Tribunal order puts spotlight on demat share fraud

Company dematted shares in excess of paid-up capital and introduced them into the market

In June 1997, a Bengaluru-based company faced a problem of fake share certificates. The Motor Industries Co (Mico) was listed both in Bengaluru and also in Mumbai. And fake share certificates abounded in the financial capital. 

It saw one possible solution to the problem. Dematerialising the shares by approaching a newly created depository which held shares in electronic form.  Centralised depositories were seen as a solution to to prevent such cases, as well as frauds related to the creation of excess shares. 

But a recent tribunal order drew attention to such a fraud which happened even after the advent of