HC: Only legal heirs, not nominees will own deceased’s investments

The Bombay High Court overturned a judgement by a single bench, which had declared that nominees, and not legal heirs, will get the ownership rights of share certificates. Justice Gautam Patel declared the much referred to Kokate judgement per incuriam, which means ‘through lack of care’. This means it has been wrongly decided and does not have to be followed.

On 31 March 2015, Justice Patel heard two similar petitions. One was filed by a man, claiming to have an interest in the investments made in mutual funds by his deceased father, as his legal heir and representative. The other petition was filed by a woman, who claimed to have an interest in the investments made by her deceased mother.

Justice Patel looked into the ‘legal right, title and interest of the concerned parties in the shares.’ Among the Supreme Court judgements cited, Justice Patel specifically referred to the Sarbati Devi’s case. He said it is clear that the amount received by the nominee can be claimed by the legal heirs of the deceased. The order further said Companies and Depositories Act cannot and does not displace the law of succession. The order concluded by saying that Kokate judgement is per incuriam which means ‘through lack of care’.

In April 2010, Justice Roshan Dalvi had dismissed a petition of a woman, claiming an interest in shares in D-mat account held by her deceased husband as his legal heir and representative, as the man had nominated his nephew. Justice Dalvi observed that shares would vest with the nephew after the death of the man in view of the provisions of the Companies and Depositories Act. The order concluded the wife would have no right to get the shares of her deceased husband. This is referred to as the Kokate judgement.



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Changes in Our Business Model
25th Sept 2020
Greetings from Moneylife Advisory Services
Between financial years 2019-21, SEBI has come up with extensive changes to investor advisor regulations. On Sep 23, 2020, SEBI had issued new additional guidelines. This comes just two months after extensive changes announced in July 2020. Earlier, in December 2019 there was an ad hoc circular
As a result of these changes, IAs, cannot accept fees through credit cards, will have to sign a 26-clause investor agreement, have to maintain physical record written & signed by client, telephone recording, emails, SMS messages and any other legally verifiable record for five years. IAs were already asked to record the suitability and rationale for every piece of advice given, sign them and store them for five years.
While these extensive and frequent changes, designed to strengthen the conduct of IAs are well-meaning, these have sharply increased compliance efforts and cost. We, being online advisors, find many of changes harder to implement, compared to advisors working in the physical space. We will have to have an army of advisors, administrative and tech staff to be compliant. If we do this, we will have to divert money to these areas and the cost of our service will double. We want to remain the least-cost service in the market to benefit more and more people. In the circumstances, we are forced to change our business model from “advisory” to “research”. This will mean the following:
What remains the same:
  • Recommendations on insurance, investment and Lion stocks, will continue as a part of the MAS premium subscription. Our strength has always been research and this will remain available to you through our recommendations.
  • The magazine and all textual content will remain as part of the service
  • We will have to suspend the restructuring tool.
What changes:
  • The interactions in Ask / Handholding will offer investment advice but not specific to your situation. It will offer information on investment products and also clarify your doubts about various financial products. It will be a forum for information, not for advice. This will be implemented with immediate effect and our guidelines in Ask, reflect this now.
Over the next few weeks our site and our communication to you will reflect these and other additional changes.
We feel this will not affect you much in terms of what really matters in investing: knowing what to buy and when to buy. This is our edge and it will still be available to you.
Debashis Basu