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The Tax Publishers Rectification of Register of Members: Fraudulent Transfer of Shares by Breaching Procedure Declared to be Void in Law Pragya Lalwani In case of Adesh Kaur v. Eicher Motors Ltd., the issue arose that in the presence of dispute about the fraud in respect of the ownership of the claim of the subjective shares and suspected impersonation of a shareholder and fabrication of documents and as a complaint was pending, whether it would be correct to order the rectification of register of members under section 59 because the shares were transferred illegally or the appellant should be relegated to any further proceeding. The learned author discusses the said issue. 1. Facts of the case It was the case in Adesh Kaur v. Eicher Motors Ltd. 2018 TaxPub(CL) 840 (SC) that Ms. Adesh Kaur (Appellant) was a shareholder/member of Eicher Motors Ltd., a company and held 903 equity shares possessing the original certificates and a fraud was perpetuated upon her, wherein another person impersonated her and requested the company to change the address from Punjab to Mumbai on the basis of forged and fabricated documents. Address was changed through share transfer agent without following the standard procedure and despite the requirements of RTI Circular No. 1, dt. 9-5-2001 issued by SEBI. Thereafter, impersonator executed indemnity bond by forging the appellant's signature and the company issued duplicate certificates in favour of impersonator on complaint being lodged for loss of share certificates, without exercising due care and diligence. Such fraudster then sold the shares by transferring it to Vikas Tara Singh(R-8) fraudulently. When the appellant became aware of the fraud perpetrated on her that her name was replaced by another in the register of shareholders, she requested company to revalidate fresh share certificates in her name. When it was not done on repeated complaints, she filed a petition against company and its agents. Petition was filed before Company Law Board, which was subsequently transferred to National Company Law Tribunal(NCLT). Company would be liable for the acts of their registrar-cum-share transfer agents. Tribunal held that procedural aspects and due care were not adhered to in the process of issuance of duplicate shares by the company as well as SEBI, thus, company was directed to rectify its register of shareholders. Further, petitioner could also get the shares demated after rectification being confirmed. Moreover, he would also be entitled to all the dividends declared on the said 903 shares which have not been passed on to her and bonus shares or other benefits, if any, accrued on those shares. SUBSCRIBE FOR FULL CONTENT

The Tax Publishers

Rectification of Register of Members: Fraudulent Transfer of Shares by Breaching Procedure Declared to be Void in Law

Pragya Lalwani

In case of Adesh Kaur v. Eicher Motors Ltd., the issue arose that in the presence of dispute about the fraud in respect of the ownership of the claim of the subjective shares and suspected impersonation of a shareholder and fabrication of documents and as a complaint was pending, whether it would be correct to order the rectification of register of members under section 59 because the shares were transferred illegally or the appellant should be relegated to any further proceeding. The learned author discusses the said issue.

1. Facts of the case

It was the case in Adesh Kaur v. Eicher Motors Ltd. 2018 TaxPub(CL) 840 (SC) that Ms. Adesh Kaur (Appellant) was a shareholder/member of Eicher Motors Ltd., a company and held 903 equity shares possessing the original certificates and a fraud was perpetuated upon her, wherein another person impersonated her and requested the company to change the address from Punjab to Mumbai on the basis of forged and fabricated documents. Address was changed through share transfer agent without following the standard procedure and despite the requirements of RTI Circular No. 1, dt. 9-5-2001 issued by SEBI. Thereafter, impersonator executed indemnity bond by forging the appellant's signature and the company issued duplicate certificates in favour of impersonator on complaint being lodged for loss of share certificates, without exercising due care and diligence. Such fraudster then sold the shares by transferring it to Vikas Tara Singh(R-8) fraudulently. When the appellant became aware of the fraud perpetrated on her that her name was replaced by another in the register of shareholders, she requested company to revalidate fresh share certificates in her name. When it was not done on repeated complaints, she filed a petition against company and its agents. Petition was filed before Company Law Board, which was subsequently transferred to National Company Law Tribunal(NCLT). Company would be liable for the acts of their registrar-cum-share transfer agents. Tribunal held that procedural aspects and due care were not adhered to in the process of issuance of duplicate shares by the company as well as SEBI, thus, company was directed to rectify its register of shareholders. Further, petitioner could also get the shares demated after rectification being confirmed. Moreover, he would also be entitled to all the dividends declared on the said 903 shares which have not been passed on to her and bonus shares or other benefits, if any, accrued on those shares.