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TMI Blog1956 (1) TMI 14X X X X Extracts X X X X X X X X Extracts X X X X ..... fixed to be held on the 9th and 10th of November, 1953. The first three meetings were held on the 9th and 10th of November, 1953. But on the 10th of November, 1953, respondent No. 1 made an application to the court that the meeting of the ordinary shareholders be postponed because there was a dispute between him and the Central Bank of India with regard to the title to about Rs. 8 lakhs worth of shares and also as to which party had the right of exercising his vote. The meeting was adjourned by the court to the 12th of December, 1953, and later on there was another order of the court dated the 12th of January, 1954, adjourning the meeting sine die. The dispute between the respondent No. 1 and the Central Bank of India as regards the transfer of rupees eight lakhs worth of shares was decided by the Company Judge on the 22nd of January, 1954, and that decision was confirmed by a Bench of this Court on Letters Patent Appeal on the 8th of November, 1954. On the 6th of May, 1955, respondent No. 1 prayed that the postponed meeting of the shareholders may be held. The court directed that the meeting should be held on the 26th of June, 1955, and on that date the meeting of ordinary ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ess than one month in order to enable the petitioners, who have filed petitions for an adjournment of the meetings to attend the adjourned meetings. Mr. Untwalia further undertakes to send intimation under certificate of posting to the shareholders informing them of the adjourned date of the meeting." The meetings of the preference shareholders and of ordinary shareholders were accordingly held on the 27th of November, 1955, but no business was transacted on that date and the meetings were adjourned to the 8th of January, 1956. On the 23rd of December, 1955, two applications were again filed before Jamuar J., one on behalf of appellants Nos. 1 and 2, and the other on behalf of appellants Nos. 3 to 44 along with seven other persons challenging the validity of the meetings held on the 27th of November, 1955. It was contended on their behalf that the meetings held on the 27th of November, 1955, were illegal because there was an omission to serve notice of the meetings at least twenty-one days before the date fixed for the meetings. It was pointed out that section 81(2) of the Indian Companies Act, 1913, required that at least 21 days' notice should be given if a special resoluti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l with two separate classes of special matters, and as a matter of construction I hold that both these special provisions are equally important and neither of the special provisions can be nullified or overridden by each other. It follows, therefore, that if there is a scheme or a proposed compromise which involves a dealing with reduction of share capital, the formalities prescribed not only by section 153 but also by section 55 have got to be complied with. That is the view expressed by Younger J. in In re White Pass and Yukon Rly. Co. Ltd. [1918] W.N. 323; 146 LT 23 This case has been cited with express approval in Buckley on the Companies Act, 12th Edition, page 414, where the following passage occurs : "The words at the end of this sub-section are taken from section 45 of the Act of 1908, repealed by the Act of 1928, which prescribed a separate and different procedure for effecting reorganizations of share capital of the two classes mentioned. Such reorganizations can now, even if they could not whilst section 45 was in force, be effected as arrangements with members under this section, as can also all other modes of reorganizing the share capital, even when involving ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... extraordinary resolution and at a general meeting of which not less than twenty-one days' notice specifying the intention to propose the resolution as a special resolution has been duly given : Provided that, if all the members entitled to attend and vote at any such meeting so agree, a resolution may be proposed and passed as a special resolution at a meeting of which less than twenty-one days' notice has been given." Reading sections 81(2) and 55 together, it is manifest that a resolution which involves a reduction of share capital can only be considered at a meeting of which not less than 21 days' notice has been duly given. Since there has been a violation of section 81 with regard to the period of notice, I think that the meetings held on the 27th of November, 1955, for considering the modification of the scheme must be held to be illegal and invalid. In support of my view, I would refer to the decision of the Privy Council in Garden Gully United Quartz Mining Co. v. McLister [1875] 1 App. Cas. 39; 33 LT 408 . A point was taken by Mr. Lalnarain Sinha that the modified scheme which was to be considered at the meetings held on the 27th of November, 1955, did not invol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of 40% of the face value of the shares out of Rs. 10,25,000 received from the preference trustees and with regard to the remaining 60% of the face value, the company would agree to allot redeemable preference shares of the face value of Rs. 100 each to the holders of the existing preference shares pro rata. It is clear that by payment in cash of 40% of the face value of the preference shares there is a corresponding reduction of the share capital of the company. Section 55 of the Indian Companies Act also contemplates that the share capital of a company can be reduced in any way. There may be such a reduction of share capital if the company returns part of the capital money to the preference shareholders in cash. There is an authoritative statement of law on this point at page 155 of Buckley on the Companies Act, twelfth edition: "A reduction therefore by which capital moneys are to be returned to some or one only and not to all of the shareholders may be resolved upon and confirmed if it be fair and equitable. To call such a transaction a purchase by the company of its own shares within Trevor v. Whitworth [1887] 12 App. Cas. 409; 57 LJ Ch. 28 which the court cannot ..... X X X X Extracts X X X X X X X X Extracts X X X X
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