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Nominee or legal heir: who owns shares and securities in India?
The nomination and the will point different ways
A shareholder names a son as nominee but leaves a will giving the same investments to a daughter. After the death, the son says the nomination makes the shares his outright.
The nomination is not the complete answer. The family has to look at the securities, the nomination, the will, the succession law that applies and any dispute about the documents. This example is hypothetical.
Why section 72 caused confusion
Section 72 of the Companies Act, 2013 lets a holder nominate a person in whom the securities "shall vest" on death.
Section 72(3) says the nominee becomes entitled to all the rights in them "to the exclusion of all other persons", notwithstanding any other law or any will.
Read alone, that wording suggests the nominee takes absolutely. A 2010 Bombay High Court decision read it that way. The Bombay High Court later declared that decision per incuriam, and the Supreme Court agreed in Shakti Yezdani.
What the Supreme Court decided
| Point | What the Court said |
|---|---|
| The nominee's title | On the holder's death, the nominee does not get absolute title to the securities (paragraph 43) |
| Why securities vest in the nominee | For a limited purpose: to avoid confusion over formalities and protect the securities from litigation until the legal representatives act (paragraph 45) |
| The company's discharge | Discharging the company once a nominee is in the picture is quite different from making the nominee the owner (paragraph 46) |
| Succession law | Nomination does not override succession law, and there is no third mode of succession (paragraphs 46 and 47) |
| Which laws | The Companies Act, 1956, the corresponding provisions of the 2013 Act, and the Depositories Act, 1996 (paragraph 43) |
| Earlier rulings | Consistent with its earlier decisions that insurance and bank-deposit nominees do not become owners (paragraph 40) |
The Court also noted that a nomination is not made with the formalities a will needs, so treating it as a "statutory testament" would let it bypass those safeguards.
Demat accounts and mutual fund folios
SEBI regulates nomination for demat accounts and mutual fund folios. Its current circular, dated 29 May 2026, applies from 1 September 2026 and replaced its earlier nomination circulars.
| Rule | What the 2026 circular says |
|---|---|
| Single holdings | Nomination is mandatory, unless the investor formally opts out |
| Joint holdings | Nomination is optional, and all joint holders must consent to it |
| Number of nominees | Up to three |
| Shares among nominees | Equal, unless the investor states percentages |
SEBI's 2025 circular had said nominees receive the assets as trustee for the legal heirs. The 2026 circular does not repeat that wording, but the ownership rule comes from the Supreme Court's judgment, not from the circular.
Shakti Yezdani dealt with company securities and depository holdings. Mutual fund units have their own SEBI rules, so do not assume the answer is identical without advice.
Joint holdings are a separate question
Under section 72(2), joint holders nominate together, and the nominee's rights arise only after the death of all the joint holders. Until then, the surviving holders continue.
Do not assume the whole value of a joint holding belongs to the estate. Identify the deceased person's actual interest before working out who inherits it.
Insurance and bank deposits have their own rules
The Supreme Court's reasoning draws on its earlier insurance and banking cases, but each asset is governed by its own statute. Life insurance nominations fall under section 39 of the Insurance Act, as amended, and need checking separately.
For bank deposits, the RBI requires banks to tell nominees they receive the money as trustee of the legal heirs. See our guide to bank nominees and legal heirs.
Put the family's records together
| Record | Why it matters |
|---|---|
| Death certificate and identity records | Needed for any transmission |
| Demat, folio or share statements | Identify the securities and how they are held |
| The nomination record, with any changes | Shows whom the company or depository will deal with |
| Wills and codicils, with where the originals are | Bear on who is finally entitled |
| Family relationship records and any court documents | Identify the heirs and any existing order |
| Letters with the company, registrar or depository participant | Show what has already been done |
| Details of any objection or competing claim | Identify what is disputed |
Keep account numbers and identity documents in a secure file. They do not need to go into a large family messaging group to start a consultation.
Before anything is distributed
If someone has raised a competing claim, preserve the records and take advice before treating a transmission to the nominee as the end of the matter. The company's discharge does not decide the family's dispute.
Do not sign a release, family settlement or indemnity without understanding which securities and which rights it covers. Not every disagreement needs the same court application.
Checking who is entitled to the securities
- List the holdings. Note each company, demat account and folio, and whether it is held singly or jointly.
- Obtain the nomination record. Ask the depository participant, registrar or company for the registered nominees and any changes.
- Find the will. Locate any will and codicil, and note where the originals are kept.
- Identify the succession law. Establish which law governs the estate and who the heirs are.
- Record what has been transmitted. Note what has already passed to a nominee, and when.
- Take advice before distributing. Settle any competing claim before signing releases or dividing the holdings.
Frequently asked questions
Does a nominee become the owner of shares in India?
No. In Shakti Yezdani (2023), the Supreme Court held that a nominee does not get absolute title on the holder's death. Ownership follows the will or the law of succession.
Does the Shakti Yezdani judgment apply to demat accounts?
Yes. The Court applied its reasoning to nominations under the Companies Act and the Depositories Act, 1996, which governs holdings in demat form.
Does a will override a share nomination?
Succession law decides ownership, and a valid will is part of that. The will's validity and scope can still be disputed, so the existence of a will does not end the analysis.
Does the same rule apply to life insurance and bank deposits?
Do not assume so. Each asset has its own statute: section 39 of the Insurance Act for life policies, and the Banking Regulation Act and RBI directions for deposits.
How many nominees can a demat account or mutual fund folio have?
Under SEBI's circular of 29 May 2026, applicable from 1 September 2026, up to three. If no percentages are given, the holdings are shared equally.
The takeaway
Put the nomination record, the holding statements and the succession documents side by side before telling anyone who owns what. The nominee can deal with the company; the will or succession law decides who keeps the securities.
To discuss a disputed estate or transmission, contact Saya & Associates with the holding statements, the nomination record and any will.
This article provides general information on Indian succession and securities law as at 1 November 2026. Entitlement depends on the asset, the nomination, the will, the personal law and any court order. It is not legal advice.
Sources
- Shakti Yezdani v Jayanand Jayant Salgaonkar, Supreme Court of India, 14 December 2023 (2023 INSC 1076)
- Companies Act, 2013, section 72 (Indian Kanoon)
- SEBI circular on modified norms for nomination in demat accounts and mutual fund folios, 29 May 2026
- SEBI circular on nomination facilities in the securities market, 10 January 2025 (since superseded)