Kedar Nath Agarwal v. Jay Engineering Works Ltd — 1962 DIGILAW 105 (CAL)

JUDGMENT 1. THIS is an application for an Order, inter alia, (a) that the respondent Jay Engineering Works Limited be ordered to allot the new shares issued by it by resolution dated the 13th January, 1961, appertaining to the 500 shares held by the petitioner and bearing specified Serial numbers to the petitioner and (b) that the register of members of the respondent Jay Engineering Works Limited be rectified by entering the name of the petitioner as the registered holder of the new shares appertaining to the said 500 shares. 2. THE facts briefly are as follows: The petitioner purchased in June, 1960, the aforesaid shares; 300 of which were registered in the name of the respondent No. 3 Vinochandra Chunilal Mehta; and 200 of which in the name of the respondent No. 2 Sir Chunilal Baichand Mehta and Central Bank, Executor and Trustee Company Private Limited. The copies of the relevant transfer deeds signed by the registered holders, the receipts, the bills and other documents have been annexed to the affidavit in reply and marked 'a'. On the 14th June, 1960, the petitioner wrote to its Bankers, The Punjab National Bank Limited enclosing the transfer deeds for 200 shares which stood in the name of the respondent No. 2 and requesting the Bank to take steps to have the shares registered in the petitioner's name. On the 16th June, 1960, a similar letter was addressed to The Punjab National Bank Limited by the petitioner in respect of 300 shares registered in the name of the respondent No. 3. 3. THE respondent No. 1, namely, the Jay Engineering Works Limited on October 15, 1960, had passed a resolution for increase of share capital of the Company. Then on January 13, 1961, a resolution was passed under section 81 of the Companies Act, 1956, offering Right Shares and the proposal was that two shares would be allotted for every three shares. 4. THE Letters of Allotment and Renunciation were sent out by the Company on the 31st January, 1961, offering two shares for every three shares held as on the 13th January, 1961. It is alleged that in the first week of February, 1961, the respondent No. 3 executed Letters of Renunciation in respect of three hundred shares in favour of the respondents Nos. 4 and 5. It is alleged that in the first week of February, 1961, the respondent No. 3 executed Letters of Renunciation in respect of three hundred shares in favour of the respondents Nos. 4 and 5. It is alleged further that the respondent No. 2 did not receive any Letters of Allotment or Renunciation at all. 5. ON the 9th February, 1961, The Punjab National Bank Limited addressed letters to the respondents Nos. 2 and 3 asking for the Letters or Forms of allotment and renunciation and agreeing to indemnify the respondents Nos. 2 and 3 against any counter claims with regard to the shares. The petitioner was registered as the holder of 500 shares on the 27th February, 1961. 6. THEREAFTER the petitioner made attempts to acquire the Right Shares as well. But the Company, by its letter dated the 29th March, 1961 asked the petitioner to obtain an order from this court in respect of the right shares appertaining to the said 500 shares as disputes had been raised in regard to them. That is why the petitioner has made the present application. I heard this matter on February, 1962 and decided on making an order in favour of the petitioner. Thereafter I felt that the various points raised in this application ought to be more thoroughly argued and I invited Mr. S. C. Sen, Barrister-at-Law to appear as amicus curiae. I have to express my deep gratitude to Mr. Sen for the assistance he has given me in coming to my conclusions. 7. BEFORE I come to the relevant provisions of section 81 of the Companies Act, 1956 it is necessary to look into corresponding provisions in the earlier English and Indian Acts. 8. I have to express my deep gratitude to Mr. Sen for the assistance he has given me in coming to my conclusions. 7. BEFORE I come to the relevant provisions of section 81 of the Companies Act, 1956 it is necessary to look into corresponding provisions in the earlier English and Indian Acts. 8. ARTICLE 27 of Table 'a' to the English Companies Act of 1862 was as follows:- "subject to any direction to the contrary that may be given by the meeting that sanctions the increase of capital all new shares shall be offered to the members in proportion to the existing shares held by them, 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. " Article 35 of the English Companies act of 1929 made certain alterations to these provisions. It provided that "subject to any direction to the contrary that may be given by the company in general meeting all new shares shall, before issue, be offered to such persons as at the date of the offer tire entitled to receive notice from the company of general meeting in proportion, as nearly as circumstances admit, to the amount of the existing shares to which they are entitled. " The language therefore was altered but the provision remained substantially the same namely that the new shares were to be offered to "members". 9. THE language of Regulation 42 in table 'a' to the Indian Companies act, 1913 was exactly the same. It provided that the new shares "shall, before issue, be offered to such persons as at the date of the offer are entitled to receive notices from the company of general meeting in proportion, as nearly as circumstances admit, to the amount of the existing shares to which they are entitled. " 10. BY Act XXII of 1936 section 105-C was introduced into the Indian Companies Act of 1913. " 10. BY Act XXII of 1936 section 105-C was introduced into the Indian Companies Act of 1913. This section ran thus :- "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 the existing shares held by each member (irrespective of class) 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 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. " The point that I wish to make is that before the Companies Act of 1956, English and Indian Legislations prescribed that offers of new shares were to be first made to the "members" of the Company. "member" has a distinct connotation in the Companies Acts. He is either a subscriber of a memorandum of a Company or a person who agrees to become a member of a Company and whose name is entered in the register of members: vide section 30 Indian Companies Act, 1913. The same definition of a "member" has been preserved in section 41 of the Companies Act, 1956. There is only a slight alteration made by the recent amending Act to the effect that the person concerned must agree in writing. 11. NOW, so far as allotment of new shares is concerned in view of the provisions I have already set out it was even held by the English Courts that where new shares had been created by special resolution in the life time of a member; but were not actually offered to the members until after his death his legal personal representative could acquire an allotment of the shares which he would, if living have been entitled to have offered him: See James v. Buena Ventura Nitrate Grounds Syndicate, Limited (1) (1896) 1 Chancery 456. 12. 12. IT may be convenient at this stage to refer to a decision of the Privy Council and one of the Supreme Court of India on the effect of sale of shares held by a member particularly with reference to new allotments. In Maneckji Pestonji Bharucha and Another v. Wadilal Sarabhai and Company and others (2) 53 I. A. 92, a share broker, having sold in Bombay shares in a Company handed to the buyers certificates for the shares described together with transfers in blank signed by the registered holders. The buyer gave a cheque for the price, but dishonoured it and failed to pay. The seller sued the buyer and the respondent, parties to whom the buyer had handed the certificates and transfers. He claimed from the respondents the return of the certificates and transfers and damages. By Rule C of the Bombay Stock Exchange, upon dishonor of a cheque for the price of shares sold they were to be returned to the seller, and, if cash was not then paid, they were, to be sold by auction. It was held that the seller's only rights were against the buyer upon the cheque and for the price. The subject of the sale was the right to be placed on the register, a chose in action which was within the definition of "goods" in section 76 of the Indian Contract Act, 1872, and under section 35 of that Act there had been a complete delivery, excluding any right of lien, while section 121 precluded the seller from rescinding the contract in the absence of any stipulation in the contract. The facts of this case were that the second plaintiff, Arajania who described himself as the sub-buyer of the first plaintiff Bharucha, a certified share-broker, sold on the Bombay Stock Exchange to the first defendant, Gora, certain shares in Alcock, Ash-down and Company Limited. Neither of the two plaintiffs was the registered holder of any of the shares. The first plaintiff acquired the requisite number of shares in the market from various brokers and took from these brokers blank transfers signed by the registered holders along with the corresponding certificates. These certificates and blank transfers were handed by the second plaintiff to Gora, the first defendant. He obtained a cheque from Gora which was subsequently dishonoured. The first plaintiff acquired the requisite number of shares in the market from various brokers and took from these brokers blank transfers signed by the registered holders along with the corresponding certificates. These certificates and blank transfers were handed by the second plaintiff to Gora, the first defendant. He obtained a cheque from Gora which was subsequently dishonoured. Gora made certain propositions as to the raising of money to a partner of the second defendant and handed the certificate's and transfers to him. The second defendant in turn handed them to the third defendant again on certain propositions as to raising money. At pages 97 and 98 Viscount Dunedin observes as follows: "it is true that what Bharucha had was not the perfected right of property, which he would have had if he had been the registered holder of the shares which he was selling. The Company is entitled to deal with the share-holder who is on the register, and only a person who is on the register is in the full sense of the word owner of the shares. But the title to get on the register consists in the possession of a certificate, together with a transfer signed by the registered holder. This is what Bharucha had. He had the certificates and blank transfers, signed by the registered holders. It would be an upset of all Stock Exchange transactions if it were suggested that a broker who sold shares by general description did not implement his bargain by supplying the buyer with certificates arid blank transfers, signed by the registered holders of the shares described. Bharucha sold what he had got. He could sell no more. He sold what in England would have been choses in action, and he delivered choses in action. But in India, by the terms of the Indian Contract Act, these choses in action are goods. By the definition of goods as every kind of movable property it is clear that, not only registered shares, but also this class of choses in action, are goods. Hence equitable consideration not applicable to goods do not apply to shares in India. "now section 78 is as follows: 'sale is effected by offer and acceptance of ascertained goods for a price. . . . . . or of a price for ascertained goods. . . . . . Hence equitable consideration not applicable to goods do not apply to shares in India. "now section 78 is as follows: 'sale is effected by offer and acceptance of ascertained goods for a price. . . . . . or of a price for ascertained goods. . . . . . together with payment of the price or delivery of the goods. " Here the goods were not ascertained goods at the time of the contract, for the contract was only for so many shares of Alecks; not of any particular share, but then section 83 provides: 'where the goods are not ascertained at the time of making the agreement for sale, but goods answering the description in the agreement are subsequently appropriated by one party for the purpose of the agreement, and that appropriation is assented to by the other, the goods have been ascertained and the sale is complete. ' So soon, therefore, as Arajania acting for Bharucha handed Gora the certificates and transfers and Gora accepted them and gave the cheque, the goods became ascertained goods, the sale was complete and the property passed. From that time onwards Bharucha and Arajania could only sue Gora on the cheque or for the price of shares unpaid in respect of that the cheque had not been honored. They had no longer any jus in re of the certificates and transfers. They had no statutory lien, for they had parted with possession and, consequently, as they had no contract with defendants Nos. 2 and 3 they could not sue them for delivery of the shares, whether the defendants had got good title as against Gora or had not. " 13. THIS decision of the Judicial Committee, bearing the facts of the present case in mind, may be said to be an authority for the proposition that the property in a share which a "member" has, passes to the buyer of the share as soon as the share certificate along with the relevant transfer deed is delivered to the buyer. 14. I may now refer to the decision of the Supreme Court in R. Mathalone and others v. Bombay Life Assurance Company Limited and others (3) A. I. R. 1953 Supreme Court page 385. 14. I may now refer to the decision of the Supreme Court in R. Mathalone and others v. Bombay Life Assurance Company Limited and others (3) A. I. R. 1953 Supreme Court page 385. It has been held in this case that on the transfer of shares, the transferee becomes the sole beneficial owner of the shares sold by the transferor, the legal title to which is vested in him. Thus, the relation of trustee and 'cestui que trust' is thereby established between them. The transferor holds the shares for the benefit of the transferee to the extent necessary to satisfy the demand of section 94. Trusts Act, 1882. As the transferee holds the whole beneficial interest and the transferor has none, the transferor must comply with ail reasonable direction that the transferee may give. 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 light to vote. The relationship arises by reason of the circumstances that till the name of the transferee is brought on the register of share-holders 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 this obliges him to transfer all the benefits of property right annexed to the gold shares of the "cesti que trust. " The Supreme Court has also pointed out; how the rights of the transferee in the circumstances would be affected by the doctrine of "delay defeats equity, or, equity aids the vigilant and not the indolent. " For purposes of the present case however it is not necessary to consider the applicability of this doctrine. 15. UPTIL now I have endeavored to describe the state of the law relating to further issue of capital or allotment of new shares as it stood on April 1, 1956 when the Companies Act 1956 came into force. There has subsequently been an amending Act which came into operation on the 28th December, 1960. 15. UPTIL now I have endeavored to describe the state of the law relating to further issue of capital or allotment of new shares as it stood on April 1, 1956 when the Companies Act 1956 came into force. There has subsequently been an amending Act which came into operation on the 28th December, 1960. It is alleged in paragraph 6 of the petition in the instant case that by a resolution passed on January 13, 1961 the Directors of the respondent Company in terms of section 81 of the Companies Act on or about the 30th January 1961 offered the said new shares to the holders of equity shares in the Company. It is not necessary therefore to consider the provisions of section 81 as it originally stood. I shall set out in full these provisions as they now stand. But the portions introduced by the amending Act have been underlined. It is not necessary therefore to consider the provisions of section 81 as it originally stood. I shall set out in full these provisions as they now stand. But the portions introduced by the amending Act have been underlined. Section 81 is as follows:-"further issue of capital- (1) Where at any time after the expiry of two years from the formation of a company or at any time after the expiry of one year from the allotment of shares in that company made for the first time after its formation, whichever is earlier, it is proposed to increase the subscribed, capital of the company by allotment of further dares, then- (a) such further snares shall be offered to the persons who, at the date of the offer, are holders of the equity shares of the company, in proportion, as nearly as circumstances admit, to the capital paid up on those shares at that date; (b) the offer aforesaid shall be made by notice specifying the number of shares offered and limiting a time not being less than fifteen days from the date of the offer within which the offer, if not accepted, will be deemed to have been declined; (c) unless the articles of the company otherwise provide, the offer aforesaid shall be deemed to include a right exercisable by the person concerned to renounce the shares offered to him or any of them in favour of any other person; and the notice referred to in clause (b) shall contain a statement of this right; (d) after the expiry of the time specified in the notice aforesaid, or on receipt or earlier intimation from the person to whom such notice is given that he declines to accept the shares offered, the Board of directors may dispose of them in such manner as they think most beneficial to the company. Explanation-In this subsection "equity share capital" and "equity shares" have the same meaning as in section 85. Explanation-In this subsection "equity share capital" and "equity shares" have the same meaning as in section 85. (1-A) Notwithstanding anything contained in sub-section (1), the further shares aforesaid may be offered to any persons (whether or not those persons include the persons referred to in clause (a) of subsection (1)) in any manner whatsoever- (a) if A special resolution to that effect is passed by the company In general meeting, or (b) where no such special resolution is passed, if the votes cast (whether on a show of hands, or on a poll, as the case may be) in favour of the proposal contained in the resolution moved in that general meeting (including the casting vote, if any, of the Chairman) by members who, being entitled so to do, vote in person, or where proxies are allowed, by proxy, exceed the votes, if any, cast against the proposal by members so entitled and voting and the Central Government is satisfied, on an application made by the Board, of directors in this behalf, that the proposal is most beneficial to the company: (2) Nothing in clause (c) of subsection (1) shall be deemed- (a) to extend the time within which the offer should be accepted, or (b) to authorise any person to exercise the right of renunciation for a second time, on the ground that the person in whose favour the renunciation was first made has declined to take the shares comprised in the renunciation. (3) Nothing in this section shall apply- (a) to a private company; or (b) to the increase of the subscribed capital of a public company caused by the exercise of an option attached to debentures issued or loans raised, by the company: (i) to convert such debentures or loans into shares in the company, or (ii) to subscribe for shares in the company: provided that the terms of issue of such debentures or the terms of such loans include a term providing for such option and such term- (a) has been approved by a special resolution passed by the company in general meeting before the issue of the debentures or the raising of the loans; and also (b) either has been approved by the Central Government before the issue of the debentures or the raising of the loans, or is in conformity with the rules, if any, made by that Government in this behalf. 16. 16. IT is evident from a comparison of the provisions of the Older Acts and Regulations with those of section 81 that there has been a deliberate departure by Parliament. Previously where increase of capital was proposed by issue of further shares such shares had first to be offered to the "members". Now the legislature prescribes that they shall be offered to the persons who at the date of the offer are "holders" of the equity shares of the Company. A "member" may be a "holder" of shares but a "holder" may not be a "member". A person whose name is on the register may have sold his shares and from the moment his property in the shares has passed to his purchaser he has ceased to be a "holder" of those shares. To my mind section 81 clearly lays down that such a person is not entitled to accept offers of new shares or to exercise any right of renunciation. In support of the view I have taken I may refer to certain other section of the Companies Act, 1956 to show that wherever rights or benefits have been sought to be conferred on "members" the legislature has expressly said so. If the intention was that the rights under section 81 should be enjoyed by "members" only there was no reason to depart from the language of the previous acts and regulations and introduce an expression which might not include "members" at all. In section 80 (5), for instance, it is provided that the capital redemption reserve account may, notwithstanding anything in this section, be applied by the Company, in paying up un issued shares of the Company to be issued to "members" of the Company as fully paid bonus shares. In other words the Act prescribes that bonus shares are to be issued to "members", but further shares for further issue of capital are to be offered to the "holders" of equity shares at the date of the offer. Similarly, section 84 provides that a certificate under the common seal of the company, specifying any shares held by any "member", shall be prima facie evidence of the title of the "member" to such shares. Similarly, section 84 provides that a certificate under the common seal of the company, specifying any shares held by any "member", shall be prima facie evidence of the title of the "member" to such shares. Section 87 (1) (a) lays down that subject to the previsions of section 89 and sub-section (2) of section 92 every "member" of a company limited by shares and holding any equity share capital therein shall have a right to vote, in respect of such capital, on every resolution placed before the Company. The following sub-clauses and sub-sections also refer to "every member". Then it is well known that a share may be sold cum- dividend or ex-dividend. Section 207 makes provisions for penalty for failure to distribute dividends within forty two days and here it speaks not of a "member" but of "any share-holder entitled to the payment of the dividends. " Moreover the word "persons" and not "members" has been used not only in section 81 (1) (a) but in every other part of that section wherever it has been necessary to do so. Upon considering this matter from all these points of view it seems to me that the "further shares" envisaged by section 81 are to be offered to the "persons" who at the date of the offer, are "holders" of these equity shares of the Company and unless the articles otherwise provide, the offer shall be deemed to include a right exercisable by the "person" concerned to renounce the scares offered to him or any of them in favour of any other "person". The "persons" who are entitled to receive this offer are not necessarily "members" of the Company. I visualize the difficulty that may arise by reason of this conclusion of section 81. For example, it may be, that the Company has objections valid and substantial to enter in its register the name of a "person" to whom a "member" has sold his shares; but such a "person" would be entitled to receive the offer for subscribing for "further shares" in terms of section 81. A company which envisages a difficulty of this nature may resort to the procedure laid down in sub-section (1-A) and offer the new shares to such "persons" as the Company thinks fit and proper in its own interests. 17. A company which envisages a difficulty of this nature may resort to the procedure laid down in sub-section (1-A) and offer the new shares to such "persons" as the Company thinks fit and proper in its own interests. 17. IN the instant case the shares of the respondent No. 3 were purchased by the petitioner in June, 1960. The Company passed its resolution for increase of share capital on the 15th October, 1960, On January 13, 1961 a resolution was passed under section 81 offering right shares and the proposal was that two shares would be allotted for every three shares. The Letter of Allotment and Renunciation were sent out by the Company on the 31st January, 1961 offering two shares for every three shares held as on the 13th January 1961. At the date of the offer therefore the "holder" of the equity shares in question was the petitioner and not the respondent No. 3. 18. IN the premises the respondent No. 3 had no right either to accept the offer of new shares or to execute Letters of Renunciation in favour of the respondents Nos. 4 and 5. The execution of Letters of Renunciation by the respondent No. 3 is, in my opinion, invalid and inoperative and is of no effect, and the respondents Nos. 4 and 5 acquired no rights whatsoever by virtue of such renunciation. Having regard to the conclusion I have arrived at it is unnecessary to discuss the other points canvassed before me. But I intend to indicate them briefly. 19. MR. R. Chaudhuri, learned Counsel for the petitioner has urged that the right under section 81 is a right conferred upon the holder of shares irrespective of his name being entered on the register. If, however, the right is that of a member he becomes a constructive trustee after sale of the shares by him and any nomination that he makes must be in favour of the purchaser or not at all: vide (3) A. I. R. 1953 Supreme Court 385. Nomination in favour of a volunteer does not change the position; it makes the volunteer a constructive trustee; and the nominee holds subject to the same equity which affected the original "holder": vide Snell's "principles of Equity", 25th Edition, pages 45 and 173. Mr. Nomination in favour of a volunteer does not change the position; it makes the volunteer a constructive trustee; and the nominee holds subject to the same equity which affected the original "holder": vide Snell's "principles of Equity", 25th Edition, pages 45 and 173. Mr. Chaudhuri has urged further that even if a volunteer has an independent right, such a right on the same principle which makes the purchaser's right an equitable right only renders the volunteer's right an equitable right also; the entry in the share register of the name of the person concerned perfects the legal right to the share vis-a-vis the Company; in the instant case if the respondents Nos. 4 and 5 are volunteers they are also "persons" whose names have not yet been registered; the purchaser's right and the volunteer's right appear in the circumstances to be the same; and between the two equities the first in time will prevail: vide Snell's "principles of Equity", 25th Edition, pages 27 and 43. These propositions of Mr. Chaudhuri were not disputed by Mr. Mitter appearing for the respondents Nos. 2 to 5. Mr. Mitter contended, however, that the respondents No. 4 and 5 were bonafide purchasers for value of the right to receive these new shares and as such the considerations put forward by learned Counsel for the petitioner do not apply to them. I have, therefore, to express my views on this contention of Mr. Mitter. 20. WHEN under section 81 (1) (c) the offered of new shares exercises his rights to renounce the shares offered to him in favour of any other person, the nominee gets a right to accept the offer and complete the contract. Obviously the nominee gets an enforceable right to compel the issue of shares. This is a chose in action and is capable of being sold or dealt with. If the nominee is a nominee for valuable consideration, bonafide without notice of a breach of trust he would have a higher right than an equitable right. Nothing can be clearer than that a purchaser for valuable consideration who obtains a legal estate at the time of his purchase without notice of a prior equitable right is entitled to priority in equity as well as at law: Pilcher v. Rawlins (4) (1872) 7 Chancery Appeals 259. In the instant case the averments in the various affidavits filed in this application require examination. In the instant case the averments in the various affidavits filed in this application require examination. There is an affidavit by Chunilal Bhaichand Mehta, the respondent No. 4 who says that he is the Managing Trustee along with the respondent No. 5 of Banu Master Trust haying its office at No. 43 Mahatma Gandhi Road, Bombay. This affidavit was affirmed on the 9th August, 1961. The deponent states in paragraph 13 of this affidavit that the rights of Banu Master Trust "who are third parties and purchasers without notice have intervened in this matter. " this paragraph is not true to the deponent's knowledge but is a submission to this Court. In paragraph 16 (d) (e), (f) and (g) the deponent has described the nature of the transaction which has been taken place. He says that the respondent No. 3 in pursuance of a notice issued by the Company executed a Letter of Renunciation in form 'c in favour of the trustees of the Banu Master Trust being the respondents Nos. 4 and 5. The said form "c" was also signed by the trustees and forwarded to the Company along with the requisite remittance on or about the 9th February, 1961. This was the transaction with respect to 366 2/3 new equity shares. It is alleged further that by virtue of a similar Letter of Renunciation executed by Sir Chunilal Mehta and Company Private Limited, the trustees of the Banu Master Trust also became entitled to the issue of 33 1/3 new equity shares. There is no allegation that any consideration was paid by the trustees to the persons who were renouncing their rights. It is also interesting that in the last sentence of paragraph 18 of this affidavit the deponent says "that the said Banu Master Trust have validly acquired without notice the relinquishment and renunciation rights of the third respondent and for which they have paid the necessary amount to the Company. " For purposes of this application it is not at all relevant as to whether any amount has been paid to the company. What is relevant is the amount, if any, that has been paid to the persons who renounced their rights to purchase the new shares. On this point the affidavit is significantly silent. 21. " For purposes of this application it is not at all relevant as to whether any amount has been paid to the company. What is relevant is the amount, if any, that has been paid to the persons who renounced their rights to purchase the new shares. On this point the affidavit is significantly silent. 21. I shall now come to the affidavit of Vinod Chandra Chunilal Mehta the respondent No. 3 also of No. 43, Mahatma Gandhi Road, Bombay affirmed on the 9th August, 1961. In paragraph 5 of this affidavit Vinod Chandra says, "I renounced my right to the said 3662/3 shares in favour of respondents Nos. 4 and 5 being the trustees of Banu Master Trust. I am informed and verily believe that the respondents Nos. 4 and 5 also filled in and signed the said form 'c and sent application moneys at the rate of Rs. 4. 50 per share to the company on the 9th February 1961. " In paragraph 7 of this affidavit he says, "i have in any event sold and validly renounced the right to 366 2/3 new equity shares in favour of Banu Master Trust. . . . . . ". In paragraph 8 of this affidavit he says, "that the respondents Nos. 4 and 5 are purchasers of the said right without notice. " In paragraph 3 of this affidavit he states, "I confirm and repeat each and every statement, contentions and submissions made in the said affidavit of Sir Chunilal B. Mehta and repeat the same for the sake of brevity as if the same were set out herein seriatim." It is obvious that in the seller's affidavit also it has not been stated what amount, if any, was paid by the purchaser or what consideration, if any, passed from the purchaser, to the seller. 22. IN England, under the old system of pleading, a bonafide purchaser for value without notice had to aver the consideration and the actual payment of it; a consideration secured to be paid was not sufficient: vide Mitford on "pleading", 4th Edition, page 275 and "ashuburner's Principles of Equity," 2nd Edition, pages 54 and 55. Assuming that the respondent No. 3 had the right to renounce the new shares offered to him, to my mind in the present application if the respondents Nos. Assuming that the respondent No. 3 had the right to renounce the new shares offered to him, to my mind in the present application if the respondents Nos. 4 and 5 wanted to succeed on the ground that they were bonafide purchasers for value without notice, the price that they paid or the consideration that passed from them should have been specifically averred in their affidavit or in the affidavit of their seller. In the absence of these material averments I am not inclined to entertain the plea at all. It is not however necessary to decide this point as I have held that the respondent No. 3 on the facts of this case had no right to renounce the new shares in favour of the respondents Nos. 4 and 5. 23. MR. Bikash Sen who appears on behalf of the Company viz., the respondent No. 1 is not opposing this application. 24. IN the result there will be an order in terms of clauses (a) and (b) of the prayers in the petition. The petitioner will get the costs of this application from the respondents Nos. 2 to 5. The Company will bear and pay its own costs. Certified for counsel.