Holding

A mere nomination under Section 39 does not confer any beneficial interest in the policy proceeds; the amount forms part of the deceased's estate and is subject to the law of succession.

Summary

The Supreme Court examined whether a nominee under Section 39 of the Insurance Act, 1938 acquires a beneficial interest in the proceeds of a life‑insurance policy when the assured dies intestate. The deceased, governed by the Hindu Succession Act, 1956, had nominated his wife as the sole nominee. The wife claimed exclusive right to the policy proceeds, while the deceased's mother and son claimed a two‑thirds share as heirs. The Court held that a nomination merely designates the person authorized to receive payment and does not vest any title in the nominee; the proceeds form part of the deceased's estate and are distributed according to the law of succession. Consequently, the lower courts' decrees were set aside and the appeal was allowed, granting the plaintiffs their share of the insurance amount.

Issues considered

Does a nomination under Section 39 of the Insurance Act, 1938 give the nominee a beneficial interest in the policy proceeds, excluding the heirs of the assured?
How does Section 39 interact with the law of succession applicable to the deceased?

Legislation cited

Subjects

insurancenominationSection 39life insurancesuccessionintestateheirsHindu Succession Actbeneficial interestestate

Judgment

SMT. sARABATI DEVI. & ANR.

v.
SMT; USHA DEVI
•
December 6, 1983

(E. S. VENKATARAMIAH AND R. B..MISRA, JJ,)

Insurance Act, 1938 (Act IV of 193/f), Section 39-Assured of a .life
insurance pO/icy dies intestate leaving be}iind him his mother, his widow, and a·ton,
bUt for the purpose of Section 39 has nominated hjs widow alone- Whether ,he

, c nqminee of a life insurance policy, on the. assured dying intestate would become
entitled to the beneficial interest in th'e amount received llnder the policy to the
· e:xcl~sion of the heirs o{ the assuP.ed.
I
The appellants being n1other and son of. one Jagmohan Swarup who
was governed by the Hindu Sqceession .Act, 1956 and who died intestate
on June 15, 1967 filed Civil Suit No. 122 of 1970 on the file of the first
Additional Civil Judge, Dehradun for' a declaration to the effect that they
were together entitled t.o 2/3rCl share .of the amount due a~d -payal?le under
the insurance policies though the deceased assured has nominated the res-
. pondent his widow as the person· to whom the amounts were payable. The
respondent contested the suit claiming that she has the .absolute right to the
amounts to the exclusion of· her son and ·her mother-in-law. The suit was
E dismissed. The First Appeal before the Dt. Judge, Dehradun and the Second
Appeal before the HiQh ..Court were dismissed. I-Jenee the appeal after obtain-
.ing sp~cial leave of the Court. .,_
J
Allowing the appeal, the Court, •
..r
F HELD :· l.1 A mere nomination made undc:r Section 39 of the Insurance
Act, 1938 docs not h~ve the effect of conferting .ori the nominee any ~neficfal ..
interest in the' amount payaJ:>le under the life insurance.policy on the death of
·the accused. The nomination only indicates the hand which is authorised to
receive the amount, on the, payment of which the i asurer gets a valid discharge
~fits liability under the policy .. The amount, however, can be claimed b)- the
heirs of the assur"ed ia accordance-with the law of :;uccession ·governing them.
G (1009G, 1004 B·D]

1.2 An analysis of the provisions of Section 39 of· the Act clearly estab-
lished. that the policy holder continues to hold inter~st in the policy during
his life tir'!1e and the nominee acquires no sort of interest· in the policy during
the life time of the holder. lf.that is so, on the death of the policyholder "the
B amount payable .under the policy becomes part of his estate whiCh is governed
by the law of succession applicable to hin1, Such ~,uccession may be "testomen·
tarY or ilitesfate. The tenuous character of the right of a nominee becomes
more·pfonounce.d 'w_hen one contrasts the provisions of Section 39 with that of
• SARBATI DEVI v. USHA DE\'! (Venkatoramiah, J.) 993'
.
-5ecti0n' 38. ,-Section 39 of the Act was not intended to act as a third mi:)de of
su~ession providCd by the stature and i.ncorrectly st); led as ~'stat.uiory ·te~t!·..:·
m0nt ...by the Delhi High Court. (998 C-EJ
I
1.3 Tho language of Section 39 of the Act is neither capable of -alteria.g·
thC·course or"succession under la\v nor can be said to have equa.ted a nominee
to an heir or legatee. [999Fj

S. Fauza Singh v. Ku/dip Singh & Ors .. AIR 1978 Delhi 276; Mrs. Uma. B
Sehgal & Anr. v. Dwarka Dass Sehgal and Ors. AIR 1982 Delhi 36; overuled.

Rama Bha//av D)randhania v. Gangadhar Nathmall AIR 1966 Ca'l. 275; ·
"D. Mohananardu Mudaliar and Anr. v. Indian lnSurance and Bankinll Corporation _
, Ltd., Salem and Anr. Alll"1957 Madras 115; Sarojini Anu11a v. Neelakanta Pillai
• AIR 1961 Kerala 126, Life insurance Cvr.PoratiOll Pf India v. United Bank of
India Ltd. & Anr. AIR 1970 Cal. 413; RajilRam ·v. Mata Prasad and Anr. AIR ·C
1972 All.167; Ma//idei and Anr. v. Kanchan Prana Dei ,AIR 1973 Orissa 83; ·
Lakshmi A1nn1a and Anr~ v .. Saguna Bhagathi & Ors. IL~ 1973 Karnataka. 827; -·
Atmaran1 Mohan/al Panchal 'v. Guna1·antiben and Ors. AlR 1977.Gujara.t 134 ~
approved. · ...

Karuppa Gounder & Ors. v. Palaniammal & Ors. AIR 1.963 Ivfadras 245;." ~
B. M'. Mundkur v. Life J11sura11ce Corporation oflndia and Ors. AIR ,977 Mad.
72, discussed and distinguished.

.. CIVIL APPELLATE. JURlSDlCTI0'1: Civil Appeal No. 96of1972 .

From.the Judgment. and Order dated 23rd December, 1971 of E
the High Court of Judicature !II 'Allahabad in Second Appeal No.
3082 of 1971.

• Yogeshwar Piasad, Mrs. Rani Chh~bra a11d S. K. Bagga for the
. Appellants.

B. R. Agarwa/a, R.H. Pancholi and Ms. VijayalakshmiMenon,
_.. for the Respondent.
The Judgment of the Court was.delivered by

VENKATARAMIAH, J. The ·short questlon which arises for
consideration in this ~ppea(by special leave is whether a nominee of
. a life insurance policy under section 39 of the Insurance Act, 1938
· (Act No. IV of 1938) (hereinafter ·referred to as 'the Act') on the
assured dying intestate would become entitled to the beneficial H
int~rest in ~he .amount received under the policy to the exclusion of
the heiJs of the assure<\. ·

•
994 SUPREME COURT<tEiORTS [19a4J .1 s.c.R.
..
Tihe facts leadi11g to this appeal are these : One Jag Mbhan
A Swarup· who was governed by the Hindu Succession Act, 1956 died·
intestate on June 15, 1967 leaving behind him his son, A°lok Kumar
(plaintiff No. 2), his widow Usha Devi (defendant) and 'his mother
Sarbati Devi '(plaintiff No. I) as hjs heirs. He had during his lifetime
taken out two insurance· policies for Rs. 10,000 each and had ·
B nominated under section 39 of the Act his wife Usha Devi as the
person to whom the amount was payable after his death.· On the
A.
basis of the said nomination, she claimed absolute right to the
amounts payable under the two policies to the exclusion of her son
and her mother-in-law. 'Thereupon Sarabati Devi and Alok Kumar'
(minor) represented by his. next friend Atma Ram who was the father
c of Ja~ Mohan Swarup filed a ~uit in Civil Suit No. 122 of 1970 on
the file of the 1st Ad.ditional Civil Judge. Dehradun fot a declaratiofl
to the effect th.at they were together entitled tO' 2/3rd share of the
amount due and payable under the insurance policies referred to
above.' .Usha Devi, the defendant resisted the suit. Her contention
was that on the .death of the assured, she as his nominee became
D absolutely e~titlcJ. to the amounts due under the insur~nce policies
by virtue of section 39 of the Act The trial court dismissed the suit.
The first appeal filed by the plaintiffs against the decree of the trial
court .was dismissed by the Dist-ict Judge, Dehradun. The second
appeal filed by them against the judgment of the District Judge before
E the High Court of Allahabad was dismisse.d in /imine under Rule 11, J..'
Order 4i of the Civil Procedure Code. The plaintiffs have filed this
app~al after obtaining special leave under Article 136 of the
Constitution.

The only' question which requires to be decided'in this ·case is
whether a nominee under section 39'qfthe Act gets an absolute right
to the amount due under a ·life insurance policy on the death of the
assured .. Section 39 of the Act reads :

"39. Domination by policy,holder.- (1) The holder
G of a policy of life insurance on his own life may, wben
effecting the policy cir at any ti\lle 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 :
ff Provided that where any nominee is a minor, it shall
be lawful for the policy-holder to appoint in the· prescri-
. SARBATI DEVI ~ ,USHA DliVI ( Jlenkataramiah, .(.) 9,5

bed manner any person to receive the .money secured by
- the policy in the event of his death during,. the minority of A
~. the nominee.

(2) Any such nomination in order to be effectual shall
unless it is incorporated in the text of. the policy
itself, be made by. an enqorsement on the policy
communicated to the insurer and registered by h.im ll
iJl die records relating ·to the policy and any such
nomination may at any time before the policy matu-
res for payment be cancelled or changed by an
endorsement, or a further endorsement or a will, as
the case may be, but uniess notice in writing of any c
such cancellation or change has been delivered to the
insurer, the insurer shall not be !iable for
any pay-
ment under the policy made bona fide by- him to a
· nominee mentioned in the text of the policy or •
registered in records of the insurer.
D
(3) The insurer shall furnish to the policy-bolder a
written acknowledgement of having registered a
nomination or a cancellation or change thereof, and
may charge a fee . not exceeding one . rupee for
registering such cancellation or change: . E
(4) A transfer or ass.ignment of a policy made in
accordance with section 38 shall automatically cancel
a nomination : ., _.
'
·Provided that the assignment of a policy to the· F
insurer who bears the risk on the policy at the time o.f the
assignment, in consideration of a · 1oan granted by that
insurer on the security of the policy within its surrender
value, or its reassignment on repayment of the loan shall
not cancel a nomination, but shall affect the rights of the ·G
nominee only to the extent. of the insurer's interest in the
policy.

(5) Where the policy matures for payment during the
lifetime of the person whose life is insured or where '
H
the nominee or, if there are more nominees tha.n one, .
all the nominees die before the policy matures for
·payment, the amount secured by the policy sI.tall b~
•
f '. •
;996 SUPREME COURT REPORTS il984j I s.c~Ii..
payable to the policy-holder or his heirs or legal
~.
·A representatives or· the holder . of a succession certi~ J

jicate, as tlie case may be. 1
(6) Where the nominee or· if there are more nominees
'than one, a nominee or nominees survive the person
.. whose iife 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
c Nlarried Women's Property Act, 1874 applies or has
at any time applied : '

Provided that where a nomination _made whether
••
before or after the commencement of· the InsuraDce
(Amendment) Act, 1946, in favour of. the wife of the .
.D person who pas insured his life or of his wife and children
or any of them, is exeressed, whether or' not on the face
of the policy, as being tnade .under this section the said
section 6 shall be deemed not .to apply. or not to have
applied to the policy."·
E· . . .
At'the out set it should be mentioned that except the decision
of the Allab,abad High Court in Kes.ari Devi ·v. Dharma. Devi(') on
. which reliance was placed by the High Court in dismi.ss-ing the appeal
before it and the two decisions of the Delhi: High Court in S. Pauza
....
,_
Singh v. Ku/dip Singh & Ors.(') and Mrs. Uma Sehgal & Anr. v.
Dwarka Dass Sehgal & Ors(') in all other decisious • cited before · ~s
the view taken is that the nominee under section 39. of the Act is
nothing more than an agent-to receive the money due und.er a life
insurance policy in the circumstances similar to those in ihe ·present
case and that the money remains the property ·of the assured·· during
his lifetime and on his death forms part of his estate subject :to the
Jaw of succession applicable to him . · The cases which have taken
.the above view are Ramballav DhanJhania v. Gangadhar Nathmall.(')
. .
Life Insurance Corporation of India v. United Bank of India Ltd. &
.
'
{I) A.I.R. 1962 Allahabad 355.
(2) A.l.R. 1978 Delhi 276.
(3) A.LR. 1982 Delhi 36.
(4) A.I~R. 1956 Cai. 275.
•,' ..
SARBATI DEVI v. iisHA DEVI (Venkataramlah, },) 997

.Anr.,(1) D.. Mohanaeelu Mu/daliar & Anr. v. Indian Insurance and
Banking Corporation Ltd. Salem & Anr.,( 2) Sarojini · Amma · v.
Neelakanta Pil/ai.('J Atmaram Mohan/al Panchal' v. Gunavantiben &
. Or~.•(') Ma/Ii Dei &. Anr. v. Kanchan Provo Dei and Lakshmi Amma(")
Anr. v. Sagnna Bhagath & Ors.,('! Since there is a conflict of judicial
opinion on the fjuestion involved in this case it is necessary to
examine the above cases !ft some length. The Jaw in force in England· B
. on the above question is summarised in Halsbury's Laws of Ilngland
(Fourth.
Edition), Vol. 25, Para
, 579 thus:
"579. Position of third party,-The policy money
payable oi:t the death. of the assured may be expressed to
•'
be payable to a third party and the third party is then
c·
prima facie nterely . the agent for . the time
• •• being of the legal owner .and has his authority to rec'eive
the policy mol)l;Y and. to give a good discharge; but he
. generally has no right to su~ tjle insurers in his own name. ·
The question has been raised whether the· third. pa'rty's D
autborityto receive the policy money is terminated by the
death of the assured; it seems, however, that unless and
..
.,.
until they are otherwise directed by the assured's personal
representatives the insurers may pay the money to the
third party and get a good discharge from him."
E
We shall now proceed to analyse the provisions of sectiOn 39 of •
the Act. The said section provides that a holder of a policy of life
insurance on bis 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 F
in the event of his death. If the nominee .is .a minor,. the policy
holder may appoint any person to receive the mopey in the event of
his death during the minority of the nominee. That means that if
the policy holder is alive. when the policy matures for payment he
alone will receive payment of the money due under the policy and
G
(I) A.l.R. 1970 Cal. 513.
(2) A.I.R .. 1957 Mad. 115.
(3) A.I.R. 1961 Kerala 126.
(4) A.l.R. 1977 Gujarat 134.
(5) A.l.R. 1973 (Orissa 83.
\6) 1.L.R. 1973.Karnataka 827.
.
•
• •
998 SUPREME COURT REPORTS [1984) l s.c.It.

not the nominee. Any such nomination 1nay at any time before the
A policy matures for·payment be cancelled· or changed, but -before
such_ cancellation or change is notified to the insurer if he makes the
payment hon fide tO the nominee already registered with him, the
insurer gets' a valid discharge. Such . power of cancellatfon of or
effecting a change in the nomination implies that the nominee bas no.
,right t.o the amount during the lifetime of tge assured. If the policy
n is transferred or assigned under section 38 of the Act, the nomi-
nation autol)'latically lapses. If the nominee or where. there are
nominees more than one al! the nominees die before the policy matu-
res.for payment the'money due under the policy is payable to the
hefrs or legal representatives or the holder of a succession certificate.
.
c It is not necessary to refer to sub-section (7) of section 39 of the· Act ••
here. But \he summary of the relevant provisions of section 39
given above establishes clearly that the polic1 bolder continues to
- hold interest in the policy during his lifetime and the nominee acq-
...
uires no sort of interest in the policy during the lifetime of the policy
holder. If that is so, .on the death of the policy hold<r the amount
D 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 operatd as.a third kind of succession which is
styled as a 'statutory testament' in paragraph 16 of the decision cf
E the Delhi High Court in Mrs. Uma Sehgal's case (supra). If section
39 of the Act is contrasted with section 38.ofthe Act which provides
for transfer or assignment of the rights under a policy, the tenous
character of the right of a nominee would become more pronounced.
It i_s difficult to hold that sect ion 39 of the Act was intended tQ act ·
as a t)lird mode of succession provided by the statute. The provision
F in sub-section (6) of section 39 ·which says that the· amount shall be
payable to the nominee or· nominees does not mean that the amount
shall belong to the nominee or nominees. We have to bear in mind
here the special care which law and judicial precedents take in the
matter of execution and proof of wills which have the effect of diver-.
ting the estate from the ordinary course of intestate succession and
G that the rigour of the rules governing the testamentary succession is
not rela.xed even where wills are registered.

As observed in the Full Bench decision of the_ Allaha_bad High
Court in Raja Ram v. Mata Prasad & Ani'.(1) which has interpreted
H-
(1) A.l.R. 1912 All 167. .
•
•
SARBATI DEVI v. USHA DEVI (Venkataramiah, J.) 999
section 39 of the Act correctly, the judgment of that .High Court in
Ke sari Devi's. cast\ (supra) related to a different set of facts. In A
Kesari Devi's case (supra) the dispute arose regarding the person
who was entitled to the succession certificate in respect of the amount
payable under .a life insurance policy which had been taken •out by
the assured between the widow of the assured and the widow of the·
.nominee tinder section 39 of the Act. On going through. the judg-
ment in Kesari Devi's· case (supra) we feel that the Court ill that case. B
. ~ paid little heed to the earlier judicial precedents of .its own Court .
The decision of the Full B.ench in Raja Ram's case (supra) set at rest
all doubts which iilight have been treated by Kesari Devi's case
(supra) about the true import of section 39 of the Act in so far as
I
the High Court of Allahabad was concerned. c
Jn Fauja Singh's case (supra) there is reference onli two three
cases-Life Insurance Corporation of India v. United Bank of India
Ltd. (supra), Matin v. Mohomed Matin and Kesari Devi's(') case
(supra) .. The Court expressed its dissent from the Calcu(ta decision D
on the, ground that decision had not considered sub-section (6) of
section 39 of the Act. The Lahore case was one decided before the
.J... Act came into force. The distinguis.hing features of Kesari Devi's
case tsupra) are already mentioned. Otherwise there is not much
discussion .in this case about the effect of section 39 of the Act.
E
We have carefully gone tbr~ugh the judgment of the Delhi
High Court in Mrs. Uma Sehga/'s (case) supra. ·In this. case of the
High Court of Delhi clearly came to the conclusion that the nominee
had no right in the lifetime of the assured to the amount payable
under the policy and ihat his rights would spring up only on the· F
death of the assured. The Delhi High Court having reached that
conclusion did not proceed to. examine the possibility of ari existence
of a conflict between the la)V of succession and the right of. the
nominee under .section 39 of the Act arising on the death of the
•
assured and in that event which would preyail. We are of the view
that the l~nguage of section 39 of the Act is no.t capable of altering G
the course of succession under law. The second error committed
by the Delhi High Court in this case is the reliance pla.ced by it on
the effect of the amendment of section 60(1) (kb) of the Code of
Civil Procedure, 1908 providing that' all moneys payable under a
H
(I) A.I.R: 1922 Lah 145.
•
1000 . HJPREME eotiRT REPORTS ll984i 1 s.c.R. ·

'policy ofinsurance on the life of the judgment debtor shal! be exempl
A from attachment by his creditors. The High Court equated a
nominee to the heirs and legatees of the assured and proceeded to
hold that the nominee succeeded ·to the estate with all 'plus and
minus points'. We find it difficult to treat a nomin·ee as being
eq1,1ivalent to an heir or legatee having rcgard·tci the clea·r ·provisions
of section 39 of the Act. The exemption of the moneys payable
B under a life insurance policy under the amended sedion 60 of the
Code of Civil Procedure instead of 'devaluing' the earlier decisions
which upheld the.right of a creditor 'of the estate of tile assured to
~ttach· the amount payable under the life insurance policy recognises
such aright in· such creditor which he could have exercised but for·
c ·the amendment. It Is because it was attachable the Code qf Civil '
Procedure exempted it from attachment in furtherance of the policy
of -Parliament in making the amendment. The Delhi High Court
bas committed another error iii appreciating the two decisions of the
Madras High Court iQ Kar(;ppa Gounder & Ors. v. Pa/aniammal & ·
D Ors.( 1) and in B.M. 'Mundkur v. Life Insurance Corporiuion of India
' & Ors.(') The'rclevant part of the decision of the Delhi High Court
in Mrs. Uma Selzga/'s case (supra) reads thus: . .

10. "In Karuppa Gounder v. falaniammal, AIR,; 1963
E Mad. 245 (para 13), K had nominated his wife in
. the insurance policy. K died. It was held . that in
virtue of the nomination, the motlier of K was not
entitled to any portion of the insurance amount.

11. I am in respectful agreement with · these . views,.
F because they accord with the law an!i reason. They
are supported by S. 44 (2) of . the Act. It provides
that the commi~sion payable to an insurance agent
shall ofter bis deaih, continue to be payable to his
•
heirs,, but if the agent has· nominated any person
G the commission shall be paid to the person· so nomi-
nated. It cannot be contended· that the nominee
u/s 44 wili receive the money not as owner l:mt as an
~gent on·behal( of someone else vide .il.M. Mundkur
v. Life Insurance Corporation, AIR 1977 .Mad. 72:'
H . Thus, the nomine~ excludes the legal heirs."

(1) A.l.R. 1963 Madras 245.
(2) A.I.R. 1977 Madras 72. .
•
..
SARBAti DEV; v. USHA DEVI 1Ve11kataraiiiah, J~) ~1ooi
Two 'mistakes committed by the Delhi High Court iu the above
passage are these. ln Karuppa Gounder'~ case (supra), 'ihe question · A
was whether tlie amounf payable under the insurance policy in
. question was joint Jamily property or separate property of the
assured. In that connection, the High Court of Madras observed·
thus:
8
"But where a coparcener has effected insurance upon
his.own life, though be might have received the premia
from out of the funds which he might have received. from
· the joint family, it does notfollow that the joint family .
· insured the life of ihe member . or paid the premia in
relation thereto. It is undeniable thai a member of a c
coparcenary may with the. moneys which be might
receive from the coparcenary effect an insurance Uf!On
bis own life for the benefit of the members of bis
immediate family. His intention to do so and to keep
the property as his separate property would be manifested D
if he makes a nomination in f;ivour of his wife or
children as tbe·case may be. It would therefore appear.
.. that no generai proposition can be advanced in the .
matter of the in&urance- policy of a member of a ·
coparcenary and that . eac.h case must be dealt with in
accordance with the circumstances surrounding it." E

It is obvious from the above passage tb&t the above case has
no bearing on the meaning of. section 39 o( the Act. The fact of
nomination was treated in that ca,e·as a piece of evidence in support F
of the finding that the policy was not a joint family asset but the· .
separate property of the coparcener concerned. No right based on .
the ground that one party was entitled to" succeed to the estate of the
. deceased in preference to the other ,;r along with the other under the
provisions of the Hindu Succession Act wasasserted in that case.
The next error committed by the. Delhi High Court is· in drawing an G
annalogy between section 39 and section 44'2) of the Act thinking
thanhe Madras High·Court had done so in B. M; Mundkur's case
(supra). In B.M. Mundkur's case (supra), ·the High Court of
Madras instead of. drawing an analogy between section 39 and
section 44(2) Of the Act actually contrasts them· as can be seen from H
.the followiJ;ig passage :
·1aoi .. SiJPR.EME COUJ\T REPORTS [!98411 s.c.il..

"There are vital differences between the nomination
A contemplated under Section 39 of the Act and the
nomination contemplated under the proviso to Sectfon
44(2) of the Act. In the first place, the sum assured,
with which· alone Sec. 39 was concerned, was to be paid
in the event of the death of the assured under the terms
B of the contract entered into between the insurer and the
asslited and. consequently it Was the .contractual right
which remained vested in'the insured with reference to
which the nomination happened to be made. It ·should
be· pointed out that the nomination as well as the
liability o~ the part of the insu.rer to pay the sum assured·
c become effective simultaneously' namely' at the moment
of the death of the assured. So long a.s he was alive, the
money was not payable to him, in the case of a whole
life policy, and equally, having ·regard to the language
of Section' 39( I) of the Act, the nominee's right to
receive the money arose only·on the death of the assured,
D Section 39 itself did not deal with the title t.o the money
assured, which was to be paid by . the insurer to the
nominee who was bound to give discharge to the insurer.
It was in this context that the Court took the view that
. the title remained 'with the estate of the deceased, and
E therefore, with the heirs of'ihe deceased, that the nomina-
tion did not in any way affect the title and that it merely
clothed the nominee with the right to receive the amount
from the insurer.

12. On the other hand, the provJSions and purport
F. of Section 44 of the Act are different. In the first place
under Sectiori 44(1) it was a statutory right conferred on
the agent to receive the. commission on the renewal
premium notwith,tanding the termination of the agree-
ment between the agent and the insurer, which provided
G for the payment of such commission on · the renewal
premium. The statute also prescribed the. qualification
·which rendered the'agent eligible to receive commission
on such renewal premium. Section 44(1) provides for
the payment of the commission to the agent during his ·
H lifetime only and does not contemplate the contingency
of his death and the.commission being paid to ·anybody
. even after his death. It is S. 44(2) which deals with the
• SARBATi DEVi v, USHA DEV! (Vei1katatamjah, J.) 1003

payment of commission "to . the heirs of deceased for so
long as such commission would have been payable had A
such insurance agent been alive. Thus it was not the
general law of inheritance which conferred title on the ·
heirs of the deceased insurance . age.it to receive the
commission on the renewal premium, but it was only the
particular statutory provision, namely, Section 44(2)
which conferred the right on the heirs of the deceased
.B
agent to rece_ive the commission on the renewal premium.
In other word·s, the right of the ·heirs to -receive the
commission on renewal· premium· does not arise under
any law of succession and it is a right directly conferred
on the heirs by.Section 44(2) of the Act, even though who c
the heirs of'the deceased insurance agent are will have to
be ascertained under the law of succession applicab!O tp
him. Thus the statute which conferred such a right on
the heirs is certainly competent to provide Jor an
exception in certain case1 and take away such a. right
from the heirs; and the proviso which has been intro· D
duced by the Government of India notification 1962· has
done exactly this in taking away the right of the heirs
• conferred under the main part of Section 44(2), in the
event of the agent, during his lifetime; making a nomina·
tion in favour of a particular person and not cancelling or E
altering that nomination subsequently. If the statute
itself was competent to donfer such a right for the first
time on the heirs of the deceased agent it is indisputable
that the statute could take away that right under st~ted
circumstances·.''
F
The reasons given by the Delhi· High Court in this case in
support of its view are not tenable.

Moreover there is. one other strong circqmstance in this case
which "d4'suades us from taking a view contrary to "the decisions .of G
all other High Courts and accepiing.the Yiew expressed by the Delhi ·
Righ Court in tije two recent judgments delivered in the year 1978
and in the year 1982. The Act has been in force from the year 1938
and all along almost all the High Courts in India have taken the
view that a mere nomination ·effected under section 39 does not H
deprive the heirs of their rights in the amount payable under a life
insurance policy. Yet Parli.ament has not· chosen to make any ·
.(
1004 \ SUPREME COURT REPORTS [1984) l s.c.R.

amendment to the Act. In such a situation unless there are strong
A· and eompelling reasons to hold that _all these decisions are wholly
erroneous, the Court should be slow to take a different view. The
reasons given. by the Delhi High Court are unconvincing. We,
therefore, hold that the judgments of the Delhi High Court in
Fauja Singh' s case (supra) and in Mrs. Uma Sehgal's case (supra) do
not lay down the law correctly. They are, therefore, overruled. We
B approve the views expressed.by the other High Courts on the mean·
a
ing of section 39 of the Act and hold that mere. nomination made
...
· under section 39 of the Act does not have the. effect of conferring Qn
the nominee any beneficial interest in the amount payable under the
life insurance policy on the death of the as'smed. The nomi~ation
c only indicates the band which is authorised to receiye the amount, on
•the payment of which the insurer gets a valid ·discharge of its liability.
unde'r the policy, The .amoun!; however, can be claimed ·by . the
heirs of the assured in accordance with the law of succession goyefn·
ing them.
D In view ·or the above concluston, the judgments and decrees of
the High Court, the first appellate court and the trial court are liable
to be set aside. They are accordingly set aside. Since it is not
disputed that tbe plaintiffs are under tlie law ·of succession governing
them each entitled to l '3 share in the estate of the deceased, it is
E hereby declared that each of the 'plaintiffs is entitled io I/3rd shar~ in
the amount received under the insurance policies in quest.ion and the
interest which may have been earned by its · investmen·t. The suit
stands decreed accordingly.
•
Parties shall, however, bear their own cost~ throughout. ·
F

S.R. ApP,eal allowe1·

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