18 June 2021
Query may be answered only by legal experts on specific provisions of Maharashtra Co-operative Societies Act. Section 154B-13 allows the transfer of shares of deceased to nominee but provides that nominee will be only provisional member until legal heir is made a member. Further a note to Bye Law 34 specifies that a nominee is not the owner and cannot create third party interest or alienation. In short, nominee cannot sell flat or mortgage the same. Now these provisions are fine. But in reality a nominee sells it and a third party buys it, they register the agreement and complete the transaction. Afterwards they submit all relevant forms alongwith copy of sale agreement seeking transfer of shares and flat. What is society's position. Is it supposed to record transfer or is it supposed to reject the same considering that nominee who is a provisional member had no right to sell and society will not support such sale else it might also invite legal action from real heirs if they contest such a sale.
18 June 2021
Yes. The nominee is only a custodian of a certain thing. The nominee shall hand over what he received to the legal heirs of the deceased. If the property is sold/transferred to a third party, then the legal heirs shall file a case against the nominee. The society shall not accept the nominee'.
19 June 2021
Nominee has no legal right to sell,rent,alienate or transfer the immovable property of deceased.Nominee is trustee of property,he has to handover the property to legal heirs of deceased. Society can not add/replace name of nominee by deleting deceased member's name Society has to reject the application for transfer of shares and flat. If society does not reject the transfer application, it will be gross legal faux pas on part of society. In such a situation legal heirs of deceased owner should file civil suit and pray for cancellations of. Sale agreement and application for transfer of share and flat against Nominee and Society.
If the nominee sells the property even when the express restriction is given in bye-law of society then society can reject the membership application of the third person and direct the provisional members and legal heirs to get their dispute to resolve themself. The legal heirs whose interest is affected can approach the court and get the remedy.
20 June 2021
According to law, a nominee is a trustee or caretaker of the assets. He/she is not the owner but an individual who will be legally bound to transfer the asset to the legal heirs. The rights of the nominee are determined in accordance with the laws governing the subject matter of nomination. It is a temporary arrangement so that the shares of the deceased do not remain ownerless, during the period that succession issues are resolved. There are no general laws on nomination, unlike in case of succession where special laws exist, based on religious affinity and bequests under wills of the deceased. Therefore, the rights of the nominee are determined in accordance with the laws governing the subject matter of nomination, whereas, succession rights are determined based on the personal law applicable to the deceased. Nomination, hence, is only a means and not an end.
It is a temporary arrangement, so that the shares of the deceased do not remain ownerless, during the period that succession issues are resolved. The two-judge bench of the Bombay High Court took into account the laws governing the nomination of shares under the Companies Act, 1956, (1956 Act), the succession laws governing the estate of a deceased in case of intestate (without making a will) or testate succession (estate bequeathed under a will) as per the Indian Succession Act, 1925 and the byelaws under the Depositories Act, 1996, and concluded that the provisions relating to nomination do not override the law in relation to testamentary or intestate succession. The judgment also draws references to precedents of the supreme court and various high courts, relating to the rights of the nominee vis-à-vis the rights of the successors, in case of shares held in a company, shares held in a cooperative society, investments made in financial instruments such as Employee Provident Fund, Government Savings Certificate and the right of nominees with respect to various accounts held with banks. The Bombay High Court observed that in all these cases, the provisions relating to nominations have been consistently interpreted as only giving a temporary controlling right to the nominees, for interim management of the affairs relating to such instrument. Thus the society can very well reject the application seeking transfer of the share certificate in the name of the nominee or the prospective buyer to who the property was allegedly sold by the said nominee.
26 June 2021
Many thanks to all learned experts for giving sharing their knowledge and time. Section 30 of MCS Act clearly mandates that society can transfer shares to a nominee. But bye laws place restriction on nominee not to sale or create third party interest (similar principle of Hon. SC that nominee is trustee). Unfortunately, Bye laws 38(d) states that society NOC is not required to sell shares and interest in society. All this could lead to a case of nominee quietly selling off the flat and submitting all documents to society after the transaction is complete, leaving society and transferee to fight between themselves...of course transferee is at risk in such cases but many buyers do not know the law or do not take legal opinion before buying a flat and then issues may crop up. Thanks to all for clarity.