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TMI Blog1956 (7) TMI 48X X X X Extracts X X X X X X X X Extracts X X X X ..... fe. Such a policy always forms part of the estate of the assured and may be dealt with at his absolute discretion such as sale, charge, settlement or bequest or made the subject at 'donatio mortis causa. 5. Dispositions of life insurance policies can be classed under three heads: (1) assignment, (2) nomination and (3) statutory creation of a trust by reason of the provisions of the Married Women's Property Act, 1882. So far as the English law is concerned legal title to the policy can be obtained by assignment as laid down in the Policies of Life Assurance Act, 1867 or Section 136 of the Law of Property Act, 1925 which replaced Section 25 Sub-section (6) of the Judicature Act of 1873. In India such an assignment is payable by virtue of Section 38 of the Indian Insurance Act IV of 1938. Except adverting to the fact that in America also the law is practically the same no further discussion of the effect of an assignment is necessary in this connection, 6. Under the general law, an assignment is understood as a transfer by an individual of his right or interest in the property to another resting upon a contract between them. That being the case if a policy is assigned it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lair's Life policy, 1938-1 Ch 799 (E), In re, Foster; Hudson v. Poster, 1938-54 TLR 993 (F), In re, Gordon Watts v. Rationalist Press Assocn., Ltd., 1940 Ch 769 (G); In re, Webb; Barclays Bank Ltd. v. Webb, 1941 Ch 225 (H) and In re, Schebsman, 1943 Ch 366 CD. The principle deducible from a consideration of the above cases is that if from the form of words used it could not be inferred that a statutory trust has been created under Section 10 of the Married Women's Property Act, 1870 and Section 11 of the Married Women's Property Act, 1882 or the. Married Women's Policies of Assurance Scotland Act of 1880, the assured amount would be payable to the personal representatives of the assured. In short very much will depend upon the words used in the policy whether the language has to be construed as creating a trust or not within the meaning of the Married Women's Property Act. In Macgillivray's Insurance Law (3rd edition pages 674-675) we find the following: There Is a distinction between the creation of a trust and a simple contract between two persons for the benefit of a third. This distinction was emphatically insisted on by the Judges in the Court of Ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... yee under a policy of life insurance did not of itself create a trust in her favour the plaintiff was non-suited. 10. The same view has been taken by the Bombay High Court in shankar Vishvanath v. Umabai Sadashiv, ILR 37 Bom 471 (L). The Madras High Court has adopted a similar line as is seen from the judgment of my learned brother. As pointed out by Baiwell in his Law of Insurance, (1940 Edn. p. 439) the earlier decisions have now become academic because of the provisions of Section 39 of the Insurance Act of 1938, 11. If by nomination, a trust is created then the nominee becomes the beneficiary but the difficulty is to find out from the exact words used what the intention was, because the terms nomination and nominee are not strictly speaking terms of art. Nominated means only to name and it is in every instance a question of mixed law and fact as to what the intention is. Thus by the expressions used it has to be found out whether the nomination merely creates a payee or a beneficiary for whose protection a trust is thereby created. 12. Barewell in his Law of Insurance in India (1940) at page 440 observes, It is part of the history of life insurance that husbands ins ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... being the case the decision of the lower court is correct and the appeal must be dismissed. RAMASWAMI, J.: 15. This is an appeal directed against the decree and judgment of the learned subordinate Judge of Salem in O. Section 229 of 1949. 16. The facts are:- The deceased Dhana-kodi Mudaliar had taken out two life insurance policies for ₹ 5000 each in the National Insurance Company Limited, Calcutta. This Dhanakoti Mudaliar had become indebted to the Indian Insurance and Banking Corporation Limited, Salem. The Bank instituted O. S. No. 131 of 1948 and obtained a decree on 8-11-1848. This Dhana-kiti Mudaliar died on 23-7-1949. The policies were attached 'before judgment on 11-9-1948. This Dhanakoti Mudaliar had nominated his wife Sidda lakshmi Ammal as the person entitled to receive the moneys due under the policies in the event of his death and Siddalakshmi Animal surviving him. This siddalakshmi Ammal died on 26-7-1949. The daughters of this couple viz., the second defendant and a minor girl by name Saroja who had died after the filing of the suit, filed a claim petition that the moneys due under the policies had become the assets of Siddalakshmi Ammal on the de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g of things in action. Thus policies of insurance which are legal things in action and the assured can grant a valid assignment of the right to recover under any policy of Insurance without the assent of the Insurers: See Jessal M. R. Ex. parte Ibbetson; Re. Moore (1878) 8 Ch. D. 519 (W); Brett L.J. in Castellan v. Preston, (1883) II QBD 380 at p. 388 (X). If it complies with the Acts, the assignment will be valid in law, and the assignee may sue the company alone. But if it does not, it will only be effective in equity, and the assignee may only sue the company in his own name if the assignor has been joined in the action, as plaintiff if he con- sents or otherwise as defendant: Performing Right Society v. London Theatre of Varieties Ltd., (1924) AC 1 (Y), c.f. William Brandt's Sons Co. v. Dun. lop Rubber Co, Ltd., (1905) AC 454 (Z). In addition to assignment, a person taking out a life policy tin his own life and who is to be considered as the owner of the reversionary sum which will become payable, cannot only assign but also sell, mortgage or settle it or even give it away as a gift. He may leave it by will or. make it, without anything in writing, the subject of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an on her own life, and expressed to be for the benefit of her husband, or of her children, or of her husband and children, or any of them, shall create a trust in favour of the objects therein named, and the moneys payable under any such policy shall not, so long as any object of the trust remains unperformed, form part of the estate of the insured, or be subject to his or her debts; Provided, that if it shall be proved that the policy was effected and the premiums paid with intent to defraud the creditors of the insured, they shall be entitled to receive, out of the moneys payable under the policy, a sum equal to the premiums so paid. The insured may by the policy, or by any memorandum under his or her hand, appoint a trustee or trustees of the moneys payable under the policy, and from time to time appoint a new trustee or new trustees thereof, and may make provision for the appointment of a new trustee or new trustees thereof, and for the investment of the moneys payable under any such policy. In default of any such appoint, ment of a trustee, such policy, immediately on its being effected, shall vest in the insured and his or her legal personal representatives, in trust for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Societies Act, 1896. 25. This rule as has been pointed out in Preston and Colinvaux Law of Insurance at page 338 sometimes works considerable injustice, as where a person took out an endowment policy expressly for the benefit of his godson, but died before the policy matured, and it was held that the policy formed part of his general estate and that the godson had no title to it: (1938) 1 Ch. 779 (E); see also Re: Clay's Policy, (1937) 3 All ER 548 (Z4). Since the policy-holder, in such a case, does not generally wish to create a trust binding upon Himself during his lifetime, it is important that he should provide by will that the policy should pass on his death to the nominee. He may, on the other hand, create a trust subject to his keeping up the policy: Pedder V. Moseley, (1862) 31 Beav 159 (Z5). 26. The law Revision Committee (Sixth Interim Report 32) has proposed that Section 11 of , the Married Women's Property Act, 1882, should be extended to education policies, to which it does not at present apply. Such a reform would render a welcome amelioration of the rule that a nominee has no right in a life insurance policy. 27. These principles are embodied in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y Section 38 of the Insurance Act and not by Section 130 of the Transfer of Property Act. 31. Section 39 of the Insurance Act of 1038 confers upon the holder of the policy of life assurance Issued upon his own life the right to nominate a person or persons to whom the policy moneys may be paid in the event of his death. We are not concerned here with proviso to Sub-section (1) dealing with minor nominees. Sub-section (2) prescribes that nominations may be effected in two-ways viz., (a) by incorporation in the text of the policy as Issued by the insurer or (b) by endorsement by the policy-holder on the policy and notified to the Insurer and registered in his books. There is no time limit given for an endorsement on the policy constituting the nomination, to be got registered. If, therefore, a policy-holder endorses his policy to nominate a person, there is nothing in the section to bar its registration in the books of the company even after the death of the assured. A nomination may be cancelled or altered by an endorsement or by a will. Nomination therefore effected by incorporation in the text of the policy Or by endorsement may be cancelled or changed by a subsequent end ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... milarly, whereas a will has the effect of abrogating the nomination altogether, an aslsgnment cannot at the option of the assignor be cancelled by a will. On account of these fundamental differences between an assignment and a nomination where under vested rights accrue under the former, to the assignee, and only a mere right to receive moneys under the policy contingent on the nominee surviving the assured and the assured not changing his mind and altering his nomination accrues in the latter case the liability of the assured amount to satisfy the liabilities of the as- sured is different in either case. In the former case it is not open to a creditor to treat the life policy as being the property of his debtor viz., the assured. In the case of the latter the nominee receives the policy amount subject to the same liabilities as in the case of beneficiaries under a disposition by a will. (For discussion of the differences between assignment and nomination under Sections 38 and 39 see Dutt Commentaries on the Insurance Act, 3rd Edition, page 101 and foll; P. A. S. Mani Life Assurance in India (1950) page 229; K. B. Venkoba Rao - The Law of insurance in India (1950) page 332 an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ery moment of its birth and cannot be looked upon therefore as available to creditors regardless of the trust imposed on it. - ILR 1938 Mad 867 : (AIR 1938 Mad 413) CS) was approved in Bharat Insurance Co., Ltd. v. Lakshmidevi, (1947) 17 Conip. Cas (Ins) l : (AIR 1948 Lah 21) (Z7-8); ILB 55 Mad 171 ; (AIR 1932 Mad, 220) (O) also is a decision taking the same view. ' The Madras view is in the line of English decisions of Section 11 of the English Married Women's Property Act, 1882 (as in Re: Pleetwood's Policy, (1926) 1 Ch 48 (Z9), (1941) 1 All ER 321 .(H); Re: Schebsman, (1543) 2 All ER 768 (Z10); though the Bombay High Court on Dinbai Hormasji v. Bamansha Janiasji, 58 Bom 513 : (AIR 1934 Bom 296) (Z11), (1937) 7 Com Cas 157 : (AIR 1937 Mad 645) (P), Shamdas v. Savitri, (1937) 7 Com Cas 267 : (AIR 1937 Sind 181) (Z13) takes the view that no trust is created in favour of the wife until the death of the assured and the assured in his lifetime can freely assign the benefit of the policy. 35. These principles are clearly brought out in two decisions of the. Calcutta High court to which our attention has been invited by the learned advocate Mr. Nambiar. The first decision ..... X X X X Extracts X X X X X X X X Extracts X X X X
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