Karnataka High Court
T. Nagendra Setty S/O Late T Thippanna ... vs T. Vishwanath Setty S/O T Thippanna ... on 1 February, 2024
Author: V.Srishananda
Bench: V.Srishananda
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NC: 2024:KHC-D:2281
MFA No. 104732 of 2023
R
IN THE HIGH COURT OF KARNATAKA, DHARWAD BENCH
DATED THIS THE 01ST DAY OF FEBRUARY, 2024
BEFORE
THE HON'BLE MR JUSTICE V.SRISHANANDA
MISCELLANEOUS FIRST APPEAL No.104732 OF 2023 (ISA)
BETWEEN:
T. NAGENDRA SETTY,
S/O. LATE T. THIPPANNA SETTY,
AGED ABOUT 52 YEARS, KIRANI BUSINESS,
R/O: METRI VILLAGE, KAMPLI TALUK,
BALLARI DISTRICT.
...APPELLANT
(BY SRI. SATHISH M.S., ADVOCATE)
AND:
1. T. VISHWANATH SETTY
S/O. T. THIPPANNA SETTY, HINDU,
AGED ABOUT 48 YEARS,
ADVOCATE AND AGRICULTURIST,
Digitally
signed by
R/O: DOOR NO.169,
SAROJA
SAROJA
HANGARAKI
BALAJI NILAYA, BEHIND VADIRAJ
HANGARAKI Date:
2024.02.19
TIFFIN CENTRE, 3RD CROSS, KAPPAGAL
16:08:45
+0530 ROAD, BALLARI.
2. T. MANJUNATHA SETTY,
S/O. LATE, T.THIPPANNA SETTY,
AGED ABOUT 50 YEARS,
WORKING IN H.A.L
R/O: DOOR NO.26, THIRD FLOOR, 2ND
CROSS, BALAJI, ENCLAVE,
DODDANAKUNDI,
MARTHHALLI, BENGALURU.
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NC: 2024:KHC-D:2281
MFA No. 104732 of 2023
3 THE MANAGER,
CANARA BANK, MAIN BRANCH,
HOSAPETE,
4. THE MANAGER,
KARNAATAKA GRAMEENA BANK,
MAIN ROAD, METRI BRANCH,
METRI VILLAGE, KAMPLI TALUK,
BALLARI DISTRICT.
5. THE BRANCH MANAGER,
LIFE INSURANCE CORPORATION OF
INDIA,
STATION ROAD, HOSAPETE,
VIJAYANAGARA DISTRICT.
...RESPONDENTS
(BY SMT. PALLAVI PACHHAPURE, ADVOCATE FOR R1-R2;
SRI. SHIVASAI M.PATIL, ADVOCATE FOR R5;
SRI. RAKESH BILKI, ADVOCATE FOR R3;
R4 SERVED)
THIS MISCELLANEOUS FIRST APPEAL IS FILED UNDER
SECTION 384 OF THE INDIAN SUCCESSION ACT, 1925,
PRAYING TO, ALLOW THE APPEAL AND SET ASIDE THE ORDER
DATED 30.08.2023 PASSED IN P AND SC NO.03/2022 ON HE
FILE OF ADDITIONAL SENIOR CIVIL JUDGE AND JUDICIAL
MAGISTRATE FIRST CLASS AT HOSAPETE AND THEREBY
DISMISS THE PETITION FILED BY RESPONDENT NO.1 TO MEET
THE ENDS OF JUSTICE AND EQUITY.
THIS MISCELLANEOUS FIRST APPEAL, COMING ON FOR
ORDERS, THIS DAY, THE COURT DELIVERED THE FOLLOWING:
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NC: 2024:KHC-D:2281
MFA No. 104732 of 2023
JUDGMENT
Heard Sri M.S.Sathish, advocate for appellant, Smt.Pallavi S. Pachhapure, advocate for respondent Nos.1 and 2, Sri Shivasai M. Patil, advocate for respondent No.5 and Sri Rakesh Bilki, advocate for respondent No.3.
2. Though the matter is listed for orders, with the consent of the parties, same is taken up for final disposal.
3. Appeal is filed by the first respondent in P & SC No. 03/2022 on the file of the Additional Senior Civil Judge and JMFC, Hosapete, assailing the Order dated 30.08.2023 passed in the said Case.
4. Facts in brief which are utmost necessary for disposal of the appeal are as under:
A petition came to be filed under Section 372 of the Indian Succession Act with a prayer for issue of Succession Certificate. One T.Vishwanath Setty being the youngest son of T.Thippanna Setty filed a petition seeking issue of Succession Certificate with regard to the Savings Bank Account, Fixed Deposit and Insurance Policy amounts held by Thippanna Setty.-4-
NC: 2024:KHC-D:2281 MFA No. 104732 of 2023 Appellant was named as nominee in the records maintained by banks and financial institutions.
5. The said petition for issue of Succession Certificate was contested. On such, petition came to be allowed. The operation portion of the impugned order reads as under:
"The petition filed by the petitioner under Section 372 of the Indian Succession Act, 1925, is allowed.
Issue Succession Certificate in favour of the petitioner by name T.Vishwanath Shetty, S/o T.Thippanna Setty, aged 47 years, advocate and agriculturist, R/o Door No.169, Balaji Nilaya, Behind Vadiraj Tiffin Centre, 3rd Cross, Kappagal Road, Ballari, in order to claim the 1/3rd amount as mentioned in the petition schedule amounts.
Likewise, issue Succession Certificate in favour of the respondent No.1 and 2 naemly T.Nagendra Setty, S/o late T.Thippanna Setty and T.Manjunatha Setty, S/o T.Thippanna Setty, in order to claim the 1/3rd amount each as mentijoned in the petition schedule amounts.
It is made very clear that, these certificates are issued only for the purpose of claiming benefits as mentioned in the petition schedule and other than -5- NC: 2024:KHC-D:2281 MFA No. 104732 of 2023 that purpose this certificate shall not be used for any other purpose.
Issue Succession Certificates in favour of petitioner and respondent No.1 and 2 after receiving necessary court fee from the petitioner and respondent No.1 and 2."
6. Being aggrieved by the same, first respondent is in appeal.
7. Sri M.S.Sathish, advocate for the appellant, reiterating the grounds urged in the appeal memorandum, contended that there is a partition suit pending between the parties in O.S.No.46/2020 on the file of the II Addl. Senior Civil Judge, Bellary, sitting at Siruguppa. Therefore, the Court which issued the Succession Certificate erred in law in allowing the petition.
More over, since appellant is the nominee, he is entitled to receive the proceeds from the Savings Bank Account, Fixed Deposit and Insurance Policy amounts from the banks and financial institutions. As such, sought for setting aside the impugned order issuing Succession Certificate by allowing the appeal.
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8. Per contra, Smt. Pallavi S Pachhapure, Sri Shivasai M. Patil and Sri Rakesh Bilki, advocates supported the impugned order.
9. Smt. Pallavi S. Pachhapure, Advocate for contesting respondents contends that there is no dispute that name of the appellant has been shown as nominee of late Thippanna Setty in the records of Banks and financial institutions. But, that itself would not make out a case for the appellant to receive the money as the owner of the proceeds of Savings Bank Account, Fixed Deposit and Insurance Policy.
10. She also contends that the nomination facility would only put an end the relationship of deceased with financial institutions by handing over proceeds of Savings Bank Account, Fixed Deposit and Insurance Policy amounts in the name of nominee.
11. She also contends that the nominee thereof would be holding the money/proceeds as a trustee for and on behalf of all the sharers and in the absence of any Will executed by the Thippanna Setty, all the legal heirs of Thippanna Setty would be entitled to receive the proceeds of Savings Bank Account, -7- NC: 2024:KHC-D:2281 MFA No. 104732 of 2023 Fixed Deposit and Insurance Policy amounts, which has been rightly appreciated by the learned Trial Judge in the impugned Order and sought for dismissal of the appeal.
12. Sri Sivasai M. Patil and Sri Rakesh Bilki, Advocates representing financial institutions supported the arguments put forth by the first respondent and contended that they are ready to handover the proceeds either to the nominee or as per the orders of this Court.
13. Having heard the parties in detail, this Court perused the material on record, meticulously.
14. On such perusal, admittedly, Thippanna Setty, died intestate. He was having Savings Bank Account, Fixed Deposit and Insurance Policies. Admittedly, name of the appellant has been entered in the records of the financial institutions and banks as nominee of Thippanna Setty. Therefore the bank and financial institutions are ready to hand over the proceeds to the nominee, who is none other than the appellant.
15. It is pertinent to note that often there arises a dispute as to the right of a legal heir by natural succession vis-à-vis, a -8- NC: 2024:KHC-D:2281 MFA No. 104732 of 2023 nominee, especially in respect of the financial investments made by a person who is deceased. The investment would also include life insurance policies. The tug of war between nominees and legal heirs has witnessed significant legal battles across the country. Several judgments are rendered on the issue. There are judgments which would hold that nominee has got a preferential right over the legal heirs. Therefore, in order to obviate such difference of opinion, it is necessary that the Court has to find out who is a nominee. The very definition of the word 'nominee' as could be seen from different dictionary is as under:
Black's Law Dictionary 4th Edition Review:
'nominee': One who has been nominated or proposed for an office.
One designated to act for another as his representative in a rather limited sense. It is used sometimes to signify an agent or trustee. It has no connotation, however, other than that of acting for another, in representation of another, or as the grantee of another. Schuh Trading Co. v. Commissioner of Internal Revenue, C.C.A.7, 95 F.2d 404, 411.-9-
NC: 2024:KHC-D:2281 MFA No. 104732 of 2023 Concise Oxford English Dictionary:
'nominee': a person who is nominated;
A person or company, not the owner, in whose name a company, stock etc. is registered.
The Chambers Dictionary 10th Edition:
'nominee': a person who is nominated by another; a person who acts on behalf of another person, especially to keep that person's identity hidden; a person on whose life an annuity or lease depends; a person in whose name stocks and shares, etc are registered, but who is not the actual owner of them; a person to whom the holder of a copyhold estate surrenders his or her interest;
The Chambers 21st Century Dictionary:
'nominee': a someone who is nominated as a candidate for a job or position, etc; someone nominated to or for a job or position, etc; a person or organization appointed to act on behalf of another, especially in order to keep the identity of the first secret; some one whose life an annuity or lease depends.
16. However, as held by the Hon'ble Apex Court in the case of Shakti Yezdani and another vs. Jayanand Jayant Salgaonkar and others reported in 2023 SCC Online SC 1679, has held that nominee holds the proceeds for and on behalf of all the sharers. Relevant paragraphs are culled out hereunder for ready reference.
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NC: 2024:KHC-D:2281 MFA No. 104732 of 2023 "NOMINATION UNDER VARIOUS LEGISLATIONS
41. In an illuminating list of precedents, this Court as well as several High Courts have dealt with the concept of 'nomination' under legislations like the Government Savings Certificate Act, 1959, the Banking Regulation Act, 1949, the Life Insurance Act, 1939 and the Employees Provident Fund and Miscellaneous Provisions Act, 1952. It would be apposite to refer to what the Court said on nomination, in reference to these legislations:
Case Law/ Precedent Held Sarbati Devi & Nomination under S. Anr. v. Usha Devi 39 of the Insurance Act, 1938 is subject to the claim of heirs of the assured under the law of succession.
Nozer Gustad Nomination under S. Commissariat v. Central 10(2) of the EPF & Misc. Bank of India Provisions Act, 1952 cannot be made in favour of a non-
family person. Relied upon Sarbati Devi (supra) to state that the principles therein were applicable to the Employees Provident Funds Act as well and not merely restricted to the Insurance Act.
Vishin N. Khanchandani v. Nominee entitled to Vidya L. Khanchandani receive the sum due on the savings certificate under S. 6(1) of the Govt. Savings Certificate Act, 1959, but cannot utilise it. In fact, the nominee may retain the same for those entitled to it
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NC: 2024:KHC-D:2281 MFA No. 104732 of 2023 under the relevant law of succession.
Ram Chander Talwar v. Nomination made Devender Kumar Talwar under provisions of S. 45ZA of the Banking Regulation Act, 1949 entitled the nominee to receive the deposit amount on the death of the depositor.
42. A consistent view appears to have been taken by the courts, while interpreting the related provisions of nomination under different statutes. It is clear from the referred judgments that the nomination so made would not lead to the nominee attaining absolute title over the subject property for which such nomination was made. In other words, the usual mode of succession is not to be impacted by such nomination. The legal heirs therefore have not been excluded by virtue of nomination.
43. The presence of the three elements i.e., the term 'vest', the provision excluding others as well as a non-obstante clause under S.109A of the Companies Act, 1956 have not persuaded us in the interpretation to be accorded vis-à-vis nomination, in any different manner. Different legislations with provisions pertaining to nomination that have been a subject of adjudication earlier before courts, have little or no similarity with respect to the language used or the provisions contained therein. While the Government Savings Certificates Act, 1959, Banking Regulation Act, 1949 and Public Debts Act, 1944
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NC: 2024:KHC-D:2281 MFA No. 104732 of 2023 contain a non-obstante clause, the Insurance Act, 1939 and Cooperative Societies Act, 1912 do not.
44. Similarly, there are variations with respect to the word 'vest' being present in some legislations (the Employees Provident Fund Act, 1952) and absent in others (the Insurance Act, 1939, the Cooperative Societies Act, 1912). Looking at the dissimilarities and the fact that uniform definition is not available relating to the rights of 'nominee' and/or whether such 'nomination' bestows absolute ownership over nominees, it is only appropriate that the terms are considered as ordinarily understood by a reasonable person making nominations, with respect to their movable or immovable properties. A reasonable individual arranging for the disposition of his property is expected to undertake any such nomination, bearing in mind the interpretation on the effect of nomination, as given by courts consistently, for a number of years. The concept of nomination if interpreted by departing from the well-established manner would, in our view, cause major ramifications and create significant impact on disposition of properties left behind by deceased nominators.
45. The legislative intent of creating a scheme of nomination under the Companies Act, 1956 in our opinion is not intended to grant absolute rights of ownership in favour of the nominee merely because the provision contains three elements i.e., the term
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NC: 2024:KHC-D:2281 MFA No. 104732 of 2023 'vest', a non-obstante clause and the phrase 'to the exclusion of others', which are absent in other legislations, that also provide for nomination.
EFFECT OF 'VEST' IN S. 109A OF THE COMPANIES ACT, 1956 & BYE-LAW 9.11.1 OF THE DEPOSITORIES ACT, 1996
46. The appellants' case is grounded in the interpretation of the term 'vest' in Section 109A of the Companies Act, 1956 and Bye-law 9.11.1 under the Depositories Act, 1996, and according to them, the use of the term 'vest' indicates the intent to bestow ownership of the securities upon the nominee on the shareholder's death. To address the aforesaid argument, it is apposite to note how the term 'vest' or 'vesting' has been defined by the courts, from time to time.
47. In Fruits & Vegetable Merchant Union v. Delhi Improvement Trust,16 the Supreme Court held that the term 'vest' has a variety of meanings dependent on the context within which it operates.
"11. ... ... In this chapter occur Sections 45 to 48 which provide for the vesting of certain properties in the Trust. Section 45 lays down the conditions and the procedure according to which any building, street, square or other land vested in the Municipality or Notified Area Committee may become vested in a Trust. Similarly, Section 46 deals with the vesting in the Trust of properties like a street or a square as are not vested in a Municipality or Notified Area Committee. These sections, as also Sections 47 and 48 make provision for
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NC: 2024:KHC-D:2281 MFA No. 104732 of 2023 compensation and for empowering the Trust to deal with such property vested in it. The vesting of such property is only for the purpose of executing any improvement scheme which it has undertaken and not with a view to clothing it with complete title. As will presently appear, the term "vesting" has a variety of meaning which has to be gathered from the context in which it has been used. It may mean full ownership, or only possession for a particular purpose, or clothing the authority with power to deal with the property as the agent of another person or authority."
(Emphasis supplied)
48. In Vatticherukuru Village Panchayat v. Nori Venkatarama Deekshithulu,17 this Court considered the question of the effect of 'vesting' under S. 85 of the AP Gram Panchayat Act, 1964 of the water works & appurtenant land on the Gram Panchayat. It was held that the word 'vesting' in S. 85 did not confer absolute title on the Gram Panchayat. Even after vesting, the Government, in appropriate cases, was amenable to place restrictions on the Gram Panchayat on enjoyment of such waterworks & lands. It is apposite to refer to the discussion at para 10, wherein the varied meaning of the term 'vest' was considered:
"10. The word 'vest' clothes varied colours from the context and situation in which the word came to be used in a statute or rule. Chamber's Mid-Century Dictionary at p. 1230 defines 'vesting' in the legal sense "to settle, secure, or put in fixed right of possession; to endow, to descend, devolve or to take effect, as a right". In Black's Law Dictionary, (5th edn. at p. 1401) the meaning
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NC: 2024:KHC-D:2281 MFA No. 104732 of 2023 of the word 'vest' is given as:"to give an immediate, fixed right of present or future enjoyment; to accrue to; to be fixed; to take effect; to clothe with possession; to deliver full possession of land or of an estate; to give seisin; to enfeoff". In Stroud's Judicial Dictionary, (4th edn., Vol. 5 at p. 2938), the word 'vested' was defined in several senses. At p. 2940 in item 12 it is stated thus "as to the interest acquired by public bodies, created for a particular purpose, in works such as embankments which are 'vested' in them by statute", see Port of London Authority v. Canvey Island Commissioners [[1932] 1 Ch. 446] in which it was held that the statutory vesting was to construct the sea wall against inundation or damages etc. and did not acquire fee simple. Item 4 at p. 2939, the word 'vest', in the absence of a context, is usually taken to mean "vest in interest rather than vest in possession". In item 8 to 'vest', "generally means to give the property in". Thus the word 'vest' bears variable colour taking its content from the context in which it came to be used."
(Emphasis supplied)
49. In Municipal Corpn. of Greater Bombay v. Hindustan Petroleum Corpn.,18 it was observed that the term 'vesting' is capable of bearing the meaning of limited vesting, in title as well as possession, and is referrable to the context and situation within which it operates. The above would suggest that the word 'vest' has variable meaning and the mere use of the word 'vest' in a statute does not confer absolute title over the subject matter.
50. Further, the term 'vesting' is also used in other contexts such as the Indian Succession Act,
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NC: 2024:KHC-D:2281 MFA No. 104732 of 2023 1925 wherein S. 211 vests the deceased's estate in the administrator or executor, although neither become the owner of the said property but merely hold the same until it is distributed among the lawful successor(s). The term 'vests' in S. 109A of the Companies Act, 1956 is therefore required to be interpreted in these logical lines.
51. In the context of the facts of the present case, S. 109A of the Companies Act (pari materia to S. 72 of the Companies Act, 2013) provides for vesting of shares/debentures of a share/debenture holder unto his nominee 'in the event of his death'. Similarly, Byelaw 9.11.1 under the Depositories Act, 1996 provides for 'vesting' of the securities unto the nominee on the death of the beneficial owner. Applying the law laid down in the aforenoted decisions of this Court, the use of the word 'vest' does not by itself, confer ownership of the shares/securities in question, to the nominee. The vesting of the shares/securities in the nominee under the Companies Act, 1956 and the Depositories Act, 1996 is only for a limited purpose, i.e., to enable the Company to deal with the securities thereof, in the immediate aftermath of the shareholder's death and to avoid uncertainty as to the holder of the securities, which could hamper the smooth functioning of the affairs of the company. Therefore, the contrary argument of the appellants on this aspect is rejected."
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17. Applying the principles of law enunciated in the aforesaid judgment to the facts and circumstances of the present case, contention of the appellant that he alone is entitled to hold the proceeds of the Savings Bank Account, Fixed Deposit and Insurance Policy amounts is incorrect and impermissible.
Appellant is bound to share the proceeds with other sharers which has been rightly appreciated by the learned Trial Judge in the impugned order, as referred to supra. Accordingly, there is no merit in the appeal.
18. Hence, following:
ORDER
(i) Appeal is dismissed.
(ii) No order as to costs.
(iii) In view of dismissal of the appeal, all pending IA's are consigned to record.
Sd/-
JUDGE kcm List No.: 1 Sl No.: 22