1. The petitioner seeks to review the judgment of this Court dated 18-6-1970 on two grounds(1) that the sale of the shares in question is prohibited by the articles of association and (2) that the sale of the excessive shares than what is absolutely required to discharge the decree debt should be set aside. Before dealing with the merits of the petitioner's contention it is necessary to set out a few facts. There was a decree against the petitioner herein and in execution of that decree ten shares belonging to him in a private limited company were brought to sale. The actual amount outstanding under the decree on the date of sale was Rs. 5193-94. There was a sale of six shares for a sum of Rs. 9,000/- to the son of the decree-holder. The said sale was challenged by the petitioner on three grounds(1) that the value fetched by the shares in auction is too low having regard to the real value worth of the shares,(2) the sale of six shares was not justified and the decree amount could have been realized by the sale of four shares for Rs. 6,000/- and that the sale of two shares in excess was not warranted and (3) the purchase by the decree-holder's son was at the instance of the decree-holder and that as such the sale without leave to bid and set off obtained from the Court is invalid in law. At the time of the hearing of this appeal this Court felt that there is no substance in the first and third contentions. As regards the second contention that there has been an excessive execution by the sale of six shares instead of four, it was found that the executing Court had ordered the sale of six shares because the purchaser had with him a sum of Rs. 9,000/-. That reason was found unacceptable and this Court held that there has been in fact an excessive execution. But this Court was not inclined to set aside the sale even in part for the reason that the entire amount realized by the sale of six shares had been distributed among the various attaching decree-holders and that no portion of the sale proceeds was available in Court. As already stated this review petition has been filed raising two grounds(1) that an important question of law has not been placed before this Court at the stage of the hearing of the appeal and (2) that the petitioner has since deposited the value of all the shares sold so that this Court can set aside the sale at least so far as it relates to the said two shares excessively sold.
2. As regards the first contention, it is pointed out that the nature of the shares is such that they cannot be sold to any one other than a share-holder and that the sale of six shares to the decree-holder's son who is not a share-holder of the company is invalid. Reference is made to Arts.2(c), 9 to 11 and 13 to 15 of the Article of Association and it is contended that there is a complete prohibition of the transfer of the company's shares to outsiders not acceptable to the directors and that the directors may refuse to recognize the transfer and to register the same in the books of the company at their discretion. It is true the above articles impose stringent restrictions on the transfer of shares by a shareholder and discretion is given to the directors to recognize or not the transfers effected by a share-holder. But the existence of these restrictions will not at all affect the sale of the shares in execution of a decree of Court. Whether the Court auction purchaser will be able to have the transfer recognized by the directors or not is not a question with which the Court is concerned. The only question to be decided is as to whether the judgment debtor had any saleable interest in the shares in question. The mere existence of certain restrictions on the registration of the shares transferred will not affect the ownership of the shares. It is well established that the transfer of interest in the shares from the transferor to the transferee is independent of the requirement of its registration for purposes of Companies Act and that as between the transferor and the transferee, the transfer would be valid even though the transferee may not be able to have the shares transferred registered in his name. The decision in R. Subba Naidu v. Commr. of Gift Tax : 73ITR794(Mad) may usefully be referred to. In that case an assessee made a gift of certain shares in a private limited company absolutely to his daughter under two settlement deeds. But the shares continued to stand in his name in the books of the company as they had not been sent to the company for registration of the transfer. The dividends of these shares continued to be assessed in the hands of the assessee. The value of the shares was subjected to gift tax for 1959-60 in the hands of the assessee, rejecting his contention that there was no actual transfer of the shares to his daughter, that the shares continued to stand in his name and that he was enjoying the dividends therefrom and paying the tax thereon. That assessment was questioned by the assessee. This Court ultimately held that there was a complete gift of the shares to the daughter by the assessee notwithstanding that, vis-a-vis the company, he continued to be the holder of the shares in the absence of registration of the transfer and that, therefore, the gift tax was properly levied. The principle laid down in that decision was that though there is no valid registration of the transfer of shares in the books of the company the title to the shares vest with the transferee and that even if the dividends had been paid to the transferor, the benefit of those dividends should go only to the transferee. Applying the principle laid down in that case, even if the transfer of the shares is not recognized by the directors, still the purchaser will become entitled to the benefit of the shares. It is well settled that what passes to the purchaser of shares at a Court sale is the beneficial interest in the shares sold, and that interest passes even though the company has discretion to recognize the purchaser as a shareholder or not. There is nothing in Order 21, Rule 79 to indicate that the title of the auction purchaser to the shares purchased by him will stand perfected only after the recognition of the transfer and registration of the same by the company. In this view, the sale of shares in question cannot be said to be invalid for the reason that there are restrictions for recognition of the transfer of shares.
3. As regards the second contention it is now stated by the learned counsel for the petitioner that a sum of Rs. 9,000/- has been deposited in the lower Court to the credit of the execution petition, that therefore the reasoning given by this Court for not setting aside the sale in part in regard to the two shares no longer holds good and that in view of the said deposit the sale of shares so far as it relates to the excess two shares should be set aside. I am of the view that there is force in this contention. As already stated, the amount due to the decreeholder on the date of the execution was Rs. 5,000/- and odd, and by the sale of four shares at the rate of Rs. 1,500/- per share, the entire decree amount could have been realized. But the executing Court has purported to sell the six shares on the ground that the purchaser had enough money to purchase the six shares out of ten shares offered for sale. This reasoning of the executing Court for effecting the sale of six shares has been held by me to be untenable in the judgment dated 18-6-1970. It is only in cases where the property to be sold is indivisible, it is possible for the Court to sell the property as one unit and the sale proceeds realized may be considerably more than the decree amount. But in a case like the present one where the executing Court should have stopped with the sale of four shares which is sufficient to fully satisfy the decree, it is not empowered to sell more than the required number of shares merely because the purchaser had money in his hands to purchase more shares. Now that the appellant has deposited the entire sum of Rs. 9,000/- representing the sale value of the shares, equity and justice demand that the sale of the excess two shares has to be set aside by this Court. As already stated, there is no reason to set aside the sale of the four shares for the reasons advanced by the appellant,. I therefore modify the judgment in the C. M. S. A. and direct that the sale held on 10-12-1964, be set aside so far as it relates to the two excess amount shares. The purchaser is entitled to the repayment of a sum of Rs. 3,000/- out of Rs. 9,000/- now said to be in Court deposit. The civil miscellaneous petition is partly allowed as indicated above. No costs.
3. Petition partly allowed.