Judgement

MAHAJAN, J. :

These appeals, though they arise out of two different suits, 336 of 1945 and 786 of 1148, can be disposed of by a common judgment, as both these suits were instituted in effect to obtain the same relief.

2. In July 1944 a struggle commenced between the group of Sir Padampat Singhania and the group of Shri Maneklal Prem Chand for control of the management of the Bombay Life Assurance Co. Ltd. and there was a race for the acquisition of the shares of the company between the two groups. Sir Padampat, the appellant in Civil Appeal No. 54 of 1950, and respondent in the cross appeal No. 53 of 1950, on 25-7-1944 purchased through Shri P. N. Gupta, his Bombay agent, 667 shares of the company, 484 out of which belonged to Mr. Reddy, the appellant in C. A. No. 53 of 1950 and respondent in Civil Appeal No. 54 of 1950.This deal was made on his behalf by a firm of share and stock-brokers Bhaidas Gulabdas. The shares were sold at the rate of Rs. 300 per share. On the 29th July Gupta executed a receipt in favour of Bhaidas Gulabdas acknowledging the receipt of these shares, while Bhaidas Gulabdas as constituted attorneys of Mr. Reddy executed five blank transfer forms in respect of the 484 shares sold by them - four for 100 shares each, and one for 84 shares. It is alleged that these transfer forms were ultimately filled in the name of Sir Padampat Singhania. Sir Padampat, however, made no application to the company for registration of his name in the register of shareholders till 11-4-1945. On an application being made, the company declined to register the shares in his name and intimated to him their refusal to do so on 8-5-1945.

3. On 8-1-1945 the company in order to combat the move of Sir Padampat to acquire control of its management, made an application under Rule 94-A, Defence of India Rules for sanction for, the issue of further capital. The sanction was granted and the company was authorised within a time limit of six months to increase its capital by a sum of Rs. 4,59,600 by issuing 4,596 shares; otherwise the sanction was to lapse. On 21-2-1945 the directors of the company passed a resolution increasing the capital of the company by issuing these 4,596 shares of Rs, 100 each at a premium of Rs. 75 per share. On the existing shares only Rs. 25 per share had been called up. The company therefore decided that the new shares should be offered to the existing share-holders in the proportion of four shares to every five shares held by the share-holders. Reddy as a shareholder of 534 shares (including 484 shares sold by him on 25th July but yet not registered in the transferee s name) thus became entitled to 427 new shares and one fractional certificate. Out of the 427 new shares offered to him he was entitled to 40 shares in his own right which appertained to 50 unsold shares which he still held in the company. The other 384 shares appertained to the shares that he had sold. The company issued a circular letter to every shareholder giving the details of the offer made and along with it sent two forms, A and B. Form A, being the application form for allotment of new shares, the shareholder had to subscribe his name to it and return it to the company for allotment of the shares offered accompanied with a cheque for the amount that had to be paid for obtaining the shares. Form B was a renunciation form. In case a shareholder did not want all or any of the shares offered to be allotted to him, he was allowed to renounce his right in favour of some other person.

4. On 21-2-1945, Reedy returned to the company form A duly filled in requesting the company for allotment of 40 shares out of the new issue, which appertained to the 50 shares he still held in the company. In respect of the balance of 384 shares offered to him and which appertained to the 484 shares sold by him he said nothing. The renunciation form was retained by him. On 23-2-1945, Messrs, J. L. Mehta and N. K. Bhartiya purporting to act on behalf of the purchas