Bombay High Court

Parasram H Bhojwani vs Pravinchand Sehgal And 4 Ors on 24 August, 2021

Bench: A. K. Menon

              IN THE HIGH COURT OF JUDICATURE AT BOMBAY
                   ORDINARY ORIGINAL CIVIL JURISDICTION
                          [ COMMERCIAL DIVISION ]

                     INTERIM APPLICATION NO.2701 OF 2020
                                       IN
              COMMERCIAL CHAMBER SUMMONS NO.822 OF 2018
                                       IN
           COMMERCIAL EXECUTION APPLICATION NO.565 OF 2019
                                       IN
                     SUMMONS FOR JUDGMENT NO.9 OF 2018
                                       IN
                   COMMERCIAL SUMMARY SUIT NO.855 OF 2017

Parasram H. Bhojwani                            ] .. Plaintiff-Judg. Creditor
         Vs.
1. Pravinchand Sehgal                           ]
2. Gaurav Sehgal                                ]
3. Pooja Sehgal                                 ] .. Defendants-Judg. Debtors
       And
1. Gorkap Properties & Investments Pvt. Ltd.    ]
2. Anamika Jain                                 ] .. Respondents


Mr. Akash Rebello, with Mr. Aniketh Poojari, i/by C.R. Naidu & Co., for the
Applicant-Original Plaintiff-Judgment Creditor.
Mr. Vaibhav Charalwar, with Mr. Pritvish Shetty, i/by Vidhii Partners, for the
Defendants-Judgment Debtors.
Mr. Sujit Lahoti, i/by Sujit Lahoti & Associates, for Respondent No.1.
Mrs. Kanchan Rane, 1st Assistant to Court Receiver, is present.


                                                CORAM : A. K. MENON, J.

                                                DATE     : 24TH AUGUST, 2021.
P.C. :

1. The short but important question that has arisen during the hearing of

IA-2701-2020.doc Dixit this IA pertains to whether or not proceeds of an insurance policy on the life

of a judgment-debtor can be attached after maturity of the policy or whether

by virtue of Section 60(1)(kb) of the Code of Civil Procedure, 1908, the

proceeds continue to be protected against attached judgment-debtors.

2. In the above interim application, the applicant-plaintiff in his attempts

to recover decretal dues of Rs.5,00,00,000/-, along with interest @ 18% p.a.

from the date of the dishonour of cheques till the filing of Commercial

Summary Suit No.855 of 2017 and thereafter pendent lite, has sought various

reliefs of appointment of Court Receiver of immovable property being Unit

No.205, 2nd floor, Dilcap Centre, Sakinaka, Mumbai; disclosure on oath of all

particulars of assets owned by the judgment-debtors; directions for Receiver

to take physical possession; for mandatory orders and such other orders that

are found necessary.

3. Pursuant to an order of disclosure passed on 8 th July 2021, the

defendant no.3 has filed an affidavit-in-reply dated 12 th July 2021, in which

certain documents are annexed including bank statements with redaction.

Earlier in affidavit of 7th June 2019 filed on behalf of defendant no.1 and

affidavit of 25th January 2020 filed on behalf of defendant no.3, certain

disclosures were made pertaining to motor vehicles and bank accounts. Item

4.6 of the affidavit dated 7 th June 2019 discloses that the defendant no.3 owns

a policy with the Life Insurance Corporation of India, maturity date of which

IA-2701-2020.doc Dixit was 21st August 2021. Having found disclosures inaccurate and incomplete,

the judgment-creditor had continued to pursue attachment of properties.

4. In the course of submissions, on behalf of the judgment-debtors and

noting their conduct to be obstructive in nature, the applicant has urged the

court to consider an order to secure amounts due under an insurance policy,

which was disclosed. On 14th July 2021, this court noted that the respondent

no.2 was occupying Unit No.205 as a licensee of respondent no.1. While

granting an injunction restraining respondent no.1 and defendant no.3-the

judgment- debtor from dealing with, disposing, alienating, encumbering,

transferring or parting with possession in respect of the suit unit, further

directions were issued directing the judgment-debtors to disclose income tax

returns. Noting that in the disclosure affidavit, defendant no.3 is scheduled to

receive maturity proceeds from life insurance policy, the court passed the

following order :-

"1 (vii) ........................................................................

(a) Not to disburse sums under Policy No.904605396, which is said to mature on 21st August, 2021.

(b) To provide all particulars of the name of the policy holder and the name of the nominee under the policy as also the sum assured and maturity value along with all bonuses, if any.

(c) To confirm date of maturity as 21 st August, 2021 and whether all premium due has been paid.

IA-2701-2020.doc Dixit

(d) To furnish the above particulars to the Advocates for the applicant within one week of service of a copy of this order."

5. The matter was then listed for further submissions. On behalf of the 3 rd

defendant, Mr. Charalwar has urged the court to vacate the directions given

to the LIC and that is the limited aspect that is being considered today. The

Advocates for the applicant-plaintiff had, pursuant to my directions dated

14th July 2021, addressed a letter to the LIC calling upon them to provide

particulars of the policy. Essentially, the court was keen on ascertaining

whether the policy was a regular insurance policy on the life of defendant

no.3 and under which scheme the policy was issued. The LIC has since

informed the applicant-plaintiff's Advocate that the policy is due to mature

on 21st August 2021 and that a sum of Rs.61,00,000/- is due to be paid out on

21st instant. The contents of the letter dated 23 rd July 2021 received by the

applicant's Advocate is reproduced below :-

"This has reference to your letter dated 16/07/2021 regarding above captioned subject.

The following are the details under policy no.904605396 in the name of Smt. Puja Sehgal :

1. We have noted "not to disburse the maturity amount" under the said policy.

2. Name of the policy holder - Mrs. Pooja Gaurav Sehgal

IA-2701-2020.doc Dixit Name of the nominee - Smt. Suman Kapoor -

Mother of policyholder

Sum Assured - Rs.20,00,000/-

Maturity Value - Rs.61,00,000/- (Sum assured Rs.20,00,000/- + Guaranteed Addition Rs.30,00,000/- + Loyalty addition Rs.11,00,000/-)

3. Date of Maturity - 21/08/2021 (All the premiums due under the policy are paid)."

6. I have therefore heard the learned counsel for the parties on the limited

aspect as to whether the proceeds of the aforesaid policy can be subjected to

any restraint order at this stage. Mr. Charalwar submitted that the proceeds of

the LIC policy cannot be attached in execution. He relied upon section 60(1)

(kb) of the Code of Civil Procedure 1908 ("the Code") and submitted that

monies payable under a policy of insurance on life of defendant no.3 cannot

be attached. In support of his contentions, he has relied upon the following

decisions :-

(i) Smt. Sarbati Devi and Anr. Vs. Smt. Usha Devi 1

(ii) The Federal Bank Ltd. Vs. Indiradevi Kunjamma and Ors. 2

(iii) Bomminayana Nirmala and Ors. Vs. Rachapathu Krishnamurthy3

(iv) Canara Bank Vs. N. Palani and Anr.4

1 (1984) 1 SCC 424 2 1984 Mah LJ 942 3 2010 SCC Online AP 216 4 1995 SCC OnLine Mad 4

IA-2701-2020.doc Dixit

(v) Pulugu Karnakar Reddy and Anr. Vs. Shreya Financiers and Hire Purchase, Hanamkonda and Ors.5

(vi) Regional Manager, LIC of India Vs. John Bosco 6

7. According to Mr. Charalwar, the aforesaid decisions make it evident

that the amounts payable under the life insurance policy of the judgment-

debtor no.3 cannot be attached, irrespective of when it matures. He has taken

me through the aforesaid judgments and has urged before me to hold that the

policy and its proceeds cannot be attached and therefore there cannot be any

restraint placed on utilization of the money falling due from the LIC.

8. On behalf of the applicant-plaintiff, Mr. Rebello submitted in the first

instance that the oral application for vacating the order dated 14 th July 2021

ought not to be entertained and that once the amounts are paid under the

policy, there is no bar to attachment. He relies upon the words "all monies

payable" used in Section 60(1)(kb) and submits that once the money is paid, it

would not be subject to exemption under the Code. He relies upon

Explanation-1, the Proviso to Section 60(1)(kb) and submits that from the

explanation it becomes clear that once it is paid, the monies are attachable.

On behalf of the applicant-plaintiff therefore he submits that once the monies

are paid and received by the policy holder, it would cease to retain its

5 2007 (2) LLN 318 6 AIR 2002 Mad. 348

IA-2701-2020.doc Dixit character as monies payable under a life insurance policy and it would be

liable to attachment.

9. Mr. Rebello submits that while Mr. Charalwar in his submissions has

sought to equate monies falling due under a policy of the life insurance to

amounts in a provident fund, according to Mr. Rebello, provident fund dues

would stand on a different footing. He submitted that the legislature did not

intend to place proceeds of life insurance on the same footing as provident

fund dues. He sought to differentiate the aforesaid judgments by relying upon

his analysis in Federal Bank (Supra), the Regional Manager, Life Insurance

Corporation of India (Supra) and that of Smt. Sarbati Devi (Supra). He also

relied upon a decision of the Kerala High Court in Sebastian Jose Vs. Indian

Overseas Bank Ltd.7 and invited me to hold that the factual basis of the

judgments cited by the judgment-debtor contemplated payments to heirs after

the death of the policy holders. He submits that none of the judgments relied

upon by Mr. Charalwar dealt with the question on whether or not sums paid

to the policy holder on maturity were capable of attachment. The court has

held that the payments due to the heirs could not be attached. Mr. Rebello

submitted that the judgment debtor should not be permitted to take shelter

under Section 60(1)(kb) as otherwise it would provide a convenient route to

avoid payment under decrees assuming large amounts become payable. Mr.

Rebello submitted that the court is empowered to pass appropriate orders

7 (2010) 1 KLT 980

IA-2701-2020.doc Dixit preventing disbursing monies to the judgment debtor since it is obvious in the

present case that the judgment debtors do not intend to pay the decretal sum.

The judgment debtors are resisting execution and adopting every possible

means to obstruct payment.

10. Inviting my attention to Section 51(e) along with Proviso (a)-(ii) and

Section 94(e) and Order XXXIX Rule 2 of the CPC, Mr. Rebello submitted that

considering the conduct of the judgment debtor no.3 having false, inaccurate

and affidavit is containing wrong information, judgment-debtors have also

diverted monies to defeat the claims of the applicant-plaintiff. My attention

has been invited to the orders dated 13 th September 2019, 13th January 2020.

14th January 2020 and 30th January 2020 in Chamber Summons No.972 of

2019 and order dated 3rd August 2021 in IA 2379 of 2020. Mr. Rebello

therefore submitted that the direction to disburse may be continued till the

final decision of the case. It is on this basis that the parties have urged their

respective cases before me.

11. Having heard the learned counsel for the parties, the larger question to

be now considered at the outset is whether the monies payable under a policy

of insurance on the life of a person can be attached and appropriated by a

judgment-creditor upon the amounts being paid over to the insured person

during his lifetime? Whether the amount, once it matures is liable to be

attached? In other words, when once the policy matures and monies are due

IA-2701-2020.doc Dixit to be paid out by the insurer during lifetime of the assured, whether such

amounts are capable of attachment? The other question is whether in the

facts of the present case, the direction given to the Life Insurance Corporation

is required to be vacated? If the direction is vacated, it will result in the

monies being paid over to the judgment-debtor in certain bank accounts of

the judgment-debtor, if already disclosed. If monies are paid into known

accounts, they will remain attached and cannot be utilized by the judgment-

debtors. There is, of-course, a possibility of the amount being collected by the

judgment-debtors in an undisclosed account.

12. During the hearing of the application on an earlier occasion,

Mr. Naidu had sought a direction to the judgment-debtors to specify the

account in which the amounts would be collected. This has not been done.

Mr. Charalwar had then opposed the application on the basis that he has no

instructions on that aspect. One other question therefore to be considered is, if

the order restraining the Insurance Corporation from paying the maturity

amount is vacated, whether those amounts would be protected in some other

manner pending a final decision in the IA and if it is to continue, to what

logical end?

13. In my view, it would be appropriate to first consider the legal position

and that requires me to consider the provisions of Section 60 of the Code. The

relevant portion of Section 60 is reproduced below :-

IA-2701-2020.doc Dixit Section 60. Property liable to attachment and sale in execution of decree.

(1) The following property is liable to attachment and sale in execution of a decree, namely, lands, houses or other buildings, goods, money, bank-notes, cheques, bills of exchange, hundis, promissory notes, Government securities, bonds or other securities for money, debts, shares in a corporation and, save as hereinafter mentioned, all other saleable property, movable or immovable, belonging to the judgment- debtor, or over which, or the profits of which, he has a disposing power which he may exercise for his own benefit, whether the same be held in the name of the judgment-debtor or by another person in trust for him or on his behalf:

Provided that the following particulars shall not be liable to such attachment or sale, namely:

(a) ...................................................

(b) ...................................................

(d) ...................................................

(e) ...................................................

(f) ...................................................

(g) ...................................................

(h) ...................................................

(i) ................................................... (ia) ...................................................

(j) ...................................................

(k) ................................................... (ka) all deposits and other sums in or derived from any fund to which the Public Provident Fund Act, 1968 (23 of 1968), for the time being

IA-2701-2020.doc Dixit applies, in so far as they are declared by the said Act as not to be liable to attachment;

(kb) all moneys payable under a policy of insurance on the life of the judgment debtor;

(l) ...................................................

(m) ...................................................

(n) ...................................................

(o) ...................................................

(p) ...................................................

[Explanation 1. The moneys payable in relation to the matters mentioned in clauses (g), (h), (i), (ia), (j), (l) and

(o) are exempt from attachment or sale, whether before or after they are actually payable, and, in the case of salary, the attachable portion thereof is liable to attachment whether before or after it is actually payable.]"

14. In the Maharashtra Amendment to Section 60, sub-clause (1) of the

CPC, further Proviso has been added after clause (kb) to provide for amounts

payable under Rules for Hyderabad State Life Insurance and Provident Fund,

which are not covered under clause (ka) or (kb). We are not concerned with

that amendment in the present case. Considering the law on this aspect, we

find that the right of a nominee under Section 39 of the LIC Act is no longer

an issue res integra. The decision in Smt. Sarbati Devi (Supra) clearly holds

that a nominee would not be entitled to ownership of the proceeds of LIC. The

Supreme Court found that the Delhi High Court had committed an error in

relying upon the effect of the amendment of Section 60(1)(kb) of CPC. The

IA-2701-2020.doc Dixit High Court had 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'. The Supreme Court found that a nominee cannot be the

equivalent of a heir or a legatee and found that nomination would not be

interfered with and succinctly observed that "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." We need not delve further into these aspects since in

the present case we are not concerned with the rights of a nominee, but the

rights of a policy holder who claims exemption from attachment of the

proceeds of life insurance receivable by her.

15. In Canara Bank Vs. N. Palani and Anr. 8, a Single Judge of the Madras

High Court had occasion to consider the effect of Section 60(1)(kb) of CPC

and observed that the words "payable under a policy of insurance" having

been used in the Code, the word "payable" was not defined in the Code. The

Madras High Court in Canara Bank (Supra) was faced with a situation where

the amount to be paid under a policy to the legal heirs of a deceased-

judgment-debtor has been kept in a fixed deposit. The executing court had

held that even if the amount paid under the policy had changed hands, the

character of the amount is the same and hence was exempted from an

attachment. Adverting to Ramanatha Iyer's Law Lexicon, the court observed

that "the word 'payable' is a descriptive word meaning capable of being paid;

8       1995 SCC OnLine Mad 4

IA-2701-2020.doc
Dixit

suitable to be paid; admitting or demanding payment; justly due; legally

enforceable". The court observed as follows :

"From the above definition, it is clear that for the amount that has been paid, the exemption can have no application. Only so long as it remains the amount under the policy of insurance and retains the character, the exemption applies. Once it goes out of the hands of the insurance company, it ceases to retain the character "payable" under the policy of insurance".

16. The Madras High Court further observed that if the insurance policy

has matured either upon demise or during lifetime of the judgment-debtor

and it is received by the judgment-debtor or his legal heirs, it becomes part of

the estate of the deceased. In that case however the court was considering the

applicability of Section 60(1)(kb) in relation to a fixed deposit receipt and it

was not a money payable under a policy. The Madras High Court has relied

upon the decision of the Supreme Court in Union of India Vs. Radha Kissen

Agarwalla9, which came to be decided on facts where one of the creditors of

an employee of the East India Railway sought to attach amount of provident

fund while it was in the hands of the Reserve Bank of India. The Supreme

Court held that only after the fund was transferred to the account of a

designated bank, the employer could be discharged and not otherwise. It

found that the High Court had erred in holding that monies in the hands of

RBI had ceased to be provident fund money and were therefore liable to be

attached. In the present case, the policy has matured and upon payment, it

9 (1969) 1 SCC 225

IA-2701-2020.doc Dixit will cease to enjoy the exemption for reasons set out. The Madras High Court

considered the decision of this court in Federal Bank (Supra), but held that the

decision would not have any application to the facts of the case before the

court. Eventually, the court held that the fixed deposit cannot enjoy any

exemption under Section 60(1)(kb).

17. In Pulugu Karnakar Reddy and Anr. Vs. Shreya Financiers and Hire

Purchase, Hanamkonda and Ors. 10, the Andhra Pradesh High Court was

considering an attachment before judgment of amounts under a life

insurance policy and held that the amounts payable on the life of the deceased

were exempt from attachment. The order of the court attaching before

judgment, the insurance policy amounts of a deceased-borrower for

recovering amount due under a promissory note executed by him, from the

wife and son of the deceased, was not sustainable. That order of attachment

before judgment was thus set aside. In the course of delivering judgment, the

Andhra Pradesh High Court also considered Federal Bank (Supra), the fact

that clause (kb) was inserted in Section 60(1) of CPC in the year 1976 and

that the Law Commission of India in its 54 th Report had observed as follows :-

"In order to encourage thrift, the habit of life insurance should be encouraged, and that consideration, in its turn justifies a more liberal approach as regards exemption of policies of life insurance from attachment. No doubt, considerations justifying an exemption have to be balanced against the legitimate claims of a creditor, who has taken all the trouble of

10 2007 (2) L.L.N. 318

IA-2701-2020.doc Dixit obtaining a decree and who is engaged in the still more troublesome venture of executing it. The less obstacles are placed in his way, the better. Nevertheless, on the same principle on which monies in certain provident funds are exempted from attachment, there is a case for the exemption of monies due on a policy of life insurance. Further, we do not think that there should be any limit as to the maximum that is to be exempted out of the amount due on the policy."

18. The court therefore observed that the policy underlying incorporation

of exemptions may have to be kept in mind and that the order of attachment

in that case was unsustainable. As we have seen, the facts in Pulugu Karnakar

Reddy's case reveal that the amounts of insurance policy were paid to the wife

and son, the insured himself having been expired. The facts at hand however

are different inasmuch as the policy is maturing during the lifetime of the

insured. The Andhra Pradesh High Court also considered the decision in

Jyothi Chit Fund (Supra), which held, as aforesaid, that the provisions of the

Provident Funds Act, 1925 being in the larger interest of the public,

exemption cannot be waived. P.K. Reddy referred to Lukas Vs. Harris11, in

which a Receiver was appointed to collect the pensions of two officers under

the Army Act inter alia retaining or finding that a person with a pension

would not be able to utilize his pension to pay a debt beforehand, but

immediately his creditor having obtained judgment, the pension may be

subject to an attachment. The court found that it is impossible to suppose that

the Legislature could have intended such anomaly.

11      1887 (18) Q.B.D. 127

IA-2701-2020.doc
Dixit

19. In Bomminayana Nirmala and Ors. Vs. Rachapathu Krishnamurthy 12,

the Andhra Pradesh High Court was considering effect of Section 60 (1)(kb)

of CPC in a civil revision petition filed by the judgment-debtors, who sought

exemption of LIC claims from attachment. A decree having been passed in the

suit, the court allowed the execution petition and sought payment of the

amounts from the garnishee-insurance company. The LIC policy in that case

was that of predecessor of the judgment-debtors, who was not a defendant in

the suit, but when a suit was filed for recovery of the amount due against the

legal representatives, the court found that no exemption could be claimed. If

the policy holder is alive, the monies would have been unattachable and even

if the suit is filed for recovery of the amount due from the policy holder after

his death, the effect of the Proviso is not taken away. Referring to the decision

of this court in Federal Bank (Supra), the Andhra Pradesh High Court also

quoted from the concluding portion of the Federal Bank, which observed that

monies payable under an insurance policy are entirely exempted from

attachment irrespective of the circumstance as to whether the insurance

policy matures during the lifetime of the assured or the monies become

payable after his death. These observations in Federal Bank require further

analysis considering the view that I propose to take.

20. In Federal Bank (Supra) the court observed thus :-

"8. In view of the above decision of the Supreme Court in

12 2010 SCC OnLine AP 216

IA-2701-2020.doc Dixit Sarbati Devi's case, it is no more possible to hold the view that monies payable under an Insurance Policy do not become a part of the estate of the deceased. However, the question before me is not whether or not the said monies become part and parcel of the estate of the deceased, since the question is whether such monies are liable to be attached for payment of a decree. Sec. 60 Civil Procedure Code deals with the property which is liable to attachment and sale in execution of a decree and its proviso lays down that some items are not liable to such attachment and sale. Clause (kb) speaks of all monies payable under a policy of insurance on the life of the judgment-debtor and exempts such monies from attachment and sale. Now as already said, Mr. Peres Cardozo argued that since such monies are part and parcel of the estate of the assured person, the exemption in Clause (kb) of Sec. 60 is not attracted. The reason behind this submission is that, according to the learned counsel, once the assured died, the monies payable under the policy come to his estate, therefore his heirs and legal representatives and appropriating the said monies and as such, the said monies are entirely outside the scope of the aforesaid Clause (kb). I am afraid that this reasoning of the learned counsel cannot be accepted. I say so, because, first of all, one- has to bear in mind the policy of the Legislature that caused the exemption to be laid down. I am of the opinion and I believe that the Legislature had exempted from attachment the monies payable under a policy of insurance on the life of the judgment-debtor in order to give some security to the heirs and legal representatives of the deceased. This being the position, even though the said monies are becoming a part and parcel of the estate of the deceased, nevertheless the exemption laid down in Clause

IA-2701-2020.doc Dixit (kb) Civil Procedure Code follows the same monies. I am fortified in this view by the observations of the Supreme Court in Sarbati Devi's case to the effect that the exemption was specifically laid down because the amounts payable under an Insurance Policy on the life of a person were, otherwise attachable. In other words, the Supreme Court pointed out that had it not been for the specific provision of Clause (kb) of Sec. 60 Civil Procedure Code, the monies payable under an Insurance Policy on the life of persons would have been liable to attachment and sale for the satisfaction of a decree. I am thus of the firm view that monies payable under an Insurance Policy on the life of a judgment-debtor are entirely exempted from attachment and sale by virtue of the aforesaid Clause (kb) of Sec. 60 Civil Procedure Code, irrespective of the circumstance as to whether the Insurance Policy matures during the lifetime of the assured or the monies become payable after his death."

(Emphasis supplied)

21. The concluding sentence was not part of the ratio of the judgment. The

court has not in that case decided the issue of payment upon maturity of the

policy during the lifetime of the insured person and it was restricted to

payment after death. The intention always was that any amount that may

become payable in future, including the policy of insurance, cannot be

attached since upon demise of the insured person, it is the heirs who stand to

benefit. Analyzing the facts in the case of Federal Bank, I find that the only

question that fell for consideration was (i) Whether monies payable under an

insurance policy on the life of a judgment-debtor after his demise could be

IA-2701-2020.doc Dixit attached? and (ii) Whether payment of such monies to a nominee after the

demise of the assured could be restrained in a suit for recovery of monies

borrowed by the deceased?

22. The relief sought was by way of an attachment before judgment. On

facts, it is seen that the suit came to be dismissed on 27 th June 1980. The

appellant therein moved court on 25 th August 1980 seeking an order of

injunction under Order XXXIX of the Code which the trial court granted Ex-

parte. It was pointed out on behalf of the defendants that the order passed by

way of an injunction was ab initio, null and void. After the suit was restored

on 17th October 1980 the plaintiff moved court again to seek the order dated

25th August 1980 to be made absolute and, in the alternative, sought a

direction against the LIC restraining it from making payment to the nominee.

On those facts, the court held that it was not possible to so restrain the LIC

relying upon the decision of Sarbati Devi (Supra), which by then had held that

a nominee is merely entitled to receive monies upon demise.

23. The fact that the observations in the concluding portion of the

judgment do not form the ratio of the judgment is evident from the fact that

the Explanation to the section does not appear to have been brought to the

attention of the court as otherwise the insertion of the explanation in 1976

would surely have been considered by the court. The issue whether after a

policy matures and the monies are available to the assured during his lifetime,

IA-2701-2020.doc Dixit has not been considered. Whether attachment of such funds is prohibited by

virtue of clause (kb) did not fall for consideration of the court. The court thus

had no occasion to examine the effect of the explanation which clearly

provides protection for only certain types of properties described in clauses

(g), (h), (i), (ia), (j), (l) and (o) after the monies are received from those in

statutory custody. These are in the nature of provident fund contributions,

pension fund contributions and compulsory deposits. Proceeds of an

insurance policy is consciously omitted from the said explanation.

Explanation-I to Section 60 of the Code is reproduced below for ease of

reference.

"Explanation I :-

The moneys payable in relation to the matters mentioned in clauses (g), (h), (i), (ia), (j), (l) and (o) are exempt from attachment or sale, whether before or after they are actually payable, and, in the case of salary, the attachable portion thereof is liable to attachment, whether before or after it is actually payable." (Emphasis supplied)

24. The effect of the explanation would have to be taken into account on

the facts of the present case. This aspect was not considered in the case of

Federal Bank. Thus, to my mind, the decision in Federal Bank does not today

prevent me from proceeding to consider the effect of the explanation and the

consequence of monies, if paid under the policy during the lifetime of the

assured. The principle underlying provident fund, the protection to provident

funds and other similar properties of a judgment-debtor, all indicate that as

IA-2701-2020.doc Dixit long as these monies are retained by the fund itself or in the hands of the

government, the amounts are incapable of attachment. In the case of P.K.

Reddy (Supra), the order was one of attachment before judgment of amounts

of an LIC policy which were payable to the deceased. The policy attached was

not of the deceased but of a different person, one Linga Reddy. The court

therefore concluded that the amounts of the policy could not be attached and

rightly so.

25. In the case of Canara Bank (Supra), which followed Sarbati Devi, Jyoti

Chit Fund and Radha Kissen, the monies were received and converted to a

fixed deposit by the nominees. It was not a case where the monies were

received by the judgment-debtor/assured during his lifetime. As we have

seen in the case of Radha Kissen (Supra), the High Court was found to have

erred in holding that monies in the hands of the RBI has ceased to be for

provident fund monies and therefore could be attached. The view taken in

Radha Kissen has since been followed in the case of Jyoti Chit Fund. In Jyoti

Chit Fund (Supra), the Supreme Court observed as follows :-

"A bare reading of Radha Kissen makes the proposition fool- proof. That so long as the amounts are provident fund dues, then, till they are actually paid to the government servant, who is entitled to it on retirement or otherwise, the nature of the dues is not altered."

26. The question was whether it is possible in law for the amounts of

provident fund contributions and pension benefits to be attached having

IA-2701-2020.doc Dixit regard to Sections 3 and 4 of the Provident Fund Act, Section 11 of the

Pensions Act and Section 60(1)(g) and (k) of the Code of Civil Procedure? In

Jyoti Chit Fund (Supra), the court was invited to hold that a judgment-debtor,

an employee of the Rajya Sabha Secretariat, who owed a small sum of

Rs.2,000/- to the judgment-creditor, could be prevented from receiving the

decretal amount from the provident fund contributions and dues, which were

yet to be paid to the judgment-debtor. Since the provident fund dues were

then lying with the Union of India, the Union of India had challenged the

decision of the High Court to restrain payment to the judgment-creditor. The

Supreme Court considered the issue and held that the Rajya Sabha Secretariat

is not so totally separate from the Union of India that the Union of India could

not approach the Supreme Court. It was a matter of public policy and the

court held as follows :-

"The court cannot content itself with playing umpire in a technical gain of legal skills but must be the activist in the cause of deciding the real issues between the parties."

27. In Sebastian Jose Vs. Indian Overseas Bank Ltd. 13, the Kerala High Court

had occasion to consider a case of conditional attachment to furnish securities

and inter alia held that when an amount is received by a policy holder during

his lifetime, it becomes his personal property but when received by his legal

representatives after the death, it would become part of his estate and the

money received by him would be liable for attachment into his hands and so

13 (2010) 1 KLT 980

IA-2701-2020.doc Dixit long as the money retains the character as amounts payable under life

insurance, it would continue to enjoy the exemption under Section 60(1)(kb)

of the Code. The lower court in that case had attached the surrender value of

an insurance policy and therefore a revision petition against that order came

to be allowed. In the course of deciding that revision petition, the court

observed that the words "all monies" used would mean "all amounts payable

under a policy of insurance" and does not exclude the amount representing

the surrender value. It was further observed that a surrender value of the life

insurance policy also comes within the scope of exemption contained in

Section 60(1)(kb) of the Code.

28. Reliance was placed in that judgment upon decisions of the Supreme

Court in Radhey Shyam Gupta Vs. Punjab National Bank 14, which considered

the exemption from attachment of pensionary benefits and gratuity received

and converted into fixed deposit by the judgment-debtor. After considering

this aspect in detail, the Supreme Court held that since the amount

represented pensionary benefits, such amounts retained their character even

after they were received by the judgment-debtor and after conversion into the

fixed deposits. The Supreme Court held that the exemption contained in

Section 60(1) of the Code extended to pensionary benefits converted into

fixed deposits. However, in another judgment in the case of Union of India

and Anr. Vs. Wing Commander, R.R. Hingorani 15, it was held that money due

14 AIR 2009 SC 930 15 AIR 1987 SC 808

IA-2701-2020.doc Dixit on account of pension or commuted pension due to a judgment-debtor would

change its character and would become liable to an attachment after it is

converted into a deposit. The court concluded that the relevant provision

applicable to life insurance policies provides that exemption would operate

only till the amount is received by the policy-holder during his lifetime or by

his legal representatives after his demise. Once received, the amount would

not retain its character so as to qualify for exemption.

29. In Smt. Sarbati Devi (Supra), the court had occasion to consider the

elements of Section 39 and the effect of a transfer or assignment of a policy

made in accordance with Section 38 of the Insurance Act. Section 38 provides

that upon transfer or assignment of a policy, the nomination made would

automatically be cancelled. It is common knowledge that policies are assigned

often by way of security and sub-section (4) of Section 39 of the Insurance

Act reads thus :-

"39. Nomination by policy-holder :-

(1) ..................................... (2) ..................................... (3) ..................................... (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

IA-2701-2020.doc Dixit 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.

30. Section 38 of the Insurance Act provides a transfer or assignment of

policy of insurance wholly or in part, may be made by an endorsement upon

the policy itself or by a separate instrument. An insured may either accept or

decline to act upon such endorsement if it finds that the transfer or

assignment is not bonafide. Reasons are required to be recorded for refusal. In

the event of a policy being assigned or transferred, a question that arises for

consideration is whether upon such an assignment or transfer, the assignee or

transferee will have absolute control over the proceeds and whether the

proceeds can be attached by such assignee or by any third party in the hands

of the assignee. Section 39 sub-section (5) provides that where policy matures

during lifetime of a person, who is insured or where the nominee or nominees

died before the policy matures, the amount of the policy shall be payable to

the policy holder or his legal heirs or holder of a succession certificate. Thus,

it is evident that if an assignment is made of a policy or the policy is

transferred, it may be done only during the lifetime of the assured. The

assured therefore continues to retain control over the policy. Whether the

protection continuing during the life of a policy or can continue after the sum

is paid over to a policy holder is the aspect that has been dealt with by the

judgment in Sebastian Jose (Supra).

IA-2701-2020.doc Dixit

31. The Law Commission of India in its report also observed that

considerations justifying an exemption would have to be balanced against the

legitimate claims of a creditor holding a decree and engaged in the

"troublesome venture of executing it" . Nevertheless, on the principle on which

monies under provident funds are exempted from attachment, there was a

case for exemption of monies due on a policy of life insurance. In the facts of

the present case, a balanced view will have to be taken. The proceeds of

insurance policies are certainly not equated to provident fund, pension funds

or compulsory deposits, which enjoy extended protection by virtue of the

Explanation to Section 60 of the Code. The decision in Jyothi Chit Fund

following Radha Kissen also recognizes the need to protect such funds, but

insurance proceeds paid over after maturity cannot enjoy the same protection

because they are paid during the lifetime of the assured. The monies once

paid can be used by the assured as he pleases. It can be gifted, spent or

ferreted away to avoid creditors. The funds need not be kept for the heirs and

legal representatives or paid to a nominee. Nomination in any event is a non-

issue once the policy matures. The fact that a policy on the life of the assured

can be assigned or transferred during the lifetime of the assured indicates its

distinct quality as against provident fund dues / pension dues or compulsory

deposits. If a policy can be legitimately assigned to a bank by the assured, its

maturity value will be augur to the benefit of the bank and not to the assured

or legal heirs. That is the reason why nominations stand cancelled upon

IA-2701-2020.doc Dixit assignment. After all, money is fungible once it reaches the account of the

judgment-debtor no.3, it may be utilized for any purpose and is not separately

identifiable. Therefore, no occasion to protect those funds received under the

policy.

32. This court has in Federal Bank (Supra) considered the aspect whether

monies payable under a policy on the life of a judgment-debtor after the

latter's demise (Emphasis Supplied) can be attached or whether payment of

such monies to a nominee can be restrained in a suit for recovery of money?

In the facts of that case, the bank had advanced certain monies to one of its

constituents. After his demise, a suit was instituted. The deceased had life

insurance policy issued by LIC of India. His widow being a nominee, the bank

filed an application for attachment of insurance policy and the trial court

granted the alternative prayer restraining the Insurance Corporation from

paying the amount of sum assured under the policy much like I have done in

the present case. The suit later came to be dismissed for default. The trial court

then passed a further order against defendant nos.1 and 2 restraining them

from receiving amounts under the policy. Later, the suit was restored to file.

The bank sought an order, in the alternate, directing the defendant's widow to

furnish a bank guarantee for the sum claimed in the suit. That application

was dismissed on the ground that amounts payable under the policy of

insurance cannot be attached and an appeal came to be filed against the said

order. Section 60(1)(kb) of the Code was relied upon by the appellant and it

IA-2701-2020.doc Dixit was contended that if the money becomes payable after the death of the

assured, the monies forms part of the estate of the deceased and can be

attached. Reliance was placed on the decision of the Allahabad High Court in

Raja Ram Vs. Mata Prasad16. The Full Bench of the Allahabad High Court held

in Raja Ram Vs. Mata Prasad (Supra) that a policy holder continues to hold

interest in the policy till the moment of his death and if the policy matures

during his lifetime, the benefit shall be his and not that of his nominees and

those monies may be seized by the decree-holder for payment of his loan.

33. This view is seen to have been approved by the Supreme Court in

Sarbati Devi (Supra), which held that under Section 39 of the Insurance Act,

policy holder continues to hold interest in the policy during the lifetime and

that the nominee acquires no interest during lifetime of the policy holder. On

the demise of the policy holder, the amount payable under the policy becomes

part of his estate, which is governed by the law of succession. In paragraph 8

of the decision in Federal Bank, this court has held that in view of the decision

in Sarbati Devi, it is no longer possible to hold the view that monies payable

under an insurance policy do not form a part of the estate of a deceased, but

the question before the court was not whether or not the said monies would

become part and parcel of the estate. The question was whether monies are

liable to be attached for payment of a decree. The court considered the policy

of the legislature that caused the exemption to be laid down and opined that

the legislature had exempted from attachment of the monies payable under a 16 AIR 1972 All. 167

IA-2701-2020.doc Dixit policy of insurance on the life of the judgment-debtor in order to give some

security to heirs and legal representatives. It is observed that even though the

monies become part and parcel of the estate, the exemption in clause (kb)

follows the same monies.

34. The court concluded that monies payable under an insurance policy on

the life of a judgment-debtor are entirely exempted from an attachment and

sale by virtue of clause (kb), irrespective of whether the insurance policy

matures during the lifetime of the assured or the monies become payable after

his death. The court was hearing an appeal against an order of the trial judge

dismissing an application for injunction filed by the appellant on the ground

that since monies were payable under a life insurance policy and were not

subject to attachment, it was not proper to restrain the LIC from making

payment to the beneficiaries. Thus, the court has arrived at the aforesaid

reasoning and the appeal came to be dismissed.

35. Considering all of the above, in the facts of the present case, I am

clearly of the view that since the policy matures during the lifetime of the

assured, once the payment of the maturity value is made by the insurance

company and the funds are paid out by the insurance company, the funds

would lose protection under Section 60(1)(kb) of the Code. The safe confines

of provident fund, pension and compulsory deposits do not encompass

amounts paid on maturity of a policy of life insurance. To that extent, I

respectfully find that the Explanation to Section 60(1) of the Code not having

IA-2701-2020.doc Dixit been considered in the judgment of Federal Bank (Supra), the aforesaid

decision stands distinguished.

36. In these circumstances, I am not inclined to vacate the order directing

the Life Insurance Corporation of India to retain the amount; however, since

the policy has now matured and the LIC is not required to retain the funds, I

have considered the submissions in the affidavit dated 26 th July 2021, which

incorporates a prayer that the judgment-debtor no.3 be ordered and directed

to instruct the LIC of India to deposit with Branch Office No.923 of the said

Corporation the original policy along with the Discharge Receipt and that the

judgment-debtor no.3 be ordered to instruct the LIC of India to remit

maturity proceeds to the account of the applicant mentioned in paragraph 8

of the affidavit dated 26th July 2021. In my view, it would not be appropriate

that the amount that is owing from the LIC of India to judgment-debtor no.3

be directed to be paid to the applicant-plaintiff.

37. Considering the state of the facts, I pass the following order :-

(i) The Life Insurance Corporation of India is directed to

deposit the maturity proceeds of Policy No.904605396

in the name of Pooja Gaurav Sehgal (Defendant-

Judgment Debtor No.3) with the Prothonotary and

Senior Master, High Court, Bombay within a period of

one week from service of a certified copy of this order

IA-2701-2020.doc Dixit upon the concerned Branch Office No.923 of the Life

Insurance Corporation of India, Jeevan Prakash, 5th

Floor, Sir P.M. Road, Fort, Mumbai - 400 001.

(ii) Upon receipt of the funds, the Prothonotary and Senior

Master shall invest the same in a short-term deposit,

initially for a period of three months, in a nationalized

bank till further orders.

(iii) Defendant/Judgment-Debtor No.3 is directed in the

meanwhile to deposit the original Policy No.904605396