Nominee is not the undisputed owner

The court only ruled that society must transfer flat shares to the nominee

“Landmark Supreme Court (SC) judgement on transfer of flat to nominee: Nominee of deceased member is absolutely entitled for the ownership by transfer, Co-op. Soc can’t challenge the right of nominee. No legal heirship, court order or succession certificate required. Please circulate.
 
Have you received such a message on Whatsapp? It is a classic example of a technically correct message that conveys the opposite of what was actually meant. It seems to suggest that the SC has decided that a nominee will henceforth become the full owner of the flat and that the legal heirs of the deceased members have no rights at all. I had covered the impact of this decision in my article “The way without a Will” carried in this paper on January 5, 2017. But many people wrote to me pointing to the above interpretation of the SC’s decision, hence I am forced to write on this issue again.

 
To recap briefly, the SC decision (Indrani Wahi versus Registrar of Societies and others) was in the context of the West Bengal Cooperative Societies Act, 1983. Similar Acts and somewhat similar provisions on nominations exist in every state. For example, in Maharashtra we have the Maharashtra Cooperative Societies Act, 1960.
 

The above decision does rule that “In this behalf, it is necessary to clarify that transfer of share or interest, based on a nomination under Section 79 in favour of the nominee, is with reference to the concerned Cooperative Society, and is binding on the said society. The Cooperative Society has no option whatsoever, except to transfer the membership in the name of the nominee, in consonance with Sections 79 and 80 of the 1983 Act (read with Rules 127 and 128 of the 1987 Rules).” This seems to imply that the nominee has full ownership rights over the flat.

 
But how mistaken that impression is becomes clear when you read what the court says next: “That would have no relevance to the issue of title between the inheritors or successors to the property of the deceased…”, and further states that “It shall, however, be open to the other members of the family (presently only the son of Biswa Ranjan Sengupta — Dhruba Jyoti Sengupta; we are informed that his mother — Parul Sengupta — has died) to pursue his case of succession or inheritance, if he is so advised, in consonance with the law”. 
 
This makes it clear that the SC has only ruled that the Society has no option but to transfer the shares in favour of the nominee. But it has also made it clear that this does not make the nominee the undisputed owner of the flat.  The legal heirs have full rights as heirs and can pursue their case under the law. The nominee will have to account to the legal heirs once their interest is upheld by the courts.

 
All this makes leaving your immovable property to your heirs an expensive and dispute-ridden affair. Hence in that article I had requested the state governments to amend the laws on the lines of the 2015 amendments to the Life Insurance Act that seems to provide beneficial interest to the nominee of a life insurance policy. Similar amendments are required in corporate and banking laws to provide for beneficial interest to nominees. This will make it easier for a common person to leave his wealth to the family member of his choice without having to involve lawyers and without the risk of expensive legal disputes. 

 The author is a Sebi-registered investment advisor