2000 (8) TMI 77 - SC - Income Tax

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? Held that - It is apparent that though the language and phraseology of section 6 of the Act is different than the one used in section 39 of 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 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. Under the circumstances 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. 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 the Civil judge Senior Division Thane. The amount received by the appellants on account of the national savings certificates in which they are nominees shall be payable to the respondents after deduction of the amounts of debts or other demands lawfully paid or discharged if any.

Issues Involved:
1. Entitlement of the nominee specified in the National Savings Certificate.
2. Interpretation of Sections 6, 7, and 8 of the Government Savings Certificates Act, 1959.
3. Comparison with Section 39 of the Insurance Act.
4. Legal standing of the nominee versus legal heirs.

Detailed Analysis:

Entitlement of the Nominee:
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 by the nominee for the benefit of the legal heirs of the deceased.

Interpretation of Sections 6, 7, and 8 of the Government Savings Certificates Act, 1959:
The Government Savings Certificates Act, 1959, particularly Sections 6, 7, and 8, was scrutinized. Section 6(1) 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, unless the nomination is varied or cancelled in the prescribed manner."

Section 7(1) further clarifies: "If the holder of a 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."

Section 8(1) ensures that any payment made to a nominee "shall be a full discharge from all further liability in respect of the sum so paid." However, Section 8(2) specifies that the payment made to the nominee does not preclude any executor or administrator or the legal representative of the deceased holder from recovering from the nominee the amount remaining in their hands after lawful debts or other demands have been discharged.

Comparison with Section 39 of the Insurance Act:
The judgment referenced the Supreme Court's decision in Smt. Sarbati Devi v. Smt. Usha Devi [1984] 55 Comp Cas 214, where it was held that a nominee under Section 39 of the Insurance Act is merely an agent to receive the money due under the life insurance policy, and the money forms part of the estate of the assured, subject to the law of succession. The court noted that although the language of Section 6 of the Government Savings Certificates Act differs from Section 39 of the Insurance Act, the effect is the same. The nominee receives the amount as a trustee for the legal heirs.

Legal Standing of the Nominee Versus Legal Heirs:
The court concluded that the nominee under the Government Savings Certificates Act does not become the absolute owner of the sum due under the certificate. Instead, the nominee holds the amount for the benefit of the legal heirs of the deceased, subject to lawful deductions. The court emphasized that the purpose of the Act is to facilitate the payment process and avoid delays and expenses associated with obtaining legal proof of succession.

Conclusion:
The Supreme Court allowed the appeal, directing that the succession certificates be issued in favor of the respondents for the debts detailed in the application, subject to the payment of necessary court fees and estate duty certificates. However, the respondents are not entitled to directly receive the amounts payable under the National Savings Certificates. The appellants, as nominees, are entitled to receive the sum due upon furnishing an undertaking in terms of Section 8(2) of the Act. The amount received by the appellants shall be payable to the respondents after lawful deductions.

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