Reason for writing this article is that, recently a message on 'WhatsApp' became 'viral' claiming that the Honourable Supreme Court of India has ruled that Nomination to the Co-operative Society Shares is enough and no more Will, Heirship Certificate, Succession Certificate etc shall be required to transfer the Right Title and Interest in the Flat of the Deceased. This created confusion and resulted in the flood of queries from clients and others.
The above-said 'WhatsApp' message did not elaborate or state the Judgement it relied upon, but it referred to the Judgement dated 10th March 2016 of the Honourable Supreme Court of India in the case of Indrani Wahi vs. Registrar of Cooperative Societies West Bengal and Ors (reported in (2016) 6 SCC 460). The meaning and interpretation of the said Judgement that the said 'WhatsApp' message spread in the popular domain is wrong and erroneous. It is important to understand this and the fact that, any person acting on such erroneous belief in the practical world exposes him/herself to legal risks which, can cause him/her to suffer loses.
All that the Honourable Supreme Court of India, in the above Order and Judgement, said was that , once a nomination is made by a member which is in a format prescribed by the Law, the Society and its officials have no choice but to transfer the shares in the name of the nominee irrespective of any objections raised by any other person/s claiming to be heirs and/or legal successors. The judgement reiterated that, the Society and/or its officials including that of Registrar of Co-operative societies, have no authority to decide on the 'Title' of the property or its succession, it must transfer the Shares in the name of the Nominee and continue to deal with the Nominee, as a member, unless otherwise directed by a competent court of Law. In the process, the Supreme Court of India did not script an alternate route of succession as the said WhatsApp message would want us to believe. In fact, the Apex Court in the concluding paragraph of its above judgment says,
'In so far the present controversy is concerned, we therefore hereby direct the 'the Cooperative society' to transfer the share and interest of the Society in favor of the Appellants – Indrani Wahi. It shall be open to the other members of the family (presently only the son of Biswa Ranjan Sengupta – Drubha Jyoti Sengupta; we are informed that his mother Parul Sengupta has died), to pursue his case of succession or inheritance, if he is so advised, in consonance with Law.'
Even the Supreme Court, despite directing the Society to transfer the shares or interest to the Nominee (Indrani Wahi in this case), left it specifically open to other members of the family to pursue their case of inheritance in accordance with law thereby making it clear that it has neither scripted nor suggested an alternate route to succession.
Division Bench of the Honorable High Court at Bombay in it recent Judgement delivered on 1st December 2016 in a case of Shakti Yezdani vs Jayanand Jayant Salgaonkar (reported in 2017(5) ALLMR 307) has considered and correctly interpreted the above judgement of the Supreme Court of India in Indrani Wahi's case by elucidating various legal aspects of the Nomination vis-a-vis Succession.
It is important to know these concepts which I have attempted to explain below in as simple language as possible:
We come across this word often in our everyday life and are routinely nominating our Spouse/children etc as 'Nominee' on Company Shares (as per Sec 109A and 109B of the Companies Act), Mutual Fund (Under Sec 29 of SEBI (Mutual Funds) Regulations 1996) Fixed Deposits /Bank accounts (Under Sec 45-ZA of the Banking Regulation Act) , Insurance Claim (as per Sec 29 of the Insurance act) , Postal savings (as per Sec 6 of Government Saving Certificate Act 1959) and Finally on the Flat in the Cooperative Housing Society (as per sec 30 of Maharashtra Co-operative Societies Act 1960 in Maharashtra and equivalent sections in other states) .
What do you actually do when you nominate?
Honorable High Court at Bombay was seized with question of defining and deciding on the Nomination to Cooperative Housing Society in a case of two brothers Gopal Vishnu Ghatnekar vs Madhukar Vishnu Ghatnekar, (Case reported in AIR (1982) Bom 482) where Deceased Vishnu Ghatnekar had nominated one of his sons as a Nominee to the Society in which he had been allotted a plot of land and on which he had constructed the building. One of the Sons, on the basis of the Nomination, claimed ownership to the land and structure to the exclusion of other heirs. The High court then ruled that only on the basis of the Nomination ownership cannot be claimed and that the other brother along with other heirs are equally entitled to the estate of the Deceased. In the said judgement the High Court clarified by saying, ' Even when a person is nominated or even when a person is recognised as a legal heir or a legal representative of the Deceased member, the rights of the persons who are entitled to the estate or the interest of the Deceased member by virtue of the Law of Succession are not lost and the Nominee or the legal heir or the legal representative recognised by the Society, as the case may be, holds the share and interest of the Deceased for disposal of the same in accordance with law. It is only as between the Society and the Nominee or the legal representative that the relationship is created and this relationship continues and subsists only till the estate is administered by a person entitled to administer the same or by Court or the rights of the heirs or persons entitled to the estate are decided in court of law. Thereafter the Society shall be bound to follow such a decision'
In short, the Nominee merely holds the estate of the Deceased in 'Trust' till the issues of succession are resolved either by heirs among themselves or through a Court of Law and the Society has no role to play in the matter, it simply abides by the decision.
What nomination does?
Nomination insulates the Society against the legal claims of other heirs and successors but it does not insulate the Nominee against claims of other heirs and successors. In conclusion, the Nomination does not pass Ownership rights to the Nominee under any circumstances.
Nomination in Other Cases: Recently, the Division Bench of Honorable High Court at Bombay, in the above-mentioned case of Shakti Yazdani Vs. Salgaonkar, was seized and engaged into interpreting the Section 109, 109A and 109B of the Companies Act and deciding whether the nomination made on the Company's shares makes the nominee owner of those shares for which he/she was nomination. In the process, the High Court also examined and considered legal provisions concerning nominations on Insurance Claim, Postal savings, Bank Deposits, Mutual Fund Units and also the Shares of Cooperative Societies (also considered the Supreme Court's decision in Indrani Wahi). After analyzing and interpreting various provisions of Law it reached a conclusion that, Nomination does not pass the ownership rights to the Nominee. Ownership right is an exclusive right, it excludes all others from claiming any right or interest. Nomination simply makes the Nominee as a 'Trustee' to the estate of the Deceased who holds that estate till succession issues are resolved.
In short, when a Nomination is made and if the Nomination is in a manner prescribed by law then the Company, Insurance Company, Mutual Fund, Bank, the Postal Authorities and/or the Cooperative Society are duty bound to transfer the Shares or Units and hand over the Money, as the case may be, to the Nominee without further enquiries. However, this does not make the Nominee owner of those shares, units or money etc. He/she simply holds it all issues of succession are settled between all the heirs of the Deceased owner. In other words, if there are two heirs and one of them is nominated on the Insurance Claim then the Insurance Company is duty bound to hand over the sum of Money to the Nominee but the other heir does not lose his legal right. He/she can claim and demand his/her share from the Nominee and proceed to the Court if the Right needs to be enforced.
The only instrument which transfers the ownership rights of the property of the Deceased to another living human is a Will or Testamentary Writing and that too, only after the Probate on this will is obtained by the executor of the Will who is appointed by the author of the Will (Testator) in the Will itself.
What is a Probate?
Probate is a procedure where the executor of the Will proves that the Will is genuine and authentic. The Executor makes an application to the Court (also called Petition) seeking 'Probate'. When this application is received, all legal heirs and successors of the Deceased are served a Citation (meaning a notice along with copy of the Will). If any of the Legal heirs has an objection/suspicion regarding the Will, he is required to file what is known as 'Caveat' in the same Court where Probate application is filed. Once a Caveat is received by the court then the Petition is converted in a Suit and proceeds further as a Suit where the Executor is required to prove the Will as per the provisions of Indian Evidence Act.
In case no Caveats are received and all legal heirs consent to the Will, a probate is granted to the Executor who distributes the estate of the Deceased as per the wishes of the Deceased. In case of a Suit, if the Executor of the Will succeeds in proving that the Will is genuine, the probate is granted and if he fails to prove then the Estate of the Deceased is distributed in accordance with the personal law applicable to the Deceased (e.g. in case of a Hindu, as per provisions of Hindu Succession Act etc). If no executor is appointed in a Will then an application called application (or Petition) for 'Letters of Administration with Will annexed' is moved before the Court, other aspects remaining the same.
Be Careful! If you are engaged in purchasing a flat or immovable property where vendor's claim to the Title is only by virtue of Nomination, your investments could be at a risk. It is necessary to seek legal advice and obtain, besides an indemnity from the vendor, legally valid 'No Objection' from all other legal heirs specifically stating their No Objection to the transaction.
Tags :Property Law