Back
SUPREME COURT OF INDIA
E.S. VENKATARAMIAH AND R.B. MISRA, JJ.
Smt. Sarbati Devi and another, Appellants
Versus
Smt. Usha Devi, Respondent.
Civil Appeal Nos. 96 of 1972
Decided on 6-12-1983.
Precedent - Cursus Curie - Decisions which have held the field for a long time should not be disturbed. (Para 11)
Certainly. Based on the provided legal document, here are the key points:
The core issue addressed is whether a nominee under a life insurance policy, as per Section 39 of the Insurance Act, 1938, acquires a beneficial interest in the policy amount upon the death of the insured, especially when the insured dies intestate.
The law specifies that a nomination made under Section 39 of the Insurance Act does not confer beneficial ownership to the nominee during the lifetime of the policyholder. Instead, the nomination serves as a designation of the person authorized to receive the payment, effectively acting as an agent for receipt of the amount (!) (!) .
The amount payable under a life insurance policy upon the insured’s death becomes part of the estate of the deceased and is governed by the law of succession applicable to the deceased, whether testamentary or intestate. The nomination does not alter this legal position and does not create a third mode of succession (!) (!) .
The rights of the nominee arise only at the time of the insured’s death and do not include any beneficial interest during the lifetime of the insured. The nominee's role is limited to receiving the amount due, discharging the insurer, and not to claim ownership or inheritance rights (!) (!) .
The law of succession remains applicable to the distribution of the insurance amount after the death of the insured, and the heirs or legal representatives are entitled to claim their share in accordance with the applicable law (!) .
The decision emphasizes that the longstanding judicial consensus and legislative history support the view that a nomination under Section 39 does not deprive heirs of their legal rights in the policy proceeds. Parliament has not amended the law to alter this position, reinforcing the view that the nominee’s interest is limited to receipt and not ownership (!) .
Consequently, the legal rights of the heirs are preserved, and the amount payable under the policy is to be distributed among them according to the law of succession. The nominee's role is purely as an agent for receipt, not as a beneficiary with beneficial ownership rights (!) .
The judgments and decrees of the lower courts are set aside, and it is declared that each heir is entitled to an equal share of the policy amount, including any interest earned. The parties are to bear their own costs (!) (!) .
These points summarize the principles and legal reasoning outlined in the document regarding the nature of nomination and beneficial interest under life insurance policies.
JUDGMENT
VENKATARAMIAH, J.:—The short question which arises for consideration in this appeal by special leave is whether a nominee of a life insurance policy under Section 39 of the Insurance Act, 1938 (Act No. IV of 1938) (hereinafter referred to as the Act) on the assured dying intestate would become entitled to the beneficial interest in the amount received under the policy to the exclusion of the heirs of the assured.
2. The facts leading to this appeal are these: One Jag Mohan Swarup who was governed by the Hindu Succession Act, 1956 died intestate on June 15, 1967 leaving behind him his son, Alok Kumar (plaintiff No. 2), his widow, Usha Devi (defendant) and his mother, Sarbati Devi (plaintiff No. 1) as his heirs. He had during his lifetime taken out two insurance policies for Rs. 10,000/- each and had nominated under Section 39 of the Act his wife Usha Devi as the person to whom the amount was payable after his death. On the basis of the said nomination, she claimed absolute right to the amounts payable under the two policies to the exclusion of her son and her mother-in-law. Thereupon Sarbati Devi and, Alok Kumar (minor) represented by his next friend Atma Ram who was the father of Jag Mohan Swarup filed a suit in Civil Suit No. 122 of 1970 on the file of the Ist Additional Civil Judge, Dehradun for a declaration to the effect that they were together entitled to 2/3rd share of the amount due and payable under the insurance policies referred to above. Usha Devi, the defendant resisted the suit. Her contention was that on the death of the assured, she as his nominee became absolutely entitled to the amounts due under the insurance policies by virtue of Section 39 of the Act. The trial court dismissed the suit. The first appeal filed by the plaintiffs against the decree of the trial court was dismissed by the District Judge, Dehradun. The second appeal filed by them against the judgment of the District Judge before the High Court of Allahabad was dismissed in limine under Rule 11, Order 41 of the Civil Procedure Code. The plaintiffs have filed this appeal after obtaining special leave under Article 136 of the Constitution.
3. The only question which requires to be decided in this cage is whether a nominee under Section 39 of the Act gets an absolute right to the amount due under a life insurance policy on the death of the assured. Section 39 of the Act reads:
"39. Nomination by policy-holder. - (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 in the Prescribed manner any person 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 policy-holder a written acknowledgement of having registered a nomination or a cancellation or change thereof, and may charge a fee not exceeding one rupee for registering such cancellation or change.
(4) A transfer or assignment of a policy made in accordance with Sec. 38 shall automatically cancel a nomination :
Provided that the assi
An indispensable Tool for Legal Professionals, Endorsed by Various High Court and Judicial Officers
Please visit our Training & Support
Center or Contact Us for assistance
Scan Me!
India’s Legal research and Law Firm App, Download now!
For Daily Legal Updates, Join us on :
Back to top
