PART VI.
SHARE CAPITAL AND DEBENTURES
NATURE, NUMBERING AND CERTIFICATE OF SHARES 

(1) The shares or other interest of any member in a company shall be movable property, transferable in the manner provided by the articles of the company.

(2) Each share in a company shall have a distinctive number.

(3) A certificate under the common seal of the company specifying any shares held by any member shall be prima facie evidence of the title of the member to the shares therein specified.

CLASSES AND KINDS OF SHARES

90. Classes and kinds of share capital:-

A company limited by shares may have different kinds of share capital and classes therein as provided by its memorandum and articles:

Provided that different rights and privileges in relation to the different classes of shares may only  conferred in such manner as may by prescribed.

GENERAL PROVISIONS AS TO SHARE CAPITAL

91. Only fully paid shares to be issued:-

No company shall issue party paid shares:

Provided that where a company has partly paid shares on the commencement of this Ordinance, it:-

(i) shall not issue any further share capital until all the shares previously issued have become fully paid up; and

(ii) shall pay dividend only in proportion to the amount paid up on each share.

92. Power of company limited by shares to alter its share capital:-

(1) A company limited by  shares, if so authorised by its articles, may alter conditions of its memorandum so as to:-

(a) increase its share capital by such amount as it thinks expedient;

(b) consolidate and divide the whole or any part of its share capital into shares of larger amount then its existing shares;

(c) sub-divide its shares, or any of them, into shares of smaller amount than is fixed by the memorandum; or

(d) cancel shares which, at the date of the passing of the resolution in that behalf, have not  been taken or agreed to be taken by any person, and diminish the amount of its share capital  by the amount of the shares so cancelled:

Provided that, in the event of consolidation or sub-division of shares, the rights attaching to the new shares shall be strictly proportional to the rights attaching to the previous shares so  consolidated or sub-divided:

Provided further, where any share issued are of a class which is the same as that of shares  previously issued, the rights attaching to the new shares be the same as those attaching to the share previously held.

(2) The new shares issued by a company shall rank pari passu with the existing shares of the class to which the new shares belonging in all matters, including the right to such bonus or right issue and dividend as may be declared by the company subsequent to the date of issue of such new share.

(3) The powers conferred by sub-section (1) shall be exercisable by the company only in a general meeting.

(3A) Notwithstanding anything contained in this Ordinance or any other law for the time being in force or the memorandum and articles, where the authorised capital of a company is fully subscribed, or the unsubscribed capital capital is insufficient, the same shall be deemed to have been increased to be extent necessary for issue of shares to a scheduled bank or financial institution in pursuance of any obligation of the company to issue shares to such scheduled bank or financial institution.

(4) A cancellation of shares in pursuance of sub-section (1) shall not be deemed to be a reduction of share capital within the meaning of this Ordinance.

(5) The company shall file th the registrar notice of the exercise of any power referred to in sub-section (1) within fifteen days from the exercise thereof.

93. Notice to registrar of consolidation of share capital, etc:-

(1) Where a company having a share capital has consolidated and divided its shares of larger amount than its existing shares, it shall, within fifteen days of the consolidation and division, file notice with the registrar of the same, specifying the shares consolidated and divided.

(2) If a company makes default in complying with the requirements of sub-section (5) of section 92 or sub-section (1) of this section, it shall be liable to a fine which may extend to one hundred  rupees for every day during which the default continues, and every officer of the company who knowingly and wilfully authorises or permits the default shall be liable to the like penalty.

94. Notice of increased of share capital or of members:-

(1) Where a company having a share capital has resolved to increased its share capital beyond the authorised capital [(or such capital is increased under sub-section (3A) of section 92] and where a company not having a share capital has resolved to increase the number of its members beyond the number previously registered, it shall file with the registrar, within fifteen days after the passing of the resolution, a notice of the increase of capital or members, as the case may be, and the registrar shall record the increase.

Provided that where default is made by a company in filing a notice of increase in the  authorised capital under sub-section (3A) of section 92, the scheduled bank or the financial institution to whom shares have been issued may file notice of such increase with the registrar and such notice shall be deemed to have been filed by the company itself and the scheduled bank or financial institution shall be entitled to recover from the company the amount of any fee properly paid by it to the registrar in respect of such increase.

(2) The notice to be given under sub-section (1) shall include particulars of the shares to be affected and the conditions, if any, subject to which the new shares are to be issued.

(3) If a company makes default in complying with the requirements of sub-section (1), it shall be liable to a fine which may extend to one hundred rupees for every day during which the default continues, and every officer of the company who knowingly and wilfully authorises or permits the default shall be liable to the like penalty.

(4) No resolution referred to in sub-section (1) shall take effect unless the notice required by that sub-section to be filed with the registrar is duly seen to him.

95. Prohibition of purchase or grant of financial assistance by a company for purchase of its own or its holding company's shares:-

(1) No company shall have power to buy its won shares or the shares of its holding company.

(2) No company limited by shares, other than a private company, not being a subsidiary of a public company, shall give, whether directly or indirectly, and whether by means of a loan, guarantee, the provision of security or otherwise, any financial assistance for the purpose of or in connection with purchase made or to be made by any person of any shares in the company or, where the company is subsidiary, in its holding company:

Provided that nothing in this sub-section shall prevent the company the advancing or securing an advance to any of its salaried employees, including a chief executive who, before his appointment as such, was not a director of the company, but excluding all directors of the company, for purchase of shares of the company or of its subsidiary or holding company, if making or securing of such advance is a part of the contract of service of such employee.

(3) If a company acts in contravention of sub-section (1) or sub-section (2), the company and every officer of the company who is knowingly and wilfully in default shall be liable to fine which may extend to ten thousand rupees if the default relates to a listed company and to two thousand rupees if the default relates to any other company.

(4) Nothing in this section shall prevent a company redeeming any shares or any other redeemable security issued in accordance with the provisions of this Ordinance.

95A. Power of company to purchase its own shares:-

(1) Notwithstanding anything contained in this Ordinance or any other law for the time being in force or the memorandum and articles, a listed company may, subject to the provisions of this section and the rules framed by the Commission in this behalf, purchase its own shares (hereinafter in this section referred to as "purchase").

(2) The purchase shall be authorized by a special resolution which shall indicate the maximum number of shares to be purchased; the maximum price at which the shares may be purchased; and the period within which the purchase is to be made.

(3) The notice of the meeting in which the special resolution authorizing the purchase of shares is proposed to be moved, shall be accompanied by an explanatory statement containing all material facts including the following::-

(a) jurisdiction for the purchase;

(b) source of funding;

(c) effect on the financial position of the company; and

(d) nature and extent of the interest, if any, of every director, whether directly or indirectly.

(4) The purchase shall always be in cash and shall be out of the distributable profits.

(5) Where shares are purchased by a company on premium, the account of premium shall be charged to Share Premium Account of the company or in the absence of any balance therein, to distributable profits of the company.

(6) Where purchase is made at a price lower than the nominal value of shares, the difference shall be credited to the reserve created under sub-section (10).

(7) The company shall have such debt enquity and current ratios as may be prescribed.

(8) The majority of the directors including the chief executive, shall at a meeting made a affairs of solvency verified by an affidavit to the effect that they made a full inquiry into the affairs of the company, and that after having done so, they have formed the opinion that the company shall continue to operate as a going concern and that it is capable of meeting its liabilities on time during the period upto the end of the immediately succeeding financial year.

(9) The purchase shall be made through a tender system and the mode of tender shall be decided by the company in general meeting through a special resolution.

(10) The shares purchased under this section shall not be resold and shall be cancelled forthwith.The amount of the company's paid up share capital shall be diminished by the nominal value of such shares accordingly. The amount by which the company's paid up share capital is thereby diminished on cancellation of the shares purchased shall, after accounting for the credit, if any, pursuant to sub-section (6) of this section, be transferred from the distributable profits to an account to be called "Capital Re-purchase Reserve Account".

(11) The provisions of this Ordinance relating to the reduction of a company's share capital apply as if the Capital Re-purchase Reserve Account were paid-up share capital of the company, except that the reserve account may be applied by the company in paying up its unissued shares to be allotted to members of the company as fully paid bonus shares.

(12) Where a company has purchased its own shares under this section, it shall maintain a register of shares so purchased and enter therein the following particulars, namely::-

(i) numbers of shares purchased;

(ii) consideration paid for the shares purchased;

(iii) mode of purchase; and

(iv) the date of cancellation of such shares.

(13) A return about the purchase of shares under this section containing such particulars relating to purchase as may be prescribed, alongwith the declaration of solvency made under sub-section (8), shall be filed with the Commission and the registrar within thirty days of the purchase.

(14) If a company makes default in compliance with the provisions of this section, the company shall be liable to a fine which may extend to one million rupees and any officer of the company who is knowingly and wilfully in default shall also be punishable with imprisonment for a term which may extend to six months, or with fine which may extend to one million rupees, or with both.

REDUCTION OF SHARE CAPITAL

96. Reduction of share capital:-

(1) Subject to confirmation by the Court, a company limited by shares, if so authorised by its articles, may be special resolution reduce its share capital in any way, and in particular and without prejudice to the generality of the foregoing powers may:-

(i) extinguish or reduce the liability on any of its shares in respect of share capital not paid up; or

(ii) either with or without extinguishing or reducing liability on any of its shares, cancel any paid-up share capital which is lost or unrepresented by available assets; or

(iii) either with or without extinguishing or reducing liability on any of its shares, pay off any paid-up share capital which is in excess of the needs of the company;

and may, if and so far as is necessary, alter its memorandum by reducing the amount of its share capital and of its shares accordingly.

(2) A special resolution under sub-section (1) is in this Ordinance referred to as a resolution for reducing share capital.

97. Application to Court for confirming order:-

Where a company has passed a resolution for reducing share capital, it may apply by a petition to the Court for an order confirming the reduction.

98. Addition to name of company of "and-reduced":-

On and from the passing by a company of a resolution for reducing share capital, or where the reduction does not involve either the diminution of any liability in respect to unpaid share capital or the payment to any shareholder of any paid-up share capital, then on a from the making of the order conforming the reduction, the company shall, unless otherwise directed by the Court for any special reasons, add to its name until such date as the Court may fix, the words "and reduced" as the last words thereof, and those words shall, until that date, be deemed to be part of the name of the company:

Provided that, where the reduction does not involve either the diminution of any liability in respect of unpaid share capital, or payment to any shareholder of any paid-up share capital, the Court may, if it thinks expedient, dispense with the addition of the words "and reduced".

99. Objection by creditors and settlement of list of objecting creditors:-

(1) Where the proposed reduction of share capital involved either diminution of liability in respect of unpaid share capital or the payment to any shareholder of any paid-up share capital, any in any other case if the Court so directs, every creditor of the company who, on the date fixed by the Court, is entitled to any debt or claim which, if that date were the date of commencement of the winding up of the company, would be admissible in proof against the company, shall be entitled to object to the reduction.

(2) The Court shall settle a list of creditors so entitled to object, and for that purpose shall ascertain, as far as possible without requiring an application from any creditor, the names of those creditors and the nature and amount of their debts or claims, and may publish notices fixing a day or days within which creditors not entered on the list are to claim to be so entered or are to be excluded from the right objecting to the reduction.

100. Power to dispense with consent of creditor on security being given for his debt:-

Where a creditor entered on the list of creditors whose debt or claim is not discharge or determined does not consent to the reduction, the Court may, if it thinks fit, dispense with the consent of that creditor, on the company securing payment of his debt or claim by appropriating, as the Court may direct, the following amount, that is to say,:-

(i) if the company admits the full amount of his debt or claim, or, through not admitting it, is willing to provide for it, then the full amount of the debt or claim; and

(ii) if the company does not admit or is not willing to provide for the full amount of the debt or claim, or if the amount is contingent or not ascertained, then an amount fixed by the Court after the like inquiry and adjudication as if the company were being would up by the Court.

101. Order confirming reduction:-

If the Court is satisfied with respect to every creditor of the company who under this Ordinance is entitled to object to the reduction that either his consent to the reduction has been obtained or his debt or claim has been discharged or has been determined or has been secured, the Court may make an order confirming the reduction on such terms and conditions as it thinks fit.

102. Registration of order and minute of reduction:-

(1) The registrar on production to him of an order of the Court confirming the reduction of the share capital of a company, and on the filing with him of a certified copy of the order and of a minute approved by the Court and showing, with respect to the share capital of the company as altered by the order, the  amount of the share capital, the number of shares into which it is to be divided and the amount of each share, and the amount, if any, at the date of the registration deemed to be paid-up on each share, shall register the order and minute.

(2) A resolution for reducing share capital as confirmed by an order of the Court registered under sub-section (1) shall take effect on such registration and not before.

(3) Notice of the registration shall be published in such manner as the Court may direct.

(4) The registrar shall certify under his hand the registration of the order and minute, and his certificate shall be conclusive evidence that all the requirements of this Ordinance with respect to  reduction of share capital have been complied with, and that the share apital of the company is such as is stated in the minute.

103. Minute to form part of memorandum:-

(1) The minute when registered shall be deemed to be substituted for the corresponding part of the memorandum of the company, and shall be valid and alterable as if it had been originally incorporated therein, and shall be embodied in every copy of the  memorandum issued after its regulation.

(2) If a company makes default in complying with the requirements of sub-section (1), it shall be  liable to a fine which may extend to fifty rupees for each copy in respect of which default is made,  and every officer of the company who knowingly and wilfully authorises or permits the default shall be liable to the like penalty.

104. Liability of members in respect of reduced shares

(1) A member of the company, past or present, shall not be liable in respect of any share to any call or contribution exceeding in amount  the difference, if any, between the amount paid, or, as the case may be, the reduced amount, if  any, which is to be deemed to have been paid, on the share and the amount of the share as fixed by the minute:

Provided that, if creditor, entitled in respect of any debt or claim to object to the reduction of  share capital, is, by reason of his ignorance of the proceedings for reduction, or of their nature and  effect with respect to his claim not entered on the list of creditors, and, after the reduction, the company is unable, within the meaning of the provisions of this Ordinance with respect to winding up by the Court, to pay the amount of his debt or claim, then:-

(i) every person who was a member of the company at the date of the registration of the order for reduction and minute shall be liable to contribute for the payment of that debt, or claim an amount not exceeding the amount which he would have been liable to contribute if the company had commenced to be wound up on the day before that registration; and

(ii) if the company is wound up, the Court, on the application of any such creditor and proof of  his ignorance as aforesaid, may, if it thinks fit, settle accordingly a list of persons so liable to contribute, and make and enforce calls and orders on the contributories settled on the list as if they were ordinary contributories in a winding up.

(2) Nothing in this section affect the rights of the contributories among themselves.

105. Penalty on concealment of name of creditor:-

If any officer of the company wilfully conceals the name of the creditor entitled to object to the reduction, or wilfully misrepresents the nature or  amount of the debt or claim of any creditor, or if any office of the company abets any such concealment or misrepresentation as aforesaid, every such officer shall be punishable with imprisonment for a term which may extend to one year, or with fine, or with both.

106. Publication of reasons for reduction:-

In the case of reduction of share capital, the Court may require the company to publish in the manner specified by the Court the reasons for  reduction, or cush other information in regard thereto as the Court may think expedient with view to giving proper information to the public, and, if the Court thinks fit, the causes which led to the reduction.

107. Increase and reduction of share capital in case of a company limited by guarantee having a share capital:-

A company limited by guarantee may, if it has a share capital and is so authorised by its articles, increase or reduce its share capital in the same manner and subject to the same conditions in and subject to which a company limited by shares may increase or reduce its share capital under the provisions of this Ordinance.

VARIATION OF SHAREHOLDERS' RIGHTS

108. Variation of shareholders' rights:-

(1) The variation of the rights of shareholders of any class shall be effected only in the manner laid down in section 28.

(2) Not less than ten per cent of the class of shareholders who are aggrieved by the variation of their rights under sub-section (1) may, within thirty days of the date of the resolution varying their  rights, apply to the Court for an order cancelling the resolution:

Provided that the Court shall not pass such an order unless it is shown to its satisfaction that some facts which would have had a bearing on the decision of the shareholders were withheld by the company in getting the aforesaid resolution passed or, having regard to all the circumstances of the  case, that the variation would unfairly prejudice the shareholders of the class represented by the  applicant.

(3) An application under sub-section (2) may be made on behalf of the shareholders entitled to make it by such one or more of their number as they authorise in writing in this behalf.

(4) The decision of the Court on any such application shall be final.

(5) The company shall, within fifteen days after the service on the company of any order made on any such application, forward a copy of the order to the registrar and, if default is made in complying with this provision, the company and every officer of the company who is knowingly and wilfully in default shall be liable to a fine which may extend to two hundred rupees for each day during which the default continues.

(6) The expression "variation" includes abrogation, revocation or enhancement.

(7) Section 5 of the Limitation Act, 1908 (IX of 1908), shall apply to an application made under sub-section (2).

REGISTRATION OF UNLIMITED COMPANY AS LIMITED

109. Registration of unlimited company as limited:-

(1) Subject to the provisions of this section, any company registered as unlimited may register under this Ordinance as limited or any company already registered as a limited company may re-register under this Ordinance, but the registration of  an unlimited company as a limited company shall not affect the rights, debts, liabilities, obligations or  contracts acquired, incurred or entered into by, to, with or on behalf of, the company before the  registration.

(2) On registration in pursuance of sub-section (1), the registrar shall close the former registration of the company, and may dispense with the delivery to him of comprise of any documents with copies of which he was furnished on the occasion of the original registration of the company; but, save as aforesaid, the registration shall take place in the same manner and shall have effect as if it were the first registration of the company under this Ordinance.

110. Power of unlimited company to provide for reserve share capital on re-registration:-

An unlimited company having a share capital may, by its resolution for registration as a limited company  in pursuance of this Ordinance, increase the nominal amount of its share capital by increasing the  nominal amount of each of its shares, but subject to the condition that no part of the amount by  which its capital is so increased shall be capable of being called up except in the event and for the purpose of the company being wound up.

UNLIMITED LIABILITY OF DIRECTORS

111. Limited company may have directors with unlimited liability:-

(1) In a limited company, the liability of the directors or of any director may if so provided by the memorandum, be unlimited.

(2) In a limited company in which the liability of any director is unlimited, the directors of the company, if any, and the member who proposes a person for election or appointment to the office of  director, shall add to that proposal a statement that the liability of the person holding that office will  be unlimited and the promoters and officers of the company, or one of them shall, before that person  accepts the office or acts therein, give him notice in writing that his liability will be unlimited.

(3) If any director or proposer makes default in adding such a statement, or if any promoter or officer of the company makes default in giving such a notice, he shall be liable to a fine which may extend to two thousand rupees and shall also be liable for any damage which the person so elected or appointed may sustain from the default, but the liability of the person elected or appointed shall not be affected by the default.

112. Special resolution of limited company making liability of directors unlimited:-

(1) A limited company, if so authorised by its articles, may, by special resolution, alter its memorandum so as to render unlimited the liability of its directors or of any director.

(2) Upon the passing of any such special resolution, the provisions thereof shall be as valid as if  they had been originally contained in the memorandum:

Provided that an alteration of the memorandum making the liability of any of the directors unlimited shall not apply, without his consent, to a director who was holding the office from before the date of the alteration, until the expiry of the term for which he was holding office on that date.

SPECIAL PROVISIONS AS TO DEBENTURES

113. Right of debenture-holder and shareholder to have copies of trust-deed:-

(1) A copy of any trust-deed for securing any issue of debentures shall be forwarded to every holder of any such debentures or holder of shares in the company, at his request on payment of such fee as the company may fix not exceeding the amount prescribed.

(2) If a copy is refused or not forwarded as required under sub-section (1), the company shall be liable to a fine not exceeding five hundred rupees, and to a further fine not exceeding fifty rupees for every day after the first during which the refusal continues, and every officer of the company who  knowingly authorises or permits the refusal shall be liable to the like penalty, and the registrar may by order compel immediate supply of a copy.

114. Debentures not be carry voting rights:-

(1) Except as otherwise provided in this Ordinance, no company shall, after the commencement of this Ordinance, issue any debentures carrying voting rights at any meeting of the company:

Provided that debentures convertible into ordinary shares may, at the option of the company carry voting rights:

Provided further that such voting rights shall not be in excess of the voting rights attaching to ordinary shares of equal paid-up value.

Explanation.:-

Debentures convertible into ordinary shares include debentures with subscription warrants.

(2) Notwithstanding anything contained in this Ordinance, or in the memorandum or articles of  any company, no debenture-holder having immediately before the commencement of this Ordinance voting rights shall, after such commencement, exercise any such rights at any meeting of the company, except a meeting of debenture-holders themselves.

115. Perpetual debenture:-

A condition contained in any debenture or any deed for securing any debenture whether issued or executed before or after the promulgation of this Ordinance, shall not be invalid by reason only that thereby the debentures are made irredeemable or redeemable only on the happening of a contingency, however remote, or on the expiration of a period however long.

116. Power to re-issue redeemed debenture in certain cases:-

(1) Where either before or after the commencement of this Ordinance a company has redeemed any debenture previously issued, the company, unless the articles or the conditions of issue expressly otherwise provide, or unless the debentures have been redeemed in pursuance of any obligation on the company so to do, not being an obligation enforceable only by the person to whom the redeemed debentures were issued or his assign, shall have power, and shall be deemed always to have had power, to keep the debentures alive for the purposes of reissue, and where a company has purported to exercise such a power the company shall have power, and shall be deemed always to have had power, to reissue the debenture either by reissuing the same debentures or by issuing other debentures in their place, and upon such reissue the person entitled to the debentures shall have, and shall be deemed always to have had, the same rights and priorities as if the debentures had not previously been issued.

(2) Where with the object of keeping debentures alive for the purpose of reissue they have, either before or after the commencement of this Ordinance, been transferred to a nominee of the company, a transfer from that nominee shall be deemed to be a reissue for the purposes of this section.

(3) Where a company has, either before or after the commencement of this Ordinance, deposited any of its debenture to secure advances from time to time on current account or otherwise, the debentures shall not be deemed to have been redeemed by reason only of the account of the company having ceased to be in debit while the debentures remained so deposited.

(4) The re-issue of a debenture or the issue of another debenture in its place under the power by this section give to, or deemed to have been possessed by, a company, whether the re-issue or issue was made before or after the commencement of this Ordinance, shall be treated as the issue of a new debenture for the purpose of stamp-duty and registration, but it shall not be so treated for the purposes of any provision limiting the amount or number of debenture to be issued:

Provided that any person lending money on the security of a debenture re-issued under this section which appears to be duly stamped may give the debenture in evidence in any proceedings for enforcing his security without payment of the stamp-duty or any penalty in respect thereof, unless he had notice or, but for his negligence, might have discovered, that the debenture was not duly stamped, but in any such case the company shall be liable to pay the proper stamp-duty and penalty.

(5) Nothing in this section prejudice and power to issue debentures in the place of any debentures paid off or otherwise satisfied or extinguished, reserved to a company by its debentures or the securities for the same.

117. Specific performance of contract to subscribe for debenture:-

A contract with a company to take up and pay for any debentures of the company may be enforced by a decree for specific performance.

118. Payment of certain debts out of assets subject to floating charge in priority to claims under the charge:-

(1) Where either a receiver is appointed on behalf of the holders of any debentures of a company secured by a floating charge, or possession is taken by or on behalf of these debenture-holders of any property comprised in or subject to the charge, then, if the company is not at the time in course of being wound up, the debts which in every winding up are under the provisions of Part XI relating to preferential payments to be paid in priority to all other debts, shall be paid forthwith out of any assets coming to the hands of the receiver or other person taking possession as aforesaid in priority to any claim for principal or interest in respect of the debentures.

(2) The periods of time mentioned in the said provisions of Part XI shall be reckoned from the date of the appointment of the receiver or of possession being taken as aforesaid,as the case may be.

(3) Any payment made under sub-section (1) shall be recouped, as far as may be, out of the assets of the company available for payment of general creditors.

119. Power and liabilities of trustee:-

(1) The trustee nominated or appointed under the trust-deed for securing an issue of debenture shall, if so empowered by such deed, have the right to sue for all redemption monies and interest in the following cases, namely::-

(a) where the issuer of the debentures as mortgagor binds himself to repay the debenture loan or pay the accrued interest thereon, or both the repay the loan and pay the interest thereon, in the manner provided on the due date;

(b) where by any cause other than the wrongful act or default of the issuer the mortgaged property is wholly or partially destroyed or the security is rendered insufficient within the meaning of section 66 of the Transfer of Property Act, 1882 (Act IV of 1882), and the trustee has given the issuer a reasonable opportunity of providing further security adequate to render the whole security sufficient and the issuer has failed to do so;

(c) where the trustee is deprived of the whole or part of the security by or in consequence of  any wrongful act or default on the part of the issuer; and

(d) where the trustee is entitled to take possession of the mortgaged property and the issuer fails to deliver the same to him or to secure the possession thereof without disturbance by the issuer or any person claiming under a title superior to that of the issuer.

(2) Where a suit is brought under clause (a) or clause (b) of sub-section (1) the Court may at its discretion stay the suit and all proceedings therein notwithstanding any contract to the contrary, until the trustee has exhausted all his available remedies against the mortgaged property or what remains of it unless the trustee abandons his security and, if necessary, retransfers the mortgaged property.

(3) Notwithstanding anything contained in sub-sections (1) and (2) or any other law, for the time being in force, the trustee or any person citing on his behalf shall, if so authorised by the trust-deed, sell or concur in selling, without intervention of the Court, the mortgaged property or any part thereof in default of payment according to re-payment schedule of any redemption amount or in the payment of any accrued interest on the due date by the issuer.

Explanation.:-"Issuer", in sub-sections (1), (2) and (3), shall mean the company issuing debentures and securing the same by mortgaged of its properties or assets, or both its properties and assets, and appointing a trustee under a trust-deed.

(4) Subject to the provisions of this section, any provision contained in a trust deed for securing an issue of debentures, or in any contract with the holders of debentures secured by a trust-deed, shall be void insofar as it would have the effect of exempting a trustee thereof from, or indemnifying him against, liability for breach of trust, where he fails to show the degree of care and diligence required of him as trustee, having regard to the provisions of the trust-deed conferring on him any power, authority or discretion.

(5) Sub-section (4) shall not invalidate:-

(a) any release otherwise validly given in respect of anything done or omitted to be done by a trustee before the giving of the release; or

(b) any provision enabling such a release to be given:-

(i) on the agreement thereto of a majority of not less than three-fourths in value of the debenture-holders present and voting in person or, where proxies are permitted, by proxy, at a meeting summoned for the purpose; and

(ii) either with respect to specific acts or omissions or on the trustee dying or ceasing to act.

(6) Sub-section (4) shall not operate:- 

(a) to invalidate any provision in force immediately before the commencement of this Ordinance, so long as any person then entitled to the benefit of that provisions or afterwards given the benefit thereof under sub-section (7) remains as trustee of the deed in question; or

(b) to deprive any person of any exemption or right to be indemnified in respect of anything done or omitted to be done by him while any such provision was in force.

(7) While any trustee of a trust-deed remains entitled to the benefit or provision saved by sub-section (6), the benefits of the provision may be given either:-

(a) to all trustees of the deed, present and future; or

(b) to any named trustees or proposed trustees thereof;

by a resolution passed by a majority of not less than three-fourth in value of the debenture-holders present in person or, where proxies are permitted, by proxy, at meeting called for the purpose in accordance with the provisions of the deed or, if the deed makes no provisions for calling meetings, at a meeting called for the purpose in any manner approved by the Court.

120. Issue of securities and redeemable capital not based on interest:-

(1) A company may by public offer or] upon terms and conditions contained in an agreement in writing, issue to one or more scheduled banks, financial institutions or such persons as are specified for the purpose by the Federal Government by notification in the official Gazette, either severally, jointly or through their syndicate, any instrument in the nature of redeemable capital in any of several forms in consideration of any funds, moneys or accommodations received or to be received by the company, whether in cash or in specie or against any promise, guarantee undertaking or indemnity issued to or in favour of or for the benefit of the company.

(2) In particular and without prejudice to the generality of the foregoing provisions, the agreement referred to in sub-section (1) for redeemable capital may provide for, adopt or include, in addition to others, all or any following manners, namely::-

(a) mode and basis of repayment by the company of the amount invested in redeemable capital within a certain period of time;

(b) arrangement for sharing of profit and loss;

(c) creation of a special reserve called the "participation reserve" by the company in the manner provided in the agreement for the issue of participatory redeemable capital in which all providers of  such capital shall participate for interim and final adjustment on the maturity date in accordance with the terms and conditions of such agreements; and

(d) in case of net loss on participatory redeemable capital on the date of maturity, the right of holders to convert the outstanding balance of such capital or part thereof as provided in the agreement into ordinary shares of the company at the break-up price calculated in the prescribed manner.

(3) The terms and conditions for the issue of instruments or certificate of redeemable capital and rights of their holders shall not be challenged or questioned by the company or any of its shareholders as repugnant to any provision of this Ordinance or any other law or the memorandum or articles or any resolution of the general meeting or directors of the company or any other document.

(4) The provisions of this Ordinance [* * * *] relating to the creation issue, increase or  decrease of the capital shall not apply to the redeemable capital.