Report No. 137

5.8. Need to end the uncertainty and settle the law urgently.-

The resultant position as it obtains today is that whereas one High Court proclaims that the provident fund amount 'vests' absolutely upto the 'nominee' as a beneficiary in his or her right another High Court holds to the contrary to the effect that the nominee is a mere collecting agent on behalf of the ultimate beneficiaries under the law. Till the Supreme Court resolves the controversy in case there is an appeal and it is not withdrawn as settled, the uncertainty will continue to persist. As the matters stand today even if an appeal reaches the Supreme Court and is disposed of on merits it may take more than a decade. The consequence would be:-

(1) In some States the nominee will get the provident fund amount as an absolute beneficiary. In other States the nominee will have only obligation to act as a collecting agent. The same law will thus operate differently in different parts of India and benefit different persons.

(2) The employee making the nomination himself will not know what he is doing and who will benefit by making the nomination and his purpose in making nomination is likely to be defeated depending on the uncertainty as to how the court will construe the legal consequences of nomination.

(3) Neither the nominee nor the other members of his family will know who is the rightful claimant for years together and will not be able to utilise or employ the funds.

(4) Nominee and other family members of the deceased are likely to be locked in a decades-drawn litigation.

(5) Instead of the funds providing succour to the family it will perhaps make it incur huge litigation costs.

5.9. It would be counter-productive and result in defeating the benign goal of the benevolent legislation to countenance such a situation. How can a situation be tolerated where there is uncertainty as to who will benefit by 'nomination' on the part of the maker of the nomination, the members of the family in distress as also the interpreter and administrator of law? A satisfactory solution has therefore to be found and found with a sense of urgency.

5.10. Suggested solution. On an anxious consideration of the issue, it appears that there are three options:-

I

First option seems to be to take a statutory provision in the Act and the Scheme to the effect that the 'nominee' would become an absolute beneficiary in his or her own right.

II

Second option that suggests itself is to make a statutory provision to the effect that the nominee will be entitled to collect the amount in question for and on behalf of such members of the family [as defined by para. 2(g) of the Scheme] for the purpose of being disbursed amongst such family members as are specified or dealt with in para. 70(ii) of the Scheme. In other words, payment will be made to the 'nominee' for the benefit of the very persons who would have been even otherwise entitled to be paid under the aforesaid provisions of the Scheme in case there was no nomination. And without the necessity to produce a succession certificate.

III

Third course which commands itself is to make a statutory provision enabling an employee to clearly state in writing in the very application making nomination either that he wants that "the nominee shall take the amount absolutely in his or her own right" or that the "nominee shall collect it and pay to my family members entitled thereto under para. 70 (ii) read with para. 2(g) of the Scheme".

The Commission is of the opinion that the third option would appear to be just and fair and would be preferable in as much as the employee would be fully aware and conscious of what he is doing by making the 'nomination' and the consequences thereof.

5.11. On giving anxious consideration to all the relevant aspects, it appears possible to evolve a formula which would satisfy the demands of social justice and fairness besides according due weightage to the desire of the employee concerned. The solution which strikes as eminently satisfactory is this.

A statutory provision may be made to the effect that the amount payable under the Act and the Scheme will vest in the nominee who will be called the "beneficiary-nominee" unless the concerned employee has named some person as a "collector-nominee" for the specific purpose of collecting the amount on behalf of the members of the family as defined in para. 2(g) for disbursement as per para 70(ii) of the Scheme.

In other words, it would tantamount to giving an option to the workmen concerned who can name either a beneficiary-nominee or a collector-nominee upon the significance of such nomination being explained to him. He may be required to express his option in clear terms stating that the nominee will be a beneficiary-nominee and not a collector-nominee or vice versa. The same formula can also be evolved in respect of life insurance policies and the recommendation by the Law Commission in its 82nd Report may be reiterated with this modification.