# SUPREME OOURT REPORTS (1962] SUPP. SHYAMAPADA CHAKRABERTTY AND OTHERS v. THE OONTROLLER OF INSURANCE, GOVERNMENT OF INDIA SIMLA AND OTHERS

- **Citation:** [1962] Supp. 2 S.C.R. 130
- **Court:** Supreme Court of India
- **Decided:** 1962
- **Bench:** P. B. Gajendraoadkar, A. K. Wanchoo, K. c. DAS GUPTA, Ayyanoar
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/supreme-oourt-reports-1962-supp-shyamapada-chakrabertty-and-others-v-the-2584
- **Pages:** 14

## Headnote

SARKAR, K. N.
N. RAJAOOPALA
,
/,..uranct-Riuiu•1r-1'ran•fer by O>V company to anotMr,
when ptrmiuible-lnauranu Act, 1938 (4 of 1938). 88. 36(3),
36 (J)-/11.Mn Companiu Act, 1913 (7 of 1913), 88. IO, 12,
186H.
Ju an application under Art. 226 of the Constitution, to
challenge the validity of the transfer of a life insu1 ance
company's business to another company under s. 36 of the
Jmurance Act, 1938:-
Htld, the transfer though it brought about an abandonmrnt of the business of the company was not bad a, resulting
in an alteration of the memorandum ot the
company without
recourse to s. 12 of the Indian Companie• Act, 1913. The
Cornpany's\.mcmOrandum ofa11ociation contained a power to
sell its undc!rtalr.ing and an exercise of that power does not
amount to a1teration of the memorandum. ·The tran1fer wunot a winding up of the company without following the
procedure laid down in the·Companies Act and hence invalid.
It was effected unde~the provisions of the Insurance Act.
JJiagoaq v. Henderaona Trann'<ll lf•tafe, [1908] I Ch. 734,
distinguished.
An agreement by the direc1ors of a company to trarufer
its undertaking 1ubject to confirmation by rhe company in
ll•ntral meeting did not offend s.
86H of the Companies Act.
Section 55 and the connected sections of the Comp.1nies Act
do not contrmplatc reduction of sha-c capital brought about
by loss of asset" and loss of assets does not amt>unt to r~<h1ction
of share capital.
Section 44 of the Insurance Act
does not prevent an
insurance company from
dealing with its assets though as a
result thereof no asset was left out of which the agents of the
company might be paid commission to which they arc entitled
under the Insurance Act.
\
.,
2 S.C.R.
SUPREME COURT REPORTS
131
S<ction 36 of the Insurance Act doe< not offend Art. 14
of the _Constitution.
That
section applies to all insurance
companies which in gcner~l meeting agree to a
transfer.
Even if it is assumed
that under s. 36 (I) of the Insurance A;::t only that scheme of transfer of which notice under
s. 35(3) of the Act had been given could 'be sanctioned and not
a modified
version of it, there would be power to sanction a
modified version
where the scheme itself or the resolution of
the co.mpany
approving of it, ·gave power to the directors to
accept modifications of that scheme on beh)llf of the company
suggested by the controller of Insurance before finnl sanction by
him.
Mihirendrak1'.sliore
Datta
v.
Brahmanbaria Loan Go.,
(!934) LL.R. 61 Cal. '913, referred to.

## Text

1961
Dt""'"11J,
130
SUPREME OOURT REPORTS (1962] SUPP.
SHYAMAPADA CHAKRABERTTY AND
OTHERS
v.
THE OONTROLLER OF INSURANCE, GOVERNMENT OF INDIA SIMLA AND OTHERS
(P. B. GAJENDRAOADKAR, A. K.
WANCHOO, K. c. DAS GUPTA AND
AYYANOAR, JJ.)
SARKAR, K. N.
N. RAJAOOPALA
,
/,..uranct-Riuiu•1r-1'ran•fer by O>V company to anotMr,
when ptrmiuible-lnauranu Act, 1938 (4 of 1938). 88. 36(3),
36 (J)-/11.Mn Companiu Act, 1913 (7 of 1913), 88. IO, 12,
186H.
Ju an application under Art. 226 of the Constitution, to
challenge the validity of the transfer of a life insu1 ance
company's business to another company under s. 36 of the
Jmurance Act, 1938:-
Htld, the transfer though it brought about an abandonmrnt of the business of the company was not bad a, resulting
in an alteration of the memorandum ot the
company without
recourse to s. 12 of the Indian Companie• Act, 1913. The
Cornpany's\.mcmOrandum ofa11ociation contained a power to
sell its undc!rtalr.ing and an exercise of that power does not
amount to a1teration of the memorandum. ·The tran1fer wunot a winding up of the company without following the
procedure laid down in the·Companies Act and hence invalid.
It was effected unde~the provisions of the Insurance Act.
JJiagoaq v. Henderaona Trann'<ll lf•tafe, [1908] I Ch. 734,
distinguished.
An agreement by the direc1ors of a company to trarufer
its undertaking 1ubject to confirmation by rhe company in
ll•ntral meeting did not offend s.
86H of the Companies Act.
Section 55 and the connected sections of the Comp.1nies Act
do not contrmplatc reduction of sha-c capital brought about
by loss of asset" and loss of assets does not amt>unt to r~<h1ction
of share capital.
Section 44 of the Insurance Act
does not prevent an
insurance company from
dealing with its assets though as a
result thereof no asset was left out of which the agents of the
company might be paid commission to which they arc entitled
under the Insurance Act.
\
.,
2 S.C.R.
SUPREME COURT REPORTS
131
S<ction 36 of the Insurance Act doe< not offend Art. 14
of the _Constitution.
That
section applies to all insurance
companies which in gcner~l meeting agree to a
transfer.
Even if it is assumed
that under s. 36 (I) of the Insurance A;::t only that scheme of transfer of which notice under
s. 35(3) of the Act had been given could 'be sanctioned and not
a modified
version of it, there would be power to sanction a
modified version
where the scheme itself or the resolution of
the co.mpany
approving of it, ·gave power to the directors to
accept modifications of that scheme on beh)llf of the company
suggested by the controller of Insurance before finnl sanction by
him.
Mihirendrak1'.sliore
Datta
v.
Brahmanbaria Loan Go.,
(!934) LL.R. 61 Cal. '913, referred to.
CIVIL APPELLATE JURISDICTION: Civil Appeal
No. 300 c•f 58.
A. N .. Sinha,
N. H. Hingorani and P. K.
Mukherjee, for the appelllants.
C. K
Daphtar.1j,
Solicitor-General
<1f India,
R. Ganpathy Iyer and R. H. Dhebar, for respondent
No. I.
C. K. Daphtary, Solicilor:General of India and
K. L. Hathi, for respondent No. 3.
1961 December 13.
The Judgment of the
Court was delivered by
SARKAR, J.-This appeal raises certain questions
as to the validity of an order made under s. 36 of
the Insurance Act, 1938, sanctioning the transfer of
its life insurance business by one insurance company
to another. The appellants had challenged that order
by a petition field under Art. 226 of the Constitution in the High Court of Punjab. The High Court
having dismissed the petition they have come to this
Court in appeal.
There are three appellants, one of whom is a
shareholder of the transferor company, another a
policy-holder in it and the third, one of its agents
who claims to have become entitled under the
Insurance Act to receive from it commission on
renewal premiums paid on life insurance business
1961
Shyamapada
Chakrabutry
v.
The OontroUer of.
lnsura11tt, Gove,nnunl
of India, Simla.
lldi
SitJ<mapoJ•
Claah•bttU)
v.
'Illll Vonrro/l<r of
""'' '"'' Gct1c1'1fflWIJ
•J 1tu1;a. s;,.i,,
S•k• J.
132
SUPREME OOURT REPORTS [1962] SUPP.
introduced by him. They complain that their
respective rights ha'lll been adversely a.nd illegally
affected by the ea.nction.
Tho transferor company is tho India Equitable
Insurance Company Ltd. and the transferee company, the Area Insure.nee Compa.n~· Ltd. Under
the transfer a.II the life insurance busi [leSS including
liabilities issued and all the life fund of the transferor company were ta.ken over by tho transferee
company. It is said-and perhaps that is the
correct position-that a.s a. result of the tra.nfer all
the transferor company would vest in the transferee
company and·the tra.nsferor company would really
become defunct.
The first point argued by Mr. Sinha. for tho
a.ppellan1 s is th .. t the transfer offends Ill!. 10 a.nd 12
of tho Companies Act. The Companies Act with
which we arc t'oncerned, is the Companie& Act of
1913 RB it stood in 1954. Section 10 of the Companies Act provides tha.t a. colilpany shall not alter
the conditions contained in its memorandum except
a.s provirled in that, Act. Section 12 states tba.t a.
company ma.y by special resolution alter the pro.
visions of its memorandum with
respect to its
object.ii but that the a.Iteration sha.11 not take effect
until it is confirmed by court on petition. The
contention of the learned Advocate is that the
arrangement of trqnsfer really amount& to abandonment of the business of the tra.risferor company a.nd
therefore to an a.Iteration of its memorandum without following the procedure la.id down in s. l:! and
this'cannot be done. The obvious answer to this
contention is tha.t the transfer does not effect any
a.ltrea.tion in the memorandum of the transferor company. Clause 3(27) of the memorandum of the
transferor company gives it the power to &ell its
undertaking. The transfer in this oa&e is a.n exercis~ of this power a.nd hence within the object. of
the company. An exercise by a. company of a.
2 S.C.R.
SUPREME COURT REPORTS
133
power given by its memorandum cannot amount to
an alteration of the memorandum at all.
It is then said that that clause only authorised
a sale and that a sale is a transfer for a consideration. It is contended that in the present case there
was no consideration moving from the transferee
company and, therefor.c, the transfer was not by
way of a sale. This. it is contended, was, therefore,
a transfer without any power in that regard in the
memorandum and hence in substance amounts to
unauthorised alteration of it. We were referred to
various balance-sheets and other figures in support
of this contention. This point as to want of consideration was not taken in the petition and the High
Court did not permit it to be raised. We have, therefore, to proceed on the basis that the transfer was
a sale. We wish however to make it clear that we
are not deciding what is enough consideration for a
sale, nor whether a transfer not authorised by the
memorandum would amount to an alteration of the
memorandum. What we have said furnishes enough
answer to the contention raised.
Mr. Sinha then contends that the result of the
transfer waR a virtual winding up and that it was
not one of the corporate objects of a company to
wind it up. The contention was that the winding up
could be effected only under the provisions of the
Companies Act.
We were referred to Bisgood v.
Henderson's Transvaal Estates Ltd(') as authority for
this proposition. We think; this contention is misconceived. What was done in this case was done
under the provisions of the Insurance Act and not
by way of carrying out a corporate object of the
transferor company. Now, s. 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 s. 35 of that
(1) [1908] l Cb. 743.
1961
Shyamapada
Chakrabett{Y
v.
The C"ntroller of
Insurance, Govunment
of India, S'imla
Sarkar J.
1961
S411amafJ.,/a
Chakrabtrt{1
..
Tlt1 Co11trollt' of
l11SUT;1111t1, Govtrnmtnt
of India, H11ala
s.,i:., J.
134
SUPREME COURT REPORTS [1962) SUPf.
Act, makes certain specific provisions which, as we
shall pre;ently show, ovaridP, the provisions of the
Companit:s Act. The objection baBe<l on Bisgoal"s
case(') is ill founded. Thero a company was sought
virtually to be wound up and its aseets distributt>d
in purported exercise of a power to Bf'll the undertaking and other coglla te powers contain eel in its
memorandum of association, aud this the Court said
could not be done as it would make the provisions for
winding up in the Companies Act indfective In ihe
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 (' ). Further
there is
not
here, as
there
was in
Bisgood's cuse (1),
a
distribution of th(l assets of the tran.~feror com pan}
after its undertaking had been transferrecl. Hence
we have here no winding up really.
·The next contention of Mr. Sinha is that the
arrangement for the transfer had been made by
the directors and the directors had no power in
view of s. 86H of the Companies Act. lo tramfer
the undertaking of the company. That section
gave the direct.ors power to transfer the undcrt&kiug
with the cof1sent of the company in i. gcncrnl meeting. In the present case, what had happened wa.a that
an agreement between the t.wo companies for the
purpose of the transfer had been ma.de by the
directors and it was subsequently approved Ly the
shareholders of the transferor company at a genera.I
meeting by about 82 per cent, majority. It was
after suoh approval tba.t the transfer had been
sanctioned under s. 36 of the Insura.noe Act, and
may be, though we do not have this on the record,
the transfer was effected oby proper documents
executed between the companies. An agreement
only to transfer the undertaking by the directors
clearly does not violate a. 86H for it ill merely
(ll [1908) I Ch. 743.
2S.C.R.
SUPREME COURT HBPORTS
135
tentati,·e subject to final approval by tile Company
in general meeting. This we think is by itself
sufficient answer to Mr. Sinha's persent contention.
Mr. Sinha however .says that the approval
by the Company at its general meeting was of no
use because the defect in the original agreement,
namely, that the di1 ectors had no power to transfer
in view of s. SfiH, was not pointed out at that
meeting to the shareholders. It is
somewhat
difficult to appreciate this point. There was no
defect in the directors' making the arrreement to
transfer; such agreement did not effect the transfer.
Even assuming that the agreement was beyond the
power of the directors, it cannot be said that the
approval of it by the shareholders had been without
any knowledge, ·of the defect.
The defect was of
the want of the directors' power to transfer in view
of the provisions of s. 86 H of which the ohareholders cannot be heard to deny knowledge.
The
case of Permila.Devi v. Peoples B<tnk of Northern
India Ltd.(1) on . which Mr. Sinha relied for the
'persent purpose is of no assistance to him.
There
certain shares had been illcgaly forfeited but it was
contended that the 'shareholders had ratified the
forfetiture. It was held that the ratification, if any,
was of no use because it had not been shown that
the attention'of thi> shareholdern and creditors had
been drawn to the illegality which 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.
!Vlr. 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 sr>ys that a reduction of
share capital mm be effected only as provided in
s. 55 and the succeeding sections of the Companies
Act. This contention ·is, in
our view, wholly
(1) A.I.R. 1938 P.C. 284.
1961
8h_yamapada
Ohakrabertry
v.
Tiu Controller of
lnsu1ance, Govt1rnme11I
of India, Simla.
8arkar J.
1911
Sli1111M/Jtztfa
CMtrobnlry
v.
Tiu Controlkr of
/JUWnct, Ooonlfnt4nJ
of In&, Simla
a.,1., J.
136 SUPREME COURT REPORTS [1962) SUP!>.
misconceived.
R~duct.ion 0f share capital under
these sections, is not brought about by loss of
assets. A bare perusal of the sections, we think, is
enougll to C6tablish that. The disappearance of the
assets of tho Company, , for wharever reason, dOt's
not cause a reduction of the share capital.
Another point raised by Mr. Sinha is that the
transfer was bad as it offended s. 44 of the Inaurance Act.
Under thi.t section certain insurance
a.gents have been given certain rights against their
employer companies to receive oommisaion in
respect of renewal premiums paid. We will assume
for the present purpose that the petitioner who is
an agent, had acquirccl such a right against the
transferor company uncler s.44. We do not however see that such rights a.re in any way affected by
tho transfer, The right. of the pctitiunn agent
again~t the Company remains. It may be that he
cannot rea lisc the amount duP, by enforcing that
right because th\) tramferor company has no assets
left after the transfer out of whic-h to pay the
commission.
But R. 44 clors not say that an insu-.
ranee company shall not be entitled lawfully to de.al
with its assets where the effect c1f such dealing
might be that nothing is left out of which the agents
oan be paid their commission. Further, more it hRs
to be remembered that what has been done in this
case has been done under the same Act. Section 36
of the Insurance Act does not say that a transfer
shall not be sanctioned if the effect of it is to leav'l
no aaeets with the transferor company. Reading the
two sections together, as we must do, it is not
possible t.o take t.he view that transfer cannot be
sanctioned undtir s. 36 if the result of that iR to
denude the transfer or company of all its assets out
of which an agent can be paid his commission.
A further point is based on Art. 14 of the
Constitution.
It is said that there were other
iusuran~ti comp.1nies in tho same insolvent poaition
2 S.C.R.
SUPREME COURT RE1'VRTtl
137
as the transferor company and that the policy-holders
of th~ latter company alone were being made to
suffer. It may be stated here that the transfer involved a condition affecting slightly
adv~rsely the
rights
of
the
policy-holders.
It does
not
seem
to us however that
any
question of
discrimination arises in the present case. The
transfer was sanctioned with the assent of the
shareholders of the two companies
concerned.
The sanction was given after the policy-holders d
the transferor company were heard. Again, s. 36
of the Insurance Act applies to all insurance
companies where the companie& in general me\'ting
agree to a transfer. No action under s. 36 can ho
taken except on the initiative of the companies
concerned. It is done in the best interests of the
policy-holders.
Then it is argued that the terms of ss. 35 and
36 had not been complied with. It is necessary now
to be set out the relevant portions of the sections
and some of the facts of this case.
S. 35. (I) No life insurance business of
an insurer specified in sub-clause (a)(ii) or sub·
J!ause (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 agreement 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 auoh scheme, notice
of the intention to make the application
together with a statement of the nature of
1961
SlrJ·amupada
Chalrrabertry
·-
The Controller of
Iumra11C4, Government
of India, Simla
~arkc.1· J.
1961
Shyaina,aJa
<:lulkrabrrl{1
v.
r1o, f,Antrolltr of
lttJVranu, G0Hrnmn1'
of India, Simla
SmkOT J.
13S
SUPR:i:~·ll; cotrRT REPOHTR rl962j SO.PP.
the amalgamation or transfer, aa the case
may be,
and
of the
reason
i.herefor
shall, at least two months before the application is made. be sent to the Controller and
certified copies, four il. 11Umber, of each of the
following
documentfi
shall be furnished
to the Controller,
«11d other such copies
shall during the two months aforesaid be
kept open for the inspection of the membere
and policy-holders a.t the principal and branch
offices and chief agencies of the insurers
concerned, namely.
[Herc cerc.a.in ducuments are specified. J
S.36. (I) When any application such as is
referred to in sub-eection (:!) of section 35 is
ma.de to the Controller, the controller shall
;f for special reasons he so direr-ti!, notice ca.use,
of the applica.tion to be sent to every person
resident in India who is the holder of a policy
of any insurer concerned and shall cauee a.
statement of tho nature and terms of the
nma.lga.mation or transfer, as the case may bo,
to be publishea in such manner and for such
period as he may direct and after, hearing the
directors and sucli policy-holders 118 apply to
be beard and all) other J:"'l'dOIJ.ll whom he considers entitled to be heard, may sancUon the
arrangement, if he is satietied that no sufficient objection to the a.rrapgement has been
established and shall make such consequential
orders a.8 are necessary to give effect to the
arrangement, including orders
11.11
to the
disposal of any deposit ma.do under section 7
ur section 98 :
It would appear from the termes ofH.35 (:!)
that it contemplates the following steps :
(a)
A notice of tho intention to make an
application to the Controller of_ Insura.n~e for sane·
tion of the transfer ha11 to be given to him.
2 S.C.R.
SUPREME CCH1RT REPOR'.rS
139
(b) Thereafter, together with the notice,
certain specified documents have to be kept open
for the inspection of the shareholders for .two
months.
( c)
After the expiry of the period ot two
months, an application has to be made to the controller of insurance for sanction of the transfer.
Now, what had happened in this case was that
the notice contemplated by .s. 35 (3)- was given on
July 27, 1951, and the necessary documents were
kept open for inspection. )3efore the upplication
to the Controller was made, the directors of the
companies
wero in touch with the Controller in
regard to the proposed transfer and the latter suggested various
modifications
in the proposed
scheme which was one of the documents which had
to be kept op.en for the inspection of the.- shareholders. On October 30, J9,)J, an application to
sanction the transfer was made under s. 35 (3) of
Insurance Act Subseque11tly, also further modifications were suggested by the Controller. On July
28, 19.52, the transferor company in its gen.era!
meeting considered the suggestions of the Controller and approved of the scheme with certain modifications, to the details ef which it is not necessary
to refer. The scheme so modified contained the
following clause.:
Cl. 16. That this arrangement is conditional upon the sanction on a subsequent date
either with or without any mcdification of the
terms hereof impos'ed or approved by the
Controller and accepted by the parties here
to and subject as afores!l.id, the provisions
a.s mentioned herein shall be operative on
and from the thirty-first of December I 950.
It was this scheme which was approved by the
Company in its general meeting by the following
resolution: "Read, eon~idered and thoroughly disous·
eed the proposed scheme of transfer: .... and resolved
1961
Shyamapada
Chakrabutty
v.
The Controller of
lnswra'fUe Gt.ivernnif..nt
of India, Simla
Sarkar J.
IHI
Sfrvo1..-1u•do
C>alcrd1rlry
v.
n, Coo.rolltr of
/1UW1t'ICI, G~mtnt
.J /.dU., Siln/a
s ... ,,.. J.
140 SUPREME COURT Rl<:PORTS [1962) SUPP.
that t.hc proposed transfer ...... having been found to
be arranged by the directors of the Company in the
best inte1ests of the Policy.holders, the same be and
arc hereby approved and confirmed, and resolved
fmther that the directors be and are hereby authorised to make and accept further modifications and
alterntions in the scheme it a11y suggested by the
Controller of Insurance." lt appears that certain
further mndifications in the scheme were thneafter made. The Controller directid notire to be
issued to all polioy-holders giving them full infor.
mation of the scheme and fixed a date for hearing.
All policy-holdera desiring to be heard, were heard.
Before however the Controller passed his order
sanctioning
the scheme,
the petition, c,ut of
which this appeal arises was filed on February 13,
1954.
Apparently, on this date further hearing
of th~matter by the Controller was pending.
On
iliarch 8, H'54, the controller gave his sanction to
the scheme as modified. Thflroafter, the petitioners
on May 14, 1954, filed a supplementary petition
asking for a writ quashing the order, tho first petition having only for asked a writ to quash the proceeding then pending before the Controller.
Mr. Sinha points out-and in this he is right--
that after notice under s. !.l5 (3) had been iSBued,
the scheme of transfer had been modifioo blltl it
was such modified scheme that was sanctiom•d by
tho Controller. Mr. Sinha.'s point is that under
M. 36 the Controller could only ~unction the scheme
of which notice bad been given under s. 35. He,
therefore, contends . that the sanction granted by
the Controller in this case was not in terms of the
section and hence a nullity. The learned SolicitorGeneral appearing to oppose the appeal contends
that on a proper construction of the sections the
Controller had power to sanction a scheme modified
after notice under s. 35 (3) had been issued. It is
however unnecessary in this case to decide the
question 80 raiaed.
2 s.c:R.
SUPREME COURT REPORTS
141
We will resume for the present purpose that
unJer s. 36 (I) only the scheme of tran~Lir in respoct of which notice under s. 35 (3) had been given
could be ~auctioned and not a modifiei.f version of
it. The scheme and
the resolution of the shareholders of the transferor eJmpany apprnving it,
however both provideJ for its modification later
at the suggestion of the C:mtroller an::l gave power
to tho directors to accJpt the modifications on behalf of the Company.
The modifications were
pursuant to the terms of the scheme as approved
by the share.holders of the transferor Company.
Therefore, in substance, it was the scheme oi which
notice had been given under s.
:~5 (3) which was
sanctioned.
A similar view was taken in England in regard
to ss. 153 and 154, of the English Companies Act,
1929.
Those sections dealt with compromis~s witli
creditors and for reconstruction and amalgamation
of companies.
These could be effected by.an order
of court after the relative scheme had been
approved by the companies or creditors concerned.
It was generally felt that the court could either
sanction the scheme approved by the shere-holders
or reject it bub had no power to modify it. The
contention of Mr. Sinha in the present case it will
be
remembered, is
substantially
tbe same.
To remove the doubt as to the power to modify
the scheme after it had been app~oved by the shareholders of the com p:Lnies concerned, the author of
of Palmer's Company Precedents appears to have
recommended the
devic~ of inserting in the
,1
scheme a clatise giving power to the court to
•
modify the scheme and the directors to accept the
modification. In the 16th Edition of this well known
bJok the following passage appears at p. 844,
"It is more than doubtful whether, if a
particular scheme is agreed to at a general
meeting of creditors, the court can sanction
1961
Shymnopd.
Chalcraluruy
v.
Thi a ,JldrOJltT of
In1uranc~. Gao.,-nment
of India, Simla
Sarkar J.
*'
S"1aw~
Chdrdirt17
••
I /w c..1ro11 ... ..,
· .. llff'aa, Gownmt11I
1f lttdi•, Silnla
S.rwJ.
142
SUPREME OOURT REPORTS [1962] SUPP.
that scheme with modifications, unleee there
ie some provision in the scheme pro.viding for
possible modifications. In cases whether has
no such pwvi$ion, and some modification has
hE>en t bought cxpedirnt, the court has rt•quire.-l
the calling of a second meeting to consider
the sc·hemc aR modified ; but to avoid this
inconvenience it has for some time past been
usual to insert in sec hemes a clause (originated
hy the author) expressly rmpowrring the
liquidator to ass<'nt to any mc<lifiratiuns or
conditions appron•d or impo8i'd by the court,
and thie provi~io11 was approved
b~· Chitty
J. in Dominion of Canada, etc. Co .. 55 L.T.
341 nnd hns frN1uent.Jy heen acted on.
This practice acems to have obtained approval in
our country to : sec lllihirendmki.ihore Datta v.
Brahmanbaria Loan Company Ltd., (') turning on
s.153 of thP. Companies Act, 1913, which corr~spon
dcd to the sections of the
English Act earlier
ml'ntioned,
Mr. Sinha contends that the authorities on
the Compani('B Act Parlier referred to had no aprlication to the pn-s•·nt cas•·.
HH says that the sections of the Companic·s Act8 on which these authorities turned were not 1ia.ri mc•leria with ss. :i5 and 3u
of the ln8urance Ad.
HiH tontcntion is that the
object of these sections of tho InHumn"e Act wa~
to pr<•tect the shan•holders and policy holders of
the Company and that tht·y wonl<l ho drprind of
that protection if a HC-h<·me modified SllbHcquentJy 10
thH i8s110 of th<' not ice 111Hkr H. :~;; (:l) con Id L" sanctioned. Wo do not think that this contentinn iH
well fot1n<le<l.
So
fur as till' policy-holders are
concerned, they have nothine' to do with the appr11val of the ttchemc. The seh<·me of tranHfer was
agreed to betw<·c·n tlw 8hart·l10l<ll'rS of till' companies
conccrn~d in th<' 1h·al. A,sume, aH .!\fr. ~inha says,
that under the InsumilCC Act, a~ it is under the
(I)
(19.54) I. L. H. 61. Cal.913.
1.
2 S.C.R.
SUPREME COURT REPORTS
143
the Companies Act,
it is the shareholders who
must agree to the scheme. In the cases falling
under the Companies Act, it is for protecting the
shareholders that it has been held that the court
cannot modifiy the scheme unless the scheme itself
gives the court the power to do so.
On the
assumption made we think it perfectly clear that
the position under the Insurance Act is the
same. If Mr. Sinha is wrong and under the Insurance Act it is not for the shareholders to sanction the .scheme, then there would be less reason
for saying that what could be done under the
Companies Act, cannot be done under the Insurance Act. The intention of es. 35 and 36 of the
Insurance Act would on the basis of Mr. Sinha's
contention, be to protect the shareholders from
having :to accept a scheme to which they have not
agreed. Such protection however may be given up
by shareholders by inserting in
the scheme
approved by them, a clause empowering the directors to modify it. So far as the policy-holders are
concerned, their protection is left in the hands of
the controller. That is the policy of the Insurance
Act and, hence, the Controller hears them. In
the present case, he actually heard policy holders.
Therefore it does not seem to us that it can be
contended with substance that ss. 35 and 36 of the
Insurance Act are not pari materia with the sections of the Companies Act to which we have earlier
referred.
The last point of Mr. Sinha must also
fail.
The result is that this appeal must. be dismissed wit.h costs and we order accordingly. '.I.here
will be one set of hearing costs.
Appeal Dismissed
1961
Shyamapada
,Chakrabertty
v.
Tiu Coritroller of
Insurance, Governmen
of India, Simla
S{'rkar J.