The Chief Justice.-This is an appeal against the order of Panchapagesa Sastry, J., made in chambers in the winding up of the Andhra Paper Mills Co., Ltd. (in liquidation). The material facts necessary for the disposal of this appeal are as follows:

The company was incorporated under the Indian Companies Act in January, 1929, with an authorised capital of Rs.23,00,000 but with a paid up capital of about Rs.12,00,000. The company appears to have been under-capitalised, and it became necessary to borrow by way of debentures, first in 1935 a sum of Rs.6,00,000 and again in 1938 a sum of Rs.5,00,000. The debentures were secured by two deeds dated 20th September, 1935, and 19th September, 1938. Under these debenture trust deeds, practically the entire premises of the Mills and all the machinery, plants, fittings, etc., attached to the Mills were mortgaged, to secure payment of the amounts due to the debenture holders. There were other provisions in the debenture deed which conferred rights on the debenture holders and the trustees for the debenture holders to take possession of the Mills on default of payment of interest and to work the Mills, if they chose, or to bring the mortgaged premises to sale. It appears that in pursuance of such provisions, the debenture trustees under the trust deed took possession of the Mills sometime in 1940 and were running the Mills till October, 1945, when the Mills were handed back to the company. It is common ground that again the debenture trustees on behalf of the debenture holders under the first deed took possession of the mortgaged premises on 14th February, 1947, as there were large arrears of interest. Thereafter, there was an agreement between the directors of the company and the debenture trustees which was confirmed at a meeting of the Board of Directors of the company held on 20th February, 1947. As it was necessary in the interests of the company that the factory should remain working, and as at the request of some of the directors the trustees had expressed their willingness to work the factory on the risk and account of the company for some time, it was resolved that certain persons be constituted into a sub-committee for the purpose of recommending proposals for future management and for negotiating with the trustees within a period of three months and it was further resolved that the trustees may, in the meantime, work the factory at the risk and on account of the company for the benefit of the debenture holders. In accordance with this agreement, the debenture trustees began to work the mills. On 2nd May, 1947, there was an extraordinary general meeting of the holders of the first mortgage debentures at which inter alia the following resolutions were proposed and carried:

"1. Resolved that the meeting of the debenture holders approves of the trustees’ action in entering into possession of the debenture premises on 14th February, 1947.

2. Resolved that the meeting approves of the debenture trustees’ action in agreeing at the instance and request of the Board of Directors of the Andhra Paper Mills Co., Ltd., to work the factory for a period of three months at the risk and on account of the Andhra Paper Mills Co., Ltd.

3. Whereas the company has been incurring an annual loss of about Rs.2½ lakhs every year as disclosed in the balance sheets and whereas in the year 1946-47 also the company had incurred a loss to the same extent and whereas after taking possession the debenture trustees agreed to work the same for a period of three months and whereas even during this period the company has suffered a loss to the same extent, resolved that this meeting of the debenture holders hereby decides not to carry on the business of the company and to discontinue the same within a reasonable time and to proceed further to take necessary steps for realising the mortgaged premises and further resolved that the trustees shall give notice to the company about the debenture holders’ intention to proceed to

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