The Delhi High Court has clarified the legal standing of nominees under the Companies Act, 2013, ruling that a nomination does not grant absolute ownership of shares or override the statutory laws of succession. The court held that the “vesting” of securities in a nominee is a provisional arrangement intended to facilitate legal formalities until the estate is settled by the legal heirs of the deceased.
Background
The legal issue arose following the death of a shareholder who held significant interests in two major companies, Oswal Agro Mills Limited (OAML) and Oswal Greentech Limited (OGL). The plaintiff, as the eldest son, sought a partition of the estate, claiming status as a Class-I legal heir under the Hindu Succession Act, 1956.
The primary defendant, the wife of the deceased, contested the claim, asserting that she was the sole nominee for the shares. She argued that the nomination, which was attested by two witnesses, functioned as a “written Will” and that an oral family settlement reached in 2006 had disinherited the plaintiff.
Arguments of the Parties
Plaintiff’s Case: Represented by Senior Advocate Mr. Jayant Bhushan, the plaintiff moved an application for judgment on admission under Order XII Rule 6 CPC. He argued that since the deceased was a Hindu who died without a written Will, the property must devolve upon his Class-I heirs. The plaintiff contended that “oral Wills” are not legally recognized for Hindus and that the Supreme Court’s precedent in Shakti Yezdani (2024) explicitly states that a nominee is merely a fiduciary and not the owner.
Defendants’ Case: Senior Advocate Mr. Sanjiv Kakra, appearing for the defendant, argued that the matter required a full trial. He maintained that the specific nomination form used by the deceased was unique because it was witnessed by two individuals, satisfying the requirements of a testamentary document. Furthermore, the defense claimed that the removal of the plaintiff’s name from an HUF account during the father’s lifetime evidenced an “oral family settlement” that extinguished the plaintiff’s inheritance rights.
Court’s Analysis
Justice Vikas Mahajan, presiding over the matter, analyzed the two primary defenses through the lens of established succession law and recent Supreme Court jurisprudence.
1. On the Validity of Oral Disinheritance: The court rejected the argument that an oral family settlement could disinherit a Class-I heir. The judgment noted that any attempt to regulate the devolution of an estate after death is testamentary in nature. Justice Mahajan observed:
“The law does not permit an oral ‘Will’ except when made under Section 65 and 66 of the Indian Succession Act, 1925 by a soldier, airman or mariner… A Hindu under section 63 of the said Act can only make an unprivileged ‘Will’, which means it has to be a document in writing which bears his signature and attested by two witnesses.”
The court further noted that the removal of a name from an HUF account does not impact the inheritance of an individual’s personal estate.
2. On the Legal Effect of Nomination: The court placed heavy reliance on the Supreme Court’s ruling in Shakti Yezdani & Anr. vs. Jayanand Jayant Salgaonkar & Ors. (2024), which dealt with Section 109-A of the 1956 Act (pari materia to Section 72 of the 2013 Act). The court held:
“The vesting of securities in favour of the nominee… is for a limited purpose i.e. 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.”
The court concluded that the Companies Act is designed to regulate corporate affairs and does not contemplate a “statutory testament” that overrides the laws of succession.
Decision
Allowing the application under Order XII Rule 6 CPC, the High Court declared:
- The plaintiff is a Class-I legal heir of the deceased.
- The deceased died intestate (without a Will).
- The plaintiff is entitled to a share in the estate, including the shares in OAML and OGL.
The court noted that while the plaintiff’s status as an heir is declared, the exact quantum of the share remains subject to the outcome of a separate application involving other potential claimants. The court directed that a preliminary decree be drawn accordingly.
Case Details
- Case Title: Pankaj Oswal vs. Aruna Oswal & Ors.
- Case Number: CS(OS) 53/2017 & I.A. 1737/2024
- Bench: Justice Vikas Mahajan
- Date: March 27, 2026
