TMI Blog1974 (7) TMI 78X X X X Extracts X X X X X X X X Extracts X X X X ..... ake 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. - 2515 OF 1972 - - - Dated:- 17-7-1974 - M. H. BEG AND R. S. SARKARIA, JJ. S.T. Desai, H. S. Parihar and I. N. Shroff for the Appellant. M.C. Bhandare, P. H. Parekh and Miss Manju Jetley for the Respondents. JUDGMENT Beg, J. This appeal, after certification by the Gujarat High Court of fitness of the case for it, arises in the following circumstances: Uttamram Mayaram Thakar, a flourishing lawyer, made a will, on June 10, 1945, and died childless on August 20, 1946. His widow, Bai Rukmani, obtained, under the will, inter alia , certain shares, the right and title to which are disputed before us. On March 6, 1948, Bai Ruxmani executed a registered gift deed purporting to donate the disputed shares in va ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntention on the part of Bai Ruxmani that Vasudev should become the owner of these shares and he should for all future time enjoy the fruits thereof. It is a well-settled position in law that unless the gift is completed as required by law, mere intention to make a gift cannot pass any title to the donee and does not make the donee the owner of the property gifted by the donor. The registered gift deed itself cannot create any transfer and so it was not competent to the donor to divest the title in her merely by the execution of the gift deed. She was required to execute the regular transfer deeds or instruments of transfer in favour of Vasudev Shelat and hand them over to the donee, Vasudev Shelat, together with the share certificates." It went on to say: "The circumstances as they clearly emerge and the facts as found by the courts below, go to show that the deed of gift was executed on March 6, 1948, and, at the same time, the relevant share certificates were handed over by the donor to the donee; and, some time between March 6, 1948, when the gift deed was executed, and April 18, 1948, when Bai Ruxmani died, blank transfer forms signed by Bai Ruxmani were handed over by Bai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g an implied authority because the donee, unlike a bona fide purchaser for value, had paid nothing for the rights he could get from the donor. All that could be urged on behalf of the respondent may be summed up as follows: (1)The facts found make out, at best, an intention of Bai Ruxmani to donate but not the completion of a donation required by law for divesting the donor of interest in the property under consideration which consisted of shares. (2)Although shares are "goods" as defined by the Sale of Goods Act, yet they are "goods" of a special kind. Their transfer is not completed merely by the execution of a registered document or by delivery, but the correct mode of transfer is determined by the character of these "goods". Section 123 of the Transfer of Property Act lays down only a general mode of transfer by gift for goods in general but not for the transfer by gift of shares which are a special type of "goods" capable of transfer only in accordance with a special mode prescribed by the Companies Act of 1913, which was applicable at the relevant time. In other words, an adoption of the prescribed form of transfer is of the essence of a transfer for all purposes and no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have arisen if the object of the agency had been fulfilled. (10)Section 202 of the Contract Act could apply to a case where an agent has an actual or existing interest in the subject-matter of the agency. Even if the subject-matter of the agency could be said to be "property", consisting of shares, there could be no question of applying section 202 of the Contract Act before an "interest" in the shares arose. Such "interest" could only arise after a completed transfer. (11)Section 202 of the Contract Act contemplated cases of termination of agency in ways other than death. It meant that, so long as a principal is alive, he could not terminate an agency so as to injure the interests of the agent in "the subject-matter of the agency". But, in the case of the death of the principal, the relationship terminated ipso facto or automatically by death. (12)A resort to the very concept of agency in this case presupposes that some interest of the principal or the donor in the property said to be donated continued, or, in other words, the assumption-behind it was that the donation of shares was not complete in the eye of law. Its completion was not possible after the death of the donor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dent to the accrual of rights of a shareholder upon the grant of a share certificate in accordance with the articles of association of a company. In Maneckji Pestonji Barucha v. Wadilal Sarabhai Co. AIR 1926 PC 38, 40 , which was a case of handing over share certificates together with blank signed transfer forms, the Privy Council said: "But, further, there seems to their Lordships a good deal of confusion arising from the prominence given to the fact that the full property in shares in a company is only in the registered holder. That is quite true. It is true that what Barucha had was not the perfected right of property, which he would have had if he had been the registered holder of the shares which he was selling. The company is entitled to deal with the shareholder who is on the register, and only a person who is on the register is in the full sense of the word owner of the share. But the title to get on the register consists in the possession of a certificate, together with a transfer signed by the registered holder. This is what Barucha had. He had the certificates and blank transfers, signed by the registered holders. It would be an upset of all Stock Exchange tra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... registered instrument signed by the donor and attested by at least two witnesses or by delivery". No special mode of delivery is specified. On the other hand, it is indicated that the delivery "may be made in the same way as the goods sold are delivered". In the case before us, the registered document was signed by the donor as "the giver" as well as by the donee, as "the acceptor" of the gift, and it is attested by six witnesses. In it, the donor specified and gave particulars of the shares meant to be gifted and undertook to get the name of the donee put on to the registers of the companies concerned. The donor even said that she was, thenceforth, a trustee for the benefit of the donee with regard to the income she may get due to the fact that her name was still entered in the registers of the companies concerned as a shareholder. The donor delivered the registered gift deed together with the share certificates to the donee. We think that, on these facts, the donation of the right to get share certificates made out in the name of the donee became irrevocable by registration as well as by delivery. The donation of such a right, as a form of property, was shown to be complete so ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ter is not transfer of property in general. It deals with transfers of shares only because they give certain rights to the legally recognised shareholders and imposes some obligations upon them with regard to the companies in which they hold shares. A share certificate not merely entitles the shareholder whose name is found on it to interest on the share held but also to participate in certain proceedings relating to the company concerned. It is for this purpose that section 34 of the Companies Act, 1913, enables the making of "an application for the registration of the transfer of shares in a company.....either by the transferor or the transferee". A share certificate is a prima facie evidence, under section 29 of the Act, of the title to a share. Section 34 of the Act does not really prescribe the mode of transfer but lays down the provisions for "registration" of a transfer. In other words, it presupposes that a transfer has already taken place. The manner of transfer of shares, for the purposes of company law, has to be provided, as indicated by section 28, by the articles of the company, and, in the absence of such specific provisions on the subject, regulations contained in T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3) was cited before us for the proposition that "non registration of a transfer of shares made by a donor does not render the gift imperfect". Considerable argument was advanced by both sides on the correct interpretation of the leading English case mentioned there: In re Rose: Midland Bank Executor Trustee Co. Ltd. v. Rose [1949] Ch 78 (Ch D) , where Jenkins J., after an exhaustive discussion of the English case law on the subject, held that, when a testator had done everything that lay in his power to divest himself of his rights in preference shares "completion of the legal title by registration could only be the act of a third party which did not affect the efficacy of the gift of shares inter vivos". The Court of Appeal upheld this decision in In re Rose : Rose v. Inland Revenue Commissioners [1952] Ch 499 (CA). It held that "the deceased was in the position of a trustee of the legal title in the shares for the transferees", pending the entry of the names of the donees in a company's register and the issue of share certificates to them. In the case before us, we find that Bai Rukmani had actually stated in the gift deed that her position vis-a-vis the donee, who h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rent. Each had different objects and legal consequences. The Companies Act did not prevent the completion of a gift of the right to obtain the shares which could, in common parlance or loosely speaking, be spoken of as a gift of shares themselves even before the gift is acted upon so that the donee obtains share certificates in his own name. The Transfer of Property Act could not enable the donee to exercise the rights of a shareholder vis-a-vis the company, until a transfer of shares is made in accordance with the company law. Other cases cited on behalf of the appellant, which we will only mention without discussion, were : Colonial Bank v. Hepworth [1887] 36 Ch D 36 , In re Tahiti Cotton Company: Exparte Sargent [1873] 17 Equity Cases 273, 279, In re Letheby Christopher Ltd. [1901] 1 Ch D 815 (Ch D), In the matter of Bengal Silk Mills Co. Ltd. [1942] 12 Comp Cas 206 (Cal.) , Bank of Hindustan Ltd. v. Kowtha Suryanarayana Rao [1958] 28 Comp Cas 71 (Mad.), Arjun Prasad v. Central Bank of India Ltd. AIR 1956 Pat 32 Binode Kishore Goswami v. Asutosh Mukhopadhya [1912] 16 CWN 666 (Cal.) and Amarendra Krishna Dutt v. Monimunjary Debi AIR 1921 Cal. 148. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the nature of shares held, due to some special restrictions on their transferability under the articles of association of the company concerned. But such is not shown to be the case at all with any of the shares which formed the subject-matter of the gift in favour of Shelat. Hence, in our opinion, cases which deal with inchoate rights to shares do not assist the respondent because at least a gift of the right to obtain the transfer of shares in the books of the companies concerned was shown to be complete on the terms of the gift deed of Bai Ruxmani coupled with the handing over of the share certificates and the subsequent signing of the blank transfer forms. It was not a case of a bare expression of an intention to donate. The donor had done everything which she could reasonably be expected to do to divest herself of her rights in the shares donated. Ireland v. Hart [1902] 1 Ch 522, 529 (Ch D) , relied upon by the respondent, was a case in which a prior equitable title of a wife, for whom the husband was a trustee, took precedence over the claim of a subsequent mortgagee. This case was cited in Palmer's Company Law as an instance of how delay in registration may endan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll not compel his personal representatives to do that act and the gift remains incomplete and fails." In Milroy's case (supra) the imperfection was due to the fact that the wrong form of transfer was used for the purpose of transferring certain blank shares. The document was not the appropriate document to pass any interest in the property at all. In In re Fry's case (supra) the flaw in the transaction, which was a transfer or transfers of shares in a certain company, was failure to obtain the consent of the Treasury which, in the circumstances surrounding the transfers in question, was necessary under the Defence (Finance Regulations) Act, 1939, and, as appears from the head-note, what was held was that the donor's executors ought not to execute confirmatory transfers.... In this case, as I understand it, the testator had done everything in his power to divest himself of the shares in question to Mr. Hook. He had executed a transfer. It is not suggested that the transfer was not in accordance with the company's regulations. He had handed that transfer together with the certificates to Mr. Hook. There was nothing else the testator could do Therefore, it seems to me that the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not accept the correctness of the form of transfer deeds. In other words, this was a case in which the provisions of the articles of association stood in the way of rectification of the register-Such is not the case before us. The result is 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 exis ..... X X X X Extracts X X X X X X X X Extracts X X X X
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