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

Assignment under section 38 of Insurance Act, 1938: Assignment is the transfer of the rights to receive the benefits under a contract accruing to the party to that contract. In life insurance parlance, assignment is the transfer of rights to receive benefits stated in the life insurance policy from the Policyholder to the Assignee. The benefits under an insurance policy accrue by way of survival benefits and death benefits. While death benefits accrue in every insurance policy, survival benefits typically relate to maturity benefits under an insurance policy with an underlying investment component, e.g. Endowment Policy, Money-back Policy, Unit Linked Insurance Policy etc. The concept and procedure for Assignment is dealt with under Section 38 of the Insurance Act, 1938. The Section treats an Assignment and a Transfer at par. It lays down that a transfer or assignment of a policy of life insurance whether with or without consideration may be made only by an endorsement upon the policy itself or by a separate instrument, signed in either case by the transferor or by the assignor or his duly authorised agent and attested by at least one witness, specifically selling forth the fact or transfer or assignment. In practice, a 'space for endorsements' is provided in the insurance policy contract where the Policyholder (Assignor) affixes the statement of assignment along with reasons therefor. This endorsement is required to be signed by the Policyholder and the signature should be witnessed by any person competent to contract. An assignment can be only for valid reasons. The insurance policy can be assigned for reasons of 'love and affection' within the immediate family members, or for a 'valid consideration' to any external person or entity. A majority of insurance policy assignments are carried out towards providing the insurance policy as a collateral security towards loans taken from financial institutions. In these cases a condition is added to the endorsement which states that on the repayment of the loan, the policy shall stand automatically re-assigned to the policyholder and the future benefits shall become payable to the policyholder. Assignment of an insurance policy to an unrelated person without a valid consideration is also viewed as a possible route for money laundering, thereby attracting enhanced scrutiny. Under the current laws, the Insurer has the limited authority of ensuring that the assignment documents are in order and has the obligation to register the assignment. The Insurer cannot deny an assignment. An assignment is effective on the date when the assignment documents in proper order are received by the Insurer. Upon registration of the assignment with the Insurer, the Assignee becomes the absolute owner of the benefits under the policy. Any nominations made by the Assignor (Policyholder) stands cancelled. However, some insurance policies enable granting of a loan by the Insurer, in which case the Policy gets assigned to the Insurer. Under such assignments, if the policy is reassigned or if the assignment is cancelled, the nomination made earlier by the policyholder survives and the policyholder is not required to make a fresh nomination after reassignment. Nomination under section 39 of Insurance Act, 1938: Nomination is a facility that enables a Policyholder to nominate an individual, who can claim the proceeds of the Policy, upon the demise of the Policyholder. Nomination is dealt with under Section 39 of the Insurance Act, 1938. It lays down that the Policyholder who holds a policy of life insurance on his own life may nominate the person or persons to whom the money secured by the policy shall be paid in the event of his death. Where any nominee is a minor, a major should be appointed to receive the money secured by the policy in the event of death of the policyholder during the minority of the nominee. A nomination can be made either at the time of buying the policy or at any time before the policy matures for payment. Any nomination made earlier can be replaced by a new nomination during the term of the policy. Any such nomination in order to be effectual is required to be incorporated within the policy either by way of a text in the policy itself or by way or an endorsement to the policy. While it is the right of the Policyholder to effect the endorsement, in order to be effective, such nomination should be communicated by the policyholder to the Insurer and registered by the Insurer in the records relating to the policy. Where a nomination is cancelled or changed by an endorsement or a will and a notice or such change in nomination is given by the policyholder to the Insurer, the Insurer is not liable for any payment made under the policy to a nominee mentioned in the text of the policy or registered in records of the insurer. Where the policy matures for payment during the lifetime of the Policyholder or where the nominee(s) die before the policy matures for payment, the amount secured by the policy shall be payable to the policyholder or his heirs or legal representatives or the holder or a succession certificate, as the case may be. Where the policy matures for payment during the lifetime or 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-holder or his heirs or legal representatives or the holder of a succession certificate as the case may be. Implications on the given facts of the case: In the given case, Mr. J nominated his wife, Mrs. U, under Section 39. As per the differentiation, nomination does not confer absolute ownership but merely identifies the person authorized to receive the policy proceeds to give a valid discharge to the insurer. The amount then forms part of the deceased's estate and is distributed according to the law of succession. Since Mr. J died intestate, his estate would be distributed as per the Hindu Succession Act, 1956. Therefore, Mrs. U, as a nominee, does not get an absolute right to the entire amount to the exclusion of Mr. J's son and mother. The son and mother, as legal heirs, have a claim to the policy proceeds as part of the deceased's estate.