Recently, I came across an interesting item "The Case of the Nominee Nephew" in Reader's Digest March 2015 issue.
The contents are an eye-opener to those who hold company shares and who have made nominations for the same. It states that under the existing provisions of Company Act and Depository Rules, the nominee - whoever it is - becomes the absolute owner of the same on the death of the holder/joint holders, to the exclusion of all other persons. This in effect means that the Company Act and Depository Rules override even a Will. This is in contrast to other nominations including those under Insurance Policies and Fixed Deposits, where the nominee is merely the trustee.
In the cited case, it is incredible to imagine that even if the deceased husband had willed the shares to his wife and kept his nephew as nominee, the widow had no right to to the shares held by her late husband.
It is clear that the existing laws go against the traditional spirit and principle of nomination and it is strange that though five years have passed since the Bombay High Court judgment in the said case, nothing has been done to amend the law of succession and nomination in India especially with regard to company shares.
Please see below full details.
V. Gopalan
