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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 ..... n renewal premiums paid on life insurance business introduced by him. They complain that their respective rights have been adversely and illegally affected by the sanction. The transferor company is the India Equitable Insurance Company Ltd. and the transferee company, the Arya Insurance Company Ltd. Under the transfer all the life insurance business including liabilities for policies issued and all the life fund of the transferor company were taken over by the transferee company. It is said-and perhaps that is the correct position-that as a result of the transfer all the assets of the transferor company would vest in the transferee company and the transferor company would really become defunct. The first point argued by Mr. Sinha for the appellants is that the transfer offends sections 10 and 12 of the Companies Act. The Companies Act with which we are concerned is the Companies Act of 1913 as it stood in 1954. Section 10 of the Companies Act provides that a company shall not alter the conditions contained in its memorandum except as provided in that Act. Section 12 states that a company may by special resolution alter the provisions of its memorandum with respect to its objects ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 117 of the Insurance Act provides that nothing in that Act would affect the liability of an insurance company to comply with the provisions of the Indian Companies Act in matters not otherwise specifically provided for by it. Section 36 of the Insurance Act, which has for the present purpose to be read with section 35 of that Act, makes certain specific provisions which, as we shall presently show, override the provisions of the Companies Act, The objection based on Bisgood's case (supra) is ill founded. There a company was sought virtually to be wound up and its assets distributed in purported exercise of a power to sell the undertaking and other cognate powers contained in its memorandum of association, and this the court said could not be done as it would make the provisions for winding up in the Companies Act ineffective. In the present case the thing has been done under express statutory power. No question here arises of a corporate power in the sense it arose in Bisgood's case (supra). Further, there is not here, as there was in Bisgood's case (supra) , a distribution of the assets of the transferor company after its undertaking had been transferred. Hence we have here no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h depended on facts of which no knowledge by the shareholders could be presumed. 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. Mr. Sinha then says that the transfer was bad as it involved a reduction of share capital of the transferor company. His point is that as all the assets were gone, there was necessarily a reduction of its share capital. He says that a reduction of share capital can be effected only as provided in section 55 and the succeeding sections of the Companies Act. This contention is, in our view, wholly misconceived. Reduction of share capital under these sections is not brought about by loss of assets. A bare perusal of the sections, we think, is enough to establish that. The disappearance of the assets of the company, for whatever reason, does not cause a reduction of the share capital. Another point raised by Mr. Sinha is that the transfer was bad as it offended section 44 of the Insurance Act. Under that section certain insurance agents have been given certain rights against their employer companies to receive commission in respect of renewal premiums paid. We w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of an insurer specified in sub-clause (a)(ii ) or sub-clause (b) of clause (9) of section 2 shall be transferred to any person or transferred to or amalgamated with the life insurance business of any other insurer except in accordance with a scheme prepared under this section and sanctioned by the Controller, (2) Any scheme prepared under this section shall set out the agree ment under which the transfer or amalgamation is proposed to be effected, and shall contain such further provisions as may be necessary for giving effect to the scheme. (3) Before an application is made to the Controller to sanction any such scheme notice of the intention to make the application together with a statement of the nature of the amalgamation or transfer, as the case may be, and of the reason therefor shall, at least two months before the application is made, be sent to the Controller and certified copies four in number of each of the following documents shall be furnished to the Controller, and other such copies shall during the two months aforesaid be kept open for the inspection of the members and policy-holders at the principal and branch offices and chief agencies of the insurers concerned. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... modified contained the following clause : Clause 16. That this arrangement is conditional upon the sanction on a subsequent date either with or without any modification of the terms hereof imposed or approved by the Controller and accepted by the parties hereto and subject as aforesaid, the provisions as mentioned herein shall be operative on and from the thirty-first day of December, 1950. It was this scheme which was approved by the company in its general meeting by the following resolution : " Read, considered and thoroughly discussed the proposed scheme of transfer . . . and resolved that the proposed transfer .... having been found to be arranged by the directors of the company in the best interests of the policy-holders, the same be and are hereby approved and confirmed, and resolved further that the directors be and are hereby authorised to make and accept further modifications and alterations in the scheme if any suggested by the Controller of Insurance." It appears that certain further modifications in the scheme were thereafter made. The Controller directed notice to be issued to all policy-holders giving them full information of the scheme and fixed a date for hearing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... creditors concerned. It was generally felt that the court could either sanction the scheme approved by the shareholders or reject it but had no power to modify it. The contention of Mr. Sinha in the present case, it will be remembered, is substantially the same. To remove the doubt as to the power to modify the scheme after it had been approved by the shareholders of the companies concerned, the author of Palmer's Company Precedents appears to have recommended the device of inserting in the scheme a clause giving power to the court to modify the scheme and the directors to accept the modification. In the 16th edition of this well-known book the following passage appears at page 844 : "It is more than doubtful whether, if a particular scheme is agreed to at a general meeting of creditors, the court can sanction that scheme with modifications, unless there is some provision in the scheme providing for possible modifications. In cases where there has been no such provision, and some modification has been thought expedient, the court has required the calling of a second meeting to consider the scheme as modified; but to avoid this inconvenience it has for some time past been usual to ..... X X X X Extracts X X X X X X X X Extracts X X X X
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