Right of legal heirs against nominees

On 3 April 2016, the Supreme Court of Bangladesh delivered a historical judgment in establishing right of the legal heirs as against that of the nominees. A former deputy director of Bangladesh Bank had Tk. 30 lakh deposited in his bank account and he made his second wife the sole nominee. Upon death of the depositor, his children of the first wife went to lower civil court seeking succession certificate which the court rejected holding the second wife as the lone inheritor of the savings. This decision of the lower civil court was challenged in the High Court Division (HCD) by the plaintiff. The HCD bench of Justice Naima Haider and Justice Khizir Ahmed Choudhury altering the lower court's decision declared that, only legal heirs are the owner of the money from savings account of the banks not the nominee.

The legal position of the nominee has been a controversial issue in Bangladesh for a long time. Previously, under section 4 of the Government Savings Banks Act of 1873, a nominee was the absolute owner of the deposited money in the event of the death of the depositor excluding all rights of the legal heirs. Legal heirs were entitled to inherit only when the depositor dies without making any nomination. In such cases the legal heirs were required to obtain a succession certificate under the Succession Act of 1925.

Indian and Pakistani courts had interpreted laws regarding nominee in a different way. In a landmark case of Sarbati Devi v Usha Devi, AIR (1984) SC 346, the Supreme Court of India held that “the nomination only indicates the hand which is authorised to receive the amount, on the payment of which the insurer gets a valid discharge of its liability under the policy.” While subsequent decision of the court extended the application of this rule in other instances of nomination such as bank savings, post office savings etc.

The Pakistani Supreme Court in Amtul Habi v Musarrat Parveen, PLD (1974) SC 185 laid down the same principle while holding that a nomination does not constitute a gift or bequest, “and, therefore, a nomination shall not deprive the legal heir of the nominator.” In Bangladesh, however, prior to this decision there was no direction from the higher court on this issue.

The main purpose of the system of nomination in banking system is the smooth transaction of money. If the depositor does not leave any nominee, then the money will be transferred only after fulfilling certain formalities, which can be a hassle for both the bank and the heirs. But if nomination is made then the burden of the bank authority is reduced and it can easily hand over the money to the nominee.

The decision also made the nominee system consistent with the Muslim Personal Law (Shariat) Application Act of 1937. The previous system was a circumvention of Muslim law of succession which was against the application on personal laws in family affairs.

With this judgment the rules regarding nominee, which was a contradiction to the rule of succession under personal law, is correctly interpreted by establishing the rights of the legal heirs. Now the nominee is merely a trustee, whose obligation is to distribute the money among the heirs. Obviously if the nominee is a legal heir then he will get his portion according to the rule of succession. However, it will be interesting to see whether the application of this rule will also be extended to laws such as the Post Office National Savings Certificate Ordinance of 1944 or the Insurance Act of 2010.

Although the conflicting situation regarding rights of the nominee and the legal heirs is settled by this decision, a comprehensive and acceptable definition of nominee is still required. And for this the legislative body should act with accordance with the direction of the HCD and make necessary amendment to the respective laws.

The writer is an LLM student, University of Rajshahi.