Primary sources · Order
Order in the matter of Alankit Assignments Limited
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WTM/AS/MIRSD/MIRSD-SEC-6/32657/2026-27
SECURITIES AND EXCHANGE BOARD OF INDIA
ORDER
Under Section 12 (3) of the Securities and Exchange Board of India Act, 1992
read with Regulation 27 of the Securities and Exchange Board of India
(Intermediaries) Regulations, 2008
In respect of
Sr. No. Name of the Noticee PAN SEBI Registration No.
1. Alankit Assignments Limited AAACA9483E INR000002532
In the matter of Alankit Assignments Limited
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1. Alankit Assignments Limited (hereinafter referred to as the “Noticee”) is registered
as a Registrar to an Issue and Share Transfer Agent (hereinafter referred to as
‘RTA’) with the Securities and Exchange Board of India (hereinafter referred to as
“SEBI”). The Noticee falls under the category of Qualified Registrar and Transfer
Agent (hereinafter referred to as ‘QRTA’). The present proceedings arise from the
Enquiry Report dated February 28, 2025 submitted by the Designated Authority
(hereinafter referred to as the “DA”) in terms of the applicable provisions of the
SEBI (Intermediaries) Regulations, 2008 (hereinafter referred to as the
“Intermediaries Regulations”).
2. The proceedings were initiated pursuant to an inspection of the Noticee for the
period from April 1, 2021 to September 19, 2022 (hereinafter referred to as the
“inspection period” or “IP”). The findings of the inspection were shared with the
Noticee vide letter dated January 12, 2023. The Noticee submitted its comments
on the findings observed during the inspection vide email dated February 07, 2023.
Based on the examination of the response received from the Noticee, SEBI
initiated proceedings against the Noticee.
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3. The summary of alleged violations and corresponding regulatory provisions is
reproduced in the Table below:
Table No. 1.
Sr.
No.
Alleged Violations Regulatory Provisions
1. 39 associated persons engaged by
the Noticee did not have the NISM
certification at all and 10 associated
persons engaged by the Noticee did
not have the valid NISM certification
during the inspection period.
‘NISM Certification’ of ‘Sec III (Compliance
Certification)’ of Annexure to SEBI Circular
no. CIR/MIRSD/7/2012 dated July 05, 2012,
Regulations 3, 6, 9 and 10 of SEBI
(Certification of Associated Persons in the
Securities Market) Regulations 2007
(“CAPSEM Regulations”),
SEBI Notification no. LAD-NRO/GN/ 2009-
10/18/175577 dated September 04, 2009
and Clauses 3, 16 and 29 of Schedule III
read with Regulation 13 of SEBI (Registrars
to an Issue and Share Transfer Agents)
Regulations, 1993 (“RTA’ Regulations”)
2. Noticee did not execute tripartite
agreements with 7 companies.
Regulation 9A (1)(b) of RTA Regulations,
Regulation 7 (4) of SEBI (Listing Obligations
and Disclosure Requirements) Regulations,
2015(“LODR Regulations”), and Clauses 3
and 20 of Schedule III read with Regulation
13 of RTA Regulations
3. Noticee did not have signature cards
for 46% of physical folios. Further,
there was, allegedly, no signature
card in more than 90% of folios in
respect of 67 client companies and
no signature card in 100% folios in
respect of 40 companies.
Clause 25(a) and 1(m) of Schedule -1 read
with Clause 8 of the model agreement of
“Draft of Agreement between the STA and
the Company” of Annexure B of Schedule II
of SEBI Circular “Instruction to Registrars to
an Issue/ share Transfer Agents” dated
October 11, 1994 and
Clause 3 of Schedule III read with Regulation
13 of RTA Regulations
4. There was a delay in 123 instances
with regard to the processing of the
request for the issuance of duplicate
shares.
Noticee had not undertaken due
diligence concerning the mismatch
of name and addresses and partial
Clause 20 of “General Norms for Processing
of Documents” of SEBI Circular - RTI
Circular no. 1 (2000-2001) dated May 09,
2001.
Clauses 12 and 13 of Clause II of Annexure
to Circular no.
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non-availability of share details on
FIR in two instances (Folio Nos.
01024288 and 51665).
Noticee had issued a duplicate share
certificate to an investor other than
the original shareholder wherein
altered PAN, Aadhaar and bank
details documents were submitted
by the investor in one case (Folio
No.13346).
SEBI/HO/MIRSD/DOP1/CIR/P/2018/73
dated April 20, 2018.
SEBI Circular no. MRD/DoP/Cir- 05/2007
dated April 27, 2007 in respect of the
availability of PAN .
Clauses 2 and 3 of Schedule III read with
Regulation 13 of RTA Regulations
5. Noticee has not obtained the
transmission form, Form ISR 4 for
processing transmission request in
one (Folio No. 8775) instance.
Further, a wrong signature was
uploaded for Folio no. Z6129 by the
Noticee.
Clause C (2) (b) of Schedule VII prescribed
under Regulation 40(7) of LODR Regulations
Clause 2 (II) of SEBI Circular no.
CIR/MIRSD/10/2013 dated October 28,
2013 and
Clauses 2 and 3 of Schedule III read with
Regulation 13 of RTA Regulations
6. 54 demat requests which were
received after June 30, 2022 were
processed by the Noticee after the
stipulated time period of 15 days. In
one instance (Folio No. 05103962),
there was a mismatch of names.
Clause 2 of SEBI Circular no.
SEBI/HO/MIRSD/RTAMB/CIR/P/2019/122
dated November 05, 2019,
RRTI Circular no. 1(99-2000)
PMD/SU/11560/99 dated May 20, 1999 and
Clauses 2, 3, and 5(c) of Schedule III read
with Regulation 13 of SEBI RTA Regulations
7. The addressees were changed
when no explicit request for an
address change was made by the
shareholder in four instances (Folio
No. 14228, 21209, 40621, 2291).
Change of address request was not
processed despite a specific request
from the shareholder in one instance
(Folio No. 6677).
Clauses 2 and 3 of Schedule III read with
Regulation 13 of RTA Regulations
8. Noticee has processed transfer
request of shares in physical form in
eight instances after the cut-off date
of April 01, 2019.
Regulation 40 (1) of LODR Regulations,
SEBI Circular no.
SEBI/HO/MIRSD/RTAMB/CIR/P/2020/166
dated September 07, 2020 and Clause 3 of
Schedule III read with Regulation 13 of RTA
Regulations
9. There was a delay in processing the
transfer re-lodgement request in 14
instances.
There was a mismatch of signatures
in two instances.
The original transfer deed was not
provided and there was no signature
Clause A (1) and Clause B of Schedule VII
read with Regulation 40(7) of LODR
Regulations,
Regulation 40(3) of LODR Regulations and
Clauses 2, 3, 5 (c) of Schedule III read with
Regulation 13 of RTA Regulations
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of the transferor on copies of the
deeds provided in one instance.
Noticee did not consider the
rejection points raised by the listed
company in one instance.
There were two transfer deeds in the
records for one folio.
10. Noticee has neither received nor
processed any requests with regard
to the unclaimed/undelivered shares
lying with it.
Regulation 39 (4) of LODR Regulations read
with Clause (5).(d) and Clauses 1.a and 1.c
of Schedule I read with Clause 8 of the model
agreement as prescribed by SEBI vide
Circular on Instructions to Registrars to An
Issue / Share Transfer Agents dated October
11, 1994 and Clause 3 of Schedule III read
with Regulation 13 of RTA Regulations
11. Noticee did not have an adequate
system (i.e. system-based alerts) in
place to identify the folios (and alert
the RTA employee) requiring
enhanced due diligence while
processing any request in that folio.
Clauses 13 and 14 of part II to Annexure of
SEBI Circular dated April 20, 2018.
12. Noticee did not furnish copies of
letters sent to the shareholders in 12
out of 14 sample cases for collecting
PAN and bank details for folios
where such information was not
available.
Clause 12 of part II to Annexure of SEBI
Circular dated April 20, 2018.
13. Noticee did not report the changes in
appointment and resignation of
Directors and Key Personnel of RTA
in Sections III.B and III.D. (iii) of the
half-yearly reports filed in terms of
SEBI Circular No.
CIR/MIRSD/7/2012 dated July 05,
2012.
SEBI Circular no. CIR/MIRSD/7/2012 dated
July 05, 2012 read with SEBI Circulars no.
RRTI Circular no. 1(94-95) dated October
11, 1994,
SEBI Circular no. CIR/MIRSD/5/2011 dated
June 17, 2011 and
Regulation 14 (5) and Clause 3 of Schedule
III read with Regulation 13 of RTA
Regulations
4. Based on the findings of the said inspection, a DA was appointed to inquire into
and submit a report pertaining to the aforesaid allegations. The DA issued a show-
cause notice dated July 10, 2024 to the Noticee under Regulation 25(1) of the
Intermediaries Regulations for the violations alleged to have been committed by
the Noticee, as mentioned above in Table No. 1. The Noticee was advised to
submit its reply, if any, within 21 days of receipt of the notice.
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5. In response to the aforesaid allegations, the Noticee, submitted its reply on January
24, 2025. An opportunity of personal hearing was granted to the Noticee by the DA
on February 04, 2025. The Noticee, vide letter dated February 10, 2025 also made
additional submissions.
6. After considering the allegations levelled in the show-cause notice, the reply filed
by the Noticee, and the material available on record, the DA submitted the Enquiry
Report and made the following recommendation:
“…I, in terms of the provisions of the Intermediaries Regulations, recommend that:
The Noticee may be prohibited from taking up any new clients/assignments qua
its activities as RTA for a period of one (1) year, as per Regulation 26(1)(iv) of the
Intermediaries Regulations and
A “regulatory censure” may be issued to the Noticee to be careful in future with
respect to complying with the mandate of RTA Regulations, as per Regulation
26(1)(vii) of the Intermediaries Regulations,”
7. The DA’s report was forwarded to the Noticee in terms of Regulation 27(1) of
the Intermediaries Regulations vide a Show Cause Notice dated April 03, 2025
(hereinafter referred to as the “SCN”). The Noticee was called upon to show
cause as to why the measures recommended by the DA, or any other action
contemplated under the Intermediaries Regulations, should not be taken
against it. The Noticee was advised to submit its written submissions within 21
days from receipt of the said SCN.
8. I note that the SCN was duly served upon the Noticee. Pursuant thereto, the
Noticee, vide its email dated April 23, 2025, sought an extension of four weeks
to file the detailed response. The Noticee’s request was acceded to and
additional time was granted to file the written submissions. Vide the said email
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dated April 23, 2025, the Noticee also submitted that it is considering to opt for
the settlement process provided under the SEBI (Settlement Proceedings)
Regulations, 2018. In response thereto, the Noticee was informed that the filing
of settlement application shall not affect
the continuance of the proceedings except that the passing of the final order
shall be kept in abeyance. Noticee vide email dated May 19, 2025 requested
for a stay on the proceedings on the basis that it has preferred an appeal before
the Hon’ble SAT against the Adjudication Order dated February 28, 2025 which
was passed on the basis of same inspection report and findings of facts. In
response thereto, SEBI vide email dated June 09, 2025, rejected Noticee’s
request for stay on the present proceedings and it was informed that the purport
and scope of Adjudication Proceedings and Enquiry Proceedings is different
and the present Enquiry proceedings are independent of the said Adjudication
proceedings. Further, no stay had been granted by the Hon’ble SAT even on
the impugned Adjudication Order. The Noticee was advised to file its reply
within 2 weeks from the receipt of the email.
9. Pursuant thereto, the Noticee vide letter/email letter dated June 19, 2025
reiterated its request for staying the proceedings and also raised some
preliminary issues on the recommendations of the DA. In response, vide email
dated June 25, 2025, the request of the Noticee for keeping the present
proceedings in abeyance pending final disposal of the appeal was rejected.
Further, it was informed that any preliminary submissions on the DA’s
recommendation would be dealt at the time of disposal of the proceedings. The
Noticee had also raised an objection that the DA’s report was changed. In
response to that it was informed that a copy of the earlier draft version of the
report (with a typographical error mentioning ‘MB regulations’ instead of ‘RTA
Regulations’) was inadvertently shared along with the letter dated April 03,
2025. The letter dated April 03, 2025 unequivocally mentions the correct
recommendation of the DA. The scanned copy of the Original DA Report as
signed by the competent authority was provided. Further, it was informed that
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if the Noticee so desires, it may also inspect the Original DA Report along with
all the necessary documents.
10. Subsequently, vide letter/email dated July 08, 2025, the Noticee again raised
preliminary objections on the DA’s report and reiterated its earlier submission
that the DA’s report has been changed and sought inspection of the documents.
The inspection of documents was provided to the Noticee on July 29, 2025 and
it was advised to submit its reply. Pursuant to the inspection, vide email dated
August 12, 2025, the Noticee sought (i) Internal Guidelines on Selection of
Cases for Enforcement Actions, (ii) The Enforcement Manual. The same
request was reiterated vide email dated August 30, 2025. In response, vide
email dated September 01, 2025, the Noticee was informed that the documents
sought by it pertain to the internal functioning of SEBI, and relate to the systems
and procedures followed at SEBI and also that these documents pertain to the
decision making by SEBI in its supervisory and regulatory role. Accordingly, the
request made by the Noticee was rejected. Vide email dated September 09,
2025, further extension of three weeks’ time was sought by the Noticee to
furnish the reply. Even though sufficient time and opportunities had already
been provided, in the interest of natural justice, one final extension was granted
to the Noticee to file the reply before October 10, 2025. Further, since in the
instant proceedings, the DA had recommended prohibition from taking up any
new clients for one year qua its activities as RTA along with regulatory censure,
the Noticee was informed that personal hearing before the competent authority
was not warranted in terms of Regulation 27(4) of the Intermediaries
Regulations.
11. The Noticee filed its response on October 10, 2025 and sought personal
hearing in the matter. Considering the request of the Noticee, hearing in the
matter was scheduled on December 04, 2025. On the said date of hearing, the
Authorized Representatives (ARs) of the Noticee appeared and made
submissions in line with the written replies filed earlier. As requested, two
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weeks’ time was granted to the Noticee to file additional submissions, if any, in
the matter. The Noticee filed its post hearing written submissions on December
18, 2025.
CONSIDERATION AND FINDINGS:
12. I have carefully perused the SCN issued to the Noticee, along with the replies
dated October 10, 2025 and December 18, 2025 filed by the Noticee and the
material available on record.
13. I note that the show-cause notice issued by the DA contained allegations on
thirteen counts as mentioned in Table No. 1 above. In response, the Noticee
filed its reply dated February 10, 2025. Pursuant thereto, the DA, in the Enquiry
Report, established all the violations against the Noticee barring the alleged
violation mentioned at Sr. No. 10 above in Table No. 1.
14. The allegations made in the DA Report and the Noticee’s response to the SCN,
vide replies dated October 10, 2025 and December 18, 2025, and
consideration of the same are discussed in the ensuing paragraphs.
Preliminary Issues
15. Before dealing with the main allegations, I deem it appropriate to deal with the
preliminary issues raised by the Noticee. The Noticee has submitted that the
inspection of documents was incomplete and improper on the premise that
(i) Change of Enquiry Report was not documented and
(ii) Not providing the Enforcement Manual and Internal Guidelines on Selection
of cases for Enforcement Actions despite being relied upon.
16. In relation to the point at (i) above, , it has been submitted that in the Enquiry
Report shared earlier vide email dated April 04, 2025 along with the SCN, the
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DA had inter alia recommended that ‘a Regulatory censure’ may be issued to
the Noticee to be careful in future with respect to complying with the mandate
of MB Regulations. The Enquiry Report was later changed by SEBI vide email
dated June 25, 2025 and in that Enquiry Report, the recommendation was ‘a
Regulatory censure’ may be issued to the Noticee to be careful in future with
respect to complying with the mandate of RTA Regulations. Thus, it is
submitted that the phrase ‘MB Regulations’ has been changed with RTA
Regulations by SEBI and the said change has not been documented by SEBI.
17. In this regard, I note that pursuant to the issuance of the SCN also, the Noticee
had raised this objection and in response to that the Noticee was informed that
a copy of the earlier draft version of the report (with a typographical error
mentioning ‘MB regulations’ instead of ‘RTA Regulations’) was inadvertently
shared along with the letter dated April 03, 2023. The forwarding letter dated
April 03, 2025 or the SCN had unequivocally mentioned the correct
recommendation of the Designated Authority. The scanned copy of the Original
DA Report as signed by the DA was provided to the Noticee vide email dated
June 25, 2025 and the Noticee was also informed that it may inspect the
Original DA Report along with all the necessary documents. It is an undisputed
fact that pursuant to the said email, the Authorized representative (AR) of
Noticee availed of the inspection opportunity and inspection of documents was
carried on July 29, 2025. The draft version and the original Enquiry Report was
signed by the same authority. Without prejudice to the same, even on merits
also, the Enquiry Proceedings were initiated against the Noticee, inter alia, for
the violation of RTA regulations and not for MB Regulations, which may mean
Merchant Banker Regulations. The Enquiry Report nowhere else mentions the
word ‘MB Regulations’ reinforcing the fact that the initial report shared with the
Noticee was a draft copy with an inadvertent error. The submission that the
Enquiry Report which was shared inadvertently was stamped, signed by the DA
and paginated and is essential for understanding the decision-making process
and ensuring procedural fairness in these proceedings is a mere conjecture
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misplaced. The Noticee has not been able to demonstrate if any prejudice has
been caused to it on account of the draft version of the report shard
inadvertently.
18. Further, the Noticee had sought copies of SEBI’s Enforcement Manual and
Internal Guidelines on Selection of Cases for Enforcement Actions. The
Noticee’s request was rejected by SEBI and in response to the said request,
the Noticee was informed that the requisite documents pertained to the internal
functioning of SEBI, and relate to the systems and procedures followed at SEBI.
These documents only pertain to the decision making by SEBI in its supervisory
and regulatory role. The Noticee had also submitted that SEBI in the past had
shared these documents with other entities and in support had cited SEBI’s
Order in the matter of Bombay Stock Exchange Limited dated June 25, 2025
wherein the counsel for the Noticee in the said matter had relied upon the
Enforcement Manual in order to make submissions. In this regard, the Noticee
was informed that in the past also, SEBI has not shared such documents with
any third party in connection with any enforcement proceedings. How any entity
in any other unconnected proceeding obtained access to such a document and
in what manner is beyond the scope of these proceedings. It is abundantly clear
that SEBI has not shared these documents with any Noticee in connection with
enforcement proceedings.
19. The Noticee has relied on the Judgment of Hon’ble Supreme Court in T. Takano
vs SEBI1 to submit that the inspection of document was incomplete and
improper. On the basis of the discussion in the above paragraphs, I find that
the record clearly shows that all the documents / material relied upon and
relevant for the purpose of these proceedings have been provided to the
Noticee in line with the principles propounded by the Hon’ble Supreme Court of
India in the matter of T. Takano vs. SEBI. Thus, the contention related to non-
1 (Civil Appeal Nos. 487-488 of 2022)
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provision of documents and the stated deficiency of the inspection of
documents is not tenable and devoid of any merit.
20. Having discussed the preliminary issues, I now advert to the issues on merit.
As mentioned above, the DA has established violation against the Noticee on
12 counts. The corresponding allegations which are established by the DA and
the response of the Noticee on the same are discussed in the next part of the
Order.
I. Allegation w.r.t. the absence and validity of NISM certification
21. It was observed that during the inspection period, 39 associated persons
engaged by the Noticee did not have the requisite NISM certification (at any
point of time) and 10 associated persons engaged by the Noticee did not have
the valid NISM certification (at the time when inspection was carried out). The
DA after considering the response filed by the Noticee observed that 24
associated persons engaged by the Noticee did not have the NISM certification
(at any point of time), and 10 associated persons engaged by the Noticee did
not have valid NISM certification during the entire inspection period.
22. In response to the SCN, the Noticee submitted that five of the associated
persons were unable to get their NISM certification renewed owing to
unavoidable reasons. Five of the associated persons were transferred from
other departments in 2021 and were unable to obtain the NISM certification
owing to restrictions imposed due to COVID. Further, all associated persons
engaged with the Noticee have subsequently obtained the valid NISM
certification and there is no deficiency to that effect at present. As submitted,
the same is evident from the fact that there are no adverse observations
regarding non-possession of NISM certification in the latest inspection period
from January 1, 2024 to August 31, 2024. It is thus put forth that the Noticee
has taken the necessary corrective measures and ensured that all associated
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persons are in possession of valid NISM certification. The Noticee has prayed
for a lenient approach when assessing the alleged violation.
23. I note that possession of a valid and necessary NISM certification by associated
persons engaged by the Noticee is an objectively determinable legal
requirement. The DA, after verification of records, observed the deficiency
pertaining to the NISM Certification requirement. The Noticee has, in its
response, admitted to the alleged violation while seeking to justify it. Noticee
has further submitted that necessary steps for rectification have since been
taken and at present, all associated persons are in possession of valid NISM
Certification. In this regard, it is noted that unlike violations that are inherently
procedural or administrative in character, the requirement of NISM certification
is a substantive investor protection measure. The rationale behind mandating
such certification is to ensure that persons handling investor requests and
securities records possess the minimum requisite knowledge and competence.
Non-compliance with this requirement during the inspection period, even if
subsequently remedied, cannot be excused on the ground of absence of
demonstrable investor harm, because such harm is precisely what the
certification requirement is designed to prevent. The absence of an adverse
outcome does not negate the statutory violation. Accordingly, the violation of
the requirement of Section III (Compliance Certification) of Annexure to SEBI
Circular No. CIR/MIRSD/7/2012 dated July 05, 2012, Regulations 3, 6, 9 and
10 of CAPSEM Regulations, SEBI Notification No. LAD-NRO/GN/ 2009-
10/18/175577 dated September 04, 2009 and Clauses 3, 16 and 29 of
Schedule III read with Regulation 13 of RTA Regulations is established against
the Noticee. However, the subsequent corrective action taken by the Noticee
and the absence of any adverse observations qua NISM certification in the 2024
Inspection are duly noted as mitigating factors for the purposes of determining
the appropriate enforcement action.
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II. Allegation w.r.t. the obligation to execute tripartite agreements with
certain companies;
24. It was alleged that the Noticee did not execute tripartite agreements with seven
companies as required under Regulation 7(4) of the LODR Regulations. After
considering the detailed response of the Noticee, the DA established the charge
against the Noticee and observed that the Noticee did not execute tripartite
agreements with five out of seven companies as alleged after the inspection.
25. In response, the Noticee submitted that it had made the following submissions
before the DA:
25.1. The obligation to execute tripartite agreements under Regulation 7(4)
is not on the RTA but on the listed company;
25.2. The requirement of executing tripartite agreements with 2 companies
did not arise as they were transferred to the Noticee prior to the
commencement of the LODR Regulations.
26. The DA accepted the second argument of the Noticee in respect of the 2
companies which were transferred prior to commencement of the LODR
Regulations. Further, the DA rejected the first argument of the Noticee and
observed that the obligation under Regulation 7(4) could not be read in isolation
and had to be read with the extant regulations, including the RTA Regulations.
While referring to Clause 20 of the Code of Conduct, the DA concluded that
while the primary responsibility of entering into tripartite agreements is on the
listed entity, it is still incumbent upon the RTA to ensure continuity in data and
record keeping. The DA held that the Noticee is required to take the necessary
steps to ensure the execution of agreement with the listed entity and its
erstwhile RTA.
27. In this regard, I refer to Regulation 7(4) of the LODR Regulations which reads
as follows.
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“7(4) In case of any change or appointment of a new share transfer agent, the
listed entity shall enter into a tripartite agreement between the existing share
transfer agent, the new share transfer agent and the listed entity, in the manner
as specified by the Board from time to time”
28. Clause 3 and 20 of the Code of Conduct of the RTA Regulations provide the
following:
Clause 3
“A Registrar to an Issue and Share Transfer Agent shall at all times exercise
due diligence, ensure proper care and exercise independent professional
judgment.”
Clause 20
“A Registrar to an Issue and Share Transfer Agent shall take adequate and
necessary steps to ensure that continuity in data and record keeping is
maintained and that the data or records are not lost or destroyed. Further, it
shall ensure that for electronic records and data, up-to-date back up is always
available with it.”
29. On a plain reading of Regulation 7(4) of LODR regulations, it is clear that in
terms of the said regulation, there is a specific requirement and obligation on
the listed entity to enter into tripartite agreement between the existing share
transfer agent and the new share transfer agent. The DA’s reasoning that the
provision under LODR Regulations cannot be read in isolation and has to be
read in conjunction with the RTA Regulations appears to be incorrect. The
obligation under Regulation 7(4) is specific in nature while the requirement
under RTA Regulations is a generic one. One cannot read the primary
obligation (specifically provided elsewhere) through the generic clause of Code
of Conduct. The DA has also acknowledged that the primary responsibility of
entering into the tripartite agreement could be attributed to the listed entity.
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However, the DA has further noted that it is incumbent upon the RTA to take
adequate and necessary steps to ensure the continuity in data and record
keeping. In my view, the requirement to ensure the continuity in data and record
keeping is definitely with the RTA but it cannot be said that the RTA should
enforce the entering of tripartite agreement with listed entity. Also, there is merit
in the Noticee’s submission that the requirement under Clause 20 of the RTA
Regulations is a generic one and it makes no reference to the tripartite
agreements. Further, there has been no allegation of non- maintenance of the
data and record-keeping or if by the acts/omissions of the Noticee, the data or
records have been lost or breached.
30. The Noticee has also referred to SEBI’s consultation paper on ‘Review of
Regulatory Framework for Registrars to an Issue and Share Transfer Agents’
dated August 7, 2025 which states that:
“8. Recognising this, section 2(60) of the Companies Act, 2013, treats share
transfer agents and registrars as “Officer who is in default” in respect of the
issue or transfer of any shares of a company. For the activities being outsourced
by the Companies to RTAs such as maintenance of shareholder records, share
transfer and transmission, dividend distribution, investor grievance handling,
management of AGMs and voting etc., the Companies Act lays down obligation
on the companies only. Thus, even when a company outsources various
functions to an RTA, the ultimate responsibility for compliance with the
provisions of the Companies Act remains with the Company only
considering that the RTAs function as the agent of the Company.”
31. Thus, I am inclined to agree with the Noticee’s submission that the RTA acts
only as an agent of the listed entity and that the final responsibility to ensure
that all requirements are met and complied with lies with the listed entity.
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32. In light of the above discussion, I disagree with the view of the DA in this regard
and find that the violation of Regulation 7(4) of the LODR Regulations read with
Regulation 9A(1)(b), Clause 3 and 20 of Schedule III of the RTA Regulations
against the Noticee is not established.
III. Allegation w.r.t. non-maintenance of Signature Card
33. it has been alleged that during the inspection period, the Noticee did not have
signature cards for 46% of the physical folios. Further, the Noticee allegedly did
not have signature card in more than 90% of folios in respect of 67 client
companies and no signature card in 100% folios in respect of 40 companies.
After considering the reply filed by the Noticee, the DA established the violation
of Clause 25(a) and 1(m) of Schedule -1 read with Clause 8 of the Model
agreement of “Draft of Agreement between the STA and the Company” of
Annexure B of Schedule II of SEBI Circular “Instruction to Registrars to an
Issue/ share Transfer Agents” dated October 11, 1994 and Clause 3 of
Schedule III read with Regulation 13 of RTA Regulations. The said legal
provisions are reproduced below.
“25. The company and Transfer Agent shall maintain following documents and
records pertaining to Transfer activities by way of hard copies and if required
may be stored by way of tape drives in computers:
a) Check-list, inward register, transfer register, buyer / sellers register with
net effect as on date of approval of transfer proposals, transfer
deeds, specimen signature cards / signature captured on signature
scanner, despatch register/ postal journal, objection memos, mandates,
Power of Attorney/ Board Resolution, RBI Approval in case of NRI
Jumbo Transfer Deeds in case of FIIs, Register of Members, Annual
Returns / Return of Allotment, Interest/ Dividend Register.
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8. The company and the Transfer Agent agree to their functions, duties and
obligations in respect of each activity relevant to the Share Transfer as specified
in the Schedule I hereto. However, the following activities shall form part of the
Transfer agent’s functions and responsibility during the currency of this
agreement.
...
SCHEDULE I
1.SPECIFIC ACTIVITIES
…
m. Cutting the specimen signature of the new share/debenture holders, pasting
and maintaining specimen signature cards up to date. Specimen signature
cards of shares and / debenture holders with nil holding will be removed and
stored separately. Transfer Agents may capture the signatures with the help of
signature scanner and store in the computers.”
34. In response to the above allegation, the Noticee, in its reply, has submitted that
it is the responsibility of listed companies and RTAs to provide signature cards
for physical folios. However, the lack of provision of these cards has resulted
in an industry-wide issue regarding their unavailability. Therefore, the absence
of signature cards was not due to any action or omission on the part of the
Noticee. The Noticee also submitted the Post-Inspection Analysis Report for
the period from September 20, 2022 to November 30, 2023 (the "2022-23
Inspection"), prepared by SEBI, wherein, SEBI itself has identified the
aforementioned industry-wide issue and subsequently dropped its observation.
The DA had rejected the Noticee’s argument, observing that there was no
material to suggest that the unavailability of signature cards was on account of
inaction on the part of the listed companies or erstwhile RTAs. The DA further
observed that the inspection finding with regard to the unavailability being an
industry-wide issue pertained to another inspection period and could not be
extrapolated to the proceedings at hand.
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35. It is further submitted that SEBI itself has acknowledged the fact that the RTA
had made attempts to obtain signature cards from issuers and in some
instances, these signature cards have not been provided by the issuer and
erstwhile RTAs. It is accordingly submitted that in rejecting the Noticee’s
submission for want of evidence, the DA has failed to consider the observations
made by SEBI in the PIA Report pertaining to the 2022-23 Inspection. Also, as
argued, SEBI regularly conducts inspection of numerous RTAs, which along
with aiding in ensuring compliance and maintenance of records by these market
intermediaries, also help in ascertaining the issues faced by them in their day-
to-day operations. It is submitted that when SEBI decided to drop its
observations in respect of the signature cards, relying on its experience and
understanding of the issues persisting in the securities market, it was no longer
justified for the DA to hold the Noticee liable for the said irregularity just because
it pertained to another inspection period.
36. As per the Noticee, SEBI has in the past excused deficiencies in maintenance
of signature cards with respect to intermediaries while accepting that such
deficiency is an industry wide issue. Reference is made to Order in respect of
Link Intime India Private Limited dated June 24, 2021, wherein relying on the
fact that the absence of signature cards is a widespread industry-wide issue
and other factors, the Noticee was exonerated from any recommended
directions.
37. I have considered the arguments made by the Noticee and note that it is true
that as per the legal requirement, the onus of maintaining the documents and
records pertaining to transfer activities including the physical signature cards is
jointly on the Company as well as the RTA. Therefore, the role of listed entities,
is a relevant factor which is required to be examined before adjudicating on the
issue. I also note that the legal requirement of maintaining the signature cards
is arising from a SEBI Circular dated October 11, 1994 and therefore substantial
time has elapsed to consider the industry practice also.
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38. The Noticee has submitted that difficulties in obtaining and maintaining of
signature cards is an industry wide practice and in support of the argument has
submitted the Post-Inspection Analysis Report (PIA) for the inspection period
from September 20, 2022 to November 30, 2023. The relevant observations in
the PIA Report are reproduced herein below:
“…
1. Attempts have been made by the RTA to obtain signatures from the issuers.
2. In some instance, Issuers/Previous RTA has not provided signature records
to the entity.
3. Investor is requested to provide signature verification from banker in ISR-2
form along with cancelled cheque/bank statement.
In view of the above and considering that non-availability of specimen signature
is Industry wide issue, submissions made by the RTA may be accepted and the
observation may be dropped.”
39. I note that the DA has not disputed the PIA Report but has refused to
extrapolate the observations with respect to present proceedings. The
inspection period for the present proceedings i.e. April 1, 2021 to September
19, 2022 is prior to the inspection period for which the observations were
dropped against the Noticee (i.e., September 20, 2022 to November 30, 2023)
as is clear from the PIA Report. Also, in the said PIA Report, it is also
acknowledged by SEBI that the RTA had made attempts to obtain signatures
from issuers and in some instances, these signature cards have not been
provided by the issuer and erstwhile RTAs.
40. Noticee has also relied on SEBI’s Order dated June 24, 2021 with respect to
another RTA, in the matter of Link Intime India Private Limited. On perusal of
the said Order, I note that the same argument was made by the Noticee in that
case also and the competent authority, without commenting on whether it was
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an industry-wide practice or not, had acknowledged that the Noticee in that case
had made multiple efforts to overcome the issue of non-availability of specimen
signatures. It was also observed that the inability to bridge the gap of missing
specimen signatures is not a result of Noticee or the RTA industry’s lack of
efforts. On the contrary, it is a consequence of the impossible task of receiving
adequate responses from individual investors. In the said case, after
considering the various arguments of the Noticee, the authority was of the
opinion that while the Noticee may be having genuine difficulties and
challenges in maintaining the specimen signatures, the fact remains that the
specimen signatures of the investors are one of the most important records
which are relied upon while verifying the genuineness of transfer requests
and these records are to be mandatorily maintained by an RTAs. Thus, the
violation was established against the Noticee. However, the various
submissions and constraints brought out by the Noticee were considered as
mitigating factors.
41. I have considered the arguments made by the Noticee and also perused the
PIA Report and the SEBI Order dated June 24, 2021 in the matter of Link Intime
India Private Limited quoted by it. I am of the view that the DA’s refusal to give
any weight to the PIA Report pertaining to a subsequent inspection period was
not well-reasoned. The PIA Report for the period September 20, 2022, to
November 30, 2023, explicitly records that the non-availability of specimen
signatures is an industry-wide issue and that the RTA had made attempts to
obtain signatures from issuers. While this pertains to a different inspection
period, it constitutes relevant evidence of a systemic challenge that persisted
beyond the inspection period in question, and the DA was not justified in
dismissing it entirely as inapplicable. Be that as it may, the legal requirement to
maintain signature cards is clear and unambiguous, and the Noticee is
undisputedly in breach of this requirement with no signature card in more than
90% of folios in respect of 67 client companies and no signature card in 100%
of folios in respect of 40 companies. The scale of non-compliance is significant
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and cannot be entirely attributed to the conduct of listed entities or erstwhile
RTAs. The Noticee as an RTA was obligated to proactively pursue the collection
and maintenance of these records. Accordingly, the violation stands
established against the Noticee. However, the following are taken into account
as mitigating factors: (i) the industry-wide nature of the issue as acknowledged
by SEBI itself in a PIA Report albeit for a separate period; (ii) the joint
responsibility of listed entities in providing such records; (iii) the Noticee’s
demonstrated efforts to obtain signatures from issuers; and (iv) the significant
improvement in subsequent inspections, where non-availability reduced to
8.71% of folios and the observation was eventually dropped altogether. These
mitigating factors shall be duly considered while determining the appropriate
direction against the Noticee.
IV. Allegation w.r.t. delay in processing of the request(s) for the issuance of
duplicate shares and issuance of duplicate share certificate to an
investor other than the original shareholder.
42. It was alleged that there was a delay in 123 instances with regard to the
processing of the requests for the issuance of duplicate share certificates.
Further, in two instances (Folio Nos. 01024288 and 51665), the Noticee had
failed to do the due diligence concerning the mismatch of the name and partial
non-availability of share details on FIR in two instances for the issuance of
duplicate share certificates. Also for the folio No. 13346, the Noticee failed to
do necessary due diligence prior to issuing duplicate shares.
43. After considering the reply filed by the Noticee, the DA established the violation
of Clause 20 of “General Norms for Processing of Documents” of SEBI Circular
- RTI Circular No. 1 (2000-2001) dated May 09, 2001, Clauses 12 and 13 of
Clause II of Annexure to Circular No. SEBI/HO/MIRSD/DOP1/CIR/P/2018/73
dated April 20, 2018, SEBI Circular No. MRD/DoP/Cir- 05/2007 dated April 27,
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2007 and Clauses 2 and 3 of Schedule III read with Regulation 13 of RTA
Regulations.
44. In response to the SCN, the Noticee has submitted the following.
44.1. It received a total of 2026 requests for issuance of duplicate share
certificates during the IP, out of which only 123 (6.07%) alleged instances
of delay were observed. Further, out of the said 123 instances, 88 requests
were processed within a delay of 10 days. Only 35 instances of delay
beyond 10 days was observed during the IP, which amount to 1.72% of the
total requests processed during the IP.
45. The above-mentioned violations are discussed in the ensuing paragraphs with
specific reference to the folios concerned.
Discrepancy with respect to folio no. 01024288
45.1. The DA’s show cause notice had initially alleged that the Noticee had
failed to undertake due diligence in respect of the name as well as address
of the said folio. However, after considering the reply and documents
submitted by the Noticee, the submission of the Noticee with respect to the
discrepancy in the address for folio No. 01024288 was accepted by the DA.
45.2. The discrepancy in the name had already been communicated to the
applicant by the relevant company’s erstwhile RTA. The applicant was
requested to execute an affidavit stating that the name stated on the PAN
and name stated in the records of the company are of the same person.
The applicant vide letter dated July 7, 2017, furnished the required affidavit.
In this regard, the DA observed that the said letter dated July 7, 2017 had
reference to “4. Original affidavit”. However, the said affidavit was not
enclosed by the Noticee and therefore, its submission relating to
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discrepancy in the name in folio No. 01024288 was not accepted by the
DA.
45.3. With reference to the above, it has been submitted that the DA has
failed to appreciate the entirety of the evidence available on record. It is
submitted that subsequent to the submission of affidavit dated July 07,
2017, there was a communication between the applicant and the erstwhile
RTA of the concerned company. In an email dated August 21, 2017, the
RTA requested some additional documents regarding financial standing of
the applicant’s surety and a copy of the police complaint lodged in relation
to the shares. However, nowhere in this email did the said RTA raise any
issues or deficiencies in respect of the affidavit that had already been
submitted. To the contrary, the RTA in the email stated that it would
“arrange to do the needful”. The said email dated August 21, 2017, was
made available to SEBI, however the same was not considered by the DA
in arriving at his conclusion.
45.4. The letter of the applicant dated July 7, 2017, when read holistically
with the subsequent emails makes it clear that required affidavit was in fact
submitted by the applicant and reasonable presumption was drawn as to
the existence of the said affidavit and therefore, the Noticee issued
duplicate shares by relying reasonably upon such correspondences of the
applicant with the listed company’s erstwhile RTA.
45.5. Even assuming without admitting that the said affidavit was not
available, documents such as the letter of indemnity to the company and
the questionnaire form of the company on the issuance of duplicate shares
furnished by the applicant both mentioned the name of the applicant as
“VIVEK KUMAR JAIN”. It is submitted that the aforesaid made it clear that
applicant used the names “VIVEK KUMAR JAIN” and “VIVEK JAIN”
interchangeably.
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Discrepancy with respect to folio no. 51665
45.6. The DA mistakenly concluded that the Noticee was in violation owing
to the alleged infirmity in the FIR for folio no. 51665 despite having
exonerated the Noticee of that charge.
Discrepancy with respect to folio no. 13346
45.7. With regard to the captioned allegation, it was submitted that the
investor had provided documents such as PAN card and Aadhar card as
identification and address proofs, and documents such as a certificate and
ISR Form-2 in his application and the Noticee relied on the same in order
to ascertain the genuineness of the request. The applicant had also
submitted an FIR lodged with the police station in Rajasthan. The Noticee
had verified the PAN card submitted by the applicant on various facilities,
including by the Income Tax department. The PAN card existing in the
name of the applicant was also linked to the Aadhar card submitted by the
applicant. It is accordingly submitted that the Noticee issued duplicate
shares, relying not only on the documents submitted by the applicant, but
also upon the verification report generated on various platforms.
45.8. The request for the issue of duplicate share certificates in respect of
folio no. 13346 was published as a newspaper advertisement and was
disseminated by the concerned listed entity on the stock exchange, despite
the same, no objection was received in respect of the said shares. Further,
no complaint has been received till date in respect of the folio and the
allegation is based on KYC documents obtained from the concerned
depository participant, which have not been provided to the Noticee.
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45.9. The DA confirmed the said allegation against the Noticee, stating that
verification reports submitted by the Noticee did not bear a time stamp and
accordingly it was not ascertainable when the Noticee had conducted due
diligence. the allegation specifically states that the duplicate shares in
question were allotted to an investor other than the original shareholder.
Analysis with respect to the folios
46. I have considered the submissions made by the Noticee with regard to the
above issue. For the delay in issuance of duplicate shares, the Noticee while
admitting to the delay has submitted that the delay is only in miniscule
instances. Out of 2026 requests, there was delay in 123 instances and out of
those 123, only in 35 instances, the delay has been more than 10 days. Be that
as it may, the extant legal requirements prescribe strict timelines for the
issuance of duplicate share certificates and the Noticee is under a legal
obligation to ensure adherence to the prescribed timelines. Thus, I agree with
the observation of the DA on this charge and, the violation stands established
against the Noticee.
47. For the discrepancy with respect to folio No. 01024288, the Noticee has
submitted that it had done its due diligence on the issue and only after being
satisfied, duplicate shares were issued relying upon all the documents available
on record. For determining the issue, I refer to the observations of the Hon’ble
Supreme Court in the matter of Chander Kanta Bansal vs. Rajinder Singh
Anand2 wherein the Hon’ble Court had held that—
“According to Oxford Dictionary (Edition 2006), the word "diligence" means
careful and persistent application or effort. "Diligent" means careful and steady
in application to one's work and duties, showing care and effort. As per Black's
2
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Law Dictionary (Eighth Edition), "diligence" means a continual effort to
accomplish something, care; caution; the attention and care required from a
person in a given situation. "Due diligence" means the diligence reasonably
expected from, and ordinarily exercised by, a person who seeks to satisfy a
legal requirement or to discharge an obligation. According to Words and
Phrases by Drain-Dyspnea (Permanent Edition 13A) "due diligence", in law,
means doing everything reasonable, not everything possible. "Due diligence"
means reasonable diligence; it means such diligence as a prudent man would
exercise in the conduct of his own affairs.”
48. For the present issue, the allegation was that the Noticee failed to do the due
diligence concerning the mismatch in name for folio No. 01024288. In the
present case, the question is whether the Noticee exercised reasonable
diligence in satisfying itself as to the identity of the applicant before issuing
duplicate shares in respect of folio No. 01024288. As held by the Hon'ble
Supreme Court in Chander Kanta Bansal vs. Rajinder Singh Anand, due
diligence in law means such diligence as a prudent man would exercise in the
conduct of his own affairs and it requires doing everything reasonable, not
everything possible.
49. In the present case, I note that the email dated August 21, 2017 from the
erstwhile RTA, read in conjunction with the applicant's letter dated July 7, 2017,
establishes that the required affidavit was treated by the RTA as having been
received, since no deficiency in respect of it was raised in subsequent
correspondence and the RTA proceeded to request further documents on
unrelated matters. The letter of indemnity and the questionnaire form, both
record the applicant's name as "VIVEK KUMAR JAIN", and the DA himself
accepted the same while considering the address discrepancy that "Vivek Jain"
and "Vivek Kumar Jain" referred to the same person. It would be internally
inconsistent to accept that identity for one purpose, while rejecting it for another.
A reasonable and prudent person, presented with this body of correspondence
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and documentation, would have been justified in concluding that the name
discrepancy was satisfactorily explained. The Noticee's conduct met the
standard of reasonable diligence. Accordingly, no infraction is established
against the Noticee with respect to the lack of due diligence in folio No.
01024288.
50. For the discrepancy with respect to folio No. 51665, it is noted that the DA in its
Enquiry Report has categorically mentioned that the ‘allegation with regard to
infirmity in the FIR for folio No. 51665 does not stand established’. However, in
the concluding paragraph, it was observed that that Noticee had not undertaken
due diligence concerning the mismatch of name and partial non-availability of
share details on FIR in two instances (Folio Nos. 01024288 and 51665). Based
on the material submitted by the Noticee and the DA’s observation in the
Enquiry Report, to me, there appears to be an inadvertent error on part of the
DA to establish the violation with respect to the Folio No. 51665. In light of the
above, I find that the issue requires no further examination and the violation
with respect to the folio No. 51665 is not established against the Noticee.
51. For the issue related to folio No. 13346, the initial allegation in the DA’s show
cause Notice was issuance of duplicate share certificate to an investor other
than the original shareholder. However, the Noticee has rightly pointed out that
the DA in his report has attributed it to lack of due diligence. The Noticee has
submitted that he relied on multiple documents to ascertain the identity of the
investor including PAN Card, Aadhar Card, Income Tax database, ISR Form-2
and even an FIR lodged with the police station in Rajasthan. Further, as per the
applicable norms, the request for the issue of duplicate share certificates was
published as a newspaper advertisement and was disseminated by the
concerned listed entity on the stock exchange and no claimant came forward. I
agree with the submissions made by the Noticee that all the possible efforts
which could have been made by any prudent man, were made by the Noticee.
Also, no complaint has been received by the Noticee till date in respect of the
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said folio. The DA’s observation that verification reports submitted by the
Noticee did not bear a time stamp and accordingly, it was not ascertainable if
the Noticee had conducted due diligence does not establish the allegation
levelled against the Noticee. The issue was if the Noticee had wrongly issued
duplicate share certificate to an investor other than the original shareholder and
for the said allegation, the material available on record does not reflect any
shortcoming on the part of the Noticee. Based on the justification provided by
the Noticee, I am reasonably satisfied that the violation on this count does not
stand established against the Noticee.
V. Allegation w.r.t. non-compliance in obtaining the transmission Form
(ISR 4) in Folio No. 8775 and uploading of wrong signature in Folio no.
Z6129.
52. It was alleged that the Noticee did not obtain the transmission form, Form ISR
4, for processing the transmission request in Folio No. 8775, and wrong
signature was uploaded in Folio No. Z6129. After considering the reply filed by
the Noticee, the DA established the violation of Clause C (2) (b) of Schedule
VII prescribed under Regulation 40(7) of LODR Regulations, Clause 2 (II) of
SEBI Circular No. CIR/MIRSD/10/2013 dated October 28, 2013 and Clauses 2
and 3 of Schedule III read with Regulation 13 of RTA Regulations.
53. In response to the SCN, the Noticee has submitted that it obtained various other
documents from the applicant such as an affidavit, PAN card, death certificate,
indemnity bond, and guarantee prior to the processing of the transmission
request. Also, obtaining the ISR-4 form was merely a procedural requirement
and by obtaining the other documents mentioned above, adequate due
diligence was done and it is not the case of SEBI that shares were transmitted
to a person other than the applicant.
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54. For the error in Folio No. Z6129, it is submitted that wrong signature of the
applicant’s brother who had given a no-objection certificate was uploaded
instead of the applicant and upon receiving the observations of the inspection
team, the Noticee promptly uploaded the correct signature in the folio.
55. I note that the allegation is that the Noticee did not obtain the transmission form
(specifically Form ISR 4) for processing the transmission request. On perusal
of the legal requirement, it is observed that Clause C (2) of the Schedule VII of
the LODR Regulations provides that in case of transmission of securities, where
the securities are held in single name without nomination, the duly signed
transmission request form shall be submitted by the legal heir(s)/claimant(s).
Thus, the regulations simply mention about a transmission request form. SEBI,
as a measure to enhance the ease of doing business for investors in the
securities markets, issued various Circulars3 to standardize the common and
simplified norms for processing of Investor Service Requests by RTAs. Before
these Circulars, the transmission requests submitted by the applicants were not
standardized. One of the crucial aspect of the transmission request(s) is that
the security should be transferred only to the rightful claimant and for
ascertaining the identity of the rightful claimant, various documents have been
specified by SEBI from time to time. In the instant case, it is not SEBI’s case
that the securities were not transferred to the rightful claimant. As submitted by
the Noticee, various other documents were obtained from the applicant, and
transmission request was processed. While it is true that complying with the
procedural requirement is a necessary pre-requisite, but the same has to be
interpreted purposely. During the inspection period only, ISR-4 form was
introduced and before that transmission requests were not standardized. It is
also observed that the legal requirement itself does not specify the form which
is required to be submitted and there is no allegation of violation of SEBI
3 SEBI/HO/MIRSD/MIRSD_RTAMB/P/CIR/2021/655 dated November 03, 2021
SEBI/HO/MIRSD/MIRSD_RTAMB/P/CIR/2021/687 dated December 14, 2021
SEBI/HO/MIRSD/MIRSD_RTAMB/P/CIR/2022/8 January 25, 2022
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Circulars which specified the Form ISR-4. Having considered the facts and
circumstances of the case, I agree with the Noticee that adequate due diligence
was done to ensure the processing of transmission request and thus no
violation is established on this count.
56. For the wrongful uploading of signature in Folio No. Z6129, there is nothing
remaining to be adjudicated. The Noticee has admitted that wrong signature of
the applicant’s brother was uploaded inadvertently and upon receiving the
observations of the inspection team, the Noticee promptly uploaded the correct
signature in the folio. Material available on record does not suggest it to be a
regular occurrence; it is only a singular instance out of numerous instances
handled by the Noticee. Also, it is clear that no prejudice has been caused to
the applicant. Uploading of wrong signature in one instance (out of many)
appears to be a human error and not a deliberate violation. In this regard, I also
refer to the observations of Hon’ble SAT in the matter of DSE Financial Services
wherein, inter alia, the following was observed:
“Under similar circumstances in one of the cases decided by us earlier
(Religare
Securities Limited vs. SEBI Appeal no. 23 of 2011 decided on 16.6.2011), we
have observed that it must be remembered that the purpose of carrying out
inspection is not punitive and the object is to make the intermediary comply with
the procedural requirements in regard to the maintenance of records. We have
also observed that every minor discrepancy/irregularity found during the course
of inspection is not culpable and the object of the inspection could well be
achieved by pointing out the irregularities/deficiencies to the intermediary at the
time of inspection and making it compliant.” (emphasis supplied)
57. I am of the view that the observations made by Hon’ble SAT are applicable in
this case particularly on the aspect discussed above. Non submission of
transmission request form and/or inadvertent wrong uploading of signature in
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one instance seems to be a minor discrepancy which, in my view, should not
be treated as serious. It is undisputed that upon receiving the inspection
findings, necessary corrections were made by the Noticee. Thus, I am inclined
to give the benefit of doubt to the Noticee in respect of the alleged violation in
this regard.
58. Having said that, I am also of the view that these observations are applicable
only on this count considering the facts and circumstances of the case and
certainly should not be generalized.
VI. Allegation w.r.t. delay in processing of 54 demat requests
59. It was alleged that 54 demat requests were processed by the Noticee after the
stipulated period of 15 days. After considering the reply filed by the Noticee, the
DA established the violation of RRTI Circular No. 1(99-2000)
PMD/SU/11560/99 dated May 20, 1999 and Clause 2, 3, and 5(c) of Schedule
III read with Regulation 13 of RTA Regulations.
60. The Noticee has admitted that there was delay of 1-2 days in processing each
demat request and the demat requests were processed within 16-17 days . It
has also been submitted that the delay in processing demat requests was an
exceptional circumstance, primarily due to holidays and the minimal delay of 1-
2 days did not cause any harm to investors. Further, the Noticee processed a
total of 30,575 demat requests during the IP, out of which only 54 instances
(0.001%) are allegedly suffering from a delay of 1-2 days in all 54 instances.
61. It is also submitted that Clause 3 of the SEBI Circular dated January 25, 2022,
prescribes a timeline of 30 days for an RTA to process demat requests which
is in contradiction to the flexible framework provided under the RTA Regulations
and SEBI Frequently Asked Questions with respect to Investor Service
Requests processed by RTAs dated July 16, 2025. Clause 5(c) of Schedule III
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mandates that an RTA must endeavour to ensure that the timelines specified
under any law are adhered to, whereas the FAQs provide a comprehensive
Table with expected timelines for processing each investor service request. As
argued, the SEBI Circular dated January 25, 2022 which provides a fixed
timeline is in contrast with RTA Regulations and the FAQs.
62. It is noted that the present allegation is violation of RRTI Circular No. 1(99-
2000) PMD/SU/11560/99 dated May 20, 1999, which clearly provides that the
demat request should be processed within 15 days from the date of such
request. The argument that the RTA Regulations do not prescribe any strict
timeline and use of the word ‘endeavour’ does not inspire confidence. The
Regulations have to be read with the SEBI Circular which also has the force of
law. SEBI Regulations generally provide for broader aspects of any regulation
and the fine details, the operational guidelines and administrative directions are
issued through Circulars only. The entity cannot seek to rely on generic
language of the Regulations to evade any liability which flows from Circular(s).
Separately, the FAQs are the guide to investors on Investor Service Requests
(ISRs) provided by RTA and it uses the word expected timeline which has to be
read with the overall timeline prescribed for processing of such requests. Thus,
the argument that the SEBI Circular dated January 25, 2022 is an overreach is
non-tenable.
63. Having observed as above, I also note that the allegation is violation of RRTI
Circular dated May 20, 1999 which provides that the demat request should be
processed within 15 days. It is undisputed that there was a delay, albeit of 1-2
days, in processing of the demat requests in violation of the strict timelines
specified by law. Further, Clause 5(c) of Schedule III of the RTA Regulations
read with Regulation 13 provides that the RTA shall endeavor to ensure that
the transfer of securities held in physical form and confirmation of
dematerialization/rematerialization requests and distribution of corporate
benefits and allotment of securities is done within the time specified under law.
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The language of the said provisions is unambiguous and self-explanatory.
Thus, the violation of RRTI Circular dated May 20, 1999 read with Clause 5(c)
of the Schedule III of RTA Regulations stands established against the Noticee.
64. However, considering the technical and venial nature of the violation and noting
that the delay was only of 1-2 days in processing of demat request, these facts
would be treated as mitigating factors and would be aptly considered at the time
of determining the enforcement action.
VII. Allegation w.r.t. change of the addressees without any explicit request
in Folio No. 14228, 21209, 40621, 2291 and not processing of address
change request despite specific request in Folio No. 6677
65. The DA has observed that Noticee updated addresses in respect of four folios
(Folio Nos. 14228, 21209, 40621 and 2291) without being in receipt of any
request for the same from the shareholders and in case of folio no. 6677, the
Noticee failed to change the address despite being in receipt of the request for
the same. Thus, the DA established the violation of Clauses 2 and 3 of
Schedule III read with Regulation 13 of RTA Regulations.
66. The Noticee, in its response, (w.r.t the four folios) has admitted to the allegation
and submitted that it updated the addresses prematurely based on the new
addresses mentioned in the documents provided by applicants for the issuance
of duplicate shares in order to ensure that any correspondences with
shareholders could be directed to their current addresses. For the failure of the
Noticee to update the address in case of folio no. 6677, it is submitted that the
same was based on a bona-fide belief that the applicant had only requested the
delivery of a new share certificate to the address mentioned on the voter ID
card and had not requested for a change in address.
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67. It is further submitted that such defaults had occurred only in few instances and
as such are minor issues and technical in nature which does not warrant
adjudication or imposition of penalties. Also, pursuant to the inspection
observations, necessary corrections were made and no findings were observed
in subsequent inspection by SEBI.
68. On perusal of the DA’s observations and the Noticee’s submission, I find that
the there is nothing substantial to discuss and adjudicate upon. The factual
determination has already been done and the Noticee has admitted to the
defaults. However, I am inclined to agree with the submissions of the Noticee
that the violations are hyper-technical and have occurred only in few instances.
Further, the justification provided by the Noticee for updating/non-updating of
the addresses seems plausible.
69. In the present case, violation of Clauses 2 and 3 of the Code of Conduct for the
RTA has been alleged which inter alia provides that the RTA shall maintain high
standards of integrity in the conduct of its business and shall fulfil its obligations
in a prompt, ethical and professional manner. The alleged violations pertain to
address updates made on the basis of documents already in the Noticee’s
possession, and in one instance of non-updation based on an erroneous,
reading of the shareholder’s request. Isolated and explicable administrative
errors of this nature, in the absence of any allegation of fraudulent intent,
financial loss to any shareholder, or systemic pattern of conduct, do not, in my
view, cross the threshold required to establish a violation of the Code of
Conduct provisions, which are directed at integrity and ethical conduct in a
broader sense. Accordingly, I find that the violation of Clauses 2 and 3 of
Schedule III read with Regulation 13 of RTA Regulations is not established in
the facts of this present case.
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VIII. Allegation w.r.t. delay in processing the transfer re-lodgment request in
14 instances, etc.
70. Allegations have been levelled against the Noticee for the delay in processing
the transfer re-lodgment request in 14 instances, mismatch of signatures in 2
instances, non-consideration of the rejection points raised by the listed
company in 1 instance, 2 transfer deeds in the records for one folio, original
transfer deed not provided and no signature of the transferor on copies of the
deeds provided in one instance. On account of the above, the Noticee has been
alleged to have violated Clause A (1) of Schedule VII read with Regulation 40(7)
of the LODR Regulations, Clause B of Schedule VII read with Regulation 40(7)
of the LODR Regulations, Regulation 40(3) of the LODR Regulations and
Clauses 2, 3, 5 (c) of Schedule III read with Regulation 13 of RTA Regulations.
a. Delay in processing the transfer re-lodgment request in 14 instances
71. The inspection had observed a delay of more than 95 days in processing
transfer re-lodgement requests in respect of 14 folios. The Noticee submitted
that the period of 15 days provided under Regulation 40(3), has been reckoned
without having regard to relevant circulars. SEBI Circular dated November 6,
2018 provides for revised timelines for the processing of transfer requests in
case of signature mismatches or unavailability of documents, Clause 2(c)(iii) of
the said Circular requires that the transfer is to be carried out within a period of
30 days of the newspaper advertisement. SEBI Circular dated April 13, 2020,
in lieu of the lockdown of 21 days imposed on account of the COVID-19
pandemic, granted market intermediaries a relaxation of 21 days over and
above the prescribed time limits for carrying out a specific transaction. The
circular further stated that in case of an extension of lockdowns by the Central
and State Governments, an additional relaxation equal to the days of the
extended lockdown would be considered. Thereafter, vide circular dated April
29, 2021, the relaxed timelines granted in the circular dated April 13, 2020, were
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extended to July 31, 2021. In addition to the lockdown of 21 days imposed by
Central Government during COVID-19, a lockdown of 56 days was imposed by
the Delhi Government from April 19, 2021, to June 14, 2021, and the same is
to be considered in calculating the time limit for processing the transfers. In
respect of the 10 out of the 14 folios in question, the Noticee submitted the
following details as to the extended timelines for processing the transfer of
securities in lieu of the lockdown.
72. The submission made by the Noticee was rejected by the DA noting that the
extended timelines on account of COVID-19 had to be read in conjunction with
relaxed timelines granted vide the circulars dated April 13, 2020, and April 29,
2021, and not in addition thereto.
73. I have gone through the inspections findings, DA observations and the
response of the Noticee. Regulation 40(3) of the LODR Regulations inter alia
provides the listed entities a period of 15 days (from the date of receipt of
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request) to register the transfers of their securities in the name of the
transferee(s) and issue certificates, or issue any valid objection or intimation to
the transferee or transferor. SEBI, vide Circular dated November 6, 2018
standardized the norms for transfer of securities in physical mode. In terms of
the said Circular, in case of non-availability/ major mismatch in transferor’s
signature or non-traceability of the transferor, other than the process prescribed
therein, the RTA Companies shall publish an advertisement in at least one
English national daily and in one vernacular daily newspaper, giving notice of
the proposed transfer and seeking objection, to the same within a period of 30
days from the date of advertisement. Any transfer shall be effected only after
the expiry of 30 days from the newspaper advertisement.
74. Also, I note that in the wake of Covid-19 pandemic, SEBI vide Circular dated
April 13, 2020 granted market intermediaries a relaxation of 21 days over and
above the prescribed time limits for carrying out a specific transaction. The
circular further stated that in case of an extension of lockdowns by the Central
and State Governments, an additional relaxation equal to the days of the
extended lockdown would be considered. Thereafter, vide circular dated April
29, 2021, the relaxed timelines granted in the circular dated April 13, 2020, were
extended to July 31, 2021. Thus, considering everything, the RTAs were
required to process the re-lodgments requests as per the extended timelines
specified by SEBI.
75. In the present case, as per Noticee’s submission, it was able to process the
requests in 10 out of 14 instances within the timeframe granted by SEBI. As per
the Table above, provided by the Noticee, even assuming everything to be
correct and in order, the Noticee was required to process the requests received
in the month of April 21 till July 31, 2021 which as per the submission, it was
able to do. However, for the requests received subsequent to July 31, 2021,
regular timelines as per the then-existing Regulations and Circulars were
applicable. The Covid relate extension was granted till July 31, 2021. For those
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requests which were received thereafter, the Noticee was required to process
the re-lodgment requests within 31 days from the date of the advertisement. As
it is clear from the Table above, the Noticee processed 3 requests (for which
the advertisement was made on August 20, 2021) on October 01, 2021 i.e.,
beyond the 30 days’ time period specified by the law, the violation on these 3
instances is established.
76. For the remaining instances i.e., 4 out of the 14 instances, the Noticee had
submitted before the DA that the delay was due to the reason that the
concerned company was facing issues in holding its share transfer committee
meetings on account of Covid-related restrictions. The DA had rejected the
argument citing the absence of any documentary evidence. No justification had
been filed for the aforesaid 4 instances. In response to the SCN, the Noticee
has now submitted that SEBI, vide Circular dated July 2, 2025, reopened the
window for investors to re-lodge transfer deeds which were lodged prior to April
1, 2019 and rejected/returned/not attended owing to deficiencies till January 6,
2026. It is submitted that SEBI acknowledged the fact that there were various
instances wherein investors were not able to re-lodge transfer deeds within the
previously prescribed timeline and thus re-opened the window in order to
accommodate such instances. It is urged that a lenient view may be taken and
the alleged 14 instances of delay in processing re-lodgement requests be
construed to have been processed during this extended and re-opened window.
77. I note that barring the 10 instances mentioned in the Table above, no cogent
justification has been provided for the remaining 4 instances before me. The
SEBI Circular dated July 2, 2025, reopened the window for submitting re-
lodgement requests by investors; however, this does not operate to correct or
undo delays that had already occurred on part of the Noticee in processing such
requests during the inspection period. Accordingly, out of the 14 instances,
violation is established for 3 instances where the advertisement was made on
August 20, 2021 but processing was completed on October 01, 2021, beyond
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the stipulated 30-day window, and for 4 instances where no justification
whatsoever has been placed on record. For the remaining 7 instances, the
extended timelines were complied with by the Noticee. Thus, I partly agree with
the observation of the DA and find that the delay in processing transfer re-
lodgement requests is established in 7 out of 14 sample instances observed
during the inspection.
b. Discrepancy with respect to folio No. 5106374
78. The DA observed that the Noticee transferred shares in folio no. 5106374 to
one Raj Kumar Sharma instead of his wife Shashi Sharma, who was the actual
transferee, without the availability of the original copy of the transfer deed and
signature of the transferor.
79. In its reply to the DA, the Noticee submitted that Raj Kumar Sharma is the
husband of Shashi Sharma and also happens to be an advocate by profession.
It was submitted that various documents and correspondences, reflected the
name of Raj Kumar Sharma as the transferee. Regarding the unavailability of
the original transfer deed and signature of the seller, it was submitted that SEBI
Circular dated November 6, 2018, provides for certain relaxations in the
procedure to be followed when certain documents related to the transfer are
unavailable or where seller was not traceable or not cooperating. It was
submitted that clause (d) of the circular read with clause c(iii) makes it clear that
a transfer may be processed even in the absence of certain documents and the
signature of the transferor, given that the buyer furnishes an indemnity bond,
his identity proof/address proof and an undertaking that the shares will be
locked-in for six months.
80. The DA rejected the Noticee’s submissions and noted that the prescribed
procedure in the said SEBI Circular becomes operative only when there is non-
availability of any document required for transfer and the transferor is not
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cooperating or not traceable and that the Noticee has brought nothing on record
to show the fulfilment of the second requirement i.e., that the transferor was
untraceable or uncooperative.
81. The DA noted that the transferor had written a letter dated November 18, 2008,
wherein he had sought documentary proof or evidence with respect to the
purchase of the share and there is nothing on record to show that the transferee
provided the same. Further, the DA referred to a bill dated July 19, 1998, which
showed that the bill was issued to Shashi Sharma. Additionally, Raj Kumar
Sharma, in the indemnity bond submitted by him had mentioned that he has
purchased certain securities in the name of his wife, i.e., Shashi Sharma. The
DA concluded that despite the proof and evidence relied upon above, the
Noticee transferred the shares in question to Raj Kumar Sharma, thereby
allegedly being in violation of the applicable provisions w.r.t. proper
documentation for processing the re-lodgement request in the folio.
82. In response to the allegations, the Noticee submitted that bill dated July 19,
1998 reflects the name of Shashi Sharma as the original buyer and the
indemnity bond submitted by Raj Kumar Sharma clarifies that he is the actual
buyer of the shares and that the shares were only being held in the name of his
wife, i.e., Shashi Sharma, on his behalf. The Noticee further submitted that it
is not the case that the shares were transferred to an unrelated person who
was not the original transferee or that the Noticee acted in a fraudulent manner
so as to unjustly profit from the transfer, but that Shashi Sharma was merely
holding the shares on behalf of her husband who was the actual transferee, i.e.,
Raj Kumar Sharma. Thus, it has been submitted that the Noticee did everything
in its capacity to follow the require standards of due diligence and that due
regard and consideration must be given to the Noticee’s efforts.
83. Having noted the submissions made by the Noticee, it is undisputed that the
transferee in this case was Ms. Shashi Sharma and not her husband. It is also
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not in dispute that the original copy of the transfer deed and signature of the
transferor was not obtained by the Noticee. The DA’s observation that SEBI
Circular dated November 6, 2018 would not be applicable is also correct as
both the conditions of the aforesaid Circular were not met. Thus, the Noticee
failed to carry out adequate due diligence and did not follow the procedural
requirements for transfer of the shares. Therefore, I agree with the observations
of the DA in this regard.
c. Discrepancy with respect to folio No. 5996
84. The allegation in this regard was that the Noticee failed to consider the rejection
points raised by the client company when the transfer request in folio no. 5996
was initially placed.
85. Noticee had submitted before the DA that there were two rejection points raised
on the initial placing of the transfer request – that the transfer deed was time-
barred and that the stamp duty was inadequate. The applicant subsequently
made a request for re-lodgement directly to the company, which instructed the
applicant to submit the required documentation for the transfer. It was submitted
that the company, while being fully aware of the initial rejection points, did not
raise any further issues or make any mention of the erstwhile rejection points,
when directing the applicant to submit the documentation. The Noticee also
notified the transferor of the shares of the re-lodged request vide letter dated
March 31, 2021, and requested the transferor to share its objections to the
same, if any. It is stated that no such objection was received from the transferor
or the listed company and that the Noticee has ensured and conducted
adequate due diligence when processing the request.
86. The DA rejected all the arguments of the Noticee and observed that the violation
in this regard stood established.
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87. In response to the present SCN, the Noticee has reiterated its submission which
it made before the DA. It also added that the applicant submitted both the new
transfer deed, which was not time-barred, and the old transfer deed, which was
duly signed by the transferor and transferee.
88. Upon perusal of the material available on record, the issue for consideration is
whether the Noticee undertook necessary due diligence prior to processing the
transfer request. The initial objections raised for the re-lodgement request was
that the transfer deed was time-barred and that the stamp duty was inadequate.
The Noticee submitted that pursuant to the initial rejection, the applicant
submitted a fresh request with the Company and provided a new transfer deed
with adequate stamp duty. Based on the documents provided, the Noticee
processed the re-lodgement. The Noticee’s assumption that the company’s
instructions to the applicant to submit the required documentation meant that
the previous rejection points were no longer relevant, seems to be valid since
the new request was accompanied with valid documents. The DA has not made
any observations on the validity of the fresh documents which the Noticee took
into consideration for effecting the re-lodgement. It is also not the case that the
shares were transferred to a wrong entity. Thus, based on the response of the
Noticee, I am inclined to give benefit of doubt to the Noticee and find that no
discrepancy has been established with respect to folio No. 5996.
d. Discrepancy with respect to folio No. 10792
89. The allegation in this regard was that there were two transfer deeds in folio no.
10792 with different consideration amounts and that there was a lack of
signature of transferor on the second transfer deed.
90. The Noticee submitted that the value of the consideration in the first transfer
deed placed on May 01, 2012 was according to the prevailing market price at
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that time. The transfer request was subsequently re-lodged on March 29, 2019,
and the consideration amount reflected the market price which was prevailing
as on date. Thus, the difference in the consideration amount was due to the
lodgement of the request on different dates and that the intent behind such a
difference was in order to ensure that a fair and accurate valuation of the
concerned shares is reflected.
91. For the lack of signature on the second transfer deed, it is submitted that the
Noticee was already in possession of the signature of the transferor owing to
the first request placed in 2012. As argued, the Noticee conducted the required
degree of due diligence upon the receipt of the initial request itself, including
sending a letter to the transferor, publishing a newspaper advertisement, and
matching and verifying the signatures, and verified all the documents and
details submitted to it. It is pertinent to note that the reason for the first transfer
deed being rejected was not owing to any inherent deficiency but only because
the Noticee did not have the procedural flexibility provided by the 2018 SEBI
Circular at the time of receiving the request, i.e., in 2012. Thus, it was submitted
the failure of the Noticee to affix the signature of the transferor on the second
transfer deed amounts to a technical non-compliance which is purely
procedural in nature.
92. The DA rejected the arguments of the Noticee on both counts. The DA observed
that the Noticee cannot cede its duty by claiming that the discrepancy on the
transfer deeds had occurred on account of the mention of the market price of
the securities in the later transfer deed.
93. On perusal of the observation made by the DA and the surrounding
circumstances, I disagree with the observation of the DA on differential
consideration amount. The first transfer deed was made in year 2012 and the
second was made in year 2019. The DA did not go into the merits of the
argument made by the Noticee. The consideration amount is dependent on the
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market value/fair value of the securities prevalent at the time of transfer and
difference in the consideration value of the shares in year 2019 as compared to
year 2012 is expected considering the prevailing market conditions and time
value of money.
94. For the non-availability of signatures on the 2nd transfer deed, the Noticee’s
argument cannot be accepted that it was already in possession of the signature
of the transferor owing to the first request placed in 2012. At the time of second
transfer deed also, the Noticee was required to ascertain that all the documents
available are sufficient including having a valid signature. Therefore, there was
a lapse on part of the Noticee.
IX. Allegation w.r.t. delay in processing of transfer requests of physical
shares
95. The DA observed that the Noticee in 8 instances processed the transfer
requests of physical shares after cut-off date of April 1, 2019 and accordingly
violation of Regulation 40 (1) of LODR Regulation read with SEBI Circular dated
September 07, 2020 and Clause 3 of Schedule III read with Regulation 13 of
RTA Regulations was established against the Noticee.
96. In response to the same, the Noticee has submitted that out of these eight
instances, six instances pertained to transfer of physical shares from the
nominees of the President of India to the President of India and it was not a
transfer per se as the shares were not held by the transferors in their personal
capacity, but as nominees to the President of India. The shares were
transferred pursuant to explicit directions to that effect from the Ministry of
Defense.
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97. The DA had rejected the Noticee’s submission stating that the prohibition in
respect of the transfer of physical securities was absolute and no exception or
exemption was provided in this regard.
98. The Noticee, in his response to the present SCN, has submitted that the DA
has not considered the contention of the Notice that the movement of shares
did not amount to transfer. The “processing” of the requests was not an actual
transfer of the shares but merely a deletion of the nominees’ name from the
shares, thereby making the President of India the sole owner of the shares.
Further, neither did the nominees pay any consideration for the shares in
question nor did they ever receive any dividends resulting from the shares.
Furthermore, there were no executed transfer deeds while processing the
requests since only the names of the nominees were deleted.
99. For determining the issue, I refer to Regulation 40(1) of the SEBI LODR
Regulations which reads as follows.
“Save as otherwise specified in provisions of securities laws or Companies Act
2013 and rules made thereunder, the listed entity shall also comply with the
requirements as specified in this regulation for effecting transfer of securities:
Provided that requests for effecting transfer of securities shall not be
processed unless the securities are held in the dematerialised form with a
depository:
Provided further that transmission or transposition of securities held in
physical or dematerialised form shall be effected only in dematerialised form.”
100. The language of the provision is very clear that no transfer of security can
be effected unless the securities are held in dematerialized form. The intent of
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the regulation is to mandate the dematerialization (demat) of securities for all
transfers, transmissions, and transpositions. Therefore, it is necessary to
examine what amounts to transfer of securities.
101. The DA has observed that there was no exemption to any category of
person and the prohibition in respect of the transfer of physical securities was
absolute. While I agree with the said observation of the DA, it is also required
to be examined whether the shares were in fact transferred or not in line with
the submission of the Noticee. I refer to Section 112 of the Companies Act,
2013 which inter alia provides that the President of India or the Governor of a
State, if he is a member of a company, may appoint such person as he thinks
fit to act as his representative at any meeting of the company or at any meeting
of any class of members of the company. Further, the person so appointed may
be deemed to be a member of such a company and shall be entitled to exercise
the same rights and powers, including the right to vote by proxy and postal
ballot, as the President or, as the case may be, the Governor could exercise as
a member of the company. Thus, it is clear that the President of India may
nominate any person as his representative. Whether the transfer of shares from
representatives of President of India to the President of India would amount to
transfer or not, has not been examined by the DA.
102. In terms of Section 56 of the Companies Act, a company shall not register
a transfer of securities of the company, or the interest of a member in the
company in the case of a company having no share capital, other than the
transfer between persons both of whose names are entered as holders of
beneficial interest in the records of a depository, unless a proper instrument of
transfer, in such form as may be prescribed, duly stamped, dated and executed
by or on behalf of the transferor and the transferee and specifying the name,
address and occupation, if any, of the transferee has been delivered to the
company by the transferor or the transferee within a period of sixty days from
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the date of execution, along with the certificate relating to the securities, or if no
such certificate is in existence, along with the letter of allotment of securities.
103. Thus for a valid transfer of securities, the names of both the transferor as
well as transferee shall be mentioned in the records of the depository and there
shall be an instrument of transfer in such form as may be prescribed. It is not
disputed by the DA that the shares were earlier held by the representatives of
President of India and were transferred to President of India. Considering the
legal requirements of the provision, the intent and purpose behind the
requirements, I agree with the submissions of the Noticee that this was not a
‘transfer’ as such. The “processing” of the requests was not an actual transfer
of the shares but merely a deletion of the nominees’ name from the shares’
records, thereby making the President of India the sole owner of the shares.
The representative of President of India was not the owner of the shares in the
first place itself. Further, the submission of the Noticee is also correct that the
obligation is upon the listed entity and as an agent of the listed entity the
Noticee only operated as per and under the instructions of the issuer company,
and thus, no fault can be found on the conduct of the Noticee. Accordingly, I
do not agree with the observation of the DA for these six instances.
104. For the remaining two instances, it has been submitted that the transfer
requests were processed in exceptional circumstances, taking into account the
hardships suffered by the applicants. For folio no. 1437016, it was submitted
that the transfer deed in regard to the folio was executed in 1997 and was
lodged with MCS Ltd., the erstwhile RTA of SBI. The request was first rejected
in 1999 on account of signature mismatch. The transfer request could not be
re-lodged for a long time, as the transferor was not traceable. The transferor
was subsequently only found in 2021, and the transfer request was accordingly
re-lodged again pursuant to a letter dated October 14, 2021. Thus, it was
evident that the transferees in the present case had to wait for more than 20
years to receive the shares. Accordingly, taking account of exceptional
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circumstances and the hardship caused to the transferees, the transfer was
processed in pursuance to the discussion with the client company. The transfer
was approved by the company in its Share and Bonds Transfer-cum-
Transmission Committee meeting dated December 3, 2021.
105. It is submitted that the transfer deed in regard to the folio no. 01148705 was
executed in 1994. The request was rejected first in 1995 and then in 2005 on
account of signature mismatch. The seller of the shares could not be traced for
a long time. Finally, she was found and agreed to give a no-objection certificate
in respect of the said transfer. The rejection letters dated July 28, 1995, and
December 20, 2005, and no-objection certificate dated January 15, 2022 have
been provided. In this case too, the transferee had to wait for more than 20
years to receive the shares. Accordingly, taking account of exceptional
circumstances and the hardship caused to the transferees, the transfer was
processed in discussion with the client company. The transfer request was
approved by the company in its Share and Bonds Transfer-cum-Transmission
Committee meeting dated February 8, 2022. As submitted by the Noticee, no
prejudice was caused to any investors/client company and thus, a lenient view
be taken in regard to the said violation.
106. I have noted the Noticee’s submission and it is an admitted position that the
transfer requests of physical shares were processed after the cut-off date of
April 1, 2019. However, the Noticee has tried to justify it citing exceptional
circumstances surrounding the case(s). The DA while acknowledging the
exceptional circumstances had rejected the argument stating that the Noticee
was required to adhere to the mandate of law in form and function, especially
when the existing Regulations and Circulars expressly forbade the transfer of
securities in a physical manner. It is stated by the DA that even if these two
instances were indeed exceptional circumstances, it was incumbent on the
Noticee to ensure that its actions were in line with the regulatory requirements.
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107. The Noticee has also placed reliance on the judgment of of Hon’ble
Supreme Court in the matter of SEBI v. Ajay Agarwal4 wherein the following
was observed:
“33. If we look at the legislative intent for enacting the said Act, it transpires that
the same was enacted to achieve the twin purposes of promoting orderly and
healthy growth of securities market and for protecting the interest of the investors.
The requirement of such an enactment was felt in view of substantial growth in
the capital market by increasing the participation of the investors. In fact such
enactment was necessary in order to ensure the confidence of the investors in
the capital market by giving them some protection.
34. The said Act is pre-eminently a social welfare legislation seeking to protect
the interests of common men who are small investors. It is a well-known canon
of construction that when the court is called upon to interpret provisions of
a social welfare legislation the paramount duty of the court is to adopt such
an interpretation as to further the purposes of law and if possible eschew
the one which frustrates it…”
108. In the present case, the exceptional circumstances have been
acknowledged by the DA also. It is submitted that the transferees, for no fault
of their own, faced significant delays of over two decades due to traceability
issues. Since the requests were processed by the Noticee to address the
hardships caused to investors and the delay in processing of the said requests
was not attributable to the Noticee, it would be appropriate to hold that the
Noticee has not violated the spirit of the regulations. Therefore, I am not
inclined to draw any adverse inference against the Noticee on this count.
X. Allegation w.r.t. absence of proper system to identify folios for enhanced
due diligence
109. It was alleged that the Noticee did not have proper system to identify folios
for enhanced due diligence. It was observed that during the inspection period
4 (2010) 3 SCC 765
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the request for issuance of duplicate shares of one Mr. Rakesh Kumar Verma
for the folio of United Drilling Tools Ltd. was processed by the Noticee without
the availability of crucial details such as PAN and Bank Account. The system
of the Noticee did not flag this folio for enhanced due diligence, as no alert was
found. Thus, the violation of Clauses 13 and 14 of part II to Annexure of the
SEBI Circular dated April 20, 2018 was observed by the DA.
110. The Noticee, in his response, submitted that it has a system in place to
detect folios in respect of which PAN or bank details are missing. The program
runs on a weekly basis and flags folios based on the availability of the PAN or
the lack thereof. The Noticee receives a system based alert whenever a
request is raised from any of these folios. The Noticee had provided a sample
screenshot of such an alert during inspection. The screenshot provided by the
Noticee was not considered by the DA as it did not pertain to the folio no. 13346
(which was being examined) and no specific system-based alert for that folio
was found.
111. I note that Clause 13 of the Annexure II of the SEBI Circular dated April 20,
2018 inter alia provides that the Issuer Company and the RTAs shall exercise
enhanced due diligence in cases as specified therein including for cases
wherein PAN / bank account details are not available in the folio. As per Clause
14 of the said Circular, RTAs shall have system based alerts for processing of
all transactions in such account folios referred in Clause 13. Further, in case
any request for transactions is received from such folios, the Issuer Company
and RTAs shall exercise enhanced due diligence. For the purpose of
exercising enhanced due diligence, Issuer Companies and/or RTAs shall call
for documents related to proof of identity/address, PAN and bank details, and
such other additional procedures that would enable the Issuer Company/RTA
to reasonably satisfy itself about the genuineness of the request.
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112. The Noticee has submitted that in relation to the specific folio, the
documents mentioned in the clause were provided by the applicant in the
application itself. Additionally, it is submitted that the Noticee verified the PAN
card on the income tax website and other platforms, confirming that the PAN
card provided by the applicant was linked to the Aadhar card submitted by the
applicant.
113. I note that it is correct to state that the requirement does not expect every
single alert to be stored. Also, the Noticee’s provision of sample alert cannot
be set aside purely because it did not pertain to the specific instance when
there is no requirement to store all the alerts. Also, system based alerts are
tools or means to identify the folio which requires enhanced due diligence. The
intent of the requirement is to have a system for identifying the folio for
enhanced due diligence and then exercising the enhanced due diligence.
Noticee has submitted that it has the requisite system and for the present case
the necessary documents required for enhanced due diligence were available
and additionally the same were checked by Noticee from independent sources.
The said submission has not been disputed by the DA.
114. It is mandate of the law that for enhanced due diligence issuer Compay(ies)
and/or RTA(s) are required to call for additional documents related to proof of
identity/address, PAN and bank details to reasonably satisfy itself about the
genuineness of the request. Considering that SEBI’s observation was based
on a single instance, the sample alert shown by the Noticee and the fact that
enhanced due diligence (w.r.t. the specific instance) was indeed carried out by
the Noticee, I am inclined to give the benefit of doubt to the Noticee and
disagree with the findings of the DA on this count.
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XI. Allegation w.r.t. non-issuance of letters to shareholders
115. During the inspection, it was observed that the Noticee had failed to furnish
copies of letters sent to the shareholders in 12 out of 14 sample cases for
collecting PAN and bank details for folios where such information was not
available. After considering the reply filed by the Noticee, the DA established
the violation of Clause 12 of part II to Annexure of the SEBI Circular dated April
20, 2018 against the Noticee on this count.
116. The Noticee had submitted before the DA that the actual obligation to ensure
the collection of PAN and bank account details rests with the listed company
and the only role of an RTA in that regard is facilitation. The Noticee could not
suo moto undertake the task of collecting PAN and bank details unless it was
authorised by the listed company to do the same. In 11 out of the 12 alleged
instances, the respective companies did not approve the sending of intimations
to such shareholders. In 1 instance, the intimation was not sent owing to a
court case which was ongoing at the time and concerned the shares in
question. In this regard, the Noticee provided the ‘stop transfer’ order in respect
of the company. The DA rejected the argument of the Noticee based on the
unavailability of the copies of letters sent to the shareholders.
117. The Noticee has submitted that from the legal provision, it is clear that the
obligation to take special efforts for the collection of PAN and bank account
details rests solely with the issuer companies. The role of the RTA is only to
operate under the instructions of the issuer company and not to proactively
issue letters for such collection out of its own volition. Further, the Noticee has
also referred to the SEBI consultation paper on ‘Review of Regulatory
Framework for Registrars to an Issue and Share Transfer Agents’ dated
August 7, 2025 which addresses and clarifies the relationship between a client
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company and its RTA to state that the RTA is only the agent of the company
which acts as the principal.
118. To address the issue, I now refer to the relevant clause of the SEBI Circular
dated April 20, 2018 which is reproduced below:
“12. Issuer Companies through their RTAs shall take special efforts to
collect copy of PAN, and bank account details of all securities holders
holding securities in physical form as mentioned below.”
119. The language of the provision is unambiguous and the obligation on the
RTA is not direct rather flowing through the issuer companies. RTA activities
can be undertaken by the issuer companies directly/ in-house or they can
outsource such RTA activities to SEBI Registered RTAs. I also refer to the
clause 4 of the said Circular which inter alia provides that issuer companies
shall strictly monitor the activities of their RTAs and ensure compliance of
provision of this circular. It is clarified that where share transfer agent activities
are carried out in-house by issuer companies, the issuer companies shall
ensure that their in-house share transfer activities comply with the relevant
norms as applicable to them. Thus, even the Circular acknowledges the role of
Issuer Companies in ensuring compliance with the legal requirements. I also
refer to Regulation 2(f) of the RTA Regulations, which defines ‘registrar to an
issue” as the person appointed by a body corporate or any person or group of
persons to carry on the following activities on its or his or their behalf. Thus,
the RTAs acts as the agent for their appointed entity including the issuer
companies. The Noticee has also referred to the SEBI’s Consultation paper
dated August 7, 2025 for ‘Review of Regulatory Framework for Registrars to
an Issue and Share Transfer Agents’ which also acknowledge the principle-
agent relationship between the issuer company and the RTAs. It is also
observed in the said consultation paper that even when RTA functions are
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outsourced to an RTA, the ultimate responsibility for compliance with the
provisions of the Companies Act remains with the Company only considering
that the RTA functions as the agent of the Company. Further, no allegation has
been made against the issuer company in this regard.
120. Having considered the provisions and submissions, I am of the view that
the matter requires a more nuanced analysis than what was undertaken by the
DA. The text of Clause 12 of the SEBI Circular dated April 20, 2018 provides
that “Issuer Companies through their RTAs shall take special efforts to collect
copy of PAN, and bank account details.” The phrase “through their RTAs” is
significant. It designates the RTA as the operative instrument through which
the issuer company discharges this obligation. The obligation is therefore not
simply one of facilitation; the RTA is the designated channel of compliance.
However, the Circular also acknowledges, in Clause 4, that issuer companies
shall strictly monitor the activities of their RTAs and ensure compliance. This
creates a structure in which the issuer company bears primary responsibility
and the RTA’s obligation to act is contingent upon the issuer company’s
authorisation and direction.
121. In the present case, the Noticee has submitted, and it has not been disputed,
that in 11 out of 12 instances, the respective companies did not approve the
sending of such intimations. For the remaining instance, the intimation was not
sent owing to a court case which was ongoing at the time and concerned the
shares in question. Having said that, I note that the RTA cannot be expected
to issue letters to shareholders without the express authorisation of the
principal issuer company, particularly where the obligation under the Circular
rests with the company. In the present proceedings, the records suggest that
no allegation has been made against the issuer companies concerned. In
these circumstances, while the spirit of the Circular requires that every effort
be made to collect PAN and bank details, it is not possible to hold the Noticee
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solely liable for a failure that is, in the peculiar facts of this case, attributable
primarily to the inaction of the issuer companies. Accordingly, the violation of
Clause 12 of part II to Annexure of the SEBI Circular dated April 20, 2018 is
not established against the Noticee.
XII. Allegation w.r.t. wrong reporting in half-yearly reports
122. The DA noted that the Noticee did not report changes in the appointment
and resignation of directors and key personnel in Sections III B and Section III
D (iii) respectively, of the half-yearly reports filed for the periods ending
September 30, 2021, March 31, 2022, and September 30, 2022. Accordingly,
violation of SEBI Circular No. CIR/MIRSD/7/2012 dated July 05, 2012 read with
SEBI Circulars No. RRTI Circular No. 1(94-95) dated October 11, 1994, SEBI
Circular No. CIR/MIRSD/5/2011 dated June 17, 2011 and Regulation 14 (5)
and Clause 3 of Schedule III read with Regulation 13 of RTA Regulations was
established against the Noticee.
123. The Noticee has submitted that the non-disclosure of the changes in the
appointment and resignation of directors and key personnel was an inadvertent
omission. The violation was technical in nature and did not adversely affect any
client/investors. The Noticee has since regularly reported such changes in their
half yearly reports and no such observation has been made in the 2022-23
Inspection.
124. I note that the Noticee has admitted to the violations albeit termed them as
technical in nature. Be that as it may, the violation of provisions of SEBI Circular
dated July 05, 2012 read with SEBI Circulars No. RRTI Circular No. 1(94-95)
dated October 11, 1994, SEBI Circular dated June 17, 2011 and Regulation
14 (5) and Clause 3 of Schedule III read with Regulation 13 of RTA Regulations
stands established against the Noticee.
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Concluding observations:
125. Based on the facts and circumstances of the case and the discussion
hereinabove, the following violations are established against the Noticee.
i. For the absence and on count of the validity of NISM Certification, the
violation of Section III (Compliance Certification)’ of Annexure to SEBI Circular
no. CIR/MIRSD/7/2012 dated July 05, 2012, Regulations 3, 6, 9 and 10 of
CAPSEM Regulations, SEBI Notification no. LAD-NRO/GN/ 2009-
10/18/175577 dated September 04, 2009 and Clauses 3, 16 and 29 of
Schedule III read with Regulation 13 of RTA Regulations;
ii. For non-maintenance of signature card, the violation of Clause 25(a) and
1(m) of Schedule-1 read with Clause 8 of the Model agreement of “Draft of
Agreement between the STA and the Company” of Annexure B of Schedule II
of SEBI Circular “Instruction to Registrars to an Issue/ share Transfer Agents”
dated October 11, 1994 and Clause 3 of Schedule III read with Regulation 13
of RTA Regulations;
iii. For delay in processing of 54 demat requests, the violation of RRTI Circular
dated May 20, 1999 read with Clause 5(c) Schedule III read with Regulation
13 of RTA Regulations;
iv. For delay in processing of re-lodgement request, improper
documentation for processing of re-lodgement request and non-
availability of signature for the transfer of securities in one of the folio,
the violation of Clause A (1) of Schedule VII read with Regulation 40(7) of
LODR Regulations, Regulation 40(3) of LODR Regulations and Clauses 2, 3,
5 (c) of Schedule III read with Regulation 13 of RTA Regulations;
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v. For wrong reporting in half-yearly reports, the violation of provisions of
SEBI Circular dated July 05, 2012 read with SEBI Circulars No. RRTI Circular
No. 1(94-95) dated October 11, 1994, SEBI Circular dated June 17, 2011 and
Regulation 14 (5) and Clause 3 of Schedule III read with Regulation 13 of RTA
Regulations.
126. Having observed as above, the issue that needs determination is what
should be the appropriate enforcement action against the Noticee. The DA has
recommended regulatory censure and that the Noticee may be prohibited from
taking up any new clients/assignments qua its activities as RTA for a period of
one (1) year. The Noticee has submitted that most of the violations are
technical and venial in nature and keeping with the true intent and purpose of
an inspection, adequate and appropriate steps have been taken by Noticee to
rectify the issues that had been identified. As submitted, the endeavors of the
Noticee in this respect are evident from the observations of the inspection team
in the post-inspection analysis reports in the 2022-23 Inspection (PIA-2) and in
the 2024 Inspection (PIA-3) vis-à-vis the allegations in the SCN. (Copy
provided)
127. The Noticee has also submitted that issuing adverse directions against it will
be against the principle of proportionality. SEBI has already imposed a penalty
of ₹10 Lakh on the Noticee for the alleged violations and non-compliances
during the IP in the adjudication proceedings. Also, the IP was during the
second and third waves of the COVID pandemic.
128. Having regard to the totality of facts and circumstances, I am of the
considered view that the following factors are relevant for the purpose of
determining the appropriate direction to be issued against the Noticee. First,
the violations established are operational and technical in nature. None of the
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established violations involved fraud, deliberate misrepresentation, or a willful
attempt to circumvent regulatory requirements. Second, the violations occurred
substantially during the inspection period of April 1, 2021 to September 19,
2022, which coincided with the unprecedented operational disruptions caused
by successive waves of the COVID-19 pandemic, including Central and State
Government-imposed lockdowns that materially impacted normal processing
timelines. Third, the Noticee has demonstrated a clear and measurable
trajectory of improvement across successive inspection periods. The
comparison of PIA-1, PIA-2 and PIA-3 findings on record shows that nearly all
the violations established in the present proceedings had been substantially
addressed and were no longer observed in subsequent inspections. Fourth, no
demonstrable loss to any investor, or to the integrity of the securities market,
has been established as a consequence of the violations. Fifth, a penalty of
₹10 lakhs has already been imposed on the Noticee through adjudication
proceedings arising from the same inspection and the same findings of fact.
129. While adjudication and enquiry proceedings serve different regulatory
purposes, the principle of proportionality requires that the totality of regulatory
consequences imposed on a party for the same underlying conduct are
commensurate with the gravity of that conduct. Considering the facts and
circumstances of the case and the mitigating factors, imposing a prohibition
from taking up new clients or assignments for 12 months (as recommended by
the DA) in addition to the monetary penalty already levied would be harsh and
disproportionate. Accordingly, in my considered opinion, a regulatory censure
to Noticee would be appropriate and justified in the present case.
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Order
130. In view of the above, I, in exercise of the powers conferred upon me under
Section 12(3) of the SEBI Act read with Section 19 thereof and Regulation
27(5) of the Intermediaries Regulations, issue a regulatory censure to the
Noticee.
131. A copy of the Order shall be served on the Noticee and the concerned
Market Infrastructure Institutions for necessary action and record.
AMARJEET SINGH
PLACE: MUMBAI WHOLE TIME MEMBER
SECURITIES AND EXCHANGE BOARD OF INDIA