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Current Page: homeexpertise people contact RSS LinkedIn Facebook Instagram Spotify Search Close Enter Search Terms Search Private Client Private Client Year Book 2024: QA India By Rishabh Shroff , Kunal SavaniChirag Shah on March 11, 2024 Posted in Estate Planning Listen to this post The following QA was first published in the Legal 500 and Legal Business Magazine on 8th March, 2024. The same was written by our Private Client team at Cyril Amarchand Mangaldas. The online version of the QA can be found here. Continue Reading Private Client Year Book 2024: QA India Does unregistered codicil alter the terms of a registered will? By Rishabh ShroffChirag Shah on March 6, 2024 Posted in Estate Planning , Property Listen to this post The following article was first published in the Mint newspaper on 5th March, 2024. The same was written by our Private Client team at Cyril Amarchand Mangaldas, who frequently publish their comments and opinions in the Mint. The online version of the article can be found here. Continue Reading Does unregistered codicil alter the terms of a registered will? How to ensure fair distribution of assets in an estate plan? By Rishabh ShroffChirag Shah on February 29, 2024 Posted in Estate Planning , Property Listen to this post The following article was first published in the Mint newspaper on 28th February, 2024. The same was written by our Private Client team at Cyril Amarchand Mangaldas, who frequently publish their comments and opinions in the Mint. The online version of the article can be found here. Continue Reading How to ensure fair distribution of assets in an estate plan? Nomination v. Succession – SC Finally Settles the Debate By Bharat VasaniAlena Jamal on February 6, 2024 Posted in Family Businesses , Family Law , Succession Planning Listen to this post Historical Background The longstanding debate on the conflict between the rights of nominees and legal heirs over the devolution of shares has always been the cause of much controversy and confusion despite the settled legal position holding the legal heir as the ultimate rightful owner of the property. A nominee can act only as a trustee on behalf of the legal heir and hold such property until a conclusive decision on the matter of succession is reached. [1] However, the introduction of Section 109A by the Companies (Amendments) Act, 1999 , dealing with nomination (and the language used therein) fueled a revival of the debate. An amendment [2] under Section 109A and 109B of the Companies Act, 1956 ( 1956 Act ”) first inserted the provisions for nomination by a shareholder, which was eventually re-enacted as Section 72 of the Companies Act, 2013 ( 2013 Act ”). The Notes on Clauses appended to the Companies Bill, 2011 , explains: This clause corresponds to Section 109A of the Companies Act, 1956, and seeks to provide that every share holder or debenture holder may appoint a nominee or a joint nominee who shall be the owner of the instrument in the event of death of the holder or the joint holder unless the nomination is varied or cancelled.” Controversy arose after the Bombay High Court in Harsha Nitin Kokate v. The Saraswat Co-operative Bank Limited [3] ( Kokate ”) held the nominee as the beneficial owner after the death of the original owner of the shares—a nomination effectively overriding succession. In Jayanand Jayant Salgaonkar v. Jayshree Jayant Salgaonkar [4] ( Salgaonkar ”), however, the Bombay High Courtdeclared the Kokate judgment per incuriam and held that legal heirs and not nominees would have ownership rights over the shares. An appeal was preferred to the Division Bench of the Bombay High Court, which ruled in favour of the view held in Salgaonkar as opposed to the one held in Kokate . [5] The issue was raised in the Supreme Court in Shakti YezdaniAnr. v. Jayanand Jayant SalgaonkarOrs. [6] The dispute in this case centered on the distribution of certain assets of Jayant Salgaonkar ( Testator ”). The Testator had executed a will making provisions for the devolution of his estates by nominating successors. The Respondent filed a suit and sought a permanent injunction, restraining all other respondents and appellants from taking any action in respect of the properties. The Supreme Court judgment has finally put the debate to rest by holding that being a nominee in a share/securities does not entitle the person to inherit it by default. The Court also held that provisions relating to the nomination for shares of the company under Section 109A of the 1956 Act , Section 72 of the 2013 Act, and the relevant provisions in the Depositories Act, 1996 ( Depositories Act ”), cannot override the rules of succession under the Indian Succession Act , 1925 , or the personal laws of succession applicable to the deceased shareholder. Issues The Court framed the following four key issues: The scheme, intent, and object behind the Companies (Amendment) Act, 1999 The implication of the scheme ofnomination ” under the 1956 Act and other comparable legislations The use of the termvest ” and the presence of the non-obstante clause within the provisions of the 1956 Act Nomination under the 1956 Act vis-à-vis law of succession The Decision On the Scheme of the Companies Act The Apex Court held that the objective of introducing a nomination facility was to provide the corporate sector with an incentive to boost investments by encouraging investors’ confidence while ensuring that the law aligned with the economic policies of liberalisation. While the Statement of ObjectsReasons of the 1956 Act does not mention nomination and/or succession, the provisions do not indicate any intent to confer absolute ownership to the nominee either. On Nomination under Various Legislations The Apex Court observed that the Courts were consistent while interpreting provisions relating to nominations. A nomination did not guarantee the nominee absolute ownership of the subject property, meaning that a nomination did not imply the exclusion of the legal heirs. Neither is any uniform definition of the rights of the nominees available nor does anything imply that such a nomination bestows absolute ownership to nominees. Hence, the terms in relevant legislations must be considered as ordinarily understood by a reasonable person making nominations. On the Effect of Vest” in Relevant Provisions The Appellants argued that the termvest ” in Section 109A of the 1956 Act and Byelaw 9.11.1 under the Depositories Act indicates the intent to bestow ownership of securities upon the nominee after the shareholder’s death. The Court referred to several precedents and concluded that the termsvest ” andvesting ” had variable meaning. The mere use of the term in a statute did not confer absolute title over the subject matter; hence, it was essential to interpret the termvest ” in Section 109A of the 1956 Act along logical lines. The vesting of the assets in the nominee under the 1956 Act/2013 Act and the Depositories Act serves only a limited purpose—to enable the Company to deal with securities in the immediate aftermath of the shareholder’s death and to avoid uncertainty regarding the holder of the securities. On the Effect of Non-Obstante Clause The Appellants argued that the non-obstante clause” in Section 109A of the 1956 Act provided overriding effect to the nomination over any other law and granted absolute rights to the nominee. The Court referred to the judgment in Ram Chander TalwarAnr. v. Devender Kumar TalwarOrs. , [7] where it had rejected the argument that the non-obstante clause granted the nominee absolute ownership of the subject matter to the exclusion of legal heirs. Interpretation of the general words and phrases used in a statute must be according to the objects of the statute and not read in isolation. Application of the non-obstante clause must be in...