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M. Malati and ors. Vs. M. Dharma Rao and anr. - Court Judgment

LegalCrystal Citation
SubjectCivil
CourtOrissa High Court
Decided On
Case NumberFirst Appeal No. 15 of 1964
Judge
Reported inAIR1968Ori8; 33(1967)CLT789; [1967(15)FLR381]; (1968)ILLJ59Ori
ActsProvident Funds Act, 1925 - Sections 2, 3(2), 4, 5 and 5(1)
AppellantM. Malati and ors.
RespondentM. Dharma Rao and anr.
Appellant AdvocateR.N. Misra and ;R.C. Patnaik, Advs.
Respondent AdvocateM.K.C. Rao and ;A.K. Rao, Advs.
DispositionAppeal partly allowed
Cases ReferredMa. Kyway v. Ma Mi Lay
Excerpt:
.....leaves the sole discretion with the depositor to deal with the same in such manner as he thinks best. 16. apart from the legal position, from the point of view of social justice, there also appears to be good reasons in support of such a view. he may place the funds in the hands of such heirs or dependents or even a stranger who in his opinion, can make the best use of the funds for such purposes as he desired. the object of the depositor is likely to be frustrated in case the fund is made available for distribution like any of his other assets amongst his heirs......3, 4 or 5 to indicate the contrary that the nominee receives the amount for the benefit of the heirs or dependents. 9. no doubt, divergent opinions have been expressed regarding the interpretation of section 5 as to whether it only gives a right to the nominee to collect the amount from the provident fund account of the deceased or the nominee becomes the absolute owner of the amount. the weight of the opinion seems to be in favour of the latter.10. in a case reported in air 1936 mad 477, m. monsingh v. mothibai the depositor was one laxman singh, a servant, of the s. m. railway who had nominated one bhagan singh to receive his provident fund amount. on the death of laxman the question arose whether his heirs will be entitled to the provident fund amount or the heirs of his nominee,.....
Judgment:

Das, J.

1. Appa Rao who was serving as a Railway guard died on 17-9-59. The plaintiff is his minor son through his predeceased first wife and M. Malati (defendant-appellant-1) is his second wife. At the time of death, Appa Rao left the following amongst his other assets.

1.

Savings Bank DepositAccount No. 35110 in the Khurda Post Office

Rs. 1600-00

2.

Gratuity

Rs. 5200-00

3.

Provident Fund Deposit ...

Rs.11664-78

In respect of the Provident Fund amount he nominated his wife M. Malati. After the death of Appa Rao, M. Malati (defendant-1) withdrew the said amount and deposited the same in the name of her father (D-2) in the post office savings bank. Defendant-2 having died during the pendency of the suit, defendants 2 to 6 were added as his legal representatives.

2. Plaintiff's case is that after his father's death, there was some dispute between him and defendant-1 and the mother of Appa Rao over the division of the assets left by his father. The matter was referred to the Panchayat who gave an award (Ext. 1) to the effect that in respect of the Provident Fund amount the plaintiff will get l/3rd and the remaining 2/3rds will go to defendant-1 and the mother of Appa Rao. The gratuity and the savings bank deposit would be shared equally between the plaintiff and the defendant-1. His case is that defendant-2 the mother of Appa Rao was entitled to l/3rd share in the assets left by his father and she having died in the meanwhile, the plaintiff as the grandson of defendant-2 is entitled to inherit her l/3rd share and thus his share has been increased to two-thirds in respect of the assets left by Appa Rao. Defendant-1 did not agree to abide by the decision of the Panchayat given by way of an Award on 28-9-59. So he filed the present suit claiming l/3rd share in the Provident Fund amount and one half share in the gratuity and savings bank deposit as decided by the Panchayat. Alternatively, his prayer was that in case the award is not accepted, he may be given a decree for realising two-thirds out of the aforesaid amounts left by his father.

3. The defendants challenged the validity of the award. Their main defence is that the Provident Fund amount is the exclusive property of defendant-1 who received the same on the strength of the nomination made by her husband and the plaintiff is not entitled to any share therein.

4. The learned Trial Court found that the award, Ext. 1, is not binding on defendant-1 and cannot be enforced in this suit. He held that the plaintiff is entitled to two-thirds share in the properties left by his father including the Provident Fund amount, the gratuity and the savings bank deposit. He rejected the plaintiff's claim for a share in the movables.

5. Defendant-1 the main contestant in this appeal challenges the correctness of the decision of the trial Court. The other defendants-appellants do not claim any interest in the property. There is no cross-appeal by the plaintiff in respect of that part of the claim which has been rejected. The dispute in the present appeal is solely confined to the Provident Fund amount and the decision of the Court below regarding other two items of property is not challenged before this Court.

6. It is not disputed that the appellant (defendant-1) is the second wife of Appa Rao and was appointed by him as the nominee to receive the provident fund deposit of Appa Rao and in fact, she received the same. The main contention of Mr. Misra, learned counsel for the appellant, is that the effect of the nomination is that the amount shall vest absolutely in the nominee and the same shall not be treated as any other asset of the deceased so as to be available for distribution amongst all his heirs, or dependents as defined in Section 2(c) of the Provident Funds Act, 1925 (Act XIX of 1925), hereinafter described as 'the Act'. Mr. Rao, on the other hand urged that under Section 5(1) of the Act, the nominee is only given the right to collect the amount from the Provident Fund Account and after such collection, it shall be made available for distribution amongst the legal heirs of the deceased or at least among his 'dependents' like any of his other assets. In this context, it is necessary to examine the relevant provisions of the Act.

7. In the definition of the word 'dependent' as given in Section 2(c) of the Act, a number of relatives of the deceased subscriber have been included including the wife and children. Thus, both the plaintiff and the defendant come within the category of 'dependents' as defined in the Act. But Section 2(c) does not speak anything about the rights of such dependents with respect to the provident fund amount of the subscriber. It is also not incumbent upon the subscriber to nominate any of his dependents as a nominee to receive the provident fund deposit. There is no legal bar to make a nomination even in favour of a stranger in preference to any of the dependents even if they are alive. Thus the choice to make the nomination is entirely left to the depositor. See AIR 1945 Bom 43, Mabelhead v. Miss Katheleen Guest.

8. With respect to the contention that by virtue of Section 3(2) of the Act, the amount is payable to the dependents of the subscriber and it vests in them absolutely. It is necessary to quote the said section here Section 3(2) runs as follows--

'Any sum standing to the credit of any subscriber to or depositor in, any such Fund at the time of his decease and payable under the rules of the Fund to any dependent of the subscriber or depositor, or to such person as may be authorised by law to receive payment on his behalf, shall, subject to any deduction authorised by this Act, and save where the dependent is the widow or child of the subscriber or depositor, subject also to the rights of an assignee under an assignment made before the commencement of this Act, vest in the dependent, and shall, subject as aforesaid, be free from any debt or other liability incurred by the deceased or incurred by the dependent before the death of the subscriber or depositor.'

This provision does not show that the provident fund shall necessarily vest in the dependent in all cases. All that it shows is that if under the rule of the fund, the amount is payable to any dependent of the subscriber or such person as may be authorised by law to receive the amount on his behalf, it shall vest on such dependent. No rules have been shown to us that the amount is payable to any of the dependents of the subscriber. Thus Section 3(2) cannot be said to have any application to the case. Section 4 only deals with the mode of payment of the provident fund amount and speaks nothing about the rights of the dependents. Section 5 specifically deals with the rights of the nominee, and that is the most material provision for the purpose of this case. Section 5(1) runs thus:

'Section 5(1) -- Notwithstanding anything contained in any law for the time being in force or in 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, where any nomination, duly made in accordance with the rules of the Fund, 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 occurring before the sum has become payable or before the sum having become payable, has been paid, the said person shall, on the death as aforesaid of the subscriber or depositor, become entitled to the exclusion of all other persons, to receive such sum or part thereof, as the case may be, unless--

(a) Such nomination is at any time varied by another nomination made in like manner or expressly cancelled by notice given in the manner and to the authority prescribed by those rules, or.

(b) such nomination at any time becomes invalid by reason of the happening of some contingency specified therein and, if the said person predeceases the subscriber or depositor, the nomination shall, so far as it relates to the right conferred; upon the said person become void and of no effect:Provided that where provision has been duly made in the nomination in accordance with the rules of the Fund, conferring upon some other person such right in the stead of the person deceased, such right shall, upon the decease as aforesaid of the said person, pass to such other person.' Thus, it is clear from the above provision in Section 5(1) that it is open to the depositor to nominate one or more persons to receive the whole or any part of the provident fund amount and he may also cancel such nomination in the manner prescribed by the rules and if the nominee predeceases the subscriber the nomination shall become void, in so far as it relates to the right conferred on the said person and will have no effect. It is also clear that the nominee or nominees have been given the sole right to receive the amount to the exclusion of all other persons. The only other question is whether the money so received vests in the nominee or nominees absolutely. In other words, whether the money received becomes the absolute property of the nominee or continues to remain the property of the deceased so as to be available for distribution amongst his heirs in accordance with the personal law. There is, however, nothing in Sections 3, 4 or 5 to indicate the contrary that the nominee receives the amount for the benefit of the heirs or dependents.

9. No doubt, divergent opinions have been expressed regarding the interpretation of section 5 as to whether it only gives a right to the nominee to collect the amount from the provident fund account of the deceased or the nominee becomes the absolute owner of the amount. The weight of the opinion seems to be in favour of the latter.

10. In a case reported in AIR 1936 Mad 477, M. Monsingh v. Mothibai the depositor was one Laxman Singh, a servant, of the S. M. Railway who had nominated one Bhagan Singh to receive his provident fund amount. On the death of Laxman the question arose whether his heirs will be entitled to the provident fund amount or the heirs of his nominee, Bhagan Singh. The appellant who was the heir of the deceased subscriber contended that the effect of the nomination was merely to entitle the nominee, if alive after the death of the subscriber to draw out the money, but such money will be available to the heirs of the depositor. It was held that the effect of nomination in favour of Bhagan Singh was that the money vested in him and after the death of Laxman the right was available to the heirs of Bhagan and not to the heirs of Laxman. In other words, it became the absolute property of the nominee and passed on to his heirs. The same view has also been taken in Lakshmamma v. Subramanyam, AIR 1939 Mad 489, AIR 1944 Mad 370(1), Sitaramaswami v. Ven-kata Ramrao, AIR 1950 Mad 210. N. Subramanya v Lakshmi Somi Devi.

11. The Bombay High Court has also adopted the same view in the case reported in Ahmad Abdul Razaak v. Jamal Bint Mehdi AIR 1935 Bom 234, AIR 1945 Bom 43. Komal Singh v . Krishna Bai. ATR 1946 Bom 304

12. The same view has also been taken by Calcutta High Court in a case reported in Keshablal v. Ivarani Rudra, AIR 1947 Cal 176. There the subscriber nominated his first wife as the sole nominee to receive the provident fund amount. Subsequently he married a second wife who bore two sons. The previous nomination was not cancelled nor any fresh nomination was made. The contest was between the first wife and the sons of the second wife as to who would be entitled to the amount standing to the credit of the subscriber at his death. It was held that the money vested absolutely in the 1st wife of the depositor and the sons of his second wife were not entitled to it.

13. In a case reported in Md. Naim v. Mst. Munimunnissa AIR 1936 Oudh 32 (FB) and also in the case reported in K. Talupulu v. D. Narasamma, AIR 1967 Andh Pra 10 the same view was taken. It was held that the provident fund amount which the nominee got after the death of the depositor would be his and could not be treated as an asset of the deceased in the hands of the nominee. This was also the view taken by the Rangoon High Court in a case reported in Ma. Kyway v. Ma Mi Lay, AIR 1929 Rang 54.

14. The legal position is therefore well-settled that the provident fund amount received by the nominee in this case vests absolutely in her to the exclusion of any other heir.

15. The provision in section 5 that 'notwithstanding anything contained in any law for the time being in force' is very significant. It purports to abrogate the personal law of the depositor in the matter of distribution of his provident fund assets and leaves the sole discretion with the depositor to deal with the same in such manner as he thinks best.

16. Apart from the legal position, from the point of view of social justice, there also appears to be good reasons in support of such a view. The depositor is called upon to make such deposits with some personal hardships and sacrifice, so that at the end of his service the money may be available for such use for which it was primarily intended. He may place the funds in the hands of such heirs or dependents or even a stranger who in his opinion, can make the best use of the funds for such purposes as he desired. The object of the depositor is likely to be frustrated in case the fund is made available for distribution like any of his other assets amongst his heirs. There is, of course, no legal bar to his nominating any of his heirs or dependents to receive such funds if his object was to make the funds, either whole or in part, to enure to their benefit.

17. In view of the legal position, M. Malati (appellant No. 1) the wife-nominee of Appa Rao alone will be entitled to the provident, fund deposit. With respect to the other items of the property, the order of the trial court shall stand.

In the result, the appeal is allowed in part, but in view of the circumstances of the case, parties to bear their own costs throughout .

Misra. J.

18. I agree.


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