Full Judgment Text
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CASE NO.:
Special Leave Petition (civil) 12766 of 1999
PETITIONER:
SHRI VISHIN N. KHANCHANDANI & ANR.
Vs.
RESPONDENT:
VIDYA LACHMANDAS KHANCHANDANI & ANR.
DATE OF JUDGMENT: 16/08/2000
BENCH:
K.T. Thomas & R.P. Sethi.
JUDGMENT:
SETHI, J.
Leave granted.
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Whether the nominee specified in the National Savings
Certificate, on the death of its holder, becomes entitled to
the sum due under the certificate to the exclusion of all
other persons?, or whether the amount of the certificate can
be retained by him for the benefit of the legal heirs of the
deceased- is the sole question required to be adjudicated by
us in this appeal by special leave.
The present dispute is with respect to the savings
certificates, the holder of which was Lachmandas Naraindas
Khanchandani. Appellant No.1 is the brother, appellant No.2
the step brother, the respondent No.1 is the widow and
respondent No.2 is the daughter of the deceased- holder.
The deceased was serving in the Income Tax Department and
has left behind debts consisting of National Savings
Certificates, amounts in Compulsory Deposit Schemes, Post
Office Cumulative Time Deposit Scheme and Pass Book Post
Office Savings Bank. The respondent No.1 filed a petition
under Section 370 of the Indian Succession Act, 1925 for the
grant of succession certificate in respect of debts and
securities left by the aforesaid deceased in the Court of
Civil Judge, Senior Division, Thane. The appellants
contested the claim with respect to such national savings
certificates in which they had been mentioned as nominees of
the deceased. The court of Civil Judge, Senior Division,
Thane held that the respondents-plaintiffs were entitled to
the grant of succession certificate in respect of the debts
mentioned in Schedules A and B to the application excluding
the National Savings Certificates enumerated at Sl.Nos.17 to
21 in Schedule A and Compulsory Deposit Scheme mentioned at
Sl.Nos.1 to 4 in Schedule B. It was further held that the
appellants herein were not entitled to the delivery from the
respondents of the National Savings Certificates and
Passbook Post Office Savings Bank in respect of which they
had been nominated by the deceased. The Civil Judge while
issuing the succession certificate in favour of the
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respondents-plaintiffs to the extent indicated hereinabove
held them entitled to get the amount of the said debts with
accrued interest thereon subject to their furnishing
necessary court-fee stamp, Estate Duty Certificate and the
security to the extent of the assets. Not satisfied with
the orders of the Civil Judge, the respondents herein filed
First Appeal No.849 of 1982 in the High Court of Bombay
praying for setting aside that portion of the order of the
Civil Judge by which their claim with regard to the National
Savings Certificates, in respect of which the appellants
were the nominees, had been disallowed. The High Court
allowed the appeal and directed the issuance of succession
certificate in favour of the respondents in respect of debts
not only mentioned in Sl.Nos.1 to 16 in Annexure A and
Sl.Nos.2,3,5 and 6 in Annexure B but also in respect of the
debts mentioned at Sl.Nos.17 to 26 in Annexure A and
Sl.Nos.1 and 4 in Annexure B. It was further directed that
the respondents shall be entitled to equal share in the
amounts which were due on securities listed in Annexures A
and B to the application/plaint on payment of necessary
court fees stamps and furnishing estate duty certificate.
As there was no other claimant, the court held that there
was no necessity to furnish any security.
Feeling aggreived, the appellants- the nominees of the
National Savings Certificates have filed this appeal
contending that under Section 6 of the Government Savings
Certificates Act, 1959, after the death of the holder they
had become entitled to the payment of such Saving
Certificates in which they were nominees, to the exclusion
of all other persons including the respondents and entitled
to utilise the aforesaid amounts in the manner they like.
It is contended that by their nomination, the holder of the
National Savings Certificates, namely, Shri Lachmandas
Naraindas Khanchandani has diverted the normal course of
succession. According to them Section 6 provides another
mode of succession, to the exclusion of testamentary and
non- testamentary successions. Alternatively, it was urged
that nomination itself amounted to testamentary succession.
The Government Savings Certificate Act, 1959 (being Act
No.46 of 1959) (hereinafter referred to as "the Act") was
enacted to make certain provisions in respect of the
Government Savings Certificates. The Act applies to such
class of savings certificates as the Central Government may,
by notification, in the official gazette, specify in that
behalf. The Act was applied to the National Savings
Certificates by notifications issued with respect to various
issues of such certificates. It is not disputed that the
National Savings Certificates in dispute are governed by the
provisions of the Act.
To appreciate the rival contentions urged at the Bar, it
is necessary to examine the provisions of the Act
particularly Sections 6, 7 and 8 which provide as under:
"6. Nomination by holders of savings certificates.--
(1) Notwithstanding anything contained in any law for the
time being in force, or in any disposing, testamentary or
otherwise in respect of any savings certificate, where a
nomination made in the prescribed manner purports to confer
on any person the right to receive payment of the sum for
the time being due on the savings certificate on the death
of the holder thereof and before the maturity of the
certificate, or before the certificate having reached
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maturity has been discharged, the nominee shall, on the
death of the holder of the savings certificate, become
entitled to the savings certificate and to be paid the sum
due thereon to the exclusion of all other persons, unless
the nomination is varied or cancelled in the prescribed
manner.
(2) Any nomination referred to in sub-section (1) shall
become void if the nominee predeceases, or where there are
two or more nominees all the nominees predecease, the holder
of the savings certificate making the nomination.
(3) Where the nominee is a minor, it shall be lawful for
the holder of the savings certificate making the nomination
to appoint in the prescribed manner any person to receive
the sum due thereon in the event of his death during the
minority of the nominee.
(4) A transfer of a savings certificate is held by or on
behalf of any person as a pledgee or by way of security for
any purpose, such holding shall not have the effect of
cancelling a nomination but the right of the nominee shall
be subject to the right of the person so holding it.
7. Payment on death of holder: (1) if the holder of
savings certificate dies and there is in force at the time
of his death a nomination in favour of any person, payment
of the sum due thereon shall be made to the nominee.
(2) Where the nominee is a minor, payment of the sum due
thereon shall be made--
(a) in any case where a person has been appointed to
receive it under sub-section (3) of Section 6, to that
person, and
(b) where there is no such person, to any guardian of
the property of the minor appointed by a competent court or
where on such guardian has been so appointed, to either
parent of the minor, or where neither parent is alive, to
any other guardian of the minor.
(3) Where the sum due on a savings certificate is
payable to two or more nominees, and either or any of them
dies, the sum shall be paid to the surviving nominee or
nominees.
(4) If a person dies and is at the time of his death the
holder of a savings certificate and there is no nomination
in force at the time of his death and probate of his will or
letters of administration of his estate or a succession
certificate granted under the Indian Succession Act, 1925,
is not within three months of the death of the holder
produced to the prescribed authority, then, if the sum due
on the savings certificates does not exceed such limit as
may be prescribed, the prescribed authority may pay the same
to any person appearing to it to be entitled to receive the
sum or to administer the estate of the deceased.
(5) Nothing contained in this section shall be deemed to
require any person to receive payment of the sum due on a
savings certificate before it has reached maturity or
otherwise than in accordance with the terms of the savings
certificate.
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8. Payment to be a full dishcarge--(1) Any payment made
in accordance with the foregoing provisions of this Act to a
minor or to his parent or guardian or to a nominee or to any
other person shall be a full discharge from all further
liability in respect of the sum so paid.
(2) Nothing in sub-section (1) shall be deemed to
preclude any executor or administrator or other
representative of a deceased holder of a savings certificate
from recovering from the person receiving the same under
section 7 the amount remaining in his hands after deducting
the amount of all debts or other demands lawfully paid or
discharged by him in due course of administration.
(3) Any creditor or claimant against the estate of a
holder of a savings certificate may recover his debt or
claim out of the sum paid under this Act to any person and
remaining in his hands unadministered in the same manner and
to the same extent as if the latter had obtained letters of
administration to the estate of the deceased."
Mr.Sanjay K. Kaul, Sr.Advocate appearing for the
appellants submitted that Section 6 of the Act very
unambiguously provides that notwithstanding anything
contained in any law for the time being in force or in any
disposition testamentary or otherwise in respect of any
savings certificate where a nomination is made, the nominee
shall, on the death of the holder of the savings
certificate, become entitled to the savings certificate and
to be paid the sum due thereon to the exclusion of all other
persons. Referring to sub-section (3) of Section 6, the
learned counsel submitted that in case where the nominee is
a minor, the holder of the savings certificate has a right
to make the nomination to appoint in the prescribed manner
any person to receive the sum due thereon in the event of
his death during the minority of the nominee. It is
contended that if the intention was not to entitle the
nominee to be paid and to retain the sum due on such
national savings certificates, there was no necessity of
making a provision as has been incorporated in sub-section
(3) of Section 6. Section 7 was also relied upon to urge
that after the death of the holder, the nominee becomes
entitled to the payment of the sum due without there being
any further obligation upon him. In support of such an
argument further reliance was placed upon sub-sections (3)
and (4) OF Section 7. He also tried to distinguish the
verdict of this Court in Smt.Sarbati Devi & Anr. vs.
Smt.Usha Devi [1984 (1) SCC 424] by pointing out the
difference of the language and phraseology in Section 6 of
the Act and Section 39 of the Insurance Act. According to
him the words, "on the death of the holder of the savings
certificate, become entitled to the savings certificate and
to be paid the sum due thereon to the exclusion of all other
persons", appearing in Section 6 of the Act have not been
incorporated in Section 39 of the insurance Act suggesting
that the legislature had intended to make the nominee
absolute owner of the value of the certificates.
The law in force in England on the position of a nominee
who has been treated to be a third party in relation to a@@
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claim regarding insurance policy, is summarised in@@
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Halsbury’s Laws of England (Fourth Edition), Vol.25, para
579 as under:
"Position of third party. --The policy money payable on
the death of the assured may be expressed to be payable to a
third party and the third party is then prima facie merely
the agent for the time being of the legal owner and has his
authority to receive the policy money and to give a good
discharge; but he generally has no right to sue the
insurers in his own name. The question has been raised
whether the third party’s authority to receive the policy
money is terminated by the death of the assured; it seems,
however, that unless and until they are otherwise directed
by the assured’s personal representatives the insurers may
pay the money to the third party and get a good discharge
from him."
Various High Court in India in different cases, namely,
Ramballav Dhandhania v. Gangadhar Nathmall [AIR 1956 Cal.
275], Life Insurance Corporation of India v. United Bank of
India Ltd.[AIR 1970 Cal 213], D. Mohanavelu Mudaliar v.
Indian Insurance and Banking Corporation Ltd., Salem [AIR
1957 Mad 115], Sarojini Amma v. Neelakanta Pillai [AIR 1961
Kerala 126], Atmaram Mohanlal Panchal v. Gunvantiben [AIR
1977 Guj. 134], Malli Dei v. Kanchan Prava Dei [AIR 1973
Orissa 83], Lakshmi Amma v. Saguna Bhagath [ILR 1973 Kant
827] have taken a view that the nominee under Section 39 of
the Insurance Act is nothing more than an agent to receive
the money due under the life insurance policy. The money as
such received remains the property of the assured during his
life time and on his death forms part of his estate subject
to the law of succession applicable to him. Allahabad High
Court in Kesari Devi v. Dharma Devi [AIR 1962 All 355] and
Delhi High Court in S.Fauza Singh v. Kuldip Singh [AIR 1978
Delhi 276] and Uma Sehgal v. Dwarka Dass Sehgal [AIR 1982
Delhi 36] had, however, taken a different view. While
dealing with the view taken by Allahabad and Delhi High
Courts, this Court in Sarbati Devi’s case (supra) has held:
"As observed in the Full Benchdecision of the allahabad
High Court in Raja Ram v. Mata Prasad [AIR 1972 All
167]which has interpreted Section 39 of the Act correctly,
the judgment of that High Court in Kesari Devi case related
to a different set of facts. In Kesari Devi case the
dispute arose regarding the person who was entitled to the
succession certificate in respect of the amount payable
under a life insurance policy which had been taken out by
the assured between the widow of the assured and the widow
of the nominee under Section 39 of the Act. On going
through the judgment in Kesari Devi case we feel that the
court in that case paid little heed to the earlier judicial
precedents of its own court. The decision of the Full Bench
in Raja Ram case set at rest all doubts which might have
been created by Kesari Devi case about the true import of
Section 39 of the Act in so far as the High Court of
Allahabad was concerned.
In Fauza Singh case there is reference only to three
cases - - Life Insurance Corporation of India v. United
Bank of India, Matin v. Mahomed Matin [AIR 1922 Lah. 145]
and Kesari Devi case. The Court expressed its dissent from
the Calcutta decision on the ground that that decision had
not considered sub-section (6) of Section 39 of the Act.
The Lahore case was one decided before the Act came into
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force. The distinguishing features of Kesari Devi case are
already mentioned. Otherwise there is not much discussion
in this case about the effect of Section 39 of the Act.
We have carefully gone through the judgment of the Delhi
High Court in Uma Sehgal case. In this case the High Court
of Delhi clearly came to the conclusion that the nominee had
no right in the lifetime of the assured to the amount
payable under the policy and that his rights would spring up
only on the death of the assured. The Delhi High Court
having reached that conclusion did not proceed to examine
the possibility of an existence of a conflict between the
law of succession and the right of the nominee under Section
39 of the Act arising on the death of the assured and in
that event which would prevail. We are of the view that the
language of Section 39 of the Act is not capable of altering
the course of succession under law. The second error
committed by the Delhi High Court in this case is the
reliance placed by it on the effect of the amendment of
Section 60(1)(kb) of the Code of Civil Procedure, 1908
providing that all moneys payable under a policy of
insurance on the life of the judgment debtor shall be exempt
from attachment by his creditors. The High Court equated a
nominee to the heirs and legatees of the assured and
proceeded to hold that the nominee succeeded to the estate
with all ’plus and minus points’. We find it difficult to
treat a nominee as being equivalent to an heir or legatee
having regard to the clear provisions of Section 39 of the
Act. The exemption of the moneys payable under a life
insurance policy under the amended Section 60 of the Code of
Civil Procedure instead of ’devaluing’ the earlier decisions
which upheld the right of a creditor of the estate of the
assured to attach the amount payable under the life
insurance policy recognises such a right in such creditor
which he could have exercised but for the amendment. It is
because it was attached the Code of Civil Procedure exempted
it from attachment in furtherance of the policy of
Parliament in making the amendment. The Delhi High Court
has committed another error in appreciating the two
decisions of the Madras High Court in Karuppa Gounder v.
Palaniammal [AIR 1963 Mad 245 at para 13] and in B.M.
Mundkur v. Life Insurance Corporation of India [AIR 1977
Mad 72]. The relevant part of the decisions of the Delhi
High Court in Uma Sehgal case reads thus: (AIR P.40, paras
10, 11)
"10. In Karuppa Gounder v. Palaniamma, K had nominated
his wife in the insurance policy. K died. It was held that
in virtue of the nomination, the mother of K was not
entitled to any portion of the insurance amount.
11. I am in respectful agreement with these views,
because they accord with the law and reason. They are
supported by Section 44(2) of the Act. It provides that the
commission payable to an insurance agent shall after his
death, continue to be payable to his heirs, but if the agent
had nominated any person the commission shall be paid to the
person so nominated. It cannot be contended that the
nominee under Section 44 will receive the money not as owner
but as an agent on behalf of someone else, vide B.M.
Mundkur v. Life Insruance Corporation. Thus, the nominee
excludes the legal heirs."
The Court further held that Delhi High Court committed
mistake in not properly appreciating the judgment in B.M.
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Mundkur v. Life Insurance Corporation of India [AIR 1977
Mad. 72]. The Court found that the reasons given by the
Delhi High Court were not tenable. It was held that a mere
nomination made under Section 39 of the Insurance Act did
not have the effect of conferring on the nominee any
beneficial interest in the amount payable under the
insurance policy on the death of the assured. The
nomination only indicated the hand which was authorised to
receive the amount on the payment of which the insurer got a
valid discharge of its liability under the policy. The
policy holder continued to have interest in the policy
during his lifetime and the nominee acquired no sort of
interest in the policy during the lifetime of the policy
holder. On the death of the policy holder, the amount
payable under the policy became part of his estate which was
governed by the law of succession applicable to him. Such
succession may be testamentary or intestate. Section 39 did
not operate as a third kind of succession which could be
styled as a statutory testament. A nominee could not be
treated as being equivalent to an heir or legatee. The
amount of interest under the policy could, therefore, be
claimed by the heirs of the assured in accordance with law
of succession governing them. It is contended on behalf of
the appellants that the non obstante clause in Section 6@@
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excludes all other persons, including the legal heirs of the@@
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deceased holder, to claim any right over the sum paid on
account of the national savings certificates, to the
nominee. There is no doubt that by non-obstante clause the
Legislature devices means which are usually applied to give
overriding effect to certain provisions over some contrary
provisions that may be found either in the same enactment or
some other statute. In other words such a clause is used to
avoid the operation and effect of all contrary provisions.
The phrase is equivalent to showing that the Act shall be no
impediment to measure intended. To attract the
applicability of the phrase, the whole of the section, the
scheme of the Act and the objects and reasons for which such
an enactment is made has to be kept in mind. The submission
made on behalf of the appellants has no substance in view of
sub-section (2) of Section 8 and the Statement of Objects
and Reasons necessitating the passing of the Act.
Sub-section (1) of Section 8 provides that if any payment is
made in accordance with the provisions of the Act to a
nominee, the same shall be a full discharge from all further
liabilities in respect of the sum so paid. Section 7 of the
Act provides that after the death of the holder of the
savings certificates payment of the sum shall be made to the
nominee, if any, and sub-section (1) of Section 8 declares
that such payment shall be a full discharge from all further
liabilities in respect of the sum so paid. However,
sub-section (2) of Section 8 specifies that the payment made
to the nominee under sub-section (1) shall not preclude any
executor or administrator or the legal representative of the
deceased holder of a savings certificate from recovering
from the person receiving the same under Section 7; the
amount remaining in nominee’s hand after deducting the
amount of all debts or other demands lawfully paid or
discharged by him in due course of administration. In other
words though the nominee of the national savings
certificates has a right to be paid the sum due on such
savings certificates after the death of the holder, yet he
retains the said amount for the benefit of the persons who
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are entitled to it under the law of succession applicable in
the case, however, subject to the exception of deductions
mentioned in the sub-section. In the Statement of Objects
and Reasons of the Act it is stated: "The Post Office
National Savings Certificate Ordinance, 1944 (42 of 1944),
issued under Section 72 of the Ninth Schedule to the
Government of India Act, 1935, as originally enacted and
continued in force by virtue of the provisions of the India
and Burma (Emergency Provgisions) Act, 1940 (3 and 4 Geo.
6, Ch. 33) regulates the sale and discharge of National
Savings Certificates issued through the Post Office.
Suggestions have been made from time to time that as the
production of legal proof of succession involves
considerable delay and expense, the holders of savings
certificates may be allowed the right to nominate one or
more persons to receive the amounts due in respect of such
certificates in the event of their death without the
production of succession certificate or other proof of
title. In seeking to amend that Ordinance for the above
purpose, opportunity is taken to replace it by an Act of
Parliament." (emphasis supplied)
In the light of what has been noticed hereinabove, it is
apparent that though language and phraseology of Section 6@@
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of the Act is different than the one used in Section 39 of@@
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the Insurance Act, yet, the effect of both the provisions is
the same. The Act only makes the provisions regarding
avoiding delay and expense in making the payment of the
amount of the national savings certificates, to the nominee
of holder, which has been considered to be beneficial both
for the holder as also for the post office. Any amount paid
to the nominee after valid deductions or becomes the estate
of the deceased. Such an estate devolves upon all persons
who are entitled to succession under law, custom or
testament of the deceased holder. In other words, the law
laid down by this Court in Sarbati Devi’s case holds field
and is equally applicable to the nominee becoming entitled
to the payment of the amount on account of national savings
certificates received by him under Section 6 read with
Section 7 of the Act who in turn is liable to return the
amount to those, in whose favour law creates beneficial
interest, subject to the provisions of sub-section (2) of
Section 8 of the Act.
Under the circumstances this appeal is allowed with a
direction that the succession certificates shall be issued@@
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in favour of the respondents in respect of debts detailed in@@
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Annexures A and B to the application filed in the Court of
Civil Judge, Senior Division, Thane subject to their payment
of necessary court fees and estate duty certificate. The
respondents would, however, not be entitled to directly
receive the amounts payable on account of debts payable
under National Savings Certificates at Sl.Nos.17 to 26 in
Annexure A and Sl.Nos.1 to 4 in Annexure B. The appellants
are held entitled to receive the sum due on the aforesaid
national savings certificates in which they are the nominees
upon furnishing the undertaking in terms of sub-section (2)
of Section 8 of the Act in the court of Civil Judge, Senior
Division, Thane. The amount received by the appellants on
account of the national savings certificates in which they
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are nominees shall be payable to the respondents after
deduction of the amounts of debts or other demands lawfully
paid or discharged, if any. Costs made easy.