Sh. Bhupendra P. Watal vs M.J. Investment & Financial ...
2010 Latest Caselaw 444 Del

.*              HIGH COURT OF DELHI : NEW DELHI

+                          CS(OS) No.1424/1988


Sh. Bhupendra P. Watal                            .... Plaintiff
                           Through : Ms. Tamali Wad, Adv.

                           Versus

M.J. Investment & Financial Consultants
& Ors.                                          .... Defendants
                        Through : Mr. Ankur Chibbar, Adv. for
                                    Defendant Nos.1-2
                                    Mr. J.P. Singh, Sr. Adv. with
                                    Mr. A.S. Mathur and Ms. Shruti
                                    Verma, Advs. for Defendant Nos.5-9

Decided on : January 27, 2010

Coram:
HON'BLE MR. JUSTICE MANMOHAN SINGH

1.

Whether the Reporters of local papers may be allowed to see the judgment? No

2. To be referred to Reporter or not? No

3. Whether the judgment should be reported No in the Digest?

MANMOHAN SINGH, J

1. The present suit has been filed by the plaintiff for declaration, rendition of

accounts and recovery of money. As per amended plaint dated 24th July, 2006

against twelve defendants, the plaintiff sought the following reliefs :

a) That a decree for declaration be passed in favour of the plaintiff against the defendants that the 1300 shares of M/s. Hindustan Aluminum Corporation Limited mentioned in para No.5 above are not stolen property and that the plaintiff had validly introduced and transacted the said shares in the market on the floor of the Delhi Stock Exchange and as a consequential relief, the defendant No.11 be directed to register the transfer of the said shares in favour of the transferee. And in the alternative :

b) Decree for the payment of Rs.1,49,400/- (Rupees one lac forty nine thousand four hundred only) or the value of the shares at the time of the passing of the decree be passed in favour of the plaintiff and against the defendants No.1-3.

bb) A decree for rendition of accounts be passed in favour of the plaintiff and against defendants No.5-9 and defendant No.11 in respect of the bonus shares, rights shares, dividend on the original 1300 shares, right shares, bonus shares, right issue of non-convertible debentures and convertible debentures, interest on the non-convertible and convertible debentures.

bc) On rendition of accounts a decree be passed in favour of the plaintiff and against defendants No.1-3, 5-9 and defendant No.11 in respect of the value of the benefits which have so accrued and found due on such rendition of accounts.

c) Interest pendent lite and till date of payment be awarded to the plaintiff against the defendant Nos.1-3.

d) Cost of the suit be awarded to the plaintiff by the defendants.

2. Brief facts for deciding this case are that the plaintiff is a share broker

conducting his business in the name and style of Bhupender & Co. The plaintiff

is registered with the Delhi Stock Exchange („DSE‟ for short). On instructions of

Defendant No.1 being M.J. Investment through its partners defendant Nos. 2 and

3, the plaintiff sold 1500 shares of HINDALCO on the floor of DSE out of which

1000 shares were sold on 1st September, 1987 and remaining shares were sold on

2nd September, 1987. Out of the said 1500 shares, defendant nos. 1 to 3 delivered

the share certificates and transfer deeds signed by the registered holders thereof

for 1300 shares i.e. by defendant Nos.5-8 who were the registered holders and

owners of the said shares. The remaining 200 shares were covered by purchase

from the open market. The details of the shares are given in para 5 of the

amended plaint.

3. Defendant No.9, Sh. N.L. Hamirwasia is the President of Mysore Cement

Ltd. and defendant Nos.5 to 8 are members of his family who are the registered

holders of 1300 shares.

4. In the course of time, the shares came to be held by Defendant No.10, M/s.

Amexco Nominees Pvt. Ltd. who lodged these shares for transfer with Hindustan

Aluminium Transfer Corporation Ltd.

5. It is alleged that due to some dispute regarding the said shares between

defendant Nos.1 to 3 and defendant No.9, the latter lodged a police report on 27th

January, 1988 against defendant Nos.1-3 claiming that the said share certificates

were stolen around 11th September, 1987 from his custody. Defendant No.9 also

informed HINDALCO that the said shares were stolen property and the same

should not be transferred in the name of defendant No.10. HINDALCO thus

refused to transfer the shares in the name of defendant No.10. Defendant No.10

claimed the said shares to be bad delivery and defendant No.4 Sh. Babu Lal

Bagri purchaser of 400 shares of the said shares raised a bill dated 8th March,

1988 for Rs.47,012/- demanded payment for return of money from the plaintiff.

He also approached DSE alleging that the plaintiff had introduced stolen shares

in the market and thus it was the plaintiff‟s liability to compensate him for the

loss suffered by him.

6. It is averred in the plaint that on the complaint of defendant No.4, DSE

suspended the plaintiff from carrying on business on the floor of DSE for over 24

hours on 22nd/23rd March, 1988 causing immense loss to the plaintiff both in

terms of money as well as reputation.

7. It is submitted that the share certificates along with blank transfer forms duly

signed by the registered shareholders namely defendant Nos.5-8 were delivered

by defendants No.1-3 to the plaintiff in the usual course of business and the

plaintiff has no reason to suspect that the said shares were stolen property. The

plaintiff dealt with the said shares bona fide for valuable consideration without

notice of any defect in the title of defendant Nos.1-3.

8. As a result of all the above stated unforeseen events, the plaintiff wrote a

letter on 9th March, 1988 to defendant Nos.1-3 informing them that the said

shares were claimed to be stolen property and that HINDALCO refused to

transfer the said shares to the transferee. In reply to this letter, the defendant

Nos.1-3 on 28th April, 1988 informed the plaintiff that:-

"that the shares were duly sent by Sh. Nirbhey Lodha, authorized representative/official of Sh. N.L. Hamirwasia of Mysore Cement Co., to which the shares belongs to Sh. Prakash Agiwal, Chartered Accountant at Daryaganj and said Chartered Accoutant had duly handed over the shares to Sh. C.P. Jain one of the partners, in his office. Prior to that Sh. Nirbhey Lodha when he visited Delhi met the said Sh. C.P. Jain in the office of Sh. Prakash Agiwal, Chartered Accountant in the presence of Sh. Rajender Prasad Jain of M/s. Aay Kay & Company and instructed the said Sh. C.P. Jain in front of the said Chartered Accountant to sell the shares in the market which would be sent to the Chartered Account by him in due course of time. The alleged theft report, if any alleged to have been lodged is absolutely false and baseless."

9. The plaintiff submitted that the complaint made by defendant Nos.5-9 was

absolutely forged and a false report was lodged by defendant No.9 because of

some dispute between defendant Nos.5-9 and defendant Nos.1-3.

10. Further, defendant No.12 Parmanand Relan & Co. after filing of the suit also

raised a bill of Rs.95,423/- on the plaintiff for return of the said amount in lien of

bad delivery of 700 shares out of the said 1300 shares.

11. It is also alleged that defendant No.11 company HINDALCO has issued

rights and bonus shares on the above said shares. Dividend has also been

disbursed on the original 1300 shares, bonus shares and rights shares. Defendant

No.11 company has also issued partly convertible debentures and non convertible

debentures on rights basis and accrued interest on them. The plaintiff estimates

the total value of such benefits to be approximately Rs.22 lac. The total value of

1300 shares at the time of sale was Rs.1,49,400/- which defendant Nos.1-3 are

liable to pay to the plaintiff in case the shares are proved to be stolen property. It

is argued that the value of shares varies from time to time and the plaintiff is

entitled to the value as on the date of payment. It is also alleged that defendant

Nos.1-3 are liable to pay interest on the said amount @ 18% p.a.

12. Defendant No.2 filed written statement taking several preliminary objections

inter alia that the suit was bad for non-joinder of necessary parties namely Shri

Nirbhay Lodha and Prakash Agiwal. On merits, it was stated that the defendant

Nos.1 to 3 had directed the plaintiff to sell their 1300 shares on the floor of DSE

for which share certificates and transfer deed duly signed by the registered holder

were delivered to the plaintiff. The lodging of FIR by N.L. Hamirwasia has been

denied with the averment that there was no occasion for Shri N.L. Hamirwasia to

lodge a report as he was not the registered holder of the shares. It was averred

that the said 1300 shares were delivered to the plaintiff along with transfer deeds

duly signed and authenticated by the registered holder and witnessed by M/s.

Agiwal and Associates and the plaintiff never approached the defendant

regarding any objection about validity of the transfer deed and shares at any time

and as such the plaintiff was now estopped from filing the present suit against the

answering defendant.

13. The bank draft was also sent to defendant No.9 by defendant No.3 vide his

letter dated 2nd December, 1987 and as the shares were purchased by the

defendant no.2 through Sh. Prakash Agiwal from M/s. Agiwal & Associates who

was along with partner of defendant No.1 Sh. Nirbhay Lodha. The transfer deeds

were duly signed by registered holder and were sent to the defendants through

representative Shri Nirbhay Lodha, therefore, there could not have been any

question of theft.

14. The defendant no.3 in his written statement also contended that the suit is bad

for non joinder of parties. It was stated that he had received the shares from M/s.

Prakash Agiwal and Associates who informed him that the said shares were

given to them by Shri Nirbhay Lodha. It is contended that the liability is

therefore, of Shri Nirbhay Lodha or Prakash Agiwal and Associates and not of

the defendant No.3. Further, the defendant no.3 in his written statement has

categorically stated that the present suit is bad for non joinder of necessary

parties inasmuch as Shri Nirbhay Lodha from whom the shares were received and

Shri Prakash Agiwal and Associates are necessary and proper parties to the

present proceedings and in the absence of the said persons, the matter cannot be

properly adjudicated.

15. The defendant Nos.5-9 filed the written statement raising preliminary

objection that the suit is undervalued as consequential relief follows from the

main relief. It is also contended that the plaintiff has no cause of action against

defendant Nos.5-9. It is denied that there exist some disputes between the

defendant Nos.5-9 and defendant Nos.1-3. It is submitted that the report

regarding the theft of the share certificates was lodged without any extraneous

consideration or motive. The report has been filed when the said shares were

stolen from the property of defendant No.9.

16. The Circle Inspector, District Tumkur Karnataka on investigation had seized

the shares of Hindustan Aluminium Corporation Limited and returned the same

back to the Defendants No.5 to 9. It is denied that Sh. Nirbhay Lodha authorized

representative/official of defendant No.9 at any time sent the concerned shares to

Sh. Agiwal and instructed for sale of the shares to Sh. C.P. Jain. The said shares

are stolen property and the plaintiff has no title to sell them in the open market

and they were received by the plaintiff in the guise of stolen goods and nothing

else. The share certificates along with transfer deeds were wrongly and illegally

delivered by the defendant Nos.1-3 to the plaintiffs who then wrongly and

illegally sold the same on the floor of the DSE.

17. Defendant Nos.4 to 12 also urged that the Delhi Stock Exchange is a

necessary and proper party to the instant suit.

18. The defendant nos.4 to 12 also raised an objection that in view of the bye

laws of the DSE, the instant suit is not maintainable. In this respect, it is

submitted that in terms of bye law 281 of the DSE, only claims, complaints,

differences and dispute between members of the stock exchange, arising out of or

in relation to transaction made subject to the Rules, have to be referred to the

Arbitration Committee. Further Bye Law 282 lays down that in such cases,

before commencing legal proceedings against a member, permission of the Board

of Directors of the Stock Exchange is to be taken.

19. The defendant No.1 was proceeded ex-parte vide order dated 30th July, 1999.

The defendants No.4, 10 and 12 have not contested the suit being formal parties.

On the basis of pleadings of the parties, the following issues were framed on 17 th

November, 1988:

(1) Whether the suit is bad for non-joinder of necessary parties?

OPD (2) Whether the suit is not maintainable on account of bye-laws of the Delhi Stock Exchange? OPD (3) Whether the suit is barred under Section 41 of the Specific Relief Act?

OPD (4) Whether the suit has been instituted by duly authorized person?

OPP (5) Whether the shares traded by the plaintiff were the stolen property of defendants No.5 to 9? If so, to what effect? OPD (6) If the answer to issue No.5 is in the affirmative, whether defendant No.3 or any other defendant is liable to the plaintiff and to what extent? OPD (7) If the answer to Issue No.5 is in the negative, are the defendants No.5 to 9 and 11 not liable to hand over the shares for registration and defendant No.11 to register shares in favour of the transferees?

OPD (8) Whether the plaintiff is entitled to decree of rendition of accounts against defendants No.5 to 9 and 11 in respect of bonus shares, rights shares, dividends on the original 1300 shares, of non-convertible and convertible debentures and interest on the said debentures and on such rendition, final decree for the amount found due?

OPP (9) Whether the plaintiff is entitled to interest? If so, at what rate, on what amount and for what period? OPP (10) Relief.

20. As a result of the application being I.A. No.10617/2009 filed by defendant

Nos.5-9 on 18th January, 2000 an additional issue was framed by this court as

under:-

(11) Whether the defendants No.1 to 3 are bonafide purchaser from the defendants No.5 to 9 or from their authorized agent/representative for valuable consideration. OPD 1-3

21. The plaintiff examined himself as PW1 in the matter. Defendants No.1-3

examined two witnesses i.e. Mr. Ravinder Kumar as D2W1 and Mr. P.C. Agiwal

as D2W2. Mr. Rohitesh Hamirwasia, defendant No.8 was examined by way of

affidavit filed on behalf of defendants No.5-9 in the Court as DW-5. The cross

examination was conducted before the Local Commissioner on 1 st October,

2003. Thereafter the plaint was amended and the order for allowing the

amendment was passed on 4th July, 2006. On 25th July, 2007 a statement was

made by the plaintiff not to produce further evidence. The defendants also did

not produce any evidence.

22. The defendant No.2 had produced the additional documents and evidence by

way of affidavit which was allowed vide order dated 26 th February, 2009. He

was cross examined by defendants No.5-9 on 31st March, 2008. The judgment

was reserved on 15th April, 2009.

23. The defendant No.2 i.e. D2W1 in his examination-in-chief has stated as

under:-

"There was no dispute between us and defendants 5 to 9 before filing of this case. After filing of this case we came to know about the report lodged by defendants 5 to 9 with the police alleging that these shares were stolen property."

24. In his cross-examination by counsel for defendants No.5-9, he has stated as

under:-

"The shares belonged to Mr. Hamirwasia and payment was to be made by us to Mr. Hamirwasia by way of bank draft in his name. The delivery of shares was given to us by Mr. Agiwal and we were to sell the shares as brokers and thereafter payment was to be made to Mr. Hamirwasia who were the registered shareholders."

25. Shri Prakash Agiwal has appeared as D2/W2for defendant No.2 where in his

examination in chief, he stated that he does not recollect having introduced

defendant no.2 to Shri Nirbhay Lodha and he further stated that he does not have

any knowledge about any share transactions between Shri Nirbhay Lodha and

Shr. C.P. Jain (defendant No.3). In his cross-examination by the counsel for the

plaintiff, he stated as under:-

"I do not know Mr. N.L. Hamirwasia. I do not know whether Mr. Nirbhay Lodha used to work for Mr. N.L. Hamirwasia. Mr. Nirbhay Lodha did not give share to me. I know Mr. C.P. Jain as he has done his articleship with Mr. D.C. Jain and I used to visit Mr. D.C. Jain being from his native place. I do not recollect Mr. Nirbhay Lodha having given any share to Mr. C.P. Jain."

26. The learned counsel for defendant Nos.5-9 argued that the plaintiff had not

pleaded anything specifically stating that the defendants No.5 to 9 were known

to the plaintiff in any manner whatsoever nor it is the case of the plaintiff that the

said shares were delivered by the Defendants No.5 to 9 to the plaintiff. The

plaintiff has no link whatsoever to the Defendants No.5 to 9 and did not know the

Defendants No.5 to 9 in their personal capacity. In view of this stand of the

plaintiff, no decree of any nature can be passed against defendant Nos.5 to 9 and

the defendant Nos. 5 to 9 cannot be held liable for any loss caused to the plaintiff

in any manner whatsoever.

27. It is thus submitted by defendants No.5-9 that defendant Nos.1 to 3 have not

been able to clear the position with regard to the fact of them being in possession

of the said shares particularly when in their cross-examination they have stated

that they cannot identify Shri Nirbhay Lodha.

28. It is argued that the defendant Nos.1 to 3 have not been able to show that they

were bonafide purchasers from defendant Nos.5 to 9 or their authorized agent

since they were not able to prove that any consideration had passed onto the

registered holders of the said shares namely defendant Nos.5 to 9. The defendant

nos.1 to 3 have not filed any document by which it can be shown that the

consideration amount was passed on by the defendant nos.1 to 3 in any manner to

defendant nos.5 to 9. It is submitted that since the defendant nos.5 to 9 were the

registered holders of the said shares, any consideration for sale of the said shares

has to come defendant nos.5 to 9. The suit is not bad for joining defendant no. 5

to 9 and is not maintainable on this reason and also under the Bye-laws of the

Delhi Stock Exchange.

29. It is argued by learned counsel for the plaintiff that in the present case, both

these Bye Laws have no application, as neither defendant nos.5 to 9 nor

defendant nos.1 to 3 are members of stock exchange. The specific relief claimed

by the plaintiff in the instant suit is against persons who are not members of the

DSE. Thus, it cannot be said that the dispute which is the subject matter of the

present proceedings has arisen between members of DSE. In any case, it is the

defendant nos. 4 to 12 who have raised a claim against the plaintiff and not vice-

a-versa. It is also pointed out that in terms of Bye Law 299, the claims raised by

the defendant nos.4 to 12 against the plaintiff cannot be referred to arbitration as

being time barred. The said bye law expressly stipulates that the Arbitration

Committee shall not take cognizance of disputes that are not referred within three

months from the date it arose. In the instant case, the defendant no.4 (Babulal

Bagri) raised his claim vide bill dated 8.3.1988 and thereafter on 11 th July, 1988

(Ex. P/4) but the matter was referred to arbitration in November, 1989.

30. It is submitted by the plaintiff that the Delhi Stock Exchange is neither a

necessary nor a property party in the instant proceedings as the plaintiff has no

grievance against the DSE. I agree with the submission of the plaintiff as in the

present suit, relief in the nature of declaration that the shares are not stolen

property has been sought against defendant nos.5 to 8 who are the registered

holders of these shares and for rendition of accounts and in the alternative for

recovery of money against defendant nos.1 to 3 on whose instructions the shares

were sold by the plaintiff on the floor of DSE and to whom the valuable

consideration being the sale proceeds of the shares were given by the plaintiff

after selling the same in the month of September, 1987. In so far as Shri Nirbhay

Lodha or Sh. Prakash Agiwal not being made a party to the present suit is

concerned, it is submitted that they are neither necessary nor proper parties. No

relief has been claimed against them by the plaintiff. It is not as if no order can

be made effectively in their absence nor is it that their presence is necessary for a

complete and final decision of the question involved in the instant proceedings.

31. Considering the above mentioned facts and circumstances, I do not find any

force in the submission of the defendants that the suit is bad for non-joinder of

parties and Delhi Stock Exchange is a necessary party in the present suit. It

appears from the above mentioned fact that the plaintiff has filed the suit against

all the relevant parties who are involved in the transaction in question hence,

issues no.1 and 2 are accordingly decided in favour of the plaintiff against the

defendants.

Issue No.3

32. The objection that the suit is barred under Section 41 of the Specific Relief

Act, 1963 has been raised only by defendant nos.2 and 3. In this regard it is

submitted that the plaintiff has no personal interest in the matter and the suit is

hit by provisions of Section 41(j) of the Specific Relief Act and thus an

injunction cannot be granted when the plaintiff has no personal interest in the

matter.

33. In terms of Bye Law 150 of the DSE Bye Laws, if there is any defect in the

title, genuineness of ownership or regularity of validity of the shares in question,

then the plaintiff may be held personally responsible to remove the said defect.

Also Bye Law 153 stipulates that a broker who receives payment against delivery

of defective documents shall be personally responsible for them to the buyer to

whom the same are delivered or to any subsequent buyer. Therefore, the plaintiff

has a real legal interest to protect and the Court in such a case would not

ordinarily enquire into his motive. He in the facts of the present case has

suffered damage or injury occasioned by reason of actions of defendant nos. 4

and 12, which can be remedied only by way of a declaration as sought for in the

instant suit which is maintainable in the eyes of law, it is not correct to allege by

the defendants that the plaintiff has no personal interest in the matter. It is held

that the suit is not barred under Section 41 of the Specific Relief Act, 1963 thus,

this issue is decided against the defendants.

Issue No.4

34. The issue as to whether the suit has been instituted by a duly authorized

person has been raised by defendant nos. 2 and 3.

35. As regards this objection, it is submitted by the plaintiff that the present suit

has been filed by Shri B.P. Wattal, a member of the Delhi Stock Exchange who

traded in the name and style of Bhupender & Co., a proprietorship firm. The suit

has been filed by the plaintiff in his personal capacity as sole proprietor of

Bhupender & Company. In view of this fact, I do not think that there is any legal

infirmity in the filing of the instant suit. This issue also is decided in favour of

the plaintiff and against the defendants.

36. As per Issue no. 5, the onus of proving that the shares were actually stolen

lies on the defendants.

37. The defendant No.8 in his evidence has deposed that the share certificates

along with the transfer deeds were kept with his father defendant No.9. He has

made the statement that the share certificates along with the transfer deeds were

stolen but during cross examination he stated that he could not remember

whether the transfer deeds along with the share certificates were stolen. The

defendant No.8 who appeared as DW-5 also denied as to where the share

certificates were kept by his father although in the FIR dated 27th January, 1988

it was specifically mentioned that the share certificates were kept by the

defendant No.9 in the drawer of his office table.

38. Further in his affidavit, defendant no. 8 has averred that the FIR was lodged

on 27th January, 1988, but during cross examination he has stated that he could

not remember as to when the complaint with the police was lodged by his father.

In his affidavit, he has made a specific statement that the defendant Nos.5 to 9

did not hand over the shares to the defendant Nos.1 to 3 either by themselves or

through Mr. Prakash Aigwal or Mr. Nirbhey Lodha for being sold in the market

but during cross examination has submitted that he did not remember whether his

father (defendant No.9) had given the shares to the defendants No.1 to 3 with

duly signed transfer deeds.

39. In the written statement filed before this court, the defendants No.5 to 9 have

admitted Shri Nirbhay Lodha to be the authorized representative of defendant

No.9 but this fact has been contradicted by defendant No.8 who appeared as DW-

5 on behalf of defendant nos. 5-9 during his cross examination by deposing that

he had no knowledge whether Shri Nirbhay Lodha was employed by the

defendant No.9.

40. Further, in their written statement before this Court defendant nos. 5 to 9

have not denied receipt of legal notice dated 29th March, 1988 sent on behalf of

the plaintiff. HINDALCO in its reply dated 15.4.1988 which is Ex. PW1/20

intimated the plaintiff that on 13.4.1988 the Investigating Officer, Circle

Inspector Dandinashivara Police Station, Turuvekere Distt. Karnataka visited

their office and seized 1100 shares lodged with the company for transfer in the

name of M/s Amexco Nominees Private Limited. The receipt of the said legal

notice is proved by the plaintiff by producing the postal receipts and R.D. Card

which are Ex-PW1/22 to PW1/29. The company did not deny any of the

statements of the plaintiff contained in his legal notice, especially regarding

shares being lodged with duly signed transfer deeds of the authorized transferors.

41. It is submitted by the plaintiff that as per practice in the trade, in the case of a

blank transfer the seller only fills in his name and signature. Neither the buyer‟s

name and signature nor the date of sale is filled in the transfer form. The

advantage in giving such a blank deed is that the buyer will be at liberty to sell it

again without filling his name and signature to a subsequent buyer. In the latter

case, he can avoid the payment for the transfer stamp and new deed to the buyer.

The process of purchase and sale can be repeated any number of times with the

blank deed and ultimately when it reaches the hands of one who wants to retain

the shares, he can fill in his name and get it registered in the company‟s books.

For this ultimate transfer and registration, the first seller will be treated as the

transferor. The person to whom the blank transfer along with the certificate is

delivered can effectually transfer his interest by handing his certificate to

another, and the document may thus pass from hand to hand until it comes into

the possession of a holder who thinks fit to insert his own name as transferee, and

to present the document to the company for the purpose of having his name

entered in the register of shareholders and obtain a new certificate in his own

favour. The important point to be noted here is that the share certificate should

also be delivered along with the blank transfer deed.

42. The plaintiff has relied upon the case decided by Apex Court in Vasudev

Ramachandran Shelat Vs. Pranlal Jayanand Thaker, AIR 1974 SC 1728

wherein it was held that a transfer is complete between the transferor and the

transferee when all the formalities such as execution of transfer deeds and

handing over the shares certificates are complete.

43. Also in the case of Mahavir Singh vs. Jai Singh, (1978) 48 Comp Cases 558

at 562 (Del) it was observed that the delay made by the Company in actually

effecting the transfer is immaterial as the transfer is complete between the

transferors and the transferee when all the formalities such as execution of

transfer deeds and handing over of share certificates are complete.

44. In Howrah Trading Co. Ltd. vs. CIT (1959) 29 Company Cases 282, AIR

1959 SC 775 referred by the plaintiff, the Supreme Court recognized the validity

of „blank transfers‟ vis., where the name of transferor is entered and the

transferor signs the transfer with the share scrip annexed, and hands it over to the

transferee who, if he chooses, may complete the transfer by entering his name

and then apply to the company to register his name in the place of that of the

transferor.

45. It is argued by the plaintiff that since the sole intention of the defendant

Nos.5 to 8 was merely to get back the share certificates lodged with HINDALCO

for transfer, they deliberately did not disclose all these facts to the court below

and obtained an injunction against the company from effecting any transfer.

46. Defendant No.2 submitted that the signatures on the transfer deeds have not

been denied by the registered holders and the transfer deeds duly signed by

defendant Nos.5 to 8 have been issued from DSE in the month of September,

1987 when the dealing between the defendant Nos.1 to 3 and Shri Nirbhay Lodha

took place.

47. Defendant Nos.1-2 annexed a list of shares of HINDALCO company Ex.D-

2W/1 to prove that the shares were delivered by the defendant Nos.5 to 9 to their

representative Shri Nirbhay Lodha for sale through Delhi broker. Shri Nirbhay

Lodha was/ is apparently an employee of defendant No.9 and as such it was not

difficult for defendant No.9 to produce Shri Nirbhay Lodha as a witness in the

present suit. The connection of Shri Nirbhay Lodha with the shares in question is

proved from the list Ex.D2W1/1 but also from Panchnama dated 28.1.88 and

telex dated 5.2.1988. No reasons are given by defendant Nos.5 to 9 as to why the

letter dated 21.9.1987 was written by Shri Nirbhay Lodha to the brother of

defendant No.2 at the address of defendant No.1 firm having reference of shares

pertaining to defendant Nos.5 to 8 and their transfer when as per the defendant

Nos.5 to 9, they at no point of time had any kind of dealings with the defendant

Nos.1 to 3.

48. The factum of dispatch of letter by courier receipt dated 15.9.87 by the

brother of defendant No.2 to Shri Nirbhay Lodha and with reference thereof

writing letter by Shri Nirbhay Lodha on 21.9.87 to the brother of defendant No.2

itself shows the fact that the defendant Nos. 5 to 9 had in fact sold their shares to

the defendant Nos.1 to 3 through Shri Nirbhay Lodha.

49. By sending the bank demand draft of Rs.10,474/- in favour of Rohitesh

Hamirwasia (defendant No.8) by the defendant Nos.1 to 3 coupled with the fact

that the defendant Nos.5 to 9 authorized Shri Rohitesh Hamirwasia in court cases

at Karnataka to act on their behalf itself suggests he was authorized.

50. Defendant nos.1-3 admit that the consideration of sale in respect of 1300

shares has been given by the plaintiff to them. The defendant no.3 has stated that

he received/purchased shares through M/s. Agiwal and Associated Chartered

Accountants and the transfer deed in respect of the said shares were duly

witnessed by Shri Prakash Agiwal, hence he had no reason to disbelieve the

authenticated transfer deeds received by him

51. As such, the lodging of report with police after more than four months on 27 th

January, 1988 is apparently an afterthought by defendant Nos.5-9. The

conduct of the defendant Nos.5 to 9 establishes that the shares had never been

stolen and it the same does not require an injunction order of the court.

52. The said defendants have failed to discharge their onus of proving that the

shares were stolen. Also the Munsiff Court has not come to any conclusion nor

recorded any finding that the shares were stolen. The plaintiff sold 1500 shares of

HINDALCO in the Delhi Stock Exchange on 1 st and 2nd of September, 1987.

Defendant no. 9 filed an FIR which records that 1500 shares held by the family

of defendant No.9 were kept in the drawer of his office table as on 11.09.1987

and were found missing. An FIR was registered on 27.01.1988. Thus, as per the

defendants‟ statement, the shares were in defendant no. 9‟s drawer on 11.09.1987

and could not have possibly been stolen by the plaintiff and subsequently sold in

Delhi ten days earlier. Admittedly, the plaintiff and defendant nos. 5 to 9 were

unknown to each other.

53. The FIR of the alleged theft was registered on 27.1.1988 by defendant no. 9

after four months of the sale of shares in September, 1987. The Police Report

filed on 24.07.1988 records that there is no proof as to when the theft occurred

and who was the thief, hence no charges were framed. Also, undisputedly, the

lock of the drawer in which the shares were supposed to be kept in was found to

be intact as was the lock of the chamber in which the table was kept and these

facts have been recorded in the Panchnama dated 28.01.1988 and relied upon by

defendant nos. 5 to 9. Even after discovering the identity of the plaintiff, the

same was not disclosed to the police or the Munsif Court in Karnataka in April

1988. Having failed to prove any information, the lower court at Karnataka

passed an order dated 3.11.1988 (Ex. DW5/5) directing release of share

certificates to the defendant Nos.5-8, who had already appeared before this Court

on 5.9.1988 in the instant suit and had not disclosed the identity of the plaintiff

nor apprised the court below about the proceedings before this Court including

the injunction/restrain order dated 4 th July, 1988 passed by this Court, in fact they

allowed the Munsiff Court in Karnataka to allow the report of the police dated

27.01.1988 and released the same to them.

54. The plaintiff filed the present suit in June, 1988 and the defendant Nos.5 to 9

were served in the said Suit in September, 1988 and the closure report before the

Magistrate in Bangalore was filed on 3 rd November, 1988. The defendant Nos.5

to 9 having come to know about the shares should have informed the police

about the same and should have prosecuted the plaintiff.

55. The share certificates were attached by duly executed transfer deeds and as

per the case of the plaintiff, there is no defect of any nature for transfer of shares

in the name of defendant No.10. The plaintiff argued that as per the advise of

HINDALCO, the defendant Nos.5 to 8 had obtained an injunction order which

shows its connivance with defendant Nos.5-9 to create a false story against the

plaintiff. Further, HINDALCO and Mysore Cement Company of which the

defendant No.9 was the President are Birla Group companies.

56. I agree with the learned counsel for the plaintiff that if it was just a case of

theft of share certificates, there was no need for HINDALCO to advise the

defendants No.5 to 9 to obtain an injunction restraining the transfer as in terms of

Section 108 of the Company‟s Act, transfer of shares cannot be effected merely

with the share certificates in absence of duly signed transfer deeds. The conduct

of defendant no. 11 in advising the registered holders of the shares to obtain an

injunction on one hand and not cooperating with the police by not disclosing the

name/details of the plaintiff shows collusion with defendant nos. 5 to 9 in order

to facilitate the release of share certificates to defendant nos. 5 to 8 which

otherwise would not have been possible as all the formalities of share transfer

were complete when the same were lodged with defendant no. 11 by the bona

fide purchasers.

57. It further appears from the record that the version of the defendant Nos.5 to 9

in the complaint made to police and in application filed before HINDALCO was

different as at one place it has been stated that the share certificates were

misplaced and at the other place stated that the share certificates were stolen.

58. In view of above, issue no.5 is decided against the defendants No.5 to 9 and

11 and it is held that the plaintiff had not traded the stolen property of defendants

No.5 to 9. The defendant nos. 5 to 9 and 11 have failed to discharge their burden

in view of the reasons given above and the complaint lodged by defendant no. 9

was false and frivolous, hence this issue is decided in favour of the plaintiff and

against defendant nos. 5 to 9 and 11.

59. The defendant No.2 who had been examined once was again examined and

allowed to file the original documents and to file the additional evidence by way

of affidavit vide order dated 26th February, 2009. In his statement, he has stated

that he had given 1300 shares of M/s. Hindustan Aluminum Corporation Limited

to the plaintiff for sale along with transfer deeds duly executed by the

registered share holders and attested by the witnesses. He has made a statement

that the said shares were given to the defendant No.3 by one Mr. Prakash Agiwal

who is the Chartered Accountant having office in Daryaganj, Delhi and Mr.

Nirbhey Lodha who is known to Mr. Prakash Agiwal. According to him, Mr.

Nirbhey Lodha was employed with Mysore Cement Limited and Mr. N.L.

Hamirvasia is President of Mysore Cement Limited. The defendant No.2 has

further made a statement that Mr. Nirbhey Lodha while handing over the share

certificates had annexed copy of the list of shares which were being handed over

to the defendant No.3. The said list was exhibited as Ex.D2W1/1. He also

made a statement that at the time of delivery of share certificates certain deeds

were not delivered to defendant No.3 therefore, the brother of defendant No.2

Mr. Ajay Mangla who works in def1endant No.1 firm along with him and

defendant No.3 wrote a letter dated 15th September, 2007 to Mr. Nirbhey Lodha

asking him to send the remaining transfer deeds of share certificates. The said

letter was sent through Air Linkers Courier. The receipt of the same was

exhibited as Ex.D2W1/2. In response to the said letter, Mr. Nirbhey Lodha sent

a letter dated 21st September, 1987 to Mr. Ajay Mangla wherein it was admitted

by Mr. Nirbhey Lodha that all the transfer deeds were not available in the

Bangalore/Ammasandra. However, it was confirmed that the share had already

been delivered. The said letter was exhibited as Ex.D2W1/3. Mr. Prakash

Agiwal had requested the defendant No.2 to deposit a sum of Rs.15,900/- on

account of Mr. N.L. Hamirwasia in favour of M/s. Damania & Co. and a sum of

Rs.41,750/- on account of Mr. N.L. Hamirwasia in favour of Verma & Co. The

said receipt is exhibited as Ex.D2W1/4. According to the statement of defendant

No.2, the defendant No.3 had sent a demand draft of Rs.10,474/- in favour of Mr.

Rohtas Hamirvasia alongwith a covering note dated 2 nd December, 1987 and the

covering note was exhibited as Ex.D2W1/5. A further statement was made in

the affidavit that the share certificate delivered to defendant No.3 were not

stolen but were delivered by authorized person Mr. Nirbhey Lodha on behalf of

defendants No.5-9 for sale through Delhi broker.

60. The said witness was cross examined by defendants No.5-9 on 31st March,

2009 and it appears from cross examination that defendants No.5-9 were not

able to extract any contrary statement to the statement already made by him in

examination-in-chief. This court is not agreeable to the submission of learned

counsel for defendants No.5-9 that defendant Nos.1-3 have not been able to

prove Issue No.11 in their favour as the defendants No.1-3 have not filed any

documents whatsoever by which it can be shown that the consideration amount

was passed on by defendant Nos.1-3 in any manner to defendants No.5-9. It is

not very much relevant that defendant No.8 was not cross examined by

defendants No.1-3 and therefore, in the absence thereof the said issue can be

decided against defendants No.1-3. For the reasons given by this Court while

deciding the Issue No.5 in the matter it is clear that the defendant Nos.1-3 were

the bona fide purchaser of the shares of the defendants No.5-9 and no relief can

be issued against them. It is actually defendant nos. 5 -9 who are liable for the

claims made by the plaintiff. Therefore, this issue is accordingly decided in

favour of defendants No.1-3 accordingly.

61. In view of the outcome of Issue No. 5, 6 and 11 and the case of Mahavir

Singh (supra), this issue is also held to be in favour of the plaintiff and against

the defendants. Admittedly, the share certificates were released to defendant nos.

5 to 9 and since it has been proved that the said share certificates were not stolen,

the same be returned to the defendant no. 11 who shall register the share

certificates in the name of the bona fide purchasers/ transfers.

62. Vide order dated 4th July, 1988 this court restrained the defendant No.11

company from distributing any benefit in any manner in respect of 1300 shares as

mentioned in the plaint.

63. The letter dated 26th April, 1989 from Shri Raghvan addressed to the

defendant no.8 filed by the defendants No.5 to 9 discloses that HINDALCO had

released rights and bonus shares to the registered holders. Thus, it appears that

the Company has been releasing the benefits in respect of the shares to the

defendant Nos.5 to 9 and they have to furnish a statement of account with regard

to the receipt of dividends benefits and all other accruals in connection with the

shares in dispute which had taken place till 31.10.1995. Thus, this issue is

decided accordingly.

Issue no. 8

64. The fact that the share certificates being the subject matter of the instant suit

were released to the Defendants No.5 to 8 pursuant to the order dated 3.11.1988

passed by the Munsiff Court, Karnataka is an admitted position and defendant

no. 8 has made as admission to the same effect during his cross examination. The

letter dated 26.4.1989 from Shri Raghvan addressed to the Defendant No.8 and

relied upon by Defendants No. 5 to 9 discloses that HINDALCO had released

rights and bonus shares to the registered holders. The Company has been

releasing benefits in respect of the shares to the Defendants No.5 to 9. By order

dated 31.10.1995, this Court had directed defendant Nos.5 to 8 to furnish a

statement of account with regard to the receipt of dividends, benefits and all

other accruals in connection with the shares in dispute which had taken place till

31.10.1995 and which may take place in future till the final disposal of the suit.

Defendants No. 5 to 9 have not done the same. Defendants No.5 to 9 are liable to

render accounts to the plaintiff with respect to all benefits, accruals and

dividends on the shares in dispute and on such rendition, a final decree for the

amount found due will be passed. This issue is, hence decided in favour of the

plaintiff.

Issue no. 9

65. The plaintiff has submitted that it should be entitled to the award of interest

on the value of the shares and referred to the decision of the Apex Court in

Ghaziabad Development Authority v. Union of India, (2000) 6 SCC 113

wherein the Apex Court has held that reasonable interest on equitable grounds

may be awarded in appropriate cases where there is no express or implied

contract for its payment nor any applicable statutory provisions. The same is

payable on account of unreasonable delay or failure to fulfill commitments.

However as per prayer, the plaintiff has not claimed any interest/ pendent lite

against the defendant nos. 3 to 9 and 11, therefore, the same cannot be granted

and this Issue is accordingly decided against the plaintiff.

66. For the aforesaid reasons given, this Court is of the view that the plaintiff is

entitled to a decree in terms of prayer (a), (bb) and (d) of paragraph 22 of the

amended plaint. Hence, the suit is decreed in favour of the plaintiff and against

defendant nos. 5 to 9 and 11 with costs. The suit against the other defendants is

dismissed. Decree be drawn accordingly.

MANMOHAN SINGH, J.

JANUARY 27, 2010 sa