Judgement

MAHAJAN C.J.I. : This appeal arises out of an application made by the official liquidator of the Gaya Sugar Mills Ltd., under S. 185, Indian Companies Act praying that Nand Kishore Bajorh and Mahadeolal Jhunjhunwala be required to pay a sum of as. 14,77,000 to the official liquidater. The facts giving rise to the application shortly stated, are these :

2. Gaya Sugar Mills, Ltd., was incorporated in 1934 with an authorised capital of Rs. 7 lakhs divided into 7,000 shares of Rs. 100 each. The capital was raised to Rs. one crore in 1946. Out of this, approximately, Rs. 65 lakhs was subscribed, and in order to obtain the balance, the directors issued debentures of Rs. 1,000 each of the value of Rs. 25 lakhs. The authorised capital of the company consisted of, amongst other shares, 2,000 seven per cent preference shares of Rs. 100 each fully Paid up, 28,000 five per cent. A class preference shares of Rs. 100 each fully paid up. The total amount of the capital raised by these A class preference sharer was in the neighbourhood of Rs. 27 lakhs. The company had raised its capital in view of an ambitious scheme for the expansion of its business. The scheme, however, owing to circumstances unforeseen, could not be carried through and the company found itself in serious financial difficulty which eventually resulted in its winding up.

3. On 24-10-1949, one Sohan Lal Jajodia, a director and debenture trustee of the company filed a suit in the High Court of Calcutta against Gursharan Lal, the then managing director of the company and others for several reliefs in respect of the management of the company. On 1-1-1950, an agreement was arrived at between the parties to the said suit. Under this agreement, the parties to it framed a scheme regarding future working of the business of the company for the sanction of the court and pending the sanction and subject to it agreed to take certain steps for paying off the debenture holders and the preference share-holders. The scheme was framed under the provisions of S. 153, Indian Companies Act. The agreement incorporating the scheme was in these terms.

"Each one of the signatories to this Memorandum covenants with each one of the other or others of them jointly and severally that they will take such steps as is necessary to give effect to the following scheme.

A Board of Directors comprising of the following persons will be constituted in substitution of the present board of directors of Gaya Sugar Mills Ltd.

The parties consider it in the interest of the company and of the share-holders that the existing debenture holders should be paid off and the capital of the company should be reduced by canceling and paying off the preference share-holders.

The debentures will be redeemed by payment in cash and the preference shareholders will be redeemed by payment of partly in cash and by partly issuing in them 5 per cent. taxable debentures of Rs. 10 lakhs on the security of Guraru works and 5 per cent. tax free cumulative redeemable preference shares of Rs. 5 lakhs, while redeeming the existing debentures , debentures of Rs. 10 lakhs will, if necessary, be kept alive for the purpose of reissuing to the preference share-holder under this scheme .. ..... .... . ..,. ...

Possession of assets appertaining to the Warsaliganj scheme will be forthwith given to the trustees of the debentures with full liberty to them to dispose of the same and to utilise the sale proceeds for reception of the debentures and to make ever surplus, if any, to the preference shares trustees hereinafter named for redemption of the redeemable preference, shares. . . . .... ...... ....

"Messrs. Nand Kishore Bajoria and Mahadeolal are appointed trustees for the purpose hereinafter named and are in these presents referred to as Preference Trustees."

The shares in the Ryam Sugar Company Ltd., belonging to this company and Chakand land and Gaya land and the unrealised dividend due on Raym shares and commission for sale of Ryam sugar of 194