company is on the verge of being wound up by reason of the existence of one or more of those circumstances or is being actually wound up. The special definition of "company" in Sub-S.(6) of S.153 indicates that a scheme cannot be proposed by any and every company as defined in S.2(2) but only by such of them as are liable to be wound up by reason of its falling within one or more of the clauses of S.162. In other words the definition of "company" in Sub-S.(6) of S.153 is restrictive. An unregistered company may be wound up under S.271 but S.276 clearly provides that an unregistered company shall not be deemed to be a company under the Act except in the event of its being wound up and then only for the purposes of Part IX and, therefore, by virtue of this section there can be no scheme: with respect to an unregistered company. The conclusion is that a scheme can be proposed under the Act, not with respect to all companies as defined in S.2 but only with respect to such of them as are liable to be wound up in the sense I have explained. The next step in the argument is that a scheme is an alternative mode of winding up, that is to say when the company is liable to be wound up, instead of winding it up a scheme may be proposed to avert the winding up. The final step in the argument is that as a scheme is an alternative mode of winding up the Court has all the powers given by the Act to the winding up Court. The argument is attractive and requires scrutiny.

5. As to whether the definition of "company" in S.153(6) is restrictive or is descriptive and intended to extend the definition of "company" given in S.2(2) so as to allow a scheme in respect of an unregistered company as stated in Palmers Company Precedents, 15th Edn., Part II, pp.904-905, or whether the provisions of S.276, Companies Act, support or run counter to the arguments of learned Advocate-General on this point, I prefer not to express any opinion and I reserve my right to go into this question if and when it arises on a future occasion. For the purposes of the applications now before us, I shall assume that a scheme can only be proposed under S.153 when the company is liable to be wound up in the sense contended for and pass on to consider the next question namely whether in every case of a scheme, whether framed in course of a winding up or not, the Court which sanctions the scheme can exercise all the powers of a winding up Court generally and in particular the power of dealing under S.216, Companies Act, all questions under or arising out of or even against the scheme as matters arising in winding up.

6. Under the English Companies Act, 1862 (25 and 26 vic,. C.89) the only provision for a scheme or arrangement was in S.136 which was in the following terms:

"Any arrangement entered into between a company about to be wound up voluntarily, or in course of being wound up voluntarily, and its creditors, shall be binding on the company if sanctioned by an extraordinary resolution, and on the creditor if acceded to by three-fourths in number and value of the creditors, subject to such right of appeal as is hereinafter mentioned."

section 137 of that act dealt with the right of appeal but it is not necessary to refer to it. It will be noticed that under that Act (i) the arrangement could be entered into only when the company was about to be, or in course of being, wound up voluntarily and (ii) the arrangement could only be between the company and the creditors only and that no arrangement could be entered into between the company and its members. The Act made no provision for a scheme in respect of a company which was being wound up by or under the supervision of the Court or which was not about to be or in course of being wound up at all. This inconvenience was to a certain extent removed by S.2, English Joint Stock Companies Arrangement Act, 1870 (33 and 34 Vic, C.104) which read as follows:

"Where any compromise or arrangement shall be proposed between a company which is, at the time of the passing of this Act or afterwards, in the course of being wound up, either voluntarily or by or under the supervision of the Court, under the Companies Acts 1862 and 1867, or either of them, and the creditors of such company, or any class of such creditors, it shall be lawful for the Court, In addition to any other of its powers, on the application in a summary way of any creditor or the liquidator, to order that a meeting of such creditors or class of creditors shall be summoned in such manner as the Court shall direct, and if a majority in number representing three-fourths in value of such creditors or class of creditors present either in person or by proxy at such meeting shall agree to any arrangement or compromise such arrangement or compromise shall, if sanctioned by an order of the Court, be binding on all such creditors or class of creditors, as the case may be, and also on the liquidator and contributories of the said company."

By S.3 of that Act the word "company" was defined to mean "any company liable to be wound up under the Companies Act, 1862." It will be seen that even this Act made no provision for any arrangement or compromise between the company and its members. But what is more important to note is that under this Act the scheme could be proposed only when the company was "in the course of being wound up, either voluntarily or by or under the supervision of the Court" and that no provision was made for a scheme when the company was not actually being wound up. Further, and this is also very important, the powers of the Court to direct meetings to be summoned and to sanction the scheme were "in addition to any other of its powers" which must mean, since the company was "in the course of being wound up" in addition to all its powers as the winding up Court. The net result of this was that a scheme could be proposed only when the company was being wound up and the purpose of the scheme was to avert further proceedings in winding up and to substitute for the winding up proceedings a scheme approved by the requisite majority of creditors and sanctioned by the Court and that the power of the Court to direct the holding of meeting and to sanction the scheme was in addition to its powers as the winding up Court. The order sanctioning the scheme in course of winding up provided for the stay of the winding up except for the purposes of carrying the scheme into effect (see Form Nos.940 and 944 in Palmers Company Precedents Edn.15, Part II, pp.959-960 and 962). This meant that the power of the Court as the winding up Court was retained for the purpose of giving effect to the scheme. The provision of S.2 of the English Act of 1870 to the effect that the power of the Court to sanction the scheme was in addition of its powers as the winding up Court and the continuation of the winding up for the purpose of giving effect to the scheme naturally and obviously had the effect of enabling the Court to make ancillary, incidental and consequential orders to implement the scheme as if they were matters arising in winding up. This is how, I apprehend, the matter stood under the English Acts of 1862 and 1870. As long as those Acts were in force it was, therefore, only a truism to say that a scheme was an alternative mode of winding up. It was Vaughan Williams, J.,who, in Re London Chartered Bank of Australia, (1893) 3 Ch. 540 at p.546: (62 L.J.Ch. 841) said:

"The scheme of arrangement under the Act of 1870 is - as I have had occasion to point out in several cases - an alternative mode of liquidation which the law allows the statutory majority of creditors to substitute for the pending winding up, whether voluntary Or under the Court, just as the Bankruptcy Act, 1869, allowed the creditors the substituted liquidation by arrangement under S.125, or composition under S.126 of that Act, for a pending bankruptcy."

The words "substitute for the pending winding up" and the words "substituted liquidation .... for a pending bankruptcy" are important and clearly indicate that the scheme was a substitute or alternative to the winding up or bankruptcy which was actually pending. In the head-note of this case the reporter omitted the word "pending" and in later times Judges in England as well as in India quoted the sentence from the head-note and applied it generally to every case of a scheme irrespective of whether the scheme was made in course of a pending winding up or otherwise as if a scheme was always an alternative mode of winding up, even where there was no winding up. For example one may refer to the case of Madan Gopal V. Peoples Bank of Northern India Ltd., 16 Lah. 1029: (A.L.R. (22) 1935 Lah. 779 S.B.), where the observations of Vaughan Williams, J., are quoted in the bald form and applied to a case where there was no winding up at all.

7. We all know that in the English Companies Consolidation Act, 1908, there were two provisions for scheme, one in S.121 and the other in S.191 of that Act. This was reproduced in our Act of 1913 in S.153 and S.215 respectively. It will be noticed that in our Act S.153 was placed under the sub-heading "Arbitration and Compromise" in part iv which is headed "Management and Administration" and S.215 which corresponds to S.136 of the English Act of 1862 and S.191 of the English Act of 1908 has been placed under the sub heading "Members or creditors voluntary winding up" in Part V which is headed "winding up". section 54 of our act which dealt with "Re-organisation of share capital" is now omitted and a re-organisation of share capital may now be effected by way of a scheme under S.153 - a fact which may support the view that there can be a scheme even when the company is not "liable to be wound up" i.e., under S.162 in the sense contended for. But as I have said it is not necessary to express any opinion on the question whether a scheme can only be proposed when the company is about to be or is being wound up or whether there can be a scheme even when there is no question or liability of the company being wound up. I assume that a scheme is permissible only when the company is being wound up or though not being wound up is liable to be wound up under S.162 i.e. is about to be wound up. If the scheme is sanctioned by the Court in course of winding up proceedings which is pending, the scheme is certainly and truly an alternative mode, a substitute, for the pending winding up and at the time of the sanction it may be possible for the Court to expressly preserve all its powers as the winding up Court in order to give effect to the scheme as is shown in the forms of the orders in Palmer to which I have referred. In such a case it may be possible for the winding up Court which sanctioned the scheme to entertain applications of the kind we have now before us. But when the company is not actually in liquidation but is about to be wound up in the sense that it has incurred the liability to being wound up under S.162, and a scheme is proposed in such circumstances, the scheme is an alternative mode of winding up only in the sense that it averts the winding up. If the company or the creditors or the members elect, out of two alternative remedies of liquidation and scheme, to adopt the remedy by way of scheme, it cannot be permissible to claim the benefit of the provisions which are incidental or ancillary to the remedy by way of winding up which has been discarded. The company not being in actual liquidation the Court has not got the powers of the winding up and there can be no question of preserving those powers by the order sanctioning the scheme. To claim that on a scheme being sanctioned otherwise than in course of winding up, all the provisions of part v, Indian Companies Act, which apply to winding up are attracted is an impossible claim. If that were so then an order sanctioning or rejecting a scheme would have been appealable under S.202 and there would have been no necessity for amending S.153 by inserting Sub-S.(7) specifically giving a right of appeal. In Nokes v. Doncaster Amalgamated Colleries Ltd., (1940) A.C. 1014: ((1940) 3 ALL.E.R. 549), where a company on a scheme of amalgamation being sanctioned under S.154 (corresponding to our S.153A) was dissolved without winding up, Viscount Simon at p.1021 observed:

"Moreover, S.154 contemplates or at any rate provides for, the dissolution of the transferor company when the transfer of its undertaking has been made, and there appears to be no means of calling back to life the company so dissolved, for S.294 occurs in Part V, Companies Act dealing with winding up, whereas S.154 is found in Part IV."

Section 254 of the English Act, corresponds to our S.243. Under our S.194 the company is dissolved after its affairs have been completely wound up. Under our S.243 the Court may make an order declaring the dissolution to have been void. But when a company is dissolved without winding up under our S.153A(1)(d), that company cannot, according to Viscount Simon, be brought back to life because the only provision for enabling the Court to resuscitate a dead company is in our S.243, which is in Part V dealing with winding up whereas our S.153A is in Part iV. This clearly shows that the scheme sanctioned under our S. 153 or 153A or 153B does not ipso facto attract the provisions of Part V of our Act. Even if the observations of Viscount Simon be regarded as somewhat too wide and even if it be conceded that some of the sections in part v which are couched in general language and are not in terms stated to be limited to winding up proceedings or applicable to proceedings had or orders made otherwise than in winding up, yet those sections which expressly relate to matters arising in winding up cannot certainly by reason of their very terms be applied to matters not arising out of winding. Sections 184 to 194 of the Act are grouped under the sub-heading "Ordinary powers of Court" and sections 195 to 198 under the sub-heading "Extraordinary powers of Court." A perusal of most of these sections will at once show that they are in terms applicable only after the making of a winding up order e.g., S.184 to S.187, S.191, S.195 and S.196. Although in S.188 to S.193 and in S.197 and S.198 there is no mention of the making of a winding up order the language employed, namely, the use of the words liquidator or contributory, or distribution clearly indicates that those sections are also applicable only in case of winding up except perhaps S.197 which may be applied both before and after the making of an order of winding up. Sections 211 to 218 apply only in voluntary winding up and therefore S.216 is not available to support the present applications, for that section is expressly applicable only to matters arising in winding up. It is, therefore, clear there is no section in Part v, even if the provisions of that part could apply to proceedings outside that part, which can be called in aid and support these applications.

8. The next argument is that the Court at the time of sanctioning the scheme could under S.153, Companies Act, go into the question of the rights of the bank draft holders or of persons whose bills had been collected by the Bank and there is nothing wrong if the Court postponed the decision of that question for a future date. The same argument is put in another way, namely, that the rights of these persons were in issue at the final hearing for sanction and the parties were entitled, under O.14, R.6 which applied to the proceedings by virtue of S.141 of the Code, to state the question of the rights of these persons in the form of an issue to be decided at a future date. A third way of putting the same argument is that the parties could, under S.90, read with O.36 of the Code, which were applicable by virtue of S.141, to proceedings under the Companies Act also, state a special case for the opinion of the Court. There is no substance in these arguments. In the first place, S.141 of the Code only provides that the procedure provided by the Code in. regard to suits is to be followed, as far as it can be made applicable, in all proceedings in any Court of civil jurisdiction. Two things are to be noticed, namely, that it is only the procedure that is to be followed and that it is to be followed as far as it can be made applicable. Besides prescribing the procedure the Code confers diverse powers and jurisdictions on the Court By reason of S.141, the Company Court is to follow the procedure provided in regard to suits as far as it may be made applicable, e.g., the provisions for discovery, inspection, hearing evidence, summoning of witnesses and the like, but the Company Court cannot arrogate to itself the special powers and jurisdictions conferred by the Code on the Civil Court. Nor can I see how the special provisions of O.14, R.6 or S.90, or O.36 of the Code can, in view of their express terms, be made applicable to the proceedings under S.153, Companies Act. In the second place the only issue before the Company Court hearing the final application for sanction of a scheme is whether the scheme should be sanctioned or rejected. In my judgment in the matter of Calcutta Industrial Bank Ltd., 52 C.W.N. 425, I discussed the duties of the Court in the matter of sanctioning a scheme. Broadly speaking, the Court has to be satisfied that the statutory requirements have been observed and performed, that the scheme is a fair and practicable one that there has been no suppression of material facts, that the majority has not been oppressed and that there has been nothing in the conduct of the company or its promoters or directors or officers which requires investigation. All these matters are to be considered by the Court only to enable itself to decide the only issue before it, namely whether the scheme as it has emerged from the meetings of the creditors and/or members should or should not be sanctioned. In order to ascertain whether the statute has been observed the Court must be satisfied that the meeting was properly convened and held. If the creditors have different interests and constitute separate classes then a general meeting of all creditors will not be the proper thing, for the views of a distinct class ought to be ascertained from the votes of that class only. A general meeting of all creditors may not protect the class interest as such. Therefore at the hearing for sanction any creditor may appear and claim that he belongs to a special class of creditors and that the interest of that class has not been protected by the meeting which comprised all and sundry creditors and the Court will naturally have to enquire whether the body of persons making asimilar claim as made by this objector do really form a separate and distinct class of creditors having special interest whose views required to be ascertained by a separate meeting of that class alone. The questions whether the particular creditor appearing before the Court is actually within the category of that separate class as he claims to be or what his individual rights are, are not in issue before the Court. As I have already explained the Court has to consider whether persons claiming to have, and not then and there found to have, separate interests do really constitute a separate class of creditors so as to be entitled to have a separate meeting of that class, and whether that not having been done, the scheme should be rejected. All this aspect of the matter is considered by the Court only in order to enable itself to decide the only issue before it, namely, whether the scheme should be sanctioned or rejected. This being the true position, as I conceive it, the decision on questions of this kind must precede the sanction, for the sanction necessarily depends on such decision. It is entirely illogical, incongruous and wrong to sanction the scheme and postpone the consideration of a matter which, if decided in favour of the separate class, may have rendered the scheme unacceptable to the Court on the simple ground that a separate meeting of that separate class should have been held. Whether the course actually adopted in the matter of the sanction of these schemes has vitiated them in toto is a matter on which it is not necessary to express any opinion now. It is enough, for the purposes of the present proceedings, to say that the schemes not having been sanctioned in course of winding up and not falling within the class of schemes referred to in S.153A and S.153B neither the parties nor the Court could invest the Company Court with jurisdiction which is not otherwise vested in it by law, namely, to reserve to itself the jurisdiction to make future orders on matters arising under or out of the scheme, Section 153 does not contemplate or confer any such power on the Company Court.

9. Closely akin to the foregoing arguments is the argument that the rights of this class of creditors claiming preferential rights were left to the decision of the Court extra cursum curia. When a particular suit or a proceeding between particular parties is pending in a particular Court, the parties instead of fighting out the matter may leave the matter to the particular Judge extra cursum curia, i.e., authorising that particular Judge to give whatever decision he thought fit without following the strict and rigid rule of practice and procedure of the Court. This doctrine can surely have no application if the persons to be affected are not actually present before the Court as parties when the matter is left to the Court. Nor can a matter be left to a Court as distinct from the particular person who is presiding over the Court at the time. The doctrine of extra cursum curie cannot, in my judgment, be possibly invoked to support the provisions in Paras.3(d) and 15 of the scheme.

10. An argument was sought to be founded on the decision in Subramania Ayyar v. Supparaya Pillai, AIR (23) 1936 Mad. 424: (161 I.C. 717). In that case Varadachariar, J. observed that although in the Provincial Insolvency Act there was no provision as the english bankruptcy act which was reproduced in S.30 of the Presidency Towns Insolvency Act, nevertheless as the Provincial Insolvency Act was only a replica of the English Bankruptcy law, the Court should follow the English practice and enforce the scheme of composition. This part of the observation of the learned Judge appears to me to be obiter, for the case could be decided on the simple ground that the surety bond being in favour of the Court itself the Court could enforce it suo motu without fresh proceedings brought by the assignee of the bond. Further, with the utmost respect to the learned Judge, I find it difficult to follow his reasonsings on this point. Both the Presidency Towns Insolvency Act and the Provincial Insolvency Act are taken from the English Bankruptcy Act. In the Presidency Towns Insolvency Act the legislature thought fit to insert Sub-S. (2) in S.30 but omitted to insert any similar sub section in S.39 of the Provincial Act. The Provincial Act was replaced by a new Act in 1920 and yet no such provision was inserted in the new Act. This omission may, for all I know, be explained on the ground of deliberate policy rather than oversight. This aspect of the matter does not appear to have been sufficiently adverted to by Varadachariar, J. In any case the reasoning of that learned Judge does not help us at all in this case. All that the learned Judge says is that the Provincial Insolvency Act being based on the English Bankruptcy laws, the Courts in India should, in the absence of any provision in the Indian law, follow the English practice. This reasoning will at best only entitle the Indian Company Court, in the absence of any specific provision in our laws, to follow the practice and procedure of the English Company Courts. We have not been referred to any English rule or practice whereby or whereunder in the case of a scheme not sanctioned in course of winding up or not falling within English S.154 (our S.153A) the Court has any jurisdiction, after sanctioning the scheme, to make any order subsequently enforcing the scheme. Therefore, the observations of Varadachariar, J., even if correct, will give us no assistance in this case.

11. Learned counsel relied on three Single Bench decisions of the Calcutta High Court as instances where the company Court made orders after the scheme had been sanctioned, namely, In re Dewangunj Bank and Industry Ltd., AIR (22) 1935 Cal.117: 38 C.W.N. 1171 and In re Jalpaiguri Banking and Trading Corporation, Ltd., AIR (23) 1936 Cal. 662: 40 C.W.N. 551. In the case before Backland, J. the application was somewhat in the nature of correcting a mistake that had crept into the scheme. In any case that decision was dissented from by Lord-Williams, J. in Re Natore Kamala Bank, Ltd., AIR (24) 1937 Cal. 124: (I.L.R. (1937) 1 Cal. 368). See also In re Mymensingh Loan Office Ltd., 41 C.W.N. 599: A.I.R (24) 1937 Cal. 667. In the case before McNair, J. his Lordship did not give any reason whatever for his assuming jurisdiction. Indeed his Lordships jurisdiction does not appear to have been seriously challenged at all. The decisions relied on, besides being instances where jurisdiction was exercised after the scheme has been sanctioned, throw no light on the question now in controversy before us and in the absence therein of any cogent reason I find it difficult to accept them as good and sound authority on the matter.

12. Finally a forlorn attempt was made to save these applications by treating them as suits instituted in competent lower Courts and transferred to this Court in exercise of its extraordinary original civil jurisdiction. In order to do so there has to be actual proceedings in the competent subordinate Courts and a transfer cannot be founded on a fiction and extraordinary original civil jurisdiction cannot be exercised in the air.

13. For the reasons stated above I am satisfied that the doubts that I entertained when these applications came before me as the Company Judge were well founded. The conclusions I have come to may now he summarised: (1) When a scheme is sanctioned by the winding up Court in course of winding up, the Court may stay the winding up except for the purpose of giving effect to the scheme, In such a case the Court may exercise the powers of the winding up Court in matters arising under or out of the scheme as matters arising in winding up; (2) When a scheme is of the kind mentioned in S.153A or S.153B, Companies Act, and is sanctioned even otherwise than in course of winding up, even then the Court may by the order sanctioning the scheme or by any subsequent order make provision for all or any of the matters mentioned in the several clauses of Sub-S.(1) of S.153A or in S.153B; (3) Where a scheme which is not of the kind mentioned in S.153A or S.153B is sanctioned otherwise than in the course of winding up, the Court sanctioning the scheme has no further seisin on the scheme and has no jurisdiction or power as the Company Court to entertain any application for enforcing the scheme, or modifying the scheme or to adjudicate upon the rights of parties arising under or out of the scheme and parties claiming under the scheme or dehors the scheme must assert their rights in regular suits or other proceedings as may be permissible in law; (4) Neither the company, nor the creditors nor the members can by a provision in the scheme which is within clause (3) above confer jurisdiction on this Court which this Court does not either under the East Punjab High Court Order read with the Letters Patent of the Lahore High Court or under the Indian Companies Act or otherwise possess; (5) Nor can the Court by sanctioning a scheme which comes within clause (3) above including a clause reserving power to the Court to entertain applications subsequent to the sanction arrogate to itself powers and jurisdictions which it does not either under the East Punjab High Court Order read with the Letters Patent of the Lahore High Court or the Indian Companies Act or otherwise possess. Tested in the light of the principles enunciated above the schemes with respect to which the applications which are now before us have been made come under Cl.(3) above and it must be held that this Court has no jurisdiction to entertain any of them. These applications must, therefore, be laid before the Company Judge to be disposed of in the light of the decision of this Full Bench.

14. Although I have not been able, for reasons stated above, to support the practice that has heretofore been followed by this Court, I must say that that practice had the merit of providing a convenient forum for expeditious disposal of all disputes arising under or out of the scheme and saved the companies working under scheme sanctioned by the Court under S.153 as well as the creditors from long drawn litigations from Court to Court. In my judgment provision should be made in our Companies Act enabling the Court sanctioning a scheme to make orders for enforcing the scheme and all other ancillary, incidental or consequential orders. It will now be for the legislature to consider the desirability of amending S.153 by introducing a sub-section on the lines of cl.(f) of Sub-S.(1) of S.153A.

15. HARNAM SINGH, J. - The question whether the High Court having sanctioned a scheme of arrangement under S.153, Companies Act, 1913 has jurisdiction to make directions and adjudications in matters arising out of the scheme including, inter alia questions of priorities, preferential payments and adjustments has arisen in a number of cases under the schemes of arrangement of the New Bank of India Ltd., Amritsar, the Frontier. Bank Ltd., Delhi, the First National Bank, Ltd., Delhi, the Punjab and Kashmir Bank, Ltd., Delhi, the Sahukars Bank, Ltd., Ludhiana, and the Lakshmi Commercial Bank, Ltd., Ludhiana.

16. The facts, so far as material, are almost identical in all cases in which the question has arisen. Broadly summarised the facts are, that subsequent to the division of the Punjab Province under S.4, Indian Independence Act, 1947, the banks mentioned above having gone under moratorium schemes of arrangement under S.153, Companies Act, 1913, with respect to those banks were sanctioned by the East Punjab High Court on various dates. The schemes of arrangement inter alia provide:

"Notwithstanding any other provision in the scheme the following amounts shall be paid in full if they are obligatory to be paid under the law -

(a) amounts lying to the credit of the employees on account of security deposits;

(b) amounts lying to the credit of the Trustees of the Banks Provident Fund Trust; (c) amounts of the nature described in S.230(1)(a,b,c and e) Companies Act; and

(d) amounts held by the High Court of the West Punjab to be payable to claimants in priority to the claims of other creditors . Any creditor, any shareholder, any claimant or the Bank may apply to the High Court for directions and adjudications in matters arising out of the scheme including, inter alia, questions of priorities, preferential payments and adjustments and the scheme shall be subject to such directions and adjudications."

17. I have set out above cl.3 and cl.15 from the scheme of arrangement of the New Bank of India, Ltd. Amritsar, but similar provisions have been made in the schemes of arrangements of all other banks mentioned above.

18. Now, under the provisions of cl.3 and cl.15 of the scheme of arrangement of the New Bank of India, Ltd., claims have been made in this Court for directions to the New Bank of India Ltd., for payment in full of the amounts due to the claimants on the ground that the amounts due to them are payable in priority to the claims of other creditors. Similar claims have been made in the case of the other banks.

19. The claim petitions when they came up for preliminary hearing, my Lord the Chief Justice entertained doubts whether the Court having sanctioned a scheme of arrangement under S.153, Companies Act, 1913, has jurisdiction to entertain such claims and to adjudicate upon them and that being so, his Lordship ordered that the cases may be laid before a Full Bench of this Court.

20. Now, I think it may not be undesirable in dealing with the question arising in these proceedings to examine the history of legislation on this point. In England at a very early stage in the history of joint-stock companies for trading and other purposes it was felt that companies are subject to business vicissitudes, and occasions arise at times in which it is found desirable to make a compromise or arrangement between a company and its creditors or some class of them, or between a company and its members or some class of them. Now, prima facie, to bind the members of a class, whether of creditors or members to a compromise or arrangement in relation to their individual rights, all the members of the class must concur in the compromise or arrangement; but this may be unpracticable, for there are pretty sure to be members of a class who refuse or neglect to concur. This necessitated the enactment of a provision such as is embodied in S.153, Companies Act, 1913, which enables the statutory majority of class to bind a recalcitrant or indifferent minority to accept the arrangement. Prior to 1844 companies in England were incorporated either by Royal Charter or by special Acts of Parliament when the English Companies Act, 1814, for the first time made provision for incur poration and registration of companies without the necessity of a Royal Charter or a special Act of Parliament. In India following the English Companies Act, 1844, Act XLIII (43) of 1850, was, for the first time, enacted in the year 1850 for the registration of joint-stock companies: Act XLIII of 1850 may be said to be the nucleus around which subsequent Companies Acts developed, though strictly speaking they were all enacted on the lines of the English Companies-Act.

21. Now, in the English Companies Act, 1862 there was no sufficient provision corresponding to S.153 of the Act of 1929, but the defect was in a measure supplied by the Joint Stock Companies Arrangement Act of 1870. As pointed out by Palmer in his celebrated work on Company Law, the Joint Stock Companies Arrangement Act of 1870 was only to operate as part of the winding up machinery of the Court, and the assistance of the Court could not be invoked except in a winding up, whether compulsory, voluntary or under supervision which was a serious defect, because the very object of the arrangement or compromise was in many cases to avoid a winding up. By subsequent legislation this defect was remedied and finally S.58, English Companies Act, 1907, enacted that the Act of 1870 should apply to a company which was not in the course of being wound up in like manner as it applied to a company which was in the course of being wound up. In 1908 when the English Companies (Consolidation) Act of 1908 was passed, S.120 was enacted embodying all the legislation up to that date and was put under Part III of the Act and not under Part.IV which provided for winding up thus making it clear that S.120 applied to the case of a company which was a going concern and also to the case of a company in liquidation. Section 120 of the English Act was replaced by S.153, English Companies Act of 1929 and S.153, Indian Companies Act, 1913, was amended in 1936 to bring it into line with S.153 of the English Act of 1929 and on a comparison of both the sections it will be seen that they are word for word the same.

22. It appears from what is stated above that company legislation in India has followed the legislation in England. That being so, Courts in India are bound to follow the principles laid down in English Courts with regard to the same matter. In considering, therefore, the construction of S.153, Indian Companies Act, 1913, which is professedly based on the English enactment, and which it reproduces, almost word for word the language of the English enactment, and which relates to a branch of the law which is entirely English law, the Courts of India are in practice, if not in theory, bound by the decisions of the English Court of appeal.

23. As stated above, the point that arises for consideration in these proceedings is whether the High Court sanctioning a scheme of arrangement under S.153, Indian Companies Act, 1913, has jurisdiction to make directions to the company concerned on the question of priorities and preferential payments.

24. Now, I think, the law is clear that under the provisions of the Indian Companies Act, 1913, the High Court possesses only such powers as have been conferred upon the Court under the provisions of that Act. Section 3(1) of Act vii (7) of 1913 reads:

"The Court having jurisdiction under this Act shall be the High Court having jurisdiction in the place at which the registered office of the company is situate:

Provided that the Central Government may, by notification in the official gazette and subject to such restrictions and conditions as it thinks fit, empower any District Court to exercise all or any of the jurisdiction by this Act conferred upon the Court, and in that case such District Court shall, as regards the jurisdiction so conferred, be the Court in respect of all companies having their registered offices in the district."

Reference in this connection may be made to S.12, S.14, S.38, S.56, S.153 and other sections of the Indian Companies Act. Section 12 empowers the Courts to confirm alteration of memorandum of a company. Section 14 provides inter alia that the Court in exercising its discretion under S.12 and S.13, may give such directions and make such orders as it may think expedient for facilitating and carrying into effect any arrangement for the purchase of the interests of dissentient members. Section 38 deals with the powers of the Court to rectify entries in the register of members of a company. Section 56 authorises the Court to make an order confirming the reduction of share capital where a company has passed a resolution for reducing share capital. Section 153(1) empowers the Court 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, on the application in a summary way 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, to 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 Court directs. It is, I think, clear law that S.153 (1) does not authorise the Court to decide the question which arises in these proceedings. Again, S.153(2) authorises the Court to sanction the scheme if a majority in number representing three-fourths in value of the creditors or class of creditors, or members or class of members, as the case may be, present either in person or by proxy at the meeting, agree to any compromise or arrangement. The powers of the Court under S.153 (2) are limited to the matters stated therein. The Court may either sanction or refuse to sanction a scheme approved by creditors or members. Section 153(2) enacts condition as to the arrangement or compromise. It imposes no limits on the nature or character of the scheme. The one and only tacit condition is that what the Court is asked to sanction shall be reasonable and fair.

25. Lindley, L.J. in Re Alabama New Orleans, Taxes and Pacific, Ry. Co. (1891) 1 Ch. 213 at pp.238 and 239: (60 L.J.Ch. 221) said:

"What the Court has to do is to see first of all, that the provisions of the statute have been complied with and, secondly, that the majority has been acting bona fide. The Court also has to see that the minority is not being overridden by a majority having interests of its own clashing with those of the minority whom they seek to coerce. Further than that, the Court has to look at the scheme and see whether it is one as to which persons acting honestly, and viewing the scheme laid before them in the interests of those whom they represent, take a view which can be reasonably taken by businessmen."

From this it appears that in a case under S.153, Indian Companies Act, the Court is not concerned with the individual claims of creditors or depositors. The duty of the Court is to see that the scheme laid before it is one as to which persons acting honestly, and viewing the scheme laid before them in the interests of those whom they represent, take a view which can be reasonably taken by businessmen. This is made abundantly clear by the scheme of the Act. Section 58 provides that where the proposed reduction of share capital involves either diminution of liability in respect of unpaid share capital, or the payment to any shareholder of any paid up share capital and in any other case if the Court so directs, every creditor of the company who at the date fixed by the Court is entitled to any debt or claim which, if that date were the commencement of the winding up of the company, would be admissible in proof against the company, shall be entitled to object to the reduction. Sub-section (2) of S.58 provides that the Court shall settle a list of creditors so entitled to object, and for that purpose shall ascertain, as far as possible without requiring an application from any creditor, the names of those creditors and the nature and amount of their debts or claims. Section 59 provides that where a creditor entered on the list of creditors whose debt or claim is not discharged or determined doss not consent to the reduction, the Court may, if it thinks fit, dispense with the consent of that creditor on security being given for his debt and S.59 (ii) empowers the Court to fix the amount of such debt after the like enquiry and adjudication as if the company were being wound up by the Court. The argument that emerges from these provisions is that whereas S.58, Companies Act, empowers the Court to ascertain as far as possible without requiring an application from any creditor, the names of those creditors entitled to object to the proposed reduction of share capital and the nature and amount of their debts or claims, and whereas S.59 empowers the Court to fix the amount of debt of a dissentient creditor after enquiry and adjudication, S.153, Companies Act, gives the Court no such power but merely deals with the class of creditors or the class of members as the case may be. That this is the correct view as to the powers of the Court under the Companies Act, 1913, I have no doubt for apart from principle the point is covered by authority. In the matter of Mymensing Loan Office Limited, AIR (24) 1937 Cal. 667: (175 I.C. 892) Lord Williams, J. said:

"The powers of the Court under the Indian Companies Act are strictly limited to those given in specific sections, such as S.12, S.38, S.77, S.153 and S.162. Under S.153 it may order a meeting to be held to consider a scheme of arrangement and may grant or withhold sanction of such scheme. It cannot modify or alter or expunge any part of it without the consent of those who have agreed to it."

26. That being the position of matters, it appears to me that S.153 does not empower the Court sanctioning the scheme to enquire into and adjudicate upon the nature and amount of the claim of any individual claimant.

27. Having made these observations, I pass on to consider the contention that jurisdiction to enquire into priorities and preferential payments is implicit in S.153. In this connection reliance is placed on the reasoning in Subramania Ayyar v. Suppasaya Pillai, AIR (23) 1936 Mad. 424: (161 I.C. 717). The facts in that case were that Subramania Ayyar had stood surety under a composition scheme under the Provincial Insolvency Act, 1920. A creditor of the insolvent put in two applications, one on the execution side and the other to the insolvency Court, to recover the amount of his decree from the surety, to the extent to which he had rendered himself liable under the surety bond given in the insolvency proceedings. The execution application was transferred to the insolvency Court. The insolvency Court thereupon made an order calling upon Subramania Ayyar to make payment in terms of the surety bond. On those facts it was contended that the Provincial Insolvency Act did not contain any provision corresponding to Sub-S.(2) of S.30, Presidency Towns Insolvency Act, and that, therefore, it was not open to the insolvency Court to give relief against the surety by summary orders, and that the only course open to the creditor was to take an assignment of the bond and sue thereon. On those facts Varadacharier, J. said:

"The absence of a provision corresponding to S.30, Presidency Towns Insolvency Act, may have an important bearing when a question of contempt of Court arises, because Courts in mofussil may not be regarded as Courts of record and, therefore, may not have jurisdiction in contempt in the absence of specific statutory provision. But so far as the power to enforce the terms of the surety bond is concerned, the absence of such a provision is by no means conclusive. On the principle indicated in the judgment of the.Judicial Committee in Raghubar Single v. Jai Indra Bahadur Singh, 42 All. 158: ( AIR (6) 1919 P.C. 55), the Court to which such bonds are given must prima facie have power to enforce them. In a case like the present, the suggestion of a remedy by way of assignment of the bond has very little to recommend it. The schedule may comprise numerous creditors, some of whom might have been paid, some of whom might have been partly paid, and others not paid at all. To whom is the bond to be assigned? The insolvency Court can do justice much more effectively between the parties if it has power to enforce the terms of the bond than ordinary Courts can do in a suit filed to enforce the bond if that bond is assigned to a third party."

Basing himself on the reasoning in Subramania Ayya v. Suppasaya Pillai, AIR (23) 1936 Mad. 424: (161 I.C. 717), counsel urges that the absence of a provision in the Companies Act, 1913, for the enforcement of a scheme of arrangement is wholly immaterial. I do not agree with him. In the first place compositions and schemes of arrangements under S.38, Provincial Insolvency Act, 1920, are made where a debtor, after the making of an order of adjudication, submits a proposal for a composition in satisfaction of his debts, or a proposal for a scheme of arrangement of his affairs. Section 38 enacts that if the Court approves the proposal, the terms shall be embodied in an order of the Court, and the order of adjudication shall be annulled and the provisions of S.37 shall apply, and the composition or scheme shall be binding on all the creditors so far as it relates to any debt due to them from the debtor and provable under the Act. Section 40 provides that if default is made in the payment of any installment due in pursuance of the composition or scheme, or if it appears to the Court that the composition or scheme cannot proceed without injustice or undue delay, or that the approval of the Court was obtained by fraud, the Court may, if it thinks fit, read judge the debtor in. solvent and annul the composition or scheme but without prejudice to the validity of any transfer or payment duly made or of anything duly done under or in pursuance of the composition or scheme.

28. Now, the insolvency Court under the Provincial Insolvency Act, 1920, after having sanctioned the composition or scheme of arrangement retains power to read judge the debtor insolvent and to annul the composition or scheme subject to certain conditions. That is not so under S.153, Companies Act, where once a scheme is sanctioned and the order granting the sanction is perfected, the order is a final order and the Court sanctioning the scheme has no jurisdiction under the Companies Act to alter or amend the scheme except by way of a fresh scheme. Again, the Provincial Insolvency Act consists of the bare skeleton of the English Act and that being so, it must be understood that wherever and whenever necessary, in a case under the Provincial Insolvency Act, the provisions of the English Bankruptcy Act and the Bankruptcy Rules can be drawn upon for the healthy working and growth of the system. Rule 215, English Bankruptcy Rules, 1915, 1926, provides:

"Where a composition or scheme has been approved, and default is made in any payment thereunder either by the debtor or the trustee (if any), no action to enforce such payment shall lie, but the remedy of any person aggrieved shall be by application to the Court."

Provision is made in S.23 (3), English Bankruptcy Act, 1914, and in S.30 (2), Presidency Towns Insolvency Act, for the enforcement of the composition. The Provincial Insolvency Act is silent on the point. It does not provide for the summary remedy, nor is there in it a prohibition of a suit by a creditor for enforcing the composition. That being so, it is legitimate in a case arising under the Provincial Insolvency Act to draw upon the English Bankruptcy Act and the Bankruptcy Rules for the healthy working and growth of the system. In this view of the case, I am of the opinion that power to enforce a scheme of arrangement sanctioned under S.153, Companies Act, 1913, is not implicit in the provisions of S.153.

29. Again, it is said that the Court has jurisdiction to make directions as are sought in these cases under S.90, O.14, R.6 and O.35, Rr.1 to 5 read with S.141, Civil Procedure Code, 1908. Section 141, Civil Procedure Code, enacts:

"The procedure provided in this Code in regard to suits shall be followed, as far as it can be made applicable, in all proceedings in any Court of civil jurisdiction."

Now, proceedings under the Indian Companies Act 1913, may be said to be proceedings of the nature contemplated by S.141, Civil Procedure Code. Section 141, however, deals with procedure and procedure alone. It does not confer any substantive right not expressly given elsewhere by the Code and the application of provisions of the Code of Civil Procedure dealing with substantive rights cannot be claimed merely on the strength of S.141. The provisions contained in S.90, O.14, R.6 and O.36, Rr. 1 to 5 are not purely matters of procedure and that being so, it cannot be claimed that the Court acting under S.153, Companies Act, 1913, has all the bowers which are conferred under the Code of Civil Procedure upon a Court; of civil jurisdiction dealing with a suit.

30. Again, it cannot be contended that a special case can be referred to a Court notwithstanding that the Court has no jurisdiction otherwise to deal with that case. As stated above, the Court sanctioning the scheme under S.153, Companies Act, enjoys powers which are conferred upon the Court by Companies Act, 1913, and that being so, we must act on the principle that what is not expressly given to the Court must be deemed to be forbidden.

31. Counsel, however, contends that all provisions contained in the Civil Procedure Code must be deemed to be rules of procedure within S.141 of the Code. This contention has only tobe stated to be rejected. A right of appeal is provided in the Code of Civil Procedure, but a right of appeal cannot be claimed merely on the strength of S.141. Similarly, S.141 does not confer a right to refer to arbitration, a right to a review or a right to proceed by way of execution against a surety who is not a party to the proceedings, on the analogy of S.145 of the Code. On the same principle, S.141 does not confer on any Court the power of making a reference to the High Court under R.1 of O.46 in a case not coming strictly within the purview of that rule. Again, the rule in S.86 as to the protection of ruling chiefs and sovereign princes from being sued is not a rule of procedure within the meaning of S.141.

32. Again, Salmond in his celebrated work on Jurisprudence, Edn. 10 at p.242, defines power as ability conferred upon a person by the law to alter, by his own will directed to that end the rights, duties, liabilities or other legal relations, either of himself or other persons. Powers according to Salmond are either public or private. The former are those which are vested in persons as agent or instrument of the functions of the state, they comprise the various forms of legislative, judicial, and executive authority. Private powers, on the other hand, are those which are vested in persons to be exercised for their own purposes, and not as agents of the state. Power is either ability to determine the legal relations of other persons, or ability to determine ones own relations. The first of these powers over other persons is sometimes called authority, the second power over oneself is usually determined as capacity.

33. For all these reasons, I find that provisions of the Code of Civil Procedure dealing with the powers of civil Courts to deal with matters that come up before them do not pertain to the domain of procedural law and that being so, S.90, R.6 of O.14 and. Rr.1 to 5 of O.36 do not empower the Court sanctioning the composition or scheme of arrangement under S.153, Companies Act, 1913, to make directions of the type as are sought in the claim petitions before us.

34. Then it is said that the High Court acting under S.153, Companies Act, has inherent jurisdiction to enforce a scheme of arrangement sanctioned by it under S.153, Companies Act, 1913. The argument raised is that it is a fundamental principle of legal-administration that where the law requires something to be done there must be in existence a Court that can directly order it to be done on the principle of ubi jus ibi remedium. Counsel cites British India Corporation, Ltd. v. Robert Menzies, AIR (23) 1936 ALL. 568: (58 ALL. 988), in support of the proposition advanced. The point that arose in that case was whether the company Judge had jurisdiction to order a company to deliver a copy of the register of members of the company to a share-holder of the company, though there was no express provision in the Companies Act empowering him to do so.On those facts, Iqbal Ahmed and Harries, JJ. said:

"The argument is that as the only penalty laid down by the Act for refusing to allow inspection or to hand over a copy of the register is the imposition of fine provided by S.36 (3) and as the Court is not vested with the authority to direct the company to furnish a copy of the register to a person applying for the same, the District Judge had no jurisdiction to pass the order that he did. In this connection particular emphasis is laid on the concluding portion of cl. (3) of S.36, which provides that "the Court may by order compel an immediate inspection of the register." It is pointed out that though cl.(3) lays down the penalty both for the failure to allow inspection or to furnish a copy of the register and goes on to vest the Court with the jurisdiction to order inspection of the register it is silent as to the powers of the Court to order a copy of the register to be given. It is said that in the absence of a specific provision authorising the Court to order a copy to be given the Court has no jurisdiction to direct a company to supply a copy of the register of the members even though it may have failed to comply with the mandatory provisions of S.36(1) of the Act. We are wholly unable to agree with this contention. It is distinctly provided by S.3 that the Courts specified in that section have jurisdiction under the Companies Act. A reference to the Act shows that there are various statutory obligations cast upon companies by the Act and that with respect to most of those obligations penalties have been provided for by the Act. There is, however, in many cases no specific provision in the Act as regards the authority of the Court to enforce compliance with the provisions that define and regulate these obligations. Nevertheless it seems to us that the Courts referred to in S.3 of the Act have inherent jurisdiction to compel due observance of the mandatory provisions of the Act."

Now, the concluding portion of cl. (3) of S.36 provides that the Court may by an order compel an immediate inspection of the register and that being so the Court when seized of the case under S.26, Companies Act, can in the interests of justice direct a company to supply copy of the register of members of the company to a shareholder of the company. British India Corporation Ltd. v. Robert Menzies, AIR (23) 1936 ALL. 568: (58 ALL. 988) does not, therefore, support the proposition advanced.

35. It is, indeed, a truism that no legislative enactment can provide for all the cases that may arise, and it is an established principle that Courts must possess inherent powers, apart from the express provisions of the law, which are necessary to their existence and the proper discharge of duties imposed upon them by law. But it is equally true that Courts are not given, nor did they ever possess, an unrestricted and undefined power to make any order which they might consider, was in the interests of justice. In the present case, the Court as found hereinafter having sanctioned a scheme of arrangement under S.153 not only becomes functus officio but has no power to make orders as are sought in these cases as that would override the written text of the law embodied in S.153A(1). That being so, I find no force, on principle and authority, in the contention raised.

36. Next it is said that schemes of arrangement under consideration make an express provision that the amounts held by the High Court of the East Punjab to be payable in priority to the claims of other creditors shall be paid in full if they are obligatory to be paid under the law. Furthermore, the schemes of arrangement authorise a creditor, shareholder, claimant or bank to apply to the High Court for directions and adjudications in matters arising out of the schemes including inter alia questions of priorities and preferential payments and adjustments and provide that the schemes shall be subject to such directions and adjudications.

37. Mr. Ved Vyasa basing himself on the provisions of the schemes of arrangement contends that provisions embodied in the various schemes of arrangement not only authorise the High Court of the East Punjab to find out the amounts which are to be payable in priority to the claims of other creditors but empower a claimant to apply to the High Court for directions and adjudications in matters arising out of the schemes including inter alia questions of priorities and preferential payments. The question then for decision is whether it is permissible under a scheme of arrangement under S.153, Companies Act, to confer jurisdiction on the High Court to settle questions of priorities and preferential payments if that jurisdiction has not been conferred on the Court under the Act. As stated above, S.3(1) enacts that the High Court shall exercise such jurisdiction as is conferred on it by the Companies Act, 1913. To confer jurisdiction on the High Court in a scheme under S.153, Companies Act, 1913, there must be something in the Act to sustain the conferment of that jurisdiction. Counsel frankly conceded that there was nothing in the Act which authorised the conferment of such jurisdiction by a scheme of arrangement. Now, the general rule as to jurisdiction is that neither consent nor waiver of a party can confer it upon a Court which has no inherent jurisdiction, for jurisdiction over the subject-matter can only be given by the law. That being so, I am firmly of the view that no jurisdiction can be conferred upon the High Court under a scheme of arrangement under S.153, Companies Act, if that jurisdiction is not conferred upon the High Court by the Companies Act, 1913.

38. In connection with the last-mentioned argument counsel maintains that the scheme having been sanctioned is not open to any challenge. Reliance is placed in this connection on the rule laid down in Bowkett v. Pullers United Electric Works, (1923) 1 K.B. 160: (92 L.J.K.B. 412). The decision in that case was that the order sanctioning the scheme becomes binding not only on the creditors but also on the liquidators and contributories, so that whether the same be a valid one or not, a shareholder cannot afterwards question it. The decision in that case is no authority for the proposition that if the scheme of arrangement purports to confer jurisdiction on a Court, which otherwise does not possess that jurisdiction, the jurisdiction of that Court cannot be challenged merely because the parties to a scheme of arrangement sanctioned under S.153 have conferred that jurisdiction on that Court.

39. The question, then, is whether the Court having sanctioned a compromise or a scheme of arrangement under S.153 becomes functus officio or retains jurisdiction to enforce the scheme that has been sanctioned by that Court. My answer to this question is that the Court after sanctioning a compromise or a scheme of arrangement not falling under S.153A or S.153B does not retain jurisdiction to pass any order to enforce that compromise or that scheme of arrangement As mentioned already S.30(2), Presidency Towns Insolvency Act, 1907, provides for the endorsement of a compromise or arrangement. Similarly, S.153A (1) provides:

"Where an application is made to the Court under S.153 for the sanctioning of a compromise or arrangement proposed between a company and any such persons as are mentioned in that section, and it is shown to the Court that the compromise or arrangement has been proposed for the purposes of or in connection with a scheme for the reconstruction of any company or companies or the amalgamation of any two or more companies, and that under the scheme the whole or any part of the undertaking or the property of any company concerned in the scheme is to be transferred to another company, the Court may, either by the order sanctioning the compromise or arrangement or by any subsequent order, make provision for all or any of the following matters:

(a) the transfer to the transferee company of the whole or any part of the undertaking and of the property or liabilities of any transferor company;

(b) the allotting or appropriation by the transferee company of any shares, debentures, policies, or other like interests in that company which under the compromise or arrangement are to be allotted or appropriated by that company to or for any person;

(c) the continuation by or against the transferee company of any legal proceedings pending by or against any transferor company;

(d) the dissolution, without winding up, of any transferor company;

(e) the provision to be made for any persons who, within such time and in such manner as the Court directs, dissent from the compromise or arrangement;

(f) such incidental, consequential and supplemental matters as are necessary to secure that the reconstruction or amalgamation shall be fully and effectively carried out."

The Legislature, therefore, appears to be fully alive to the question of the enforcement of compromises or schemes of arrangement under S.153 and has enacted a provision in S.153A, Companies Act, 1913, for the enforcement of a compromise or a scheme of arrangement when the compromise or arrangement has been proposed for the purpose of or in connection with a scheme for the reconstruction of any company or companies or the amalgamation of any two or more companies, and that under the scheme the whole or any part of the undertaking or the property of any company concerned in the scheme is to be transferred to another company. In other words, the Legislature for good and sufficient reasons has not made any provision in the Act for the enforcement of a compromise or a scheme which is sanctioned under S.153 but does not come within S.153A, Companies Act, 1913.

40. From what is stated above, it would, therefore, appear that the Court sanctioning the compromise or arrangement when that compromise or arrangement does not come within S.153A, Companies Act, 1913, does not retain jurisdiction to make by any subsequent order provision inter alia for such incidental, consequential and supplemental matters as may be necessary to secure that the reconstruction or amalgamation shall be fully and effectively carried out. It is significant to notice in this connection that S.153A, Indian Companies Act, 1913, which reproduces S.154, English Companies Act, 1929, was added by the Companies Amendment Act, 1936. That being so, the provisions of S.153A applicable to a compromise or a scheme of arrangement cannot be read into S.153,Companies Act, 1913, as being applicable to companies other than companies for the reconstruction or amalgamation whereof a compromise or a scheme of arrangement has been sanctioned under S.153, Companies Act, 1913.

41. Mr. Bal Raj Tuli who has also appeared in these proceedings for the claimants relied on In re Jalpaiguri Banking and Trading Corporation Ltd., AIR (23) 1936 Cal. 662: (165 I.C. 655); In re Dewasgunj Bank and Industry Ltd., AIR (22) 1935 Cal. 117: (155 I.C. 811) and In re Natore Kamala Bank Ltd., AIR (24) 1937 Cal. 124: (I.L.R. (1937) 1 Cal. 368) in support of the contention that the Court after sanctioning a compromise or a scheme of arrangement under S.153, Companies Act, 1913, retains jurisdiction to entertain applications arising out of that scheme.

42. In re Jalpaiguri Banking and Trading Corporation Ltd., AIR (23) 1936 Cal. 662: (165 I.C. 655), the facts were that Kalipada Banerji decree-holder applied that he was entitled as a decree-holder to be considered separately as a class of creditor under S.153 of the Act. The contention of Kalipada Banerji was repelled and the scheme was sanctioned, Kalipada Banerji was, however, not satisfied and made an attempt to nullify the orders of the Court by getting his decree transferred to the Court of the Subordinate Judge of Jalpaiguri for execution against the assets of the company. On those facts Mac-Nair, J. said:

"Mr. Banerji has already had one decree of this Court given against his contention that he was not bound by the compromise and he is now endeavouring to set that decree at naught by starting execution proceedings in the mofussil. In my opinion, this Court has the power to stop such proceeding and there will be an injunction restraining him from proceeding further with execution of the proceedings of the decree in this suit, dated 20th July 1934, now pending in the Court of the Subordinate Judge of Jalpaiguri. The injunction will remain so long as the scheme is in operation."

43. In the brief judgment recorded by Mac-Nair, J. no attempt has been made to point out as to how the Court sanctioning the scheme of arrangement retained that jurisdiction and apart from the bare statement of fact that the Court had power to stay proceedings in execution, there is no reason given in that judgment to sustain that conclusion.

44. Sections 153 and 169 give the Court, in the interval between the presentation of a petition and an order upon it, a discretionary power torestrain proceedings against the company, and S.268 and S.273 give the same power to the Court to restrain proceedings against any contributory. Again S.171, S.265 and S.274 peremptorily stay proceedings after an order has been made until the leave of the Court has been obtained to proceed with them. Now, S.153 (5) empowers the Court to stay the commencement or continuation of any suit or proceedings against a company until the application under S.153 (1) is finally disposed of. That being the situation the decision in Jalpaiguri Banking and Trading Corporation Ltd. AIR (23) 1936 Cal. 662: (165 I.C. 655) has no warrant in law.

45. Again in In the matter of Natore Kamala Bank Ltd., AIR (24) 1937 Cal. 124: (I.L.R. (1937) 1 Cal. 368), the scheme of arrangement was sanctioned by Ameer Ali, J. acting under the provisions of S.153 of the Companies Act, on 26th August 1933. The petitioner who was depositor in the Natore Kamla Bank, Limited, instituted a suit for the realisation of the sum of Rs.425/5/- being the deposit money. A consent decree was made on 21st June 1933 whereby the Bank was ordered to pay to the petitioner Rs.87/2/6 within a month and a balance of Rs.400 by two equal instalments in September/October 1933 and march/April 1934. In default of such payment the entire decretal amount became due. Pursuant to the decree the company paid to the petitioner the sum of Rs.87/2/6 as the first instalment. On 18th July 1933 a notice was sent to the petitioner by the Secretary of the Bank intimating that by an order of 10th July 1933 Ameer Ali, J, had directed that a meeting of the depositors of the company should be held on 11th August 1933 for the purpose of considering, if it thought fit, approving, with or without modification, a scheme of arrangement proposed to be made between the company and the depositors. The petitioner appeared and opposed the scheme. His objection was overruled by Ameer Ali, J. In the application out of which the proceedings arose in In re Natore Kamala Bank Ltd., AIR (24) 1937 Cal. 124; (I.L.R. (1937) 1 Cal. 368) the petitioner applied that the scheme may either be cancelled, or so modified as to expunge the words

"which expression also include depositors who have filed a suit or obtained decrees against the company"

from the scheme. On those facts Lord-Williams, J., said:

"I cannot conceive, therefore, what power this Court can have, upon an application, such as the present, to alter a scheme, which has not only been agreed to at a meeting convened under the provisions of S.153, without giving the parties who came to that agreement an opportunity of considering the scheme in the way the Court proposes that it shall be me defied and agreeing thereto. This seems to us an insuperable objection to the action which the Court adopted in the cases to which I have referred."

46. The question of jurisdiction in such matters was neither raised nor considered in In re Natore Kamala Bank Ltd AIR (24) 1937 Cal. 124: (I.L.R. (1937) 1 Cal. 368) and therefore, the decision in In re Natore Kamala Bank Ltd., AIR (24) 1937 Cal. 124: I.L.R. (1937) 1 Cal.

368) is of no assistance to sustain the argument advanced in this case.

47. Lastly, counsel relies on the decision In the matter of Dewangunj Bank and Industry, Ltd., AIR (22) 1935 Cal. 117: (155 I.C. 811). In that case Buckland Ag., C.J. said:

"A further point is taken whether I have jurisdiction to entertain this application and make the order. It is suggested that the proper course to be followed is for the decree-holders to execute their decree, which I am told would be at Rangpur, when they could contend before the local Court that they were not bound by the scheme. Not only would it be embarrassing to throw the burden of deciding the point upon the local subordinate Court but I see no reason for justice being done in this matter by an extremely round about method, at the time when the notice of the scheme of the proposed meeting was given the petitioners had ceased to be depositors. They were fully justified in not attending the meeting. The meeting, I conceive, though sanctioned by the Court, had no right by a mere definition to include the petitioners within the scope of depositors, any more than a company would have the right by definition to include its general trade creditors, and in my opinion the petitioners are not bound by the scheme. "The scheme having been sanctioned by the Court doubtless per in curiam or because the circumstances were not sufficiently explained to the learned Judge, the applicants only remedy, in my judgment, is to come to this Court to have the scheme modified."

Now, the rule laid down in this case must be considered as overruled by the decision of the Court sitting in appeal in Mahindra Kishore Dutt v. Brahmanbaria Loan Co. Ltd., AIR (21) 1934 Cal. 816: (61 Cal. 913). It is true that the decision in In re Dewangunj Bank and Industry Ltd., AIR (22) 1935 Cal. 117: (155 I.C. 811), was approved by the Court sitting in appeal in Rajshahi Banking Corporation v. Surabala Debi, 40 C.W.N. 1104, but apparently Mahindra v. Brahmanbaria Loan Co. Ltd., AIR (21) 1934 Cal. 816: (61 Cal. 913), was neither cited nor considered in that case.

48. In any case, the decision in Re Dewangunj Bank and Industry Ltd., AIR (22) 1935 Cal. 117: (155 I.C. 811), does not proceed upon any principle or authority; and regard being had to what I have stated above, I must say that I cannot accede to the ground upon which Buck- land Ag., C.J. decided that case.

49. I now pass on to consider a more serious contention put before us that inasmuch as a scheme of arrangement under S.153 is an alternative mode of liquidation High Court can give directions such as are sought in these cases under S.216 of the Act. In this connection counsel cites Re London Chartered Bank of Australia, (1893) 3 Ch. 540: (62 L.J.C.H. 841) and Madan Gopal v. Peoples Bank of Northern India Ltd., 16 Lah. 1029: (AIR (22) 1935 Lah. 779 (S.B.)).

50. Now, in Re London Chartered Bank of Australia, (1893) 3 Ch. 540: (62 L.J.C.H. 841) at p.546 Vaughan Williams, J., (said):

"The scheme of arrangement under the Act of 1870 is, as I have had occasion to point out in several cases, an alternative mode of liquidation which the law allows the statutory majority of creditors to substitute for the pending winding up, whether voluntary or under the Court, just as the Bankruptcy Act, 1869, allowed the creditors the substituted liquidation by arrangement under S.125, or composition under S.126 of that Act for a pending bankruptcy.

51. In India Courts appear to have adopted the rule laid down in Re London Chartered Bank of Australia, (1893) 3 Ch. 540: (62 L.J.C.H. 841), to companies not in liquidation. In this connection reference may be made to Madan Gopal v. Peoples Bank of Northern India Ltd., 16 Lah. 1029: (AIR (22) 1935 Lah. 779 S.B.). In that case Young, C.J., with whom Addsion, J., concurred, said:

"It has been urged by counsel for the bank that the opinion of the creditors and share-holders in meeting, which has been consistently in favour of the present Directors carrying on the liquidition should be followed. I am aware of the various English decisions on this point. I do not, however, think that these decisions apply to the facts of this case."

52. Young, C.J. was of the view that a scheme of arrangement under S.153, Companies Act, 1913 was a proceeding in liquidation. Again, Tek Chand, J., in the same case basing himself on the rule In re London Chartered Bank of Australia, (1893.3 Ch. 540: 62 L.J.C.H. 841), said:

"Section 153, Indian Companies Act, makes provision not merely for schemes for the resuscitation or reorganisation of companies, but it also provides for schemes of arrangements which in the words of Vaughan Williams, J., (used in reference to the corresponding section of the english act) provide an alternative mode of liquidation, which the law allows the statutory majority of creditors to substitute for winding up, whether voluntary or under the Court."

53. Now, the decision given in Re London Chartered Bank of Australia, (1893) 3 Ch. 540: (62 L.J.Ch. 811), was under S.2, Joint Stock Companies Arrangement Act, 1870. As stated above, the Joint Stock Companies Arrangement Act, 1870, was confined to cases relating to liquidation and in fact providing an alternative or substitute, in cases where it was applicable for the ordinary method of winding-up of the company under the Companies Act. The law has since been changed and a going company as well as a company in liquidation can now apply under S.153, English Companies Act, 1929, for a scheme of arrangement. That being so, the learned Advocate-General who has appeared in these proceedings as amicus curia, contends that the rules laid down in Re London Charatered Bank of Australia, (1893) 3 Ch. 540: (62 L.J. Ch. 841), must be confined to cases where the company is in liquidation. He next contends that that being the situation there is no warrant in law to apply that rule to companies not in liquidation as was done in Madan Gopal v. Peoples Bank .of Northern India, 16 Lah. 1029: (AIR (22) 1935 Lah. 779 S.B).

54. And this brings me to the consideration of the point, namely, whether a scheme of arrangement under S.153, Companies Act, 1913, is an alternative mode of winding-up. Section 153(6) provides that the expression "company" means in that section any company liable to be wound up under the Act. Now, it is said, and said with truth, that companies formed and registered under the Act and companies formed and registered under the Indian Companies Act, 1866 or under any Act or Acts repealed there by or under the Indian Companies Act, 1882 can be wound up under the Act. Again, a foreign company can be wound up under S.271, Indian Companies Act. Palmer at p.905 of his celebrated work, Palmers Company Precedents, Part II, suggests with reference to the provisions of the English Companies Act, 1929, that the following companies which can be wound up are companies liable tobe wound up under that Act: (1) Companies formed and registered under Part I of the Act; (2) existing companies as defined by S.380; (3) Companies registered, but not formed, under the Companies Act, 1862; (4) Companies registered as limited under the Companies Act, 1879; (5) unregistered companies as explained or defined in S.337 of the Act, which section provides that for the purposes of that part of the Act, the expression "unregistered company" shall include any Trustee Savings Bank certified under the Trustees Savings Bank Act of 1863 and any partnership, whether limited or not, any association and any company with the exceptions stated therein.

55. The learned Advocate-General, basing himself on the passage from Palmer cited above urged that the definition of "company" in S.153(6) is merely descriptive and intended to extend the definition of "company" given in S.2(2) so as to allow a scheme in respect of an unregistered company. In other words, he maintains that the phrase "liable to be wound up" is interchangeable with the expression "can be wound up." Now, "liability" has a legal connotation.Salmond in his celebrated work on Jurisprudence Edn. 10 at p.364 says:

"Liability or responsibility is the bond of necessity that exists between the wrongdoer and the remedy of the wrong. This vinclum juris is not one of mere duty or obligation; it pertains not to the sphere of ought but to that of must. It has its source in the supreme will of the state, vindicating its supremacy by way of physical force in the last resort against the unconforming will of the individual. A mans liability consists in those things which he must do or suffer, because he has already failed in doing what he ought. It is the ultimatum of the law."

Again, in the matter of the Indian Companies Act VII (7) of 1913 and of the Traders Bank, Ltd., Lahore, AIR (36) 1949 Lah. 48: (Pak.L.R. (1948) Lah. 209), Cornelius, J. said:

"The expression liable in a legal context importing sanctions, can only be understood to mean a state of being exposed or contingently subject to such sanctions. To take a simple example from the Criminal law the mere fact that a punishment is prescribed for a particular offence does not render every person subject to the jurisdiction of the Criminal Court liable to such punishment; it is also necessary that in relation to such person the elements of the offence for which such punishment has been prescribed should be duly satisfied."

56. The argument that then arises is that companies are liable to be wound up under the Act when the conditions specified in S.162 of the Act are satisfied. In other words, the expression "liable to be wound up" appears to have a restricting effect and the companies formed and registered under the Act or of the existing companies only such of them are liable to be wound up as satisfy the conditions specified in S.162 of the Act.

57. Again, the history of legislation on this point would seem to point in the same direction. As stated above, under S.2, Joint Stock Companies Arrangement Act, 1870, before a company could apply for the sanction of a scheme of arrangement it had to satisfy that the company was in the course of being wound up either voluntarily or by or under the supervision of the Court. The provisions of S.2 of the said Act have been liberalised and at present s.153, of the english act applies to a going company as well as to a company in liquidation. At p.465 0f Palmers Company Law (Edn.18) we find:

"A company at times finds itself embarrassed by something in its constitution prejudicial to the successful carrying on of its business. It may have started with too restricted an objects clause in its memorandum of association, and the desired extension may not fall within the scope of relief afforded by S.5 of the Act, or, being at an end of its financial resources, it may need further capital to work the undertaking. In these and other cases it is common for the company to reconstruct. There are, roughly speaking, four ways of doing this: (1) by a sale and transfer of assets under S.234 of the Act; (2) by a sale under the memorandum, followed by a winding up; (3) by proceedings under S.153 of the Act and (4) by a sale of all or most of the shares to another company."

58. This passage from Palmers Company Law indicates that proceedings under S.153 of the Act come into being when a company finds itself embarrassed by something in its constitution prejudicial to the successful carrying on of its business or when it finds at an end of its financial resources and needs further capital to work the undertaking. Reconstruction and amalgamation, therefore, according to Palmer, are necessary only in the situation described by him at p.564 of his work on Company law.

59. Again, considering the provisions of Insolvency law as obtaining in England and India, we come to the same conclusion. Section 38, Provincial Insolvency Act, 1920, provides for compositions and schemes of arrangement where a debtor after the making of an order of adjudication, submits a proposal for a composition in satisfaction of his debts, or a proposal for a scheme of arrangement of his affairs.

60. Next it is urged that the definition of "company" in S.153(6) is descriptive and intended to extend the definition of "company" given in S.2(2) so as to allow a scheme of arrangement in respect of an unregistered company as stated in Palmers Company Precedents, Edn.15 Part II, pp.904-905. As at present advised, I do not agree with this proposition. An unregistered company may be wound up under S.271. Section 276 provides that an unregistered company shall not, except in the event of its being wound up, be deemed to be a company under the Act, and then only to the extent provided by Part Ix of the Act. The conclusion is that a scheme of arrangement under S.153 can be proposed only with respect to a company when it is "liable to be wound up" under S.162 of the Act and that S.276 renders inapplicable to unregistered companies the whole of the Act except Part V.

61. In the view of the matter that I have taken in the preceding paragraph, I receive support from the decision in Rudow v. Great Britain Mutual Life Assurance Society, (1881) 17 Ch.D. 600: (60 L.J.Ch. 504). In that case Jessel M.R. said:

"But there are at the end of the section, these words, upon which the vice Chanceller relied, that an unregistered company shall not, except in the event of its being wound up, be deemed to be a company under the Act and then only to the extent provided by this part of the Act. His Lordship read being wound up as if it had been having been wound up which would make the Act absolutely unworkable. It is necessary that the provisions anterior to the actual order for winding up should apply to an unregistered company, and that he seems to have forgotten. It is plainly the meaning of the Act that all the provisions of Part IV shall apply as much to unregistered companies as to registered companies."

Baggallay and Lush L., JJ., concurred in the opinion expressed by the learned Master of the Rolls.

62. That this appears to be the true meaning of the concluding portion of S.276 is clear from the fact that S.271 makes applicable to unregistered companies all the provisions of the Act with respect to winding up with certain exceptions and additions including inter alia the exception that no unregistered company shall be wound up under the Act voluntarily or subject to supervision and S.276 provides that an unregistered company shall not except in the event of its being wound up, be deemed to be a company under the Act, and then only to the extent provided by Part IX of the Act.

63. From all these considerations, it appears that the expression "liable to be wound up" used in S.153 (6) cannot be regarded as synonymous with the expression "can be wound up" under the Act.

64. But, it may be said, that if the expression "liable to be wound up" as used in S.153(6), Companies Act is interpreted as I have explained above, schemes of reconstruction and amalgamation of companies which are not liable to be wound up in the sense described above would not come within S.153, Companies Act, 1913. That may be so. But this does not mean that merely because a company which is not liable to be wound up cannot propose a scheme for its reconstruction under S.153, Companies Act, the expression "liable to be wound up" may be regarded as synonymous with the expression "can be wound up."

65. Though the question is one of some difficulty and is untouched by any English or Indian authority I know the conclusion to which we must come. The decision of the question is, however, not necessary for the disposal of these cases, and therefore, reserving the point for my further consideration I shall assume for the purpose of these cases that a scheme can only be proposed under S.153 when the company is liable to be wound up under S.162 of the Act and proceed to consider the powers of the Court in that situation. The only argument that can be raised is that proceedings under S.153 being an alternative mode of winding up the Court can make directions as are sought in these cases under S.216 of the Act. The final step in the argument is that a scheme under S.153 being a provision to avert a winding up, proceedings under S.153 of the Act may be regarded as proceedings with respect to winding up, On this last mentioned point, in re: Travancore National and Quilon Bank Ltd., AIR (26) 1939 Mad. 318: (183 I.C. 353), Venkataramana Rao, J. said:

"Under S.271, all the provisions of the Act with respect to winding up would apply to an unregistered company and a provision to avert a winding up will be a provision with respect to the winding up."

With great respect I do not accept the reasoning in re Travancore National and Quilon Bank. Ltd., AIR (26) 1939 Mad. 318: (183 I.C. 353)..

66. Now, in the first place the incidents of proceedings initiated to avert the winding up of a company cannot be claimed to be the incidents of proceedings initiated for the winding up of a company for in proceedings initiated to avert a winding up we are running away form the winding up proceedings.

67. In the second place, the phrase winding up is by implication defined in S.155, Companies Act. Section 155, Companies Act reads:

"(1) The winding up of a company may be either (i) by the Court; or (ii) voluntary; or (iii) subject to the supervision of the Court.

(2) The provisions of this Act with respect to winding up apply, unless the contrary appears, to the winding up of a company in any of these modes."

68. Then, S.216 enables the liquidator or any contributory or creditor to apply to the Court to determine any question arising in the winding up of the company, or to exercise, as respects the enforcing of calls, staying of proceedings or any other matter, all or any of the powers which the Court might exercise if the company were being wound up by the Court. Section 216 is a provision grouped under the heading "Members or Creditors winding up" in Part V. Companies Act, 1913, whereas S.153 is in Part IV of the Act. Section 210 enacts that the provisions contained in S.211 to S.218, both inclusive, shall apply to every winding up, whether a members or a creditors winding up and, therefore, S.216 is not available to sustain the applications before us for the application of S.216 is expressly limited to matters arising in winding up. That being so, and considering the observations of Viscount Sinon in Nokes v. Doncoster Amalgamated Collieries, Ltd. 1940 A. C. 1014 at p.1021:(1940-3 ALL E.R. 549), I think that S.216 was not intended for giving directions for the enforcement of a scheme of arrangement under S.153.

69. Next, it would appear from an examination of S.153 itself that the proceedings under S.153 of the Act are not in the matter of the winding up of a company. Section 153 was amended by the Companies (Amendment) Act, 1936, when Sub-S.(3),(4),(5) and (7) were added to S.153. Now, if the proceedings under S.158, Companies Act, 1913, were in the matter of the winding up of a company, the addition of Sub-S.(7) was not necessary. Sub-S.(7) was, however, added for it was laid down in Viramgam Spinning and Manufacturing Co. Ltd v. Industrial Bank of Western India, Ltd., AIR (12) 1925 Bom. 442: (89 I.C. 108), that there was no appeal under S.202 of the Act from an order made under S.153 on an application by a company which was not in the course of being wound up and to remove that defect Sub-S.(7) gave a right of appeal in such cases. In this connection reference inter alia be made to the decision in Mymensingh Loan Office, Limited, AIR (24) 1937 cal. 667: (175 I.C. 892). This alone would show that proceedings under S.153, Companies Act, 1913, were not in the matter of the winding up of a company.

70. As stated above, Sub-S.(5) of S.153 was also added by the Companies (Amendment) Act, 1936. This was felt necessary for the provisions contained in S.169, Companies Act were not applicable to proceedings under S.153, Companies Act. Under S.169, the Court may, at any time after the presentation of the petition for winding up a company under the Act, and before making an order for winding up the company, upon the application of the company or of any creditor or contributory of his company, restrain further proceedings in any suit or proceeding against the company, upon such terms as the Court thinks fit. Section 153(5) provides that the Court may at any time after an application has been made to it under that section, stay the commencement or continuation of any suit or proceeding against a company on such terms as it thinks fit and proper until the application is finally disposed of Clearly, the addition of Sub-S. (5) to S.153 was not necessary if proceedings under S.153 were in the matter of the winding up of a company.

71. For the reasons given above, I am of the view that even if it be regarded that S.153, Companies Act provides an alternative mode of winding up a company the question now in controversy before us cannot be regarded to be a question arising in the winding up of a company so as to attract the application of S.216, Companies Act, 1913.

72. Finally, it was pressed upon us that in the various schemes of arrangement the question now before us was left to the decision of the Court extra cursum curia. In my opinion, there is a double-barrelled objection to this line of reasoning. In the first place, the doctrine of extra cursum curia has no application to a case where the persons to be affected by the decision of the Court are not parties to the litigation before the Court when the matter is left to the decision of the Court, In the second place, no matter can be left to the decision of a Court as distinct from the particular person who is presiding over the Court at that time.

73. For the foregoing reasons, I find that when scheme of arrangement which does not come within S.153A and S.153B is sanctioned otherwise than in the course of winding up the Court sanctioning the scheme has no further seisin on the scheme and has no jurisdiction or power as the Company Court to entertain any application for enforcing the scheme, or modifying the scheme or to adjudicate upon the rights of parties arising under or out of the scheme and parties claiming under the scheme must assert their rights in such proceedings as may be permissible in law.

74. KAPUR, J. - This is a reference made by the Honble the Chief Justice sitting as a company Judge and the facts which have given rise to it may be shortly stated as follows:

75. After the partition of the Punjab, several Banks had to shift to what is now called East Punjab and to Delhi. Because of the partition, the position of their assets was very considerably affected and in the first instance there was a moratorium proclaimed by the Central Government and then these companies entered into arrangements with their creditors under S.153, Companies Act. Several schemes were presented. Civil Original No.5 of 1947 was the case of the Lakhsmi Commercial Bank Ltd., Civil Original No.12 of 1947 of the Commercial Bank of India Ltd., Ludhiana, and Civil Original NO.1 of 1948 of the New Bank of India Ltd. These matters were heard by the then Company Judge, Achhru Ram, J., and we are told that with the approval of one Mr. Sethi in the case of the New Bank Ltd., who had been authorised by the shareholders certain modifications were made in the scheme as passed by the shareholders and the creditors of the New Bank.

76. In the scheme which was proposed by the New Bank of India Ltd., the first paragraph runs as follows:

"For the purpose of this scheme the word deposit includes Fixed Deposits, Banks own Cash Certificates, Current Accounts, Deposits, at Call, Savings Fund Accounts, amounts lying in sundries or in any other kind of Credit Accounts, Bank Drafts, Cash Orders, Pay Orders and documents of the like nature and amounts due to Bankers over and above the value of Government Securities lying with them against such deposits, after adjustment of loans as may be permissible under the law, if any, against any or all the deposits in the said accounts whether pledged specifically or not."

77. In Para.3 (d) in place of the competent Court as proposed in the scheme the High Court of the East Punjab was substituted and the new clause runs as follows:

"The amount held by the High Court of the East Punjab to be payable in priority to the other creditors."

Another clause No. 15 was added which runs as follows:

"Any creditor, any share-holder, any claimant or the Bank may apply to the High Court for directions and adjudications in matters arising out of the scheme including, inter alia, questions of priorities, preferential payments and adjustments and the scheme shall be subject to such directions and adjudications."

78. It was also provided in Paras, 16 and 17 that the Bank will furnish an annual balance sheet with a report on the working of the scheme within one month from the formal adoption of the balance sheet and auditors would be appointed with the approval of the High Court of East Punjab and it shall be open to the Court to appoint any additional auditor or auditors, Thus these modifications became part of the scheme wherein three clauses were added and Sub-cl. (d) of cl.3 was amended. Similar kind of amendments were made at the instance of the learned Company Judge in the scheme of the other Banks also.

79. As far as we are told, these schemes are in operation and whenever any directions had to be obtained, this Court was approached and the directions were given and if any order had to be passed for the enforcement of the schemes that was done. When the matter came before the Honble the Chief Justice sitting as a Company Judge he doubted this procedure and referred to this Full Bench the question whether, after a scheme has been sanctioned by this Court, this Court retains any jurisdiction to give directions or pass orders for the enforcement of the scheme or any part thereof.

80. In support of the contention that the Court retains the power both for the purpose of giving directions and for the enforcement of the provisions of the scheme several arguments were addressed by the learned advocates who appeared in the case.

81. It was in the first instance, submitted that what the learned Company Judge Achhru Ram, J , did was what was variously described as a partial sanction to the scheme and the final sanction was to be given later or it was a sanction with a condition which was contained in the amendments suggested by the Court and incorporated in the original scheme as given above, With great respect to the learned advocates I am unable to agree with this contention. Section 153 runs as follows:

"153. (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 Court may, on the application in a summary way 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 Court directs.

(2) If a majority in number representing three-fourth in value of the creditors or class of creditors, or members or class of members, as the case may be, present either in person or in proxy at the meeting, agree to any compromise or arrangement, the compromise or arrangement shall, if sanctioned by the Court, be binding on all the creditors, or the class of creditors, or on all the members or class of members, as the case may be, and also on the company, or, in the case of a company in the course of being wound up on the liquidator and contributories of the company.

(3) An order made under Sub-S.(2) shall have no effect until a certified copy of the order has been filed with the registrar, and a copy of every such order 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, of every copy so issued of the instrument constituting or defining the constitution of the company.

(4) If a company makes default in complying with Sub-S. (3) the company who is knowingly and willfully in default shall be liable to a fine not exceeding ten rupees for each copy in respect of which default is made.

(5) The Court may, at any time after an application has been made to it under this section, stay the commencement or continuation of any suit or proceeding against a company on such terms as it thinks fit and proper until the application is finally disposed of.

(6) In this section the expression company means any company liable to be wound up under this Act and the expression arrangement includes re-organization 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) An appeal shall lie from any order made by the Court exercising original jurisdiction under this section to the authority authorized to hear appeals from the decisions of the Court."

82. As I understand the Act, it provides a machinery both where there is not a winding up proceeding in progress. In the first instance, an application is made to the Court to direct meetings of creditors or different classes of creditors and of members or class of members to be held to consider the proposed scheme. For the different meetings the Court usually appoints different chairmen and the resolutions of the meetings require to be passed by three-fourths majority in value of those who are present in person or by proxy and vote and after the requisite majority has been obtained a petition is then presented to the Court to sanction the scheme and if it is approved an order is made by the Court sanctioning the scheme. The Court to scrutinize the scheme and then if it finds it to be fair and reasonable and made in good faith it will sanction it if it could reasonably be supposed by sensible business people to be for the benefit of general class of members or the creditors concerned.

83. In re Alabama New Orleans Texas and Pacific Junction Rly. Co., (1891) 1 Ch. 212: (60 L.J.Ch. 221), the powers of the Court have been defined in the judgment of Lindley, L.J. which have been summed up as follows:

"In exercising the power of sanctioning a scheme of arrangement conferred on it by the Act, the Court will not only ascertain that all the statutory conditions have been complied with, but will also consider whether the class of creditors summoned to the meeting was fairly represented by those who attended, and whether the statutory majority who approved of the scheme were acting bona fide or were seeking to promote interests adverse to those of the class whom they professed to represent, and generally whether the arrangement is such as a man of business would reasonably approve."

84. This is the leading case on the powers of the Court. And words to the same effect were used in Be English Scottish and Australian Chartered Bank, (1893) 3 Ch. 385: (62 L.J.Ch. 825). In my opinion the only order that the Court can pass after taking all these matters into consideration is either to give its sanction to the scheme or to refuse it. I cannot see how there can be a provisional sanction or a partial sanction or sanction with a condition. In S.163(2) all that is provided is that the scheme, if sane honed, shall be binding as provided in that clause. It clearly allows the sanctioning or not sanctioning a scheme. Besides these two alter, natives no other alternative is, in my opinion, available. The learned counsel who argued this matter relied on In re English Scottish and Australian Chartered Bank, (1893) 3 Ch. 385: (62 L.J.Ch. 825) and said that that decision supported the giving of a provisional sanction. As I read that judgment, I do not think that this argument is well-founded. In this case, a chartered banking company, the principal business of which was in Australia, stopped payment and was ordered to be wound up in England. A scheme of reconstruction was proposed by which a new bank was to be established which was to defray the liabilities of the old bank with certain exceptions. The Judge directed meetings of the shareholders and creditors to be held in order to ascertain their wishes as to the scheme and as it was necessary that this should be done without delay he made an order directing a form of proxy to be sent by the Official Receiver by telegraph to Australia appointing specified persons to vote for or against the scheme at the London meeting; the proxy papers were to be executed by the creditors in Australia and deposited at the offices of the company at the principal cities in Australia not later than three days previous to the meeting in London and the particulars and numbers of the proxies for and against the scheme were to be telegraphed to the Official Receiver.This being done, it was found that the statutory number of creditors including the Australian creditors were in favour of the scheme but without the Australian proxies the requisite majority was not there.

85. This scheme was sanctioned by Vaughan Williams, J. and on appeal the Court of appeal affirmed the judgment. In sanctioning the scheme Vaughan Williams, J. said:

"But although I give my sanction to the scheme, it is only a provisional sanction; I shall make no final order, and I shall give no direction whatever to the Official Receiver as to handing over the assets of the old bank to the new bank until I am satisfied as to the constitution of the new Bank, as to its articles of association and as to its corporate existence."

86. Now as I read this judgment, it is no authority for the proposition that the sanction under S.153 of the Act can be provisional, nor do I think that the learned Judge was giving such provisional sanction as has been argued by the learned Advocates before us. The learned Judge had certain doubts as to whether full information had been supplied to the meeting or not and whether he should not order the reconsideration of the scheme by the meeting but as postponement of the scheme would have defeated it he did not feel justified in refusing sanction to the scheme. And dealing with this matter he made the observations given above. What was meant was that sanction had been given but effect would be given to it later when he was satisfied on certain other points. The learned Judge said further:

"Therefore, all that my decision on the question amounts to to-day is this, that I am prepared to give effect to the scheme when I have been satisfied as to the proper constitution and corporate existence of the new company, under conditions which are really suitable for carrying this scheme into effect,"

87. This is very different from saying that it is a provisional sanction. The matter was in a winding up proceeding and it was open to the Court to give his sanction to the scheme and then to order effect being given to it when his doubts were resolved and when he had the necessary particulars before him.

88. Another argument which was addressed was that the order of sanction of the Court in the present case was as a matter of fact a conditional order of which the right to give directions and to order payment was an integral part and as it had not been appealed against it became final. Even if it is possible to have scheme with conditions attached-a point which I need not decide in this case-no such condition can be attached which would be ultra vires and would confer jurisdiction on the Court which it does not other wise possess. I have discussed above the powers of the Court and I do not think that any such power could be conferred by consent of the parties which the Act itself does not give.

89. It was then contended that S.153 provided as alternative mode of winding up and, therefore, the Court would retain its jurisdiction after the sanctioning of the scheme just as it would in a matter of winding up. This contention also I must repel. It is true that in one English case some such words were used which gave an impression that arrangements under S.153 were in the nature of alternative mode of winding up, but as I shall show later the observations of the learned Judge who decided that matter have not been correctly followed. I may here give the history of the matter. The English Companies Act of 1862 was not found sufficient to meet the needs of the companies and for that purpose in 1870 an Act called the Joint Stock Companies Arrangement Act was passed by Parliament.

It was

"an Act to facilitate compromises and arrangements between creditors and shareholders of Joint Stock and other companies in liquidation."

Section 2 of the Act provided:

"Where any compromise or arrangement shall be proposed between a company which is, at the time of the passing of this Act, or afterwards in the course of being wound up, either voluntarily or by or under the supervision of the Court, under the Companies Act, 1862 and 1867, or either of them and the creditors of such Company or any class of such creditors, it shall be lawful for the Court, in addition to any other of its powers, on the application in a summary way of any creditor or the liquidator, to order that a meeting of such creditors or class of creditors shall be summoned in such manner as the Court shall direct, and if a majority in number, representing three-fourths in value, of such creditors or class of creditors present either in person or by proxy at such meeting shall agree to any arrangement or compromise, such arrangement or compromise shall, if sanctioned by an order of the Court, be binding on all such creditors or class of creditors, as the case may be, and also on the liquidator and contributories of the said company."

90. It will be noticed that this Act applied to Companies in the course of being wound up, either voluntarily or by or under the supervision of the Court under the Companies Acts of 1862 and 1867. It was passed for the purpose of increasing the power of creditors to make arrangements and compromises with liquidators. Under the Act of 1862, there were clauses providing for compromises but it was found difficult, if not impossible, for a majority of creditors to bind the minority, and if there was any such power it was restricted. The Act of 1870 was passed to enlarge that power. It may be noticed that the section applied only to a company in liquidation and In re Alabama New Orleans, Texas and Pacific Junction By. Co. (1891) 1 Ch. 213: (60 L.J.Ch. 221), the conditions for passing the schemes and considerations which the Court would keep in view while giving sanction were laid down. The case where such a scheme of arrangement was considered to be an alternative mode of winding up is In re London Chartered Bank of Australia, (1893) 3 Ch. 540: (62 L.J.Ch. 841). At p.546 appear the observations of Vaughan Williams, J. who said:

"The scheme of arrangement under the Act of 1870 is as I have had occasion to point out in several cases an alternative mode of liquidation which the law allows the statutory majority of creditors to substitute for the pending winding up, whether voluntary or under the Court, just as the Bankruptcy Act, 1869, allowed the creditors the substituted liquidation by arrangement under S.125, or composition under S.126 of that Act, for a pending bankruptcy. The discharge of the bankrupt in such case was statutory and not conventional, and therefore by operation of law. Just so here, under the Act of 1870.The discharge of the company or contributories under the Joint Stock Companies Arrangement Act, 1870, is by operation of law effected by the stay of actions imposed, after winding up order, by S.87 of the Act of 1862, and, during voluntary liquidation by an order for a stay under S.138 in the case of any action being brought. The effect of this stay coupled with the stay of the winding up proceedings excepting so far as necessary for carrying out the scheme of arrangement, is to discharge the company and contributories from further liability."

The learned Judge goes on to say:

"It seems to me, also that it is unnecessary at all events in a case where the arrangement is arrived at pending a winding up by the Court or under supervision, as distinguished from a mere voluntary winding up to introduce into the order sanctioning the scheme any express words staying proceedings by creditors by action, or discharging contributories from further liability beyond that imposed by the scheme, because this is necessarily implied by the sanction by the Court of the scheme disposing of the whole of assets of the company; but if those who ask for a reservation of rights against sureties wish to have an express order to stay, I do not know that there is any objection to this being done."

91. I have quoted the words of Vaughan Williams, J. in extenso because it appears to me that an error seems to have crept in some of the Indian cases by the fact that the words "to substitute for the pending winding up" which are found in the observation of the learned Judge are missing from the, headnote of the report (L.R.) and it is because of these missing words that it has been considered that this is an alternative mode of winding up. Provisions similar to those of S.2 of the Act of 1870 are contained in the English Act of 1929 under S.251 and a similar provision was contained in the Act of 1908 in S.191. In the present Act similar kind of provision is to be found in S.215. It will be noticed that all these sections are within the part dealing with winding up. In Buckleys Law of Companies, 1929 Edition, a scheme of this kind is (if I may say with respect) correctly described as an alternative mode of winding up of a company which is already not wound up.

92. There are three Indian cases which have dealt with this matter.In Madan Gopal v. The Peoples Bank of Northern India, Limited, 16 Lah. 1029: (AIR (22) 1935 Lah. 779 S.B.) at p.1046, Tek Chand, J. observed:

"Section 153, Companies Act, makes provision not merely for schemes for the resuscitation or reorganisation of companies, but it also provides for Schemes of arrangement, which in the words of Vaughan Williams, J. (used in reference to the corresponding section of the english act) provide an alternative mode of liquidation, which the law allows the statutory majority of creditors to substitute for winding up, whether voluntary or under the Court."

93. Indeed, if I may say so with respect, this judgment seems to have missed the significance of the words "to substitute for the pending winding up." Reliance was placed by Tek Chand, J. on Moti Lal Kanji and Co. v. Natwar Lal, 56 Bom.16 (AIR (19) 1932 Bom. 78), where similar observations were made implying that S.153 provides an alternative mode of liquidation. There the words to substitute for the pending winding up" seem to have been missed. But then that was a case where a company was in voluntary liquidation and a scheme propounded by persons not coming within S.153 by the Companies Act which was rejected by the Court and an appeal was filed by the propounder of the scheme and, they were not allowed to appeal as being persons who could not be heard against a winding up petition. And perhaps in that case the missing words might not be of much significance.

94. In a more recent case In re Travancore National and Quilon Bank Ltd., AIR (26) 1939 Mad. 318 at p.327: (183 I.C. 353), Venkataramana Rao, J, also observed that "a scheme under S.153 provides an alternative mode of winding up." In that judgment also the words mentioned above have been missed.

95. Now S.153 is in Part IV which deals with management and administration and not in Part v which deals with liquidation. That this is an important matter in interpreting this section is supported by the observations of Viscount Simon L.C. in Nokes v. Doncaster Amalgamated Collieries Ltd., (1940) A.C. 1014 at p.1021: (19403 ALL E.R. 549), where dealing with S.154 of the English Act which is equivalent to B. 153a of the indian act the learned Lord Chancellor said:

"It is further argued on behalf of the respondents that S.154 constitutes a new and simpler machinery for the transfer of the undertaking of an old company to a new company, which thus acquires the undertaking without the necessity of the transferor company going into liquidation. As the Master of the Rolls observed in his judgment, the word transfer is not a word of art and the language of S.154 is in very wide terms. Moreover, S.154 contemplates, or at any rate provides for, the dissolution of the transferor company when the transfer of its undertaking has been made, and there appears to be no means of calling back to life the company so dissolved, for S.294 occurs in Part V of the Companies Act dealing with winding up, whereas S.154 is found in Part IV."

96. This speech of the Lord Chancellor was followed by Das, J., as he then was, In re Bank of Mymensing Gouripur Ltd., 53 C.W.N. 143 at p.150.

97. Another case which was cited in support of the argument that the scheme is an alternative mode of winding up is In the matter of Mymensing Loan Office Ltd., AIR (24) 1937 Cal. 667: (175 I.C. 892), where dealing with the right of appeal of a person who wanted to object to the scheme, the learned Judge said:

" because he could have applied to the Court for leave to appeal against the order sanctioning the scheme: S.202, Companies Act; In re, Securities Insurance Co. 1894-2 Ch. 410: ( 63 L.J.Ch. 777)."

98. There seems to be a mistake of some kind because the case relied on In re Securities Insurance Co., (1894) 2 Ch. 410: (63 L.J.Ch. 777), was one in which an arrangement had been sanctioned under the Act of 1870 and an appeal was presented by the creditors whose interests were affected by the scheme, but who had not opposed the scheme at the meeting, nor appeared before the Judge, and it was held that they had a right of appeal subject to the same conditions as appeals from decisions in the ordinary jurisdiction of the Court. The mere mention of S.202 does not, in my opinion, lend support to the argument that the learned Judge was considering the matter to be one in liquidation.

99. That these proceedings are not in the nature of an alternative mode of winding up is made clear from the fact that the oldS.54 which dealt with the reorganisation of share capital now forms part ofS.153 and that certainly is not a matter which concerns winding up. Not only this, there is a separate section dealing with arrangements made where there is a voluntary winding up and following that is S.216, Companies Act which gives the power to a Liquidator, contributory or creditor to apply to the Court to determine any question arising in the winding up of a company. This power is missing in S.153 Similarly S.229, Companies Act which deals with the application of insolvency rules in winding up of insolvent companies and S.230 which deals with priorities and preferential payments and S.231 which deals with fraudulent preferences are not applicable to schemes under S.153, Companies Act. It cannot be said that while the scheme is being worked anybody can come to the Court to prove his debts or claim priority or to get any fraudulent preference avoided as is possible under the above sections in the case of winding up proceedings.

100. According to Palmer - Company Law, 18th Edition, p.471 by S.154 (of the English Act), the Court may provide for the transfer of the companys business and the dissolution of the company without winding up and other incidental matters.

101. Another argument in favour of this section not being in the nature of a winding up is that S.153 is a self contained Act and Sub-cl.(7) provides for appeals against orders passed under that section. If it was a matter in winding up S.202, Companies Act would have been sufficient to give power of appeal against such orders. In my opinion, therefore, this is not an alternative mode of winding up as contended and the provisions dealing with winding up do not apply to schemes under this section.

102. The submission that a scheme under the section was an alternative mode of winding up was further sought to be supported by an argument based on the words "liable to be wound up" in sub-s.(6) of the section wherein it is provided:

"In this section the expression Company means any company liable to be wound up under this Act ..."

It was submitted that the words connoted the state of affairs of a company which would make it liable to be wound up under S.162 of the Act and not a company which can be wound up under the Companies Act or for the winding upof which provision exists in the Act. In other words the expression referred to the state of affairs of the company and was not merely descriptive. It was contended that on the suggested interpretation the applicability of S.216 of the Act would be attracted and the powers conferred under that section would be available to the persons named therein. It was also submitted that the history of S.153 of the Act showed that by the use of this definition of the word company in Sub-S.(6) the intention was to have a more limited meaning placed on the word company than is given in S.2(2) of the Act and which is confined to registered companies. To support his argument reliance was placed by the learned counsel on a judgment of the Lahore High Court in Re The Traders Bank Ltd., AIR (36) 1949 Lah. 48 (Pak. L.R. (1948) Lah. 209), where interpreting the words "liable to be wound up" Cornelius, J. said:

"Again the expression liable to be wound up appears to me to have a restrictive effect inasmuch as it confines the application of S.153 to companies whose condition is such that they are exposed to windingup."

103. According to the learned Judge these words could not embrace every company what ever its nature, for the winding up of which provision is contained in the Companies Act and would not include unregistered companies.

104. In the Lahore case after a winding up petition had been filed, a scheme was presented by the company, against which objections were filed by one of the depositors who also supported the winding up. As the company was one of which the registered office had been transferred to Delhi in the Dominion of India, the company had according to the learned Judge become an unregistered company in West Punjab. On the meaning of this expression "liable to be wound up" it was held that S.153 would have no application to an unregistered company unless an order for winding up had first been made and this was because of S.276 of the Act the relevant portion of which runs as follows:

"An unregistered company shall not except in the event of its being wound up, be deemed to be a company under this Act, and then only to the extentprovided by this part"

(Part IX of the Act).

Relying on this and on a decision of the Court of Appeal in Rudow v. Great Britain Mutual Life.Assurance Society, (1881) 17 Ch.D. 600: (50 L.J.Ch. 504), it was held that the effect of S.276 of the, Act was

"to confine the mischief of S.159 to unregistered companies such as satisfy the condition of being wound up"

. But as the words underlined (here italicized) had, in that English case been interpreted in the wider sense of extending to a time prior to the making of the winding up order but subsequent to the petition for the winding up the proceedings taken in accordance with S.153, were competent under the law.

105. Now there is a difference of opinion between Rangoon and Bombay as to the extent of the applicability of S.270 of the Act to Foreign Companies, V.E.E.R.M. Chettyar Firm v. J. Hormasji, 8 Rang. 658: (AIR (18) 1931 Rang. 77) and In re Strauss and Co. Ltd., AIR (24) 1937 Bom. 15: (167 I.C. 85). And under S.271 which deals with winding up of unregistered companies, a foreign company may be wound up as an unregistered company under Part ix. Section 271(3) runs as follows:

"(3) Where a company incorporated outside British India, which has been carrying on business in British India, ceases to carry on business in British India, it may be wound up as an unregistered company under this part, notwithstanding that it has been dissolved or otherwise ceased to exist as a company under or by virtue of the laws of the company under which it was incorporated."

106. It cannot be said that a foreign company cannot be wound up under the Act or is not liable to be wound up under the Act. It has been held that when a foreign company has a place of business in England an English Court has under the corresponding provisions of the english act jurisdiction to wind up the same even if it has ceased to exist, Tea Trading Co., (1938) 1 Ch 647: (102 L.J.Ch. 224); Palmers Company Law, p.478 (18th Edn,); Re Mercantile Bank of Australia, (1892) 2 Ch. 204: (61 L.J.Ch. 417).

107. According to Palmers Company Precedents, Pt.II, page 904, arrangements with English creditors of foreign companies in England have been allowed. And in India also it has been held that S.153 applies to foreign companies and arrangements with Indian creditors are allowed under the law.

108. In re Travancore National and Quilon Bank, Ltd., AIR (26) 1939 Mad. 318: (183 I.C. 353) at page 321, it was observed by Venkataramans Rao, J:

"Under the English Act it is clear therefore that the provision corresponding to S.153, Companies Act is applicable to the case of foreign companies because a foreign company is a company liable to be wound up under the Act. Therefore, S.153, Companies Act when it was first enacted contained the provision that expression company in clause 1 would mean a company liable to be wound up. There can be no doubt that the Travancore National Bank though incorporated outside British India and therefore a foreign company, would be an unregistered company within the meaning of S.270 and S.271 of the Act. An unregistered company is a company liable to be wound up under the Act. When the legislature itself has defined the expression company and has given it a wide signification, there is no reason for excluding a foreign company from its purview."

109. The history of the section also shows that there has been a continuous liberalization of S.153 so as to provide for as many eventualities as may arise for the purposes of arrangements and compromises in different circumstances including re-organization, amalgamation and reconstruction. If the meaning of the words were as was suggested at the bar then the repeal of S.54, Companies Act and its re-arrangement in S.153 (6) would have been meaningless. If I may say so with respect, the only way in which the word company as used in S.6(2), S.153(6), S.271 and S.276 of the Act can be reconciled with the quotation from Palmer referred to above is by interpreting the expression "liable to be wound up" in the manner that I have suggested above.

110. The learned Advocate-General in reply referred us to Palmers Company Precedents, Part II, pages 904-5 which has given the meaning of the expression "Company" as used in S.153(5) of the English Act which is corresponding to S.153(5), Indian Companies Act, It is there said by the learned author:

"Section 153(5) says that the expression company means in that section any company liable to be wound up under the Act. Now, as appears above (pp. 11 to 14) the following companies can be wound up, that is to say:

1. Companies formed and registered under Part I of the Act.

2. Existing companies as defined by S.380.

3. Companies registered, but not formed, under the Companies Act, 1862. See S.317.

4. Companies registered as limited under the Companies Act, 1879, S.4. See Act of 1929, S.16.

5. Unregistered companies as explained or defined in S.337 of the Act, which section provides that for the purposes of this part of this Act, the expression unregistered company shall include any Trustee Savings Bank certified under the Trustee Savings Bank Act, 1863, and any partnership, whether limited or not, any association and any company with the following exceptions: (1) a railway company incorporated by Act of Parliament (except in so far as provided by the Abandonment of Railways Act, 1850, and the Abandonment of Railways Act, 1869, and any Acts amending them);. (2) a company registered in any part of the United Kingdom under the Joint Stock Companies Acts (see S.320) or under the Companies Act, 1862, or under the Companies (Consolidation) Act, 1908, or under this Act; (3) a partnership, association or company consisting of not less than eight members and not being a foreign partnership, association or company; (4) a limited partnership registered in England or Northern Ireland.

Company, therefore, as used in the section (S.153) has a very wide signification. Its meaning is much wider than the meaning given to the word by S.380 of the Act. The Court can apparently approve a scheme of arrangement affecting English creditors of a foreign company. This is convenient, as it may be doubted whether creditors whose debts were incurred in England and who are domiciled and resident in this country could be bound by a scheme sanctioned by the Courts of a foreign country. See Antony Sibbs and Sons v. La Societe Industrielie Et Commerciale Des Metaux, (1890) 25 Q.B. 399: (59 L.J.Q.B. 510); Newzeland Loan and Mercantile Agency Co. v. Morrison, (1898) A.C. 348: (67 L.J.P.C. 10).

111. But even if the argument addressed at the bar were correct, I do not see how that would help us in assuming jurisdiction which the Act itself does not give us. Merely because S.153 is an alternative mode of winding up or the words liable to be wound up" mean that it is a company which has made itself liable to be wound up under S.162, cannot mean either that it is wound up and, therefore, the powers given under the winding-up part will be available to the Court, or it is a company which is about to be wound up or in the course of being wound up and make the provisions of S.216 applicable. If there are two alternative methods and one of them is chosen, it does not mean that the powers available under one can be used in the case of the other nor can liability to be wound up mean about to be wound up.

112. It was then contended that under S.153, Companies Act, the Court retains the power to give directions, to correct mistakes and to pass orders in order to enforce the scheme. The learned counsel were asked by the Bench whether the Court would have jurisdiction if a clause such as cl.15 of the amended scheme was not in the scheme. One learned Advocate submitted that the Court would not have such jurisdiction but another learned Advocate who argued later said that the Court would have the power. In my opinion, unless the statute has conferred any jurisdiction on or given express powers to the Court, the Court cannot arrogate to itself any jurisdiction or powers not so given. The powers of the Court under S.153, as I read it, are confined to ordering the holding of meetings and, when a proposed scheme is passed by such meeting, to scrutinise whether it has been passed by the requisite majority and also to determine whether the scheme is a proper one to which the Court will give its sanction, and after it has determined these various things it has either to sane Lion the scheme or to refuse to sanction. The Court has no powers other than these. The other express power conferred by this section is contained in Cl.5 and that relates to stay of proceedings. That there are no powers which can be exercised by the Court beyond those mentioned above is clear if one were to compare S.153 and S.153A, Companies Act. In the latter section the statute has specifically inserted Cl.(f) in Sub-S.(1) which says that the Court by any supplementary order can make provision for such incidental, consequential and supplemental matters as are necessary to secure that the reconstruction or amalgamation shall be fully and effectively carried out. The very fact that such words are missing from S.153, to my mind, clearly indicates that the legislature did not think it necessary to give powers to the Court beyond what I have already described.

113. The learned Advocates who appeared in support of the schemes relied on several cases showing that the Court retained jurisdiction after the sanctioning of the scheme. The first case relied on was the Sovereign Life Assurance Co. v. Dodd, (1892) 2 Q.B. 573: (62 L.J.Q.B. 19) and it was submitted on the basis of this authority that it was open to the Court to determine whether a particular person belonged to a particular class within the scheme or not. This case does not in my opinion support any such contention. In this case an action was brought by a liquidator to recover a debt from a defendant who was a policy holder which had matured. Before the scheme was passed the persons who were summoned to the meeting under S.2, Joint Stock Companies Arrangement Act, 1870, were the policy holders of the company, and no separate meeting was sanctioned of those whose policies had, as distinct from those whose policies had not matured. The defendant who belonged to the latter class claimed a set off and it was held that such persons formed a class of creditors distinct from those whose policies had not matured; that a separate meeting of such class ought to have been held under the Act in order to make the arrangement binding upon the members of that class and therefore, such a person could claim a set off.Now this is very different from saying that the Court retains after sanctioning a scheme the power as a Company Court to adjudicate upon whether a particular person does or does not belong to a particular class of creditors or members. This was an ordinary action on a debt brought by the liquidator no doubt and the only question to be decided was whether the debtor was bound by the scheme or not and, if he was not, whether he could claim a set off. This case does not support the argument that after the scheme is passed a Company Court can determine whether a particular person is or is not bound by the scheme because of his belonging to one class of creditors or the other.

114. The next case relied upon by the learned counsel was Booth v. Walkden Spinning and Manufacturing Co. Ltd., (1909) 2 K.B. 368: (78 L.J.K.B. 764). In this case a scheme had been proposed under S.120 of the Act of 1908 and an order was made that meetings of the creditors and of the members of the company be summoned for the purpose of considering and, if thought fit, of agreeing to an arrangement proposed to be made between the company and its creditors and members. Before the meetings had been held, the company applied to the Court to grant a stay of execution on a judgment obtained by the plaintiff against the company previously to the making of the order summoning the meeting and it was held that there was no power to grant a stay of execution. No doubt, Darling, J. did observe:

"I am far from saying that, if the meetings of the creditors and of the share-holders of the company had been held, and if the proposed scheme of arrangement had been agreed to at these meetings and had been sanctioned by the Court, a stay of execution on a judgment obtained against the company might not be ordered."

But the learned Judge did not consider it necessary to decide the point for that stage had not yet been reached in the case. Jolf, J. who agreed with Darling, J. observed at page 373.

"But in the present case, where steps are being taken by a company, which is not in liquidation, for the arrangement of the companys affairs under S.120, Companies (Consolidation) Act, 1908, the position is not in the least analogous to that of a compulsory or voluntary winding-up."

115. The stay was not granted even on terms and this is hardly a case which can be said to support the argument of the learned counsel. At any rate, the observations of Darling, J, were in the nature of obiter.

116. The next case quoted was Kamlapat Moti Lal v. Union Indian Sugar Mills Co. Ltd., AIR (16) 1929 P.C. 256: (119 I.C. 631) and it was contended by the learned counsel that this case supported his contention because in this case the scheme had been sanctioned and a deed of conveyance was to be executed later. In the first place this is not what happened in this case. What did happen was that because money was required to satisfy the creditors of the company against which a winding up order had been made and frantic efforts were being made by the share-holders to save the concern, ultimately Kamlapat put forward a scheme whereby he offered to advance Rs.10, 000. As more money was needed, he agreed to advance a further sum of Rs.37, 000 and liquidators charges or Rs.62,000. On this footing, the scheme went forward and the Court appears to have approved of the scheme in principle, and after the terms of the conveyance were examined by a person named it was to be submitted to the Court for its consideration and sanction and subsequently the Court did sanction the scheme. On appeal it was held by their Lordships of the Privy Council that the share-holders had not assented to the extra burden of Rs.62, 000 and the scheme as amended must be sent for approval to the share-holders. If anything, it just proves that the Court could not sanction any amendment without the assent of the shareholders being taken.

117. Some Indian cases were pressed in support of the argument by the learned counsel, the first one being In the matter of Dewangunj Bank and Industry Ltd., AIR (22) 1935 Cal. 117: (155 I.C. 811). This was a judgment delivered on 5th march 1934. It is contrary to a decision in a subsequent case of the Court of appeal Nihirendra Kishore Dutt V. Brahmanbaria Loan Co. Ltd., AIR (21) 1934 Cal. 816: (61 Cal. 913) decided by Costello and Lort. Williams, JJ. which must be taken to have overruled it, at least by implication. Dewangunj Bank case was a case of a decree-holder who claimed that he could not be included in the term depositors and as a decree-holder he did not attend the meeting of the depositors. The scheme which was finally adopted by the meeting of the creditors made a very important modification which included the decree-holders within the term creditors.No doubt, when one of the decree holders objected. Buckland Ag., C.J. held that he was fully justified in not attending the meeting and that by the mere sanction of the Court such a person could not be brought within the scope of the term depositors. The learned Judge went on to observe:

"The scheme having been sanctioned by the Court doubtless per in curiam or because the circumstances were not sufficiently explained to the learned Judge, the applicants only remedy, in my judgment, is to come to this Court to have the scheme modified."

I must most respectfully dissent from the view of the learned Judge. It is not open to the Court to modify the scheme suo motu or at the instance of any one creditor or a class of creditors. A scheme once having been passed can only be modified if the same procedure is gone through as at the time of the passing of the original scheme and it is only then that a scheme can be modified, or, in other words, the modified scheme can be sanctioned. This was the view taken in the judgment I have referred to above by the Court of appeal in Calcutta in Nihirendra Kishore Dutt v. Brahmanbaria Loan Co. Ltd., AIR (21) 1934 Cal. 816: (61 Cal. 913), where it was said:

"It is not open to the Court suo motu to impose on a creditor any condition which will operate by way of modification of the scheme, especially in absence of the consent of the persons who entered into the arrangement."

In this case a scheme was presented by a company not in the course of winding up and it was passed by a meeting on 25th June 1938, but not in the exact form which had originally been proposed. Certain alterations were made and it was the altered scheme which came before the Court for sanction which was given by Ameer Ali, J. with the addition of certain modifications and conditions and on appeal it was held that such a modified scheme could not be sanctioned reliance being placed on Palmers Company Precedents, Edn. 14, Part 1, p.1236, where it was said:

"The scheme of arrangement usually contains a clause empowering the company or its liquidator to assent to any modifications or conditions approved or imposed by the Court, and the clause is sometime qualified, e.g., by adding the words "and by the trustees for the debenture holders."

The paragraph then continues thus:

"In the absence of any such clause it is more than doubtful whether the Court can sanction a modified scheme or impose conditions which must operate by way of modification."

I most respectfully agree with the view of the Court of appeal.

118. The next case cited by the learned counsel was a judgment of McNair, J.In re Jalpaiguri Banking and Trading Corporation Ltd., AIR (23) 1936 Cal. 662 (165 I.C. 655). There the learned Judge gave an injunction in favour of the Company restraining the decree-holder from executing his decree. In the course of his judgment the learned Judge said:

"There is no doubt that S.153 contemplates the type of arrangement which has been come to in this case and not merely a compromise or arrangement come to in or after a winding up order has been passed and it provides in clear language that when such compromise has been sanctioned by the Court, such compromise shall be binding on the creditors. Mr. Banerji has already had one decree of this Court given against his contention that he was not bound by the compromise and he is now endeavouring to set that and use at naught by starting execution proceedings in the mofussil. In my opinion, this Court has the power to stop such proceedings and there will be an injunction restraining him from proceeding further with the execution of the proceedings of the decree in this suit dated 20th July 1934 now pending in the Court of the Subordinate Judge of Jalpaiguri. The injunction will remain so long as the scheme is in operation."

In coming to this conclusion, the learned Judge referred to the observations of Darling, J. in Booth v. Walkden Spinning and Manufacturing Company, Limited, (1909) 2 K.B. 368: (78 L.J.K.B. 764) which I have referred to already. Those observations were, as I have said before, in the nature of obiter, and at any rate the observations of Jolf, J. show that the learned Judges were thinking that their powers were the same as they would have had had the matter been one in liquidation. This Calcutta case also, if I may say with great respect, I am unable to agree with and it cannot help the contention of the learned counsel.

119. Another case which was cited by the learned counsel in support of his argument was Rajshahi Banking Corporation v. Surabali Deb, 40 C.W.N. 1104. There one Surabala Devi had got a decree against the Bank and after the decree there was an application for an arrangement under S.153, Companies Act. A meeting was held on 18th March 1934, but Surabala Devi did not attend although notice had been sent to her. On 13th April 1934 the first installment was paid by the Bank and it was received by Surabala Devi. Subsequent to this the lady started proceedings before Panckridge, J. asking that the words in para. (1) of the schedule set out in the scheme of arrangement which included decree-holders in the term depositors be expunged. In other words, she asked for those provisions in the scheme of arrangement which prevented her from executing her decree to be deleted. The Court of appeal held:

"The Court sanctioning the scheme has jurisdiction to entertain an application, for an order modifying a, scheme so as to expunge from the scheme certain words preventing the decree holder from executing his decree,"

This case also goes counter to the view that I have mentioned above that before a scheme can be amended another meeting of the persons into rested should be summoned to consider it and only then can the Court sanction or refuse to sanction, which is supported by the observations of Lord Atkin in Kamlapat Moti Lal v. Union Indian Sugar Mills Co. Ltd., AIR (16) 1929 P.C. 256: (119 I.C. 631), where it was said:

"The accepted scheme provided for an advance of ten lace: the new scheme evolved by the new situation provided for a further advance of 62,000 ..the approval of the meeting was not taken as is usual in carefully drawn scheme subject to modifications to be approved by the Court. Their Lordships find it impossible to hold that the amended scheme had been approved by the shareholders at the meeting on 16th December or that the shareholders impliedly assented to an increased advance of Rs.62, 000."

In another Privy Council case Smt. Premila Devi v. Peoples Bank of Northern India, Ltd., AIR (25) 1928 P.C. 284: (I.L.R. (1939) Lah. 1), it was held that

"upon confirmation by the Court of a scheme of arrangement, that scheme becomes by virtue of S.153 binding upon the creditors, the shareholders and the company. Its terms can thereafter only be varied by order of the Court after the variation had been approved at meetings of the creditors and shareholders."

In view of the decisions of their Lordships of the Privy Council I do not think it will be correct to say that the Court is left any power to modify the scheme in the manner it is suggested by the learned counsel.

120. In another Calcutta case Naokhali Loan Co., Ltd. v. Hamendra Narayan Roy, AIR (23) 1936 Cal. 402: (166 I.C. 815), the decree-holder started execution after the scheme had been passed. It was held that this scheme could not possibly be held to apply to the depositor-creditor who had already obtained a decree before the scheme, as he had ceased to be a depositor and was, therefore, entitled to execute it, I cannot see how this case can help in giving jurisdiction to the Court which it did not already possess. Besides, this was not a case which arose in any matter for the enforcement of the scheme or for directions to be given by the Company Judge.

121. In another case Barisal Loan Office Ltd, v. Gasthi Charan Bhattacharya, AIR (23) 1936 Cal. 282: (166 I.C. 408) which was decided before the case above referred to and to which Guha, J. was again a party, just as be was a party to the case just above mentioned, it was held that a decree-holder was bound by the scheme and could not be allowed to execute his decree.

122.In Calcutta there are cases in which just the opposite view has been taken. One such case is the one which I have already quoted, namely In the matter of Mymensingh Loan Office Ltd., AIR (24) 1937 Cal. 667: (175 I.C. 892), where the prayer to the Court was for the cancellation or modification of the scheme by expunging the words "depositors shall include those who have sued the company and also those who have obtained decrees." The learned Judge held that the Court bad no power to modify or alter the scheme without the consent of those who had agreed to it and that the powers of the Court "were strictly limited to those given in specific sections such as S.12, S.38, S.77, S.153 and S.162." It was observed by him that to hold that the Court has power to expunge part of a sanctioned scheme without the consent of those persons whose agreement to the scheme was essential before it could be sanctioned at all would be contrary to all principles of fairness and justice.

123.In Bombay also similar view has been taken in In re Katni Cement and Industrial Co. Ltd., AIR (24) 1937 Bom. 423: (171 I C. 769).

124.A further argument was raised that the Court will have inherent powers to give relied by summary orders. This was based on the analogy of the Provincial Insolvency Act and it was submitted that in spite of the fact that in the Provincial Insolvency Act there was no such express provision it still possessed the power to enforce a composition and scheme of arrangement arrived at. Reliance was placed for this on a judgment of Varadachariar, J. in Subramania Ayyar v. Supparaya Pillai, AIR (23) 1936 Mad. 424: (161 I.C. 717) and on Nizam Khan v. Hukam Chand, I.L.R. (1942) Lah. 330: (AIR (28) 1941 Lah. 316), wherein it was held that the Insolvency Court continues to have jurisdiction after an annulment of adjudication following a composition under S.38 of that Act or on an annulment under S.43 of that Act. In the former case a surety-bond was furnished under a composition scheme and it was held that the Court had the power to enforce the terms of the bond because an annulment under S.39 did not put an end to the jurisdiction of the insolvency Court over all the parties. Reliance was in this case placed, firstly, on Raj Raghubar Singh, v. Jai Indra Bahadur Singh, 42 ALL. 153: (AIR (6) 1919 P.C. 55) which lays down that the Court to which a bond has been given had prima facie power to enforce it. It was further said (reliance being placed on various rulings referred to in that judgment) that an insolvency Court does not become functus officio by reason of annulment under S.39 of that Act. This question was discussed in the Lahore case at p.342 and it was observed by Beckett, J.:

"When the statutory law is closely similar in England and in India and one is presumably modelled on the other, I can see no reason for dissenting from this view, so far as we are concerned with the continuing control of an Insolvency Court over the distribution of assets through an appointee."

In Mullas Law of Bankruptcy, 1930 edition, it has been laid down at p.255 that under the Provincial Insolvency Act there is no remedy provided for default in payment of installments under the composition as in the Presidency Towns Insolvency Act.

"The reason is that a Provincial Court has no power to commit for contempt of Court under the Provincial Insolvency Act; if default is made in payment under a composition a suit is the only remedy."

English Courts have no doubt held that there is a continuing control; the reason is that in the English Bankruptcy law power is expressly given to the Courts and under the Presidency Towns Insolvency Act in S.30. Sub-Cl. (2) there are words to the same effect. Now, I do not see bow this analogy of the Provincial Insolvency Act can apply to proceedings under S.153 of the Companies Act. No doubt they are both compositions and schemes of arrangement. Under the Provincial Insolvency Act, the power of the Court may be said to continue over the bankrupt even after annulment of insolvency, because under S.40 of the Provincial Act if a debtor does not pay in accordance with the scheme he can be re-adjudged. No power is vested in the Company Courts after the scheme is once sanctioned. Besides that the argument in the Lahore case that I have referred to above was that in England from where the whole law had been taken the power did exist and must, therefore, he presumed to exist in the Courts under the Provincial Insolvency Act also. In the present case under the English Companies Act no power has been shown to exist in English Courts and even if the Indian Act may be a copy of the corresponding sections of the English statute it cannot be raid that by the mere analogy of the Insolvency Act such a power would be inherent in the Court under the Companies Act. I would like to point out that wherever Legislature wanted to give express power to the Court to exercise a particular power it has done so in specific words, I may refer here to Sub-Cl.(f) of clause (1) of S.153A and S.14, S.33, S.53 and several others sections.

125. An argument which was pressed with some force was that the words of S.153 make it clear that the Court will have to decide as to what are the different classes of members or creditors and who could be included in each different class. As an example, it was submitted that if a person before the scheme is sanctioned comes to the Court and complains that although he is a perferential creditor notice sent to him is as if he was an ordinary unsecured creditor and it was contended that in that case it will be incumbent on the Court to decide (i) as to whether he is a creditor of that class and (ii) whether he has or has not got a notice to attend the meetings of the class to which he belongs. It may be necessary for the Court to decide for the purpose of complying with the statute to see whether different classes of persons who form distinct classes within the statute have held their respective meetings or not and if an occasion did arise and somebody complained that he was not given notice to attend a particular meeting of a particular class of persons to which he claimed to belong and his non-attendance is a material factor, the Court may find that the statute has not been complied with and therefore may refuse to give sanction. But as an abstract proposition of law, I am not quite certain that the Court will decide whether he is or he is not a preferential creditor. Be that as it may, supposing it was incumbent on the Court to decide that matter before it gave sanction, it does not logically follow that this power will be continued in the Court after the sanction has been given and the Court has become functus officio as I think it does become in that event.

126.In my opinion, therefore, the doubts which the learned Chief Justice expressed with regard to these matters were well-founded and I consider that the only power which is conferred on a Court under S.153 of the Companies Act is to order meetings of creditors or of the members and then if the proposed scheme or schemes have been passed by a statutory majority to sanction or refuse to sanction them, and after the sanction has been given the Court does not seem to possess any further powers in regard to those schemes. Beyond this the Court has, in my opinion, no powers, and I would answer the question accordingly.

127. Order of the Court. - Where a scheme which is not of the kind mentioned in S.153A or S.153B is sanctioned otherwise than in the course of winding up, the Court sanctioning the scheme has no furher seisin on the scheme and has no jurisdiction or powers as the Company Court to entertain any application for enforcing the scheme of modifying the scheme or to adjudicate upon the rights of parties arising under or out of the scheme and parties claiming under the scheme or debars the scheme must assert their rights in regular suits or other proceedings as may be permissible in law.

128. These applications must, therefore, be laid before the Company Judge to be disposed of in the light of the decision of this Full Bench.

Answer accordingly.

Civil Misc. No.32/L of 1949

Sm.Bhagwanti v. New Bank Of India Ltd., Amritsar

Full Bench Opinion — Summary

Factual and Procedural Background

Legal Issues Presented

Arguments of the Parties

Applicants / Claimants (creditors asserting priority)

Bank / Company and other supporters of entertainments of applications

Amicus / Advocate-General and other submissions considered by the Bench

Table of Precedents Cited

Court's Reasoning and Analysis

Holding and Implications

Sm.Bhagwanti v. New Bank Of India Ltd., Amritsar

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