Constructive trustee treatment of registered shareholdings allows the beneficial owner to control voting and proxy execution.

Where the beneficial interest in shares has passed to a transferee but registration is still in the transferor's name, the registered holder is treated as a constructive trustee for the beneficial owner. On that basis, the incidents of shareholding, including voting rights and proxy execution, follow the beneficial interest rather than bare legal title. A company article stating that the register does not record notice of trusts does not defeat the trust as between transferor and transferee. The beneficiary may therefore compel performance of the trustee-like duty and obtain injunctive relief directing the registered holder to act in accordance with reasonable instructions concerning the shares.

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Issues: Whether the registered holder of shares, after transfer of the beneficial interest but before registration in the transferee's name, holds the shares as trustee and can be compelled to vote and sign a proxy in accordance with the transferee's directions; and whether such relief is barred by the company articles or by the nature of the voting right.

Analysis: Under Section 28 of the Indian Companies Act, 1913, shares are movable property transferable in the manner provided by the articles, and until registration the transferor remains the holder on the register. Section 94 of the Indian Trusts Act, 1882 treats a person having the legal possession but not the whole beneficial interest as holding for the benefit of the person entitled to that interest. On that basis, the registered transferor is a constructive trustee for the transferee, and the right to vote, like dividends and other incidents of the shares, follows the beneficial ownership. The restriction in the articles that the register does not record notice of trust does not negate the trust as between transferor and transferee, and the right to vote is not so personal as to be incapable of assignment or control by the beneficiary. The beneficiary is therefore entitled under Section 61 of the Indian Trusts Act, 1882 to compel performance of the trustee's duty and to obtain appropriate injunctive relief, including directions concerning proxy execution.

Conclusion: The registered holder was bound to act in accordance with the transferee's reasonable directions in relation to the shares, including voting and proxy execution, and the requested injunctive relief was maintainable.

Final Conclusion: The suit succeeded, and the plaintiffs obtained relief enforcing the trustee-like obligations attached to the registered holder's position.

Ratio Decidendi: Where the legal title to shares remains in the registered holder but the entire beneficial interest has passed to another, equity and the Trusts Act treat the registered holder as a constructive trustee who may be compelled to exercise the incidents of shareholding, including voting, for the beneficiary's benefit.

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