2017 (3) TMI 1665 - Tri - Companies Law

Rectification of the Register of Members of Respondent no.1 Company - recording the name of the petitioner in respect of her 903 equity shares - violation on the part of agents - Held that - petitioner s complaint of being cheated is not an isolated case and appears to be the handiwork of insiders of Respondent no. 1 and/or their agents Respondent no.2. The petitioner should not be made to suffer for their acts - The petitioner has further been able to satisfy this Bench that as per the guidelines of SEBI (Registrar to an issue and Share Transfer Agents) Regulations 1993, there was no diligence exercised by Respondent no.2 at the time of recording the change of address and issuance of duplicate shares. The documents purportedly filed for this purpose appear forged on the very face of it. The SEBI guidelines provide that a Company is liable for all acts of its Agents and cannot shirk the responsibility towards their shareholders. It mandates that under such circumstances the Respondent Company has to make good the loss by purchasing shares from the open market and transferring the same to the aggrieved shareholder. This Bench is of the opinion that the petitioner is entitled to rectification of the Register of Shareholders maintained by the Respondent no.1 Company in Folio no. 031308 registering her as the rightful owner of 903 shares. The original of these certificates, in the physical form, are still in possession of the petitioner. The petitioner may take adequate steps to get the same demated after due confirmation of the rectification of the Register having been carried out - The petitioner would also be entitled to all dividends declared on the aforesaid shares which have not been passed on to her. She would also be entitled to any bonus shares or other benefits that may have accrued on these shares. Petition allowed.

Summary

Issues:
Rectification of Register of Members and recovery of entitlements due to fraud.

Analysis:
1. The petitioner filed a petition under section 59 of the Companies Act 2013 seeking rectification of the Register of Members of the respondent company to include her 903 equity shares and recover dividends, rights issue, and bonus shares she was deprived of due to fraud.

2. The petitioner, a shareholder of the company, was defrauded when an impersonator changed her address and obtained duplicate shares, which were later sold to another party without her knowledge. The company's share transfer agents were involved in these fraudulent activities, causing financial loss to the petitioner.

3. The petitioner, due to personal circumstances, did not immediately realize the fraud until she inquired about opening a demat account and discovered the unauthorized changes made to her shareholding details. Despite her efforts to address the issue, the company denied any liability and shifted blame to their share transfer agents.

4. Respondent no.1 denied allegations of fraud and forgery, claiming the issue was beyond the Tribunal's jurisdiction due to complexity. They argued that as a listed company, they appointed SEBI-approved agents for share-related tasks, absolving themselves of responsibility for maintaining shareholder records.

5. SEBI, as a party to the case, refrained from direct involvement initially but initiated an inquiry upon Tribunal's direction. Previous cases of similar fraud were cited where SEBI took action against the company and reinstated shares to the rightful owners.

6. Respondent no.1 acknowledged the petitioner as a victim of fraud in their correspondence and cooperated in the investigation. The company also filed a police complaint against the perpetrators involved in the fraudulent activities.

7. The Tribunal found the petitioner's case to be part of a larger scheme orchestrated by insiders of the company or their agents. The lack of due diligence by the share transfer agents in addressing the petitioner's concerns was highlighted.

8. The Tribunal held that the company cannot evade liability for the fraudulent acts of its agents and must compensate the petitioner for the loss suffered. The company was directed to rectify the Register of Shareholders to reinstate the petitioner as the rightful owner of the 903 shares.

9. The original share certificates, still in the petitioner's possession, were to be dematerialized post rectification of the Register. The petitioner was entitled to all dividends, bonus shares, and benefits accrued on the shares that were fraudulently transferred.

10. The petition was allowed, with no costs imposed, emphasizing the company's liability for the acts of its agents and the petitioner's right to rightful ownership and entitlements as a shareholder.