Report No. 137
5.6. The preferable view.-
Thus, by reason of the conflicting decisions regarding the rights of a nominee under the Act of 1952 and the Scheme framed thereunder, the question arises as to which of the two views needs to be accepted. The view taken by Calcutta High Court1 appears to be correct on an overall interpretation of the relevant provisions contained in section 10(2) of the Act of 1952 and paras 61 and 70 of the Scheme framed thereunder for the following reasons:-
1. Usha Majumdar v. Snit. Smriti Basu, AIR 1988 Cal 115.
(i) Section 10(2) of the Act of 1952 specifically provides that any amount standing to the credit of a member in the fund or of an exempted employee in a provident fund at the time of his death and payable to his nominee under the Scheme or the rules of the provident fund shall, subject to any deduction authorised by the said scheme or rules, vest in the nominee. (Emphasis supplied). There is no such or similar provision in the Insurance Act, 1938.
(ii) Para 61(3) of the Scheme of 1952 places a restriction on the right of a subscriber in making a nomination. It provides that if a subscriber has a family at the time of making the nomination, the nomination shall be in favour of one or more persons belonging to his family and that any nomination made by such member in favour of a person not belonging to the family shall be invalid.
Moreover, para 61(4) of the Scheme of 1952 further provides that if at the time of making the nomination, the subscriber has no family, the nomination may be made in favour of any person(s) but such nomination shall forthwith be deemed to be invalid if subsequently the subscriber acquires a family. There is no such restriction in the Insurance Act, 1938. 'Under the said Act, a nomination can be made in favour of any person.
In other words, under the Insurance Act, an assured person, whether or not he has a family at the time of making the nomination, can nominate any person to receive the amount of the Insurance Policy and such nomination remains valid till the same is specifically cancelled or revoked by the assured or on the nominee predeceasing the assured. The difference between the two provisions is not unintentional. The Legislature appears to have enacted the two provisions differently with a specific object.
The object is that under the Act of 1952 since the nomination is restricted to a member of the family, such a nominee should be entitled to the amount of the Fund absolutely and to the exclusion of others; whereas under the Insurance Act, a nomination can be made in favour of any person, such nominee should receive the amount for the benefit of all the legal heirs.
(iii) The proposition that a nominee under the Act of 1952 and the Scheme framed thereunder gets an absolute interest in the,amount of the Fund to the exclusion of others, is also supported by the provisions of para 61(2) of the Scheme which says that a subscriber may in his nomination distribute to amount that may stand to his credit in the Fund at his own discretion. The concept envisaged by this provision establishes beyond doubt that the nominee(s) would get the amount absolutely.
This provision cannot be interpreted to mean that the subscriber is to distribute the money between the nominee for further distribution among the legal heirs. As an illustration in a given case a Subscriber nominates his two sons and further provides that both such nominees shall get half share in the amount of the Fund. One of the nominees predeceases the subscriber. A question would arise as to what would be the effect of one nominee pre-deceasing the subscriber. Whether the surviving nomineer will get the whole amount or whether the nomination as a whole would become ineffective?
The answer to this situation is found in para 61(5) of the Scheme, which provides that if the nominee predeceases the subscriber, the interest of the nominee shall revert to the subscriber who may make afresh nomination in respect of such interest. Therefore, in the case taken as an illustration, in the event of one nominee pre-deceasing the subscriber, only half share of the deceased nominee will revert to the subscriber. Undoubtedly, a subscriber is at liberty to cancel, revoke or modify but then the nominee, whoever he may be, ultimately acquires an absolute interest in the amount of the Fund.
(iv) The proposition that a nominee will take the amount of the fund absolutely to the exclusion of other heirs also finds support from the provision of para 70(i) of the Scheme, which permits nomination in respect of a part of the amount of the Fund. If a nominee was not to get any absolute beneficial interest, the Legislature would hot have provided for a nomination in respect of a part of the amount. There is no such corresponding provision in the Insurance Act, 1938.
(v) The provisions contained in paras 61 and 70 of the Scheme read with section 10(2) of the Act of 1952 are to be read as an exception to the personal law regarding succession governing the subscriber. This is evident from the bare provision of para 70. Under these provisions the amount is required to be paid to the nomniee(s) if there be a nomination. In the cases where there is no nomination the amount is to be paid to the member of the family of the subscriber in equal shares.
Through the children-sons or daughters-majors or minors-married or unmarried-are included within the definition of the word "family" in clause (g) of para 2 of the Scheme, under the proviso to para. 70(ii) of the Scheme, major sons, major sons of a deceased son, married daughters whose husbands are alive and married daughters of a deceased son whose husbands are alive, have been specifically excluded and they are not entitled to any share in the amount of provident fund in spite of the fact that they are members of the family of the subscriber and the legal heir under the personal law of succession.
Further clause (iii) of para 70 of the Scheme provides that in case there is not person entitled to receive the amount under clause (i) or clause (ii), then the amount is to be paid to the persons legally entitled to it, i.e., legal heirs according to the personal law of succession. The provision of clause (iii) also supports the view that para 70 of the scheme is to be read as an exception to the provisions of personal law regarding succession. In other words, the provisions contained in paras 61 and 70 of the Scheme read with section 10(2) of the Act, prescribe a mode of succession altogether different from the mode provided under the personal law of succession governing the subscriber.
5.7. The Calcutta view would appear to be correct in view of the language, content and intendment of section 10(2), And para 61(3) of the Scheme of 1952 provides a clue to this object by providing that if the member has a family, then the nomination should be in favour of a person belonging to the family, as defined in para 2(g) of the Scheme. Moreover, the common man or women would perhaps justifiably assume that the nominee would be beneficially entitled to the said amount.
Understandably so because the desire of the person covered by the Act in making nomination might well be to extend a protective umbrella to the person in whose welfare he is most concerned in the unfortunate event of his or her demise resulting in rendering destitute such a person who was economically dependent on the employee covered by the Act. From all points of view, therefore, the Calcutta view would appear to be more persuasive.