NCLAT Finds IndusInd Bank, RTA Negligent In Issuing Duplicate Share Certificates, Upholds Restoration Of 5,000 Shares

The National Company Law Appellate Tribunal (NCLAT) at Delhi has recently upheld the restoration of 5,000 equity shares of IndusInd Bank to their original holder, holding that the bank and its Registrar and Transfer Agent acted negligently in issuing duplicate share certificates to a third party.

A bench of Judicial Member Justice Yogesh Khanna and Technical Member Ajai Das Mehrotra observed, “We note that the Appellant was negligent and had not followed the due procedure in issue of duplicate share certificates. The registered shareholder was nevour kept in the loop and was never informed. As per the law and guidelines prescribed, the duplicate share certificate could have been issued only to the registered shareholder, and not to any body else.”

The appellate tribunal dismissed the appeal filed by IndusInd Bank Limited and Link Intime India Private Limited and affirmed the National Company Law Tribunal Mumbai's order directing rectification of the register of members. It also upheld the award of Rs. 25,000 as costs.

The case arose after Neetu R. Menda sought dematerialisation of 5,000 physical shares held by her. Her request was rejected on the grounds that duplicate share certificates had already been issued in 2015 and the shares had been transferred to one Navin Amrutlal Chohan. Menda said she had never transferred the shares and had continued to hold the original certificates.

The bank claimed it had acted on a transfer deed, an indemnity bond, and supporting documents submitted by Chohan before issuing duplicate shares and recording the transfer.

Before the tribunal, the bank argued that it had followed due process and that disputes involving alleged fraud or forgery could only be decided by a civil court. It also contended that the petition was barred by limitation. Menda relied on statutory provisions and SEBI guidelines to argue that duplicate shares could not be issued without proper compliance and without informing the registered shareholder.

Rejecting the bank's objections, the tribunal held that the petition was filed within the limitation, as Menda became aware of the transfer only in September 2018 when her dematerialisation request was refused. On merits, it found serious discrepancies in the documents relied upon by the transferee and noted that the prescribed indemnity was not obtained and the registered shareholder was never notified.

The bench observed, "Admittedly, share certificates were issued in the name of the Respondent, but the Respondent was never informed nor the share certificates were handed over to her."

It further held that the duplicate shares were issued “at the back of the registered shareholder” and that the NCLT had rightly directed rectification of the register.