The Allahabad High Court, in a significant ruling, clarified that a nominee has the legal right to claim funds in bank deposits following the death of the account holder but emphasized that the ownership of such funds is determined by the applicable succession laws. The decision was delivered in Manoj Kumar Sharma v. Union of India & Another (Writ-C No. 8197 of 2024) by a Division Bench comprising Justice Shekhar B. Saraf and Justice Vipin Chandra Dixit.
Background of the Case
The petitioner, Manoj Kumar Sharma, approached the High Court seeking the release of funds held in multiple Fixed Deposit Receipts (FDRs) at the Bank of Baroda. He contended that he was the nominee of the FDRs as well as a legal heir of his deceased mother, who passed away on February 8, 2020. The bank had refused to release the funds citing legal complexities, including pending litigation regarding the validity of the deceased’s will.
The petitioner had previously filed a succession suit (Civil Suit No. 195 of 2020) in the Civil Judge (Senior Division)/Fast Track Court, Moradabad. This suit was dismissed due to the pendency of another suit challenging the will of the petitioner’s mother.
Legal Issues Examined
The court addressed several key legal questions, including:
1. Nomination Rights under Banking Laws:
The petitioner relied on Section 45ZA of the Banking Regulation Act, 1949, which grants the nominee the right to receive funds upon the depositor’s death. He also referred to a 2005 Reserve Bank of India (RBI) circular, mandating banks to release funds to nominees without requiring succession certificates or indemnity bonds.
2. Interplay of Nomination and Succession Laws:
The court analyzed whether the rights of a nominee under the Banking Regulation Act override the rights of legal heirs under succession laws.
3. Judicial Precedents:
The court reviewed the Supreme Court judgment in Ram Chander Talwar v. Devender Kumar Talwar (2010), which held that a nominee is entitled to receive funds as a trustee for the legal heirs but does not gain ownership of the funds.
Court’s Observations and Decision
The Division Bench made the following key observations:
– Nominee’s Role as Trustee:
The court reiterated that the nominee acts as a trustee for the legal heirs, stating:
“Section 45-ZA(2) merely puts the nominee in the shoes of the depositor after their death and clothes them with the exclusive right to receive the money lying in the account. But it by no stretch of imagination makes the nominee the owner of the money.”
– Bank’s Obligations:
The court directed the Bank of Baroda to release the funds in the FDRs to the petitioner within three weeks, subject to him filing an affidavit that the funds would be held in trust and distributed according to the final determination of the succession dispute.
– Succession Laws Take Precedence:
The court emphasized that the legal heirs’ rights to the funds remain intact and are governed by succession laws, irrespective of the nominee’s entitlement to receive the funds initially.
The writ petition was disposed of with directions to the bank to release the funds to the petitioner. However, the petitioner was required to provide an undertaking that the funds would be held in trust for the legal heirs until the conclusion of the succession dispute.
Counsel Details
– For the Petitioner: Ram Lal Mishra
– For the Respondents: A.S.G.I. Anadi Krishna Narayana, Harish Kumar Yadav, Ishan Shishu, and Sandeep Kumar Singh
