Mr. J who governed by the Hindu Succession Act, 1956, died intestate on June 15, 1967 leaving behind his son. Mr. A (plaintiff No. 2), his widow, Mrs U (defendant) and his mother Mrs S (plaintiff No. 1) as his heirs. He

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Mr. J who governed by the Hindu Succession Act, 1956, died intestate on June 15, 1967 leaving behind his son. Mr. A (plaintiff No. 2), his widow, Mrs U (defendant) and his mother Mrs S (plaintiff No. 1) as his heirs. He had during his lifetime taken out two insurance policies for ₹ 10,000 each and had nominated under section 39 of the Act his wife 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 his mother and son (minor) represented by his next friend Mr. A who was the father of J filed a suit in Civil Suit, 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. Mrs U, the defendant and wife 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. Section 39 of the Act reads as: (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 policy-holder 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. From the facts of the case, explain 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.

Answer & Explanation:

A mere nomination made under Section 39 of the Insurance Act, 1938 does not have the effect of conferring on the nominee any beneficial interest in the amount payable under the life insurance policy on the death or 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. An analysis of the provisions of Section 39 of the Act clearly established that the policy holder continues to hold interest in the policy during his life time and the nominee acquires no sort of interest in the policy during the life time of the holder. If that is so, on the death or the policyholder 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. The tenuous character of the right of a nominee becomes more pronounced when one contrasts the provisions of Section 39 with that of section 38. Section 39 of the Act was not intended to act as a third mode of succession provided by the stature and incorrectly styled as 'statutory testament'. The language of section 39 of the Act is neither capable of altering the course of succession under law nor can be said to have equated a nominee to an heir or legatee. Thus, it is clear that a nominee under section 39 of the Act does not get an absolute right to the amount due under a life insurance policy on the death of the assured. The legal position of a nominee in an insurance policy, has been well laid down by the Supreme Court in the case of Smt. Sarabati Devi & Anr v/s Smt. Usha Devi where it held that a mere nomination made under Section 39 of the Insurance Act, 1938 does 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 or 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.

Topics: Life Insurance

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