1974 (7) TMI 78 - SC - Companies Law

Whether there was no equity in favour of Shelat so that he may claim a right to complete what was left incomplete by the donor in her lifetime even though there could be no doubt that Bai Ruxmani had intended to donate the shares to Shelat? Held that - We do not think that the respondent has made out a case for defeating the clearly expressed intentions of the donor coupled with the authority with which the donee was armed by reason of the signed blank transfer forms. We think that the implied authority was given with regard to a subject-matter in which Shelat had acquired an interest. On a correct interpretation of the gift, deed and the other facts mentioned above, we are of opinion that the right to obtain transfer of shares was clearly and completely obtained by the donee-appellant. There was no question here of competing equities because the donee-appellant was shown to have obtained a complete legal right to obtain shares under the gift deed and an implied authority to take steps to get his name registered. This right could only be defeated by showing some obstacle which prevented it from arising or which could defeat its exercise. No such obstacle having been shown to us to exist, the rights of the donee-appellant would prevail as against any legal rights which could have accrued to others if the donee had not already acquired the legal right which, as held by us above, had become vested in him. Appeal allowed.

Issues Involved:

1. Validity of the gift deed.
2. Compliance with the formalities prescribed by the Companies Act for the transfer of shares.
3. Implied authority to complete the transfer of shares.
4. Equitable considerations in completing the transfer.
5. Legal consequences of the donor's death on the transfer process.

Issue-wise Detailed Analysis:

1. Validity of the Gift Deed:

The appellant argued that the transfer was complete with the registration of the gift deed, and delivery of share certificates to the donee was unnecessary under Section 122 of the Transfer of Property Act. The Division Bench acknowledged the clear and unequivocal intention of Bai Ruxmani to donate the shares to Shelat, as evidenced by the registered gift deed and the handing over of share certificates and signed blank transfer forms. However, it held that the gift was incomplete due to non-compliance with the Companies Act's formalities for transferring shares.

2. Compliance with the Companies Act:

The Division Bench reversed the single judge's decision, stating that the gift was incomplete as the formalities prescribed by the Companies Act for the transfer of shares were not followed. The Companies Act requires that the transferor execute regular transfer deeds or instruments of transfer and hand them over to the donee, along with the share certificates. The appellant contended that the gift deed and the signed blank forms should be read together, and the donor had done all within her power to complete the donation.

3. Implied Authority to Complete the Transfer:

The appellant argued that the donor's conduct in handing over the share certificates and blank transfer forms, coupled with the gift deed's intentions, raised the presumption of an implied authority for the donee to fill in the details and submit the forms to the companies. The Division Bench, however, did not consider this implied authority, focusing instead on the doctrine that there is no equity to complete an incomplete transaction.

4. Equitable Considerations:

The appellant contended that the Division Bench misdirected itself by resorting to the doctrine that there is no equity to complete an incomplete transaction, as there is when a bona fide purchaser for value comes before the court. The respondent argued that equitable considerations would not be irrelevant in deciding the case, as the donee had not paid anything for the rights he could get from the donor. The Supreme Court clarified that the relevant provisions of the Transfer of Property Act and the Companies Act should be interpreted harmoniously, without nullifying each other.

5. Legal Consequences of the Donor's Death:

The respondent argued that the purported donation was frustrated by the donor's death, as acceptance of the gift during the donor's lifetime is a condition precedent to the gift's validity. The Supreme Court held that the donation of the right to get share certificates made out in the donee's name became irrevocable by registration and delivery. The actual transfers in the companies' registers were mere enforcements of this right, and the donor had done everything reasonably expected to divest herself of her rights in the shares.

Conclusion:

The Supreme Court allowed the appeal, setting aside the Division Bench's judgment and decree and restoring the learned single judge's decision. The Court held that the right to obtain the transfer of shares was clearly and completely obtained by the donee-appellant, and no obstacle prevented its exercise. The donee-appellant's rights prevailed over any legal rights that could have accrued to others.

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