1894 (6) TMI 1 - Other - Indian Laws

Interpretation of Special Dividend Clause in Share Agreement Upheld by Court

The court interpreted a provision in an 1864 agreement between the parties regarding a special dividend attached to certain shares post-purchase. The key ... - Issues:Interpretation of a provision in an agreement regarding a special dividend attached to certain shares post-purchase.Analysis:The case revolved around the interpretation of a provision in an agreement made in 1864 between the Appellants and Mr. Wallace, a timber merchant, regarding the continuation of a special dividend attached to certain shares as part of the purchase consideration. The agreement was related to the transfer of Mr. Wallace's business to a joint stock company, now known as the Bombay Burmah Trading Corporation, Limited. The terms of the agreement included clauses specifying the transfer of property and the entitlement to an extra dividend based on future profits.The key provision in question was Clause 13 of the agreement, which granted Mr. Wallace or his legal representatives an extra dividend equal to one-third of surplus net profits of the company as long as they held the specified shares. The purpose of this provision was to ensure that Mr. Wallace received payment for the goodwill of his business from future profits, aligning the interests of both parties. The agreement also stipulated a five-year restriction on transferring the shares, emphasizing the importance of Mr. Wallace's continued association with the company.Following Mr. Wallace's death, his legal representatives sought to claim the extra dividend, leading to a dispute with the company. The company argued that since Mr. Wallace was deceased and his executors were not listed on the share register, the dividend should not be payable. However, the court held that as long as Mr. Wallace's name remained on the register, the company was obligated to credit dividends to his holding and recognize his legal representatives' entitlement to receive them.The company's contention that Mr. Wallace's estate should be wound up and shares distributed to beneficiaries was dismissed by the court. The judgment emphasized that the legal title to the shares belonged to Mr. Wallace or his legal representatives, and the company's concerns were limited to the fulfillment of the agreement terms. Ultimately, the court advised dismissing the appeal, affirming that the shares were held by Mr. Wallace or his executors/administrators, and ordered the Appellants to bear the costs of the appeal.