LI Network
Published on: December 22, 2023 at 14:40 IST
The Supreme Court has clarified that the nomination process under the Companies Act, 1956 (pari materia Companies Act, 2013) does not supersede succession laws.
The Court held that the scope of a company’s affairs doesn’t extend to facilitating succession planning for shareholders.
The authority to determine the line of succession lies with the administrator or executor under the Indian Succession Act, 1925, in the case of a will, or the laws of succession in the case of intestate succession.
The bench, comprising Justice Hrishikesh Roy and Justice Pankaj Mithal, upheld the High Court’s order stating that the nominee of a share or securities holder is not entitled to beneficial ownership to the exclusion of others entitled to inherit the estates under succession laws.
The dispute revolved around mutual fund investments held by Mr. Jayant Shivram Salgaonkar, with the appellants and respondents being legal heirs and representatives.
The nominee claimed absolute ownership of securities, relying on Sections 109A and 109B of the Companies Act, 1956. The High Court rejected this claim, emphasizing that the provisions of the Act do not govern succession and that the nominee is not entitled to the beneficial ownership.
The Supreme Court concurred, asserting that the nomination process does not override succession laws and dismissed the appeal, upholding the High Court’s order.
