TaxTMI 
TaxTMI 
2026 (2) TMI 613
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.... as noted in the impugned order are as under: i. CP No. 4770/MB/2018 was filed by Ms. Nitu R Menda under Section 59 of the Companies Act, 2013 seeking directions to the Appellants to restore the name of the petitioner in the register of members as the lawful owner of 5000 fully paid up equity shares of Rs. 10/- each of Appellant No. 1 company (IndusInd Bank Ltd.). ii. The Appellants had filed MA No. 2404/2019 challenging the maintainability of aforesaid company petition. iii. The Respondent herein was holding 5000 equity shares bearing distinctive nos. 179891484 to 179896483 under folio number 00916735 of the face value of Rs. 10/- each aggregating of Rs. 50,000/- in Appellant No.1, which is a scheduled commercial private sector bank. iv. Pursuant to the SEBI Notification issued on 08.06.2018 mandating dematerialization of physical shares held by the investors in any listed company before 05.12.2018, the Respondent made a request by submitting Dematerialisation Request Form (DRF) dated 31.08.2018 to JM Financial Services Limited, a depository participant where Respondent holds Demat Account in her name and also surrendered the original share cert....
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....of some share transfer form submitted by him alleging that he had purchased the shares from the Petitioner in the year 2003. The Counsel for the Petitioner has further pointed out that no information was given to the Petitioner before issuing duplicate certificate to Navin A Chohan. The Counsel for the Petitioner has further argued that the Petitioner continued to be in possession of the original share certificate throughout and the same was produced for dematerialization in the year 2018 which amply proves that the shares were never sold by the Petitioner at any point of time. According to the counsel for the Petitioner, the Respondents had no occasion to issue duplicate shares to Navin A Chohan at the back of the Petitioner. Therefore, having wrongly issued duplicate shares and transferred the same to Navin A Chohan, the Respondents are liable to restore the name of the Petitioner in the register of members of Respondent No. 1 u/s 59 of the Companies Act, 2013. 19. On the other hand, the counsel for the Respondent Nos. 1 and 2 have argued that the present Petition in barred by limitation. It has further been argued on behalf of the Respondents that the NCLT does not have....
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.... the particulars of the Petitioner must be available with Respondent No. 2 in its records. Issuance of a notice in a newspaper cannot be said to be sufficient. A public notice is issued when the shareholder himself applies for duplicate certificate to ensure that he/she might not have sold the same and in case any third person has any claim, he can lodge the same with the company before the duplicate shares are issued. There is no procedure prescribed under the law that duplicate shares can be issued at the instance of some person other than the original shareholder or his/her legal heirs in case of death. 23. Secondly, non-issuance of notice on the part of Respondent No. 2 to the Petitioner any time prior to issuance of the duplicate share certificate on the request of Navin A Chohan is a glaring and humongous lapse on the part of Respondent No. 2. 24. Respondent No. 2 has claimed that the signature of the Petitioner on the transfer deed submitted by Navin A Chohan were compared with her specimen signature available in the records of the Respondent No. 2 and the same were found to be similar. However, surprisingly, Respondent No. 2 has not placed on record the sp....
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....aterialization, the Petitioner continued to be in possession of the original share certificate. Even otherwise the Petitioner had no privity of contract with Navin A Chohan. As a matter of fact, there was a complete failure on the part of the Respondents to exercise the expected level of due diligence while acceding to the request from Navin A Chohan for issuance of duplicate share certificate. The matter was not probed at all by Respondent No. 2 when the request for issuance of duplicate share certificate was received. Surprisingly, even when the original certificates were submitted by the Petitioner for dematerialization in the year 2018, the Respondents simply informed the Petitioner that duplicate share certificate has been issued against the shares of the Petitioner and the same has also been transferred to Navin A Chohan and further that the Petitioner should take up the matter with Navin A Chohan. Even at that stage, Respondent No. 2 did not wake up to the fact that some fraud had been committed as the original shares were still in possession of the Petitioner. This simply shows the callous attitude of Respondent No. 2 in dealing with the whole matter. The Respondent company....
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....ellant to any further proceedings as this was an open and shut case of fraud in which the Appellant has been the victim and the Respondent company the perpetrator. In this case also, the company had similarly issued duplicate share certificate who further transferred the same to a third party and further the RTI circular dated 09.05.2001 was not followed while issuing duplicate shares nor the Stock Exchanges were informed by the company. In the instant case also, the Respondents issued duplicate shares to a third party at the back of the Petitioner by not exercising due diligence nor the Petitioner was informed at any time prior to issuing the duplicate share certificate which is a gross illegality on the part of the Respondents. A further reference can also be made to the law laid down in Howrah Trading Company Limited v. Commissioner of Income Tax Calcutta AIR 1959 SC 775 whereby it has been held that the company recognizes no person except one whose name is on the register of members. A transferee or purchaser of shares cannot be treated as a member or a shareholder till the shares are transferred in his name. Therefore, as per Section 46 of the Companies Act, 2013 duplicate sha....
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....regulations for issue of duplicate share certificate to unregistered holder. (e) The Petition was liable to be dismissed on account of non-joinder of necessary parties as Mr. Navin A Chohan was not impleaded. (f) The Petition was barred by limitation as the Respondent had knowledge regarding the transfer of the Shares since 2015. 5. The Ld. Counsel for the Appellants submitted that the issue here was not a matter for rectification of register under Section 59 of the Companies Act, 2013 as already there was a share transfer form duly executed. It was submitted that even if we assume that it was a fraudulent transfer which was recorded, it is still not a matter covered under Section 59 of the Companies Act, 2013 as the said section deals only with rectification of register. It was submitted that only Civil Courts have jurisdiction over such matters. It was submitted that the companies are not liable to make good the loss to a shareholder regarding such fraudulent transfer. It was also submitted that the Ld. NCLT has no power to levy damages under Section 59 of the Act. 6. The Learned Counsel for the appellant submitted that Section 59 of the Act is 'pari mater....
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....udge held that no order for rectification could be made but that the case was governed by the decision in In re Bahia and San Francisco Railway Company the certificate purporting to be a certificate that Gardner was the owner of the specific shares, the numbers of which were given Accordingly he directed an inquiry as to what damages had been sustained by Goode in consequence of inability of the Company to register him as the transferee of the shares. The Chief Clerk accordingly assessed the damages according to the value of the shares on that day, which was accepted Before the Appellate Court no question as to the validity of the order made by Stirling J., was raised and no appeal from that order had ever been bought It may also be stated that before the Appellate Court for the respondent Goode it was however stated that Stirling, J., had held in another case-Ex Parte Sandys that when relief is given under section 35, the measure of damages is to certain extent discretionary, but that the respondent is willing to waive all further remedy at law, and to have the application treated as an action for dam-ages at common law, to which the appellants consented. Lindley L.J., dealing wit....
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....e it was an action at law brought to recover damages and was not an application under Section 35 of the English Companies Act, while in In re Bahia and San franciseo Railway Company's case the Court had under Section 35 ordered to restore T.'s name to the register and only on a case stated the question of damages arose. 15. It is, therefore clear that it is only after rectification that the question of awarding damages would arise. The observations of Lindley L.J., were made in a case where that question would have arisen but for the fact that there was no appeal against the order of Stirling, J. that no rectification could be made. Even though Lindley L.J., observed that no damages with-out rectification can be obtained by a summons under Section 35 of the Act of 1862 instead of by an action at law, the Appellate Court proceeded to assess the damages in view of the consent of the parties to treat it as an action at law. In our view also, whether those observations are obiter or not, they are entitled to great weight and even on a plain reading of section 33(1) and (2) no question of damages will arise without rectification of the register and since no rectificatio....
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....s purportedly signed as of 04.12.2003 in Mumbai, India (see page 137 of the Appeal). 4.4. The Share Transfer Deed was sent to the Appellant No. 2 vide letter dated 27.12.2014 (see page 136 of the Appeal), more than 11 years after it was allegedly signed. 4.5. Though the Share Transfer Deed was sent on 27.12.2014, its revalidation was done on 29.12.2014 (see para 5 of the Appeal read with page 137 of the Appeal). 4.6. That the original share certificates corresponding to the Respondent's Shares were well and truly within the possession of the Respondent (para 12 of the Appeal). 4.7. That in absence of original share certificates, the Appellants engaged directly with the Purported Transferee, and issued and handed over the share certificates for the Respondent's Shares to the Purported Transferee, despite the Respondent being the registered holder of the said shares in the register of the Appellant No. 1. Admittedly, no notification of this process was ever issued to the Respondent (para 7 to 9 of the Appeal). 4.8. That the Appellant No. 2 vide letter dated 13.02.2015 had asked the Purported Transferee to provide the following docu....
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....e Appeal), the indemnity bond states that the share certificates "has/have been lost or misplaced in transit and the same is/are not traceable despite best and bonafide efforts". Evidently, no proof of such loss in transit was provided by the Purported Transferee, despite it being one of the documents which Appellant No. 2 had requested vide the letter. Despite this glaring defect, the Appellant No. 2 proceeded to issue and handover the share certificates to the Purported Transferee (para 6 of the Appeal, and Appeal Vol. 1 from pages 148-176). (d) That the newspaper advertisement (see page 188 of the Appeal) for giving notice of the loss of share certificates corresponding to the Respondent's Shares was only issued in Mumbai despite the Appellant No. 1 having shareholders across India, and the Respondent herself having always resided in Bangalore, Karnataka, India. To the best of the knowledge of the Respondent, the said advertisement was also published in a Marathi newspaper. 4.9. That the purported correspondence issued by the Appellant No. 2 on 29.08.2015 for intimating the Respondent of the transfer of Respondent's Shares to the Purported Tran....
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.... be solely responsible for the issue of such duplicate share certificates." 12. It was submitted that as per procedure the company was required to obtain indemnity bond in case of issue of duplicate share certificate and the said bond was to be given by the registered shareholder only. It was specifically mentioned in the circular that if duplicate is issued on any other document, the company and the RTA shall be solely responsible. It was further submitted that it was the duty of the company to inform the last registered shareholder regarding claim for loss of share certificate and the duplicate share certificate should have been issued only to the shareholder existing in the register of the company, i.e. previous registered shareholder, the Respondent in this case. 13. The Ld. Sr. Counsel for the Respondent submitted that the shares transfer deed is available at page 137 of the Appeal Paper Book (APB) where following discrepancies can be noticed: a) the consideration is shown as Rs. 2,15,000/- whereas the alleged broker notes of Acumen Share Services Pvt. Ltd. placed at page 150 of the APB reflects consideration as Rs. 2,09,750/-; b) the validation stated to be done by Assi....
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....d at page 119 of the APB which shows that advertisement was published in Marathi newspaper in Maharashtra whereas the Respondent (Neetu R Menda) resides at Bangalore and it was not possible for her to be aware of the said advertisment. 15. The Ld. Sr. Counsel submitted that at page 158 of the APB is the indemnity bond given by the Navinchandra Amrutlal Chaohan wherein at page 159 the details of payments like cheque no. and date, drawn on, amounts are all left blank as well as confirmation by Broker has been left blank. The bank had shown extreme negligence in not ascertaining that the payments have been made for the said shares. At page 151 of the APB is the purported report of the police station Ahmednagar which strangely states that the application was filed on 05.02.2015 and was investigated the same day and the relevant share certificate was not found and as per the said report, the shares were lost within the limit of Bhingar Police Station. In the letter to the appellant bank Mr. Navin A. Chaohan has stated that the shares have been misplaced while shifting, while in the certificate of Police Station it is stated that the shares certificate have been misplaced in February ....
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....areholder and even indemnity given by the transferee was incomplete. (d) The consideration stated in the broker's challan and in the transfer deed were different. (e) The transferee had given three different reasons for loss of share certificates before the police in Non-Cognizable Report (NCR), in the letter to the company and in the indemnity bond. (f) The intimation of transfer was given by the company to the Respondent at the wrong address, whereas the Respondent had communicated her current address to the company. (g) The advertisement for duplicate share certificates was issued in a Marathi paper at Mumbai whereas the original holder resided in Bangalore. 20. It is submitted that the Respondent relies upon the decision of the Hon'ble Supreme Court in the case of Chalasani Udaya Shankar and Others v. M/s. Lexus Technologies Pvt. Ltd. and Others in Civil Appeal Nos. 5735-5736 of 2023 rendered on 09.09.2024. The Ld. Sr. Counsel relied upon the judgment from para 22 onwards. 21. The Learned Counsel for the Respondent submitted that decision of Ld. NCLT is correct and relied upon the judgment of the Hon'ble Supreme Court in the case of Adesh Kaur v. Eicher Motors Limited and....
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....ce in the claim of the Respondent that she was not aware of any such response. The Respondent also asserted that despite her mobile number and email ID available in her letter dated 06.08.2015, no communication was received by her in email or mobile. It was only when the Respondent submitted her original share certificate along with request for dematerialization with her Depository that she came to know of the fraudulent transfer of shares to Mr. Chohan through letter dated 28.09.2018 issued by the Appellant No. 2. The Appellant No. 2 informed the Respondent vide the said letter dated 28.09.2018 that they have issued duplicate share certificate for 5000 shares to Mr. Chohan on 17.04.2015, and then only the fraud was discovered by the Respondent. The fraudulent issue of duplicate share certificate to Mr. Chohan by Appellant No. 2 came to the knowledge of Respondent in September, 2018 and the petition for rectification of register was filed on 23.11.2018, and was numbered as Company Petition No. 4770/MB/2018. The petition was filed in short time after discovery of fraud and thus it was well within limitation. The Appellants claim regarding non-maintainability of petition of the Respo....
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.... is clear that the shareholder can invoke the said provisions if her name is removed from the register of members without sufficient cause. As per sub-section 2, the Tribunal also has the power to direct the company to pay damages if any loss is sustained by the aggrieved party. 29. We find that the Appellants were negligent while handling the request of Mr. Chohan regarding issue of duplicate share certificate and transfer of shares in his name. At this stage, we like to refer to Section 46 of the Companies Act, 2013 which governs the process of issue of duplicate share certificate. The said provisions are as under: "46. Certificate of shares.- (1) A certificate, [issued under the common seal, if any, of the company or signed by two directors or by a director and the Company Secretary, wherever the company has appointed a Company Secretary], specifying the shares held by any person, shall be prima facie evidence of the title of the person to such shares. (2) A duplicate certificate of shares may be issued, if such certificate - (a) is proved to have been lost or destroyed; or (b) has been defaced, mutilated or torn and is surrendered to the c....
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....f the company to register, on receipt of an intimation of transmission of any right to securities by operation of law from any person to whom such right has been transmitted. (3) Where an application is made by the transferor alone and relates to partly paid shares, the transfer shall not be registered, unless the company gives the notice of the application, in such manner as may be prescribed, to the transferee and the transferee gives no objection to the transfer within two weeks from the receipt of notice. (4) Every company shall, unless prohibited by any provision of law or any order of Court, Tribunal or other authority, deliver the certificates of all securities allotted, transferred or transmitted- (a) within a period of two months from the date of incorporation, in the case of subscribers to the memorandum; (b) within a period of two months from the date of allotment, in the case of any allotment of any of its shares; (c) within a period of one month from the date of receipt by the company of the instrument of transfer under sub-section (1) or, as the case may be, of the intimation of transmission under sub- section (2), in the c....
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....note that the indemnity bond given by Mr. Chaohan is not in the format prescribed in Securities Exchange Board of India (SEBI) guidelines. We note that no evidence regarding payment of consideration for the said share was furnished by Mr. Chaohan. The purported broker note has been submitted but no details regarding payment have been furnished. The relevant page of the indemnity bond is scanned below which shows that no details of cheque no., cheque date, bank account, amount and confirmation letter of the broker has been mentioned. This should have been noticed by the Appellants: 35. The SEBI had issued RTI Circular No. 1 (2000-2001) dated May 09, 2001 to all RTAs stating that the directions therein have to be mandatory followed with immediate effect. These directions were issued pursuant to powers conferred on SEBI under Section 11B of SEBI Act, 1992. The guidelines relevant to decide this case are contained in para 23, 26 and in the "Transfer Norms" given in tabular format annexed with the said Circular. The relevant portion of the guidelines is as under: "23. The Company/ STA shall necessarily obtain the following documents duly executed by the claimant, prior to is....
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..... 02- TRANSFER NORMS (FOR Cos./SHARE TRANSFER AGENTS) Sl. No. Reason for Objection Procedure to be followed by Companies / STAs 0 7 Share Certificate/s reported to be missing / lost / stolen by the third party claimant (i.e. holder in due course or beneficial owner or unregistered transferee) and subsequently not transferred or subsequently lodged for transfer by a transferee 1. To record caution immediately on the certificate/s involved. 2. To give notice to the third party claimant (TPC) to produce to the Company/STA, the following documents within 30 calendar days from the date of intimation of loss by the TPC, which shall necessarily mention the date of loss, distinctive nos., certificate nos • Copy of Contract Note/Bill/other documentary evidence for purchase of involved share certificates, duly certified by the concerned SEBI registered broker or SEBI registered sub-broker Copy of postal/ courier slip through which transfer documents sent but lost in transit / stolen (if share certificates lost in transit) • Copies of transfer documents (if retained). • Copy of FIR/acknowledged police complaint, and/ o....
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....share certificate based on any other documents, then the Company/STA shall be solely responsible for the issue of such duplicate share certificates". 37. The Appellants had issued an advertisement in a Marathi newspaper in Maharashtra where the registered shareholder was residing in Bangalore and thus could not have come to know of the advertisement. As per the transfer norms, Sl. No. 7, given above, it was the duty of the Company/STA to inform the last registered holder of the claim for loss of share certificate and the duplicate share certificates were to be issued to the previous registered holder as per general guidelines no. 23. The Appellants failed to inform the registered shareholder, the Respondent herein, and thus had been negligent in following the guidelines. The Respondent had also relied upon the General Circular No. 19/2014 dated 12.06.2014 issued by Ministry of Corporate Affairs wherein it was mentioned that the company has to get itself satisfied suitably with regard to justification of delay in submission. 38. As per the above guidelines, if the share certificates are lodged beyond the prescribed period, it is the duty of the company to be satisfied suitably....
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....esy of informing her. The company by its action had converted valuable original shares held by the Respondent physically in her custody as worthless paper. 42. We now look for judicial guidelines on this issue. In Adesh Kaur v. Eicher Motors Limited and Others reported in (2018) 7 SCC 709 the Hon'ble Supreme Court has held as under: "The present case discloses a very sordid state of facts. The appellant before us is a resident of Punjab, and had acquired in all 903 equity shares in the respondent No. 1-Company. way back in the year 1994-95. This acquisition took place It appears that sometime in 2012, another Ms. Adesh Kaur, who is a resident of Mumbai impersonated the appellant and requested respondent No. 2 to change the address from Punjab to Mumbai. It is not disputed before us that the standard procedure to be followed was not followed by respondent No. 2, and the aforesaid change of address was despite the requirements of Circular No. 1 dated 09.05.2001. The impersonator then went on to execute an indemnity bond by forging the appellant's signature for issue of duplicate share certificates of the 903 equity shares mentioned above. This being ....
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....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. 44. Further, in Chalasani Udaya Shankar and others v. M/s. Lexus Technologies Pvt. Ltd. and others, reported in (2024) 10 SCC 303, the Hon'ble Supreme Court has held as under: "27. In Adesh Kaur vs. Eicher Motors Limited and others, this Court found, on facts, that it was an open-and-shut case of fraud, in which the appellant who had applied for rectification had been the victim, and held that the appellate tribunal was not correct in relegating the appellant to the civil court on the ground that a criminal complaint and a SEBI investigation were pending and in holding that it was not proper for the National Company Law Tribunal to exercise power to rectify the Register under Section 59 of the Companies Act, 2013. 28. In Shashi Prakash Khemka (Dead) through legal representatives and another vs. NEPC MICON (Now NEPC India Limited) and others 5, this Court again had occasion to deal with exercise of power under Section ....
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....tutory mandate thereof, i.e., anything done or omitted to be done in contravention of the Act of 2013 or the Rules framed thereunder. 33. ......... In Adesh Kaur (supra), this Court observed that if, on facts, an open-and-shut case of fraud is made out and the person seeking rectification was the victim, the National Company Law Tribunal would be entitled to exercise such power under Section 59 of the Act of 2013. This Court rejected the contention that, as criminal proceedings had been initiated, there was a serious dispute and it was not correct for the National Company Law Tribunal to exercise power under Section 59 of the Act of 2013. The contention that the shares had been dematted and were in the name of another person and, therefore, the power of rectification should not have been exercised, was also rejected." (Emphasis supplied) 45. In the aforesaid Chalasani case, following the judgment of Adesh Kaur (supra), it was made clear that in an open and shut fraud case, where the person seeking rectification was the victim, the NCLT would be entitled to exercise such powers under Section 59 of the Companies Act, 2013. It was also noted that the contention that the....
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.... Neetu R. Menda Menda Document 2 LINK INTIME INDIA PVT LTD C-101. 247 PARK. LBS. MARC, VIKHROLI (WEST). 400083, Tel: (022) 49186270 Fax: (022) 49186060 Email : [email protected] LINK MUNBAT NECTU R MENDA MENDA HOUSE 45/1 FAIR FIELD LAYOUT RACE COURSE ROAD BANGALORE BANGALORE 560001 KARNATAKA Ref no : ID79641 OUT NO : 0037357 Date : 29/08/2015 folio : 00916735 Dear Sir/Madam unit :Indusind Bank Limited Subject :Change of Address, Registration of Necs / Ecs Details we are in receipt of your letter dated 06/08/2015. we are unable to register your NECS/CCS and change of address details since the holding in the said folio is nil and the shares are already being transfer to NAVINCHANDRA AMRUTLAL CHADHAN on 17/04/2015. THANKING YOU. YOURS FAITHFULLY FOR LINK INTIME INDIA PVT LTD AUTHORISED SIGNATORY Shareholder's who have yet to register their email id are requested to do so with their thepository participants (for these holding shares in electronic form) or the Registar (for those holding physical shares),so that future communication is enabled in a paperless form contributing to the 'Go Green' initiative. - - 3115/....