JUDGMENT Das, J. - This is the final hearing of the application under sec. 153 of the Indian Companies Act made by the Indian National Bank, Ltd. (hereinafter called the bank) for sanction of a scheme of arrangement for the gradual payment of its liabilities to its creditors. The bank was incorporated as a company under the Indian Companies Act in the year 1930. The registered office of the bank is in Calcutta within the jurisdiction of this Court. The authorised capital of the bank is Rs. 1 crore divided into 4,000 ordinary shares of Rs. 25 each, 7,40,000 ordinary shares of Rs. 10 each, and 50,000 six per cent. non-cumulative preference share of Rs, 50 each. According to the audited balance sheet as at the 31st December, 1946, the subscribed capital of the company was Rs. 14,32,345. namely Rs. 69,500 for 1390 preference shares of Rs. 50 each, Rs. 22,075 for 883 ordinary shares of Rs. 25 each and Rs. 13,40,770 for 1,34,077 ordinary shares of Rs. 10 each. The paid-up capital was Rs. 7,66,266 made up as follows: Rs. 17,200 on 430 preference shares of Rs. 50 at Rs. 40. Rs. 19,200 on 960 preference shares of Rs. 50 at Rs. 20, Rs. 18,000 on 3,000 ordinary shares of Rs. 25 at Rs. 6, Rs. 5,830 on 583 ordinary shares of Rs. 25 at Rs. 10 each. Rs. 1,64,452 on 41,113 ordinary shares of Rs. 10 at Rs. 4 and Rs. 5,57,784 on 92,964 ordinary shares of Rs. 10 each at Rs. 6. The calls in arrears were Rs. 95,671. In the subsequent accounts as at the 17th October, 1947. certified by the Chief Accountant of the bank the subscribed capital is shown as Rs. 14,32,345, the called-up capital as Rs. 9,33,430, the paid-up capital as Rs, 7,92,042 and the calls in arrears as Rs. 1.41.388. The point to be noticed is that even in respect of shares of the same class the amounts called and paid up are not the same. 2. The bank appears to have done fairly good business during the years 1942 to 1946. It experienced difficulties in the year 1947 on account of heavy withdrawals. Indeed from the 1st January, 1947, to the 17th October, 1947, the withdrawals reduced the deposits from Rs. 91 lacs to Rs. 17 lacs. In other words more than 81 per cent. 2. The bank appears to have done fairly good business during the years 1942 to 1946. It experienced difficulties in the year 1947 on account of heavy withdrawals. Indeed from the 1st January, 1947, to the 17th October, 1947, the withdrawals reduced the deposits from Rs. 91 lacs to Rs. 17 lacs. In other words more than 81 per cent. of the deposits were withdrawn in the space of 94,- months. This fact shows that the bank maintained a good liquid position of its holdings and certainly reflects credit on the management. 3. The liquid assets being thus considerably depleted the bank presented this petition before the Court on the 17th October, 1947, asking for leave to convene meetings of its creditors and share-holders for the purpose of considering and, if thought fit, of approving, with or without modifications, a scheme of arrangement proposed by the company. Broadly speaking the proposed scheme was as follows: (a) It would be binding on all creditors except the secured creditors. (b) All deposits below Rs. 50 each, all staff provident fund and staff security, bill collection proceeds or drafts or pay orders issued against bill proceeds or cash payment, and trust money would be paid within three months from the date of sanction. (c) The whole of the dues of the creditors would be paid in six installments of specified percentages payable on different dates within a period of six years as therein mentioned. (d) All arrears of calls on shares would be realised in full and on default in payment the said shares would he forfeited and utilised in writing off bad debts. (e) 25 per cent. of the amount paid up on shares would be written off to adjust bad debts (if any) and capitalised expenses. (f) The Board of directors would be reconstituted in the manner specified therein. (g) All necessary alterations in the articles would be effected within four months after the date of the sanction. (h) The Court might alter, amend or modify the scheme. 4. The petition was admitted and directions were given for convening the meetings of creditors and share-holders, for advertisements in the newspapers, for service of individual notices on the creditors and share-holders, for an investigation into the accounts by an independent auditor whose report was directed to be made available to the creditors before the meeting. 5. 4. The petition was admitted and directions were given for convening the meetings of creditors and share-holders, for advertisements in the newspapers, for service of individual notices on the creditors and share-holders, for an investigation into the accounts by an independent auditor whose report was directed to be made available to the creditors before the meeting. 5. The meetings were eventually held on the 17th January. 1948. at the registered office of the hank under the chairmanship of Mr. S. Chatterjee, a member of the Bar. The Chairman made his report on the 21st January, 1948. An affidavit of compliance has been filed showing that the directions of the Court have been duly carried out. 6. It appears from the Chairman's report that the creditors' meeting was attended in person by 64 creditors of the value of Rs. 2,49,339-4-4 and by proxy by 492 creditors of the value of Rs. 3,84,502-8-2. 7. The meeting happily was an orderly one Certain amendments were moved and seconded. The scheme and the amendments were put to the vote and passed unanimously after one dissentient creditor had withdrawn his objections. The share-holders' meeting was attended personally by 22 share-holders holding 30,533 shares of the value of Rs. 3,15,160 and by proxy by 102 share-holders holding 28,410 shares of the value of Rs 5,02,445. The amended scheme was put to vote and passed by the share-holders unanimously. 8. The bank now applies for sanction of the amended scheme. Mr. J. C. Moitra appearing for certain creditors, some of whom are also share-holders, supports the application. Mr. H. N. Sanyal who appears for Sm. Swarnalata Das, a creditor in respect of two fixed deposit accounts, opposes the application. His objections are founded on two clauses of the amended scheme, namely, clauses 1 and 4. 9. Clause 1 of the scheme as originally proposed read as follows: Creditors shall include creditors of all descriptions but shall not include secured creditors. 10. By an amendment made at the creditors' meeting the following sentence has been added to that clause: Liberty is given to the new Board of Directors to decide the nature of the secured creditors and payments to them will be made accordingly. 11. This addition appears quite clearly to be wholly ineffective, for by the first sentence the secured creditors are not bound by the scheme and, therefore, by the provisions of this added sentence. 11. This addition appears quite clearly to be wholly ineffective, for by the first sentence the secured creditors are not bound by the scheme and, therefore, by the provisions of this added sentence. Further the addition is an unnecessary surplusage, for if anybody claims to be a secured creditor but the bank disputes that claim it is always open to it to do so even without this addition. If there was nothing else in this case I would have felt no difficulty in sanctioning the scheme after deleting the added sentence, as I have the power to do under clause 10 of this very scheme. 12. The second objection of Mr. Sanyal raises a question of far greater complexity. The fourth clause of the scheme as originally proposed was as follows:-- That 25% of the amount paid up on shares shall be written off to adjust bad debts (if any) and capitalised expenses. 13. To that has been added the following sentences. The issued capital of Rs. 14,32,345/- be reduced to Rs. 7,92,042/- and the existing shares be treated as fully paid up for a proportionately lesser number of shares. Fractions shall be set off. 14. The clause as it now stands clearly contemplates a reduction of capital. The objection is that as this scheme involves a reduction of capital and as the requirements of sec. 55 and the following sections of the Act as to reduction of capital have not been complied with the Court cannot sanction the scheme under sec. 153 and the application must be rejected. Learned Counsel for the bank and the supporting creditors submit that there is nothing to prevent the Court from exercising its jurisdiction under sec. 153 and the bank will implement the scheme after it is sanctioned by complying with the formalities of the Act and that in any event the Court should sanction the scheme subject to the condition that it will come into effect after the requirements of the Act as to reduction of Capital are carried out. 15. Sec. 6 of the Indian Companies Act requires that in the case of a company limited by shares the memorandum shall state. amongst other things, the amount of share capital with which the company proposes to be registered and the division thereof into shares of a fixed amount. 15. Sec. 6 of the Indian Companies Act requires that in the case of a company limited by shares the memorandum shall state. amongst other things, the amount of share capital with which the company proposes to be registered and the division thereof into shares of a fixed amount. This peremptory requirement clearly indicates that the statement of the amount of share capital and the division thereof into shares is one of the conditions of the memorandum of a company limited by shares. Sec. 10 provides that a company shall not alter the conditions contained in its memorandum except in the cases and in the mode and to the extent for which express provision is made in the Act. 16. The question whether a scheme involving an alteration of the memorandum can be sanctioned by the Court without complying with the requirements of the Companies Act in respect of such alteration has been raised in connection with schemes providing for re-organisation of the share capital. Sec. 54 of our Act (which reproduces verbatim sec. 45 of the English Act of 1908) prescribes a particular procedure for modifying the conditions contained in the memorundum so as to reorganise the share capital whether by consolidation of shares of different classes or by division of its shares into different classes. In re: Palace Hold, Ltd. (1912) 2 Ch. 438 the scheme involved an alteration of the memorandum and the question was raised whether the scheme could he sanctioned in view of the fact that the provisions of sec. 45 (our sec. 54) had not been complied with. After analysing the provisions of that scheme it was held that the scheme did not involve any re-organisation of share capital within the meaning of that section and, therefore, could he sanctioned under sec. 120 of the English Act of 1908 (our sec. 153). The same question arose in re: Schweppes, Ltd. (1914) 1 Ch. 322 and it was held that so long as the re-organisation provided for the scheme did not come within the terms of sec. 45 (our sec. 54) it could be sanctioned. In re: J. A. Nordberg Ltd. (1915) 2 Ch. 439 it was held that the Court could under sec. 120 (our sec. 322 and it was held that so long as the re-organisation provided for the scheme did not come within the terms of sec. 45 (our sec. 54) it could be sanctioned. In re: J. A. Nordberg Ltd. (1915) 2 Ch. 439 it was held that the Court could under sec. 120 (our sec. 153) sanction a scheme which altered the rights conferred by the memorandum upon preference share-holders provided that it did not amount to consolidating shares of different classes or dividing shares into shares of different classes. In Re: The Tata Iron and Steel Co. Ltd., (1928) 30 BOMLR 197 was a case where the scheme involved an alteration of the rights conferred by the memorandum on the second preference share-holders but the requirements of sec. 54 had not been complied with. Crump, J., after referring to the above English cases concluded at p. 84 as follows:-- The general result appears to be this : that where the Act lays down an express procedure for altering the memorandum it is doubtful whether it is not necessary to follow that procedure, before applying for sanction under s. 120; but where that is not so the court can under s. 120 sanction a scheme which alters the memorandum. 17. On a parity of reasoning it seems to follow that if a scheme involves a reduction of capital, as the scheme before me does, the special requirements prescribed by sec. 55 of the Act must also be complied with. further if the reduction of capital made by the scheme involves a diminution of the liability in respect of unpaid share capital or payment to any share-holder of any paid-up capital so as to entitle every creditor to object to such reduction the special procedure prescribed by sec. 58 and the several following sections must be followed. This position is accepted in Palmer's Company Precedents, 15th Edn., Part I, p. 1249 and Part II, p. 916. Palmer's Form No. 774 in Part I, p. 1264, sets out the form of an order sanctioning a scheme in conjunction with reduction of capital. The requisite majority required for a special resolution which is necessary for reduction of capital under sec. 55 being the same as that required for passing a scheme under sec. 153 separate meetings need not be held and the Court may by the same order confirm the reduction of capital under sec. The requisite majority required for a special resolution which is necessary for reduction of capital under sec. 55 being the same as that required for passing a scheme under sec. 153 separate meetings need not be held and the Court may by the same order confirm the reduction of capital under sec. 55 and sanction the scheme under sec. 153. All that is necessary is that proper notices should be issued and there should be a special resolution for reduction as well as a resolution approving the scheme. If the reduction is such that creditors are entitled to object the procedure as to the settlement of list of creditors and the advertisements and other requirements should be complied with. If at the date when the Court is asked to sanction the scheme under sec. 153 it appears that all the requirements of the Act as to reduction of capital have been complied with there is no difficulty and the Court can make an order sanctioning the scheme in conjunction with reduction of capital as shown in Palmer's Form No. 774. If, however, the provisions of the Act as to reduction of capital have not been complied with, the Court need not necessarily reject the application for sanction but may well direct the application to stand over as was done in re: Cooper, Cooper and Johnson (1902) 51 W. R. 314 : s. c. (1902) W. N. 199 and in re: White Pass & Yukon Rail Co., Ltd. (1918) W. N. 323. 18. In the case before me the scheme involves a reduction of capital with a diminution of liability in respect of unpaid share capital so as to entitle the creditors to object to the reduction. The special requirements of sec. 55 and the following sections and of our rules relating to such reduction have not as yet been complied with. Seeing that it is a case where there is no charge of mismanagement against the persons in control of the affairs of the bank and I shad be readily prepared to adjourn this application so as to enable the bank to comply with those requirements. The question, however, is whether an adjournment will serve any useful purpose at all. 19. To answer the above question it is necessary, first of all. The question, however, is whether an adjournment will serve any useful purpose at all. 19. To answer the above question it is necessary, first of all. to consider the meaning and effect of the fourth clause in the scheme which provides for reduction of capital. I confess that I find it difficult to ascertain and appreciate the meaning of this clause. If I take a simple case and then apply the provisions of this clause to that case it will at once illustrate the difficulty in construing and reconciling the different points of this clause. Suppose A has subscribed for 100 shares of Rs. 10 each on which he has paid Rs. 8 per share and B has subscribed for 100 shares of Rs. 10 each on which he has paid Rs. 4 per share. What is the effect of this clause with reference to these two persons? By the first sentence 25 per cent. of the amount paid up is to be written off. Therefore, in the case of A 25 per cent. of Rs. 8, i.e., Rs. 2 is to be written off and similarly 25 per cent. of Rs. 4, i.e., Rs. 1 is to be written off in case of B. The question is: from which amount is it to be written off? Is it to be written off from the nominal value of the shares or from the amount paid up respectively by A and E? If the amount to be written off is to be deducted out of the nominal value of the shares then A's 100 shares of Rs. 10 each on which he paid Rs. 8 per share will become 100 shares of Rs. 8 each against which he has paid Rs. 8 per share. Or in other words. A becomes the holder of 100 fully paid-up shares of Rs. 8. In B's case the result will be that his 100 shares of Rs. 10 each on which he paid Rs. 4 per share will become 100 shares of Rs. 9 each on which he has paid Rs. 4 per share. I do not think this can be the meaning of the first sentence. First of all, the words are "25 per cent. of the amount paid up on shares " and not " 25 per cent. 4 per share will become 100 shares of Rs. 9 each on which he has paid Rs. 4 per share. I do not think this can be the meaning of the first sentence. First of all, the words are "25 per cent. of the amount paid up on shares " and not " 25 per cent. of the nominal value of the shares" and the golden rule of construction is to adopt the literal meaning unless it leads to an absurdity. In the second place the adoption of the first meaning will have the effect of sub-dividing shares of one and the same class of one and the same denomination, e.g., ordinary shares of Rs. 10 into shares of different denominations according to the amount actually paid by each share-holder. This sub-division will have to be made in respect of each class of shares. I do not think the simple sentence was intended 10 bring about such a far-reaching effect. In the third place if that were the meaning, the first part of the next sentence will he wholly inconsistent with the first sentence, for the first sentence, according to this meaning, provides for reduction of the share capital by 25 per cent. of the amount actually paid up but the first part of the next sentence provides reduction by the amount of the difference between the nominal value of the share and the amount actually paid up on each share. This also shows that the first sentence does not mean that capital will be reduced by 25 per cent. of the amount paid up. I, therefore, think that according to the true meaning of the first sentence 25 per cent. of the amount paid up by A and B is to be deducted from the amounts respectively paid up by them. According to this literal meaning A remains holder of 100 shares of Rs. 10 each but is to be treated as having paid Rs. 6 per share instead of Rs. 8 per share and similarly B continues to be the holder of 100 shares of Rs. 10 each but is to be treated as having paid Rs. 3 per share instead of Rs. 4 per share. 10 each but is to be treated as having paid Rs. 6 per share instead of Rs. 8 per share and similarly B continues to be the holder of 100 shares of Rs. 10 each but is to be treated as having paid Rs. 3 per share instead of Rs. 4 per share. If this be the true meaning of the first sentence there will be really no reduction of capital at all and no diminution of liability of any share-holder in respect of unpaid share capital. On the other hand the liability of the share-holders will in effect be increased by reducing the amount paid up by them by 25 per cent. and utilising that amount in writing off bad debts, etc. Whether this will indirectly have the effect of increasing the capital and offend against the ordinance now in force and prohibiting raising of fresh capital, I do not know and have not considered. But I am quite clear that the intention and effect of the first sentence are that the share-holders should bear the burden of the loss of capital by writing off 25 per cent. of the amount paid by them. This was the only provision of clause 4 as originally proposed. It has been left in tact. By amendment, however, some additions have been made to this clause and it is now necessary to consider their effect. 20. The first part of the present second sentence provides for reducing the issued capital of Rs. 14,32,345 to Rs. 7,92,042 which is the actual paid-up capital. As different amounts have been paid up by different share-holders of the same class this will have the effect of splitting up shares of the same class of the same face value into shares of different face values according to the amount actually paid on them. Thus the issued preference shares of Rs. 50 each, on which Rs. 40 has been paid will become preference shares of Rs. 40 and issued preference shares of Rs. 50 each on which Rs. 20 has been paid will become preference shares of Rs. 20 each. Likewise issued ordinary shares of Rs. 25 each will become ordinary shares of Rs. 6 or Rs. 10 according as Rs. 6 or Rs. 10 have been paid and issued ordinary shares of Rs. 10 each will become ordinary shares of Rs. 4 or Rs. 6. 20 has been paid will become preference shares of Rs. 20 each. Likewise issued ordinary shares of Rs. 25 each will become ordinary shares of Rs. 6 or Rs. 10 according as Rs. 6 or Rs. 10 have been paid and issued ordinary shares of Rs. 10 each will become ordinary shares of Rs. 4 or Rs. 6. Apart from this far-reaching result implied in this part of the second sentence of the clause as it now stands, what will be the effect of its application on A and B of the illustration I have taken? By the application of the first sentence A who held 100 shares of Rs. 10 each on which Rs. 8 had been paid becomes the holder of 100 shares of Rs. 10 each on which Rs. 6 are to be regarded as having been paid and then under the first part of the second sentence those shares become 100 shares of Rs. 8 each on which he is to be treated as having paid Rs. 6. A's liability on his shares is thus first increased from Rs. 2 to Rs. 4 per share and then reduced from Rs. 4 to Rs. 2, similarly B's 100 shares of Rs. 10 each on which he paid Rs. 4 per share become by the application of the first sentence 100 shares of Rs. 10 each on which Rs. 3 is to be treated as paid and then by the application of the first part of the second sentence they become 100 shares of Rs. 4 on which Rs. 3 is to be treated as having been paid. Thus B's liability on his shares is first raised from Rs. 6 to Rs. 7 per share and then reduced to Re. 1 per share. Two things are to he noticed: that the respective changes in the liability of A and B are not uniform and that in each case as a result of the alterations effected by the first sentence and the first part of the second sentence there remains a liability for each of them on each share, i.e., Rs. 2, for A and Re. 1 for B. Then I pass on to the second part of the second sentence which provides that each existing share be treated as fully paid up for a proportionately lesser number of shares. What does the expression "existing share" mean? 2, for A and Re. 1 for B. Then I pass on to the second part of the second sentence which provides that each existing share be treated as fully paid up for a proportionately lesser number of shares. What does the expression "existing share" mean? Does it refer to the shares as they are before this clause comes into effect or does it refer to the shares as reduced by the earlier parts of this clause? Going back to the illustration, does this part of the sentence mean that A's 100 shares of Rs. 10 each on which he paid Rs. 8 per share are to be treated as 80 fully paid-up shares of Rs. 8 or that A's 100 shares of Rs. 8 each on which he is to be treated as having paid Rs. 6 per share are to be treated as 75 fully paid-up shares of Rs. 6 each? The same questions arise in respect of B's shares, namely, do B's 100 shares of Rs. 10 each on which he paid Rs. 4 per share become 40 fully paid-up shares of Rs. 4 each or do they become 75 fully paid-up shares of Rs. 3 each ? In either case if the first meaning is to prevail how can I apply and work out the provisions of the earlier parts of the clause? Finally the last sentence provides, that fractions shall be set off. Against what will it be set off? 21. I have failed to appreciate the meaning of the clause as a whole as it now stands. I have taken recourse to an illustration in order to bring out prominently the difficulty I have in working out the effect of this clause as a whole. It seems to me that the clause has been amended without any mature or serious thought with the result that it has become meaningless. I asked Mr. R. Chaudhuri to explain the meaning of this clause, but he could offer no explanation. Mr. Moitra told me that the meaning of the clause was quite simple and obvious and he put forward an explanation which, I confess, has not dispelled the darkness which still envelopes my mind. I, therefore, asked Mr. Moitra to redraft this clause in language which will be intelligible to an ordinary average person. Mr. Mr. Moitra told me that the meaning of the clause was quite simple and obvious and he put forward an explanation which, I confess, has not dispelled the darkness which still envelopes my mind. I, therefore, asked Mr. Moitra to redraft this clause in language which will be intelligible to an ordinary average person. Mr. Moitra has been good enough to do so in the following terms: That the subscribed and paid-up capital of the company shall be reduced from Rs. 14,82,345/-and Rs. 7,99,042/- respectively to Rs. 5,94,031/-by extinguishing the uncalled and unpaid capital of the company and by reducing the paid-up capital of the company by 25%. In effecting such reduction the share-holders shall forego fraction of a rupee. The said reduction of 25% of paid-up capital shall be effected to adjust bad debts (if any) and capitalised expenses. 22. Let me examine how this works out The paid-up capital is Rs. 7,92,042 and if it is reduced by 25 per cent. the paid-up capital becomes Rs. 5,94,028. I am overlooking the discrepancy between the last-mentioned figure and Rs. 5,94,031 giver in Mr. Moitra's draft. But by what process do I reduce the subscribed capital to Rs. 5,94,031? According to Mr. Moitra's draft this result is to be brought about by extinguishing the uncalled and unpaid capital. Let me work it out. The subscribed capital is Rs. 14,32,345 and the called-up capital is Rs. 9,33,430. The uncalled capital is, therefore, the difference between these two figures, namely, Rs. 4,98,915. The called-up capital is Rs. 9,33,430 and the paid-up capital is Rs. 7,92,042. The difference between these two figures is the unpaid capital or calls in arrears, namely, Rs. 1,41,388. If I extinguish the uncalled capital (Rs. 4,98,915) and the unpaid capital (Rs. 1,41,388) then the total amount extinguished comes up to Rs. 6,40,303. By this process the subscribed capital of Rs. 14,32,345 is reduced to Rs. 7,92,042 which is the paid-up capital but I do not arrive at Rs. 5,94,031. In order to reduce the subscribed capital to Rs. 5,94,031 I have, to reduce it first to the paid-up capital and then again reduce it by 25 per cent. The clause in the scheme does not provide for reduction of the subscribed capital by 25 per cent. Mr. Moitra's draft is self-contradictory because it starts by saying that the subscribed capital of Rs. 14,32,345 shall be reduced to Rs. 5,94,031 I have, to reduce it first to the paid-up capital and then again reduce it by 25 per cent. The clause in the scheme does not provide for reduction of the subscribed capital by 25 per cent. Mr. Moitra's draft is self-contradictory because it starts by saying that the subscribed capital of Rs. 14,32,345 shall be reduced to Rs. 5,94,031 but ends by saying that this result is to be brought about (i) by extinguishing the uncalled and unpaid capital and (ii) by reducing the paid-up capital by 25 per cent. Mr. Moitra does not here claim to reduce the subscribed capital by 25 per cent. If his draft means that subscribed capital after its reduction to the paid-up capital shall be further reduced by 25 per cent. then he will be introducing something new which is not in the clause in the scheme. The result of adjourning this application will certainly give the bank an opportunity to comply with the requirements of the Act as to reduction of capital. But if after following all the procedure the bank pass a special resolution exactly in terms of clause 4 then that special resolution will be as meaningless as clause 4 is. If they improve upon clause 4 and the special resolution adopts a new scheme of reduction that will be inconsistent with clause 4. In either case it will be impossible to sanction this scheme. I have been asked to alter or amend clause 4. As I do not understand the meaning of clause 4 as it now stands it will be futile for me to attempt to alter it so as to bring out the real intention of the creditors which is unknown to me. If I alter it according to my notion I may impose something on the creditors which they may not ever have contemplated. I do not think the power of modification reserved for the Court can he exercised to alter the scheme beyond recognition. On a consideration of the fourth clause of the scheme I find that it is totally meaningless and that its defects cannot be cured by any formal or slight alterations. With regret, therefore, I have come to the conclusion that no useful purpose will be served by adjourning this application. The application is, therefore, rejected. The bank shall pay the costs of Mr. Sanyal's client.