The National Company Law Appellate Tribunal (NCLAT), New Delhi, has upheld the rectification of the share register in a case where a Registrar and Transfer Agent (RTA) negligently issued a duplicate share certificate, leading to the wrongful transfer of shares to a third party. The Tribunal noted that the shareholder promptly acted upon discovering the fraud and that the RTA failed to follow the prescribed procedure for issuing duplicate certificates. Accordingly, the NCLAT affirmed the NCLT’s direction to restore 5,000 shares to the rightful shareholder or alternatively pay damages equivalent to their market value, reinforcing the accountability of RTAs in safeguarding shareholder rights.
Citation
[2026] 183 taxmann.com 365 (NCLAT – New Delhi)
Decision Date: 10 February 2026
Reported On: 19 February 2026
Forum
National Company Law Appellate Tribunal (NCLAT), New Delhi
Key Legal Area
Company Law / SEBI – Share Certificates, Rectification of Register, RTA Liability
Parties Involved
- Respondent: Original shareholder (genuine owner of shares)
- Appellant: Registrar & Transfer Agent (RTA)
- Third Party: Person/entity to whom shares were wrongly transferred using duplicate certificate
Core Issue
Whether the share register can be rectified when an RTA negligently issues a duplicate share certificate, enabling fraudulent transfer of shares to a third party.
Facts of the Case
- The respondent was the lawful holder of 5,000 equity shares.
- The appellant RTA issued a duplicate share certificate fraudulently.
- Based on that duplicate certificate, the shares were transferred to a third party.
- The shareholder discovered the fraud and promptly approached the Tribunal seeking rectification.
- The shareholder alleged that the RTA failed to follow mandatory procedures before issuing duplicates.
Key Findings
The NCLAT observed:
- The RTA acted negligently.
- Proper procedure for issuing duplicate share certificates was not followed.
- The shareholder took immediate action once fraud came to light.
- The NCLT’s rectification order was justified.
NCLT Direction (Confirmed by NCLAT)
The Tribunal directed the appellants to:
✅ Restore the 5,000 shares to the respondent shareholder
OR
💰 Pay damages equivalent to the market value of those shares.
NCLAT Ruling
- There was no ground to interfere with the NCLT’s order.
- Negligence of the RTA in issuing duplicate certificates cannot prejudice the genuine shareholder.
- Rectification of the share register is the correct remedy in such cases.
Legal Significance
This ruling reinforces that:
- RTAs must strictly comply with procedures before issuing duplicate share certificates.
- Fraudulent transfers enabled by negligence will not be protected.
- Genuine shareholders are entitled to rectification or full compensation.
Practical Takeaway
Companies and RTAs must ensure:
- Strict verification before issuing duplicates
- Compliance with Companies Act + SEBI norms
-
Robust safeguards against fraudulent share transfers