Scheme of arrangement survives dissolution, with limitation and acknowledgment rules preserving the shareholder's claim.

A scheme of arrangement under section 208-C was held enforceable against the transferee company even after the transferor company's dissolution, because the transferee's liability was independent of dissolution and the Company Court was not functus officio. The shareholder's claim was not defeated by the option clause, as service of the required notice by the joint liquidators was not proved and the time limit never properly commenced. The claim was also within limitation under Article 137, running from the first unequivocal refusal, and the balance-sheet entry operated as acknowledgment of liability. Voluntary winding up and dissolution were not invalid for breach of the Air Corporations Act.

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Issues: (i) Whether the Company Court retained jurisdiction after the transferor company stood dissolved to direct implementation of a scheme of arrangement made under section 208-C of the Companies Act, 1913; (ii) whether the shareholder's claim was defeated for want of exercise of option within the time stipulated in the scheme and for alleged service of notice; (iii) whether the claim was barred by limitation or saved by acknowledgment in the transferee company's balance-sheet; (iv) whether the voluntary winding up and dissolution of the transferor company were invalid for breach of section 28 of the Air Corporations Act, 1953.

Issue (i): Whether the Company Court retained jurisdiction after the transferor company stood dissolved to direct implementation of a scheme of arrangement made under section 208-C of the Companies Act, 1913.

Analysis: The scheme under section 208-C was an arrangement by which the transferee company undertook to discharge the liabilities of the transferor company in consideration of taking over its assets. That liability was independent of the later dissolution of the transferor company under section 208-E. Since the relief was directed against the transferee company and concerned enforcement of a matter expressly provided for by the Act, the dissolution did not render the Company Court functus officio in relation to enforcement of the scheme.

Conclusion: The Court held that jurisdiction continued after dissolution and the objection to maintainability failed.

Issue (ii): Whether the shareholder's claim was defeated for want of exercise of option within the time stipulated in the scheme and for alleged service of notice.

Analysis: The stipulation in paragraph 5 of the scheme required notice of acceptance to be served by the joint liquidators, and the evidence did not establish service of such notice in August 1956. A later communication sent by the transferee company could not substitute for the notice required by the scheme. In the absence of proved service by the liquidators, the time limit in paragraph 5 did not commence to run against the shareholder, and non-exercise of option within that period could not defeat the claim.

Conclusion: The Court held that the claim was not barred by the option clause in the scheme.

Issue (iii): Whether the claim was barred by limitation or saved by acknowledgment in the transferee company's balance-sheet.

Analysis: The company petition was treated as an application governed by Article 137 of the Limitation Act, 1963, and time began to run when the right to apply accrued and was unequivocally denied. That occurred on the first clear refusal of 10 November 1967, so the petition filed on 2 November 1970 was within time. Independently, the balance-sheet entry showing an amount held in shareholders' suspense account for payment to the shareholders of the transferor company amounted to a written acknowledgment of an existing liability signed by duly authorised officers, and therefore furnished a fresh period of limitation.

Conclusion: The Court held that the claim was within limitation.

Issue (iv): Whether the voluntary winding up and dissolution of the transferor company were invalid for breach of section 28 of the Air Corporations Act, 1953.

Analysis: Section 28 did not exclude voluntary winding up under the Companies Act, 1913, nor did it make prior Central Government authorisation indispensable where the company proceeded under the Companies Act. The statutory scheme showed that the Air Corporations Act provided only an alternative mode in appropriate cases, and the winding up and dissolution were not vitiated on that ground.

Conclusion: The Court held that the winding up and dissolution were valid.

Final Conclusion: The appeal and the cross-objections both failed. The transferor company's dissolution was upheld, the scheme of arrangement remained enforceable against the transferee company, and the shareholder's monetary claim survived and was found to be in time.

Ratio Decidendi: A scheme of arrangement sanctioned in a members' voluntary winding up under section 208-C survives the dissolution of the transferor company and may be enforced against the transferee company by the Company Court; limitation for an application begins when the right is first unequivocally denied, and a duly signed balance-sheet may amount to acknowledgment of an existing liability.

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