TaxTMI 
TaxTMI 
2021 (5) TMI 1075
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....Vineet Huria. 3. Respondent No. 1 pleaded that her deceased son late Shri Vineet Huria and Respondent No. 2 were sole and absolute joint owners of property bearing No. MIG Flat No. 35, Block-A, Type-B, Pocket-3, Bindapur, Dwarka, New Delhi (hereinafter referred to as 'suit property'). Shri Vineet Huria died on 11.07.2018 intestate and left behind four Class-I heirs i.e. (a) Respondent No. 1/mother (b) Appellant No. 1/wife (c) Appellants No. 2 & 3/son and daughter. 4. It was further pleaded that Respondent No. 1 inherited the estate of her deceased son, as he died intestate, to the extent of 1/4th share in his immovable and moveable assets and Appellants were entitled to the remaining 3/4th share. Her deceased son was in a high income group, with numerous properties, including moveable and immovable, in his own name and in the name of his wife and children, besides investments in Demat and Mutual Funds etc., the details whereof were not in the knowledge of Respondent No. 1 and needed to be ascertained and identified for partition. 5. It was also averred that the deceased son of Respondent No. 1 had 50% share in the flat at Dwarka, apart from various insurance policies. Af....
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....nominated her as a sole nominee and she had an exclusive right over the monetary benefits under them. 10. It was averred in the written statement that the policies are governed by Insurance Laws (Amendment) Act, 2015, which came into force w.e.f. 26.12.2014, whereby the Insurance Act, 1938, which is a Special Law, was amended. By virtue of the amended provision, Appellant No. 1 became a 'beneficial nominee' and was entitled to the benefits under the policies, to the exclusion of Respondents No. 1 & 2. With respect to Provident Fund and other benefits under the Mutual Funds etc., it was averred that the suit was premature as the said amounts had not been received by Appellant No. 1. Reimbursements of medical expenses were for the expenses incurred by her on the treatment of her late husband, at the rates fixed by the CGHS and were paid to her being an employee of Kendriya Vidhyalaya. Respondent No. 1 thus had no right to claim any share in the same. 11. Along with the replication, Respondent No. 1 filed an application under Order XII Rule 6 CPC, 1908 on the basis of an alleged admission by the Appellants in the written statement that Appellant No. 1 had received a sum of R....
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....t came into force, sub-sections (7) of Section 39, added by the Amendment Act, would apply. By virtue of sub-Section (7), where the holder of insurance policy, in his lifetime nominates his parents or spouse or children or any of them, the nominee(s) shall be beneficially entitled to the amount payable by the insurer, unless it is proved that the holder of the policy, having regard to the nature of his title to the policy, could not have conferred any such beneficial title on the nominee. 17. To highlight the marked difference the 2015 Amendment brought out, Ms. Gambhir, by way of an illustration pointed out that the newly added sub-Section 39 (7) carves out an exception in favour of a class of nominees and it is under this even a father gets right to the benefits, in case he is a nominee albeit under the general law of inheritance, he has no right being a Class-II heir under the Hindu Succession Act, 1956. The argument is that there is a complete change in law of nomination under the insurance policies and the underlying intent of the Legislature is to honour and respect the will of the insured, with regard to the recipient of benefits under the policies. Under the new regime, no....
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....minee of the deceased. Being the mother, Respondent No. 1 is a Class-I legal heir and entitled to 1/4th share and there is no infirmity in the order of the Trial Court, as the admissions were clear and unambiguous. 21. It is argued that reliance of the Appellants on the Insurance Act, 1938 as amended by Insurance Laws (Amendment) Act, 2015 is misplaced in view of the settled law that a nominee does not have an absolute right over the estate of the deceased, as nomination is not a 'Will'. Several Courts have held from time to time that a nominee in an insurance policy only acts as a receiver on behalf of the legal heirs of the deceased policy holder and once the money is received by the nominee, disbursement under the policy, has to follow the testamentary disposition under the law of succession, which cannot be overridden by the Insurance Act, 1938, even after the said amendment. No judgment has been cited by the counsel for the Appellants which denies a legal heir the right to claim the amounts payable under the Insurance Policy and on the contrary it has been held that a policy holder continues to hold interest in the policy during his lifetime and the nominee acquires n....
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....that the expression 'the amount shall be payable to the nominee' in Section 39 (6), does not mean that the amount shall belong to the nominee. 23. I have heard the learned counsels for the parties and examined their rival contentions. 24. The relationship between the parties to the lis is that Appellant No. 1 is the daughter-in-law of the Respondents herein and the widow of Late Shri Vineet Huria. Appellants No. 2 & 3 are the minor son and daughter of Appellant No. 1 and grandchildren of Respondents No. 1 & 2. Respondent No. 1 had filed a suit before the Trial Court for partition, rendition of accounts, permanent injunction and recovery of Rs. 54,14,077/- from the Appellants. 25. During the pendency of the suit, Respondent No. 1 filed an application under Order XII Rule 6 CPC for judgment on admission based on an alleged admission in the written statement filed by the Appellants, that Appellant No. 1 had received as sum of Rs. 2,48,53,000/- as well as the amount under two policies, from ICICI Bank, wherein her deceased husband was the policy holder. Respondent No. 1 claimed 1/4th share in the amounts under the said policies as a Class-I heir of the deceased on the ground....
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.... power of cancellation of or effecting a change in the nomination implies that the nominee has no right to the amount during the lifetime of the assured. If the policy is transferred or assigned under Section 38 of the Act, the nomination automatically lapses. If the nominee or where there are nominees more than one all the nominees die before the policy matures for payment the money due under the policy is payable to the heirs or legal representatives or the holder of a succession certificate. It is not necessary to refer to sub-section (7) of Section 39 of the Act here. But the summary of the relevant provisions of Section 39 given above establishes clearly that the policy-holder continues to hold interest in the policy during his lifetime and the nominee acquires no sort of interest in the policy during the lifetime of the policy-holder. If that is so, on the death of the policy-holder the amount payable under the policy becomes part of his estate which is governed by the law of succession applicable to him. Such succession may be testamentary or intestate. There is no warrant for the position that Section 39 of the Act operates as a third kind of succession which is styled as a....
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.... to treat a nominee as being equivalent to an heir or legatee having regard to the clear provisions of Section 39 of the Act. The exemption of the moneys payable under a life insurance policy under the amended Section 60 of the Code of Civil Procedure instead of 'devaluing' the earlier decisions which upheld the right of a creditor of the estate of the assured to attach Patna High Court CWJC No. 12012 of 2018 dt. 25-09-2019 the amount payable under the life insurance policy recognises such a right in such creditor which he could have exercised but for the amendment. It is because it was attached the Code of Civil Procedure exempted it from attachment in furtherance of the policy of Parliament in making the amendment. The Delhi High Court has committed another error in appreciating the two decisions of the Madras High Court in Karuppa Gounder v. Palaniamma [ AIR 1963 Mad 245 at para 13 : (1963) 1 MLJ 86 : ILR (1963) Mad 434] and in B.M. Mundkur v. Life Insurance Corporation of India [ AIR 1977 Mad 72 : 47 Com Cas 19 : (1977) 1 MLJ 59 : ILR (1975) 3 Mad 336]. The relevant part of the decision of the Delhi High Court in Uma Sehgal case [AIR 1982 Del 36 : ILR (1981) 2 Del 315] ....
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.... the Life Insurance Policy, on the death of the assured and no longer remains a mere receiver nominee, whose rights under the unamended Section were subject to rights and claims of the legal heirs under the law of succession. 29. In order to appreciate the legal nodus that arises, it is imperative to compare and contrast relevant provisions of the unamended and amended Sections 39, respectively, which are extracted hereunder for ready reference:- Unamended Section 39:- "39. Nomination by policy-holder. --(1) The holder of a policy of life insurance on his own life may, when effecting the policy or at any time before the policy matures for payment, nominate the person or persons to whom the money secured by the policy shall be paid in the event of his death. (6) Where the nominee or if there are more nominees than one, a nominee or nominees survive the person whose life is insured, the amount secured by the policy shall be payable to such survivor or survivors. (7) The provisions of this section shall not apply to any policy of life insurance to which Section 6 of the Married Women's Property Act, 1874 applies or has at any time applied: Amended Section 39: 39. (1) ....
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....mount on the basis that the nominee is a different person seems harsh. On the other hand, what appears reasonable is to give an option to the policyholder to clearly express whether the nominee will collect the money on behalf of the legal representatives (in other words such nominee will be the collector nominee) or whether the nominee will be the absolute owner of the monies in which case such nominee will be the beneficial nominee. Public interest and the peculiar social realities in India cannot permit the adoption of the procedures followed in Canada, USA or South Africa. The Commission is not agreeable to the suggestion that a provision similar to s. 45ZA as in the Banking Regulation Act, 1949 should be adopted. 7.1.13 The suggestion that a proviso be added to make the nomination effectual for the nominee to receive the policy money in case the policyholder dies after the maturity of the policy but before it can be encashed, has also been welcomed by the responses, and is hereby recommended. Final recommendations of the Law Commission in regard to Section 39:- 7.1.14 After considering all the responses and reexamining the entire issue, the final recommendations of the L....
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....aturing for payment after the commencement of this Act. (11) Every policyholder shall have an option to indicate in clear terms whether the person or persons being nominated by the policyholder is/are a beneficiary nominee(s) or a collector nominee(s). Provided where the policyholder fails to indicate whether the person being nominated is a beneficiary nominee or a collector nominee it will be deemed that the person nominated is a beneficiary nominee. Explanation: For the purposes of this sub-section the expression 'beneficiary nominee' means a nominee who is entitled to receive the entire proceeds payable under a policy of insurance subject to other provisions of this Act and the expression 'collector nominee' means a nominee other than a beneficiary nominee." 31. As is evident from a reading of the recommendations of the Law Commission, a distinction was carved out between 'beneficiary nominee' and 'collector nominee' and Section 39 of the Insurance Act, 1938 was amended accordingly, adding sub-Section (7). Beneficiary nominee means a nominee who was entitled to receive the entire proceeds under an insurance policy and a collector nominee me....