Beneficial Nominee Is Not Owner Of Money Out Of Proceeds Of Insurance Policy: Allahabad High Court
The Allahabad High Court held that the beneficial nominee cannot be said to be the owner of the money out of the proceeds of the insurance policy.
The Lucknow Bench held thus in a Petition filed against the Order passed by the District Judge, Unnao in a Civil Revision.
A Single Bench of Justice Pankaj Bhatia observed, “Section 39(7) of the Insurance Act which is pari materia to Section 45-ZA(2) and was incorporated to achieve similar objective having been interpreted in Ram Chander Talwar (supra) to hold that the nominee cannot be held to be the owner of the money lying in the account. Section 39(7) also has to be interpreted to hold that the beneficial nominee cannot be said to be the owner of the money out of the proceeds of policy.”
The Bench said that the rights conferred by the Hindu Succession Act, 1956 will prevail over the rights claimed by the nominee under Section 39(7) of the Insurance Act, 1938.
Advocate Deepak Kumar represented the Petitioner while Advocate Vivek Kumar Pandey represented the Respondents.
Factual Background
The Petitioner claimed that she had taken out 15 life insurances in the name of her daughter when she was unmarried and subsequently, she was married to the Respondent. The granddaughter of the Petitioner was born out of the said wedlock but unfortunately, the Petitioner’s daughter died in 2021 when her granddaughter was about 11 months’ old. It was claimed that in the 15 life insurance policies, the Petitioner was the nominee as named by her daughter before her death. However, to resist the said claim, the Respondents filed a Civil Miscellaneous Case under Section 372 of the Indian Succession Act, 1925 before the Civil Judge, claiming succession including the claim arising out of life insurance policies.
It was further claimed that the Petitioner was not even made a party and subsequently, the case was disposed off in the Lok Adalat, without hearing the Petitioner. Being aggrieved, the Petitioner filed a Petition in which an Order was passed, holding that a Revision would lie against the said Order of the Civil Judge before the competent Court. Ultimately, the Revision was decided vide which the succession certificate was modified to the extent that amount of all the insurance policies was directed to be excluded from the list of assets. Thus, the issue that arose for consideration was with respect to the claim of the Petitioner, being the nominee.
Reasoning
The High Court after hearing the contentions of the counsel, noted, “… the insurance policy is basically a contract and the said contract is subject to the limitations and the restrictions as imposed by virtue of the Insurance Act which itself was enacted for regulating the business of insurance in India.”
The Court added that the Insurance Act was never enacted by the Parliament to govern the rights of succession in respect of the persons who are governed by their individual succession laws, whereas the Hindu Succession Act was specifically enacted to codify the law of succession in respect of Hindus dying intestate.
“Clearly the issue of succession would be governed by a specific statute being The Hindu Succession Act and to that extent, the general law as flows from Section 39(7) under the Insurance Act has to give way”, it further said.
The Court observed that holding the beneficiary to be a beneficial nominee to the exclusion of the heirs would lead to absurdity which was never intended by the statutes while amending the provisions of Section 39(7).
“Any other interpretation would be doing violation to the delicate balance of rights in between the nominee and the legal heirs whose rights flow from the Hindu Succession Act”, it also added.
The Court held that the nominee would not unsettle the rights of the legal heirs by virtue of the respective Succession Act.
“On harmonious interpretation of the two provisions i.e. Insurance Act and Hindu Succession Act, the rights conferred by Hindu Succession Act will prevail over the rights claimed by the nominee under Section 39(7) of the Insurance Act, the succession act being specific to succession in contradiction to the Insurance Act which is general”, it concluded.
Accordingly, the High Court dismissed the Petition, upheld the impugned Judgment, and granted the Certificate of Appeal under Section 134-A of the Constitution to the Supreme Court.
Cause Title- Smt. Kusum v. Anand Kumar and 3 Others (Neutral Citation: 2025:AHC-LKO:24631)
Appearance:
Petitioner: Advocates Deepak Kumar and Vindeshwri Pandey.
Respondents: Advocates Vivek Kumar Pandey, Mahendra Pratap Singh, and Vivek Shukla.
