Nominations – Securities – Nominee continues to hold the Securities in trust and as a fiduciary for claimants under succession law : Succession Act 1925 Section 58:

The issue arose as to whether the decision of a learned single Judge of Court in Harsha Nitin Kokate vs. The Saraswat Cooperative Bank Ltd. & Ors. 2010(112) Bom. LR 2014 was per incuriam and not a good law wherein the Court had considered the provisions of section 109A of the Companies Act, 1956 and Bye-Law 9.11 under the Depositories Act, 1996, and found that once a nomination is made, the securities in question: automatically get transferred in the name of the nominee upon the death of the holder of the shares.

In the present matter the Hon’ble Court observed that The Depositories Act, 1996. is an act to provide for regulation of depositories in securities and for matters connected therewith or incidental thereto.

This Act has nothing whatever to do with succession or disposition inter vivos. 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, testamentary succession or inheritance.

A nomination, though said to be a ‘testament’, requires no probate or other proof ‘in solemn form’. Witnesses need not be in the presence of the nominator. Witnesses need not act at the instance of the nominator. Witnesses need not see the nominator execute the nomination. 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. There can be no codicil to a nomination. 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 u/s. 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. Nominations u/ss 109A and 109B of the Companies Act and Bye-Law 9.11 of the Depositories Act, 1996 cannot and do not displace the law of succession, nor do they open a third line of succession.