S.39 Insurance Act | Nomination Doesn't Confer Any Beneficial Interest On Nominee; Legal Heirs Entitled To Claim As Per Succession: MP High Court

The Madhya Pradesh High Court recently noted that a mere nomination would not confer any beneficial interest on the nominee under an insurance policy and that a nominee is only an authorized hand to receive the insurance amount, which is subject to disbursement amongst the legal heirs under the law of succession governing the parties.

Considering that almost all the High Courts in India have taken a similar view, Justice Anjuli Palo noted that unless there are strong and compelling reasons to hold that all these decisions are wholly erroneous, the Court should be slow to take a different view-

Thus, 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 insurer 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 law of succession governing them.

Facts of the case were that the deceased had purchased a life insurance policy and had nominated his father/Petitioner. After the death of the insured individual, his wife /Respondent(wife/widow ) wrote a letter to the Insurance Company to release the death benefit under her late husband's life insurance policy. However, her request was declined on the grounds that the Petitioner was the sole nominee. She then moved an application U/S 372 of Indian Succession Act praying for the succession certificate to be issued in her favour which was partly allowed by the lower court. Aggrieved, the Petitioner preferred an appeal against the same before the appellate court.

The appellate court dismissed the appeal on the ground that the Respondent was entitled to get all the benefits U/S 8 of Hindu Succession Act as she was the legal heir of her husband. The appellate court further commented that only on the basis of nomination, the Petitioner could not claim any benefit as nominee. Challenging the dismissal, the Petitioner moved the Court.

The Petitioner submitted before the Court that he was the sole nominee in the insurance policy of his son which was tantamount to will of the deceased. Referring to Section 39 of Insurance Act, he asserted has exclusive make claim over the death benefits of his son. Hence, it was contended that the impugned orders were liable to be set aside.

Referring to the decision of the Apex Court in Sarbati Devi v. Usha Devi, the Court observed that nomination does not confer any beneficial interest on the nominee-

In the said decision, the Supreme Court held that nomination would not confer any beneficial interest on the nominee and it is a mere authorization to receive the insurance amount, which can be claimed by the legal heirs of the assured in accordance with law of succession, governing the parties. The judgment has been followed successively by various High Courts in a long line of cases, holding that mere nomination effected under Section 39 shall not deprive the legal heirs to the amount under the Insurance Policies.

With the aforesaid observations, the Court opined that there was no illegality or perversity in the concurrent finding given by the courts below in favour of the Respondents. Therefore, the Court held that no interference was required in the impugned orders. Accordingly, the petition was dismissed.

Case Title : ARUN KUMAR SINGH v SMT. JAYA SINGH and ors

Case citation: 2022 LiveLaw (MP) 218

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