Siddartha Karnani Clarifies Legal Position on “Either or Survivor” Clause in ET Wealth Online Feature

Siddartha Karnani recently shared detailed legal insights with ET Wealth Online, addressing frequently asked questions on the legal implications of the “either or survivor” clause in banking arrangements.

Through a structured FAQ, Siddartha clarified key misconceptions surrounding survivorship, ownership, and testamentary rights.

No Automatic Transfer of Ownership

Addressing whether an “either or survivor” clause creates survivorship in ownership, Siddartha explained that the clause merely constitutes a banking mandate. It allows the bank to discharge its liability by making payment to the surviving account holder. However, it does not transfer ownership of the underlying funds or valuables. Beneficial title continues to be governed by succession law or a valid Will.

Testamentary Freedom Remains Intact

On whether one joint holder can bequeath their share without the co-holder’s consent, Siddartha confirmed that a joint holder who is the true owner of the asset may unilaterally bequeath their interest to a third party. The co-holder’s consent is not required, as the banking mandate does not restrict testamentary freedom.

Bank’s Operational Discharge vs Beneficial Ownership

He further clarified that while a bank obtains valid operational discharge by paying the survivor in accordance with the mandate, such payment does not determine beneficial ownership. If a Will exists, ownership rights under the Will may still be enforced against the survivor.

Distinction Between Joint FDs and Joint Lockers

Importantly, Siddartha distinguished between joint fixed deposits and joint lockers. A joint fixed deposit represents a debt payable by the bank, allowing the survivor to receive payment under the mandate. In contrast, a locker is merely a custody facility. Access granted to the survivor does not imply ownership of the locker contents, which may belong to the deceased or even third parties.

Supreme Court Position on Survivorship vs Testamentary Rights

Referring to the settled position of law, including the Supreme Court’s ruling in Anumati v. PNB, Siddartha noted that an “either or survivor” clause does not override proprietary or testamentary rights. While the decision restricts unilateral actions such as pledging a joint fixed deposit, it does not negate the right of a true owner to bequeath their share through a Will. The ruling reinforces that banking mandates cannot defeat substantive succession rights.

Siddartha’s insights highlight a critical legal distinction: operational convenience provided by banking mandates must not be conflated with ownership or succession rights. His insights provide much-needed clarity for account holders, estate planners, and financial institutions navigating joint banking arrangements.

Read more in The Economic Times: https://economictimes.indiatimes.com/wealth/legal/will/daughter-loses-claim-to-gold-jewellery-kept-in-joint-locker-with-late-mother-hc-upholds-will-bequeathing-it-to-another-family-member/articleshow/128945992.cms?from=mdr