India Inc eyes no-contest clause as Ratan Tata's will sparks estate debate

A no-contest clause is designed to discourage beneficiaries from disputing the terms of a will, but inheritance laws in India do not explicitly recognise or prohibit such clauses

The inclusion of a “no-contest” clause in Ratan Tata’s will has caught the attention of India Inc, prompting a wave of interest among promoters of listed companies and business families. Legal advisors and estate planners are seeing a noticeable uptick in queries, as wealthy individuals look for ways to shield their legacies from courtroom battles.

 

The clause, which disinherits any beneficiary who contests the will, is a common feature in western estate planning but remains largely unfamiliar in India.

 

Amit A Tungare, managing partner at Mumbai-based law firm Asahi Legal, said the clause is “exceptionally rare” in Indian testamentary practice. “While common in western legal systems, these provisions have seldom appeared in Indian testamentary documents until now,” he said. “After this high-profile case, I’ve noticed a significant increase in clients — particularly business owners — enquiring about similar protections.”

 

Ratan Tata, the doyen of Indian industry and former chairman of the Tata Group, passed away on October 9 last year. His will, currently undergoing probate in the Bombay High Court, lists multiple beneficiaries and includes assets reportedly worth ₹3,900 crore, among which are shares of Tata Sons. The no-contest clause in the will states that any person who challenges it will lose all rights and benefits under it.

 

Tungare believes the case could set a precedent for India’s wealthy, who are increasingly exploring wealth preservation strategies that give them greater posthumous control over their legacies.

 

Legal experts say that such clauses are now being seriously considered, especially as families seek to avoid prolonged succession disputes.

 

“Many individuals, particularly those with significant assets or complex family dynamics, are now considering no-contest clauses as a way to deter potential challenges and ensure a smooth distribution of their estate,” said Nidhi Singh, partner at New Delhi-headquartered IndiaLaw LLP.

 

The increased interest comes against the backdrop of a rise in intra-family legal disputes in corporate India. Binoy Parikh, partner at Katalyst Advisors, a Mumbai-based  M&A legal advisory firm, said that while the clause has gained attention due to Tata’s will, the trend had been building.

 

“Many promoter families, apprehending potential disputes among beneficiaries that could stall the probate process, have started to incorporate this clause,” Parikh said. “It acts as a safeguard, protecting the will from being tied up in litigation.”

 

Common or rare?

 

Known in legal parlance as “in terrorem” clauses (literally meaning “in fear”), no-contest clauses are designed to discourage beneficiaries from disputing the terms of a will, at times on frivolous grounds, leading to time-consuming legal battles. They work by creating a deterrent — the threat of disinheritance — to protect the testator’s intent, reduce internal disputes, and pave the way for a smooth execution of the will.

 

Radhika Gaggar, partner and co-head–Private Client at law firm Cyril Amarchand Mangaldas, said it is no longer unusual for clients to insert a no-contest clause in their wills. “The motive is two-fold — to protect their legacy and decisions regarding distribution of wealth under the will, and to avoid conflicts amongst the legatees after their demise,” she said.

 

According to Parikh, the growing complexity of family structures and the increasing number of contested wills in corporate India make such clauses more relevant. “In the last two years, we have been incorporating the no-contest clause,” he said.

 

However, some legal experts remain cautious.

 

N G Khaitan, senior partner at law firm Khaitan & Co, said that such clauses are not always well-suited for wills where the beneficiaries are close family members.

 

“When the bequest is in favour of family members, I’ve found that people don’t want to include such clauses,” he said. It’s more useful when there are several beneficiaries, especially those outside the immediate family, he added.

 

Legal landscape: Grey areas remain

 

Globally, no-contest clauses enjoy mixed legal treatment. In the United States, for instance, several states recognise the clause, while others limit its enforceability.

 

In India, however, the clause exists in a legal grey zone.

 

The clause is not common in India as it could be seen as curbing the legal rights of individuals, said Saket U Gandhi, partner at Ahmedabad-based Gandhi Law Associates.

 

The right to sue is, after all, a legal right in Indian law.

 

“Even though the clause may potentially help reduce litigation, the right to challenge cannot be taken away,” Khaitan said.

 

There are other complexities as well. Singh of IndiaLaw LLP points out that inheritance laws in India — governed by the Indian Succession Act, 1925 or the Hindu Succession Act, 1956 — do not explicitly recognise or prohibit such clauses.

 

“Such a clause can be incorporated as a cautionary measure, but the enforceability and legality would have to be interpreted and determined by the courts,” she said.

 

Sanjay Basu, founding partner at New Delhi-headquartered Aquilaw, seconded that view. He added that the Indian Trusts Act, 1882, which governs private trusts created for specific identifiable persons or purposes, also does not recognise or categorically prohibit a no-contest clause.

 

Since there is a legal vacuum with respect to the recognition or prohibition of the no-contest clause in Indian jurisprudence, its enforceability is left to the judicial scrutiny on a case by case basis, he said.

 

Courts may, for instance, override such clauses if there are legitimate concerns like fraud, coercion or undue influence, said Jidesh Kumar, managing partner at Delhi-based law firm King Stubb & Kasiva. Barring such circumstances, the clause helps reinforce the testator’s intent and can discourage unnecessary challenges, he added.

 

While the no-contest clause in Ratan Tata’s will may not have absolute clarity in Indian law, it has already succeeded in starting a wider conversation. Whether it becomes a mainstream estate planning tool for India’s wealthy remains to be seen — but the shift in sentiment is unmistakable. 

Clause for concern

 

> A no-contest clause disinherits any beneficiary who contests the will

> It aims to discourage beneficiaries from challenging the validity of the will

> It helps to reduce legal disputes and litigations, and encourages smooth execution of a will

> However, Indian inheritance laws do not explicitly recognise or prohibit such clauses

> In Indian jurisprudence, the enforceability of the clause is left to the judicial scrutiny on a case by case basis