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Supreme Court says being a nominee in share doesn't grant inheritance rights
The Supreme Court said the ownership of shares and debentures relies on the deceased's will or succession laws.
The Supreme Court has ruled that ownership of financial instruments like shares and debenture certificates should pass to the successor through legal or testamentary means, rather than to the nominee.
In a December 14 judgment, a bench of justices Hrishikesh Roy and Sanjay Karol said being a nominee in a share/debenture certificate doesn't automatically grant inheritance rights. The ownership of these instruments is decided by the deceased's will or succession laws in India, which may include the Hindu Succession Act or the Indian Succession Act, Moneycontrol reported.
The court decision came in a family disagreement, where the father granted shares and debentures to one son in his will. The other son, listed as the nominee in the documents, opposed this decision, claiming his ownership as the beneficial owner based on his nominee status.
The court said the ownership of shares and debentures relies on the deceased's will or succession laws. The Companies Act of 1956 and 2013 intend nominees to assist in transferring shares, not to become successors, the ruling said.
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Nominee not owner of asset in event of death of original holder
The ruling, thus, made clear that a nominee isn't the actual owner of the asset but holds it in a fiduciary role for the benefit of legal heirs, determined by a will or relevant succession laws.
A nominee is a temporary custodian appointed by the asset owner until succeeded by legal heirs, without absolute title to the asset.
The rights of a nominee are subordinate to those of a beneficiary under a will, with the will taking precedence over nomination.
