Sabyasachi Mukharji, J.
1. In this reference under Section 27(1) of the Wealth-tax Act, 1957, three questions have been referred to this court:
'(1) Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that in computing the net assets of W. H. Harton & Co. Ltd. for the purpose of determining the break-up value of its shares the sum of Rs. 61,800 being the amount of proposed dividend should be allowed as a deduction ?
(2) Whether, on the facts and in the circumstances of the case, the Tribunal was legally justified in holding that the assessee was not the owner of 32,440 shares of Rohtas Industries Ltd. ?
(3) If the answer to the question No, 2 is in the negative, then whether the Tribunal was justified in holding that in respect of the shares of Rohtas Industries Ltd., only a sum of Rs. 1,63,200 should be included in the net wealth of the assessee in place of Rs. 4,69,894 '
3. There is a slight mistake in question No. 2. The figure should be 22,440 shares of Rohtas Industries Ltd. and not 32,440 as is inadvertently stated in the said question.
4. In view of the decision of this court in the case of Commissioner of Wealth-tax v. Smt. Radha Debi M. Nopany, : 77ITR704(Cal) and in the case of Commissioner of Wealth-tax v. Mohan Lal Nopany, : 78ITR435(Cal) and the decision of the Supreme Court in the case of Kishanlal Haricharan v. Income-tax Officer, : 86ITR141(SC) , the question No. 1 referred to this court must be answered in the negative and in favour of the revenue. We need not, therefore, discuss the facts relating to this question.
5. So far as the second and the third questions are concerned, it appears that the assessee had held 22,440 ordinary shares in the Rohtas Industries Ltd. The assessee had shown these shares as her property for the assessment years 1957-58, 1958-59 and 1959-60, under the Wealth-tax Act, 1957. The assessee contended for the assessment year being the assessment year 1961-62, for which the valuation date was 31st March, 1961, that these shares were lost in the early part of 1954 and a criminal case had been filed by the assessee later on. For this reason, the assessee had not shown these shares in her valuation of the wealth. The value of these shares as per market quotation on the valuation date relevant for this assessment year was Rs 20'94 per share. The Wealth-tax Officer included the total value of these shares amounting to Rs. 4,69,894 in the net wealth of the assessee. The assessee's case was that during the period from 23rd October, 1951 to 7th November, 1951, the assessee had purchased 5,100 ordinary shares of Rohtas Industries Ltd. for a sum of Rs. 36,234 and these shares were held on blank transfers and were kept in the assessee's father's custody. In February, 1954, according to the assessee, 1,300 shares out of this lot of 5,100 shares were sold to one Ramprotap Harlalka but at the time of the delivery the scrips could not be traced to the place where these had been kept. The assessee's version was that the scrips had been stolen by one Satyanarayan Prahladka, an employee of the share department of the assessee's father's business. A criminal case, it appears, was instituted against the said Satyanarayan Prahladka in the court of the Chief Presidency Magistrate, Calcutta, but the learned Magistrate held against the assessee in the said criminal case. It has been stated in the appellate order of the Tribunal as well as in the statement of case that the assessee thereafter filed an appeal against the Presidency Magistrate's order before the High Court. We are told and it is undisputed that that was an incorrect statement. There was no appeal actually filed against the order of the Chief Presidency Magistrate referred to hereinbefore but a civil suit was instituted in the High Court claiming title to the said shares. Pending the disposal of the said suit the High Court appointed one Sri K. Khaitan as receiver in respect of the said shares. In the year 1955, right shares were issued by Rohtas Industries Ltd. and on the disputed 5,100 ordinary shares another bunch of 5,100 shares were recivable on payment of Rs. 51,000. The receiver asked the assessee to finance for the acquisition of these shares and the assessee deposited a sum of Rs. 51,000 with the receiver for the right shares. In the year 1958, the receiver also received 1,020 bonus shares on account of the original 5,100 shares. In the year 1960, right shares were again issued and the receiver received notice for 11,220 shares. Again the receiver, it appears, had asked the assessee to finance for the acquisition of these shares and the assessee had deposited a sum of Rs. 1,12,200. The assessee contended before the Wealth-tax Officer that unless and until her claim to be recorded in the company's register as a shareholder in respect of 5,100 original shares was upheld by a competent court the assessee could not be considered to be the owner of these shares. It was further contended that the right to receive the bonus and right shares was also dependent on the assessee's restitution of the ownership in respect of the original 5,100 shares and all that the wealth-tax authorities could do was to include in the assessment a sum of Rs. 1,63,200 advanced by the assessee to the receiver as mentioned hereinbefore. Upon these the Tribunal held that there was good deal of force in the assessee's contention and according to the Tribunal so long as the ownership was not ascribed to the assessee by the competent court it could not be said that 22,440 shares belonged to the assessee. Having regard to the facts and circumstances prevailing on the valuation date the Tribunal felt that in so far as shares of the Rohtas Industries Ltd. were concerned only a sum of Rs. 1,63,200 should be included in the assessment in place of Rs. 4,69,894. Thereupon, the two questions being questions Nos. 2 and 3 have been referred to this court as mentioned hereinbefore.
6. It appears that the questions as referred to this court and the Tribunal also in its approach proceeded slightly in an erroneous way.
7. Under Section 3 of the Wealth-tax Act, 1957, it has been provided that subject to the other provisions contained in the said Act, there shall be charged for every assessment year commencing on and from the first day of April, 1957, a tax in respect of the net wealth on the corresponding valuation date of every individual and Hindu undivided family. Therefore, tax is payable on the net wealth of the assessee. Net wealth has been defined under Section 2(m) of the Act. Net wealth means the amount by which the aggregate value computed in accordance with the provisions of the said Act of all the assets wherever located belonging to the assessee on the valuation date including assets required to be included in his net wealth as on that date under the said Act is in excess of the aggregate value of all the debts owed by the assessee on the valuation date other than certain items mentioned in the said Section 2(m) of the Act. In this case it is also necessary to refer to Section 7(1) of the Act which provides how the value of the assets is to be determined and provides that subject to any rules made in this behalf the value of any asset other than cash for the purpose of the Act shall be estimated to be the price which in the opinion of the Wealth-tax Officer it would fetch if sold in the open market on the valuation date. Therefore, the appropriate point to consider is whether these 22,440 shares of Rohtas Industries Ltd. could be said to be assets belonging to the assessee on the valuation date and, if so, what was the proper value of the assets that belonged to the assessee on the valuation date. The Act in question does not stipulate that in order to belong to an assessee, the assessee should be owner of the asset. The ownership, however, is an important ingredient of belonging but it must still fulfil the qualification of belonging. The question is that in the facts and circumstances narrated before, could it be said that 22,440 shares of the Rohtas Industries Ltd. belonged to the assessee on the valuation date in this case. From the facts as it appears from the statement of the case it appears that the shares were on blank transfers, that is to say, that the assessee had not got herself registered as the registered holder of the shares. Secondly, in 1954 these shares had been lost. Thirdly, that in respect of acquisition of certain right shares the assessee had financed to the extent of Rs. 1,63,200. Fourthly, in the relevant assessment year a dispute was pending over those shares and the assessee had instituted a suit in a civil court claiming title and right to get back those shares and a receiver had been appointed over those shares. In these circumstances, it is necessary to determine whether it can be said that the shares in question belonged to the assessee. The position of a shareholder in respect of the blank transfer deed was considered by the Supreme Court in the case of Howrah Trading Co. Ltd. v. Commissioner of Income-tax : 36ITR215(SC) . of the report the Supreme Court observed as follows :
'Section 2(16) of the Indian Companies Act, 1913, defines 'share' as 'share in the share capital of the company'. Section 5 deals with the mode of forming incorporated companies, and in the case of companies limited by shares, the liability of the members is limited to the amounts, if any, unpaid on the shares respectively held by them. By Regulation 18, Table A is made applicable to companies, unless by the articles of any company the terms of Table A have been excluded or modified. Regulation 18 of Table A reads as follows :
'The instrument of transfer of any share in the company shall be executed both by the transferor and transferee, and the transferor shall be deemed to remain holder of the share until the name of the transferee is entered in the register of members in respect thereof.' The words 'holder of a share' are really equal to the world 'shareholder', and the expression 'holder of a share' denotes, in so far as the company is concerned, only a person who, as a shareholder, has his name entered on the register of members. A similar view of the Companies Clauses Consolidation Act, 1849, was taken in Nanney v. Morgan  37 Ch. D. 346, 356 (C.A.). The learned Lords Justices held that under Section 15 of that Act, the transferee had not the benefit of a legal title till certain things were done, which were indicated by Lopes L.J, in the following passage :
'Therefore, the transferor, until the delivery of the deed of transfer to the Secretary, is subject to all the liabilities and entitled to all rights which belong to a shareholder or stock-holder, and, in my opinion, until the requisite formalities are complied with, he continues the legal proprietor of the stock or share subject to that proprietorship being divested, which it may be at any moment, by a compliance with the requisite formalities.' The same position obtains in India, though the completion of the transaction by having the name entered in the register of members relates it back to the time when the transfer was first made. See Nagabushanam v. Ramachandra Rao, A.I.R. 1923 Mad. 241.
During the period that the transfer exists between the transferor and the transferee without emerging as a binding document upon the company, equities exist between them, but not between the transferee and the company. The transferee can call upon the transferor to attend the meeting, vote according to his directions, sign documents in relation to the issuance of fresh capital, call for emergent meetings, and, inter alia, also compel the transferor to pay such dividend as he may have recived. See E. D. Sasoon & Co. Ltd. v. Patch, : (1943)45BOMLR46 approved in Mathalone v. Bombay Life Assurance Co. Ltd., : 1SCR117 . But these rights though they, no doubt, clothe the transferee with an equitable ownership, are not sufficient to make the transferee a full owner, since the legal interest vis-a-vis the company still outstands in the transferor; so much so, that the company credit the dividends only to the transferor and also calls upon him to make payment of any unpaid capital, which may be needed. The cases in Black v. Romersham,  L.R. 4 Ex. D. 24 or Wimbush, In re: Richards v. Wimbush,  Ch. 92 (Ch. D.) hardly advance the matter further than this.'
8. It appears, therefore, from the decision of the Supreme Court that so far as the ownership and the legal title was concerned the assessee was not the legal owner of the shares. The assessee, however, had equitable right, an equitable right against the transferor to have his name entered in the company's register and to have the benefits accruing from these shares.
9. Counsel for the assessee drew our attention to the decision of this court in the case of Smt. Sumitra Devi Jalan v. Satya Narayan Prahladka : AIR1965Cal355 . Incidentally, it might be mentioned that this case is the decision in the case which was filed by the assessee in the High Court. It must be mentioned, however, that the decision of this court had not been given before the Tribunal gave its decision and the Tribunal had not referred to the decision. We are, therefore, not concerned with the facts found in this case. Counsel for the assessee, however, relied on this decision for the proposition of law laid down in this case. It was held that generally no person could pass a better title to another than he himself possessed but there might, however, arise cases when a person having no title to the property might confer or pass a good title to a bona fide purchaser for value without any knowledge or notice of any defect in the title of the person conveying the same. This kind of cases frequently occurred in cases of negotiable instruments and like properties the title of which passed freely by mere delivery. Reliance for this proposition was placed on the decision of the Privy Council in the case of G. M. O' Meara v. Benet A.I.R. 1921 P.C. 190. It was, however, held in the case of Smt. Sumitra Devi Jalan v. Satya Narayan Prahladka, that title to shares such as the shares in that case passed from hand to hand frequently by delivery with blank transfer deeds duly signed by the registered holders. The purchaser could not have found out if there was any defect in title to these shares at the time of the purchase and thus these shares were negotiable according to the law merchant custom and/or practice of the Calcutta Stock Exchange. Under the Sale of Goods Act, shares were goods but that did not preclude them from being negotiable according to the custom, practice or law merchant. There might arise cases also when the true owner might be estopped from asserting his title against a bona fide purchaser for value without notice of any defect in the title although from whom such bona fide purchaser acquired such title had no title to pass. The learned judge recognised this on the ground of mercantile convenience. It was further obserded that whether a bona fide purchaser for value acquired a good title from one who had no title to the same and he only was estopped from denying such title depended on the facts of each particular case. So far as the true owner being estopped from asserting his title such an estoppel might arise by negligence, by conduct or by representation. To attract the principle of negligence, three conditions were to be satisfied :
(a) duty on the part of the owner and breach of such duty ;
(b) negligerice in the act itself; and lastly
(c) negligence must be a proximate cause.
10. It was further held that under the Companies Act, 1913, Sections 28 and 34, the buyer of shares with blank transfer deeds had a statutory duty to have the shares registered in his name in order to become the full owner thereof. The delivery of shares along with blank transfer deeds passed not the property of the shares but a title legal and equitable right which enabled the holder to vest himself with the shares without the risk of his right being repudiated by any other person deriving title from the registered owner. Such a buyer had a further duty to the transferee or the public at large, not to leave or allow the shares to remain with the blank transfer deeds duly executed by the registered holders with a person, thereby enabling him to deal with these and such a duty was broken by leaving the property in such condition. In that case the learned judge found that there had been a breach of both those duties. It was further noted that the principle of law on which Sections 27 to 30 of the Sale of Goods Act was founded was that one of the two innocent parties must suffer from the fraud of the third, the loss should be borne by him who had enabled the third party to commit the fraud if he had neglected some duty owing to the other or had done something which had in fact misled the other. But this principle is subject to the qualification that some duty was owing to the transferee or the public at large which was broken by leaving the property with apparent indicia of title to another. In that case it was found by the learned judge that the plaintiff was negligent in not exercising her rights diligently in respect of her alleged title to the shares in question, which incidentally were the shares involved in this case, and, therefore, estopped from asserting any title in respect thereof.
11. In view of these principles indicating the right to shares and the nature of the blank transfer deeds, it appears to us that it cannot be said that the assessee was the owner of 22,440 shares. The assessee at best had equitable right in respect of these shares, as she had blank transfer deeds in her favour. The right, however, was in jeopardy on the relevant valuation date because according to the assessee she had lost the shares because of stealing or otherwise. Therefore, all that she had at the relevant moment was the right to recover her equitable ownership in respect of these shares. The Tribunal or the revenue authority, however, had not considered whether that right of equitable ownership was capable of having any market value in terms of Section 7(1) of the Wealth-tax Act, 1957. We need not, therefore, advert to this aspect of the matter. It may incidentally be mentioned that in the case of Smt. Chandra Jalan v. Commissioner of Wealth-tax (in Matter No. 378 of 1962) in respect of dividends declared in East Pakistan which the shareholder had the right to get was property within the meaning of the definition of asset in Section 2(c) of the Act, it was held that in respect of such a property, in view of the restrictions in respect of such property, the Wealth-tax Officer was not justified in estimating the value on the face value thereof. We need not, however, as mentioned hereinbefore, examine this question in greater detail in the view we have taken in this reference. The assessee was not the legal owner of these shares and had only certain equitable rights over these shares and on the relevant valuation date the said scrips and the blank transfer deeds had been lost by theft. But, in the relevant year, all that happened was that the assessee was trying to recover her assets or to get back her lost property. Therefore, at the relevant moment it could not be said that these assets belonged to the assessee. Counsel for the assessee, in our opinion, was justified in contending that a man who was the owner of movable property like a diamond or jewellery and if that property or goods had been lost due to stealing or theft even then if the assessee was made liable as the owner of that property and as such liable to pay wealth-tax ad infinitum year after year in respect of that property that would lead to great hardship and anomaly. We might here mention the observations of the Select Committee on the 'assets stolen, lost or destroyed' which is noted in paragraph 13 of the report and are as follows:
' With regard to the definition of 'net wealth', the Committee have noted the assurance given by the Minister of Finance that if any asset referred to in the said definition was lost or stolen or destroyed, it would not be included in computing the net wealth of an asset, provided the same had not been insured and that necessary instructions in this respect would be issued to the authorities concerned.'
12. In view of the principles of law as discussed above and in view of the nature of right in respect of shares held on blank transfer deeds and the facts of this case, irrespective of the observations of the Select Committee, it appears to us that these shares could not be said to have belonged to the assessee on the relevant valuation date.
13. In the premises, the question No. (2) will have to be answered in the affirmative and in favour of the assessee and in that view the question No. (3) does not arise. But we must make it clear that the assessee was the owner of the sum of Rs. 1,63,200 and the money belonged to the assessee. In any view of the matter, therefore, in respect of this money the assessee was the owner and it belonged to the assessee and it had been rightly included in the net wealth of the assessee.
14. In the facts and circumstances of the case, each party will pay and bear its own costs.
15. I agree.