The Supreme Court Just Confirmed Your Nominee Owns Nothing: What the Shakti Yezdani Ruling Means for an NRI's Indian Estate

A reader in Toronto called me last spring convinced the matter was settled. His father had passed away in Pune, the NRO savings account and a demat full of blue-chip shares both named him as the sole nominee, the bank had released the balance, and the depository had transmitted the shares into his name. As far as he was concerned, he had inherited everything. Then his sister in Sydney, named nowhere on any account, sent a legal notice claiming her half. He thought she had no case. She had a very good one. Under Indian law he was never the owner of a single rupee or a single share; he was a trustee holding it for both of them, and the Supreme Court had said so in as many words barely a year earlier.

The 30-second answer: The Supreme Court in Shakti Yezdani v. Jayanand Jayant Salgaonkar (2023 INSC 1076, decided 14 December 2023) confirmed that a nominee on a bank account, demat account, shares or mutual fund is only a trustee or custodian, not the owner. The nominee receives the asset so the institution gets a clean discharge, but the asset still forms part of the deceased's estate and passes by the will, or by intestate succession law if there is no will. Nomination under Section 45ZA of the Banking Regulation Act, Section 72 of the Companies Act 2013 and the Depositories Act does not create a third mode of succession and does not override a will. For NRIs with heirs spread across countries, this makes a valid Indian will, aligned with your nominations, the difference between a clean transfer and years of cross-border litigation.

This guide assumes you already know what an NRO or demat account is and how repatriation works; if not, read the NRE, NRO and FCNR guide first. What follows is the part that decides who actually ends up owning your Indian wealth: what the court actually held and the long confusion it ended, why the trustee rule lands harder on NRIs than on resident families, and the concrete, two-part estate-planning fix that takes an afternoon and saves your heirs years.

What the court actually held, in plain terms

For decades two camps argued past each other. One read the nomination statutes literally: the share or deposit "shall vest" in the nominee on death, the wording is mandatory, so the nominee becomes the owner. The other read those same statutes as nothing more than a discharge mechanism, a way for the bank or company to pay one named person and be done with it, leaving the question of ownership to succession law. The Bombay High Court itself had split, with one single-judge decision (Kokate) saying the nominee owns the shares and a later full bench (the Salgaonkar litigation) saying the opposite.

The Supreme Court ended it on 14 December 2023. In Shakti Yezdani v. Jayanand Jayant Salgaonkar, the nominees of a deceased man's mutual funds and fixed deposits argued that nomination under Section 109A of the Companies Act 1956 (now Section 72 of the 2013 Act) and the Depositories Act 1996 gave them full and exclusive ownership, overriding the man's registered will. The court rejected this cleanly. It held that nomination confers only limited and temporary rights, that the nominee assumes the role of an agent or trustee upon vesting, and that this vesting does not create a third mode of succession standing above the Indian Succession Act 1925. A will supersedes a nomination. The asset belongs to the estate and devolves by the will, or by intestacy where there is none.

The reasoning matters because it tells you the limit of what a nomination ever does. A nomination answers one question only: to whom does the institution hand the asset so it can close the file? It never answers the second question: who is entitled to keep it? That second question has always belonged to succession law, and now there is no ambiguity left to exploit.

This was not a sudden reversal. The principle traces back to Sarbati Devi v. Usha Devi (1984), where the court held that an insurance nominee under Section 39 of the Insurance Act is merely an authorised receiver of the policy money, not its owner, and the money forms part of the deceased's estate. On bank accounts, the courts have read Section 45ZA(2) of the Banking Regulation Act the same way: the nominee gets every right of the depositor as against the bank, but "by no stretch of imagination" does that make the nominee the owner; the RBI's own master direction has long described the nominee as receiving the money "as trustee of the legal heirs". The one genuine wobble came in Aruna Oswal v. Pankaj Oswal (2020), where a two-judge bench, declining to decide a company-law dispute, made observations suggesting the nominee's vesting was absolute. That stray line is what kept the debate alive and what Shakti Yezdani has now firmly closed.

The two questions every NRI confuses, and why it costs you

Almost every NRI I speak to collapses two separate ideas into one. The first is who receives the asset. The second is who owns it. The nomination governs the first. Succession law governs the second. They are different decisions with different documents, and the entire problem comes from treating the nominee form as if it were a will.

Here is the trap in concrete terms. You fill in a nominee on your NRO account and your demat because the bank insists and SEBI now makes it effectively mandatory. You tick the box, name your spouse or your eldest child, and feel you have "done your estate planning". You have not. You have only chosen who collects the money at the counter. If your actual intention, that the wealth be split among three children, lives nowhere except your head, then on your death the nominee collects everything and is legally a trustee for heirs who may not even know what they are owed. The nominee can refuse to share, the heirs can sue, and the courts will side with the heirs because that is exactly what Shakti Yezdani held.

Put real names on it. Suppose Anil, a US-based NRI, holds Rs 80,00,000 across an NRO fixed deposit and an equity mutual fund portfolio, and he has named only his elder son Rohit as nominee on both. Anil dies without a will. He is Hindu, so the Hindu Succession Act 1956 applies, and his Class I heirs, his widow and his two sons, take equal shares: Rs 26,66,667 each. Rohit, as nominee, receives the full Rs 80,00,000 from the bank and fund house. But he owns only his one-third. He is holding Rs 53,33,334 in trust for his mother and his brother. If he treats it as his own, he is converting trust property, and either of the other two can sue to recover their share, with the 2023 ruling squarely on their side.

Now the counterfactual that shows what planning buys. Had Anil written a one-page will leaving the entire Rs 80,00,000 to Rohit, and kept the nomination consistent, Rohit would own all of it outright, the widow and second son would have no claim, and there would be nothing to litigate. The money does not change. What changes is whether ownership is documented or left to a default rule that may be the opposite of what Anil wanted. The nomination alone gave Rohit possession and a lawsuit. The will plus the nomination would have given him ownership and peace.

Why this hits NRIs harder than resident families

A resident family in this situation has it bad enough. An NRI family has it worse, for reasons that compound.

The heirs are abroad, and often not in the same country. When the asset sits in India and the entitled heirs are in London, Dubai and Vancouver, the trustee problem becomes a logistics nightmare. The nominee who collected the funds may be in one country, the co-heirs in three others, and resolving who owns what now requires foreign affidavits, apostilled documents, powers of attorney executed before a notary or Indian consulate abroad, and coordination across time zones. A dispute that a resident family settles over a weekend in Pune can take an NRI family two years and a lawyer in each jurisdiction.

The default succession law is Indian, not the law where the family lives. This is the point NRIs most consistently get wrong. An NRI's domicile of origin is typically India, and immovable property and accounts in India devolve under Indian succession law regardless of where the person lived or died. A man settled in Canada for twenty years still passes his NRO balance and Indian shares under the Hindu Succession Act (if Hindu) or the Indian Succession Act (if the family is Christian or Parsi, or for the secular provisions), not under Ontario law. The family assumes the rules of their adopted country apply to the Indian assets. They do not. So intestacy produces an outcome the family never anticipated, dividing assets among Class I heirs by a formula no one in Toronto has read.

Repatriation rides on top of all this. Even once ownership is sorted, moving an inherited NRO balance abroad runs into the USD 1 million per financial year remittance limit and requires Form 15CA and 15CB with a chartered accountant's certificate. If three heirs each need their share remitted to three countries, each remittance is its own compliance exercise. Get the ownership wrong first, and you cannot even start this process cleanly, because the bank will not remit contested funds.

And the nominations themselves are now unavoidable. Under SEBI's framework, effective in stages from October 2023 and tightened by the circular dated 10 January 2025, every demat account and mutual fund folio must either carry a nominee or a signed opt-out, and you may now name up to ten nominees with specified percentages. NRIs scrambling to meet these deadlines have been adding nominees in bulk without a will behind them, which is precisely the configuration that produces the trustee trap. The nomination is mandatory; the will that makes it meaningful is not, so people do the first and skip the second.

Consider Priya, a UK-based NRI and the only daughter of a Hindu widower in Bengaluru who dies intestate. He left an NRO account, a demat account and two mutual fund folios totalling Rs 1,20,00,000, with Priya as sole nominee on all of them, plus a self-occupied flat with no nominee at all (property has no nomination facility of the kind accounts do). Priya assumes she inherits the lot. On the financial assets she is in fact the sole Class I heir as well, so here the nominee and the heir coincide and she does own them, but she still needs a legal heir certificate or succession certificate to satisfy the bank and depository, because they transmit to the nominee but record ownership against proof of heirship. On the flat, with no will and no nomination, she needs a full succession process before she can sell or repatriate. Had her father left a will naming her, every one of these assets would have transferred on a death certificate and a copy of the will, the flat included, and Priya would have skipped months of certificate-chasing from another country. The intestacy did not change who inherited; it changed how long and how expensively she had to prove it.

The bank, demat and mutual fund rules are not identical, so know which applies

The trustee principle is now uniform across asset classes, but the mechanics of getting the asset out differ, and NRIs deal with all three at once.

On bank accounts, including NRO and NRE, nomination operates under Section 45ZA of the Banking Regulation Act. The nominee receives the balance, gives the bank a valid discharge, and holds it in trust for the heirs. Joint accounts behave differently: a survivor on an "either or survivor" NRO account takes the operating right immediately, though again as against the bank, not as a determination of ownership.

On shares and demat holdings, nomination runs through Section 72 of the Companies Act 2013 and the Depositories Act 1996. This is the exact territory Shakti Yezdani decided. The depository transmits the shares to the nominee on a death certificate and KYC, and under the 2025 SEBI simplification it can no longer demand notarised affidavits, indemnities or undertakings for transmission to a nominee. But transmission is not ownership; the nominee still holds for the estate.

On mutual funds, the same logic applies through the registrar and transfer agent, and the 2023-2025 SEBI nomination rules cover folios alongside demat accounts.

The practical NRI takeaway is that easier transmission is not the same as settled ownership. SEBI made it faster for the nominee to receive the asset. It did nothing to change who owns it. So the smoother transmission process can actually deepen the trap: the nominee gets the money quickly, spends or repatriates it, and only later discovers the co-heirs were always entitled to a share. The speed is on the receiving side; the ownership question is untouched and now firmly governed by the will or intestacy.

The fix is two documents that have to agree with each other

The solution is not complicated, and it is not the same as "add nominees", which most NRIs have already done to their detriment. It is two things done together.

First, write a valid will covering your Indian assets. For an NRI, the cleanest approach is usually a separate India-specific will dealing only with the Indian estate (the NRO and NRE balances, demat, mutual funds, property and any FCNR deposits), kept distinct from a will governing assets in your country of residence, so that probate in one country does not stall the other. An Indian will needs to be signed by the testator and attested by two witnesses under the Indian Succession Act; it does not require registration or stamping to be valid, though registration adds an evidentiary edge. Name an executor, ideally someone in India or willing to act there, because an executor stuck abroad slows everything down.

Second, align every nomination with the will. The nominee on each account should be the same person who inherits that asset under the will. When the nominee and the beneficiary are the same, the trustee question never arises: the nominee receives the asset and is also entitled to keep it, so there is nothing to hold in trust and no co-heir with a claim. Where the will splits an asset among several people, name those people as co-nominees in the same proportions now that SEBI allows up to ten nominees with percentages. The principle is simple: the nomination decides who collects, the will decides who keeps, and they must name the same people in the same shares.

Put numbers on why alignment beats nomination alone. Take Vikram, a Dubai-based NRI, with Rs 1,50,00,000 in Indian financial assets and three children he wants treated equally. If he merely nominates one child on each account and dies intestate, that child collects everything and holds two-thirds, Rs 1,00,00,000, in trust, and the other two must demand and possibly sue for their Rs 50,00,000 each. If instead he writes a will leaving one-third to each child and names all three as co-nominees at 33.33% on every account, then on his death each child receives and owns exactly Rs 50,00,000, the institution transmits directly in those proportions, and no one holds anything in trust for anyone. Same money, same intended split. One version ends in a trustee dispute across three emirates and India; the other ends at the bank counter. The cost of the better version is one afternoon and a modest will-drafting fee.

Edge cases

Insurance is the one carve-out, and even it is narrow. A 2015 amendment to the Insurance Act created the concept of a "beneficial nominee": where the policyholder nominates a parent, spouse or child, that nominee is treated as beneficially entitled, not a mere trustee. This is the genuine exception to the Sarbati Devi line, but it applies only to life insurance and only to those close relatives. It does not extend to bank accounts, shares, demat or mutual funds, where the trustee rule from Shakti Yezdani governs in full. Do not let an insurance agent's "the nominee gets it absolutely" pitch lull you into thinking the same is true of your demat account. It is not.

A nomination made after the will can still be overridden. The order in time does not matter. Even where a nomination form (as in the Aruna Oswal facts) declared it would supersede any prior testamentary document, the Supreme Court's settled position is that nomination cannot defeat succession. A will, whenever made, controls ownership. So you cannot "update" your estate plan by changing a nomination; you update it by changing the will and then realigning the nominations to match.

No will plus religion-specific intestacy can surprise non-Hindu NRIs especially. Intestate succession in India is religion-specific. A Hindu, Sikh, Jain or Buddhist NRI's estate follows the Hindu Succession Act; a Christian or Parsi NRI follows the Indian Succession Act's intestacy rules, which divide between spouse and children differently; Muslim NRIs follow personal law with fixed shares. An NRI assuming "my spouse gets everything" can be wrong under all of these, because children are usually co-heirs. This is another reason the will matters: it lets you override a default that may not reflect your wishes at all.

Property has no account-style nomination, so the will is the only tool. Real estate in India does not have a nominee facility comparable to bank or demat accounts; a society "nominee" only gets management rights, not ownership. For Indian property, a will (or intestate succession) is the sole route to ownership. If your Indian wealth includes a flat, the will is not optional. See selling inherited property as an NRI for what the heirs face on a later sale.

The closing read

The honest read is that the law here is now as clear as it has ever been, and it is not on the side of the casual planner. A nominee is a postman, not a legatee. The Supreme Court has said it twice over, in 1984 on insurance and decisively in December 2023 on shares and funds, and SEBI's mandatory-nomination push has quietly multiplied the number of NRIs who have done the easy half (named a nominee) and skipped the half that actually decides ownership (written a will). If you take one thing from this, take this: the nomination you filled in to satisfy your bank or broker does almost nothing to control where your Indian wealth ends up.

So for the vast majority of NRIs, the recommendation is concrete and the same: write a short India-specific will, attested by two witnesses, naming an executor who can act in India, and then go through every NRO, NRE, FCNR, demat and mutual fund account and make the nominees match the will, person for person and share for share. That alignment is the whole game. It converts a trustee dispute waiting to happen into a transfer that completes on a death certificate. The exception, the person who genuinely needs more than a template, is the NRI with assets in several countries, a blended family, a business interest, or heirs across multiple legal systems; that is the point to pay an estate lawyer who works across both jurisdictions, not to rely on a blog, this one included. But do not let complexity in the hard cases become an excuse for inaction in the simple ones. Most Indian estates are simple. Most NRI families fight anyway, because no one wrote the will.

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This guide is educational and general in nature. It is not individual legal or tax advice. Succession outcomes depend on your religion, domicile, the assets involved and whether you leave a valid will, and the rules cited here, including the Shakti Yezdani ruling of 14 December 2023 and SEBI's nomination circulars, may be applied differently to your facts, so confirm your specific position with a qualified estate lawyer and chartered accountant before acting.