The Court's jurisdiction to sanction a scheme of compromise or arrangement under S. 153 of the Companies Act, 1913, is subject to the provisions of S. 45 of the Banking Companies Act, 1949, which requires a certificate from the Reserve Bank of India that the scheme is not detrimental to the interests of depositors.

BANERJEE, J. :- This is an appeal from an order made on June 15, 1950, by Bachawat, J., refusing to sanction a scheme. The Company in question is the Bengal Bank Ltd. which was incorporated in 1926 under the Indian Companies Act. The petition under S. 153 was first presented to this Court on or about December 9, 1949, on which day preliminary directions under that section were given.

2. The Bank has twenty branches. Five of the branches are in Pakistan and the remaining fifteen are within the State of West Bengal. The authorised capital of the Company is Rs. 25,00,000/-. The paid up capital is Rs. 11,70,000/-. It carries on business as a Bank in India as well as in Pakistan. Its registered office and principal place of business is in India. The majority of the depositors are within the Union of India. Notice of the application has not been given to the creditors in Pakistan.

3. Section 153 of the Indian Companies Act deals with the right of Companies to enter into a compromise or arrangement, (a) between itself and its creditors or any class of them, or (b) between itself and its members or any class of them. The procedure is as follows. First of all an application has to be made to the Court for leave to call a meeting or meetings, (a) of the share-holders or the class of shareholders, where the arrangement is intended to be between the Company and the share-holders or a class of them; or (b) of creditors, where the compromise or arrangement is intended to be made between the Company and the creditors or any class of them. Where there are different classes, separate meeting of each class must be held. After the meeting is held, if a majority in number representing three-fourths in value of the class of creditors or members present either in person or by proxy at the meeting agree to the compromise or arrangement, the matter is brought before the Court for its sanction. The matter is then dealt with by the Court and if sanctioned, the scheme or compromise becomes binding on the shareholders or the class of share-holders, or on the creditors or the class of them, with whom such an arrangement or compromise is intended to be made.

4. The scheme of course is not effective unless it is confirmed by the Court. But before the Court makes an order sanctioning the scheme, it is necessary in the first place to have the scheme or arrangement approved and accepted by the requisite majority and if the scheme is sanctioned by the requisite majority then it is presented to the Court for confirmation. In other words, the Court cannot sanction a scheme until it has been approved by the majority in terms of S. 153 (2) of the Indian Companies Act.

5. Our Rules made under the Companies Act lay down the procedure for making applications for the sanction of the Court of schemes of compromise and/or arrangement. The rules are Rr. 40 to 47, App. 7 pages 812 and 813 of the Original Side Rules. The petition for confirmation must clearly show the compromise or arrangement, recite the order for the meetings, the result of the meetings and the necessity for the compromise or arrangement. All proper materials must be placed before the Court to show that the scheme or arrangement, is one which would be accepted by an ordinary reasonable and prudent man of business.

6. The Court does not sanction a scheme merely because it has been approved by the requisite majority. The Court does not sit merely to see that the majority are acting bona fide and thereupon to register the decision of the meeting. But, at the same time, the Court would be slow to differ from the meeting, unless either the class has not been properly consulted, or the meeting has not considered the matter with a view to the interest of the class which it is empowered to bind, or some blot is found in the scheme. If the company is solvent, it does not follow that the creditors ought not to make concessions. If there is 20 s. in the pound for the creditors they ought to have it at the expens