India: Bombay High Court - Rights Of Successors To Prevail Over Those Of Nominees Of Shares

Last Updated: 6 February 2017
Article by Seema Jhingan, Neha Yadav and Saniya Kothari

(Holding the view in the earlier Kokate Case as incorrect, the Division Bench of the Bombay High Court has clarified the position of law with respect to rights of nominees versus those of successors over shares of a company. The Court has held that nomination does not override the law in relation to testamentary or intestate succession, and vesting under Section 109A (of Companies Act, 1956) does not create a third mode of succession.)

Earlier Position – Kokate Case:

The issue of rights of nominees versus those of the successors over shares of a company, upon death of a shareholder, have been a matter of much debate over the last one decade. The single bench of the Bombay High Court in Harsha Nitin Kokate v. The Saraswat Co-operative Bank Limited and Others1 ("Kokate Case") had held that upon death of the shareholder, the nominee, nominated by the shareholder in accordance with the prescribed procedure, will be the beneficial owner of the shares and will be entitled to all the rights in the shares to the exclusion of all other persons. The single judge in this case considered the provisions on nomination under Section 109A and 109B of the (old) Companies Act, 1956 ("CA 1956") and the Bye-Law No. 9.11 framed under the Depositories Act, 1996 ("DA 1996"), particularly the non-obstante provisions contained therein.

Broadly, Section 109A of CA 1956 (which now corresponds to Section 72 of the new Companies Act, 2013) entitled the nominee to all rights in the shares upon death of the shareholder, notwithstanding any other dispositions under any other law, testamentary or otherwise. On similar lines, Bye-Law no. 9.11.7 under the DA 1996 provided that notwithstanding any other disposition, for the purposes of dealing with the securities lying to the credit of deceased nominating security holder, the depository will rely upon the last nomination validly made prior to such demise.

Interpreting the above provisions, the Bombay High Court had held that the nomination would have the effect of a testamentary disposition itself, and the nominee's position would be superior to even a testamentary disposition.

Division Bench overrules the Kokate Case:

The decision in the Kokate case was much criticized and was again considered by another single judge of the Bombay High Court, in Jayanand Jayant Salgaonkar vs Jayashree Jayant Salgaonkar2, wherein it was held that the view taken in the Kokate Case is per incuriam, and that nominations under Sections 109A and 109B of CA 1956 and Bye-Law 9.11 of DA 1996 cannot displace the law of succession or open a third line of succession.  Since, this order was passed by a single judge, appeals were placed before the Hon'ble Chief Justice of the Bombay High Court for referral of this issue to a larger/division bench.

Accordingly, the appeals were taken up for final disposal by the Division Bench of the Bombay High Court in Shakti Yezdani and Ors. Vs. Jayanand Jayant Salgaonkar and Ors.3 ("Salgaonkar Case"), where the Division Bench, on December 1, 2016, finally put the question of correctness of the view in the Kokate Case at rest.

The Court referred to the provisions relating to nomination under various enactments, and various Supreme Court decisions where such provisions have been interpreted, to hold that:

"the nominee does not get absolute title to the property subject matter of the nomination. The reason is by its very nature, when a shareholder or a deposit holder or an insurance policy holder or a member of a Co-operative Society makes a nomination during his life time, he does not transfer his interest in favour of the nominee. It is always held that the nomination does not override the law in relation to testamentary or intestate succession. The provisions regarding nomination are made with a view to ensure that the estate or the rights of the deceased subject matter of the nomination are protected till the legal representatives of the deceased take appropriate steps....The object of the provisions of the Companies Act is not to either provide a mode of succession or to deal with succession. The object of the Section 109A is to ensure that the deceased shareholder is represented by someone as the value of the shares is subject to market forces....the provision is enacted to ensure that the commerce does not suffer due to delay on the part of the legal heirs in establishing their rights of succession and claiming the shares of a Company." [Emphasis Supplied]

The Court also placed its reliance on a recent judgement of Indrani Wahi v. Registrar of Co-op. Societies and Other4, wherein the Supreme Court while dealing with the issue of nomination of a member of a society, had directed the co-operative society to transfer the shares of the deceased member in the name of the nominee. While upholding the right of the nominee, it was observed that it would be open for the other family members of the deceased member to pursue a case for succession or inheritance over such shares in accordance with law.

We may add here that while the aforesaid decision dealt with Section 109A of CA 1956, the Court's observations would be equally applicable in interpreting the (new) corresponding Section 72 of the Companies Act, 2013.

Concluding Remarks:

The Kokate Case, had presented a strange conundrum vis-ŕ-vis nomination versus succession laws, as it was effectively held that nominee's rights would prevail over the rights of legal heirs whether under testamentary or intestate succession. It essentially meant that shareholders would need to ensure that their nomination filings, at all times, are in tandem with the scheme of succession contemplated by them under their will, failing which the will may end up giving rights contrary to the nomination made.

However, the Bombay High Court has now clarified this position, by holding that nomination does not give an absolute right on the shares to the nominee, nor does it override the law in relation to testamentary or intestate succession. Therefore, it appears that the shares only vest in the nominee as a trustee until such time any legal heirs/successor of the deceased shareholder is able to establish his/her rights of succession with respect to such shares.


1 2010(4) ALLMR 51.

2 AIR 2015 Bom 296.

3 Appeal No. 313 of 2015 in Notice of Motion No. 822 of 2014 in Suit No. 503 of 2014 and Appeal No. 311 of 2015 in Testamentary Petition No. 457 of 2014, Decided On: 01.12.2016.

4 (2016) 6 SCC 440.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Seema Jhingan
Neha Yadav
Saniya Kothari
In association with
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.