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Nominee needs approval from legal heirs to sell a property

The purpose of the nomination is to make certain the person with whom the society has to deal with

My brother died intestate at the age of 47 years. After his demise, my sister-in-law declared that she will be settling down at her native place in her sister’s residence along with her daughter and son. My sister-in-law transferred all the immovable assets in her name since she is nominee for most of his assets. Is she is eligible to own/sell-off the movable/immovable property of my brother without consent of my parents? Also, can the housing society ask for succession certificate before issuing a no-objection certificate (NOC) to sell a flat owned by a member, who has died intestate? I also want to know, as per law, how can one claim the sales proceeds of the property owned by my brother?

—Gopal

We have assumed that the immovable assets which you have referred to in your query are flats situated in Maharashtra in a society registered under the provisions of the Maharashtra Co-operative Societies Act, 1960 (MCSA). As per the MCSA and rules made thereunder, upon the owner’s death, the society must transfer the flat and shares in the society to the owner’s nominee(s). Therefore, if your sister-in-law was the nominee in respect of your brother’s flats, the society would be bound to transfer the flats to your sister-in-law upon your brother’s demise. However, by virtue of the nomination or the transfer of the flat/shares to the nominee (your sister-in-law in this case), the nominee herself does not become the owner of the flat/shares or become entitled to sell/transfer the flat to any third party. The purpose of the nomination is to make certain the person with whom the society has to deal with. The true owners of the flat/shares are the legal heirs of the deceased person and the flat/shares can be sold only by such legal heirs (or with their consent); the role of the nominee is to hold the flat in trust for such legal heirs. So, even though your brother’s flat has been transferred to your sister-in-law as nominee, she will not acquire any interest in the flat merely by virtue of holding the flat as a nominee. As a nominee, she holds the flats in trust for the legal heirs of your brother and she will be bound to transfer the flat in the name of such legal heirs and will not be legally entitled to sell/transfer the flat to any third party without their consent. Accordingly, if your parents are legal heirs to your late brother’s property, they would be entitled to a share in the flats and your sister-in-law would not be able to transfer the said flats without their consent. However, the question as to whether your parents are legal heirs to your late brother’s property will depend on the personal laws applicable to him. You are advised to seek professional legal advice as to whether your parents would be classified as legal heirs of your brother.

As regards valuation of the flats, if your sister-in-law is not disclosing the same to your parents, your parents may consider contacting a property broker to get a rough determination of the possible market value of the flats.

You have also asked whether your sister-in-law would be eligible to sell off the movable property of your brother without consent of your parents. In this regard, we have assumed that you are referring to movable assets such as shares of a company where nomination is permissible. The law regarding the ownership right of nominees to shares of a company is different from that of the law relating to flats in a society under the MCSA as mentioned in the paragraphs above. As per the Bombay high court (in the case of Harsha Nitin Kokate vs The Saraswat Co-Op. Bank Ltd, 2010), upon the death of the owner of shares in a company, the nominee in respect of such shares becomes their beneficial owner to the exclusion of all others including the legal heirs of the deceased. Once the shares are transmitted to the nominee by the company, the nominee is free to sell/transfer them to any third party and appropriate the proceeds of the sale. Accordingly, your sister-in-law will be free to dispose of such shares in respect of which she was nominated by your late brother without obtaining consent from your parents or any other person.

With regards to your second question, normally, a housing society registered under the MCSA will ask the legal heirs of a deceased member to produce a succession certificate before transferring the shares to such legal heirs only in situations where the deceased member of the society dies without making a nomination or no nominee comes forward for such transfer. In a situation where there is a nominee, the society will transfer the flat/shares in the name of such nominee and then normally leave it to the nominee to identify the legal heirs of the deceased to whom the flat/shares are to be transferred.

If your sister-in-law does attempt to sell a flat(s) which she holds as nominee, then the society itself may refuse to transfer the flat in the name of the third party without the consent of all the legal heirs of your late brother. In the event that your parents can be classified as your brother’s legal heirs (as explained in previous paragraphs), it may be advisable for them to write a letter to the society informing the society of their right, title and interest in the flat and requesting the society not to transfer the flat to any third party without their prior consent. If, in spite of this, your sister-in-law does transfer the flat and appropriates the sale proceeds, your parents (if they are legal heirs of your brother) would need to file appropriate legal proceedings against your sister-in-law to claim their share of the sale proceeds of the flat from her.

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