In India, when a Hindu male passes away without a will, one of the most misunderstood aspects is who gets access to the money lying in his bank accounts. It’s commonly assumed that if someone is listed as a nominee, that person becomes the automatic owner of the account funds. However, this belief doesn’t align with the legal position under Indian law.
What Does a Nominee Actually Mean?
Under Section 45ZA of the Banking Regulation Act, 1949, along with the Banking Companies (Nomination) Rules, 1985, a bank is permitted to release the account balance to the nominee upon the death of the account holder. This is a practical mechanism designed to help the bank deal with such situations efficiently and avoid freezing of funds.
However, it’s crucial to understand that a nominee is not the legal owner of the money. The nominee merely acts as a custodian or representative of the legal heirs. Their role is limited to receiving the money on behalf of those who are legally entitled to inherit it under succession laws.
Nominee or Legal Heirs – Who Has the Right?
In the absence of a will, the Hindu Succession Act, 1956 governs the distribution of the deceased’s assets, including bank deposits. According to Section 8 of this Act, the estate of a Hindu male devolves upon his Class I legal heirs, which typically include his wife, sons, daughters, and mother.
Even if a bank releases money to a nominee, this does not make the nominee the rightful owner. The nominee is expected to hand over the funds to the legal heirs. Courts in India have repeatedly clarified this position.
What Do the Courts Say?
Indian courts have ruled consistently on this matter. In Sarla Sharma v. Rekha Sharma (Delhi High Court, 2007), it was held that a nominee is not the owner of the funds but holds them in trust for the legal heirs. Similarly, the Supreme Court in Ram Chander Talwar v. Devender Talwar (2019) and the Bombay High Court in Shakti Yezdani v. Jayanand Salgaonkar (2017) reaffirmed that legal succession overrides nomination.
These cases make it clear that while a nominee can access the bank funds easily, they are legally obligated to pass them on to the heirs under succession law.
How Is the Money Claimed?
In practice, the bank will release funds to the nominee upon submission of standard documents like the death certificate and ID proof. However, if the legal heirs raise an objection or dispute the claim, they can approach a civil court. By obtaining a succession certificate, they can legally claim their share and compel the nominee to distribute the money accordingly.
If a nominee refuses to cooperate, legal action can be taken, and the court will enforce the rightful distribution as per the Hindu Succession Act.
Common Misunderstandings
A frequent mistake is believing that nomination equals inheritance. It does not. Nomination is simply an administrative convenience for the bank—not a tool that overrides inheritance laws.
Importance of Estate Planning
To avoid such disputes, it is highly advisable for individuals to prepare a valid will and keep their legal heirs informed of their intentions. A well-drafted will can provide clarity and prevent unnecessary litigation among family members.
Conclusion
In summary, while nomination helps banks release money without delays, it does not determine ownership. The rightful owners are the legal heirs as per succession law. Understanding the limited role of a nominee can help families manage post-death finances with less confusion and fewer conflicts.