Nominees under the Companies Act do not gain absolute ownership of shares; they hold them in a fiduciary capacity for legal heirs, preserving the rights of succession.

JUDGMENT :

HRISHIKESH ROY, J.

1. Heard Mr. Abhimanyu Bhandari, learned counsel appearing for the appellants. Also heard Mr. Rohit Anil Rathi, learned counsel representing respondent no. 1. Mr. Aniruddha A. Joshi, learned counsel appears for respondent nos. 4, 6, 7 and 8.

2. The appellants and respondent nos. 1 to 9 are the legal heirs and representatives of an individual-Jayant Shivram Salgaonkar. The family patriarch executed a will on 27.06.2011 making provisions for the devolution of his estates upon the successors. Apart from the properties mentioned in the will, the testator had certain fixed deposits (FDs) for the sum of Rs. 4,14,73,994/- in respect of which the respondent nos. 2, 4 and appellant no. 2 were made nominees. Additionally, there were certain mutual fund investments (MFs) of the amount of Rs. 3,79,03,207/- in respect of which appellants and Jay Ganesh Nyas Trust (respondent no. 9) were made nominees. The testator Jayant Shivram Salgaonkar passed away on 20.08.2013.

3. On 29.04.2014, the respondent no. 1 filed Suit No. 503/2014 with the prayer for declaration inter-alia that the properties of the testator may be administered under the court’s supervision and seeking absolute power to administer the same. He also prayed for permanent injunction restraining all other respondents and appellants from disposing, transferring, alienating, assigning and/or creating any third-party interests in respect of the properties in Exhibit A.

4. In their reply to the notice of motion in Suit No. 503/2014, the appellants pleaded that they were the sole nominees to the MFs. The essence of their claim was that the appellants being nominees were absolutely vested with the securities on the testator’s death. The appellant no. 2 was additionally nominated and entitled to the FDs of the testator in the IDBI Bank. It was also the appellants’ contention that nominations made under/in Jayant Shivram Salgaonkar’s MFs/shares were made as per Section 109A and 109B of Companies Act, 1956 and bye-law 9.11.7 of the Depositories Act, 1996. Section 109A and 109B of the Companies Act, 1956 must be read as a code in themselves, wherein the meaning of words ‘vest’ and ‘nominee’ are to be seen from the statute alone bearing in mind the non-obstante clause contained therein. Therefore, the provisions should be interpreted without reference to any outside consideration.

5. On 31.03.2015, the learned Single Judge of the Bombay High Court while passing the order in the Notice of Motion mainly considered whether the law laid down in the case of Harsha Nitin Kokate vs. The Saraswat Co-operative Bank Limited and Others, (2010) SCC Online Bom. 615 was per incuriam. Further, the contentions of the appellants were rejected by the court by observing that S. 109A & S. 109B of the Companies Act, 1956 cannot be read in a vacuum and it is permissible for the court to look at pari materia provisions in other statutes. The court, while considering the argument of a ‘statutory testament’ raised in Sarbati Devi vs. Usha Devi, (1984) 1 SCC 424 expressly negated those and opined that it would not be proper to limit the ratio in Sarbati Devi (supra) to the narrow confines of Section 39 of the Insurance Act, 1939. The same was thereafter reaffirmed in Vishin N. Khanchandani and Another vs. Vidya Lachmandas Khanchandani and Another, (2000) 6 SCC 724, Shipra Sengupta vs. Mridual Sengupta and Others, (2009) 10 SCC 680, Ramchander Talwar and Others vs. Devendra Kumar Talwar and Others, (2010) 10 SCC 671, Nozer Gustad Commissariat vs. Central Bank of India and Others, (1993) 1 Mah. L.J. 228 and Antonio Joao Fernandes vs. Asst. Provident Fund Commissioner, (2010) 4 Mah. L.J. 751. According to the learned judge, the decision in Kokate (supra) failed to consider the decision of the Supreme Court in Khanchandani (supra), Shipra Sengupta (supra) or even those of the Single Judge of