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HIGH COURT OF CALCUTTA
B. C. MITRA, S. K. MUKHERJEE
LIFE INSURANCE CORPORATION OF INDIA - Appellant
Versus
UNITED BANK OF INDIA LTD. - Respondent
A. F. O. D. 62 Of 1967, Suit No. 1705 Of 1961
Decided On : MARCH 13, 1970
INSURANCE - NOMINEE - ASSIGNMENT OF POLICY - SURRENDER OF POLICY - RIGHTS OF NOMINEE - INSURANCE ACT, 1938, SECTIONS 38, 39.
Fact of the Case:
The holder of a policy of insurance on his own life nominated a person under Section 39 of the Insurance Act, 1938, to whom the money secured by the policy was to be paid in the event of his death. The nominee assigned the policy to a bank as security for a loan. The bank brought an action against the nominee and the insurance company for the surrender value of the policy. The insurance company contended that the nominee had no right to assign the policy or to surrender it.
Finding of the Court:
The court held that the nominee had no right to assign the policy or to surrender it. The court held that the nominee's right was merely a right to collect the moneys from the insurer, and that such a right could not confer any title. The court also held that the policy was not a life insurance policy within the meaning of the Insurance Act, and that therefore the provisions of Section 39 did not apply.
Issues: 1. Whether a nominee under a life insurance policy can validly assign the claim in respect of the policy after the holder of the policy dies but before the policy matures. 2. Whether a nominee can assign the claim under the policy or surrender the policy at all.
Ratio Decidendi: The court held that the nominee had no right to assign the policy or to surrender it because: * The nominee's right was merely a right to collect the moneys from the insurer, and such a right could not confer any title. * The policy was not a life insurance policy within the meaning of the Insurance Act, and that therefore the provisions of Section 39 did not apply.
Final Decision: The court allowed the appeal and set aside the decree of the trial court. The court dismissed the suit against the insurance company and ordered the bank to pay the insurance company's costs of the appeal and of the trial.
( 1 ) THE question which has to be decided in this appeal is whether a nominee under a life insurance policy can validly assign the claim in respect of the policy after the holder of the policy dies but before the policy matures. It also raises a larger question namely whether a nominee can assign the claim under the policy or surrender the policy at all.
( 2 ) ONE Narayan Chandra Ghosh, a person considerably advanced in age, took out a policy of insurance on January 24, 1947, by payment of a single premium of Rupees 15,000/ -. Under the policy a sum of Rs. 33,000/- was payable on January 17, 1978 to the assured or his nominees, executors, administrators or other representatives-in-interest as the case might be. It is not without significance that the moneys payable under the policy were payable not on the death of the assured but at a fixed date. Moreover, as only one single premium was payable there was no question of premiums ceasing to be payable on the death of the assured. The policy contained the following clause:"1. Surrender value. After one year from the within mentioned date of commencement of Assurance this policy will acquire a cash surrender value payable on the surrender of the policy provided there be no legal impediment. The amount of such surrender value will vary with the duration of the policy but will be not less than 80 per cent of the within mentioned single premium. "
( 3 ) THE assured nominated one Nitish Chandra Ghosh, his younger son as his nominee, under Section 39 of the Insurance Act. Soon thereafter, the assured died intestate on August 25, 1952, leaving his widow and two sons, as his heirs and legal representatives.
( 4 ) AS the" policy did not mature on the death of the assured the nominee did not prefer any claim under it. In 1957 the nominee, in order to obtain a loan from the United Bank of India Ltd. by pledging the policy made enquiries of the Life Insurance Corporation of India as to what surrender value the policy had acquired. By a letter dated December 23, 1957 the Life Insurance Corporation of India hereinafter referred to as the insurer, intimated to the United Bank of India Ltd. that the surrender value of the policy was Rs. 12012/ -. Immediately thereafter the nominee assigned the policy to the Bank by way of pledge and secured a loan of Rupees 10,000/- on interest. By a letter dated November 5, 1958 the Bank notified to the insurer that the policy had been assigned to the Bank for valuable consideration and the Bank was the beneficiary of the policy. By a letter dated November 26, 1958 the insurer intimated to the Bank that the assignment had been duly registered. Thereafter by another letter dated December 2, 1958 the insurer made it clear that in registering the notice of the assignment it had not accepted any responsibility for the validity of the assignment and that the policy is payable only on the expiry of the period, i. e. on 17th January, 1978. By another letter dated April 5, 1960 the insurer pointed out that the legal validity of the assignment in favour of the Bank "is not free from doubt" and the matter was, therefore, being referred for legal opinion. By a letter dated December 17, 1960 the insurer, presumably on the basis of legal opinion it had received, wrote:"sri Nitish Chandra Ghosh is the nominee under Section 39 of the Insurance Act and nothing more. A nomination of the policy under Section 39 of the Insurance Act gives the right to collect the money only; policy money does not vest in the nominee by mere nomination. We are afraid, therefore, that the assignment made by the nominee is not legally valid and your right to surrender the policy on the basis of assignment is doubtful. Please note in this connection that we simply registered the assignment without expressing any opinion as to the legal validity. "
( 5 ) IT appears from an endorsement on the policy that on December 26, 1957 the nominee purported to assign his right, tide and in
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