I. MAHMUD. J.-This is a Letters Patent Appeal against the judgment and decree of a learned Single Judge of this Court on the Original Side (Kadir Nawab Awan, J.) dated 26th May 1967, by which the learned Judge dismissed the appellant's suit (No. 196/63) against the respondents.
2. Briefly, the case of the appellant/plaintiff, Yukuf son of Hakimuddin, was that the respondent No. :2, Keki P. Jamadar, an Indian national, was the registered holder of 500 shares of the face value of Rs. 100 each of Valika Textile Mills Ltd. The respondent No. 1, which is a public company, whose shares are quoted on the Stock Exchange. That, in or about 1953-54 two persons came to the house of the appellant's father, Hakimudin with the share certificates which were accompanied by blank transfer forms duly executed by respondent No. 2 and they delivered the same to his father against payment of Rs. 47,000 in cash, as the purchase price of the shares. That the shares and blank transfer forms were handed over to the appellant by his father as they were purchased for him.
That the appellant and his father met Fakhruddin Valibhai, the Managing Director of the respondent No. 1 and they informed him of the purchase of the said shares and requested him to register the transfer in the appellant's name, but they were told that since the respondent No. 2 was a non-resident Indian National. The transfer could mot be registered without the permission of the State Bank of Pakistan. That as the purchase price for the shares was "black money", the appellant could not approach the State Bank of Pakistan for permission to register the transfer until after he had declared the shares In a statement of income and assets under the Martial Law Regulation, 1958 and the Income-tax Act. That despite obtaining the State Bank's permission in 1962 the respondent No. 1 refused to register the transfer in the name of the appellant in collusion with the respondent No. 2 on the alleged ground that the respondent No. 2 had instructed the company not to register the same. Therefore, the appellant filed an application to the high Court under section 38 of the Companies Act, 1913, for rectification of the register of members but the application was dismissed on the ground that the matter being highly contentious and disputed, it could only be decided by a regular suit. Accordingly, the appellant filed the suit in question praying for declaration as to the appellant's title to the said shares and for a mandatory injunction directing the respondent No. 1 to register the transfer of the said shares in his name.
3. In his written statement, the respondent No. 2 denied that he had sold the said shares to Hakimuddin or that he had received any payment for them. His plea was that, at first, the shares and the executed blank transfer forms were kept with one Sulaman Hoodbhai for sale, but they had remained unsold. Therefore, he took them back from the said Suleman Hoodbbai in or about September 1953, and he and Cassumali M. Shroff, who was well-known to Hakimuddin, went with the shares to Hakimuddin and requested him to keep the shares for sale for a good price after obtaining his prior approval. He further stated that Hakimuddin visited him in Bombay in 1956 and informed him that as he was not keeping well, he had not been able to dispose of the shares and requested him to make other arrangements for their sale. Accordingly, the respondent requested Hakimuddin to hand over the shares to witness Abdul Aziz Ramzanali of Karachi and when the said Abdul Azia visited Bombay a few months later, he also requested him to collect the shares from Hakimuddin. That this was mot done with the result that the shares continued to remain with Hakimuddin. That after he came to know of Bakimuddin's death In 1958, he visited Karachi in October 1960, and he and the said Cassumali Shroff contacted the appellant and requested hire to return the said shares but he was kept them on false promises. Therefore he instructed the respondent No. 1 not to register any transfer of the shares without reference to him and, in the meanwhile, he made other arrangements with Habib Executors and Trustees Company Ltd. To deal with the shares. By his legal notice dated 25-9-63 he formally demanded return of the said shares.
But as the appellant declined to return the shares, he filed a Suit No. 160/63) in the High Court against the appellant and the respondent No. 1 for possession of the said shares, which suit was then pending. The case of the respondent in short, wag that as Hakimuddin had died before the shares could be sold, the appellant taking advantage of the situation had attempted falsely to put himself forward as the purchaser of the shares on payment of consideration. He emphatically denied that he had sold the shares to Hakimuddin or the appellant or received payment of any consideration.
4. The respondent No. 1 in its written statement denied the case of the appellant and put him to strict proof and generally supported the case of the respondent No. 2.
5. The appellant examined himself and Abdul Waheed, a share broker. On behalf of the respondents, only one witness was examined and he was Abdul Aziz Ramzanali, referred to earlier.
An application for examination of the respondent No. 2 on commission was filed but it was withdrawn by Mr. Valiani, his counsel who, despite an undertaking to produce the defence witnesses at the next hearing, failed to examine the respondent No. 2.
6. The learned Judge discussed the evidence of these witnesses and the circumstances of the case. He was impressed by the presence of several circumstances which, according to him, supported the respondent's version that the shares had not been sold to the appellant but were kept with Hakimuddin for the purpose of sale with his prior approval, as being more consistent with the story given by the respondent No. 2 in his written statement. Accordingly, he dismissed the appellant's suit.
7. The main and important circumstances which, according to the learned Judge, supported the version of the respondent No. 2 and belied that of the appellant, were that each of the blank transfer forms appear to have been interpolated and the blanks in the forms filed in after their deposit with Hakimuddin, which therefore showed that the transaction was not a sale. The interpolations, according to the learned Judge, were: "(a) that the name of the respondent No .1as well as the name of the respondent No. 2 as transferor and the serial number of the-- respective shares were in different handwriting in ink, and the figure of the purchase money was also in different ink and handwriting. Further, the name of the appellant appeared thereon in rubber stamp;
(b) the transfer forms were not stamped at the time of the alleged transfer but later on in 1962 when they were presented for registration, to the respondent No. 1, a fact which, according to the learned Judge, went against the appellant because in the words of the learned Judge' No same person would take the risk of purchasing there shares. Without being stamped"and
(c) Sharaf A.I, who had attested the signature of the transferor. The respondent No. 2, and Masoodur Rahman, who had attested the signature of the transferee, the appellant, had not been examined:'
8. Mr. Mohsin Tayabali, learned counsel for the appellant, submitted that the above-mentioned circumstances relied upon by the learned Judge, showed that he had not appreciated the true nature of a transaction of sale, of shares in blank. We are inclined to agree with this submission The transaction of sale (or mortgage) of fully paid-up shares of public companies quoted on the Stock Exchange accompanied by transfer forms' in blank executed only by a transferor, is well-known to company Law and is extensively practised and acted upon in the share markets in Pakistan as in other countries. Palmer's Company Law, 19th Edn., p. 113 explains the practice relating to sale or mortgage of shares in blank as follows :- "Upon a sale or mortgage of shares, the transferor very commonly signs and hands over what is called a blank transfer (i.e. a transfer, signed by transferor, but with a blank for the name of the transferee), the intention being that the purchaser or mortgagee shall be at liberty later on to fill up the blank and perfect his security by getting himself registered. If however, the regulations require the transfer to be by deed, the transferee cannot effectively, fill up the blank and deliver the deed unless authorised so to do by power of attorney under scale; whereas. If the transfer may be under hand merely, the authority to fill up the blank may be oral and shay be implied from. The nature of the transaction:"
The English case-law relating to transfer of shares in blank was fully discussed by Lord William, J. In the matter of Bengal silk Mills Co. Ltd AIR 1942 Cal. 461. In that case, one Mst. Fatima Begum was the registered holder of 6 shares In the Bengal Silk Mills Co. Ltd. In 1928 she executed a transfer of the shares in blank in favour of one Suhrawardy for Rs, 2,100. After the death of Mot. Fatima in 1935, Suharwardy transferred the shares in blank to the petitioner on 10th December 1940 for Rs. 2,400.
The petitioner thereupon completed and filled in the blanks and inserted the date o'1 the transfer as 10th December 1940 and presented the transfer for registration, to the company. But the company declined to register the same ors the ground that it was filled in after the death of Mst. Fatima Begum. It was held that in the case of transfers in blank, the transferee has the right and authority to fill in the necessary particulars including his own name was transferee and the date of the transfer even after the death of the original transferor. The learned Judge cited a passage from Sircar and Son's Indian Companies Act, 1913, which stated as follows :-- "In the case of a transfer executed in blank if the transferor dies before the ultimate transferee's name has been subsequently filled in, that would not in any way affect the right of such transferee to get his name registered. f he reason is that so far as the transferor is concerned he loses his right in the shares as soon as he executed transfer in blank. The transfer is good as against him even though the transferee has not filled up the form."
K. M. Ghose en "The Indian Company Law, 10th Edn. 1956, Article 515 states :- "Transfer to blank.-Where under the articles of a company a transfer of shares ma,/ be made by an instrument in writing the transferor may sign a blank transfer and hand it over to a purchaser or mortgagee with authority to the holder of it for the time being to fill in the name of the transferee.
Such a transfer when filled up can be sent in for registration and the transfer will be valid as between the parties to the transaction and where the right of no third parties is involved (Arjun Prasad v. Central Bank of India AIR 1956 Pat. 32=34 Pat. 8).
Whether it be a matter of agency or authority or contract, the transferee in cases of transfers of shares in blank has the right to fill in necessary particulars including his own name as transferee and the date of the transfer after the death of the original transferor: The instrument then. Is complete and the transferee is entitled to have his name registered in the company's register (Bengal Silk Mill Co. 1342 C. 461, 45 C W N 1109). Where a transfer in blank has been used for effecting a transfer, the transferor cannot take a technical objection as to the filling in of the consideration to defeat the object for which he gave the transfer (Indo-China Steam Navigation CO. (1917) 2 Ch. 100)."
9. These passages show that the transfer is good as against the transferor even though the transferee has not filled in the blanks in the forms. Therefore, the fact that the name of the appellant as purchaser, as well as the other particulars were filled in after the delivery of the blank transfer form to Hakimuddin was quite irrelevant and does not support the inference that the forms were interpolated and the transfer was not a completed sale and is consistent with the appellant's case of purchase. The appellant as subsequent holder, in possession of the blank transfer forms and the share certificates became the prima facie owner thereof. He had the authority and the right to fill in the blanks in the transfer forms and present the same for registration to the respondent No. 1 alongwith the share certificates. It is also immaterial that the blank transfer forms were not stamped at the time of their transfer, for the practice is that they are stamped before presenting the forms for registration to the company by the ultimate holder who desires to have them registered in his name. Equally irrelevant is the fact that the attesting witnesses had not been examined to prove "caution of the transfer by the respondent No 2, because execution by him was not in dispute, as It was his case that he had deposited blank forms duly executed, with Hakimuddin.
10. The learned Judge alms mentions two other circumstances which, according to him, east doubt on the appellant's version of sale. The first is that there has been delay in applying for registration of the transfer. Some explanation has been given by the appellant that the source of the purchase money was "black money" and until he has declared the source to the Martial Law authorities in 1959 he could not even only apply to the State Bank of Pakistan for permission to transfer them in his name. The explanation of the delay may not be convincing, but that by itself, in our view, cannot defeat the applicant's prima facie title to the shares. The second circumstance is the non-production of a receipt for the purchase money. This falls in the same category. It may be that for the same reason the appellant's father did not take a receipt for "black money" which he paid to the respondent No. 2.
11. It also appears to us that the learned Judge failed to appreciate that the onus of proof on the second part of the third issue, was on the respondent No. 2, namely "whether the shares and transfers in suit came and have remained, in possession of the plaintiff in the manner and circumstances alleged in sub-pare. (a) to para. 4 of the written statement of defendant No.2." It eras his plea in the written statement that the shares and the blank transfer forms were kept with Hakimuddin for sale. It was, therefore, incumbent upon this respondent to produce the best evidence as proof of the alleged deposit. The case of the respondent No. 2 in para. 4 of his written statement was that he, accompanied by Cassumali M. Shroff, went to the house of Hakimuddin and personally deposits;: and entrusted the shares with him, Neither he examined himself nor was Cassumali produced. There is, therefore, no direct evidence of the alleged deposit, except the hearsay account given by Abdul Asia (D. W. 1) with regard to his conversation with the deceased Hakimuddin. The learned Judge also did not even consider the evidence of this witness as of any value.
12. We are satisfied that on the balance of probabilities, the evidence is preponderantly more in favour of the appellant's version than of the version given by the respondent No. 2 in his written statement which remained unproved at the trial.
13. In the circumstances, we could allow the appeal but would leave the parties to bear their own costs.