The Supreme Court has ruled that a valid nominee under the General Provident Fund (Central Service) Rules, 1960, is entitled to receive the amount standing to the credit of a deceased subscriber, irrespective of whether the sum exceeds Rs. 5,000. Dismissing a Special Leave Petition filed by the Union of India, the Court held that the statutory requirement under the Provident Funds Act, 1925, for a succession certificate in cases involving amounts over Rs. 5,000 has been rendered irrelevant by inflationary forces and must be harmoniously construed with the 1960 Rules.
Background
The appeal challenged the final judgment dated April 4, 2025, passed by the Calcutta High Court in WPCT No. 199/2024. The High Court had dismissed the writ petition filed by the Union of India, thereby affirming the order dated October 6, 2023, passed by the Central Administrative Tribunal (CAT), Kolkata.
The CAT had allowed an application filed by the respondent, Paresh Chandra Mondal, directing the release of amounts lying in the General Provident Fund (GPF) account of his deceased brother. Both the Tribunal and the High Court decided in favor of the respondent, holding that Rule 33(ii) of the General Provident Fund (Central Service) Rules, 1960, establishes the respondent as the only valid nominee entitled to receive the funds.
Arguments of the Parties
The Additional Solicitor General (ASG), appearing for the Union of India, contended that the release of funds to the nominee was barred by statutory provisions, specifically the Provident Funds Act, 1925. The ASG informed the Court that objections regarding the respondent’s claim had been raised by the nephews of the deceased.
The main thrust of the petitioner’s argument was based on Section 4(1)(c)(i) of the Provident Funds Act, 1925. The ASG submitted that while Rule 33(ii) of the 1960 Rules recognizes the nominee, the 1925 Act mandates that if the provident fund balance exceeds Rs. 5,000, it must be paid to the nominee only “on production by such person of probate or letters of administration… or a certificate granted under the Succession Certificate Act, 1889.”
The ASG argued that the High Court and Tribunal erroneously gave primacy to the 1960 Rules over the Act. It was further submitted that although the respondent had produced a succession certificate, the GPF amount was not listed in its schedule, justifying the authority’s refusal to release the funds.
Court’s Analysis
The Supreme Court Bench comprising Justice Manoj Misra and Justice Manmohan rejected the Union of India’s submissions. The Court observed that Rule 33(ii) of the 1960 Rules, framed by the Central Government, clearly mandates that the amount “shall become payable to his nominee.”
Sanctity of Nomination: The Court reasoned that accepting the Government’s submission would undermine the entire purpose of nomination. The Bench observed:
“This Court is of the view that if the submission of Government of India is accepted, then the purpose of having a nomination would be lost. After all the process of nomination has a sanctity attached to it.”
Obsolescence of the Rs. 5,000 Threshold The Court addressed the specific limitation under Section 4(1)(c) of the 1925 Act, which distinguishes between amounts below and above Rs. 5,000. The Bench noted that this classification, established a century ago, is no longer practical:
“While the basis of classification, namely, the amount of Rs. 5,000/- may have been substantial and reasonable in the year 1925, i.e., when the Act was passed, however, the same has ceased to be of any relevance a century later due to inflationary market forces. Recognising this ground level reality, the government itself in the Rules framed thirty-five (35) years later stipulated that in cases of nomination, irrespective of the amount of money lying in the account, the same shall be released to the nominee.”
Harmonious Construction and Statutory Interpretation: The Court relied on Section 5(1) of the Provident Funds Act, 1925, which begins with a non-obstante clause (“Notwithstanding anything contained in any law…”), conferring the right upon a nominee to receive the sum “to the exclusion of all other persons.”
The Bench noted that a literal interpretation of Sections 4(1)(b) and 4(1)(c)(i) leads to an inconsistency where a nominee requires a succession certificate simply because the amount exceeds a trivial threshold. Citing the principle of harmonious construction, the Court stated:
“Consequently, keeping in view Rule 33 (ii) of the Rule 1960 and the fact that Section 5(1) of the Act begins with a non-obstante clause… means that the nominee has primacy to receive the amounts standing in the name of a depositor upon his death.”
Nominee as Trustee: The Court clarified that the release of funds to a nominee does not confer absolute ownership to the exclusion of legal heirs. Referring to the settled legal position in Sarbati Devi vs. Usha Devi (1984), the Court observed:
“The opinion of this Court is strengthened by the settled position of law that a nominee is a mere trustee to collect the funds and not the beneficial owner… Therefore, the mere fact that the amount is released to a valid nominee will not bar the objector(s) or holder(s) of probate or letters of administration or succession certificate from claiming their share from the amount released to the nominee from a competent court.”
Government’s Role in Private Disputes Finally, the Court advised the Government against becoming a litigant in such matters:
“This Court is of the view that the Government of India should not get involved in protracted litigation with respect to the estate of a deceased employee or dispositor under the Act, 1925. The requirement to have a probate or letters of administration or succession certificate even in cases of valid nomination will invariably make the Government a party to litigation which should ideally only be between private parties.”
Decision
The Supreme Court dismissed the Special Leave Petition, affirming that in cases of a valid nomination, the provident fund amount must be released to the nominee. The Court clarified that any competing interests regarding the estate could be challenged on their merits in the appropriate forum, but the release to the nominee stands valid.
Case Details
Case: The Union of India & Anr. v. Paresh Chandra Mondal
Case No: Petition for Special Leave to Appeal (C) Diary No. 71438/2025
Coram: Justice Manoj Misra and Justice Manmohan
