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Section 46: Certificate of shares

Companies Act • Official Statutory Text & Practice Guide

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Act 2013
Section 45 All 470 Sections of Companies Act Section 47
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Company Sec 2(20) Director Sec 2(34) Tribunal Sec 2(90)

Legal Commentary & Landmark Judgments: Section 46

Section 46 of the Companies Act, 2013 governs the execution, evidentiary value, and regulatory sanctity of share certificates, establishing them as prima facie evidence of legal title while prescribing stringent anti-fraud mechanisms and severe criminal penalties for the unauthorized issuance of duplicate certificates.

  • Prima Facie Evidentiary Character of Title: A share certificate issued under the common seal of the company (or signed by two directors or by one director and the company secretary where the company has no seal) specifying the shares held by any person constitutes prima facie evidence of the title of that person to such shares.
  • Conditions Precedent for Duplicate Certificates: A duplicate share certificate cannot be issued unless the original is proved to have been lost or destroyed, or has been defaced, mutilated, or torn and surrendered to the company, in strict compliance with Rule 6 of the Companies (Share Capital and Debentures) Rules, 2014.
  • Penal Sanctions for Fraudulent Duplication: If a company with intent to defraud issues a duplicate certificate of shares, the company is punishable with a fine of not less than five times the face value of the shares involved, extendable to ten times or Rs. 10 crore, whichever is higher, and every officer in default is liable for criminal fraud under Section 447.
Key Landmark Precedents:
  • Dixon v. Kennaway & Co., [1900] 1 Ch 833: Established the doctrine of estoppel by share certificate: a company that issues a share certificate is estopped from denying the title of a bona fide purchaser who purchased the shares in good faith relying upon the representations made in that certificate.
  • Gopal Paper Mills Ltd. v. Commissioner of Income Tax, AIR 1970 SC 1750: The Supreme Court affirmed that a share certificate is prima facie evidence of title; the person whose name is inscribed on the certificate is prima facie the legal owner of the shares vis-a-vis the company and third parties.
  • S.P. Chengalvaraya Naidu v. Jagannath, (1994) 1 SCC 1: Applied in corporate disputes to hold that duplicate share certificates procured by fraud, concealment of prior transfers, or false police loss reports are void ab initio, as fraud vitiates all solemn commercial and statutory acts.
Courtroom Practice & Strategic Litigation Guidance:

When advising a company on requests for duplicate certificates, ensure strict procedural compliance: require a police non-traceable report, public notices in English and vernacular newspapers, a stamped indemnity bond, and entry into Form SH-2 (Register of Renewed and Duplicate Share Certificates). Directors who approve duplicates without these safeguards risk personal prosecution under Section 447 if rival claimants surface.

Section 45 All 470 Sections of Companies Act Section 47