DOES NOMINEE BECOME OWNER OF FLAT ON DEATH OF THE SOCIETY MEMBER?

There has been some confusion regarding the nature and extent of rights acquired by a nominee in co-operative housing societies in case of death of the member (flat owner). Basic conflict being whether the nominee will become entitled to ownership of the flat and be permitted to dispose off such flat to the exclusion of legal heirs of the member. This article attempts to explain the position of a nominee on occurrence of such scenario by analyzing various provisions of law and series of landmark judgments.

As per section 30(1) of the Maharashtra Co-operative Societies Act, 1960 which reads as under:

“On the death of a member of a society, the society shall transfer the share or interest of the deceased member to a person or persons nominated in accordance with the rules or, if no person has been so nominated, to such person as may appear to the committee to be the heir or legal representative of the deceased member.”

Further rule 25(1) of the Maharashtra Co-operative Societies Rules, 1961 provides that:

“For the purpose of transfer of his share or interest under sub-section (1) of Section 30, a member of a society may, by a document signed by him or by making a statement in any book kept for the purpose by the society nominate any person or persons.”

While deciding upon the scope of section 30, this dispute was primarily addressed by the Bombay High Court in Gopal Vishnu Ghanetkar v/s. Madhukar Vishnu Ghanetkar (1982) MhLJ65 . The ratio laid down by Justice Shri N.A. Mody in paragraph No. 6 of the judgement is hereby reproduced:

“It is very clear on the plain reading of the section that the intention of the section is to provide for who has to deal with the society on the death of a member and not be create a new rule of succession. The purpose of the nomination is to make certain the person with whom the society has to deal, and not to create interest in the nominee to the exclusion of those who in law will be entitled to the estate”

Further in Chitra Haldipur v/s. Shahid Bhagat Singh CHS Ltd. and Ors. 2007(4)BomCR432 it was observed by Justice Dr. D.Y. Chandrachud under paragraph No. 5 that:

“It is a settled principle of law that a nomination to a share or interest in a Co-operative Society is only meant to provide an arrangement between the death of the original member and the full administration of the estate. Mere nomination does not either vest title or disrupt the title of persons who are interested in the estate of the deceased under the ordinary law of succession.”

Thereafter the same question again came up for consideration before the Bombay High Court in Ramdas Shivram Sattur v/s. Rameshchandra and Ors. 2009(3)BomCR705 wherein as per paragraph No. 10 of the judgement it was held that the nominee does not become absolute owner of the property but is only empowered to hold the property in trust for legal heirs and cannot alienate such property.

The confusion around dispute of nominee vs. legal heirs resurrected in Indrani Wahi v/s. Registrar of Co-op. Societies and Ors. AIR 2016 SC 1969 where relying on section 80 of the West Bengal Co-operative Societies Act, 1983 r/w rule 127 of West Bengal Co-operative Socities Rules, 1987, it was held by the Supreme Court that nomination is binding on the society and the society has no option but to transfer the membership in the name of the nominee. It is pertinent to note that the decision of this case was based on specific provisions of the West Bengal Co-operative Societies Act, 1983 which are in essence different from the provisions of the Maharashtra Co-operative Societies Act, 1960. The judgement also went on to further record a caveat that it will be open to the other family members to pursue case of succession or inheritance.

In spite of the above facts the Indrani Wahi judgement till date gets presented out of context and circulated across social media to buttress the myth that a nominee becomes solely entitled to ownership of a flat when the member expires.

The applicability of Indrani Wahi case to section 30 was subsequently considered by the Bombay High Court in Shakti Yezdani and Ors. v/s. Jayanand Jayant Salgaonkar and Ors. 2017(1)BomCR319 where under paragraph No. 20 it was clarified that:

“Notwithstanding the provision of Section 80 of the West Bengal Act of 1983 which mandates that on the death of a member of a Cooperative Society, his share or interest shall be transferred to nominee, the Apex Court (in Indrani Wahi case) did not hold that nomination supersedes the succession or inheritance in accordance with law.”

In backdrop of the authorities cited an inference can be drawn that the purpose of nomination is to ensures that there is a single point-of-contact (nominee) for society to deal with till the time legal heirs or beneficiaries of the deceased member establish their title over the flat by producing relevant testamentary documents or family settlement documents. Nothing is left to the sweet will of the society or the nominee who merely acts as a trustee on behalf of the legal heirs till the estate of the deceased member is settled as per applicable succession law and the nominee in no circumstances is allowed to create third party rights in the flat.

It can be seen that time and again above mentioned position of law has been retained vide plethora of judicial decisions. But recently the controversy revolving around law of nomination under co-operative housing societies has finally been settled by the state legislature under the Maharashtra Co-operative Societies (Amendment) Act, 2019 effective from 9th March, 2019. For the first time the Maharashtra Co-operative Societies Act, 1960 has been amended to include a new Chapter XIII-B which deals with provisions exclusively applicable to housing societies. As per the newly introduced section 154B-13 of the Maharashtra Co-operative Societies Act, 1960 (which overrides section 30 mentioned above), a society can transfer the interest of the deceased member in the flat only when testamentary documents or succession certificate or heirship certificate or document of family arrangement has being produced by the legal heirs of the deceased member or person/s entitled to the flat. The first proviso under this section further goes on to categorically clarify that a nominee shall only be admitted as a provisional member in place of the deceased member till the time legal heirs or person/s entitled to the flat are admitted as member/s. The concept of “provisional member” has been newly incorporated and the term has been defined under section 154B-1(18) of the Maharashtra Co-operative Societies Act, 1960 as a person who is duly admitted as a member of a society temporarily after death of a member on the basis of nomination till the admission of legal heir/s as the member of the society in place of deceased member.

In light of the recent Maharashtra Co-operative Societies (Amendment) Act, 2019 the long standing controversy of nomination vs. succession has been put to rest once and for all. From perspective of a flat purchaser it must be properly checked if the name of proposed seller has been entered on the share certificate plainly on basis of nomination, if so, the flat can be under threat of claims being made by legal heirs of the original member.