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India: Nominee holds the Property for the legal heir

August 16, 2018

Introduction

A pertinent question with respect to the laws of transfer of property in case of inheritance/ succession in India has been that, the person designated as nominee or the legal heir of the demised individual takes possession and becomes owner of the property.

What does nomination mean?

Nomination is the method by which a person (hereinafter referred as the “nominator”) during his/ her lifetime designates another person (hereinafter referred as the “nominee”) to be the legal nominee after the death of the nominator.

Nominee v. Legal heir

The legal position in this regard is that upon demise of the nominator, it is the nominee who shall take possession of the property of the deceased nominator. The nominee performs the function of receiving and holding the property of the deceased nominator until the time such property is required to be disposed by the nominee in accordance with the laws of transfer of property in case of inheritance/ succession to the legal heir of the deceased nominator. However, as per the laws of succession, it is the legal heir who shall be the rightful owner of the property and will ultimately inherit the property of the deceased nominator either through intestate or testamentary succession.

Nomination of shares

Another pertinent question which arises in this regard is that whether the same rules apply when the property to be inherited is share(s) of a company. As per Section 72 of the Companies Act, 2013, a holder of securities of a company may, at any time, nominate any person as his nominee in whom the securities shall vest in the event of his death.

Further, in 2016, in the case of Shakti Yezdani and anr. v. Jayanand Jayant Salgonkar[1] , the Bombay High Court has held that “the nomination does not override the law in relation to testamentary or intestate succession. The provisions regarding nomination are made with a view to ensure that the estate or the rights of the deceased subject matter of the nomination are protected till the legal representatives of the deceased take appropriate steps.”

Conclusion

From the above discussion, we can conclude that the method of nomination does not create any interest of the nominee in the property of the nominator. The nominee merely holds the property of the deceased nominator until the time rights of the legal heir(s) are established and the nominee is required to transfer such property to the legal heir(s).

[1]Bombay High Court judgment dtd. December 1, 2016 (Appeal No. 313 OF 2015 in notice of motion no. 822 OF 2014 in Suit No.503 OF 2014).

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