534

VASUDEV RAMCHANDRA SHELAT

v.

PRANLAL JAY ANAND THAKAR AND ORS ..

July 17, 1974

(M. H. BEG AND R. S. SAR KARIA, JJ .)

Tran,f.r of Prop<rly Act, 1882 (4 of 1882) "· 6, 122 and 123-Gift of sharu in

companKs by regjs/ered gift deed--Transfers TlDI effected ~fore donor's death-No

question of competing equities--WMther rights of ownership can be split into ,;ght to

t;arpw and usafruct.

Jndiim Compank' Act, 1913-S. 28-Rtf, 18 of Tablt A "title to g<t on th<

ezister" and "the full property in the shares in a company"-Distinction.

Interpretation--Harmonious interpretation.

By a registered deed, a donor gifted to the appellant shares in various limited

companies. Before her death the donor had signed several blank transfer fonns

to enable the donee to obtain transfer of the shares in the register of companies

and share certificates in his name. She bad signed at the correct places show­

ing that she meant to sign transfer of shares but the transfer could not be effected

before the donor's death. The respondent claiming the shares filed an administration

suit. A single Judge

of the High Court held that the appellant

was entitled to

shares covered by the gift deed to which blank transfer .forms could be related. A

division bench of the High Court reversed the decision of the Single Judge on

the ground that the gift was incomplete for failure to comply with the formalities

prescribed by the Indian Companies Act, 1913 for transfer of shares, It further held

that there was no equity in favour of the appellant so that be may claim the right

to complete what was left imcomplete by the donor in her life-time. On appeal it

was contended in tbiB Court (1) that since the donor had signed the blank transfer

forJn' and handed them over to the dontt, the gift deed and the signed blank forms

bad to be read together and (2) that the transfer was complete with the registration

()f the gift deed and even delivery of share certificates to the donee was not neces­

sary in view ofs. 122 of the Transfer of Property Act.

Allowing

the appeal,

HELD:

(I) The respondent bas not made out a case for defeating the clearly

expressed intentions of the dOnor. coupled with the authority with which the donor

was armed by reason of the signed blank transfer forms. On a correct interpretation

or the gift deed and other material the right to obtain a transfer of shares was clear ..

ly and completely obtained by the donee appellant. There was no question of com-

A

B

c

D

E

peting equities because the donee appellant was shown to have obtained a complete F

legal right to obtain ~bares under the gift deed and an implied authority to take steps

to aet his name registered. [549~D] ·

The fact that the relevant provisions of the Transfer of Property Act

and the Companies Act must be interpreted harmoniously does not mean

that a provision of one Act could be nullified by any provision of the

other Act. It means that the provision of the two Acts should be read

consistently with each other so far as it is reasonably possible to do so. This

end can be best achieved by examining the object! and the subject-matter of

each enactment and by viewing each relevant provision as a limb of an intergrated

whole meant to serve the underlying purposes. In this way their separable spheres

of operation will be clarified so as to avoid possibilities of conflict between them or

any unnecessary overflow of what really appertains to one field into another.

(539H-540B]

(2) The Transfer of Property Act is an enactment meant for defining certain

basic types of transfers and lays down the requirement both of substance and of

form for their legal recognition and effectiveness. Section 5 of the Act

gives a wide connotation to .. transfer of property". Section 6 of the Act lays down

that

0

propertY of any kind may be transfered" subject to certain exceptions.

Shares in a company are certainly a form of property. Section 28 of the Companies

G

B

,

A

B

c

I

D

E

F

G

H

V. R.

SHELAT v. P. J. THAKAR

535

Act, 1913 says that they "shall be movable property, transferable in the manner pro­

vided by articles of the Company". A wide definition of "property" ins. 6 of the

Transfer of Property Act includes not merely shares as transferable, movable pro·

perty but would cover as a separate form of property a right to obtain shares which

may

be antecedent to the accrual of rights of a shareholder upon the grant

of

a sharr certificate in accordance with tho articles of association of a company.

[540B-E]

There is a distinction between ''the title to get on the register" and "the full

property in the shares in a company". The first is acquired by mere delivery, with

the requied intention of the share certificate and a blank form signed by the trans­

fer. The second is only obtained when the transferee, in exercise of his right to

become a shareholder, gets his name on the register in place of the transferor. This

antecedent right in the person

to whom the share certificate is given with a signed

blank transfer form under a transaction meant to confer right or

title upon

him to become a shareholder is enforceable so long as no obstacle to it is shown

to exist in any of the articles of association of a company or a person with a

superior right or title, legal or equitable, does not appear to be there. Section 6 of

the T.P. Act justifies such a splitting up of rights constituting property in sharos

just as it is well recognised that rights of ownership of property may be split up into

a right to the ''Corpus" and another to the "usufruct" of the property and then

separately dealt with.

[541C-E]

M.P. Barucha

&: Anr. V. V. Sarabhai &: Co.&: Ors. 53 Indian Appeals P. 92 @

97-98, relied on.

Section 122 of the Transfer of Property Act defines a "gift". Section 123 of the

T. P. Act prescribes the mode of transfer by gift. No special mode of delivery

is specified in the se.ction. On the other hand it is indicated that the delivery "may

be made in such a way as the goods sold are delivered". [54!E-G]

In the instant case the registered document was signed both by the donor and

donee and is attested by witnesses. The donor specified and gave particulars of the

shares meant to be gifted. The donor delivered the registered gift deed together

with the

share certificates to the donee.

On these facts the donation of the right

to get i;ihare certificates made out in the name of the donee became irrevocable by

registration as well as by delivery. The actual transfers in the registers of the com­

panie.$ concerned were to constitute mere enforcement of this right. They were

necessary to enable the donee to exercise the rights of the shareholder. The mere

fact

that such

transfers had to be recorded in accordance with the Company Law

did

not detract from the completeness of what was donated. [541G-542B]

The broadly indicated requirements of regulation 18 of Table A of

1st Schedule

to the Companies Act, 1913 were also .complied with by the contents of the gift deed.

It is immaterial that the gift deed deals with a number of items so long as the rc­

guirements of Regulation 18 are fulfilled. The observance of a form whether found

m the Transfer of Property Act or in the Companies Act is meant to serve the needs

of the substance of the transaction which were undoubtedly shown to have been cqm­

plctely fu1filled here. There is nothing in Regulation 18 to mdicate that without strict

compliance· with some rigidly prescribed form, the transaction must fail to achieve

its purpose.

The subservience of substance of a transaction to some rigidly pres­

cribed form required to be meticulously observed, savours

of archaic and outmoded

j urisprudence. [543G-544A]

Re Nose, Midland Bank

Executer & Trustee Co. Ltd. v. Rose. 1949 Ch. D. 78,

Re Ruse, Rose v. Jnland Renvenue Commissioners, 1932 (1) Ch.D. 499, M/s. Howrah

Trading Co. Ltd. v. The Commissioner of lncoflU!tax, Calcutta, [1959] Sopp. (2) SCI!.

448 @ 453 referred to.

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 2515 of 1973.

(From the Judgment and Decree dated the 11th/12th July, 1972 of

the Gujarat High Court in L.P. A. No. 40 of 1969.) .

s. T. Desai and H. S. Parihar for the appellant.

M. c. Bhandare, P. H. Parekh and Manju Jetley · for respondent

No.

1.

SUPREME COURT REPORTS [1975] 1 s.c.R.

The Judgment of the Court was delivered iby

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 10-6-1945 and died childless on 20-8-1946-His widow, Bai Ruxmani,

A

obtained, under the will, inter alia, certain shares the right and title B

to which are disputed before us. On 6-3-1948, Bai Ruxmani executed

a registered gift deed purporting to donate the disputed shares in vari-

ous limited companies, of which details

were given in the gift deed,

to her brother, Vasudev Ramchandra

Shela!, the appellant before us

(hereinafter refeired to as "Shelat"). On 18-4-1948, Bai Ruxmani

also expired. But, before

she died, she had signed several blank trans-

fer forms, apparently intended to

be filled in by donee so as to enable c

him to obtain the transfer of the donated shares in the registers

of the various companies and share certificates in his own name.

She

had put her signatures in the correct places showing that she meant

sign

as the transferor of the shares. The shares could not, however,

be transferred in the registers of the various companies, in accordance

with the relevant provisions of Company law, before the lady's death.

Therefore, the respondent before

us,

Pranlal Jayanand Thakar, a D

nephew

of the late Uttamram

Maya.ram Thakar, disputed the claim

of the appellant Vasudev Ramchandra Shela! to these shares in an

ad.ministration suit which

came up before a learned Judge of the Guja-

rat High Court in second appeal together with other matters. The

learned

Single Judge held that Shela! was entitled to the shares covered

by the registered gift deed to which the blank transfer forms could

be

related but not to others said to have been orally gifted with which E

we are not concerned here. The learned Judge having granted leave

to file a Letter's

Patent Appeal, a Division Bench of the Gujarat High

Court, which considered the rival claims, reversed the decision

of the

learned

Single Judge even with regard to the shares covered by the

registered gift deed on the ground that the gift was incomplete for

failure

to comply with the formalities prescribed by the Companies'

Act for

"transfer" of shares. It held that there was no equity in F

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.

We think Mr. S.T. Desai, learned Counsel for the appellant Shelat,

rightly pointed out that every material finding on questions of fact, G

given in favour

of the appellant, was upheld by the Division Bench.

After indicating the terms

of the gift deed, the Division Bench held: "Thus, it is undoubtedly true that the deed of gift discloses a

clear and unequivocal intention 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 Jaw that unless the gift

is completed as required by law, mere intention

to make

a gift cannot pass any title to the donec and does not make the

H

•

•

A

•

B

c

D

E

F

G

H

V. R. SHELAT V. P. J. THAKAR (Beg, ],) '537

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 Shela! and hand them over to

the donee, Vasudev Shela!, together with the share certifi·

cates."

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

re­

levant share-certificates were handed over by the donor to the

donee; and, sometime between March

6, !948, when the gift

deed

was executed, and April 18, 1948, when Bai Ruxmani died

blank transfer forms signed

by Bai Ruxmani were

hand­

ed over by Bai Ruxmani to vasudev Shelat, the donee."

The appellant's submissions, on facts found, may be summarised

as follows:

(!) As between the donor and the donee the transfer was complete

with the regis(ration of the gift deed; and,

as there was a registered

document, even delivery

of share certificates to the donee was not

necessary in

view of Section 122 Transfer of Property Act.

(2) Assuming, without conceding, that the donor had to do something

more than to execute a registered document, this too

was done when

the shares certificates and the signed "blank transfer" forms were

handed over to the donee by the donor. It did not matter if the name

of the donee and other particulars are wanting in these blank forms.

All necessary particulars

of shares involved were expressly ment oned

in the gift deed which

specifies and identifies each individual share

meant to

be donated. The gift deed and the signed blank forms had

to be read together. The donor had done all

that reasonably lay with­

in her power to complete the donation.

(3) The conduct of the donor, in handing over the share certificates

to the donee and the blank transfer forms, read in the context of the

expressly laid down intentions

of the donor in the gift deed,

raised the presumption

of an implied authority to fill in the details

and

to submit to the companies concerned the forms given by the

donor to Shelat before her death.

(4) There was no evidence whatsoever in the case to repel the

irre­

sistible inference of an implied authority given to the donee to fill in

and submit the transfer forms

so as to obtain the necessary entries

in the registers

of the various companies concerned.

( 5) The Division Bench had, after giving all the necessary findings

of fact in favour of the appellant, misdirected itself by resorting to the

do ctrine that there

is no equity to complete an incomplete trasaction,

as there

is when a bona fide purchaser for value comes before the Court.

. 538 SUPREME COURT REPORTS [1975] 1.s.c.R.

There was no question of any equity involved here. The simple ques­

tion was one of fact. Did the inference of an implied authority of the

donee to

fill in the forms and take other steps necessary to get his

name entered in the registers of shareholders arise or not? Inst.ead

of considering and deciding whether such an inference arose, the

Divi­

sion Bench had failed to decide the real issue on the erraneous view

that equity debars it from inferring an implied authority because the

ilonee, 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 sum-

med up as follows : .

(!) 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 com­

pleted 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" Sec. 123 of the Transfer of Property Act Jays down only a

general

mode of transfer by gift for goods in general

bui 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 not merely as between

the shareholder and the company concerned. '

(3) Sections 12.2 & 123 of the Transfer of Property Act had to be

read. harmoniously with Sections 28 and 34 of the Companies Act,

1913.

(4) Since material portions of the transfer form given in regula­

tion 19 of Table A of the first Schedule of the Companies Act of 1913

were never filled in, the doctrine of "substantial compliance" with

the required form could not

come to the aid of the appellant.

·

(5) The gift deed itself does not empower the donee to take any

of those steps

which remained to be taken to complete the 'transfer' so

that the doctrine of implied authority would be excluded by the

ex•

press terms of the gift deed which not only do not confer any such

authority upon the donee but indicated that the donor

was to take

the necessary steps herself. '

(6) Inasmuch as acceptance of the gift

"during the life-time of

the donor" is a condition precedent to the validity of the gift as a

transaction, and the appellant shelat did not apply for the transfer

of shares, so as to indicate Ws acceptance of the gift before the do no

died, the purported donation-was frustrated by reason of Sec. 122 of

of the Transfer of Property Act.

A

B

•

c

D

E

F

G

•

H

A

B

c

v. R.

SHl!LAT v>P. J. THAKAR (B~g, /.) r .. ;., &39

(7) Even if we were to assume that the facts proved disclosed that

the appellant donee

was armed with an implied authority to

obtian

a transfer, yet that authority not having been acted upon during

the life-time of the donor, lapsed with the donor's death. The result

was that the donation, even if intended, was imperfect or infructu·

ous in the eye of law and could not be perfected or completed.

Equity

does not aid a merely purported donee who has given no

consi­

deration to obtain any right. In other words, equitable consideration~

would not be irrelevant in deciding the question before us.

(8) Even apart from equity, under the law of agency, found

in

sec.

201 of our Contract Act, the Principal's death terminates the

agency, so that the doctrine

of implied authority does not help the

appellant.

(9)

Section 202 of the Contract Act could not apply to a case where

the subject-matter

of the alleged agency is the taking of steps

to complete a transfer and not the rights which could only

accrue after

the necessary steps are taken. Hence, the appellant donee

could not

be said to have an interest in the

"subject-matter of the

agency" which is distinct from rights which could have arisen if the

D object

of the agency had been fulfilled.

E

F

G

H

(I 0) Section 202 of the Contract Act could apply to a case where

an agent has an actual or exi>ting 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 9.uestion

of applying Section 202 of the Contract Act before an "merest"

in the shares arose. Such "interest" could only arise after

a completed transfer.

(11) Section

202 of the Contract Act contemplated cases of termi­

nation 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 in­

jure the interests of the agent in "the subject matter of the agency".

But, in the case of the death of the Principal, the relationship ter­

minated ipso facto or automatically by death.

(12) A resort to the very concept of agency in this case pre-supposes

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.

We think that questions to be really decided in the case before

us

have tended to become needlessly clouded by references to statutory

provisions and to doctrines or concePts which really operate in separate

and distinct fields of their own. It is true that the relevant provisions

of the Transfer of Property Act and the Companies Act must be inter­

preted harmoniously. But, this certainly does not mean that a pro·

vision of one Act could be nullified by any provisions of the other Act.

It means that the provisions of the two Acts should bf' read consis­

tently with each other so far as it is reasonably possible to do so.

51!10 SUPllEMB COURT REPORTS [197 5] 1 s.c.it.

We.think that this end can be best achieved here by examining

the objects and the subject-matter

of each enactment and by viewing

each relevant provision as a

limb of an integrated whole meant to serve

the underlying purposes.

In this way, their separable spheres of

opera­

tion will be clarified so as to avoid possibilities of conflict between them

or any unnecessary overflow of what really appertains to one field

into another.

No doubt the Transfer

of Property Act is not exhaustive. It does

not

deal with every kind of transfer of property which the law per­

mits. Nor does it prescribe the mode for every legally recognised trans­

fer. Nevertheless, it is an enactment meant for defining certain basic

types

of transfer and it lays down the requirements both of

sub­

stance and of form for their legal recognition and effectiveness.

Section 5 of this Act gives a wide connotation to "transfer of pro­

perty". All that it requires is that the transferor must be living at the

time

of the transfer recognised by the Act. Section 6 of the Act

lays

down that "property of any kind may be transferred" subject to certain

exceptions. Shares in a company are certainly a form of property.

Section 28 of the Companies Act, 1913, says thatthey "shall be movable

property, transferable in the manner provided by the articles

of the company". Both sides accept as correct the view of the Division Bench

of the High Court that the shares are "goods" within the meaning of

the Sale of Goods Act. The point which, however, deserves to be noted

here

is that wide defination of

"property" in Section 6 of the Transfer

of Property'Act includes not merely shares as transferable, movable

property, but would cover, as a separable form of property, a right

to obtain shares which may be antecedent to the accrual of rights of

a shareholder upon the grant of a share certificate in accordance with

the a.tides of association of company.

In M.P. Barucha & Anr. v. V. Sarabhai & Co. & Ors.(1) which

was a case

of handing over share certificates together with

blank

signed transfer forms, the Privy Council said (at p. 97-98):

"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 regis­

tered holder. That is quite true. It is ture that what Barucha

had was not the perfect 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 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 certifi.

cates and blank transfers, signed by the registered holders.

It would be an upset of all

Stock Exchange transactions if it were

suggested that a broker who sold shares by general description

(I) 53 Inc\ianAppealsp. 92@ p. 97-98.

A

•

B

c

D

E

'f

F

G

•

H

A

•

B

c

D

E

F

G

-·

..

H

V. R. SHELAT v. p, J, THAKAR (Beg, ].) 5' ~

did not implement his bargain by supplying the buyer with

certificates and blank transfers. signed

by the registered

liolders

of the shares described. Barucha sold what he had got. He

could sell no more. He sold what in England would have been

choses in action, and

he delivered choses in action. But in India,

by the terms of the Indian Contract Act, these choses in

ac­

tion are goods. By the definition of goods as every kind of mov­

able property it is clear that not only registered shares, but

also this class of

choses in action, are goods. Hence, equitable

considerations not applicable to goods

do not apply to shares in

India."

Thus, we find that, in Barucha's case (supra), a distinction was

made between "the title to get on the register" and "the full property

in the shares

in a

Company." The first was held to have been acquired

by

mere delivery, with the required intention, of the share

certificate

and a blank form signed by the transferor. The second is only ob­

tained when the transferee, in exercise of his right to become a shar~­

holder, gets his name on the register in place of the transferor. This

antecedent right in the person to whom the share certificate

is given

with a signed blank transfer form under a transaction meant to confer

right or title upon him to become a shareholder,

is enforeeable so long

as

no obstacle to it is shown to exist in any of the articles of

associa­

tion of a company or a person with a superior right or title, legal or

equitable

does not appear to be there. We think that

Section 6 of the

Transfer

of Property Act justifies such a splitting up of rights

constituting

"property" in shares just as it is well recognised that

rights

of ownership of a property may be split up into a right to

the

"corpus" and another to the "usufruct" of the property

and then separately dealt with.

Sec. 122 of the Transfer of Property Act defines a "gift". Its subs­

tantial requirements are : (I) the donor must transfer "property", which

is the subject-matter of the gift, voluntarily and without consideration;

(2) and, the donee must accept it during the life-time of the donor or

while the donor's competence to

give

exi;ts. Section 123 of the

Transfer

of Property Act prescribes the mode of transfer by gift.

It Jays down that

"the transfer may be effected either by 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 such a 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 accepter" of the gift,

and

it is attested by six witnesses. In it, the donor specified and

gave paniculars

of the shares meant to be gifted and undertook to

get the name

of the donee put on to the registers of the companies

ccincerned. 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 t~e fact that her name was still entered in the registers of the

compa~1es concerned as a shareholder. The donor delivered the regis­

tered gift deed together with the share certificates to the donee. We

542 SUPREME COURT REPORTS [1975] 1 s.c.R.

think that, on these facts, the donation of the right to get share cer-A

tificates

made out in the name of the donee becanie 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 that nothing was

left to be done so far as the vesting of such a right in the donee is con­

cerned. The actual transfers in the registers of the companies concern-

ed were to constitute mere enforcements of this right. They were

necessary to enable the donee to exercise the rights of the share-B

holder. The

mere fact that such transfers had to

be recorded in accord-

ance with the company law did not detract from the completeness

of what was donate.d.

We think the learned Counsel for the appellant rightly contended

that,

even in the absence of registration of the gift deed, the delivery

of the documents mentioned above to the donee, with the clear

inten­

tion to donate, would be enough to confer upon the donee a complete

and irrevocable right, of

the kind indicated above, in what is movable

property.

He

relied upon : Kalyanasundarain Pillai v. Keruppa

Mooppanar & Ors.(1); Venkatsubba Shrinivas Hegde v. Subba

Rama Hegde;(2) Firm Sawan Mal Gopi Chand v. Shiv Charan Das(l).

The requirements of form or

mode of transfer are really intended

to ensure that the substantial requirements of the transfer

have been

satisfied. They subserve an object. In the case before us, the

re­

quirements of both Section I 22 and Section 123 of the Transfer of

Property Act

were completely met so as to vest the right in the

donee to obtain

the share cartificates in accordance with the

provisions of the Company law. we think that such a right

is in itself

"property" and separable from the technical legal

ownership

of the shares. The subsequent or

"full rights of

ownership" of shares would follow as a mattef of course by compliance

with the provisions

of Company law. Jn other words, a transfer of "property" rights in shares, recognised by the Transfer of Property

Act,

may be antecedent to the actual vesting of all or the

full. rights

of ownership of shares and exercise of the rights of shareholders in

accordance with the provisions of the Company law.

The Companies Act of 1913 was meant "to consolidate and

amend the Jaw relating to trading companies and other

associations". It is concerned with the acts and proceedings relating

c

D

Jil

F

to the formation, running, and extinction of companies, with

rights, duties, and liabilities of those

who are either members or

officers of such companies, and of those who deal with companies

c'

in other capacities. Its subject-matter 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 im-

poses 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 H

(I) 54 I. A. 69. (2) ILR 52 Born. 313.

(3)

AIR

1924 Lah. 173.

•

•

A

•

B

c

D

E

F

G

H

V. R. SHELAT v. p, J, THAKAR (Beg, /,) 543-

concerned. It is for this purpose that Section 34 of the Companies

Act

1913 enables the making of

"an applicaton for the registration of

the 'transfer of shares in a Co ......... either by the transferor or the

transferee". A sha11e certificate is a prima facie evidence, under Sec.

29 of the Act of the title to a share. Sec. 34 of the Act does not really

prescribe the' mode

of

transfor but lays down the provisions for "re­

listration" of a transfer. In other words, it pre-supposes 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 Sec. 28, by the articles

of the Company, and, in the absence of such

specific provisions on the subject, regulations contained in Table 'A'

of the 1st Schedule of the Companies Act apply.

Table

'A' of the !st

Scheduk to the Companies Act of 1913 gives

re,ulation

19 as follows :

"19. Shares in the company shall be transferred in the

following form,

or in any usual or common form which the

directors shall approve :

I, A. B. of , in consideration of the

;um of

rupees paid to me by C. D. of (here­

inafter called "the said transferee"), do hereby transfer to

the said transferee the share (or shares) numbered in the under­

taking called the Company, Limited, to hold unto the

said transferee, his executors, administrators and assigns,

subject to the several conditions

on which I held the same at the

time

of the execution thereof, and I (the said transferee) do

hereby agree

to take the said share (or shares) subject to

the conditions aforesaid. As witness our hands the

day

of

Witness to the signatures of,

etc."

Apparently, the form given here is only for sales. In the case of a

gift the more general provisions

of regulation 18 would apply. This

regulation says :

"The instrument of transfer of any share in the company

shall be executed both by the transferor and transferee, ard

the transferor shall be deemed to remain holder of the share

until the name

of the transferee is entered in the register of

members in respect

thereof."

We find from the gift deed that both the donor and the donee have

signed the document, under two headings respectively : "giver of the

gift" and "accepter of the gift''. Hence, we think that the broadly

indicated requirements

of regulation 18 were also complied with

by

the contents of the gift deed. It is immateral that the gift deed deals

with a number of items so long as the requirements of regulation 18

arc fulfilled. Mter all, the observance of a form, whether found in

the Transfer of Property Act or in the Companies Act, is meant to

serve the need of the substance of the transaction which were undoub­

tedly shown to have been completely fulfilled here. There is nothing in

regulation

18 or anywhere else in our Company law to indicate that.

544 SU:PREME COURT REPORTS [1975] l S.C.R·

without strict compliance with some rigidly prescribed form the transac­

tion must fail to achieve its purpose. The subservience of substance

of a transaction to some rigidly prescribed form required to be meti­

.culously observed savours of archaic and outmoded jurisprudence.

Buckley on the Companies Acts (XIIl-Edn. p. 813) 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 : Re Nose, Midland Bank

Executor & Trustee Co. Ltd. v. Rose,(1) 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 affec! the

efficacy of the gift of shares inter-vivas". The Court

of Appeal upheld this decision in : In Re Rose V. Inland Revenue

Commissioners.(2) 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 Ruxmani had actually stated in the gift-deed that her position,

vis-a-vis the donee, who had accepted the gift, was that of a trustee

. for the benefits received

by her from the gifted .shares until the com-

pletion

of the legal formalities so that appropriate entries are made

in the registers of companies concerned and fresh share certificates

are issued to the donee. We, therefore, think that this case helps the

appellant.

In M/s. Howrah Trading Co. Ltd. v. The Commissioner of

Income­

Jax, Calcutta(3), considering a case of blank transfers, Hidayatullah J.,

speaking for this Court, said (at p. 453) :

"fn such blank transfers, the name of the transferor is entered,

and the transfer deed signed by the transferee, who,

if he so

chooses,

completes the transfer by entering his name and

then applying to the company to register his name in place

of

the previous holder of the share. The company recognises no

person except one whose name

is on the register of members,

upon whom alone calls for unpaid capital can

be made and

to whom only the dividend declared by the company is legally

payable.

Of course, between the transferor and the transferee,

certain equities arise even on the execution and handing over

of

'a blank transfer', and among these equities is the right of the

transferee to claim the dividend declared and paid to the

trans­

feror who is ·treated as a trustee on behalf of the transferee.

These equities, however, do not touch the company, and no

claim by the transferee whose name is not in the register

of

(I) [1949] Ch. D. 78. (2) [1932) (I) Ch. D. 499.

(3) [1959) Supp. (2) SCR 448 @ 453.

A

B

c

D

E

F

G

H

•

•

A

B

c

D

V. R. SHELAT v. P, J, THAKAR (Beg, ].) 545

members can be made against the company, if the transferor re­

tains the money in his own hands and fails to pay to it to

him."

'J;his case also makes a distinction between an antecedent right and title

o1 the transferee under a blank transfer and the fully blossomed rights

and title

of such a transferee after the due registration of a transfer .

Another

case cited before us was : R.

Subba Naidu v. Commis­

sioner of Gift Tax, Madras,(1) where a distinction was made between a

transfer

of the antecedent right to the shares which operated with

full force between a donor and

the. donee,

"notwithstanding that, vis-a­

vis the company, the donor continued to be holder of the shares in the

absence

of transfer of

shares". In othe1 words, the fields of operation

of the provisions of Sections 122 and 123 of the Transfer of Property

Act and the provisions of the Companies Act, 1913 were different.

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

Tranafer 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 :

I. Colonial Bank v. Hepworth(2);

E 2. In Re. Tahiti Cotton Company ex-parte Sargent(l);

3. In Re. Letheby & Christoph~r, Limited(4);

4. In tf1e matter of Bengal Silk Mills Co. Ltd.(5);

5. T11e Bank of Hindustan Ltd. & Ors. v. Kowth~ Suryanara­

yana Rao & Ors .(6);

F 6. Arjun Prasad & Ors. v. Central Bank of India Ltd. (7);

G

H

7. Benode Kishore Goswani v. Asutosh Mukhopadhya & Anr.(8).

Learned Counsel for the respondent cited the following passage

from the

Palmer's Company Law (21st edition-1968, p. 334).

"A transfer is incomplete until registered. Pending

registration, the transferee has only an equitable right to the

shares transferred to him. He does not become the legal owner

until his name is entered on the register in respect

of these

shares." (I) (1969] (Vol. 73) I.T.R. 794.

(3) [1873] (17) Equity Cases 273 @ 279.

(S} AIR 1942 Cal. 461 @ 464.

(7) AIR 1956 Pat. 32.

(2) [18871 (36) Ch. D. 36.

(4) (1904] (I) Ch. D. 815.

(6) !LR (1957] Mad. 1958 @ 1072·

(8) 16 C.W.N. 666.

546 SUPREME COURT REPORTS [1975] l S.C.R·

This statem:nt of the Jaw in England is correct. The transferee,

under a gift of shares, cannot function

as a shareholder

recognisei bv

company law until his name is formally brought upon the register of a

company and he obtains a share certi:licate as already indicated above.

Indeed, there may

be restrictions on transfers of shares either by gift

or by sale in the articles of association. Thus, we find in Palmer's Company Law (at p. 336) :

"There is nothing to limit the restrictions which a company's

articles

may place on the right of transfer.

Tile articles may give

the directiors power to refuse to register a transfer in any specified

cases, for instance, where calls are in arrear,

or where the

company has a lien

on the shares--and some such pro­

visions are usually inserted. Thus article

24 provides that

. the directors may decline to register any transfer of a share (not

being a fully paid share) to a person of whom they

do not approve,

and may also decline to register any transfer of shares on

which the company has a lien. But the articles in many cases

go far beyond this. They may prohibit, for example, the

transfer

of a share to any person who is not a member of a

specified class,

or provide, as they often do in private com­

panies, that before transferring

to an outsider the intending

transferor must 'first offer the shares to

the other members, and

give them a right of pre-emption. Such provisions, though

permanent, do not contravene the rule aganist perpetuities."

A

B

c

D

In the type of cases contemplated above, where there are special

restriciions on

the transfer of shares imposed by the articles of asso-E

ciation, the difficulty

or defect is

inherent in the character of such

snares. In such cases, the donee or purchaser cannot get more thaa

what the transferor possesses. Therefore, in such cases, it is possible

to bOld that even the right and title to obtain shares, which we have

viewed as separable from the legal right and title to !unction as a

shareholder,

is incomplete because of a defect in the nature of shares

held due to some special restrictionson their transferability under F

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

Shela!. Hence, in our

-0pinion, cases which deal with incbOate 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 com-

plete

on the terms of the gift deed of Bai Ruxmani coupled with the G 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.

Ire/and V: Hart (I) relied upon by the respondent, was a case H

in which a prior equitable title of a wife, for whom the husband

was

a

(I) [1902] (I) C.D. p. 522 @ 529.

•

•

A

•

t

•

8

c

D

V. R. SHELAT y, p, J, THAKAR (Beg, /,) 547

trustee, tllok 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 endanger the claims

of a transferee when

some already existing prior equity comes to light .

In upholding the

wife's

claim of a prior equitable right the Court said (at p. 529) :

"It is established by Societe Generale de Paris v. Walker

(II App. Case 20), Roots v. Williamson (38 Ch. D. 485);

and Moore v. North Western Bank (1891(2) Ch. 599] that, where

the articles are in the form in which they arc in the present

case, a leg'll title is not acquired as against an equitable owner

before registration,

or at all events until the date when the person

seeking to register has a present absolute and unconditional

right to have the transfer registered.

I am not called upon to

define the meaning of a present absolute and unconditional

rigllt,

but, as it appears to me, I am not sure that anything short of re-

gistration would do except under very special circumstances.

At all events,

I am of opinion that in this case, prior to the date of

the injunction, the defendant Hart had not a 'present absolute

and unconditional right' to the registration

of the transfer of

these shares, and that the prior equitable right of the plaintiff,

Mrs. Ireland, must

prevail."

Thus, what was disputed there was the right ·to obtain regis­

tration of a transfer of shares. The husband's power to mortgage

was itself circumscribed by his position as a trustee.

It was also pointed out in Palmer's Company Law (at p. 334) :

E "It has never been clearly decided in what circumstances the

F

G

H

'present, absolute, unconditional right to have the transfer

registered' to which Lord Selborne refers arises.

It is thought

that in many instances the test

is that indicated by Jenkins J. in

Re. Rose.

'I was referred on that to the well known case of

Milroy v. Lord and also the recent case of Re. Fry, Chase

National Executors

& Trustees Corpn.

v. Fry. Those cases,

as 1 understand them, turn on the fact that the deceased

donor had not done all in his power, according to the

nature

of the property given, to vest the legal interest in the

property in the do

nee. In such circumstances it is, of course

well settled that there is no equity to complete

th;

imperfect gift. If any act remained to be done by the donor

to complete the gift

at the date of the donor's death the eourl will not compel his personal representatives to do

that act and the gift remains incomplete and fails.

In Milroy v. Lord the imperfection was due to the fact

that the wrong form

of transfer was used for the purpose

of

tramferring certain bank shares. The document was not

the appropriate document to pass any interest in the pro­

perty at all. In Re Fry the flaw in the transaction, which

·was a transfer or transfers of shares in a certain company,

548

•

·SUPREME COURT REPORTS [1975] l s.c.R.

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 headnote, what was held

was

th1t tile donor's executors ought not to execute confir­

matory transfers.

In this case, as I understand it, the testa­tor had done everything in his power to divest himself of

the shares in qnestion 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 present case is not in

pari materia with the two cases to which I have been refer­

red. The real position, in my judgment, is that the question

here is one

of construction of the will. The testator

says

"if such preference ·shares have not been transferred

to him previously to my death." The position was that,

so far

as the testator was concerned, they had been so . transferred."

Respondent's learned Counsel also relied on Re Fry, Chase Nation­

nal Executors

& Trustees Corpn. Ltd. v. Fry & Ors.(1) which has been

referred

to by Jenkins J. in the passage quoted above. In that case,

apart from other distinguishing features, the flaw in the purported

transfer was that

it contravened the Defence (Finance Regulation)

Act, 1939, which prohibited

an acquisition of interest in the shares

without a licence from the Treasury. Hence, the purported transfer

was really illegal. No such illegality is shown to exist in the case

before us.

·

Respondent's learned Counsel cited Amarendra Krishna Dutt

v. Monimunjary Debi, (2) where, after a husband had executed. a

document in favour

of his wife, the parties had done nothing to get

the transfer registered for nearly 2 years during which the dividend

was received sometimes by the wife and sometimes retainedby the

husband with the permission

or implied consent of the wife.The Court

held

that the purported gift being an intended

"transfer" only could

not operate as a "declaration of trust". Another ground for the de­

cision was

that

"the disposition of the shares failed as being imperfect

voluntary gift". Here, the Calcutta High Court purported to follow

Milroy v. !-ord, (3) and, Richards v. Delbridge(4). No such facts

are present m the case before us. Moreover, we seriously doubt the

correctness

of this decision of the Calcutta High Court. It seems to

conflict with the law declared in the cases cited by the appellant which

we approve.

A .

B

c

D

E

F

Another case relied upon by; the respondent was: The Bank of Hin-

dustan Ltd. v. Kowtha Suryanarayana Rao & Ors. (supra), where H

the Court refused

to direct rectification of a register of members

(I} 1946 (2) AU. E.R. 106.

(3) 1862 (4) DEG. F. & J. 264.

(2) !LR [1921) Cal, 986.

(4) 1874 L.R. 18 Eq. II.

•

•

A

•

B

c

t

D

E

•

V. R. SHELAT V. P. J. THAKAR (Beg, J,) 54 ~

because the articles of association vested an ab5olute discretion in the

company to recognise or refuse to recognise a transfer. The Company's

consent

to a transfer had been refused because the company did not

accept the correctness of the form of transfer deeds. Jn other words,

this

was a case in which the provisions of articles ofassociation stood

in the

way of rectification of the register. Such is not the case tefore

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

oflhe signed blank transfer forms. We think that the

impli<d 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 a

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 excercise. 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

nolalready acquired the legal right which, as held by us above, had

become vested in him.

We, therefore, allow this appeal with costs and set aside the judg­

ment and decree

of the Division Bench

ofthe High Court and restore

that of the learned Single Judge.

Appeal allowed.

P.B.R .

3-M!85 Sup. Cf/75