1. Sm. Sumitra Debi Jalan (the plaintiff) is the daughter of a Radha Kissen Kanoria who is the Managing Director of Kanoria and Company, Ltd. Her case is that she purchased and took delivery of 5,100 ordinary shares of the 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. In her plaint she admits that she had not registered herself as the owner of these shares in the books of the Company, i.e, Rohtas Industries, Ltd.
2. It is stated that the defendant No. 1 was at the material time 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 shares 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.
3. 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 share 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.
4. Out of 43 defendants, the defendants Nos. 4, 6, 7, 8, 18, 21, 33, 34, 36 and 43 have filed their respective written statements in this suit. All of them have denied the theft of the shares as alleged in the plaint and have also denied that the plaintiff is the owner of 5,100 ordinary shares in the Rohtas Industries, Ltd., which is the subject-matter of the suit. They state that the plaintiff is not entitled to the declaration asked for in the plaint. The common defence of these defendants also is that each of them has bought his respective share or shares in open market for valuable consideration without any notice of defect in the title thereto, and further the plaintiff has been negligent in not exercising her rights diligently in respect of her alleged title to the shares in question and is thereby estopped from asserting her alleged rights in respect of those shares.
5. Upon these pleadings the following issues were raised.
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?
6. After settlement of these issues the hearing of the case commenced and was continued from day to day until 9 July, 1963, when Mr. P.K Sen, Counsel for defendant No. 1 orally applied for leave to enter appearance on behalf of his client and file his written statement. The learned Standing Counsel appearing for the plaintiff and other counsel appearing for different defendants gave their respective consent, whereupon by consent of the parties present, the service of summons was waived by the applicant and leave was granted to defendant No. 1 to enter appearance and file his written statement by 11 O'clock on 11 July, 1903. Directions were also given that discovery be made by the letters in the meantime. The hearing of the suit, however, was continued meanwhile. The defendant No. 1 thereafter duly filed his written statement.
7. The nature of his defence will be clearly manifest from the following issues which were raised on 12 July, 1963 upon his written statement;
A. Were the shares in suit, namely, 5,100 ordinary shares in Rohtas Industries and 145 shares in Calcutta Electric Manufacturing Go. Ltd. given to the defendant No. 1 absolutely by Radha Kissen Kanoria in 1953, for reasons as stated in paragraphs 2 and 4 of the Written Statement of the defendant No. 1?
B. Did the defendant No. 1 render valuable service to Kanoria and Co. Ltd. and thereby obtain refund of huge sums of money from the Income-tax authorities and also save tax of various concerns amounting to over five lacs of rupees?
C. Did Radha Kissen Kanoria in 1953 promise to pay to the defendant No. 1 a sum of Rs. 50,000 for such services and thereafter make over to the defendant No. 1 absolutely by way of gift the said 5,100 shares of Rohtas Industries and 145 shares of Calcutta Electric Manufacturing Co. Ltd. of the value of Rs. 40,000 and also promise to pay the balance later on as stated in paragraph 4 of the Written Statement?
8. The plaintiff has not examined herself but has examined a large number of witnesses on her behalf the principal witness being her father Radhakissen Kanoria. 4 witnesses were examined on behalf of the defendants.
9. The learned standing counsel appearing for the plaintiff admitted that except the defendant No. 8 Radhakissen Santhalia, all other defendants were bona fide purchasers for value without notice of any defect in the title of their respective vendors in respect of shares in Rohtas Industries, Ltd. held by them respectively. This admission has accordingly been recorded in the minutes of the Court.
10. The hearing of this case has taken a considerable time as a large number of witnesses were examined on behalf of the plaintiff and also because a very large number of entries in the account Dooks of Kanoria and Co. Ltd. and various entries in different books of the stock-brokers and their firms and various documents were proved. The main questions for consideration, however, are not many, upon decisions of which the result of the case will depend.
11. The questions are:—
1. Whether the shares in question were purchased by or on behalf of the plaintiff with her money?
2. Was there a theft of these shares by the defendant No. 1? and
3. Was the plaintiff negligent in not exercising her right diligently in respect of her alleged title to the shares in question and thus estopped from asserting any title in respect thereof?
12. I shall deal with these questions in this order before I deal with other questions which also arise in this case.
13. (His Lordship discussed the evidence and continued).
14. Thus I hold that at the time of her marriage in 1940 the plaintiff received Rs. 5,01,111 as present from her father-in-law's house at her marriage and deposited the same through her father with Kanoria and Company, Ltd. at an Interest thereon at the rate of 9 as per cent per month.
15. The next question to consider is whether the shares in question were purchased by the plaintiff or on her behalf. (In this respect after criticising the evidence of Radhakissen. His Lordship proceeded).
16. I do not think it is necessary for me here to detail the different dates when these shares ware purchased in different lots between 23 October, 1951 and 4 December, 1951 from different brokers: but I am satisfied on the evidence on record referred to above that 5,100 ordinary shares in Rohtas Industries, Ltd. in question, were in fact purchased by Radhakisen on account of the plaintiff and were paid for out of the monies lying to the credit of plaintiff in lie books of Kanoria and Co. Ltd. and that delivery of the said shares was taken as and when they were given by the sellers. For these reasons I answer the Issue No. 1 in the affirmative.
17. This brings me to the next important question as to whether the defendant No. 1 had stolen the shares in question as stated by the plaintiff in her plaint. This is raised in Issues Nos. 3 and 4.
18. In order to deal with this question it would first be necessary to ascertain the case made by the plaintiff in her plaint. It appears that the case made in the plaint and the case made in evidence are different. It further appears from the pleadings and the correspondence that the case of the alleged theft was changed from time to time. According to paragraph 4 of the plaint the sharescrips together with some other shares were found to be missing from the office of Kanoria and Co. The defendant No. 1 was then on leave and as a result of enquiries it transpired that the defendant No. 1 had stolen the sharescrips from the office of the said Kanoria and Co. Ltd. and decamped with the same. No mention is made in the plaint about the blank transfer-deeds in respect of those shares. Next in plaintiff's letter, dated 27 May, 1954 addressed to Rohtas Industries, Ltd. the case made out was that the said Rohtas shares together with the blank transfer-deed were kept by her with her father and it was discovered that the said shares had been stolen from her father's custody. Then again in plaintiff's letter, dated 25 August, 1955 addressed to Sahu Jain, Ltd. Managing Agents of Rohtas Industries, Ltd. the case was again changed and it was stated that the said shares along with the blank transfer-deeds were kept at the office of Radhaldsen Kanoria in the custody of defendant No. 1 who was an employee of her father. Lastly I find that on 14 September 1955, the day before the suit was filed, the plaintiff served a notice to a Biswanath Khandelwal a registered shareholder of Rohtas Industries, Ltd. that 10 ordinary shares in Rohtas Industries (included in the subject-matter of the suit) were kept together with blank transfer-deeds in the office of Kanoria and Co. of which the plaintiff's father was the Managing Director and the defendant No. 1 an employee under her father subsequently stole the said shares, decamped and dealt with the same in the market. Such is the plaintiff's case as is to be found in the plaint and different correspondence referred to above.
19. It should be noted that no mention was made either in the plaint or in the correspondence about the alleged theft of shares of Calcutta Electric Manufacturing Co. Ltd. which was only introduced in evidence when an entirely different case was made out. I have not dealt with these shares of Calcutta Electric Manufacturing Co. Ltd. as they are not the subject-matter of the suit.
20. According to Radhakisen's testimony he purchased these Rohtas shares on account of the plaintiff between 23 October, 1951 and 4 December, 1951 and duly received delivery of the same with blank transfer-deeds signed by the registered holders and bills as and when they were delivered by the sellers. The last batch of shares was received on 4 December 1951. It is admitted that these shares remained in possession of Radhakissan Kanoria with the respective blank transfer deeds with the consent of the plaintiff and with full authority of the plaintiff to him to sell, dispose of or deal with them. Thereafter according to Radhakissen these shares along with blank transfer deeds were made over by him in his turn to the defendant No. 1 as and when they were received from the sellers so that they might be kept in his custody. Radhakisen though he was giving his evidence in vernacular used the English words ‘custody’ and ‘safe custody’ which I am inclined to hold were used by him advisedly. He has also stated in his testimony that the defendant No. 1 was entrusted with these shares by him.
21. It was contended that when shares were kept with a servant or a clerk, the owner remained in juridical possession and the servant or the clerk in such case remained in temporary possession or custody of the shares. It is no doubt so but from the evidence on record it is clearly manifest that the defendant No. 1 was neither a servant of the plaintiff nor of Radhakissen but was in fact an employee of North Bihar Sugar Mills Ltd. from which he received his salary. The plaintiff did not herself make over the shares to the defendant No. 1 but Radhakissen who admittedly fulfilled all the conditions of a mercantile agent of the plaintiff did. It cannot be denied also that the plaintiff had in fact put the shares into the power of Radhakissen who remained in possession with the consent of the plaintiff and he Radhakissen later on in his turn put them into the power of the defendant No. 1 by allowing them to remain in his possession with the respective blank transfer deeds with his (Radhakissen's) consent. Thus the contention of the learned counsel that the shares remained in temporary possession or the custody of the defendant No. 1 cannot be accepted as the defendant No. 1 was neither a servant of the plaintiff nor of Radhakissen.
22. From the evidence on record it further appears that the defendant No. 1 also helped as an assistant of Jagadish Prosad Nangalia in the Share Department of Kanoria and Co. Ltd. and for a considerable length of time he used to take and give delivery of shares on behalf of Radhakissen and/or Kanoria and Co. Ltd. although he was servant of neither of them. Defendant No. 1 was also authorised to write vouchers and take money and keep contracts for sale or purchase of shares with him and do other works in connection with the dealings in shares.
23. Radhakissen in his testimony has next stated that the defendant No. 1 kept the shares in suit which were made over to him in an almirah in the office of Kanoria and Ltd. The key of the almirah remained with the defendant No. 1 and nobody but the defendant No. 1 could open it. He has further stated that the said shares were kept with the defendant No. 1 in order to ensure that the plaintiffs shares would remain separately in one place) and a month or two after the last batch of shares was received on 4th December 1981 as aforesaid he asked the defendant No. 1 in or about February 1952 to have the said shares registered in the name of the plaintiff but the defendant No. 1 did not carry out his orders. Therefore in August 1952 he again instructed defendant No. 1 to register the shares in the plaintiffs name whereupon on 28th August the defendant No. 1 took Rs. 504/- (Rs. 392/- for stamps and Rs. 112/- for transfer fees) on plaintiffs account for the purpose of having those shares registered in her name and thus he was under the impression that the shares in question were in fact registered in the name of the plaintiff. As proof of the payment of Rs. 504/- he relied on a voucher and a slip both in the handwriting of the defendant No. 1 and the slip bearing also his signature at the bottom (translations No. 895 of 1958 and No. 894 of 1958 respectively) Exts. WXX. Thereafter it appears nothing was done for more than one year and a half and no enquiries were made by Radhakissen about the said shares which remained in possession of the defendant No. 1 along with blank transfer deeds. It further appears that the defendant No. 1 had in the meanwhile sold the said shares of which 4500 shares have only been traced so far.
24. Radhakissen's next testimony is that in February 1954 he sold 1300 Rohtas shares to Rampratap Haralalka and Co. stock brokers and immediately instructed the defendant No. 1 to give delivery but it was not given and put off from day to day. In March 1954 he again gave instruction to defendant No. 1 to give delivery of those shares to Ramprotap Haralalka and Co., but his instructions were not again carried out in April 1954 Satyanarayan Haralalka of Ramprotap Haralalka and Co. complained to him that delivery had yet not been given and told him that a letter had come to them from the defendant No. 1 on behalf of the plaintiff stating that the Rohtas shares had been sent for registration and along with that letter was also attached a copy of a letter written to Rohtas Industries Ltd.
25. The letter referred to above is the alleged letter dated 7th April 1954 addressed to Ramprotap Haralalka and Co. by defendant No. 1.
26. It is said by Radhakissen that on 5th May 1954 the defendant No. 1 applied for leave for a fortnight which was granted. Thereafter the letter dated 7th April 1954 was shown to him by Satyanarayan Haralalka who was complaining about nondelivery of 1300 shares sold to them; whereupon on 20th May 1954 the almirah in which the shares were kept by the defendant No. 1 was by his order opened by Jagadish in the absence of the defendant No. 1 who was still on leave, with a duplicate key but the shares were not there.
27. This is the gist of Radhakissen's evidence. Question is has theft been established?
28. It is admitted that the plaintiff kept the Rohtas shares in question with respective blank transfer deeds in possession of Radhakissen Kanoria who, it is also admitted was in possession of the shares with the plaintiffs consent and had full authority of the plaintiff to sell, dispose of or in any way deal with them. No doubt the plaintiff held out Radhakissen as owner of the shares in question and in any event, Radhakissen fulfilled the condition of a Mercantile agent of the plaintiff. It cannot be disputed also that the consent of Radhakissen acting as agent or Mercantile Agent of the plaintiff would be as effective as the consent of the plaintiff herself.
29. It may be noted here that these Rohtas shares admittedly did not belong to or were property of Kanoria and Co. Ltd. and they were not in its possession or custody or in custody of any of its employees or servants but were kept with the defendant No. 1 separately by Radhakissen and thereafter the defendant No. 1 remained in possession thereof with consent of Radhakissen. Admittedly the defendant No. 1 was not a servant of the plaintiff or of Radhakissen but was employed by North Bihar Sugar Mills Ltd. which paid his salary as hereinbefore stated. It is further admitted that the defendant No. 1 used to give and take delivery of shares on behalf of Radhakissen Kanoria and/or Kanoria and Co. Ltd. for a fair length of time and do other works in connection therewith.
30. It appears, therefore, that the defendant No. 1 who was admittedly entrusted with 5100 shares of Rothas Industries by Radhakissen came into possession of these shares legally with the consent and permission of Radhakissen and remained in possession thereof lawfully. Seetion 378 of the I.P.C defines theft:
“Whoever intending to take dishonestly any movable property out of the possession of any person without that person's consent moves that property in order to such taking, is said to commit theft.”
According to this definition, therefore, the defendant No. 1 cannot be said to have committed theft of these shares; but on behalf of the plaintiff it was argued that even in case of entrustment there could also be theft and my attention was drawn to illustration (d) of section 378 of the I.P.C In my opinion, illustration (d) has no application to the facts of this case as the defendant No. 1 was neither a servant of the plaintiff nor a servant of Radhakissen Kanoria as I have stated before. Therefore the defendant No. 1 cannot be held to have stolen those shares of which he was in lawful possession by entrustment with the consent and permission of Radhakissen. It was next argued that when goods are handed over to another for a limited or a specific purpose as in this case, namely, for the purpose of having them registered in the name of the plaintiff, the goods so handed over cannot be said to be in juridical possession of such other person.
31. In support of this contention the learned counsel for the plaintiff inter alia relied on the Privy Council decision in Official Assignee of Madras v. Mercantile Bank of India Ltd. 1935 AC 53 at p. 68 : (AIR 1934 PC 246 at p. 251) and Mercantile Bank of India Ltd. v. Central Bank of India Ltd. 65 Ind App 75 : (AIR 1938 PC 52) and argued that as the shares in question were handed over to the defendant No. 1 for the limited or the special purpose of having them registered in the name of the plaintiff, it was for that purpose only the defendant No. 1 had temporary possession rather custody of the shares; and that being so, the shares were not in possession, order or disposition of the defendant No. 1, still less that they were so with the consent of Radhakissen or the true owner.
32. These decisions are nu doubt of great authority but in my opinion have no application to the facts of this case as it would be found presently in this judgment Nevertheless it is of first importance to ascertain whether the shares in question were in fact entrusted with the defendant No. 1 for this limited or specific purpose of getting them registered in the name of the plaintiff. This is a pure question of fact and after careful consideration of the evidence on record I have no hesitation in saying at once that the plaintiff has totally failed to establish that the shares in question were handed over to or entrusted with the defendant No. 1 for this specific purpose of having them registered in the name of the plaintiff. The story of giving instruction to the defendant No. 1 to register the shares in the circumstances of this case is highly improbable and is not accepted by me (His Lordship considered the evidence and proceeded).
33. Thus I am bound to disbelieve Radhakissen which I do, and reject his entire evidence in respect of his alleged instruction to register the shares in question and hold that Radhakissen never gave any instruction to the defendant No. 1 either in February 1952 and/or in August 1952 or at any time to get the shares in question registered in the name of the plaintiff; because if he did in fact do so he could easily have got the shares registered as they were only sold by the defendant No. 1 between 8th June 1953 and 6th February 1954. I further hold that Radhakissen did not entrust these shares in question with the defendant No. 1 for the specific purpose of getting them registered in the name of the plaintiff or for any other limited purpose. In my opinion it is clearly established that these shares with blank transfers were allowed to remain in possession of the defendant No. 1 by Radhakissen.
34. The counsel for the plaintiff also relied on the following cases in support of his contention that there was a theft of these shares by the defendant No. 1. Biddomoya Dabee v. Sittarain, ILR 4 Cal 497; 1935 AC 53 : (AIR 1934 PC 246); Pyarelal Bhargava v. State of Rajasthan, AIR 1963 SC 1094 at p. 1097 and Shankar v. Lakshmibai, AIR 1928 Bom 225, I am unable to accept this contention because in my opinion all these cases are distinguishable on facts from the present case as in all of them the relationship of master and servant was present and/or the possession was made over for a limited purpose or a purpose which was temporary in nature and as such have no application to the facts of this case.
35. The next evidence of Radhakissen is that by reason of this payment of Rs. 504/- to the defendant No. 1 he was under the impression that the shares were in fact registered in the name of the plaintiff. This evidence is also false. (His Lordship considered the evidence and continued).
36. Thus I hold that Radhakissen could not have instructed the defendant No. 1 to register the shares in the name of the plaintiff at any point of time. This is pure invention—a new case made in evidence which has not been made in the plaint. The case made in the plaint is of theft and if theft is not established, the plaintiff is bound to fail.
37. Next question to be considered is whether Radhakissen sold to Ramprotap Harlalka and Co. through Satyanarayan Iiaralalka 300 Rohtas shares on 3rd February 1954 and 1000 Rohtas shares on 20th February 1954 aggregating 1300 shares out of the said 5100 Rohtas shares in suit, and asked the defendant No. 1 to give delivery of the same to Ramprotap Haralalka and Co. Radhakissen in his testimony said that he sold 1300 shares to Ramprotap Haralalka and asked the defendant No. 1 to give delivery of the same to the buyers but about middle of March 1954 he was informed by Satyanarayan Harlalka that the shares had not been delivered to them whereupon he sent for the defendant No. 1 and asked him to give delivery quickly. (His Lordship on discussion of the evidence disbelieved the story and proceeded).
38. In this state of the evidence, in my opinion, it would be very reasonable to hold, which I do, that even if 1300 Rohtas shares were in fact sold by Radhakissen, they were not sold out of 5100 Rohtas shares in suit or on account of the plaintiff. There is no acceptable evidence before me in this case to come to the conclusion that 1300 Rohtas shares were sold out of 5100 Rohtas shares in suit and/or on account of the plaintiff. The whole of this story namely that the defendant No. 1 kept the shares in suit in an Almirah in the office of Kanoria and Co. and that the same was opened with a duplicate key on 20th May 1954 and thus discovering that the shares in suit were not there and the sale of 1300 shares out of the said 5100 Rohtas shares in suit to Ramprotap Haralalka and Co. is in my opinion entirely false and fabricated for the purpose of making out a case of theft I disbelieve the entire evidence of Radhakissen, Jagadish, Nathmall and other employees of Kanoria and Co. in this respect and totally reject the same. In my view theft has not been established, nor has it been established that the shares in suit were kept by the defendant No. 1 in an Almirah and/or in the office of Kanoria and Co. or that the Almirah was opened with a duplicate key on 20th May 1954 or that 1300 shares out of the shares in suit were sold to Ramprotap Haralalka. The whole of this evidence is false. I hold that with the full knowledge and consent of Radhakissen (who had admittedly full authority to sell the shares in suit) those shares along with the blank transfer N deeds were allowed by Radhakissen to remain in possession, order or disposition of the defendant No. 1.
39. Thus the Issues Nos. 3 and 4 are answered in the negative.
40. The next question to be considered is the crucial question in this suit, namely, was the plaintiff negligent in not exercising her right diligently in respect of her alleged tide to the shares in question and thus estopped from asserting any tide in respect thereof? (Issues Nos. 7 and 8).
41. In order to deal with this question J shall have to go back and repeat myself. I have said that the shares in question were bought on behalf of the plaintiff out of her own money lying in her account with Kanoria and Co. by Radhakissen her father. Admittedly the plaintiff kept these 5100 Rohtas shares with Radhakissen who had full authority to deal with them at his sweet will. It is accepted also that Radhakissen fulfilled all the conditions to constitute him to be the mercantile agent of the plaintiff. It is admitted that Radhakissen entrusted the shares with the defendant No. 1. I have held that such entrustment was not made for any specific or limited purpose or for safe custody. Why the shares were allowed to remain with the defendant No. 1 with respective blank transfer deeds has not been clearly established but the fact remains that the shares along with blank transfer deeds remained in possession of the defendant No. 1 with the consent of Radhakissen from 4th December 1951 until the defendant No. 1 first started selling them off in the maket on and from 8th June 1953 till 6th January 1954. It is further accepted that all these shares were sold by defendant No. 1. It is admitted that all the defendants except defendant No. 8 were bona fide purchasers for value without any notice of any defect in title of their respective vendors in respect of the shares held by them. As regards defendant No. 8 it would be convenient for me to dispose of the question here and now. I am satisfied on evidence that defendant No. 8 was also a bona fide purchaser for value without notice of any defect in title of his vendor like the other defendants for the reasons I shall state presently. There is no evidence on record that Radhakissen Santhalia the defendant No. 8 knew of any defect in the tide of defendant No. 1. It further appears from the evidence that the defendant No. 8 paid for 3600 of these Rohtas shares purchased by him from the defendant No. 1 and that has been proved beyond doubt; and that he merely earned a profit in the paltry sum of Rupees 300/- only on the transaction in respect of these 3600 Rohtas shares. It has further been proved that defendant No. 8 paid Rs. 25,000/- to Kayan and Co. stockbrokers, for had delivery in respect of 900 Rohtas shares. Therefore, there cannot be any question of collusion between the defendant No. 8 and defendant No. 1, and that has not been either suggested or proved. It cannot be doubted that the defendant No. 8 is a very old member if not a founder member of the Calcutta Stock Exchange and the firm of Radhakissen Santhalia is a well known firm having considerable business. Their overdraft facility was about Rs. 60/- lakhs against security for about one crore with the Allahabad Bank (evidence of K.P Santhalia). There was no suggestion made in cross examination that there was any collusion between defendants Nos. 1 and 8.
42. In this connection it would also be proper at this stage to consider the evidence of Laduram Sarogi an old munim who worked for about 30 years under the defendant No. 8 and was so employed at the material time. (His Lordship discussed this evidence and continued).
43. It is true that the defendant No. 1 has not established his case made in his written statement that there was a gift of these shares in his favour by Radhakissen but that cannot affect the rights of bona fide purchasers for value without any notice of defect in the title of their respective vendors. The fact remains that the shares in question with blank transfer deeds were allowed to remain in possession of the defendant No. 1 with the consent of Radhakissen who was no doubt the mercantile agent of the plaintiff, and also had full authority to sell the shares in question.
44. Turning to the main question I shall now state the law as I have understood it.
45. Generally no person can pass a better title to another than he himself possesses but there may, however, arise cases when a person having no title to the property may confer and/or pass a good title to a bona flde purchaser for value without any knowledge or notice of any defect. In the title of the person conveying the same.
46. This kind of cases frequently occur in cases of Negotiable Instruments and/or like properties, the title of which passes freely by mere delivery. (London Joint Stock Bank v. Charles James Simons, 1892 AC 201 and G.M O'meara v. Benet, AIR 1921 PC 190).
47. In this case it has been clearly established on evidence that title to shares such as the shares in suit, passes from hand to hand freely by delivery with blank transfer deeds duly signed by the registered holders. There is evidence also that the purchasers could not have found out if there were any defect in title to these shares at the time of purchase and thus in my opinion these shares are negotiable according to the law merchant, custom and/or practice of the Calcutta Stock Exchange. No doubt under Sale of Goods Act ‘shares’ are goods but that do not preclude them from being ??? Me according to custom, practice or the law ???.
48. There may arise cases also when the ??? owner may be 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: Section 27 of Sale of Goods Act. Fuller v. Glyn Mills Currie and Co., (1914) 2 KB 108 : 1938 AC 287 also 42 Cal WN 321 : (AIR 1938 PC 52).
49. The principle of bona fide purchaser for value without notice acquiring a good title although the person conveying the same had no title had further been extended and recognised on the ground of mercantile convenience. Eastern Distributors v. Goldring, (1957) 2 All ER 325 at pp. 529, 530.
50. Whether a bona fide purchaser for value acquires a good title from one who has no title to the same and the true owner is estopped from denying such title depends on the facts of each particular case, 1892 AC 201 at p. 208.
51. So far as true owner being estopped from asserting his title, such an estoppel may arise by negligence, by conduct or by representation.
52. To attract the principle of negligence three conditions are to be satisfied:
(a) Duty on the part of the owner and breach of such duty;
(b) Negligence in the act itself; and lastly
(c) Negligency must be the proximate cause.
53. See 42 Cal WN 321 : (AIR 1938 PC 52).
54. Estoppel by negligence as laid down in 42 Cal WN 321 : (AIR 1938 PC 52) in my opinion applies to the facts of the present case.
55. Under the Companies Act Ss. 28 and 34 the buyer of shares with blank transfer deeds has a statutory duty to have the shares registered. In his name in order to become the full owner thereof. Delivery of shares along with blank transfer deeds passes not the property of the shares, but a title legal and equitable which enables the holder to vest himself with the shares without risk of his right being repudiated by any other person deriving title from the registered owner. Re, In the matter or Mahaluxmi Cotton Mills Ltd. 57 Cal WN 102.
56. Such buyer has a further duty to the transferee or the public at large, not to leave or allow the shares to remain with blank transfer deeds duly executed by the registered holder, with a person thereby enabling him to deal with them; and such duty is broken by leaving the property in such condition.
57. In this case it appears to me that there has been breach of both these duties.
58. I further find in this case that negligence is in the very act itself, namely, leaving the shares with blank transfer deeds or allowing them to remain in possession of the defendant No. 1. This very act or leaving the shares or allowing them to remain in possession of the defendant No. 1 with blank transfer deeds enables the defendant No. 1 to deal with them and that act of negligence was the proximate cause.
59. Thus it appears all the conditions which Iconstitute estoppel by negligence are satisfied in this case.
60. Next it appears to me that the plaintiff is also estopped by representation.
61. In (1914) 2 K.B 108 it was observed at p. 177 as follows:
“I must, therefore, consider the principle on which this estoppel rests. In my view it does not rest on the mere manual act of signature. That act is not an essential element in the estoppel. Its importance, where it exists, is as one step towards placing in the power and disposition of another an instrument which carries with it representation of authority to that other person to deal with it, and which when produced to a third person will convey to the third person that such an authority exists. If that be the principle I see no difference between the case where the owner signs and hands to a broker and leaves in his hand the document so signed and the case where the holder of a document signed by the registered owner puts. It into hands of the broker or the case where the true owner never having had possession of the document but knowing it to be in such a condition that the brokers can deal with it, allows it to remain in the broker's possession and thereby enables the broker to part with it to another who takes on the faith of the apparent authority of the broker to deal with it.”
62. The principle of law on which Section 27 to Section 30 of the Sale of Goods Act is founded, appears to me to be that where one of the two innocent parties must suffer from the fraud of the third, the loss should be borne by him who has enabled the third party to commit the fraud if he has neglected some duty owing to the other or has done something which has in fact misled the other. The same view was also expressed by Savage C.J in the Supreme Court of New York which has been quoted with approval by Lord Halsbury in Henderson v. Williams (1895) 1 Q.B 521 at p. 529. But this principle is subject to the qualification that some duty is owing to the transferee or the public at large which is broken by leaving the property with apparent indicia of title to another. See 42 Cal WN 321 : (AIR 1938 P.C 521 (supra).
63. It would indeed be regrettable if these principles were to be departed from and/or a contrary principle established because that would in my judgment knock the very bottom out of the principle upon which the ground of mercantile convenience is based and thereby endanger the security of commercial transactions and destroy that confidence upon which what is called the usual course of trade materially rests.
64. This principle was also expressed by Blackburn J. in Swan v. North British Australasian Co. (1863) 2 H. & C. 175 at p. 182 also reported in 159 E.R 73 and also in Farquharson Bros. & Co. v. C. King & Co. 1902 A.C 324 at p. 342 that the rule is qualified; that neglect must be in the transaction itself and must be the proximate cause of leading the party into that mistake; that it must be neglect of some duty that is owing to the person led into that belief or what comes to the same thing, to the general public of whom the person is one.
65. These two cases are distinguishable from the instant case on facts and though relied upon by the plaintiff, do not support her case as has been stated before.
66. In the light of the above discussion I am clearly of the opinion that 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. Accordingly I answer Issues Nos. 5, 7, 8 and 9 in the affirmative. That disposes of the main points argued in this case.
67. Issue No. 6 — Answer is Yes. The evidence has clearly established that the shares in question were purchased by the defendants through different stock brokers. They were usual transactions of the Calcutta Stock Exchange. The words ‘open market’ are not to be understood in the sense of ‘market overt’ which has no application in India.
68. Issue No. 2 — In view of my findings as stated above the answer is in the negative. The plaintiff is not entitled to the declarations asked for. She has no title to the shares in suit as the defendants have acquired valuable rights in respect of these shares as hereinbefore stated.
69. Issue No. 10 — The plaintiff fails.
70. As regards the Issues A, B and C raised on behalf of the defendant No. 1, none of them having been established must necessarily be answered in the negative. I answer them in the negative.
71. The suit is dismissed with costs.
72. Certified for two counsel.
FH/R.G.D
73. Suit dismissed.
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