Union of India vs Aishabi

Hidayatullah, C.J.—This appeal is by the defendant, the Union of India, against a decree for Rs. 5,288-12-0 with costs passed by the Civil Judge, Class I, Narsimhapur.

The facts of the case are as follows:�

One Mohammad Khan, an employee in the G.I.P. Railway died on 3rd February 1944 leaving no issue. The plaintiff was his legally married wife. Mohammad, Khan was a subscriber to the Provident Fund. On his death there stood a sum of Rs. 4,515-14-0 in his account. Mohammad Khan had nominated his brother Dilawarkhan to receive the amount. Dilawarkhan predeceased Mohammad Khan, leaving behind him his widow Mst. Shakuran Bi. After the death of Mohammad Khan, claims to the money were made by Mst. Shakuran Bi and Mst. Aisha Bi, the widow of the subscriber. The dispute was taken to the District Court and an application for: the grant of a succession certificate was made. At first Mst. Shakuran Bi, succeeded. Later the decision was reversed by the District Judge, who granted the certificate to Mst. Aisha Bi, the widow of the subscriber, A revision was filed by Mst. Shakuran Bi and two others in the High Court against that order. Mudholkar J. dismissed the revision and held that u/s 3 of the Provident Funds Act the amount standing to the credit of the subscriber vested in his dependant, the widow, and not in the nominee because the nomination became null and void on the death of the nominee before the subscriber. That decision of Mudholkar J. has since been reported in Shakuran Bi Vs. Aisha Bi ILR 1951 Nag 407.

The Railway authorities, however, declined to give the money in spite of the succession certificate and Mst. Aisha Bi was, therefore, compelled to bring the present suit against the Railway Administration and the Union of India. The learned Judge who tried this suit has decreed the claim of Mst. Aisha Bi in full. He has also commented very strongly upon the conduct of the. Railway authorities, particularly the officers immediately concerned, in declining to give effect to the order of the High Court and the succession certificate granted to Mst. Aisha Bi.

The appellant, the Union of India, contends that the decision of Mudholkar J. is erroneous. There has been a conflict of opinion in India, to which I shall advert presently; but particular reliance is placed by the appellant on a decision given by Grille C.J. and myself in Governor General in Council vs. Jagannath ILR 1948 Nag. 357 which, it is contended, the learned District Judge and Mudholkar J. were bound to follow in preference to the decision of the Calcutta High Court in Nidhusudan Mukherjee and Others Vs. Smt. Bibhabati Debi and Others, on which they relied, Mudholkar J. in dealing with the earlier Division Bench case of the Nagpur High Court distinguished it�and, in my opinion, rightly so. In Governor General in Council Vs. Jagannoth (cit-sup.) the specific question which is before us now was not considered. In that case the nominee Tatya (brother of the subscriber) survived the nominator and the amount was paid to him. The widow and the son of the subscriber were claiming the amount as dependants, but it was paid to Tatya on the strength of the nomination in his favour. His letter to the Railway authorities to pay the money to the dependants did not reach the Chief Auditor before payment was actually made to him, and the letter was held by the Division Bench to be no more than a pay order liable to be cancelled by Tatya either expressly or by implication. It was not treated as an assignment of the claim u/s 130 of the Transfer of Property Act.

In dealing with the case Grille C.J. and I only considered the respective claims of the nominee and the dependants. We declined to hold, as was done in the Calcutta case above cited, that section 4 (1) of the Provident Funds Act incorporates a preference in favour of dependants and held that clauses (a) and (b) thereof stand on an enqual footing. That case is thus not in cur way and is not an authority for the proposition that on the death of the nominee prior to that of the subscriber, the legal representatives of the nominee have preference over the dependants. No doubt, the Calcutta case was doubted by the Division Bench but that was on quite a different point. I do not think that the dissent goes further than what is stated here. However, I do not propose to deal with the Calcutta case nor with the dissent which has been recorded by the Calcutta High Court itself against that decision in Keshablal vs. Ivarani Rudra 50 C.W.N. 872, because the latter Calcutta case only decided that the effect of the vesting of the fund u/s 3 (2) of the Provident Funds Act in a dependant-nominee is to exclude other dependants not so nominated.

There are, however, many cases decided by the Madras and the Bombay High Courts which were cited by Shri Shevde in support of his contention that on the death of the nominee the legal representative of the nominee stands in the shoes of the nominee and unless the nomination is cancelled the legal representative is entitled to receive the money to the exclusion of the dependants. The leading case is M. Mon Singh Vs. Mothi Bai, . In that case one Mothi Bai''s husband was the nominee and he predeceased the subscriber. Mon Singh, who was an heir of the subscriber, laid claim to a succession certificate, but failed. It was held by the High Court that the "absolute right to receive" the money, which was conferred by the rules which reproduced section 5 of the Provident Funds Act meant a vested right in the money which passed to the heir of the nominee at his death and that Mothi Bai was entitled to succeed. The learned Judges followed Benett vs. Slater (1899) 1 Q.B. 45, and Redman, In re, Warton vs. Redman (1901) 2 Ch, 471. It was held on the authority of Ma Kyway vs. Ma Mi Lay AIR 1929 Rang. 54 that the nominee was "not merely a person designated to receive the money and give the Railway Company a clear quittance by a beneficiary". Their Lordships of the Madras High Court in dealing with this point relied upon the dictum of Kekewich J. in Redman''s case cited in this paragraph as supporting the view of the Rangoon High Court. Actually it was not Kekewich J., but Phillimore J. (as he then was) who had so held in an earlier case, Caddick vs. Highton reported in the foot-notes to the ruling, and the dictum was followed by Kekewich J. though reluctantly.

Man Singh''s case was followed in Korlam Sitaramaswamy Vs. Korlam Venkatarama Rao, . The nominee of the subscriber in that case was the first wife who predeceased her husband. The nomination was not cancelled and the son from the first wife was held entitled to the amount to the exclusion of the son from the second wife; The learned Judges conceded that but for section 5 the combined effect of sections 3 and 4 would have been in favour of the losing party. They referred also to Lakshmamma (dead) and Another Vs. P.S. Subramanyam, . The last case need not detain me. It only laid down that persons who were not dependants could also be nominated and that a non-dependant, if nominated, was not postponed to the dependants.

In Sobrahmanya Somayajulu vs. Lakshmi Somi Devi (1949) 1 MLJ 635, it was held that the nomination did not become null and void if the nominee predeceased the subscriber and the nominee''s heir was entitled to get the money. The reason given was that the amount vested absolutely in the nominee and passed to the heir of the nominee. Reliance was placed on Mon Singh vs. Mothi Bai (cit. sup) and Korlam Sitaramaswamy vs. Korlam Venkatarama Rao. In Thaj Mahomed Saib vs. Balaji Singh ILR 57 Mad. 440, the nominee did not predecease the subscriber. It was a case of a dependant getting the money u/s 4 (1) (a) of the Provident Funds Act. It was held that the money in the hands of the dependant could not be regarded as the assests of the deceased and that it became the property of the dependant, I need not consider that case.

I now consider some Bombay cases in which the point has arisen. In Ahmad Abdul Razaak Vs. Jamala Bint Mehdi, , the subscriber nominated his widow. The nephews claimed a share in the property under the personal law. It was held that the nominee was entitled to the whole of the amount and that section 5 gave the right to the nominee to receive the money absolutely. The nominee in that case was however a dependant, and it was held that u/s 3 the nominee-dependant got the property absolutely. Ma Kyway vs. Ma Mi Lay (cit, sup.) was followed.

In Mabel Head Vs. Miss Kathleen Guest, , it was held that a non-dependant could be validly nominated even if there was a dependant in existence. That case also followed Ma Mi Kyway vs. Ma Mi Lay (cit. sup.). In Komalsing Kuwarsing Vs. Krishnabai, , it was laid down that a non-dependent could be nominated and the nominee, whether a non-dependent or a dependent, received the fund absolutely for his own benefit and not for the benefit of the dependents of the subscriber, In that case the subscriber''s brother was the nominee and the widow was claiming the amount either wholly or partially. Reliance was placed on Ma Kyway vs. Ma Mi Lay (sit. sup), Abdul Ahmad Razzak vs. Jamala Bint AIR 1935 Bom 534 , Mabel Head Vs. Miss Kathleen Guest, and Lakshamma vs. Subramanyam AIR 1939 Mad 488. The learned Judges observed as follows:�

On the view taken by the trial Court the word ''absolutely'' in section 5 would be meaningless. If the nominee is only to recover the amount and band it over to the dependent, then there is no propriety in nominating a non-dependent.....Where, therefore, the rules do not prohibit nominations in favour of those who are not dependents, a nominee, though not a dependent, takes an absolute interest in the fund, though he may not be entitled to the benefit of section 3 (2).

The learned Judges on that occasion dissented from Nidhusudan Mukherjee and Others Vs. Smt. Bibhabati Debi and Others, Mt. Amna Khatoon Vs. Abdul Karim, . Hayatuddin vs. Mst. Rahiman AIR 1935 Sind 73 . AIR 1928 773 (Lahore) . Imni vs. Awabai AIR 1924 Sind 57 and Mr. Hurmat Bibi vs. Mt Kaz Banu AIR 1932 Sind 115.

In Mohammad Naim vs. Mst. Munim-un-nessa AIR 1936 Oudh 32; there was a difference of opinion between Srivastava J. and Ziaul Hasan J. King C.J. who beard the case as a third Judge, laid down that the nominee under the declaration of the depositor was entitled not only to realise the deposit but to receive and appropriate it to his own use and benefit, free from any charge or attachment or liability enforceable by other heirs OF creditors. Ziaul Hasan J., however, said that the right was to receive the money and no more. Srivastava J. in his opinion had observed that the personal law was wiped out and the benefit was conferred on the nominee absolutely. According to him, the nominee became entitled to the amount absolutely and was not given an absolute right merely to realise it. Sing C.J. observed that the word "absolutely" suggested that the recipient was deemed to be entitled to receive the money free from any charge or attachment or liability enforceable by other heirs or by creditors. According to him, it implied also that the recipient took a beneficial interest in the sum which he received. According to him, the opening words of section 5 read with the word "absolutely" gave the nominee an absolute ownership of the money.

In Ma Kyway vs. Ma Mi Lay (cit. sup.) which seems to have influenced most of these decisions, it was only held that the nomination was in the nature of the testamentary disposition and was valid even though by reason of personal law wills might be prohibited,

On the other side many cases are cited in which it was held that the right of the nominee was merely to receive the amount, but that the amount did not become his but was to be held for the benefit of the dependents or heirs of the subscriber, This view was expressed in a series of cases in the Sind Chief Court beginning with Aimai vs. Awabai AIR 1924 Sind 5, and ending with Noor Mohamed vs. Mt, Sardar Khatun AIR 1949 Sind 38. I have given the reference of all the Sind cases, except one viz., Ismail vs. Amino AIR 1929 Sind 158. The most exhaustive treatment of the subject is to be found in the judgment of Tayabji C.J. and Meher J. in Noor Mohamed vs. Mt. Sardar Khatun (cit. sup.). All the relevant authorities were considered and it was ruled that the words of section 5 did give the right to receive the money absolutely but not to appropriate it.

The short question before me is which of the two views is correct. The first view of decisions is influenced by the decision of the Rangoon High Court. In that case it was only held that a nomination was in tie nature of a testamentary disposition and the nominee had a beneficial interest. Reliance has invariably been placed also upon M. Mon Singh Vs. Mothi Bai, which referred to two English cases where the interest of the nominee was described as a beneficial interest. Of course, the law on the subject of provident fund and contributions to Friendly Societies etc. must in the ultimate analysis rest upon the terms of the rules controlling such contributions. Most of these, however, allow nominations to be made, and the question that falls for consideration is whether the nominee takes the money beneficially or not. Incidentally is involved another question, namely, what happens when the nominee dies during the lifetime of the subscriber.

Now, the dictum of Phillimore J., to which I have already referred, was as follows:�

I cannot see why the estate of a nominee who dies before the nominator should be deprived of the benefit intended to be conferred, even although his death may be unkown to the nominator.......I do not see anything in the wording of the rule to prevent the policy, money being due to the legal personal representative of the nominee.

The dictum of Phillimore J. (as he then was) was not accepted by the Chief-Registrar of the Friendly Society, just as the dictum of Mudholkar J. was not accepted by the Railway authorities in the present case. For years the dictum of Phillimore J. (as he then was) stood. In 1912 however, the question of the exact nature of the nomination came before the House of Lords in Eccles Provident Industrial Co-operative Society Ltd. Vs. Griffiths 1912 A.C. 483. In that case Lord Mersey explaining the effect of section 25 of 56 and 57 Vict. C. 39, observed that the nomination was in the nature of a testamentary disposition and that till the death of the subscriber the nominee takes no beneficial interest in the property and, like any other testamentary disposition, is, subject to the rules of the Funds, also subject to the law of the Wills. This is what Lord Mersey observed:�

The object of S. 25 is, in my view, to give to the poorer members of a society that is to say, to those who have not more than 100 Pounds to their credit, the power to make provision for the disposal, at their death, of this small sum without the expense being incurred of the making of a will or of administering this part of their estate, Once made the nomination takes effect, not by creating any charge or trust in favour of the nominee as against the nominator, as was suggested during the argument (for the nominator can at any moment revoke the nomination), but giving to the nominee a right as against the society, in the event of the death of the member without having revoked the nomination, to require the society to transfer the property in accordance with the nomination. Until death the property of the member, and all benefits accruing in respect of it during his life time are his also. The view contended for by the appellants would make the nomination defeasible not merely by the statutory revocation provided for the purpose, but by possible future and uncertain events, such as payments by the member or credits by the society of sums to the member''s account, having the effect of increasing the total to his credit at his death to a sum over 100 pounds.

A similar view was expressed by Farwell, L.J. in the same case in the Court of Appeal. Though his dissenting judgment was not approved by the House of Lords, his statement of the effect of section 25 found concurrence in the speech of Lord Mersey, Farwell L.J. said:-

Section 25 of the Act of 1893 like several other sections of the same character in similar Act, is in my opinion intended to confer a benefit on members of societies of this kind by giving them a limited power to disposition in its nature testamentary without the formality and expense of making a will or obtaining probate. The nomination in pursuance of such a power is like any other testamentary disposition, revocable, as, under the Wills Act, a will is revocable, and, like a will, does not, prior to the nominator''s death, affect his property, but leaves him free to deal with it as he pleases, either by withdrawing it in accordance with the rules of the society or receiving payment of his loans to the society, without any power of interference by the nominee. The nominator is in the position of a testator, and the nominee of a legatee.": In re Barnes Asheden vs. Heath (1940) 1 Ch. 267 at 272.

These two cases were considered by Farwell J. in In re Barnes Asheden vs. Heath (cit. sup.) in which the learned Judge dissented from the decision of Phillimore J. (as he then was) and laid down that the nomination is in its nature testamentary and being ambulatory the death of the nominee in the life-time of the subscriber defeats the nomination, so that on the death of the member his legal personal representative is entitled to the property and not the legal representative of the nominee. He declined to hold that a nomination is an appointment by deed.

The question that arises is whether the reasoning in M. Mon Singh Vs. Mothi Bai, does not suffer by reason of these observations. It is to be recalled that in Ma Kyway vs. Ma Mi Lay AIR 1929 Rang. 54 the learned Judge also described the disposition as a testamentary one and not an appointment by a deed. Farwell J. dissented from the observations of Phillimore J, (as he then was) that the legal representatives of the subscriber stand in the shoes of the nominee who dies during the life-time of the subscriber.

It is necessary to quote section 5 of the Provident Funds Act at this stage. It reads:�

(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.

(2) Notwithstanding anything contained in the Succession Certificate Act, 1889, or the Bombay Regulation VIII of 1827, any such person shall, on the death of the subscriber or depositor, be entitled to the grant of a certificate under that Act, or that Regulation, as the case may be, entitling him to receive payment of such sum or part, and such certificate shall not be deemed to be invalidated or superseded by any grant to any other parson of probate or letters of administration to the estate of the deceased.

The section merely wipes out all the personal and other law for the time being in force and also sets at naught any other disposition by the subscriber, whether testamentary or otherwise, creating a right in the nominee to receive the money from the Government or the other holder of the provident fund. It is also stated in the section that the nomination confers this right on the nominee absolutely. In my opinion, this last provision cannot be read as making the nominee the owner of the fund. It only gives him the right to demand it unconditionally. To explain my meaning I give a few examples. It is not open to the holder of the fund to demand any document from a Court or to ask the recipient for an indemnity bond or security before the payment is made. The right is conferred absolutely or in other words, unconditionally, So long as the nomination stands, the nominee is required only to prove that he is the person nominated by the subscriber and he can then receive the amount without any conditions being imposed on him. The opening words remove all impediments which might be created by the holder of the fund, the heirs and dependants or third parties like creditors. There is nothing in those words which makes the money belong to him after he bas received it, and indeed, there is nothing in those words which shows that even before the death of the subscriber the nominee is entitled to a beneficial interest in the money. I have already quoted from the English cases and I cannot do better than respectfully adopt the reasoning of Farwell J. in In re Barnes Ashenden Vs. Heath (cit. sup.).

I accordingly confirm the decision of Mudholkar J. and hold that the money was payable not to the widow of Dilawarkh but to Mst. Aishabi, the respondent in this case, I must say that the learned Judge of the lower Court need not have been so hard upon the officers administering the Provident Fund, because they have to perform their duty according to statute under which they hold the Fund. Even the decision of Phillimore J. was not followed by the Chief Registrar of the Friendly Society and the decision was later found to be erroneous on the dicta of the King''s Bench, the Court of Appeal and the House of Lords.

I would, therefore, hold that there is no force in this appeal. It fails and is dismissed with costs. It is to be hoped that Government will now pay immediately to the widow the money of which she has been deprived for no less than 13 years.

Chaturvedi J.

I agree.