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P L D 1981 Lahore 90
Before Gul Muhammad Khan and Abdul Shakurul Salam, JJ
MRS. YASMEEN LARI-Petitioner
versus
Mums LAHORE INVESTMENT LTD. AND 2 oTHERs-Respondents
C. O. No. 47 of 1978, decided on 7th September, 1980.
Companies Act (VII of 1913)-
-- S. 38-Transfer of shares-Gift of shares alleged by petitioner to have beer, made by donor not proved-Affidavit of petitioner showing shares not actually owned by alleged donor and donor found to have held same as benamidar-No request made to respondent by transferor or transferee of shares to register transfer and respondent never considered or refused to register same-Mere allegation on part of respondent to refuse to register transfer of shares, held, not enough-Petition dismissed.-[Gift].
Muhammad Akbar v. Official Liquidator A I R 1950 Bom. 217; New Citizen Bank of India v. Asian Assurance Co. Ltd. A I R 1945 Bom. 149; Ontario Jockey Club Ltd. v. McBride 1927 A C 916(1); In re: Luchmee Chand (1882) 8 Cal. 317; Jagan Nath v. Gopi Chand A I R 1915 Lah. 100; Ramesh Chandra Mitter v. Jogini Mohan Chatterji 47 Cal. 901 and Indian Merchants Bank Ltd. v. Jogindra Singh A I R 1928 Lah. 234 ref.
Raza Kazim with Minnat Ullah and Abdul Majid for Petitioner.
Nerno for Respondent No. 2.
Date of hearing : 18th August, 1980.
GUI. MUHAMMAD KHAN, J.-The petitioner has prayed through this petition for rectification of the register of share-holders of the respondent Company under section 38 of the Companies Act, 1913. Her late father Mr. Zafarul Ahsan is stated to have held 34000. shares out of 50000, shares of the respondent-Company but according to Annex. 'A' he held only 500 shares. It is stated in paras. 2 and 3 of the petition that the seed money for promotion of the Company was provided by late Justice Z. H. Lari, to his brother Mr. Zafarul Ahsan who and his family members held all the shares as 'benami'.
2. Respondent No. 2, who is petitioner's brother and who was exercising various powers of the respondent-Company, statedly abused his position by mismanaging and misusing the funds of the, Company. He was later charge-sheeted and removed. The conduct of the petitioner's brother is said to have shocked Mr. Zafarul Absan who fell ill and asked to be removed to the petitioner's house. She is said to have taken him to England for treatment. It is in pursuance to that care that late Mr. Zafarul Ahsan gifted and handed over to her, 15500, shares of the respoaderit Company, alongwith duly executed transfer deeds.
3. The other consideration for the transfer of abovesaid 15500 shares is alleged to be the promise of the petitioner that she would pas off a loan of rupees one lac given by Khyber Insurance Company to Ambassador investment Limited. It is stated that the petitioner did ultimately pay the sum of Rs. 1,46,077,38 with interest to Khyber Insurance in full and final discharge of the loan secured by mortgaging a house at Abbotabad owned by Ambassador Investment Limited. Various allegations of non-compliance of provisions of law and rules were also alleged, but the same are not relevant so far as this petition goes.
4. In reply to the notice served, Shamshad Ali Khan, Resident Director of the respondent No. 1, accepted the main case of the petitioner as well as the allegations levelled against respondent No. 2. He also admitted the payment of a sum of Rs. 1,46,077.38 to Khyber Insurance Company Limited. Respondent No. 2 in his written statement raised a few preliminary objections. He stated that some suits with regard to the ownership of the said 15,500 shares had been previously instituted by respondent No. 1 through respon dent No. 2 in the High Court of Sind. He also stated that petition was bad for non joinder of Messrs Ambassador Investment Limited as a necessary party. Plea of limitation was also raised. He denied that Zafarul Ahsan was holding the shares as 'benami .
5. Respondent No. 2 also stated that no application had ever been made to the Company for the transfer of shares on the basis of the alleged gift deeds. According to him the said 15,500 shares were in fact found missing and consequently new shares were issued in the name of share-holders including Ambassador Investment Limited.
6. The petitioner produced Mr. Shamshad Ali Khan, Director, Lahore Investment Limited. He deposed that 15,500 shares of the value of Rs. 10, each numbering 3, 16, 15 and 14 placed on record as P. W. 1/1, 2, 3 and 4 had been given by Mr. Zafarul Ahsan to Mrs. Yasmin Lari petitioner with the condition that if the loan due to the Khyber Insurance Company was cleared off by Ambassador Limited the transfer of shares shall be treated by way of gift, otherwise the petitioner shall have to pay that loan in lieu of the shares. He stated that as the Ambassador Investment Limited could not pay off the loan the same was done by the petitioner and, therefore, she was entitled to the shares on that basis. He produced the original receipt of the payment which is Exh. P. W. 1/5. He also identified the signatures on the blank share-transfer-orders (Exh. P. W. 1/6-9). The learned counsel also placed on record an affidavit sworn by the petitioner in support of her case.
9. There may be another interpretation of paras. 2 and 3 of the petitioner to say that Mr. Zafarul Ahsan was the owner but his family members were 'benami' holders. The shares claimed by the petitioner were being held as under:-
Certificate Original owner Transferee Date.
No.
15 Younis Ali Raza, Ambassador Invest 18-6-63
ment Limited.
16 Nasim Ali Raza do do
14 S. Hassan Raza. do do
3 do do do
It will be seen from the above that as from 18th June, 1963, all the disputed shares were held by Ambassador Investment Limited. According to Annex. B' Ambassador Investment Limited had 9 shareholders having in all 5000 shares cut of which Mr. Zafarul Ahsan held 500, shares. There is no evidence on record that Ambassador Investment Limited had authorised Mr. Zafarul Ahsan to make a gift of those shares on behalf of the Company.
10. In any case, the facts brought on record are-
(ii) gift was not complete ;
(iii) the petition raises questions of fact which cannot be decided in this summary procedure.
11. It will be seen that a mere allegation on the part of the company to refuse to register a transfer of shares is not enough. It was held in Muhammad Akbar v. Official Liquidator (A I R 1950 Dom. 217), that something much more has to be established before it could be held that the Company was in default in not making the necessary alterations so as to entitle the share holder to call for rectification under section 38. The petitioner has to show that there was an omission on the part of the company which would amount to a sufficient cause within the meaning of sub-clause (a) and would amount to default or unnecessary delay within the meaning of sub-clause (b).
12. In New Citizen Bank of India v. Asian Assurance Co. Ltd. (A I R 1945 Born. 149), it was held that before a shareholder claims that his name should be entered in the register of company as a share-holder he has to submit the share-script and properly executed and duly stamped transfer form. Where an instrument of transfer properly stamped has not been given, it cannot be said that the transferee's name was omitted without any sufficient cause.
13. The Privy Council in Ontario Jockey Club Ltd. v. McBride (1927 A C 916), reversed a decision of Canadian Supreme Court and upheld the refusal, on the part of the Directors, to register the transfer of shares where the transferor was not a party and the holder gave no opportunity to the company to purchase it in accordance with his agreement.
14. In the matter of In re: Luchmee Chand ((1882) 8 Cal. 317), the Court held that the power given to the Court by section 34 of the Indian Companies Act of 1866, is discretionary and the Court will not order a transfer to be registered where the alleged transfer is not before the Court and there is any real doubt as to the validity and bona fide of the ttansaction.
15. In Jagan Nath v. Gopi Chand (A I R 1915 Lah. 100(1)
), it was held that the power to take summary action under section 38 of the Compaines Act, 1913, is discretionary. In Ramesh Chandra Mitter v. Jogini Mohan Chatterji (A I R 1928 Lab. 234
), it was held that in a simple case where an immediate rectification is essential it may be desirable to apply under section 38 but if the case is complicated, a civil suit should be brought.
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16. In Indian Merchants Bank Ltd. v. Jogindra Singh (47 Cal. 901)
, the Court held that the jurisdiction of the civil Court to decide the questions falling within the purview of section 38 is not excluded.
S. A. H. Petition dismissed.
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