LexSHAKTI YEZDANI & ANR. versus JAYANAND JAYANT SALGAONKAR & ORS.
Open in Lexace · Ask the AI about this caseJudgment (excerpt)
[2023] 16 S.C.R. 695 : 2023 INSC 1076 695 CASE DETAILS SHAKTI YEZDANI & ANR. v. JAYANAND JAYANT SALGAONKAR & ORS. Civil Appeal No. 7107 of 2017 DECEMBER 14, 2023 [HRISHIKESH ROY AND PANKAJ MITHAL, JJ.] HEADNOTES Issue for consideration: Whether a nominee of a holder of shares or securities appointed u/s. 109A of the Companies Act, 1956 read with the Bye-laws under the Depositories Act, 1996 is entitled to the benefi cial ownership of the shares or securities subject matter of nomination to the exclusion of all other persons who are entitled to inherit the estate of the holder on testator’s death as per the law of succession. Companies Act, 1956 – s. 109A and s. 109B – Companies Act, 2013 – s. 72 – Depositories Act, 1996 – Byelaw 9.11.1 – Nomination of shares – Eff ect – Nominee of a holder of shares or securities appointed u/s. 109A if, entitled to the benefi cial ownership of the shares or securities, upon the holder’s death: Held: Upon the holder’s death, the nominee would not get an absolute title to the subject matter of nomination, and those would apply to the Companies Act, 1956 (pari materia provisions in Companies Act, 2013) and the Depositories Act, 1996 as well – Usual mode of succession is not to be impacted by such nomination – Legal heirs have not been excluded by virtue of nomination – Vesting of securities in favour of the nominee contemplated u/s. 109A of the Companies Act 1956 (pari materia s. 72 of Companies Act, 2013) and Bye-Law 9.11.1 of Depositories Act, 1996 is for a limited purpose – It is to ensure that there exists no confusion pertaining to legal formalities that are to be undertaken upon the death of the holder and by extension, to protect the subject matter of nomination from any protracted litigation until the legal representatives of the deceased holder are able to take appropriate steps – Object of introduction of nomination facility vide the Companies (Amendment) Act, 1999 was only to provide 696 SUPREME COURT REPORTS [2023] 16 S.C.R. an impetus to the investment climate and ease the cumbersome process of obtaining various letters of succession, from diff erent authorities upon the shareholder’s death – Nomination process, thus does not override the succession laws – There is no third mode of succession that the scheme of the Companies Act, 1956 and Depositories Act, 1996 aims or intends to provide – Thus, it is clear that the Companies Act does not deal with the law of succession – Impugned decision takes the correct view. [Paras 26, 44, 45, 46, 47] Companies Act, 1956 – Companies (Amendment) Act, 1999 – Scheme, intent and object – Nomination under the Companies Act, 1956 vis-a-vis law of succession: Held: 1956 Act does not contemplate a ‘statutory testament’ that stands over and above the laws of succession – 1956 Act is concerned with regulating the aff airs of corporates and is not concerned with laws of succession – ‘Statutory testament’ by way of nomination is not subject to the same rigours as is applicable to the formation and validity of a will under the succession laws – Submission of the appellants of nomination as a ‘statutory testament’ cannot be accepted because the Companies Act, 1956 does not deal with succession nor does it override the laws of succession – It is beyond the scope of the company’s aff airs to facilitate succession planning of the shareholder – In case of a will, it is upon the administrator or executor under the Succession Act, 1925, or in case of intestate succession, the laws of succession to determine the line of succession. [Para 41, 42] Companies Act, 1956 – s. 109A – Eff ect of term ‘vest’ in s. 109A and Byelaw 9.11.1 under the Depositories Act, 1996: Held: s. 109A of the 1956 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’ – Byelaw 9.11.1 under the Depositories Act, 1996 provides for ‘vesting’ of the securities unto the nominee on the death of the benefi cial owner – Use of the word ‘vest’ does not by itself, confer ownership of the shares/securities to the nominee – Vesting of the shares/securities in the nominee under the Companies Act, 1956 and the Depositories Act, 1996 is only for a limited purpose-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 697 securities,
Excerpt shown. Read the full judgment & AI analysis in Lexace.