Preference shareholders' rights on winding up are confined to capital repayment and dividends where the articles exhaust their entitlement.

The articles, read as a whole, were construed as limiting preference shareholders to preferential dividends and repayment of paid-up capital on winding up; they had no additional right to participate in surplus assets, which remained for ordinary shareholders. In assessing the proposed reduction of capital, section 25 of the Coal Industry Nationalisation Act, 1946 was treated as relevant but not determinative of fairness under the Companies Act, 1929. Because the preference shareholders had no certain enforceable entitlement to a better adjustment, and the reduction only accelerated repayment otherwise due on winding up, the proposal was regarded as fair and equitable.

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Issues: (i) Whether the preference shareholders had a right under the articles to share in surplus assets on winding up beyond repayment of their paid-up capital; (ii) whether the proposed reduction of capital was unfair and inequitable having regard to section 25 of the Coal Industry Nationalisation Act, 1946.

Issue (i): Whether the preference shareholders had a right under the articles to share in surplus assets on winding up beyond repayment of their paid-up capital.

Analysis: The articles were construed as a whole. The majority held that the provisions governing dividend rights, reserve funds, capitalisation of undivided profits, and distribution on winding up showed that the preference shareholders' rights were limited to priority for repayment of paid-up capital and preferential dividends. The relevant winding-up clauses were treated as an exhaustive statement of their rights, and the ordinary shareholders were regarded as entitled to the balance of assets, including appropriated profits and assets accumulated before liquidation.

Conclusion: The preference shareholders had no further right to participate in surplus assets beyond repayment of their paid-up capital.

Issue (ii): Whether the proposed reduction of capital was unfair and inequitable having regard to section 25 of the Coal Industry Nationalisation Act, 1946.

Analysis: Section 25 did not oust the court's jurisdiction under the Companies Act, 1929, but it was only one factor in assessing fairness. The majority held that the section and the contemplated regulations did not give the preference shareholders any certain or enforceable entitlement to a better adjustment, while the reduction merely accelerated repayment of capital that they would in any event receive in winding up. On that footing, the proposal was not shown to be unfair between the classes of shareholders.

Conclusion: The proposed reduction of capital was fair and equitable.

Final Conclusion: The reduction of capital was properly confirmed, and the appeal failed.

Ratio Decidendi: Where the company's articles, read as a whole, exhaustively define preference shareholders' rights on winding up, they cannot claim an additional share in surplus assets, and a reduction of capital returning their paid-up capital is not unfair merely because liquidation is imminent or a separate statutory compensation regime may later affect the parties' relative positions.

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