Nominee or Legal Heir: Who Gets The Cooperative Housing Society Flat?

Death is certain and so are the testamentary formalities after death. The Bombay High Court spelled out the legal provisions of a nominee and a legal heir in the matter between the sole nominee/legal heir who claimed a 100% ownership share in a flat in Mumbai and the other two legal heirs of the deceased.

A very interesting case where the deceased (for simplicity's sake let’s name him “MK”) was the owner of a flat in a cooperative housing society in Mumbai. During his lifetime, MK had registered a nomination in his grandson's name (“VK”). The entry of nomination was recorded in the society register. The owner MK died intestate (without a will) leaving behind his two sons (“RK and KK”) and grandson VK whose father was the predeceased son of owner MK. 

The son RK took a no objection cum declaration from his brother KK after their father MK’s demise, and in this way, he claimed a 2/3rd share and interest in the flat and sought transfer of a proportionate interest in the flat and claimed of the housing society. His application was rejected by the society based on the Hon’ble Apex Court judgement in the case of Indrani Wahi Vs. Registrar of Cooperative Societies (Civil Appeal 4930/2006) held that the Cooperative Society is bound by a valid nomination; however, it does not mean that nominee becomes the property owner, but that he holds the property in trust for the legal heirs.

 

Now, let’s look at the provisions of the applicable law- Maharashtra Cooperative Societies (Amendment )Act, 2019 (MCS Amendment Act) duly considered by the Bombay High Court in the case at hand, Karan Vishnu Khandelwal v. Honourable Chairman/Secretary Vaikunth (Andheri) Co-operative Housing Society Ltd. & Ors (Writ Petition No. 12468 of 2022 dated 10 November 2022). Section 154-13 of Chapter XXIII-B which came into effect on 9th March 2019 is plain and easy and as such needs no interpretation.

The Court directed the Society to transfer the flat to the grandson VK in his capacity as nominee and admit him as a provisional member till the time RK was able to obtain a succession certificate or legal heirship certificate or testamentary document, as the case may be. A nominee is a trustee who cannot acquire ownership rights in a cooperative housing society flat by nomination.

Every Cheque Bounce Is Not A Section 138 Matter!

 Ms Money: Cheque bounced?

Mr Banker: Madam, you can seek help by filing a suit under Section 138…

It is a widely accepted norm in India that if a cheque is dishonoured then the person can get relief through legal court proceedings under Section 138 of the Negotiable Instruments Act, 1881. As easy as it may sound, Section 138 is not a ‘Brahmāstra’ for all cheque bounce cases.

In the present case, the Bombay High Court did not provide relief in the cheque dishonour case. The judgement specifically states that “No doubt cheque is a negotiable instrument which is transferable and negotiable; the presumption under Section 138 of the Negotiable Instrument Act can be drawn only when the pre-conditions are satisfied. The complainant unilaterally put dates on the cheques without the authority of the accused and even by not informing him. So, it amounts to material alterations. If it is so such negotiable instrument becomes void".

The complainant is one of the partners in a partnership firm (“the financier”) who is the appellant. In 2003, the financier gave a loan of Rs. 1 crore to the accused (“the developer”) so that he could pay the consideration to the owner of the property.  A Memorandum of Understanding (MoU) for repayment was entered between the two parties, wherein the developer had issued two cheques which were not complete in all respect (i.e. the cheques did not mention the name of the payee and were undated). The developer could not complete the construction of the building in time and by way of a civil suit has prayed for an extension of time for recovery of the amount by the financier based on the MoU. The two cheques were deposited by the financier in 2007, after filing the Civil Suit the developer against the financier, which was returned unpaid. Hence, the financier filed two complaints in the trial court which acquitted the developer. The conclusion drawn by the trial court is when the suit was pending how the developer can give authority to the financier to put the name of the payee and the date on the cheques. Hence the present appeals.

The High Court considered the reasoning given by the trial Court for concluding the acquittal. The material question was whether the financier was justified in putting the name of the payee and the date on the cheques.

The court observed that putting the name of the payee cannot be held to be objectionable for the reason that they were handed over to the financier only.

For putting the date on the cheques the court referred to section 87 of the Negotiable Instruments Act which authorizes alteration in two contingencies: -

(a) If it is with the consent of the parties.

(b) Even if the party does not give consent if the alterations are done to carry out the common intention of the parties.

The court noted that neither of these contingencies exists to authorize the financier to put in dates on the cheques. The financier has not stated that those dates were put in as instructed by the developer. The circumstances suggest that there was a dispute filed in Civil Court by the developer for extension of the time and has not consented to the financier to deposit those cheques. The financier unilaterally put in dates on the cheques without the authority of the developer and even by not informing him. So, it amounts to material alterations which render such a negotiable instrument void. Hence prosecution under Section 138 of the Negotiable Instrument Act cannot be initiated in the case of M/s. Pinak Bharat and Company v. Anil Ramrao Naik (Criminal Appeal Nos. 1630 and 1631 of 2011, Bombay High Court)

Outraging Woman’s Modesty –Equality in Gender

 A woman can outrage the modesty of another woman! Yes, you read it right. The judgement by  Mumbai Metropolitan Magistrate MV Chavhan that the offence of outraging a woman’s modesty under Section 354 of the Indian Penal Code (IPC) can be committed either by a man or woman, is a significant shift in the paradigm.

Section 354 in The Indian Penal Code 354.  Assault or criminal force to woman with intent to outrage her modesty —Whoever assaults or uses criminal force to any woman, intending to outrage or knowing it to be likely that he will thereby outrage her modesty, shall be punished with impris­onment of either description for a term which may extend to two years, or with fine, or with both.

To the point of law, it is not the act of outraging the modesty that is made an offence under this section. To constitute an offence, there must be an assault or use of criminal force on any woman with the intention or knowledge that the woman's modesty will be outraged. It is pertinent to note that the offence under section 354 IPC is not a sexual offence, rather it falls under the Chapter Criminal Force and Assault. The offence can be committed by any man or woman with the necessary intent. A woman can assault or use criminal force on any other woman as equally and effectively as any man; and the intention or knowledge that the modesty of the woman assaulted or against whom criminal force has been used will be outraged, is of a kind which a woman on account of inherent differences from man is capable of having. The pronoun 'he' used in Section 354 of IPC 'that he will thereby outrage her modesty' must therefore be taken under section 8 of the Indian Penal Code as a male or a female. It is thus clear that under section 354 IPC, a man, as well as a woman, can be held guilty of the offence of assaulting or using criminal force on any woman with the intention or knowledge that the woman's modesty will be outraged and be punished for the offence.  

Section   354   IPC,   therefore,   operates equality upon all persons whether males or females and it cannot be maintained that women are exempted from any punishment under this section.  This is because gender equality as enshrined in the Indian Constitution implies that the duties, opportunities and rights are valued, and considered justly for men or women.

State of Maharashtra vs. Rovena @ Aadnya Amit Bhosle (C.C. No. 7000138/PW/2021 dated 22-11-2022) has set a precedent!

Ind AS Reporting Season: Risk Disclosures

The first time Ind AS adopters are having a nerve racking time in getting the pieces together for risk disclosures. The quintessential Ind AS 107 mandates disclosures which will aid the financial statement users to evaluate the nature and extent of risks arising from financial instruments and how the company manages those risks.

Like the other financial instruments standards, scope of Ind AS 107 specifies that the standard applies to ALL the entities. So the myth that risk is for the financial services entities only has to disappear sooner. This disclosure standard merely sets out the amount of information reported to the management for the purpose of running the business which must be made available to the users.

Risk Disclosures of two types are required:

§ Qualitative disclosures: Company has to provide a brief explanation of the their exposure to risk, how they arise and how these risks are measured and managed

§ Quantitative disclosures:
   o Credit risk/ Counter party risk – with information about age of the assets where the counter party has defaulted and the collateral held by the company

   o Liquidity risk – categorize the financial liabilities in maturity buckets

   o Market risk – split between Currency risk, Interest rate risk and Price risk. A sensitivity analysis   must be provided for each type of risk where the effect of let’s say a 1% shift (up/down) in the currencies/ interest rate/ prices on profit or loss and equity

Happy Disclosing!!