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In Re: E.D. Sassoon United Mills Limited - Court Judgment

LegalCrystal Citation
SubjectCompany
CourtMumbai
Decided On
Judge
Reported in(1928)30BOMLR598; 110Ind.Cas.649
AppellantIn Re: E.D. Sassoon United Mills Limited
DispositionPetition dismissed
Excerpt:
indian companies act (vii of 1913), sections 54, 54(1), proviso, 81(3)-reorganize the of share capital-conclusiveness of chairman's declaration.;the memorandum of association of a company limited by shares fixed its authorized capital at rupees ten crores divided into twenty lacs preference shares of ea. 10 each and eighty lacs ordinary shares of rs. 10 each, of which twenty lacs preference shares and forty lacs ordinary shares were issued and were subscribed and fully paid. clause 5 of the memorandum of association provided inter alia that the preference shares shall confer the right to a fixed cumulative preferential dividend at the rate of 7 1/2 per cent, per annum on the capital for the time being paid up thereon and the right in a winding up to payment of capital and arrears of.....blackwell, j.1. this is a petition to sanction a reduction and reorganization of the capital of a company. the petition is opposed by certain shareholders of the company.2. the capital of the company as fixed by its memorandum of association is rs. ten crores divided into twenty lacs preference shares of rs. 10 each and eighty lacs ordinary shares of rs. 10 each, and the issued and subscribed capital of the company is twenty lacs cumulative preference shares of rs. 10 each and forty lacs ordinary shares of rs. 10 each. the whole of the issued and subscribed capital has been taken up and fully paid.3. article 52 of the articles of association of the company provides that the company may from time to time by special resolution reduce its capital as therein indicated. article 55 of the.....
Judgment:

Blackwell, J.

1. This is a petition to sanction a reduction and reorganization of the capital of a company. The petition is opposed by certain shareholders of the company.

2. The capital of the company as fixed by its memorandum of association is Rs. ten crores divided into twenty lacs preference shares of Rs. 10 each and eighty lacs ordinary shares of Rs. 10 each, and the issued and subscribed capital of the company is twenty lacs cumulative preference shares of Rs. 10 each and forty lacs ordinary shares of Rs. 10 each. The whole of the issued and subscribed capital has been taken up and fully paid.

3. Article 52 of the articles of association of the company provides that the company may from time to time by special resolution reduce its capital as therein indicated. Article 55 of the articles of association of the company is in the following terms:-

Whenever the capital, by reason of the issue of preference shares or otherwise, is divided into different classes of shares, all or any of the rights and privileges attached to each class may be modified, commuted, affected, abrogated, or dealt with by agreement between the company and any person purporting to contract on behalf of that class, provided such agreement is ratified in writing by the holders of as least three-fourths in nominal value of the issued shares of the class, or is confirmed by an extraordinary resolution passed at a separate general meeting of the holders of shares of that class and all the provisions hereinafter contained as to general meetings, shall mutatis mutandis, apply to every such meeting, but so that the quorum thereof shall be members holding or representing by proxy one-fifth of the nominal amount of the issued shares of the class. This clause is not to derogate from any power the company would have had if this clause were omitted.

4. Clause 5 of the memorandum of association of the company, which it is important to draw attention, is in the following terms:-

The capital of the company is Rs. 1,00,000,000 divided into 20,00,000 preference shares of Rs. 10 each and 80,00, 000 ordinary shates of Rs. 10 each, and such preference shares shall confer the right to a fixed cumulative preferential Mills dividend at the rate of 74 per cent, per annum on the capital for the time being paid up thereon and the right in a winding-up to payment of capital and arrears of dividend, whether declared or undeclared, up to the commencement of the winding up in priority to the ordinary shares, but shall not confer any further right to participate in profits or assets. And upon any increase of capital the company is to be at liberty to issue any new shares with any preferential, deferred, qualified or special rights, privileges or conditions attached thereto. The rights for the time being attached to the preference shares in the initial capital or to any shares having preferential, deferred, qualified or special rights, privileges or conditions attached thereto, may be altered, or dealt with in accordance with Clause 65 of the accompanying articles of association but not so as to prejudice the preferential rights hereby attached to the preference shares in the initial capital.

5. Paragraph 10 of the petition stated that with a view to giving effect to the proposed reduction and reorganization of capital, a provisional agreement dated January 6, 1927, was entered into between the company of the one part and the Bombay Trust Corporation Ltd., on behalf of the holders of the preference shares of the company, of the other part, and that a similar provisional agreement of the same date was also entered into between the company of the one part and Mr. F.E. Dinshaw on behalf of the holdera of the ordinary shares of the company of the other part. These agreements were put in before me as Exhibits Nos. 2 and 3, the memorandum and articles of association of the company being put in as Exhibit No. 1.

6. The petition further stated that at a meeting of the preference shareholders of the company held on January 17, 1927, the following resolution was carried unanimously, namely, that the agreement dated January 6, 1927, and made between the company of the one part, and the Bombay Trust Corporation Limited on behalf of the preference shareholders of the company of the other part be ratified and confirmed. The petition further stated that the shareholders present at the said meeting formed the majority in number of the preference shareholders and held 1999400 preference shares of the company out of the 2000000 preference shares issued by the company, and that at a further meeting of the holders of preference shares of the company held on February 1, 1927, the above resolution was confirmed unanimously, the same shareholders being present as at the first meeting.

7. The petition also stated that at a meeting of the holders of the 1927 ordinary shares of the company held on January 17, 1927, the following resolution was put to the vote, namely, that the agreement dated January 6, 1927, and made between the company of the one part and Mr. F.E. Dinshaw on behalf of the ordinary shareholders of the company of the other part he ratified an(J confirmed. On a show of hands sixty-four shareholders voted for the resolution and fifty voted against the same. A poll was duly demanded and taken and as the result of the poll, the resolution was carried, 147098 votes being recorded for the resolution and 4300 votes against the resolution.

8. The petition further stated that by special resolutions of the company duly passed and confirmed in accordance with the provisions of the Indian Companies Act, 1913, at extraordinary general meetings of the company held respectively on January 17, 1927, and February 2, 1927, it was resolved as follows :-

1 (a) That the capital of the company be reduced from Rs. 10,00,00,000 to Us. 2,50,00,000 by canceling 40,00,000 of the existing ordinary shares which have not been issued and by canceling paid-up capital which has been lost or is unrepresented by available as Beta to the extent of Rs. 3,50,00,000.

(b) That such reduced capital of Rs. 2,50,00,000 be divided into 20,00,000 ordinary shares of Rs. 10 each and 30,00,000 deferred shares of Rs. 1 each.

(c) That the existing 20,00,000 preference shares of Rs. 10 each be converted into 20,00,000 ordinary shares of Rs. 10 each.

(d) That the existing 40,00.000 ordinary shares of Rs. 10 each be converted into 40,00,000 deferred shares of Rs. 1 each.

2. That all arrears of dividend on the existing preference shares be extinguished and that 10,00,000 fully paid deferred shares of Re, 1 each be allotted to the holders of the existing preference shares rateably in proportion to the number held.

3. The rights and privileges of the ordinary and deferred shares respectively shall be as follows :-

(a) The profits of the company made during the financial year or other period comprised in the accounts submitted to the ordinary general meeting which it shall be determined to distribute in dividend with any profits carried forward from past years shall be applicable in order of priority in manner following :-

Firstly to the payment of a dividend at the rate of 67 per cent, per annum on the capital paid up on the ordinary shares to the close of such period.

Secondly to the payment of u dividend for such period at the like rate on the capital paid up on the deferred shares.

Thirdly the residue shall be applicable as to one half to the payment of a further dividend on the ordinary shares and as to the other half to the payment of a further dividend on the deferred shares.

(b) In case of a winding-up of the company the assets available for distrbution among the members shall be applied first, in paying off the capital paid up on the ordinary shares, secondly in paying off the capital paid up on the deferred shares and thirdly the balance (if any) shall be divided as to one half among the holders of the ordinary shares rateably in proportion to the number held and as to the other half among the holders of the deferred shares rateably in proportion to the number held.

(c) On a show of hands every member holding deferred share or shares only present in person shall have one vote, and every member holding ordinary share or shares present in person shall have ten votes. Upon a poll every member present in person or by proxy shall have one vote for every deferred share and ten votes for every ordinary share, held by him.

4. That the company's Memorandum and Articles of Association be altered United in accordance with the above resolutions.

9. According to the petition, at the meeting of January 17, 1927, fifty-nine shareholders voted for the resolution and thirteen'-'against. At the meeting of February 2, 1927, sixty-seven shareholders voted for the resolution and forty-two against, and on a poll being demanded and taken 1638047 votes were recorded for the resolution and 338745 votes against the same. The petition further stated that before the passing of these special resolutions, the paid-up capital of the company to the extent of rupees three crores and fifty lacs and upwards had been lost or was unrepresented by available assets, and that the reduction of the capital did not involve either any diminution of any liability in respect of unpaid capital or payment to any shareholders of any paid-up capital.

10. Several objections were taken to the scheme and to its approval by the Court. I will deal with each of the main objections in turn. In the first place, it was contended that the scheme cannot be proceeded with under Article 55 of the articles of association of the company, inasmuch as Clause 5 of the memorandum of association expressly provides that any alteration is not to prejudice the preferential rights hereby attached to the preference shares in the initial capital, In my opinion, this is clearly a valid objection. The rights attached to the preference shares by Clause 5 of the memorandum of association became rights unalterably attached unless and until these rights are modified in accordance with the provisions for modification of the memorandum of association provided for by any of the applicable sections of the Indian Companies Act itself, and not otherwise. If, therefore, and in so far as, any attempt has been made to alter those rights by virtue of the machinery of Article 55, in my opinion, such attempt is ultra vieas of the powers of the company. If that be the true view to be taken in this case, the reorganiation involved in this scheme could in ray judgment only be effected either under Section 54 of the Act, if that is applicable at all, or under Section 153 of the Act.

11. In the course of his argument Mr. Desai stated that this scheme was put forward not under or by virtue of the provisions of Article 55 of the articles of association, but under the provisions of a 54 of the Act. An argument was, however, adduced to me upon the position which has arisen in this case supposing that the scheme can be proceeded with under Article 65. I, Bassoon therefore, propose very shortly to deal with the argument.

12. It was said that having regard to the terms of Article 55, the agreement, which has been purported to be contracted between the company and any person contracting on behalf of a class, must be confirmed by an extraordinary resolution passed at a separate general meeting of the holders of the shares of that class, but the quorum must be the quorum of members holding or representing by proxy one fifth of the nominal amount of the issued shares of the class. Now in the case of the separate meeting of the ordinary shareholders, referred to in the petition, held on January 17, 1927, it is important to bear certain points in mind in connection with this argument. The nominal amount of the issued shares of this class was forty lacs. One-fifth of that would be eight lacs. The persons who were actually present at that meeting, as appears from the affidavit of Mr. C.J. Barrow,-the secretary of the company,-(Exh. No. 7), was 2054631 shares. If those figures are taken as being the number of persons actually present, then it is true that there was a quorum, but there was then no three quarters majority as required by the article. If, on the other hand, you take the number who actually voted, as being the number present, namely, 157000 odd, though I do not think that this is permissible, then there was no quorum as required by the article. In my opinion, therefore, the resolution purporting to have been passed at this meeting of the ordinary shareholders on January 17, 1927, was not properly passed and is accordingly invalid.

13. The next point arising for consideration is whether the scheme falls within Section 54 of the Act. The first part of that section is in these terms :-

54(1) A company limited by shares may, by special resolution confirmed by an order of the Court, modify the conditions contained in its memorandum so as to recognize it a share capital, whether by the consolidation of shares of different classes or by the division of its shares or by the division of its shares into shares of different classes.

14. It was contended by those opposing the confirmation of this scheme that the scheme does not fall within that section because there is under it no consolidation of shares into different classes and no division of shares into shares of different classes. In connection with this argument, the case of In re Palace Hotel, Limited [1912] 2 Ch. 438 was cited to me, In the course of his judgment in that case Swinfen Eady J. said with reference to the English section, namely, Section 45, which corresponds with Section 54 of the Indian Act, as follows (p. 414) :-

It applies to two modes of reorganizing share capital, namely, (a) the consolidation of shares of different classes into shares of one class and (6) the division of shares of one class into shares of different classes.

15. Reference was also made to the case of In re J. A, Nordberg, Limited [1915] 2 Ch. 439. where Neville J., referring to the distinction existing between the ambit of Section 120 of the English Act (which corresponds with Section 153 of the Indian Act) and Section 45 of the English Act (which corresponds-as I have pointed out before-with e, 54 of the Indian Act), said in reference to the arrangement proposed to be sanctioned in the case which he was considering (p. 441):-

If Section 120 includes such an arrangement it must include all alterations of the memorandum with regard to capital which do not come under Section 45, that is to say, which do not involve consolidation of shares of different classes or the division of shares into shares of different classes.

16. The contention of the opponents to the present scheme is that this scheme is not a scheme for the division of the shares of the company into different classes. They point out that the shares are already divided into different classes and that what this scheme involves is the total abolition of the existing classes into which the share capital of the company has been divided and the creation of other classes out of the re-organized capital, if that is sanctioned, Mr. Desai, on the other hand, argued that this was a completely erroneous interpretation sought to be placed upon the section. He said the words of the section are 'by the division of its shares into shares of different classes.' He contended that the company's shares are the existing preference shares and the existing ordinary shares, and he said that the present proposal is merely a proposal to divide up the company's existing shares into a division of ordinary shares and deferred shares. Accordingly, he contended that the scheme fell within the ambit of the section. I am unable to accept Mr. Desai's argument. In my judgment, the words in the section 'by the division of its shares into shares of different classes' assume the division of one class into shares of different classes. In order to give effect to Mr. Desai's contention, it seems to me that there would first have to be a consolidation of the shares already divided into a consolidated class followed by a division of shares of that class into shares of different classes. I do not think that this was ever contemplated by this section, or that the section has any application whatever to a scheme which is not really in my judgment a scheme for dividing shares into different classes, but a scheme for the total abolition of the existing classes and the creation of fresh classes of shares on a reorganization, if sanctioned. In this connection it must be borne in mind that when Mr. Desai in support of his contention said that the division contemplated is merely a division of the new reduced capital of 2,50,00,000 into different classes of shares, in my opinion, this is begging the question, because unless and until the capital is reduced, and the sanction of the Court is obtained for the reduction, it is impossible even to entertain the question of the division of that reduced capital into different classes of shares. In my judgment, therefore, the petitioners were not entitled to invoke the assistance of Section 54 of the Indian Companies Act. If I am right in my judgment upon the construction of that section, this alone is sufficient to dispose of this petition, it being admitted by Mr. Desai that he relies only upon a 54 for the re-organization of the capital, and upon Section 55 of the Act for the proposed reduction.

17. If, however, I am wrong in the construction which I have placed upon Section 54, and i f it is competent for the petitioners to rely upon that section, then a further point arises, and that is this: ought not a confirmatory resolution to have been passed in the same manner as a special resolution of the company at a separate meeting of ordinary shareholders of the company? That question depends upon the proper construction to be placed upon the proviso to Section 54(1) of the Act. That proviso is in these terms :-

Provided that no preference or special privilege attached to or belonging to any class of shares shall be interfered with except by resolution passed by a majority in number of shareholders of that class holding three-fourths of the shares capital of that class and confirmed at a meeting of shareholders of that class in the same manner as a special resolution of the company is required to be confirmed, and every resolution so passed shall bind all shareholders of the class.

18. It was contended by the opponents of this scheme that there were certain special privileges attached to or belonging to the ordinary class of shareholders of the company, and that accordingly their rights could not be affected, unless a resolution had been duly passed and confirmed as a special resolution as required by the proviso of the section, It is admitted that there was no confirmatory meeting to confirm as a special resolution, but merely an extraordinary resolution passed by the ordinary shareholders. It is further admitted that if this contention of the opponents of this scheme is right, the petitioners are out of Court.

19. Mr. Desai contended that there was no special privilege attach- - -J-ed to or belonging to the class of ordinary shareholders, He 1921 said that the meaning of Clause 5 of the memorandum of association of the company was merely this, that certain preference rights were given thereby to the preference shareholders, and that that clause did not in terms confer any right upon the ordinary shareholders. They got, he said, what was not expressly ' conferred by that clause on the preference shareholders, but it could not be called a special right.

20. The opponents of the scheme, on the other hand, contended, among other things, that Clause 5 of the memorandum of association undoubtedly conferred upon the ordinary shareholders, at any rate by implication, certain special privileges. They pointed out that under that clause the preference shareholders were given a fixed cumulative preferential dividend at the rate of 7 percent, per annum on the capital for the time being paid up thereon, and the right in a winding-up to payment-off of capital and arrears of dividend in priority to the ordinary shares, but that they were expressly deprived of 'any further right to participate in profits or assets.' They contended that this involved by implication the conferring upon the ordinary shareholders of the special privilege of participating to the exclusion of the preference shareholders in any surplus assets in a winding-up. They pointed out that but for this exclusion of the preference shareholders to share in a winding up in surplus assets, the preference shareholders would have been entitled to share in such surplus assets pari pasau with the ordinary shareholders. Accordingly, they argued that this exclusion of the preference shareholders from participating in surplus assets impliedly conferred upon the ordinary shareholders the special privilege of taking the whole of those surplus assets. In my opinion this is a special privilege attached to or belonging to the ordinary shareholders of the company by virtue of the memorandum of association of the company. Mr. Desai referred to In re Stewart Precision Carburettor Company Limited [1912] W.N. 100. In that case the capital of the company was fixed by the memorandum of association n at 10,000 divided into 4,000 six per cent, cumulative preference shares of 1 each, and 6000 ordinary shares of 1 each. The preference shares were preferential both as to interest and repayment of capital, and of the authorized capital 2000 preference shares and 6000 ordinary shares had been issued. By a special resolution of the company it was resolved that the existing capital of the company should be re-organized by the division of the preference shares into 3000 A shares of 1 each entitled to certain rights, and 1000 ordinary shares of 1 each ranking pari passu with the existing ordinary shares. No meeting of the ordinary shareholders had been called, and the question was whether the Court could accede to the prayer of the petition seeing that there had been no meeting of the ordinary shareholders. The petitioning company relied on the fact that by the memorandum of association no special privilege was attached to the ordinary share B and none had been, therefore, interfered with. In the note of the judgment of Mr. Justice Eve it was said :-

Undoubtedly the reorganization of the company's capital did interfere with the rights of the ordinary shareholders in that it transferred from them the right to participate in the surplus profits to the extent to which the preference shareholders were given an interest in such surplus profits. But his Lordship did not think that it could be strictly said that this right of the ordinary shareholder to receive such surplus profits was a preference or special privilege attached to or belonging to the class of ordinary shareholders, within the meaning of the section.

21. As to whether that decision was right or wrong, I do not myself think it necessary to express any opinion. I am satisfied in the present case, as I have said, that by the terms of Clause 5 of the memorandum of association of the company, there were special privileges attached to or belonging to the ordinary shareholders. By the present scheme the whole of these rights are completely wiped out. Indeed, the class itself is wiped out. I am, therefore, clearly of opinion that before the class of ordinary shareholders could be wiped out, and before the special privileges,-which I hold were conferred upon them by Clause 5 of the memorandum of association,-could be interfered with, it was certainly necessary that any extraordinary resolution passed at a separate meeting of the ordinary shareholders should have been confirmed as a special resolution as required by the proviso to Section 54(1) of the Act. If I am right in my view on this part of the case, again this petition must fail.

22. If, as I hold, the scheme does not fall within Section 54 of the Act, or, if contrary to my opinion, it does fall within it, and Section 54 has not, as I hold, been complied with, then it is admitted that the company has not purported to proceed under the only available section, namely, Section 153 of the Act.

23. A further question which was hotly contested, and upon which I will shortly express my opinion, was the question whether the extraordinary resolution moved at the meeting of the company held on January 17, 1927, was passed by the requisite majority. having regard to the terms of Section 81 of the Act? The relevant provisions of that section are as follows :-

81 (1). A resolution shall bean extraordinary resolution when it has been passed by a majority of not less than three-fourths of such members entitled to In re vote as are present is person or by proxy (where proxies are allowed) at a Sihsoow general meeting of which notice specifying the intention to propose the resolution as an extraordinary resolution has been duly given,

(2) A resolution shall be a special resolution when is has been-

(a) passed in manner required for the passing of an extraordinary resolution' and

(b) confirmed by a majority of such members entitled to vote as are present in person or by proxy (where proxies are allowed) at a subsequent general meeting of which notice has been duly given, the held after an interval of not less than fourteen days, nor more than one mouth, from the date of the first meeting.

(3) At any meeting at which an extraordinary resolution is submitted to be passed or a special resolution is submitted to be passed or confirmed, a declaration of the chairman on a show of hands that the resolution is carried shall, Unless a poll is demanded, be conclusive evidence of the fact without proof of the number or proportion of the votes recorded in favour of or against the resolution.

24. In this connection it must be borne in mind that such a resolution must be passed for the purpose both of Sections 54 and 55 of the Act as a preliminary to the passing of a confirmatory resolution. I do not think it necessary to deal with the figures relating to this question because I have coma to the conclusion that by reason of Sub-section (3) of Section 81, the declaration of the chairman of the meeting on the show of hands that the resolution was carried is conclusive evidence of that fact without proof of the number or proportion of the votes recorded in favour of or against the resolution, no poll having been demanded. The declaration of the chairman, as appears from the company's minute book, Exh. No. 5, shows that fifty-nine votes were cast in favour of the resolution and thirteen were against. The opponents of the scheme desired to be permitted to show from the minute book itself that at least 138 persons were present at the meeting, and to found thereon an argument that the declaration of the chairman was quite unjustified and unwarranted, and that in fact the resolution was not properly passed. In answer to this contention, Mr. Desai submitted that if the opponents were entitled to go behind the declaration of the chairman, he ought to be entitled to call the secretary of the company to prove what upon his instructions he said was the fact, namely, that a large number of persona left before the voting took place, and he was prepared to contend that upon the true construction of Section 81(7) of the Act, the proper time, for calculating the number of persons present at the meeting for the purpose of the three-fourths majority, was the time at which the resolution was proposed, and that it was not right to have regard in calculating that majority to Saloon number of persons who might at any time have been present from the beginning of the meeting, even though they had left before the resolution was put to the vote. In my opinion, my duty is to have regard to the express words of Section 81(3) of the Act in the first instance, regardless of any English decisions that there may be on the corresponding section of the English Act. Now Sub-section (3) provides that:-.a declaration of the chairman on a show of hands that the resolution is carried shall, unless a poll is demanded, be conclusive evidence of the fact without proof of the number or proportion of the vote a recorded in favour of or against the resolution.

25. The words are 'conclusive evidence.' 'There are no words which say unless it can be shown from the minute book of the company or the proceedings or the declaration of the chairman that he was wrong in law or mistaken in fact, The words are 'conclusive evidence, unless a poll is demanded.' I am, therefore, of opinion that I must give effect to the express words of Sub-section (3) and hold that where the chairman has declared the resolution carried, the declaration is conclusive evidence of the fact, unless a poll is demanded. No poll was demanded in this case. I, therefore, hold that the declaration of the chairman was conclusive. This being my view of the section, unaided by any decisions on the corresponding English section, I may nevertheless in passing refer to the case of Art v. United African Landsi Limited [1901] 1 Ch. 518 and to the case of In re Hadleigh Castle Gold Mines, Limited [1900] 2 Ch. 419 decisions upon the corresponding section of the English Companies Act, and say that in my view those are authorities which support the construction which I have placed upon the words in Sub-section (3) of a 81.

26. Mr. Munshi relied on the case of In re Caratal (New) Minest Limited [1902] 2 Ch. 498. There the chairman said: 'I will now put the resolutions for the reconstruction.' There was then a show of hands, on which he said, 'those in favour six; those against twenty-three; but there are 200 voting by proxy, and I declare the resolutions carried as required by Act of Parliament,' Buckley J. took the view, in construing the corresponding section of the English Act, that where the declaration of the chairman shows on the face of it that the statutory majority has not voted in favour of the resolution, such a declaration was not conclusive. He pointed out that (p. 500): 'It has been held that, if the chairman by his declaration affirms erroneously or without sufficiently ascertaining the facts but fide that a resolution has been carried, the Court cannot go behind that declaration', and he referred to the two cases which I have above referred to. But he went on to gay that in his view (p. 501) 'those decisions do not apply to a ac we case where the chairman by his declaration finds the figures and erroneously in point of law holds that the resolution has been duly passed. That is what the chairman has done in the present case,' I do not think it necessary to express my own opinion whether, having regard to the words of Section 51 of the English Act, that decision was right or wrong. It is enough for me to say that in the present case there was nothing on the face of the chairman's declaration which showed that he was taking into account Something which he was not entitled to take into account; as according to the view of Buckley J., was the fact in the case which he decided. Therefore, in any event, that case in my judgment is distinguishable from the present. But I prefer to construe the words of Section 81(8), as I have done, unaided by any authority, because they seem to me to be plain upon the face of it.

27. A further point was raised by the opponents as to whether the confirmatory resolution purporting to have been passed by the company at the meeting held on February 2, 1927, was in any event a valid resolution? An argument was founded upon this that from figures supplied by the petitioners in the scrutineer's list of votes recorded (Exh. No. 12) at that meeting, one Smith-Wright recorded 1520133 votes. He was authorized to attend and vote at the meeting as appears from Exh. No. 11 by the Bombay Trust Corporation Limited, which held not merely the 1520133 ordinary shares in the company but some nineteen lacs of preference shares. Paragraph 15 of the petition states that on the taking of the poll which was demanded at this confirmatory meeting, 1638047 votes were recorded for the resolution and 338745 votes against it. The opponents of the petition contended that inasmuch as the said Smith-Wright was present at the meeting, the nineteen lacs of preference shares held by the Bombay Trust Corporation Limited must be calculated in considering whether there was a majority of those present within the meaning of Section 81(2)(b) of the Act. They drew attention to Article 79 of the articles of association which provides that upon a poll being taken, every member present in person or by proxy Shall have one vote for every share held by him. They also drew attention to Section 81, Sub-section (6), of the Act. They contended that as Smith-Wright was undoubtedly present at the meeting, these nineteen lacs of votes must be brought into the calculation for the purpose of ascertaining whether there was a majority, and if they were so brought in, the 1638047 votes recorded for the resolution was not a requisite majority On the other hand, Mr. Desai contended that if the opponents of the scheme were entitled to maintain this argument, he was entitled to show, if necessary, that the figure put down in the scrutineer's list (Exh. No. 12) of 1520133 was erroneous, and that the nineteen lacs of preference shares ought also to have been inserted. Mr. Desai pointed out that Smith Wright in virtue of Exh. No. 11 re presented the Bombay Trust Corporation Limited, He could only do what the Corporation could do. That Corporation, he submitted, could not split, its vote. It could only give one vote, the value of which would be calculated of course by virtue of the number of shares held by the voter, and he contended that inasmuch as it was plain from the scrutineer's list that Smith-Wright had given the vote of the Corporation in favour of the resolution, he must have intended to ca'-t the whole of the votes held by that Corporation in favour of the resolution. In my opinion, this is a sound argument, and it is not open to the respondents to go into the question of figures as they speck to do. I, accordingly, hold that the confirmatory resolution passed at the company's meeting held on February 2, 1927, was validly carried.

28. Certain arguments were addressed to me upon the merits of the scheme. Having regard, however, to my view that the Court cannot be asked to sanction this scheme for the reasons I have given above, I do not think it necessary to say anything upon the merits of the scheme. For the reasons given by me, this petition will be dismissed. Company's costs, and costs of brief of one supporting shareholder, and two sets of costs allowed to the opponents of the petition, to come out of company's assets, and to be taxed as a long cause.


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