Companies Act, 2013 – s.59 – Rectification of register of members – On facts, respondent no. 2 issued duplicate shares without following proper procedure, in favour of impersonator, who in turn transferred the said shares to respondent no. 8 – Subsequently, appellant came to know about the fraud and sought issuance of revalidated fresh share certificate for the said equity shares – However, the same was not done – Company petition by appellant – NCLT held that the Company was liable for the acts of their Register cum Share Transfer agents, and as such there was no reason for appellant to resort to civil court in order to prove her title – However, the appellate tribunal holding that since criminal complaint and SEBI investigation was pending, it was not correct for the tribunal to exercise its power to rectify the register u/s. 59, set aside the judgment of NCLT and relegated the appellant to a suit – Correctness of – Held: Not correct – Tribunal was correct in not relegating the appellant to any further proceedings since it was a case of fraud wherein the appellant was the victim, and respondent no. 2 was the perpetrator – Further, the due procedure of the RTI Circular was not followed – Thus, the appellate tribunal’s order is set-aside and that of the tribunal is upheld.
Allowing the appeals, the Court
HELD: The tribunal was absolutely correct in not relegating the appellant to any further proceedings inasmuch this was an open and shut case of fraud in which the appellant has been the victim, and respondent no. 2 the perpetrator. Equally, it is clear that the due procedure of the RTI Circular has not been followed. When the duplicate shares were issued, stock exchanges were not informed and neither was an advertisement in a widely circulated newspaper issued as the value of the shares were far greater than Rs. 10,000/-. The appellate tribunal in relegating the appellant to a further proceeding was not correct. Therefore, the appellate tribunal’s order is set-aside and that of the tribunal is reinstated. If respondent No. 8 does not happen to be on the register at all, then there would be no difficulty whatsoever in restoring the appellant back to its original position. Even if respondent No. 8 has been entered on the Register, his name will have to be deleted in view of the fact that the transfer to him has been declared to be void in law. The Company is directed to rectify its register, insofar as the physical share certificates are concerned, and the concerned depository to rectify the demat records in accordance with this order. [Paras 8-11][204-B-F]
As published in the Supreme Court Reports, Supreme Court of India. Text from the Indian Supreme Court Judgments open data set (Dattam Labs), CC BY 4.0.
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