BTL 904 - Perusal of Will – Precautions

 

The Banking Tutor’s Lessons

BTL 904                                                                                30-05-2026

Perusal of Will – Precautions

In this Issue I am sharing one case, which I came across a decade back, during statutory audit of a Bank (post retirement).

One Bank branch has extended a Secured Overdraft limit of Rs 50 lacs to meet working capital needs of a cloth merchant against the collateral of a house property in a Town which was valued by Panel Engineer for Rs 80 lacs.

On a perusal of the Legal Report given by panel advocate of the Bank the following are observed.

The property is in the name of Smt. Lakshmi. She got the title over the house property in question based on a Will.

The Testator of the Will  was Mr Rangayya, has 3 sons – Ravi, Chandra and Ganesh. All the three sons are married. He is owner of  3 independent houses. He has allotted each one house to Ravi and Ganesh. However, when it comes to Chandra, it is allotted to  Gopi, son of Chandra, as Chandra’s character is not good.

Gopi pre-deceased Rangayya. Rangayya has not made any amendment to the Will. After demise of Rangayya, the house allotted to Chandra’s son was transferred in the name of Smt. Lakshmi , mother of the deceased Gopi.

In my view transfer of Property to Smt. Lakshmi is not correct and legal.

My argument goes like this – Will become operative only on the death of Rangayya. However, at that time as Gopi is not alive, her mother will not get right in the property allotted to Gopi, automatically. As such transferring the house property in the name of mother of the deceased Gopi is not correct.

The property bequeathed must vest in a living beneficiary at the time of the testator’s death. If the beneficiary is not alive, the bequest generally lapses.

Under Indian law, unless the Will specifically provides for substitution (e.g., “to X, and if X is not alive, then to his heirs”), the gift does not automatically pass to X’s legal heirs (like his mother).

Therefore, transferring the property to Lakshmi after Rangayy’s death to Smt Lakshmi (mother of deceased Ravi)  was not correct in law. The bequest had already failed.

What Happens to the Lapsed Legacy

A lapsed legacy normally falls into the residuary estate (if the Will has a residuary clause). If there is no residuary clause, it devolves by intestate succession under the Hindu Succession Act (assuming Mr. Rangayya was Hindu). That means the property would be distributed among Rangayya’s legal heirs.

Status of Present Case

On my raising the above doubt, Bank management got further opinion from two more advocates, who had given divergent opinion. Then the matter was referred to Bank’s Retainer (Senior Advocate). Simultaneously, Bank ordered for Internal Investigation.

During the Investigation, the following have come to light.

1. Mr Ravi, eldest son of the Testator (Rangayya) filed a case in Court of Law contesting the automatic transfer of house property in the name of Smt. Lakshmi. The case is pending in the Court of Law.

2. Mr. Chandra (Second son of Rangayya and husband of Smt. Lakshmi) availed a business loan from a different bank against the house property which was mortgaged to present bank (by depositing colour xerox title deeds which were laminated).

Other Bank initiated action for recovery of loan when it has come to light the documents are not original. The other Bank has treated the borrowal account of Mr Chandra as a Fraud and they have initiated action.

All these have come to light only when I made observation about legality of registering the house property in the name of Smt. Lakshmi.

We may not have any expertise in legal matters, but we can make of common sense to add value.

While perusing any document, whenever you get any doubt, escalate the issue to appropriate authority. No need to feel shy. Some times our observation may look absurd, but some times, they may lead us to some important points.

Sekhar Pariti

+91 9440641014