India: Co-Operative Societies - Transfer Of Ownership To A Nominee Upon Death Of A Member

Last Updated: 25 August 2017
Article by Solomon & Co.

The Maharashtra Co-operative Societies Act, 1960 ("the Act") allows a member to nominate a person or persons to whom his share and interest in the co-operative society will be transferred by the society in the event of the member's death.

Section 25 of the Act provides that a member would cease to be a member of a society on death. However, his holding and other interests do not lapse, but they pass on to his heirs or legal representatives and the society is bound to transfer the shares or interest to them as provided in section 30 of the Act.

Section 30 of the Act provides that the society shall transfer the share or interest of the deceased member to a person/s nominated in accordance with the Maharashtra Cooperative Societies Rules, 1961, and if no such person is nominated then the committee of the society shall transfer it to such person as may appear to the committee to be the heir or legal representative of the deceased member.

Therefore, on the death of a member, the society shall transfer the share or interest of the deceased member to a person nominated in accordance with the rules. The purpose of nomination is to make clear the person with whom the society has to deal upon the death of a member. It does not create any interest in favour of the nominee, to the exclusion of those who are in law entitled to the estate of a deceased member. The nominee does not become the absolute owner of the property. He is only empowered to hold the property in trust for the real owners for the purpose of dealings with the society. He has no power, authority or title to alienate the property to the exclusion of the other legal heirs of the deceased member.

Rights of the nominee

  • Upon the death of the member, the nominee will be entitled to all the rights in the member's shares to the exclusion of all other persons, provided the prescribed procedure for nomination is followed.
  • The shares of the member are simplicitor transferred to the nominee, which transfer will effectually discharge the society against any other person making a demand. But such a transfer of shares cannot and does not result in vesting of the flat in such nominee.
  • As stated above, such nominee is merely a trustee for the estate of the deceased until the estate passes by will or intestacy. The nominee shall hold the flat/unit in trust until all the heirs are brought on record and shall not have the right to ownership and shall not create any third party interest.
  • The society is not concerned with disputes amongst the heirs of the deceased. Section 30 of the Maharashtra Cooperative Societies Act allows the society to transfer the shares of the member to a nominee and the transfer will be valid against any demand made by any other person upon the Society.

Procedure for nomination

  • In order to nominate a person, member of a society has to either make and sign a document or make a statement in the book kept for that purpose by the society. Where the nomination is made by a document, such document shall be deposited with the society during the member's life time and where the nomination is made by a statement, such statement shall be signed by the member and attested by one witness - Rule 25 of the Cooperative Societies Rules,1961.

Procedure to be followed by the nominee in the event of death of the member

  • Nominee/s shall submit an application for membership within 6 months of the death of the member.
  • If there is more than one nominee, such nominees shall make a joint application to the society and indicate the name of the nominee who should be enrolled as a member.
  • The other nominees shall be enrolled as associate members.
  • In case only one nominee is indicated by the nominees for membership of the society, the nominees shall also file an indemnity bond in the prescribed form indemnifying the society against any claims made to the shares and interest of the deceased member in the capital/property of the society by any of them upon transfer of shares and interest of the deceased member in the capital/property of the Society to the nominee.

Procedure to be followed by the society in the event of death of the member

  • The managing committee of the society shall verify the nomination form duly submitted by the deceased member and the Will of the deceased member duly probated by the appropriate court through the executor of the Will or the letters of administration or the succession certificate obtained from civil court under the Indian Succession Act 1925.
  • The Society will act on the nomination immediately on death of the member and transfer the share or interest to the nominee, without waiting to find out who the actual owner of the share or interest is, so that there is no hindrance in the functioning of the society. Apart from this, the nomination has no legal effect and it cannot deprive the heir or legatee of his right to the share or interest of a deceased member. Nomination cannot override the general law of succession.
  • When a nomination is made in accordance with law, the society cannot make any inquiry or invite any objection. The share or interest of the deceased member must be transferred in the name of such nominee/s.
  • In the absence of any person being nominated, the society shall transfer the share or interest to such person as may appear to the managing committee to be the heir or legal representative of the deceased member provided he is duly admitted as a member of the society.

Originally published August 2016

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.

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