In a significant ruling, the Supreme Court declared on December 14 that nominees of shares and debentures cannot claim succession rights by default. The judgment establishes that the rightful claim over financial instruments rests with the legal successor determined either by the deceased’s will or succession laws, not with the nominee.
The ruling emanated from a family dispute where the patriarch bequeathed the inheritance of shares and debentures to one of his two sons. The other son, serving as the nominee, contested this decision, asserting his beneficial ownership based on his nominee status.
The Bombay High Court, in a previous hearing, clarified that nominees are designated to safeguard the instruments until the legal heirs or representatives take appropriate steps to assert their rights. The High Court underscored that nomination provisions do not supersede laws pertaining to testamentary or intestate succession.
The matter eventually reached the Supreme Court in 2017, where a two-judge bench, comprising Justice Hrishikesh Roy and Sanjay Karol, delivered the final decision.
Arguments presented in court contended that existing laws do not provide for a ‘third mode of succession’ where a person inherits financial instruments merely by being named a successor. Additionally, it was emphasized that the Companies Act of 1956 and 2013 intends for a nominee to facilitate the transfer of shares, not to become a successor.
The parties involved were represented by lawyers Rohit Anil Rathi and Rooh-e-hina Dua during the legal proceedings.
This judgment establishes a legal precedent that clarifies the intricate relationship between nomination provisions and the broader spectrum of succession laws governing financial instruments.
