Transfer to be by operation of law under IEPF –Taken long time to clarify; still clarification awaited!


MCA has added yet another Circular to the throng of circulars w.r.t. IEPF vide its general circular no 07/2017 dated 5th June, 2017[1]. It provides that companies may, for transferring the shares to IEPF, follow the procedure as in the case of transmission.

The said circular states that stakeholders have sought clarification from the IEPF Authority with respect to the issuance of duplicate share certificates under Rule 6 (3) (d) of the Investor Education and Protection Fund (Accounting, Audit,  Transfer and Refund) Rules, 2016 (‘IEPF Rules’).

Since transfer of shares under the IEPF Rules takes place as a consequence of operation of law, it becomes similar to that of transmission which also takes place as a result of operation of law, therefore, companies may follow the transmission procedure while transferring shares to the IEPF demat account. While such a stand on the part of the IEPF Authority has come after a long time, we have from the very inception taken this view that transfer of shares under IEPF is a transfer inter-vivos and is a result of operation of law and not by consent of the parties.

Transmission v/s Transfer of shares to IEPF demat account
Transmission has not been defined under the Companies Act, 2013 (‘Act, 2013’), however, section 56 of the Act, 2013 provides that – “Nothing in sub-section (1) shall prejudice the power of the company to register, on receipt of an intimation of transmission of any right to securities by operation of law from any person to whom such right has been transmitted.

“Transmission” means with regard to shares that on the death of the last holder of shares there is by operation of law an instantaneous transfer of ownership to their heirs of the last holder from the moment of the death. It may be necessary to obtain a succession certificate or letters of administration, but the property is deemed to vest not on the date of grant of the certificate, but on the date of the death.

On the other hand, even though the transfer of shares under the IEPF Rules is taking place as a result of operation of law i.e. under section 124 (6) of the Act, 2013, however, the transferee in this case, i.e. IEPF Authority is a mere custodial holder of shares till the time a legitimate claim is made by the original shareholder. This transfer is not in the nature of permanent vesting of property so as to make the IEPF a permanent owner of the shares but it is only a custodial transfer. In fact, it is a transfer until it is reclaimed by the original shareholder.

Transmission does provides for permanent vesting of the property on the legal heirs unlike the transfer of shares to IEPF.

Therefore, basically, there are three concepts on transfer and transmission:

  1. Transfer which is by the consent of the parties and requires compliance of section 56 (1) of the Act, 2013;
  2. Transfer which happens as a result of operation of law but need not comply with the provisions of section 56 (1) of the Act, 2013. For example- transfer by way of scheme of arrangement[2]; and
  3. Transmission which is as a result of operation of other specific laws, i.e. Indian Succession Act, etc.

Transfer of shares under IEPF is a mid-way transfer where the companies are required to execute it as a case of transmission but name it as transfer.

Clarification on the documents required

Even though the Circular has clarified that instead of issuing duplicate share certificates, companies may follow the transmission process, however, the documents required for such transfer has not been explicitly stated.

Generally transmission involves the following procedure:

  • Application by the legal heir to the company for requesting transmission of the shares along with certain documents, so which generally includes:
  • Copy of the death certificate;
  • Probate or succession certificate;
  • Specimen signature; etc.

In our view, transfer of physical shares to IEPF should not require any of the above documents. Instead of the application under Rule 6 (3) (d) (i) of the IEPF Rules, companies may straight away make a corporate action converting  the physical shares into demat shares and thereafter transfer it to the IEPF demat account.


As a concluding remark, one is bound to say that, inspite of the trail of circulars w.r.t. IEPF, things are not cent percent clear and hence further clarification is expected from the Ministry, in the absence of which the matter is still left for interpretation leaving room for confusion in the mind of the stakeholders.


[2] Same has been held in the case of M/S Jay Bee Properties Private Limited & Others v.                                                          Sri Pawan Kumar Budhia & Others –

by  Pammy Jaiswal (

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