1. This appeal is by the defendant, the Union of India, against a decree for Rs. 5,288-12-0 with costs passed by the Civil Judge, Class I, Narasimhapur.
2. The facts of the case are as follows: One Mohammad Khan, an employee in the G.I.P. Railway, died on 3rd February 1944, leaving no issue. The plaintiff was his legally married wife. Mahammad Khan was a subscriber to the Provident Fund. On his death there stood a sum of Rs. 4,515-14-0 in his account. Mahammad Khan had nominated his brother Dilawar Khan to receive the amount. Dilawar Khan predeceased Mohammad Khan, leaving behind him his widow Mst. Shakuran Bi.
After the death of Mohammad Khan, claims to the money were made by Mst. Shakuran Bi and Mst. Aishi Bi, the widow of subscriber. The dispute was taken to the District Court and an application for the grant of a succession certificate was made. At first Mst. Shakuran Bi succeeded. Later the decision was reversed by the District Judge, who granted the certificate to Mst. Aisha Bi, the widow of the subscriber.
A revision was filed by Mst. Shakuran Bi and two others in the High Court against that order. Mudholkar, J., dismissed the revision and held that under Section 3 of the Provident Funds Act the amount standing to the credit of the subscriber vested in his dependent, the widow, and not in the nominee because the nomination became null and void on the death of the nominee before the subscriber. That decision of Mudholkar, J., has since been reported in Shakuran Bi v. Aisha Bi, ILR (1951) Nag 407: (AIR 1950 Nag 244) (A).
3. The Railway authorities, however, declined to give the money in spite of the succession certificate and Mst. Aisha Bi was therefore compelled to bring the present suit against the Railway Administration and the Union of India. The learned Judge who tried this suit has decreed the claim of Mst. Aisha Bi in full. He had also commented very strongly upon the conduct of the Railway authorities, particularly the officers immediately concerned, in declining to give effect to the order of the High Court and the succession certificate granted to Mst. Aisha Bi.
4. The appellant, the Union of India, con-tends that the decision of Mudholkar, J., is erroneous. There has been a conflict of opinion in India, to which I shall advert presently; but particular reliance is placed by the appellant on a decision given by Grille, C.J., and myself in Governor-General-in-Council v. Jagannath, ILR (1948) Nag 357: (AIR 1949 Nag 85) (A-1), which, it is contended, the learned District Judge and Mudholkar, J., were bound to follow in preference to the decision of the Calcutta High Court in Nidhusuden Mukherji v. Bibha Batee Devi, ILR (1940) 1 Cal 476: (AIR 1940 Cal 395) (B), on which they relied.
Mudholkar, J., in dealing with the earlier Division Bench case of the Nagpur High Court distinguished it - and, in my opinion, rightly so. In Governor-General in Council v. Jagannath (A-1) (cit. sup.) the specific question which is before us now was not considered. In that case the nominee Tatya (brother of the subscriber) survived the nominator and the amount was paid to him. The widow and the son of the subscriber were claiming the amount as dependants, but it was paid to Tatya on the strength of the nomination in his favour.
His letter to the Railway authorities to pay the money to the dependents did not reach the Chief Auditor before payment was actually made to him, and the letter was held by the Division Bench to be no more than a pay-order liable to be cancelled by Tatya either expressly or by implication. It was not treated as an assignment of the claim under Section 130 of the Transfer of Property Act.
5. In dealing with the case Grille, C.J., and I only considered the respective claims of the nominee and the dependents. We declined to hold, as was done in the Calcutta case above cited, that Section 4(1) of the Provident Funds Act incorporates a preference in favour of dependents and held that Clauses (a) and (b) thereof stand on an equal footing.
That case is thus not in our way and is not an authority for the proposition that on the death of the nominee prior to that of the subscriber, the legal representatives of the nominee have preference over the dependants. No doubt, the Calcutta case was doubted by the Division Bench, but that was on quite a different point. I do not think that the dissent goes further than what is stated here. However, I do not propose to deal with the Calcutta case nor with the dissent which has been recorded by the Calcutta High Court itself against that decision in Keshablal v. Ivarani Rudra, 50 Cal WN 872: (AIR 1947 Cal 176) (C), because the latter Calcutta case only decided that the effect of the vesting of the fund under Section 3(2) of the Provident Funds Act in a dependant nominee is to exclude other dependants not so nominated.
6. There arc, however, many cases decided by the Madras and the Bombay High Courts which were cited by Shri Shevde in support of his contention that on the death of the nominee the legal representative of the nominee stands in the shoes of the nominee and unless the nomination is cancelled the legal representative is entitled to receive the money to the exclusion of dependants.
The loading case is Mon Singh v. Mothi Bai, ILR 59 Mad 855: (AIR 1936 Mad 477) (D). In that case one Mothi Bai's husband was the nominee and he predeceased the subscriber. Mon Singh, who was an heir of the subscriber, laid claim to a succession certificate, but failed. It was held by the High Court that the 'absolute right to receive' the money, which was conferred by the rules which reproduced Section 5 of the Provident Funds Act, meant a vested right in the money which passed to the heir of the nominee at his death and that Mothi Bai was entitled to succeed.
The learned Judges followed Bennett v. Slater, 1899-1 QB 45 (E) and Redman, in re, Warton v. Redman, 1901-2 Ch 471 (F). It was held on the authority of Ma Kyway v. Ma Mi Lay, ILR 6 Rang 682; (AIR 1929 Rang 54) (G) that the nominee was 'not merely a person designated to receive the money and give the Railway Company a clear quittance by a beneficiary'. Their Lordships of the Madras High Court in dealing with this point relied upon the dictum of Kekewich, J., in Redman's case (F) cited in this paragraph as supporting the view of the Rangoon High Court. Actually it was not Kekewich J., but Phillimore, J., (as he then was) who had so held in an earlier case, Caddick v. Higton, (1901-2 Ch 476n) (H), reported in the foot notes to the ruling, and the dictum was followed by Kekewich, J., though reluctantly.
7. Mon Singh's case (D) was followed in Sitaramaswamy v. Venkatarama Rao, AIR 1944 Mad 370 (1) (I). The nominee of the subscriber in that case was the first wife who predeceased her husband. The nomination was not cancelled and the son from the first wife was held entitled to the amount to the exclusion of the son from the second wife.
The learned Judges conceded that but for Section 5 the combined effect of Sections 3 and 4 would have been in favour of the losing party. They referred also to Lakshamamma v. Subramanyam, AIR 1939 Mad 489 (J). The last case need not detain me. It only laid down that persons who were not dependants could also be nominated, and that a non-dependant, if nominated, was not postponed to the dependants.
8. In Subrahmanya Somayajulu v. Lakshmi Somi Devi, 1949-2 Mad LJ 635: (AIR 1950 Mad 210) (K), it was held that the nomination did not become null and void if the nominee predeceased the subscriber and the nominee's heir was entitled to get the money. The reason given was that the amount vested absolutely in the nominee and passed to the heir of the nominee. Reliance was placed on Mon Singh v. Mothi Bai (D) (cit. sup.) and AIR 1944 Mad 370 (1) (I).
In Thaj Mohamed Saib v. Balaji Singh, ILR 57 Mad 440: (AIR 1934 Mad 173) (L), the nominee did not predecease the subscriber. It was a case of a dependant getting the money under Section 4(1)(a) of the Provident Funds Act. It was held that the money in the hands of the dependant could not he regarded as the assets of the deceased and that it became the property of the dependant. I need not consider that case.
9. I now consider some Bombay cases in which the point has arisen. In Ahmad Abdul Razzak v. Jamala Bint, ILR 59 Bom 475: (AIR 1935 Bom 234) (M), the subscriber nominated his widow. The nephews claimed a share in the property under the personal law. It was held that the nominee was entitled to the whole of the amount and that Section 5 gave the right to the nominee to receive the money absolutely. The nominee in that case was however a dependant and it was held that under Section 3 the nominee-dependant got the property absolutely. Ma Kyway v. Ma Mi Lay (G) (cit. sup.) was followed.
10. In Mabel Head v. Kathleen Guest, ILR (1944) Bom 716: (AIR 1945 Bom 43) (N), it was held that a non-dependant could be validly nominated even if there was a dependant in existence. That case also followed Ma Kyway v. Ma Mi Lay (G) (cit. Sup.). In Komalsingh Kuwarsing v. Krishnabai Kunjalsing, ILR (1946) Bom 146: (AIR 1946 Bom 304) (O), it was laid down that a non-dependant could be nominated and the nominee, whether a non-dependant or a dependant, received the fund absolutely for his own benefit and not for the benefit of the dependants of the subscriber.
In that case the subscriber's brother was the nominee and the widow was claiming the amount either wholly or partially. Reliance was placed on Ma Kyway v. Ma Mi Lay (G) (cit. sup.), ILR 59 Bom 475: (AIR 1935 Bom 234) (M), ILR (1944) Bom 716: (AIR 1945 Bom 43) (N) and AIR 1939 Mad 489 (J). The learned Judges observed as follows:
'On the view taken by the trial Court the word 'absolutely' in Section 5 would be meaningless. If the nominee is only to recover the amount and hand it over to the dependant, then there is no propriety in nominating a non-depend an I. ...... Where, therefore, the rules do not prohibit nomination in favour of those who are not dependants, a nominee, though not a dependant, takes an absolute interest in the fund, though he may not be entitled to the benefit of Section 3(2).'
The learned Judges on that occasion dissented from ILR (1940) 1 Cal 476: (AIR 1940 Cal 395) (B); Amna Khatoon v. Abdul Karim, AIR 1937 All 562 (P); Hayatuddin v. Mst. Rehiman, AIR 1935 Sind 73 (Q); Hardial Devi Ditt v. Janki Das, AIR 1928 Lah 773 (R); Annai v. Awabai, AIR 1924 Sind 57 (S) and Mt. Hurmat Bibi v. Mt. Kaz Banu, AIR 1932 Sind 115 (T).
11. In Mohammad Naim v. Mst. Munim-un-Nessa, ILR 11 Luck 611: (AIR 1936 Oudh 32) (FB) (U), there was difference of opinion between Shrivastava J. and Ziaul Hasan J. King C.J. who heard the case as a third Judge, laid down that the nominee under the declaration of the depositor was entitled not only to realise the deposit but to receive and appropriate it to his own use and benefit free from any charge or attachment or liability enforceable by other heirs or creditors.
Ziaul Hasan J., however, said that the right was to receive the money and no more. Srivastava J. in his opinion had observed that the personal law was wiped out and the benefit was conferred on the nominee absolutely. According to him, the nominee became entitled to the amount absolutely and was not given an absolute right merely to realize it. King C.J. observed that the word 'absolutely' suggested that the recipient was deemed to be en-titled to receive the money free from any charge or attachment or liability enforceable by other heirs or by creditors.
According to him, it implied also that the recipient took a beneficial interest in the sum which he received. According to him, the opening words of Section 5 read with the word 'absolutely' gave the nominee an absolute ownership of the money.
12. In Ma Kyway v. Ma Mi Lay (G) (Cit sup), which seems to have influenced most of these decisions, it was only held that the nomination was in. the nature of a testamentary disposition and was valid even though by reason of personal law wills might be prohibited.
13. On the other side many cases are cited in which it was held that the right of the nominee was merely to receive the amount, but that the amount did not become his but was to be held for the benefit of the dependants or heirs of the subscriber. This view was expressed in a series of cases in the Sind Chief Court beginning with AIR 1924 Sind 57 (S) and ending with Noor Mahomed v. Sardar Khatun, AIR 1949 Sind 38 (V). I have given the reference of all the Sind Cases, except one, viz., Ismail v. Mt. Amina, AIR 1929 Sind 158 (W).
The most exhaustive treatment of the subject is to be found in the judgment of Tyabji C.J. and Meher J. in Noor Mahomed v. Mt. Sardar Khatun (V) (cit. sup.). All the relevant authorities were considered and it was ruled that the words of Section 5 did give the right to receive the money absolutely but not to appropriate it.
14. The short question before me is which of the two views is correct. The first set of decisions is influenced by the decision of the Rangoon High Court. In that case it was only held that a nomination was in the nature of a testamentary disposition and the nominee had a beneficial interest. Reliance has invariably been placed also upon ILR 59 Mad 855: (AIR 1936 Mad 477) (D), which referred to two English cases where the interest of the nominee was described as a beneficial interest.
Of course, the law on the subject of provident fund and contributions to Friendly Societies &c.; must in the ultimate analysis rest upon the terms of the rules controlling such contributions. Most of those, however, allow nominations to be made, and the question that falls for consideration is whether the nominee takes the money beneficially or not. Incidentally is involved another question, namely, what happens when the nominee dies during the lifetime of the subscriber.
15. Now, the dictum of Phillimore J., to which I have already referred, was as follows :
'I cannot sec why the estate of a nominee who dies before the nominator should be deprived of the benefit intended to be conferrad, even although his death may be unknown to the nominator..... I do not see anything in the wording of the rule to prevent the policy money being due to the legal personal representative of the nominee.'
The dictum of Phillimore J. (as he then was) was not accepted by the Chief Registrar of the Friendly Society, just as the dictum of Mudholkar J. was not accepted by the railway authorities in the present case. For years the dictum of Phillimore J. (as he then was) stood. In 1912, however, the question of the exact nature of the nomination came before the House of Lords in Eceles Provident Industrial Cooperative Society, Ltd. v. Griffiths, 1912 AC 483 (X).
In that case Lord Mersey explaining the effect of Section 25 of 56 & 57 Vict. c. 39, observed that the nomination was in the nature of a testamentary disposition and that till the death of the subscriber the nominee takes no beneficial interest in the property and, like any other testamentary disposition, is, subject to the rules of the Funds, also subject to the law of Wills. This is what Lord Mersey observed :
'The object of Section 25 is, in my view, to give to the poorer members of a society that is to say, to those who have not more than 100 to their credit, the power to make provision for the disposal, at their death, of this small sum without, the expense being incurred of the making of a will or of administering this part of their estate.....
Once made the nomination takes effect, not by creating any charge or trust in favour of the nominee as against the nominator, as was suggested during the arguments (for the nominator can at any moment revoke the nomination), but giving to the nominee a right as against the society, in the event of the death of the member without having revoked the nomination, to require the society to transfer the property in accordance with the nomination. Until death the properly is the property of the member, and all benefits accruing in respect of it during his lifetime are his also.
The view contended for by the appellants would make the nomination defeasible not merely by the statutory revocation provided for the purpose, but by possible future and uncertain events, such as payments by the member of credits by the society of sums to the member's account, having the effect of increasing the total to his credit at his death to a sum over 100 .'
16. A similar view was expressed by Farwell, L.J., in the same case in the Court of Appeal. Though his dissenting judgment was not approved by the House of Lords, his statement of the effect of Section 25 found concurrence in the speech of Lord Mersey. Furwell, L.J. said :
'Section 25 of the Act of 1893 like several other sections of the same character in similar Acts, is in my opinion intended to confer a benefit on members of societies of this kind by giving them a limited power of disposition in its nature testamentary without the formality and expense of making a will or obtaining probate.
The nomination in pursuance of such a power is like any other testamentary disposition, revocable, as, under the Wills Act, a will is revocable, and, like a will, does not, prior to the nominator's death, affect his property, but leaves him free to deal with it as he pleases, either by withdrawing it in accordance with the rules of the society, or receiving payment of his loans to the society, without any power of interference by the nominee. The nominator is in the position of a testator, and the nominee of a legatee.'
In re Barness Ashenden v. Heath, 1940-1 Ch 267 at p. 272 (Y).
17. These two cases were considered by Farwell J. in 1940-1 Ch 267 (Y), in which the learned Judge dissented from the decision of Phillimore J. (as he then was) and laid down that the nomination is in its nature testamentary and being ambulatory the death of the nominee in the lifetime of the sub-scriber defeats the nomination, so that on the death of the member his legal personal representative is entitled to the property and not the, legal representative of the nominee. He declined to hold that a nomination is an appointment by deed.
18. The question that arises is whether the reasoning in ILR 59 Mad 855: (AIR 1936 Mad 477) (D), does not suffer by reason of these observations. It is to be recalled that in ILR 6 Rang 682: (AIR 1929 Rang 54) (G), the learned Judges also described the disposition as a testamentary one and not an appointment by a deed. Farwell J. dissented from the observations of Phillimore J. (as he then was) that the legal representatives of the subscriber stand in the shoes of the nominee who dies during the lifetime of the subscriber.
19. It is necessary to quote Section 5 of the Provident Funds Act at this stage. It reads :
'1. Subject to the provisions of this Act, but otherwise notwithstanding anything contained in any law for the time being in force or any disposition, whether testamentary or otherwise, by a subscriber to, or depositor in, a Government or Railway Provident Fund of the sum standing to his credit in the Fund, or of any part thereof, any nomination, duly made in accordance with the rules of the Fund, which purports to confer upon any person the right to receive the whole or any part of such sum on the death of the subscriber or depositor, shall be deemed to confer such right absolutely, until such nomination is varied by another nomination made in like manner or is expressly cancelled by the subscriber or depositor by notice given in such manner and to such authority as is prescribed by those rules.'
2. Notwithstanding anything contained in the Succession Certificate Act, 1889, or the Bombay Regulation VIII of 1827, any such person shall, on the death of the subscriber or depositor, be entitled to the grant of a certificate under that Act, or that Regulation, as the ease may be, entitling him to receive payment of such sum or part, and such certificate shall not be deemed to be invalidated or superseded by any grant to any other person of probate or letters of administration to the estate of the deceased.'
The section merely wipes out all the personal and other law for the time being in force and also sets at naught any other disposition by the subscriber, whether testamentary or otherwise, creating a right in the nominee to receive the money from the Government or the other holder of the Provident Fund. It is also stated in the section that the nomination confers this right on the nominee absolutely.
In my opinion, this last provision cannot be read as making the nominee the owner of the fund. It only gives him the right to demand it unconditionally. To explain my meaning I give a few examples. It is not open to the holder of the fund to demand any document from a Court or to ask the recipient for an indemnity bond or security before the payment is made. The right is conferred absolutely or in other words, unconditionally.
So long us the nomination stands, the nominee is required only to prove that he is the person nominated by the subscriber and he can then receive the amount without any conditions being imposed on him. The opening words remove all impediments which might be created by the holder of the fund, the heirs and dependants or third parties like creditors.
There is nothing in those words which makes the money belong to him after he has received it, and indeed, there is nothing in those words which shows that even before the death of the subscriber the nominee is entitled to a beneficial interest in the money. I have already quoted from the English case and I cannot do better than respectfully adopt the reasoning of Farwell J. in In re Barness Ashenden v. Heath (Y) (cit. sup.).
20. I accordingly confirm the decision of Mudholkar J. and hold that the money was payable not to the widow of Dilawar Khan but to Mst. Aishabi, the respondent in this case. I must say that the learned Judge of the lower Court need not have been so hard upon the officers administering the Provident Fund, because they have to perform their duty according to statute under which they hold the Fund. Even the decision of Phillimore J. was not followed by the Chief Registrar of the Friendly Society and the decision was later found to be erroneous on the dicta of the King's Bench, the Court of Appeal and the House of Lords.
21. I would, therefore, hold that there is no force in this appeal. It fails and is dismissed with costs. It is to be hoped that Government will now pay immediately to the widow the money of which she has been deprived for no less than 13 years.
22. I agree.