9911796707
TMI Blog1952 (4) TMI 25X X X X Extracts X X X X X X X X Extracts X X X X ..... ade a party to the suit. In execution of the decree obtained by the plaintiff in that suit he sold these shares in court auction and himself purchased the same on 15-3-1112. Exhibit A is the copy of the sale certificate granted to him. Subsequent to such purchase he had some correspondence with the defendant company to have these shares transferred to his name on the strength of the court sale. The company informed the plaintiff that defendant No. 5 had already transferred 40 shares in favour of defendant No. 2, 25 shares each in favour of defendants Nos. 3 and 4 and that these transfers had already been recognised by the company and the necessary entries made in share register. The plaintiff was also informed that defendants Nos. 2 to 4 as transferees of these shares were being paid the dividends due in respect of such shares and that for certain amounts due to the company from defendants Nos. 3 and 5 the company had a lien over the 25 shares standing in the name of defendant No. 3 and over the 31 shares still standing in the name of defendant No. 5. According to the plaintiff the transfer of shares in favour of defendants Nos. 2 to 4 has been fraudulently effected as a result of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntiff's suit is not maintainable and that it is barred by limitation. Still another contention raised by defendant No. 5 was that since the court sale evidenced by Exhibit A was not followed by the delivery as contemplated in Rules 76 and 77, of Order XXI, Travancore Civil Procedure Code, the plaintiff had acquired no valid title to the shares in question. The lower court overruled the plea of limitation raised by the defendants but upheld the other contentions raised by them and accordingly dismissed the suit. Hence this appeal by the plaintiff. Defendants Nos. 1, 4 and 5 have filed objection memorandum challenging the correctness of the lower court's finding that the suit is not barred by limitation and also reiterating the contentions that the non-compliance with the procedure prescribed in Order XXI, Rules 76 and 77, Civil Procedure Code, is fatal to the rights claimed by the plaintiff. Of the several grounds raised by the defendants against the maintainability of the plaintiff's suit one ground alone is seen to have been considered by the lower court. That ground is to the effect that plaintiff should have pursued his remedies by way of proceedings in execution of the decree ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the main relief. Since the reliefs claimed in the present suit were entirely beyond the scope of the prior suit O.S. No. 63 of 1108 there is no force or substance in the contention that the plaintiff should have applied for these reliefs in the court executing the decree in O.S. No. 63 of 1108. Such reliefs could be obtained by the plaintiff only by way of other independent proceedings and hence it cannot be said that section 47, Civil Procedure Code, operates as a bar to the present suit. The next point urged on behalf of the respondent is that the non-compliance with the procedure prescribed by Rules 79 and 80 of Order XXI, Civil Procedure Code (corresponding to Rules 76 and 77 of the Travancore Code) makes the present suit based on Exhibit A unsustainable. It is contended that the delivery as contemplated in clause (3) of Rule 79 is essential to complete the title of the auction purchaser, under the sale certificate Exhibit A, to the shares covered by that certificate. The rule only prescribes the different modes in which delivery is to be effected in the case of sales of movable properties. When such property consists of shares in a corporation it is stated that the delivery ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t such a delivery order and the company as a party defendant in that case had the necessary notice that subsequent to the court sale the auction purchaser alone could be treated as the owner of the shares in question. The absence of a formal delivery order as contemplated by clause (3) of Rule 79 cannot therefore in any way prejudice the plaintiff's rights under Exhibit A. Coming to the procedure prescribed by Rule 80 it is clear from a reading of the rule itself that the procedure is not obligatory. Clause (1) of the rule runs as follows: "Where the execution of a document or the endorsement of the party in whose name a registered instrument or a share in a corporation is standing is required to transfer such negotiable instrument or share the Judge or such officer as he may appoint in this behalf may execute such a document or make such an endorsement as may be necessary and such execution or endorsement shall have the same effect as an execution or endorsement by the party." This provision is to govern cases where the execution of a document or the endorsement by the party in whose name the negotiable instrument or the share in a corporation is standing, is necessary for e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecution of such a document is not insisted upon in the case of transmission of shares. On the other hand, such transmission will be recognised and implemented by the company on production of the evidence in proof of such transmission. The plaintiff in whose favour the shares covered by the share certificate (Exhibit C) had been transmitted by the sale in O.S. No. 63 of 1108 has produced the sale certificate (Exhibit A) in support of his claim to the shares and it is sufficient to substantiate his claim to have his name entered in the share register of the company, as the holder of these shares. For the reasons stated above we hold that the objection that the plaintiff's suit based on Exhibit A is unsustainable for the reason of noncompliance of the procedure prescribed by Rules 79 and 80 of Order XXI, Civil Procedure Code, cannot prevail. Still another objection urged on behalf of the defendants is that the plaintiff's remedy is by way of an application under section 38, Companies Act, and not by way of a fresh suit like the present one. No doubt that section provides for an application for rectification of the share register of the company and for consequential, reliefs being gr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , deposited or passed and afterwards bought from the trustee, depositary or pawnee for a valuable consideration. Article 48-B relates to suits to set aside sale of movable property comprised in a Hindu, Muhammadan or Buddhist religious or charitable endowment, made by a manager thereof for a valuable consideration. Article 49 applies to suits for other specific movable property, or for compensation for wrongfully taking or injuring or wrongfully detaining the same. The reliefs claimed in the present suit do not come under the category of any of the reliefs specified in Articles 48 and 49. There is no other particular article applicable to suits of this nature. In the absence of any other specific article governing the present suit it has necessarily to be taken that the present suit is governed by the residuary article, i. e., Article 120, Limitation Act. That this is the article applicable to suits for rectification of the share register of a company and for other incidental reliefs is also the view taken in Jawahar Mills Ltd., Salem v. Official Receiver, Sha Mulchand and Co. Ltd. The next point for decision is whether by virtue of the court sale evidenced by Exhibit A the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y had any notice of the proceedings in that case which terminated with the issue of the sale certificate (Exhibit A) to the plaintiff. The defendant company was a party to that suit and thus it can be taken that in the year 1108 the company had notice of the pledge in favour of the plaintiff of the shares in question. But nearly seven years prior to that date defendants Nos. 2 to 4 had become the transferees in respect of 90 of these shares and they had been duly recognised as the holders of those shares from the position occupied by defendants Nos. 2 to 5 in relation to the defendant company the plaintiff wants the court to draw the inference that all these defendants had notice of the pledge in his favour of the shares in question. Defendant No. 5 has all along been the president of the first defendant company. It is stated that defendant No. 4 was the managing director of the company and defendants No. 2 and 3 are his brothers. Defendant No. 4 as D. W. 2 has stated that he become the managing director of the company only in the year 1105. The transfer of the shares in favour of defendants Nos. 2 to 4 by defendant No. 5 was in the year 1101. There is the evidence of defendant No. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the same time it was not accompanied by any transfer either in full or in blank executed by the mortgagor. As already stated the deposit of the share certificate by defendant No. 5 with the plaintiff by way of security for the loan was not intimated to the company. In the absence of any such intimation there was nothing wrong in the company having recognised the transfer of the shares in favour of defendants Nos. 2 to 4 under Exhibits XXIV to XXVI as proper and valid and in giving effect to such a transfer. On behalf of the plaintiff it is urged that without the production of the share certificate (Exhibit C) the company should not have recognised the transfer of these shares under Exhibits XXIV to XXVI. The note at the foot of Exhibit C is relied on in support of this contention. That foot-note is as follows : "No transfer of any portion of the shares comprised in this certificate can be registered unless accompanied by this certificate. Payment of calls will be endorsed on the back hereof." At the outset it has to be stated that this foot-note cannot have the force of a provision in the articles of association of the company contained in Exhibit XXII. Exhibit XXII contain ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecame the auction purchaser under Exhibit A there were only 31 shares standing in the name of the judgment-debtor who is the present defendant No. 5. The title to these 31 shares alone passed to the plaintiff under that court sale. It follows therefore that on the strength of the sale certificate (Exhibit A) plaintiff is not entitled to enforce any claims in respect of the remaining 90 shares which had already been registered in the names of defendants Nos. 2 to 4. So far as these defendants and the shares registered in their names are concerned the suit has to fail and the plaintiff can get a decree in this case only in respect of the 31 shares standing in the name of defendant No. 5. In the result this appeal is allowed only in respect of the 31 shares-covered by Exhibit C still standing in the name of the defendant No 5. Plaintiff is given a decree for the several reliefs claimed in the plaint only in respect of these 31 shares subject to the lien in favour of the defendant company for whatever amount that may be due to the company from defendant No. 5 up to 15-3-1112 the date of court sale under Exhibit A. Plaintiff will get proportionate costs throughout from defendant No. 6 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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