Hon’ble Supreme Court of India in its recent judgment dated December 14, 2023 in Shakti Yezdani vs Jayanand Jayant Salgaonkar (Civil Appeal No. 7107 of 2017) has upheld its previous judgments, holding that Companies Act does not deal with the law of succession and therefore an absolute title to the securities to the nominee cannot be conferred under the provisions of the Companies Act.
The appellants in this case contended that nominations under S. 109A of the Companies Act, 1956 & Bye-law 9.11 of the Depositories Act, 1996 suggest the intention of the shareholder, to bequeath the shares/securities absolutely to the nominee, to the exclusion of any other persons (including legal representatives) and constitutes a ‘statutory testament’.
Hon’ble Supreme Court stated that it is beyond the scope of the company’s affairs to facilitate succession planning of the shareholder. In case
of a will, it is upon the administrator or executor under the Indian Succession Act, 1925, or in case of intestate succession, the laws of succession to determine the line of succession. The objective of nomination facility under the Companies Act and the Depositories Act is for a limited purpose i.e., to ensure that there exists no confusion pertaining to legal formalities that are to be undertaken upon the death of the holder and by extension, to protect the subject matter of nomination from any protracted litigation until the legal representatives of the deceased holder are able to take appropriate steps. The object of introduction of nomination facility under the Companies Act is only to provide an impetus to the investment climate and ease the cumbersome process of obtaining various letters of succession, from different authorities upon the shareholder’s death.
Nomination process therefore does not override the succession laws.
