Fraud in transfer of shares

In a case which the Supreme Court described as one that disclosed “a very sordid state of facts”, the court set aside the order of the National Company Law Appellate Tribunal and asked Eicher Motors Ltd to rectify its register and grant relief to a woman who was the victim of a fraud. In this case, Adesh Kaur vs Eicher Motors, the woman in Punjab had 903 equity shares of the company in physical form. Someone in Mumbai impersonated her and asked the company to change the address. Then the impersonator executed an indemnity bond by forging the signature of the Punjab woman and sought duplicate shares. The company allowed it without following the procedures and the shares were then transferred to a man in Mumbai. When Adesh Kaur came to know the fraud, she asked the company to issue revalidated fresh shares. The company did not do this, leading to her petition in the National Company Law Tribunal (NCLT). The company challenged the jurisdiction of the tribunal and contended that she should move a civil court. Rejecting the arguments as frivolous, the tribunal held the company liable for the fraud played by its employees or its agents. It also underlined that the company had flouted rules and procedures under the company law and Sebi. It allowed the woman to demat the shares. The company went on appeal and the appellate tribunal reversed the ruling, leading to the appeal in the Supreme Court. It upheld the NCLT ruling stating that it would be unfair to relegate her to further legal proceedings when she is a victim of an “open and shut case” of fraud. If the new buyer’s name has been entered in the register it would be invalid.