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Published on: May 26, 2025
When a person opens a bank account, they are often asked to name a nominee. Many believe that this nominee becomes the rightful owner of the account’s funds after the account holder’s death. However, legally speaking, this understanding is incorrect. In India and many other jurisdictions, the role of a nominee is distinctly different from that of a legal heir. This article explores the legal status of a nominee, their rights, and the remedies available to legal heirs if they are wrongfully deprived.
A nominee is a person designated by the account holder to receive the funds from the account in the event of their death. This nomination is made under Section 45ZA of the Banking Regulation Act, 1949 and Rule 2(1) of the Banking Companies (Nomination) Rules, 1985. The purpose of appointing a nominee is to enable the bank to discharge its liability quickly and without requiring legal formalities such as a succession certificate or probate.
Several landmark court judgments have clarified the distinction between nominees and legal heirs. The most notable is the Supreme Court ruling in Sarbati Devi v. Usha Devi (1984 AIR 346) which stated that the nominee is merely a trustee for the legal heirs.
In the context of bank accounts, the nominee holds the funds in trust for the legal heirs unless the nominee is also a legal heir. If the deceased has written a will, the distribution of the funds must follow the instructions in the will. If there is no will, the assets are distributed according to the personal law applicable to the deceased (e.g., Hindu Succession Act, Muslim Personal Law, Indian Succession Act, etc.).
Thus, nomination ensures smooth transfer from the bank’s side but does not confer legal ownership.
Banks are not responsible for verifying the rightful heir before releasing the funds to a nominee. Their legal obligation ends once the money is handed over to the nominee. It is up to the legal heirs to claim their rightful share from the nominee if they believe they have been wrongfully excluded.
If a nominee refuses to share the funds with the rightful heirs, legal action can be taken. The following remedies are available:
1. Civil Suit for Recovery
Legal heirs can file a civil suit for recovery of their share in the funds. The suit should be supported by succession documents, such as a will, legal heir certificate, or succession certificate.
2. Probate or Letters of Administration
If there is a will, it should be probated (where required) to establish the rights of the heirs. In the absence of a will, a court may grant letters of administration to distribute the estate as per applicable succession laws.
3. Injunction Orders
Courts can also grant injunctions to prevent the nominee from withdrawing or utilizing the funds until rightful ownership is determined.
4. Mediation or Family Settlement
In cases involving family disputes, mediation can help arrive at a mutually agreeable settlement without prolonged litigation.
Upon the death of the account holder, succession laws come into play.
Applicable Succession Laws:
Hindu Succession Act, 1956 (for Hindus, Sikhs, Jains, Buddhists)
Muslim Personal Law (Shariah) (for Muslims)
Indian Succession Act, 1925 (for Christians and others)
If a will exists, the executor must distribute the estate as per its terms. If the deceased died intestate (without a will), the property is distributed among Class I heirs, which usually include:
Spouse
Children
Mother
Other direct descendants
A nominee cannot override these rights.
Make a Will: Ensure your intentions are clearly mentioned in a registered will.
Appoint the Right Nominee: Preferably appoint a nominee who is also a legal heir.
Inform Family Members: Make your heirs aware of your nomination and estate planning.
A nominee does not automatically become the owner of funds in a deceased person’s bank account. Instead, the nominee acts as a custodian until the legal heirs claim their rightful share. Misconceptions around nomination often lead to disputes. Understanding the legal framework and taking proper estate planning measures can prevent conflict and ensure smooth transmission of assets.
Want to know more about your legal rights as an heir?
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KhA Advocates is a premier law firm in Kolkata, West Bengal known Internationally, providing expert legal services in property registration, corporate law, matrimonial law, taxation, dispute resolution, and more. We offer tailored legal solutions for NRIs, businesses, and residents, ensuring 100% compliance and protection. With our efficient, transparent, and reliable approach, we safeguard your legal interests.
