Norman Macleod, Kt., C.J.
1. This is an appeal from the decision of Kajiji J. who passed a decree in favour of the plaintiffs against all the three defendants.
2. The principal facts are not in. dispute. Plaintiff 1 is a certified broker. Plaintiff 2 is said to be a sub-broker working under him. It is not clear what the term 'sub-broker' implies. There appears to have been some sort of arrangement between plaintiff 1 and plaintiff 2 that plaintiff 2 should induce business on behalf of plaintiff 1 and should obtain remuneration in the shape of a share in the brokerage for such business, but it is not disputed that in this case plaintiff No. 2 conducted the business in his own name. In my opinion the term 'sub-broker' should not be used as it has no legal significance and may only lead to confusion of ideas. The learned Judge says that it is a fact of which even judicial notice can be taken that where a sub-broker issues contracts in his own name and the head broker allows him to do so, the party dealing with the sub-broker always looks to the sub-broker for the performance of the contract. With due respect I cannot agree. The terms 'head-broker' and 'sub-broker' may or may not be a convenient method of expressing the relationship between plaintiff 1 and plaintiff 2, but it is inadvisable to introduce into legal language terms which require explanation when the ordinary terms will suffice. Plaintiff 2 may have been the agent of plaintiff 1 to enter into contract in his behalf, or he may have been an employee of plaintiff 1 so that the law of principal and agent, or master and servant, respectively, would be applicable. As the plaintiff 2 entered into contracts in his own name, it would depend upon evidence whether he was acting on his own behalf or on behalf of an undisclosed principal or on behalf of a principal whose name was given to the other contracting party, and consequently on the facts proved the rights and liabilities of the various parties would have to be decided. I cannot see myself what interest plaintiff 1 had in this suit except to sue on Gora's cheque, unless it can be said that plaintiff 2 was acting as the agent of plaintiff 1. It was plaintiff 2 who contracted in March 1920 to sell 150 shares in Alcock, Ashdown & Co., Ltd., to the first defendant Esmail Gora, a certified broker. Plaintiff 2 was not a certified broker and so we are not concerned with any terms which may be implied in a contract between certified brokers. In all the transactions in suit the parties acted as principals and not on behalf of clients. In pursuance of his contract plaintiff 2 handed over to Gora, on April 14, being payment day, certificates for 129 shares with their respective transfer forms signed in blank by the registered share-holders. The amount to be paid according to the rules, on that day was Rs. 1,54,800, and at about 8 P. M. Gora handed to plaintiff 2 a cheque for that amount drawn in favour of plaintiff 1. The cheque was dishonoured on presentation the next day.
3. It will now be necessary to consider what were the dealings of Gora in shares in Alcock Ashdown & Co. for the April settlement. He had been bulling the market, buying largely from defendants 2 and others. Exhibit 5 at page 1, Part III, is his account with defendants 2. Between February 13 and March 9, he had bought 460 shares, though Manilal said he had bought 463, at prices ranging from Rs. 1305 to 1505 of which thirty-one were sold before April 14. He took delivery on the 14th of 3oH shares, and gave a cheque for Rs. 4,41,600 at Rs. 1200 per share, the rate fixed by the Association on payment day. The final adjustment was to take place on April 17 when a very considerable amount more would have to be paid to defendants 2 on the 368 shares, apart from what was due for differences on the shares of which delivery was not taken and on other accounts. In addition to the 368 shares, Gora had obtained 129 from the plaintiff 2, 56 from one Dave to whom he had given a cheque for Rs 67,200, and 16 from other sources making a total of 569 shares. He delivered 264 to one Nemchand, receiving a cheque from him for Rs. 3,16,800 at Rs. 1200 per share. Out of the 264 shares 25 shares were part of the 129 he had received from plaintiff 2, Gora thus had 305 shares left with him of which 104 had come from plaintiff 2. His position was then desperate. Apart from other liabilities he had issued cheques on the 14th for Rs. 4,41,600, Rs. 1,54,800 and Rs. 67,200 a total of Re. 6,63,600 which he could not hope to meet unless he realised the full value on the 305 shares. His own story is as follows. On April 15, he went with Nemchand's cheque for Rs. 3,16,800 and the 305 shares to the Bank of India. Whilst waiting to receive payment for the cheque he saw Manilal, a partner in defendant 2's firm. He explained his difficulties to Manilal, who said he had a friend who would advance money on the 305 shares at Rs. 1200. Gora gave Manilal the 3,16,800 rupees which he got for the cheque of Nemchand, and the 305 shares, in order that he might arrange the loan. Manilal knew the amounts of the cheques given to plaintiff 2 and Dave which had to be met. Gora met Manilal again in the evening at Manilal's residence when according to him he was asked to sign two documents which he did without reading them. One was a document of pledge, the other a promissory note for Rs. 3,50,000, Exs. M and N. Both were made out in the name of Maganlal C. Ghia whom up to that time Gora had neither Been nor heard of. The pledge document referred to three cheques for Rs. 1,24,800, Rs. 75,200 and Rs. 1,50,000 as having been received by Gora hut as a matter of fact no cheques were given to him. It certainly seems extra-ordinary that Gora should have left without receiving any of the money, of which he was so urgently in need, in exchange for the 365 shares. On the 17th he received a letter dated the 16th, Ex. V, from Mr. Kanuga, a pleader practicing at the Police Courts, purporting to act on behalf of Ghia. It alleged that Gora had already received two cheques from Ghia aggregating Rs. 2,00,000 but as his client had then received information which made him apprehensive that there would be a difficulty in getting the pledged shares transferred to his name, he had told Gora he would not pay the balance of Rs. 1,50,000 until the shares were transferred to his name. Gora was, therefore, to co-operate in getting the shares transferred. On the 19th Messrs. Soonderdas & Co. wrote a reply on behalf of Gora, Ex. 5, stating that the transaction referred to had not been correctly represented and asked for inspection of the writing and the two cheques. On the 16th Gora had written two letters for plaintiff 2 and Dave to deliver to Manilal, asking him to give cheques to plaintiff 2 and Dave for sums of Rs. 1,54,800 and Rs. 67,200 respectively. Exhibit D is the letter in respect of the cheque to be given to plaintiff 2. Manilal admitted he had received these letters asking for cheques : see page 94. Plaintiff 2 and Dave told Gora that Manilal had promised to pay them when the Bazar closed, but eventually when he heard the cheques had not been given he went to the office of defendants 2 where there was a meeting, at which Mr. Devidas, a partner in the firm of Motichand and Devidas, who had acted generally as Gora's solicitors, was present. After a long discussion no arrangement was arrived at. The following is the note in Mr. Devidas's diary:
16th April. Attending with Esmail Gora at the residence of Mr. Mohanlal, having a long interview. Matter could not be amicably settled. Engaged three hours at night.
4. It is not necessary to detail further what happened thereafter. The 305 shares remained with defendants 2, and Gora received nothing for the document of pledge which he had signed. He was declared a defaulter on April 19. Sometime after August he left India from Porebunder for South Africa where his evidence was taken on commission. With regard to defendants 2 his main complaint is that Manilal promised to give him cheques for Rs. 1,54,800, and Rs. 67,200 to pay plaintiff 2 and Dave on pledge of the 305 shares and he did not do so. Before dealing with Manilal's evidence as to what happened between him and Gora with regard, to the pledge of the 305 shares, it is necessary to dispose of the third defendant who Manilal had finally to admit was his nominee. The case as first presented was that Ghia was the friend whom Manilal had induced to advance three and a half lacs on pledge of the 305 shares, out of which Rs. 2,00,000 were paid by Gora to defendants 2 towards the amount due to them. Ghia had an amount with the Bank of Morvi into which Manilal paid Rs. 2,00,000 on April 16 against which Ghia drew two cheques for Rs. 1,24,000 and Rs. 75,200 in favour of Esmail Gora dated April 15. He also drew a third cheque for Rs. 1,50,000 which was never used. We have here the old story of the money lender who has no money to advance himself but has a friend who will oblige the borrower.
5. Manilal in his evidence endeavoured to maintain the defence set up in the written statement, but the whole of his evidence may be discarded as an elaborate tissue of falsehoods. It is certain that he knew what Gora's position was on April 14 and 15. Whether or not he actually promised to enable Gora to pay the plaintiff 2 and Dave, he was solely concerned to secure himself and obtain possession of the 305 shares without paying Gora anything. Ghia had in fact no concern with any of the transactions and his name was only used by Manilal to cloak his own dealings. Reference may here be made to Ex. V, which was a letter written by Motichand and Devidas on behalf of defendant 2 to the agents of Alcock, Ashdown & Co., asking them not to transfer any of the 368 shares which they had sold to Gora, on the ground that the cheque for Rs. 4,41,600 had been dishonoured. The learned Judge came to the conclusion that instructions were given for that letter on the 15th though it is not quite clear why they could not Have been given on the 16th. However that may be, defendants 2 had already received Rs. 3,16,800 on account of those shares on the 15th together with the certificates for the 305 shares on which a loan was to be obtained, so that the object in writing that letter could only have been a dishonest one. On the facts, therefore, I am entirely in accord with the conclusion of the learned Judge.
6. I now come to the actual terms of the decree passed by him.
1. The plaintiffs were held entitled to the 129 shares the numbers of which were annexed in Schedule A to the decree.
2. Gora was ordered to deliver to the plaintiffs 129 shares or to pay Rs. 1,54,000 and costs.
3. 104 shares out of the 129 were declared to be in the possession of defendants 2 and 3, defendant 3 being a nominee of the defendants 2.
4. Defendants 2 and 3 were ordered to deliver to the plaintiffs the 104 shares.
5. Defendants 2 and 3 were ordered to pay to the plaintiffs by way of damages Rs. 71,500 being the difference between the rate of Rs. 1200 and the rate of Rs. 512-8-0 their value at the date of the decree.
6. Defendants 2 and 3 were to account for all dividends recovered by them on the 104 shares after April 20, 1920.
7. The grounds in law for this decree are to be found in the following passage in the judgment:
Gora was only an ostensible owner and the plaintiffs who were the unpaid vendors had the equity in them and they could have stopped Gora from getting these shares transferred in his name in the books of the Company but if Gora had passed on these shares either by way of sale or by way of pledge to any third person who acted bona fide and without notice then I certainly think that such a person would have had a better title to these shares than the plaintiffs But in this case it is abundantly clear that Gora himself felt that he was not the owner. Manilal had notice that these shares were not paid for and Ghia being a mere nominee of Manilal, Ghia was in no better position than Manilal himself. They took these shares with this infirmity from Gara and therefore they cannot claim these shares in priority to the Plaintiffs.
8. Sir Thomas Strangman for the appellants, defendants 2, began his argument by contending that as shares were goods, Section 121 of the Indian Contract Act applied so that if the vendor of the shares sold them on credit his only remedy, if the purchaser defaulted, was to sue for the price, and he could not follow the goods into the hands of third parties. Admitting that shares are goods, the first question is how are they delivered in pursuance of a contract for sale? Shares are a peculiar kind of moveable property which cannot pass from hand to hand like bales of cotton. The property in these shares belonged to the registered share-holder and could not be transferred to another except according to the articles of the company. Article 42 is as follows:
The instrument of transfer of any share in the company shall be executed by the transferor and transferee, and the transferor shall be deemed to remain the holder of the said share until the name of the transferee is entered in the register of members in respect thereof.
9. Lord Watson said (p. 277) in Colonial Bank v. Cady and Williams (1890) 15 AC. 267:
The appellants1 witnesses say that delivery of the certificate, with the transfer executed in blank, 'passes the property' of the shares; but that statement must be accepted subject to the explanations by which it is qualified. The right of the holder appears from these explanations to be in the nature of a jus ad rem and not of a jus in re. Delivery does not invest him with the ownership of the shares in the sense that no further act is required in order to perfect his right. Notwithstanding his having parted with the certificate and transfer, the original transferor, who is entered as owner in the certificate and register continues to be the only shareholder recognised by the Company as entitled to vote and draw dividends in respect of the shares, until the transferee or holder for the time being obtains registration in his own name. It would, therefore, be more accurate to say that such delivery passes, not the property of the shares, but a title, legal and equitable, which will enable the holder to vest himself with the shares without risk of his right being defeated by any other person deriving title from the registered owner.
10. As that case has been relied on for other purposes it is necessary to consider the facts in order to realise what is actually decided. The registered owner of shares in a New York Company died. His executors obtained probate and in order that the shares might be registered in their own names signed as executors the transfers on the back of the certificates and without filling in the blank handed them to their brokers, who fraudulently deposited them with a Bank which took them bona fide and without notice as security for advances. The Bank took no steps to get themselves registered in the books of the Company. It was held that the conduct of the executors in delivering the transfers was consistent either with an intention to sell or pledge the shares or to have themselves registered as the owners and therefore did not stop them from setting up their title as against the Bank.
11. As Lord Watson said, the only question in the case was whether the respondents were stopped from saying that Blakeway (the broker) had not, then authority to dispose of the certificates in question. That his Lordship answered in the negative because the documents were not 'in order', or in other words were not accepted in commercial circles as sufficient vouchers of title, unless they wore accompanied by an extract of the probate and an attestation of the genuineness of the executors' signature by the United States Consul or other competent officer. When, therefore, plaintiff 2 parted with the certificates and blank transfers he was not, the registered holder, nor had he any title left in him to enable him to vest himself with the shares. Having no title to anything it is thus difficult to see what cause of action he had against defendants 2 and No. 3. He had done all he could to deliver the shares, and if the blank for the transferee's name was filled in that person alone would have the right to apply to the Company to recognise him as the registered holder. As the blanks in the transfers for the said shares were never filled in it is not necessary to consider what the legal rights of the transferee would be against the registered holder if the company refused to recognise the transfer. Now the legal position as between the plaintiff 2 and Gora was entirely different from the legal position as between plaintiff 2 and defendants 2 and 3, and the failure to recognise that vitiates the whole of the Advocate General's argument before us. The plaintiff 2 could have filed a suit against Gora for the price, and by way of attachment before judgment would probably have been able to prevent him from dealing with the shares if he still held the certificates and transfers. The Advocate General argued that there were contesting equities between plaintiffs, Gora, and defendants 2 and 3, but the plaintiff 2 had no equity against the others, he had only a remedy against Gora on the contract for failure to pay the price. If he had asked the Company not to recognise a transferee who asked to be placed on the Company's register as a share-holder, he would have been told that the only person the Company recognised was the registered holder, and they had no concern with the various persons through whose hands the blank transfers passed before they were filled in.
12. The case of France v. Clark (1884) 26 Ch.D. 257 was relied upon by the Advocate General. There the registered holder of shares in a Company deposited the certificate with C as security for 150, and gave him a blank transfer signed by F.C. deposited the certificate and the blank transfer with Q as security for 250. C died insolvent after which Q filled in his own name as transferee and sent in the transfer for registration. F gave notice to the Company but whether before or after the transfer was registered was doubtful on the evidence. It was held that Q had no title against F except to the extent of what was due from F to C. Lord Selborne said (p. 262):
The defence of purchaser for valuable consideration without notice, by any one who takes from another without inquiry an instrument signed in blank by a third party, and then himself fills up the blanks, appears to us to be altogether untenable.... The person who has signed a negotiable instrument in blank, or with blank spaces, is (on account of the negotiable character of that instrument) estopped by the law merchant from disputing any alteration made in the document, after it has left his hands, by filling up blanks (or othewise in a way not ex Jacie fraudulent) as against the bonafide holder for value without notice; but it has been repeatedly explained that this estoppel is in favour only of such a bonafide holder; and a man who, after taking it in blank, had himself filled up the blanks in his own favour without the consent or knowledge of the person to be bound, has never been treated in English Courts M entitled to the benefit of that doctrine.
13. And at page 263:
It was said that when a man, in a transaction for value, does what this plaintiff did, and delivers a blank form of transfer to a creditor by way of security, together with the certificate of shares, his meaning must necessarily be that the creditor may complete his security by obtaining registration of the shares, either in his own or (possibly) in some other name; and that he, therefore, entrusts him with the requisite authority for that purpose. Granting this, what follows? Only that the creditor to whom such an authority is given may execute it or not, for the purpose of giving effect to the contract in his own favour, as he pleases; but not that, if he does not execute it, he can delegate the like authority to a stranger for purposes foreign to and possibly (as in this case) in fraud of that contract....
But it was pressed on us that the plaintiff had, by the blank transfer and certificate, enabled Clark to represent himself as the true owner of the shares, or as having power to deal with the shares as owner. The documents themselves showed that Clark was not the owner. Nor was there any evidence of any mercantile usage to the effect that the holders of such documents as Clark handed over to Quihampton are treated as having the right to transfer shares referred to in the documents, as if such holders were the owners of such shares, in other words, there is no evidence that, as a matter of fact, blank transfers, accompanied by certificates of shares registered in the names of transferors, pass from hand to hand like negotiable instruments.
14. It appears to have been suggested in Fox v. Martin (1895) 64 L.J. Ch. 473 that France v. Clark had been overruled by Colonial Bank v. Cady and Williams, but Kekewich J. was of opinion that was not the case, and although there may be one or two passages in the judgments of Lord Watson and Lord Herschell which may be said to countenance such a suggestion, I cannot see any inconsistency in the law as laid down in the two cases as appropriate to their respective facts. In both cases the holders of the documents were held to have been put on inquiry and therefore there was no estoppel against the true owner. The important point to notice is that the only representation which is made and can be made on the facts of the documents in such cases is by the true owner who signs the transfer as transferor. The various parties through whose hands the documents may pass before they come to the last holder, have made no representations. Sir Thomas was right in saying that the only inquiry that a holder can be put to, by reason of the nature or character of the documents which come into his possession, is with regard to the action of the registered holder. Did he intend to transfer, and had he authority to transfer? He could not possibly be put to inquiry with regard to the rights and liabilities of intermediate holders.
15. But it has been contended by the respondents that Manila knew that Gora had not paid plaintiff 2 for the shares, and therefore took the documents with notice of plaintiff 2's rights. That is correct, but all that the plaintiff 2 was entitled to as against Gora was to receive the price. He had no title either in law or in equity to the shares, which was the proposition with which I started. The learned Judge thought that the plaintiffs as unpaid vendors had the equity in them, but as between the plaintiffs and Gora it was a matter of contract which could only. be regulated by the provisions of the Contract Act. Assuming for the purposes of argument that delivery of the documents constituted the delivery of the goods, once they parted with the documents, they had no right to have them returned. If Gora had stolen the documents the case would be entirely different. But Gora's statement in his evidence that he did not think he was the owner because he had not paid for the shares cannot alter the legal position.
16. The defendants 2 and 3 rightly admit that they are not entitled to hold the shares except for what may be found due to them by Gora on a proper account being taken. As Gora has absconded and has made no attempt to have that account taken nothing can be done unless Gora is adjudicated insolvent.
17. On the question of costs defendants 2 and 3 have both filed false written statements. Defendant 2 persisted in maintaining what he had said in his written statement until he was forced to admit that Ghia was his nominee.
18. Ghia did not appear at the hearing, although he instructed counsel to argue the appeal. The appeal must be allowed and the suit dismissed as against defendants 2 and 3, but having regard to their conduct I think they should pay their own costs throughout.
19. I have had the benefit of reading the judgment of the learned Chief Justice in this case. I agree entirely with his conclusions, but as we are reversing the judgment of the learned trial Judge I desire to state my reasons briefly.
20. It is unnecessary for me to recapitulate the facts. The position may be summed up shortly as follows:- Plaintiffs sold 129 shares to defendant 1. Defendant sold 25 of these to a third party and pledged 104. along with 201 similar shares to defendant 2. Defendant 2 put forward defendant 3 as a party who was willing to advance money. In fact defendant 3 was a mere nominee of defendant 2. Defendant 2 got possession of these 105 shares fraudulently. The fraud was that he deceived defendant 1 by false pretences that he would use these shares for the purpose of raising a loan for the benefit of defendant 1 which he did not do and which he did not intend to do, his real object being to secure himself from loss as regards the moneys due to him by defendant 1.
21. On these facts it is not disputed that plaintiffs are entitled to a decree an against defendant 1 for their unpaid purchase money. They seek, however, to recover the documents and also damages as against defendants 2 and 3. The question is whether they can do this.
22. As regards the position of plaintiffs inter se I agree with what is stated in the judgment of my Lord the Chief Justice. It appears that plaintiff 2 and defendant 1 dealt as principals. Plaintiff 2 was not the registered holder of these shares.
23. It is not perhaps strictly accurate to speak of these transactions as sales of shares. Plaintiff 2 as vendor agreed to sell and deliver transfers and certificates with the interests and rights which they convey (London Founders' Association v, Clarke (1888) 20 Q.B.D. 576). Such delivery passes not the property in the shares but a title legal and equitable which will enable the holder to vest himself with the shares (Per Lord Watson in Colonial Bank v. Cady and Williams (1890) 15 A C. 267). On delivery of the documents there was no interest left in plaintiff 2 on which any equity can be founded. As between him find defendant 1 there was no fraud or misrepresentation which can vitiate the transaction. Plaintiff 2 had thus no lien for his unpaid purchase money and without such lien he cannot seek to follow the documents. He could not do so were they still in possession of defendant 1 and therefore the further history of these documents is not material. The same result follows from the statute law of this country. Whatever be the exact nature of the property gold it must be 'moveable property' for the purpose of Chapter VII of the Indian Contract Act. The definition in section and Sub-sections 5 and 6 of the General Clauses Act (Act I of 1868) is applicable. The property is not 'immoveable' property within that definition, therefore it is 'moveable' property. It follows from Section 76 of the Indian Contract Act that this property is 'goods.' The case therefore falls within Section 121 of the same Act. Plaintiff 2 delivered all that he had. He cannot, therefore, rescind the contract on the buyer's failing to pay the price unless it was stipulated by the contract that he should be so entitled. I agree that no special condition to this effect is proved. The statement of defendant No. 1 that he did not regard himself as owner until he had paid the purchase money cannot alter the legal relations of the parties.