Report No. 70
109.51. Position in India as to transfer of shares.-
In India, to some extent, this position is reaffirmed by a Supreme Court judgement,1 where it was held that even till the transfer is registered the transferee becomes the beneficial owner of the shares. Reliance was placed, inter alia, on section 94 of the Indian Trusts Act, 1882. The seller must transfer all the benefits to property rights annexed to the sold share of the beneficiary
1. R. Mathalone v. Bombay Life Assurance Company, AIR 1953 SC 385.
109.52. Section 137-last paragraph-Recommendation.-
It may be pointed out that section 137 does not mean that a negotiable instrument or document of title or share cannot be transferred in the manner provided in this chapter. Although the language of the section does not fully bring out this position, it was not the intention to exclude11 the mode of transfer provided in the chapter. Section 137 is only a provision qualifying the word 'only' in section 130. The mode of transfer provided m the chapter can, if the parties so desire, be adopted even in regard to actionable claims represented by such instruments or documents as are mentioned in section 137.
1. See Mulla, (1973), p. 827.
109.53. Negotiable instruments.-
The subject may be more particularly considered with regard to negotiable instruments. Negotiable instruments have been exempted from the operation of this chapter because their assignment is regulated mostly by the provisions of the Negotiable Instruments Act. The usual mode of transfer of negotiable instruments is endorsement or delivery.1
The debts represented by such instruments are, nevertheless, actionable claims and, as such, may be transferred by assignment, i.e., by an assignment in writing under section 130. In fact, that has been the judicial construction, as will be apparent from a study of the reported cases, a few of which are mentioned in the footnotes.2-8
1. See sections 27 and 48, Negotiable Instruments Act.
2. Venkataswamy v. Noor Mahmed, AIR 1956 Andhra 9.
3. Surath v. Kripanath, AIR 1934 Cal 549.
4. AIR 1921 Mad 137.
5. Gadadhar v. Damo Behara, AIR 1966 Ori 230.
6. Ghanshyam v. Ragho, AIR 1937 Pat 100 (102).
7. Mulji Deok, AIR 1957 Nag 31.
8. AIR 1935 Born 343 (346).
109.54. Position regarding negotiable instruments.-
Negotiable instruments represent actionable claims, and as such, they can also be transferred by assignment under section 130. That is why, in a Madras case,1 where an agreement in writing transferred all assets of the transferor, the transferee became entitled to pronates of the transferor. It is true that section 137 saves negotiable instruments from the operation of section 130, but this does not mean that section 130 cannot be availed of for a transfer of a negotiable instrument, nor does section 130 create such a bar. The view that they could be transferred only by endorsement or by delivery is not correct.
Thus, in an Andhra case,2 an endorsement was construed as an assignment. Endorsement on a promissory note by one of the two payees in favour of the other is invalid as an endorsement. Still, the creditor has a right to get a decree on the ground that the endorsement amounted to an assignment of an actionable claim.
1. Awshashalam v. Venkatachalam, AIR 1954 Mad 820 (821, 822) (reviews cases).
2. Srinivasulu v. Kondappa, AIR 1960 AP 17 (175).
109.55. Of course, there may be differences in the incidents of each mode of transfer. The assignee of a debt having an assignment in his favour, can sue the person liable for debt, while an endorsee who gets only the property in the instrument by the endorsement, and who is not an assignee of the debt, has merely the rights on the instrument and, therefore, can sue only the person whose name appears thereon. But this does not affect the position that section 137 does not override section 130.
109.56. Recommendation as to section 137.-
Thus, in regard to all the instruments mentioned in section 137, that section supplements, but does not override, section 130. Since this position is not brought out beyond doubt by the present section, we think that it should be suitably redrafted for the purpose and accordingly, we recommend the following redraft of section 137:-
Revised section 137
"137. (1) An actionable claim represented by any of the following that is to say-
(a) instruments which are for the time being, by law or custom, negotiable; or
(b) any mercantile document of title to goods; or
(c) stocks, shares or debentures, may be transferred either in the manner provided by the law or custom, as the case may be, for the time being in force, providing a special mode of transfer thereof, or in the manner provided in this Chapter.
(2) Where such actionable claim is transferred in the manner provided by the law or custom referred to in sub-section (1), nothing in the foregoing sections of this Chapter applies to such transfer.
Explanation.-The expression 'mercantile document of title to goods includes a bill of lading, dock-warrant, warehouse-keeper's certificate, railway receipt, warrant or order for the delivery of goods, and any other document used in the ordinary course of business as pool of the possession or control of goods, or authorizing or purporting to authorize, either by endorsement or by delivery, the possessor of the document to transfer or receive goods thereby represented."