CONCEPT OF CALLS, SURRENDER, FORFEITURE AND

LIEN OF SHARES

MANIPAL UNIVERSITY JAIPUR

SCHOOL OF LAW

Submitted To: Submitted By:

Dr. MONA MAHECHA ROHIT BISHNOI
161401079
BA.LL.B (Hons.)
Semester - VI
Section - B

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 CERTIFICATE

This is to certify that the project entitled, “A study on law relating to risk prima facie passes
with property” submitted by “ROHIT BISHNOI” in partial fulfilment of the requirement for
the award of “BA.LLB (HONOURS) at the “MANIPAL UNIVERSITY JAIPUR” is an
authentic work carried out by her under my supervision and guidance.

To the best of my knowledge, the matter embodied in the project has not been submitted to
any other University / Institute for the award of any Degree or Diploma in the year 2018-
2019.

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 ACKNOWLEDGEMENT

In performing our assignment, I had to take the help and guidance of some respected persons
who deserve our greatest gratitude. The completion of this assignment gives me much
pleasure. I would like to show our gratitude to Dr. MONA MAHECHA, Course Instructor,
and Manipal University Jaipur for giving us good guideline for assignment throughout
numerous consultations. I would also like to expand our deepest gratitude to all those who
have directly and indirectly guided us in writing this assignment.

In addition, a thank you to the Professor who introduced us to the Methodology of work and
whose passion for the “underlying structures” had lasting effect. I also thank the Manipal
University Jaipur for the consent to include the copyrighted pictures as a part of our paper.

Many people, especially our classmates and team members itself have made valuable
comment suggestions on this proposal which gave us inspiration to improve our assignment. I
thank all the people for their help directly and indirectly to complete our assignment.

ROHIT BISHNOI

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 Table of Contents

CERTIFICATE ..................................................................................................................................... 2
ACKNOWLEDGEMENT .................................................................................................................... 3
INTRODUCTION................................................................................................................................. 5
What are Shares .................................................................................................................................... 5
Authorized and Issued Shares ......................................................................................................... 5
CONCEPT OF CALLS ON SHARES ................................................................................................ 6
Legal Provisions Relating to the Calls............................................................................................. 6
Procedure for making Calls ............................................................................................................. 7
CONCEPT OF SURRENDER OF SHARES ..................................................................................... 8
CONCEPT OF FORFEITURE OF SHARES .................................................................................... 9
Conditions for Forfeiture of shares ................................................................................................. 9
Procedure of Forfeiture of shares .................................................................................................... 9
Annulment of Forfeiture ................................................................................................................ 10
CONCEPT PF LIEN OF SHARES ................................................................................................... 10
Lien of shares: ................................................................................................................................. 10
CASE .................................................................................................................................................... 11
WEBLIOGRAPHY............................................................................................................................. 15

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 INTRODUCTION

What are Shares

Shares are units of ownership interest in a corporation or financial asset that provide for an
equal distribution in any profits, if any are declared, in the form of dividends. The two main
types of shares are common shares and preferred shares. Physical paper stock
certificates have been replaced with electronic recording of stock shares, just as mutual
fund shares are recorded electronically.

When establishing a corporation, owners may choose to issue common stock or preferred
stock.

Most companies issue common stock. The stock may benefit shareholders through
appreciation and dividends, making common stock riskier than preferred
stock. Common stock also comes with voting rights, giving shareholders more control over
the business. In addition, certain common stock comes with pre-emptive rights, ensuring that
shareholders may buy new shares and retain their percentage of ownership when the
corporation issues new stock.

In contrast, preferred stock typically does not offer appreciation in value or voting rights in
the corporation. However, the stock typically has set payment criteria; a dividend that is paid
out regularly, making the stock less risky than common stock. Also, preferred stock may
often be redeemed at a more beneficial price than common stock. Because preferred
stock takes priority over common stock, if the business files for bankruptcy and pays its
lenders, preferred shareholders receive payment before common shareholders.

Authorized and Issued Shares

Authorized shares comprise the number of shares a company’s board of directors may issue.
Issued shares comprise the number of shares that are given to shareholders and counted for
purposes of ownership.

Because shareholders’ ownership is affected by the number of authorized shares,

shareholders may limit that number as they see appropriate. When shareholders want to
increase the number of authorized shares, they conduct a meeting to discuss the issue and
establish an agreement. When shareholders agree to increase the number of authorized shares,
a formal request is made to the state through filing articles of amendment.

Example of Shares- As the 10-year bull market that began in 2008 stretched on, shares of
companies continually reached new highs through 2017. So-called FANG (Facebook, Apple,
Netflix and Google) tech stocks led the market rally, as their share prices soared by double
digits in 2017 on strong earnings results. The increasing price meant that investors were

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willing to pay more to own shares of these companies. All told, the shares of the companies
in the S&P 500 Technology Select Sector traded up 34.57% in 2017. In 2018, the shares of
companies on the stock market began to experience volatility due to economic and political
uncertainty.

CONCEPT OF CALLS ON SHARES

Reputed companies require the applicants to send the full value of the shares along with the
applications. This is because, the Companies Act does not prohibit companies to collect the
entire amount at the time of issue itself. But the usual practice of the companies is to collect a
certain percentage of the face value of the shares on application and allotment and the
balance in one or more instalments known as calls.
A call may be defined as a demand made by the company on its shareholders to pay a part or
the whole of the unpaid balance within a specified time. Lord Lindley says that the
expression “Call” denotes both the demand for money and also the sum demanded.
The following points should be noted, in this context, so that the reader can understand what
a call really means.
1. Time for Making the Call: The call can be made at any time during the life time of the
company or during the course of winding up. During the life time, the call should be made by
the Board of Directors and during the course of winding up, it should be made by the
liquidator.
2. Obligatory: Each shareholder is obliged to pay the amount of call as and when the call is
made. But, this liability arises only when the call is made and not before.
3. Debt Due: As soon as a call is made, the call amount shall become a debt due from the
shareholders to the company.
4. Consequences of Default: If a shareholder fails to pay the call amount, the company can
enforce payment of the amount together with interest or can forfeit the shares.
5. Calls and Other Payments: A call is different from other payments made by a
shareholder. The amounts paid on application and allotment are not calls. Similarly, if a
company requires the shareholders to pay the entire amount either on application or on
allotment, it is not a call under this Act.

Legal Provisions Relating to the Calls

The statutory provisions relating to the making of calls can be summed up as follows:
1. Call should Bona fide: The power to make call is generally in nature of a trust and so it
can be exercised bona fide and for the benefit of the company. It should not be made for
private ends. It means the directors or the liquidator can make the call only when there is a
bona fide need for funds.

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2. Uniformity: The calls should be made on a uniform basis on all the shares falling under
the same class. If a call is made only on some shareholders of the same class but not on others
or a greater amount is demanded from some shareholders and a lesser amount from others of
the same class, the call is not valid.
3. Provisions of the Articles: The calls should be made strictly in accordance with the
provisions of the Articles. If this is not done, the call will be invalid.

Procedure for making Calls

Generally, the procedure for making calls is incorporated in the Articles of most companies.
If a company has its own Articles, it should follow the provisions of its Articles. If not, the
regulations specified in Table A of the Act shall apply.
The following provisions of Table A can be noted at this stage.
1. The power to make calls generally vests in the Board of Directors.
2. The calls should be made by passing a resolution at the meeting of the Board.
3. The call money should not exceed 50% of the face value of the share at one time.
However, companies may have their own Articles and raise this limit.
4. There must be at least 30 days interval between two successive calls.
5. When a call is made a letter known as “Call Letter” or “Call Notice” should be sent to all
the shareholders of the same class.
6. The notice should also specify the amount of the call, place of payment etc. and should be
sent at least 14 days before the last date for payment.
7. The Board of directors has the power to revoke or postpone a call after it is made.
8. Joint shareholders are jointly and severally liable for payment of calls.
9. If a member fails to pay call money, he is liable to pay interest not exceeding the rate
specified in the Articles or terms of issue. The directors are free to waive the payment of
interest.
10. If any member desires to pay the call money in advance, the directors may at their
discretion accept and pay interest not exceeding the rate specified in the Articles.
11. A defaulting member will not have any voting right till call money is paid by him.

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 CONCEPT OF SURRENDER OF SHARES

Surrender of shares means the return of shares by the shareholder to the company for
cancellation. Holder in this case voluntarily abandons all his shares in favor of the company.
A mere refusal to take up newly issued shares, to which a shareholder is entitled to, is not a
surrender of shares. The power to accept surrender of shares cannot be exercised by a
company unless expressly given by the Articles of Association.
But no shares can, in any case, be surrendered to the company in consideration of the
payment of money or money’s worth by the company. Such a surrender shall be ultra-vires
the company since it would amount to purchase by the company of its own shares. There are
only two cases where surrender of shares will be valid provided its acceptance by the
company is authorized by the Articles of Association—

1. When shares are surrendered in exchange of the new shares of the same nominal
value. There would be no reduction of share capital in such a case; and
2. When shares are surrendered as a short cut to forfeiture of shares when all the
circumstances for forfeiture have arisen. Reduction of capital in such a case shall be
valid.

Provisions in the articles, for the acceptance of surrender of shares in all other cases except
the above two, will be void.

A member validly surrendering his shares to the company can nevertheless be held liable as a
list B contributory in the event of winding up of the company within twelve months of his
surrender of shares. Court may order for the restoration of the plaintiff’s name in the Register
of Members after lapse of any number of years if the surrender of shares is proved to be
illegal and provided that the shares have not been reissued in the meantime or otherwise dealt
with by the company.

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 CONCEPT OF FORFEITURE OF SHARES

If a shareholder, who is called upon to pay any call fails to pay the amount, even after
sending several reminders, the company may forfeit his shares. Forfeiture of shares results in
a permanent reduction of the share capital.

Conditions for Forfeiture of shares

A company can forfeit its shares only when the following conditions are satisfied:
1. Authority to Forfeit: The power to forfeit must be expressly given in the Articles.
Accordingly, if no power is given in the Articles, no forfeiture can be made.
2. Default in Payment of Calls: The shares can be forfeited only for the non-payment of
calls and not for the default in payment of any other debts.
3. In Accordance with the Articles: Forfeiture shall be valid only when the provisions of the
Articles are strictly complied with. Even a slight deviation from the provisions shall render
the forfeiture invalid.
4. Bonafide and for the Benefit of the Company: The right to forfeit shares is in the nature
of trust and so it can be exercised bonafide and only for the benefit of the company. The
power cannot be exercised hastly or for private ends.
5. Board Resolutions: Forfeiture will be effected only by means of a Board resolution.
6. Notice to Defaulting Shareholder: Notice precedent to forfeiture must be given to the
defaulting shareholder. In the matter of forfeiture of shares, technicalities must be strictly
observed.

Procedure of Forfeiture of shares

The following procedure must be followed for forfeiture of shares:

1. The secretary shall prepare a list of defaulters i.e., the list of members who have not paid
the call money up to the last date, and place it before the Board of Directors for necessary
action.
2. The Board of Directors then passes a resolution instructing the secretary to send call
notices to such defaulters.
3. As per Board’s resolution, the secretary dispatches the notices under registered post to the
defaulting shareholders asking them to pay the call dues within 14 days with interest at a
specified rate.
4. If any defaulting member does not comply with the requirements of such notice, a second
warning notice may be sent stating that if the call money is not received within 14 days from
the date of notice, the forfeiture of shares will follow.

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5. If this notice also proven ineffective, the secretary convenes a meeting of the Board of
Directors and places the facts before it. The Board then passes a formal resolution to forfeit
the shares.

Annulment of Forfeiture

After the forfeiture of shares, if the defaulting shareholder likes to pay the amount due and
requests the company to cancel the forfeiture of his shares, the secretary should take the
following steps:
1. Board meeting is to be convened to settle the terms of annulment or cancellation of the
forfeiture. This will be done by passing a resolution. Such resolution generally calls upon the
defaulting member to pay off calls due together with interest.
2. A letter should be sent to the shareholder informing that on fulfilment of the conditions
laid down by the Board, his name will be entered in the register of members.

CONCEPT PF LIEN OF SHARES

The legal right of a creditor to sell the collateral property of a debtor who fails to meet the
obligations of a loan contract. A lien exists, for example, when an individual takes out an
automobile loan. The lien holder is the bank that grants the loan, and the lien is released when
the loan is paid in full. Another type of lien is a mechanic's lien, which can be attached to real
property if the property owner fails to pay a contractor for services rendered. If the debtor
never pays, the property can be auctioned off to pay the lien holder.

Lien of shares:
A lien is the right to retain possession of a thing until a claim is satisfied. In the case of a
company lien on a share means that the member would not be permitted to transfer his shares
unless he pays his debt to the company. The articles generally provide that the company shall
have a first lien on the shares of each member for his debts and liabilities to the company.
The right of lien is not inherent but must be clearly provided for in the articles. The articles
may give the right of lien over share either for unpaid calls or for any other debt due by the
member of the company. The company may have lien on fully paid-up shares. The lien also
extends to the dividends payable on the shares.

The death of a shareholder does not destroy the lien. The right of lien can be exercised even
through the claim has become barred by law of limitation. Where the liability of the
shareholder towards the company is disputed by him, it does not deprive the company of its
right of lien on the shares. But a company will not be able to exercise its right of lien where
the shareholder has mortgaged his shares before he has incurred any liability to the company
and the company has notice of it. Similarly, a company will lose its lien if registers a transfer
of shares subject to the lien.

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From companies point of view the right to take another’s property if a particular obligation is
not discharged.
From company’s point of view if a shareholder indebted to the company, he cannot dispose
of the shares without first paying the debt of the company. The right of the company on
shares is called lien of shares. However company can exercise his right only if provided in
AOA.

CASE

Calcutta High Court

Unity Company Private Ltd. vs Diamond Sugar Mills And Ors. on 18 November, 1968
Equivalent citations: AIR 1971 Cal 18
Author: A Sen
Bench: A Sen

JUDGMENT A.N. Sen, J.

1. Unity Company Private Ltd., the plaintiff herein (hereinafter referred to as the plaintiff or
the plaintiff company) was the owner and registered holder of 25,000 shares of Diamond
Sugar Mills Ltd., the defendant No. 1 (hereinafter referred to as the defendant company). The
said shares are fully paid up and, the shares are of the face value of Rs. 10/- per share. The
defendant company claimed a lien over the said shares owned by the plaintiff company in
respect of a debt of the plaintiff company to the defendant company and in exercise of the
said lien the defendant company had sold the shares to other parties who happen to be and/or
are represented by the other defendants in this suit. In this suit the plaintiff company
challenges the validity of the sale of the plaintiff's said shares by the defendant company. The
plaintiff had originally instituted this suit against the defendant company. By subsequent
amendment of the plaint the other defendants who are the purchasers of the said 25,000
shares and the present registered holders thereof have been impleaded and brought on record
in this suit. One of the original defendants Pannalal Beriwal who was the purchaser of 10,000
shares out of the said 25,000 shares died during the pendency of the suit and the defendant
Nos. 2 to 10 are the heirs and legal representatives of the said Pannalal Beriwal. The
defendant No. 3 Gopi Kissen Agarwal who is an heir and legal representative of Pannalal
Beriwal is also himself a purchaser and the present registered holder of 5,000 shares out of
the said 25,000 shares. The defendant No. 4 Sanwalram Agarwal, another heir and legal
representative of Pannalal Beriwal is the purchaser and the present registered holder of
another lot of 5,000 shares out of the said 25,000 shares and the defendant No. 5 Amarnath
Agarwal who is also an heir and legal representative of Pannalal Beriwal is the purchaser and
registered holder of another lot of 5,000 shares out of the said 25,000 shares which form the
subject-matter of dispute in the present suit.

2. The case of the plaintiff as made in the plaint may be stated. In paragraph 1 of the plaint,
the plaintiff states that the plaintiff is and at all material time was the holder of 25,000 shares
in the defendant company and the particulars of the said shares are given. In paragraph 2 of

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the plaint, the plaintiff alleges that the defendant company demanded payment from the
plaintiff a sum of Rs. 1,10,000/- alleged to be due to the defendant company by the plaintiff
company on account of money lent and advanced by the defendant company to the plaintiff
company in 1948 and in the said letter the defendant company claimed to exercise an alleged
lien on the said shares belonging to the plaintiff if the said amount was not paid by the
plaintiff to the defendant company. In paragraph 3 of the plaint, the plaintiff avers that no
amount whatsoever was due by the plaintiff to the defendant company in June 27, 1956, all
advances made by the defendant company to the plaintiff having been liquidated several
years prior thereto and the plaintiff further states that in any event the alleged advances were
barred by the law of limitation. In paragraph 4 of the plaint, it is stated that by letter dated 8th
October, 1937 the defendant company informed the plaintiff that in exercise of the alleged
power and lien as contained in the Articles of Association of the defendant company the said
25,000 shares standing in the plaintiff's name had been sold by the defendant company @ Rs.
5/- per share and a sum of Rupees 1,25,000/- had been realised by virtue of such alleged sale
and it was further aliened in the said letter that after giving credit for the said amount to the
plaintiff a sum of Rs. 42,940-1-0 still remained due and payable by the plaintiff to the
defendant company, In paragraph 5 of the plaint the plaintiff makes the case that the plaintiff
was and is not indebted to the defendant company in any sum whatsoever and the alleged sale
of the said shares in exercise of the alleged lien contained in the Articles of Association of the
defendant company is void, inoperative and not binding on the plaintiff. In paragraph 6, it is
stated that no sale of the said shares in fact took place as alleged or at all and the purported
sale of the said shares by the defendant company is mala fide and the sum of Rs. 5/- per share
alleged to have been realised by the defendant company in respect thereof is grossly
inadequate and is far below the market rate of the said shares. It is stated in paragraph 7, that
the plaintiff is still the owner of the said shares. It is claimed in paragraphs 7 (a), 7 (b), 7 (c),
7 (d) and 7 (e) which were introduced by amendment of the plaint, that the purported
forfeiture of the said shares by the defendant company by its resolution dated 25th May, 1957
and allotment of the said shares to the alleged purchasers of the said shares and entering their
names on the share-register of the defendant company and issuing fresh certificates in their
favour and expunging the name of the plaintiff company from the share register of the
defendant company are wrongful and illegal and not binding on the plaintiff company and
that the share register of the defendant company should be rectified by deleting the names of
the alleged purchasers therefrom and recording the name of the plaintiff as the lawful owner
of the said shares. In para 8 the plaintiff alleges that the defendant are denying the plaintiffs
title to the said 25,000 shares. In para 9 of the plaint, the plaintiff in the alternative claims
damages from the defendant company in respect of the said shares for Rupees 12,50,000/- @
Rs. 50/- per share, being the value thereof on 18th October, 1957. On the basis of the
aforesaid material averments the plaintiff has asked for the following principal reliefs:

(i) A declaration that the plaintiff continues to be the owner of the 25,000 shares in the
defendant company.

(ii) A declaration, if necessary, that the purported sale of the said shares by the defendant
company is void, inoperative and not binding on the plaintiff.

(in) A declaration that the forfeiture of the said shares by the defendant company and the
allotment of the same to the said Pannalal Beriwal since deceased and the defendants 3, 4 and
5 is void, inoperative and not binding on the plaintiff.

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(iv) A declaration that the said resolution of the Board of Directors of the defendant company
dated 25th May, 1957 is void, illegal and not effective and is not binding on the plaintiff.

(v) Rectification of the share register of the defendant company by deleting the name of the
said Pannalal Beriwal since deceased and of the defendants Nos. 3, 4 and 5 and by putting in
the name of the plaintiff as the owner of the said shares.

(vi) If necessary, cancellation of the share certificates issued by the defendant company in
favour of the said Pannalal Beriwal since deceased and the defendants 3, 4 and 5.

(vii) Alternatively, Rs. 12,50,000/- as damages or an enquiry into damages and a decree for
such sum as may be found to be due on such enquiry.

3. The case of the defendants may now be noted. The defendant company in the written
statement admits that prior to 21st May, 1957, the plaintiff company was the holder of 25,000
ordinary shares which form the subject-matter of the suit and makes the case that between
January and July, 1948 the defendant company lent and advanced to the plaintiff company a
sum of Rs. 1,40,000/-in 4 instalments for the purpose of the business of the plaintiff company
and at its request, and in December 1949, the plaintiff company repaid a sum of Rs. 30,000/-
in part payment of the said sum of Rupees 1,40,000/- leaving a balance of Rupees 1,10,000/-.
The defendant company further makes the case that as the plaintiff company was unable to
repay the said sum of Rs. 1,10,000/- immediately or in the near future, the plaintiff company
through Babu Champalal Jathia appealed to the defendant company for sufficient time to
repay the said balance sum of Rs. 1,10,000/- and also for facilities to repay the same in easy
monthly instalments and it was agreed by and between the plaintiff company and the
defendant company as follows:--

(a) That the sum of Rs. 1,10,000/- would not become payable by the plaintiff company to the
defendant company before 1st February, 1955.

(b) That the plaintiff company would repay the said sum to the defendant company with
interest thereon @ 6% per annum by monthly instalment of Rs. 5,000/-, the first of such
instalment to be paid on 1st February 1955, and all subsequent monthly instalments on the
first of each succeeding month.

(c) That payments were to be made at the plaintiff's registered office.

(d) That for the purpose of recovery of the said sum of Rs. 1,10,000/- and its interest thereon
@ 6% per annum, the defendant company would be entitled to exercise all its rights provided
under the Articles of Association in respect of the aforesaid 23,000 shares held by the
plaintiff company in the defendant company.

4. It is the case of the defendant company that even after expiry of 1st February, 1955, and in
spite of demands the plaintiff company failed and neglected to pay the said sum of Rs.
1,10,000/- or any part thereof or any interest thereon either by monthly instalment of Rs.
5,000/- as agreed or at all and that it was resolved by the defendant company that the
defendant company would enforce its lien on the said shares of the plaintiff as the plaintiff
had failed and neglected to pay the sum of Rs. 1,10,000/- together with interest thereon or
any part thereof by giving a notice to the plaintiff company in terms of the Articles of
Association of the defendant company; and on or about 27th June, 1955, the defendant

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company called upon the plaintiff company to make payment of the said sum of Rupees
1,10,000/- with interest thereon @ 6% per annum within 7 days from the date of receipt of
the said letter by the plaintiff company and also informed the plaintiff company that in
default of such payment the defendant company in exercise of its lien on the said 25,000
shares would forfeit, sell and allot the same in accordance with the provisions of the Articles
of Association of the defendant company after the expiry of the said period and would apply
the sale proceeds towards payment and discharge of the said sum of Rs. 1,10,000/- with
interest @ 6% per annum. It is the further case of the defendant company that as inspite of the
said notice the plaintiff company failed and neglected and/or refused to nay the said sum of
Rs. 1,10,000/- with interest @ 6% per annum or any portion thereof within the aforesaid time
or at all, the defendant company in exercise of its lien forfeited the said 25,000 shares of the
plaintiff company and expunged the name of the plaintiff company from the register of
members and the defendant company sold and allotted the said 25,000 shares @ Rs. 5/- per
share to the following persons in the following manner, viz.,

1. Shri Pannalal Beriwal 10,000 shares

2. Shri Gopi Kissen Agarwal 5,000 shares

3. Shri Sanwalram Agarwal 5,000 shares and

4. Shri Amarnath Agarwal 5,000 shares and the defendant company duly entered and/or
registered the names of the said persons in the register of members of the defendant company.
The defendant company states that the defendant company gave due notice to the plaintiff
company of the said forfeiture and sale and allotment of the raid 25,000 shares and also
called upon the plaintiff company to pay the defendant company a sum of Rs. 42,940/- and 1
anna which was still due and owing to the defendant company by the plaintiff company. The
defendant company denies the allegations made in the plaint and denies in particular the case
made by the plaintiff company that the plaintiff company had liquidated the debt several
years earlier or that the loans advanced -by the defendant company were barred by limitation.
In substance the case of the defendant company is that the plaintiff company had failed and
neglected to pay its debt to the defendant company of the said sum of Rs. 1,10,000/- with
accrued interest and the said debt was justly payable by the plaintiff company to the
defendant company and the defendant company in exercise of its lien has forfeited the said
shares and has sold and allotted the said shares to purchasers of the said shares and the name
of the defendant company has been expunged from the register of members of the defendant
company and the names of the purchaser have been recorded therein. It may be noted that the
defendant company has filed a suit against the plaintiff company for recovery of the said
balance amount alleged to be still due and payable by the plaintiff company to the defendant
company after giving credit to the plaintiff company for the sale proceeds realized in respect
of the said 25,000 shares of the plaintiff company.

5. The other defendants (hereinafter referred to as the purchaser defendants) hap-pen to be the
heirs and legal representatives of the original defendant Pannalal Beriwal who had taken
10,000 shares and 3 of the other defendants namely, Gopikissen Agarwal, Sanwalram
Agarwal and Amarnath Agarwal, the defendants Nos. 3, 4 and 5 herein are also purchasers of
lots of the said 25,000 shares in their individual capacities. These defendants in their written
statement deny the claim of the plaintiff and these defendants make the case that these
defendants are in any event bona fide purchasers of the said shares for valuable consideration
without any notice of any alleged claim of the plaintiff and the rights of these defendants in

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relation to the said shares cannot be affected by any alleged claim of the plaintiff company.
The purchaser defendants further make the case that the plaintiff company with full
knowledge that the defendant company was threatening to and intended to sell the said shares
stood by and took no steps to prevent such sale and thereby made it possible for the defendant
company to sell the said shares and impliedly represented and/or permitted these defendants
(the purchaser defendants) to believe that the defendant company was entitled to sell the said
shares and/or acquiesced in the said sale; and that these defendants are bona fide purchasers
for value of the said shares and have acted on the basis of the said inaction and/or
representations of the plaintiff and/or said beliefs. It is the case of these defendants that the
plaintiff is therefore estopped from challenging the title of these defendants to the said shares
and these defendants make the further case that the plaintiffs are guilty of laches and/or delay
and have and/or must be deemed to have lost and/or waived their rights, if any, in the said
shares, which these defendants deny.

WEBLIOGRAPHY

1. https://indiankanoon.org/doc/1143725/
2. https://aqua-phyd.com/brief-notes-on-lien-of-shares-surrender-of-shares-forfeiture-of-
shares/
3. https://www.slideshare.net/amitmakwana501/the-terms-lien-of-shares

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