Blank Transfers :
A blank transfer is an instrument of transfer signed by the transferor in which the name of the transferee and the date of the transfer are not filled. But why blank transfer at all? You know that the ownership of shares in a company is generally transferred from one person to another by the execution of a document by the seller and the buyer. This document is variously described as a ‘transfer instrument’ or ‘transfer deed’ or simply ‘transfer’. But in a blank transfer, the seller only fills in his name and sign it. Neither the buyer’s name and signature nor the date of sale is filled in the transfer form. This will enable the buyer to sell the shares again to a subsequent buyer without filling his name and signature. The process of purchase and sale can be repeated any number of times with the blank deed and any transferee can fill in his name and date and get it registered in the company’s book. For such ultimate transfer and registration, the first seller will be treated as the transferor.
A blank transfer deed is not a negotiable instrument merely because it may be transferred by mere delivery. Accordingly, the title of the transferee acquiring shares through a blank transfer shall invariably be subject to the title of the transferor. Thus, the bonafide transferee from a person who has acquired a blank transfer deed by fraud does not acquire good title to the shares included in the deed.
The widespread practice of blank transfers which was prevalent before the Companies Act, 2013, lent itself to certain abuses, the most important of which were: (1) avoidance of transfer stamps; (2) concealment of the identity of the real beneficial owners behind their nominees; (3) evasion of tax by suppression of ‘secret’ profit invested in holdings on blank transfers.