SYED HAMM ALI SHAH, J.------ Sialkot Dry Port Trust, according to the register of members of the respondent company, is shareholder to the extent of 2710219 shares of the value of Rs. 2,71,02,190/- out of total capital of the company, amounting to Rs. 8,03,0.0,000/-. The petitioner through filing of instant petition, prays for rectification of the register of members of respondent company by seeking removal of the name of Sialkot Dry Port Trust, as shareholder/member of the company. The respondent company contested the petition, filed reply, controverted the assertions of the petition and raised various preliminary objections Sialkot Dry Port Trust/shareholder also filed reply to the petition and controverted the assertions made in the petition.
2. Learned counsel for the petitioner has contended that Sialkot Dry. Port Trust is not a legal entity, hence it cannot be a shareholder in the company. Learned counsel has submitted that notice of any trust expressed implied or constructive cannot be entered on the register of Members nor such notice can be received by the Registrar, according to Section 148 of Ordinance, 1984,He added that bar imposed on receiving or entering the notice of trust, on the register of members, means that a trust cannot become a member of the company. Learned counsel further submitted that the shareholder of the company is entitled to receive the dividend while the Trust can only be registered for a charitable purpose. Becoming a member in company, affects the very object of trust and its nature changes into profitable instead of charitable. Learned counsel has referred to the case of E.D. Sasson and Company Limited v. Kapatch (XLV Bombay Law Reporter 48) to contend that a Trust can be restrained from attending meeting of company and to enjoy and sign the proxy with regard to shares Learned counsel further submitted that Sialkot Dry Port Trust is Sum total of individuals/human being and as such does not qualify to be designated as a person, within the contemplation of Section 2(21) of the Companies Ordinance, 1984. Learned counsel has lastly submitted that the capital has been increased to turn existing members of the company into a minority.
3. Mr. Shahid Karim, Advocate, learned counsel for the trust, on the other hand, has submitted that increase in capital was not due to any male fide or with an intent to turn petitioner in negligible minority, but it was made to meet the mandatory requirement of Section 28 of the Insurance Ordinance, 2000. He contended that Sialkot Dry Port Trust is a legal entity and clause 3(xii)(c) of the instrument of Trust, which is a registered document, authorized the trust to invest in stocks. He further submitted that the Trust falls within the definition of person as contemplated in Section 3(39) of the General Clauses Act. Trust, which is duly registered, is eligible to become a member of the company. Learned counsel has submitted that the term "trust" in Section 148 starts with small T, which is meaningful and pertains to a person who holds share in trust for another person. Learned counsel explained that under Section 148 of the Companies Ordinance a shareholder, cannot issue notice or to convey to a company that a certain person, who holds share in trust for another, cannot represent the original shareholder in the meetings of the company, etc. Learned counsel supported this contention by referring to page 446 of Palmer's Company Law. Learned counsel for respondent No. 1, Sh. Muhammad Ismail, Advocate, has submitted that as per record of the company, Sialkot Dry Port Trust holds shares in its name, of the value of Rs. 2,71,02,190/-. He adopted the arguments of Mr. Shahid Karim, Advocate and submitted further that the name of respondent No. 2 had been entered in the register of members in legal manner, and no illegality has been committed in this respect.
4. Heard. Learned counsel for the parties and record perused.
5. The membership of Sialkot Dry Port Trust, has been challenged by petitioner, on the ground that Section 148 of the Companies Ordinance, 1984 (Ordinance XLVII of 1994), imposes restriction that no notice of any trust shall be entered on the register of. members. The restriction statedly, creates the bar on trust, to be made a member in a company. To resolve this issue. The term "trust" used in Section 148 of Ordinance, 1984, needs its determination first. Term "Trust" is commonly used for a 'Trust' registered and created under Trust Act, 1882; or for the right to the beneficial enjoyment of property, to which another person holds the legal title. 'Trust' in the former case is an obligation annexed to be ownership of property and arising out of confidence reposed in and accepted by the owner, or declared and accepted by him for the benefit of another or the owner. The person who reposes or declares the confidence is called the "Author of trust", the person who accepts the confidence is called 'trustee'. The person(s) for whose benefit the confidence is accepted is called the 'beneficiary' or beneficiaries'. The subject-matter of trust is called the 'Trust Property' or 'Trust money'; and the instrument, if any, by which the trust is declared is called the 'instrument of trust' it can be private or public i.e. charitable.
6. The trust in the latter case, signifies the relation whereby one or more persons hold something material or accept some obligation in trust for another or for the benefit of other persons. The relation, when it finds manifestation in ifs practical form is named as 'trust'. The person in such relation, who holds something or accept some obligation for benefit of other is called the 'Trustee' and for whose benefit something is held, is called 'beneficiary' or `cestui que trust. So in the former case, it is in an 'Institution' while in the latter is relation or confidence.
7. Coming to the expression "trust" used in Section 148 of the Companies. Ordinance, 1984, it is to be seen that which kind of trust is mentioned in the said section. Reference of Palmer's Company Law (13th Edition) is necessary, where dealing with similar situation, at page 446, it has been expressed that:--- "In the case of companies registered in England, no notice of any trust is to be entered on the register or is receivable by the company (S. 117). This is one of the key sections of the Act. Its effect is that a beneficiary who is not registered as a holder of shares has no connection with or rights in, a company in which shares are held on trust for him. He cannot, for instance, except by taking legal proceedings to seek the protection of the. Court for his interests, interfere with the normal transfer procedure."
Reference to the following paragraph of the judgment of Lord Coleridge in the case of "Perkins etc. v. Mexican Santa Barbra Mining Co."[(1890) 24 QBD 613) is relevant:-- "It seems to me extremely important not to throw any doubt on the principle that companies have nothing whatever to do with the relation between trustees and their cestui que trust in respect of the shares of the company. If a trustee is on the company's register as the holder of share, the relations which he may have with some other person in respect of the shares are matter with which the company have nothing whatever to do; they can look only to the man whose name is on the register."
8. Case of E.D. Sasson and Company Limited v. Kapatch (Volume XLV 1943 Bombay Law Reporter 46), relied upon by the petitioner himself, deals with situation, where purchaser of the share in the company, took delivery of share certificates and transfer deeds. Suit was filed for injunctive order of the Curt against the defendant (seller of shares) to vote in the meeting of the company according to wishes of plaintiff to enable them to get themselves registered as share holder of the company or in the alternative sign the proxy forms. Court found that Section 33 of the Indian Companies Act, which forbids notice of trust to be received on the register, implies that there can be, trust of shares.
It was observed in the judgment that control of vote on share holder by cestui que trust will render provision of Section 33 of Indian Companies Act nugatory, while depriving the beneficiary to control the trustee would defeat the provisions of Section 94 of Trust Act, 1882. It was also observed that the position with regard to such shares is simple. As between company and seller, the seller' is shareholder while it is the beneficiary, who is a shareholder inter-se the seller and purchaser, Court decreed the suit, restrained the defendant to attend meeting and directed to sign proxy forms. This judgment though referred by learned counsel for the petitioner, supports the stance of the respondents.
10. A person whose name is entered in the register of members is the shareholder/member of the Company according to provisions of Ordinance, 1984 (ibid). Thu& the transferor remains the shareholder of company as long as his name remains on the register and until the time the name of transferee is entered on the register. Sale and purchase of shares some time creates a situation, whereafter the sale, transferor receives consideration, signs transfer deeds and delivers share scrip. But the name of transferee is yet to be entered in the register of members. In spite of concluded transaction, the seller/transferor is holder of shares and legal little in this respect vests with him although beneficial interest has, been transferred to purchaser/transferee. A company cannot inquire into a share holder's motive and invalidate his voting right, by going, deep into the scrutiny and see that legal as well as 'beneficial estate vests in such shareholders. Section 148 further implies the restriction to keep the company out of any controversy, with regard to rights of a -shareholder as trustee end the transferee as cestui que trust. Beneficial owner is alien to the provisions of Companies Ordinance, 1984. Permitting the beneficial owner to control voting etc., in meetings of the Company, will render Section 148 of the Companies Ordinance nugatory. The transferor, who holds the legal title, has no right to receive dividend of other benefits because due to conclude contract the transferee is beneficial owner. Transferor is bound to pay the divided and other benefits to the transferee, even when there is no express contract between the parties, to that effect. A constructive trust comes into existence, which make it obligatory on the part of trustee to transfer the corpus and income to cestui que trust. The position which emerges in such situation, is that as between company and trustee, the trustee is shareholder. While on the other hand as between the trustee and beneficiary, it is beneficiary who is shareholder. The severance of interest in such like situation creates a constructive trust, within the contemplation of Section 94 of the Trust Act, 1882, which reads:--- "94. Constructive trusts in cases not expressly provided for. - In any case not coming within the scope of any of the preceding sections, where there is no trust, but the person having possession of property has not the whole beneficial interest therein, he must hold the property to the benefit of the persons having such interest, or the residue thereof (as the case may be), to the extent necessary to satisfy their just demands."
11. Above discussion and resume of case-law brings me to conclude that word 'trust' used in Section 148 of the Companies Ordinance, 1984, relates to a trust, where relationship of trustee and cestui que trust is created. The provisions of Section 148 do not extend to a trust as an institution, registered and created under Trust, Act, 1882.
12. will now advert to the question of admissibility of a trust as member of company. Section 2(21) of the Companies Ordinance, provide that a 'person' is eligible to become a member of a company. Trust on its registration become a person, within the contemplation of Section 3(39) of the General Clauses Act Sub-section (39) is reproduced hereunder:-- "Person" shall include any company or association or body of individuals, whether incorporated or not."
Trust, according to above definition is person and in that capacity can enter on the register of members as shareholder of a company. The trust in the instant case is a registered body and its bye-laws permit the trustee to invest in securities and derive profit thereform. Clause 3(xii)(c) is reproduced as under:--- "3. .....................
(i) .......................
(ii) .....................
(iii) ...............
(iv) .......................
(v) .........................
(vi) ...........................
(vii) .................
(viii) .................
(ix) .................
(x) .......................
(xi) With the above objects in view to do all or any of the following things:---
(a) ........................
(b) .............................
(c) To receive, take title to hold and use the proceeds and income of stock, bonds, obligations, or other securities of any corporation or corporations, domestic or foreign, but only for foregoing purposes, or some of them."
13. The curx of the above discussion is that respondent No. 2, fails within the definition of person. It is capable of becoming a member in a company. Only restriction in this respect, is when the instrument of trust fails to provide or prohibits the trust to become, member/shareholder in a company. The instrument of trust, if imposes conditions then trust can become member, subject to those conditions. The petitioner has failed to make out a case for rectification of the register of members of the respondent company.
14. For the foregoing, this petition has no merit and the same is accordingly dismissed with no order as to costs.