Under S.39 (7), Insurance Laws (Amendment) Act, 2015 nominee now has a beneficial interest in the amount payable and is no longer a mere receiver nominee: High Court of Delhi

Section 39 of the Insurance Act, 1938 was amended 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 means a nominee other than a beneficiary nominee. Keeping this distinction in mind, sub-section (7) of Section 39 was carefully and cautiously drafted and the words used by the legislature are ‘beneficial interest’. This was held in SMT. SHWETA SINGH HURIA & ORS. LTD v. SMT. SANTOSH HURIA & ANR [RFA 310/2020] in the High Court of Delhi by a single bench consisting of JUSTICE JYOTI SINGH.

Facts are that a Respondent had filed a suit for partition or separation of shares of Respondent, recovery of Rs. 54,14,077/-, rendition of accounts and permanent injunction against the Appellants. Trial Court had decided both the applications by a common order, dismissing the application under Order VII Rule 11 CPC and allowing the application under Order XII Rule 6 CPC. The Appellants have filed a regular first appeal against the same.

The counsel for the Appellants contended that there was no admission on the part of the Appellants enabling the Trial Court to pass a decree under Order XII Rule 6 CPC. It was also contended that the Life Insurance Policies of Late Shri Vineet Huria were governed by Insurance Act, 1938 as amended by Insurance Laws (Amendment) Act, 2015.

The counsel for respondent opposed the appeal and submitted that the partial decree had been rightly passed by the Trial Court on an application under Order XII Rule 6 CPC. He contended that the nominee does not have an absolute right over the estate of the deceased, as the nomination is not a ‘Will’.

The court made reference to the judgment of Apex court in the case of  Smt. Sarbati Devi & Anr. Vs. Smt. Usha Devi., wherein it was held that “We approve the views expressed by the other High Courts on the meaning of Section 39 of the Act and hold that a mere nomination made under Section 39 of the Act does not have the effect of conferring on the nominee any beneficial interest in the amount payable under the life insurance policy on the death of the assured. The nomination only indicates the hand which is authorised to receive the amount, on the payment of which the Patna High Court CWJC No.12012 of 2018 dt.25-09- 2019insurer gets a valid discharge of its liability under the policy. The amount, however, can be claimed by the heirs of the assured in accordance with the law of succession governing them”.

The court also made reference to the amended sec 39 of the Insurance act and to the recommendations of 190th Report of the Law Commission of India, wherein it was recommended that “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)”.

Considering the facts of the case and the legal precedents, the court observed that the Appellants had brought the 2015 Amendment to the notice of the Trial Court, but the Trial Court has not even dealt with the legal issue raised before it and allowed the application under Order XII Rule 6 CPC, based on the unamended provisions of Section 39. Since the Trial Court had not considered the Amendment to the Insurance Act 1938, raised by the appellants, the court ordered the matter to be taken afresh.

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