1977 (4) TMI 135 - HC - Companies Law

Issues Involved:
1. Ownership of 5,000 shares.
2. Obligation of defendants 1 and 2 to deliver share certificates upon payment.
3. Obligation of the third defendant-company to effect the transfer of shares.
4. Liability of defendants 1 and 2 for costs.
5. Reliefs entitled to the parties.
6. Absolute ownership and redemption rights of the 18th defendant in O.S. No. 658 of 1970.
7. Interest liability on amounts due by the late Raja of Ramnad.

Issue-wise Detailed Analysis:

1. Ownership of 5,000 shares:
The court examined whether the plaintiffs were the owners of the 5,000 shares in question. The late Raja of Ramnad had pledged these shares with defendants 1 and 2 as security for loans. The plaintiffs claimed ownership based on a sale agreement with the Raja, supported by letters and documents (Exs. A-16, A-1, and A-2). The court concluded that the plaintiffs had acquired a right to get into the register of the company based on the completed transaction of sale, despite the shares being in the possession of defendants 1 and 2 as pledgees.

2. Obligation of defendants 1 and 2 to deliver share certificates upon payment:
The court found that defendants 1 and 2, who held the shares as pledgees, were obliged to deliver the share certificates and blank transfer forms to the plaintiffs upon receiving the amount due. The court noted that the Raja had authorized the plaintiffs to pay the debt and receive the share certificates, thus transferring possession in the eye of law to the plaintiffs.

3. Obligation of the third defendant-company to effect the transfer of shares:
The court held that the plaintiffs could not compel the third defendant-company to register the transfer of shares without complying with the mandatory provisions of Section 108 of the Companies Act. The plaintiffs had not approached the company with the necessary documents to effect the transfer, and the court emphasized that compliance with Section 108 was mandatory.

4. Liability of defendants 1 and 2 for costs:
The court did not specifically address the liability of defendants 1 and 2 for costs in the judgment. However, it implied that defendants 1 and 2 were only obliged to receive the amount due and could not seek enforcement of the pledge once the plaintiffs fulfilled their obligation to redeem the pledge.

5. Reliefs entitled to the parties:
The court granted the plaintiffs a declaration that the second plaintiff was the owner of the 5,000 shares and directed defendants 1 and 2 to deliver the share certificates and transfer forms upon receiving the amount due. However, the court denied the plaintiffs' request for a mandatory injunction to compel the third defendant-company to register the transfer, as the plaintiffs had not complied with Section 108 of the Companies Act.

6. Absolute ownership and redemption rights of the 18th defendant in O.S. No. 658 of 1970:
The court found that the 18th defendant was not the absolute owner of the shares and that the plaintiffs had the right to redeem the pledge. The court modified the trial court's decree to limit the amount payable to the principal amount due, as the defendants 1 and 2 had refused the tender of the amount by the plaintiffs.

7. Interest liability on amounts due by the late Raja of Ramnad:
The court held that defendants 1 and 2 were not entitled to interest on the principal amount after December 19, 1966, when they refused to accept the tender of the amount by the plaintiffs. The court decreed the suit in O.S. No. 658 of 1970 for the principal amount only, without interest.

Conclusion:
The appeal in A.S. No. 141 of 1973 was allowed in part, granting the plaintiffs a declaration of ownership and directing defendants 1 and 2 to deliver the share certificates upon payment. The appeal in A.S. No. 51 of 1975 was modified to limit the decree to the principal amount due. The court emphasized the mandatory nature of Section 108 of the Companies Act for registering the transfer of shares and dismissed O.S. No. 658 of 1970 as against defendants 18 to 20 without costs. Each party was ordered to bear their respective costs in the appeals.

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