In Shakti Yezdani and Another v Jayanand Jayant Salgaonkar and Others, a division bench of Bombay High Court has resolved the differences between two earlier decisions by single judges in cases involving conflicts between the rights of nominees and those of successors in relation to ownership of various financial instruments, including shares of a company.
In Harsha Nitin Kokate v The Saraswat Co-operative Bank Limited (2010), after interpreting sections 109A and 109B of the Companies Act, 1956, the single judge ruled that the nominee of shares becomes the beneficial owner after the death of the original owner, and that nomination effectively overrides succession. In Jayanand Jayant Salgaonkar v Jayshree Jayant Salgaonkar (2015), another single judge declared that the judgment in Kokate was per incuriam, and that legal heirs will obtain the ownership rights of share certificates.
The main legal question before the division bench was whether a bequest made in a will executed in accordance with the Indian Succession Act, 1925, in respect of shares or securities of the deceased supersedes a nomination made under section 109A of the 1956 act and bye-law 9.11 framed under the Depositories Act, 1996.
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The court observed that it is well settled that nomination provisions under various statutes are merely to protect property of the deceased pending the assertion and settlement of succession-related issues by the heirs or successors of the deceased. The court further observed that the object of section 109A is to ensure that the deceased shareholder is represented by someone, as the value of the shares is subject to market forces.
The judgment is significant since section 72 of the Companies Act, 2013, retains the nomination provisions of the 1956 act.
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The dispute digest is compiled by Bhasin & Co, Advocates, a corporate law firm based in New Delhi.
The authors can be contacted at lbhasin@bhasinco.in or lbhasin@gmail.com. Readers should not act on the basis of this information without seeking professional legal advice.
