The Supreme Court ordered Eicher Motors to compensate investor Adesh Kaur after she was a victim of fraud. In 2012, an impersonator changed Kaur's address on file and had her shares transferred. When Kaur did not receive dividends in 2013, she discovered the fraud. Lower courts ruled in her favor but orders were overturned until the Supreme Court ruled Eicher Motors was responsible for rectifying its records and purchasing replacement shares for Kaur within two weeks, valued at approximately 2.19 crore rupees. The case established companies are liable for acts of agents and must make shareholders whole after fraud to uphold investor protection.

1. ANALYSIS ON SUPREME COURT ORDERING
EICHER MOTORS TO COMPENSATE INVESTOR
(EICHER MOTORS VS ADESH KAUR
- BY KETAN R JAIN

2. Back Ground of the Case
• Ms. Adesh Kaur, resident of Punjab,
and had acquired in all 903 equity shares in Eicher Motors
in the year 199495.
• It appears that sometime in 2012, another person as Ms. Adesh
Kaur, who is a resident of Mumbai impersonated the Appellant
(Adesh Kaur) and requested Eicher Motors to change the address
from Punjab to Mumbai.
• Eicher Motors issued duplicate certificates in favour of the
impersonator who, in turn, on 10.12.2012, transferred the said
shares to one Vikas Tara Singhz resident of Malad, Mumbai by
using the forged signature of Ms. Adesh Kaur.

3. Company Law Board
• The fraud took place in 2013. Kaur that year didn’t get the dividend
Eicher Motors declared. When she made an enquiry with the
company about the dividend and also about the formalities to
convert her physical shares into demat shares, she came to know
about the fraud and that her name was not there in the register of
shareholders.
• As soon as she became aware of the fraud that was perpetrated on
her, the appellant requested the Company to issue revalidated
fresh share certificates for the said 903 equity shares on
17.09.2014.
• Since
this was not done, despite repeated reminders for the
same, a Company Petition was filed on 31.07.2015 before
the Company Law Board, which was then taken up under the
Amended Act by the National Company Law Tribunal.

4. NCLT’s Judgement
• NCLT also stated that the original share certificates, which were
still in physical form with the appellant, could get demated
after due confirmation from the register which would be
carried out pursuant to the aforesaid order
• NCLT gave judgement in Favor of Ms. Adesh Kaur stating, “Sebi
guidelines provide that a company is liable for all acts of its agents
and cannot shirk the responsibility toward the shareholders and
mandates that Eicher Motors has to make good the loss by
purchasing shares from the open market for the aggrieved
shareholder (Kaur),

5. Appeal by Eicher Motors
• Aggrieving by Order of National Company Law
Tribunal, Eicher Motors made and Appeal to National
Company Law Appellate Tribunal
• NCLAT set aside the order of Tribunal’s (NCLT) order
saying it was not correct for it to exercise power to
rectify the register

6. Appeal by Adesh Kaur
• Ms. Kaur appealed to the Supreme Court which set
aside the NCLAT order and reinstated the tribunal’s
order.
• The Supreme Court Stated, “We are of the view that
the Tribunal was absolutely correct in not relating the
appellant to any other proceedings in as much this is
an open and shut case of fraud”.
• The apex court directed the company to rectify its
register on the physical share certificate concerned
and the depository to rectify the demat accounts.

7. CDSL’s Inability to rectify
records
• Thereafter, Kaur approached Eicher Motors to rectify its
register. However, CDSL, the depository expressed its
inability to rectify the demat accounts.
• Subsequently, Kaur approached the Supreme Court by
way of a contempt petition.

8. Provision Violated in the
Case:
• This case pertain to section 397 & 398 of Companies act, 1956
which relates to Application to CLT for relief in cases of oppression
and Application to CLT for relief in cases of mismanagement.
• As per Section 84(3) of the Companies Act 1956, If a company with
intent to defraud renews a certificate or issues a duplicate thereof,
the company shall be punishable with fine which may extend to ten
thousand rupees and every officer of the company who is in default
shall be punishable with imprisonment for a term which may extend
to six months, or with fine which may extend to ten thousand rupees,
or with both.
• Eicher Motors has issued duplicate shares without following the
proper procedure and without exercising due care and diligence.
Due procedure that had been outlined in RTI Circular had not been
followed.

9. Provision Violated in the
Case:
• When the duplicate shares were issued, stock
exchanges were not informed and neither was an
advertisement in a widely circulated newspaper issued
as the value of the shares were far greater than Rs.
10,000/-.
• The Original Share Certificates which were still in
physical form with the Appellant and has not got
converted to demat account and Company or CDSL has
rectified its records. As a result, Section 59 of the act
was violated.

10. Decision by Supreme
Court
• The Supreme Court has come to the rescue of small
investors by directing Eicher Motors to purchase some of
its shares from the open market and hand them over
within two weeks to one its shareholders - Adesh Kaur.
She was a victim of a fraud.
• The company would have to purchase 9,030 shares,
valued about Rs 2.19 crore on the current market price.

11. THANK YOU