Reduction of share capital under a reconstruction scheme requires full statutory notice and separate compliance with reduction formalities.

A scheme for reconstruction under section 153 of the Indian Companies Act, 1913 may reorganise share capital, but where the arrangement involves reduction of capital, the special requirements for reduction must also be met. Sections 153 and 55 operate in distinct fields, and read with section 81(2) a resolution for reduction can be considered only at a meeting called on not less than 21 days' notice unless all entitled members consent to shorter notice. Because the proposed modification involved cash payment of part of the face value of preference shares, it amounted to a reduction of capital, and notice of only about ten to eleven days was insufficient. The meetings were therefore illegal and invalid.

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Issues: Whether a modified scheme for reconstruction of a company that involved reduction of preference share capital could validly be considered at meetings for which less than 21 days' notice had been given, and whether the notice requirements under the Companies Act could be displaced by directions under section 153.

Analysis: A scheme under section 153 of the Indian Companies Act, 1913 may provide for reorganisation of share capital, but where the proposed arrangement necessarily involves reduction of share capital, the special formalities governing reduction must also be complied with. Sections 153 and 55 operate in distinct fields and neither overrides the other. Read with section 81(2), a resolution involving reduction of share capital can be considered only at a meeting of which not less than 21 days' notice has been duly given, unless all entitled members agree to shorter notice. The proposed modification here contemplated payment in cash of a part of the face value of preference shares, which amounted to a reduction of capital. The notice actually given was only about ten to eleven days, and the statutory requirements were not satisfied.

Conclusion: The meetings held on 27 November 1955 were illegal and invalid, and the order directing the adjourned meetings to proceed was rightly set aside.

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