Explain the consequences of forged transfer under the Companies Act, 2013. What is the normal practice the company follows to avoid the consequences of forged transfer ?

When the instrument of transfer (also known as transfer deed) in Form SH-4 contains the forged signature of the transferor and is presented to the company by the transferee along with the share certificates, it is called a forged transfer deed. Further Section 57 of the Companies Act, 2013 states that if any person deceitfully personates as an owner of any security or interest in a company, or of any share warrant or coupon issued in pursuance of this Act, and thereby obtains or attempts to obtain any such security or interest or any such share warrant or coupon, or receives or attempts to receive any money due to any such owner, he shall be punishable with imprisonment for a term which shall not be less than one year but which may extend to three years and with fine which shall not be less than one lakh rupees but which may extend to five lakh rupees. The consequences of forged transfer are detailed as below: A forged transfer is a nullity and the original owner of shares remains the shareholder and the member of the company. A forged transfer deed has no legal effect. The company is bound to restore the name of the transferor on the register of members (maintained in Form MGT-1 u/s 88 of the Act) as decided in a case law Peoples Insurance Company v Wood, 1961. A company does not incur any liability in case of a forged transfer if the name of the transferor is restored on the register of members. However, if a company (without obtaining an indemnity bond from the transferee) issues new share certificates to the transferee who made the share transfer application using a forged transfer deed and subsequently, on receipt of new share certificates from the company, the illegal transferee sells the shares to an innocent buyer, then the company is liable to compensate the innocent buyer if it refuses to register him as a member or if the name of the innocent buyer has been removed, on the application of the true owner of the shares. Normally, companies write to the transferor about the lodgement of the transfer deed to avoid the consequences of a forged transfer. If a company incurs any loss due to a forged transfer, it may recover the losses independently from the person who lodged the forged transfer.