R.C. Mitter, J.
1. The Serajgunj Loan Office Limited, a banking corporation registered under the Companies Act, found itself in financial difficulties, but no winding up proceedings were taken. Instead of that a composition with its creditors was proposed, accepted and sanctioned by the Court under Section 153, Companies Act. The relevant dates on which the respective contentions of the parties have been advanced before me are the following:
8 th January 1933.-A meeting by the share-holders of the Bank for the purpose of devising means for stopping payment of interest and withdrawal of deposits.
21st February 1933,-A resolution was passed by the share-holders authorising the filing of an application on behalf of the Bank in the High Court under Section 153, Companies Act, proposing an arrangement between itself and its creditors.
20th April 1933.-The said application was moved and the preliminary order was passed by the High Court directing a meeting of the creditors to be held.
21st May 1933.-The said meeting was held and the majority of creditors representing more than three-fourths in value agreed to the arrangement proposed.
19th June 1933.-Sanction was given to the said arrangement by the High Court.
2. The substance of the arrangement sanctioned by this Court is that the creditors of the Bank shall not be able to demand payment of their dues within ten years, interest was reduced, a consultative body of six persons selected by the creditors was constituted and the directors in consultation with the consultative body were directed to distribute pro rata amongst the creditors a certain portion of the collections annually made.
3. The respondent, who received notice of the meeting which the High Court directed to be held did not attend it. He had before the date of the preliminary order of the High Court, that is, on 20th March 1933, instituted a suit to recover his dues. That suit was decreed on 24th April 1933. It is this decree which he seeks to execute against the Bank. The Bank has taken up the position that the respondent must come and accept payment in pursuance of the arrangement sanctioned by the High Court. The first Court gave effect to the Bank's contention and dismissed the execution case, but the lower appellate Court has held otherwise. In my judgment the view taken by the first Court so far as this case is concerned is the correct view, notwithstanding the fact that the decree was obtained by the respondent before the date when the majority of creditors at a meeting held under the preliminary order of the High Court agreed to the arrangement proposed by the Bank. This view accords with the decision of my learned brothers Guha and Lodge, JJ., in Appeal No. Barisal Loan Office Ltd., v. Sasthi Charn, Appeal No 70 of 1934, decided on 26th June 1935. It is no doubt in conflict with the decision on my learned brother Henderson, J., in Sushila Bala Basu v. Anjuman Trading and Banking Corporation, 1935 Cal 398, but I prefer to follow the decision in Appeal No. Barisal Loan Office Ltd., v. Sasthi Charn, Appeal No 70 of 1934, decided on 26th June 1935 not only because it is the decision of a Division Bench, and so binding on me, but also because its ratio recommends itself to me.
4. Section 153, Companies Act, no doubt, confers an extraordinary power on the majority to bind the minority. Ordinarily an arrangement or composition is binding on parties who are contracting parties. A contract between A and B can ordinarily be varied by a subsequent contract between them. But that principle has been sacrificed by the legislature where a person or a company is in insolvent circumstances and either bankruptcy proceedings or winding up proceedings have been taken, as the case may be, for the purpose of equitable distribution of assets. Proceedings under Section 153 is only an alternative proceeding to winding up proceedings, the object being practically the same. The sanction of the Court is the safeguard of the minority who do not agree. In according the sanction the Court has not only to see that arrangement proposed and accepted by the majority is reasonable and practicable, but also to see that one class of creditors or depositors does not feast upon the rights of another class. It is for this purpose that separate meetings must be convened by distinct classes of creditors. It has also to see that the provisions of the statute have been complied with that the mojority is acting bonafide and the minority has not been overridden. (Per Lindley, L.J. in In re Alabana, New Orleans, Texas and Pacific Junction Railway Co. (1891) 1 Oh 213 at pp. 238-239). But if these conditions are satisfied and the Court grants sanction the agreement of the majority of creditors with company concluded at the meeting held under the preliminary order of the Court under Section 153 binds all those who fall within the class represented by the said majority. Unsecured creditors of a company who have already obtained decrees against the company are in my judgment within the same class as unsecured creditors who have not obtained decrees against the company; they do not form a distinct class. Their rights against the company are not so dissimilar as to make it impossible for them to consult together with a view to the common interest in a meeting held under the directions of the Court given under Section 153 of the Act.
5. This is the view which has been taken by my learned brother Cunliffe, J. in In re Jalpaiguri Banking and Trading Co. (1935) 89 CWN 875 following the test propounded by Bowen, L.J. in Sovereign Life Assurance Co. v. Dodd (1892) 2KB 573. With this decision I entirely agree. On these principles I do hold that the respondent is bound by the scheme adopted by the majority of the creditors of the company, which, in my judgment, were of the same class, and sanctioned by this Court. The view that I am taking, in my judgment, does not militate against the decision of Viscount Haldane in Raghubar Dayal v. Bank of Upper India, 1919 PC 9, where the precise question which I have to consider did not arise. On the view that the schema sanctioned by the Court under Section 153 takes effect not from the date of the final order of the Court but from the date of the resolution of the majority of the creditors passed at the meeting convened under the preliminary order of the Court, Raghubar Dayal was admittedly one of the members of the class of creditors the majority of which agreed to the arrangement proposed. Where there is no winding up proceedings and a composition or arrangement is proposed under Section 153, any other view would lead to manifest injustice and lead to a race and consequent inequality amongst the creditors of the same class, which it is the object of the legislature to prevent, seeing that there is no provision in the Act in such cases to stay actions and proceedings against the company by individual creditors while the application under Section 153 is being considered by the Court. Section 169 would not cover the case. This has been pointed in cases under the Companies Consolidation Act, 1908, of which the Companies Act' in this respect is a mere copy (per judgment of Scrutton, L.J. Bowkett v. Fullers United Electric Works Ltd. (1923) 1 KB 160.
6. For these reasons I allow the appeal. The order of the learned Subordinate Judge is accordingly set aside and the Munsif's order restored with costs to the appellant company to this Court and of the lower appellate Court. Hearing fee is assessed at one gold mohur. The prayer for leave to appeal under 8. 15 of the Letters Patent is refused.