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2 years ago

Is Legal heir and Nominee the same?

I wonder how many of us are aware of this legal twist.

Read on...

Will your Nominee get the money on your death ?

Did you think that your nominee is the person, who will get all the money legally from your Life Insurance Policy and Mutual funds investments ?
Ha! That is exactly what you think if you are not aware of the legal aspects.
We assume a lot of things which sounds like they are obvious, but are not true from the legal point of view.

Today, we all concentrate on nominations in financial products.

For whom are we earning ?
For whom are we investing ?

Who, do we want to leave all our wealth to, in case something happens to us ?

It might be your children, your spouse, parents, siblings etc., or just a subset of these.
You also might want to exclude some people from your list of beneficiaries!.
So you think you will nominate person X in your Insurance policy, and when you are dead and gone, all the money goes to person X and he/she becomes the sole owner ? You are wrong, dude !
It does not work that way.

Let us see how it actually does!

What is a Nominee ?

According to law, a nominee is a trustee, not the owner of the assets.
In other words, he is only a caretaker of your assets.

The nominee will only hold your money/asset as a trustee and will be legally bound to transfer it to the legal heirs.

For most investments, a legal heir is entitled to the deceased’s assets.

For instance, Section 39 of the Insurance Act says the appointed nominee will be paid, though he may not be the legal heir.
The nominee, in turn, is supposed to hold the proceeds in trust and the legal heir can claim the money.

A legal heir will be the one who is mentioned in the will.
However, if a will is not made, then the legal heirs of the assets are decided according to the succession laws, where the structure is predefined on who gets how much.

For example, if a man during his lifetime executes a will... In the will, he mentions his wife and children as legal heirs, then after his death, his wife and children are the legal owners of his assets.

It is essential that one needs to execute a will.
It is the ultimate source of truth and replaces the succession law.

Nominee can also be one of the legal heirs.

Important :
Mention the Full Name, Address, age, relationship to yourself of the nominee.
Do not write the nomination in favour of wife and children as a class.
Give their specific names and particulars existing at that moment.
If the nominee is a minor, appoint a person who is a major as an appointee giving his full name, age, address and relationship to the nominee.

Why is the concept of Nominee ?

So you might be wondering, if the nominee does not become the sole owner, why does such a concept of a nominee exist at all ?

It is pretty simple. When you die, you want to make sure that the Insurance company, Mutual fund or your Shares should at least get out of the companies and go to someone you trust, and who can further help, in process of passing it to your legal heirs.

Otherwise, if a person dies and has not nominated anyone, your legal heirs will have to go through the process of producing all kind of certificates like death certificates, proof of relation etc., not to mention that the whole process is really cumbersome! (For each legal entity! The insurance company, the mutual funds, for the shares, for the real estate..) .
So, to simplify, if a nominee exists, these hassles do not happen, since the company is bound to transfer all your money or assets to the nominee.
The company then goes out of scene & then, it is between nominee and legal heirs.

Example of Nomination :

Ajay was 58 years old who died recently in an accident. As his children were settled, he wanted to make sure that his wife is the sole owner of all the monetary assets. This includes his insurance policy and mutual funds. So during his lifetime, he nominated his wife as a nominee in his term insurance policy and mutual funds investments. However, after Ajay’s death things did not turn up the way he wanted. The reason being Ajay did not leave a will. Though his wife was the nominee in all his movable assets, as per the law, his wife, along with children, were the legal heirs and all of them had equal right to Ajay’s assets.

One simple step which could have saved the situation was that Ajay should have made a will which clearly stated that only his wife was entitled to get all the money and not his children.

Nomination in Life Insurance :

A policyholder can appoint multiple nominees and can also specify their shares in the policy proceeds. Nomination in life insurance has one limitation, as insurance policies are bought to secure your financial dependents, your first choice of nominee has to be your family members. In case you want to nominate a non-family member like a friend or third party, you will have to show/PROVE the insurance company that there is some insurable interest for the person. This happens because of a Clause called PRINCIPAL OF INSURABLE INTEREST in insurance. Note that provision of nomination in life insurance is related to Section 39 of the Insurance Act.

Note that as per LIC website –....

Nomination is a right conferred on the holder of a Policy of Life Assurance on his own life to appoint a person/s to receive policy moneys in the event of the policy becoming a claim by the assured’s death. The Nominee does not get any other benefit except to receive the policy moneys on the death of the Life Assured.
A nomination may be changed or cancelled by the life assured whenever he likes without the consent of the Nominee.

Make sure, you have a nominee for your policy for easy settlement of the claim, if you do not have any nominee mentioned in the policy, it can turn out to be a disaster for your dependents to get a claim.

Nomination in Mutual Funds :

In case of mutual funds, you can nominate up to three people, who can be registered at the time of purchasing the units. While filling in the application form, there is a provision to fill in the nomination details.

Even a minor can be a nominee, provided the guardian is specified in the nomination form.
You can also change nomination later by filling up a form which is available on the mutual fund company website.
Nomination in mutual funds is at folio level and all units in the folio will be transferred to the nominee(s). If an investor makes a further investment in the same folio, the nomination is applicable to the new units also.
A non-resident Indian can be a nominee, subject to the exchange control regulations in force from time to time.

Nomination in Shares :

Quiz for you...
Now you know what a Nominee means and who actually gets the money.
So if there is a husband H, with wife W and nephew N, and he has nominated his nephew N to be the nominee of his shares in demat account, who will have the legal right to own the shares after husband’s death ? If you answer is wife, you are wrong in this case!

In case of stocks, it does not work the usual way, if a will does not exist.

In the verdict, Justice Roshan Dalvi struck down a petition filed by Harsha Nitin Kokate, who was seeking permission to sell some shares held by her late husband.
The Court noted that as she was not the nominee, she had no ownership rights over the shares. Ms Kokate’s lawyer had argued that as she was the heir of her husband who had died intestate (without a will), she should have ownership rights of the shares, and be able to do anything with them as she wished.
In this case, Ms Kokate’s husband had nominated his nephew in favour of the shares. Justice Dalvi however noted that under the provisions of the Companies Act and the Depositories Act, Acts which govern the transfer of shares, the role of a nominee was different.

A reading of Section 109(A) of the Companies Act and 9.11 of the Depositories Act makes it abundantly clear that the intent of the nomination is to vest the property in the shares which includes the ownership rights there under in the nominee upon nomination validly made as per the procedure prescribed, as has been done in this case.

It means that if you have not written a will, anyone who has been nominated by you for your shares will be the ultimate owner of those stocks... The succession laws on inheritance will not be applicable... but, in case, you have made a will, that will be the source of truth.

Nomination in PPF :

Let me give you some shock first. If you have Rs 10 lakh in your public provident fund (PPF) account and you have not nominated anyone for your PPF account, your legal heirs will get maximum of Rs1 lakh only!
Yes, it is so important to have a nominee, now you get it .

You can nominate one or more persons as nominee in PPF. Form F can be used to change or cancel a nomination for PPF.
Also note that you cannot nominate anyone if you open an account for a minor.

Nomination in Saving/Current/FD/RD Account in Banks :

FD’s also come with nomination facility. While opening a new account, there is a column for nomination in the same form and you should fill it. You can nominate two persons with first and second option. Note that in case you have not done any nomination till now, you should request Form No DA-1 from your Bank which is used to assign a nominee in future. (Examples of ICICI Bank , HDFC Bank , Canara Bank) .
In the same way to change/cancel the nomination, you need to fill up Form no DA-2.

Read about Corporate Fixed Deposits :

As per a famous case, A Bench of Justices Aftab Alam and R M Lodha in an order said that the money lying deposited in the account of the original depositor should be distributed among the claimants in accordance with the Succession Act of the respective community and the nominee cannot claim any absolute right over it.
Section 45ZA(2)(Banking Regulation Act) merely put the nominee in the shoes of the depositor after his death and clothes him with the exclusive right to receive the money lying in the account. It gives him all the rights of the depositors so far as the depositors account is concerned. But, it by no stretch of imagination make the nominee the owner of the money lying in the account, the Bench observed.

CONCLUSION :

Now you know!
Taking Personal finance for granted can be fatal!!!!!

Just investing knowledge, is not enough to have a great financial life.
You also need to be well versed with basic legal aspects and make sure you carry out all due arrangement .

Nomination is one important aspect you should seriously consider, when checking for the financial products you have bought or plan to buy in future.

Mistakes in Personal Finance :

It’s important to make sure that your loved ones do not face legal issues and only say and think lovely thoughts about you when you are not around, rather than crib & grumble.

*Very Important message for all middle aged people*

2 years ago
Photos from DnS Legal's post

नमस्कार,
आता कोरोनामुळे उदभलेल्या संकटामुळे आपण सर्वजण अडचणीत आलेले आहोत, आणि अश्यातच MSEB ने जवळपास सर्वाना reading न घेता वाढीव वीज बिल दिलेले आहे, ते वाढीव वीजबिल कमी करण्यासाठी online तक्रार द्या किंव्हा MSEB ऑफिस ला जाऊन कमी करून आणा हे दोन पर्याय आहेत, त्यापैकी online तक्रारीचे निवारण होत नाही किव्हा झाली असे सांगून बिल आहे तेच ठेवतात.
दुसऱ्या प्रकारात line मध्ये उभे राहा, नंतर तेथील अधिकारी सांगतात की तुमचे average बिल आम्ही लावले, मागील महिन्यात तुम्हाला कमी लावले म्हणून या महिन्यात add केले आहे, अशी बिनबुडाची, कुठलाही आधार नसलेली उत्तर देतात, आणि बिल भरायला सांगतात. वाढीव बिल हे दर 2 ते 3 महिन्यात येत राहते आणि आपण MSEB ऑफिसात जात राहतो.

महाराष्ट्र विद्युत अधिनियम 2003 नुसार विज ग्राहकांना काही अधिकार देण्यात आलेले आहेत, जसे की,
जर आपण वेळेत बिल भरले नाही तर MSEB चे कर्मचारी हे घरी येऊन विद्युत पुरवठा खंडित करतात, परंतु हा विद्युत पुरवठा खंडित करण्याअगोदर काही तरतुदी हे महाराष्ट्र विद्युत अधिनियम 2003 मध्ये दिलेल्या आहेत.

चला तर त्या कोणत्या आहेत पाहुयात खालील जोडलेल्या परिपत्रकात....

आपण सर्वांनी ही माहिती आपल्या परिचयातील लोकांपर्यंत पोचवावी.

2 years ago

Consumer Protection Act, 2019 - Key Highlights

The new Consumer Protection bill was passed by the Parliament on 06 August 2019 when it was passed through a voice vote in the Rajya Sabha. The bill was earlier presented and passed in the Lok Sabha on 30 July 2019. This bill would replace Consumer Protection Act, 1986.

• Broadening the definition of “consumer”
The definition of “consumer” has been expanded to include persons who engage in offline or online transactions through electronic means or by tele-shopping or direct selling or multi-level marketing. In our transactions concluded in all media in any case covered by CPA 1986.
The definition now provides consumers with a remedy in case of multi-level marketing. Thus, the seller at each level of multi-level marketing can be exposed to liability under CPA 2019 and not restricted to only the manufacturer of the product but all entities involved at various stages of production and marketing.
When services are provided for free, the person availing the service will not be considered as a consumer. Whether or not the service being provided is free is a question of fact and will have to be evaluated on case to case basis.

Some of the Key Highlights of the New Act:

➢ Covers E-Commerce Transactions:
The New Act has widened the definition of ‘consumer’. The definition now includes any person who buys any goods, whether through offline or online transactions, electronic means, teleshopping, direct selling or multi-level marketing. The earlier Act did not specifically include e-commerce transactions, and this lacuna has been addressed by the New Act.

➢ Enhancement of Pecuniary Jurisdiction:
Revised pecuniary limits have been fixed under the New Act.
The National Consumer Disputes Redressal Commissions will hear complaints where the dispute value is worth more than Rs. 10 crores.
The State Consumer Disputes Redressal Commissions will hear complaints where the disputed value is more than Rs 1 crore but less than Rs 10 crore.
While the District Consumer Disputes Redressal Commissions will entertain complaints when the value of goods or service is up to Rs 1 crore.

➢ E-Filing of Complaints:
The New Act provides flexibility to the consumer to file complaints with the jurisdictional consumer forum located at the place of residence or work of the consumer. This is unlike the current practice of filing it at the place of purchase or where the seller has its registered office address. The New Act also contains enabling provisions for consumers to file complaints electronically and for hearing and/or examining parties through video-conferencing. This is aimed to provide procedural ease and reduce inconvenience and harassment for the consumers.
➢ Establishment of Central Consumer Protection Authority:
The New Act proposes the establishment of a regulatory authority known as the Central Consumer Protection Authority (CCPA), with wide powers of enforcement. The CCPA will have an investigation wing, headed by a Director-General, which may conduct inquiry or investigation into consumer law violations.
The CCPA has been granted wide powers to take suo-moto actions, recall products, order reimbursement of the price of goods/services, cancel licenses and file class action suits, if a consumer complaint affects more than 1 (one) individual.
➢ Product Liability & Penal Consequences:
The New Act has introduced the concept of product liability and brings within its scope, the product manufacturer, product service provider and product seller, for any claim for compensation. The term ‘product seller’ is defined to include a person who is involved in placing the product for a commercial purpose and as such would include e-commerce platforms as well. The defense that e-commerce platforms merely act as ‘platforms’ or ‘aggregators’ will not be accepted. There are increased liability risks for manufacturers as compared to product service providers and product sellers, considering that under the New Act, manufacturers will be liable in product liability action even where he proves that he was not negligent or fraudulent in making the express warranty of a product. Certain exceptions have been provided under the New Act from liability claims, such as, that the product seller will not be liable where the product has been misused, altered or modified.
• Product Liability
Who can be made liable:
CPA 2019 has gone a step forward and defined a product manufacturer, product seller and product service provider to provide clarity on who can be made liable for an action under Chapter VI of CPA 2019.
Ingredients to initiate product liability action:

1. Product manufacturer will be liable if product contains a manufacturing defect, or defective in design; or there is a deviation from manufacturing specifications; or does not conform to the express warranty; or fails to contain adequate instructions of correct usage to prevent any harm or any warning regarding improper or incorrect usage. Absence of negligence or fraud in making express warranty of a product cannot be pleaded as a defence.
2. Product seller who is not a product manufacturer may be held liable if (a) he has exercised substantial control over the designing, testing, manufacturing, packaging or labelling of a product that caused harm; or (b) he has altered or modified the product and such alteration or modification was the substantial factor in causing the harm; or (c) he has made an express warranty of a product independent of any express warranty made by a manufacturer and such product failed to conform to the express warranty made by the product seller which caused the harm; or (d) the product has been sold by him and the identity of product manufacturer of such product is not known, or if known, the service of notice or process or warrant cannot be effected on him or he is not subject to the law which is in force in India or the order, if any, passed or to be passed cannot be enforced against him; or (e) he failed to exercise reasonable care in assembling, inspecting or maintaining such product or he did not pass on the warnings or instructions of the product manufacturer regarding the dangers involved or proper usage of the product.

3. Product service provider may be liable if (a) the service provided was faulty or imperfect or deficient or inadequate in quality, nature or manner of performance which is required to be provided by or under any law for the time being in force, or pursuant to any contract or otherwise; or (b) there was an act of omission or commission or negligence or conscious withholding any information which caused harm; or (c) the service provider did not issue adequate instructions or warnings to prevent any harm; or (d) the service did not conform to express warranty or the terms and conditions of the contract.

CPA 2019 while defining a ‘product’ has specifically excluded human tissues, blood, blood products and organs. CPA 2019 also lists down certain exceptions to “product liability” action, in circumstances where the products have been misused, or if the product being purchased by the employer for use at the workplace did not adhere to installation warnings or instructions, or if the nature of the product is such that the user should have known the associated dangers, etc.

➢ Unfair Trade Practices:
The New Act introduces a specific broad definition of Unfair Trade Practices, which also includes sharing of personal information given by the consumer in confidence, unless such disclosure is made in accordance with the provisions of any other law.
Unfair Contracts & expansion of Unfair Trade Practices including the following, namely:—
1. requiring manifestly excessive security deposits to be given by a consumer for the performance of contractual obligations; or
2. imposing any penalty on the consumer, for the breach of contract thereof which is wholly disproportionate to the loss occurred due to such breach to the other party to the contract; or
3. refusing to accept early repayment of debts on payment of applicable penalty; or entitling a party to the contract to terminate such contract unilaterally, without reasonable cause; or
4. permitting or has the effect of permitting one party to assign the contract to the detriment of the other party who is a consumer, without his consent; or
5. imposing on the consumer any unreasonable charge, obligation or condition which puts such consumer to disadvantage.
The above provisions would directly impact the financial institutions such as banks, as the apex court has already stated that the Banks also get covered under the Act. This would specifically take into account contracts entered with banks, e-commerce platforms where parties are not left with any option but to agree to the standard terms to avail the services. With such a broad subjective definition, it remains to be seen how courts would interpret in case of online contracts.

2. Expanding definition of “unfair trade practice”

While CPA 1986 had listed six (6) types of unfair trade practices, three (3) types of additional unfair trade practices have now been added to the list which are as follows:

1. Failure or non-issuance of a bill or a cash memo;

2. Refusal to take back or withdraw defective goods or withdrawal or discontinuance of deficient services or refusal to refund the consideration amount paid within the period as stipulated in the bill or cash memo or receipt or in the absence of such stipulation, refusal to withdraw or refund goods or services within thirty (30) days; and
Before ascertaining whether it amounts to unfair trade practice, it become relevant to determine whether the goods or deficient services have been provided. The section as drafted in its current form pre-determines existence of defective product or deficient service. Separately, even if withdrawn or discontinued, companies could still be held liable under ‘product liability’ or for ‘deficiency of services’.

3. Disclosure of consumer’s personal information to any other person unless such disclosure is made in accordance with the provisions of any law for the time being in force or in public interest.
The provision fails to give any clarity whether information can be shared if consent is taken from the consumers. The reliance will have to be placed on prevalent data protection law. The current data protection law in India does not require any specific compliance for data sharing in case the information is not in the nature of sensitive information i.e. relating to (i) passwords; (ii) financial information; (iii) physical, physiological and mental health conditions; (iv) sexual orientation; (v) medical records and history; (vi) biometric information; (vii) any detail relating to the above, as provided to a body corporate for providing services; and (viii) any of the information received under the above by a body corporate, for processing or storing data under lawful contract, or otherwise.

➢ Penalties for Misleading Advertisement:

The cases of misleading advertisements are not new in the Indian landscape, however, now the manufacturers may have to go to jail or pay a heavy fine under the new guidelines. The authority will have the power to impose a penalty of up to Rs 10 lakh and imprisonment for up to two years for a false or misleading advertisement. Though there is no provision for jail for celebrities, they could be banned for endorsing products if it is found to be misleading.
In case of a subsequent offence, the fine may extend to INR 5,000,000 (Indian Rupees Five Million) and imprisonment of up to 5 (five) years. The CCPA can also prohibit the endorser of a misleading advertisement from endorsing that particular product or service for a period of up to 1 (one) year. For every subsequent offence, the period of prohibition may extend to 3 (three) years.
The New Act fixes liability on endorsers considering that there have been numerous instances in the recent past where consumers have fallen prey to unfair trade practices under the influence of celebrities acting as brand ambassadors. In such cases, it becomes important for the endorser to take the onus and exercise due diligence to verify the veracity of the claims made in the advertisement to refute liability claims.

➢ Provision for Alternate Dispute Resolution:
Alternate Dispute Resolution
The Act provides for mediation as an Alternate Dispute Resolution after admission of the Complaint or even at a later stage of the complaint proceedings in the District Commission. The Act provides for referral to Mediation within 5 days of receiving due consent of the parties to settle the matter through alternate means.
If the mediation proceedings fail to determine or resolve the issues between the parties, then the District Commission will be authorised to take up the complaint for its redressal as per the procedure prescribed in the Act.

A comparative chart of the substantive changes in the provisions of CPA 1986 and CPA 2019 are listed below:

2 years ago

*```CERTIFICATE UNDER SECTION 65B (4) OF THE EVIDENCE ACT ARE NOT NECESSARY BEFORE PRODUCING ELECTRONIC EVIDENCE IN COURT : SC```*

Clarifying the law on section 65 of the Evidence Act, a three-judge bench headed by justice Rohinton F Nariman said a certificate is not a must in each and every case before electronic evidence can be produced in a court of law.
- It is not mandatory to obtain a certificate every time before electronic evidence can be adduced in a court of Law

- It is held that no certificate required to produced electronic evidence such as disks, pen drives, etc.

- About such evidence being stored in a network or in a server that cannot be produced in a court, the bench said a certificate will be required in those cases.