2026 (2) TMI 613 - AT - Companies Law

Rectification of register of members and restoration of shares upheld where duplicate certificates and deficient transfer procedures proved fraudulent.

Rectification of the register of members was sustained where duplicate share certificates were issued and transfers occurred without prescribed procedure ... Rectification of register of members under Section 59 of the Companies Act, 2013 - Summary jurisdiction of the Tribunal in rectification proceedings - Power to award damages and costs in rectification proceedings - Liability of company/Registrar and Transfer Agent for issuance of duplicate share certificates - Compliance with SEBI/RTA guidelines and due diligence for issuance of duplicate certificates - Effect of non-joinder of transferee in rectification petition - Limitation and discovery of fraud - HELD THAT:- In this case, the share certificates were lodged after several years instead of within 60 days, as the transfer deed dated 04.12.2003 was submitted by Mr. Chohan in January, 2015. There were other discrepancies like the amount of consideration shown in the transfer deed was Rs. 2,15,000/- whereas in the brokerage note, the consideration shown, including brokerage was Rs. 2,09,750/-. We note that the Appellant was negligent and had not followed the due procedure in issue of duplicate share certificates. The registered shareholder was nevour kept in the loop and was never informed. As per the law and guidelines prescribed, the duplicate share certificate could have been issued only to the registered shareholder, and not to any body else. Admittedly, share certificates were issued in the name of the Respondent, but the Respondent was never informed nor the share certificates were handed over to her. The shares were handed over to Mr. Chaohan, apparently after issuing them in the name of the Respondent and recording of the transfer simultaneously. This assertion of the Appellant is a proof that duplicate shares were issued at the back of the registered shareholder, without any courtesy of informing her. The company by its action had converted valuable original shares held by the Respondent physically in her custody as worthless paper. The facts of Adesh Kaur [2018 (8) TMI 836 - SUPREME COURT] are quite similar to the present case. The impersonator had got the duplicate share certificate issued. The Hon’ble Supreme Court had directed the company to rectify its register and the concerned depository to rectify the demat records in favour of the original registered shareholder. Thus, we find that the Ld. NCLT has rightly directed the Appellants to rectify the register and to restore the 5000 shares held by the Respondent herein to her. It is only in the alternative, that the Appellants had been asked to pay damages, which are in the nature of compensation, equivalent to market value of the shares as per the closing rate of National Stock Exchange on the date of the order. We find no reason to interfere in the well-reasoned order of Ld. NCLT. The Appellants have failed to restore what is rightfully the assets of the Respondent and have instead resorted to litigation. The Appellant No. 1 is a large private sector bank with market cap of more than Rs. 70,000 crores and has branches/offices in every nook and corner of the country as opposed to the individual shareholder who has been made to go through the grind, for no fault of hers. In the facts of this case, we deem it appropriate to levy towards cost reimbursement of legal expenses of Rs. 1,00,000/- on the Appellant No. 1 to be paid to the Respondent within two months. The appeal is accordingly dismissed. Issues: Whether the National Company Law Tribunal correctly exercised its power under Section 59 of the Companies Act, 2013 to order rectification of the register of members, restore the shares to the registered shareholder and award damages/costs where duplicate share certificates were issued and shares were transferred without following prescribed procedure and due diligence.Analysis: The Tribunal examined statutory provisions governing certificates and transfers (Sections 46, 56 and 59 of the Companies Act, 2013) and applicable regulatory guidelines (including SEBI Circular No. 1 (2000-2001) dated 09.05.2001 and transfer norms). The Tribunal analysed factual findings that the registered shareholder remained in possession of the original share certificate until dematerialisation request in 2018; that duplicate certificates were issued on the basis of belated/defective documents; that prescribed indemnity formats, notice and communication requirements and other prescribed checks were not complied with; that communications from the company/RTA were sent to an outdated address; and that material discrepancies existed in the documents submitted by the claimant (multiple inconsistent reasons for loss, non-standard indemnity, lack of evidence of payment). The Tribunal considered precedent (including Adesh Kaur v. Eicher Motors and Chalasani Udaya Shankar v. Lexus Technologies) establishing that where an open-and-shut case of fraud is shown and the aggrieved person is the victim, the Tribunal may exercise powers under Section 59 and order rectification and consequential reliefs. It rejected arguments that the petition was time-barred, that civil courts alone have jurisdiction over disputed title/forgery, or that non-joinder of the transferee barred relief, on the facts that the fraud was discovered only on dematerialisation and the statutory scheme and authorities permit Tribunal adjudication where powers are vested in it.Conclusion: The Tribunal's order directing rectification of the register, restoration of the shares to the registered shareholder, or alternatively awarding damages equivalent to market value, together with costs, is upheld. The appeal is dismissed and the Tribunal's remedy under Section 59 in favour of the registered shareholder is affirmed.