Oswal has hopefully solved this problem once and for all. As mentioned above, individuals should note that there is a clear difference between the rights of nominees and legal heirs to ensure that their estate passes smoothly to their heirs. In another recent judgment in Indrani Wahi v Registrar of Cooperative Societies and Others (`the Indrani Wahi case`), the Supreme Court considered the appointment provisions under the West Bengal Societies Act of 1983 (`the West Bengal Act`), which requires the cooperative to transfer the shares of that member in the name of the nominee. The Supreme Court`s conclusion was that a cooperative under the West Bengal Act was bound by the appointment of the member. Therefore, in the event of an appointment, the Society has no choice but to transfer the shares in the name of the nominee after the member`s death. Let us hope that with the Oswal case, this problem has finally been resolved and calmed down. As above, you need to know the clear difference between the rights of a nominee and a legal heir to ensure that your estate is passed smoothly to your heirs. Of course, there`s nothing better than talking to your favorite and trusted lawyer to prepare your estate plan. Accordingly, NCLAT concluded that in the event of a person`s death, his or her legal heirs are entitled to his or her property. Each nominee holds the assets only until the question of acquisition is decided in favour of the legal heirs. Thus, a nominee is a custodian of the deceased`s property until it is distributed among the legal heirs. The legal provisions of sections 109A and B were considered by the Division Bench of the Bombay High Court in the case of Shakti Yezdani v. Jayanand Jayant Salgaonkar, where, in interpreting the provisions, the court held that the agent of a holder of shares or securities appointed under section 109A of the Companies Act 1956 has no beneficial ownership right in the shares or securities which make the purpose of the appointment, to the exclusion of any other person, who are entitled, under the law of succession, to inherit the holder`s estate.
Thus, the High Court held that appointment does not take precedence over the law in matters of testamentary or legal succession. The appointment provisions are intended to ensure that the estate or the rights of the deceased`s object are protected until the deceased`s legal representatives take appropriate action. In the past, there have been conflicting observations. In one such case (Harsha Nitin Kokate v. The Saraswat Cooperative Bank Limited, also known as the “Kokate case”), a single judge of the Mumbai High Court ruled that the rights of the candidate took precedence over those of successors in the case of shares held in a company. With this per incuriam decision, another single judge of the Bombay High Court subsequently confirmed the opposite, i.e. in favour of the successors. However, the power of a single judge to review the findings of another single judge gave rise to controversy which was questioned in this case before the two-judge chamber of the High Court in Mumbai. It is not clear from the above cases whether preference should be given to the appointment of testamentary or non-testamentary succession or vice versa. Always ensure that, for a smooth flow of assets or assets to heirs, a will made by the person is consistent with the appointment or that the will so explicitly overrides the appointments so that the fundamental purpose of the appointment for a particular element is not defeated. This avoids possible conflicts between beneficiaries and legal heirs. The Honourable Supreme Court had another twist in March 2016 in the case of Indrani Wahi v.
Registrar of Cooperative Societies & Ors, which stated that “a cooperative cannot challenge the transfer of ownership to the nominee if it is a relative of the deceased. The agent of a deceased member is entitled to property by transfer if he is a relative of the deceased person who made the appointment on his behalf, according to the cooperative`s records, and the co-operative cannot contest the nominee`s right. The Supreme Court has ruled that in cases where there is a candidate, there is an absolute transfer of rights to the candidate and section 72(3) of the Companies Act 2013 supersedes any other law currently in force due to its non-obstantial clause. Furthermore, in view of the Delhi High Court Standing Order 20, the shares should be held in the name of Ms. Aruna Oswal until the civil action has been finally decided. Since the basis of the claim is a right to inherit, such a decision on legal, ownership and ownership of shares, including the effect of appointment, would fall directly within the jurisdiction of a civil court before which a decision is pending. It would therefore not be appropriate for the company court to conduct parallel proceedings before the civil court decides on the matter. Accordingly, the Supreme Court set aside the orders of NCLT 22 and NCLAT 23 and allowed the civil appeal to the extent that Pankaj withdrew the claim in its entirety until the civil dispute regarding his rights, title and interests in the estate or shares was finally resolved. The Supreme Court ruled that a candidate`s rights would depend on the legal provisions and distinguished Sarbati Devi 7, Khanchandani 12 and Ram Talwar 14 on the grounds that the provisions of the Life Insurance Act, the Public Savings Act and the Banking Regulation Act did not provide for the “allocation” of the instrument in question to the applicant. It therefore appears that the Supreme Court was influenced by the use of the term “vested” in the Companies Act, which had to be interpreted separately from any other law that did not adopt similar wording as a nominee. In fact, as we saw above, this was exactly the reasoning adopted in Kokate 3, which was eventually set aside in Shakti Yezdani 5.
For example, a man bequeaths his bank accounts to his children also in his will. During his lifetime, he made an appointment in favour of his wife. After his death, his wife kept the accounts only in the name of her children until the estate was completed. This could lead to a family dispute if the children claim the bank balance and their mother refuses to hand it over. Although banks may decide to remit the funds held in the various bank accounts to you (as the agent of these bank accounts), you are only entitled to hold these funds in the name of the legal heir identified in the will. However, NCLAT relied on the Supreme Court`s decision in World Wide Agencies Pvt Ltd. (4), according to which an interpretation according to which the legal representatives of a deceased shareholder cannot have the same rights as a shareholder would be a hypertechnical vision contrary to justice. The Supreme Court added: In light of Dayagen Private Limited v. Rajendra Dorian Punj and Anr2 2008, the Delhi High Court interpreted Section 109A of the Companies Act strictly, making it clear that the legislature intends to override the general law of succession and create an exception in respect of the appointment of shares and bonds.
The rules of procedure set out in this section must be strictly adhered to in order to achieve such priority effect, i.e. the designation must be made in the prescribed manner. In this case, no witness had duly testified to the nomination and was therefore invalid. However, Justice Dalvi noted that under the provisions of the Companies Act and the Depositary Act governing the transfer of shares, the role of a candidate is different.