1. This is a petition under Section 243 of the Indian Companies Act, praying for the winding up of the Madras Equitable Assurance Society, an unregistered Association formed for the mutual Assurance of lives in the year 1824, and now governed by the provisions of a special Act, Madras Act VI of 1869. Under Section 5 of this Act, there is a quinquennial valuation of the assets and liabilities of the Society, and such portion of the profits as the Directors may think, fit is applied in reduction of the premium payable during the next quinquennium by the holders of the policies in existence at the end of the quinquennium, in respect of which the valuation is made. Owing to the high rates of the premium charged by the Society, and other circumstances, the balance of profit as divisible at the end of each quinquennium has been very large-so large as to reduce the premiums payable under the policies by no less than 75 per cent., or to only one-fourth of the premium provided for in the policies. in its prospectuses, the Society has held out the expectation that these favourable results would continue, and there can be no doubt that a system, which appearing to provide for an unusually high rate of premium in the beginning, followed by a very low rate subsequently is specially calculated to appeal to Europeans holding appointments out here, as they would naturally be willing to pay a higher rate whilst holding their appointment, with a view to paying a lower rate after they had gone Home on pension, or otherwise. Unfortunately, the system did not, and could not, guarantee such favourable results; and it merely provides that the profits of one quinquennium shall go in reduction of the premiums for the next, and if those profits fall off in any quinquennium, it is obvious that reduction in the premiums for the next quinquennium must be less, in order to keep the Society in a sound condition. In the present quinquennium there has been a depreciation in the market-value of the Society's General Fund, owing to the fall in Government paper, in which it is invested under the Act, and Messrs. Arbuthnot and Co., who acted for many years as the Secretaries and Treasurers to the Society, have failed, and at the date of their failure in October 1906, were indebted to the Society in some Rs. 80,000. For this and other reasons, the Actuary of the Society estimates that the profits of the present quinquennium will admit of a reduction of only as much as 662/3 per cent. in the premiums payable for the next quinquennium, beginning with 1911. The Directors also anticipate that for these and other reasons, which I need not go into, the Society's business is not likely to get any considerable amount of now business, if it should wish to do so, and that if the Society's business is carried on, it will have to be carried on as what is known as a sealed series, which is explained to moan that no new business will betaken, and the existing contracts will be worked out to the last survivor. In his Report of the 11th October 1907, the Society's Actuary recommended amalgamation with a powerful Company as preferable to carrying on the business as a sealed series, and in order that the policy-holders might have all possible courses before them, he also mentioned winding up the Society, but only to put it aside as out of the question. Negotiations for amalgamation took place and have failed, and in these circumstances those petitioners who claim to voice the wishes of the policy-holders for over Rs. 10 lakhs, or more than one-fourth of the existing assurances of the Society, have applied to the Court to exercise its jurisdiction under Section 243 of the Indian Companies Act, and to wind up this unregistered Association, regarding winding up as preferable to carrying on the Society's business as a sealed series.
2. Now, under this section the Court is not empowered, as it is under Section 128 in the case of registered Companies, to wind up a Company when it has passed a special Resolution requiring the Company to be wound up by the Court. In the case of an unregistered Society, such as this, the Court under Section 243 can only make a winding up order (1) when the Company is dissolved, or has ceased to carry on business, or is carrying on business only for the purpose of winding up its affairs; (2) when the Company is unable to pay its debts; and (3) when the Court is of opinion that it is just and equitable that the Company should be wound up.
3. The petitioners' claim that a case for winding up has been made under all these three heads, and the Court has to see if that is so. The first head is only applicable if it can be said that the Society has ceased to carry on its business only for the purpose of winding up its affairs. Now I am not satisfied that the Society has ceased to carry on business, except as a sealed series. All that appears is that it is not anticipated that new business is likely to be obtained to any great extent, and that under these circumstances it may be more advantageous to the existing policy- holders to carry on as a sealed series and so curtail the expenses of management. The words carrying on business only for the purposes of winding up,' in Section 243 of the Indian Companies Act, and Section 199 of the English Companies Act, 1832, do not occur in Section 128 of the Indian and Section 79 of the English Act, and I have not been referred to any case in which they have been so construed or succeeded in finding any. In the absence of authority I should certainly hesitate to apply them to a Society which has outstanding assurances for nearly Rs. 40 lakhs, which it must take years to work out, and a gross premium income of nearly Rs. 2 lakhs, merely because the Society ceased to take new business. And even if the Society could be held to be carrying on business only for the purpose of winding up, it would not, in my opinion, be right for the Court to exercise jurisdiction to order a winding up on this ground only whore the effect would be to prevent the Society from carrying out the contracts it has entered into and to oblige policy-holders to accept something which they have not stipulated for.
4. The next point suggested is that the Society is unable to pay its debts including in that term its prospective liabilities on policies, according to the provision in Section 130 of the Indian Act. This ground, in my opinion, should not have been put forward, as there is absolutely nothing in the petition to support it. According to the certificate of its Actuary, one of the best-known Actuaries in London, the business of the Society, for the quinquennium ending 31st December 1905, showed that its assets exceeded its liabilities by more than Rs. 9 lakhs, out of which surplus the Directors in accordance with Section 5 of the Act, made an appropriation reducing the premiums payable for the current quinquennium by 75 per cent. It may or may not be that the profit earned in future quinquenniums will not account for so large a reduction as 75 per cent. As to this, I am not called upon to hazard an opinion, and I will only remark that in putting forward the case for amalgamation as against carrying on as a sealed series, the Directors and others were naturally concerned to put before the policy-holders every possible risk to which they would be exposed in carrying on as a sealed series. At the very worst it only comes to decreasing rates of profit and smaller redactions and there is no reason to anticipate that the worst will happen. But as to the alleged inability of the Society to pay its debts, which is the question before me, all that the petitioners can bring themselves to state is to be found in paragraph 29 of their petition, where they say that there is no certainty that there will be funds enough to meet the policies of those who live long when they fall due. There is absolutely nothing in the evidence before me as to the present state and prospects of the Society, to justify its doubts as to its capacities to meet all its liabilities on its policies as they fall due to the utmost farthing. The only doubt is as to how far profits might shrink in future quinquenniums and give rise to smaller reductions than have hitherto been made. Even if the Society carries on as a sealed series it appears to me that it has ample resources out of which to provide for meeting all its policies as they fall due and providing for the expenses of management until the last policy is paid. In my opinion the petitioners have entirely failed to show that the Society is unable to pay its dues.
5. The petitioners then fall back on the third statutory ground and contend that it is just and equitable that the Society should be wound up. This contention is based upon the ground that if the business is carried on as a sealed series, the policy-holders will not get a reduction of 75 per cent. on the amount of their premiums, which they counted on when they effected them, but only 50 per cent. or something even less. As I have already said, I am not in a position to foresee what reductions will be made at the end of each quinquennium in future. They still, of course, vary according to the turn of events, and may be, as I venture to hope, nearly as large as at present, or only 50 per cent. or even less, but whatever they are they will be what the policy-holders stipulated for when they effected their policies, viz., so much of the balance of profit of the previous quinquenniums as the Directors may deem expedient to apply in reduction of the premiums for the current quinquennium. Whatever the rate of the reduction may be the policy-holders will get what they contracted for, though, possibly, not what they expected to get. Every policy-holder who enters into one of these policies must have known that the rates of the reduction would depend upon the profits earned and have taken the risk of smaller reductions being necessary. He must have known that his only right against the Society is to be paid the amount of his policy when it falls due if he has paid his premiums at the agreed rate less any reduction under Section 5 of the Act, The only other right he has is to surrender his policy and accept the surrender value according' to the Society's scale. What the petitioners and those who think with them say they want to obtain by means of a: winding up order is something which they did not stipulate for-return of their back premiums out of the general fund and a rateable distribution of any surplus according to the aggregates of their past premiums. What they would be legally entitled to in winding up, would be a share of the assets after payment of the costs of winding up, proportionate to the value of their respective policies at the date of the winding up order. The right method of valuing policies in winding up has been the subject of controversy in England. Lord Cairns and Lord Westbury taking one view, and Lord Justice James and Lord Romilly the other, In Re: the English Assurance Company 14 Eq. p. 72 and in England the question has been settled according to Lord Cairn's view by the Life Assurance Act, 1872. But assuming that the petitioners, and even a majority of the policy-holders, would desire to take their chance in a winding up and get the share of assets as would fall to them after the costs of the winding up had been met, would it be just and equitable to force other policy-holders who might be unwilling into winding-up when the Society is in a perfectly solvent position, and to deprive them of what they stipulated for in order to give other policy-holders what they did not stipulate for. In my opinion it would not. So long as a Society like this, formed for the mutual assurance of lives, is solvent, and is in a position to do all that it has undertaken to do, I do not think it would be just or equitable, even if it were the wish of the majority of the share-holders to wind it up against the wishes of the minority. It is not suggested that the policy-holders are anything like unanimous in wishing the Society to be wound up. On the contrary, the petition is strongly opposed. While winding up might be to the advantage of some policy-holders, there must be others, such as those whose lives have ceased to be insurable, in whose case it would have the effect of destroying the provision they had made for their families after them. Then, there is the fact spoken to in Mr. Lynn's affidavit, that about one-half in value of the policies issued by the Society are held by transferees from the original holders, either against advances or otherwise. As in such cases the transferees generally have to keep up the premiums, the actual holders are not immediately concerned with the rate of premium payable, and the fact that the rate of reduction may be less than was expected is no reason for depriving them of their security or impairing it in any way. On the whole I have arrived at the conclusion that it would be unjust and in-equitable to make a winding up order. In these circumstances there would be no use in consulting the share-holders and the petition must be dismissed with costs.