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2025 (3) TMI 370 - HC - Indian LawsOverriding provisions of nomination on provisions relating to succession - Amendments to Section 39 of the Insurance Act 1938 specifically sub-sections (7) and (8) confer a beneficial interest to certain nominees thereby excluding heirs from succeeding to the benefits of an insurance policy under personal law - HELD THAT - The right of a nominee under Section 39 of the Act of 1938 vis- -vis the right of an heir under the personal law was considered in Smt. Sarbati Devi Anr vs Smt. Usha Devi 1983 (12) TMI 319 - SUPREME COURT wherein the Apex Court has held that there is nothing in Section 39 of the Act of 1938 (before amendment) to hold that the provision overrides the law relating to succession. The ratio in Smt. Sarbati Devi s case 1983 (12) TMI 319 - SUPREME COURT is followed in various other cases where the provisions relating to nomination are interpreted to hold that such provisions do not override the law relating to succession. It is required to be emphasised that the Apex Court and various Courts despite the use of the expression vest absolutely or Notwithstanding anything contained in any law for the time being in force and to the exclusion of all in various provisions of law governing nominations have held that such provisions have to be understood in the background of the scheme of the Act in which the provisions relating to nomination are found. The contentions suggesting nomination overriding the provisions of law have been rejected in various decisions. Section 39(7) and (8) of the Act of 1938 seem to suggest a different category of succession not provided in personal law (Hindu Succession Act) but running contrary to personal law. The provision meddling with the law of succession does not fit in the Scheme of the Act of 1938 which occupies a different field in the Seventh Schedule as compared to Succession which is found in a different List and Entry. In the light of the discussions made above it is difficult to hold that the Parliament has enacted a parallel law relating to succession in so far as benefits flowing from the policy of insurance. Under the unamended provision the nominee had an obligation to distribute the benefits flowing from the policy to the legal heirs. Under Section 39(7) there is no such obligation as long as there is no claim by the legal heirs. In the absence of any claim by legal heirs the title vests in beneficiary nominee. However if there is a claim by the legal heir/s then the nominee s claim has to yield to the personal law governing succession. Coming to the facts of the case the appellant who is the mother of late Ravi Somanakatti the insured is one of the Class-I heirs along with widow and minor son of the insured. Since this Court has taken a view that the Section 39 of the Act of 1938 does not override the provisions of Hindu Succession Act 1956 the appellant who is the nominee described in Section 39(7) of the Act of 1938 cannot claim absolute ownership over the benefits flowing from the insurance policy as other Class-I heirs of the deceased have also laid a claim over the benefits flowing from the policy - Though the Trial Court has not noticed the amended Section 39 and decreed the suit for partition by referring to un-amended Section 39 this Court is confirming the judgment and decree for the reasons already recorded. Conclusion - i) The amended Section 39 is not intended to override the provisions of law relating to succession. ii) The expression beneficial interest in Section 39(7) and beneficial title in Section 39(8) should be interpreted to mean that such nominees or their legal representatives will get beneficial title over the benefits if the testamentary and non-testamentary heirs do not claim the benefits. iii) In the absence of any claim by legal heirs the title vests in the beneficiary nominee. However if there is a claim by the legal heir/s then the nominee s claim has to yield to the personal law governing succession. Appeal dismissed.
ISSUES PRESENTED and CONSIDERED
The core legal question considered in this case was whether the amendments to Section 39 of the Insurance Act, 1938, specifically sub-sections (7) and (8), confer a "beneficial interest" to certain nominees, thereby excluding heirs from succeeding to the benefits of an insurance policy under personal law. ISSUE-WISE DETAILED ANALYSIS The primary issue revolved around the interpretation of Section 39 of the Insurance Act, 1938, as amended by the Insurance Laws (Amendment) Act, 2015. The Court examined whether the amended provisions allowed certain nominees to have a beneficial interest that supersedes the rights of heirs under personal succession laws. Relevant legal framework and precedents: The Court referred to various precedents, including the landmark case of Smt. Sarbati Devi & Anr vs Smt. Usha Devi, which established that nomination under Section 39 of the Insurance Act does not override the law of succession. The Court also considered the case of Shakti Yezdani and another v. Jayanand Jayant Salgaonkar and others, which further explored the relationship between nomination and succession under different statutes. Court's interpretation and reasoning: The Court noted that the amended Section 39 introduced the concept of "beneficiary nominee" but did not explicitly override the law of succession. The Court emphasized that the Insurance Act was not intended to legislate on succession matters, which are governed by personal laws. The Court also pointed out that the Law Commission's recommendations, which suggested a distinction between "beneficiary nominee" and "collector nominee," were not fully incorporated into the amended Act. Key evidence and findings: The Court highlighted the absence of a clear legislative intent in the amendment to override succession laws. It noted that the amendment did not include provisions for a policyholder to declare the type of nominee, nor did it define "beneficial interest" clearly. Application of law to facts: In applying the law to the facts, the Court concluded that the nomination of the mother as a beneficiary nominee did not exclude the widow and minor son from claiming their shares under personal succession laws. The Court affirmed the Trial Court's decision to divide the insurance benefits equally among the mother, widow, and son. Treatment of competing arguments: The appellant argued that the mother, as a beneficiary nominee, had an absolute right to the insurance benefits. In contrast, the respondents contended that the nominee was merely a custodian, obligated to distribute the benefits according to succession laws. The Court sided with the respondents, emphasizing the need to interpret the amended provisions in light of established legal principles and the socio-economic context of India. Conclusions: The Court concluded that the amended Section 39 did not intend to create a new mode of succession and that the rights of heirs under personal law were not overridden by the nomination. SIGNIFICANT HOLDINGS The Court held that:
The Court dismissed the appeal, confirming the Trial Court's judgment to distribute the insurance benefits equally among the mother, widow, and minor son, thereby reinforcing the principle that nomination does not override succession laws.
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