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A nominee is not a beneficial owner — they are a trustee for the legal heirs: the Supreme Court has definitively settled this in Shakti Yezdani v. Jayanand Salgaonkar, clarifying that nomination under the Companies Act and Depositories Act does not override the law of succession.
Inheritance in India is shaped by a patchwork of personal laws, statutes, and judicial interpretations. A fundamental question persists: is there a difference between a legal heir and a nominee? While a legal heir is entitled by substantive succession law to inherit assets, a nominee is generally authorised only to receive assets as a custodian on behalf of legal heirs. Understanding the distinction between heirship and succession, the roles of nominees versus legal heirs, and the statutory requirements for transferring assets is essential to avoid protracted disputes and stress for families.
A Legal Heir Certificate (LHC) is an administrative document issued by the Civil Court that identifies the survivors of the deceased, primarily for non-financial purposes such as accessing family pensions, gratuity, provident fund, or transferring utility connections and immovable properties. Courts have consistently held that an LHC is not a document of title. In State of Chhattisgarh v. Dhirjo Kumar Sengar (2009) 13 SCC 600, the Supreme Court clarified that a succession certificate is the primary document for debts and securities, while an LHC is limited to administrative recognition. A Succession Certificate, issued under Section 370 of the Indian Succession Act, 1925, is mandatorily required to inherit debts and securities including movable financial assets like bank deposits, mutual funds, and shares in the absence of a Will. Under Section 381 of the Act, it affords full indemnity to all persons who pay debts or deliver securities to the certificate holder.
A critical ambiguity long plagued wealth management: does a nominee supersede a legal heir? The Bombay High Court in Harsha Nitin Kokate v. The Saraswat Co-operative Bank (2010) had suggested a nominee becomes the absolute owner of shares. This conflicted with the established position in Sarbati Devi v. Usha Devi (1984) 1 SCC 424, where the Supreme Court held that a nominee for an LIC policy is merely a receiver, not an owner. The Supreme Court definitively resolved this conflict in Shakti Yezdani & Anr. v. Jayanand Jayant Salgaonkar & Ors. (2023 SCC OnLine SC 1679). The Court ruled that the Companies Act, 2013 and Depositories Act, 1996 are not intended to rewrite the law of succession. A non-obstante clause in corporate regulations helps the company discharge its liability but does not grant beneficial title to the nominee. The Trustee Principle stands: a nominee receives the asset to ensure the company or bank is not dragged into litigation, but must hold it in trust for the rightful legal heirs identified under the relevant Succession Act.
Legal Heirship is an administrative status certification primarily used for claiming benefits and establishing identity of heirs. Succession is a judicial process specifically designed for recovering debts and securities with legal protection. Practitioners must carefully assess which document is appropriate based on the specific assets involved, the nature of claims, and institutional requirements. In many cases, both documents may be required for different purposes in settling an estate.
