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PETITIONER: M/S. JOHN TINSON & CO. PVT. LTD. & ORS. ETC.

       Vs.

RESPONDENT: MRS. SURJEET MALHAN & ANR. ETC.

DATE OF JUDGMENT:       03/02/1997

BENCH: K. RAMASWAMY, G.T. NANAVATI

ACT:

HEADNOTE:

JUDGMENT:                          O R D E R      Leave granted.  We have  heard learned  counsel on both sides.      These appeals  by special leave arise from the judgment of the Division Bench of the High Court of Himachal Pradesh, made on November 14, 1996 in RFA Nos.230 and 231 of 1985.      The admitted  position is  that the  respondents,  Mrs. Surjeet  Malhan  and  Mr.  B.K.  Malhan,  wife  and  husband respectively, laid  two suits  for declaration and permanent and mandatory  injunction. The  learned single  Judge of the High Court  dismissed the suits. But on appeal, the Division Bench has  decreed the suits. Thus, these appeals by special leave.      The first  respondent, Mrs.  Surjeet Malhan,  held 1500 shares in  total -900  in her  name and  600 in  the name of other relatives  - and  10 preferential  shares. The  second respondent, B.K.  Malhan, had  held 2230 ordinary shares and 64 preferential  shares. It  would appear  that there was an agreement between  B.K. Malhan  and Shri  R.D.  Bhagat,  the appellant for  transfer of  the shares and completion of the transaction to put on rails the company which was running in losses.  It   would  appear   that  as  per  the  agreement, subsequent  transactions   were  to   be  completed  and  in furtherance thereof, it appears that the shares, admittedly, were entrusted  to Mr.  Bhagat with  a blank  transfer form. Thereafter, the disputes arose between them. In consequence, the suits  came to  be laid  by the  respondents against the appellants.      The principal  contention raised  by Shri  P.N.  Lekhi, learned senior  counsel for  the  appellant,  is  that  Mrs. Malhan had  admitted in  her evidence  that her  husband had delivered her  shares to  Bhagat and that she never objected to the  transfer and  that, therefore,  there was an implied consent for  the transfer of her shares in favour of Bhagat. Equally,  it   is  contended   that  when  B.K.  Malhan  had transferred the shares, though they were not registered with the previous consent of the Board of Directors and they were not duly  registered  in  the  register  maintained  by  the Register in  that behalf,  there was a complete transaction; the Division Bench, therefore, is not right in reversing the

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judgment of  the single  Judge. We  find  no  force  in  the contentions.      There should  be consensus  ad  idem  for  a  concluded contract and  it is  seen that Section 25(1) of the Contract Act  contemplates   that  when   a   transfer   is   without consideration, it  is a  void contract.  It is  an  admitted position that  there is  no concluded  contract between Smt. Surjeet and  Bhagat. The  acquiescence  did  not  amount  to consent unless  Smt. Surjeet Malhan expressly authorised her husband to transfer her shares. The transfer as contemplated in this  case is only for a sum of Re.1/-. As a consequence, in the eye of law, there is no consideration and, therefore, the transfer  agreement  is  void.  The  question  then  is; whether the  wife hand  consented to  the transfer? It is an admitted position  that she  had not  given authority by any letter in  writing or  otherwise to  her husband to transfer her shares  in favour  of Mr.  Bhagat. Shri  Lekhi sought to rely upon  a judgment  of this  court in  Vasudev Ramchandra Shelat vs. Pranlal Jayanand Thakur & Ors. [(1974) 2 SCC 323] in which the Privy Council judgment rendered in M.P. Barucha vs. W.  Sarabhai &  Co. [53  IA  92]  was  approved  of.  He contended that  once the  shares with  blank transfer  forms were entrusted,  the contract  is complete  and,  therefore, there  is  a  concluded  contract  between  Bhagat  and  the respondents.  We  find  no  force  in  the  contention.  The transaction was  between the broker and the purchaser. After the broker  purchased the  shares on  behalf of  the company with blank  transfer forms,  the shares  were entrusted.  It was, therefore,  concluded that  the moment  the shares were entrusted, being movable property, the contract was complete and, therefore, it was a valid transfer. In this case, there was no  direct transaction  between Mrs.  Surjeet Malhan and Mr. Bhagat.  It is  not even  the case of the appellant that Mr. Malhan  had been  authorised to entrust those shares and blank transfer  forms to  Bhagat. Under these circumstances, without any  specific authority  by the owner of the shares, i.e. Mrs. Surjeet Malhan in favour of third party, including her husband,  he gets  no right  to transfer her shares; nor Bhagat gets   any right and title in the shares held by Mrs. Malhan. Even  the judgment cited by Shri Lekhi in Balkrishan Gupta vs.  Swadeshi Polytex Ltd. [(1985) 2 SCC 167] does not help the  appellants. In that case, the question was whether the appellant was a shareholder. This Court relying upon the concept  of  "ownership  of  right"  discussed  in  Dais  on Jurisprudence held  that "an  owner may  be divested  of his claims   etc, arising from the right owned to such an extent that he  may be left with no immediate practical benefit. He remains the  owner of  nonetheless because his interest will outlast that  of other persons in the thing owned. The owner possesses that  right which  ultimately enables him to enjoy all rights  in the thing owned by attracting towards himself those rights  in the  thing owned  which for  the time being belong to  others,  by  getting  rid  of  the  corresponding burdens." In  that  case,  similar  to  transfer  of  shares without being registered in the company, it was held that he was holder  of the  shares. The  ration therein  also has no application to the facts in this  case. Accordingly, we hold that the transfer of shares held by Mrs. Malhan in favour of the appellant is invalid in law.      The next  question is:  whether  the  transfer  of  the shares held  by Mr.  B.K. Malhan  is valid  in law?  In that behalf  clause   (8)  of  the  Articles  of  Association  is relevant.  It  is  now  well  settled  legal  position  that Articles of  Association of  a private company is a contract between the  parties. Clause  (8) reads that "No transfer of

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any share  in the  capital of  the company  shall be made or registered   without    the   previous   sanction   of   the Directors..." It  is an  admitted position  that no previous sanction has  been obtained  from the Directors for transfer of the  shares held  by Mr. Malhan. Shri Lekhi contends that Mr. Malhan  being the  only Director,  since his  father had already resigned  and he  had entrusted  the shares  to  the appellant, Bhagat, there is a transfer in the eye of law. We are unable to agree with the learned counsel. The concept of previous sanction  of  the  Directors  connotes  that  there should be  a written  resolution accepting the transfer from Mr. Malhan  in favour  of Bhagat  and such previous sanction should be  preceded by  handing over  of the shares. In this case, such  an action  was not done and, therefore, even the transfer of  the shares  held by Mr. Malhan in favour of the appellant is  not valid  in law.  The division  Bench of the High Court,  therefore, was  right in granting the decree as prayed for.      The appeals  are  accordingly  dismissed,  but  in  the circumstances, without costs