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Family Arrangement instead of Probate while transferring Flat in Housing Society on death of member

The Maharashtra Co-operative Societies Act, 1960 ("the Act") allows a member to nominate a person or persons to whom his share and interest in the co-operative society will be transferred by the society in the event of the member's death. Section 25 of the Act provides that a member would cease to be a member of a society on death. However, his holding and other interests do not lapse, but they pass on to his heirs or legal representatives and the society is bound to transfer the shares or interest to them as provided in section 30 of the Act. Section 30 of the Act provides that the society shall transfer the share or interest of the deceased member to a person/s nominated in accordance with the Maharashtra Cooperative Societies Rules, 1961, and if no such person is nominated then the committee of the society shall transfer it to such person as may appear to the committee to be the heir or legal representative of the deceased member.

Therefore, on the death of a member, the society shall transfer the share or interest of the deceased member to a person nominated in accordance with the rules. The purpose of nomination is to make clear the person with whom the society has to deal upon the death of a member. It does not create any interest in favour of the nominee, to the exclusion of those who are in law entitled to the estate of a deceased member. The nominee does not become the absolute owner of the property. He is only empowered to hold the property in trust for the real owners for the purpose of dealings with the society. He has no power, authority or title to alienate the property to the exclusion of the other legal heirs of the deceased member.


The word nominee means a person who holds or acquires right, property or any other kind of liability incurred on behalf of others. Nominee means a trustee. A nominee holds a property on behalf of other legal heirs. Thus, the simple meaning derived from above proposition is that a nominee cannot be a real owner but, in fact a trustee who has legal control of property that is kept or invested for another person, company or organization.

Status of a Nominee

The provisions of nomination is found in various Acts, Rules Instructions of Regulators like RBI, SEBI, L.I.C., Provident Fund, Gratuity, but the nomination does not create any title or interest in favour of the nominee. Thus Nominees who have become member in Housing Society would be treated and classified as "Provisional Member" in Society's records and thus he/she cannot sell the flat without following due process of law.

Transmission of Shares in D’mat A/C by NSDL

The Companies Act distinguishes transmission of shares from transfer of shares. While transfer of shares relates to a voluntary act of the shareholder such as Sale, transmission is brought about by operation of law. The word 'transmission' means devolution of title to shares otherwise than by transfer, for example, devolution by death, succession, inheritance, bankruptcy, marriage, etc. While transfer of shares is brought about by delivery of a proper instrument of transfer (viz, transfer deed) duly stamped and executed, transmission of shares is done by forwarding the necessary documents (such as a notarised copy of death certificate) to the company. On registration of the transmission of shares, the person entitled to transmission of shares becomes the shareholder of the company and is entitled to all rights and subject to all liabilities as such shareholder. In the depository system, problems are mitigated as the shares are account balances in the electronic form. The process of transmission through the depository is not only simple but it is also quicker. This is because the successor to the title interacts only with one entity - his DP.

Transmission of Shares (Securities) in case of Nomination

The nomination facility for shares is provided by amendment in Companies Act 1956. The clients can avail of this facility by furnishing duly filled Form for Nomination available with their DPs.

Upon the death of the sole client (in case of securities held singly) or the death of all the clients (in case of securities held jointly), the nominee must request the DP in writing along with a certified true copy of the death certificate and transmission form to transmit the securities covered by the nomination to the account of the Nominee. The DP will ensure the completeness of the form and validity of the signature of the client and then execute the transmission request. Thus transmission of securities where nomination has been made eliminates the need of cumbersome legal documents such as Will, Probate, succession certificate etc. Most of these Companies also own properties in their names and as such each Shareholder has fractional ownership of these properties. However, DPs don’t insist on Will, Probate or Succession Certificate even though shareholders have fractional ownership of these properties.

As per process in Companies Act, “Transmission of share could be valid without obtaining succession certificate. However Board of Directors should ensure that sufficient evidence has been produced by the legal heirs. Following documents shall be submitted to the Company:

1. Certified Copy of death Certificate

2. Particulars and signatures of all legal heirs

3. Affidavit on non-judicial stamp paper certified by notary,

4. Indemnity bond on non-judicial stamp paper PAN of legal heir”

These provisions are enumerated in Section 56 of Companies Act, 2013.

Nomination in CHS

In a co-operative housing society you are the owner of unit of a share in the society in the form of a flat. Due to this type of ownership, you have to appoint a nominee in co-operative housing societies. The appointed nominee is only a custodian and the actual ownership of the flat will go to legal heirs as per his will through “Will”. Bombay High Court judgment has ruled that "mere nomination to the co-operative housing society does not give the nominee exclusive rights of ownership to the flat – and neither are the rights of other legal heirs lost by such nomination”. So on demise of the owner of the flat, it is the legal heir and not the nominee who bequeath it.

This, a nominee is a custodian of the asses and not the owner of the asset. A nominee will hold the property as a trustee and will be legally bound to transfer it to the legal heirs whose names are mentioned in the will. There are judgments of various High Courts and even Supreme Court on this matter.

Rights of Nominee v/s Rights of Legal Heirs as regards Property in a Housing Society

There has been some ambiguity on legal rights of nominees vis-à-vis the legal heirs. One of the pertinent legal questions that have been put to test time and again before various courts is whether the rights of nominees prevail over those of the successors/legal heirs inter alia regarding the shares and interest of a member in a co-operative housing society.

In the matter of Indrani Wahi v. Registrar of Co-operative Societies and Others (“Indrani Wahi Judgment”), Indrani Wahi (being a married daughter) was made a nominee member by her father Biswas Ranjan Sengupta. The Deputy Registrar of Co-operative Societies did not accept her membership on the ground that Indrani Wahi being a married daughter did not fall within the definition of ‘family’ under the West Bengal Co-operative Societies Act, 1983. This order was challenged by Indrani Wahi before the Hon’ble High Court of Calcutta and was further appealed before the Hon’ble Supreme Court by Indrani Wahi, wherein the Hon’ble Supreme Court while allowed the transfer of share and interest of her deceased father in the society in favour of Indrani Wahi as a nominee, however, the Hon’ble Supreme Court also specifically observed in this regard that such a transfer in favour of a nominee would have no relevance to the issue of title between the inheritors or successors to the property of the deceased and it would be open to the other members of the family to pursue their case of succession or inheritance, in consonance with law.

Based on the observations of the aforementioned Judgment read with the Act, it can be concluded that the method of nomination in a co-operative housing society does not create any right, title and interest of the nominee in the property of the nominator. The nominee merely performs the function of receiving and holding the property of the deceased nominator until the time the legal heir(s) of the deceased nominator is established and the property is transferred in favour of such legal heir(s).

The apex court had observed that it would be open for other members of the family of the deceased, to pursue their case of succession or inheritance. Therefore, those who are claiming their rights under inheritance will be entitled to claim the title to the shares in the society on the basis of inheritance.

Many Housing Societies are insisting on "Probate" from the Nominee/s to transfer the Share and thus Maharashtra Government brought amendment to MCS Act in 2019 vide Section 154B-13, which simplified the process to address the difficulties faced by relatives of member who has passed away.


A probate means a copy of the Will, certified under the seal of a competent Court with a grant of administration of the estate to the executor of the testator. It is the official evidence of an executor's authority. A probate is mandatory when the Will is executed by a Hindu, Christian or Parsi in the jurisdiction of High Courts of Bombay (Mumbai), Calcutta (Kolkata) or Madras (Chennai), or pertains to immovable property situated in their respective jurisdictions.

Probate is a legal process in which the court certifies the authenticity of the will. It establishes the legal character of the Executor to implement the Will and to the validity of the Will. Probate can be granted only to the executor appointed by the will.

Fees, Expenses & Delays

The court may impose a percentage of assets as a fee to issue a probate. In Maharashtra it is RS 75,000/- On top of that you have to incur expenses on Lawyer’s fees (ascertain the fees of Lawyer in a city like Mumbai) for Drafting & appearing and long time it takes in a Court considering current situation of pending cases. It may take 6 months to may be 60 months and until then you would be stuck.


The cooperative societies having been conferred a constitutional status by the 97th Amendment; the whole concept of cooperatives has undergone a major change. Now with Introduction of Chapter XIII-B in the form of Section 154B, a separate Chapter has been introduced to deal exclusively with issues in Co Operative Housing Societies (CHS) in Maharashtra. This amendment was incorporated vide Maharashtra Co-operative Societies (Amendment) Act, 2019, which was notified on 20th June, 2019. Ordinance for this was originally issued on 26th October, 2018, which was re-promulgated on 9th March, 2019 and thus becomes legal requirements applicable to all CHS from 26th October, 2018 onwards.

Section 154B

Clause (18) (C) defines “provisional Member” means 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 or heirs as the Member of the society in place of deceased Member.

Transfer of interest on death of a Member in MCS Act, 1960.

Section 154B-13 of MCS Act, 1960

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 Act 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.”

It is therefore clear that till any one of these documents (testamentary documents or succession certificate or legal heirship certificate or document of family arrangement) are produced by the legal heir, Provisional Member cannot be treated as regular Member.

What do these documents mean?

1. The letter of testamentary is a document issued by a probate court. A probate court is the type of court that validates and processes Wills after someone dies. A probate is granted with the court seal and has a copy of the Will attached to it. Under Section 57 of the Indian Succession Act, the Will is required to be probated. The transfer of property by inheritance takes place in 3 Metropolitan Cities i.e. Bombay, Calcutta and Madras only by Letter of Probate. While in other cities, it can be on the basis of the documents in support thereof with an affidavit or declaration before the appropriate authority. Succession is testamentary if the deceased has executed a Will which is a legal declaration of the intention of the testator with regard to his properties to be carried into effect after his death.

2. A Succession Certificate is a document that is granted by a civil court to the legal heirs of a deceased who dies without leaving a will. So a person who dies has either made a ‘Will’ or died ‘intestate’. If a person has made a ‘Will,’ the ‘Will’ has to be submitted for Probate after the death of the person. If a person dies ‘intestate,’ then all the legal heirs have to apply to a competent court for a ‘Succession Certificate’ so that his property can be transferred upon his successors.

3. Legal Heir certificates are issued by the tahsildar of the district to recognize the actual deceased person’s living heirs

4. A Family Arrangement is an agreement between members of the same family, intended to be generally and reasonably for the benefit of the family, either by compromising doubtful or disputed rights or by preserving the family property or the peace and security of the family by avoiding litigation or by saving its honour. The intention of the arrangement is to shield the family from long drawn litigation or perpetual strives which mark the unity and solidarity of the family and create hatred and bad blood between the various members of the family. Family arrangements are governed by a special equity peculiar to themselves, and will be enforced if honestly made, although they have not been meant as a compromise, but have proceeded from an error of all parties, originating in mistake or ignorance of fact as to that their rights actually are, or of the points on which their rights actually depend.

Validity of family Arrangement

Family Arrangements are rarely invalidated, as the Courts accord sanctity to their principal objectives of avoiding disputes and ensuring cordial family relations. Family Arrangements are likened to agreements under the law. Hence, they must satisfy all of the requirements of a legally enforceable agreement, such as the absence of fraud, undue influence or coercion. The existence of the dispute or a threatened dispute between the members of the family is considered to be a precondition for a valid Family Arrangement and such disputes and the consequent giving up of claims and counter-claims between the various members of the family constitutes good and valid consideration between the parties for enforcement of the rights and obligations created by such Arrangement. The Family Arrangement, therefore, is not founded on existing rights or liabilities but rather on existing claims and disputes between the parties which are amicably resolved & notices may be given by contending parties, even suits may be filed matters may be referred to arbitration and Arbitration Award may work out as Family Arrangement/Settlement.

Registration of Family Arrangement

As per decision of the Supreme Court, Family Settlement Document Which Merely Records Past Transaction Does Not Require Compulsory Registration as it should not be confused with a partition deed. The need of partition arises as soon as one of the co-owners seeks the partition of his undivided share. By virtue of a partition, a property is divided amongst co-owners by clear identification and demarcation of their respective ownership share of such property.

The essentials of a family arrangement were laid down by the Supreme Court in the case titled as Kale & Ors vs. Deputy Director of Consolidation which are as follows:

· The family arrangement should be bonafide in order to resolve present or possible future disputes among family members and to ensure equitable distribution of property among the family members;

· The family arrangement needs to be honest, voluntary and should not be induced by fraud, coercion and undue influence;

· Family arrangement can either be oral or written;

· The memorandum recording the family arrangement itself does not create or extinguish any rights in the immovable properties, therefore, not compulsorily registrable.

Stamp duty of Family Arrangement

Since the family arrangement itself does not create or extinguish any rights in the immovable properties, hence not compulsorily registrable, it normally doesn’t require any stamping. However, it is advisable to record this on a Stamp Paper as per local laws which could vary Rs.100-500. It is also advisable to get this notarized to avoid any future dispute about its authenticity.

Old Cases where “Transfer” has already been done by CHS without "Probate"

The question also arises of old cases, prior to amendment. In those old cases, where transfer of name has been carried in CHS, based on nomination and the nominee`s name is still there as Member and as such Nominee should be treated as “provisional member” in Society`s records and Society might insist on Probate (or other documents specified above) before transfer of flat happens (if not transferred or sold already) by sale or otherwise by “Provisional Member”.

If any such transaction of sale or transfer takes place now or in the past then the buyer of the Property would get property with inherent defect in its title and runs the risk associated with such deficiency in title.


The issue that arises from this is that whether Probate (or other documents specified above) is mandatory for transmission of flat in CHS, particularly when Society has already transferred the share in the name of “Nominee”? Based on reading of the section 154B, it appears that Probate (or other documents specified above) is necessary.

The two-judge bench of the Bombay High Court took into account the laws governing the nomination of shares under the Companies Act, 1956, the succession laws governing the estate of a deceased in case of intestate (without making a will) or testate succession (estate bequeathed under a will) as per the Indian Succession Act, 1925 and the byelaws under the Depositories Act, 1996, and concluded that the provisions relating to nomination do not override the law in relation to testamentary or intestate succession.

Therefore, heirs are advised to record the transaction in the form of Family Arrangement to clear title issue. After that, Family Arrangement can be shared with CHS who should keep the same in personal file of respective member along with Property title document.

Why CHS should not insist on Probate in Maharashtra?

In a co-operative housing society you are the owner of unit of a share in the society in the form of a flat. This is similar to fractional ownership in a Company where you own all assets including properties propionate to your share. In the case of Listed Companies, these shares are held in your D’mat Account and Depositary Participants provides Nomination facilities to all Account holders and upon death of account holder, the share is transferred to the nominee. Thus what each member of CHS is holding is a Share in Capital of Society similar to the Share in a Limited Company. Most Limited Companies hold properties and while transfer of share after the death of the member to the nominee, DP doesn’t insist on Probate. This position has been upheld by courts in India.

Therefore, Probate is required in respect of independent Property not forming part of CHS located in Maharashtra.

For this, the Society should also insist on following as a matter of extra precaution:

1. Certified true copy of Death Certificate

2. Indemnity bond on Rs. 200/- stamp paper

3. No Objection Certificate(s) from all the Class 1 legal heir(s) who do not object to such transmission. If all legal heirs are nominees, then declaration that they are the only legal heirs of the deceased.

4. Issue Public Notice in 2 local newspapers about the transfer/transmission, inviting any claims or objections, if any, along with substantiating their claim.

CA Harshad Shah, Mumbai (

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