RIGHT OF NOMINATION V RIGHT OF SUCCESSION: A LACUNA IN COMPANIES ACT
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Abstract
One of the recent lacunae in Companies Act,2013 is the issue regarding the right of legal heirs to shares as opposed to nominees. The position of the Supreme Court on this particular issue is still undecided, however there are binding judgments provided by the division bench of the Bombay High Court and a recent judgement by the National Company Law Appellate Tribunal (Hereinafter referred to as NCLAT) reiterated the same.
A nominee in common parlance shall be understood to be a beneficiary who is so nominated that he receives the benefit of an asset (money) upon the death of the individual who is the owner of that asset and who, in the relevant document, has appointed the nominee. A nominee's legal status has often been agreed to be that of an 'agent' or 'trustee' and appointment is not treated as an alternative to a succession rule.
The present issue arose due to two conflicting judgements of Single Judge Benches of the Bombay High Court in the decisions of Harsha Kokate v. The Saraswat Co-operative Bank Limited iand J. J. Salgaonkar v. J.J. Salgaonkarii.
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