Follow Us :


During a person’s lifetime, he may make several investments by way of investing in shares, opening bank accounts and making fixed deposits, purchasing insurance policies, contributing towards employees’ provident fund and acquiring immovable property. A question that naturally arises is what happens to these investments and acquisitions after the original owner/holder’s death. In many cases, owners/holders are required to make nominations for their various investments and assets in their lifetime, to take effect after their death. Along with making nominations, owners/holders may also make testamentary dispositions (wills) of how they desire their property to devolve after their death. The competing rights of nominees and heirs have always been a matter of debate. This conflict often gets accentuated when different legislations use different phraseology relating to nominees and nominations and the same goes before various benches of various courts for interpretation.


In the matter of Shakti Yezdani & Anr. v. Jayanand Jayant Salgaonkar and Others[1], a Division Bench of the Bombay High Court had opportunity to consider whether shares in a company would ultimately enure to the benefit of the nominee or legal heirs of the deceased shareholder. In the process of answering this, the High Court considered various decisions of the Supreme Court and Bombay High Court on the position of nominees and effect of nomination under various other statutes pertaining to bank accounts, insurance policies, employees’ provident fund, flats in co-operative housing societies, etc.

Position of Legal Heirs and Nominees under Various Statutes

Nominee under the Insurance Act, 1938

In the case of Sarbati Devi[2], the Supreme Court considered the effect of nomination under Section 39 of the Life Insurance Act, 1938. It held that the purpose of nomination is merely for the payment of the amount under the Life Insurance Policy without confirming any ownership rights in the nominee and to give a valid discharge to the insurer of its liability under the policy. It further held that such amount could be claimed by the heirs of the deceased policy holder in accordance with the law of succession governing them.

Nominee under the Maharashtra Co-operative Societies Act, 1960

In the case of Ramdas Shivram Sattur v. Rameshchandra Popatlal Shah[3], the Bombay High Court followed its previous decision in the case of Gopal Vishnu Ghatnekar v. Madhukar Vishnu Ghatnekar[4]and held that a nominee does not become the owner of the properties in question. The purpose of nomination is to protect the rights of the deceased in the subject matter of nomination till the legal representatives of the deceased take appropriate steps and to give a valid discharge to the society.

A recent amendment to the Maharashtra Co-operative Societies Act, 1960 in 2019 further clarified the position by insertion of Section 154B-13.

Nominee under the Employees Provident Fund & the Miscellaneous Provisions Act, 1952

In the case of Nozer Gustad Commissariat v. Central Bank of India and Others[5], the Bombay High Court considered the effect of nomination and held that “Any amount standing to the credit of a member in the fund or of an exempted employee in a provident fund at the time of his death and payable to his nominee under the Scheme or the rules of the provident fund shall, subject to any deduction authorized by the said Scheme or rules vest in the nominee…” (emphasis supplied)

The word ‘vest’ was then interpreted in the light of prior judgments and the Bombay High Court held that the word ‘vest’ in this context would merely entitle the nominee to collect the amount for the benefit of the heirs of the deceased and such amount would belong to the estate of the deceased.

Nominee under the Companies Act, 1956 and Banking Regulation Act, 1949

The provisions of the Companies Act, 1956 (Sections 109 A and 109 B[6]) and Banking Regulations Act, 1949 (Section 45-ZA) use a different phraseology from the aforementioned statutes while dealing with the position of nominees and effect of nomination. Provisions of both Acts start with a non-obstante clause, seek to provide that nomination will override the disposition whether testamentary or otherwise and seek to exclude all other persons except the nominee. This phraseology raised a doubt whether the legislative intent behind these two statutes was different from the remaining statutes.

Section 45-ZA of the Banking Regulation Act, 1949 and the position of nominees with respect to bank accounts was dealt with by the Supreme Court in the case of Ram Chander Talwar and Others v. Devender Kumar Talwar and Others[7]. The Supreme Court held that the Banking Regulation Act was in no way concerned with the question of succession and therefore all the monies receivable by the nominee by virtue of Section 45-ZA would form part of the estate of the deceased depositor and would be governed by the law of succession by which the depositor is governed. Further, the nominee does not become the owner of the money lying in the bank account.

After considering all the aforementioned judgments and others in the case of Shakti Yezdani (supra), the Bombay High Court applied the same rationale to nomination in the case of shares of a company. It held that the object of Section 109A was to ensure that the deceased shareholder was represented by someone as the value of the shares is subject to market forces. Further, various advantages accrue to shareholder such as issue of bonus shares, etc. Section 109A has been enacted “to ensure that commerce does not suffer due to delay on the part of the legal heirs in establishing their rights of succession and claiming the shares of a Company.


What emerges from the aforesaid judgments and a line of judgments on the issue is that the position of a nominee is similar to that of a trustee. A nominee holds the property in trust for the benefit of the legal heirs of the deceased till such time as the legal heirs establish their rights of succession. Knowing the effect of nomination is important so that the owner/holder can arrange his financial matters accordingly and take the necessary steps to ensure that his properties devolve in the manner he desires.

[1] Judgment dated 1st December, 2016 passed in Appeal No. 313 of 2015 in Notice of Motion No. 822 of 2014 in Suit No. 503 of 2014

[2] Smt. Sarbati Devi and Another v. Smt. Usha Devi [AIR 1984 SC 346]

[3] 2009 (3) Bom CR 705

[4] AIR 1982 Bom 482

[5] 1993 (2) Bom C.R. 8

[6] Corresponds to S. 72 of the Companies Act, 2013 read with Rule 19 of the Companies (Share Capital & Debentures) Rules, 2014

[7] (2010) 10 SCC 671

Author Bio

My practice areas include conveyancing, civil litigation, estate planning (wills, trusts, gift deeds and family settlements) and testamentary matters (probates, letters of administration and succession certificates). I can be reached on - [email protected] View Full Profile

My Published Posts

Basics of FSI Rights in Rem and Rights in Personam Pagdi Flats Nomination under Maharashtra Apartment Ownership Act, 1970 Sale of Property by NRIs- Legal & Tax implications View More Published Posts

Join Taxguru’s Network for Latest updates on Income Tax, GST, Company Law, Corporate Laws and other related subjects.

One Comment

Leave a Comment

Your email address will not be published. Required fields are marked *

Search Post by Date
May 2024