TMI Blog1970 (3) TMI 161X X X X Extracts X X X X X X X X Extracts X X X X ..... of premiums ceasing to be payable on the death of the assured. The policy contained the following clause: 1. Surrender value. After one year from the within mentioned date of commencement of Assurance this policy will acquire a cash surrender value payable on the surrender of the policy provided there be no legal impediment. The amount of such surrender value will vary with the duration of the policy but will be not less than 80 per cent of the within mentioned single premium. 3. The assured nominated one Nitish Chandra Ghosh, his younger son as his nominee, under Section 39 of the Insurance Act. Soon thereafter, the assured died intestate on August 25, 1952, leaving his widow and two sons, as his heirs and legal representatives. 4. As the policy did not mature on the death of the assured the nominee did not prefer any claim under it. In 1957 the nominee, in order to obtain a loan from the United Bank of India Ltd. by pledging the policy made enquiries of the Life Insurance Corporation of India as to what surrender value the policy had acquired. By a letter dated December 23, 1957 the Life Insurance Corporation of India hereinafter referred to as the insurer, intimated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... endant No. 2. On July 5, 1966 the learned Judge passed a decree against the defendant No. 1 for a sum of ₹ 10,741/- with interest, payable in certain instalments. The decree also provided that in the event of the decretal dues not being paid by the defendant No. 1 in terms of the decree the plaintiff would be entitled to realise from the defendant No. 2 the balance of the decretal sum. It was further provided by the decree that the sum paid to the plaintiff by the defendant No. 2 under the decree should be treated as a loan to be deducted with interest thereon at the rate of 6 per cent per annum from the moneys payable under the policy on the stipulated date i. e. 17th January, 1978. 6. From this decree the defendant No. 2, the Life Insurance Corporation of India, has come up in appeal. The issues on which the parties went to trial were: (i) Did the defendant No. 1 have any right, title or interest to assign or pledge the policy forming the subject-matter of the suit in favour of the plaintiff? (ii) If so, has the plaintiff any right to surrender the insurance policy? Strictly speaking, neither of these issues arises on the pleadings read in the context of the ins ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cy; they also assumed that the policy was surrendered or sought to be surrendered by the plaintiff that is to say, the assignee from the nominee. It must be conceded that a nominee can validly surrender or assign a policy only if he has a title to the moneys payable under it, or in other words, only if he is a beneficiary of the policy. If the right of the nominee is merely a right to collect the moneys from the insurer, such a right cannot confer any title. It is, therefore, necessary to examine the precise nature of the interest of a nominee in the contemplation of Section 39 of the Insurance Act. 12. Sub-section (1) of Section 39 provides that the holder of a policy of life insurance on his own life may nominate the person to whom the money secured by the policy shall be paid in the event of his death. It is not without significance that the subsection speaks of the transaction of payment and not of any right, title or interest in the money which is payable. In saying that the money shall be paid to the nominee, the sub-section underlines the obligation of the insurer to pay to the nominee and not the right of the nominee to receive payment, though the obligation and the righ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te. He contended that although in the scheme of Section 39 the nominee does not acquire any title to the money before the policy matures, he docs so after the policy matures on the death of the policy-holder. In my opinion, the argument is untenable. There is good reason for thinking that Sub-section (5) was introduced ex abundanti cautela. The first limb of the sub-section prescribed that if the policy matures during the lifetime of the policy-holder the money shall be payable to him. This provision is clearly redundant because Sub-section (1) of Section 39 has already provided that the money will be payable to the nominee only in the event of the policy holder's death. The other limb of the sub-section which enjoins payment to the heirs and legal representatives of the policy-holder if the nominee dies before the policy matures may very well be also treated as superfluous. In my opinion, the legal position should have remained the same even if Sub-section (5) were not in the statute. Sub-section (6) or Section 39 confirms that the nominee does not acquire any title to the money when the policy matures on the death of the policy-holder. It provides that where the nominee or, i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... claim is no doubt transferable but it is transferable only by the person who has a title to the property in respect of which the claim lies. The position is the same in English Law. Nemo dat quod non habet, no one gives what he does not possess. If the nominee has no title to the policy money he can neither surrender the policy nor can he transfer by assignment any right, title or interest in the moneys payable under the policy. In the contemplation of the statute, the right of a nominee is a mere right to collect the proceeds of the policy and the right has been given only to obviate the inconvenience of obtaining representation to the estate of the deceased policy-holder or a succession certificate. 14. Judicial precedents also do not support the contention that the nominee has any title to the moneys payable under the policy or that they become a part of his estate. In Krishna Lal v. Pramila Bala Dasi , a case decided before the Insurance Act came into force, the insurer was to pay to the wife of the insured, as his nominee, a certain sum payable under the policy. Negativing the claim of the wife that she was beneficially, entitled to the money, the Bench which was presided o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llows: An assignment of life policy passes to the assignee the right to the insurance money, even though the assignor's interest in the life has ceased before the date of assignment. The life policy forms part of the estate of the assured and may be dealt with at his absolute discretion, sold, charged, settled, etc. Once an assignment is made it cannot be cancelled at the option of the assignor. It creates a vested right in the assignee who no doubt takes it subject to the equities in the case of assignor, because the assignee cannot have a better title than his assignor, On the other hand, a nomination unless there is a special clause inserted to make it irrevocable, does not deprive the policy-holder of his rights, privileges, options and benefits under the policy including the right to alter the beneficiary. 16. Elsewhere he says: A nominee is entitled to receive policy moneys only. There is no statutory trust created by Section 39 in favour of the nominee, nor is he conferred as the nominee under Section 5 of the Provident Funds Act 1925, with the right to receive the moneys absolutely. The nominee being only given the right to receive money after the death o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ke for the Court observed at page 572 of the Report: 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. 19. Mr. Chatterjee relied on a Bench decision of the Allahabad High Court in Kesari Devi v. Dharma Devi, . There the insurance money was payable 'to the assured, his nominees, executors, administrators, assigns or other representatives as the case may be'. The assured nominated his brother Mannulal under Section 39 of the Insurance Act as his nominee. Shortly thereafter the assured died leaving his widow Sm. Kesari Devi as his heir and legal representative. Before he could collect the insurance moneys, the nominee died leaving his widow Sm. Dharma Devi as his heir and legal representative. She applied for a succession certificate in respect of insurance moneys. Her application was contested by Sm. Kesari Devi, who claimed that she was entitled to the succession certificate as the heir of the assured. The learned District Judge granted the succession certificate to the nominee's widow. Kesari Devi as the heir and the legal r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce has already been made. 20. Mr. Chatterjee in course of his argument contended that the nominee who is a son of the deceased policy-holder is a beneficiary within the meaning of Section 6 of the Married Women's Property Act 1874 and as such he has an absolute and indefeasible title to the money. He was, therefore, legally competent to assign the policy. This is a case neither made in the plaint nor argued at the trial. No mention of it is to be found in the grounds of appeal. The policy is embodied in a printed form. Some of the printed clauses are patently inapplicable to the contract of insurance evidenced by the policy. No doubt, the words children's endowment appear at the top of the policy in print. Be that as it may, nowhere is there any indication that the policy is taken out for the benefit of any son of the policy-holder nor is the name of any beneficiary indicated in the policy. All that the assured has done is to have nominated Nitish Chandra Ghosh, under Section 39 of the Insurance Act as his nominee to whom the money is payable. In the plaint it is expressly stated that the nominee assigned his right, title and interest as nominee and not as a beneficia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was made under Section 39 of the Insurance Act, 1938, (hereinafter referred to as the Act.) The policy was single premium policy, the premium being ₹ 15,015. The sum assured was ₹ 33,000 payable on January 17, 1978, on expiry of the endowment period of 31 years. 24. The nominee purported to assign the policy in favour of the respondent No. 1 who filed the suit for recovery of a loan. The question is if the respondent No. 2 as the nominee of the policy had the right to assign the claim under the policy, to the respondent No. 1 so as to enable the latter to obtain a decree against the appellant for recovery of the money due on the policy. On a plain reading of Sub-sections (5) and (6) of Section 39 of the Act it is clear to me that the only right which a nominee of an insurance policy has is the right to collect and receive the money, if he is alive at the date of maturity and if the policy-holder is dead at that time. If the policy-holder is alive when the policy matures, the nominee has no right whatsoever and the amount secured by the policy is payable to the policy-holder, and if he is dead and the nominee is also dead to his heirs or legal representatives or the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is dead at the time of such maturity. While a nominee has no right whatsoever by virtue of nomination, if the policy-holder is alive at the time when the policy matures for payment, the assignee under Section 38 is the only person entitled to the benefit of the policy even though the assured is alive at the maturity of the policy. To hold that a nominee is entitled to assign and transfer his rights by virtue of the nomination, would be equating his position to that of an assignee and this in my view will be entirely contrary to the provisions in the statute. 27. The next question is if the policy could be surrendered by the respondent No. 2 as the nominee or by the respondent No. 1 as the assignee of the nominee. In my view the respondent No. 2 as the nominee had no right to surrender the policy, and the respondent No. 1 could have no better or higher right than the respondent No. 1 had. But quite apart from the question of the right of the respondent to surrender the policy, there is nothing on record to show that the policy was ever surrendered. By a letter December 23, 1957 the appellant had informed the respondent No. 1 of the surrender value of the policy, no doubt on inqu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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