Andhra Pradesh High Court - Amravati
Karanam Sirisha vs Insurance Regulatory ... on 22 November, 2022
IN THE HIGH COURT OF ANDHRA PRADESH
***
W.P.No.26730 of 2021
BETWEEN:
# Karanam Sirisha W/o. Late Karanam Raghu
(under protection of her father Gattim manikyala Rao)
R/o. Dr. No.1-11-14/1, K.N. Road,
Opp. Bus Complex, Tadepalligudem,
West Godavari District.
... Petitioner
AND
$ 1. Insurance Regulatory Development Authority, 3rd Floor, Parisrama
Bhavan, Basheer Bagh, Hyderabad - 500004, Telangana.
2. The Life Insurance Corporation of India, Jeevan Bima Marg, Nariman
Point, Mumbai, Maharashtra 400021.
3. LIC of India, Chirala Branch, Chirala, Prakasam District.
4. LIC of India, Tadepalligudem Branch, Tadepalligudem, W.G. District.
5. HDFC Life Insurance Company Limited, 11th Floor, Lodha Rxelus,
Apollo Mills Compound, N.M. Joshi Road, Mahalakshmi, Mumbai
400011, Maharashtra.
6. Max Life Insurance Axix Bank Limited, Door No.37-1-406/10, Trunk
Road, Opp: LIC of India, Bhagya Nagar, Ongole, Prakasam District.
7. Karanam Raghava Rao, S/o. Subbarao, Dr.No.35-065-432, Rahul
Residency, ZPE colony, Lawyer Pet, Gandhinagar, Ongole, Prakasam
District.
8. Smt. Karanam Venkata Chalamma, W/o. Raghavarao, Dr.No.35-065-
432, Rahul Residency, ZPE colony, Lawyer Pet, Gandhinagar, Ongole,
Prakasam District.
... RESPONDENTS
Date of Judgment pronounced on : 22.11.2022
HON'BLE SRI JUSTICE R. RAGHUNANDAN RAO
1. Whether Reporters of Local newspapers : Yes/No
May be allowed to see the judgments?
2. Whether the copies of judgment may be marked : Yes/No
to Law Reporters/Journals:
3. Whether The Lordship wishes to see the fair copy : Yes/No
Of the Judgment?
2 RRR,J
W.P.No.26730 of 2021
*IN THE HIGH COURT OF ANDHRA PRADESH AT AMARAVATI
*HON'BLE SRI JUSTICE R. RAGHUNANDAN RAO
+ W.P.No.26730 of 2021
% Dated:22.11.2022
BETWEEN:
# Karanam Sirisha W/o. Late Karanam Raghu
(under protection of her father Gattim manikyala Rao)
R/o. Dr. No.1-11-14/1, K.N. Road,
Opp. Bus Complex, Tadepalligudem,
West Godavari District.
... Petitioner
AND
$ 1. Insurance Regulatory Development Authority, 3rd Floor, Parisrama
Bhavan, Basheer Bagh, Hyderabad - 500004, Telangana.
2. The Life Insurance Corporation of India, Jeevan Bima Marg, Nariman
Point, Mumbai, Maharashtra 400021.
3. LIC of India, Chirala Branch, Chirala, Prakasam District.
4. LIC of India, Tadepalligudem Branch, Tadepalligudem, W.G. District.
5. HDFC Life Insurance Company Limited, 11th Floor, Lodha Rxelus,
Apollo Mills Compound, N.M. Joshi Road, Mahalakshmi, Mumbai
400011, Maharashtra.
6. Max Life Insurance Axix Bank Limited, Door No.37-1-406/10, Trunk
Road, Opp: LIC of India, Bhagya Nagar, Ongole, Prakasam District.
7. Karanam Raghava Rao, S/o. Subbarao, Dr.No.35-065-432, Rahul
Residency, ZPE colony, Lawyer Pet, Gandhinagar, Ongole, Prakasam
District.
8. Smt. Karanam Venkata Chalamma, W/o. Raghavarao, Dr.No.35-065-
432, Rahul Residency, ZPE colony, Lawyer Pet, Gandhinagar, Ongole,
Prakasam District.
... RESPONDENTS
3 RRR,J
W.P.No.26730 of 2021
! Counsel for Petitioner : Sri B. Soma Sekhar
^Counsel for Respondent No.1 : Sri M.V. Suresh
^Counsel for Respondent Nos. 2 to 4 : Sri Valiveti Sreedhar
^Counsel for Respondent No.5 : Sri T.P. Ravishankar
^Counsel for Respondent No.6 : Sri D. Ravi Kiran
<GIST :
>HEAD NOTE:
? Cases referred:
1. AIR 1984 SC 346
2. AIR 2021 DEL 121
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W.P.No.26730 of 2021
HON'BLE SRI JUSTICE R. RAGHUNANDAN RAO
W.P.No.26730 of 2021
ORDER:
The husband of the petitioner, before and after marriage, had
taken six life insurance policies from respondents 1, 5 and 6. The details
of these policies are as follows:
1. Respondent No.3, vide Policy No. 845828411 on 28.12.2014 for a
sum of Rs.15,00,000/-.
2. Respondent No.4, vide Policy No.633991139 on 28.08.2019, for a
sum of Rs.1,50,00,000/-.
3. Respondent No.5, vide Policy No.20980126 on 03.01.2019 for a
sum of Rs.10,00,00,000/-.
4. Respondent No.5, vide Police No.18273437 dated 27.02.2016 for a
sum of Rs9,64,970/-.
5. Respondent No.5, vide Policy No.18991940 dated 06.02.2017 for a
sum of Rs.7,71,010/-.
6. Respondent No.6, vide Policy No.266676659, on 03.12.2014 for a
sum of Rs.10,99,996/-.
2. The 7th respondent, who is the father of the deceased
husband of the petitioner, was registered as nominee in respect of the life
insurance policies shown in Sl.Nos.1, 2, 4 & 6. The 8th respondent, who is
the mother of the deceased husband of the petitioner, was nominated in
the other policies. The husband of the petitioner was murdered on
18.08.2021 in Vijayawada and investigation in the said murder is being
carried out in Crime No.555 of 2021.
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W.P.No.26730 of 2021
3. The petitioner has approached this Court with the complaint
that respondents 7 and 8 are seeking to take away the sum assured being
paid out by the insurance companies, without giving her share of the said
compensation. The petitioner contends that she is entitled to a share of
the sum assured, under the said life insurance policies, as she is a Class-I
heir of her late husband along with respondents 7 and 8 and would be
entitled for her share in the sum assured being paid out by the insurance
companies. She also contends that her husband had executed a Will
bequeathing the sum assured in these policies to her and she is the sole
person who is entitled to the entire sum assured.
4. The petitioner contends that respondents 7 and 8 have
already withdrawn the sum assured under the policies mentioned at
Sl.Nos.3 and 4, depriving her from the benefits accrued to her as a Class-I
legal heir under the Hindu Succession Act. The petitioner now seeks a
direction to the respondents 1, 5 and 6 to pay out, her share, of the sum
assured to her.
5. The petitioner contends that Section 39 of the Insurance Act,
1938, which provides for a nominee to receive the sum assured, has been
interpreted by various High Courts and the Hon'ble Supreme Court to
mean that the nominee is only an agent who shall receive the sum
assured on behalf of the legal heirs of the deceased person and as such
respondents 7 and 8 are required to deliver her share after receiving the
sum from the insurance companies and that, in the alternative, the
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W.P.No.26730 of 2021
insurance companies should pay out her share of the sum assured directly
to her.
6. Respondents 7 and 8 have filed a counter affidavit
contending that by virtue of the Amendment Act, 2015, the law on the
subject has changed and respondents 7 and 8 are entitled to the entire
sum assured on account of being nominated to receive the said amounts
by their son.
7. During the pendency of the writ petition, I.A.No.2 of 2022
has been filed by the bank of Baroda contending that the late husband of
the petitioner is due a sum of approximately Rs.20 crores as on
21.12.2021 and that the sum assured that will be paid out by the
respondent-insurance companies should be attached and paid to the
Bank.
8. Similarly, I.A. No.1 of 2022 has been filed by a private
individual claiming that the deceased husband of the petitioner owes an
amount of Rs.5,86,00,000/- along with interest at the rate of 25% per
annum and a suit for recovery has also been filed in O.S.No.48 of 2022 on
the file of the X Additional Chief Judge, City Civil Court, Hyderabad. The
case of the implead petitioner is also that the said amount has to be
attached and paid out to the implead petitioner.
9. Both these implead petitions have been dismissed by way of
a separate order today.
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W.P.No.26730 of 2021
10. Section 39 of the Insurance Act, 1938, prior to its
amendment, in 2015 reads as follows:
39. Nomination by policyholder. --(1) The holder of a
policy of life insurance on his own life may, when effecting
the policy or at any time before the policy matures for
payment, nominate the person or persons to whom the
money secured by the policy shall be paid in the event of his
death:
Provided that, where any nominee is a minor, it shall be
lawful for the policyholder to appoint any person in the
manner laid down by the insurer, to receive the money
secured by the policy in the event of his death during the
minority of the nominee.
(2) Any such nomination in order to be effectual shall, unless
it is incorporated in the text of the policy itself, be made by
an endorsement on the policy communicated to the insurer
and registered by him in the records relating to the policy
and any such nomination may at any time before the policy
matures for payment be cancelled or changed by an
endorsement or a further endorsement or a will, as the case
may be, but unless notice in writing of any such cancellation
or change has been delivered to the insurer, the insurer shall
not be liable for any payment under the policy made bona
fide by him to a nominee mentioned in the text of the policy
or registered in records of the insurer.
(3) The insurer shall furnish to the policyholder a written
acknowledgement of having registered a nomination or a
cancellation or change thereof, and may charge such fee as
may be specified by regulations for registering such
cancellation or change.
(4) A transfer or assignment of a policy made in accordance
with section 38 shall automatically cancel a nomination:
Provided that the assignment of a policy to the insurer
who bears the risk on the policy at the time of the
assignment, in consideration of a loan granted by that
insurer on the security of the policy within its surrender
value, or its reassignment on repayment of the loan shall not
cancel a nomination, but shall affect the rights of the
nominee only to the extent of the insurer's interest in the
policy:
(5) Where the policy matures for payment during the lifetime
of the person whose life is insured or where the nominee or,
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if there are more nominees than one, all the nominees died
before the policy matures for payment, the amount secured
by the policy shall be payable to the policyholder or his heirs
or legal representatives or the holder of a succession
certificate, as the case may be.
(6) Where the nominee or if there are more nominees than
one, a nominee or nominees survive the person whose life is
insured, the amount secured by the policy shall be payable
to such survivor or survivors.
(7) The provisions of this Section shall not apply to any
policy of life insurance to which Section 6 of the Married
Women's Property Act, 1874 applies or has at any time
applied.
Provided that where a nomination made whether before
or after the commencement of the Insurance (Amendment)
Act, 1946 in favour of the wife of the person who has
insured his life or of his wife and children or any of them is
expressed, whether or not on the face of the policy, as being
made under this section, the said section 6 shall be deemed
not to apply or not to have applied to the policy.
11. This provision stipulates that, in the event of the death of
the policy holder of the life insurance policy, the sum assured shall be paid
out to the person registered as the nominee and such payment shall be
valid discharge for the insurance company. The question, as to whether
the nominee receives the said amounts on his own account or as an agent
for all the legal heirs, had come up for consideration before various high
Courts. All the High Courts, barring the Hon'ble High Court of Allahabad
and the Hon'ble High Court of Delhi, had held that the nominee, under
Section 39 of the Act, is nothing more than an agent to receive the money
due in a life insurance policy and that on the death of the assured/holder
of the policy, the said amounts form part of the estate of the deceased,
subject to the Law of Succession applicable to him. However, the Hon'ble
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High Court of Allahabad took a contrary view. The Hon'ble High Court of
Delhi had also held in the same manner.
12. One of the said judgments of the Hon'ble High Court of
Allahabad came up, by way of an appeal, before the Hon'ble Supreme
Court in the case of Smt. Sarbati Devi and Anr. Vs. Smt. Usha Devi1.
The Hon'ble Supreme Court, after reviewing the aforesaid judgments, had
taken the view that a nominee is only an agent who would receive the
money on behalf of the legal heirs of the policy holder and the said
amount can be claimed, by the heirs of the assured, in accordance with
the Law of Succession governing them. The ratio in the aforesaid
judgment is contained in the following paragraphs:
5. We shall now proceed to analyse the provisions
of Section 39 of the Act. The said section provides
that a holder of a policy of life insurance on his own
life may when effecting the policy or at any time
before the policy matures for payment nominate the
person or persons to whom the money secured by
the policy shall be paid in the event of his death. If
the nominee is a minor, the policy-holder may
appoint any person to receive the money in the
event of his death during the minority of the
nominee. That means that if the policy-holder is alive
when the policy matures for payment he alone will
receive payment of the money due under the policy
and not the nominee. Any such nomination may at
any time before the policy matures for payment be
cancelled or changed, but before such cancellation
AIR 1984 SC 346
10 RRR,J
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or change is notified to the insurer if he makes the
payment bona fide to the nominee already
registered with him, the insurer gets a valid
discharge. Such power of cancellation of or effecting
a change in the nomination implies that the nominee
has no right to the amount during the lifetime of the
assured. If the policy is transferred or assigned
under Section 38 of the Act, the nomination
automatically lapses. If the nominee or where there
are nominees more than one all the nominees die
before the policy matures for payment the money
due under the policy is payable to the heirs or legal
representatives or the holder of a succession
certificate. It is not necessary to refer to sub-section
(7) of Section 39 of the Act here. But the summary of
the relevant provisions of Section 39 given above
establishes clearly that the policy-holder continues to
hold interest in the policy during his lifetime and the
nominee acquires no sort of interest in the policy
during the lifetime of the policy-holder. If that is so,
on the death of the policy-holder the amount
payable under the policy becomes part of his estate
which is governed by the law of succession
applicable to him. Such succession may be
testamentary or intestate. There is no warrant for
the position that Section 39 of the Act operates as a
third kind of succession which is styled as a 'statutory
testament' in para 16 of the decision of the Delhi
High Court in Uma Sehgal case [AIR 1982 Del 36 : ILR
(1981) 2 Del 315] . If Section 39 of the Act is
contrasted with Section 38 of the Act which provides
for transfer or assignment of the rights under a
policy, the tenuous character of the right of a
nominee would become more pronounced. It is
difficult to hold that Section 39 of the Act was
intended to act as a third mode of succession
provided by the statute. The provision in sub-section
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W.P.No.26730 of 2021
(6) of Section 39 which says that the amount shall be
payable to the nominee or nominees does not mean
that the amount shall belong to the nominee or
nominees. We have to bear in mind here the special
care which law and judicial precedents take in the
matter of execution and proof of wills which have
the effect of diverting the estate from the ordinary
course of intestate succession and that the rigour of
the rules governing the testamentary succession is
not relaxed even where wills are registered.
8. We have carefully gone through the judgment
of the Delhi High Court in Uma Sehgal case [AIR 1982
Del 36 : ILR (1981) 2 Del 315] . In this case the High
Court of Delhi clearly came to the conclusion that the
nominee had no right in the lifetime of the assured
to the amount payable under the policy and that his
rights would spring up only on the death of the
assured. The Delhi High Court having reached that
conclusion did not proceed to examine the
possibility of an existence of a conflict between the
law of succession and the right of the nominee under
Section 39 of the Act arising on the death of the
assured and in that event which would prevail. We
are of the view that the language of Section 39 of the
Act is not capable of altering the course of
succession under law. The second error committed
by the Delhi High Court in this case is the reliance
placed by it on the effect of the amendment of
Section 60(1)(kb) of the Code of Civil Procedure, 1908
providing that all moneys payable under a policy of
insurance on the life of the judgment debtor shall be
exempt from attachment by his creditors. The High
Court equated a nominee to the heirs and legatees
of the assured and proceeded to hold that the
nominee succeeded to the estate with all 'plus and
minus points'. We find it difficult to treat a nominee
12 RRR,J
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as being equivalent to an heir or legatee having
regard to the clear provisions of Section 39 of the
Act. The exemption of the moneys payable under a
life insurance policy under the amended Section 60
of the Code of Civil Procedure instead of 'devaluing'
the earlier decisions which upheld the right of a
creditor of the estate of the assured to attach the
amount payable under the life insurance policy
recognises such a right in such creditor which he
could have exercised but for the amendment. It is
because it was attached the Code of Civil Procedure
exempted it from attachment in furtherance of the
policy of Parliament in making the amendment. The
Delhi High Court has committed another error in
appreciating the two decisions of the Madras High
Court in Karuppa Gounder v. Palaniamma [AIR 1963
Mad 245 at para 13 : (1963) 1 MLJ 86 : ILR (1963) Mad
434] and in B.M. Mundkur v. Life Insurance Corporation
of India [AIR 1977 Mad 72 : 47 Com Cas 19 : (1977) 1
MLJ 59 : ILR (1975) 3 Mad 336] . The relevant part of
the decision of the Delhi High Court in Uma Sehgal
case [AIR 1982 Del 36 : ILR (1981) 2 Del 315] reads
thus: (AIR p. 40, paras 10, 11)
"10. In Karuppa Gounder v. Palaniamma [AIR 1963
Mad 245 at para 13 : (1963) 1 MLJ 86 : ILR (1963) Mad
434] , K had nominated his wife in the insurance
policy. K died. It was held that in virtue of the
nomination, the mother of K was not entitled to any
portion of the insurance amount.
11. I am in respectful agreement with these views,
because they accord with the law and reason. They
are supported by Section 44(2) of the Act. It provides
that the commission payable to an insurance agent
shall after his death, continue to be payable to his
heirs, but if the agent had nominated any person the
commission shall be paid to the person so
13 RRR,J
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nominated. It cannot be contended that the nominee
under Section 44 will receive the money not as
owner but as an agent on behalf of someone else,
vide B.M. Mundkur v. Life Insurance Corporation [AIR
1977 Mad 72 : 47 Com Cas 19 : (1977) 1 MLJ 59 : ILR
(1975) 3 Mad 336] . Thus, the nominee excludes the
legal heirs."
13. The Hon'ble Supreme Court, in the above judgement, had
also observed as follows:
12. Moreover there is one other strong
circumstance in this case which dissuades us from
taking a view contrary to the decisions of all other
High Courts and accepting the view expressed by the
Delhi High Court in the two recent judgments
delivered in the year 1978 and in the year 1982. 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.
Yet Parliament has not chosen to make any
amendment to the Act. In such a 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. The reasons
given by the Delhi High Court are unconvincing. We,
therefore, hold that the judgments of the Delhi High
Court in Fauza Singh case [AIR 1978 Del 276] and
in Uma Sehgal case [AIR 1982 Del 36 : ILR (1981) 2 Del
315] do not lay down the law correctly. They are,
therefore, overruled. We approve the views
expressed by the other High Courts on the meaning
of Section 39 of the Act and hold that a mere
nomination made under Section 39 of the Act does
14 RRR,J
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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 the law of succession governing them.
14. No Amendment of this provision was carried out for some
time. The issue was examined by the Law commission of India, in its 190 th
report, in the following manner, (the extract of the report of the Law
commission is taken from the judgement of the Hon'ble High Court of
Delhi, in Shweta Singh Huria and Others vs. Santosh Huria and
Another2.)
The Law Commission's views:--
7.1.12. There appears to be a consensus of sorts on the
need for drawing a clear distinction between a beneficial
nominee and a collector nominee. It is not possible to agree
to the suggestion made by some of the insurers that in all
cases the payment to the nominee would tantamount to a
full discharge of the insurer's liability under the policy and
that unless the contrary is expressed, the nominee would be
the beneficial nominee. Although it is true that this is the law
in USA, Canada and South Africa, the social realities of our
country where the death of a sole breadwinner of the family
immediately throws the remaining family into hardship
cannot be lost sight of. To deny, in such instance, the right
AIR 2021 DEL 121
15 RRR,J
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of the legal representatives to the policy amount on the
basis that the nominee is a different person seems harsh. On
the other hand, what appears reasonable is to give an option
to the policyholder to clearly express whether the nominee
will collect the money on behalf of the legal representatives
(in other words such nominee will be the collector nominee)
or whether the nominee will be the absolute owner of the
monies in which case such nominee will be the beneficial
nominee. Public interest and the peculiar social realities in
India cannot permit the adoption of the procedures followed
in Canada, USA or South Africa. The Commission is not
agreeable to the suggestion that a provision similar to s.45
ZA as in the Banking Regulation Act, 1949 should be
adopted.
7.1.13. The suggestion that a proviso be added to make
the nomination effectual for the nominee to receive the
policy money in case the policyholder dies after the maturity
of the policy but before it can be encashed, has also been
welcomed by the responses, and is hereby recommended.
Final recommendations of the Law Commission in
regard to Section 39:--
7.1.14. After considering all the responses and
reexamining the entire issue, the final recommendations of
the Law Commission regard to s.39 may be summarised as
under:
(a) A clear distinction be made in the provision itself between a
beneficial nominee and a collector nominee.
(b) It is not possible to agree to the suggestion made by some
of the insurers that in all cases the payment to the nominee
would tantamount to a full discharge of the insurer's liability
under the policy and that unless the contrary is expressed,
the nominee would be the beneficial nominee.
16 RRR,J
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(c) An option be given to the policyholder to clearly express
whether the nominee will collect the money on behalf of the
legal representatives (in other words such nominee will be
the collector nominee) or whether the nominee will be the
absolute owner of the monies in which case such nominee
will be the beneficial nominee.
(d) A proviso be added to make the nomination effectual for the
nominee to receive the policy money in case the policyholder
dies after the maturity of the policy but before it can be
encashed.
Suggested Amendment of Section 39:--
"7.1.15 To give effect to the above recommendations,
the Law Commission is of the view that s.39 be recast as
follows:
xxxxxxxxx
(7) Subject to the other provisions of this section, where
the holder of a policy of insurance on his own life nominates
his parents, or his spouse, or his children, or his spouse and
children, or any of them, the nominee or nominees shall be
beneficially entitled to the amount payable by the insurer to
him or them under sub-section (6) unless it is proved that
the holder of the policy, having regard to the nature of his
title to the policy, could not have conferred any such
beneficial title on the nominee.
(8) Subject as aforesaid, where the nominee, or if there
are more nominees than one, a nominee or nominees, to
whom subsection (7) applies, die after the person whose life
is insured but before the amount secured by the policy is
paid, the amount secured by the policy, or so much of the
amount secured by the policy as represents the share of the
nominee or nominees so dying (as the case may be), shall
be payable to the heirs or legal representatives of the
17 RRR,J
W.P.No.26730 of 2021
nominee or nominees or the holder of a succession
certificate, as the case may be, and they shall be beneficially
entitled to such amount.
xxxxxxxxx
(10) The provisions of sub-sections (7), (8) and (9) shall
apply to all policies of life insurance maturing for payment
after the commencement of this Act.
(11) Every policyholder shall have an option to indicate in
clear terms whether the person or persons being nominated
by the policyholder is/are a beneficiary nominee(s) or a
collector nominee(s).
Provided where the policyholder fails to indicate whether
the person being nominated is a beneficiary nominee or a
collector nominee it will be deemed that the person
nominated is a beneficiary nominee.
Explanation : For the purposes of this sub-section the
expression 'beneficiary nominee' means a nominee who is
entitled to receive the entire proceeds payable under a policy
of insurance subject to other provisions of this Act and the
expression 'collector nominee' means a nominee other than
a beneficiary nominee."
15. Thereafter, Parliament had amended Section 39 of the
Insurance Act, 1938 by an Amendment Act in 2015, as recommended by
the Law commission. However, the distinction between a 'beneficiary
nominee' and 'collector nominee' was not included in the amendment. The
relevant change in the provision of law is contained in the amended sub-
sections (7) and (8) of Section 39, which read as follows:
"(7) Subject to the other provisions of this section, where
the holder of a policy of insurance on his own life nominates
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his parents, or his spouse, or his children, or his spouse and
children, or any of them, the nominee or nominees shall be
beneficially entitled to the amount payable by the insurer to
him or them under sub-section (6) unless it is proved that
the holder of the policy, having regard to the nature of his
title to the policy, could not have conferred any such
beneficial title on the nominee.
(8) Subject as aforesaid, where the nominee, or if there
are more nominees than one, a nominee or nominees, to
whom sub-section (7) applies, die after the person whose
life is insured but before the amount secured by the policy is
paid, the amount secured by the policy, or so much of the
amount secured by the policy as represents the share of the
nominee or nominees so dying (as the case may be), shall
be payable to the heirs or legal representatives of the
nominee or nominees or the holder of a succession
certificate, as the case may be, and they shall be beneficially
entitled to such amount."
16. Under the amended sub-section 7, a beneficial interest is
created in favour of the nominee, when such a nominee is one of the
members of the family of the holder of the life insurance policy,
enumerated in sub-section 7 (hereinafter referred to as the enumerated
nominee). The enumerated nominee is not just an agent or trustee of the
legal heirs of the policy holder. The enumerated nominee is conferred with
an independent beneficial right over the money received by the
enumerated nominee. Where an enumerated nominee dies, after the
death of the holder of the policy and before receiving the sum assured,
sub-section 8 mandates that the legal heirs of the enumerated nominee
19 RRR,J
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are entitled to receive the sum assured and not the legal heirs of the
policy holder. Such a change, in the line of succession, is because the sum
assured is to be received by the enumerated nominee, absolutely, in his
own right and consequently the legal heirs of the enumerated nominee
would be entitled to the sum assured. Both these sub sections, read
together, have created a right in favour of the enumerated nominee, to
receive the sum assured in his/her own right and not as the agent of the
legal heirs of the assured/policy holder.
17. Viewed from any perspective, the provisions of Section 39 of
the Insurance Act, now provide a right to the nominee enumerated in sub
sections 7 and 8 to receive the sum assured in his/her own right and not
as an agent of the legal heirs of the policy holder. This view is also
strengthened by the judgement of the Hon'ble High Court of Delhi in
Shweta Singh Huria and Others vs. Santosh Huria and Another.
18. There is another factor which requires to be taken into
account. Sub section 2 of Section 39 of the Act, sets out the manner in
which a nomination is to be made and the liability of the insurer in relation
to payment of the sum assured to the nominee, in the following terms:
(2) Any such nomination in order to be effectual shall, unless
it is incorporated in the text of the policy itself, be made by
an endorsement on the policy communicated to the insurer
and registered by him in the records relating to the policy
and any such nomination may at any time before the policy
matures for payment be cancelled or changed by an
endorsement or a further endorsement or a will, as the case
may be, but unless notice in writing of any such cancellation
or change has been delivered to the insurer, the insurer shall
20 RRR,J
W.P.No.26730 of 2021
not be liable for any payment under the policy made bona
fide by him to a nominee mentioned in the text of the policy
or registered in records of the insurer.
19. Sub Section 2 provides that a nomination has to be
incorporated into the text of the policy itself and registered in the records
of the insurer. The policy holder can change the nominee by way of an
endorsement or a Will. However, an Insurer will not be liable for any bona
fide payment made by the insurer to the earlier nominee if the change is
not informed to the Insurer. This would mean that a change in the
nominee can be made, by way of a Will, outside the text of the policy also.
But, the same would not affect the liability of the Insurer who, has not
been informed of the change carried out by the Will, and under a bona
fide belief, pays out to the earlier nominee. The operative words here are
"payment made bona fide". Payment made by an Insurer, after being
informed of a change made through a Will, cannot be a bona fide
payment which is protected under Section 39 of the Act. In such
circumstances, the Insurer would have to either act in terms of the Will or
await the result of any litigation, in the event of the Will being challenged
by any of the legal heirs of the policy holder.
20. In the present case, a Will is being propounded by the
Petitioner and given the disputes between the parties here, the said Will
would have to be proved in an appropriate proceeding. Consequently, the
Insurers would have to await the orders of the competent court, in
relation to the said Will, before paying out any part of the sum assured to
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W.P.No.26730 of 2021
either party. It is stated that some of the policies have already been paid
out to the 7th and 8th respondents. In such an event, the Insurers would
have to await the result of the proceedings relating to the Will, for those
policies which have not been paid out and it would be open to the
Petitioner to avail of her remedies against the 7th and 8th respondent in
relation to the policies which have already been paid out.
21. Since, the said litigation may take time, it would be appropriate
to direct respondents 1, 5 and 6 to place all the sums assured, which have
not been disbursed till now, in a fixed deposit with any public sector
scheduled bank and pay out the sum assured with the accrued interest to
the person who succeeds in the litigation relating to the said Will.
Needless to say, the respondents 1, 5 and 6 can always pay out the sum
assured with interest accrued on the fixed deposits to the petitioner and
respondents 7 and 8, if they arrive at a compromise and approach the
Insurers together.
There shall be no order as to costs. As a sequel, pending
miscellaneous petitions, if any, shall stand closed.
__________________________
R. RAGHUNANDAN RAO, J.
22nd November, 2022.
Js.
22 RRR,J
W.P.No.26730 of 2021
HON'BLE SRI JUSTICE R. RAGHUNANDAN RAO
W.P.No.26730 of 2021
22nd November, 2022
Js.
