Suppose you are holding few shares or mutual fund investments in physical format with joint holding. Now you want to change them into demat form under your existing joint holding account. But you noticed that order of holding in physical format with that of demat account holding is different. Then your request for demat conversion may get rejected due to order of the holders is not matching. In such a situation Transposition of Securities facility will come into picture and using this facility you can easily convert them to demat form.
To simplify the above condition, we will see with one example. Suppose Mr.A and Mr.B holding few shares jointly. Where Mr.A is first account holder and Mr.B as second account holder. They have demat account too where Mr.B is first account holder and Mr.A is second account holder. In such a situation if Mr.A and Mr.B apply for demat conversion of their existing shares then it will automatically get rejected mentioning the reason that order of holding shares not matching.
So in such a situation Mr.A and Mr.B need to open multiple demat accounts for each sequence (Mr.A & Mr.B and Mr.B & Mr.A). Else they need to change the order of the holding first with issuing company with matching demat account then they need to request for demat conversion.
But instead of doing such cumbersome activity, if you submit Transposition-cum-dematerialisation, then you can get shares dematerialised in the same account if the names appearing on the certificates match with the names in which the account has been opened but are in a different order.
To avail this facility you need to submit both Transposition form and DRF form (Demat request form) with your DP. But remember the below few things.
1) Signatures and number of holdings must be same. Means if signatures mismatch then your DRF request may get rejected. Also holding members count must be same.
2) This is the free facility provided by your depository.
3) Just for simplicity I mentioned holding as shares. But you can use this facility for conversion of securities. (Shares, Mutual Funds and Bonds etc.)