Vasudev Ramchandra Shelat Vs. Pranlal
Jayanand Thakar & Ors  INSC 125 (17 July 1974)
BEG, M. HAMEEDULLAH BEG, M. HAMEEDULLAH
SARKARIA, RANJIT SINGH
CITATION: 1974 AIR 1728 1975 SCR (1) 534 1974
SCC (2) 323
CITATOR INFO :
RF 1986 SC1370 (69,77,80) RF 1988 SC 782 (65)
RF 1988 SC1353 (3)
Transfer of Property Act, 1882 (4 of 1882)
ss. 6, 122 and 123--Gift of shares in companies by registered gift
deed--Transfers not effected before donor's death--No question of competing
equities--Whether rights of ownership can be split into right to corpus and
Indian Companies Act, 1913--S. 28--Reg. 18 of
Table A "title to get on the register" and "the full property in
the shares in a company"--Distinction.
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 forms to enable the done to obtain transfer of
the shares in the register of companies and share certificates in his name. She
had signed at the correct places showing 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 he may claim the right
to complete what was left incomplete by the donor in her life-time. On appeal
it was contended in this Court (1) that since the donor had signed the blank
transfer forms and handed them over to the done, the gift deed and the signed
blank forms had to be read together and (2) that the transfer was complete with
the registration of the gift deed and even delivery of share certificates to
the done was not necessary in view of s. 122 of the Transfer of Property Act.
Allowing the appeal,
HELD:(1) The respondent has 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 of the gift deed and other material
the right to obtain a transfer of shares was clearly and completely obtained by
the donee appellant. There was no question 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. [549B-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 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 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 "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 535 Act,
1913 says that they "shall be movable property, transferable in the manner
provided by articles of the Company". A wide definition of
"property" in s. 6 of the Transfer of Property Act includes not
merely shares as transferable, movable property. 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 share certificate in
accordance with the 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 required intention of the share certificate and a blank form
signed by the transfer. 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 shares 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 section. On
the other hand it is indicated that the delivery "may be made in such a
way as the goods sold are delivered". [541E-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
share 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 companies 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 requirements of Regulation 18 are fulfilled.
The observance of a form whether found in 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
completely fulfilled here.
There is nothing in Regulation 18 to indicate
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 prescribed form required to be meticulously
observed, savors of archaic and outmoded jurisprudence. [543G-544A] Re Nose,
Midland Bank Executer & Trustee Co. Ltd. v. Rose.
1949 Ch. D. 78, Re Rose, Rose v. Inland
Renvenue Commissioners, 1932 (1) Ch.D. 499, M/s. Howrah Trading Co.Ltd. v. The
Commissioner of Income-tax, Calcutta,  Supp. (2) SCR 448 @ 453 referred
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.
536 The Judgment of the Court was delivered
by BEG, J. This appeal, after certification by the Gujarat High Court of
fitness of the case for it, I rises 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, obtained, under the will, inter alia, certain shares the right and
title to which are disputed before us.
On 6-3-1948, Bai Ruxmani executed a
registered gift deed purporting to donate the disputed shares in various
limited companies, of which details were given in the gift deed, to her
brother, Vasudev Ranichandra Shelat, the appellant before us (hereinafter
referred to as "Shelat"). On 18-41948, Bai Ruxmani also expired. But,
before she died, she had signed several blank transfer forms,apparently
intended to be filled in by donee so as to enable 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
Therefore, the respondent before us, Pranlal
Jayanand Thakar, a nephew of the late Uttamram Mayaram Thakar, disputed the
claim of the appellant Vasudev Ramchandra Shelat to these shares in an
administration suit which came up before a learned Judge of the Gujarat High
Court in second appeal together with other matters. The learned Single Judge
held that Shelat 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 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 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, 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 law
that unless the gift it completed as required by law, mere intention to make a
gift cannot pass any title to the donee and does not make the 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 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, sometime
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 Ruxmani to vasudev Shelat, the donee." The appellant's
submissions, on facts found, may be summarised as follows:
(1) As between the donor and the donee the
transfer was complete with the registration 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 mentioned 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 within 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
(4) There was no evidence whatsoever in the
case to repel the irresistible 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 doctrine that there is no equity to complete an incomplete
transaction, as there is when a bonafide purchaser for value comes before the
538 There was no question of any equity
involved here. The simple question 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? Instead of considering and deciding whether such an inference arose, the
Division Bench had failed to decide the real issue on the erroneous view that
equity debars it from inferring 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" Sec. 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 not merely as between the shareholder and the company concerned.
(3) Sections 122 & 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 regulation 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
(6) Inasmuch as acceptance of the gift
"during the lifetime 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 his acceptance of the gift before
the dono died, the purported donation was frustrated by reason of Sec. 122 of
the Transfer of Property Act.
539 (7) Even if we were to assume that the
facts proved disclosed that the appellant donee was armed with an implied
authority to obtain 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 infructuous in the
eye of law and could not be perfected or completed.
Equity does not aid a merely purported donee
who has given no consideration to obtain any right. In other words, equitable
considerations 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
(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 object of the agency had
(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
"'merest" 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.
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
interpreted harmoniously. But, this certainly does not mean that a provision of
one Act could be nullified by any provisions of the other Act. It means that
the provisions of the two Acts should beread consistently with each other so
far as it is reasonably possible I to do SO.
540 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 operation will be clarified so as to avoid possibilities of conflict
between them or any unnecessary overflow of what really appertains to one field
No doubt the Transfer of Property Act is not
exhaustive. It does not deal with every kind of transfer of property which the
law permits. Nor does it prescribe the mode for every legally recognised
transfer. Nevertheless, it is an enactment meant for defining certain basic
types of transfer and it lays down the requirements both of substance and of
form for their legal recognition and effectiveness. Section 5 of this Act gives
a wide connotation to "transfer of property". All that it requires is
that the transferor must be living at the time of the transfer recognised by
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 that they "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 definition of "property" in Section 6 of the
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
rightsof a shareholder upon the grant of a share certificate in accordance with
the articles 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.
"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 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 certificates 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 (1) 53 Indian
Appeals P. 92 @ P. 97-98.
541 did not implement his bargain by supplying
the buyer with certificates and blank transfers, signed by the registered
holders of the shares described. Barucha sold what he had got. He could sell no
more. He sold what in England would have been chooses in action, and he
delivered chooses in action. But in India, by the terms of the Indian Contract
Act, these chooses in action are goods. By the definition of goods as every
kind of movable property it is clear that not only registered shares, but also
this class of chooses 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 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.
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
Sec. 122 of the Transfer of Property Act
defines a ",gift".
its substantial requirements are : (1) 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 exists.
Section 123 of the Transfer of Property Act prescribes the mode of transfer by
gift. It lays 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 acceptor" of the gift, and it is attested by six
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 542 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 that nothing was left to be done so far
as the vesting of such a right in the donee is concerned. The actual transfers
in the registers of the companies concerned were to constitute mere
enforcements 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.
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 intention 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 : Kalyanasundaram Pillai v.
Keruppa Mooppanar & Ors.(1); Venkatsubba
Shrinivas Hegde v.Subba Rama Hegde;(2) Firm Sawan Mat Gopi Chand v. Shiv Charan
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
requirements of both Section 122 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 certificates 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 matter of course by
compliance with the provisions of Company law. In 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 law relating to trading companies and other associations".
It is concerned with the acts and proceedings relating 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 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 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 (1) 54 I. A. 89.
(2) ILR 52 Bom. 313.
(3) AIR 1924 Lab. 173.
543 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 Co.........
either by the transferor or the transferee". A share 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 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
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 1st Schedule to the
Companies Act of 1913 gives regulation 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 :
1, A. B. of in consideration of the sum of
rupees paid to me by C. D. of (hereinafter called "the said
transferee"), do hereby transfer to the said transferee the share (or
shares) numbered in the undertaking 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, and 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 "acceptor 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
immaterial that the gift deed deals with a number of items so long as the
requirements of regulation 18 are fulfilled. After 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 undoubtedly
shown to have been completely fulfilled here. There is nothing in regulation 18
or anywhere else in our Company law to indicate that, 544 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 prescribed form required to be meticulously observed savors of archaic
and outmoded jurisprudence.
Buckley on the Companies Acts (XIII-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 Fights 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 intervivos". The Court of Appeal upheld this decision in : In Be
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 giftdeed 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 completion 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.Howrali Trading Co. Ltd. v. The
Commissioner of Income-tax, Calcutta(3), considering a case of blank transfers,
Hidayatullah J., speaking for this Court, said (at p. 453) :
"In 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 transferor 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 (1)  Ch. D. 78. (2)
 (1) Ch.
(3)  Supp. (2) SCR 448 @ 453.
545 members can be made against the company,
if the transferor retains the money in his own hands and fails to pay to it to
him." This case also makes a distinction between an antecedent right and
title of 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. Commissioner 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 other 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 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 1. Colonial Bank v.
2. In Re. Tahiti Cotton Company ex-parte
3. In Re. Letheby & Christopher,
4. In the matter of Bengal Silk Mills Co.
5. The Bank of Hindustan Ltd. & Ors. v.
Kowtha Suryanarayana Rao & Ors.(6);
6. Arjun Prasad &.Ors. v. Central Bank of
India Ltd. (7);
7. Benode Kishore Goswani v. Ausutosh
Mukhopadhya & Anr.(8).
Learned Counsel for the respondent cited the
following passage from the Palmer's Company Law (21st edition-1968, p.
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." (1)  (Vol. 73)
(2)  (36) Ch. D. 36.
(3)  (17) Equity Cases 273@ 279.
(4)  (1) Ch. D. 815, (5) AYR 1942 Cal.
461 @ 464.
(6) RR  Mad 1958 @ 1072.
(7) AIR 1956 Pat. 32.
(8) 16 C.W.N. 666.
546 This statement of the law in England is
correct. The transferee, under a gift of shares, cannot function as a
shareholder recognised by company law until his name is formally brought upon
the register of a company and he obtains a share certificate as already
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. The
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 provisions 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 companies, 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 against
perpetuities." In the type of cases contemplated above, where there are
special restrictions on the transfer of shares imposed by the articles of
association, the difficulty or defect is inherent in the character of such
shares. In such cases, the donee or purchaser cannot get more than what the
transferor possesses. Therefore, in such cases, it is possible to hold that
even the right and title to obtain shares, which we have viewed as separable
from the legal right and title to function as a shareholder, is incomplete
because of a defect 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 ease 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
Ireland v.. Hart'(1) relied upon by the
respondent, was a case in which a prior equitable title of a wife, for whom the
husband was a (1)  (1) C.D. p. 522 @ 529.
547 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 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 (11 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 are in the present case, a legal 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 right, but, as it
appears to me, I am not sure that anything short of registration 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 registration 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) "It has never been clearly decided in what circumstances
the `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 I 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
In such circumstances it is of course, well
settled that there-is no equity to complete the 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 court 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
transferring certain bank shares, The document was not the appropriate document
to pass any interest in the property at all. In Re Fry the flaw in the
transaction, Which was a transfer or transfers of shares in a certain company,
548 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 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 referred. 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 National 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 retained by 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 decision was that "the disposition of
the shares failed as being imperfect voluntary gift". Here, the Calcutta
High Court purported to follow Milroy v. Lord, (3) and, Richards v. Delbridge(4).
No such facts are present in 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
Another case relied upon by the respondent
was: The Bank of Hindustan Ltd. V. Kowtha Suryanarayana Rao & Ors. (supra),
where the Court refused,. to direct rectification of a register of member s (1)
1946 (2) All. E.R. 106.
(2) ILR  Cal. 986.
(3) 1862 (4) DEG. F. & J. 264.
(4) 1874 LR. 18 Eq. II.
549 because the articles of association
vested an absolute 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. In other words, this was a case in which the provisions of 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 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
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.
We, therefore, allow this appeal with costs
and set aside the judgment and decree of the Division Bench of the High Court
and restore that of the learned Single Judge.
Appeal allowed P. B. R.