Legal Heirs Preferred Over Nominees - Court Decision

The issue of legatees vs. nominees still seems to be causing confusion in the minds of the public. Even after a number of clear judicial decisions on this topic, confirming that legal heirs are the correct persons to inherit assets (over that of a nominee), a new decision re-confirms this issue.

The National Company Law Appellate Tribunal, New Delhi (“NCLAT”), on November 14th, 2019 had held that nomination does not amount to beneficial ownership to an asset and the nominee holds the asset for and on behalf of the legal heirs of the deceased. The Bench of Justice S.J. Mukhopadhyaya and Justice A.I.S. Cheema, in the case of Oswal Greentech v Mr Pankaj Oswal and Ors[1] (“Oswal”) whilst listening to the question of maintainability of the petition under Section 241-242 of the Companies Act, 2013 (“Act”), decided on the said matter.
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 A Will differs from contracts and other executed documents in one important aspect. Unlike other documents, a Will only takes effect from the death of the person who has made it (called the testator). The testator’s testimony is not available to determine whether the Will is valid and whether it constitutes the testator’s true intentions. Thus, the validation and interpretation of a Will is rather unique for the significance of surrounding circumstances, and the identity and status of parties.

This being the case, it becomes advisable not only to prepare a Will that is clear and legally valid, but also to ensure that if a challenge to the Will is anticipated, suitable safeguards to fortify it have been put in place. In this post, we discuss the legal grounds on which a Will may be challenged, and some of the commonly adopted precautions that testators may put in place to help validate their Wills and to assist in giving effect to their desired intentions.

Grounds for Challenge

After the testator passes away, the Will may be challenged before a Court by any person who claims to have an interest in the testator’s estate. If the Court finds, based on the evidence placed before it, that the challenge is sustainable, it will declare the Will void and set it aside.


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Recently, a Division Bench[1] of the Bombay High Court hopefully settled the controversy regarding the rights of legal heirs as opposed to nominees. The Court held that the rights of legal heirs supersede the rights of the nominee of a shareholder.

The controversy arose with two Single Bench Bombay High Court judgments: Harsha Kokate v. The Saraswat Co-operative Bank Limited[2] (Kokate case) and J. J. Salgaonkar v. J.J. Salgaonkar[3] (Salgaonkar case). In the Kokate case, relying primarily on Section 109A of the erstwhile Companies Act, 1956 (1956 Act), the Court held that the nominee would be entitled to all rights in shares and debentures, including ownership rights, to the exclusion of all other persons. Thus, upon death of the shareholder, the securities would automatically get transferred to the nominee, and not the legal heirs.
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