Shobba Sharma v. Keshav Narain — 1978 DIGILAW 480 (ALL)

JUDGMENT R.R. Rastogi, J. 1. THIS civil revision arises out of proceedings under Section 372 of the Indian Succession Act. One Hari Gopal had taken two life insurance policies for a total sum of Rs. 11,850/-in the year 1966. At that time he was a bachelor and he made his father Sri Kishan Lal as his nominee in those policies. Later on he was married to Smt. Shobha Sharma, who is the applicant before this Court, on 11-3-1969. He died on 24-12-1970. The nominee, Sri Kishan Lal, made a will on 10-8-1971 in favour of his own son Keshav Narain, who is opposite party No. 1 in the present revision application. By that will Kishan Lal bequeathed the amount payable under the aforesaid two policies to Keshav Narain. Kishan Lal died on 18-5-1971. Thereafter Keshav Narain made an application under Section 372 (1) of the Succession Act for issue of a succession certificate so as to enable him to obtain payment of the money payable under the aforesaid two policies. The opposite-parties were his own mother Smt. Laxmi Devi and two, others including the widow of the assured, Smt. Shobha Sharma. 2. SMT. Shobha Sharma filed an objection to that application contending that Kishan Lal had not executed any such will and as such the alleged will was ineffective. As widow of the assured she claimed herself to be entitled to the amount payable under the aforesaid policies. Evidence was led by the parties. The court of first instance, relying on a Division Bench decision of this court in Keshri Devi v. Dharma Devi, 1962 AWR 254, held that Keshav Narain was entitled to the certificate prayed for. The decisions relied upon from the other side before him were distinguished and they were Sarojini Amma v. Neel Kanta Pillai, AIR 1961 Kerala 126, Smt. Shantt Devi v. Sri Ram Lal, 1958 AWR 295, Life Insurance Corporation of India v. United Bank of India Ltd, AIR 1970 Calcutta 513 and Raja Ram v. Mata Prasad, 1971 AWR 785 F. B. 3. AN appeal was filed against that order by Smt. Shobha Sharma before the District Judge, Bulandshahr. Reliance was placed on behalf of the applicant on the provisions of Section 39 of the Life Insurance Act 1938 (hereinafter referred to as the Act) and the very same decisions which had been cited before the Court below. AN appeal was filed against that order by Smt. Shobha Sharma before the District Judge, Bulandshahr. Reliance was placed on behalf of the applicant on the provisions of Section 39 of the Life Insurance Act 1938 (hereinafter referred to as the Act) and the very same decisions which had been cited before the Court below. The learned District Judge was of the opinion that the decisions in all those cases were distinguishable on facts except of course the decision of Kerala High Court in Sarojini Amma's case (supra) but in view of the fact that this court had taken a contrary view in Kesari Devi v. Dharma Devi's case (supra) he was of the opinion that he was bound to follow that decision. He also referred to another decision of this Court in the case of Mahadeo Nath v. Meena Devi, AIR 1976 Alld. 64 but distinguished it. Thus following the decision in Keshri Devi v. Dharma Devi (supra) he confirmed the order of the trial Court. However, he felt that the Civil Judge should have directed the applicant Keshav Narain to furnish adequate security for the disputed amount before granting a succession certificate to him and he modified the Civil Judge's order to this extent that Keshav Narain was to furnish security in a sum of Rs. 15,000/- and that was to enure for a period of three months so that during that period Smt. Shobha Sharma might approach this Court and obtain a stay order. 4. THE present revision application has been filed against these two orders. The submission made before me on behalf of the applicant was that the courts below erred in distinguishing the various decisions of different High Courts and the Supreme Court cited before them and that a nominee under Section 39 of the Act is only an agent for collection of money payable under an insurance policy and he does not acquire any interest in such money. It was also stated that since the parties had led evidence, it would be only in the interest of justice if their rights and title were decided in these very proceedings. It was also stated that since the parties had led evidence, it would be only in the interest of justice if their rights and title were decided in these very proceedings. On the other hand, from the side of opposite party No. 1 it was submitted that the decision of this Court in Kesri Devi v. Dharma Devi (supra) is on all fours to the facts of the instant case and that was rightly followed by the courts below. Apart from this the proceedings under Section 372 (1) of the Indian Succession Act are summary in nature and the Court is required to see only if a prima facie case has been made by an applicant under this Section. 5. I agree that the proceedings under Section 372 (1) of the Indian Succession Act are summary in nature, and as provided under Section 387 of this Act no decision upon any question of right between any parties in such proceedings shall be held to bar the trial of the same question in any suit or in any other proceeding between the same parties. An aggrieved party has his remedy in a civil action to establish his right to the debt or security under this section. The grant of a certificate does not establish the title of the grantee to such a debt or security. According to the applicant if there are more applicants than one for a certificate, and it appears to the Judge that more than one of such applicants are interested in the estate of the deceased, the Judge may, in deciding to whom the certificate is to be granted, have regard to the interest and fitness in other respect of the applicants, as provided under Section 373 (4). In the present case, however, there was only one applicant and the courts below were not of the view that more than one of such applicants were interested in the estate of the deceased and hence an enquiry in the existence of interest and the fitness in other respects of the applicant was not gone into. It could not be said, therefore, as claimed for the applicant that it were her interests which were more appropriate and hence the certificate should have been granted in her favour. 6. It could not be said, therefore, as claimed for the applicant that it were her interests which were more appropriate and hence the certificate should have been granted in her favour. 6. THE question involved in this revision application is somewhat interesting and hence I propose to deal with the same in some detail. THE question is as to what is the nature of right conferred on the nominee in respect of policy of life insurance ? Section 2(1) of the Act defines 'life insurance' as the business of effecting contracts of insurance upon human life. It would thus appear that insurance is a contract between the insurer and the assured. Under such contract the assured is entitled to a certain benefit, that is, to the payment of a definite amount. THE contract together with the other benefits assigned in it forms part of his assets. A distinction has been provided by the Act itself between an assignee and a nominee. Section 38 of the Act deals with the assignment of policies. The assured may assign, whether with or without consideration, his policy to any one. An assignment is a transfer intervivos. It becomes complete and effective upon the execution of an endorsement upon the policy itself or by a separate instrument duly attested. After assignment the interest of the assured comes to an end and the assignee or his legal representative becomes entitled to the money payable under the policy. Thus on his death, the assured has no interest in the policy and it does not form a part of his estate. Under Section 39, which provides for nomination by a policy holder, a nomination does not involve transfer of the rights under a policy unlike as assignment. 7. SECTION 39 in so for as it is material for our purpose reads as under :- 8. IN Raja Ram v. Mata Prasad, AIR 1972 Alld. 167 a Full Bench of this Court after analysing the provisions of Section 39 of the Act observed as under - "The result of our survey of the material provisions is :- (1) The policy-holder continues to hold interest in the policy till the moment of his death. (2) The nominee under Section 39 acquires no interest in the policy in the lifetime of the policy-holder. (3) The benefit secured by the policy forms part of the estate of the deceased policy-holder. (2) The nominee under Section 39 acquires no interest in the policy in the lifetime of the policy-holder. (3) The benefit secured by the policy forms part of the estate of the deceased policy-holder. As it is part of his estate, his creditors can realise their loans from the money paid to the nominee. He will be the legal representative of the deceased policy-holdser." This view is supported by Amar Das v. Dadu Dayalu Mahasabha, 1953 AWR 182, Smt. Shantt Devi v. Ram Lal, 1958 AWR 295, Ram Baliav v. Gangadhar, AIR 1956 Cal. 275 , D. M. Mudaliar v. Indian Insurance and Banking Corporation, AIR 1957 Mad. 115 , Mahadara Brahmamma v. Kandula V. Venkatramana Rao, AIR 1957 Andhra Pradesh 757, Sarojani Amma, v. Neelkanta Pillai, AIR 1961 Ker. 126 (FB) and Life Insurance Corporation v. United Bank, AIR 1970 Cal 513 . 9. THE decision of the Full Bench of this Court was "THE nominations in the two policies do not create a trust in favour of the nominees. They do not create any vested interest in them in the life time of the assured. On the other hand, the policies clearly show that the assured continued to hold title to the policies until his death. THE amounts due under the policies were payable to the nominees only in the event of his death. So the nominee will be his legal representative, and the money may be seized by the decree holder for payment of his loan." 10. THERE is a decision of the Supreme Court as well on this point and it is in the case of Smt. Parbati Kuer v. Sarangdhar Sinha, AIR 1960 SC 403 in which it has been laid down :- "THERE is no proposition of law by which insurance policies must be regarded as the separate property of the coparceners on whose lives the insurance is effected by a coparcenary and that the proceeds of an insurance policy do not belong to the joint family." "It might be true that for purposes of insurance, by the family is meant the wife and children of the Karta of the assured. But the question is not whether the Karta took out the policies for the benefit of his own family but whether he did so without detriment to the joint family funds and if it was the latter, then anything obtained with the joint family funds would belong to the joint family." I may make a mention of certain observations by a Division Bench of this Court in Smt. Shanti Devi v. Ram Lal, 1958 AWR 295. It was observed that a policy is brought into effect when the assured and the insurer enter into the contract, and a nomination, if it is intended to operate as a divestment of the interest of the assured in the subject-matter of the policy, would have to be made by way of such as is contemplated and permitted by Section 38 of the Insurance Act which provides for the assignment and transfer of Insurance policies. If the nomination is made only under Section 39 it is not an assignment but merely gives the right to the nominee to receive the assured amount without creating any interest in the nominee. There is a recent decision of a single Judge of this Court in Mahadeo Nath v. Meena Devi, AIR 1976 Alld. 64 in which as well the same view has been taken that a nomination does not amount to a transfer, but it merely enables the nominee, in the event of the death of the assured, to get the amount of the insurance policy. Nomination creates no interest in the nominee in respect of the title to the insurance policy. The true succession right will not be affected by the nomination. 11. IN Kesari Devi v. Dharma Devi, 1962 AWR 254 of course, the facts were almost the same as in the present case. There the facts were that in 1958 Jhunnoo Lal took an insurance policy from an insurance company for Rs. 5,000/-. The period for which the policy was taken was 30 years. The assured made a nomination in favour of Mannu Lal. The assured died before the maturity of the policy leaving Mannu Lai and Keshan Devi, his widow. Before the insurance company could pay the money to Mannu Lal, as the nominee of the assured, Mannu Lal died leaving Dharma Devi as his legal representative. The assured made a nomination in favour of Mannu Lal. The assured died before the maturity of the policy leaving Mannu Lai and Keshan Devi, his widow. Before the insurance company could pay the money to Mannu Lal, as the nominee of the assured, Mannu Lal died leaving Dharma Devi as his legal representative. She applied for money to the company which directed her to obtain succession certificate in proof of her title to it. Consequently, she made an application to the District Judge for a succession certificate. Her application was contested by Kesari Devi who claimed that she was entitled to the succession certificate being the widow and heir of the deceased. The learned District Judge holding that, if Mannu Lal had been alive he would have been entitled to receive the money, granted the succession certificate to his widow. The widow of the assured thereupon filed an appeal before this Court. The view taken was :- "It is not open to the company to say that it cannot pay the money to the respondent because she is neither a nominee, nor an executor, administrator, assign, or any other representative of the assured. To whom the money is payable is to be seen with reference to the date on which it becomes payable; it became payable according to the policy itself, on the death of the assured, and on that date there was in existence his nominee, who alone was entitled to receive it. The company must pay the money to him, and, if he has died in the meanwhile, to his estate. It cannot pay it to the appellant, who does not answer the description "his Nominees, Executors, Administrators, Assigns or other Representatives in interest/' She cannot receive it, and the only other person who can receive it is the respondent, as representing the estate of the nominee." 12. THIS decision was considered by Full Bench in Raja Ram's case and by the learned Single Judge in Mahadeo Nath's case (supra), but since the facts were found to be different, it was not found necessary to deal with the precise problem arising in that case. THIS decision was considered by Full Bench in Raja Ram's case and by the learned Single Judge in Mahadeo Nath's case (supra), but since the facts were found to be different, it was not found necessary to deal with the precise problem arising in that case. Hence so far as this decision goes to lay down that the money payable under an insurance policy in the event of the death of the assured before the period of maturity, is payable to the nominee of the assured and since the nominee died shortly after the death of the assured and before the insurance company could pay the money, the amount became payable to his legal representative and not to the heir or the legal representative of the assured, this Court is bound to follow it because it has not been dissented from by the Full Bench in Raja Ram's case and still holds good and thus it has to be held that Keshav Narain is certainly entitled to the succession certificate in respect of the money payable on the two policies of Hari Gopal deceased. Further observation made in Keshari DevVs case that the nominee is left free to deal with the money in any manner he likes and he does "not receive the money as a trustee or an agent of the assured's representatives, is not binding on this court since it is per incurium. That observation is as under:- "There is nothing in Section 39 to suggest that he receives the money merely as a trustee or agent of the assureds legal representatives. Section 39 does not lay down that he is under any liability to account for the money received to any person. The obvious meaning of the language used in sub-sections (1) and (6) is that the insurance company must pay the money to him and he is left free to deal with it in any manner he likes. When the money becomes payable on the death of the assured and on account of the death, we do not understand how it can be said to form part of his estate. It is payable to his nominee and not to one representing his estate. When the money becomes payable on the death of the assured and on account of the death, we do not understand how it can be said to form part of his estate. It is payable to his nominee and not to one representing his estate. Nothing can form part of his estate which could not possibly belong to it immediately proceeding his death.'' While making these observations , earlier Division Bench decision of this Court in Smt. Shanti Devi v. Ram Lal, 1958 AWR 295 and that of the Supreme Court in Smt. Parbati Kuer v. Sarangdhar Sinha (Supra) were entirely ignored. Besides this, by implication these observations would be taken to have been overruled by the Full Bench in Raja Ram v. Mata Prasad, 1971 AWR 785 where the principle enunciated is that the policy holder continues to hold interest in the policy till the moment of his death. The benefit secured by the policy forms part of the estate of the policy-holder and on his death his creditors can realise their loans from the money paid to the nominee. It has also been laid down that the nominee under Section 39 acquires no interest in the policy in the life-time of the policy-holder. Therefore the settled view of this Court, and other Courts also of the Supreme Court is that the benefit secured by the policy forms part of the estate of the deceased policy-holder and a nominee has only a right to receive payment of the money payable under it. He does so as an agent or trustee of the legal representatives of the deceased. 13. THE position, therefore, is that the orders of the courts below are to be confirmed, but with this modification that the opposite party Keshav Narain is certainly entitled to succession certificate for the money payable under the two policies taken by the deceased, but he would receive that amount merely as an agent or trustee of the heirs and legal representatives of the deceased and not in his own right. This money would constitute a part of the estate of the deceased and the rightful heir or legal representative would be entitled to have it from the nominee. 14. WITH these observations the revision application is dismissed. In the circumstances of the case, no order is made as to costs. Revision dismissed.