What Happens to Nominee Rights in Co-operative Societies?

In co-operative societies, the concept of nominee rights allows a member to designate an individual (the nominee) who will receive the deceased member’s rights, including their shares and interest in the society. However, the transfer of rights or shares to the nominee after the member's death is governed by both the rules of the specific co-operative society and the applicable laws. While a nominee does not automatically inherit the deceased member’s rights, the process ensures that the nominee can claim the deceased’s property or shares in the society, but only after fulfilling the necessary formalities.

Nominee Rights in Co-operative Societies: Legal Framework

Nominee’s Role and Entitlement:

A nominee in a co-operative society is an individual designated by a member to receive their shares, deposits, or benefits in the event of the member's death. However, it is important to note that the nominee is not an automatic heir to the member’s property but acts as a temporary custodian until the rightful legal heirs are determined. Nominee rights pertain to the transfer of shares or interest in the society, not the member's other assets such as land or personal property.

Co-operative Society Rules:

Each co-operative society may have its own set of rules governing the transfer of shares upon the death of a member. While the role of a nominee is generally to step in and claim the deceased's rights, the process depends on the society’s bylaws. The society's board will verify the legitimacy of the nominee and follow the prescribed procedures for transferring the shares to the nominee.

Nominee Rights in the Event of a Member's Death:

Step 1: Intimation of Death:

Upon the death of a member, the nominee must inform the co-operative society of the member's passing, usually by submitting a death certificate.

Step 2: Verification:

The society verifies the nominee's rights as per the records and bylaws. In some cases, the nominee may be required to provide further documentation, such as identity proofs, to validate the claim.

Step 3: Transfer of Shares:

Once the nominee's identity is confirmed and the society's board approves the transfer, the shares or rights of the deceased member are transferred to the nominee. The process may involve the payment of any dues owed to the society or the fulfillment of other requirements laid down by the society.

Step 4: Effect on Other Legal Heirs:

While the nominee receives the rights, it does not override the claims of the legal heirs (like children, spouse, or other family members) of the deceased member. The legal heirs can contest the nominee's claim if they believe they are entitled to the shares as per the succession laws or the society’s bylaws.

Key Aspects of Nominee Rights

Nominee as a Trustee:

A nominee is considered a trustee for the rightful legal heirs and is required to act in accordance with the laws. The nominee may have to transfer the rights to the actual legal heirs once they establish their claim over the deceased’s property. Therefore, the nominee cannot claim ownership of the shares but is entrusted with them temporarily until the legal heirs come forward.

Inheritance and Succession:

The nominee may not be the ultimate owner of the deceased member’s shares. The nominee’s role is to hold the shares on behalf of the legal heirs.

If the deceased member had left a will specifying who should receive the shares, then the will takes precedence over the nominee's claim, provided the will is valid under the law.

If there is no will, the shares will be passed on as per the laws of intestate succession, meaning the legal heirs have the right to claim the property.

Impact of Co-operative Society’s Bylaws:

The society’s rules often stipulate that the nominee's rights are subject to the approval of the society’s management committee. The society can refuse to transfer the deceased's shares to the nominee if there are issues such as unpaid dues, or if the nominee fails to meet the conditions laid down by the bylaws. This ensures that the transfer is carried out legally and responsibly.

Dues and Liabilities:

Any outstanding dues of the deceased member to the society (such as unpaid loans or subscriptions) may need to be settled before the nominee can claim the shares. The society will generally deduct any outstanding amounts from the proceeds or shares of the deceased before transferring them to the nominee.

Legal Contestation and Disputes

Disputes Between Nominee and Legal Heirs:

There may be instances where the legal heirs contest the nominee’s rights. The legal heirs can file a petition in court to claim the shares, asserting their rights as the rightful heirs. Courts will typically consider the society’s rules and the family’s succession rights when making decisions.

Court Intervention:

In case of disputes, the nominee may have to defend their claim in court if there is a challenge by the deceased’s legal heirs. The court's role will be to determine the rightful owner of the shares based on the society’s rules, applicable inheritance laws, and any documented will or succession plan.

Example

Scenario 1:

Mr. Rajesh, a member of a co-operative housing society, passes away. He has nominated his son, Rahul, as the nominee for his shares in the society. Rahul informs the society of his father’s death and submits the death certificate. The society verifies his identity, clears any dues owed by Mr. Rajesh, and then transfers the shares to Rahul. However, Mr. Rajesh’s wife, Rekha, also claims the shares as his legal heir. The society’s board states that Rahul, as the nominee, has the first right over the shares, but Rekha can contest this claim in court, which will then determine the final ownership of the shares based on succession laws.

Scenario 2:

Ms. Sunita, a member of a co-operative bank, passes away without leaving a will. She had nominated her niece, Priya, as the nominee for her bank deposits. Upon Sunita’s death, Priya submits the required documents to the bank. However, Sunita’s children challenge Priya’s claim, asserting that they are the legal heirs. The bank, following its internal bylaws, initially transfers the funds to Priya, but the legal heirs challenge the decision in court. The court will then determine whether the nominee’s rights override the succession rights of the legal heirs.

Conclusion

In co-operative societies, nominee rights play an essential role in ensuring that the deceased member’s shares and benefits are transferred to a designated individual. However, the nominee is not the absolute owner of the deceased's property; they act as a temporary trustee until the legal heirs are established. The society’s bylaws govern the transfer process, and while nominees typically receive the shares, disputes can arise, especially when legal heirs challenge the nominee’s claim. Ultimately, the resolution of such disputes will depend on the society's rules, the deceased’s will (if any), and applicable inheritance laws.