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PETITIONER: MATHALONE

       Vs.

RESPONDENT: BOMBAY LIFE ASSURANCE CO.  LTD.PINGLE VENKAT RAMA REDDYV.SIR

DATE OF JUDGMENT: 19/05/1953

BENCH: MAHAJAN, MEHR CHAND BENCH: MAHAJAN, MEHR CHAND BOSE, VIVIAN JAGANNADHADAS, B.

CITATION:  1953 AIR  385            1954 SCR  117  CITATOR INFO :  R          1959 SC 775  (10)  RF         1981 SC1298  (137)  R          1985 SC 520  (20)  RF         1986 SC1370  (77,79)

ACT:  Indian  Companies  Act (VII of 1913), s.  105-C-Transfer  of  shares-Transferee’s  name not entered on  register-Offer  of  new  shares  under  s.  105-C-Transferor  whether  bound  to  acquire  the new shares as trustee for transferee-Duties  of  transferor--Validity  of requisition by  transferee-Suit  by  transferee against transferor-Maintainability.

HEADNOTE:   A,  who  held a certain number of shares in-  a  company, sold  some of these shares to B on the 29th July, 1944,  and executed  blank transfer forms in respect of the shares.   B made  an application to the company for registration of  his name, only on the 11th April, 1945, and his application  was rejected.    Meanwhile,  in  February,  1945,  the   company resolved to issue new shares and offered to A the number  of shares  to which he was entitled under the provisions of  s. 105-C  of the Indian Companies Act in respect of the  shares which  stood in the register in his name.  A did  not  apply for  the  now shares pertaining to the shares sold to  B.  A firm  of solicitors sent a requisition to A on behalf of  B, C,  D, E and others who claimed to be the purchasers of  the shares sold by A, calling upon A to apply for the additional shares, and to hold them, when allotted, on behalf of B,  C, D and E and others, and offering to indemnify A against  all liabilities  he may incur thereby. A declined to  apply  but offered to sign the renunciation form in favour of the  true purchasers.  As the time fixed for making an application for the new shares was about to expire, B filed a suit against A praying  that  A  may  be  ordered  to  deliver  to  B   the application  form for the now shares, and to hand  over  the new share certificates when received, with transfer forms in blank   duly  signed  by  him,  and  for  damages   in   the alternative.  A receiver 17 118

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was appointed and he applied to the company in his own  name for allotment of the new shares and for registering his name in  respect thereof but the company declined to do so.   The receiver  filed a suit against the company for allotment  of the new shares to him.  The High Court of Bombay held  that, as A was a trustee of B in respect of the new issue, and  he had  failed  to apply for the new shares, he was  liable  in damages to B. On appeal : Held,  (i) that if A ",as not of his own volition,  prepared to obtain the now shares in his name, there was no principle of  law or equity by which he could be compelled to  acquire those  shares  by spending his own money or  by  undertaking financial  liabilities and pass them over to B on  receiving the  amount  spent  by  him  from  the  purchaser  or  being otherwise  fully  indemnified  by  him  in  respect  of  the liabilities incurred or to be incurred. (ii)Assuming  that A was under any such obligation,  as  the requisition  made  by the solicitors to A  to  purchase  the shares   was  made  on  behalf  of  4  disclosed  and   some undisclosed persons, it was ineffective and inadequate,  and A  was not guilty of any breach of duty as a trustee in  not complying with the requisition. (iii)As B had no right to call upon A to buy the new  shares in  his  own  name for his (B’s) benefit,  a  fortiori,  the receiver had also no such right. (iv)  In any event, as the company was not a party  to  B’s suit,  no order could be issued to the company in that  suit to  recognise  the receiver as a shareholder in  respect  of shares sold to B and, as long as he was not on the register, the  company was not bound to entertain an application  from him for issue of the now share in his favour. Hardoon v. Belilios ([1901] A. C. 118), E. D. Sassoon, &  Co Ltd.  v.  Patch (45 Bom.  L.R. 46), Miles  v.  Safe  Deposit Trust Co. (66 L.E. 903) referred to.  Biss v. Biss ([1903] 2 Ch. 40), Jones v. Evans ([1913] 1 Ch. 23) distinguished.

JUDGMENT: CIVIL APPELLATE JURISDICTION: Civil Appeals Nos. 52, 53  and 54 of 1950. Appeals  from the Judgment and Decree dated the  7th  March, 1949,  of the High Court of Judicature at Bombay in  Appeals Nos. 55 and 54 of 1948, arising out of Decree dated the 29th July, 1948, of the said High Court in its Ordinary  Original Civil  Jurisdiction in Suits No. 336 of 1945 and No. 786  of 1948. G.S.  Pathak (H. J. Umrigar and P. N. Mehta, with  him)  for the appellant in Civil Appeals Nos. 52 and 54 and respondent in Civil Appeal No. 53,                             119 M.   C. Setalvad, Attorney-General for India (J.  B.Dadachanji, with him) for the respondent in Civil Appeals Nos. 52 and 54 and appellant in Civil Appeal No. 53. 1953.  May 19.  The Judgment of the Court was delivered by MAHAJAN  J.-These  appeals,  though they arise  out  of  two different  suits,  336  of  1945 and 786  of  1948,  can  be disposed  of by a common judgment, as both these suits  were instituted in effect to obtain the same relief. In July, 1944, a struggle commenced between the group of Sir Padampat Singhania and the group of Shri Maneklal Prem Chand for  control of the management of the Bombay Life  Assurance Co.  Ltd.  and there was a race for the acquisition  of  the shares of the company between the two groups.  Sir Padampat, the appellant in Civil Appeal No. 54 of 1950, and respondent

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in the cross appeal No. 53 of 1950, on the 25th July,  1944, purchased  through Shri P. N. Gupta, his Bombay  agent,  667 shares  of  the company, 484 out of which  belonged  to  Mr. Reddy,  the appellant in C.A. No. 53 of 1950 and  respondent in  Civil Appeal No. 54 of 1950.  This deal was made on  his behalf  by  a  firm  of share  and  stock  brokers,  Bhaidas Gulabdas.   The shares were sold at the rate of Rs. 300  per share.  On the 29th July, Gupta executed a receipt in favour of  Bhaidas  Gulabdas  acknowledging the  receipt  of  these shares,  while Bhaidas Gulabdas as constituted attorneys  of Mr.  Reddy executed five blank transfer forms in respect  of the  484 shares sold by them-four for 100 shares  each,  and one for 84 shares.  It is alleged that these transfer  forms were  ultimately  filled in the name of  Sir  Padampat  Sin- ghania.   Sir Padampat, however, made no application to  the company  for  registration of his name in  the  register  of shareholders till the 11th April, 1945.  On an application - being  made, the company declined to register the shares  in his name and intimated to him their refusal to do so on  the 8th May, 1945. 120  On  the 8th January, 1945, the company, in order to  combat the  move  of  Sir  Padampat  to  acquire  control  of   its management,  made  an  application under rule  94-A  of  the Defence of India Rules for sanction for the issue of further capital.   The  sanction  was granted and  the  company  was authorised within a time limit of six months to increase its capital  by a sum of Rs. 4,59,600 by issuing  4,596  shares; otherwise the sanction was to lapse.  On the 21st  February, 1945,  the  directors  of the company  passed  a  resolution increasing the capital of the company by issuing these 4,596 shares of Rs. 100 each at a premium of Rs. 75 per share.  On the  existing shares only Rs. 25 per share had  been  called up.   The  company  therefore decided that  the  new  shares should  be  offered  to the existing  shareholders,  in  the proportion  of four shares to every five shares held by  the shareholders.    Reddy  as  a  shareholder  of  534   shares (including 484 shares sold by him on 25th July, but yet  not registered in the transferee’s name) thus became entitled to 427  new shares and one fractional certificate.  Out of  the 427  new shares offered to him he was entitled to 40  shares in his own right which appertained to 50 unsold shares which he  still  held  in  the  company.   The  other  384  shares appertained  to  the shares that he had sold.   The  company issued  a  circular letter to every shareholder  giving  the details of the offer made and along with it sent two  forms, A and B. Form A being the application form for allotment  of new shares, the shareholder had to subscribe his name to  it and  return  it to the company for allotment of  the  shares offered accompanied with a cheque for the amount that had to be paid for obtaining the shares.  Form B was a renunciation form.  In case a shareholder did not want all or any of  the shares  offered  to be allotted to him, he  was  allowed  to renounce his right in favour of some other person. On  the 21st February, 1945, Reddy returned to  the  company form A duly filled in, requesting, the company for allotment of 40 shares out of the new issue, 121 which  appertained  to the 50 shares he still  held  in  the company.  In respect of the balance of 384 shares offered to him  and which appertained to the 484 shares sold by him  he said  nothing.  The renunciation form was retained  by  him. On  the 23rd February, 1945, Messrs.  J. L. Mehta and N.  K. Bhartiya  purporting to act on behalf of the  purchasers  of 484 shares wrote to Reddy asking him to forward to them the,

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company’s  circular letter along with forms A and B  as  and when   received  by  him,  after  appending  to   them   his signatures, to enable them to apply for these shares  either in Mr. Reddy’s name or in the name of, the transferees.   He was  told  that  he  was to hold  the  shares  offered  when acquired as a trustee for them. On the 28th February,  1945, Messrs.  Craigie, Blunt & Caroe, a firm of solicitors,  also acting  on  behalf of the purchasers, wrote to Mr.  Reddy  a letter  to  a similar effect.  This was  prefaced  with  the remark  that  the offer of fresh shares by the  company  was illegal.   Without prejudice to that contention,  Mr.  Reddy was  called upon to apply for the newly offered  shares  and obtain them on their behalf or to send them the  application form  (A) and the renuniciation form (B) and the  fractional certificate to enable them to obtain the new shares  offered which  appertained  to  the 484 shares  sold  by  him.   The relevant part of this letter reads thus: -- "We are instructed by our clients, the parties to whom  you, sold  these shares,Mr. J. L. Mehta, Sir Padampat  Singhania, Lala Kailashpat Singhania, Mr. N. K. Bhartiya and others  to call  upon  you  to  apply for  the  additional  shares  and fractional certificates now issued to which you have  become entitled,  and to let us know when you have done  so.   When allotted to you, you will hold these shares on their  behalf and  please then hand them to the Hindustan Commercial  Bank Ltd., Apollo Street, Fort, Bombay, who will pay you the  sum of Rs. 100 for every share allotted to you, which should  be accompanied  by  blank transfer form signed by  you  as  the transferor and the form of renunciation unsigned.  They will also pay you the,                             122 Proportionate sum on any fractional certificate to which you are  entitled on handing over the same to the bank in  blank unsigned on or before the 7th March, 1945. If you prefer to do so, please send the form of  application ’A’ duly signed by you as well as the renunciation form  ’B’ as   also  the  fractional  certificate  and  the   relevant application  attached  thereto  unsigned  in  blank  to  our client,  Mr.  N.  K. Bhartiya at  Second  Floor,  Rahimtoola House, Homji Street, Fort, Bombay, so as to reach him before the   7th  March,  1945,  and  he  will  then  forward   the application  to  the company on your behalf along  with  the necessary remittance. Our  clients  agree to indemnify you against any  and  every liability  which you will incur by applying for  the  partly paid shares. We  are instructed to point out that you are a  trustee  for our  clients by virtue of the fact that you have  sold  your shares  in  this company to them pending our  clients’  name being entered on the register in respect of the shares which you have sold to them and that you are bound to comply  with our clients’ request." The  Hindustan Commercial Bank Ltd. also wrote a  letter  to Mr. Reddy on the 1st of March, 1945, which reads thus :- "With reference to a circular dated the 28th February, 1945, issued  by  Messrs.  Craigie, Blunt and Caroe on  behalf  of their clients Mr. J. L. Mehta, Sir Padampat Singhania,  Lala Kailashpat Singhania, Mr. N. K. Bhartiya and others, we have instructions  to  pay you in respect of all  shares  of  the abovenamed  company in the new issue that you deliver to  us at  Rs. 100 per share, when such shares are allotted to  you in exchange for the allotment letters or share scrips with a duly signed transfer deed.  We have also instructions to pay you at Rs. 20 per fractional certificate delivered to us  on or before the 7th March, 1945.  Please note that we shall do

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the  same if the shares and/or fractional  certificates  are delivered  to us in terms of the circular  mentioned  above. You may send these to us through any 123 bank and the exchange commission will also be paid by us." These  letters indicate that the persons named therein  with some  undisclosed persons were the purchasers of the  shares sold  by  Reddy and they were the equitable  owners  of  the shares, in spite of the original bargain having been made by Sir  Padampat.  It was not disclosed in these  letters  that the  persons named therein were mere nominees or  benamidars of  Sir Padampat.  One fact however is beyond  dispute  that the  names  of these persons were not entered in  the  blank transfer  forms in the column of transferee, and  eventually it  was  the  name of Sir Padampat alone  that  was  entered therein. Mr.  Reddy replied to all these communications  received  by him on the 3rd March, 1945, in the following terms:- "With reference to all these communications, I have to state that  nearly  eight  months have elapsed since  I  sold  the shares  and  the shares are not as yet  transferred  to  the names  of the purchasers.  I have no objection to  give  the renunciation  forms, duly signed in favour of the  real  and true purchasers. As regards the requisition made by you in paras. 4 and 5  of the  circular  letter  of 28th February,  1945,  1  fail  to understand as to how I am under an obligation to comply with it.   I  am ready and willing to sign renunciation  form  in favour  of the true purchasers, on my being  satisfied  that those  who are described as the purchasers of my shares  are the  real  and  true purchasers of  those  shares  by  their producing  the transfer forms given by me duly  executed  by them along with the share certificates." Whatever  else may be said about the attitude of  Reddy,  he was certainly entitled to know the name of person or persons who were the real purchasers of the shares sold, because  he could  only respect and comply with the requisition made  by those persons and those persons alone and by none else.  Not satisfied  with this reply and in view of the fact that  the last  date  for  making the application  for  the  issue  of additional shares 124 was  to  expire on the 10th March, Sir  Padampat  instituted suit No. 336 of 1945 on the 8th March, 1945, on the Original Side of the Bombay High Court, inter alia, for the following reliefs  against  Mr.  Reddy as  the  sole  defendant.   The company was not impleaded in this suit. "1. That the defendant may be ordered to send and deliver to the plaintiff the application form A annexed to the circular letter for the number of additional shares allotable to him, as  also  the fractional certificates  and  the  application relating thereto (unsigned and in blank) upon the  plaintiff paying  to him such sum as this honourable court may  direct and/or  upon  the plaintiff giving such  indemnity  as  this hon’ble court may deem proper; 2.   That  the defendant may be ordered upon  receiving  the certificates of the new shares to hand over the same as also the  fractional certificates to the plaintiff together  with transfer forms in blank duly signed by him." On  the  7th December, 1945, the plaint was amended  and  an alternative  relief for a decree for Rs. 7,29,600 by way  of damages was included therein. It was averred in the plaint that upon the sale by defendant of  484 shares the plaintiff became the beneficial owner  of those  shares and the defendant became a trustee for him  of

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all rights and benefits whatsoever appertaining or  accruing to  the said shares, that one of such rights was  the  right and opportunity to apply for shares forming part of the  new issue, that the defendant was bound to do all lawful acts in relation  to  and  for  the purpose  of  securing  the  said benefits  for  the plaintiff and which the  plaintiff  might call upon him to do, on terms of the plaintiff  indemnifying him  against  all  the consequences thereof,  and  that  the plaintiff  was  ready and willing to do the  same.   It  was further  alleged  that unless the  plaintiff’s  rights  were safeguarded by the 10th March, 1945, which was the last  day for making application for the shares, he will be irretriev- ably   prejudiced.   Ail  application  was  made   for   the appointment of a receiver of the application form and                             125 letterof renunciation and of the rights of Reddy in the  new issue of shares. On  the same day Bhagwati J. made an order under  Order  XL, rule  1, of the Civil Procedure Code, appointing  the  court receiver,  interim  receiver  of the  application  form  and letter  of  renunciation and of the rights, if any,  of  the defendant in the 384 shares of the Bombay Life Assurance Co. Ltd.   The  receiver  was given power to  exercise  all  the rights of the defendant in respect of the said shares on the plaintiff giving the usual undertakings.  On the 10th March, 1945,  the  receiver made a request to the company  for  the allotment to him of 384 shares of the new issue appertaining to  the 484 shares standing in Reddy’s name in  the  company register  and  sold  by him on the 25th  July,  1944.   This application  was accompanied by a remittance of  Rs.  38,400 payable  on these shares according to the resolution of  the board.   The company was requested to register the  name  of the receiver in the register of members in respect of  these shares.   On the 30th April, 1945, the company intimated  to the  receiver that his application for allotment  of  shares was  considered by the board of directors in a meeting  held on  the 21st April, 1945, and it was resolved to reject  the same because Reddy had accepted the company’s offer only  to the extent of 40 shares and the offer regarding the  balance had lapsed. The result was that the company refused to register the name of  the  receiver in respect of the new shares on  the  30th April, 1945, and it also refused Sir Padampat’s  application for registering his name as transferee in respect of the 484 shares  of Reddy purchased by him which might have  entitled him to retain the new shares in his own name.  Sir  Padampat having thus failed in getting the newly issued shares regis- tered  in the name of the receiver had no  alternative  left but to fight out the suit already instituted against  Reddy. He  also had another suit instituted to  obtain  practically the same reliefs which were claimed in his own suit, by  the receiver  against the company with the leave of  the  court, namely, suit No, 786 of 1948. 18 126 This suit was filed on the 8th March, 1948, after the  lapse of  about  three  years of the company’s  rejection  of  the receiver’s application.  It was explained in paragraph 14 of the  plaint that the suit had not been filed earlier as  the validity  of  the  issue  of  the  new  shares  ’was   being challenged in suit No. 347 of 1945.  The prayer in this suit was  that the defendant company be ordered to allot  to  the plaintiff 384 shares mentioned in the application and to put his  name on the share register of the company for the  said shares.

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Both the suits were heard by Bhagwati J., who delivered  one judgment  in  both  of them and  substantially  granted  the reliefs  claimed  in  both the suits.  It was  held  by  the learned  judge  that  the 484 shares which  Reddy  had  sold through Bhaidas Gulabdas had been purchased by Sir Padampat, that  as  trustee of these shares he as vendor  was  also  a trustee  of all. property rights annexed to the  shares  and that it was the duty of Reddy, when called upon to do so  by Sir Padampat on proper safeguard and indemnity for  payment, to  transfer  to  Sir Padampat all  the  benefits  which  he derived  by  the issue of the new shares by  virtue  of  his being their legal owner.  It was further held that a  proper requisition  had  been made by the beneficial owner  on  the trustee to obtain for him these shares and that the  trustee defaulted in his duty in not complying with that requisition and  that  the  company was also in error  in  refusing  the application  of the court receiver for registration  of  his name  as a shareholder in respect of the new shares  on  the ground that Reddy having applied for 40 shares, his right to obtain  the remaining shares had lapsed.  It was  argued  on behalf  of  the  company  that the  sanction  given  by  the examiner of capital issues having lapsed, no relief could be given  against  the company and it could not be  ordered  to allot  shares  to the plaintiff as there  was  no  available capital which could be issued.  Bhagwati J. however took the view that the plaintiff could not be deprived of his  rights by  reason of this circumstance.  In the result  he  ordered the company to comply with the order and allot within three                             127 months  384 shares to the plaintiff after obtaining a  fresh sanction for the same from the authority concerned.   Before concluding the learned judge said that issues 10 and 11  had not  been  argued  before him  and  the  contentions  raised therein  seemed  to  have  been  abandoned  and  that   even otherwise  there was no merit in them.  Against this  common judgment in both the suits, Reddy and the company  preferred separate  appeals.   The  appeal Bench  of  the  High  Court allowed  the company’s appeal and dismissed  the  receiver’s suit on the finding that the court receiver was not entitled to the allotment of the new shares in his own name as  such. Civil Appeal No. 52 of 1950 has been preferred against  this decision.   In  suit  No. 366 of  1945  Reddy’s  appeal  was allowed   to  the  extent  that  the  plaintiff   was   held disentitled  by  the  reason of lapse  of  the  sanction  to reliefs  (A)  and (B) granted to him by Bhagwati J.  It  was however  held  that  he was a trustee  of  Sir  Padampat  in respect of the shares of the new issue and he having  failed to apply for the new shares was liable to him in damages and the fact that he made an application in respect of 40 shares did  not  disentitle  him to  make  another  application  in respect  of the 384 shares.  It was also held that a  proper requisition  had  been  made by  the  beneficiary  upon  the trustee  to  carry  out the trust and he  had  defaulted  in complying  with the requisition.  The suit  was  accordingly remanded to the trial judge for assessing damages. The principal questions involved in the appeals are: (a)Whether on the facts and circumstances of this ease Reddy was  under a legal obligation as a trustee to apply for  and obtain  on  behalf  of Sir Padampat  384  new  shares  which appertained to the shares sold by Reddy to Singhania; (b)whether   the  requisition  made  on  Reddy  by   Messrs. Craigie,  Blunt  & Caroe by their letter  dated  3rd  March, 1945,  was sufficient in law to call upon him to  apply  for shares of the new issue and whether Reddy committed  default as a trustee in not complying with this requisition;

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128 (c)whether  the conduct of Sir Padampat in not  lodging  484 shares   for  transfer  to  his  name  till   April,   1945, disentitled him to the reliefs claimed by him; (d)whether  the  receiver  was  not  entitled  to  make  the requisition  and was not the proper person to apply for  the new  shares  in his own name, and whether  the  company  was under no obligation to allot to him the shares; (e)whether the plaintiff was entitled to reliefs (A) and (B) of the plaint in the altered situation of the company. It  has  been  held in the courts below  that  Sir  Padampat became on the 29th July, 1944, the sole beneficial owner  of 484  shares  sold  by Reddy, the legal title  to  which  was vested  in  him.  That having been found,  the  relation  of trustee and cestui que trust was thereby established between them.    All   that  is  necessary  to  establish   such   a relationship  is  to prove that the legal title was  in  the plaintiff  and  the equitable title in the  defendant.   The fact  that  such a relationship qua the 484 shares  sold  by Reddy  existed  between  the parties to  the  suit  was  not disputed by the learned AttorneyGeneral appearing for Reddy, but he contested the view of the High Court that the  cestui que  trust could not on any principle of equity or law  call upon  the trustee to bear his burdens and ask him to  obtain on  his  behalf new shares of the company  or  make  further investments in its capital which would involve in its  train new obligations and fresh burdens. As  observed by Lord Lindley in Hardoon v.  Belilios(1)  the plainest principles of justice require that cestui que trust who  gets  all the benefit of the property should  bear  its burden  unless be can show some good reason why his  trustee should  bear them himself.  Mr. Pathak did not  contest  the proposition  that  Singhania had any right as  a  beneficial owner  of  484 shares to throw on Reddy any of  the  burdens incidental  to the ownership of those shares.   He  conceded that Reddy as a trustee had a right to be indemnified by his cestui  que  trust against calls.  The proposition  is  well recognised and (1)  [1901] A.C. 118.                             129 the  liability is enforced on the principles  applicable  to the equitable ownership of property. Once it is held established that Reddy was a trustee of  the 484  shares sold by him, he as holder of those  shares  must also  be  held to be a trustee of all  the  property  rights annexed to the shares.  It was conceded that he was not only the trustee of the corpus but also the trustee of the income and  of  the dividends that he may receive and that  he  was bound to pay them over to the beneficiary.  In E.D.  Sassoon &  Co. Ltd. v. Patch(1) Pratt J. held that under section  94 of  the Indian Trusts Act a transferor holds the shares  for the  benefit  of the transferee to the extent  necessary  to satisfy  its  demands and that as the transferee  holds  the whole  beneficial  interest  and transferor  has  none,  the transferor  must comply with all reasonable directions  that the  transferee  may give and that in this situation  if  he becomes  a trustee of dividends he is also a trustee of  the right  to  vote  because the right to vote  is  a  right  to property  annexed to the shares and as such the  beneficiary has  a right to control the exercise by the trustee  of  the right  to vote.  The learned AttorneyGeneral did not  combat the  view  expressed  by Pratt J., but he  objected  to  any further  extension  of  the rule  therein  laid  down.   The question that needs our decision is bare of authority.   The English  law  can furnish no guidance for  its  solution  as

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there  is no provision corresponding to section 105  (C)  in the English Companies Act.  In India this is the first known occasion  when  a situation like this has arisen  between  a transferor  and  transferee of shares on  a  stock  exchange transaction.   The  proposition  therefore  that  has   been canvassed   in  this  case  has  to  be  decided  on   first impressions and on general principles of equity. Section’  105(C),  the  enactment  of  which  has  conferred certain rights and privileges on a shareholder which he  did not possess before its enactment is in these terms: " Where the directors decide to increase the capital of  the company by the issue of further shares such shares shall  be offered to the members in proportion to (1)  45 Bom.  L.R. 46. 130 the  existing  shares  held by each member  and  such  offer shall, be made by notice specifying the number of shares  to which  the  member is entitled and limiting  a  time  within which  the  offer,  if not accepted, will be  deemed  to  be declined  ;  and after the expiration of such  time,  or  on receipt of an intimation from the member to whom such notice is given that he declines to accept the shares offered,  the directors  may  dispose of the same in such manner  as  they think most beneficial to the company." This  section limits the powers of the directors to  dispose of the further issue of capital in any manner that they  may think  most  beneficial to the company.  They  are  under  a mandate  to offer these shares in the first instance to  the members  in proportion to the existing shares held by  them. In  other  words,  a  member  becomes  entitled  under   the provisions of this section by reason of his being the holder of  a  certain number of shares in the  company,  to  obtain shares in the further issue of capital as of right. This  is not a fruit of stock ownership, in the nature of  a profit, nor does it amount to a division of any part of  the assets of the company.  It is not an organic product of  the original  stock  like the young of animals or the  fruit  of trees, but, as described by the Supreme Court of America  in Miles  v. Safe Deposit Trust Co.(1) this right to  subscribe to new stock is but a right to participate in preference  to strangers   and   on  equal  terms   with   other   existing shareholders  in the privilege of contributing  new  capital called  for  by the corporation-an equity  that  inheres  in stock  ownership  under  such  circumstances  as  a  quality inseparable from the capital interest represented by the old stock.  The exercise of the privilege depends on the  option of  the  shareholder.  If he likes, he  can  invest  further money  and purchase a proportionate share, of the new  issue of  capital.  He is of course not obliged to do so.  He  has also the right to assign the offer made to him in favour  of any  other person but in that event the directors  have  the option to allot or not to allot the (1)  66 Law.  Edition 903 at 026. 131 shares  to  the  person in whose  favour  the  share  holder renounces the shares offered to him.  The offer, of  course, creates  fresh  rights  but  it also  brings  in  its  train liabilities  and  obligations.  It confers the  right  on  a shareholder  to purchase shares in the new issue of  capital in proportion to his existing shareholding, but in order  to obtain  that right he has to fulfil certain obligations  and he has to incur certain liabilities.  In the first instance, if  he  decides to invest his money in the  further  capital issued, he has to make an application to the company for the allotment  of shares so offered and with his application  he

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has  to remit to the company the amount of  the  application money.   That  having been done, if the shares  offered  are only partly paid up, as they were in this case, he incurs on allotment the further liability of meeting any future  calls on  these shares.  Can it be said in this situation  that  a transferor of a certain number of shares who being the legal owner  of those shares and the beneficial interest of  which vests  in  the  cestui  que trust, is  liable  for  all  the payments  and  obligations  attaching to the  new  issue  of shares and is bound to act in both respects for the  benefit of the cestui que trust; in other words, whether he is under a  duty, when so instructed by his beneficiary, to  make  an application  for the new issue of shares offered  under  the provisions  of section 105-C and obtain them in his name  by making   the   necessary  payment  and  by   incurring   the consequential obligations.  Plainly put, the question may be posed  thus:  whether the obligation of a  transferor  of  a certain  number  of  shares as a  trustee  extends  also  in respect of the right to acquire further shares issued by the company on behalf of his cestui que trust by putting himself on the register of shareholders in respect of the new shares regarding which. he may have to incur fresh liabilities  and obligations which were not existing at the time when he made the transfer. Mr. Pathak contended that as the right to obtain new  shares was  inseparable  from the ownership of the old  stock,  the transferor  of  the old -stock held the option  to  buy  new stock in like manner as he held the 132 original  stock, and if qua the old stock he was  a  trustee for  the  beneficial  owner, in the like  manner  he  was  a trustee  also of the right or the option to buy  new  shares and  was bound to exercise it for the benefit of the  cestui que trust and according to his directions, and was bound  to obtain new shares in his own name for the cestui que  trust. Reliance   was  placed  for  this  proposition  on   certain observations  of  Buckley J. in Biss v.  Biss(1).   In  that case, a lessor granted a lease for seven years of a house in which  the  lessee  carried on a  profitable  business.   On expiration  of the term of the lease, the lessor refused  to renew  the  lease,  but allowed the lessee to  remain  as  a tenant  from  year to year on increased  rent.   During  the tenure  of the lease, the lessee died leaving a widow and  3 children,  one  being an infant.  The widow and a  son  each applied to the lessor for a new lease for the benefit of the estate,   which  the  lessor  refused  to   grant.    Having determined the yearly tenancy by notices the lessor  granted to the son personally a new lease for 3 years.  In an action already    instituted   by   the   children   against    the administratrix,  namely, the widow, she applied to have  the new lease treated as being taken by the son for the  benefit of  the estate.  Buckley J. held that the son was a  trustee of  the new lease for the benefit of the estate.  The  Court of Appeal reversed this decision and held that the right  of renewal  had been determined by the lessor long  before  the son intervened, and that the new lease could not be regarded as  an accretion to the estate and the son was  entitled  to retain the lease and that he had not abused his position  in any  way.   This  case therefore is  no  authority  for  the proposition  before us, and the Court of Appeal did not  say anything on the point.  Buckley J. however in the course  of his judgment observed as follows:-  "It  is,  of course, very familiar law that  if  a  trustee obtains  a renewal of a lease of property vested in  him  as trustee, whether by virtue of a right of renewal or not,  he

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must  hold the new lease for the benefit of his  cestui  que trust.  The leading authority upon that is (1)  [1903] 2 Ch . 40. 133 Keech  v.  Sanford (1).  The principle is that  the  trustee owes  it to his cestui que trust to obtain a renewal, if  he can do so, on beneficial terms, and that the court will  not allow  him  to obtain a renewal upon  beneficial  terms  for himself  when  his  duty is to get it  for  his  cestui  que trust." Reliance was also placed on certain observations of  Neville J. in Jones v. Evans(2).  That was a case where the  capital of  a  company was divided into 10,000 shares  of  pound  10 each,  of  which 3,728 only had been issued and  were  fully paid  up.   The company was very prosperous and  the  market value of the shares was pound 30 each.  The reserve fund  of the company exceeded pound, 50,000.  The directors  proposed a  scheme for distribution of the reserve fund  representing accumulated  undivided profits amongst the shareholders,  so that  every shareholder was to get a bonus of one new  fully paid  up share of pound 10 for every existing share held  by him.   Accordingly  resolutions were passed by  the  company empowering the directors to declare a bonus dividend out  of the reserve fund and sanctioning the distribution of a bonus dividend  of pound 10 per share out of the reserve fund  and authorising  the further -issue of 3,728 shares of pound  10 each  out  of  the unissued capital of  the  company  to  be allotted  pro  rata amongst the  existing  shareholders  and directing that such new shares be paid up in full forthwith. The  directors sent a circular letter to  every  shareholder with  a  warrant  for  the bonus  divident  on  his  shares, informing  him of an allotment to him of his  proportion  of the new shares and giving him an option to accept or  refuse the allotment, and stating that if he accepted the allotment he  was  to indorse and return the dividend warrant  to  the company  to  be  applied  in  payment  of  the  new  shares. Trustees  of  a  testator’s  will held  200  shares  of  the company,  and  on receipt of the  circular  letter  accepted their  allotment  of 200 new shares, indorsed  and  returned their bonus dividend warrant for pound 2,000, and afterwards sold the new shares (1) (1726) Sel.  Cas. 61.  (2) [1913] 1 Ch. 23.                             134 at  a profit.  The question then arose whether,  as  between the  tenants for life and remainderman under the  will,  the bonus  dividend was capital or income.  It was held, on  the evidence,  that  the  company  intended  to  capitalize  the reserve  fund and not to distribute it as a bonus  dividend, and therefore the whole of the bonus dividend was capital of the  testator’s  estate.  In the concluding portion  of  his judgment, Neville J. said as follows:- "............  when  I say that the option  vested  in  each shareholder, either to take the dividend and keep it, or  to return  it  and get the greater benefit  which  the  company offered  if be did, I do not think that is true in the  case of trustees; because it seems to me that, if by taking pound 10  in cash, when they were offered by the company  a  share worth  E  20 if they would return it, it would be  a  wilful default  on  their part if they refused and took  less,  and consequently  their  cestui que trust would be  entitled  to insist  upon the trustees taking the greatest benefit  which the company offered.  Therefore, in the case of trustees  it seems  to me that, although as between the company and  them there may be a right to elect, between them and their cestui que  trust  there is no such right, and they must  take  the

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dividend in what I will call the capitalized form." On the basis of these authorities, Mr. Pathak contended that his  client  as a beneficiary was entitled  to  the  fullest benefit  conferred  on the old shares by reason of  the  new offer and that he was entitled to compel the trustee to  act in a manner which would enable him to obtain the benefit. In  our opinion the observations made in these  cases  cited above  must be limited to the facts of those cases.  We  are here  dealing  with  a  trustee  with  peculiar  duties  and peculiar  liabilities, and it is a fallacy to  suppose  that every trustee has the same duties and liabilities.  In  none of  the cases cited by Mr. Pathak was there any question  of the trustees incurring any personal pecuniary liability.  In the case of Biss v. Biss(1), the question was obtaining  the benefit of renewal of a (1)  [1903] 2 Ch. 40. 135 lease,  and the trustee had to incur no fresh liability  for obtaining it.  On the other hand, a prosperous business  was being  conducted  in those premises and the renewal  of  the lease  was  obviously  for the benefit  of  the  lessee  and carried with it no new or onerous obligations.  In Jones  v. Evans  (1), the trustee had incur no liability of  any  kind whatsoever.  That only question there was whether he  should exercise  the  option  of  receiving  the  dividend  or   of converting the bonus into the shape of capital.  It is  part of  the  general law of trust that a trustee must act  in  a manner  most beneficial to the cestui que trust and  he  can retain  no benefit to himself from the corpus of  the  trust estate   or  from  anything  that  accrue  to  that   estate subsequently.   None of these cases death with  a  situation like  the one that has arisen in the present case.   If  the newly offered shares were fully paid up and no liability was attached  to  them, there is no question  that  the  trustee would have been bound to obtain them for the benefit of  the cestui  quo trust.  The cases referred to therefore go  only so far and no further.  We see no principle of equity or  on general law which obliges a trustee to buy new shares in his own name for the benefit of the cestui que trust, when in so doing  he  has to bear a heavier pecuniary  burden  than  he undertook  to bear as constructive trustee by reason of  the sale  of  his shares in favour of the cestui que  trust  and which  relationship was contemplated to last only  till  the time  when  the shares sold could not be registered  in  the name  of the transferee.  Of course, if the trustee  of  his own volition chose to obtain the new shares which  appertain to  the shares already sold by him, on principles of  equity it could not be denied that the cestui que trust would  have been  entitled to call upon the trustee to hand  over  those shares to him on receipt of the amount spent by the trustee; but  if the trustee of his own volition is not  prepared  to obtain those shares in his own name, it is difficult to  see on what principle of law or equity he can be forced to  make an  application for obtaining those shares in his own  name, and then pass (1)  [1913] 1 Ch. 23. 136 them over to the cestui que trust after obtaining the amount spent by him or after being otherwise fully  indemnified in respect of the payments made or to  be made,  or liabilities incurred or to be incurred in  future. It  is difficult to conceive any principle of  equity  which obliges  a person in the position of a constructive  trustee in  respect  of  X  number  of  shares  to  also  become   a constructive  trustee  in respect of in additional,  say,  Y

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number  of  shares  and thus become a trustee of  X  plus  Y shares.  Such a burden is not a necessary consequence or  an incident of the original transaction of purchase and sale of shares  or of the legal relationship of trustee  and  cestui que trust thus created.  That relationship arises by  reason of the circumstance that till the name of the transferee  is brought  on the register of shareholders in order  to  bring about  a  fair  dealing  between  the  transferor  and   the transferee equity clothes the transferor with the status  of a  constructive trustee and his obliges him to transfer  all the  benefits of property rights annexed to the sold  shares of the cestui que trust.  That principle of equity cannot be extended to cases where the transferee has not taken  active steps to get his name registered as a member on the register of  the  company  with due diligence  and  in  the  meantime certain other privileges or opportunities arise for purchase of new shares in consequence of the ownership of the  shares already  acquired.   The trustee can very well  say  to  any request made by the cestui que trust for the acquisition  of new  shares that he is not prepared to put his name  on  the register of members for any Additional shares,  particularly when the acquisition of those shares involves him in further liabilities.  In our judgment therefore neither on principle nor  on  authority can it be held that Mr.  Reddy  could  be forced to acquire in his own name 384 shares which appertain to the 484 shares sold by him to Sir Padampat.  All that Sir Padampat  could  call  upon  Reddy to  do  was  to  sign  he renunciation form in his favour of the shares offered put of the  new  issue  appertaining to the old  shares  and  after having obtained the renunciation form, to make an  application  in his own name for the purchase  of  those shares.   This  view can be sustained  on  the  intelligible principle  that the transferor as a constructive trustee  in respect of the shares sold by him cannot retain any  benefit himself of the new issue which is annexed to the shares sold by  him  and if any benefit arises out of  that  offer  made under   section   105-C,  that  benefit  must  go   to   the beneficiary,  but  more  than that the  beneficiary  is  not entitled to call upon the trustee to do. Mr. Pathak reiterated the argument that had been accepted by the  High  Court  that  if the only duty  of  Reddy  was  to transfer  the offer made to him under section 105-C  to  Sir Padampat  after signing the renunciation, then in that  case Sir Padampat could not get the full advantage of that  offer because in that event the directors were not bound to  allot the  shares  to the person in whose favour  they  have  been renounced  by the shareholder, while on an application  made by  the shareholder they were bound to allot him the  shares offered.  That disadvantage is certainly there but it has to be  borne  in  mind that the  relationship  of  constructive trustee and cestui que trust created on principles of equity cannot  be  extended ad infinitum in respect of  all  future acquisitions  of  rights annexed to the  shares  sold  which acquisitions may involve not only rights but liabilities and obligations  which  the  constructive  trustee  may  not  be prepared to undertake, and in this situation the cestui  que trust  may not be able to get all the benefits of the  fresh incidents annexed to the ownership of the shares that he had purchased.  He himself may be blamable for the loss that  be may  have  thus  to  suffer  by  his  not  having  made   an application  in time for getting himself registered  on  the register of members and for not having taken proper steps in law  for getting his transfer recognised by the  company  if the  request  made by him has already been  refused  by  the company.  The equitable principle on the basis of which  the

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legal relationship between the transferor and the transferee arises cannot be worked in a manner so as to prejudice the 138 position  of  the  constructive  trustee  and  make  him  an accounting  party  in  respect of all  privileges  or  fresh offers  that may be annexed to the shares sold for all  time to come. Mr.  Pathak urged that his client was prepared not  only  to pay  the  application money and the allotment money  to  the trustee  but was further prepared to indemnify  him  against any  future calls on those shares.  It has to be  remembered that  even  the  original 484 shares sold by  Reddy  to  Sir Padampat were partly paid up shares and Reddy was liable  to pay the amount of any call made on those shares, subject  to being  indemnified when the time arose by Sir  Padampat  for the amount paid on those shares.  If Mr. Pathak’s contention is accepted, then Reddy will also become further liable  for future  calls on the new 384 shares.  He would  be  entitled only to claim indemnity when an occasion arose.  It is  well settled  that a trustee is not entitled to  claim  indemnity till   he  suffers  an  injury  for  which  he  has  to   be indemnified.  But the fact remains that the liability to pay calls  is for the time being his liability and not  that  of the  cestui  que  trust.  Once his name is  entered  on  the register  of shareholders, a mere right to  claim  indemnity may,  in a case like the present, when the time to claim  it arises, prove to be merely illusory.  The shares may go down in  value,  the  company  may  go  in  liquidation,  or  the financial position of the equitable owner of the shares  may deteriorate.   In  all these situations, the  right  of  the trustee  to be indemnified in respect of  fresh  liabilities accruing  on the shares would be, as already stated,  merely chimerical,  and  the trustee would have to incur  in  those situations  personal pecuniary liability on account  of  the shares.  Therefore, the contention that the trustee is bound to buy the new shares in his own name for the benefit of the cestui que trust is not well-founded, because it involves in its  train pecuniary liabilities which the trustee may  have to  incur personally and which he is not bound to  undertake under  any system of law for the benefit of the  cestui  que trust.  We thus hold that Sir Padampat was not 139 entitled  to call upon Reddy to make an application  in  his own  name for the acquisition of the newly issued shares  by investing  his  own  money in the first  instance  and  then recovering   it  from  Sir  Padampat  or  by   signing   the application  form  and  sending  it  to  Sir  Padampat   for acquiring the shares in his name.  All that he was  entitled to  was to call upon him to send him the renunciation  form. This Reddy was prepared to do and offered to do so  provided the  names of all the persons in whose  favour  renunciation had  to be made were disclosed to him.  Admittedly this  was never  done  and Sir Padampat could not gain his  object  by merely  having the renunciation form, because the  directors of the company in the circumstances of this case would never have granted his application, if made in his own name on the basis  of  the  renunciation  form  signed  by  Reddy.   Sir Padampat’s or the receiver’s suit therefore in this view  of the case could not have been decreed. On  the view expressed above, both the suits must fail.   If Sir  Padampat had no right to call upon the trustee  to  buy the newly offered shares in his own name for his benefit,  a fortiori,  the receiver appointed by the court had  also  no such  right, and on this short ground the claim put  forward in both the suits has to be negatived.

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We are further of the opinion that even if it was held  that Reddy was under a duty to sign the application form and  the renunciation  form  and send them over to  Sir  Padampat  to enable  the  latter to obtain the newly  offered  shares  in Reddy’s  name, the requisition that was made on  his  behalf directing  the  trustee  to purchase  these  shares  and  to exercise the option was ineffective and inadequate.  On  the basis  of  that  requisition, it was not  possible  for  the trustee  to carry out the mandate of the cestui  que  trust, and,  that being so, on this ground also, the plaintiff  was disentitled to relief in the two suits. The first requisition made by Messrs.  J. L. Mehta and N. K. Bhartiya  on the 23rd February, 1945, was made on their  own behalf only and not on 140 behalf of Sir Padampat.  It called upon Mr. Reddy to forward the circular letter with his signatures on the forms annexed to the letter, to enable them to apply for the newly offered shares either in his name or in their or such other names as might  be  decided upon by them.  This requisition  was  not considered  adequate by the High Court and was left  out  of consideration.  Mr. Pathak also did not place much  reliance upon  it.   Both  the courts below and  Mr.  Pathak  however placed  reliance  on  the  requisition  made  on  the   28th February,  1945, in the letter of Messrs.  Craigie, Blunt  & Caroe  cited in the earlier part of this judgment.  In  that letter, it was stated as follows "We  are instructed by our clients, the parties to whom  you sold these shares, Mr. J. L. Mehta, Sir Padampat  Singhania, Lala Kailashpat Singhania, Mr. N. K. Bhartiya and others  to call  upon  you  to  apply for  the  additional  shares  and fractional certificates now issued........" This  requisition  therefore purports to have been  made  on behalf   of  4  disclosed  beneficiaries  and   some   other undisclosed cestuis que trust.  It was not asserted in  this letter  that  the  real  purchaser of  the  shares  was  Sir Padampat  Singhania and the other persons mentioned  therein were merely his agents or benamidars.  Moreover, it did  not disclose the names of all the beneficiaries.   Legitimately, therefore,  in his letter of the 3rd March, 1945, Mr.  Reddy said that he was ready and willing to sign the  renunciation form  in  favour  of  the  true  purchasers,  on  his  being satisfied that those who are described as the purchasers  of his shares are the real and true purchasers by perusing  the transfer  forms duly executed by them along with  the  share certificates.    It  is  difficult  to  understand   how   a requisition made on the trustee by some disclosed and  other undisclosed  beneficiaries  could be regarded  as  a  proper direction  to  him, which he could be called upon  to  obey. This  requisition was therefore faulty in this respect,  and the trustee could not be said to have defaulted in his  duty in not carrying out                             141 such  a  requisition.  Again, the indemnity offered  in  the requisition  is merely illusory, because in the  letter  the extent  of the liability of each beneficiary, whether  known or  unknown,  is not mentioned, and the  trustee  could  not ascertain  from  its  contents the name of  each  and  every person  liable for his claim for indemnity as and  when  the occasion for it arose, or its extent.  A mere bald statement in  the following words "Our clients agree to indemnify  you against each and every liability that you incur by  applying for  these partly paid up shares" was in our opinion  wholly inadequate.   The  matter may have been different  if  along with  this  requisition a bank  guarantee  safeguarding  the

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trustee in regard to his future liabilities had been sent to him as well as a cheque for the money required to be paid at the  time  of making the application.  We are  also  of  the opinion  that in view of the allegations made in the  plaint and  in view of the fact that all the share  transfer  forms were  subsequently signed by Sir Padampat  Singhania  alone, this requisition cannot be said to have been made on  behalf of  the plaintiff and on the basis of it he cannot be  heard to  say  that he made a proper requisition  on  the  trustee which  the  latter  failed to carry out  and  was  therefore liable   to  him  in  damages  for  not  carrying  out   his directions.   It is significant that no mention is  made  in the  plaint as to how the names of the persons contained  in the  letter  of  the  28th February  came  to  be  mentioned therein,  and how the requisition was made on  their  behalf when they had never signed the blank transfer forms. It  may also be observed that it was left to the  option  of the  trustee  to  pay from his own  pocket  the  application money,  and  then recover it from the bank.  Such  a  demand could not be made on a trustee and he could not be asked  to invest  his  own  money for the benefit of  the  cestui  que trust.  The trustee was under no obligation to find a  heavy sum of money and to invest it on the purchase of new  shares for the benefit of the cestui que trust, and to recover  the amount after having invested it in them.  What the letter of the solicitors in fact intended to 20 142 convey to Reddy was: "Pay yourself and obtain the shares, or else, sign a blank cheque and send it to us and then we will see  to  what  extent we are going to  make  you  liable  by putting  your  name on the register  of  shareholders."  The conclusion  of the High Court on this point has been  stated in these terms:- "Sir Jamshedji relies on the attitude taken up by his client and  has  contended that he took up the  right  attitude  by enquiring  as  to  who the real beneficiary was  and  to  be satisfied by the production of the relative transfer  forms. Now, if this had been the only attitude of Reddy much  might have  been  said in his favour.  But unfortunately  in  this very letter Reddy clearly declined any liability or  obliga- tion  upon  him to apply for these shares on behalf  of  his beneficiary.   Whether  he knew that his purchaser  was  Sir Padampat  or not, as the learned Judge has held, or  whether there  is force in Sir Jamshedji’s contention  that  Messrs. Craigie,  Blunt and Caroe referred to the purchasers as  Sir Padampat  and  others, the fact remains that Reddy  did  not accept  his  liability  as  a trustee  and  then  agreed  to discharge that liability provided he was satisfied as to who his purchaser was.  He only wanted to be satisfied about his purchaser   in   order  to  send  to  him  the   letter   of renunciation.  That was the only question on which he wanted to be satisfied.  ’In view of the attitude taken up by Reddy the plaintiff had no other course open to him except to file the  suit, and, therefore, in our opinion the learned  judge was right when he came to the conclusion that the  plaintiff was entitled to the relief he had claimed." We  have not been able to appreciate this line  of  thought. The attitude adopted by Reddy could not cure the defects  in the  requisition alleged to have been made on behalf of  the plaintiff.   If the directions given to the trustee were  of an  inconclusive nature, and were in law  ineffective,  then the trustee could not be mulcted in damages for not  obeying them, even if his attitude was not what it should have been. The  plaintiff is not entitled to damages unless  and  until

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lie                             143 proves  that  he made a proper and effective demand  on  the trustee  and this the trustee failed to carry out.  On  this ground  also, both the suits are bound to fail.  Mr.  Pathak argued  that the plaintiff was entitled to reliefs A and  B, both in his suit as well as in the receiver’s suit and  that the receiver’s suit was wrongly dismissed by the High Court. We  are  unable to agree.  In our opinion,  the  High  Court rightly held that the receiver appointed in the suit of  Sir Padampat  could not acquire the newly issued shares  in  his name.  That privilege was conferred by section 105-C only on a  person  whose name was on the register of  members.   The receiver’s  name admittedly was not in the register and  the company  was not bound to entertain that  application.   Mr. Pathak  argued that that may be so but the receiver was  not making  an  application in his individual right but  he  had been armed by the court with power to apply in the right  of the defendant Reddy.  The fact however is that the  receiver made the application in his own name.  Even if Mr.  Pathak’s contention  is  right the company was no party to  the  suit filed  by Sir Padampat against Reddy and that being  so,  no order  could  be  issued  to the company  in  that  suit  to recognize  the receiver as a shareholder in place of  Reddy. The  matter might have been different if the company  was  a party  to the suit and was ordered by the court to  register the  receiver’s  name in place of Reddy for the  484  shares purchased by Sir Padampat and was also ordered to issue  new shares in the name of the receiver.  It is not necessary for us  to offer any final opinion on the question if the  court would  have been within its right to direct his name  to  be included in the register, even if the company was  impleaded in  the  suit filed by Sir Padampat against Reddy.   We  are however  quite  clear  that  the  company  not  having  been impleaded  in that suit, it was not bound to issue  the  now shares in the name of a person whose name was not already in the  register  of members even if he  represented  a  person whose name was already in the register.  The High Court  was thus  right in dismissing the receiver’s suit.  We are  also of the opinion that the appellate bench of 144 the  High  Court was also right when it  declined  to  grant reliefs A and B of the plaint to Sir Padampat.  The sanction given  to the company to issue new capital had  lapsed  long before Bhagwati J. granted reliefs A and B to the plaintiff. It was an extraordinary procedure in a civil suit to  direct a company which was no party to the original suit to  obtain fresh  sanction for the issue of new shares and  then  allot them to the plaintiff It seems to have been overlooked  that if sanction to issue new capital was somehow obtained,  that capital  would  also have to be distributed as  directed  by section 105-C and could not be allotted by the directors  in favour  of  any  particular  shareholder.   In  the  altered situation  that arose after the institution of the suit,  if the  plaintiff  succeeded,  the only relief  that  could  be granted  to him was the relief of damages.  We  are  however unable  to grant the relief to the plaintiff in view of  our finding  that Reddy could not be compelled  as  constructive trustee to buy new shares in his own name for the cestui que trust  and  further in view of our finding that even  if  he could  be compelled to acquire those shares in his own  name for  the  cestui  que trust he could not  be  said  to  have defaulted in his duty in carrying out the directions of  the cestui  que  trust  as  in this case  no  proper  and  valid requisition was made by the cestui que trust on the  trustee

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for the acquisition of those shares.  The plaintiffs in  the two suits are therefore not entitled to any relief For the reasons given above, we allow Reddy’s appeal No.  53 of 1950 and dismiss the cross appeal of Sir Padampat as well as the receiver’s appeal No. 52 of 1950 and dismiss both the suits, but in the circumstances of this case we will make no order as to costs in both the suits throughout.                    Appeal No. 53 allowed.              Appeals Nos. 52 and 54 dismissed. Agent  for the appellants in Appeals Nos. 52 and 54 and  the respondent in Appeal No. 53: S. P. Varma. Agent for the respondents in Appeals Nos. 52 and 54 and  the appellant in Appeal No. 53: Rajinder Narain. 145