Do you re-call that when you open an account in any bank irrespective of whether it is a nationalized or a private, while filling up the application form you are asked to select the nominees? Now who is a nominee? It is as we all know if the account holder expired suddenly or deceased untimely, a nominee can claim the money the amount lying in the account if it is a bank account or if it is a locker he claim the articles.
Sec: 45ZA of Banking Regulation Act 1949 requires all the account holders to nominate persons who could claim ownership of the amount in the absence of account holder ie., after his death. The general impression for a lay man is however is (which is contrary to the legal expectation) appointing a nominee for his account means he (the nominee) will be sole owner of deposit in his account after his death. But it might be surprising to hear that nominee cannot claim an undisputable ownership of deposit when the account holder is deceased. Because legal heir takes primacy over nominee and the later is relegated merely to the position of collection agent. This has led to a tremendous confusion and is apparently against the intentions of the account holder, because if he wanted the money to be distributed among his heirs he would have selected his/her legal heirs, why would he select others as nominee. The precedence given to legal heir is because of Hindu succession act 1956. And we have Indian succession and Muslim succession acts for Christians and Muslims.
The deposit in the account is considered as a property and the one claims ownership should be legal heir only. Though as per the Hindu succession act priorities may differ. Hence they are classified as Class I, Class II, Agnates and Cognates as per order of precedence. This is for intestate succession. It means when the owner dies without explicitly writing a will. And will can be written if it is not an ancestral property.
Recently I was stumbled by a case in which one of my friends Shalini was involved. To his relative Kumar she has given an amount of Rs 100,000. Since Kumar is very old say beyond 80 and his wife Kamu who is at her late 70’s. As they have no other source of income Shalini has been taking care of both of them. Though Kamu had a sister and their children all adult males in a good earning position nobody cared to look after this old couple.
Pleased by the Shalini’s help Kumar has nominated her as a nominee for his bank account. Kamu died few years ago. Suddenly Kumar is also deceased. When as a nominee my friend Shalini claimed the deposit in Kumar’s account, her claim is disputed by Kamu’s sister’s children who are the right owners of the property legally.
But all the while we were thinking that Shalini is the right owner because she has been nominated by the account holder out of his own will. He consciously made a choice that after his death the deposit should go to Shalini because she took care of him (Kumar). But law(and a latest judgment on this too) treats nominee as only collection agents and nothing more. It is clear that mostly we select our legal heirs as nominees but not always, there are few instances like my friend’s Shalini.
What should we do?
Testamentary succession is one of the less cumbersome transactions legally. Which means one writes a will when he is alive and this piece of paper (will) acquires power when the one written is deceased until then it is just a piece of paper. When a will has such a power why not a decision of nominee? The account holder/depositor out of his own volition picks up nominee and that nominee must be given primacy over legal heirs. The choice of nominee must be treated on par with will. Ie., if I am making some one as a nominee which means I am writing a will in which I am declaring that my nominee will have an undisputable right over my property, ie., money lying in bank account in this case. Because even when account holder knows about the existence of class I legal heirs but he chooses to ignore them and nominates others which means this must be treated as testamentary succession. Nothing but a will.
In a judgment (Ram Chander Talwar & another Vs. Devender Kumar Talwar & others Civil Appeal NOS.1684 OF 2004 Hon’ble Judge(s): AFTAB ALAM, R.M. LODHA Date of Judgment: October 06, 2010) Justice Lodha & Aftab Alam declared that section 45ZA of Banking Regulation act 1949 puts the nominee merely in the shoes of depositor’s after his death and he cannot claim any ownership of money lying in his account.
There is no way to resolve this conflict without the intervention of legislature. Hence there must be an inclusion of a clause which gives nominee’s primacy over legal heirs. And this is the only way we are going to respect the decision of depositor who out of his own will decided to nominate someone other than his legal heir, and the account holder never intended to make nominee as a collection agent.
- Note: This is without any doubt is my personal view and this piece in no way questions or negates any body’s authority