2000 (8) TMI 993 - SC - Companies Law

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/ 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? Held that - Appeal allowed. Any amount paid to the nominee after valid deductions 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. The law laid down holds the 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 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. Thus this appeal is allowed with a direction that the succession certificates shall be issued in favour of the respondents in respect of debts detailed in Annexures A and B to the application filed in the Court of the Civil Judge Senior Division Thane subject to their payment of necessary court fees and estate duty certificates.

Issues Involved:
1. Entitlement of nominee to the sum due under the National Savings Certificate.
2. Legal interpretation of Section 6 of the Government Savings Certificates Act, 1959.
3. Comparison with Section 39 of the Insurance Act regarding nominee rights.
4. Legal heirs' rights versus nominee rights under the Act.
5. The effect of non obstante clauses in statutory interpretation.
6. Statement of objects and reasons for the Act.

Issue-wise Detailed Analysis:

1. Entitlement of nominee to the sum due under the National Savings Certificate:

The core issue is whether the nominee specified in the National Savings Certificate becomes entitled to the sum due under the certificate to the exclusion of all other persons, or whether the amount can be retained for the benefit of the legal heirs of the deceased. The Supreme Court examined the provisions of the Government Savings Certificates Act, 1959, particularly sections 6, 7, and 8, to resolve this issue.

2. Legal interpretation of Section 6 of the Government Savings Certificates Act, 1959:

Section 6 of the Act states: "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 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... 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." The Court highlighted that this provision allows the nominee to receive the sum due on the savings certificate but does not confer absolute ownership over the amount.

3. Comparison with Section 39 of the Insurance Act regarding nominee rights:

The Court referred to its earlier judgment in Smt. Sarbati Devi v. Smt. Usha Devi, where it was held that a mere nomination under Section 39 of the Insurance Act does not confer any beneficial interest on the nominee. The nominee is simply authorized to receive the amount, which remains part of the deceased's estate and is governed by the law of succession. The Court noted that although the language in Section 6 of the Government Savings Certificates Act differs from Section 39 of the Insurance Act, the effect is the same.

4. Legal heirs' rights versus nominee rights under the Act:

The Court emphasized that the nominee under the Government Savings Certificates Act holds the amount for the benefit of the legal heirs. Sub-section (2) of Section 8 specifies that the payment made to the nominee does not preclude any executor, administrator, or legal representative of the deceased holder from recovering the amount remaining in the nominee's hands after deducting debts or other demands lawfully paid or discharged.

5. The effect of non obstante clauses in statutory interpretation:

The appellants contended that the non obstante clause in Section 6 excludes all other persons, including legal heirs, from claiming any right over the sum paid to the nominee. The Court clarified that while non obstante clauses are used to give overriding effect to certain provisions, the entire section, scheme of the Act, and the objects and reasons for the enactment must be considered. The non obstante clause in Section 6 does not negate the rights of legal heirs under the law of succession.

6. Statement of objects and reasons for the Act:

The Act was enacted to avoid delays and expenses in making payments to nominees without requiring succession certificates or other proofs of title. The Court noted that the Act aims to facilitate the payment process but does not alter the course of succession. The amount paid to the nominee becomes part of the deceased's estate and devolves upon the legal heirs.

Conclusion:

The appeal was allowed with a direction that the succession certificates be issued in favor of the respondents for the debts detailed in the application, subject to payment of necessary court fees and estate duty certificates. The respondents were not entitled to directly receive amounts payable under the National Savings Certificates for which the appellants were nominees. The appellants were entitled to receive the sums due on the National Savings Certificates upon furnishing an undertaking as per sub-section (2) of Section 8. The amounts received by the appellants were to be payable to the respondents after lawful deductions.

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