1983 (12) TMI 319 - SC - Indian Laws

Summary

Issues Involved:
1. Whether a nominee under section 39 of the Insurance Act, 1938, acquires an absolute right to the amount due under a life insurance policy on the death of the assured.
2. The interpretation of section 39 of the Insurance Act, 1938, in relation to the rights of the heirs of the assured.

Summary:

Issue 1: Nominee's Rights under Section 39 of the Insurance Act, 1938

The primary question was whether a nominee under section 39 of the Insurance Act, 1938, acquires an absolute right to the amount due under a life insurance policy upon the death of the assured. Section 39 allows the policyholder to nominate a person to receive the policy amount in the event of their death. However, the nominee does not acquire any beneficial interest in the policy during the lifetime of the policyholder. The nominee is merely an agent to receive the money on behalf of the legal heirs. The court held that the policyholder retains interest in the policy during their lifetime, and upon their death, the amount payable under the policy becomes part of their estate, subject to the law of succession.

Issue 2: Interpretation of Section 39 in Relation to Heirs' Rights

The court examined various judicial precedents and concluded that a mere nomination under section 39 does not confer any beneficial interest on the nominee. The nominee is only entitled to receive the amount, which remains part of the assured's estate and is subject to succession laws. The court overruled the judgments of the Delhi High Court in Fauja Singh's case and Mrs. Uma Sehgal's case, which had erroneously interpreted section 39 to confer beneficial interest on the nominee. The court approved the views of other High Courts, which held that the nominee's right is limited to receiving the amount, and the legal heirs can claim the amount as per the law of succession.

Conclusion:

The court set aside the judgments of the trial court, the first appellate court, and the High Court, declaring that the plaintiffs are each entitled to a 1/3rd share in the amount received under the insurance policies and any interest earned. The suit was decreed accordingly, with parties bearing their own costs throughout. The appeal was allowed.