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2025 Supreme(Online)(KAR) 1231
IN THE HIGH COURT OF KARNATAKA AT DHARWAD BENCH
MR JUSTICE ANANT RAMANATH HEGDE, J
Neelavva @ Neelamma W/o Neelappa Somanakatti – Appellant
Versus
Chandravva @ Chandrakala @ Hema W/o Ravi Somanakatti – Respondent
RFA NO.100471 OF 2023
Advocate Appeared:
For the Appellant :SRI N M PATIL, ADVOCATE
For the Respondent: SRI CHANDRASHEKAR M HOSMANI, ADV.FOR R1& R2, SRI MRUTYUNJAYA TATA BANGI, ADV.
:
Nomination under the Insurance Act does not override personal law on succession; nominees are custodians, not absolute owners of insurance benefits when legal heirs exist.
Headnote:(A) Insurance Act, 1938 - Section 39 - Nomination and succession - Conflicting claims of a nominee and heirs over life insurance benefits - The amendment to Section 39 raised the question of whether a nominee's beneficial interest excludes heirs under personal law - The Court held that nomination does not override succession laws, confirming that the nominee is not entitled to absolute ownership over insurance benefits when heirs exist. (Paras 1, 26, 42)
(B) Nominee's Rights - The nominee is considered a custodian who must distribute benefits to legal heirs according to personal law, thus upholding the principle that legal heirs retain rights over insurance proceeds despite nomination. (Paras 8, 36)
Facts of the case:
The case involved the death of an insured individual who had nominated his mother for life insurance benefits, while his widow and minor son claimed rights as legal heirs. The Trial Court decreed a partition of the benefits among the heirs, rejecting the nominee's claim to exclusivity. (Paras 3, 5)
Findings of Court:
The Court affirmed the Trial Court's decision, emphasizing that the nominee does not have absolute rights over the policy benefits in the presence of legal heirs. (Paras 42, 44)
Issues: The main issues were whether the amended Section 39 of the Insurance Act excludes heirs from claiming rights over insurance benefits and the interpretation of 'beneficial interest' under the Act. (Paras 2, 36)
Ratio Decidendi: The Court concluded that the amended Section 39 does not intend to override the provisions of personal law relating to succession, and the nominee's role is limited to that of a custodian for the legal heirs. (Paras 36, 42)
Result: Appeal dismissed.
CAV JUDGMENT
This case is about the conflicting claims of a nominee and an heir under personal law, over the benefits flowing from a life insurance policy. Almost similar claims over the estate covered by nomination under different provisions of law, have been the subject matter of discussion in multiple Courts. On innumerable occasions, the Courts have held that nomination cannot override the provisions relating to succession.
2. The amendment to Section 39 of the Insurance Act, 1938 (for short, 'the Act of 1938') as effected by Act No.5 of 2015 has raised the following question:
Whether “certain nominee/s” named in sub- Section (7) and (8) of Section 39 of the Act of 1938 who is/are conferred“beneficial interest” over the benefits under an insurance policy, exclude/s the heir/s from succeeding to the benefits flowing from the insurance policy?
Facts:
3. Sri. Ravi Somanakatti who had subscribed to two Life Insurance Policies died on 20.12.2019. Insured was a bachelor when the policies were issued. Insured had nominated his mother as the nominee to the benefits (Rs.19,00,000/- and Rs.2,00,000/-) flowing from the policies, in the event of his death. By the time, the insured died, he had married and had a son from the marriage. However, the insured had not effected any changes in the nomination to the policies referred to above.
4. The plaintiffs, (widow and minor son of late Ravi Somanakatti) filed the suit against the mother of late Ravi Somanakatti, claiming share in the benefits flowing from the insurance policies.
5. The suit is decreed. The Trial Court rejected the nominee’s claim for entire benefit under the policies. The Court held that each of the plaintiffs and 1st defendant is entitled to 1/3rd share despite nomination.
6. Aggrieved by the aforementioned judgment and decree, the defendant is in appeal.
Contentions:
7. Learned counsel Sri. J.S. Shetty, appearing for appellant/defendant No.1 urged that the impugned judgment and decree overlooks Section 39 of the Act of 1938, as amended by the Insurance Laws (Amendment) Act, 2015. Amended Section 39 to the Act of 1938 confers absolute right in favour of a certain class of nominees, who are termed as 'beneficiary nominee' and the mother falling under the category of beneficiary nominee excludes all other heirs under the personal law governing the parties from claiming any right over the benefits payable to the nominee under the insurance policy.
8. Learned counsel appearing for respondent No.1 would contend that the mother/defendant No.1 who is the nominee under the policies is only a custodian entitled to receive the benefits under the policy, on behalf of all the heirs, and the nominee owes a duty to disburse the amount to the legal heirs as per the personal law governing the succession.
9. Since the “Objects and Reasons” did not reveal the intention behind the amendment to Section 39 of the Act of 1938, this Court also requested the Central Government Standing Counsel to provide materials throwing light on the reasons behind the amendment.
10. Sri Mrutyunjaya Tata Bangi, the learned Counsel for respondents No.3 and 4 submits that the reasons for amendment to Section 39 of the Act of 1938, are not specifically mentioned in the Objects and Reasons for the amendment. However, submits that the amendment is based on the recommendations in 190th Report of the Law Commission of India.
Discussions:
11. Relevant portions of Section 39 of the Act of 1938, read as under:
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:
xxx.
(2) xxx.
(3) xxx.
(4) xxx
(5) Where the policy matures for payment during the lifetime of the person whose life is insured or where the nominee or, if there are more nominees than one, all the nominees die before the policy mature
