Transfer Of Unclaimed Shares To IEPF Does Not Extinguish Ownership: NCLT Jaipur

The National Company Law Tribunal (NCLT) at Jaipur has recently held that the transfer of unclaimed shares and dividends to the Investor Education and Protection Fund (IEPF) does not extinguish ownership and directed Shree Cement Ltd. to issue duplicate share certificates to Sumati Projects Limited.

“The transfer to IEPF does not extinguish the underlying ownership of the Petitioner; it only transfers the unclaimed shares and dividends to the Fund. The Company is still duty-bound to issue duplicate certificates upon satisfactory proof of loss, so that the Petitioner can complete the necessary formalities for claiming the shares from the IEPF Authority or otherwise deal with them.”

A coram of Judicial Member Reeta Kohli and Technical Member Kavita Bhatnagar passed the order.

Sumati Projects Limited stated that it had purchased 1850 and 150 equity shares of Shree Cement Ltd in the early 1990s and continued to hold them. The original share certificates were misplaced over time during office relocations.

Upon noticing appreciation in the share value, the company approached the Registrar and Transfer Agent and was informed that the shares and dividends had been transferred to the IEPF. It thereafter filed Form IEPF-5 and submitted the requisite documents.

Despite this, the respondents raised objections and sought additional documents, including financial statements, and ultimately refused to issue duplicate share certificates, leading to the petition before the Tribunal.

The respondents contended that under Section 46(2) of the Companies Act, duplicate share certificates can be issued only upon satisfactory proof of loss or destruction of the originals and that the petitioner had failed to establish this, relying on vague assertions.

The Tribunal noted that Shree Cement Ltd had itself released dividends in favour of the petitioner, which constituted a clear acknowledgment of ownership and shareholding.

“Despite the Petitioner's bonafide efforts and compliance with the queries raised, the Respondents have refused to issue duplicate share certificates on hyper-technical and untenable grounds.”

The Tribunal held that Sumati Projects had prima facie established ownership and that the respondents' objections were in the nature of delaying tactics. It also observed that insisting on financial statements despite dividend payments was unsustainable and unsupported by any regulation.

“We are satisfied that the Petitioner has made out a clear case for grant of relief.”

Accordingly, the tribunal allowed the petition and directed Shree Cement Ltd to issue duplicate share certificates within four weeks, subject to applicable indemnity requirements.

For Petitioner: Advocates Anurag Kalavatiya, Parul Singhal, Aayush Kevlani, Trinisha De, Aayushi Jain

For Respondent: Advocate Prateek Kedawat