1965 Supreme(Cal) 113

HIGH COURT OF CALCUTTA
D. N. Sinha And A. C. Sen
CHAMPARUN SUGAR CO. LTD - Appellant
Versus
HARIDAS MUNDHRA - Respondent
.   Of  .
Decided On : May 5, 1965

A right to purchase shares or even an option to do so is a beneficial interest in movable property and is an actionable claim where the moveable property is not in possession. Such a right is assignable and transferable. According to the above definition, it must be considered to be movable property.

Headnote:

ATTACHMENT - Right to purchase shares - Whether attachable - Whether prohibitory order can be issued - C. P. Code (5 of 1908), Ss. 51, 60, O. 21, Rr. 41 to 54, Form No. 16.

Fact of the Case:

The respondent filed a suit for specific performance of an agreement relating to the sale of 51 per cent ordinary shares in Turner Morrison and Co. Private Ltd. and for other reliefs. The plaint alleged that the respondent had an option to purchase the remaining 51 per cent of the issued capital of the said company for the sum of Rs. 86,60,000. On 30th October, 1956 an agreement was entered into between the said parties and M/s. British India Corporation Ltd. , the 5th defendant in the said suit, inter alia as follows: That the agreement contained in the offer dated 29th November 1955 and acceptance dated 8th December, 1955 was to be considered as a binding agreement; that the 5th defendant, the British India Corporation Ltd. , would be at liberty to assign its right, title and interest to Mundhra, and the purchase and sale would be completed within 14 days of the execution of the agreement. By a deed of Revocation dated 7th September 1957 Mundhra became entitled to exercise the option and to purchase 51 per cent of the remaining shares. It is stated that Mundhra paid for and obtained a transfer of 49 per cent of the said shares. On the 7th December, 1960 and 28th December, 1960 Mundhra, through his Solicitors, exercised his option to buy the remaining 51 per cent of the said shares. As the defendants failed to act in terms of the said agreement, Mundhra Instituted the said suit for specific performance of the agreement relating to the sale of 52 per cent ordinary shares in Turner Morrison and Co. Private Ltd. , and/or specific delivery of the said shares against payment of the consideration thereof. On May 22, 1963 the appellants, M/s. Champarun Sugar Co. Ltd. and Another obtained a decree in Suit No. 179 of 1960 (Champarun Sugar Co. Ltd. v. Shri Haridas Mundhra) in the Court of the Civil Judge, Kanpur, against Haridas Mundhra for a sum of Rs. 60,950. 20 np. and costs. On December 17, 1963 the decree holders filed an application for execution, by tabular statement, in which they prayed for execution of the said decree, passed by the Kanpur Court and transmitted to this Court, by attachment and sale of the option of Mundhra under the agreement dated 30th October, 1956 taken together with the Deed of Revocation dated 7th September, 1957, and of all his rights under the said agreement which is the subject matter of Suit No. 600 of 1961 then pending in this Court. Upon this application being made, an ex parte order of attachment was made by the learned Master of this Court, the relevant part whereof is set out below: "whereas Shri Haridas Mundhra the defendant No. 1 abovenamed has failed to satisfy the decree made in the above suit No. 179 of 1960 of the Court of Second Civil Judge Kanpur and dated the 22nd day of May 1963. It is ordered that the said defendant Shri Haridas Mundhra be and he is hereby prohibited and restrained until further order of this Court from exercising the option under the agreement dated the 30th October 1956 with Hungerford Investment Trust Limited and J. G. Turner and N. f. Turner construed with Deed of Revocation dated the 7th day of September 1957 between British India Corporation Ltd. , and the said defendant Shri Haridas Mundhra, to purchase 51 per cent shares of the Turner Morrison and Co. Ltd. , and of all rights of the said defendant Shri Haridas Mundhra under the said agreement which is the subject matter of Suit No. 600 of 1961 (Haridas Mundhra v. Mrs. Mary Therese Turner) of this Court in respect of the said option as recorded and all persons be and they are hereby prohibited and restrained from receiving the same by purchase, gift, sale or otherwise until further order of this Court. "

Finding of the Court:

The Court held that the right attached was not attachable in law and that the procedure for attachment followed was not in accordance with law. Firstly, the learned Judge held that the option having been exercised, the right to exercise the option could not be attached. Secondly according to the learned Judge, a decree having been passed, the attachment had the effect of which could not be permitted. Thirdly, according to the learned Judge, the property sought to be attached was movable property and the proper way of attaching it was by actual seizure. As there could not be a seizure of a right to purchase shares, there could be no attachment. The learned Judge came to the conclusion that the "matter in question" was not attachable and that in fact, there was no attachment in accordance with the provisions of the Code and the High Court Rules.

Issues: 1. Whether the right to purchase shares is attachable in law? 2. Whether the procedure for attachment followed was in accordance with law?

Ratio Decidendi: 1. The right to purchase shares or even an option to do so is a beneficial interest in movable property and is an actionable claim where the moveable property is not in possession. Such a right is assignable and transferable. According to the above definition, it must be considered to be movable property. Section 51 of the Code of Civil Procedure lays down the procedure in execution. The relevant provision runs as follows:"51. Subject to such conditions and limitations as may be prescribed the Court may on the application of the decree-holder, order execution of the decree - (a) by delivery of any property specifically decreed, (b) by attachment and sale or by sale without attachment of any property; xx xx xx xx (e) in such other manner as the nature of the relief granted may require. "section 60 deals with the question of attachment, the relevant provisions thereof are as follows:"60 (1 ). The following property is liable to attachment and sale in execution of a decree, namely, lands, houses or other buildings, goods, money, bank-notes, cheques, bills of exchange, hundis, promissory notes, Government securities, bonds or other securities for money, debts, shares in a Corporation and save as hereinafter mentioned, all other saleable property, movable or immovable, belonging to the judgment-debtor, or over which, or the profits of which, he ahs a disposing power which he may exercise for his own benefit, whether the same be held in the name of the judgment-debtor or by another person in trust for him or on his behalf. "this is followed by the enumeration of certain things which cannot be the subject matter of attachment. For example, a mere right to sue for damages or any right of personal service or an expectancy of succession by survivorship, cannot be the subject matter of attachment. 2. In this particular case, the right to be attached is the right that arose from an agreed consideration. It is an actionable claim and/or a beneficial interest in movable property which is itself to be considered as movable property and is assignable and transferable. There is no reason why such a right cannot be the subject matter of an attachment. What is argued is that the contract is really not an executed but an executory contract and there are mutual rights and obligations. It is even argued that the payment of the money is a contingency and the contract is a contingent contract. It is argued that such a right is neither assignable nor can be the subject matter of attachment. In order to consider this point it will be necessary to examine a number of authorities which have been cited before us.

Final Decision: Appeal allowed.