1. This judgment will dispose of cases Nos. 16, 109 and 119 in C. O. No. 18 of 1960 as a common question of law relating to the jurisdiction of this Court is involved. Himalaya Bank Limited instituted a petition in this Court against 259 respondents under Sections 45-M and 45D of the Banking Companies Act for settlement of the list of debtors. In this petition, it was prayed that the petitioner-bank may be allowed to settle list of its debtors in respect of various amounts shown due from them and payment orders should be passed against the respondents.
The petitioner-bank is working under the scheme of arrangement sanctioned by this Court on 21st of August, 1959 in L. M. 39 of 1958 in Civil Original No. 126 of 1958. It was alleged that the names of the respondents were borne on the register of the members as holders of shares in the Bank and that a call of the unpaid share capital of Rs. 10/- on every share was made from its share-holders but respondents failed to make payment of the call money which was due from them. Under Clause 4 of the scheme, the shares of which Calls in arrears are not paid within two months after the date of the sanction of the scheme, shall stand forfeited and consequently these shares stood forfeited on 21st of October, 1959, but despite the forfeiture, the liability of the respondents to pay the arrears continued and the arrears are due from them as debt.
It was also averred that the petitioner-bank was working under the scheme sanctioned by this Court and therefore the list of the debtors could be settled with the permission of this Court in accordance with the provisions of Section 45-D of the Banking Companies Act. It was in these circumstances that the jurisdiction of this Court was invoked by the Himalaya Bank. The respondents in each of the three cases raised an objection questioning the jurisdiction of this Court, under the Banking Companies Act.
2. I have heard arguments on behalf of the parties.
3. The contention of the respondents rests on interpretation of Sections 45-D and 45-M of the Banking Companies Act (No. X of 1949). Section 45-D Sub-section (1) provides that notwithstanding anything to the contrary contained in any law for the time being in force, the High Court may settle in the manner hereinafter provided a list of debtors of a banking company which isbeing wound up. The argument of the learned counsel on behalf of the respondents is that the bank is under a scheme and us such it cannot be said that it is being 'wound up.'
4. Reference in this connection may also be made to two other sections, Section 45-K Sub-section (1) and Section 45-M. They are as under:
'45-K (1). Where a High Court makes an Order under Section 391 of the Companies Act, 1956, sanctioning 3 compromise or arrangement in respect of a banking company, it shall have power to supervise the carrying out of the compromise or arrangement and may at the time of making such order or at any time thereafter give such directions in regard to any matter or make such modifications in the compromise or arrangement as it may consider necessary for the proper working of the compromise or arrangement.'
'45-M. Special provisions for banking companies working under schemes of arrangement atthe commencement of the Amendment Act. Whereany compromise or arrangement sanctioned in respect of a banking company under Section 391 of theCompanies Act, 1956, is being worked at the comencement of the Banking Companies (Amendment) Act, 1953, the High Court may, if it sothinks fit, on the application of such banking company:
(a) excuse any delay in carrying out any of the provisions of the compromise or arrangement, or
(b) allow the banking company to settle the list of its debtors in accordance with the provisions of Section 45-D and in such a case, the provisions of the said section shall, as far as may be, apply to the banking company as they apply to the banking company which is being wound up as it the order sanctioning the compromise or arrangement were an order for the winding up of the banking company'.
5. Section 45-K was omitted by Section 31 of the Banking Companies (Amendment) Act (No. XXXIII of 1959). The reason for this omission is that Section 392 of the Companies Act, 1956, had incorporated Section 45-K of the Banking Companies Act which is in ipsissima verba. This provision of the Companies Act was new and did not correspond to any similar provision in the Indian Companies Act, 1913. Section 392 gives power to the High Court to supervise the carrying out of the arrangement or to modify the same and to order the winding up of the company if deemed necessary.
Section 392 applies to all companies including the banking companies and, therefore, the provisions of Section 45-K (1) of the Banking Companies Act having become redundant were omitted. At the time when Section 45-K was enacted the Companies Act did not contain a similar provision and, therefore, the Banking Companies Act conferred an additional power on the High Court to enforce the scheme of arrangement and to sanction a compromise in respect of a banking company.
Under the Banking Companies Act exclusive jurisdiction was conferred upon the High Court to entertain and decide any claim made by or againsta banking company which was being wound up. Section 45-M is in the nature of a special provision as the heading of that section also shows. I do not find any force in the argument of the learned counsel for the respondents that Section 45-M, on account of omission of Section 45-K, conferred certain powers upon the High Court only in those cases where a banking company was functioning under Section 391 of the Companies Act, 1956. The omission of Section 45-K does not, in the circumstances, indicate that the law underlying it has been repealed.
It has been embodied in the Companies Act which covers a larger field than the Banking Companies Act, 1949; and such powers as the High Court possesses to enforce scheme of arrangement etc., under Section 392 of the Companies Act equally extend to the Banking Companies and also to other companies. It is not that Section 45-M alone applies to Banking Companies Act, and, therefore, it is to be deemed that the High Court's powers analogous to the power it had under Section 45-K had been excluded.
6. Mr. D.N. Avasthy, learned counsel for the bank has next drawn my attention to Section 37 of the Banking Companies Act which provides that the High Court may on the application of a banking company which is temporarily unable to meet its obligations, make an order staying commencement or continuance of all actions and proceedings against the company for a fixed period of time on such terms and conditions as it shall think fit and proper.
The High Court is empowered under Section 37(3) to appoint a special officer who is required to take into custody or control the assets, books etc., including actionable claims to which the banking company may be entitled. Section 38 empowers the High Court to Order the winding up of banking company if it is unable to pay its debts. Mr. D.N. Avasthy also maintains that the scheme of arrangement is an alternative mode of winding up and, therefore, such powers as the High Court possesses under Section 45-D of the Banking Companies Act, 1949, will also entitle it to exercise the same powers for enforcement of the scheme of arrangement etc.
He has rested his argument on three decisions reported in Madan Gopal v. Peoples Bank of Northern India, Ltd., AIR 1935 Lah 779 (SB), Motilal Kanji and Co. v. Natwarlal M. Jhaveri, AIR 1932 Bom 78, In re Travancore National and Quilon Bank Ltd., AIR 1939 Mad 318. In AIR 1935 Lah 779 (SB), Tek Chand J. said
Section 153, Companies Act, makes provision not merely for schemes for the 'resuscitation' or 're-organisation' 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. In re London Chartered Bank of Australia, (1893) 3 Ch. 540 at p. 546.' On the strength of these decisions, it was argued that the scheme of arrangement was an alternative mode of liquidation. This does not appear to beso either under the Companies Act, 1956, or under the Indian Companies Act, 1913, which preceded the present statute. Provisions of the Companies Act relating to 'Arbitration, Compromises, Arrangements and Reconstruction' covered by Sections 389 to 396 are placed in Chapter V of Part VI which deals with Management and Administration. Part VII is devoted to Winding Up. A scheme, therefore, cannot be said to be an alternative mode of liquidation but only an alternative to liquidation. The incidents of scheme of arrangement and of winding up are distinct both in principle and in consequences.
The dictum of Vaughan Williams, J., which was cited in the three decisions referred to above, was examined by a Full Bench of this Court in Sm. Bhagwanti v. New Bank of India Ltd., Amritsar, AIR 1950 EP 111. It was held by the Full Bench that in the corresponding English Act all the sections relating to the scheme were contained within the bar dealing with winding-up; and, therefore, a scheme of that particular kind was correctly described as an alternative mode of winding up. That particular provision which was being considered was applicable only to a company in liquidation.
This is also clear from the observations of Vaughan Williams, J., only a portion of which was noticed in the three decisions referred to above. He said:
'The scheme of arrangement under the Act of 1879 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 Section 125, or composition under Section 126, of that Act, for a pending bankruptcy ........' In view of this, I am not persuaded by this argument of the learned counsel for the bank, that the scheme of arrangement should be treated as a specie of liquidation. I am, therefore, satisfied that this Court has jurisdiction to entertain the petition and to pass appropriate order in view of the provisions Of Section 392 of the Companies Act read with Section 391.
7. It is hardly necessary to point out that even if jurisdiction vested in the subordinate Courts, this Court had in exercise of its extraordinary civil jurisdiction the power to transfer proceedings pending in a Court subordinate to it vide Peoples Insurance Co., Etd. v. Sardul Singh, ILR (1960) 1 Punj 341 : (AIR 1961 Punj 87). For reasons stated above, I do not find any force in the objections of the respondents which cannot be entertained. These three cases will now proceed on their merits. Evidence shall be recorded on 21st April, 1961.