Case Laws On Nominees
Case Laws On Nominees
Case Laws On Nominees
Petitioner
v.
4. The disputes between the parties relate to the removal of respondent no. 2, Dr. Mukund L.
Abhyankar, from the post of President of NFSL. While NFSL claims that the removal of Dr.
Mukund L. Abhyankar was legal and valid, the respondents contend otherwise.
10. In order to appreciate the contention that disputes regarding removal of the President
of NFSL are not arbitrable under Section 84 of the MSCS Act, it is necessary to refer to Section
84 of the MSCS Act. Sub-section (1) and (2) of Section 84 of the MSCS Act are relevant and are
set out below:-
“84. Reference of disputes.— (1) Notwithstanding anything contained in any other law
for the time being in force, if any dispute [other than a dispute regarding disciplinary action
taken by a multi-State co-operative society against its paid employee or an industrial dispute
as defined in clause (k) of section 2 of the Industrial Disputes Act, 1947 (14 of 1947)]
touching the constitution, management or business of a multi-State co-operative society
arises—
(a) among members, past members and persons claiming through members, past
members and deceased members, or
(b) between a member, past members and persons claiming through a member, past
member or deceased member and the multi-State co-operative society, its board or
any officer, agent or employee of the multi-State co-operative society or liquidator,
past or present, or
(c) between the multi-State co-operative society or its board and any past board, any
officer, agent or employee, or any past officer, past agent or past employee, heirs or
legal representatives of any deceased officer, deceased agent or deceased
employee of the multi-State co-operative society, or
(d) between the multi-State co-operative society and any other multi-State co-operative
society, between a multi-State co-operative society and liquidator of another multi-
State co-operative society or between the liquidator of one multi-State co-operative
society and the liquidator of another multi-State co-operative society, such dispute
shall be referred to arbitration.
(2) For the purposes of sub-section (1), the following shall be deemed to be disputes
touching the constitution, management or business of a multi-State co-operative society,
namely:-
(a) a claim by the multi-State co-operative society for any debt or demand due to it from
a member or the nominee, heirs or legal representatives of a deceased member,
whether such debt or demand be admitted or not;
(b) a claim by a surety against the principal debtor where the multi-State co-operative
society has recovered from the surety any amount in respect of any debt or demand
due to it from the principal debtor as a result of the default of the principal debtor,
whether such debt or demand is admitted or not;
(c) any dispute arising in connection with the election of any officer of a multi-State co-
operative society.”
Harsha Nitin Kokate v/s The Saraswat Co-op. Bank Ltd. & Others
1. The Plaintiff married one Nitin Kokate on 3rd December 2004. Her husband expired on 5th
July 2007. Nitin Kokate held certain shares in Dmat Account with the Depository Participant
Cell of Defendant No.1. Her husband executed a nomination in the prescribed form following the
prescribed procedure set out by the Depository Participant, Defendant No.1 Bank in favour of the
Defendant No.3, his nephew on 11th July 2006. The Plaintiff claims an interest in the said shares
as his heir and legal representative. She claims to have them sold.
2. This Suit is not concerned with the reason why she claims the sale of the shares. The Plaintiff
must show her legal right, title and interest in those shares. If that is shown, the Plaintiff would
be entitled to sell or transfer those shares or to hold them as her own.
3. The Defendant No.3 claims right, title and interest in the shares pursuant to the nomination
executed in his favour. The nomination has been executed well prior to the death of the deceased
and well after his marriage with the Plaintiff. The Defendant No.1 Bank has stated that the
nomination is executed as required and has been so registered with the Depository Participant.
The effect of the nomination is, therefore, to be seen. The nomination form itself shows that the
rights of transfer and/or the amount payable in respect of the securities held by Nitin Kokate,
Defendant No.3 vests in him as the said nominee.
4. The law relating to nomination is set out in 109A of the Companies Act pursuant to the
amendment which came into effect on 31st October 1998. It is common knowledge that prior to
1996 shares were not held in dematerialized form. Consequent upon the Dematting of the shares
the Share Certificates in physical form are not mandatorily required to be issued by the Limited
Companies listed on the Stock Exchanges. Shares can be transferred by word of mouth or on the
Internet from person to person. Upon such transfer the membership rights of the holder of the
shares changes. Since the share is an intangible movable property it is bequeathable estate The
nomination in respect of the shares is, therefore, important. Section 109A sets out the rights of
the holder of shares to nominate as well as the rights of the nominees thus:-
S. 109A. Nomination of shares ? (1) Every holder of shares in, or holder of debentures of a
company may, at any time, nominate, in the prescribed manner, a person to whom his shares in
or debentures of, the company shall vest in the event of his death.
(3) Notwithstanding anything contained in any other law for the time being in force or in any
disposition, whether testamentary or otherwise, in respect of such shares in, or debentures of, the
company, where a nomination made in the prescribed manner purports to confer on any person
the right to vest the shares in, or debentures of, the company, the nominee shall, on the death of
the shareholder or holder of debentures of the company or, as the case may be, on the death of
the joint holders become entitled to all the rights in the shares or debentures of the company or,
as the case may be, all the joint holders, in relation to such shares in, or debentures of the
company to the exclusion of all other persons, unless the nomination is varied or cancelled in the
prescribed manner.
(4) It can be seen from the aforesaid provision that nomination is required to be made in the
prescribed manner. Upon such nomination the shares would vest in the nominee in the event of
the death of the holder. Further upon it being made in the prescribed manner the nominee would
become entitled to all the rights in the shares of the Company to the exclusion of all other
persons. That is the effect of vesting the shares in the nominee.
9.11.1. In respect of every account, the Beneficial Owner(s) (?Nominating Person(s)?) may
nominate any person (?Nominee?) to whom his securities shall vest in the event of his death in
the manner prescribed under the Business Rules from time to time.
9.11.2. The securities held in such account shall automatically be transferred in the name of the
Nominee, upon the death of the Nominating Person, or as the case may be, all the Nominating
Persons subject to the other Bye Laws mentioned hereunder.
9.11.5. A Nominee shall not be entitled to exercise any right conferred on Beneficial Owners
under these Bye Laws, upon the death of the Nominating Person(s), unless the Nominee follows
the procedure prescribed in the Business Rules for being registered as the Beneficial Owner of
the securities of the Nominating Person(s) in the books of the Depository.
9.11.6. A nominee shall on the death of the Nominating Person(s) be entitled to elect himself to
be registered as a Beneficial Owner by delivering a notice in writing to the Depository, along
with the certified true copy of the death certificate issued by the competent authority as
prescribed under the Business Rules. Subject to scrutiny of such election, the securities in the
Account shall be transmitted to the account of the Nominee held with any depository.
6. Upon such nomination the securities automatically get transferred in the name of the nominee
upon the death of the holder of shares. The nomination is required to be dematted duly registered
with the Depository Participant (Bank) in accordance with the Business Rules. The nominee is
required to follow the prescribed procedure in the Business Rules. Upon the death of the holder
of the shares the nominee would be entitled to elect to be registered as an beneficiary owner by
notifying the Bank along with the certified copy of the death certificate. The Bank would be
required to scrutinise the election and nomination of the nominee registered with it. Such
nomination carries effect notwithstanding anything contained in a Testamentary Disposition or
nominations made under any other law dealing with the Securities. The last of the many
nominations would be valid.
7. Under the said Section the holders of the shares would nominate any person in whom the
securities would vest in the event of his death. This nomination has to be made in the manner
prescribed under the Business Rules.
8. It can be seen that since all the shares are held in Demat form with the Depository Participant
and the portfolio of the holder may change each day. Hence one nomination is specifically
required to be made as provided in the aforesaid legislation. The nomination would have the
effect of vesting in the nominee complete title in the shares. He would be entitled to elect to be
registered as a beneficial owner of the shares or he would have the right to transfer the shares.
These are inter alia the rights of every shareholder of a listed Companies. These rights show that
the vesting of the shares is upon the death of the shareholder provided only that the nomination is
made as per the procedure set out by the Depository Participant. This procedure is the
registration of the form of nomination constituting the nomination of the nominee with his
photograph signed by the holder as well as the nominee and witnessed by at least 2 persons and
registered with the Bank. The purpose and object of this Section is clear. It is simplifies the
procedure relating to the transmission of shares which is otherwise an intangible movable
property. As the shares are now held in Dmat form and can be purchased and sold in the market
by word of mouth or on the Internet, and no physical share certificates are issued by Companies,
only one nomination for all the shares in all the companies need be made. That can be registered
only with the Depository Participant who records all the share transactions of the holder of the
shares who is mandatorily required to open a Dmat account with the Depository Participant.
Hence the legislature has simplified and specified the procedure for vesting of shares by
nomination made in the prescribed manner.
9. Mr. Maheshwari on behalf of the Plaintiff contends that the nomination only makes a nominee
a trustee for the shares. He holds the shares in trust for the estate of the deceased, the deceased
died intestate and hence the Plaintiff as the widow would be entitled to the shares to the
exclusion of the nominee.
11. Under the Insurance Act the nomination entails payment by the Insurance Company to the
nominee to obtain a complete discharge. Once the amount under the Policy is paid to the
nominee, the nominee would hold it in Trust or the Estate because under the Insurance Act there
is no legislative provision that the nominee would obtain any other right.
12. It may be mentioned that the position under Section 30 of the Maharashtra Co-operative
Societies Act is similar for nominees in respect of shares in a Housing Society
Provided that, such nominee, heir or legal representative, as the case may be, is duly admitted as
a member of the society:
Hence in a Co-operative Society also the shares of the member can be simplicitor transferred to
the nominee which transfer would effectually discharge the Society as against any other person
making a demand.
Such a transfer, therefore, cannot and does not result in vesting of the flat in such nominee.
Hence such nominee is merely a trustee for the estate of the deceased. The Society is not
concerned with the dispute amongst the heirs of the deceased.
13. The provision pursuant to the amendment of the Companies Act is quite the contrary. The
nomination under Section 109A of the Co-operative Act does not entail mere payment of the
amount of shares. It specifically vests the property in the shares in the nominee, in the event of
the death of the holder of the shares. The analogy drawn from the judgment in the case of Sarbati
Devi is completely misplaced.
24. In the light of these judgments Section 109A of the Companies Act is required to be
interpreted with regard to the vesting of the shares of the holder of the shares in the nominee
upon his death. The act sets out that the nomination has to be made during the life time of the
holder as per procedure prescribed by law. If that procedure is followed, the nominee would
become entitled to all the rights in the shares to the exclusion of all other persons. The nominee
would be made beneficial owner thereof. Upon such nomination, therefore, all the rights
incidental to ownership would follow. This would include the right to transfer the shares, pledge
the shares or hold the shares. The specific statutory provision making the nominee entitled to all
the rights in the shares excluding all other persons would show expressly the legislative intent.
Once all other persons are excluded and only the nominee becomes entitled under the statutory
provision to have all the rights in the shares none other can have it.
Nominee (nom -i-nee), n. 1. A person who is proposed for an office, membership, award, or like
title or status; an individual seeking nomination, election or appointment is a candidate. A
candidate for an election becomes a nominee after being formally nominated. See CANDIDATE.
2. A person designated to act in place of another, usu. In a very limited way. 3. A party who
holds bare legal title for the benefit of others or who receives and distributes funds for the benefit
of others.