Supreme Court Judgment on Nominee in Bank Account: Overview
One of the most persistent misconceptions in Indian personal finance is that naming someone as a "nominee" on a bank account, fixed deposit, mutual fund, demat account, or insurance policy automatically makes that person the legal owner of the money after the account holder's death — to the exclusion of the deceased's spouse, children, or other legal heirs. This misunderstanding has caused countless family disputes, with nominees sometimes attempting to keep funds entirely for themselves, and other legal heirs left uncertain about their actual rights.
The Supreme Court's ruling in Shakti Yezdani v. Jayanand Jayant Salgaonkar resolved years of conflicting High Court decisions on this exact question, definitively confirming that a nomination is fundamentally an administrative mechanism — designed to tell the bank or company who to pay so it can promptly discharge its obligation — rather than a mode of transferring ownership. The real entitlement to the money continues to be governed by succession law: the deceased's Will, or, if there is none, the relevant personal law of intestate succession. This page explains that judgment, the surrounding legal framework, and what it means in practice for both nominees and other legal heirs.
What Was the Case About?
Jayant Shivram Salgaonkar, the family patriarch, executed a Will on 27 June 2011 specifying how his estate should devolve upon his successors. Separately, he also held certain fixed deposits (FDs) and mutual fund investments (MFs), for which he had named specific nominees under Section 109A of the Companies Act, 1956, and Section 9 of the Depositories Act, 1996. After his death, the nominees (the appellants, Shakti Yezdani and others) claimed absolute ownership of these FDs and MFs based purely on their nomination status, while another legal heir, Jayanand Jayant Salgaonkar (who was not a nominee), filed a suit before the Bombay High Court seeking administration of the deceased's entire estate under the Court's supervision, disputing the nominees' claim to exclusive ownership.
The Main Legal Questions
A Single Judge of the Bombay High Court initially ruled in the nominees' favour in 2015, relying on an earlier decision (Kokate) that had treated a nominee as the "beneficial owner." A Division Bench of the Bombay High Court later declared the Kokate view per incuriam (decided without considering binding precedent) and instead held that nomination under company and depository law does not override succession law. When the matter reached the Supreme Court, the central legal question was definitive: does a nomination made under Section 109A of the Companies Act (or the equivalent Depositories Act provision) grant the nominee absolute, exclusive legal ownership of the shares, securities, or deposits — or does it merely designate who the company/bank should pay, with the underlying ownership question still governed by the deceased's Will or the applicable law of succession?
Key Directions and Findings (14 December 2023 Judgment)
The following is a structured, plain-English summary of what the Court actually decided.
Nomination Does Not Create a Separate Mode of Succession
The Court held that the Companies Act, 1956/2013 and the Depositories Act, 1996 do not deal with the law of succession, and a nomination made under these statutes does not override or bypass the deceased's Will or the applicable succession law.
A Nominee Does Not Acquire Absolute Ownership
The Court held that the right conferred on a nominee under these provisions does not grant absolute title to the shares, securities, or deposits in question — the nominee's role is fundamentally different from that of an owner.
A Nominee Is Merely a Trustee or Custodian for the Legal Heirs
The Court held that a nominee holds the relevant asset only as a trustee or custodian, on behalf of the deceased's actual legal heirs or beneficiaries under a Will — the nominee's obligation is to ensure the asset ultimately reaches those who are legally entitled to it.
Payment to the Nominee Discharges the Institution, Not the Heirs' Rights
The Court clarified that the nomination mechanism exists primarily to let a company, depository, or bank pay out the asset to a specific person quickly upon death, discharging the institution's own liability — but this does not extinguish the rights of the true legal heirs to subsequently claim their rightful share from the nominee.
Relevant Legal Framework
Nominee vs. legal heir disputes typically involve the interplay between specific nomination provisions and the general law of succession.
| Companies Act, 1956, Section 109A / Companies Act, 2013, Section 72 | Allows a shareholder to nominate a person who will become entitled to the shares upon the shareholder's death — the provision the Supreme Court held does not confer absolute ownership, only a mechanism for the company to know who to recognise/pay. |
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| Depositories Act, 1996, Section 9 | Contains a similarly worded nomination provision for securities held in dematerialised (demat) form — interpreted in this judgment consistently with the Companies Act provision. |
| Banking Regulations & RBI Guidance on Nomination | Bank nomination rules (under the Banking Companies (Nomination) Rules, 1985 and related RBI guidance) follow a similar principle: the nominee receives payment as a trustee for the legal heirs, unless the nominee is also the sole legal heir or sole beneficial owner in their own right. |
| Indian Succession Act, 1925 / Hindu Succession Act, 1956 / Other Personal Laws | Governs who actually inherits a deceased person's property where there is a valid Will (testamentary succession) or where there is none (intestate succession) — the substantive law that ultimately determines true entitlement, regardless of any nomination. |
| Insurance Act, 1938, Section 39(7) — The Key Exception | Uniquely allows a nominee who is also a specified close family member (parent, spouse, or child) of a life insurance policyholder to receive the payout beneficially in certain circumstances — a distinct statutory carve-out not extended to bank deposits, shares, or mutual funds by this judgment. |
Timeline of Important Court Proceedings
Testator Executes a Will
Jayant Shivram Salgaonkar executes a Will specifying how his estate should devolve, while separately holding fixed deposits and mutual funds with specific nominees named.
Dispute Arises Between Nominees and Other Heirs
The nominees claim absolute ownership of the FDs and MFs; another legal heir (not a nominee) files a suit before the Bombay High Court seeking administration of the full estate.
Bombay High Court Single Judge Rules for the Nominees
A Single Judge rules in favour of the nominees, relying on the earlier Kokate decision treating a nominee as the "beneficial owner."
Division Bench Declares Kokate Per Incuriam
A Division Bench of the Bombay High Court holds the Kokate judgment was decided without considering binding precedent, and rules instead that nomination does not override succession law.
Supreme Court's Judgment (2023 INSC 1076)
Justices Hrishikesh Roy and Pankaj Mithal affirm the Bombay High Court's Division Bench view, definitively holding that a nominee does not acquire absolute ownership and holds the asset as a trustee for the legal heirs.
SEBI Introduces a Smoother Transmission Framework
SEBI introduces a framework to ease the practical process of transferring securities from nominee to rightful legal heirs, reflecting the settled legal position from this judgment.
What Does This Judgment Mean in Practice?
For Nominees
Being named a nominee gives you the right to receive the money or asset from the bank or institution efficiently after the account holder's death, but it does not make you the legal owner — you hold it as a trustee and remain legally obligated to distribute it according to the Will or succession law, sharing with other rightful heirs where applicable.
For Other Legal Heirs (Non-Nominees)
You are not automatically excluded from your rightful share simply because you weren't named as nominee — you retain your full entitlement under the Will or succession law, and can pursue a claim against a nominee who wrongly withholds your share.
For Account Holders Planning Their Estate
A nomination alone does not achieve your full estate planning goals if you intend a specific person to receive an asset exclusively — a properly drafted Will remains essential to clearly express and legally secure your actual intentions.
For Banks and Financial Institutions
Paying out to a validly recorded nominee upon the account holder's death continues to discharge the institution's own liability and protects it from being sued twice — but institutions should be aware this does not resolve underlying ownership disputes between the nominee and other heirs.
Guidance for Nominees and for Other Legal Heirs
This judgment affects different family members differently — from the person named as nominee, to other legal heirs who were not. What you should do next depends on which situation applies to you.
If You Are the Nominee on a Deceased Relative's Account
- Understand that receiving the funds from the bank does not mean you are entitled to keep all of it — you hold it as a trustee for the actual legal heirs under the Will or succession law.
- Check whether the deceased left a valid Will, and if so, distribute the asset according to its terms rather than your nomination status alone.
- If there is no Will, identify all legal heirs under the applicable succession law (Hindu Succession Act, Indian Succession Act, or other personal law) and their respective shares.
- Keep clear records of how you distribute the funds, to protect yourself from future disputes or claims of mismanagement.
- Consult a lawyer before distributing significant assets, particularly where the family situation or the deceased's intentions are unclear or contested.
If You Are a Legal Heir Who Was Not Named as Nominee
- Understand that not being named as nominee does not by itself exclude you from your rightful share of the deceased's estate.
- Check whether a valid Will exists, and if so, what it says about your entitlement to this specific asset or the broader estate.
- If there is no Will, determine your entitled share under the applicable law of intestate succession, based on your relationship to the deceased.
- If a nominee is refusing to share funds you are legally entitled to, raise this directly first, and consider formal legal action if the dispute cannot be resolved amicably.
- Consult a lawyer to understand your rights and the best way to pursue your rightful share, including whether a succession certificate or other legal document may assist your claim.
Does This Judgment Apply to Your Situation?
The Court's ruling addressed nominations for fixed deposits, mutual funds, and securities specifically, but its core principle applies broadly across most nominated financial assets in India.
Read the Original Supreme Court Judgment
Wherever possible, refer to the original court record for the exact operative directions rather than relying solely on editorial summaries — including this one.
📄 Visit Supreme Court of India WebsiteRelated / Landmark Cases on Nomination and Succession
These judgments form the broader legal backdrop against which the current position on nominee vs. legal heir rights has developed. This is general legal information — always have a lawyer confirm how a precedent applies to your specific facts.
Smt. Kokate — The Earlier "Beneficial Owner" View
An earlier Bombay High Court decision that had treated a nominee as the "beneficial owner" of shares, effectively allowing nomination to override succession — later declared per incuriam and ultimately rejected by the Supreme Court.
Jayanand Jayant Salgaonkar v. Jayshree Jayant Salgaonkar
The Division Bench ruling that declared Kokate per incuriam and held that nominations under the Companies Act do not override succession law — the view the Supreme Court ultimately affirmed.
Shakti Yezdani & Anr. v. Jayanand Jayant Salgaonkar & Ors.
Definitively held that a nominee does not acquire absolute ownership of shares, securities, or deposits, and holds them only as a trustee for the deceased's legal heirs under the Will or applicable succession law.
The Section 39(7) Insurance Act Divide
The Andhra Pradesh and Rajasthan High Courts have held that a close family member nominee under Section 39(7) of the Insurance Act receives the payout absolutely, while the Karnataka High Court (2025) rejected this, holding nomination still does not override succession law even for insurance.