The Bombay high court on Tuesday overturned a judgment by a single bench, which had declared that nominees, and not legal heirs, will get the ownership rights of share certificates.
Justice Gautam Patel declared the much referred to Kokate judgment per incuriam, which means ‘through lack of care’. This means it has been wrongly decided and does not have to be followed.
On March 31, justice Patel heard two similar petitions. One was filed by a man, claiming to have an interest in the investments made in mutual funds by his deceased father, as his legal heir and representative. The other petition was filed by a woman, who claimed to have an interest in the investments made by her deceased mother.
Justice Patel looked into the ‘legal right, title and interest of the concerned parties in the shares.’ Among the Supreme Court judgments cited, justice Patel specifically referred to the Sarbati Devi’s case. He said it is clear that the amount received by the nominee can be claimed by the legal heirs of the deceased.
The order further said Companies and Depositories Act cannot and does not displace the law of succession. The order concluded by saying that Kokate judgement is per incuriam which means ‘through lack of care’.
In April 2010, justice Roshan Dalvi had dismissed a petition of a woman, claiming an interest in shares in D-mat account held by her deceased husband as his legal heir and representative, as the man had nominated his nephew.
Justice Dalvi observed that shares would vest with the nephew after the death of the man in view of the provisions of the Companies and Depositories Act. The order concluded the wife would have no right to get the shares of her deceased husband. This is referred to as the Kokate judgment.
Advocates divided over ruling
While some advocates have said that the latest ruling will only lead to confusion, others are of the opinion that the Bombay high court (HC) has only reinforced a Supreme Court order.
Advocate Suhas Tuljapukar, Managing Partner, Legasis, said, “This creates a lot of confusion as a contradictory situation has arisen as companies will go as per the Companies Act and individuals will go as per the Indian Succession Act. People will now have to be consistent about choosing their nominees and successors of the wills to align themselves with the new judgement.”
“This point has already been brought out by the Supreme Court and has now been reiterated by the Bombay high court. It simply states that nominee is only a trustee appointed for convenience and is not the owner of the shares,” advocate Yatin Shah, practices at the Bombay HC.
What the terms mean
Legal heir: The term includes only next of kin or relatives by blood
Nominee: A holder of shares, having no beneficial interest in shares