Beneficial Nominee Is Not A Owner

Implications for Housing Societies

In a recent landmark judgment (Kusum v. Anand Kumar, 2025 AHC LKO 24631), the Allahabad High Court clarified a crucial principle in succession law:

A nominee under an insurance policy is merely a custodian of the proceeds and not the ultimate legal owner unless proven to be the rightful heir.

This decision has broader implications, especially for the real estate and cooperative housing sector. The ruling draws attention to the often-misunderstood status of nominees, especially Provisional Members in housing societies.

Nominee ≠ Owner: The Legal Parallel in Housing Societies

Much like insurance nominees, Provisional Members in a Co-operative Housing Society are not the legal owners of a deceased member’s property. Their nomination is merely administrative, intended to ensure continuity in society affairs—not ownership transfer.

Key Legal Observations:

No Ownership Rights: A nominee is not a substitute for lawful succession under the Indian Succession Act or Hindu Succession Act.
No Right to Sell or Sublet: Provisional Members cannot legally sell, transfer, or rent the property without the explicit consent and proper legal documentation from all legal heirs.

Responsibility of Managing Committees

It is alarming that some Managing Committees (MCs) continue to issue No Objection Certificates (NOCs) to provisional members, facilitating illegal sales or subletting of properties.

🔴 Issuing NOCs without verifying legal ownership can expose MCs to criminal charges and financial liability.

Legal Heirs Can:

Challenge such transactions in court.
Demand compensation from the MC for any financial losses.
Seek cancellation of such fraudulent transfers.

Maharashtra Government's Draft MCS Rule Notification (15 April 2025)

In a proactive move, the Government of Maharashtra issued a Draft Amendment to MCS Rules, reinforcing legal safeguards.

Rule 106 C - 6 - g (Page 8):

Prohibits Managing Committees from printing or endorsing the names of Provisional Members on Share Certificates.

This reform aims to:

Prevent fraudulent transactions based on nominee status.
Protect the rights of legal heirs (beneficiaries).

Ensure stamp duty and registration compliance, which often gets evaded in nominee-based transfers.

Legal Advisory to Buyers

Avoid buying flats or property from Provisional Members, regardless of price advantage or seller assurances. Such purchases can:

Be declared null and void.
Lead to protracted litigation.
Result in loss of money and ownership rights.

This judgment from the Allahabad High Court serves as a timely reminder that nomination does not override succession law. In housing societies, Managing Committees must act within the legal framework, and buyers must exercise due diligence.

The move by Maharashtra to clarify rules through its draft MCS amendment is commendable and crucial in curbing property misuse, protecting beneficiaries, and promoting legal transparency.

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