The Judgment of the Court was as follows:

Nasim Ali, J.:— The facts which are not in dispute in this appeal are these:

2. The Light of Asia Insurance Co., Ltd., (hereinafter referred to as “the Company”) was incorporated in the year 1913 under the Indian Companies Act with a capital of Rs. 5,00,000 (5,000 shares of Rs. 100 each) with the object, inter alia, of carrying on business as a Life Insurance Company. The capital of the Company was reduced to Rs. 1,50,000 (5,000 shares of Rs. 30 each) by a resolution adopted and confirmed at extraordinary general meetings of the share-holders held on August 7th and September 12th, 1933, respectively. This was confirm ed by this Court on the January 15th, 1934. Of the authorised capital of Rs. 1,50,000 shares of the nominal value of Rs. 36,750 were only subscribed for and issued and the whole sum was paid for in respect thereof.

3. On or about June 30th, 1939, a valuation of the assets and liabilities of the Company as on 31st December, 1938, was made by its actuary and a deficiency of Rs. 55,641 was found on such valuation.

4. The Insurance Act of 1938 came into force on July 1st, 1939. On that date, the securities which were deposited by the Company with the Government of India prior to the Insurance Act came into force, were valued at Rs. 1,13,298-12-0 and were treated as the first deposit under sec. 7 of this Act. In accordance with the provisions of this Act the Company had to make a further deposit of Rs. 9,638 on or before October 31st, 1939. It, however, failed to make this deposit. On November 27th, 1939, Mr. H.L Humphreys, a practising Actuary of Calcutta, appointed to investigate and report on the affairs of the Company under sec. 33 of the Insurance Act reported that there was a deficit of Rs. 89,666. In accordance with the provisions of the Insurance Act the Company had to make a further deposit of Rs. 9,638 on or before November 31st, 1939, but it failed to make this deposit also.

5. On February 3rd, 1940, the shareholders of the Company passed a resolution (a) directing the Company to be wound up voluntarily for the purpose of effecting its reconstruction by converting it into a mutual insurance Company under sec. 54 of the Insurance Act; and (b) appointing Mr. P.K Mitra as liquidator for winding up and re-construction of the Company.

6. On May 25th, 1940, registration of the Company was cancelled for failure to pay two deposits of Rs. 9,638 by October 31st and December 31st, 1939.

7. On May 27th, 1940, a Committee of Inspection (Respondents Nos. 2 to 5) was appointed under sec, 209 (c) of the Companies Act.

8. On June 8th, 1940, Maya Palit, (Respondent No. 8), one of the policyholders of the Company whose policy had matured, made an application to wind up the Company compulsorily. This application was adjourned sine die.

9. On June 17th, 1940, Mr. S.N Mitra (Respondent No. 1) was appointed liquidator in place of Mr. P.K Mitra.

10. On August 27th, 1940, a scheme of reconstruction of the Company was submitted to Court by Respondents Nos. 2 to 5. On August 28th, 1940, Lort-Williams, J., ordered the liquidator to convene a meeting of the creditors and policy-holders. On September 27th, 1940, this scheme was passed at a meeting of the creditors and policy-holders of the Company. On November 15th, 1940, Mr. Humphreys made his report on this scheme. On December 2nd, 1940, the learned Judge refused to sanction this scheme and directed a fresh meeting of the creditors and policy-holders for reconsideration of the scheme.

11. On March 31st, 1941, an application was made on behalf of the Superintendent of Insurance for winding up the Company under sec. 53 (2)(b) of the Insurance Act, 1938.

12. On April 3rd, 1941, a joint meeting of the creditors and policy-holders was held for consideration of the following scheme of reconstruction:

Requirements under the New Act (Insurance Act of 1938) for a Mutual Company.

“A. Initial Security Deposit Rs. 25,000 B. Balance Rs. 1,75,000 to be deposited by yearly installments at 1/3 of the gross premium income … C. Working Capital … Rs. 15,000 D. Registration fee … Rs. 100”

“II. Present position of the Company.

A. Assets (tangible) Govt. Securities … Rs 1,05,000 Cash with Reserve Bank … Rs. 6,000 Rs. 1,11,000

B. Policy Liabilities– (i) According to Mr. J.C Sen's Valuation … Rs. 1,36,000 (ii) According to Mr. H.L Humphrey's Valuation Rs. 1,70,000 C. Deficit according, i, Mr. Sen Rs. 22,500 … … i.e 17% (ii) Mr. Humphrey … Rs. 56,500 i.e 33½%

“III. Procedure to be adopted (by order of Court).

1. To reduce the policy contracts, policy liabilities and sundry liabilities by 37½ per cent, (accepting Mr. Humphrey's valuation though his valuation has been made on a very stringent basis). If any policy-holder discontinue his policy within three years from the date of reconstruction, his benefit) on the policy shall be further reduced by 12½ per cent.

2. To withdraw from the Reserve Bank—

(a) Rs. 30,000 (approximately) to meet outstanding claims after reduction.

(b) Rs. 45,000 to provide for further claims to arise upto 1943.

(c) Rs. 5,000 to pay to sundry creditors and law expenses.

The amount of Rs. 45,000 as per (b) will be kept invested in approved securities to keep more than 55 per cent of policy liabilities invested in approved securities as required under the Act. But they will be lodged with the Banker of the Company as a deposit and not with the Reserve Bank as security deposit (statutory).

3. To keep the balance as security deposit with the Reserve (Bank for new registration) ..Rs. 30,000.

4. It is assumed that the Company will be managed toy premium income and in case any emergency arises the management undertakes not to spend any amount from the reserved fund for the further claim tout will raise necessary money to meet requirements”.

“IV. Position after reconstruction.

A. Assets.—

Deposit with the Reserve Bank .. Rs. 30,000

B. Liabilities—

According to Mr. Humphrey Rs. 1,11,000 less amount provided for in III.

After reconstruction the company will be solvent and sound.

In future if expenses are made according to suggestion of actuary there is no reason why the Company should not prosper.

Management.

The Company will be managed by a Board of Directors which will be elected from Policy-holders.

The first Board of Directors will foe nominated from the existing policy-holders, and election will be held in January after preparations have been made to meet the requirement of new Act and reconstruction”.

13. The result of the voting at the meeting was, on the basis of the nominal value of the policies and of creditors dues, in favour of the scheme 75.3 and against it 24.7 and on the basis of the paid-up value of the policies and of creditors' dues, in favour of the scheme 67.8 and against it 32.2

14. On May 19th, 1941, the Liquidator (Respondent No. 1) made an application to Court for sanction of the scheme of reconstruction. Notice of this application was given to the Superintendent of Insurance under sec. 106A of the Insurance Act.

15. On June 16th and 23rd, 1941, the scheme passed at the joint meeting of the creditors and policy-holders held on April 3rd, 1941, came up for the consideration of Lort-Williams, J. The Superintendent of Insurance and Respondents Nos. 6 to 14 (some of the policy-holders of the Company) opposed the scheme. The learned Judge overruled their objections and sanctioned the scheme subject to the modification that the liability of the policy-holders will be limited to Rs. 10 each. The application of the Superintendent of Insurance which was made on March 31st, 1941, and the application which was filed by Respondent No. 8 on June 8th, 1940, were disposed of by the learned Judge thus:

“The application dated 31st March for winding-up is adjourned sine die. Both this application and the winding up application made in June, 1940, which has already been adjourned sine die, will depend upon whether the sanctioned scheme is carried into effect. If and when that has been done, both applications will stand dismissed.”

16. The learned Judge gave liberty to the parties to apply for directions.

17. On June 30th, 1941, the learned Judge ordered the Reserve Bank of India to make over to the liquidator the securities held by it as deposit in the name of the Company and gave certain other directions.

18. On July 28th, 1941, the Governor-General in Council and the Superintendent of Insurance filed the present appeal.

19. A preliminary objection has been taken on behalf of the Committee of Inspection (Respondents Nos. 2 to 5) to the competency of this appeal.

20. The argument in support of this preliminary objection is two-fold:

(1) The order appealed against is a composite order under sec. 153 of the Companies Act and secs. 9 and 61 (1) of the Insurance Act, 1938. The portions of the order made under the Insurance Act are not appealable. The appeal, therefore, so far as it is against the orders under the Insurance Act is incompetent.

(2) Assuming that the order appealed against is appealable the Appellants have no right to maintain this appeal.

21. The effect of the order appealed against is that the original Company limited by shares will be dissolved and a new mutual Insurance Company (i.e, a Company which has no share capital and of which all policy-holders are members) with limited liability will be created. If the Court under sec. 153 of the Companies Act sanctions the reconstruction of a Company other than an Insurance Company by dissolution of the said Company and creation of a new Company it is not disputed that such an order is an order under sec. 153 read with sec. 153 (A) of the Companies Act and is, therefore, appealable, even though the scheme involves the transfer of the properties of the dissolved Company to the new Company and the reduction of the liabilities of the dissolved Company. Where, as in the present case, the Court sanctions a scheme of reconstruction of an Insurance Company by its dissolution and creation of a new Insurance Company involving the transfer of the money deposited by the dissolved Company under sec. 7 of the Insurance Act [a property within the meaning of cl. (a) of sec. 153 (A) of the Companies Act] and the reduction of contracts of insurance it does so under sec. 153 of the Companies Act as the jurisdiction of the Court under sec. 153 of the Companies Act to sanction such scheme has not been in any way affected by any provision of the Insurance Act though in the exercise of this jurisdiction the Court is to keep in view the provisions of sec. 8, sec. 36 and sec. 61 of the Insurance Act. I am, therefore, of opinion that the order sanctioning the scheme is an order under sec. 153 read with sec. 153 (A) of the Companies Act and is, therefore, appealable under cl. (7) of sec. 153 of the Companies Act.

22. The contention of Mr. Ghosh on behalf of Respondents Nos. 2 to 5 is that right of appeal must be conferred expressly by a statute and as cl. 15 of the Letters Patent is not attracted to orders under sec. 9 and sec. 61 of the Insurance Act and as the Insurance Act does not provide for any appeal against orders under sec. 9 and sec. 61 of the Act, no appeal lies against orders under those sections.

23. Orders under sec. 9 and sec. 61 of the Insurance Act are made by “the Court” which includes the High Court in the exercise of its Ordinary Civil Jurisdiction [sec. 2, cl. (6) of the Insurance Act]. Under cl. 15 of the Letters Patent appeals to the High Court lie from the judgment of one Judge of the High Court or of one Judge in any Division Court in all cases except in the following instances, viz.:

(1) An order made in the exercise of Revisional Jurisdiction.

(2) A sentence or order passed or made in the exercise of power of superintendence.

(3) A sentence or order passed or made in the exercise of Criminal Jurisdiction.

(4) A judgment passed in the exercise of the jurisdiction to hear appeals from Appellate decrees made by a Court subject to the superintendence of the High Court unless the Judge who passed the judgment declares that the case is a fit one for appeal.

24. Cl. 44 of the Letters Patent is in these terms:—

“And we do further ordain and declare that all the provisions of these our Letters Patent are subject to the legislative powers of the Governor-General in Legislative Council and also of the Governor-General in Council under see. 71 of the Government of India Act, 1915, and also of the Governor-General in cases of emergency under sec. 72 of that Act, and may be in all respects amended and altered thereby.”

25. It is argued by Mr. Ghosh that cl. 15 of the Letters Patent does not apply to orders of a Judge of the High Court under the Insurance Act as it refers to judgment in matters over which Supreme Court had jurisdiction before the Letters Patent.

26. The Supreme Court had jurisdiction over Company matters under Act XIX of 1857 and Act VII of 1860. The Companies Act and the Insurance Act of 1938 simply enlarged the jurisdiction of the High Court

“with all its incidents including a right of appeal to a new matter closely resembling in character those matters over which it has already jurisdiction as a court of law.”

27. [See the observation of Lord Atkinson in National Telephone Company, Limited v. His Majesty's Postmaster General(1)].

“When a question is stated to be referred to an established court without more it …. . imports that the ordinary incidents of the procedure of that Court are to attach and also that any general right of appeal from its decision likewise attaches “[Per Viscount Haldane,. L.C, in the National Telephone Co., Ltd. v. Post Master General].

28. Where by statute matters are referred to the determination of a Court of record with no further provision the necessary implication is that the Court will determine the matters as a Court. Its jurisdiction is enlarged but all the incidents of such jurisdiction including the right of appeal from its decision remain the same (per Lord Parker, Ibid p. 562). If the ordinary Courts of this country are seized of any dispute by virtue of the provisions of a statute it would require a specific limitation to exclude the ordinary incidents of litigation including the right of appeal from the decision of such Courts [Secretary of State for India, in Council v. Chelikani Rama Rao(2), Mating Ba Thaw v. Ma Pin(3) and Hem Singh V. Basant Das(4)].

29. It is contended by Mr. Ghosh that the provisions of sec. 110 of the Insurance Act exclude the right of appeal under cl. 15 of the Letters Patent. This section, however, does not deal with appeals from the orders of “the Court.” It deals with appeals from the orders of certain officers under the Act. In the absence of any specific provision appeals against orders of officers under the Act to the Court would not be competent. It was, therefore, necessary to lay down in sec. 110 of the Act that certain orders of officers under the Act would be appealable to “Court.” In other words the object of sec. 110 was not to curtail the right of appeal under cl. 15 of the Letters Patent against orders of “the Court” under the Act but to extend the right of appeal against certain orders of officers under the Act which would not be otherwise appealable. This section does not contain any specific limitation to exclude the right of appeal against judgment of the “Court” under cl. 15 of the Letters Patent. There is no provision in the Insurance Act which takes away this right of appeal from the judgment of a single Judge of the High Court in matters arising out of the Insurance Act either expressly or by necessary implication. I am, therefore, of opinion that orders of the “Court” under the Insurance Act are appealable under cl. 15 of the Letters Patent in cases where such orders are “judgments” within the meaning of the said clause.

30. An order under sec. 9 directing the refund of the deposits under sec. 7 finally determines the right of the insurer to get refund and the liability of the Reserve Bank of India to refund the deposits under sec. 7. It is therefore a “judgment” within the meaning of cl. 15 of the Letters Patent.

31. It cannot be disputed that an order under sec. 61, cls. (1) and (2) of the Insurance Act reducing the amount of the insurance contracts finally determines the rights of the policy-holders under policy contracts and the liability of the Insurance Company under these contracts. These orders, therefore, are also “judgments” within the meaning of cl. 15 of the Letters Patent.

32. Mr. Ghosh's contention is that the Appellants have no right to appeal against an order under sec. 153 of the Companies Act as they are neither share-holders nor creditors. I am unable to accept this contention. My reasons are these: The whole foundation of the scheme is the withdrawal of the deposit under sec. 7 of the Insurance Act. No order for refund of this deposit under sec. 9 of the Insurance Act can be made unless the liabilities of the Insurance Company have been provided for. The scheme in question purports to provide for the liabilities of the Company from this deposit. If the sanction of the scheme is not in accordance with law or if the scheme does not adequately provide for the liabilities of the Company, the liabilities of the Company cannot be said to have been provided for as required by sec. 9 of the Insurance Act and no order under that section can be made with the result that the whole scheme automatically fails.

33. The deposit under sec. 7 of the Insurance Act with the Reserve Bank of India is for or on behalf of the Central Government, i.e, the Governor-General in Council. The Governor-General in Council was not a party to the proceedings in the trial Court. An appeal at the instance of a person not on the record is maintainable where his interest in the subject-matter of the dispute will be bound by the judgment or order [see Daniel's Chancery Practice, 7th Edition, Volume 1, p. 1042, In re: Securities Insurance Company(5)]. An order under sec. 9 is binding on the Governor-General in Council. The latter has a statutory right to retain the deposit under sec. 7 until and unless the events justifying an order under sec. 9 have happened. He has, therefore, an interest in the deposit which entitles him to appeal against the order under sec. 9.

34. The Superintendent of Insurance is an officer appointed by the Central Government to perform certain duties under the Insurance Act (sec. 2, cl. 15). By sec. 106 (a) of the Insurance Act when an application is made to the Court for the making of any order under sec. 9 the Court is bound, unless the Superintendent of Insurance has himself made the application or has been made a party thereto, to send a copy of the application together with the intimation of the date fixed thereof and shall give him an opportunity of being heard. Notice under sec. 106 (a) was served on him. He was made a party to the proceeding by service. He opposed the application and the decision was against him. I am, therefore, of opinion that he is entitled to appeal. Crawcour v. Salter(6), In re: Lamb, Ex-parte. The Board of Trade(7) and the observations of the majority of the Judges in Ex parte Official Receiver, In re: Reed, Bowen & Co.(8). Again, the Superintendent of Insurance, before the orders under sec. 9 and sec. 61 were made, made an application for winding up the Company under sec. 53 (2)(b) of the Insurance Act and asked the Court to proceed with his application for winding up. The effect of sanctioning the scheme is dismissal of his application. There is, therefore, no reason why he should not have also the right to appeal against the order complained of.

35. For reasons given above I overrule the preliminary objection of Respondents Nos. 2 to 5 to the competency of this appeal.

36. The scheme in question was sanctioned by Lort-Williams, J., under sec. 153 of the Companies Act. The material provisions of this section are:

“(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-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 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.”

37. In sanctioning a scheme under this section the Court does not simply register a resolution passed by the majority of the creditors or the shareholders. It must look at the scheme and see whether the Act has been complied with and whether the scheme is a reasonable or whether there is such an objection to it that any reasonable man might say that he could not approve of it [In re: Albama, New Orleans, Texas and Pacific Junction Railway Co.(9)]. It is true that if the creditors act on sufficient information, and act honestly, they are much better judges of what is to their commercial advantage than the Court can be, but that is not conclusive because there might be some defect in the scheme which they did not notice [In re: English Scottish and Australian Chartered Bank(10)].

38. Sec. 153, cl. (1) contemplates the division of creditors into different classes.

39. The reason for dividing the creditors into different classes is that they have different interests. If different states of facts exist among different creditors which may differently affect their minds and their judgment they must be divided into different classes. The word “class” in cl. (1) has not been defined in the Act. We must, however, give this word such a meaning as will prevent the section being so worked as to result in confiscation and injustice and that it must be confined to those persons whose rights are not so dissimilar as to make it impossible for them to consult together with a view to their common interest. In this case the learned Judge ordered a joint meeting of creditors and policy-holders. Policy-holders whose policies have ripened into debts have a vested cause of action. They can sue the Company for the money due which is an ascertained sum. Their interest is entirely different from that of those policy-holders whose policies might not ripen into debts for years to come and whose future is entirely uncertain. It was, therefore, not right to summon a joint meeting of the creditors and all policyholders [Sovereign Life Assurance Company v. Dodd(11)]. Cl. (2) of sec. 153 lays down that the majority must represent three-fourths in value of the creditors or class of creditors. In this case the majority who voted for the resolution represented three-fourths of the nominal value of the policies. The question is what is the meaning of the word “value.” The learned Judge has observed:

“It seems to me …. that neither the Chairman of the meeting nor the Court in the usual course of the proceedings can ascertain what is the real value of policies issued by an insurance company. Neither the paid-up value nor the nominal value appears to be the real value of the policies. The real value is the value of the reversion and it depends upon the life-insured person's expectation off life. In these circumstances and in view of the fact that it is impracticable to try and ascertain the true or real value of the policies I have come to the conclusion that the nominal value of the policies must be accepted for the purpose of ascertaining majorities at meetings held to approve or disapprove of a scheme of compromise.”

40. The scheme involves the reduction of policy contracts. In such a case the value of the liabilities of the Company and of all claims in respect of the policies issued by it is to be ascertained by Court having regard to the rule contained in the Sixth Schedule of the Insurance Act [sec. 55, cl. (2) of the Insurance Act]. It is an admitted fact in this case that no attempt was made to ascertain the value of the policies with reference to the said rule. I am, therefore, of opinion that the resolution sanctioning the scheme was not passed by the majority as contemplated by sec. 153, cl. (2) of the Companies Act.

41. The learned Judge has said that

“The scheme is a fair one and that there is every possibility of the new Company being and remaining solvent.”

42. The present position of the Company is that it is insolvent. The object of reconstruction is to make it solvent. An examination of the scheme, however, will show that its position after reconstruction will be this: (a) assets Rs. 30,000 and (b) liabilities Rs. 31,000. In order to convert the Company into a mutual Insurance Company a working capital of Rs. 15,000 and an initial security deposit of Rs. 25,000 would be necessary in view of the provisions of sec. 97 and sec. 98 (2) of the Insurance Act respectively. In other words, in order to start the Mutual Company Rs. 10,000 more would be required. There is no provision in the scheme where this money is to come from. No provision has been made for payment of monies of policy-holders whose policies have ripened into debts. Their dues were Rs. 23,943-8 as as on 31st December, 1938. Reduction by 37½ per cent would bring it down to Rs. 14,400. This blot in the scheme remained unobserved at the time when the resolution was passed. After reconstruction the new Company will have to meet the expenses of management and to pay the amount which will fall due on account of policies after 1943. In the scheme” it is stated:

“it is assumed that the company will be managed by premium income and in case any emergency arises the management undertakes not to spend any amount from the reserve fund for the further claim but will raise necessary money to meet requirements.”

43. There is nothing in this case to indicate that at the time of the meeting the policy-holders had any information as regards the premium income of the new Company. They had also no information as to how the money required for emergency expenses is to be raised. In the scheme it is also stated that

“in future if expenses are made according to suggestions of the Actuary there is no reason why the Company should not prosper.”

44. There is nothing to show that the suggestions of Actuary referred to in the scheme regarding expenses were placed before the meeting. The majority who passed the resolution apparently had no information on this point. It is, therefore, clear that the policyholders had no sufficient information regarding important matters involved in the scheme. I am not at all satisfied that the policy-holders will benefit by the scheme. I am inclined to think that their position would be worse if the Company is not now wound up.

45. The result, therefore, is that this appeal is allowed and the order appealed against and the directions given by the learned Judge in pursuance of the said order are set aside. The applications of the Respondent Nos. 2 to 5 and the liquidator for sanctioning the scheme are rejected. It is further directed that the application of the Respondent No. 8 and of the Superintendent of Insurance be heard as early as possible.

46. The Superintendent of Insurance and the Governor-General will get their costs against the Respondents Nos. 2, 3, 4 and 5 but those costs will be limited to those of one day's hearing in the appeal. The Respondents Nos. 6 to 14

47. will likewise get their costs as against the Respondents Nos. 2, 3, 4 and 5 also on the basis of one day's hearing. The liquidator will be entitled to take the taxed costs incurred by him in these proceedings out of the assets of the Company other than the deposit made under sec. 7 of the Insurance Act.

48. No costs that have been ordered in any of these proceedings are to be paid out of the sum deposited with the Governor-General in the Reserve Bank.

49. Certified for two Counsel.

Derbyshire, C.J:— I agree. The position of the Court when it is asked to sanction a scheme of arrangement under sec. 153 of the Indian Companies Act is, I think, shortly summarised by Maugham, J., in the case of In re: Dorman, Long and Company, Limited(12) as follows:

“What I have to see is whether the proposal is such that an intelligent and honest man, a member of the class concerned and acting in respect of his interest, might reasonably approve.”

51. In this case, I think the duty of the Court goes further, because in addition to observing the provisions of the Companies Act we must have regard to the provisions of the Insurance Act which was passed in order to protect the interests of policy-holders and those who derive benefits under them; and in my view the Court must be satisfied that the scheme proposed is under the circumstances prevailing for their benefit.

52. In August last an application was made to a Bench over which I presided for stay of an order which had been made by the learned Judge pursuant to the scheme. That order, inter alia, directed the Reserve Bank of India to pay over to the liquidator the securities held by the Reserve Bank under the provisions of the Insurance Act and also that the liquidator should set aside part of the securities so handed over to meet certain liabilities to the amount of Rs. 8,000 in respect of (inter alia) costs of litigation and other matters. It was further ordered that upon the formation of the new Company and its registration under the Insurance Act the present Company should be dissolved without the winding up being completed.

53. That order, which was a necessary corollary to the sanctioning of the scheme, on the face of it ordered the payment of moneys which were directed by the Insurance Act to be deposited with the Reserve Bank as a security for the policy-holders, to be used for other purposes, and other purposes clearly contravening the provisions of sec. 7 of the Act. The order was manifestly illegal and stay of it was made pending the hearing of this appeal. It was pointed out to the Bench at that time that the scheme which had been approved by the creditors had been sanctioned with an alteration by the Court.

54. There had been previously reports upon the scheme by Actuaries, but upon it appearing that the scheme had been modified by the order of the Court I directed that the scheme as sanctioned by the Court should be examined by an Actuary on behalf of those who favoured the scheme and also an Actuary on behalf of the Superintendent of Insurance. Those reports have been before us in these proceedings. Paragraph 7 of Mr. Sen's report made to the Committee of Inspection reads as follows:

“Granting that the present position is more or less unaffected, it is to be considered whether it is possible for the Company to carry on independently after reconstruction. In able hands it may be possible to keep the concern going under the following conditions:

(1) The existing business should be run as a closed section and not more than 20 per cent, of the future premium collection, of this section should be spent in expenses. This will mean that the position of the existing policy-holders will Hot deteriorate.

(2) The new business should be financed entirely out of the new premium income. I would suggest that the premiums should be recast with proper loading for expenses and on basis of mortality and interest more likely to be experienced in future and the expenses should be strictly limited; to the provisions for expenses contained in the premiums.

(3) The Company would thus be more or less in the position of a new mutual life insurance company and the task of running it would be similar. Of course much will depend on the future management of the company and if, by its efficiency, the Company is kept going the interests of the policy-holders would in my opinion foe better served than by a liquidation, for the simple reason that some of the policy-holders may have become uninsurable and would not get cover of life insurance, even for the reduce sums assured elsewhere. The only other alternative would be to transfer the business of the ‘company to another sound concern after modification of the contracts in the light of a more up-to-date valuation.”

55. There are many “ifs” about that report and looking at it broadly it would appear that the Actuary himself was in considerable doubt as to whether the reconstructed Company with the reduced policies would be able to carry on the business of the present Company in a solvent condition. On the other hand in paragraph 6 of the report made by the Actuary, Mr. Krishna Murty, Deputy to the Superintendent of Insurance, it is stated:

“It is therefore the considered conclusion of the Superintendent of Insurance that, even from a strictly actuarial point of view, the reconstruction scheme mill not make the company solvent and sound, the assumptions made about future expenses cannot and will not be fulfilled in this case and that if the company is allowed to continue the policy-holders mill not only lose what little they may get to-day in winding up out of the deposit held by the Reserve Bank but will be forced to lose more by way of the further premiums they would be bound to pay consequent on the scheme toeing accorded the sanction of the Court.”

56. This sanction, as my brother Nasim Ali, J., has pointed out, was given after a meeting of the creditors which was not convened in accordance with the provisions of the Act. The policy-holders did not have before them a proper valuation of each policy. They were not in a position to judge adequately for themselves what the outcome of the scheme would be. The Court before it can sanction a valid scheme must be satisfied that it is under the circumstances prevailing for the benefit of the policy-holders. Reading the two Actuaries' reports there can be no doubt that the balance of expert opinion is against the scheme proposed. Looking at it broadly one could have very little confidence in a Company which is to start from the foundation of an insolvent Company without any reasonable certainty that it will be expertly managed. The matter will go back to the learned Judge who deals with Company winding up and he will have the benefit of the reports of the Actuaries and of the observations that have been made by this Court.

57. There is one matter that might be taken into consideration by the liquidator and the policy-holders and that is the suggestion made by Mr. Sen, the Actuary, that the business of this Company might be transferred to another existing sound Insurance Company; but that is a very different matter from what has been proposed in this case, viz., the transfer of the business of the Company and its liabilities to its policyholders to a Company not yet in existence whose solvency is problematical and whose management is unknown.

58. I agree that this appeal must be allowed and the matter must go back to the winding up Court to be dealt with there by the learned Judge dealing with winding up matters.

Solicitors: S.C Sen for the Appellant; D.P Roy, A.K Bey and J.C Basu for the Respondents.

C.C