1. The plaintiff in this case is the son of one David Ezekiel, who on. 2nd September 1936, was the registered holder of 16,800 ordinary shares in the defendant company. The defendant company's registered office is at Calcutta and their business is that of sugar manufacturers and distillers. On 18th April 1929, David Ezekiel had executed a power of attorney in favour of his nephew, Solomon Ezekiel, the terms of which must be considered at a later stage. At that time David was the proprietor of two businesses, one known as Davidson & Co. and carried on in Calcutta, and the other known as S. Ezekiel & Co. and carried on in Chittagong. Both the businesses traded in general stores and wines and spirits. In 1931, the business of Davidson & Co. was incorporated as a private limited company under the style of Davidsons Ltd. It is not challenged that shortly after the execution of the power, David left India for England, or that he. visited India and spent some months in Calcutta every succeeding cold season up to' and including that of 1934-1935. According to the plaintiff, David left India for the last time in March 1935 and has never' returned. The defendants however do not admit this.
2. Admittedly David has a strong motive for not returning. In March 1936, proceedings were instituted against him and various other persons in the Criminal Courts at Alipore, wherein he was charged with' offence punishable under the Penal Code and Excise Act. In the course of the criminal proceedings, David has been proclaimed an absconder under Section 87, Criminal P.C. and under Section 88 his property, including the 16,800 shares in the defendant company, has been attached. The Official Receiver of this Court is now in possession of the share certificates, as receiver appointed by the Criminal Court under Section 88 (3) (b) by an order dated 17th June 1936. When the share certificates were seized they were in the custody of Messrs. Lyall Marshall & Co. the Managing Agents of the defendants, in the following circumstances. Solomon had purported to transfer the shares under the power of attorney, the transferee being the plaintiff. As to 6800 shares the consideration is said to have been shares in Davidsons Ltd., belonging to the plaintiff, and as to the balance, a sum of Rs. 2,10,000 borrowed on over-draft account from the Eastern Bank Ltd. The plaintiff had arranged with the Bank that all the 16,800 shares should be held by them as security against his overdraft, and that the transfers should be made out in the names of two of the Bank's officers. Solomon as attorney executed the transfers in that form and handed the certificates to the Bank. The Bank forwarded them to the Managing Agents for registration, but this had not been effected when the scrip was seized under the order of the Criminal Court. In my opinion these facts are not relevant to this suit, although the defendants sought to make them the basis of an issue which I ruled did not arise on the pleadings.
3. To resume the main story. About this time the defendants thought it desirable to increase their capital. Their powers to do so are limited and prescribed by Articles 37 to 40 of the Articles of Association. These Articles are as follows:
37. The company may, from time to time, by extraordinary resolution, increase the capital by the creation of new shares of such amount as may be deemed expedient.
38. The new shares shall be issued upon such terms and conditions and with such rights and privileges annexed thereto as shall be directed in such Resolution, or in default of such direction as the Directors may determine, and in particular such shares may be issued with a preferential or qualified right to dividends, and in the distribution of assets of the company, and with a special or restricted or without any right of voting.
39. Subject in all respects to any direction to the contrary that may be given by the company in general meeting at which the resolution for the issue of any new shares is passed, such shares shall be offered in the first instance either at par or at a premium as the Directors may decide to all the then members in proportion to the amount of the capital held by them, and such offer shall be made by notice specifying the number of shares to which the member is entitled and limiting the time within which the offer, if not accepted, will be deemed to be declined, and after the expiration of such time or as to the shares of any particular member on the receipt of an intimation from such member that he declines to accept the shares offered, the Directors may dispose of the same in such manner as they think proper but in default of any such determination or so far as the same shall not extend the new shares may be dealt with as if they formed part of the shares in the original ordinary capital.
40. Except so far as otherwise provided by the conditions of issue or by these presents any capital raised by the creation of new shares shall be considered part of the original ordinary capital and shall be subject to the provisions herein contained with reference to the payment of the calls and instalments, transfer and transmission, forfeiture, lien, surrender and otherwise.
4. On 17th August 1936, the Managing Agents convened an extraordinary general meeting of the Company by a notice in the following form:
P. D. 4.
Carew & Company Ltd. Notice convening Extraordinary General Meeting
Notice is hereby given that an Extraordinary general meeting of Carew & Co. Ltd. will be held at the registered office of the company at 4, Fairlie Place in the town of Calcutta on 2nd September 1936 at noon when the subjoined resolutions will be proposed as extraordinary resolutions, namely:
(1) That pursuant to the provisions of the Companies Act 1913 and of Article 37 of the Company's Articles of Association, the capital of the company be increased to Rs. 30,00,000 by the creation of 1,40,000 additional ordinary shares of Rs. 10 each ranking for dividend and in all other respects in pari passu with the existing ordinary shares in the company, save only that the same-shall not rank for dividend in respect of dividends declared for the year ending 30th June 1936.
(2) That 40,000 of the said 1,40,000 shares be forthwith issued and the Directors be instructed to offer the said 40,000 shares in the first instance at a premium of Rs. 4 per share to members of the company whose names appear on the register of members as on the 2nd day of September 1936 holding four or more ordinary shares in the proportion of one new share for every four shares held by them respectively fractions being disregarded or to the nominee or nominees of any such member and upon the footing that the full amount of each share taken up plus the premium making together Rs. 14 per share shall be paid to the company on(tm) acceptance of the offer and that such offer be made by notice specifying the number to which the member is entitled and limiting the time within which the offer if not accepted by payment will be deemed to be declined and that the Directors be empowered to dispose of the shares not taken up in response to such offer by offering them at the same premium to any one or more of the share-holders of the company including the Directors or otherwise as they consider expedient in the interests of the company.
5. The notice was accompanied by a circular letter addressed to the shareholders, in which the Managing Agents explained the reasons which caused the Directors to recommend the increase of capital, and the purposes to which the new capital when: raised would be put. On 9th September 1936, the extraordinary general meeting was held and the resolutions in the form set out in the notice of 17th August were passed unanimously. Immediately after the extraordinary general meeting, a Directors meeting was held and a form of circular letter purporting to contain the offer that the Directors were instructed to make by the second resolution was approved. Accordingly letters in the approved form were despatched to the members of the company, the letter to David being dated 15th September 1936. It is not necessary to set out the letter in extenso, but the following paragraphs are of importance:
Should you desire to renounce your rights to all or any of the shares to which you are entitled in favour of a nominee, will you be good enough to fill up the enclosed form 'B' provided for that purpose instead of or in addition to the form already referred to. The letter of renunciation should be counter-signed by the nominee. The Directors reserve the right to reject any nominee. Should the said shares not be applied for by yourself or by the nominee within the time named the Directors of the company will assume that you are not prepared to take them up and will dispose of them elsewhere.
6. The time referred to expired on 9th November 1936. This letter was opened by Solomon as the attorney of David and shown to the plaintiff. The plaintiff's position was that though he considered himself the legal owner of the 16,800 shares, he realized that as he had not been able to effect registration either of his own name or the names of the Bank's nominees, he would not be in a position to enforce his right as a member of the company to participate in the new issue. On 1st October 1936, his solicitors accordingly wrote to Solomon requesting him to complete the form of nomination in the plaintiff's favour and to make it over to the plaintiff. On 6th November he delivered to the Managing Agents a form of renunciation signed on 6th October 1936 by Solomon as attorney for David and a form of acceptance signed by himself. He remitted with these documents his cheque for Rs. 58,800 being the amount due on the basis of Rs. 14 for each share of the 4200 new shares to which David was entitled, as the holder of 16,800 of the original shares in the company. The forms of renunciation and of acceptances had been prepared in the office of the company and were as follows. The form of renunciation addressed to the Directors of Carew & Co., Ltd. ran:
I hereby renounce in favour of the undersigned Mr. Herbert Ezekiel the whole of 4200 ordinary shares to which I am entitled in the above issue as stated in your notice of 17th August 1936.
7. The notice of acceptance ran:
I hereby accept the above mentioned shares upon the terms of the said notice and authorize my name to be put on the Register in respect of them.
8. On 10th November 1936, the Managing Agents called upon the plaintiff to produce David's power of attorney for inspection and at the same time they returned his cheque for Rs. 58,800. On 27th November the Managing Agents wrote again to the plaintiff, the letter being admittedly drafted by the defendants' solicitors. In that letter the Managing Agents state that the company has been advised : (1) that the validity of the power of attorney dated 16th April 1929 is open to challenge; (2) that doubt exists as to its scope; (3) that it is not-known whether the donor is absent from India or whether he may even be dead; (4) that a discretion was reserved to refuse to accept a nominee; (5) that in the particular circumstances of this matter, the discretion may be properly exercised by a refusal to accept the plaintiff as the nominee of David; (6) that the fact the power may have been acted upon in the past is immaterial. The letter goes on in the circumstances we have to inform you that shares will not be allotted to you as the nominee of Mr. David Ezekiel'. On 9th December 1936 the present suit was instituted. It was in form a suit for specific performance of a contract to allot and issue 4200 shares, or alternatively, for damages. An application to restrain the company from disposing, of the shares elsewhere was unsuccessful, and thereafter the company sold the shares in the market. An amendment was thereupon made which converted the suit into one for damages for breach of contract, the damages claimed being the difference between the market price on the date of breach and Rs. 58,800, or in the alternative the difference between Rs. 58,800 and the highest market price since the date of breach. It is not now contested that if the plaintiff is entitled to damages, such damages should be assessed as on 27th November 1936 or that on that date the market rate for the shares was Rs. 19.8-0. On this basis if the plaintiff obtains a decree it will be for Rs. 23,100.
9. The defences with which I now propose to deal were raised by issues which for all practical purposes were agreed upon with one exception. Mr. Clough, as I have already indicated, pressed me to permit a defence to be raised based on the contention that the ownership of the 16,800 shares has passed to the plaintiff, and accordingly David on 2nd September 1936, had no right to an offer of new shares and as a consequence was not in a position to nominate the plaintiff in his place. I ruled that the title of David to the 16,800 shares on 2nd September 1936, as pleaded in para. 2 of the plaint, had not been denied in the writ-ten statement, and that without amendment of the written statement the issue was not admissible. Mr. Clough did not apply for leave to amend and that defence accordingly dropped out.
10. The first line of defence is a challenge of the validity of the power of attorney. It is said that for the plaintiff to succeed he must show that Solomon, when he signed the renunciation form on David's behalf, was acting under a subsisting power. It is now admitted that the power has never been expressly revoked by David, but it is said that the agency of Solomon may have been terminated by David's death, and that the plaintiff and Solomon are the most likely persons to be able to produce the best evidence as to the continued existence of David, and that they have failed to do so. In my opinion in the circumstances there is no obligation on the plaintiff to call evidence to show that David was alive in October 1936. The question of the burden of proving death is dealt with by Section 107, Evidence Act; that section forms part of Ch. 7 which deals with the burden of proof generally. The section runs:
When the question is whether a man is alive or dead, and it is shown that he was alive within 30 years, the burden of proving that he is dead is on the person who affirms it.
11. It is admitted that David was alive as late as March 1935. The evidence is that he is now 65 years of age and in these circumstances there is nothing, in my judgment, which renders Section 107 inapplicable to the circumstances of a case. Accordingly it is unnecessary for the plaintiff to produce evidence to show that David was alive and the burden of proof is on the defendants to show that he was dead in October 1936, if they seek to challenge the validity of the exercise of the power on that ground. Indeed it appears that the plaintiff, if David is dead, has no motive for concealing the fact; because on his death David would obviously cease to be an accused person in the criminal proceedings, and it follows that the order under which the 16,800 shares claimed by the plaintiff are attached would have to be vacated.
12. It is next suggested that on David's return to India in the cold weather of 1929-1930 the agency was automatically terminated. This defence is founded upon a recital in the power of attorney that the donor is about to proceed to England, and is therefore desirous of appointing the donee as his constituted attorney for purposes thereinafter expressed. The submission is that this recital indicates an intention to limit the duration of the power, a matter as to which the rest of the document is silent to the period of David's absence from India. Mr. Clough relies on Danby v. Coutts & Co. (1885) 29 Ch D 500. In that case the relevant recital was as follows:
And Whereas I am about to return to South Australia and am desirous of appointing an attorney or attorneys to act for me during my absence from England, etc.
13. It was held that the recital controlled the generality of the operative part of the instrument and limited the exercise of the powers of the attorneys to the period of the donor's absence from England. I have been referred to a passage in Halsbury's Laws of England, Edn. 2, Vol. 1, p. 314, where it is stated on the authority in Danby v. Coutts & Co. (1885) 29 Ch D 500 that when a power of attorney recited the fact that the donor was about to go abroad, it was held to be impliedly revoked on his return home. In my opinion, however, Danby v. Coutts & Co. (1885) 29 Ch D 500 does not justify the proposition that the return to England of the donee revoked the power, or more properly speaking, terminated the agency. At p. 514, Kay J. says:
The operative part of this instrument does not refer in any way to the duration of the power. Therefore a statement in the recital or any part of it that it was only intended to have effect during the donor's absence from England would not be repugnant to anything in the operative part. It is only a conclusion of law that if such power is silent as to its duration it must last during the donor's life or until he revokes it.
14. Moreover the contention of the plaintiff in that case is summarized in the following terms:
I take next in order the second question, whether or not the power of attorney of 16th August 1880 ceased to be operative during the plaintiff's residence in England from 18th June 1882 to 30th November in the same year.
15. Although the language in the power with which I am dealing is by no means as emphatic as the language in Danby v. Coutts & Co. (1885) 29 Ch D 500, I am willing to concede that the authority of the attorney could not have been exercised during the periods that David was in Calcutta or possibly in India, but I see nothing in the document to support the contention that the authority of the attorney terminated absolutely upon the return of the donor, and that from that date the document was as ineffective as if it had been expressly revoked. If it is permissible to look to the conduct of the parties, it is not without significance that the donor did not think it necessary to execute a new power when he left India again : on the contrary, the power has been continuously acted upon since its execution during the periods of David's absence from Calcutta. I therefore hold that if David was absent from Calcutta, or even from India, on 6th October 1936, Solomon had authority to sign the letter of renunciation if such an act is within the scope of the power.
16. Mr. Clough on this basis contends that it has not been shown that the donor was in fact absent from India on that date. In my opinion, in the circumstances, no reasonable man can doubt that since the institution of the criminal proceedings, David has been deliberately absconding, and that the last place which he is likely to visit is India. When Mr. Nicolson, the Chairman of the defendant company, was in the witness-box he gave the following answers. (Ques. 147):
Q.-You are content to let that statement pass, that to the best of your knowledge he was not in India?
At Question 85:
Q.-You had very little doubt in your mind, I imagine, that Mr. David Ezekiel was not in India?
A.-We had very little doubt.
17. In these circumstances I hold as a fact that David Ezekiel was absent from India on 6th October 1937.
18. The next question to be considered concerns the scope of the power, that is to say 'did the power give the attorney authority to sign the letter of renunciation, and thereby relinquish David's claim to the new shares, and nominate the plaintiff in his place'? There is no serious divergence as to the principles which are to be applied to the construction of powers of attorney. It is admitted that they must be construed strictly, and that general words must be interpreted in the light of the special powers, although they include incidental powers necessary for carrying out the authority. The crucial clause in the power is clause (4):
To accept, draw, make, sign, endorse, realize or negotiate any bills of exchange, drafts, hundies, orders, cheques, promissory notes, bills of lading and all other mercantile documents receipts for fixed deposits with Banks shares, policies of Insurance, Government or other securities for money, shares in public Companies, Debentures, War Bonds, War Loan and dues for payment of money and to execute, sign, enter into, acknowledge, perfect and do all such contracts, hypothecations, leases, reconveyances, transfers of mortgages and other transfers, surrender of leases and shares and all other assurances, deeds, agreements, instruments, acts and things as shall be required or as the said attorney may deem necessary or proper in relation to my said businesses and affairs.
19. Does the claim cover the acts which the donee has purported to do on the donor's behalf in this case? I have come to the conclusion it does not, although the question is one of considerable difficulty. I have no hesitation in holding that the transaction in question was not 'a surrender of shares' within the meaning of the clause. The phrase surrender of shares' has a well-ascertained and definite signification, and it means the surrender to the company on the part of the registered holder of shares already issued. Many companies, of which the defendant company is an example (see Articles 27 and 28), have articles expressly providing for surrender in certain circumstances. The phrase is not, in my opinion, applicable to the refusal of a registered share-holder to take up newly issued shares to which he is entitled. I do not think any business man would describe what Solomon purported to do when he signed the combined form of renunciation and nomination as a surrender of shares.
20. Mr. Page states that as under the power of attorney the donee can both accept shares and transfer them, there can be no justification for holding that the donee has not the power to achieve the same result by renunciation and nomination. This argument is not without its force, but I have come to the conclusion that the transaction which the donee sought to perfect on the donor's behalf was a special and peculiar one which the power does not contemplate and for which it does not provide nor can it be held to be an act incidental to the power to transfer. Indeed it is not surprising if those are contingencies not covered by the power. The power was not executed in 1929 to meet a situation where the agent was not in a position to communicate with the principal; indeed I take leave to doubt whether such a situation has even now arisen. The power appears to me to have been designed primarily to enable the agent to act for the principal in routine matters. Anything exceptional could be passed on to the principal, who could then either deal with the matter direct or give the agent special authority. In these circumstances, it seems improper to strain the language of the power for the purpose of giving it as comprehensive a scope as possible. I hold accordingly that the renunciation and the nomination of the plaintiff were unauthorized, and inasmuch as they have never been ratified the defendants are not bound by them.
21. It remains to consider two questions relating to the letter of 15th September 1936. The defendants argue that inasmuch as the letter was addressed to David, there was no offer to the plaintiff and that it follows that the plaintiff's purported acceptance on 6th November did not conclude a contract between the parties. This submission is one which will not survive the most cursory examination. By the resolution of 9th September, the Directors were instructed to offer the new shares to members of the company or to the nominee or nominees of any such members.' The letter of 15th September was intended to be a compliance with these instructions and enclosed a form whereby the nominee was enabled to accept the shares offered to the member. The letter clearly contains an offer made first to the registered share-holder, and then in the event of his renouncing to his nominee or nominees. If there is renunciation by the former, acceptance by the latter concludes a contract. The second question is concerned with the purported reservation by the Directors of the right to reject a nominee. Unquestionably the resolution gave them no authority to qualify the offer in this manner, nor can the defendants justify the qualification by any provision in the articles. In Re: Pool Shipping Co. Ltd. (1920) 1 Ch 251 is of assistance here. In that case it was held that the letter of renunciation of bonus shares in favour of a nominee did not amount to a transfer' of shares so as to fall within and be subject to articles dealing with the transfer of these shares of shareholders already registered.
22. Mr. Page makes two points. First he argues that the qualification of the offer being without authority the acceptor is not bound by it and can regard it as a nullity. I cannot agree with this view. It must be remembered that the nominee has no rights against the company until acceptance. It may be conceded for the purpose of argument that a share-holder could have insisted that the offer made by the Directors to him should conform to the terms of the resolutions of 9th September, but the nominee can only accept, or decline to accept, the offer actually made to him. Acceptance of an offer made by an agent, the terms of which are beyond the agent's authority, cannot give the acceptor a right to call upon the principal to perform a contract based on a hypothetical offer which the agent would have had authority: to make. There is more force in Mr. Page's second argument founded on the form of acceptance. He points out that the phraseology of the form by renunciation and acceptance is in terms for which the defendants are responsible, a fact which distinguishes this case from cases where the acceptance purports to qualify the terms of the offer. The renunciation refers to 'your (i. e. the Directors') notice of 17th August 1936' and the acceptance is in the form:
I hereby accept the above mentioned shares upon the terms of the said notice and authorize my nominee to be put on the register in respect of them.
23. The point now raised is the basis of the amendment of the concluding portion of para. 3 of the plaint. This originally ran:
By such letter (i. e. the letter of 15th September 1936) the defendant company offered upon the terms of such letter to issue to the said David) Ezekiel or to his nominee the said 4200 shares.
24. This was subsequently amended to read:
By such letter the defendant company offered upon the terms of the said notice dated 11th, August 1936, and in accordance with the said' resolution (2) set out in para. 1 of the plaint to issue, etc.
25. Paragraph 5 states that the plaintiff accepted the shares in terms of the notice. It is in evidence that the letter of 10th September as also the accompanying forms were settled by the company's solicitors and approved without more than a formal examination by the Directors.
26. It is not suggested that the reservation was inserted in the letter in anticipation of any nomination on the part of David. The Directors only applied their minds to the matter when they found that David through his constituted attorney had purported to nominate the plaintiff. They had no objection to the plaintiff personally as a member of the company, but the fact that shares in, which the plaintiff claimed a beneficial interest had been attached by the Magistrate's Court made them apprehensive that difficulties might be expected with regard to any shares that were issued to the plaintiff. There is no evidence what was in the mind of the draftsman when he referred to the notice of 17th August 1936, and there seems to be no reason why the letters of acceptance and renunciation could not have been drafted in simple and non technical language as was done in In Re: Pool Shipping Co. Ltd. (1920) 1 Ch 251. But whatever be the effect of the reference to the notice, it cannot alter the fact that the offer was made by the letter of 15th September which clearly stated that the Directors reserved the right to reject any nominee. That was the only offer made to the plaintiff and consequently the only offer he could accept. It follows that it was part of the contract between the defendants and the plaintiff that the acceptance of the shares on the plaintiff's part should be subject to the Directors' veto. It is not denied that the Directors did in fact reject the plaintiff as David's nominee. I hold therefore that the suit must be dismissed with costs on two grounds, firstly, because the purported renunciation and nomination of the plaintiff by David through Solomon were invalid as being beyond the scope of the authority vested in Solomon under the power: secondly, because it was a term of the contract between the defendant and the plaintiff that the Directors should have the power to reject the plaintiff as David's nominee and the Directors did in fact reject him.