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IN THE HIGH COURT OF KERALA AT ERNAKULAM
P.M. MANOJ, J
Deepti Sivan D/o Vasantha Pillay - Appellant
Versus
Jyothi Haridranath D/o. Vasanthapillay - Respondent
CRP NO. 402 OF 2024
Decided On : 24-02-2025
(A) Specific Relief Act, 1963 - Section 41(h) - Civil Procedure Code, 1908 - Order VII Rule 11 - Revision Petition against the order declining to reject the plaint for mandatory injunction concerning de-mat account holdings of deceased - The defendant, as nominee, is bound to account to legal heirs, and the suit is not barred by law - The court found no merit in the defendant's argument that the suit should be for partition, noting the plaintiff's right to seek necessary reliefs. (Paras 7 , 10 , 21 , 23 )
(B) Nominee's Duty - A nominee does not acquire absolute ownership but holds the assets for the benefit of legal heirs - The court clarified that the non-obstante clause does not exclude legal heirs from claims against a nominee. (Paras 20 , 21 )
(C) Court Fee - The suit must be valued according to the substantive relief sought, and the court fee linked to the value of shares claimed is applicable. (Paras 6 , 17 )
Facts of the case:
The plaintiff, a sister, sued the defendant, also a sister, for mandatory injunction to transfer her 1/4th share of de-mat account holdings of their deceased mother, which the defendant allegedly transferred to her own account without accounting to other legal heirs.
Findings of Court:
The court upheld the trial court's decision, stating the suit is maintainable and the plaintiff is entitled to seek the relief of mandatory injunction.
Issues: The main issues were whether the suit should be treated as one for partition and if the plaint disclosed a cause of action.
Ratio Decidendi: The court found that the defendant's status as a nominee does not grant her absolute ownership, and the plaintiff is entitled to seek the transfer of her share.
Result: Revision Petition dismissed.
Based on the provided legal document, the key legal principles and findings are as follows:
A nominee does not acquire absolute ownership of assets but holds the assets for the benefit of the legal heirs. The nominee is obligated to account to the legal heirs and transfer their rightful shares (!) (!) .
The suit filed by the plaintiff for a mandatory injunction to transfer her 1/4th share of the de-mat account holdings is maintainable. The court upheld that the defendant, as a nominee, is bound to account to the legal heirs, and the suit is not barred by law (!) (!) (!) .
The primary contention that the suit should be treated as one for partition and that the plaint does not disclose a cause of action is rejected. The court found that the plaintiff’s cause of action is properly pleaded, and the relief sought is within her rights (!) (!) .
The argument that the suit is undervalued and that the court fee is insufficient, based on the value of shares, was dismissed. The relief sought relates to an injunction to transfer shares, and the valuation is linked to the relief, not the market value of shares (!) (!) (!) .
The contention that the suit is barred under specific provisions, including Section 41(h) of the Specific Relief Act, was rejected. The court clarified that this provision pertains to suits barred by law, which is not applicable here, as the suit is maintainable (!) (!) (!) .
The non-obstante clause in relevant statutes (such as the Companies Act and Depositories Act) limits its effect to immediate dealings with securities after the holder’s death and does not exclude the legal heirs’ rights to claim their shares or assets (!) (!) (!) .
Nomination under laws like the Companies Act or Depositories Act does not constitute a "statutory testament" that overrides succession laws. Such nominations do not confer absolute ownership but are akin to a trustee holding assets for the benefit of legal heirs (!) (!) (!) (!) (!) (!) (!) (!) .
The court emphasized that the power to reject a plaint under Order VII Rule 11 is a drastic measure and must be exercised strictly. The court scrutinizes whether the plaint discloses a cause of action and whether the suit is barred by law, based on the entire pleadings and documents (!) (!) (!) .
The court clarified that the suit’s cause of action is adequately pleaded, and the contention that it does not disclose a cause of action is unfounded. The suit is for a specific relief of transfer of shares, which is permissible (!) (!) .
The procedural aspect that the suit is still pending and the defendant has the right to file a written statement challenging the maintainability was noted. The order rejecting the application for rejection of the plaint does not bar the plaintiff from pursuing the suit (!) .
The court dismissed the revision petition, affirming that the order declining to reject the plaint was proper and that the suit should proceed to be heard on its merits (!) (!) .
In summary, the court held that a nominee does not have absolute ownership rights over assets but holds them in trust for the legal heirs. The suit for a mandatory injunction to transfer the share of assets is maintainable, and the procedural and substantive grounds raised for rejection under Order VII Rule 11 do not apply here. The legal framework recognizes the rights of legal heirs over assets, notwithstanding nomination or statutory provisions limiting immediate dealings with securities.
JUDGMENT :
The Revision Petition is preferred by the defendant in OS No.1074/2024 of the Rent Control Court, Thiruvananthapuram being aggrieved by order dated 11.09.2024, whereby the petitioner’s objection to the Suit was declined. The parties in the Revision Petition will hereinafter be referred as to their status before the trial court.
2. Originally the suit is for a mandatory injunction. The plaintiff and the defendant are sisters. They are the children of late Vasantha Pillai, who died on 22.02.2022, intestate, as far as plaint A schedule property is concerned. Plaint A schedule is nothing but a de-mat account with the Sharekhan Limited in the name of late Vasantha Pillai. The defendant was a nominee of the mother in the de-mat account No.1208670001323727 with HDFC Securities.
3. When the plaintiff verified the status of the de-mat account in the name of her mother with the HDFC Securities, it was informed that the said account was closed on 18.04.2022 by the defendant. She had transferred the entire holdings belonging to her mother by using her status as the nominee to the mother. She has been in possession of holdings of the account for more than the last two years. She has neither disclosed anything about the transactions in the mother’s de-mat account nor she had accounted or transferred 1/4th right of the value and profits of those shares, which is transferred to de-mat account Number 12036000-05582065 with Sharekhan Limited, which is plaint B schedule.
4. The case of the plaintiff in the suit is that the defendant, being the nominee, was legally bound to account to the legal heirs of Vasantha Pillai, which includes two brothers of the plaintiff and the defendant. However, the said legal heirs had not raised a claim for their shares till this time and they are not party to the proceedings. The plaintiff has preferred the suit alleging that the defendant had failed to transfer the share of plaint A schedule property, i.e. 1/ 4th share of the holdings of Late Vasantha Pillai, to the de-mat account of the plaintiff. The Suit was preferred after giving sufficient opportunity by preferring legal demand notice. The reliefs sought in the suit is to grant decree of mandatory injunction directing the defendant/nominee of the deceased mother to transfer 1/4th share of the holdings of Late Vasantha Pillai given in plaint A schedule property as specifically provided in plaint B schedule property along with the 1/4th of the dividend received in the de-mat account of the defendant with respect to the asset holdings of Late Vasantha Pillai till date into the de-mat account number of the plaintiff, within the time fixed by the court.
5. Along with the suit, the plaintiff preferred I.A. No.1 of 2024 for temporary injunction against which a counter affidavit has been preferred by the defendant. Thereafter a petition was filed by the defendant as I.A. No.3 of 2024 for rejecting the plaint under Order VII Rule 11 CPC wherein the contentions raised by the revision petitioner is that the plaintiff’s claim for 1/4th share of her late mother results in testifying that the defendant is also a shareholder along with her two brothers who are not parties to the proceedings. On that argument, the suit necessarily is one for partition, which could be filed after paying sufficient court fee for the value of shares claimed by the plaintiff. That too after arraying necessary parties on the party array. Without doing the same, by raising a tactical relief, she tried to evade the payment of the requisite court fee. This exercise is only to circumvent the provisions of the Civil Procedure Code. These are the circumstances in which I.A.No.3 of 2024 is preferred under Order VII Rule 11 to reject the plaint.
6. It is further contended that the value of the shares is more than Rs.4 Crores which is not mentioned anywhere in the suit. Without mentioning the same, relief is sought for mandatory injunction and accounts with consequential relief. Instead of seeking t
A nominee does not gain absolute ownership of assets but is obligated to account to legal heirs, and the suit for mandatory injunction is maintainable without being barred by law.
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.
Nomination does not confer ownership rights; legal heirs retain entitlement to the deceased's estate under succession laws.
Nominees do not inherit the estate of the deceased; they must distribute amounts to legal heirs according to succession laws.
A nominee does not inherit the estate of the deceased and must distribute amounts to legal heirs according to succession laws.
Nominees under the Companies Act acquire exclusive ownership rights over shares post the holder's death, distinguishing them from other laws.
Nomination in insurance does not confer absolute rights over terminal benefits, which pertain to legal heirs under succession laws.
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