Judgment

GAJENDRAGADKAR J. : (Majority judgment : on behalf of himself and Wanchoo J.): The principal question which arises in this appeal relates to the construction of section 76(1) and (2) of the Indian Companies Act, 1956 (I of 1956) (hereinafter called the Act) before the amendment of sub-section (2) in 1960. That question arises in this way. The appellant, Madanlal Fakirchand Dudhediya, and respondents Nos. 2 and 3 and the father of respondents Nos. 7 to 10 were the promoters of the 1st respondent Co., Shree Changdeo Sugar Mills Ltd. The said Co. was incorporated in 1939 as a Private Limited Company. It was, however, converted into a Public Ltd. Co. in 1944. At the time of the original incorporation of the Co. a Promoters Agreement was arrived at whereby the Co. agreed during its existence to pay a sum equal to 3 1/8 every year out of its net profits to each of the four promoters. As a result of this agreement, the aggregate consideration payable every year to the promoters came to 12 1/2 of the net profits of the Co. Article 3 of the Articles of Association of the Co. justified the making of this agreement. In 1941 the Co. came into financial difficulties and in consequen