The Delhi High Court has established important precedent regarding parental access to children's investment accounts through the Sudhir Kawatra v. Shamli Kawatra case (RFA 85/2023, CM APPL. 16953/2023). According to reports from Upstox News, the court ruled that a father who opened a PPF account in his minor daughter's name could not withdraw ₹8,13,853.79 and use it for maintenance payments to his wife. The court upheld a decree directing the father to return the entire PPF corpus along with 8% annual interest, establishing that a parent cannot treat a child's investment as personal property. In a recent case involving a legal conflict between a father and daughter over ownership of a PPF account, the daughter sued her father for withdrawing all funds before she could claim it upon maturity. The complainant, now a college student, complained that she was facing difficulties in funding her education, particularly after her parents separated due to marital discord and she began living with her mother.
As explained by Aditya Chopra, Managing Partner at The Victoriam Legalis (TVL) and Apoorva Pandey, Advocate at Delhi High Court, parents can operate minor's investment accounts strictly within applicable rules. Withdrawals are permissible where money is used for the child's education, medical treatment, or similar upbringing expenses consistent with any undertaking given to the institution. A parent or guardian's role in a child's PPF account is limited to operating and closing the account when it's time for a handover. Closing a minor's PPF account on maturity is not, by itself, improper. Parents can make withdrawals if the money is meant to be used for the child's education, medical treatment, or other legitimate upbringing expenses, but that does not mean they can deprive the child of basic maintenance. The guardian's role ends when the child turns 18, requiring full transfer of the account and its accrued value to the child.
According to the court ruling, once withdrawn, money cannot be transferred to the parent's own account or spent on parental needs. Maintenance already paid to the child or spouse cannot be set off against the child's investment corpus, as these are independent legal obligations. Section 10 of the PPF Act only protects the mechanics of closing accounts in good faith, not the parent from separately accounting to the child for withdrawn funds. A parent cannot appropriate or adjust a child's investment towards the discharge of the parent's independent legal obligation to maintain the child. The principle extends to other minor-held investments including Sukanya Samriddhi Yojana (SSY), NPS Vatsalya, bank fixed deposits, mutual funds, shares, and other securities. Any contribution beyond the prescribed limit does not qualify for tax benefits and may not earn interest under the PPF rules.
Both parents cannot invest ₹1.5 lakh each in their child's PPF account. If they do, the total annual contribution will be raised up to ₹3 lakh, which is not permitted. Just like a regular PPF account, a minor's account cannot receive more than ₹1.5 lakh in total contributions in a financial year, irrespective of whether the money is deposited by one parent or both. An individual can contribute only up to ₹1.5 lakh per financial year across their own PPF account and the accounts of their minor child. Separate legal restrictions govern minor's property under Section 6 of the Hindu Minority and Guardianship Act, 1956. Natural guardians may acquire, register, and administer property in a minor's name but cannot sell, gift, mortgage, or lease it for more than 5 years without prior court permission. This statutory restriction is independent of the fiduciary-duty principle established in the court case and is stricter than the fiduciary duty principle itself.
The principle established in the PPF case extends to other minor-held investments including Sukanya Samriddhi Yojana (SSY), NPS Vatsalya, bank fixed deposits, mutual funds, shares, and other securities. As reported by Upstox News, Jagtap noted that while the case concerned a PPF account, the underlying principle that a guardian holds investments fiduciarily and cannot use them for personal obligations applies by analogy to these other investment instruments. However, precise rules differ between schemes, requiring parents to check applicable scheme rules before making withdrawals or transfers. The principle that where funds are invested in the child's name for the child's benefit, the parent, even as guardian, holds such funds in a fiduciary capacity and cannot utilise them to offset maintenance obligations applies universally across minor-held investment instruments.
