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According to Black's Law Dictionary, "Nomination" and "Nominee" refer to people who have been put forward as candidates for a position or appointed to fill a position. A nominee is a person named to receive property or investments in the case of a deceased individual. A nominee need not be a relative or a legal heir.

When a person dies, their property is dispersed according to their Will; if there is no Will, succession rules take over. Distinct succession laws include varying categories for heirs and different distribution rules for who gets what. Until the family or dependents can prove their claim to the asset, the nominee holds it. However, if a Will provides differently, all of the nominations would be disregarded.

Types of Succession

Intestate succession and testamentary succession are the two different types in which successions occur in India.

Intestate succession: Intestate indicates that when a person passes away without leaving a Will, their assets are distributed to their family and loved ones in accordance with the deceased's religion's legal requirements. If the deceased was a Hindu, Hindu personal law would apply; similarly, if the deceased was a Muslim, Muslim personal law would apply; and if the deceased belonged to any other faith, the Indian Succession Act, 1925 would apply.

Testamentary succession: A person can dispose of property through a testamentary succession in accordance with his or her own wishes, and this disposition typically takes place after death. Two fundamental ideas form the foundation of testamentary succession. First and foremost, the testator must be able to make decisions and have some awareness of what he is doing. He should also not be pressured to accept others' opinions when creating a will. Every religion recognises testamentary succession, and the Will may be used to transfer anything the testator owns, such as real estate, stock, or other assets, to the intestate. The Indian Succession Act contains rules of testamentary succession that are also prescribed on the basis of religion.

Rationale Behind Nomination

Nomination is primarily a temporary solution to ensure that property has an owner while succession issues are being resolved. Nomination serves merely as a tool, not as a goal. If nomination is not made, it may be difficult for legal heirs to establish their claim. All assets and investments, including mutual funds and insurance, will stay with the respective businesses until that time. The purpose of having a nominee, however, is to appoint someone who, in the event of death, will take control of the assets and distribute them to the lawful heirs.

When, for instance, payment of monies is required from a closed bank account of any deceased individual, a nomination eliminates several problems and processes. If the bank pays the nominee, it receives a fully legitimate discharge of liability if there is a nomination in the account. The other successors will receive their share, if any, from the nominee and will not be able to take legal action against the bank as a result of succession regulations. To avoid issues and legal challenges that may arise when there are several claimants to a financial asset, people are encouraged to make nominations in financial assets, and they are doing so at an increasing rate.

Legal Heir v Nominee

In India, there has been much discussion on the nominee's legal standing for a very long time. Numerous situations occur where a person names a nominee, such as when buying an insurance policy, shares, or when opening a fixed deposit with a bank.

It is unclear from the aforementioned examples whether nomination should take precedence over testamentary or non-testamentary succession, or the other way around. A person should always make sure that their will is in line with their nominations or expressly overrides nominations in order to prevent the primary goal of their nomination for a given subject matter from being defeated and to enable a seamless transfer of assets and riches to the heirs. By doing this, any potential disputes between the beneficiaries and the legal heirs will be avoided.

Indrani Wahi v. Registrar of Cooperative Societies & Ors, decided in March 2016, the Hon'ble Supreme Court ruled that a cooperative society could not contest the transfer of property to the candidate if she was a close relative of the dead. According to the cooperative society's records, the nominee of a deceased member is entitled to ownership through transfer provided she is a relative of the deceased and made the nomination in her name. The cooperative society cannot contest the candidate's claim.