The Madhya Pradesh High Court has reiterated that nomination would not confer any beneficial interest on the nominee and it is a mere authorization to receive the insurance amount, which can be claimed by the legal heirs of the assured in accordance with law of succession, governing the parties.

The single-judge bench of Justice Anjuli Palo added that nomination only indicates the hand which is authorised to receive the amount, on the payment of which the insurer gets a valid discharge of its liability under the policy.

Brief Facts of the Case

Petitioner was the father of deceased who employeed on the post of Manager in Kotak Mahendra Old Mutual Life Insurance Ltd. He had purchased life insurance policy and nominated his father’s name. The deceased's wife sent a letter to Kotak Life Insurance Company to release of amount of death benefit under the policy which was declined on the grounds that the petitioner is the sole nominee. She then filed an application under Section 372 of Indian Succession Act, 1925 to issue a succession certificate in her favour which was partly allowed by the Trial Court holding that the she is the widow of deceased and therefore entitled to get all the benefits under Section 8 of Hindu Succession Act being the legal heir.

Aggrieved, the petitioner filed the present revision petition. He has alleged that he was sole nominee in the insurance policy of his son which amounts to will of the deceased. As per Section 39 of Insurance Act, 1938, he can exclusively claim over the death benefits of his son. Section 39 of Insurance Act, is statutory and overriding declaration of right and entitlement of claim after the death of insured.

His Counsel submitted that Insurance (Amended) Act, 2015 came into effect from 26.12.2014 and since the policies in question matured after the 2015 Amendment came into force provision of amended section 39 are applicable in this case. In view of this he averred that beneficial nominee has to be entitled for the benefits under the insurance policies to the exclusion of any other legal heir, who is not a nominee.

Learned Counsel for the respondents on the other hand relying on High Court rulings contended that the insured amount shall be distributed according to the Hindu Succession Act, 1956. He further averred that insured amount can be claimed by legal heirs of the deceased in accordance with law of succession governing them and nomination does not confer any beneficial interest on the nominee

High Court's Observation

The Court opined that nomination is only for the benefit of the insurer so that he gets a valid discharge of its liability under the policy and is not embroiled in the litigation interse the legal heirs of the insured.

It mentioned SC verdict in Sarbati Devi Vs. Usha Devi wherein held that nomination would not confer any beneficial interest on the nominee and it is a mere authorization to receive the insurance amount, which can be claimed by the legal heirs of the assured in accordance with law of succession, governing the parties.

The Court remarked that the above has been followed successively by various High Courts in a long line of cases, holding that mere nomination effected under Section 39 shall not deprive the legal heirs to the amount under the Insurance Policies.

"The preposition of law laid down by the Supreme Court in Sarbati Devi (supra) cannot be disputed and is a binding dictum. The Supreme Court held that nomination would not confer any beneficial interest on the nominee under and insurance policy and a nominee is only an authorized hand to receive the insurance amount, which is subject to be disbursement amongst the legal heirs under the law of succession, governing the parties."

The Court also reflected on the relevance of the provision ever since the inception of the Act and no debate surrounding it.

"The Act has been in force from the year 1938 and all along almost all the High Courts in India have taken the view that a mere nomination effected under Section 39 does not deprive the heirs of their rights in the amount payable under a life insurance policy has not chosen to make any amendment to the Act. In such situation unless there are strong and compelling reasons to hold that all these decisions are wholly erroneous, the Court should be slow to take a different view."

It thus asserted that a mere nomination made under Section 39 of the Act does not have the effect of conferring on the nominee any beneficial interest in the amount payable under the life insurance policy on the death of the assured.

"The nomination only indicates the hand which is authorised to receive the amount, on the payment of which the insurer gets a valid discharge of its liability under the policy. The amount, however, can be claimed by the heirs of the assured in accordance with law of succession governing them."

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