A M P ARUNACHALAM Vs. A R KRISHNAMURTHY

JUDGEMENT

(1.) THE second plaintiff in O. S. No. 7000 of 1969 is the appellant in A. S. No. 141 of 1973. THE 6th defendant in O. S. No. 658 of 1970, who is the 9th defendant in O. S. No. 7000 of 1969, is the appellant in A. S. No. 51 of 1975. Original Suit No. 7000 of 1969, on the file of the City Civil court, Madras, was a suit for declaration, redemption and for injunction. Original Suit No. 658 of 1970 is a suit for enforcing a pledge of shares in an incorporated company by a sale thereof in a manner known to law, Both these suits were tried together and it was understood that the array of parties in o. S. No. 7000 of 1969 may be referred to in the course of the judgment for purposes of convenience. THE late Raja of Ramnad held 5, 000 shares in the third defendant-company. Under Ex. B-1, the late Raja borrowed a sum of Rs. 25, 000 on the pledge of such shares as above and the pledge is evidenced by a letter Ex. B-2, which bears the same date as the promissory note, Ex. B-1, namely, January 25, 1960. Under Ex. B-3, the said loan was renewed. On the same security, the Raja further borrowed a sum of Rs. 10, 000 under Ex. B-4, and under Ex. B-5, the shares were received as security for the additional borrowings also. It is common ground that on the date when the shares were pledged with the intention of creating a security for the borrowings made the blank transfer forms exhibited as Ex. B-31 (Ex. A-15) were handed over by the Raja to defendants 1 and 2. As the Raja failed to repay the amounts borrowed, there was a notice of demand for payment by the creditors. Apparently finding that he could not pay off the debts, the Raja bargained with the plaintiff to sell the shares to the 1st plaintiff for a sum of Rs. 50, 000 with a direction to the first plaintiff to discharge the debts due to defendants 1 and 2 out of the said sale consideration and pay the balance thereof to him. THE transaction of sale is evidenced by a series of letters. Under Ex. A-16, the Raja confirms the sale of the 5, 000 shares in favour of the first plaintiff whose legal representatives are the 2nd and 3rd plaintiffs and who are brought on record after his demise. THE Raja admits receipt of the consideration of Rs. 50, 000 in the following manner : (a) Rs. 12, 398 by cheque on the Indian Bank Ltd. , thyagarayanagar ; (b) THE balance of Rs. 37, 602 to be paid to defendants 1 and 2 in full and complete discharge of the amounts due to them under the loans set out above and towards which they were holding the 5, 000 shares in the third defendant-company as security.

(2.) NOT only does the Raja say that he has sold the shares to the first plaintiff in Ex. A-16, he would also confirm that he has addressed a letter to defendants 1 and 2 to receive a sum of Rs. 37, 602 and expressly authorised the first plaintiff to receive back from defendants 1 and 2 the share certificates and the blank transfer forms. On the same day, Ex. A-1 dated december 19, 1966, is written by the Raja to his creditors who had a pledge over the shares. He acknowledges therein the borrowing and the deposit of the shares in Sri Krishna Tiles & Potteries (Madras) Private Ltd. together with the transfer form and requests them to receive the balance of Rs. 37, 602 and irrevocably authorises them to deliver the share certificates together with the transfer forms and other discharged instruments to the 1st plaintiff. In order to more fully confirm the sale, he would add in Ex. A-1 that as per the agreement between himself and the purchaser of the shares (the 1st plaintiff), he is to receive the dividend warrants for the year ending 30th June, 1966, and, therefore, requested defendants 1 and 2 to send the relative dividend warrants to him. Under Ex. A-2 which is again of the date December 19, 1966, the first plaintiff wrote to defendants 1 and 2 referring to the sale of shares by the late Raja and confirmed that he had a meeting with the defendants 1 and 2 and sought to tender the sum of Rs. 37, 602 to them and requested for the delivery of the share certificates to him (as per completed sale of such shares as per the information given to them by the Raja himself. The first plaintiff also made it clear in Ex. A-2 that he was always ready and willing to pay the amount and asked defendants 1 and 2 to fix up a time as to when he could see them to complete the transaction. In the first instance, the stand of defendants 1 and 2 was that they had title to the shares and that the sale of such shares by the Raja to the first plaintiff was invalid. This is seen from exs. A-3 and A-4. But this was later given up. Consequent upon the attitude of defendants 1 and 2, the first plaintiff wrote a letter, Ex. A-5, enclosing the amount due and payable to them as pledgees of the 5, 000 shares and called upon defendants 1 and 2 to send the share certificates together with the transfer form and other documents duly discharged. This letter was refused by the defendants. Finally under Ex. A-12 dated 27th January, 1967, the first plaintiff once again called upon defendants 1 and 2 to respect their obligations. For a second time, the defendants 1 and 2 took up again the stand that they were the owners which for purposes of completion was reiterated, is not the present stand of defendants 1 and 2. In the trial and before us the only stand taken up is that they are the pledgees and quite in consonance with the latter stand taken by them, they have instituted O. S. No. 658 of 1970, to enforce the pledge on the securities and for other ancillary reliefs. Even at this stage, the Raja who was being notified from time to time by the first plaintiff of the attitude of defendants 1 and 2, confirms the sale as it is seen from Ex. A-17 dated 30th January, 1967. In this letter, he informs the first plaintiff that he has paid interest on his borrowing to defendants 1 and 2 up to January 24, 1967, and requested the first plaintiff to pay the principal amount of Rs. 36, 000 and wanted the first plaintiff not to pay anything more by way of interest. In the above circumstances, the first plaintiff came to court seeking for three distinct reliefs. Firstly, for a declaration that he has title over the shares and they belong to him and for a direction to defendants 1 and 2 to accept the sum due and payable to them as and towards the pledge of the shares by the Raja and hand over the related documents such as the share certificates, blank transfer form, etc. , and, thirdly, for a direction as against the 3rd defendant to register the shares in the books of the company. As the Raja died in March, 1967, before the filing of the suit, defendants 4 to 20 were impleaded in the suit as his legal representatives.

(3.) THIS is an inclusive definition. It includes any document used in the ordinary course of business as proof of the possession or control of goods or purporting to authorise, either by endorsement or by delivery the possessor of the document to receive the goods thereby represented. We have already seen that "goods" include "stock and shares". Therefore, if shares could be transferred by issuing a document whereby the seller purports to assert his title to the goods and authorises the buyer to receive such goods represented thereby, -- may be from a third, party, -- yet it would operate as a valid delivery of such goods notwithstanding the non-co-operation of the person in physical possession of the goods by refusing to attorn or acknowledge to the buyer that he holds the goods on his behalf. We are unable, therefore, to agree with the contention of mr. Dulipsingh that in the instant case, there could be no delivery of the goods at all because the shares were in the possession of a third party. As each case has to be decided on its relative merits, it appears to us that by reason of the issuance of the blank transfer forms, which is one of the accredited methods under the law merchant by which shares could be transferred by one to the other, by the mere fact that such goods or shares were in the possession of the defendants 1 and 2 at the time of their sale by the Raja to the plaintiffs there could be no delivery at all, is not an acceptable proposition. As pointed out by Sri Fredrick Pollock, "delivery" means "a voluntary dispossession in favour of another". In all cases, the essence of delivery is that the delivery by some apt and manifest act puts the deliverance in the same position of control over the thing either directly or through a custodian, which he himself holds immediately before the Act".