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Transfer/Transmission of Shares (and Interest & rights in Property) to Legal Heirs

Transmission of flats happens:

· When the flat owner has made a nomination before death.

· Nomination has been duly registered in the Nomination Register of CHS or Association

· Flat Owner has made a Will

· Nomination & Will has same Beneficiary

In a case where both nomination and Will is prepared, then Will shall prevail over the nomination paper.

Nominee

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.

Nomination is not a will

Transmission of flats

Transmission is passing of property or rights therein on the death of the erstwhile owner. It takes place in accordance with the wishes of the deceased or, in the absence of any expression of such wish, in accordance with the provisions of succession laws applicable to him. The wish is expressed either by nominating a person to take over on death or by a written or oral Will or any other testamentary disposition.

If the member dies without making a nomination or no nominee comes forward for transfer, the Society invites claims or objections by a public notice and then the committee decides the person who, in its opinion, is the legal heir of the deceased.

In case a flat is purchased by two persons contributing equally, only one, to be decided by them, can be the member of the Society, the other is admitted as ‘associate member’ only. As per the bye-laws, if there is a nomination, it is the nominee who succeeds as member and not the associate member.

Transmission in case of flats is possible only for the flats owned by individuals. If flat is held by a body corporate, transmission is impossible, since body corporate has no death. Even after the death of all the partners or directors of a company/firm, the company/firm does not die.

Testamentary Succession

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.

Will is sometimes accompanied by ‘Codicil’, and is an instrument made in relation to a Will explaining, altering or adding to its dispositions.

The Will is required to be probated if it is executed by Hindus or Parsis within the jurisdiction of Calcutta, Bombay and Madras High Courts.

Probate is also necessary if the Will is executed by Hindus or Parsis outside these jurisdictions but it relates to the flat situated in these cities (Calcutta, Bombay and Madras).

As a general rule, it is not necessary to probate the Will of a Muslim. However, if the Muslim was married under the Special Marriage Act, the succession to his estate is governed by Indian Succession Act.

Up to 26th May, 2002, Christians also were required to obtain probate of the Will but they have now been exempted from this requirement.

The transmission by nomination in respect of shares in a co-operative Society is not a conclusive proof of ownership and can be challenged by other claimants in appropriate proceedings.

It was held by the Hon’ble Bombay High Court in the case of Gopal Vishnu Ghatnekar vs. Madhukar Vishnu Ghatnekar reported in AIR 1982 Bom 482 that a nomination is permitted only in respect of the share and the property of the society. The society is concerned only with the shares held by a member and the land given by it to a member and not with the structure that a member may put up.


Intestate Succession

“Unwilled succession”-Absence of Will

Intestate succession of the property of deceased takes place as per operation of law.

There being no uniform law of succession, different communities are governed by different laws.

Muslims for instance, are governed by Sharia law, Christian and Jews by Sections 31 to 49 of Indian Succession Act, 1924 and Parsis by Sections 50 to 56 of the Indian Succession Act, 1924.

The Hindus are generally governed by the provisions of Hindu Succession Act, 1956 and some provisions of the Indian Succession Act, 1925.

Persons marrying under the Special Marriage Act, 1954 are, in the matter of succession, governed by those provisions of Indian Succession Act which are applicable to Christians, etc.

Thus, if one Muslim and one Parsi get married under the Special Marriage Act, succession to their estate is governed by the provisions of Indian Succession Act, 1925.

However, where both the spouses are Hindu, Buddhist, Sikh or Jain the succession to their estate will continue to be governed by Hindu Succession Act.

Safeguard in the Purchase Deed for smooth transmission

As a measure to obviate the necessity of making nomination or executing a Will, with attendant disputes and procedural hassles, an alternative course to facilitate transmission is to provide for the successor in the Purchase Deed itself at the time of acquiring the flat.

Quite often the flat is acquired by two individuals, say husband and wife, with the intention that it should pass to the survivor. In such a case the flat may be purchased by the couple as joint tenants or joint owners with a clear stipulation that on the death of either of them, the survivor will become the sole owner of the flat. A possible way to do so is to define the purchaser in the recitals in such a way that the term ‘purchaser’ means and include the survivor. This will be an easier way to exclude other legal heirs to put their claim as heirs.

Heirs according to the Hindu Succession Act

If the person (Hindu) dies without Will, his Assets (Estate) passes on to:

Class-I heirs: Widow, Children (including married daughter) and mother. In case if son has already expired then his widow and similarly son of a pre deceased daughter will get their propionate share. Thus if husband dies without a Will survived by his widow, widow of his son, son of his predeceased daughter and mother, then all 4 of them gets 25% each. If predeceased daughter had 2 sons, then both the sons of predeceased daughter get 12.5% each.

Mutation of changes would happen according to local practice in government records as regards respective share.

If Class I hairs are absent then it goes to Class II hairs:

· Father

· Grandchildren

· Brothers

· Sisters

Succession through a will

People, who come under the jurisdiction of the Hindu Succession Act, can bequeath their property to any person, even excluding relatives, through the execution of a will. In such a case, it is mandatory for the executor of the will, to obtain a probate (certification) from a court for assets in Mumbai, Kolkata or Chennai

Rights of successors versus nominees

Conflicting decisions on the rights of nominees and successors

Bombay High Court’s ruling on nominees’ rights

Operative Part of Indira Wahi Judgment (Supreme Court)

“In this behalf, it is necessary to clarify that transfer of share or interest, based on a nomination under Section 79 in favour of the nominee, is with reference to the concerned Cooperative Society, and is binding on the said society. The Cooperative Society has no option whatsoever, except to transfer the membership in the name of the nominee, in consonance with Sections 79 and 80 of the 1983 Act (read with Rules 127 and 128 of the 1987 Rules). That would have no relevance to the issue of title between the inheritors or successors to the property of the deceased. Insofar as the present controversy is concerned, we therefore hereby direct `the Cooperative Society' to transfer the share or interest of the society in favour of the appellant – Indrani Wahi. It shall however, be open to the other members of the family (presently only the son of Biswa Ranjan Sengupta – Dhruba Jyoti Sengupta; we are informed that his mother – Parul Sengupta has died), to pursue his case of succession or inheritance, if he is so advised, in consonance with law.”

Practical Approach

Ø Many associations/Most CHS does not insist on Probate or succession Certificate

Ø NOC (Relinquishment Deed) from other Legal Heir(s) for Relinquishment of his/her share & interest in the said Flat in favour of the Applicant(s)

Ø Declaration from Legal Heir as to total list of Class 1 Heirs and Undertaking to Society of its correctness

Ø Public Notice in 2 widely circulated newspapers by CHS

Ø Can a Nominee sell the flat with approval from legal heirs? As a nominee, the person holds the flats in trust for the legal heirs and at the time of sale if he/she takes the consent of all the legal heirs, will this suffice?

Issues & Controversies in Successions

1. When no nomination is made by the flat owner or when no nominee is ready to accept the membership of the society

In such a case, if there is a dispute among the relatives of the deceased; the Society will demand Succession Certificate from the relatives of the deceased. But till they obtain that, follow

2. Nominations Made but Will not made:

CHS should transfer the share in view of Provisions of Section 30 of MCS Act. But before any further transfers are made insist on Court mandated Succession Certificate

3. Will Made but Nominations not made

Insist on Probate. But till then carry out the process highlighted above

4. Nomination & Will made but Beneficiaries are not same:

Things to remember that “Will “shall always prevail over the “nomination.”

However CHS should transfer the share in view of Provisions of Section 30 of MCS Act. But before any further transfers are made insist on Court mandated Probate

Ø Can Society Transfer the Share Certificate To Nominee without Probate/Succession Certificate?

Ø What happens if there are objections from legal heirs?

Ø How does Managing Committee of CHS deal with that?

Ø Follow the process mentioned in slide no.8 but Insist on Probate/Succession Certificate before any further transfer takes place

Ø What happens if person nominated in Nomination and in Will also dies

Flat in the name of HUF

A HUF can acquire properties from various sources viz., on partition, by way of gift, through will, accretion to the existing properties, blending, by joint labour, etc.

Ø Nomination? –There can`t be a Nomination of HUF Property.

Ø Will ?-There can`t be a Will of HUF Property

Ø As per SC: HUF assets to be taken as joint property

The Supreme Court has held that all assets in a HUF would be presumed to be joint property belonging to all its members and a family member has to produce evidence to stake claim over any part even if it is 'self-acquired‘ as per SC “, the burden is always on a family member, claiming ownership over a part of property of joint family, to prove before a court that it is his self-acquired property and not joint property of the family by placing oral or documentary evidence”

Ø It is a settled principle of Hindu law that there lies a legal presumption that every Hindu family is joint in food, worship and estate and in the absence of any proof of division, such legal presumption continues to operate in the family.

Ø The bench said it was obligatory upon the contesting family members to prove that despite existence of jointness in the family, properties were not part of ancestral properties but were their self-acquired properties and the petitioners failed to prove their claim.

Is Probate Compulsory?

A probate for a will is required to be obtained only under circumstances mentioned in Section 213 of Indian Succession Act, 1925. Section 213 is reproduced for ready reference:-

“Section 213: Right as executor or legatee when established – (1) No right as executor or legatee can be established in any court of justice, unless a court of competent jurisdiction in India has granted probate of the will under which the right is claimed, or has granted letters of administration with the will or with a copy of an authenticated copy of the will annexed. [(2) This section shall not apply in the case of wills made by Mahommedans and shall only apply in the case of wills made by any Hindu Buddhist, Sikh or Jains where such wills are of the classes specified in ‘Clauses (a) and (b) of Section 57.’] The above sub-s (2) is substituted, by the Indian Succession, (Amendment) Act 16 of 1962 dated 30 March 1962, by the following:

(2) This section shall not apply in the case of wills made by Mahommedans, and shall only apply - (i) in the case of wills made by any Hindu, Buddhist, Sikh, or Jains where such will are of the classes specified in (a) and (b) of s 57; and (ii) in the case of wills made by any Parsi dying, after the commencement of the Indian Succession (Amendment) Act 1962 where such will are made within the local limits of the ordinary civil jurisdiction of the High Courts of Calcutta, Madras and Bombay and where such wills are made outside those limits, in so far as they relate to immoveable property situate within those limits.”

Thus it is very clear from the above provision that a probate is required only under following circumstances:

(i) All wills of Hindus etc. made on and after 1 September 1870, within the provinces of Bengal, Bihar, Orissa and Assam and within the local limits of the ordinary original civil jurisdiction of the High Courts of Madras and Bombay.

(ii) All such wills made outside the territories mentioned in (i) above relating to immovable properties situate within the said territories must also be proved and probate thereof obtained, before any right as executor or legatee can be established.

(iii) Wills other than those in categories (i) and (ii) above made before 1 January 1927, i. e to say, such wills made outside the territories mentioned in (i) above, relating to movable property situate inside or outside the said territories or immovable property situate outside the said territories are not required to be proved or probated [see s 213 (2), infra].

(vi) Where a “WILL” is not executed within the territories mentioned in Para (i) or the will does not relate to property situate within the territories mentioned in Para (ii), sub-s (1) of s 213 is not attracted.

In your case, since the will is executed in Gandhinagar and moveable property is involved such a will does not attract provisions of section 213 of Indian Succession Act, 1925. Therefore such a will is not required to be probated.

2. Since no probate is necessary of the will in the instant case, the will is admissible in evidence even though it is not probated in accordance with Section 213 of Indian Succession Act, 1925.

As far as the second query is concerned, you have not stated who the person acting on the instructions contained in the Will is. If he did not know the testator, he should, in order to protect himself, ask the heirs to swear an affidavit to the effect that: i) this was the last will made by the deceased; ii) that the signature is that of the testator; and iii) the testator was of sound mind when making the will.

If there is any dispute among the heirs about the will e.g. one heir insists that the will is genuine and is the last will of the testator and the other heir or heirs insist that it is not, and then the person carrying out the instructions should insist that they will be proved in Court.

Latest Changes in Maharashtra

Maharashtra has introduced amendment to MCS Act from 20th June 2019, which is reproduced below and is self-explanatory.

Section 154B

Clause (18) (C) defines provisional Membermeans 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


CHAPTER XIII-B

CO-OPERATIVE HOUSING SOCIETIES

(Gazetted on 20th June 2019)

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.


Transfer of interest on death of a Member.

Section 154B-13

“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.

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.

Old Cases where “Transfer” has already been done by CHS

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 will be treated as “provisional member” in Society`s records and CHS has to insist on Probate (or other documents specified above)before transfer of flat happens 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 matter.

Issue:

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, and concluded that the provisions relating to nomination do not override the law in relation to testamentary or intestate succession.

Indrani Wahi Case (Supreme Court)

In the Indrani Wahi Case, 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.

What`s The Way Out?

Prepare Family Arrangement Deed which should be in sync with Nominations and Will.


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