JUDGMENT <NAME>, J.

1. This is an appeal by <ORG>, (now in liquidation) by its Joint Official Liquidators, the Official Receiver of this Court and Messrs. <NAME> and Co., the first defendant in C.S. No. 525 of 1948 and Application No. 1229 of 1951 on the file of this Court, against the Judgment and Decree of <NAME>, declaring that the plaintiffs, <NAME> and <ORG>, represented by him as governing director, were entitled to have their names, which stood registered in the books of the appellant company, as holders and owners, cancelled, and omitted in respect of 1608 partly paid up snares of Rs. 90 each (only Rs. 40 out of each share having been paid up) standing registered in the name of the first plaintiff, and of 60 other similar shares standing registered in the name of the second plaintiff in the books of the company, and directing the name of the second defendant, <NAME>, to be registered as the holder and owner of the above 1668 shares in the books of the bank, and restraining the appellant bank and its liquidators by an injunction from making any call or taking any other proceedings against the plaintiffs in respect of the said 1668 shares.

2. The facts are briefly as follows: <ORG>, the appellant bank, was a banking company incorporated under the Indian Companies Act with its registered office at No. 119, Armenian Street, Madras. The first plaintiff is a landlord and merchant, carrying on business at No. 95, Broadway, Madras. Till the beginning of May, 1945, he, admittedly, held 2508 partly paid up shares of Rs. 100 each (reduced to Rs. 90) in this bank; and the second plaintiff, of which the first plaintiff is the governing director, held another 610 shares of Rs. 90 each. These shares admittedly, stood registered in the books of the appellant bank in the names of the fast and second plaintiffs respectively till May, 1947, The first plaintiff was then not only a director of the appellant bank, but the Managing Director thereof, having been an ordinary director from 1942 to 1944.

3. On 4th May, 1945, under an unstamped agreement, Exhibit P-1, the second defendant, <NAME>, a merchant of Sir Phirozshah Mehta Road, Bombay, then considered to be a man of substance (now said to be a man of no substance), agreed to purchase all the 3118 shares (noted in Exhibit P-1 as about 3200 shares) from the plaintiffs at Rs. 41-4-0 net per share (as against the Rs. 40 paid up share). Exhibit P-1 added that the purchase money calculated at that rate would be paid by <NAME>, the fourth defendant, a partner of <NAME>ally Co., Sembudoss Street, Madras, and that he had agreed to pay the money and to receive 3118 shares from the plaintiffs, the fourth defendant being said to have agreed to advance the amounts to the second defendant who was asked by the first plaintiff to pay up at once and had no ready cash then but hoped to get it in a few days from Bombay. Exhibit P-1 went on to say that, as the first plaintiff had sold away all his shares and had no more interest as a shareholder in <ORG>, he should tender his resignation as the Managing Director, Chairman and Director as agreed to by him. This agreement was to enable the second defendant to step into his shoes, and defendants 2 to 4, who were the other Directors then, to run the bank themselves, without the first plaintiff's interference. Exhibit P-l added that the plaintiffs had agreed to give blank transfer deeds for each scrip separately, from the persons concerned, that is, the persons in whose names the relative share scrips stood. Exhibit P-1 did not say to whom the scrips would have to be eventually sold or transferred by the second defendant, who purchased them, or by the fourth defendant who took delivery of them after making payment on behalf of the second defendant, or fix a date for deleting the names of the plaintiffs from the books of the company and substituting the names of the purchasers in respect of these shares.

4. As per the agreement under Exhibit P-1, the first plaintiff tendered his resignation as Director, Chairman and Managing Director of the appellant bank on 4th May, 1945, itself. The fourth defendant later on bought 500 shares out of the 3118 shares agreed to be purchased by the second defendant. He paid the plaintiff Rs. 1,28, 617-8-0 on behalf of the second defendant, as agreed to under Exhibit P-1; and wrote a letter Exhibit P-3, on 8th May, 1945, to the second defendant at Bombay, informing him about the payment to the plaintiffs on behalf of the second defendant, and requesting him to send a cheque to him payable at Madras for Rs. 1,07,992-8-0, the money paid by him to the plaintiffs, less Rs. 20,625, the value of 500 shares bought by him out of the 3118 shares. Exhibit P-3 also conveyed to defendant 2 information of a tea party given to the Deputy Governor, <ORG>, at the appellant bank premises and added that the bank matter was going in order. On 9th May, 1945, the first plaintiff passed a stamped receipt for Rs. 1,03,455, the value of 2508 shares of his own sold by him to the second defendant, on whose behalf the fourth defendant had paid the money. A similar receipt was granted with regard to Rs. 25,162-8-0 due to the second plaintiff for the 600 shares sold by it to defendant 2.

5. But troubles began very soon. On 16th May, 1945, the fourth defendant wrote a letter, Exhibit P-5, to the second defendant at <ORG> enclosing a copy of the previous letter, Exhibit P-3, written 8 days before and complaining of non-receipt of the cheque for Rs. 1,07,992-8-0 requested therein, and asking for the immediate despatch of a draft for that amount together with interest at 4^ per cent, per annum upto the date of the payment. The second defendant, of course," had not paid defendant 4 a pie by then, probably because he was unable to find the money though he had become the Managing Director of the appellant bank in the place of the first plaintiff who had been ousted under Exhibit P-i. He, however, managed to sell 950 more shares, out of the 3118 shares purchased from the plaintiff, to the third defendant, <NAME>, another Director of the bank, who was carrying on business in Princess Street, <ORG>. The blank transfer forms given to defendant 4 by the plaintiffs, on defendant 2's behalf, in respect of the 500 shares bought by the fourth defendant were signed by the purchaser, the fourth defendant, as the transferor, the plaintiff having already signed before. The transfer forms thus signed by the transferor and transferee were presented to the bank duly stamped and these shares were transferred by the directors of the bank to the name of the fourth defendant on the 8th of June, 1945, the plaintiff's name being deleted in respect of these shares. Similarly, the blank transfer forms in respect of the 950 shares bought by the third defendant were signed by the third defendant (the transferor the plaintiff had already signed) and the transfer forms, thus completed by the transferor and the transferee, were presented to the bank, duly stamped, and were duly transferred by the Directors to the name of the third defendant, the plaintiff's name being deleted in respect of those shares. But the blank transfer forms with regard to the remaining 1668 shares (1608 shares standing in the name of the first plaintiff, and 60 shares standing in the name of the second plaintiff in the books of the bank) were not filled up by any transferee, till the suit and the petition were filed, and no completed transfer forms presented to the bank, apparently because the second defendant could not find purchasers for them and get such purchasers to sign in them as transferees. So the 1608 shares and 60 shares continued in the books of the company registered in the names of the plaintiffs.

6. The scrips in respect of the 1668 shares, and the blank transfer forms relating to them, were handed over by the second defendant to the third defendant as security for large sums advanced by him to the second defendant, probably to pay off the fourth defendant. The third defendant wrote a letter Exhibit P-6 to the Secretary of the appellant bank on 19th May, 1945, claiming dividend in respect of those shares as mortgagee, producing those shares before the Secretary and executing an indemnitybond (Exhibit P-1 1), in favour of the bank against any claims in respect of the dividend for those shares, and giving in detail the numbers of the shares. The bank paid him the dividend on those shares on the authority of the letter, statements therein, production of the scrips, and the indemnity bond, for the year ending 31st December, 1944 and for two more years. After this the amount due to the third defendant from the second defendant was said to have been entirely paid and discharged. The third defendant then delivered back the blank transfer forms and the scrips to the second defendant's nominee, <ORG>, Bombay, and he ceased to have any more interest in the 1668 shares. Exhibit P-13 dated 5th April, 1947, is the third defendant's letter to <ORG>, regarding these and other shares, and Exhibit P-14 is a letter of his to <ORG>, requesting for payment. Exhibit P-15, dated 18th April, 1947, is a letter from <ORG>, acknowledging the receipt of the scrips and the blank transfers. Exhibits 16 and 16-A relate to the payment of the price of those shares by <ORG>, in discharge of the amount due by defendant 2 to defendant 3. In Exhibit P-16-B a letter written by the Director of <ORG>, to the third defendant, it is stated that the remittance of Rs. 68,272-14-7 was in full settlement of the purchase of the shares by <ORG> So finally, defendant 2 discharged his dues to defendants 4 and 3.

7. The plaintiffs did not worry at all about the transfers of the 3118 shares sold by them under Exhibit P-1, or enquire from the company whether their names were removed from the register in respect of those shares and the names of the second defendant or other purchasers substituted in respect thereof. They took it for granted that the second defendant would have sold the shares to whomsoever, he liked and got the purchaser's names, or his own name, registered in the bank's books. When the second defendant wanted time for payment of the money due under Exhibit P-1 the first defendant had firmly refused to give even a few days, and then the second defendant had made the fourth defendant pay on his behalf, and the first plaintiff gave the scrips and the blank transfer forms to the fourth defendant after receiving full payment. He had at first refused to give the scrips and the blank transfer forms to the fourth defendant, probably because he had no privity of contract with him. Then the second defendant had said that it was impossible to conclude the contract under Exhibit P-1 unless he agreed to give the scrips and the blank transfer forms to the fourth defendant, as they (defendants 2 and 4) had to place the shares internally. According to the first plaintiff's evidence as P.W. 1, the second defendant added:

It is our look-out to see that the transfers are effected in the registers. It is our business and interest. We will do it.

As the second defendant was the Managing Director of the Bank, and the fourth defendant was the Chairman, and the third defendant was also a Director, the first plaintiff did not worry about the transfers, and took it for granted that they would be made in due course after the second defendant had distributed the 3118 shares he had bought to the purchasers from him, or that the second defendant would get himself registered in respect of the unsold shares. According to him, though, technically the purchaser of the 3118 shares under Exhibit P-1 was the second defendant, <NAME>, he treated him as the mouth piece and nominee of the other directors and as acting on behalf of the other Directors, and considered all the three Directors, defendants 2 to 4, to be acting in concert and to be jointly purchasing the shares under Exhibit P-1 though the third defendant was absent at the transactio n, and only defendants 2 and 4 were present, and defendant 4 purported to pay the price only on behalf of the second defendant, and there was no privity of contract between him and the plaintiffs regarding the purchase of any of the shares under Exhibit P-1. The first plaintiff added, as P.W. 1, that, after he had sold all the shares and resigned his chairmanship, managing directorship, and directorship, he phoned to the bank and told the Secretary or the Assistant Secretary or some other officer of the bank {he was not sure who received the phone call) that he had sold away all his interest in the bank to the Directors, and that he phoned like that at the request of defendants 2 and 4. He added that he did not write any letter to the Secretary of the bank about it, or have any other correspondence with the bank. He had also omitted to mention this phone call in his plaint. According to him, his belief that the names of the plaintiffs had been removed from the books of the bank, and the names of the purchasers substituted, was reinforced by the fact that no notice of meetings and no dividend notice or dividend warrants were sent to him by the bank after Exhibit P-1.

8. While the plaintiffs were thus pursuing a policy of masterly inactivity, the affairs of the bank were going from bad to wrose, and the bank was steadily rushing towards bankruptcy. In October 1947, the plaintiffs were surprised to receive from the appellant bank a notice, calling on them to pay up a sum of Rs. 15,012 representing a further call of Rs. 9 per share in respect of 1668 shares said to stand registered in the names of the plaintiffs, 1608 shares in the name of the first plaintiff and 60 shares in the name of the second plaintiff. The plaintiffs were taken aback on receiving this notice, and made enquiries, and learnt, to their surprise, that out of the 3118 shares sold by them to defendant 2, under Exhibit P-1, only 950 had been got transferred by him to the name of the third defendant, and only 500 to the name of the fourth defendant, and that the balance of the 1668 shares stood still registered in their names in the books of this company. They were also suprised at the bank's landing on the rocks, and rushing towards bankruptcy, under the directorship of defendants 2 to 4. The first plaintiff swore, as P.W. 1, that so confident was he of the bank's continuing to prosper even after he resigned, that he invested the entire sum of Rs. 1,28,617-8-0 received by him under Exhibit P-1, in the appellant bank itself, adding it on to the plaintiff's existing deposit of Rs. 1,20,000.

9. The first plaintiff wrote Exhibit P-18 on 2nd September, 1947, immediately, after receiving the call for Rs. 9 per share, to the second defendant, pointing out that he had purchased from the plaintiff all the 3118 shares belonging to them on 4th May, 1945, and that the second defendant had also drawn the dividends on those shares, when he himself was the managing director, but had omitted to register the shares in his name, and added that the plaintiffs had no liability in respect of the shares, and that the second defendant should, in honesty and fairness, see that the shares were actually registered in the bank's books in his name at once, if he had not already done so, and requested reply. The second defendant was too cunning to be taken in by such tactics. He did not reply to that letter. The first plaintiff wrote frantically another letter to him on 31st October, 1947, possibly by registered post. The second defendant, then by registered post, sent a reply Exhibit P-19, dated 10th November, 1947, stating that he did not appear to have received the letter, dated 2nd September, 1947, and requesting for a copy thereof to be sent to him. He added that he was not in any way liable to pay any call in respect of the 1668 shares standing registered in the plaintiff's name in the books of the bank, as he had acted merely as a nominee or mediator in the transaction evidenced by Fxhibit P-1. It was only thereafter that the first plaintiff wrote a letter, Exhibit P-20, on 2nd December, 1947, to the bank itself, addressing it to the secretary of the bank, the previous letters being addressed only to the second defendant personally, by name, to his Bombay address. In Exhibit P-20, the first plaintiff alleged that the second defendant, who was till recently the managing director of the bank, and defendants 3 and 4, the other directors, had purchased the 3118 shares from the plaintiffs under Exhibit P-1, and that the shares were duly transferred to him, and that the bank and the then secretary, Mr. <NAME>, knew all about this, and that the bank deliberately and designedly kept in abeyance the transfer of those shares in the name of the second defendant, who had promised to get the shares transferred in the books of the bank to his name or to the name of the other directors, defendants 3 and 4, and that defendant 2, or his nominee, defendant 3, had drawn out the dividends for two years, as the owner of shares, executing an indemnity bond. He added that the two other directors defendants 3 and 4 also were fully aware of all the facts, and that, therefore, the call on the plaintiffs at Rs. 9 per share, in respect of the 1668 shares was unsustainable, and the liability of the plaintiffs regarding that call, or any other call respecting these shares, was repudiated and disowned as well as any right or title of the plaintiffs in those shares. He enclosed along with Exhibit P-20 a copy of the letter Exhibit P-1.

10. On 26th December, 1947, on not receiving any satisfactory reply from the bank* the first plaintiff sent another letter, Exhibit P-21, to the Secretary of the bank, once again repudiating the liability of the plaintiffs for the call of Rs. 9 made by the directors, and asking the bank to hold the second defendant responsible for the payment of all call moneys and to take criminal action against him for the way in which he had treated the bank in drawing the dividends in his name or in the name of his nominee, the third defendant, and asking for copies of the indemnity bonds executed by defendants 2 and 3 for receiving the dividends, and asking for a reply acknowledging the receipt of his letter. All these letters and protestations proved to be of no avail.

11. The first plaintiff happened to become again the managing director and chairman of the appellant bank after the second defendant had cleared out. At a meeting of the directors of the bank, presided over by him, the 1668 shares, concerned in this suit and the petition, were transferred to the name of the third defendant, who had received the dividends in respect thereof for two years, and the plaintiff's name was deleted from the company's books. But the third defendant at once took out Application No. 1238 of 1948 in this Court for rectification of the company's register of shareholders, making only the appellant bank a party, and not the plaintiffs also. <ORG>, by his order, dated 20th April, 1948, ordered rectification of the company's register of shareholders, removed the name of the third defendant on the ground that the directors' meeting approving the transfer in his name, was an invalid one, and put back the plaintiff's names once more in the register of shareholders.

12. In August, 1948, a petition for winding up the appellant bank was filed in this Court, as its affairs were said to be in bankrupt condition. The winding-up order was passsed in April, 1950 and the Official Liquidators were appointed.

13. Soon after the winding-up petition was filed, the plaintiffs filed under Section 39 of the Indian Companies Act, C. S. No. 525 of 1948, and Application No. 1229 of 1951 in this <ORG>, on 7th September, 1948, for a declaration that the plaintiffs were entitled to have their names cancelled, struck out and omitted in the bank's register of shareholders, and to have the name of the 2nd defendant or his nominees or transferees, entered in their place, and for a declaration that the plaintiffs had ceased to own or hold the aforeasid 1668 shares, and to restrain the first defendant or its Liquidators by an interim temporary and permanent injunction from making any call or taking any other proceedings against the plaintiffs in respect of the 1668 shares, and to make the 1st or 2nd or 3rd or 4th defendant, as the <ORG> though fit, pay the plaintiffs' costs. The plaintiffs also relied on estoppel on the part of the bank, preventing them from contending that the plaintiff's names should remain in the register of shareholders regarding these 1668 shares. The cause of action, according to the plaintiffs, arose on the 4th May, 1945, when the plaintiffs sold the 1668 shares (as part of the 3118 shares) to the defendants, on the 10th October, 1947, when the call on the shares was made on the plaintiffs by the first defendant, on the nth February, 1948, when the plaintiffs applied to the first defendant for transfer of the 1668 shares and on the 20th April, 1948, when their names were put back again in the register of shareholders of the bank by the order of <ORG>

14. The suit and the applications were hotly contested by all the defendants. The bank, the first defendant, contended that there were no completed transfer forms regarding these 1668 shares signed by the transferor and transferee, and that such completed transfer forms, duly stamped were not presented to the bank, praying for registration of the shares in the name of the transferee and that, even if these blank transfer forms had been presented (which were not), the bank could not have transferred those shares, as the mandatory provisions of Section 34 of the Companies Act and Article 35 of the Articles of Association regarding applications for transfer were not complied with, and that the company had an absolute right without giving any reasons, to refuse the transfer under Article 36 of the Articles of Association and Section 34(7) of the Companies Act, and that this right was specially relevant when these were partly paid up shares and the plaintiffs were solvent persons and defendant 2, the purchaser, was not at all in a sound financial position and able to discharge the further calls of Rs. 60 per share. Several other defences were also raised by the bank, namely, that the power of the <ORG> to rectify the register under Section 38 would not extend to a case like this, where the default lay only with the plaintiffs and defendant 2, and the alleged fraud only with defendant 2, and there was no default or unnecessary delay or fraud on the part of the bank, and the names of the plaintiffs were continued in the register of shareholders for excellent reasons, and not "with out sufficient cause" as contemplated under Section 38 . The defence was also raised that the moment the winding-up petition was filed and resulted in a winding-up order, the winding-up order thus passed would, under the insolvency law, take effect from the date of the filing of the winding-up petition, and take away the powers of the <ORG> to rectify the register of shareholders as and from the date of the winding-up petition, since the effect of a winding-up order would be to make the company cease to exist, and to give rights to innocent third parties, like the creditors of the erstwhile company, against the shareholders. The first defendant said that the 950 shares out of the 2118 shares, covered by Exhibit P.1 were transferred to the name of the third defendant, and another 500 shares out of the 3118 shares, covered by Exhibit P-1, were transferred to the name of the fourth defendant, as properly stamped transfer forms signed by the transferor and transferee were presented to the bank and the directors had allowed the transfers and deleted the names of the plaintiffs regarding those shares and substituted the names of defendants 3 and 4, since no such transfer forms were presented regarding the remaining 1668 shares, there was no occasion to the bank's directors to consider any transfer applications except when the first plaintiff, after becoming the managing director once more, had at an invalid meeting of the directors, got the 1668 shares transferred to the third defendant, without any proper transfer forms and without producing the shares and so that act was challenged by the third defendant who filed a rectification petition allowed by the order of <ORG>, bringing back the names of the plaintiffs to the register once more in respect of these 1668 shares. Defendants 3 and 4 not only adopted the above contentions of defendant I, but urged that there was no privity of contract between them and the plaintiffs regarding the sale of the shares under Exhibit P-1.

15. Defendant 3 added that he had received the dividends regarding the 1668 shares only as a mortgagee from defendant 2, in respect of those shares and on his behalf, and had ceased to have any interest in those shares from April, 1947, when his mortgage amount was discharged. He said that his purchase of the 950 shares out of the 3118 shares from the second defendant was irrelevant to this Suit and petition. It was urged before us by his learned Counsel, Mr. <NAME>, that the third defendant had settled with the liquidators his liability for the calls concerning the 950 shares bought by him.

16. The fourth defendant stated that he had only acted as a financier for the second defendant who had purchased the 3118 shares from the plaintiffs under Exhibit P-1 and had no ready cash. Defendants 3 and 4 denied that they had conspired with defendant 2 regarding these shares purchased under Exhibit P-1 or that those shares were purchased by defendant 1 on their behalf also. It was represented by the learned Counsel for defendant 4 that the fourth defendant had settled with the liquidators his liability regarding the calls concerning the 500 shares bought by him from the second defendant, out of the 3118 shares purchased by the second defendant under Exhibit P-1.

17. The second defendant has filed a written statement, contending that he had never agreed to purchase from the plaintiffs the 3118 shares, under Exhibit P-1, as urged by the plaintiffs, but was only acting as an intermediary in respect of these shares, in other words, that he had only promised to find purchasers for those shares, if possible, and that he was not liable for getting the names of the plaintiffs deleted and those of the purchasers substituted in respect of these 1668 shares, as no purchasers had bought them, and it was the duty of the plaintiffs to have applied to the first "defendant bank by filing properly stamped transfer forms duly signed by the transferor and transferee after he had ascertained the names of the purchasers. He also 'denied any collusion or concert or conspiracy between him and defendants 3 and 4 or his having purchased the shares on behalf of defendants 3 and 4 also, and said that defendants 3 and 4 did not acquire any rights to any shares under Exhibit P-1. So all the defendants prayed that the suit and petition should be dismissed with their costs.

18. <NAME>, J., held that, though no properly stamped instrument of transfer excuted by the transferor and transferee had been delivered to the bank along with the share certificates, in respect of these 1668 shares, and the necessary formalities required by Section 34 of the Companies Act and under Article 35 of the Bank's Articles of Association had not been complied with and there was no fraud or default or negligence by the bank in not effecting transfers, as there was no application for transfer regarding these 1668 shares either by the transferor or transferee, as required by Section 34 and by both under Article 35 , still the terms of Section 38 were wide enough to give him power to rectify the register in the circumstances of the case, as the fraud of the second defendant on the plaintiffs was enough to sustain the claim of the plaintiffs for rectification, and if the second defendant had acted honestly, as per his representation made to the first plaintiff, the plaintiffs' names would not have continued in the register of sharesholders of the bank regarding these 1668 shares, and so the Court had the right, and indeed the duty, to remove the plaintiff's names regarding these shares in the bank's register of shareholders and substitute the second defendant's name, especially as the second defendant had the full benefit of the shares and had raised money on their security from the third defemdant, and had made the third defendant send those scrips and blank transfer ferns to <ORG>, Bombay, of which he was the Chairman of <ORG>, selling the shares to the <ORG> and paying the sale proceeds to the third defendant towards the mortgage amount. He also held that the bank was estopped from contending that the plaintiffs' names were properly continued in the register, as it had not sent the plaintiffs any notices of meetings or dividend warrants after Exhibit P-1 leading them by such conduct of theirs, to believe that the shares had been transferred from the plaintiff's names. He observed that mere knowledge of the sale of the shares by the plaintiffs, on the part of the officers of the bank, because of the telephone conversation referred to by P.W. 1, would not be enough to satisfy the requirements of Section 34 of the Companies Act or Article 35 of the Articles of Association, though it might be taken into account regarding the plea of estoppel raised by the plaintiffs.. He rejected the contention of the plaintiffs regarding concert and conspiracy by defendants 3 and 4 with defendant 2 regarding the purchase of the shares under Exhibit-P 1 by defendant 2. He also rejected the plaintiffs contention that the purchase of the shares under Exhibit P-1 was for the benefit of all the directors, namely, of defendants 2 to 4 and not merely for the benefit of defendant 2. He held that the purchase of all the 3118 shares under Exhibit P-1 was only by defendant 2 and would bind him only, defendant 4 having acted only as his immedite financier, and defendant 3, as. his subsequent lender under a mortgage of the 1668 shares, the liabilities of defendants 3 and 4 being therefore restricted to the 950 shares and 500 shares, out of the 3118 shares purchased by them from defendant 2, they having no privity of contract with the plaintiffs, and no liability whatever regarding the 1668 shares concerned in the suit. In the end, therefore, he gave the plaintiffs a decree granting them the declarations and injunction, as prayed for, regarding the 1668 shares, and directing the bank to rectify its register of shareholders regarding these 1668 shares, by deleting the names of the plaintiffs as holders or owners thereof, and substituting the name of the second defendant as the purchaser of those shares, overruling the contention that the bank had an absolute discretion, under Section 44(7) and Article 36 , to decline to transfer the shares. He directed the second defendant who remained absent after filing his written statement, though keeping his advocate, Mr. <NAME>, to watch the case, to pay the costs of the plaintiffs, with subsequent interest thereon at six per cent, per annum from the date of taxation till date of payment, and directed all the defendants to bear their own costs in the suit, but allowed the official liquidators of the first defendant bank to recover their costs, including an advocate's fee of Rs. 1,000, from the assets of the bank. He did not pass any separate order in Application No. 1229 of 1951, as the decree in the suit covered everything' The first defendant bank has felt aggrieved and has filed this appeal.

19. We have perused the entire records, and heard the learned Counsel on all sides. Mr. <NAME>, learned Counsel for the appellant and Mr. <NAME>, learned Counsel for the plaintiffs-respondents, argued in detail every aspect of the case, and took us through the entire evidence oral and documentary. Mr. <NAME> urged various grounds for holding the judgment and decree of <NAME>, to be unsound and unsustainable.

20. Of course, he admitted that under Section 38 of the Companies Act, though a petition is the normal way for moving the <ORG> for rectification of the register, a suit also can be filed under that section, either alternatively or in addition as in this case. A ruling of a Bench of this <ORG> in <CITATION> . A.I.R. 1938 Mad. 571 shows this clearly.

21. Mr. <NAME>'s first contention was that no petition under Section 38 of the Companies Act will lie after a petition for winding up, resulting eventually in a winding-up order, has been filed, as in this case, since, under the Insolvency Law, an order of winding-up like an adjudication, will take effect from the filing of the petition itself, and the company must be deemed to have ceased to exist from the dale of the petition as the rights of the innocent third parties would have intervened, on the winding-up order. He was not able to convince us on this point, or cite any clinching ruling. Obviously, the theory adumbrated by him will have startling results, and will lead to much avoidable hardship and injustice.. In <NAME> v. <ORG> (1879) L.R. 4 A.C. 615 a resolution for winding up the company had already been passed before the application for rectification was made. So <ORG> rejected the petition for rectification as the rights of innocent parties had intervened. The following on servations in the judgment of <ORG>, at page 621, are relevant:

The assumption is that, while the company is a going concern, no creditor, has any specific right to retain the individual liability of any particular shareholder. It is on the same or on a similar principle that, so long as the company is a going concern, a shareholder who has been induced to take up shares by the fraud of the company has a right to throw back his shares upon the company without reference to any claims of creditors. He would have a right to transfer his shares without reference to creditors. The company, as a going concern, is assumed to be solvent, and able to meet its engagements, and to have a surplus, and the company being solvent, its duty to pay the repudiating shareholder who is due to him, and to take the shares off his hands, is an affair of the company, and not of its creditors. But if the company has become insolvent and has stopped payment, then, even irrespective of winding up, a wholly different state of things appears to me to arise. The assumption of new liabilities under such circumstances is an affair not of the company but of its creditors.

22. The same principle cannot without undue extension, be applied to a case where a petition for rectification is filed after the winding-up petition but before the winding-up order, as the company is still a going concern carrying on its business. In In re <ORG> (1880) L.R. 15 Ch. Div. 507 it was held that after the winding up of a company a shareholder, who was induced to apply for shares by fraudulent misrepresentaions contained in the promoters' prospectus, was not entitled to rectification as innocent, third parties' interests (creditors' interests) had intervened. In In re <ORG> and <ORG> (1867) L.R. 2 Ch. Ap. 431 a suit for specific performance and rectification of register, filed four days before the petition for winding up was presented, was rejected, as the company was in a state of bankruptcy and as the jurisdiction given to a <ORG> in such cases for rectifying a register, though not limited to cases in which there had been error, mistake or default on the part of the company and was a wide jurisdiction, such jurisdiction ought to be confined to cases where the register is incorrect through the default of the company when it was rushing towards bankruptcy, and as in the present case there had been no delay or default on the part of the company, the <ORG> should not use its discretion and rectify the register. In <NAME> v. <NAME> and Harding 2 Eng. and Ir. Ap. 325. 7. 52 L.T. Rep. 501 it was held that a petition for rectification of the company's register of shareholders for removing the peitioner's name from the list of contributories on the ground that he had purchased shares on misrepresentations made to him by the directors should be dismissed if it was filed after winding-up order. As his voluntary ignorance upon the subject until the winding-up order came precludes him from raising the objection and as his name was on the register of shareholders on the date of the winding-up order he was rightly placed on the list of contributories, and the petition was dismissed. Several learned Law Lords delivered that judgment. They did not say that a petition would not have lain after the winding-up petition but before the winding-up order was passed, thus going against Mr. <NAME>'s contention. <CITATION> A.I.R. 1915 Bom. 1 a Bench of the Bombay High <ORG> held that after a company had gone into liquidation, the transfer of shares or rectification of the registers, could only be made on proof of the company's default or delay, in dealing with the application for transfer (made before the winding up order) but that it could be done, if such default or delay on the part of the company in dealing with the application was proved. In that case, the petition for rectification of the register was taken out before the winding-up order. As held in <CITATION> (1932) 63 M.L.J. 859 : A.I.R. 1932 P.C. 240 (P.C) on the winding-up order, the liability of a person on the register of shareholders of the company became absolute, and flowed from the fact of his being on the register in respect of those shares, and that though the original contract may supply the reason for his name having been placed on the register in respect of the shares, it cannot affect his liability in respect of those shares after the winding up. In In Re Land and Company of South Africa ex parte Boyle 52 L.T. Rep. 501 it was held that an application for rectification would not lie after the winding-up order was passed, and the rights of innocent third parties, the creditors, arose. The ruling in <NAME>'s Case (1866) L.R. a Eq. Cases 226 shows that the <ORG> is not bound by the company's register of shareholders in settling the list of contributors and has authority to rectify the register, and will determine the question as to who is in equity the real owner of the shares, provided that the winding-up order has not been passed, thus showing that the petition for rectification will lie after the winding-up petition but before the winding-up order is passed.

23. As against this formidable array of authorities, Mr. <NAME> relied on the ruling of a Bench of <ORG> consisting of <NAME> and <NAME>, JJ., in <CITATION> where <NAME>, J., who delivered the judgment of the <ORG>, has observed in paragraph 20:

In addition to the laches, the winding up of the company raises another bar in the way of the opposite parties to repudiate their shares. The law is that a shareholder cannot be relieved from his shares, after a winding-up application.

He relied on the ruling in <NAME> v. <ORG> (1868) L.R. 3 Ch. Ap. 493 (and some other similar rulings). In <NAME>'s Case (1868) L.R. 3 Ch. Ap. 493 Lord <NAME>, L.C., held that a petitioner cannot be relieved from his liability for shares in a company upon the ground of misrepresentation in the prospectus on a bill filed after the presentation of a petition for winding up the company, on which an order for winding up was subsequently passed, though the petitioner might have his remedy against any of the defendants except the company. The company in question had already become bankrupt and unable to pay its debts by the time the petition was filed, though the winding-up order was passed subsequently. This was a decision rendered in 1868. In view of the numerous decisions to the contrary referred to above, and especially of several Law Lords in Oakes v. <NAME> and Harding 2 Eng. and Ir. Cases 325 and <CITATION> (1932) 63 M.L.J. 859 : A.I.R. 1933 P.C. 240(P.C.) and the special facts in <NAME> v. <ORG> (1868) L.R. 3 Ch. Ap. 493 and similar rulings, which will not apply to the facts of this case, we are unable to follow the view of Desa J., or accept the correctness of the ruling in <CITATION> and hold that a petition for rectification will lie normally after the filing of a winding up petition and before the winding-up order is passed, provided the <ORG> will normally reject that petition if the company is already in a notorious state of bankruptcy by the time the petition for rectification is filed, as in <NAME> v. <ORG> (1868) L.R. 3 Ch. Ap. 493 and that it is for the <ORG>, in its discretion to say whether such a petition should be allowed or not, it having undoubted jurisdiction to entertain it.

24. The next contention of Mr. <NAME> was that <ORG> went wrong in holding that no defaulter delay, or fraud of the company was required in a petition under Section 38 against it for rectification. We cannot agree. It is only under Section 38(b) that default, or unnecessary delay, on the part of the company comes into play. Under Section 38(a) a petition for rectification will lie if the name of any person is fraudulently or without sufficient cause entered in or omitted from the register of members of a company. Thus, it is obvious that even without any mistake, default, or fraud of the company, a man's name may be entered in the register of shareholders in substitution of an existing shareholder's name by the directors, approving of a transfer of the shares in the name of the transferee either on the transferee's cleverly forging the transfer deed, in order to make an unlawful gain, or on the transferors forging it in order to pass on his liability, and cause unlawful loss to another; and yet a <ORG> can, and ought to, rectify the register if a petition is filed before the winding up and the fraud or forgery is proved. There are several English rulings rectifying the register in such cases. So too, supposing rioters (as in the Moplah rebellion or the <ORG> riots) or the enemy (like the Japs in the late war) burn down a <ORG> house or other buildings containing a valid transfer deed signed by the transferor and transferee, before it can be presented to the company for registration of the transfer and the reconstruction of such documents (as is usually ordered by the <ORG> in such cases) takes a very long time, the <ORG> can, on a petition for rectification of the register, do the needful, though the company is not responsible for the delay, provided the petition for rectification is filed before the winding-up order and the company has no objection to the transfer. Such instances may be multiplied. Indeed, even the company will have a right to apply under Section 38(a) , to rectify the register of shareholders regarding the name of any person entered in it fraudulently or without sufficient cause or omitted from the register of members, and of course, no default or fraud of the company can, or need be, proved in such cases.

25. In <NAME> and <NAME>'s Case (1867) L.R. 2 Ch. Ap. 431 (436) Lord Justice <NAME> has held at page 436:

The question is, whether the jurisdiction given by it is general, applicable to all cases, or limited to cases in which there has been error, mistake, or default on the part of the company. Upon the best consideration I have been able to give to the subject, I am inclined to think that the jurisdiction is general, and not limited, as suggested. The intention of the section, as I understand it, is to provide a summary means of dealing with cases which the <ORG>, in its discretion, should think might be so dealt with. A large and wide discretion ought, I think, to be exercised by the <ORG> in determining whether it will exercise the power given to it by the section, and it is, I think, too narrow a construction to hold that the section applies only where there is error, mistake, or default, on the part of the company.

In other words, there is jurisdiction in the <ORG> to rectify the register even in the absence of error, or mistake, or default, on the part of the company, though the <ORG> will not, usually, exercise its discretion and rectify the register, when there is no mistake, or error, or default, on the part of the company. It is a matter entirely for the <ORG> to decide, subject to the Articles of Association and Companies Act . In that case, the <ORG> refused to exercise its jurisdiction and order rectification, on the ground that there was no mistake or delay or default on the part of the company.. 26. In Ex parte Shaw (1895) L.R. 2 Q.B.D. 463 the <ORG> of Appeal held that it was not necessary to give jurisdiction to a <ORG>, for rectifying a register of shareholders in a company, that there should be mistake or delay or default on the part of the company, but that it is a matter of discretion whether the <ORG> will exercise that jurisdiction, and that in a complicated or doubtful case the jurisdiction ought not to be exercised, but that in a clear case it ought to be exercised, and rectification made. In In re <ORG> (1936) 2 All E.R. 463 it was held that the jurisdiction of the <ORG> to rectify the register is. not limited to cases where a name has been entered improperly in it, but extends to cases where a name stands on the register without sufficient cause (this phrase is specifically found in Section 38(a) of the Companies Act) and that where a petitioner's name is entered in the register without sufficient came, though forgery, etc., was not proved, his application for rectification should be granted and his name removed, from the register. So it is all a question for the <ORG> to allow or dismiss the petition at its discretion the jurisdiction being there despite there being no mistake, default or delay on the part of the company.

26. The last and strongest ground urged by Mr. <NAME> was that, in the absence of the presentation of a duly stamped transfer deed, signed by the transferor and transferee to the bank, along with the scrips, in respect of these 1668 shares, and the admitted fact that the transfer forms in respect of these shares are still blank, without any transferees signing therein, the bank had no authority to transfer the shares to the name of the second or third or fourth defendant as prayed for by the plaintiffs, and that the bank was certainly not bound to do so, in view of Section 34 of the Companies, Act and Article 35 of the Articles of Association, and that <NAME>, went grievously wrong in directing the second defendant's name to be substituted for the name of the plaintiffs, overriding the absolute discretion of the bank, given under Section 34(7) of the Companies Act and Article 36 of the Articles of Association, to refuse to register any transfer without giving any reason whatever. We agree Mr. <NAME> could not cite a single ruling, English, Indian, or American, or of any other country where it has been held, that a company is bound to register a transfer without the transferee signing in the transfer deed. Section 34(1) of the Companies Act says that an application for the registration of the transfer of shares in a company may be made either by the transferor or the transferee, provided that where such application is made by the transferor no registration shall, in the case of partly paid up shaes (like these 1668 shares), be effected unless the company gives notice of the application to the transferee, and that the company can, unless objection is taken by the transferee within two weeks from the date of receipt of the notice, enter in its register the name of the transferee in the place of the transferor. Section 34 ' (7) says:

Nothing in this section shall prejudice any power of the company Under its articles to refuse to register the transfer of any shares.

Innumerable rulings, English and Indian, were relied on by Mr. <NAME> to show that a <ORG> cannot override either the provisions of the Companies Act or the Article in the Articles of Association. In <NAME>'s Case (1866) L.R. 2 Eq. Cases 226 Re Imperial Chemical Industries Ltd. (1936) 2 All E.R. 463 <NAME> and <NAME>'s Case L.R. 2 Ch. D. 43 In re Imperial Mercantile Credit Association L.R. 2 Ch. 596 <NAME> and <NAME>'s Case (1867) 4 Eq. Cases 189 and Musgrave and Hart's Case (1867) 5 Eq. Cases 193 it has been held that where the Articles of Association of a Company require the transfer of shares to be executed by both parties, the <ORG> has no power to rectify the register by removing the name of the transferor, unless the transfer deed has been executed by the transferee also. The principle of it is simple. A <ORG> is bound to carry out the contract between the parties, and cannot make a new contract for them. Each company has its own Articles of Association which have been settled by it, and accepted by the shareholders as the terms governing the condition on which the shares have been issued to them and the manner in which the transfers of the shares have to be effected after they have been registered in the company's books. It will be contrary to justice, equity and good conscience and indeed, sense and commonsense alike, for the <ORG> to override these terms, agreed to by the parties in all solemnity, and no <ORG> is given power to do so. It is also obvious that unless the transferee has signed in the transfer deed, and unless such a tranfer deed executed by the transferor and the transferee is presented to the company, the company cannot now in whose name the shares are to be transferred and cannot issue the mandatory notice to the transferee required by Section 34(1) of the Companies Act before the transfer can be made in the transferee's name. A blank transfer deed may pass property in the shares as between the purchaser and the seller, and transfer the shares in that sense, but before that transfer can be registered with the company under Section 34 the transferee's name must be clearly known to the company either by his signing in the transfer deed, in token of the transfer to him, or by a <ORG> passing a decree for specific performance recognising the transfer of the shares to the transferee. Such a procedure will show clearly who the transferee is. Even then, the transfer deed signed by the transferor and the transferee (wherever possible) or by <ORG> for one of the parties and duly stamped must be presented to the company with an application for the registration of the transfer and it will be within the discretion of the company to allow or refuse the registration of the transfer under Section 34(7) of the Companies Act and Article 36 of the Articles of Association, in this case. Of course, the prescribed stamp is required for the transfer deed under the Stamp Act , whose provisions the company must obierve on pain of its being subjected to pecuniary penalties, or even prosecution if it is justified. No doubt, in the case of a decree for specific performance enforcing the transfer of the shares, if the transferor or transferee does not sign the transfer deed, the <ORG> might sign it on his behalf, as in any other decree for specific performance, and the other side can then sign in it, stamp it and present it to the company for registering the transfer, but the company has still the usual discretion to register it or not.

27. <CITATION> (1922) 42 M.L.J. 449 : I.L.R. 45 Mad. 537 a Bench of this Court, consisting of Kumaraswami Sastri and <NAME>, JJ., held that where a transfer of shares in a limited company, like this company, is required by law, or by the Articles of Association, to be made only by a deed executed both by the transferor and the transferee in the prescribed form, a deed of transfer executed by the transferor alone would not pass to the transferee the title to the shares, and an auction-purchaser under a subsequent attachment and sale of the shares was entitled to the shares and to apply for registration, as the owner, in preference to the private purchaser. It was observed there at page 541:

It is argued by Mr. <NAME> (T.M.) that when there is a <ORG> sale and a purchase under it, there is no discretion left for the directors and that they are bound to transfer the shares. It is argued by Mr. <NAME>, for the other side, that there is nothing in the Companies Act or the Articles of Association to make any difference between private sales and sales in execution of decrees, the necessity for the sanction of the directors being to prevent undesirable persons or debtors of the company from getting transfers of shares. The reason applies with equal force to private or <ORG> purchasers. We agree with the view taken in <CITATION> . (1916) I.L.R. 41 Bom. 76 that there is still a discretion in the directors to recognise or not purchasers in execution of decrees.

The view of this Bench regarding the discretion of the directors to allow or refuse to register the transfer represents, in our opinion, the correct state of the law, as it is based on several English Rulings like <NAME>'s Case (1866) L.R. 2 Eq. Cases 226 and several cases of Indian High <ORG>s like <CITATION> . (1916) I.L.R. 41 Bom. 76 referred to above. In our opinion, a ruling of a Bench of this <ORG> consisting of <NAME> and <NAME>, JJ., in <CITATION> . A.I.R. 1928 Mad. 571 holding that a company has no discretion to refuse to register the shares whose transfer is ordered by the <ORG>, relied on by Mr. <NAME>, is with great respect, wrong law, and is due to the failure to observe the vital distinction between a valid transfer of shares, in the sense of the passing of ownership, and the registration of the transfer by the company in its register of shareholders. The learned Judges drew a distinction between the transfer of shares by the voluntary act of the parties and what they termed transmission of shares by order of <ORG> and considered the observations in <CITATION> (1922) 42 M.L.J. 449 : I.L.R. 45 Mad. 537 that the directors of a company have a discretion in the matter of registering a transfer ordered by <ORG> to be mere obiter. Both the views, are in our opinion, unsustainable. The observations in <CITATION> (1922) 42 M.L.J. 449 : I.L.R. 45 Mad. 537 were not obiter, and amounted to direct decision on a point which arose in the case, and could not be overruled by a Bench of co-equal authority, like that in <CITATION> . A.I.R. 1928 Mad. 571. Again, the distinction between the transfer and transmission, drawn by the Bench in <CITATION> . A.I.R. 1928 Mad. 571 is, in our opinion, irrelevant for the purpose of registering the shares. Section 34(7) of the Cdmpanies Act and Article 36 of the Articles of Association are concerned with the company's registering the transfer of the shares, and not with their accepting or rejecting the validity of transfer and the ownership in the shares in the transferee. While the <ORG> can declare in a suit for specific performance that the owner of the shares is the transferee there being a valid transfer, and can direct the transferor to execute a proper transfer deed in the name of the transferee, it cannot affect the discretion of the company to allow or reject an application to register the transfer, whether before or after the winding up. <NAME>, J.'s observation in <CITATION> . A.I.R. 1928 Mad. 571 at page 583.

the company was not a party to the litigation and the observation of the learned Judge that there was a discretion in the directors to recognise or not purchasers in execution of decree was only obiter will have no relevancy regarding this matter. The learned Judge gave another ground, which was perhaps the real reason for the decision in that particular case, namely, Further it does not appear what exactly were the rules of that company about the transfer and transmission of shares.

28. We do not think it necessary to refer the apparent conflict between the two Bench rulings of this Court in <CITATION> (1922) 42 M.L.J. 449 : I.L.R. 45 Mad. 537 and <CITATION> . A.I.R. 1928 Mad. 571 to a Full Bench as in this case, a duly stamped transfer deed signed by the transferor and transferee alike, in respect of these 1668 shares, was not presented before the company, and registration of the transfer applied for, after which event alone the question of discretion of the company to order or refuse the registration of the transfer would arise. Both the Bench rulings, of course, recogmse, as mdeed all other rulings on this point, English, Indian and American that unless a duly stamped transfer deed, signed by the transferor and transferee was presented to the company, and registration of the transfer applied for, the company had no authority or power to consider the registration of the transfer excent of course in the extraordinary case of rioters, fraudulent persons and the occupying army of the enemy destroying such transfer deeds signed by both the transferor and the transferee, which is not the case here.

29. <CITATION> . (1940) 2 M.L.J. 721 Gentle, J., held that in the absence of an instrument of transfer signed by the transferor and transferee and duly stamped and presented to the company for registration of the transfer when so required by Articles of Association, there was no power in the company to register the transfer, and the registration was set aside as ultra vires of Section 34 of the Compames Act, just as <ORG>, in Application No. 1238 of 1948, set aside the registration of these very 1668 shares in the third defendant's name by this bank, after the first plaintiff became again its managing director and chairman by his order, dated 20th April, 1948, for the same reason among others.

A Bench of <ORG> consisting of <NAME>, <NAME> and <NAME>, J., has held in <CITATION> . A.I.R. 1945 Bom. 149 that before a shareholder claims his name should be entered on the register of the company as a shareholder he has to submit the share scrip and a properly executed and duly stamped transfer deed sign ed by the transferor and transferee, and that where an instrument of transfer pronerly stamped has not been given it cannot be said that the transferee's name was omitted without any sufficient cause. <CITATION> a Bench of <ORG> consisting of <NAME>, <NAME>, and <NAME>, J., now in <ORG>) have held the same view and have added that a contributory cannot I am not liable because I have sold my shares to a purchaser who has not got his name registered in the register of shareholders of the company .

as in this case.

30. Regarding these 1668 shares, the transfer forms have remained in blank till today, and have not been signed by the transferee, and indeed the plaintiff's alleged that all the directors, and not merely defendant 2, had purchased the shares under Exhibit P-1, and prayed that their names should be omitted from the register in respect of these 1668 shares, and the name of either the second defendant, or the third defendant or the fourth defendant, entered in their place, not ever adding how many of the shares were to be entered in the names of each of these three, or whether they were to be entered in the names of the three jointly and in what proportion and leaving it to the <ORG> to decide about the exact transferee and his number of shares in each case a ridiculous thing to ask a <ORG> to do as the parties have to do t Nor were the 168 shares presented to the bank along with the duly stamped and completed transfer deeds.

31. Mr. <NAME> urged that the absolute discretion given to the company to accept or reject an application for registration or a transfer, under an Article in the Articles of Association, recognised by the rulings cited above and by Section 34(7) of the Companies Act, cannot be held to be valid, as it is arbitrary and un reasonable, and affects the citizen's rights of property. We cannot agree. As already stated, the company is given the discretion only in the matter of registering the transfers, and is not empowered to decide whether the transfers are valid or not; nor does it affect the plaintiff's right to sue defendant 2, or defendant 3, or defendant 4, for specific performance, if so advised. Of course, even after getting a decree for specific performance against them or any one of them, directing them to get the transfer deeds executed in their favour (the <ORG> executing the transfers in the place of the unwilling parties in suitable cases of decrees of specific performance) the transfer deeds will have to be presented by the transferors or transferees to the company, under Section 34(1) , praying for the registration of the transfers, and the company will have an absolute discretion (possibly subject to good faith) to refuse to register the transfer under Section 34(7) . The only possible exception is that when the company refuses to register a transfer out of spite, or from corrupt and improper motives, a writ may possibly lie by the aggrieved person to enforce the registration, though we give no ruling on the point, as it is not necessary in the facts of this case. The discretion given to the company under the Articles of Association, is, in our opinion, perfectly justifiable, as that is necessary for the well being of companies and was the basis of the contract between the company and the shareholders. It is intended to prevent the company from being ruined by infiltrating fifth columnists, parading as transferees, or by transfers in the names of impecunious, persons by solvent people in order to get rid of their liability regarding unpaid calls, and also to prevent the cornering of all shares by wealthy people to the prejudice of the ordinary shareholders. Thus, people interested in a rival company, carrying on the same trade, might want to become transferees, in respect of the bulk of a company's shares, and to get their names registered, in order to obstruct the work of the company and to facilitate the business of their own company. So too, rich men, in their desire to become Managing Directors or Electors and run the company, may try to corner all the shares. So too, on seeing a company rushing towards bankruptcy, rich shareholders, desirous of getting rid of their liability for unpaid calls, may transfer their shares in the names of impecunious persons. All the three reasons will apply to partly paid up shares, and the first two reasons. to fully paid up shares, and justify in the interests of the public the discretion given to the company under the Articles of Association and under Section 34(7) to refuse to register the transfers in the names of the undesirable persons. We may add that the plaintiffs are admitted to be rich and solvent persons, while defendant 2 is said to be man of no worth at all, and the 1668 shares in question are only paid up to the extent of Rs. 40 each, and there are unpaid calls to the tune of Rs. 50 each; So, in the interests of the company, and of the innocent creditors, the company was rightly given the descretion to refuse to register the transfer in the names of defendant 2, even if a duly stamped and completed transfer deed signed by the transferor and transferee had been presented to the company and registration of the transfer asked for.

32. Mr. <NAME> stressed that the plaintiffs had acted honestly and in good faith throughout. But that is not relevant for this purpose. Many an honest man will have to suffer for his laches in not presenting a properly, completed and stamped transfer deed to the company for registration of the transfer, just as he will have to suffer if he does not sue within the period of limitation. Honesty, by itself, will not prevent the operation of law. Again, Mr. <NAME> forgets that the honest creditors of the bank deserve more consideration than the honest plainiffs who were at least guilty of laches.

33. The last contention of Mr. <NAME> was that the bank was estopped from contending that the names of the plaintiffs should remain in the register of shareholders against these 1668 shares, because they knew about the transfers by the first plaintiff's phone call intimating it, and impliedly accepting the transfer of the shares by not sending any notices of meetings or dividend notices or dividend warrants to the plaintiffs in respect of these shares after Exhibit P-1. We cannot agree. There was no estoppel, in law, by such conduct. The first plaintiff's-phone call does not deserye any weight to be attached to it, as he could not say whether the Secretary, or the Assistant Secretary, or other officer of the bank received the call, and could not even say to whom the shares were transferred, whether to the second defendant, or third defendant, or fourth defendant, or to all the three combined. To give such a phone call any value would be unthinkable. The first plaintiff did not follow up the phone call by any letter to the bank giving details. Even that would not have been of any avail, in the absence of presenting a duly completed and stamped transfer deed to the company with an application for registration of the transfer. The fact that the plaintiffs were not sent any notices of the meetings or dividend notices or warrants, by the company after Exhibit P-1 would only be sufficient to deprive the first defendant bank of its costs in the lower <ORG> and here for such laches, when dismissing the suit and application. It will not amount to representation by conduct to the plaintiffs, by the bank, that the shares had been transferred. How could the bank have ever transferred the shares when the transferee's name was not known to it, or even settled by the plaintiffs, and when no duly completed and stamped transfer deeds were presented to the company with an application for registration as required by the mandatory provisions of Section 34(1) of the Companies Act and Article 35?. It is not even as if the plaintiffs wrote to the bank stating that they presumed that notices of meetings and dividends, and dividend warrants, were not sent to them in respect of these shares, as they had been transferred and as the names of the transferees had been registered by the bank in their place, and the bank had replied that it was so, or had failed to reply for an unreasonably long time, and become bankrupt meanwhile. It is obvious that many other reasons might have existed for the failure to send the plaintiffs notices of the meetings and dividends and the dividend warrants after Exhibit P-1. Negligence of clerks especially in a fast sinking bank resulting in confusion and disorganisation and carelessness, is one of those possible causes. When the conduct, of the company cannot be attributed with certainty to be due to any one cause, it will be absurd to rely on it as operating as estoppel, especially when the bank itself had no power to transfer the shares from the names of the plaintiffs in the absence of duly completed and stamped transfer deeds presented to it with an application for transfer. It must be remembered that even when the bank illegally ordered the transfer of these shares in the name of the third defendant (not second defendant), after the first plaintiff again became the Managing Director and Chairman for a short spell, there were no duly completed stamped transfer deeds and an application for registering the transfer before the bank. The plaintiffs never wrote to the bank directly for months after the call for Rs. 9 per share was received by them, and corresponded only personally with the fraudulent second defendant. The first letter of the plaintiffs to the bank was only Exhibit P-20, on 2nd December, 1947, three months after the call was received. The fact that the dividend on the 1668 shares was given by the bank to the third defendant, the mortgagee, on behalf of the second defendant, who had purchased the shares under Exhibit P-1 and mortgaged them to defendant 3 will not amount to any conduct on the part of the bank operating as estoppel, as it is clear that banks in such circumstances, usually give dividends to such mortgagees after taking indemnity bonds from them.

34. The rights of the plaintiffs, if any, against defendants 2, 3 and 4 may remain intact, subject to limitation but that will not be relevant to this petition for rectification. In the end, therefore, we set aside the judgment and decree of <NAME>, in C.S. No. 525 of 1948 and Application No. 1229 of 1951, and direct the name of the second defendant to be removed from the list of shareholders, in the register of shareholders kept by the bank, in respect of these 1668 shares, and direct the names of the plaintiffs to be put back in the register as shareholders (now contributories). In the peculiar circumstances, we direct all the parties to bear their own costs in both the suit and petition before <ORG> and in this appeal, the Official Liquidators of the company being allowed to draw out their costs, including an Advocate fee of Rs. 1,000 in <ORG>, and Rs. 1,500 here, from the assets of the bank.