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TMI Blog1943 (3) TMI 11X X X X Extracts X X X X X X X X Extracts X X X X ..... able and immovable properties at Karaikudi as he considered proper. On 30th December, 1940, the plaintiff applied to the Bank for transfer of the 402 shares in his name, relying on the will, a registration copy of which he enclosed. This letter is Exhibit P-2. The defendant Bank recorded the copy of the will in their books and returned it to the plaintiff. As the transfer of the shares was not effected, the plaintiff, who had by that time gone to Burma and the Federated Malay States, wrote Exhibit P-5 on 12th April, 1941, to the Bank asking for the transfer and the return of the share certificates. This was followed up by a telegram on 22nd April, 1941, Exhibit P-6. The Bank sent a reply, Exhibit P-7, on 24th April, 1941, stating that the directors had postponed consideration of the transfer of the shares pending the plaintiff's return. By their letter of the 12th of May, 1941 (Exhibit P-10) the Bank intimated to the plaintiff, who was then at Klang, Federated Malay States, that the shares would be transferred in the joint names of himself and the minor sons of Lakshmanan Chettiar, but that, if the shares were to be transferred in the plaintiff's sole name, probate of the will ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... procure and forward to the Bank a letter from the plaintiff, who was then in the Federated Malay States overrun by Japan, recognising the Bank's lien for the amount due by Lakshmanan Chettiar and consenting to be treated as a member of the Bank and to be entered in the register of its members as such. They pointed out that the power-of-attorney, which the agent had, did not confer this power on him. Mr. T.L. Venkatarama Aiyar urged in his reply, Exhibit P-26, the difficulties in getting a letter from the plaintiff Thenappa, that his agent was prepared to give a letter if the Bank would be satisfied with it and stating that, as the shares were not proposed to be transferred to third parties and as it was only a case of the name of the legal representative being substituted in place of the deceased, there was no necessity for any such letter. But the Bank would not accept the position thus taken and they said definitely in Exhibit P-27 dated 19th February, 1942, that: "the question of transfer cannot be proceeded with unless Thenappa Chettiar should agree to being registered as a member subject to the Memorandum and articles of Association of the Bank and for the registration being ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ced, they took no notice of it and raised other obstacles to the transfer. The plaintiff himself wrote to the Bank two letters Exhibits P-2 and P-5, wanting the shares to be transferred in his name and he also sent the telegram Exhibit P-13. Still, the Bank wanted a letter of request from him consenting to be treated as a member and to be entered in the register of members as such. The conduct of the Bank cannot but be described as evasive and dilatory right through and raises a suspicion about its bona fides. It was strenuously contended by Mr. V.V. Srinivasa Aiyangar the learned advocate for the Bank, that under article 42 of the articles of association of the Bank, "the executor or administrator of a deceased member shall be the only person recognised by the company as having any title to his share and the company is not bound to recognise the executor or administrator unless he shall have obtained probate or letters of administration." I have pointed out already that the will, a registration copy of which was sent to the Bank, makes it perfectly clear that the plaintiff was an executor. As it is a mofussal will executed at Karaikudy, probate is not compulsory. Article 42 co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s the objection to the transfer of shares in the absence of an express letter from the plaintiff as regards the subsistence of the company's lien for the Kaulalampur overdraft. Apart from the fact that the objection was raised for the first time only on 2nd February, 1942, in Exhibit P-25 almost at the fag-end of the controversy between the parties which itself suggests that it was more or less an after-thought there does not appear to be any legal basis for the belief that the transfer of the shares in the name of the plaintiff in place of his deceased father would destroy the lien in the absence of any such express affirmation. Article 29 which was referred to in this connection provides no doubt, that "unless otherwise agreed, the registration of a transfer of shares shall operate as a waiver of the company's lien, if, any, on any such shares." But this article deals with transfer as distinguished from transmission which is dealt with in article 43. Transfer and transmission are quite distinct from each other. The former is based upon the act of parties; the latter is the result of the operation of law. In the case of a transmission of shares, they continue to be subject to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le 43 deals with the devolution or transmission of shares on the death or bankruptcy of any member, and even here, the person on whom the shares devolve cannot insist on any right to be registered as a member, the directors not being under any obligation to accord consent to the transfer. The law on the subject is found in Bede Steam Shipping Company, Ltd., In re [1917] 1 Ch. 123, where the earlier decisions in Ex parte Penney [1872] 8 Ch. 446 , In re Coalport China Co. [1895] 2 Ch. 404 and In re Bell Brothers 65 LT 243 are all considered and discussed. The right of transfer is absolute as it is inherent in the ownership of the shares, but it can be restricted by contract, which has to be found in the articles of association. Even in a case where the power to refuse registration is conferred in absolute terms, the refusal must not be arbitrary. Provided they act in a bona fide manner, the directors are not bound to give any reasons. But if they give reasons, the Court can examine them, but it will not overrule the decision of the directors merely on the ground that it would have reached a different conclusion. If the directors refuse registration on any wrong princ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... refore disentitled from maintaining the suit either by himself or through his agent Ganesa Aiyar. Section 83 of the Code has no application as the Federated Malay States is not a foreign country the Government of which is at war with the United Kingdom of Great Britain and Ireland. Mere military occupation by an enemy is not enough. The lawful and recognised government of the foreign country must be at war. A Government based on military force is not the Government contemplated by the section. The Defence of India Act and rules do not apply either. It is not enough that Klang which was the place where the plaintiff was last residing, is in the occupation of Japan. Before it can be described as enemy territory, we must also say that it was not an area in the occupation of His Majesty or of a State allied with His Majesty. There is no proof of any kind, and we cannot assume this in favour of the defendant, that the plaintiff has been carrying on any business in the place where he is now residing and can therefore be said to be trading with the enemy. Part 15 of the rules makes it clear that what is prohibited and rendered penal is any commercial, financial or other intercourse, or de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nager of the defendant Bank, examined as D.W. I, said that there were no transactions to his knowledge from 15th December, 1941, to 20th January, 1942, and that there was only a nominal market because of the war conditions that had come into existence. The plaintiff has not established any general damages representing a fall in the price of the shares now as compared with the prices prevalent in January, 1942. The fact that the plaintiff has not been able to prove any loss sustained by him by reason of the refusal on the part of the Bank to transfer the shares to his name does not however destroy his right of action to have the wrong rectified and get some damages for the breach by the defendant Bank of its legal obligation to the plaintiff in the matter of the shares. He is entitled to nominal, if not substantial damages; and I award Rs. 250 under this head, besides decreeing the rectification of the Register of Members as claimed in prayer ( a ) of paragraph 22 of the plaint. He will get costs only on this part of his claim and not on the claim as regards damages which he has grossly inflated. There will be no order as to costs in favour of the defendant. - - TaxTMI - TMITax ..... X X X X Extracts X X X X X X X X Extracts X X X X
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