Case Note & Summary
The appellant, Smt. Yashodha, is the mother and nominee of the deceased policyholder, Sri Rohith S, who died intestate. The respondents, Smt. Rashmi J (widow) and Baby Lakshara (minor daughter), filed a suit for declaration and injunction against the appellant and the insurance companies, seeking a declaration that they are the legal heirs and entitled to the insurance proceeds, and an injunction restraining the appellant from receiving the policy amounts. The trial court decreed the suit, declaring the respondents as legal heirs and restraining the appellant from receiving the proceeds. The appellant appealed. The High Court allowed the appeal, holding that a nomination under Section 39 of the Insurance Act, 1938 does not create any beneficial interest in the nominee; the nominee is merely a trustee to receive the amount and must distribute it to the legal heirs. The suit for declaration and injunction was held not maintainable, as the proper remedy is to seek a succession certificate or probate. The court set aside the trial court's judgment and decree, and dismissed the suit with liberty to the respondents to pursue appropriate remedies.
Headnote
A) Insurance Law - Nomination - Section 39 of the Insurance Act, 1938 - The court held that a nomination under Section 39 does not confer any beneficial interest on the nominee; the nominee is merely a trustee or agent to receive the policy amount and must distribute it to the legal heirs of the deceased policyholder. The suit for declaration and injunction by the legal heirs against the nominee was held not maintainable, as the proper remedy is to seek a succession certificate or probate. (Paras 1-10) B) Civil Procedure - Maintainability of Suit - Section 9 of CPC - The court held that a suit for declaration and injunction by legal heirs against a nominee of a life insurance policy is not maintainable, as the nominee does not claim any right to the proceeds but only holds them in trust. The proper remedy is to approach the civil court for succession certificate or probate. (Paras 1-10)
Issue of Consideration
Whether a suit for declaration and injunction is maintainable against a nominee under a life insurance policy, and whether the nominee is entitled to the insurance proceeds as her own property or holds them in trust for the legal heirs.
Final Decision
The appeal is allowed. The judgment and decree dated 14.09.2023 passed in OS No. 1448/2022 by the LXI Additional City Civil and Sessions Judge, Bengaluru, is set aside. The suit is dismissed. No order as to costs.
Law Points
- Nomination under Section 39 of Insurance Act
- 1938 does not create a beneficial interest in the nominee
- nominee is merely a trustee to receive the policy amount and must distribute it to legal heirs
- a suit for declaration and injunction by legal heirs against the nominee is not maintainable
- the proper remedy is to seek succession certificate or probate.
