1964 Supreme(Cal) 79

HIGH COURT OF CALCUTTA
U. C. Law
SM. SUMITRA DEBI JALAN - Appellant
Versus
SATYA NARAYAN PRAHLADKA - Respondent
Suit 2891  Of  1955
Decided On : MARCH 26, 1964

The owner of shares is estopped from asserting his title against a bona fide purchaser for value without notice of any defect in title although from whom such bona fide purchaser acquires such title has no title to pass.

Headnote:

NEGLIGENCE - ESTOPPEL - SALE OF GOODS ACT, 1930 - SECTIONS 27 TO 30 - SHARES - NEGOTIABLE INSTRUMENTS - BONA FIDE PURCHASER FOR VALUE WITHOUT NOTICE - DUTY OF OWNER TO REGISTER SHARES - LEAVING SHARES WITH BLANK TRANSFER DEEDS WITH ANOTHER - NEGLIGENCE - ESTOPPEL BY REPRESENTATION - DUTY OWING TO TRANSFEREE OR PUBLIC AT LARGE - PROXIMATE CAUSE.

Fact of the Case:

Plaintiff purchased and took delivery of 5,100 ordinary shares of Rohtas Industries, Ltd., through her father. The share-scrips in respect of these shares together with the relevant blank transfer-deeds duly signed and endorsed by the registered holders were kept in the office of Kanoria and Company, Ltd. The defendant No. 1 was an employee of Messrs. North Bihar Sugar Mills, Ltd., of which Kanoria and Company, Ltd., was the managing agents. On or about the 3rd week of May, 1954, the said share-scrips together with some other shares were found to be missing from the office of Kanoria and Company, Ltd., when the defendant No. 1 was on leave and it transpired as a result of enquiries made in that respect that the defendant No. 1 had stolen the said sharescrips from the office of Kanoria and Company, Ltd., and had decamped with the same. Thereupon the defendant No. 1 was dismissed from the service of the North Bihar Sugar Mills, Ltd., on 27 May, 1954, the plaintiff caused a notice to be sent to Messrs. Rohtas Industries, Ltd., of the theft of the sharescrips and requested them not to have the sharescrips registered in any name other than that of the plaintiff. She also caused an information to be lodged with the police whereupon the said defendant No. 1 was arrested and was charged under S. 406 of the I. P. C. and in course of investigations the police authorities seized and recovered possession of 4,500 shaves out of the aforesaid 5,100 shares, but the remaining shares had not at all been traced. The plaintiff next states that the defendant No. 1 after stealing the Rohtas Industries shares had dealt with them of which 4,500 shares have been seized from the custody of several of the defendants. She claims that the defendants or any of them have no title to the said shares and that a declaration be made that she is the owner thereof. On August 30, 1955, Rohtas Industries, Ltd., passed a resolution increasing the capital of the Company to the effect that the holders of existing ordinary shares or the registered members of the Company would be entitled to one ordinary shave for each existing ordinary share held by each of them, such new shares to be offered at par, i. e., Rs. 10 each which is payable with the application. Pursuant to such resolution the defendant whose name happened to be in the register of members would be entitled to the new shares on payment of Rs. 10 per share as stated above. It is stated that these: new shares constitute benefit or advantage attached to or annexed with the existing shares, and by reason of plaintiff's purchase of 5,100 shares as stated before she alone is entitled to these new shares. She further claims that as owner of these 5,100 ordinary shares of the Company she has the right in preference to strangers and on equal terms with other existing share-holders to the privilege of contributing to the new capital called for by the Company and that she has all along been and still is ready and willing to do all that is necessary to be done, including the payment of money for the purpose of effectively working out her rights in respect of such shares and/or for the purpose of acquiring the additional stock offered to the shareholders of the said Company as aforesaid. It is next stated that the defendants Nos. 2, 4, 12, 13, 14, 15, 16, 20, 22, 25 and 37 were called upon in writing to accept the offer of new shares on payment of Rs. 10 per share by the plaintiff to the Company or such payment being secured by ' the guarantee of any scheduled bank or to authorise the plaintiff to accept the said offer of new shares on payment of Rs. 10 per share to the Company and to receive these scrips of the new shares, but the said defendants have wrongfully refused the payment or requisition of the plaintiff as aforesaid. Upon these facts the plaintiff has brought this action for a declaration that she is the owner of the said 5,100 ordinary shares of Rohtas Industries, Ltd., and for other consequential reliefs fully mentioned in the prayers of the plaint

Finding of the Court:

The plaintiff was negligent in not exercising her rights diligently in respect of her alleged title to the shares in question and therefore estopped from asserting any title in respect thereof. The defendants have acquired valuable rights in respect of these shares as hereinbefore stated.

Issues: 1. Were 5,100 ordinary shares in Rohtas Industries, Ltd. , purchased by the plaintiff through her father Radha Kisan Kanoria? 2. Was the plaintiff at all material times the owner of the said shares? 3. Were the said shares kept in the office of Kanoria and Co. , Ltd. ? 4. Did the defendant No, 1, Satyanarayan Prohladka, Steal the said shares as alleged in paragraph 4 of the plaint ? 5. Are the appearing defendants bona fide holders for value in good faith and without notice of any defect in the title of their respective vendors in respect of the shares held by them ? 6. Did the defendants purchase their respective shares in the open market ? 7. Was the plaintiff negligent in not exercising her right diligently in respect of her alleged title to the shares in question ? 8. Is the plaintiff thereby estopped from asserting her alleged right in respect of those shares ? 9. Have the defendants acquired valuable rights in respect of those shares ? 10. To what relief, if any, is the plaintiff entitled ?

Ratio Decidendi: The plaintiff was negligent in not exercising her rights diligently in respect of her alleged title to the shares in question and therefore estopped from asserting any title in respect thereof. The defendants have acquired valuable rights in respect of these shares as hereinbefore stated.

Final Decision: Suit dismissed with costs.