Summary
The Supreme Court held that nomination of shares or securities does not confer absolute beneficial ownership or displace testamentary or intestate succession. The statutory vesting and overriding clauses facilitate dealings with the company or depository after the holder’s death and discharge its liability, while preserving lawful successors’ claims.
Issues
- Whether nomination under company law and the depository bye-laws confers ownership to the exclusion of legal heirs.
- Whether statutory vesting and the non-obstante clause create a separate mode of succession.
Provisions considered
- Sections 109A and 109B, Companies Act, 1956The nomination facility enables transmission and corporate dealings without conferring an independent right of beneficial succession. The Court also identified Section 72 of the 2013 Act as the corresponding provision. (¶¶ 20, 21, 22, 23, 24, 27, 29, 35, 37, 43, 45, 46, 47)
- Bye-laws 9.11.1 and 9.11.7, Bye-laws under the Depositories Act, 1996Vesting and the overriding provision operate for dealing with the deceased holder’s securities, not for excluding successors’ claims against the nominee. (¶¶ 30, 35, 38, 45, 46)
Held
- The purpose of introducing nomination was to ease administrative burdens, protect ongoing corporate dealings and encourage investment. Neither the company-law scheme nor its legislative object disclosed an intention to alter succession law or confer absolute ownership on nominees. (¶¶ 20, 21, 22, 23, 24)
- “Vest” takes its meaning from context and does not invariably convey full ownership. Here, vesting identifies the person with whom the company or depository can deal in the immediate aftermath of death, avoiding uncertainty pending lawful succession. (¶¶ 30, 31, 32, 33, 34, 35, 45)
- The non-obstante clause and exclusionary language protect the entity’s discharge in dealing with the nominee. They do not defeat legal heirs’ rightful claims against that nominee once succession is established. (¶¶ 36, 37, 38, 46)
- Nomination is not a statutory testament or a third line of succession. It cannot supersede succession law while bypassing the safeguards governing execution and validity of wills. The High Court’s rejection of the contrary Kokate view was correct. (¶¶ 39, 40, 41, 42, 43, 44, 46, 47)
Result
Appeal dismissed without costs. The High Court’s ruling that nomination does not override the law of succession was upheld.