2009 (8) TMI 1124 - SC - Indian Laws

Legal heirs trump nominees in provident fund distribution per Supreme Court ruling

The Supreme Court held that nomination in a provident fund does not confer beneficial interest, and distribution is governed by the law of succession. The ... Whether nomination of mother by a member of a Provident fund governed by the Imperial Bank of India Employees’ Provident Fund Rules before his marriage confers ownership on the nominee and destroys right of succession of the widow under Succession Act? Whether nomination only indicates the hand which is authorized to receive the amount on the payment of which trustees of the provident fund get a valid discharge? Whether the provident fund can be claimed by the heirs of the member of the provident fund in accordance with the law of succession governing them? Whether it was proper for the High Court to rely upon a forged and fabricated Will which was not even signed by Niharbala? Whether it was proper for the High Court to accept the alleged Will on record in its revisional Jurisdiction, in absence of any application to that effect? Whether the High Court was entitled to take Will on record without giving fresh opportunity to lead evidence on it? Whether the High Court was right in interpreting and relying upon section 3(2) of Provident Fund Act, 1925? Issues:1. Interpretation of nomination in provident fund rules before marriage.2. Beneficial interest of nominee in provident fund.3. Claiming provident fund by heirs under the law of succession.4. Validity of a Will in relation to succession certificate.5. Acceptance of Will by the High Court in revisional jurisdiction.6. Interpretation of Provident Fund Act, 1925.Analysis:1. The case involved a dispute regarding the entitlement to the provident fund and other benefits of a deceased bank employee, Shyamal Sengupta, who died issueless. The appellant, his widow, claimed her share based on the principle that any nomination made by Shyamal Sengupta before his marriage would stand cancelled after his marriage.2. The Trial Court granted a succession certificate to both the appellant and the deceased's mother, dividing the amounts due to Shyamal Sengupta equally between them. The Appellate Court upheld the decision, rejecting the contention that the nomination in favor of the mother excluded the widow from any share.3. The District Judge modified the order, holding that the mother was equally entitled to a share under the Hindu Succession Act, 1956. The High Court, relying on precedents, declared that the nominee is entitled to receive the amount but distribution is to be made according to the law of succession.4. The High Court accepted a Will allegedly executed by the deceased's mother, which specified the distribution of the succession certificate amount. The appellant challenged the reliance on the Will and the High Court's jurisdiction to accept it without giving an opportunity for fresh evidence.5. The Supreme Court, following established legal principles, reiterated that nomination does not confer beneficial interest and that the nominee is entitled to receive the amount but the distribution is governed by the law of succession. The Court directed the bank to release half of the general provident fund amount to the appellant in accordance with the Hindu Succession Act, 1956.6. The appellant's appeal was allowed, emphasizing that the nominee's entitlement to receive the amount does not override the rights of the legal heirs under the law of succession. The judgment clarified the distribution of the provident fund and other benefits according to the applicable legal provisions, ultimately deciding in favor of the appellant.