Big relief by SEBI in old transfer deed cases seems to be confronted by RTA by saying that the shares have been transferred to IEPF.
As per Rule 6(3) (d) of IEPF Rules, 2016 read with Section 124(6) of the Companies Act, 2013, if the dividend is unclaimed for 7 years, shares pertaining to those unclaimed dividends would be transferred to IEPF.
As per Rule 6(3)(d) of IEPF Rules, 2016; for effecting the transfer of physical shares to IEPF, Company Secretary / Authorised person of Board of Directors shall make an application, on behalf of shareholders to the company for issue of duplicate share certificates. On receipt of the application, the company shall issue duplicate share certificate and those shares will be transferred to IEPF through SH-4 form. Shares will be dematted in favour of IEPF till the actual claimant approaches company. Further in case of claim of shares by investor, IEPF will transfer shares from it’s demat account to investor’s demat account.
However on November 06th, 2018, SEBI issued a Circular (SEBI/HO/MIRSD/DOS3/CIR/P/2018/139) regarding transfer of shares with transfer deeds executed prior to December 01, 2015 and allowed transfer of shares subject to fulfilment of certain conditions by transferee.
The motive of SEBI to bring this notification was to mitigate the practical difficulties faced by Transferee who could not lodge the shares for transfer within 1 year from the date of transfer deed and was pending since many years due to Non-availability of PAN of transferor or mismatch of signature of the transferor or any other reasons.
It seems that the purpose of SEBI’s notification is defeated as the shares which have been transferred to IEPF are not being considered for transfer to the transferee by RTAs (Registrar and Transfer Agents) and transfer claims are being rejected.
What is the Disconnect?
IEPF gives back shares to shareholder (ideally whose name appearing as member on the register of member company) but what about someone who bought the shares from shareholder long back and he/she is holding the physical share along with transfer deed who is yet to become a shareholder of the company? This needs clarification by IEPF.
On one side SEBI allowed transfer of shares with old transfer deed which were pending since many years, by bringing this new notification and on another side RTAs reject such claims due to shares being transferred to IEPF. Thus it is the contradiction of the rules/provisions of transfer of shares by two different Authorities of Ministry of Corporate Affairs, Govt. of India i.e. SEBI and IEPF.
As per Rule 6(3) (d) of IEPF Rules, company issues the duplicate share certificates against shares which are lying in physical form, thus rendering the physical shares lying with Transferees invalid and consequently claim of Transfer of Shares being rejected by RTAs. Further, to add to the irony of Investors / Transferees, there is no way out given to Investors / Transferee by RTAs, SEBI or IEPF and this has created ambiguity to the investors/transferees who has genuinely purchased the share from the shareholder
What Needs Clarification by IEPF?
Considering the spirit of the SEBI notification and interest of investor at large, IEPF need to provide clarity in the matter of Old transfer deed cases and, allow the transfer of shares in the name of the person who is holding Original Shares, Original Transfer Deed , which establishes the genuinity of buyer.
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