Nominee is owner of shares and not mere trustee

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Bombay High Court in Harsha Nitin Kokate v The Saraswat Co-op Bank Limited and Ors, has virtually overturned established practice for transmission of shares by giving all ownership rights to the nominee rather than the legal heirs. The court on 20 April held that section 109A of the Companies Act and section 9.11 of the Depositories Act, 1996, gives the nominee all ownership rights of shares.

In stating this, the court has distanced itself from the long-held opinion that the nominee was merely a trustee for the estate of the deceased.

In this case, Harsha Nitin Kokate was asking the court for permission to sell her late husband’s shares, which she claimed ownership over as his legal heir, even though he had nominated them in favour of his nephew.

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The update of court judgments is compiled by Bhasin & Co, Advocates, a corporate law firm based in New Delhi. The authors can be contacted at lbhasin@vsnl.com. Readers should not act on the basis of this information without seeking professional legal advice.

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