The longstanding debate on the conflict between the rights of nominees and legal heirs over the devolution of shares has always been the cause of much controversy and confusion despite the settled legal position holding the legal heir as the ultimate rightful owner of the property. A nominee can act only as a
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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