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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 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, 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 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.
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 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.
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; 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 vs 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) ; 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. vs 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 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) 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 vs 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 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 vs 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 must hold the new lease for the benefit of his cestui que trust.
The leading authority upon that is (1) [1903] 2 Ch .
133 Keech vs 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 vs 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.
(2) 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 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 vs Biss(1), the question was obtaining the benefit of renewal of a (1) 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 vs 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) 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 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 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.
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 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 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 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: section P. Varma.
Agent for the respondents in Appeals Nos. 52 and 54 and the appellant in Appeal No. 53: Rajinder Narain.

Output:
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 section 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 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 vs Belilios ([1901] A. C. 118), E. D. Sassoon, & Co Ltd. vs Patch , Miles vs Safe Deposit Trust Co. (66 L.E. 903) referred to.
Biss vs Biss ([1903] 2 Ch. 40), Jones vs Evans ([1913] 1 Ch.
23) distinguished.


Input:
view Petition Nos.
571 586 & 586A of 1985.
In Transfer Cases Nos. 52 to 68 of 1982.
By Circulation.
The Order of the Court was delivered by ORDER We have considered the grounds urged in the Review Petition and since we find no substance in them.
the Review Petition are dismissed.
PER THAKKAR, J.
While it is not agreeable to disagree with the. majority.
my conscience commands.
and my sense of duty demands.
that I should disagree.
Disagree with the proposed order dismissing the Review Petitions in limine with the remark that "we find no substance in them", without affording to the Petitioners any opportunity of hearing in the Court to substantiate the grounds urged by them.
One of the grounds urged.
ground No. 8 in the Petitions, is: "8.
That during the course of arguments the parties had proceeded on the assumption that the Hon 'ble Court would 901 decide only the 7 questions framed by the then Hon 'ble Chief Justice and the individual petitions on merits would be dealt with either by the Division Benches of this Hon 'ble Court or by the respective High Courts.
It was on this assumption that the parties addressed their arguments and submissions only on those general questions.
It is for this reason that written submissions were made only in T.C. No. 55 of 1982 amongst all the Railway matters.
None of the Petitioners had been given any opportunity to argue their cases on merits.
The judgment under review dismissed all the Transferred Cases and thus all these petitions stand decided on merits also.
It is, therefore, necessary that in the interest of justice, the petitioner should be given another opportunity to argue their petitions on merits.
This has caused serious prejudice to their cases is apparent from the facts of a few cases reference whereto is made herein after.
" It is not possible to say that there is no substance in this ground because no notices have been issued on the Review Petitions and the averments have not been controverted by the other side.
So also it is not stated in the majority judgment that the averment is factually untrue.
Reference may be made to ground number 9 in Review Petitions Nos.
57 1 to 586A of 1985 which reads as under: ' '9.
That it may be submitted 'that the petitioner Shri Narpat Singh had been served with the Office Order identical to the one reproduced in para 3 above and was charged with stoppage of work from 3.2.
1981 and missing from his place of duty and for intimidating and pressurising the loyal employees for not joining duty.
The fact is that the petitioner, Narpat Singh is a patient of Asthama and was under the treatment of the Rail way Medical Authorities between December 1980 to 1.2.1981 as outdoor patient.
On 2.2.
1981 while on duty as Shed man is DSL/Shed BGKt in shift 6 hours to 14 hours, he developed breathing difficulties and was unable to perform his duties.
He obtained sick memo G/92 on 2.2.1981 from GFO/DSL BGKt and while leaving duty proper charge was handed over by the petitioner.
He was advised complete rest and sick certifi cate No. 62 of 2.2.1981 for 27 days was submitted.
902 In these circumstances the petitioner could not be treated as on un authorised absence from work from 3.2.1981 when he had obtained G 92 on 2.2.1981 and had sent in his sick certificate and had observed all clue formalities of reporting sick as required under the rules.
Had the cases been argued on merits, the petitioner, Narpat Singh would have shown to the Hon 'ble Court as to how he could not be treated on un authorised absence and that the dismissal order has been malafidely issued in a mechanical manner and cannot be substained.
" That the matter of Narpat Singh was not argued on its individual merits is correct.
Unless the factual averments made in para 9 are shown to be untrue, these may be consid ered adequate to vitiate the impugned order on the ground that it manifests non application of mind and is built on 'no evidence '.
This is a good ground to entertain the Review Petition and issue notice to the other side for heating in the Court.
In the majority judgment ; (451) paragraph 59 the proposition of law has been enunciat ed that the pleasure under Article 310(1) can be exercised even by an authority specified in the Act or rules made under Article 309 (proviso) in the passage quoted below: "Thus, though trader Article 310(1) the tenure of a govern ment servant is at the pleasure of the President or the Governor, the exercise of such pleasure can be either by the President or the Governor acting with the aid and on the advice of the Council of Ministers or by the authority specified in the Acts made under Article 309 or in rules made under such Acts or made under the proviso to Article 309 and in the case of clause (c) of the second proviso to Article 311 (2), the inquiry is to be dispensed with not on the personal satisfaction of the President or the Governor but on his satisfaction arrived at with the aid and on the advice of the Council of Ministers . " (Emphasis supplied) Serious Constitutional questions, such as the following, arise in this context: When the Constitution advisedly invests powers in regard to the exercise of pleasure on the incumbents of highest executive office can these powers be exercised by any other official, say Divl.
Mechani 903 cal Engineer (DME)? By a process of interpretation (and not amendment) can it be so construed that what the President by virtue of Article 310 (1) can do, the DME of the Railway can do by virtue of the same Article? It would virtually amount to amending Article 310 (1) by adding the words "or by any other authority . ".
That is to say to rewrite an article in the Constitution.
Is this permissible? What is more, the power under Article 310 (1) is exercisable even by the President or the Governor, not on his personal satisfaction, but with the aid and on the advice of the Council of Ministers.
Can the same power be exercised by a D.M.E. or any other lower functionary acting on his own, there being no question of his acting with the aid or advice of the council of Ministers? Can the DME who does not even act in the name of the President, surrogate for the President? It is certainly an important Constitutional issue which requires to be examined, but has not been examined, from this perspective though the point was debated.
This is another ground to entertain the Review Petition and to issue a notice to the other side for heating in the Court.
Another ground for entertaining the Review Petition is this: Will it not be tantamount to speaking in two voices to hold that principles of Natural Justice need not be complied with even in regard to the quantum of punishment to be inflicted on a workman, even though the law declared so far demands that even a black marketeer cannot be black listed without observing the principles of Natural Justice? Is a workman who 'sweats ' for the Nation not entitled to the same treatment as a black marketeer who 'bleeds ' the Nation? 5.
An extremely serious and important ground for review also arises in the context of the doctrine enunciated in the following passages ; (522,523), paragraphs 170, 173: "It may be that the railway servants went on these strikes with the object of forcing the Government to meet their demands.
Their demands were for their private gain and in their private interest.
In seeking to have these demands conceded they caused untold hardship to the public and prejudicially affected public good and public interest and the good and interest of the nation.
. . . In the context of an all India strike where a very large, number of railway servants had struck work, the railway services paralysed, loyal workers and superior officers assaulted and intimidated, the country 904 held to ransom, the economy of the country and public inter est and public good prejudicially affected, prompt and immediate action was called for to bring the situation to normal.
In these circumstances, it cannot be said that an enquiry was reasonably practicable." The workers certainly have a right to struggle and strive for economic justice in a country the Constitution of which, in the preamble, proclaims it to be a "Sovereign SOCIALIST Secular Democratic Republic".
Going on strike in the course of such a struggle cannot be characterized as holding the country to ransom and be frowned upon.
Nor can they be condemned as seekers of private gain for endeavouring to remove their economic distress and plight to bring about a just society.
And it cannot be said on that account that it is not "reasonably practicable" to hold the inquiry in the case of any workman if there is a country wide general strike by workers.
Article 311 (2)(b) was surely not de signed by the Founding Fathers in order to ' enable 'braking ' a strike called in support of workers ' demands for socio economic justice.
The issue therefore deserves to be exam ined in the light of this perspective and the Review Peti tions deserve to be admitted.
On these grounds and in the light of the other grounds urged in the Review Petitions, the Review Petitions deserve to be heard in the Court.
It is therefore directed that the Review Petitions be admitted, notices be issued to the Respondents, and the matters may be placed in the Court for further hearing.

Output:
The petitioners, who were Railway employees, were either dismissed or removed from service without holding any en quiry for striking work, paralysing railway services, as sualting and intimidating loyal workers and superior offi cers, etc.
The writ petitions flied in the High Courts challenging the orders of dismissal or removal stood trans ferred to this Court, heard along with other writ petitions and civil appeals and by judgment dated 11th July, 1985 dismissed.
The, petitioners sought review of the said judgment alleging that during the course of arguments, parties had proceeded on the assumption that the Court would decide only the seven questions framed by the then Hon 'ble the Chief Justice, and the individual petitions on merits would he dealt with either by the Division Benches of this Court or by the respective High Courts, that the parties addressed their arguments and submissions only on those general ques tions, that written submissions were made only in transfer case No. 55 of 1982 amongst all the railway matters, that none of the petitioners had been given any opportunity to argue their cases on merits, that the judgment under review dismissed all the transferred cases and thus all these petitions stand decided on merits also, that this has caused serious prejudice to their cases and, therefore, in the interest of justice, another opportunity should he given to argue the petitions on merits.
Dismissing the Review Petitions, HELD: Per P.N. Bhagwati, C.J., V.D. Tulzapurkar, R.S. Pathak and D.P. Madon, JJ.
899 The Review Petitions are dismissed as there is no sub stance in the grounds urged.
Per M.P. Thakkar, J. dissenting.
There is good ground to entertain the Review Peti tions and issue notice to the other side for hearing.
[904E] 2.
There is substance in the grounds because no notices have been issued on the Review Petitions and the averments have not been controverted by the other side.
In the majori ty judgment also it has not been stated that the averments are factually untrue.
[901D E] 3.
That the matter of Narpat Singh was not argued on its individual merits is correct.
Unless the factual averments made in Para 9 of the Review Petition are shown to be un true, these may be considered adequate to vitiate the im pugned order on the ground that it manifests non application of mind and is built on 'no evidence '.
[902C] 4.
In the majority judgment the proposition.
of law has been enunciated that the pleasure under Article 310(1) can be exercised even by an authority specified in the Act or rules made under the proviso to Article 309.
[902D E] 5.
The power under Article 310(1) is exercisable even by the President or Governor, not on his personal satisfaction, but with the aid and on the advice of the Council of Minis ters.
Can the same power be exercised by a Divisional Me chanical Engineer or any other lower functionary acting on his own, there being no question of his acting with the aid or advice of the Council of Ministers? Can the D.M.E. who does not even act in the name of the President, surrogate for the President? It is certainly an important Constitu tional issue which requires to be examined, but has not been examined from this perspective though the point was debated.
[903B D] 6.
Will it not tantamount to speaking in two voices to hold that principles of Natural Justice need not be complied with even in regard to the quantum of punishment to be inflicted on a workman, even though the law declared so far demands that even a black marketeer cannot be black listed without observing the principles of Natural Justice? Is a workman who 'sweats ' for the Nation not entitled to the same treatment as a black marketeer, who 'bleeds ' the Nation? [903D E] 900 7.
The workers certainly have a right to struggle and strive for economic justice in a country the Constitution of which in the Preamble, proclaims it to be a "Sovereign SOCIALIST Secular Democratic Republic".
Going on strike in the course of such a struggle cannot be characterized as holding the country to ransom and be frowned upon.
Nor can they be condemned as seekers of private gain for endeavour ing to remove their economic distress and plight to bring about a just society.
And it cannot be said on that account that it is not "reasonably practicable" to hold the enquiry in the case of any workman if there is a country wide gener al strike by workers.
[904B 904D] 8.
Article 311(2)(b) was surely not designed by the Founding Fathers in order to enable 'breaking ' of a strike called in support of workers ' demands for socio economic justice.
The issue therefore deserves to be examined in the light of this perspective.
[904D]


Input:
Civil Appeal No. 2040 of 1974.
Appeal by special leave from the Judgment and order dated the 13th June, 1974 of the Andhra Pradesh High Court in W.P. No. 2145 of 1972.
Niren De, Attorney General of India and P. P. Rao, for the appellant.
r A. Subba Rao for the respondent.
The Judgment of the Court was delivered by RAY, C.J.
This appeal is by special leave from the judgment dated 13 June, 19?4 of the Andhra Pradesh High Court quashing an order of dismissal.
The principal question canvassed by the Attorney General is that the High Court should not have interfered with the findings of the Tribunal.
The State Government in the year 1964 received certain complaints alleging misconduct against the respondent.
The Director of Anti Corruption Bureau was asked to inquire and make a report.
The Government in the light of advice tendered by the Vigilance Commission referred the matter to the Tribunal constituted under Andhra Pradesh Civil Services (Disciplinary Proceedings Tribunal) Act, 1960.
Three charges were framed against the respondent.
Broadly stated the charges were that the respondent claimed false travelling allowance on certain days in the months of January, April and September, 1964.
The respondent denied the charges and submitted a written statement on 4 November, 1968.
The Tribunal made inquiries and on 9 December, 1968 recommended dismissal of the respondent from the service.
The Government thereafter gave a notice to the respondent on 22 February, 1969 to show cause why the penalty of dismissal from service should not be imposed on him.
On 20 March, 1969 the respondent submitted his written explanation.
The Government after considering the explanation of the respondent, by an order dated 24 May, 1969 dismissed the respondent from service.
523 The respondent challenged the order of dismissal in the Andhra Pradesh High Court.
The High Court by judgment dated 27 July, 1970 set aside the order of dismissal on the ground that the recommendations of the tribunal were not communicated to the respondent alongwith the notice regarding the proposed punishment of dismissal.
The High Court observed that it was open to the punishing authority to issue a fresh show cause notice regarding the proposed punishment after communicating the enquiry report and the recommendations of the Tribunal The Government thereafter complied with the directions of the High Court.
The Government cancelled the order of dismissal dated 24 May, 1969.
The Government, however, ordered that the respondent shall be deemed to have been under suspension from service from 21 May, 1969 until further orders.
The order of suspension was challenged by the respondent and set aside by the Andhra Pradesh High Court on 22 March, 1970.
The Government then issued fresh notices dated 16 September, 1970 and 25 September, 1970 to the resplendent and communicated the report of the Tribunal and the recommendations of the Tribunal and the Vigilance Commission regarding the proposed penalty.
The respondent submitted his explanation on 6 and 23 October, 1970.
The Government considered the same.
The Commerce Department thereafter by an order dated S May, 1972 dismissed the respondent from service.
The charges against the respondent were that he made three false claims for travelling allowance for three journeys.
The first journey was on 3 January, 1969 from Rajahmundry to Hyderabad The second journey was on 19 April, 1964 from Rajamundry to Hyderabad and Hyderabad to Rajahmundry on 24 April, 1964.
The third journey was from Rajahmundry to Guntur on 13 September, 1964 and Guntur to Rajahmundry on 16 September, ]964.
The respondent in his written statement filed before the Tribunal denied the charges and maintained that he travelled by first class on the days mentioned in the claim for travelling allowance.
He stated that he travelled by first class from Rajahmundry to Hyderabad on 3 January, 1964 in accordance with his tour programme and claimed the travelling allowance.
He also said that he travelled by first class from Rajahmundry to Hyderabad on 19 April, 1964 and from Hyderabad to Rajahmundry on 24 April, 1964 and claimed travelling allowance.
In Exhibit P 45 which was his signed statement dated 8 January, 1967, he stated that on 3 January, 1964 he went with his Joint Director from Vijayorgram from Rajahmundry in a car.
In that statement he said that he went from Hyderabad to Waltair on 7 January, 1964 and he claimed travelling allowance from Vijayawada to Hyderabad.
In Exhibit P 45 he said that on 19 April, 1964 he travelled from Rajahmundry to Vijayawada by first class and he went to Hyderabad by first class on 19 April, 1964.
In Exhibit P 45 he said that he did not 524 travel on 24 April, 1964 from Hyderabad to Rajahmundry because.
A there was no accommodation.
He waited at Hyderabad.
On 28 April, 1964 he got reservation and travelled to Rajahmundry.
The Tribunal on enquiry found the respondent guilty of charges 1 and 2.
In the Enquiry Report dated 9 December, 1968, the Tribunal recommended dismissal of the respondent.
The respondent in the High Court challenged the order of dismissal.
The High Court set aside the order of dismissal on the grounds that the prosecution did not adduce every material and essential evidence to make out the charges and that the conclusion reached by the Tribunal was not based on evidence.
The High Court held that Exhibit P 45 was not admissible in evidence according to the Evidence Act and it was not safe to rely on such a statement as a matter of prudence.
The High Court said that corruption or misconduct under rule 2(b) of the Andhra Pradesh Civil Service (Disciplinary Proceedings Tribunal) Rules, has the same meaning as criminal misconduct in the discharge of official duties in section 5(1) of the Prevention of Corruption Act, 1947.
The High Court in that background discussed the evidence and findings of the Tribunal as to whether the prosecution placed evidence in respect of the ingredients of the charge under section 5(1)(d) of the Prevention of Corruption Act, 1947 The High Court referred to these features in regard to the finding of the Tribunal.
Four years elapsed between the journeys forming subject matter of the charge and the framing of the charge.
The respondent in his evidence said that he secured accommodation through the Conductor incharge of the first class compartment after the arrival of the train.
It was possible that the respondent might have converted his ticket to first class one once he found that first class accommodation was available on the train even though he had purchased a ticket of lower denomination.
The conductor 's chart is the only basis for showing whether a particular person travelled by first class by a particular train and not by a copy of the reservation chart kept at the starting station.
Though the prosecution produced evidence to show that the respondent did not purchase or reserve first class accommodation in advance, the prosecution failed to produce the Conductor 's charts relating to the trains in question.
According to the High Court "The prosecution utterly failed to adduce any evidence to exclude these possibilities".
The High Court said that it was doubtful whether Exhibit P 45 was admissible in evidence.
It was said to be taken during the course of investigation.
The High Court said that even if the statement is accepted, it only shows that the respondent did not actually travel on the days mentioned in the tour programme according to which travelling allowance was paid.
The respondent made the statement marked Exhibit P 45 on 8 January, 1967.
The charge sheet was framed on 17 November, 525 1967.
The respondent filed the written statement on 2 August, 1968.
He filed an additional written statement on 4 November, 1968.
It is apparent that the charge sheets were framed after investigation.
It transpired on evidence before the Tribunal that one first class ticket bearing No.03834 was collected at Hyderabad on 4 January" 1964.
The further evidence about ticket No. 03834 was that it was issued to one P. Ramachandra Raju who travelled from Rajahmundry to Hyderabad on the night of 3 January, 1964.
The further evidence before the Tribunal was that one first class ticket bearing No. 04049 for the journey from Rajahmundry to Hyderabad was sold to one A. section Murty for the journey an 19 April, 1964.
The Tribunal examined the respondent.
The respondent was given full opportunity to deal with Exhibit P 45.
The High Court was not correct in holding that the domestic enquiry before the Tribunal was the same as prosecution in a criminal case.
The High Court was also in error in holding that Conductor 's chart would show whether the respondent travelled or not.
The High Court accepted the explanation that Conductor 's charts were burnt and, therefore, they could not be produced.
Further, Conductor 'section chart could not show the name of the persons paying the money.
There was positive evidence before the Tribunal of tickets being purchased by persons other than respondent on 3 January, 1964 and 19 April, 1964.
These features figured prominently before the Tribunal.
The High Court all throughout treated the enquiry before the Tribunal as a criminal prosecution.
The scope of Article 226 in dealing with departmental inquiries has come up before this Court.
Two propositions were laid down by this Court in State of Andhra Pradesh vs section Sree Rama Rao(1).
First, there is no warrant for the view that in considering whether a public officer is guilty of misconduct charged against him,.
the rule followed in criminal trials that an offence is not established unless proved by evidence beyond reasonable doubt to the satisfaction of the Court must be applied.
If that rule be not applied by a domestic Tribunal o Inquiry the High Court in a petition under Article 226 of the Constitution is not competent to declare the order of the authorities holding a departmental inquiry invalid.
The High Court is not a Court of Appeal under Article 226 over the decision of the authorities holding a departmental enquiry against a public servant.
The Court is concern ed to determine whether the enquiry is held by an authority competent in that behalf and according to the procedure prescribed in that behalf, and whether the rules of natural justice are not violated.
Second, where there is some evidence which the authorities entrusted with the duty to hold the enquiry has accepted and which evidence may reason ably support the conclusion that the delinquent officer is guilty of the charge, it is not the function of the High Court to review the evidence (1) 526 and to arrive at an independent finding on the evidence.
The High A Court may interfere where the departmental authorities have held the proceedings against the delinquent in a manner inconsistent with the rules of natural justice or in violation of the statutory rules prescribing the mode of enquiry or where the authorities have disabled themselves from reaching a fair decision by some considerations extraneous to the evidence and the merits of the case or by allowing themselves to be influenced by irrelevant considerations or where the conclusion on the very face of it is so wholly arbitrary and capricious that no reasonable person could ever have arrived at that conclusion.
The departmental authorities are, if the enquiry is otherwise properly held, the sole judges of facts and if there is some legal evidence on which their findings can be based, the adequacy or reliability of that evidence is not a matter which can be permitted to be canvassed before the High Court in a proceeding for a writ under Article 226.
Again, this Court in Railway Board, representing the Union of India, New Delhi & Anr vs Niranjan Singh(1) said that the High Court does not interfere with the conclusion of the disciplinary authority unless the finding is not supported by any evidence or it can be said that no reasonable person could have reached such a finding.
In Niranjan Singh 's case (supra) this Court held that the High Court exceeded its powers in interfering with the findings of the disciplinary authority on the charge that the respondent was instrumental in compelling the shut down of an air compressor at about 8.15 a.m.
On 31 May, 1956.
This Court said that the Enquiry Committee felt that the evidence of two persons that the respondent led a group of strikers and compelled them to close down their compressor could not be accepted at its face value.
The General Manager did not agree with the Enquiry Committee on that point.
The General Manager accepted the evidence.
This Court said that it was open to the General Manager to do so and he was not bound by the conclusion reached by the Committee.
This Court held that the conclusion reached by the disciplinary authority should prevail and the High Court should not have interfered with the conclusion.
The jurisdiction to issue a writ of certiorari under Article 226 is a supervisory jurisdiction.
The Court exercises it not as an Appellate Court.
The findings of fact reached by an inferior court or Tribunal as a result of the.
appreciation of evidence are not reopened or questioned in writ proceedings.
An error of law which is apparent on the face of the record can be corrected by a writ, but not an error of facts however grave it may appear to be.
In regard to a finding of fact recorded by a Tribunal, a writ can be issued if it is shown that in recording the said finding, the Tribunal had erroneously refused to admit admissible and material evidence, or had erroneously admitted inadmissible evidence which has influenced the impugned finding.
Again if a finding of fact is based on no evidence, that would be regarded as an error of law which can be corrected by a writ of certiorary.
A finding of fact recorded by the Tribunal cannot be chal (1) ; 527 lenged on the ground that the relevant and material evidence adduced before the Tribunal is insufficient or inadequate to sustain a finding.
The adequacy or sufficiency of evidence led on a point and the inference of fact to be drawn from the said finding are within the exclusive jurisdiction of the Tribunal.
See Syed Yakoob vs K. section Radhakrishnan & ors(1).
The High Court in the present case assessed the entire evidence and came to its own conclusion.
The High Court was not justified to do so.
Apart from the aspect that the High Court does not correct a finding of fact on the ground that the evidence is not sufficient or adequate, the evidence in the present case which was considered by the Tribunal cannot be scanned by the High Court to justify the conclusion that there is no evidence which would justify the finding of the Tribunal that the respondent did not make the journey.
The Tribunal gave reasons for its conclusions.
It is not possible for the High Court to say that no reasonable person could have arrived at these conclusions.
The High Court reviewed the evidence, re assessed the evidence and then rejected the evidence as no evidence.
That is precisely what the High Court in exercising jurisdiction to issue a writ of certiorari should not do.
The respondent raised another contention that the State did not give the respondent a document described as 'B ' Report and Investigation Report of the Anti Corruption Bureau.
The ground advanced by the respondent in the petition before the High Court was that 'B ' Report and Investigation Report to which the reference is made by the Tribunal in its report and which are relied on to support the charges, were not made available to the respondent.
The High Court did not express any opinion on this question because the High Court set aside the dismissal in the ground that there was no evidence for the Tribunal to come to that conclusion.
The State in the affidavit filed in the High Court in answer to the respondent 's petition said that 'B ' Report and Investigation Report are secret reports which are intended for the reference of the Tribunal of Disciplinary Proceedings and the Government and, therefore, these reports are not supplied, to the officers.
We need not express any opinion on that answer of the State in the affidavit.
The respondent in answer to the affidavit of the State said that the Tribunal used the 'B ' Report and the Investigation Report against the respondent and did not supply copies.
It is because the respondent alleged in the writ petition that the Tribunal relied on 'B ' Report and Investigation Report, we looked into the Inquiry Report of the Tribunal to find out whether that was a correct statement.
We find that there is a reference to 'B ' Report by the Tribunal only because the respondent challenged the genuineness and authenticity of Exhibit P 45.
The respondent 's case was that if he made a statement like Exhibit P 45, the Investigating Officer would have sent it along with his report.
The Inquiry Officer says that the Investigating officer recorded the statement of the respondent.
The Tribunal has not relied on 'B ' Report or Investigation Report.
The (1) ; 528 respondent never demanded 'B ' Report and Investigation Report.
The A respondent was interested before the Tribunal to displace Exhibit P 45 by doubting its genuineness.
The Tribunal found that Exhibit P 45 was genuine and was a statement made and signed by the respondent in the presence of the Investigating Officer.
It does not appear that the Tribunal based its finding only on Exhibit P 45.
For these reasons we are of opinion that the High Court was wrong in setting aside the dismissal order by reviewing and re assessing the evidence.
The appeal is accepted.
The judgment of the High Court is set aside.
Parties will pay and bear their own costs.
V.P.S Appeal allowed.

Output:
(1) The jurisdiction of the High Court to issue a writ of certiorari under article 226 is a supervisory jurisdiction, and not as an appellate court.
The findings of fact reached by an inferior court or tribunal as result of the appreciation of evidence are not reopened or questioned in these proceedings.
An error of law which is apparent on the face of record can be corrected but not an error of fact, however grave it may be.
In regard to a finding of fact recorded by a tribunal a writ can be issued if it is shown that the tribunal had erroneously refuged to admit admissible and material evidence or had erroneously admitted inadmissible evidence which has influenced the impugned finding.
Again, if a finding of fact is based on the evidence, that would be regarded as an error of law which can be corrected be a writ of ' certiorari, but if there is some evidence which may reasonably support the conclusion, its adequacy or sufficiency and the inference of ' fact drawn, are within the exclusive jurisdiction of the tribunal.
The Court is concerned to determine whether the inquiry is held by an authority competent in that behalf, and according to the procedure prescribed in that behalf, and whether the rules of natural justice are not violated.
Therefore, in departmental enquires relating to the guilt of delinquent officers, the High Court may interfere only where the departmental authorities have held tax proceedings against the delinquent officer in a manner inconsistent with the rules of natural justice or in violation of the statutory rules prescribing the mode of inquiry or where the authorities have disabled themselves from reaching a fair decision by some considerations extraneous to the evidence and the merits of the case, or by allowing themselves to be influenced by irrelevant considerations or where the conclusion, on the very face of it, is so wholly arbitrary and capricious that no reasonable person could ever have arrived at that conclusion.
[525 E 527B] State of Andhra Pradesh vs section Sree Rama Rao ; Railway Board, representing the Union of India New Delhi & Anr.
vs Niranjan Singh ; and Syed Yakoob vs K. section Radhakrishnan & Ors.
[1964] 5 S.C.R. 64, referred to.
(2) There is no warrant for the view that in considering whether a public officer is guilty of misconduct charged against him the rule followed in criminal trials, namely, that an offence is not established unless proved beyond reason able doubt, must be applied.
[525F G] In the present case, charges that the respondent fraudulently claimed travelling allowance were inquired into by the Disciplinary Proceedings Tribunal.
The Tribunal found him guilty and recommended dismissal.
The Government accept ed the recommendation and dismissed the respondent.
In a writ petition challenging the order of dismissal, the High Court equated the charge of mis conduct to a charge under s.5(1)(d) of the Prevention of Corruption Act, 1947 discussed the evidence and findings of the Tribunal on that basis and held that the prosecution did not adduce material and essential evidence namely; the conductor 's chart which would show whether the respondent travelled on a particular day, that a statement made by the respondent during investigation was not admissible in evidence, that it was not safe to rely on it and set aside the order of dismissal.
Allowing the appeal to this Court.
^ HELD .
(a) The High Court was not correct in holding that the domestic inquiry before the Tribunal was the same as prosecution is a criminal case.
[525C D] 3 L925SupCI/75 522 (b) The respondent was given full opportunity to explain the statement A made by him during investigation.
Further, the Tribunal did not base its findings only on that statement.
It had given its reasons for its conclusion and it is not possible for the High Court to say that no reasonable person could have arrived at that conclusion.
The High Court had accepted the explanation that the conductors ' charts were destroyed and therefore could not be Produced.
Moreover, the conductor 's chart would not show the names of the persons paying the money.
The High Court reviewed and re assessed the evidence and then rejected evidence as no evidence, and this is precisely what the High Court, in exercising jurisdiction under Art 226, should not do.
[525SC; 527B D] (c) The respondent 's contention that the Tribunal relied upon certain reports which were not available to the respondent is not correct.
A reference to the inquiry report of the Tribunal shows that the Tribunal had not relied upon those documents for finding the respondent guilty.
[527G 528B]