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Acceptability Of A 'Will' In Financial Institutions: Problems And Possible Solutions

Raghav Kumar Singh
26 July 2020 3:07 PM GMT
Acceptability Of A Will In Financial Institutions: Problems And Possible Solutions
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Although a 'Will' is a legal instrument but when it comes to its acceptability, it is obviously not treated at par with that of the Succession Certificate or a letter of administration. Most of the financial institutions have internal policies which require treating of loan proposals/deceased settlement cases with extra care and caution whenever a 'Will' is involved. One of the reasons for such instructions is that high number of frauds takes place in cases of 'Will'. Since, Succession certificate is a conclusive finding of the court regarding determination of the property rights of the members of the family of deceased in case of intestate succession, therefore, Succession Certificate shall always hold a better position in terms of acceptability in the financial institution than a 'Will'. Since, in a Succession Certificate, the finding which is made by the court, in determining the property rights of the legal heir(s), is equivalent to a judgment of the court, therefore, it can be easily relied upon by the financial institutions in case of it being a part of the chain of title of the property or settlement of the deceased claim.

As per the code of Bank's commitment to customers by Banking codes and standards Board of India, deceased claim has to be settled and payment has to be released to the survivor(s)/ nominee(s) within a period of not exceeding 15 days from the date of receipt of the claim subject to the production of the proof of death of the depositor and suitable identification of the claim(s), to the bank's satisfaction. It has to be considered here that although there is a timeline which has been specified of 15 days for the release of payment from the time of receipt of documents in case of deceased claim settlement, the same has been left to the satisfaction of the Bank to verify the genuineness and the authenticity of the 'Will' and also whether it is the last and final 'Will'. Therefore, that process may take more time and it differs from case to case basis.

Similarly, when a 'Will' is involved in the Chain of title of the documents, financial institutions would be careful in considering the same or treating it at par with any other document like sale deed, gift deed, etc, conveying the title of the property for the above-mentioned reasons.

Therefore, the question arises here as to how the 'Will' should be treated by such financial institutions in order to strike a balance between the interest of the customer as well as the legislative intent of use of a 'Will' as a document for conveyance of property rights and safeguarding the security interest of such financial institutions?

It would not be wise to expect one straight jacket formula for the aforementioned question. One needs to understand that every document has a degree of acceptability in every institution and there involves varying scope of risk with each document. It is obvious that such document which can be easily verified and authenticity of which can easily be examined would be more acceptable than the other. Considering the aforementioned factors, the question which would arise while considering a 'Will' is, can it be easily verified? And can the authenticity of a 'Will' be examined conveniently?

In order to understand this, first we have to understand, what is the meaning of a 'Will'?

The 'Will' is defined under Sec. 2 (h) of the Indian Succession Act, 1925 as "the legal declaration of the intention of a testator with respect to his property which he desires to be carried into effect after his death."

In common terms, a 'Will' is the document which allows the owner of the property to enjoy the benefits of such property till his lifetime and then vest such rights relating to the property after his demise to the person of his choice by exercising his prerogative. Generally, this prerogative is exercised in order to do away with the operation of the Law of Intestate Succession. The owner of the property might not want the devolution of the property to take place as per the law of intestate succession since such devolution may not be as per his intention or wishes. Also, one of the other reasons for executing a 'Will' is to save the legal heirs from the hardship and rigorous process of obtaining the Succession Certificate from the Court which has cost implications and also consumes a lot of time and effort.

In order to understand the complete operation of 'Will', it is pertinent to understand the effect of Part V of the Indian Succession Act, 1925 deals with the provisions of Intestate Succession i.e. when a person dies without making a 'Will' and PART VI of the Indian Succession Act, 1925 which deals with the provisions of Testamentary Succession. And Section 57 which sets forth that such provisions are applicable in territories of Calcutta, Madras and Bombay subject to the restrictions specified therein. And it is further pertinent to understand what 'probate' is?

As per section 2(f) of the Indian Succession Act, 1925, Probate means the copy of the will certified under the seal of a court of competent jurisdiction with a grant of administration to the estate of the testator. Basically, it is a judicial proceeding conducted to examine the validity and authenticity of the 'Will'.

Furthermore, Sec.213 (1) of the Indian Succession Act, 1925 states that no right as executor or legatee can be established in any Court of Justice, unless a Court of competent jurisdiction in India has granted probate or the 'Will' under which the right is claimed, or has granted letters of administration with the 'Will' or with an authenticated copy of the 'Will' annexed. The sub section (2) of the said section further states that the said section shall not apply in case of will made by Mohammedans or Indian Christians and shall only apply to the cases of 'Will' made by any Hindu, Buddhist, Sikh or Jain where such 'Wills' are of the classes specified in clauses (a) and (b) of section 57.

A combined reading of Sections 213 and 57 of the Act would show that where the parties to the 'Will' are Hindus or the properties in question are not in territories falling under Section 57 (a) and (b), Sub Section (2) of Section 213 of the Act applies and sub section (1) has no application. As a consequence, a probate of a 'Will' is not required to be obtained by a Hindu, in respect of a 'Will' made outside those territories or regarding the immovable properties situated outside those territories i.e. Calcutta, Madras and Bombay. Therefore, it can be safely said that it is not mandatory to probate the 'Will' other than in the territories of Calcutta, Madras or Bombay. However, it is advisable to get the WILL probated in order to rule out the coercion, to confirm the subject Will is the last Will and to rule out the contrary claim on the subject property.

Now after attaining the clarity about what is a 'Will' and what is a 'Probate', let us consider the two most important questions i.e. whether a 'Will' can be easily verified? And can the authenticity of a 'Will' be examined conveniently?

Since, it has been already stated that it is not mandatory for the will to be probated apart from the territories of Calcutta, Bombay and Madras; it would mean that any person can make a 'Will' on a simple piece of paper, specifying his intention in regard to the devolvement of the property rights as per his prerogative. However, even if that 'Will' is not required to be probated, whether it needs Registration? By definition nothing compels a 'Will' to be compulsorily registered under section 17 of the Registration Act, 1908. But considering the fact of relevance of 'Will', which shall have financial implication, it is always recommended to get a 'Will' Registered. Creating a record by virtue of Registration shall afford some degree of genuineness and authenticity to that document. But whether a registered will can be considered as a final 'Will' in law? The answer is 'No'. Even if the 'Will' has been registered then also a subsequent 'Will' can be made and the previous 'Will' can be cancelled. This would mean that even registration does not afford the final word on authenticity and genuineness of the 'Will'. Therefore, considering the aforementioned tests-Whether a document can be easily verified and can the authenticity of that document be examined conveniently? The answer which we were looking for, which is a comfortable 'yes', is missing in the instant case i.e. a registered 'Will'.

Now, the obvious question which arises here is, in order to get the answer that we are looking for i.e. a 'yes', what is required in case of a 'Will'? The answer is pretty simple, as already stated, it is 'Probate'. Even though it has not been made mandatory as mentioned above, it is the only legal proceeding which gives finality to the 'Will' when it comes to its genuineness and authenticity and can be easily relied upon by the financial institutions and increases that scope of acceptability of the document since it can be easily verified as there is a record created in form of an order of probate and authenticity of such document has already been verified by the Court. Therefore, it is advisable to get the 'Will' probated. However, probate proceedings incur cost and it takes time to get an order from the Court. One can argue that the basic purpose of creating a 'Will' is to make a document which could create property rights without any hassle and as already stated, avoid the hardship of getting a succession certificate from the Court and the very purpose of making a 'Will' is frustrated if the person is subjected to visit court and incur expenses for a legal proceeding which is not even mandatory in law. This concern is genuine but again it boils down to the question of acceptability and reliance of the financial document in order to safeguard the security interest of the financial institutions.

In such a scenario where there is void to confirm the genuineness and authenticity of 'Will' (other than probate cases), the concern of the same being misused is not misplaced. It has to be acknowledged that when a loan is given by any financial institution (apart from loan schemes without security), the same is done on the basis of keeping certain property as a security so that when the loan is not being repaid and has been classified as a Non performing Asset, such financial institution can enforce its security interest to recover the dues. When the document by virtue of which such security interest is intended to be safeguarded itself does not inspire any confidence to the lender in terms of its authenticity and reliability then acceptability of such document is bound to get questioned. Particularly in the world of today, when there are numerous tools available to create a forged document, it becomes more important for the financial institutions to exercise all the available safeguards before disbursing any loan.

Does it mean that every financial institution should not act on any 'Will' that is not probated? The answer is 'No'. Every case where a 'Will' is involved has to be dealt with on a case to case basis. Every transaction or a chain of title where a 'Will' is involved is different from the other. There are certain factors which should be considered while considering an unprobated 'Will' like whether a 'Will' is registered, whether a reasonable time has been lapsed since the operation of the 'Will' and the subject property is in the possession of the person in whose favour the 'Will' has been made (legatee), whether there does not seem to exist any dispute in regard to such will and a discreet enquiry has been made to vindicate the same, whether all the legal heirs are aware about the 'Will' and there does not exist any dispute, whether publication has been made about the 'Will' inviting objections in leading newspapers and no objections were received, etc. These factors are only inclusive and as stated every will is peculiar in nature and has to be dealt accordingly. The act of balancing of legislative intent of not making probate mandatory combined with the interest of the customer producing the unprobated 'Will' vis-a-vis safeguarding the security interest of the financial institution has to be made without resorting to any straight jacket formula.

Views are personal only.

(Author is the Deputy Manager (Law)  at State Bank of India,Bhopal)

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