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TMI Blog1961 (12) TMI 43X X X X Extracts X X X X X X X X Extracts X X X X ..... nsfer the undertaking by the directors clearly does not violate section 86H for it is merely tentative, subject to final approval by the company in general meeting. In the present case, the defect, if any, arose from a statutory provision itself of which the shareholders must be deemed to have had knowledge. It is not possible to take the view that a transfer cannot be sanctioned under section 36 if the result of that is to denude the transferor company of all its assets out of which an agent can be paid his commission. In the present case, he actually heard the policy-holders. Therefore, it does not seem to us that it can be contended with substance that sections 35 and 36 of the Insurance Act are not pari materia with the sections of the Companies Acts to which we have earlier referred. The last point of Mr. Sinha must also fail. Appeal dismissed. X X X X Extracts X X X X X X X X Extracts X X X X ..... undertaking. The transfer in this case is an exercise of this power and hence within the objects of the company. An exercise by a company of a power given by its memorandum cannot amount to an alteration of the memorandum at all. It is then said that that clause only authorised a sale and that a sale is a transfer for a consideration. It is contended that in the present case there was no consideration moving from the transferee company and, therefore, the transfer was not by way of a sale. This, it is contended, was, therefore, a transfer without any power in that regard in the memorandum and hence in substance amounts to unauthorised alteration of it. We were referred to various balance sheets and other figures in support of this contention. This point as to want of consideration was not taken in the petition and the High Court did not permit it to be raised. We have, therefore, to proceed on the basis that the transfer was a sale. We wish however to make it clear that we are not deciding what is enough consideration for a sale, nor whether a transfer not authorised by the memorandum would amount to an alteration of the memorandum. What we have said furnishes enough answer to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y at a general meeting by about 82 per cent, majority. It was after such approval that the transfer had been sanctioned under section 36 of the Insurance Act and may be, though we do not have this on the record, the transfer was effected by proper documents executed between the companies. An agreement only to transfer the undertaking by the directors clearly does not violate section 86H for it is merely tentative, subject to final approval by the company in general meeting. This we think is by itself sufficient answer to Mr. Sinha's present contention. Mr. Sinha, however, says that the approval by the company at its general meeting was of no use because the defect in the original agreement, namely, that the directors had no power to transfer in view of section 86H, was not pointed out at that meeting to the shareholders. It is somewhat difficult to appreciate this point. There was no defect in the directors making the agreement to transfer ; such agreement did not effect the transfer. Even assuming that the agreement was beyond the power of the directors, it cannot be said that the approval of it by the shareholders had been without any knowledge of the defect. The defect was of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fect of such dealing might be that nothing is left out of which the agents can be paid their commission. Furthermore, it has to be remembered that what has been done in this case has been done under the same Act. Section 36 of the Insurance Act does not say that a transfer shall not be sanctioned if the effect of it is to leave no assets with the transferor company. Reading the two sections together, as we must do, it is not possible to take the view that a transfer cannot be sanctioned under section 36 if the result of that is to denude the transferor company of all its assets out of which an agent can be paid his commission. A further point is based on article 14 of the Constitution. It is said that there were other insurance companies in the same insolvent position as the transferor company and that the policy-holders of the latter company alone were being made to suffer. It may be stated here that the transfer involved a condition affecting slightly adversely the rights of the policy-holders. It does not seem to us, however, that any question of discrimination arises in the present case. The transfer was sanctioned with the assent of the shareholders of the two companies conce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as apply to be heard and any other persons whom he considers entitled to be heard, may sanction the arrangement, if he is satisfied that no sufficient objection to the arrangement has been established and shall make such consequential orders as are necessary to give effect to the arrangement, including orders as to the disposal of any deposit made under section 7 or section 98." It would appear from the terms of section 35(3) that it contemplates the following steps : (a)A notice of the intention to make an application to the Controller of Insurance for sanction of the transfer has to be given to him. (b)Thereafter, together with the notice, certain specified documents have to be kept open for the inspection of the shareholders for two months. (c)After the expiry of the period of two months, an application has to be made to the Controller of Insurance for sanction of the transfer. Now, what had happened in this case was that the notice contemplated by section 35(3) was given on July 27, 1951, and the necessary documents were kept open for inspection. Before the application to the Controller was made, the directors of the companies were in touch with the Controller in regard t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Mr. Sinha points out--and in this he is right--that after notice under section 35(3) had been issued, the scheme of transfer had been modified and it was such modified scheme that was sanctioned by the Controller. Mr. Sinha's point is that under section 36 the Controller could only sanction the scheme of which notice had been given under section 35. He, therefore, contends that the sanction granted by the Controller in this case was not in terms of the section and hence a nullity. The learned Solicitor General appearing to oppose the appeal contends that on a proper construction of the sections the Controller had power to sanction a scheme modified after notice under section 35(3) had been issued. It is, however, unnecessary in this case to decide the question so raised. We will assume for the present purpose that under section 36(1) only the scheme of transfer in respect of which notice under section 35(3) had been given could be sanctioned and not a modified version of it. The scheme and the resolution of the shareholders of the transferor company approving it, however, both provided for its modification later at the suggestion of the Controller and gave power to the directors ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned. Mr. Sinha contends that the authorities on the Companies Act earlier referred to had no application to the present case. He says that the sections of the Companies Acts on which these authorities turned were not pari materia with sections 35 and 36 of the Insurance Act. His contention is that the object of these sections of the Insurance Act was to protect the shareholders and policy-holders of the company and that they would be deprived of that protection if a scheme modified subsequently to the issue of the notice under section 35(3) could be sanctioned. We do not think that this contention is well-founded. So far as the policy-holders are concerned, they have nothing to do with the approval of the scheme. The scheme of transfer was agreed to between the shareholders of the companies concerned in the deal. Assume, as Mr. Sinha says, that under the Insurance Act, as it is under the Companies Act, it is the shareholders who must agree to the scheme. In the cases falling under the Companies Act, it is for protecting the shareholders that it has been held that the court cannot modify the scheme unless the scheme itself gives the court the power to do so. On the assumption made ..... X X X X Extracts X X X X X X X X Extracts X X X X
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