Beneficial interest in shares ‑ Scope of the section relating to declaration by persons not holding beneficial interest in share ‑Declaration of Beneficial Interests in Shares Rules, 1975 framed thereunder - Companies Law - Circular : No. 8/2 (Misc.)/75‑CL‑V,

Circular : No. 8/2 (Misc.)/75 ‑ CL ‑ V, dated 31 ‑ 3 ‑ 1976. Subject:- Beneficial interest in shares ‑ Scope of the section relating to declaration by persons not holding beneficial interest in share ‑ Declaration of Beneficial Interests in Shares Rules, 1975 framed thereunder Query : In sub‑section (2) of section 187C, the words beneficial interest and beneficial owner have been used. It requires a person having beneficial interest in ownership to file a declaration with the company concerned. Under the rules, Form II has to be filed by persons having a beneficial interest. In the rule, the words used are beneficial interest and not beneficial owner . In the form also, the words used are beneficial interest . As a result, in a case where shares are given to the banks and pledged to secure loans, the banks insist on filing Form II and they also want the respective clients to certify as to the facts stated in the said form. This is on the basis that the bank has got beneficial interest as pledgee. Again, under sub‑section (3), whenever there is a change in beneficial interest the respective persons have to file declaration in Form II. The difficulty in the customers certifying as to the facts in Form II as may be filled in by the bank is that they themselves file Form II because they are the beneficial owners of the shares and the shares are also registered in their names. If they certify as to the facts contained in Form II filed by the banks indicating beneficial interests of the banks as pledgee that will be in contradiction to the facts already stated in Form II filed by them. The whole problem arises because of the synonymous use of the words beneficial interest and beneficial owner in the section while in the form and rules only beneficial interest is used. The Department may kindly clarify that merely because there is a beneficial interest in a pledgee there is no necessity of complying with the requirement of filing the form in respect of beneficial interest. Answer : The Department has carefully considered the matter and is of the view that in the circumstances explained by the chamber, Form I should be filed by the bank when the shares pledged with them are transferred to its name, the beneficial interest of the shares continuing to remain with the customers pledging the shares with the banks. Form II will, therefore, be filed by the customer as he is the beneficial owner of the shares.