Rights of the nominee vis-à-vis legal heirs

Bankers are always found in a difficult position in managing deceased accounts because they are in a great dilemma as to whether they should follow section 103 of the Bank Company Act to pay the money to the nominee or abide by the succession order issued by the court to pay the successor(s). According to Section 103 (3) of the Bank Companies Act, 1991, the nominee shall get priority over any person and all other persons shall be deprived of such property upon the death of the depositor or account-holder. Therefore, this legal provision takes precedence over any other law (e.g. law of inheritance).

A nominee is a person whose name is endorsed by the account holder in the application of account, wherein the nominee's right to his/her deposits is unequivocally stipulated. By including the nominee in the account application, the account holder expresses an absolute intent of the payment of the money after his/her death to the person nominated. The successors are defined in the family of each person according to their religious faith. The Muslim Personal Law (Shariat) Application Act of 1937 is the regulating law of successor for the Muslims.

There are some laws and rules defining the nominee and their rights over the money of the deceased. The Wage Earner Development Bond Rules, 1981 Section 2(5) has defined the word nominee. ‘Nominee’ means the person named by the purchaser of the Bond to receive the amount(s) due against the Bond in the event of the death of the holder of the Bond and to receive the death risk-benefit in the event of the death of the wage-earner who purchases the Bond(s). When the nominee dies before the death of the Bond holder, the heirs of the deceased Bond holder shall be entitled to the interest and the maturity value of the Bond (Section 10).

Under the notification of Sanchayapatra Rules, 1977 (Amended on June 30, 2015), a nominee included an individual and/or legal or juristic person and maybe one or more. Thus, by the above provisions, the law has given the absolute right of the nominee over the deposited money against the successors or heirs. Section 8 of the Pensioner Policy, 2004 and Section 10 of the Family Savings Policy also elaborated about the nomination, nominee and their rights.

Section 57 of the Insurance Act 2010, provides that the nomination may be incorporated in the text of the policy by the insurer to receive the money in the event of the death of the insured before the maturity of the policy. The nomination can be made to one or more persons. Even a minor may be made a nominee and in this case, a person shall be appointed to receive the money in case of the death of the insured during the minority of the nominee. If a nominee is not made in the above process, it can be made by an endorsement of the Policy.

The Insurance Act is silent over the rights of the heirs. The position of the legal heirs has not been made clear; whether the legal heir will be excluded by the nominee or not. If a nominee gets an exclusive right over the property, it will be completely in contradiction with the Muslim personal law. Therefore, the above circumstantial situation becomes a complex and ambiguous concept regarding the law of nomination.

The Co-operative Societies Act, 2001 does not define the word “nominee” and “legal heir”. The act only deals with the nomination of a receiver. The law has denied the rights of the legal heirs (Section 40) on the shares of the societies. It provides all the rights and liabilities in the shares to the person nominated. The Act has conferred an exclusive right on the nominee to receive the shares as well as the liabilities in case of the death of the members. This has created a conflicting situation with other laws relating to a nominee in Bangladesh.

The government Savings Bank Act, 1873 applicable for nomination for savings instruments has given the right to the nominee (Section 4 A) to receive money against the savings instrument of the deceased person. The heirs will get the money in case there is no nominee authorised by the savings certificate holder (section 5-C).

There is a decision of the High Court Division of the Supreme Court of Bangladesh related to the issue. On April 3, 2016, the High Court delivered a landmark decision in establishing the right of the legal heirs over the deposited or invested money against the nominees. According to the decision of the High Court, the nominee would merely hold the money as a trustee and thus must distribute the money among the legal heirs of the deceased. The judgment of the High Court was subsequently been stayed by the Appellate Division.

Subsequently, in 2019, the High Court Division delivered the full judgment, which stated that only nominees are authorized to withdraw money from bank accounts of deceased persons and distribute it amongst the legal heirs as per the basis of the respective religious laws of inheritance. The case is reportedly pending with the Appellate Division of the Supreme Court for the final decision.

Bangladesh may consider a reference case in Pakistan. The Pakistani Supreme Court in Amtul Habi vs 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.”

The supervisory body of the banks, Bangladesh Bank (BB) has issued an instruction BRDB circular no 6 dated 19 April 2017 to all commercial banks advising them to follow the Bank Company Act 1991 and amendment thereof up to 2013 while making payments of depositors' money after his/her death. In fact, with this instruction Bangladesh Bank has unequivocally advised commercial banks to pay depositor's money to the nominee when the depositor dies.

The decision of the High Court is a law of the land after the final decision from the Supreme Court in due course. Moreover, there is no clear or superseding clause in any law which clearly states which one will prevail when a conflicting situation arises.

In this situation, different banks are following different processes of releasing the money of a deceased person. The nominees and legal heirs are thereby facing numerous problems due to the prevailing confusing practices by different banks.

The laws dealing with a nomination should be very clear, sufficient and exhaustive but the existing laws relating to nomination in Bangladesh, such as the Insurance Act, 2010; The Government Savings Bank Act, 1873; the Co-Operative Societies Act, 2001, are not exhaustive because they do not cover all the aspects of the law of nomination.

The existing laws in Bangladesh as mentioned above have not given any definition of the term “nominee” which is highly necessary to understand the concept of a nominee. Some of the Acts have mentioned that if a depositor dies without making any nomination the payment will be delivered according to the rule of the Succession Certificate under the Succession Act, 1925.

To avoid such confusion and contradiction of law and rule related to the money of the deceased person, Bangladesh needs a law with provisions of (1) An acceptable and clear definition of a nominee, (2) Mention the persons who become nominees, (3) Qualification and disqualification of a nominee, (4) Power and function of a nominee will have to be mentioned, (5) Grounds for the cancellation of a nomination. (6) Who will be entitled to the deposited money if the depositor dies without designating a nominee, should be mentioned.

Currently, the banks may follow the rule of Bangladesh Bank and the principle of the judgment of the High Court Division that the nominee is entitled to the money of the deceased person and pay to the nominee at the first instance to complete their responsibility. Subsequently, the nominee will be treated as a custodian in case of a succession certificate given by the court and distribute the amount accordingly.

The writer is Non-Government Adviser, Bangladesh Competition Commission. He can be contacted at [email protected]