Report No. 137

5.3. Conflicting views of High Courts.-

The Calcutta High Court has held1 that the amount exclusively vests in the nominee and the legal heirs have no right therein. Distinguishing the provisions contained in section 39, Insurance Act, the High Court held:-

"13. the status of a nominee under the Provident Fund Act is completely different from his counterpart under the Insurance Act. The most striking difference about the status of the nominee under the two Acts is clearly discernible from section 10(2) of the Provident Fund Act quoted earlier which expressly provides that the amount standing to the credit of a member of the Fund at the time of his death shall vest in the nominee and it shall be free from any debt or liability incurred by the deceased or the nominee before the death of the member.

From section 10(2) it is abundantly clear that immediately upon the death of member the provident fund money becomes part of the asset of the nominee whereas under the Insurance Act after the death of the assured the money continues to be his asset; and the money which was standing to the credit of the member becomes free even from the debt or liability incurred by the nominee before the death of the member.

Only because the money vested in, and thereby became the property of the nominee after the death of the member such a provision was required to be incorporated as, otherwise, being estate of the nominee, it was liable to be attached for debts or liabilities incurred by him prior to the death of the member. That the nominee under the Provident Fund Act, unlike the nominee under the Insurance Act gets a right to the money also has been made clear by the provisions of paras 61 and 70 of the Scheme quoted earlier."

1. Usha Mnjumdar v. Smt. Smriti Basu, AIR 1988 Cal 115.

5.4. On the other hand the Andhra Pradesh1 and Delhi2 High Courts relying upon the ratio laid down by the Supreme Court in Sarbati Devi's case3 have held that the nominee of a provident fund has only the right to collect the amount and that such a right does not confer an absolute right on him to receive the amount to the exclusion of the statutory beneficiaries.

1. Shaik Dawood v. Mahmooda Begum, AIR 1985 AP 321.

2. Omwati v. Delhi Transport Corpn., New Delhi, 1988 Lab IC 500 (Del).

3. Sarbati Devi v. Smt. Usha Devi, AIR 1984 SC 346.

5.5. The Andhra Pradesh High Court has largely adopted the approach that the position under the Employees' Provident Funds and Miscellaneous Provisions Act, 1952 is the same as that in respect of a nomination under section 39, Insurance Act. For the purpose of the Insurance Act, the Supreme Court in Sarbati Devi v. Usha Devi, AIR 1984 SC 346. has held that the nominee does not become beneficial owner. Correspondingly, (according to the Andhra Pradesh High Court) the nominee under the Employees' Provident Funds Act, also does not become a beneficial-owner.

In contrast, the Calcutta High Court has pointed out that the statutory language in the case of the Employees Provident Funds and Miscellaneous Provisions Act, 1952 is different from that employed in section 39 of the Insurance Act. In particular, because of the words "vest in the nominee" used in section 10(2) of the Employees' Provident Funds Act of 1952, it must be held that immediately upon the death of the member, the provident fund money becomes part of the assets of the nominee whereas, under the Insurance Act, after the death of the assured, the money continues to be his asset.

This is also made clear (according to the Calcutta High Court) by the provision of paras 61 and 70 of the Scheme. It may be mentioned that the Andhra Pradesh High Court does not seem to have noticed section lo(2) of the main Act and as regards paras 61 and 70 of the Scheme, that High Court does not construe the words "right to receive" and "become payable" (used in the Scheme) as indicating an intention to confer beneficial ownership. There are a few other provisions of the Act and the Scheme, discussed in the two judgments. But for the present purpose, it is not necessary to enter into their details.