Summary
The Supreme Court restored rectification relief to a shareholder whose 903 equity shares had been transferred through impersonation and forged signatures after duplicate certificates were issued without prescribed safeguards. In this clear and substantially uncontested fraud, pending criminal and SEBI investigations did not justify relegating her to a civil suit. The company and depository were directed to correct their respective records.
Issues
- Whether a shareholder had to pursue a civil suit while criminal and regulatory investigations were pending despite a clear case of fraudulent transfer.
- How rectification should operate where the disputed shares might have been dematerialised or registered in the transferee’s name.
Provisions considered
- Section 59, Companies Act, 2013The Court reinstated the Tribunal’s rectification relief in this clear case of fraud, rejecting the Appellate Tribunal’s reliance on pending investigations as a reason to require separate civil proceedings. (¶¶ 4, 8, 10, 11)
Held
- The appellant retained her original certificates, and failures of procedure and due care in issuing duplicates were acknowledged. With no real contest from the affected transferee, the Tribunal correctly granted relief without requiring another proceeding to establish her entitlement. (¶¶ 3, 5, 6, 8, 10)
- Prescribed safeguards for duplicate shares had not been followed: the stock exchanges were not informed and a newspaper advertisement was not issued despite the shares exceeding the stated value threshold. (¶ 9)
- If the transferee had been entered on the register, his name had to be deleted because the transfer was void; if not, the shareholder could be restored without that step. The company must rectify its register for physical certificates and the depository must correct the demat records. (¶¶ 10, 11)
Result
Appeals allowed; Appellate Tribunal’s order set aside and Tribunal’s rectification order reinstated. Company and concerned depository directed to rectify the register and demat records respectively. Pending applications disposed of.