Company Cannot Seek Rectification Of Fraudulent Share Transfers Without Ownership Proof: NCLT Ahmedabad

The National Company Law Tribunal (NCLT) at Ahmedabad has held that a company cannot seek rectification of its register to undo fraudulent share transfers when it cannot produce the original shareholders' titles or any evidence of ownership. A coram of Judicial Member Chitra Hankare and Technical Member V G Venkata Chalapathy in an order dated December 3, 2025 said Symphony Limited had not proved its claim over 50,500 shares belonging to 14 shareholders that were allegedly transferred fraudulently by its Registrar and Share Transfer Agent, Sharepro Services, to unrelated transferees. The tribunal said it cannot regularise a transaction when the applicant provides no supporting material. “This court does have the power to regularise a fraudulent transactions as a parallel entity which had an agency arrangement has committed the fraud and the applicant may have to only make good if the fraudulent proceeds of the crime is not realised to the respondents if any claim is made”, it observed. The dispute arose from alleged irregularities between March 2010 and March 2016 when Sharepro purportedly transferred shares and siphoned dividends. Investor complaints in March 2016 prompted a SEBI investigation and an interim order dated March 22, 2016 recorded prima facie findings of widespread fraud. Symphony then appointed EY to conduct an audit which flagged 14 suspicious transactions. The company sought deletion of the names of the transferees and restoration of the original shareholders. The tribunal noted that Symphony had not made Sharepro a party to the proceedings despite its allegations being centred entirely on the RTA's conduct. After examining the company's Articles of Association, it found that Symphony could not shift responsibility for maintaining the register of members to an outside agent. “There apparently does not appear to be any provision for enabling the company to appoint a RTA and the provision contained in the Articles of Association Para 24 to 28 apparently makes the onus of any dereliction or such fraud stated to have been committed by the third party on the applicant”, the tribunal recorded. It also found that Symphony had not produced any board approved resolution authorising the transfers and had not disclosed any losses arising from the alleged irregularities in its financial statements for the financial years 2021 to 2022 and 2022 to 2023. The company did not furnish the status of the FIR it had lodged. None of the original shareholders appeared before the tribunal and no physical share certificates or proof of ownership were produced. Finding no documentary basis to establish the illegality of the impugned transfers, the tribunal dismissed the application. It directed that the order be forwarded to the Economic Offences Wing to examine the company's role in the transactions. The Registrar of Companies was also directed to investigate Symphony's registers and take appropriate action for any violations. Case Title: Symphony Limited v Swapnil Suryakant Sutar and Ors Case Number: Appeal/32/(AHM)2023 For Applicant: Advocate Sachin Vasavada For Respondent: Advocate Sunny Gohil for Sutar, Advocate Dharmishta Raval for SEBIClick Here To Read/Download Order

Company Cannot Seek Rectification Of Fraudulent Share Transfers Without Ownership Proof: NCLT Ahmedabad

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Company Cannot Seek Rectification Of Fraudulent Share Transfers Without Ownership Proof: NCLT Ahmedabad

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