NCLT Dismisses Symphony Limited's Appeal for Share Register Rectification Amid Fraud Allegations

Tribunal Orders Further Investigation by EOW, SEBI, and ROC into Alleged Fraudulent Share Transfers

The National Company Law Tribunal (NCLT) Ahmedabad has dismissed an appeal filed by Symphony Limited seeking rectification of its register of members. The company alleged fraudulent share transfers orchestrated by its Registrar and Share Transfer Agent (RTA), Sharepro Services (India) Pvt. Ltd. This significant development comes as the tribunal directed further investigation into the matter by the Economic Offences Wing (EOW), Securities and Exchange Board of India (SEBI), and the Registrar of Companies (ROC).

The case, filed under Section 59(1) of the Companies Act, 2013, revolved around Symphony Limited's plea to restore the names of original shareholders whose shares were allegedly fraudulently transferred to other individuals by the RTA. The tribunal, after examining the submissions, held that it lacked the authority to regularize fraudulent transactions, especially when the ownership of shares remained disputed and unverified.

Symphony Limited, a prominent player in the air-cooler industry, had appointed Sharepro Services as its RTA to manage share transfers and related activities. However, in 2015-16, the company began receiving complaints from shareholders about fraudulent activities by the RTA, including unauthorized share transfers and non-issuance of share certificates. SEBI's investigation into these allegations led to an ex-parte order debarring Sharepro Services and its officials.

In its judgment, the tribunal noted that Symphony Limited failed to provide adequate documentation or board resolutions to substantiate its claims. Furthermore, it was observed that neither the original shareholders nor the respondents appeared before the tribunal to assert ownership of the disputed shares. Given the lack of clarity on share ownership and the ongoing investigations, the tribunal dismissed the appeal.

The tribunal's order emphasized that the rectification of fraudulent transactions is beyond its jurisdiction, especially when the fraud involves third-party agents like Sharepro Services. It also referenced judicial precedents, including cases from the NCLT New Delhi and the Supreme Court, to support its decision.

As part of the order, the NCLT directed the EOW to investigate Symphony Limited's role in the alleged fraud and instructed SEBI and other market regulators to scrutinize the trading history of the disputed shares. Additionally, the ROC was tasked with examining the company's registers for compliance with the Companies Act during the relevant period.

This case underscores the challenges companies face in addressing fraudulent activities by third-party agents and highlights the critical role of regulatory authorities in ensuring transparency and accountability in the securities market. Symphony Limited's legal battle continues as regulatory bodies delve deeper into the alleged fraud.

Bottom Line:

Companies Act, 2013 - Application filed under Section 59(1) for rectification of register of members - Fraudulent share transfers by Registrar and Share Transfer Agent (RTA) - Tribunal does not have the power to regularize fraudulent transactions - Dismissal of appeal and directions for further investigation by appropriate authorities.

Statutory provision(s): Companies Act, 2013 Section 59(1), Section 90; SEBI Act Sections 11, 11B, 11D

Symphony Limited v. Swapnil Suryakant Sutar, (NCLT)(Ahmedabad) : Law Finder Doc Id # 2819862