Nomination – is it effective?

If you make a nomination in your assets (for property, insurance, provident fund, demat account etc.) would the assets devolve as mentioned in your Will or would it go to the person nominated absolutely or would it be governed by law of succession?

A nomination is made during the life of the holder / owner of the asset and comes into force after his death. Similarly, a Will or a Testament is also made during the life time of the owner of the asset and is effective after the death of the testator.

The primary uncertainty appears to be whether after a nomination is made the nominee derives absolute right as the owner or the nominee is merely a trustee on behalf of others and acts in a fiduciary capacity for the legal heirs as per the succession law or for the legatee as per the Will.


Companies Act, 1956 as also Companies Act, 2013, Banking Regulation Act, 1949, Provident Funds Act, 1925, Government Savings Banks Act, 1873, Depositories Act, 1996 have a “Notwithstanding provision” for nomination with respect to Testamentary or Intestate Succession which can interpreted that upon the death of the Nominator the Nominee in respect of his assets is vested with all the right of the Nominator and becomes the owner of the asset.

The above interpretation was tested by the Hon’ble Supreme Court and various High courts. Again, around March 2015, the same issue again came up before the Hon’ble Bombay High Court in the case of Jayanand Jayant Salgaonkar and Ors. Vs. Jayashree Jayant Salgaonkar and Ors Thus, in view of the Judgment in case of Jayanand Jayant Salgaonkar, it appears that whatever be the language of the section in the Acts relating to Nominee, a nominee is a mere trustee and holds the assets for and on behalf of the legal heirs. On death of the Nominator, the Company will confer the rights on the nominee but the same will not make the nominee the owner of the asset but only a trustee who holds the asset for and on behalf of the legal heirs of the deceased.

Thus, while carrying out succession planning, it is important to note that Nomination may not really serve the purpose as the Nominee will only act as a Trustee for and on behalf of the legal heirs of the Nominator. Nomination merely serve to discharge the responsibility or liability of the issuing organisation (i.e. Society, Bank, Mutual Fund, Insurance, etc.) vis-a-vis the nominee. The assets of the Nominator (irrespective of Nomination) will devolve upon the beneficiaries in case of a Will and upon the legal heirs in the absence of a Will as per the respective laws of succession.

Therefore, it appears that the compliance of the procedure of nomination is not really effective as it  does not substitute a Will and merely appointing a nominee will not suffice.

Please contact us for further consultation on these matters.

Posted in Law India, Lawyer, Will.