The appellants and respondent nos. 1 to 9 are the legal heirs and representatives of an individual – Jayant Shivram Salgaonkar. The family patriarch executed a will on 27.06.2011 making provisions for the devolution of his estates upon the successors. Apart from the properties mentioned in the will, the testator had certain fixed deposits (FDs) for the sum of Rs. 4,14,73,994/-in respect of which the respondent nos. 2, 4 and appellant no. 2 were made nominees. Additionally, there were certain mutual fund investments (MFs) of the amount of Rs. 3,79,03,207/-in respect of which appellants and Jay Ganesh Nyas Trust (respondent no. 9) were made nominees. The testator Jayant Shivram Salgaonkar passed away on 20.08.2013. (Para 2)
On 29.04.2014, the respondent no. 1 filed Suit No. 503/2014 with the prayer for declaration inter alia that the properties of the testator may be administered under the court’s supervision and seeking absolute power to administer the same. He also prayed for permanent injunction restraining all other respondents and appellants from disposing, transferring, alienating, assigning and/or creating any third-party interests in respect of the properties in Exhibit A. (Para 3)
With the above understanding of the legal provisions, the learned Judge declared that the view in Kokate (supra) generates inconsistencies as it renders a nomination under the Companies Act the status of a ‘superwill’ that is bereft of the rigour applicable to a will for its making or the test of its validity under the Indian Succession Act, 1925. According to the ruling, S. 109A & S. 109B of the Companies Act, 1956 and the Bye-law 9.11 of the Depositories Act, 1996 does not displace the law of succession nor does it stipulate a third line of succession. (Para 7)
The vesting of securities in favour of the nominee contemplated under S. 109A of the Companies Act 1956 (pari materia S. 72 of Companies Act, 2013) & Bye-Law 9.11.1 of Depositories Act, 1996 is for a limited purpose i.e., to ensure that there exists no confusion pertaining to legal formalities that are to be undertaken upon the death of the holder and by extension, to protect the subject matter of nomination from any protracted litigation until the legal representatives of the deceased holder are able to take appropriate steps. The object of introduction of nomination facility vide the Companies (Amendment) Act, 1999 was only to provide an impetus to the investment climate and ease the cumbersome process of obtaining various letters of succession, from different authorities upon the shareholder’s death. (Para 45)
Upon a careful perusal of the provisions within the Companies Act, it is clear that it does not deal with the law of succession. Therefore, a departure from this settled position of law is not at all warranted. The impugned decision takes the correct view. (Para 47)
SUPREME COURT OF INDIA
2023 STPL(Web) 486 SC
Shakti Yezdani & Anr Vs. Jayanand Jayant Salgaonkar & Ors.
Civil Appeal No. 7107 of 2017-Decided on 14-12-2023
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