MOTILAL HIRALAL SETH Vs. BAI MANI

JUDGEMENT

(1.) His Lordship after setting out the facts proceeded:- It has been contended that a mortgagee of shares is in the same position as a life-tenant, and that any accretion to the mortgaged shares by the issue of fresh capital must be treated as belonging to the corpus but, as pointed out by Lord Herschell in Bouch V/s. Sproule (1887) 12m App. Cas, 385 that depends on whether accumulated profits are distributed as dividend or converted into capital. If, as in that case, a sum which is entered in the balance sheet to the credit of the Reserve Fund is transferred from the Reserve Fund to the Capital Account and new shares issued to the existing shave-holders, it may be said that there is a distribution of capital and the life-tenant can only get the interest on the new shares, but if the share-holders prefer that instead of getting dividends paid to them in cash, the amount to the credit of profit and loss account available for payment of dividends in a particular year should be transferred to the capital account and new shares issued in respect thereof clearly there is a distribution of dividends, and the life-tenant would be entitled to retain the new sharep. But we have to endeavour to ascertain what was actually decided by the Court which passed the decree.

(2.) The learned Subordinate Judge in allowing the plaintiff, under the terms of the decree, to redeem the B capital as well has referred to Exhibit 14 (which seems to be a mistake for Exhibit 78) in the suit which was a statement brought in by the defendant of the dividends of the five shares received after Bhadarva 1939. It contains the dividends on the five shares and sub-shares in existence at the date of the mortgage as also of the five shares and five sub- shares of B capital. He deduces from that statement that the defendant did not claim the B capital shares themselves as representing payment of dividends. He also points out that, the mortgagee had always treated the B shares as part of the property mortgaged, and, that when the mortgagor prayed for redemption of the five shares with all the issues thereof up to the date of the suit, no objection was made to the claim by the defendants in their written statement, and as the five mortgaged shares mentioned in the decree clearly included the five A sub-shares without mentioning them, they also must be taken as including the five whole and five half shares of B capital. There is considerable force in this argument. If there was no evidence at all on the record from which it could be deduced that the learned Judge was aware of the issue of the B capital it might be said that the mortgaged shares referred only to A capital, but with Exhibit 78 before him the learned Judge was aware of the B capital and yet throughout the case the mortgaged property is referred to as the five shares. If the defendants when asked to bring1 in an account of the dividends made no claim to include the B shares as representing dividends but only mentioned the dividends on the B shares and if they allowed the mortgaged property to be referred to throughout as the five shares Nos. 5266 to 270, I think it may fairly be assumed that it was so obvious to the Court and to the parties that the B shares were accretions to the A shares that no one thought of taking the precaution of stating that a8 a fact. I should prefer to take this view, than the opposite one, that both parties understood that the B capital should be treated as dividends, be that it was not necessary for the Court to make it clear that only the A capital could be redeemed. I think the appeal should be dismissed with costs. Shah, J.

(3.) [After setting out the facts of the case, his Lordship went on:-] The defendants have appealed to this Court and it is argued on their behalf that the decree does not refer to these new shares and that the plaintiff is not entitled to them, as the High Court must be deemed to have by necessary implication negatived her claim to them. It is further. urged that the question arising between the parties with reference to these new shires cannot be dealt with in execution; that thee shares represent the dividends of the old shares and not an accretion to capital, Mint they should go to the representatives of Achratlal and Bai Gnlab and not to the plaintiff, and that in any case the plaintiff should pay back the original profits used by the Company in paying up the calls of the new shares.