Citizens' Issues
Observe Financial Hygiene
Make sure you get your nomination right

At any discussion about money and investments, people agitate about every 0.25% difference in interest rates. Yet, large chunks of money are lost to temptation (lured by dubious ponzi schemes, hot stock tips, or weak companies offering higher interest on fixed deposits). People agonise over saving enough for their families (parents/children) but don’t observe basic financial hygiene to ensure that their heirs and loved ones are protected and get access to their savings without hassles. The simple precaution of mentioning a nominee for your financial assets like fixed deposits, shares, debentures and apartments (in Maharashtra) will ensure that the assets don’t remain locked in litigation but go to your heirs or a person you trust. Unfortunately, people are notoriously lazy about filling out the nominee column; and even those who do, often, forget to update it, sometimes with disastrous consequences. 
 
Consider this. A man makes a Will when he is unmarried, leaving all his wealth to his only sister. He does not bother to change the Will after he is married and has children. Unfortunately, he dies in an accident. The sister stakes a claim to the Will. It leaves his widow high and dry. 
 
Here is another true story that is stranger than fiction. It was reported by the Bangalore Mirror on 21st April. Jayasheelan, a divorced male, died without leaving a Will. His mother was his immediate heir and entitled to inherit all his assets, but for a wicked twist. Jayasheelan, had named his wife as the nominee in his bank account, but failed to change it when he divorced her in 2006. There was a settlement of Rs10 lakh and his wife had remarried in 2007. The man had a hefty Rs1.44 crore in his account and died a few months after the divorce. His mother learnt of the nomination from the bank. The divorced wife wasn’t going to pass up the opportunity to get the money, so a legal battle ensued. Finally, nearly seven years later, the Bengaluru high court ruled in favour of the mother saying that the wife, who had remarried, could not claim succession. It is a landmark judgement that upholds the right of the legal heir over a nominee. If only the divorce lawyer had impressed on Jayasheelan about the need to get his financial documentation right and to check his nomination as part of the divorce clean up! 
 
If Jayasheelan were living in Maharashtra and his assets were dematerialised shares or debentures held in a depository account, the mother would have been a loser. A very curious Bombay High Court judgement has held that, under the Companies Act, the rights of the nominee are superior to that of a legal heir who inherits through a Will.  The answer is diligence!
 
At Moneylife Foundation’s financial safety workshops, we emphasise the need to make a Will and regularly update the nomination for bank accounts, insurance policies and flats. An annual ‘check-up’ of your finances is important, because there are too many horror stories about the consequences of ignoring basic financial hygiene or diligence. A nominee gets access to assets by simply producing a death certificate and identity proof, without the process of obtaining a succession certificate, probate and other hassles. 

User

COMMENTS

Bapoo Malcolm

3 years ago

Google has 2.28 crore searches for "nomination". Thst is a few lakh more over the last few months.

Until the terminolgy and its effects are settled, problrms will continue to occur. Suggest that since a new government is in place, and since a new broom sweeps clean, Moneylife should initiate a move to properly define the term.

The problem is mainly due to the fact that testators are in the habit of fooling people. This comes from personal experience. To please relatives of friends, they file nomination papers. This the relative can see. But behind their backs, the testator executes a will with a different person or set of persons as legatees. The will is then kept secret.

While my perosnal view is that the will is final and most sacrosanct, legislation to this or other view is necessary to avoid complications.

Moneylife should take up this initiative and also include the non-necessary insistance on probates where it can be avoided, e.g. in the case of company share transfers. Immovable assets like land and buildings, flats, apartments, must be transferred after the process of registration.

Bapoo M. Malcolm

Sudheer M

3 years ago

On the spot Ms.Sucheta Dalal. I feel the laws have been complicated and more confusing with complicated judgement criss-crossing the same.

Nomination rules should be made simple. My take is, Nomination should be the process of naming a person who can receive money on behalf of the deceased person and distribute the same according to the will or according to any of the laws in absence of the will.

If the law makers want nomination to be having superiority over the will, then make it in such a way for all transactions/assets rather than having some of them super-ceding and others not.

My dream would be that the process of recording a will also should be made simple and made in such a way that there is an authority by government where in one can create a will online and store the same.

REPLY

sivaraman anant narayan

In Reply to Sudheer M 3 years ago

Your second para comment is bang on and all legal interpretation should also be similar. Nomination only absolves the bank/hsg society etc from their responsibility. Ultimately will should supercede nomination as far as rights go and sooner or later the Bombay HC judgement is likely to be reversed. From a practical point of view everyone must match the nomination with their will, asset by asset.

CBI says rise in fraud due to failure of regulatory mechanism

Frauds are increasing due to collective failure of the regulatory oversight mechanisms like statutory auditors, independent directors, the board, the shareholders and other regulators, says CBI director Sinha

The Central Bureau of Investigation (CBI) has blamed 'collective failure' of regulatory oversight mechanism, including statutory auditors, for the rise in corporate frauds in recent years, involving about Rs29,000 crore.

 

India has witnessed a marked increase in the number of scams that have surfaced both in public and private sectors, said Ranjit Sinha, director of CBI.

 

He said, “The scale and size of corporate frauds in India has zoomed in the last 15 years with majority of the cases of fraud involving siphoning off funds by promoters, top management and defrauding the lenders or investors”.

 

He said commercial banks have reported around 1.69 lakh cases of frauds involving Rs29,910 crore as on 31 March 2013.

 

“The public sector banks have commutatively lost a massive sum of Rs22,743 crore due to cheating and forgery in the three years ending March 2013,” Sinha said, while addressing the eighth annual summit on corporate frauds organised by Assocham.

 

He said a short-term objective of good results instead of long-term sustainability and failure of corporate governance mechanism are leading to growing fraudulent practices.

 

“These frauds are also occurring due to collective failure of the regulatory oversight mechanisms like statutory auditors, independent directors, the board, the shareholders and other regulators. This is, where a lot of correction, is required,” said Sinha.

 

The CBI director also highlighted 'sharp rise' in the non-performing assets (NPAs) of commercial banks. “The gross NPAs of the public sector banks was Rs1.64 lakh crore in March 2013 comprising 3.6% of gross advances and are estimated to have grown further as on March 2014,” he added.

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CAG to continue auditing PPPs having revenue sharing pact

According to the CAG, industries vulnerable to abuses of capitalism based on rent seeking, include banking, mines, telecom spectrum, utilities, oil and gas and public infrastructure

Regretting that economic progress has thrown up a class of 'rent seekers', Comptroller and Auditor General (CAG) Shashi Kant Sharma on Tuesday said the CAG will continue to audit private companies and private public partnership (PPP) projects in cases, where revenue sharing with the government is involved.

 

Speaking at a conference on corporate fraud, he said, "Work on telecom audit is already in progress and I am hopeful that our first report would be ready before the year end. A report on gas and oil exploration will be presented to Parliament soon. We will be taking up performance audit of some ongoing PPP projects shortly".

 

Noting that CAG audit will not cause any discouragement to investors, Sharma said, "in a mature market economy, where there is very little scope for manipulations and fudging, why should companies fear such audit if they have nothing to hide."

 

Capitalism based on rent seeking, he said "is not just unfair, but also bad for long term growth. In such an environment, resources are mis-allocated, competition is repressed and dynamic new firms are stifled by better connected players".

 

Rent seeking refers to instances when a company or individual uses public resources to obtain economic gain from others without reciprocating any benefits back to society.

 

"Many of the corporate tycoons, throughout the emerging economies, are today accused of making fortunes by 'rent seeking'. They want to grab a bigger slice of the pie rather than making the pie bigger," he said, adding the industries vulnerable to such abuses include banking, mines, telecom spectrum, utilities, oil and gas and public infrastructure.

 

Although several private companies, specially in telecom, oil and power have resisted audit by CAG, the Supreme Court in its latest judgement had ruled that any entity using public resources in its business and sharing revenue with the government can be audited by the CAG. "Our stand has been the same since long," Sharma said.

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COMMENTS

Nagesh Kini

3 years ago

All, repeat all, each and every, PPP has necessarily to be subjected to CAG audit as corporates are known to subject diverse numbers.

Nagesh Kini

3 years ago

All, repeat all, each and every, PPP has necessarily to be subjected to CAG audit as corporates are known to subject diverse numbers.

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