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Petitioner: Naushad Shamsuddin Fancy And Another VS Respondent: New Jubilee Insurance Co. &
Court Name: Sindh High Court Judge(s): Zia Pervez Title:Naushad Shamsuddin Fancy And Another vs New Jubilee Insurance Co. &
JUDGMENT
Reported As: K.L.R. 2007 Civil Cases 404 Result: Suit dismissed Judgment JUDGMENT ZIA PERWEZ, J.- Plaintiff instituted Suit No. 572/1978 seeking declaration and mandatory injunction together with all benefits accruing with respect to 92,800 shares (hereinafter referred to as the said disputed shares) of M/s. New Jubilee Insurance Co., a public limited company carrying on the business of insurance. 2. The plaintiff claimed that on 21.06.1973 he acquired the said shares of New Jubilee Insurance Company Limited in London. At that time 22,000. Shares were registered in. The name of Jubilee Insurance Kenya, a Kenyan Company and the remaining 70,800 shares were registered in the name, of East West International, a Swiss Company, In 1974 the plaintiff through his bank lodged these shares for transfer, later New Jubilee Insurance Company Limited refused to transfer the disputed shares on the basis of letter dated 10.03.1974 from Amirali Fancy, defendant No. 2, the then Chairman of the Company objecting to the transfer. The plaintiff claims that the company had no right to refuse the transfer of said shares as such objection could have only been raised by Jubilee Insurance Kenya or East West International in whose names the disputed shares are registered, In this-background the plaintiff in 1978 filed the present suit against defendant No. 1 company as well as eight others who at that time were directors on the board of defendant No. 1 company. The plaintiff seeks transfer of the said shares in his name and in the alternative pray for a. Decree in a sum of Rs. 38,28,000/- against defendants Nos. 1 to 9 with 14% interest.
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3. The defendant No. 1 company and its three* directors i.e. Defendant Nos. 3, 5 and 9 filed a joint written statement in which it has been stated that the disputed shares .Were subscribed, paid for and, held by foreign companies i.e. (i) East West International Trade Establishment and (ii) Jubilee Insurance Company Mombasa, Kenya and admitted that on 10.03.1974 late Amirali Fancy the then Chairman of the company gave notice to the company that the disputed shares and transfer deeds signed in blank had come into possession of persons other than the true owners, In the written statement it was also admitted that late Amirali Fancy was, at that time, the Chairman of the Board of Directors of the company and therefore the company had no reason to doubt his notice to be without reasonable ground or substance, It is mentioned that late Amirali Fancy the defendant No. 2 passed away on 13.08.1979. As defendants* Nos. 2 and 4 have died on written statement on their behalf was filed. 4. The remaining directors of the company i.e. Jimmy Fancy, Shaukat Fancy and Amir S. Chinoy, who are defendant Nos. 6, 7 and 8 respectively adopted the written statement filed by defendants Nos. 1, 3, 5 and 9. Thus written statement of defendants No. 1, 3, 5, 6, 7, 8 and 9 is common. 5. The defendant No. 10 namely Hasham son of Ally Bhai was impleaded as a party In 1984. In his written statement filed on 15.08.1985 he pleaded that Aziz Fancy who was his close friend and business associate informed him in April, 1970 that Jubilee Insurance Kenya, defendant No. 12, was interested in selling its shares which at that time numbered 4,400 shares of Rs. 25/- each. The shares were later converted into 22,000 shares of 5 each. Defendant No. 10 settled the price of 3 Kenyan Pound per share with defendant No. 12 and paid the entire price amounting to 13,200/- Kenyan Pounds in Nairobi to defendant No. 11- namely, Jubilee Insurance Kenya and purchased those shares. The defendant No. 10 further claimed that the second set of 70,800 disputed shares of Rs. 5/- each which were originally 14,160 shares of Rs. 25/- each were also purchased by him through Aziz Fancy. He remitted the payments in the bank accounts of Aziz Fancy in London and Switzerland towards the sale consideration and that the said shares were held by Aziz Fancy, since deceased, in trust for him. The defendant No. 10 further states that this fact was known to late Amirali Fancy the defendant No. 2 who was apprised of the transactions both by the defendant No. 10 and Aziz Fancy, It was further asserted by defendant No. 10 that it was oh the basis of his knowledge of this- transaction Amirali Fancy served notice dated 10.03.1974 on the defendant No. 1 and objected to the transfer of disputed shares, It is also the case of the defendant No. 10 that at all material times Amirali Fancy assured him that his interest in the disputed shares would be watched and protected and the defendant No. 10 should-have nothing to fear. The defendant No. 10 in his written statement also stated that in the third week of February, 1934 on his visit to Karachi from Kenya he learnt about the present suit and, therefore, applied to be joined as a party. The application was granted; thereafter the defendant No. 10 filed his written statement. 6. The defendants Nos. 11 and 12 are proforma defendants. The said shares are registered in their names but both these defendants have not raised only claim of ownership of the said shares, In 1995 Ismat Fancy son of late Aziz Fancy was also impleaded as defendant No. 14. In his written statement he claimed that his father until his death was owner of the disputed shares and denied the claims of the plaintiff as well as of the defendant No. 10. 7. It was during the pendency of the above suit that Hasham (defendant No. 1.0, in suit No. 572/1978) instituted Suit No. 472/1993 seeking delivery of possession of the said 92800 shares (hereinafter referred to as the said shares), subject-matter of suit No. 572/1978. Proceedings in this suit were
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stayed vide order dated 6.12.1995, however, as the subject-matter of this suit , pertains to the title/ownership of the shares which is subject-matter of Suit No. 572/1978, this judgment will also resolve the issue in suit No. 472/1993 as well. 8. Brief facts of Suit No. 472/1993 are that the plaintiff and Amirali, who is younger brother of Aziz Fancy, Chairman of defendant No. 1, were on good terms and on the advise of Aziz Fancy for making a good profitable investment, the plaintiff paid a sum of Kenyan Pounds 13,200 towards the purchase price of 4400 shares of defendant No. 1 to Jubilee Insurance Company Limited Kenya who owned the shares and asked them to send necessary documents for custody and registration of shares in favour of his name. Subsequently the plaintiff purchased another 14160 shares of defendant No. 1 from defendant No. 3 through Aziz Fancy and remitted an amount of Kenyan Pound 42.501 to Aziz Fancy. The necessary documents for registration and transfer in the name of the plaintiff were placed with Aziz Fancy , It is the case of the plaintiff that he is the owner of the aforesaid shares which shares were subsequently converted into 92,800 share? Of Rs. 5A each instead of Rs. 25/- as were earlier. Aziz Fancy died in October, 1973 and according to the plaintiff after the death of Aziz Fancy, defendant No. 2 and his father are trying to get the shares transferred in their name which are now lying in the custody of defendant No. 3. Hence the plaintiff instituted this suit for delivery of possession of 92,800 shares. 9. On 30.5.1982 consent. Issues filed in Court were adopted which followed by additional consent issues adopted on 27.1.1985 and 21.9.1986 respectively which are renumbered as follows:- (1) Whether the suit is barred by limitation? (2) Whether the claim of the plaintiff is barred by limitation? (3) Is this suit maintainable as framed? (4) Whether the plaintiff did not acquire the shares as alleged. If no, to what effect? (5) Has the plaintiff any right, title or interest in or to the shares claimed by the defendant No. 10? (6) Did the plaintiff acquire any right to the shares in suit and if so from whom? (7) Did the plaintiff pay any consideration for the shares in suit or any part thereof and if so what was the consideration? (8) Whether there exists any custom or bank practice for alleged arrangement referred in para 4 of the plaint? Is the said alleged arrangement otherwise vitiated being a devious and questionable transaction and no rights thereunder arise? (9) Have first defendants acknowledged their liability to plaintiff? If so, is such acknowledgment binding on defendant No. 10? (10) Whether the claim raised by defendant No-. 10 in respect of shares is within time? If not what is the effect? (11) Whether the ' defendant No.' 10 lodged/made/raised any claim in respect of the said shares
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against late Mr. Aziz Fancy during his life-time or against his legal heirs after his death? If not, what is the effect? (12) What is the right, title and interest of the defendants No. 10 to the shares in question and against whom? (13) Whether the defendant No. 10 has any claim as against the plaintiffs in respect of the shares in question? If not, what is the effect? (14) Whether the shareholders in the suit belong to the plaintiff, defendant No. 10 or the group of defendant No. 6 and late Amir Ali. (15) Whether the Company' competently and justifiably refused registration of the shares in question? (16) Whether the Company:s act to refuse registration is not justiciable? 17), Whether the defendants illegally withheld the shares of which the plaintiff was constrained to secure release in the circumstances set out in para 10 of the plaint? (18) Is it fact that there is no claim whatsoever from any concerned quarter against the plaintiff's ownership of the shares and registration thereof in his name? (19) Who is competent to effect registration of shares in the plaintiffs' name? (20) Whether the plaintiff besides registration of the shares in his name is also entitled to bonus shares on the 92,800 shares since their acquisition and also dividends as per Annexures H & I to the plaint? (21) Whether the shares in suit belong to the plaintiff of any of the defendants and if so to whom? (22) To what relief or reliefs the plaintiff is entitled? 10. Plaintiff examined his father Samsuddin Fancy as his witness as Exh. 14. He produced original power-of- attorney as X/1 and a letter dated 6.7.1978 from a Swiss Bank as X/2, two news papers as Exh, P/1 and P/2, letter dated 6.7.1978 addressed to Naushad Fancy by Compagnie De Gestion et de Banque Gonet SA (the Swiss Bank) as Exh. P/3, letter dated 13.6.1974 from the Swiss Bank as Exh. P/4, receipt of shares as Exh. P/5, copy of letter dated 10.7.1974 from the Swiss Bank as Exh. P/6, notice of distringas and refusal letter from New Jubilee Insurance Company to the Swiss Bank regarding safe custody of. The disputed shares, Telex message from Amirali Fancy to New Jubilee for transfer of the shares as Exh. P/10, letter dated 18.5.1977 from defendant noo. 1 to New Jubilee Insurance as Exh. P/11, reply to letter (Exh. P/11) from Z.C. Valiani as Exh. R/12, letter dated 25.1.1978 from the Swiss Bank as Exh. P/13, and letter from son of Aziz Fancy to-the plaintiff dated 14.9.1979 as Exh. P/14. Mr. Masood Noorani, the managing director of' defendant No. 1 appeared as defendant No. 1's witness and he was examined as Exh. 15. He produced his affidavit-in-evidence as Exh. 15/1, notice dated 10.3.1974 as Exh. 15/2, letter dated 10.7.1974 fr6m the Swiss Bank to defendant No. 1 as Exh. 15/3, letter from New Jubilee Insurance to the Swiss Bank as Exh. 15/4 regarding wrongful possession of the shares in dispute, letters dated 19.5.1975, 18.1.1977, and 14.1.1978 from New Jubilee Insurance to the
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Swiss Bank as Exhibits 15/5 to 15/7, letter dated 20.2.1975 from the Swiss Bank to New Jubilee Insurance regarding return of the disputed shares, as Exh. 15/8, letter dated 4.1.1977 from the Swiss Bank to New Jubilee Insurance as Exh. 15/9, letter dated 20.4.1977 from the Swiss Bank to New Jubilee Insurance requesting for return of the disputed shares, as Exh. 15/10, letter dated 5.1.1978 fr6m the Swiss Bank to New Jubliee Insurance for forwarding the shares to E.W.I. As Exh. 15/11, letter from New Jubilee to Mr. Z.C. Valiani, advocates, to New Jubilee Insurance clarifying that the shares are to be sent to their client, EWI, and not to kept in safe custody, as Exh. 15/13, and copy of letter of consent and copy of Memorandum and Articles of Association as Exh. 15/14 and 15/15 respectively, Mr. Hasham s/o Ali Bhai, the defendant N^. 10, appeared in support of his claim and was examined as Exh. 16. He produced photo-copy of letter dated 29.4:1970, there telegraphic transfer vouchers, letters dated 31.5.1974 and 4:7.1984. However these documents were not exhibited due to objections raised by the opposing counsel and were marked as Articles 1 to 6. He produced his additional affidavit-in-evidence as Exh. 16/1. He' also produced photocopy of a voucher of National and Grindlays Bank, Nairobi and photocopies of two statements of account from the said Bank. As these documents were also objected to by the counsel for the other sides, the same Were kept, on record as Articles 7, 8 and 9. 11. None of the other defendants adduced evidence in support of their respective claim though they did file affidavit-in-evidence of their witnesses but did not appear in Court for cross-examination. Thus evidence was led only on behalf of the plaintiff and defendants Nos. 1 and 10. 12. The learned counsel for the plaintiff has placed reliance on the following cases: 1. Commissioner of Income Tax vs. M. Ramaswamy (1985) 57 Company Cases 7. 2. Vasudev Ramehandra Shelat vs. Pranlal Jayanand Thakkar and others (1975) 45 Company Cases 43, 3. Howarth Trading Co. Vs. CIT, central Calcutta (1959) 29 Company Cases 282, 4. Life Insurance Corporation of India vs. Escorts Ltd., and others (AIR 1986 SC 1370), 5. Vasudev Ramehandra Shelat vs: Pranlal Jayanand Thakkar and others (AIR 1974 SC 1728), 6. R. Mathalone & others \/$. Bombay Life Assurance Co. Ltd. (AIR 1953 SC 385), 7. In the matter of Bengal Silk Mills Co. Ltd. (AIR 1942 Cal. 461), 8. Grindlay's Bank Ltd. Vs. Murree Brewery Company Ltd. & others (PLD 1954 Lah. 745), 9. Usuf vs. M/s. Valika Textile Mills Ltd. (PLJ 1978 Kar. 74). 13. While Mr. Faisal Arab, learned counsel for defendant No. 10, placed reliance on the following cases: 1. Rattan Bi vs. Fateh Muhammad (PLD 1974 Lah. 458), 2. Mst. Ahmedi Begum vs. Syed Israr AH & another (1985 CLC 2335),
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3. Syed Israr AH & another vs. Mst. Ahmedi Begum (1993 CLC 770), (1993 CLC 2084), (AIR 1969 AP 41), 5. Bhavabhuti Datta vs. Anadinath Datta (ILR 61 Cal, Appellate (Calcutta Series) 1933), 6. Promotho Nath Mullick vs. Prodymno Kumar Mullich (1921 CWN 772), 7. Lala Gobined Prassed vs. Chairman of Patna Municipality (6 CLJ 535), 8. Kishtappa Chetty vs. Laksmi Ammal (1923 Mad 578), 9. Pachaiyappa Chetti vs. Sivakami Ammal (AIR 1926 Mad 109), 10. Corpus Juris Secundum volume 26A. 14. The learned counsel for the parties advanced their arguments jointly on the issues and the same are being dealt with accordingly as follows: Issue Nos. 1, 2 and 10: 15. Since issues Nos. 1, 2 and. 10 are on the question of limitation, the same are addressed together, It is first to be examined what is the starting point of the claim of , each of the three claimants, i.e. The plaintiff, the defendant No. 10 and defendant No. 14. This suit 'was filed on 1.07.1978-and the plaint read with better particulars later furnished by the plaintiff, the plea which emerges is that disputed shares were' purchased by the plaintiffs from defendants Nos. 11 and 12: This plea was not referred or proved in the evidence, In the written statement of the defendant No. 10 filed on 15.08.1985 and of defendant No. 14 filed on 20.04.1986 and in the evidence of plaintiff's examination- in:chief held on 02.05.1987, the common factor of claiming ownership from and through late Aziz Fahey emerged. For the purposes of starting point of limitation it was the defendant No. 10 who first claimed in his written , statement filed on 15.08.1985 that he acquired disputed shares from and through late Aziz Fancy. Then comes the claim of defendant No. 14 in his written statement filed on 20.04.1986 that the disputed shares belonged to late Aziz Fancy. From the above-mentioned dates of each of the contesting parties claim it- is evident that defendant No. 10 first raised the plea that the disputed shares were acquired through or from Aziz Fancy, then by defendant No. 14 and lastly by the plaintiff. 16. It is admitted that disputed shares are lying in trust with defendant No. 11 till the disputes as to their ownership is resolved, It has also come on record that defendant No. 11 company is owned by Prince Sadruddin Aga Khan, of Aga Khan, of Aga Khan community to which all the claimants to the disputed shares including defendant No. 10 belong and admittedly at an earlier stage Prince Sadruddin Aga Khan even agreed to commence arbitration in the matter to resolve the controversy as to the entitlement of the disputed shares. 17. The plaintiff in paragraphs 11 of the plaint has also acknowledged that the disputed shares are lying in trust with defendant No! 11. Plaintiff's witness in his cross- examination stated that Prince Sadruddin Aga Khan and defendant No. 11 have been writing letters to the members of fancy family
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and defendant No. 10 to file their power-of- attorney so that Prince Sadruddin Aga Khan could arbitrate in the matter. The witness further stated at page 137 that he had no idea when Prince Sadruddin Aga Khan will complete the arbitration. This goes to prove that at the time when the evidence of the plaintiff's witness was being recorded in this suit, steps for arbitration were underway before Prince Sadruddin Aga Khan. Defendant No. 10 in paragraph 10 of his affidavit-in- ^evidence also stated that it was the understanding between the parties that the question of entitlement to the shares be decided by Prince Sadruddin Aga Khan-. The plaintiff and defendant No. 10 were considering resolution of their claim before Prince Sadruddin Aga Khan as late as 1987 while the disputed shares were entrusted to defendant No. 11, which is admitted to be a concern owned by Prince Sadruddin Aga Khan. Thus* it becomes amply clear that defendant No. 10 did not for the first time jump into the controversy in 1984 but he too was interested in the arbitration proceedings before the Prince Sadruddin Aga Khan and confined the resolution on their dispute in the present suit. 18. Clause (a) of Section 11 of Specific Relief Act and Section 10 of the Limitation Act envisages that where a trust is created, no period of limitation would apply. Reference can be made to judgment of this Court reported as Deputy Custodian of Enemy Property {supra). From the evidence led by the plaintiff and the defendant No. 10, the only two claimants who. Adduced evidence, it is evident that the shares are lying in trust. The plaintiff has himself admitted that the dispute as to the shares; was to*be arbitrated by Prince Sadruddin Aga Khan and defendant No. 10 i.e. Hashim Alibhai was also one of the parties whose rights were to be arbitrated, In the very same page 13? It was also mentioned that arbitration was -still not complete, which clearly establishes that even on 17.05.1987, when the plaintiff was being cross-examined, the arbitration, as to who was the owner of the shares, was yet to be decided. 19. It was because of the pendency of the arbitration before Prince Sadruddin Aga Khan that defendant No. 1Q did not initiate any legal proceedings.. When the became aware of the present suit during the pendency of reference to arbitration to Prince Sadruddin Aga Khan that he also joined as a party and raised his claim to the shares in his written statement, In the affidavit-in- evidence of defendant No. 10, paragraphs 7 & 10 has stated that the disputed shares are lying in trust and that the matter was to be decided by Prince Sadruddin Aga Khan and no question was put in cross-examination to rebut such an assertion. Thus, it is clear that the disputed shares were entrusted to the business concern of Prince Sadruddin Aga Khan which amount to creation of trust. Reference may again be made to judgment reported as Deputy Custodian, of Enemy Property (supra) 20. Even where there is entrustment, two provisions of Limitation Act may be attracted to the case, which are Section 10 and Article 145. In this regard effect of Section 10 and Article 145 of the Limitation Act need to be examined. Under Section 10 of the Limitation Act, no suit against a person, in whom property has become vested in trust, shall be barred by any length' of time, It is pertinent to again refer Section 1^ of the Specific Relief Act, which is as follows: Section 11. Any person having the possession or control of a particular article of movable property, of which he is not the owner, may be compelled specifically to deliver it to the person entitled to its immediate possession, in any of the following cases: (a) When the thing, claimed is held by the defendant as the agent or trustee of the claimant.
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Illustration: A, proceeding to Europe, leaves his furniture in charge B as his agent during his absence, B, without A's authority, pledges the furniture to C, and C, knowing that B had no right to pledge the furniture, advertises it for sale. C may be compelled to deliver the furniture to A, for he holds it as A s trustee. 21. In , the above, illustration of Section 11 of Specific Relief Act the position of "A" himself did not create a trust in "C" but the legal effect of "C's possession has been treated to be that of a trustee, In the present case the defendant No. 10 has also claimed to have entrusted the disputed shares to Aziz Fancy for specific purpose. Defendant No. 10 in his affidavit-in-evidence stated: "These shares were lying deposited in trust with the said Aziz Fancy who had been requested by me. And had undertaken to take steps to have the same transferred and registered in my name." After Aziz Fancy's death the disputed shares came in the custody of the plaintiff, from whom the shares came in custody of defendant No. 1 and from defendant No.1 the shares found their way to defendant No. 11 and are lying with it in trust till the dispute as to their title is resolved. The assertion made by defendant No. 10 in paragraph 6 of his affidavit-in-evidence attracts illustration (a) of Section 11 of the Specific Relief Act,' which signify that disputed shares were given in trust and the subsequent holder of the disputed shares after the Aziz Fancy's death would be doing so also as a trustee* It is now to be examined whether a trust was created within the meaning of Section 10 of the Limitation Act or such a trust could be termed as a "depository" as described in Article 145 of the Limitation Act. Article 145 prescribes a period of 30 years to sue a depository as under: 145. Against a depository Thirty years The date of. Or pawnee to movable the deposit property deposited or or pawn, pawned. 22. For the purpose of the present suit, the significance of the word "trustee" as described in Section 10 and the world "depository" as described in Article 145 requires consideration. Entrustment of disputed shares with Aziz Fancy or subsequently with defendant No. 11 could be either termed as entrustment within the meaning of Section 10 of Limitation-Act read with Section 11 of the Specific Relief Act or it could also be termed as "depository" within the meaning of Article 145 of the Limitation Act. In case of former no period of limitatiOn applies whereas in case of latter finds support from the discussion in the following judgments and would be useful. 23. In Bhavabhuti Datta vs. Anadinath Datta reported in ILR 61 Cal: Appellate Court ^Calcutta Series) 1933, where three brothers D, G and R jointly possessed DP Notes of face value of Rs. 33,000/- as part of joint property. Out of these, DP Note of value of Rs. 20,000/- were deposited with employer of G as security for his service. Thereafter the joint properties were .Partitioned and each brother got DP Notes of value of Rs. 11,000/-. As R had died by this time his sons got their Share but D could not as the same continued to be held by G's employer as security for G's service. G later retired and died. Upon the death of G, his sons withdrew the DP Notes from the employer given in security after obtaining succession certificate.- Thereafter on 27.2.1922 the heirs of D demanded back their share fr6m the heirs of G who refused to return the same vide letter dated 01.03.1922. The heirs of D then filed suit for return of their share of DP Notes on 15.02.1928, which was decreed in their favour* The defendants to the suit i.e. The heirs of G appealed on the grounds that article 49 and not article 145 or…
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