By Nazaqat Lal, Advocate & Solicitor, Bombay High Court
firstname.lastname@example.org | November 19, 2022
Myth is existing in the mind of general public that upon death of a member of Co-operative Housing Society, the Nominee of such member becomes the Owner of the Flat.
There is a general practice in housing societies of members making nominations for their respective flats. The nomination form is then submitted to the secretary or chairman of the society. After the member’s demise, the society in its meeting takes note that the member has passed away and based on the nomination form, inducts the nominee as a member and notes the same on the share certificate. It becomes imperative to understand what the purpose and legal effect of making a nomination is. A nominee holds the flat in a fiduciary capacity, i.e. as a trustee for the legal heirs of the deceased till such time the legal heirs are determined by the applicable succession laws. A nominee does not become the owner of the flat by virtue of the nomination. In order to become an owner of a flat, it will have to be received by way of gift, Will, family arrangement or other such similar document.
The Maharashtra Co-operative Societies Act, 1960 (“the said Act”) governs co-operative societies. Section 30 of the said Act deals with transfer of interest on death of a member. This provision has come up for interpretation before the Bombay High Court on several occasions as there is invariably a dispute that arises between the nominee and the legal heirs regarding the vesting of ownership rights in the flat of deceased member.
In the case of Ramdas Shivram Sattur v. Rameshchandra Popatlal Shah, the Bombay High Court followed its previous decision in the case of Gopal Vishnu Ghatnekar v. Madhukar Vishnu Ghatnekar and held that a nominee does not become the owner of the properties in question. The purpose of nomination is to protect the rights of the deceased member in the subject matter of nomination till the legal representatives of the deceased take appropriate steps and to give a valid discharge to the society.
A recent judgment of the Bombay High Court in the case of Karan Vishnu Khandelwal v. Honourable Chairman/Secretary Vaikunth (Andheri) Co-operative Housing Society Ltd. & Ors. has once again brought to the fore the effect of nomination in case of a co-operative housing society versus the rights of legal heirs. While this judgment reiterates the well settled legal position that a nominee is merely a trustee and shall hold the flat in his capacity as trustee till the time the legal heirs are ascertained, the manner in which it is drafted is likely to cause some confusion. The brief facts of the case are set out hereunder to better appreciate the findings.
1. One, Mr. Mannalal Khandelwal (“Mannalal”) was the owner of a flat in Vaikunth (Andheri) Co-operative Housing Society, Mumbai (“the said Flat”).
2. During his lifetime, he made a nomination in favour of his grand son (son of a predeceased son), the Petitioner herein. The nomination was duly acknowledged by the managing committee in its meeting and recorded in the nomination register maintained by the society.
3. Thereafter, Mannalal died without leaving behind a will.
4. After his death, one of his sons, Rajendra (Respondent No. 2) made an application to the society seeking transfer of membership and issue of share certificate in his name. He also submitted an NOC and indemnity bond from his brother, Krishnakumar. On this basis, Rajendra sought 2/3rd share and interest in the said Flat. The society rejected Rajendra’s application.
5. Rajendra preferred an appeal before the Deputy Registrar Co-operative Societies. The Deputy Registrar allowed the appeal and held that since Respondent No. 2 had acquired 2/3rd right in the said Flat and to that extent, his interest be noted in the society record. In consequence, the Deputy Registrar acknowledged 2/3rd undivided right of Respondent No. 2 and 1/3rd right of the Petitioner in the said Flat and directed the society to make an entry in its records.
6. In revision, the Divisional Joint Registrar upheld the order of the Deputy Registrar and dismissed the revision application of the Petitioner.
7. Aggrieved by the order of the Divisional Joint Registrar, the Petitioner approached the Bombay High Court.
The Bombay High Court set aside the order of the Divisional Joint Registrar on broadly two grounds (a) the impugned order was in breach of the principles of natural justice and (b) the impugned order was against the law. It is the latter ground that we are concerned with.
The Bombay High Court placed reliance on the judgment of the Supreme Court of India in the case of Indrani Wahi v. Registrar of Cooperative Societies, Section 30 of the said Act and the Maharashtra Cooperative Societies (Amendment) Act, 2019 whereby Section 154B-13 came to be inserted in the said Act.
Section 154B-13 reads as under –
“154B-13. Transfer of interest on death of a Member
On the death of a Member of a society, the society shall transfer share, right, title and interest in the property of the deceased Member in the society to a person or persons on the basis of testamentary documents or succession certificate or legal heirship certificate or document of family arrangement executed by the persons, who are entitled to inherit the property of the deceased Member or to a person duly nominated in accordance with the rules:
Provided that, society shall admit nominee as a provisional Member after the death of a Member till legal heir or heirs or a person who is entitled to the flat and shares in accordance with succession law or under will or testamentary document are admitted as Member in place of such deceased Member:
Provided further that, if no person has been so nominated, society shall admit such person as provisional member as may appear to the committee to be the heir or legal representative of the deceased Member in the manner as may be prescribed.”
What emerges from the above is that a society is empowered to transfer the right of a deceased person on the basis of (i) testamentary documents, (ii) succession certificate, (iii) legal heirship certificate, (iv) family arrangement or (v) duly made nomination. However, it is expressly clarified that a nominee shall be admitted as a provisional member. Therefore, a nominee is merely a trustee who holds the flat till the time the legal heirs are ascertained.
In the case at hand, Mannalal had made a valid nomination in favour of his grandson (the Petitioner). However, he had died intestate, i.e. without leaving behind a Will. Therefore, the Society was directed to transfer the flat to the Petitioner in his capacity as nominee (trustee) and admit him as a provisional member till the time Rajendra (Respondent No. 2) was able to obtain a succession certificate or legal heirship certificate or testamentary document, as the case maybe.
What the Divisional Joint Registrar had done was in effect, ascertained the shares of the parties as per the applicable succession laws, given that Mannalal had died intestate. While this would likely be the eventual manner in which the ownership rights in the said Flat devolve, the Bombay High Court did not want to give a go-by to the nomination and the compulsory requirement of obtaining a legal heirship certificate or letters of administration without will that would have to be obtained by the heirs of Mannalal given that the flat is situated in Mumbai. The Bombay High Court therefore, directed the society to admit the Petitioner as a provisional member and call upon Respondent No. 2 to furnish the necessary documents on the basis of which the legal ownership in the flat would eventually vest. At first glance, it may appear that the Bombay High Court held in favour of the nominee as against the legal heirs. However, what it has done is to recognize the nominee as an interim trustee till the time Respondent No. 2 procures the necessary legal documents acknowledging his ownership right and the ownership right of all other legal heirs in the flat.
In light of the Maharashtra Cooperative Societies (Amendment) Act, 2019 and the aforesaid judgments of the Supreme Court of India and Bombay High Court, it becomes amply clear that in the eyes of a law, a nominee is a trustee and does not acquire ownership rights in a flat by virtue of nomination. Therefore, if the intent of a member is to vest ownership rights in a person, he/she will have to do the same by way of gift, Will, family arrangement or other such document; a nomination alone will not suffice. It is also important for societies to take note of this so that after a member’s demise, the ownership rights in the flat finally vest in the legal heirs or such person as maybe named in the Will or family arrangement or other such document, and not in the nominee.