TMI Blog2015 (6) TMI 86X X X X Extracts X X X X X X X X Extracts X X X X ..... tests of its validity, one that is never displaced by a later, properly made will that deals with the very same property. Mr. Pai asks that we should place ourselves in the ‘armchair of the nominator’. That, as it happens, is the same furniture used by a testator, and it simply cannot be that the view from that seat depends on the nature of the document before the executant. There is no particular form for a will, but there are requirements attendant to its proper making. These do not apply to all nominations: even the requirement of witnesses is a matter of prudence rather than statute. If that be so, no nomination per se requires attestation, and if that be so, it is admissible in evidence under Section 68 of the Evidence Act, 1872 without the evidence of any witness (simply because a witness to a nomination is not, in any sense, an ‘attesting witness’). But no will can be so read in evidence without such evidence. From the fundamental definitions to the decisions cited, it is clear that a nomination only provides the company or the depository a quittance. The nominee continues to hold the securities in trust and as a fiduciary for the claimants under the succession law. Nom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pplications in both cases will then have to be heard on their merits. However, it is necessary to set out briefly how the question for determination arises. 4. Salgaonkar (Suit No.503 of 2014) is an action for administration of the estate of one Jayant Shivram Salgaonkar. The Plaintiff s Notice of Motion No. 822 of 2014 seeks reliefs in respect of his estate described in the list at Exhibit A to the Plaint. Item 9 of that list speaks of investments in Mutual Funds, etc. These are detailed in Exhibit D to the Plaint. This is a list of various investments in Mutual Funds and it shows the name of the nominee in respect of each such investment. Defendants Nos. 5 and 6 seem to be the nominees in respect of the bulk of these mutual fund investments. In their Affidavits in Reply to the Notice of Motion, Defendants Nos. 5 and 6, represented by Mr. Rajendra Pai, learned Counsel, have specifically urged that these investments do not form part of the Jayant Salgaonkar s estate. They each claim to be exclusively entitled in law to succeed to these investments qua such nominees, and they invoke, inter alia, Regulation 29A of the SEBI (Mutual Fund) Regulations, 1996. Defendant No.6 ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the name of the nominee upon the death of the holder of the shares.(Paragraph 6) and, further, that: such nomination carries effect notwithstanding anything contained in a Testamentary Disposition or nominations made under any other law dealing with the securities. The last of the many nominations would be valid. ( Paragraph 6) 7. In opposition to the 3rd defendant s claim, the submission made on behalf of the plaintiff was noted in paragraph 9 of Kokate thus: 9. Mr. Maheshwari on behalf of the Plaintiff contends that the nomination only makes a nominee a trustee for the shares. He holds the shares in trust for the estate of the deceased, the deceased died intestate and hence the Plaintiff as the widow would be entitled to the shares to the exclusion of the nominee. This is precisely the formulation that Mr. Shah and Mr. Tamboly commend before me today. 8. The plaintiff s counsel in Kokate also placed before the Court the Supreme Court decision in Smt. Sarbati Devi v Smt. Usha Devi,( (1984) 1 SCC 424 : AIR 1984 SC 346) a decision under Section 39 of the Insurance Act. Similarly, attention was also invited to Section 30 of the Maharashtra Cooperative Societies ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... another nomination can be made. Such later nomination would be relied upon by the Depository Participant. That would be for conferring of all the rights in the shares to such last nominee. 25. A reading of Section 109A of the Companies Act and 9.11 of the Depositories Act makes it abundantly clear that the intent of the nomination is to vest the property in the shares which includes the ownership rights there under in the nominee upon nomination validly made as per the procedure prescribed,, as has been done in this case. These Sections are completely different from Section 39 of the Insurance Act set out (supra) which require a nomination merely for the payment of the amount under the Life Insurance Policy without confirming any ownership rights in the nominee or under Section 30 of the Maharashtra Cooperative Societies Act which allows the Society to transfer the shares of the member which would be valid against any demand made by any other person upon the Society. Hence these provisions are made merely to give a valid discharge to the Insurance Company or the Co-operative Society without vesting the ownership rights in the Insurance Policy or the membership rights in the Soci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by any of the checks, balances and tests against which the validity of a will and its due execution are to be tested. This was not, they say, the intendment of the corporate statutes considered, and this construct of the law is directly contrary to decisions of the Supreme Court and the High Court, each of which was binding on the Kokate Court. I will turn presently to the decisions cited in this regard, and to these arguments in greater detail. 10. Mr. Shah invites attention to the preamble to the Depositories Act, 1996. This is: An Act to provide for regulation of depositories in securities and for matters connected therewith or incidental thereto. When Mr. Shah says, therefore, that this has nothing whatever to do with succession or disposition inter vivos, I believe he is correct. Plainly, the Depositories Act is concerned with the regulation of depositories, i.e., those entities providing depository services, and not in relation to the holders of the securities in such services, or the manner in which those security-holders might choose to conduct their affairs or to leave the distribution of these securities either to be governed by actions and deeds inter vivos, tes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in any other disposition and/or nominations made by the Nominating Person(s) under any other law for the time being in force, for the purposes of dealing with the securities lying to the credit of deceased Nominating Person( s) in any manner, the Depository shall rely upon the last nomination validly made prior to the demise of the Nominating Person(s). The Depository shall not be liable for any action taken in reliance upon and on the basis of nomination validly made by the Nominating Person( s). 9.11.8 ... (Emphasis supplied) Now while it is true that Bye-Law 9.11.7 contains a non-obstante clause, the reason for this is clear from the following phrase, viz., for the purposes of dealing with the securities lying to the credit of the deceased Nominating Person(s) in any manner . 12. Section 109A of the Companies Act, 1956 was introduced in 1999 and this was done, Mr. Shah submits, for conformity with the Depositories Act which preceded it by three years. Sub-section (3) of the newly introduced section of the Companies Act, 1956 reads: (3) Notwithstanding anything contained in any other law for the time being in force or in any disposition, whether testamentary or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll is presented to Parliament, the reports of Committees which preceded the Bill and the reports of Parliamentary Committees. Occasional excursions into the debates of Parliament are permitted. Internal aids are the preamble, the scheme and the provisions of the Act. Having discovered the reason for the statute and so having set the sail to the wind, the interpreter may proceed ahead. No provision in the statute and no word of the statute may be construed in isolation. Every provision and every word must be looked at generally before any provision or word is attempted to be construed. T he setting and the pattern are important. It is again important to remember that Parliament does not waste its breath unnecessarily. Just as Parliament is not expected to use unnecessary expressions, Parliament is also not expected to express itself unnecessarily. Even as Parliament does not use any word without meaning something, P arliament does not legislate where no legislation is called for. Parliament cannot be assumed to legislate for the sake of legislation; nor can it be assumed to make pointless legislation. Parliament does not indulge in legislation merely to state what it is unnecessary ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... literal sense, must usually be construed as being limited to the actual objects of the Act. 12. In Maunsell v. Olins 1975 (1) All ER 16, Lord Wilberforce observed, ...I am not, myself, able to solve the problem by a simple resort to plain meaning. Most language, and particularly all languages used in rent legislation, is opaque: all general words are open to inspection, many general words demand inspection, to see whether they really bear their widest possible meaning. 13. But we think that when we rely upon rules of construction we must always bear in mind Lord Reid s admonition in Maunsell v. Olins (supra) to the following effect: Then rules of construction are relied on. They are not rules in the ordinary sense of having some binding force. They are our servants not our masters. They are aids to constructions, presumptions or pointers. Not infrequently one rule points in one direction, another in a different direction. In each case we must look at all relevant circumstances and, decide as a matter of judgment what weight to attach to any particular rule . (Emphasis supplied) 15. Mr. Shah submits that if a mere nomination was to effect a full-fledged transfer wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... defined in the Companies Act. It apparently means a holder of shares, having no beneficial interest in the shares, the whole beneficial interest remaining in one or more other persons. (Emphasis supplied) 17. No nomination can ever result in a divesting, Mr. Shah submits. It is merely a matter of convenience for the company or the depository, not for the nominator and certainly it does not transfer ownership to the nominee. The reason for this is that the company or depository should not have to face a legal vacuum till the contesting rights are decided. Vatticherukuru Village Panchayat v Nori Venkatarama Deekshithulu Ors. (1991 Supp (2) SCC 228) is a decision of vital import to the present discussion because it not only considers the meaning of the word vest , but also the decision in Fruit Vegetable Merchants Union, which was cited before and considered by the Kokate Court. In paragraph 10 of Vatticherukuru, the Supreme Court considered the implications and meaning of the word vest in the context of a local tenancy and land law and revenue records. It said: 10. The word vest clothes varied colours from the context and situation in which the word came to be use ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the Government with absolute right, when the property was entrusted under the scheme for construction of the markets etc. It was held by this Court that placing the property at the disposal of the trust did not signify that the Government had divested itself of its title to the property and transferred the same to the trust. The clauses in the agreement show that the Government had created the Trust as its agent not on permanent basis but as a convenient mode of having the scheme of improvement implemented by the Trust subject to the control of the Government. 18. The Supreme Court decision in Smt. Sarbati Devi v Smt. Usha Devi ((1984) 1 SCC 424 : AIR 1984 SC 346, supra) was placed before the Kokate Court. This was a case under Section 39 of the Insurance Act, 1938. The question, as set out in paragraph 1, was whether a nominee of life insurance policy under that Section, on the death intestate of the assured, would be entitled to the beneficial interest in the amount received under the policy to the exclusion of all the heirs of the assured. The section under consideration contained no non-obstante clause akin to the ones in Section 109A of the Companies Act, 1956 or Bye- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the nominee succeeded to the estate with all plus and minus points . We find it difficult to treat a nominee as being equivalent to an heir or legatee having regard to the clear provisions of Section 39 of the Act. ... (Emphasis supplied) 19. Mr. Shah submits that this decision was on all fours with the case before the Kokate Court and was incorrectly distinguished. What the Kokate Court also did not consider was that Sarbati Devi was also considered by the Supreme Court itself in Shri Vishin N. Khanchandani Anr. v Vidya Lachmandas Khanchandani Anr. ((2000) 6 SCC 724) That case came up to the Supreme Court from a decision of this court in a First Appeal. It dealt with a nomination under the Government Savings Certificates Act, 1959. The question before the Supreme Court was whether the nominee specified in the National Savings Certificate, on the death of its holder, became entitled to the sum due under the certificate to the exclusion of all other persons, or whether the amount of the certificate was to be retained by him for the benefit of the deceased s legal heirs. Clearly, this was substantially the question in Sarbati Devi. The contention by the appellants in Khan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m all further liability in respect of the sum so paid. (2) Nothing in Sub-section (1) shall be deemed to preclude any executor or administrator or other representative of a deceased holder of a savings certificate from recovering from the person receiving the same under Section 7 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. (3) Any creditor or claimant against the estate of a holder of a savings certificate may recover his debt or claim out of the sum paid under this Act to any person and remaining in his hands unadministered in the same manner and to the same extent as if the latter had obtained letters of administration to the estate of the deceased. (Emphasis supplied) 22. Mr. Pai and Mr. Ghatalia submit that Khanchandani clearly has no application because the statutory provision there had a failsafe in Section 8(2) that specifically saved the interests of heirs or legatees. There is no such provision in the Companies Act or the Depositories Act, they say, and the two legal schemas are distinct and different from the one under the Government Savings Certi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7; the amount remaining in nominee s hand after deducting the amount of all debts or other demands lawfully paid or discharged by him in due course of administration. In other words though the nominee of the National Savings Certificates has a right to be paid the sum due on such savings certificates after the death of the holder, yet he retains the said amount for the benefit of the persons who are entitled to it under the law of succession applicable in the case, however, subject to the exception of deductions mentioned in the Subsection. In the Statement of Objects and Reasons of the Act it is stated: 13. In the light of what has been noticed hereinabove, it is apparent that though language and phraseology of Section 6 of the Act is different than the one used in Section 39 of the Insurance Act, yet, the effect of both the provisions is the same. The Act only makes the provisions regarding avoiding delay and expense in making the payment of the amount of the National Savings Certificates, to the nominee of holder, which has been considered to be beneficial both for the holder as also for the post office. Any amount paid to the nominee after valid deductions becomes the estat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ade abundantly clear that the amount in any head can be received by the nominee, but the amount can be claimed by the heirs of the deceased in accordance with law of succession governing them. In other words, nomination does not confer any beneficial interest on the nominee. In the instant case amounts so received are to be distributed according to the Hindu Succession Act, 1956. The State Bank of India is directed to release half of the amount of general provident fund to the appellant now within two months from today along with interest. (Emphasis supplied) 25. Now Shipra Sengupta is a decision of 20th August 2009; Kokate is of 20th April 2010, about eight months later. Shipra Sengupta contains an absolutely unambiguous statement of the law without any qualification on account of this or that statutory provision. This decision was preceded by just a few months by that of the Supreme Court in Challamma v Tilaga Ors.( (2009) 9 SCC 299) on 31st July 2009, and this decision too reiterates and follows Sarbati Devi and Khanchandani. It reaffirms paragraph 4 of Sarbati Devi: 14. In Sarbati Devi v. Usha Devi [(1984) 1 SCC 424 : 1984 SCC (Tax) 59] this Court held: (SCC p. 427, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er the Insurance Act but set a general principle in relation to nominees. Both Nozer Commissariat and Antonio Joao Fernandes preceded Kokate (the latter by about two weeks). Neither was cited nor noticed in Kokate. Neither was distinguished. 27. The Supreme Court s decision in Ram Chander Talwar Anr. v Devender Kumar Talwar Ors. ((2010) 10 SCC 671) was delivered on 6th October 2010 a few months after Kokate. Its relevance lies in the fact that it quite unequivocally reiterates the legal position in relation to a nominee and a nomination following Khanchandani; and Talwar does so in the context of Section 45ZA of the Banking Regulation Act, 1949, a provision that is in pari materia with Section 109A of the Companies Act, 1956: 45ZA(2). Notwithstanding anything contained in any other law for the time being in force or in any disposition, whether testamentary or otherwise, in respect of such deposit, where a nomination made in the prescribed manner purports to confer on any person the right to receive the amount to deposit from the banking company, the nominee shall, on the death of the sole depositor or, as the case may be, on the death of all the depositors, become entitle ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Master in the fund, or at any rate the right to recover that amount from the fund, formed part of the estate of Master during his life-time. Has he done anything to divest himself of his right thereto? All he did was to direct that in case of his death the sum should be paid to Aimai. This is in itself a mere mandate the validity of which expires with the death of the mandator. It is true the validity is extended by Statute beyond such death but such statutory extension does not by itself produce any change in the nature of the mandate. The question as to what the recipient is to do with the fund when she has obtained it is still for decision. The nomination paper is not a Will. In no case could a Parsi execute a Will in that form. But even in the case of those persons who can make a valid informal Will the nomination paper could not be considered as a Will and nothing more; if it were so considered the whole object of the nomination would be frustrated. The object of the nomination system is to designate some person to whom the Provident Fund may pay over the amount due to the subscriber, and obtain a valid quittance. If the nominee were merely the legatee under the nomination p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cording to the English Law the payee or the nominee is nothing more than an agent to receive the money, which money remains as the property of the assured and at his disposal during his life time and on his death forms part of the estate. The result is that the payee or the nominee takes no beneficial interest in it. The views of the Kerala High Court, the Calcutta High Court, the Andhra Pradesh High Court and the Delhi High Court all to the same effect were also considered. 31. Mr. Shah and Mr. Tamboly both relied on the 2009 decision of a learned single Judge in Ramdas Shivram Sattur v Rameshchandra alias Ramchandra Popatlal Shah Ors.( 2009 (3) Bom. C. R. 705) This was a decision under Section 30 of the Maharashtra Co-operative Societies Act, 1960. The learned single Judge (A.P. Deshpande, J) held that the purpose of a nomination is to make certain the person to whom the society must look, and not to create an interest in the nominee to the exclusion of those in law entitled to the estate of a deceased member. This was also the view of another learned single Judge of this Court (R.D. Dhanuka, J) in Shashikiran Ashok Parekh v Rajesh Virendra Agarwal Ors.( 2012 (4) Mh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 58(2) of the Indian Succession Act. The statutory intention, he says, was to avoid disputes between heirs. 33. Mr. Pai also cites the decision of a Division Bench of the Calcutta High Court in Smt. Usha Majumdar v Smt. Smriti Basu,( AIR 1988 Cal 115) which held that a nominee in respect of a provident fund account is exclusively entitled to the amount in that account to the exclusion of the others. It is not possible to accept this submission. That decision was considered by Mr. Justice Britto in Antonio Joao Fernandes, and expressly not accepted in view of Sarbati Devi and Khanchandani.( Paragraph 15 of the Manupatra report in Antonio Joao Fernandes) Mr. Justice Britto s decision binds me; that of the Calcutta High Court, with respect, does not. To accept Mr. Pai s submission, I would have to hold that Antonio Joao Fernandes was incorrect and refer the matter to a larger Bench, or to hold that it was per incuriam. I can do neither. 34. Similarly, I am unable to accept Mr. Pai s submission that the decision of a learned single Judge of the Delhi High Court in Dayagen P. Ltd v Rajendra Dorian Punj Anr.( [2009] 151 Com Cas 92 (Del)) should be followed. There, the learn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... war, Nozer Gustad Commissariat and Antonio Joao Fernandes. 37. The decision in Kokate does not consider the decisions of the Supreme Court in Khanchandani, Shipra Sengupta or Challamma, or those of learned single Judges of this Court in Nozer Gustad Commissariat and Antonio Joao Fernandes. Each one of these was binding on the Kokate court. The view taken in Kokate is contrary to, and does not consider any of these. It is, for that reason, per incuriam. 38. The interpretation on Section 109A and Bye-Law 9.11 placed by the Kokate Court does not seem to me to be reconcilable with the explicit decisions of the Supreme Court and of this Court. What was the mischief , if any, sought to be avoided by those two statutes? The succession law is unchanged. There are no further complications on account of testamentary or intestate succession. The nature of corporate instruments and securities has, however, undergone a massive change and so has the way corporations (including banks and depositories) conduct their business. The fundamental focus of Section 109A and Section 109B of the Companies Act and Bye-Law 9.11 of the Depositories Act is not the law of succession, nor is it intended t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Witnesses need not see the nominator execute the nomination. Yet it is said to be a will. No nomination can be assailed on the ground of importunity, fraud, coercion or undue influence; Section 61 of the Indian Succession Act is wholly defenestrated, as is Section 59. Yet it is said to be a will. There can be no codicil to a nomination. Yet it is said to be a will. In short, a nomination, in the Kokate formulation, is some sort of super-will , one that partakes of none of the defining traits of a properly executed will and none of the tests of its validity, one that is never displaced by a later, properly made will that deals with the very same property. Mr. Pai asks that we should place ourselves in the armchair of the nominator . That, as it happens, is the same furniture used by a testator, and it simply cannot be that the view from that seat depends on the nature of the document before the executant. There is no particular form for a will, but there are requirements attendant to its proper making. These do not apply to all nominations: even the requirement of witnesses is a matter of prudence rather than statute. If that be so, no nomination per se requires attestation, and ..... X X X X Extracts X X X X X X X X Extracts X X X X
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