NOMINEE v/s LEGAL HEIRS contd..
In my earlier post I discussed the recent judgment of the Bombay High Court, Harsha Nitin Kokate Vs. The Saraswat Co-op. Bank Limited & Others that gave an elevated status to a nominee u/s. 109A Companies Act.
I will now examine provisions in respect of nomination found in laws, such as Insurance, Banking, Co-operative Societies, etc. Though the provisions in respect of nomination, in each statute may be worded differently, the legal position of a nominee has always been accepted to be that of a trustee and nomination is not considered to be a kind of testamentary succession.
Since the function of a nominee in respect of a certain property, springs into operation on the death of the person nominating, enormous disputes have arisen between the legal heirs of the deceased on one hand and the nominee on the other, in respect of such property.
Let us see the provisions in respect of nomination in areas other than Company Law.
INSURANCE:
The first of these disputes arose in respect of the nomination provision under section 39 of the Insurance Act. The question was settled by the Supreme Court in the case of Sarbati Devi v. Usha Devi. However, prior to this decision, divergent views had been expressed by various High Courts, in respect of the position of a nominee. For example the Allahabad High Court in Kesari Devi v. Dharma Devi, did not accept the view that that the policy money that is paid to a nominee under Section 39(6) of the Insurance Act is held by him as a trustee for the legal representative of the assured. This view was also ascribed by the Tamil Nadu High Court in Karuppa Gounder v. Palaniammal. Similarly, the Delhi High Court in S. Fauja Singh v. Kuldip Singh and Uma Sehgal v. Dwarkadas Sehgal held that, “the nominee takes the money by way of statutory testamentary disposition. He is not a trustee for or an agent of the heirs or successors of the assured…”
On the other hand, a full bench of the Kerala High Court, in Sarojini Amma v. Neelakanta Pillai, a division bench of Tamnil Nadu High Court in D. Mohanvelu Mudaliar v. Indian Insurance and Banking Corporation Ltd., Salem, Calcutta High Court in Ramballav Dhandania v.Gangadhar Nathmall, and Gujarath High Court in Atmaram Mohanlal Panchal v. Gunavantiben took a contrary view and held that a nominee is merely a receiver of the policy amount and does not get any title to the policy amount.
In Sarbati Devi v. Usha Devi, the Apex court held that a nominee cannot receive the policy amount to the exclusion of other legal heirs primarily because:
1) Nothing in Section 39 indicates that it will operate as a third kind of succession and
2) The section provides that “the money shall be payable to the nominee” and not that it shall belong to the nominee.
COOPERATIVE SOCIETIES:
Post Sarbati Devi, when any dispute arose between a nominee and legal heirs of the nominating deceased under any legislation, the Courts have relied on the ruling in Sarbati Devi and given their decision in favour of legal heirs. For Example:
IN Ramdas Shivram Sattur v. Rameshchandra @ Ram Chandra Popatlal Shah and Or, 2009(3) BomCR 705, the Bombay High Court while interpreting section 30 of the Maharashtra Co-operative Societies Act which provides - “On the death of a member of a society, the society shall transfer the share or interest of the deceased member to a person or persons nominated in accordance with the rules or, if no person has been so nominated, to such person as may appear to the committee to be the heir or legal representative of the deceased member.” [Section 30(1)] … “All transfers and payments duly made by a society in accordance with the provisions of this section shall be valid and effectual against any demand made upon the society by any other person.” [Section 30(4)], held that, “Purpose of nomination is to make certain the person with whom the society has to deal and not to create interest in the nominee to the exclusion of those who in law are entitled to the estate of a deceased member.”
BANKING :
a) Banking Regulation Act, 1949
In Arnab Kumar Sarkar v. Smt. Reba Mukherjee and Ors., AIR 2007 Cal 79, the Calcutta High Court held, “just as section 39 of the Insurance Act, 1938, the purpose of Section 45Z of the Banking Regulation Act, 1949 is to provide for the discharge of the Bank’s obligation.”
Similarly, see Divya Vasant Desai v. State Bank of India, (2009) 1GLR 495 on nomination under section 45ZA of Banking Regulations Act.
b) The Government Savings Banks Act, 1783
Section 4 of the said Act provides for nomination by a depositor in respect of his deposits and Section 5 provides:
“Payment to be a discharge - Any payment made in accordance with the foregoing provisions of this Act shall be a full discharge from all further liability in respect of the money so paid:
Saving of right of executor.- But nothing herein contained precludes any executor or administrator, or other representative of the deceased, from recovering from the person receiving the same the amount remaining in his hands after deducting the amount of all debts or other demands lawfully paid or discharged by him in due course of administration…”
Thus, it may be seen that the language used in each statute varies and the consequences intended wherefrom will also accordingly vary. However, most of these statutes indicate clearly that the purpose of nomination is to provide a valid discharge to the co-operative society or bank or as the case may be and that it does not preclude the legal heirs of the deceased from asserting their claim in the property.
The provisions u/s, 109A of the Companies Act certainly differ from the provisions aforementioned and the decision of the Bombay High Court in recognizing the same is laudable.
I will now examine provisions in respect of nomination found in laws, such as Insurance, Banking, Co-operative Societies, etc. Though the provisions in respect of nomination, in each statute may be worded differently, the legal position of a nominee has always been accepted to be that of a trustee and nomination is not considered to be a kind of testamentary succession.
Since the function of a nominee in respect of a certain property, springs into operation on the death of the person nominating, enormous disputes have arisen between the legal heirs of the deceased on one hand and the nominee on the other, in respect of such property.
Let us see the provisions in respect of nomination in areas other than Company Law.
INSURANCE:
The first of these disputes arose in respect of the nomination provision under section 39 of the Insurance Act. The question was settled by the Supreme Court in the case of Sarbati Devi v. Usha Devi. However, prior to this decision, divergent views had been expressed by various High Courts, in respect of the position of a nominee. For example the Allahabad High Court in Kesari Devi v. Dharma Devi, did not accept the view that that the policy money that is paid to a nominee under Section 39(6) of the Insurance Act is held by him as a trustee for the legal representative of the assured. This view was also ascribed by the Tamil Nadu High Court in Karuppa Gounder v. Palaniammal. Similarly, the Delhi High Court in S. Fauja Singh v. Kuldip Singh and Uma Sehgal v. Dwarkadas Sehgal held that, “the nominee takes the money by way of statutory testamentary disposition. He is not a trustee for or an agent of the heirs or successors of the assured…”
On the other hand, a full bench of the Kerala High Court, in Sarojini Amma v. Neelakanta Pillai, a division bench of Tamnil Nadu High Court in D. Mohanvelu Mudaliar v. Indian Insurance and Banking Corporation Ltd., Salem, Calcutta High Court in Ramballav Dhandania v.Gangadhar Nathmall, and Gujarath High Court in Atmaram Mohanlal Panchal v. Gunavantiben took a contrary view and held that a nominee is merely a receiver of the policy amount and does not get any title to the policy amount.
In Sarbati Devi v. Usha Devi, the Apex court held that a nominee cannot receive the policy amount to the exclusion of other legal heirs primarily because:
1) Nothing in Section 39 indicates that it will operate as a third kind of succession and
2) The section provides that “the money shall be payable to the nominee” and not that it shall belong to the nominee.
COOPERATIVE SOCIETIES:
Post Sarbati Devi, when any dispute arose between a nominee and legal heirs of the nominating deceased under any legislation, the Courts have relied on the ruling in Sarbati Devi and given their decision in favour of legal heirs. For Example:
IN Ramdas Shivram Sattur v. Rameshchandra @ Ram Chandra Popatlal Shah and Or, 2009(3) BomCR 705, the Bombay High Court while interpreting section 30 of the Maharashtra Co-operative Societies Act which provides - “On the death of a member of a society, the society shall transfer the share or interest of the deceased member to a person or persons nominated in accordance with the rules or, if no person has been so nominated, to such person as may appear to the committee to be the heir or legal representative of the deceased member.” [Section 30(1)] … “All transfers and payments duly made by a society in accordance with the provisions of this section shall be valid and effectual against any demand made upon the society by any other person.” [Section 30(4)], held that, “Purpose of nomination is to make certain the person with whom the society has to deal and not to create interest in the nominee to the exclusion of those who in law are entitled to the estate of a deceased member.”
BANKING :
a) Banking Regulation Act, 1949
In Arnab Kumar Sarkar v. Smt. Reba Mukherjee and Ors., AIR 2007 Cal 79, the Calcutta High Court held, “just as section 39 of the Insurance Act, 1938, the purpose of Section 45Z of the Banking Regulation Act, 1949 is to provide for the discharge of the Bank’s obligation.”
Similarly, see Divya Vasant Desai v. State Bank of India, (2009) 1GLR 495 on nomination under section 45ZA of Banking Regulations Act.
b) The Government Savings Banks Act, 1783
Section 4 of the said Act provides for nomination by a depositor in respect of his deposits and Section 5 provides:
“Payment to be a discharge - Any payment made in accordance with the foregoing provisions of this Act shall be a full discharge from all further liability in respect of the money so paid:
Saving of right of executor.- But nothing herein contained precludes any executor or administrator, or other representative of the deceased, from recovering from the person receiving the same the amount remaining in his hands after deducting the amount of all debts or other demands lawfully paid or discharged by him in due course of administration…”
Thus, it may be seen that the language used in each statute varies and the consequences intended wherefrom will also accordingly vary. However, most of these statutes indicate clearly that the purpose of nomination is to provide a valid discharge to the co-operative society or bank or as the case may be and that it does not preclude the legal heirs of the deceased from asserting their claim in the property.
The provisions u/s, 109A of the Companies Act certainly differ from the provisions aforementioned and the decision of the Bombay High Court in recognizing the same is laudable.
My father has made a registered will in favour of my brother for movable property in 2006. After execution of will my father made the nominations in Bank Fixed Deposite in my favour in the year 2007. Whether I entitle to received payment on the basis of nomination basis from bank.
ReplyDeleteSanjay Jain