Supreme Court ends century-old 5,000 rupee limit for GPF nominees

Any valid nominee in accordance with the rules of the fund would be entitled to receive the sums in the provident fund account, the Supreme Court said. (Image enhanced using AI)
Key Findings

The nominee has primacy to receive the amounts standing in the name of a depositor upon his death.
Any valid nominee in accordance with the rules of the fund would be entitled to receive the sums in the provident fund account.
If the submission of the government is accepted, then the purpose of having a nomination would be lost.
After all, the process of nomination has a sanctity attached to it.
While the basis of classification, namely, the amount of Rs 5000 may have been substantial and reasonable in the year 1925, i.e., when the Provident Fund Act, 1925 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 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.
In any event, Section 5 of the Act, 1925 provides for rights of a nominee under the Act, 1925.
A nominee is a mere trustee to collect the funds and not the beneficial owner.
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.
The government 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.
This court declines to entertain the present special leave petition as Rule 33(ii) of the General Provident Fund (Central Services) Rules, 1960 has been framed by the Central government and the same cannot be and has not been challenged.
Rule 33 of the General Provident Fund (Central Services) Rules, 1960 governs the distribution of GPF balances upon a subscriber’s death, ensuring that if a nomination becomes invalid (e.g., due to marriage), the funds are distributed equally among family members.
It stipulates that a nomination is invalid if it is not in favor of family members when the subscriber has a family.
Also, if a succession certificate is required in both eventualities i.e. cases covered under (i) and (ii) of Section 4(1)(c), then it would render all nominations otiose made under the Provident Fund Act, 1925 read with the Rules, 1960.
Section 4(1)(c) of the Provident Funds Act, 1925 outlines procedures for paying out provident fund balances that are not payable to dependents (under 4(1)(a) or (b)) upon the death of a subscriber.
It covers payment to nominees with legal documentation (i) or to other persons producing such documentation if no nominee exists (ii).
This court further finds that the basis of cases falling in Section 4(1)(b) and 4(1)(c)(i) is stated to be the amount standing to the credit of the depositor.

Any valid nominee in accordance with the rules of the fund would be entitled to receive the sums in the provident fund account, the Supreme Court said.
Background

The case originated from a dispute over the release of GPF dues belonging to a deceased Central government employee.
The employee had nominated her brother, Paresh Chandra Mondal, as the sole nominee for his GPF account.
After his death, objections were raised by some relatives, including nephews, questioning the release of the amount to the nominee.
Despite the existence of a valid nomination, the authorities refused to disburse the GPF amount on the ground that it exceeded Rs 5,000 and that, under the Provident Funds Act, 1925, such payment required a succession certificate or probate.
Aggrieved, the nominee approached the Central Administrative Tribunal (CAT), Kolkata.

The Supreme Court said that the nominee has primacy to receive the amounts standing in the name of a depositor upon his death.
CAT, high court side with nominee

In an order dated October 6, 2023, the CAT allowed the application and directed the authorities to release the GPF amount to the nominee.
The tribunal relied on Rule 33(ii) of the General Provident Fund (Central Services) Rules, 1960, which clearly states that where a valid nomination exists, the amount standing to the credit of the subscriber “shall become payable to his nominee.”
The Centre challenged this decision before the Calcutta High Court, but the high court, on April 4, 2025, upheld the CAT’s reasoning and dismissed the government’s writ petition.
Following this, the Centre moved the Supreme Court.

Government’s stand

Appearing for the Centre, Additional Solicitor General Kanakamedala Ravindra Kumar argued that the authorities were bound by Section 4(1)(c)(i) of the Provident Funds Act, 1925.
He submitted that when the provident fund amount exceeds Rs 5,000, payment to a nominee can be made only after production of a succession certificate, probate, or letters of administration.
The government further argued that statutory provisions of the 1925 Act would override the GPF Rules of 1960 and accused both the tribunal and the high court of wrongly giving primacy to subordinate legislation.
It was also pointed out that although the respondent had obtained a succession certificate under the Indian Succession Act, the GPF amount was not specifically mentioned in its schedule, and therefore could not be acted upon.

Decision

The Supreme Court dismissed the government’s special leave petition.
The top court said that where a valid nomination exists, the general provident fund amount regardless of its size must be released to the nominee without insisting on succession certificates, probate, or letters of administration.

Experts speak

Advocate Grahita Agarwal, Delhi High Court said that the Supreme Court’s ruling on provident fund nominations marks an important clarification in service jurisprudence and succession law.

Agarwal further said, “Imagine a government employee who nominates his mother as the nominee in his provident fund account. After his death, his wife and children claim that the amount should not be released to the mother unless she produces a succession certificate. Earlier, such claims often resulted in authorities withholding payment due to fear of legal disputes.”

Advocate Rohit Jain, managing partner, Singhania & Co said that the top court’s ruling is a landmark step in restoring the sanctity of the nomination process.

“By removing the mandatory requirement for a succession certificate, the Court has eliminated a major procedural bottleneck that has often left grieving families in financial limbo. The judgment clarifies that while a nominee receives the funds swiftly, they do so as a ‘trustee’ for the ultimate legal heirs,” he added.

Advocate Priyanka Desai, co-founder, partner, The Fort Circle said, the judgment curbs litigation by allowing nominees to secure provident fund amounts without first obtaining probate, letters of administration, or a succession certificate.

Advocate Tushar Kumar, Supreme Court said, the judgment brings much-needed clarity and compassion to the law governing provident fund disbursements. 

“The purpose of nomination is to ensure swift access to money at a time of bereavement, not to entangle families in avoidable procedural litigation. For instance, where a deceased government employee has nominated his spouse in the GPF records, the authorities are bound to release the entire amount directly to the spouse. Any dispute among legal heirs must be resolved independently and cannot be used as a ground to withhold payment,” added Kumar.