IN THE HIGH COURT OF DELHI CM(M) No.306/2007 # Smt Manjula Verma & Anr. ........ Petitioners ! through: Mr. Dev Anand Bhardwaj, Advocate VERSUS $ Kumari Sarla Verma. ....... Respondent ^ through : Mr. Shesh Datt Sharma, Advocate RESERVED ON: 20.11.2007 % DATE OF DECISION: 3.12.2007 CORAM: * Hon'ble Mr.Justice Pradeep Nandrajog 1. Whether reporters of local papers may be allowed to see the judgment? Y 2. To be referred to the Reporter or not? Y 3. Whether judgment should be reported in Digest? Y : PRADEEP NANDRAJOG, J. 1. The present petition under Article 227 of the Constitution of India is directed against the order dated 29.11.06 passed by the Additional District Judge, Delhi whereby the application under Order VII Rule 11 of the Code of Civil Procedure filed by the petitioners seeking rejection of plaint filed by the respondent was dismissed. 2. Respondent is the plaintiff and the petitioners are the defendants in the original suit. I shall be referring to the parties by their nomenclature in the suit. 3. Brief facts relevant for deciding the controversy in the page 1 of 20 present petition are that Late Sh Vijay Kumar Sharma (hereinafter referred to as the deceased) joined Custom, Excise and Gold (Control) Appellate Tribunal, West Block 2, R.K. Puram, New Delhi in the year 1977 as an Inspector. At the time of the joining the deceased nominated his mother and unmarried sister i.e. the plaintiff as his nominees for the purposes of Provident Fund Act, 1925 and General Provident Fund (Central Services) Rules 1960. It is to be noted that the deceased was a bachelor at the time he joined service. 4. Deceased got married to defendant no.1 as per Hindu rites and ceremonies on 28.2.1987. A minor son i.e. defendant no.2 was born out of the said wedlock. 5. Unfortunately the deceased met with an untimely death on the intervening night of 2/3.06.02. At the time of his death the deceased was working as a Superintendent. The mother of the deceased had pre-deceased him. 6. After the death of the deceased the plaintiff approached the employer of the deceased seeking release of retirement benefits of the deceased in her favour. To overcome a nomination dated 06.07.1991 in favour of the defendants it was contended by the plaintiff that the defendant no.1 who was also working with the same employer manipulated the service record of the employer and prepared a forged nomination dated 06.07.91 in her own favour and in favour of defendant no.2. 7. It is not in dispute that the retirement benefits of the page 2 of 20 deceased consist of sum standing to the credit of the deceased in the Provident Fund Account of the deceased. 8. Considering the dispute between the parties the employer of the deceased expressed its inability to release the amount standing to the credit of the deceased in the Provident Fund Account. 9. Thereafter the plaintiff approached the Central Administrative Tribunal, New Delhi seeking release of the amount standing to the credit of Provident Fund Account of the deceased. Central Administrative Tribunal directed the plaintiff to approach an appropriate forum for the said relief. 10. Plaintiff filed the instant suit seeking declaration and consequential reliefs against the defendants. Declaration sought was that the original nomination made by the deceased in favour of the plaintiff is valid and subsisting and that the plaintiff is entitled to receive the amount standing to the credit of the deceased in the Provident Fund Account of the deceased. It was also prayed that the nomination dated 06.07.91 purportedly made by the deceased in favour of defendants be cancelled as being null and void. 11. Apart from the allegations that the nomination dated 06.06.91 made by the deceased in favour of the defendants is forged the other allegations in the plaint are that the relationship between the deceased and defendant no.1 was strained; that the deceased intended to divorce defendant no.1 and that the death of the deceased was a result of criminal conspiracy entered into page 3 of 20 between the defendant no.1 and her friends. 12. Defendants resisted the suit and filed a written statement. In said written statement defendants categorically denied the averments made in the plaint. 13. The defendants filed an application seeking rejection of the plaint. Rejection was sought on the ground that the suit does not disclose any cause of action for the reason nomination does not confer beneficial interest upon the nominee but only a right to receive the amount standing to the credit of the Provident Fund Account of the deceased subscriber and that nominee who receives such amount holds the same for the benefit of the estate of the deceased subscriber and the amount continues to be estate of the deceased and therefore has to be disbursed to the legal heirs of the deceased subscriber as per personal law applicable. In support whereof reliance was placed upon two decisions of the Supreme Court reported as Sarbati Devi & Anr v Smt. Usha Devi AIR 1984 SC 346 and Vishin N. Khanchandani v Vidya Lachmandas Khanchandani & Anr AIR 2000 SC 2747. 14. It was pleaded that admittedly the deceased died intestate and the defendants were the only class I heirs. 15. Holding that the decisions in Sarbati and Vishin's cases (supra) pertain to the Insurance Act, 1983 and Government Saving Certificate Act, 1959 respectively and that provisions of said enactments are quite different from the provisions of the Provident Funds Act, 1925, vide order dated 29.11.06 the learned Trial Court page 4 of 20 dismissed the application under Order VII Rule 11 of the CPC filed by the defendants. 16. In the instant petition the petitioners reiterate the stand taken by them in their application under Order VII Rule 11 of the Code of Civil Procedure. 17. Per contra, respondent/plaintiff has raised two contentions arising out of the language of Sections 5(1) and 2(c) read with 3(2) and 4(1)(a) of the Provident Funds Act, 1925. The contentions are:- I. That the expression “to the exclusion of all other persons” occurring in Section 5(1) of the Provident Funds Act, 1925 means that the amount standing to the credit of Provident Fund Account of the deceased subscriber becomes the absolute and exclusive property of the nominee and that the legal heirs of the deceased subscriber have no right or interest in the said amount. In support whereof, reliance has been placed upon the following judicial decisions:- a) Piare Lal & Ors v Ganpat & Anr AIR 1930 Lahore 437(2). b) Koruprolu Talupulu v Dasetti Narasamma AIR 1967 AP 10. c) M. Malati & Ors v M. Dharma AIR 1968 Ori 8. d) Ugra Sen Singh v Ganpat & Anr. 1995 All LJ 788. II. That the plaintiff is a 'dependent' within the meaning of Section 2(c) of the Provident Funds Act, 1925, and that when the nominee is a dependent, by virtue of the operation of Section 3(2) read with Section 4(1)(a) and Section 5(1) of the Provident Funds page 5 of 20 Act, 1925, the amount standing to the credit of the Provident Funds Account of the deceased subscriber vests in the nominee and thus becomes the property of the nominee. In support whereof, reliance has been placed upon the following 2 judicial decisions:- a) Kadiam Kusuma & Ors v Kadiam Appachiamma & Anr (1985) ILLJ 194 AP. b) Mridul Sengupta & Anr v Shipra Sengupta & Anr 2002 (2) CCC 172 (MP). 18. To appreciate the first contention raised by the respondent/plaintiff it is important to note the legislative history of Section 5 of the Provident Funds Act, 1925. 19. Section 5 of the Provident Funds Act, 1925 as originally enacted read as under:- "5. Rights of nominees (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. 20. There was a conflict of judicial opinion whether a nomination made by a person is only in nature of an authority to the nominee to receive the provident fund or in the nature of a page 6 of 20 testamentary disposition. 21. Noting the expression 'deem to confer such right absolutely until such nomination is varied' occurring in Section 5(1) of the Provident Funds Act, 1925 as also non-obstante clause therein following decisions took a view that a nominee acquires an absolute right to enjoy the fund:- a) N on Singh v Mothi Bai AIR 1936 Mad 477. b) Sitarama Swamy v Venkatarama Rao AIR 1944 Mad 370(1). c) Somayajulu v Somi Devi AIR 1950 Mad 210. d) Nayagam v Krishnaswni AIR 1944 Mad 370. e) Dharma Rao v Venkata Mahalakshmamma AIR 1947 Mad 96. f) Maung Bakin v Ma Pwa Thin AIR 1929 MP 79. g) Mohammad Naim v Munimunnissa AIR 1936 Oudh 32. h) Mabel Head v Miss Kathleen Guest & Anr AIR 1945 Bom 43. i) Anmad Abdul Razzak & Ors v Jamala Bint Mehdi AIR 1935 Bom 234. 22. On the other hand the expressions 'notwithstanding anything contained in any law for the time being in force or any disposition, whether testamentary or otherwise' and 'confers such absolutely' occurring in Section 5(1) of the Provident Fund Act, 1925 were construed by some High Courts as not conferring beneficial interest upon the nominee but only a right to receive the provident page 7 of 20 fund amount and the nominee who receives the amount would hold for the benefit of estate of the deceased subscriber. It was held that the fund continues to be the estate of the deceased. According to this view, the non-obstante clause noted above is intended to take away the impediment in the personal law of the parties to nominate a person to receive the provident amount as a legatee if the nomination was treated as a testamentary disposition, but no beneficial interest is vested in the nominee except a bare right to receive the provident fund exclusively and the said amount continues to be the estate of the deceased subscriber. That the word 'absolutely' was held as not conferring on the nominee a title to the exclusive ownership of the provident fund amount. The decisions which took aforesaid view are as under:- a) Noor Mahomed v Sardar Khatun AIR 1949 Sindh 38. b) Mt. Amna Khatoon v Abdul Karim AIR 1947 All 562. c) Hardial Devi Ditta v Janki Das AIR 1928 Lahore 773. d) Janki Das v Asha Bi AIR 1957 MP 79. 23. In the year 1946, Section 5(1) of the Provident Fund Act, 1925 was amended to read as under:- “5. Rights of nominees- (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 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 occuring before the sum has become payable, has been page 8 of 20 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 contigency specified therein. And if said person predeceases the suscriber 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 where provision has been duly made in the nomination in accordance with the Rules of the Fund, conferring upon some other person such right instead of the person deceased, such right shall, upon the deceased as aforesaid of the said person, pass to such other person.” 24. The following two important changes were introduced in the new Section:- a) The word 'absolutely' occurring in the old section was omitted. b) If the nominee predeceased the subscriber the right conferred upon the nominee became void and of no effect. 25. Considering the afore-noted two material changes, in the decision reported as Shaik Dawood v Mahmooda Begum AIR 1985 AP 321 the Division Bench of the Andhra Pradesh High Court observed as under:- “13. Prior to the amendment of 1946, section of 5 of the Provident Funds Act, 1925, in its material terms, and dealing with a case of nomination provided : "Any nomination which purports to confer upon any person page 9 of 20 the right to receive the whole or any part of such sum on the death of the subscriber ... shall be deemed to confer such right absolutely" There was a conflict of judicial opinion whether the nominee who has the excluded right to receive payment takes the amount to enjoyed by him absolutely or only receives the amount, subject to the rights of the legal heirs of the deceased subscriber. By the amendment of 1946, the word "absolutely" occurring hitherto in section 5 was omitted. After the amendment of 1946, section 5 of the Provident Funds Act, 1925, read in its material terms "where any nomination purports to confer upon any person the right to receive the whole or any part of such sum on the death of the subscriber occurring before the sum has become payable or before the sum, having become payable, has been paid, the said person other shall on the death of the subscriber become entitled, to the exclusion of all other persons, to receive such sum" The amendment, in our view, sought to put an end to the conflict of judicial opinion and to favour the view that the nominee has, after the amendment, only the right to receive the amount which had become payable, without any legislative expression, that such nominee has any right as such to enjoy the money merely on the basis of such nomination. 17. Section 3 of the Act merely provides for protection of compulsory deposits both during the lifetime of subscriber or after the death, when the fund vests in the dependent. Section 4 of the Act provides for repayments and section 5 provides for the rights of nominees. These various provisions have to be read together and with the other provisions of Provident Funds Act. The Act makes provision in the interest of certain large clause of employees of a scheme of compulsory, and to a limited extent voluntary, thrift. Its intention is that such people in case of their retirements have something to live on, and in case of death, have some thing to leave. In the majority of cases, accumulated balance in the provident fund represents the life savings of the employees. Provision for a making nomination is made to facilitate quick repayment so that the nominee gives a nation is made to facilitate quick repayment so that the nominee gives a valid acquittance for the amount paid to him as such nominee. Section 5 of the Act, therefore, provided that the nominee shall become entitled, to the exclusion of all other persons, to receive such sum. The Act had only provided for the exclusive right of the nominee receive and did not provide that the same shall become page 10 of 20 the absolute property of the nominee. Prior to the 1946 amendment, the word "absolutely" occurring in section 5 contributed to the divergence of opinions. After the 1946 amendment, the view expressed by the Madras High Court and shared by other High Courts has become obsolete. Malati's case, (AIR 1968 Orissa 8)(supra) in our view, does not lay down the correct legal position. We dissent from that view. 22. To sum up, out conclusions are : (1) The nominee of a provident fund has only the exclusive right to receive the fund. His rights are the same as that of a nominee under the section 39 of the Insurance Act. (2) The provident fund remains the property of the deceased subscriber and is available for distribution amongst his heirs in accordance with their personal law. The Supreme Court decisions decision in Sarbati Devi's case [1984] 55 Com Cas 214, governs nominations made in respect of provident funds as well. (3) Tulupulu's case, AIR 1967 AP 10 and Lalitha's case [1975] 2 APLJ 168, do not sate the law correctly.” 26. Turning to the decisions relied upon by the respondent, Piare Lal's case (supra) was decided with reference to Section 5(1) as it existed prior to the Amendment incorporated in the year 1946. 27. The decision in Koruprolu Talupulu's case (supra) has merely followed the decision rendered by the Calcullta High Court in In the Goods of Stanley Austin Cardigan Martin AIR 1939 Cal 642 without any discussion. Like Piare Lal's case (supra), Stanley's case also pertains to Section 5(1) as it existed prior to the Amendment incorporated in the year 1946. 28. In M. Malati's case (supra) the Division Bench of the Orissa High Court merely adopted the view expressed by the page 11 of 20 Madras High Court, in the decisions rendered on the basis of the wording used in section 5 prior to the amending Act of 1946. Section 5 of the Act, as amended, was no doubt extracted but there is no discussion as to the effect of the amendment on the divergent opinions expressed by different High Courts on the pre-amended Section 5. 29. Reliance upon the Ugra Sen's case is wholly misplaced for the reason the said decision hold that the nominee has the right to receive the provident fund amount on the death of the subscriber. 30. The Division Bench of the Andhra Pradesh High Court in Shaik Dawood's case (supra) has noted the amendment incorporated and has discussed the affect thereof. I concur with the said view. 31. Pertaining to the second contention raised by the respondent, Sections 3(2) and 4(1)(a) of the Provident Funds Act, 1925 need to be noted. 32. Section 3(2)(a) of the Provident Funds Act, 1925 reads as under:- “3. Protection of compulsory deposit- (1)................ (2) 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 dependant of the subscriber or depositor, or to such person as may be authorized by law to receive the payment on his behalf, shall subject to any deduction authorized by this Act and, save where the dependant is the widow or child of the subscriber or depositor, page 12 of 20 subject also to the rights of an assignee under an assignment made before the commencement of the Act, vest in the dependant, and shall, subject as aforesaid, be free from any debt or other liability incurred by the deceased or incurred by the dependant before the death of the subscriber or depositor.” 33. Section 4(1)(a) of the Provident Funds Act, 1925 reads as under:- “4. Provisions regarding repayment (1) When under the rules of any Government or Railway Provident Fund the sum standing to the credit of any subscriber or depositor, or the balance thereof after the making of any deduction authorized by this Act has become payable, the officer whose duty it is to make the payment shall pay the sum, or balance as the case may be. to the subscriber or depositor, or, if he is dead, shall-- (a) if the sum or balance, or any part thereof, vests in a dependant or under the provisions of Section 3, pay the same to the dependant to such person as may be authorized by law to receive the payment on his behalf............” 34. In the two decisions relied upon by the respondent i.e. Kadiam Kusuma and Mridul Sengupta's cases (supra) a view was taken that the provident fund amount becomes the absolute property of a nominee when the nominee is also a 'dependent' within the meaning of Section 2(c) of the Provident Funds Act, 1925. Gist of the reasoning was that the word 'vest' occurring in Sections 3(2) and 4(1)(a) of the Provident Fund Act, 1925 was used in the wider sense indicating that it intended to confer rights of ownership on the nominee-dependent as against mere right to obtain possession of the fund on behalf of true owners. It was held that the statute statutorily vested the beneficial interest in the nominee- dependant. Reasoning could be culled out from the following page 13 of 20 observations of the Andhra Pradesh High Court in Kusuma's case (supra):- “8. A reading of these two provisions along with S. 5(1) would show that the fund would vest in the nominee when the nominee is a dependent and the fund is payable absolutely to the exclusion of others. S. 2(c) merely defines who is the dependent and does not purport to confer any right upon the dependent. S. 3(2) provides that if under the rules the fund is payable to the dependent then it vests in him and shall be free from any debt or other liability incurred by the deceased-subscriber S. 4(i) contains instructions for payment. Thus we see when the nominee is a dependent by virtue of the operation of S. 3(2) read with S. 4(1)(a) and S. 5(1) of the Act, the fund vests in the nominee and is payable absolutely to the nominee to the exclusion of others. It is difficult to hold that the said vesting is for a limited purpose of receiving the amount but not carrying the beneficial interest with it. When a special provision is made under S. 3(2) vesting the fund in the nominee-dependent and the rules provide for payment to such nominee we must give effect to that provision irrespective of the effect of the nomination in general under S. 5(1).” 35. The question which needs to be answered is; what is the true meaning and import of the word 'vest' occurring in Sections 3(2) and 4(1)(a) of the Provident Funds Act, 1925. 36. This question was considered in the decisions reported as Aimai v Awabai Dhanjishaw Jamsetji & Ors 1924 Sind 57 and Noor Mahomed v Sardar Khatun AIR 1949 Sind 38. 37. In Aimai's case, one Dhanjishaw Master was a widower with one daughter Aimai. Afterwards he married one Awabai. He died leaving behind his second wife and several children. He died intestate. He had nominated his daughter Aimai to receive the provident fund amount. The widow Awabai claimed that the page 14 of 20 provident fund belonged to the estate of the deceased and that she was entitled to recover it from Aimai. Though the controversy in the case revolved around the Provident Funds Act, 1897 but provisions similar to Sections 3 and 4 of the Provident Funds Act, 1925 existed. In the appeal, the Court posed the following question:- “Did he, in any way, divest himself of it