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Before A. M. Jan, Custodian of Evacuee Property, Lahore

In the matter of CIVIL & MILITARY GAZETTE,

LTD.

LAHORE

(a) Pakistan (Administration of Evacuee Property) Ordinance (XV 1949)

, S. 15 proviso‑Shares in joint stock company‑Held, to be movable property in immediate physical possession of evacuee and thus saleable.

Both in section 28, Companies Act (VII of 1913)

and section 2 (7), Sale of Goods Act (III of 1930), "shares" have been defined as consti tuting movable property. Therefore, an evacuee holding shares in a joint stock company is authorised to sell such shares as "movable property in his immediate physical possession" by virtue of the proviso to section 15, Pakistan (Administration of Evacuee Property) Ordi nance (XV of 1949).

Maneckji Pestonji Bharucha v, Wadilal Sarabhai & Co. 53 1 A 92, Fazal D. Allana v. Mangaldas M. Pakvasa I L R 46 Born. 489 (121), In re Bengal Silk Mills Co., Ltd. I L R (1942) 1 Cal. 122 and Kannambra Nayar v. P., N. Krishna Pattar A I R 1943.Mad.74 ref.

(b) Pakistan (Administration of Evacuee Property) Ordinance (XV of 1949)

, S. 2 (2) (e)‑Company more than 50% shares of which are held by non‑evacuees‑Company not an evacuee.

Kh. Nazir Ahmad, Chairman, Civil & Military Gazette, Ltd., Lahore,

Sh. Abdur Rahman, R. O. (Legal) for the Rehabilitation Authority.

Sardar Muhammad Iqbal Khan, amicus curiae.

A. M. JAN.

-- It was brought to my notice that a Reference under section 34, Ordinance XV of 1949, was made by a Civil Court to the Deputy Custodian, Lahore, in which it was held on 26th February 1954, that the Civil & Military Gazette Limited was a non -evacuee Company and their claim for a sum of Rs. 664‑12‑0 against Mr. M. A. Wahid and Mr. Grieg, which was the subject‑matter of the civil suit, was non‑evacuee property. I sent for the record of this case, suo Motu, under section 36 (4) of the Ordinance in order to satisfy myself about the legality of this order and issued notice to Kh. Nazir Ahmad, Chairman and Principal Officer of the Civil & Military Gazette Limited, Lahore. Kh. Nazir Ahmad has addressed me at length and taken me through the entire history of the case. It is not necessary to repeat the facts stated by him because, on my direction, he has incorporated those facts in an affidavit and has also testified to them as a witness in the Court of the Deputy Custodian. The gist of his statement is that the Civil & Military Gazette was registered as a limited Company at Lahore on 29th March 1934, and has remained and functioned here, without a break, ever since. The total number of allotted shares of this Company, of the value of Rs. 63 each, was 24226 out of which no less than 23531 shares had been acquired by Dalmia Cement and Paper Marketing Company Limited, Delhi, by November 1949. On 20th November.1949, Kh. Nazir Ahmad offered to purchase these shares at Rs. 30 each from Dalmia Cement and Paper Marketing Company on the stipulation that he would pay the price in Pakistan to a resident of Pakistan and the sale‑proceeds of the shares would remain in Pakistan, The offer was accepted on 26th November 1949 by Dalmia Cement and Paper 1darketing Company who agreed to sell these shares on the terms and conditions mentioned above and asked Kh. Nazir Ahmad to arrange for taking delivery of the scripes with duly executed blank transfer forius. The shareholders of the Company named in Exh. P. W. 7/1 were found by the Deputy Custodian, Lahore, to be either non‑evacuee Europeans or non‑evacuee Indians except two, namely, Natha Singh and Ram Jowaya Kapur. Natha Singh had 1538 shares which he had sold to the aforesaid Dalmia Company on 21st January 1947 vide Exh. P. 9 when there were no evacuee laws. Ram Jowaya Kapur had 586 shares which he too had sold to Dalmia Cement and Paper Marketing Company Limited sometime before November 1949. Dalmia Cement and Paper Marketing Company Limited were registered at Delhi on 16th July 1938. They had business in territories now comprising Pakistan up to 1944 but ceased to function here after that and left no immovable property here. They too were found to be non‑evacuees. But, even if Dalmia Cement and Paper Marketing Company were an evacuee Company its registered office being situated in India before 15th August 1947 and continuing to be so situated after the said date its property could not be treated as evacuee property under section 2, subsection (3), clause (c), para. (ii) of the Evacuee Property Ordinance (XV of 1949). Moreover, according to the proviso to section 15, Ordinance XV of 1949, Dalmia Cement Company and the registered shareholders of the Civil & Military Gazette, even if they were evacuees, could lawfully sell the shares to them as movable property in their immediate physical possession, Section 28, Companies Act, says that the shares of a com pany shall be treated as movable property and section 2 (7) Sale of Goods Act, says that the term "Goods' means every kind of movable property including stocks and shares.

In pursuance of the letter from Dalmia Cement and Paper Marketing Company, dated 26th November 1949, Kh. Nazir Ahmad went to Delhi in order to take delivery of the 23531 shares purchased by him. The relative share certificates with blank transfer forms executed by the registered shareholders were delivered to him on 3rd December 1949. He presented these certificates with the transfer forms in the office of the Civil & Military Gazette at Lahore and had them registered in his own name on 7th December 1949. The price of these shares at Rs. 30 each came to Rs. 7,05,930. Some time after the delivery of the shares i.e, in the beginning of 1950, Dalmia Cement and Paper Marketing Company telephoned to Kh. Nazir Ahmad to pay the price to M/S Allenbury & Company Limited, Delhi, who had' an office in Lahore before the Parti tion but not when the demand for payment was made. Kh Nazir Ahmad refused to pay them on the ground that they were not residents of Pakistan. Dalmia Cement and Paper Marketing Company then telephoned and asked Kh. Nazir Ahmad to pay Dalmia Jain Airways Limited, Delhi. They too had no office in Pakistan and Kh. Nazir Ahmad refused to pay them also. Dalmia Cement and Paper Marketing Company then wrote to Kh. Nazir Ahmad, vide their letter No. D/2307 dated 25th/28th July 1950, that as he was not paying the purchase price of i.e aforesaid shares to the parties named by them he should re‑transfer the shares. Kh. Nazir Ahmad refused to do so. He admits that he has not paid the price up to now and adds that the claim for the price has become time‑barred according to Article 52 and the claim for restoration of shares under Article 48, Limitation Act.

The matter came to the notice of the Central and the Provincial Governments who made enquiries from various sources including the Custodian of Evacuee Property, Punjab. In para. 10 of his affidavit Kh. Nazir Ahmad has stated that before purchasing these shares he had seen Mr. Justice Rahman who was the Custodian of Evacuee Property at that time and he told him that the sanction of the Custodian was not necessary for the purchase of these shares. I have looked into the administrative file of this case maintained in the Custodian's office and found that in a letter dated 22nd‑23rd June 1951 to the Special Police, Mr. Justice Rahman had expressed the opinion that according to law the shares of the Civil & Military Gazette could have been sold without the permission of the Custodian but added that the position of the Civil & Military Gazette appeared to be anomalous as though Kh. Nazir Ahmad had apparently purchased the shares he had not paid the price owing to a dispute which had arisen between the parties and which had remained unsettled.

The position taken up by Kh. Nazir Ahmad before Mr. Justice Rahman was, and the same is his position now before me, that the shares of a company are movable property and title therein passed to the transferee with the delivery of the relevant scrips accompanied by blank transfer forms executed by the registered owners of the shares. He relied upon a case decided by the Privy Council in 1926, Maneckji Pastonji Bharucha v. Wadilal Sarabhai & Co. (53 1 A 92). In that case Maneckji Pestonji Bharucha had sold through their agent Arajania, who was the second plaintiff in the case, 129 shares of Alcock, Ashdown & Co.. Limited for Rs. 1,54,800. Neither of the two plaintiffs was a registered owner of these shares. Maneckji Pestonji Bharucha had acquired them from various brokers in the Stock Exchange with blank transfer forms signed by the registered owners. These share certificates and blank trans fer forms were handed over by the second plaintiff to Gora, defendant No. 1, at 6 p.m. on 14th April 1920. At 8 p. m. on the same day a cheque for the price in favour of Maneckji Pestonji Bharucha was given by Gora to Arajania, Having come into possession of the share certificates and transfer forms, Gora made some arrangement for getting money from Mani lal who was a partner in the firm of Wadilal Sarabhai & Co. the second defendant, and handed the certificates and transfer forms to Manilal, Wadilal Sarabhai & Co. in their turn handed over these share certificates and transfer forms to one Ghia, the third defendant iii the case. Gora absconded and the cheque was dishonoured. Maneckji Pestonji Bharucha and their agent Arajania filed a suit against the three defendants named above asking for the return of the share certificates with blank transfer forms and damages. The suit was decreed on the ground that Gora was only an ostensible owner and the plaintiffs who were the unpaid vendors had equity in the shares and they could have stopped Gora from getting them transferred in his name in the books of the Company. This decree was set aside by the Bombay High Court and in appeal to the Privy Council by the plaintiffs it was urged, inter alia, that they had a lien on these shares. It was held that the plaintiffs had no lien because they had parted with possession and unless there is possession there is no lien. As regards the ownership of the shares it was held that full property in the shares of a company vests only in the registered holders thereof that Maneckji Pestonji Bharucha did not have the perfected right of property because they were not the registered holders of the shares but, by dint of their having possession of the share certificates along with the transfer forms signed by the registered holders, they were entitled to be brought on the register of the Company as owners of those shares because in England these shares with the transfer forms would have been treated as chooses in action but according to the laws of India chooses in action were included in the term "Goods", defined by section 76, Indian Contract Act, 1872, as every kind of movable property. The point to be considered was whether these goods had been legally transferred. Reliance was placed upon section 78 of the Contract Act which said that sale was effected by offer and acceptance of ascertained goods for a price together with payment of the price or delivery of the goods. At the time of the contract for the sale of these shares the goods were not ascertained within the meaning of section 78 but, according to section 83, Contract Act, where the goods were not ascertained at the time of the making of the agreement for sale but goods answering the description in the agreement were subsequently appropriated by one party for the purpose of the agreement and that appropriation was assented to by the other, the goods became ascertained and the sale became complete. It was, therefore, held that as soon as Arajania, acting for Bharucha, ‑handed over to Gora the certificates with the transfer forms and Gora accepted them the goods became ascertained, the sale became complete and the property in the goods passed to Gora. From that time onward Bharucha and Arajania could only sue Gora on the cheque for, the unpaid price of the shares because the cheque had been dishonoured. They had no longer any legal right in the share certificates or the transfer forms nor had they any lien on them because they had parted with possession.

The basis of this decision of the Privy Council was that the share certificates with the transfer forms in England constituted chooses in action but according to the Indian Contract Act they were movable property and as such goods the transfer of which was completed by delivery.

The relevant sections 76 to 123 of the Indian Contract Act, 1872 have now been repealed and substituted by the Sale of Goods Act 1930. Section 2 (7) of this Act now defines "Goods" to mean every kind of movable property other than actionable claims and includes stocks and shares. But even if the share certificates accompanied by transfer forms executed by the registered holders were only an actionable claim then too Kh. Nazir Ahmad by presenting those certificates and transfer forms to the Managing Director of the Civil & Military Gazette and having those shares duly registered in his name became the full and complete owner thereof.

In Fazal D. Allana v. Mangaldas M. Pakvasa (I L R 46 Bom. 489 (1921)) it was held that share certificates are movable property and the delivery of the share certificates with the transfers executed in blank passes not the property in the shares but a title, legal and equitable, which enables the holder to vest himself with the shares without the risk of his right being defeat ed by the registered owner or any other person deriving title from the registered owner.

In re. Bengal Silk Mills Co., Ltd. (I L R (1942) 1 Cal. 122) the registered holder of six ordinary shares transferred the shares in blank to one Suhrawardy for Rs. 2,100. Suhrawardy transferred these shares to the Bengal Silk Mills Limited on 10th December 1940. Prior to this date the original holder of these shares had died. On 4th March 1941 the Bengal Silk Mills Company Limited presented the transfer form with the share‑scrips for registration which was refused. He went up in appeal to the High Court of Calcutta where, after an exhaustive examination of the law on the subject, it was held by Lort‑Williams, J. that in cases of transfers of shares in blank, the transferee has the right to fill in the necessary particulars, including his own name as transferee even after the death of the original transferor. The learned Judge observed that if it were otherwise the vast amount of business done by means of blank transfers would have to cease, because it would be quite impossible in many cases to ascertain without much trouble and inconvenience whether the original transferor was alive or not.

In Kannambra Nayar v. P. N. Krishna Pattar (A I R 1943 Mad. 74) it was held that under the English Law a 'share' is regarded as a chose in action but in India it is not so. Both in section 28, Companies Act and section 2 (7), Sale of Goods Act, 'shares' have been defined as constituting movable property and are therefore 'goods' within the meaning of the Sale of Goods Act. As shares are not tangible things, the Legislature must have associated share certificates, which are marketable, when they included shares' in the definition of goods' in the Sale of Goods Act.

There is nothing on the record to show that Dalmia Cement and Paper Marketing Company, or the registered owners of the shares who gave their share certificates with blank transfer forms to that Company were evacuees except Natha Singh and Ram Jowaya Kapur who had only 1538 and 586 shares which they were authorised to sell as movable property in their immediate physical possession by virtue of the proviso to section 15, Ordinance XV of 1949. Thus more than 50 1o shares of the Civil & Military Gazette Limited have all along been held by non‑evacuees and the Civil & Military Gazette cannot be treated as an evacuee-Company within the meaning of section 2, subsection (2), clause (e), Ordinance XV of 1949.

The shares acquired by Kh. Nazir Ahmad appear to have been validly acquired and registered in his name. He is the owner of 23531 g shares out of a total of 24226 shares. The remaining 695 shares are held by three non‑evacuee Europeans namely Mr. Bustin, Mrs. Mitchell and Mrs. Taylor. The overwhelming majority of the shares being the property of Kh. Nazir Ahmad and he being a non‑evacuee the Civil & Military Gazette Limited was rightly held to be non‑evacuee. I am satisfied that there has been no illegality or impropriety in the order of the learned Deputy Custodian, dated 26th February 1954.

The Counsel for the Rehabilitation Authority, Mr. Karam Elahi Chohan, had appeared for Kh. Nazir Ahmad in the Court of the Deputy Custodian and could not appear against him here. The R. O. (Legal) was required to be present but as the legal points involved in the case were somewhat complicated, I asked Sardar Muhammad Iqbal Khan, Advocate, to act as amicus curiae. He went through the record of the case very carefully and satisfied me that the facts mentioned above and stated in the affidavit and evidence of Kh. Nazir Ahmad are borne out by the record. He has been very helpful to me in appraisal of the legal position also and I record my appreciation of the valuable assistance rendered by him in this case.

A. H. Order accordingly.

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