Judgement

Appeal (No. 139 of 1923) from a decree of the High Court (September 6, 1921) affirming an order of the Subordinate Judge of Ahmedabad made in execution proceedings of a decree for redemption of shares in a limited company pledged or mortgaged by the present respondent.

The facts appear from the judgment of the Judicial Committee.

1924. Oct. 31. De Gruyther K.C., and E. B. Raikes for the appellants. The Court had no power under

s. 47 of the Code to entertain the application so far as it related to the "B” shares. These shares were not claimed in the plaint, nor were they covered by the decree. The word "issues" in the decree refers to the sub-shares existing at the date of the pledge. The "B" shares cannot be regarded as a capitalization of profits. Further, having regard to the interest of Bai Gulab under the agreement of 1883 in the profits of the company the rights of the parties could not properly be adjudicated in execution proceedings. [Reference was made to Bouch v. Sproule (( 1887) 12 App. Cas. 385.) and In re Piercy. ([ 1907] 1 Ch. 289, 294.)]

Sir George Lowndes and Parikh for the respondents. The mortgagee cannot set up the rights of a third party against the mortgagors right to redeem. The present question was rightly determined under s. 47 of the Code of Civil Procedure. The mortgagee or pledgee was entitled to any accession to the property mortgaged or pledged Transfer of Property Act, 1882, s. 82 ; Indian Contract Act, 1872, s. 163. Whether the new shares were to be regarded as capital or income depends upon the intention of the company In re Evans ([ 1913] 1 Ch. 23, 32.) ; In re Hatton ([ 1917] 1 Ch. 357.) ; Commissioners of Inland Revenue v. Blott. ([ 1921] 2 A. C. 171, 186.)

E, B. Raikes replied.

Dec. 5. The judgment of their Lordships was delivered by

MR. AMEER ALI This appeal arises out of proceedings in execution of a decree made by the Subordinate Judge of Ahmedabad on September 28, 1915, which was affirmed by the High Court of Bombay on June 26, 1917.

The circumstances that gave rise to this litigation are simple. It appears that one Achratlal had purchased forty-eight shares of Rs.1000 each and forty-eight sub-shares at Rs.500 each issued by a company which carried on business in Ahmedabad under the name of the Ahmedabad Ginning and Manufacturing Company. The purchase was made in the name of a person named Girdharlal Dalpat Ram. This Girdharlal was the nephew of a woman called Bad Gulab, who is said to have been under the protection of Achratlal. In the year 1883 a controversy arose between Achratlal and Girdharlal as to the real ownership of the forty-eight Rs.1000 shares and the forty-eight Rs.500 sub-shares. Achratlal alleged that Girdharlal was only his benamidar and that in fact he was the real beneficial owner of the said shares. The contest was settled between Achratlal and Girdharlal on July 18, 1883. On that date an agreement was entered into by which it was agreed that twenty-four shares of Rs.1000 each and twenty-four sub-shares of Rs.500 each were to be transferred to Achratlal under certain conditions. The remaining twenty-four shares of Re. 1000 and the twenty-four sub-shares of Rs.500 were allowed to remain in the name of Girdharlal, subject to the following among other conditions " That during the lifetime of Achratlal and Gulab, Girdharlal should not sell or mortgage the same without their consent, (2.) that out of the amount to be received by Girdharlal as the dividend in respect thereof (excluding such shares as might have been sold with their consent) he was to retain for himself Rs.1100 and hand over the balance, if any, to Achratlal and Gulab or the survivor of them, and (3.) that after the death of both of those persons the shares were to belong to Girdharlal absolutely."

Shortly after the settlement Girdharlal appears to have got into financial difficulties, and in September, 1883, Achratlal advanced him Rs.7500 without interest on the pledge by Girdharlal of five shares