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SC ruling on NSCs claims by successors of the deceased

R.N. Sahai

THOUGH language and phraseology of Section 6 of the Government Savings Certificate Act, 1959 (`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. In other words, the law laid down by this court in Mrs Sarbati Devi vs. Mrs Usha Devi 1984(1) SCC 424 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 Se ction 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.

Thus, decided the Supreme Court in Mr Vishin N. Khanchandani vs. Vidya Lachmandas Khanchandani (Civil Appeal No. 4538 of 2000 decided on August 16, 2000). The judgment was delivered by a Division Bench comprising Mr Justice K.T. Thomas and Mr Justice R.P . Sethi.

The only question for determination in this appeal by way of grant of special leave petition by the Supreme Court was 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.

While deciding the appeal, the apex court, held the appellants entitled to receive the sum due on the national savings certificates in which they were 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.

But it was further held that the amount received by the appellants on account of the national savings certificates in which they were nominees shall be payable to the respondents after deduction of the amounts of debts or other demands lawfully paid or d ischarged, if any.

In this case, the dispute arose with respect to the savings certificates, the holder of which was Lachmandas Naraindas Khanchandni. The appellants are his brother and step-brother, while the respondents are the widow and the daughter of the deceased-hold er. The deceased was serving in the income-tax department and had left behind debts consisting of National Savings Certificates, amounts in Compulsory Deposit Schemes, Post Office Cumulative Time Deposit Scheme and Pass Book Post Office Saving Bank.

The Court of Civil Judge held that the widow and daughter of the deceased were entitled to the grant of succession certificate in respect of the debt excluding the National Savings Certificate and Compulsory Deposit Scheme. It was further held that the a ppellants 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 respondents to the extent indicated held them entitled to get the amount of the said debts with accrued interest thereon subject to their furnishing necessary court-fee stamp, Esta te Duty Certificate and the security to the extent of the assets.

Not satisfied with the orders of the Civil Judge, the respondents filed First Appeal 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 the disputed debts. It was further directed that the respondents shall be entitled to equal share in the amounts which were d ue on the securities on payment of necessary court fees stamps and furnishing estate duty certificate. As there was no other claimant, the High Court held that there was no necessity to furnish any security.

Feeling aggrieved, the nominees of the National Savings Certificates filed this appeal before the Supreme Court contending that under Section 8 of the Government Savings Certificates Act, 1959, after the death of the holder they had become entitled to th e 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. The Supreme Court had not accepted this claim, and h ad clarified the legal position in this behalf.

(By arrangement with Corporate Law Adviser, New Delhi.)