Time and again, various courts across the country have had to resolve this highly controversial issue as to who
shall receive a deceased’s property. And the judgments, I must say, are varying. Some courts have interpreted
the law as it is, whereas some have gone that extra mile to apply the provisions to the actual intentions of the
legislative enactments.
Well, no. A
nominee is a mere agent. In simple terms, he is only the person entitled to
collect the money of the deceased. After collection, the money ought to be
distributed among the legal heirs as per succession laws.
“The holder of a policy of life insurance on his 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 in the event of his death: Provided that, where any
nominee is a minor, it shall be lawful for the policy- holder to appoint in the
prescribed manner any person to receive the money secured by the policy in the
event of his death during the minority of the nominee.”
Various
judgments, including Kesari Devi v.
Dharma Devi AIR 1962 All 355, have been passed upholding the fact that a
nominee under the abovementioned section has an absolute right to the insurance
amount due on the death of insurer[1].
However, this would mean that section 39 is altering the course of succession
laws, even overriding it. These judgments did not critically analyze the legal
position.
In Sarbati Devi v. Usha Devi (1984) 1 SCC 424,
the Supreme Court upheld that the Allahabad High Court, while deciding the Kesari Devi case, did not correctly interpret the said section. It held that nominees under section 39 of the Insurance Act, 1938
are mere agents to collect the money due. Such money is the property of the
assured during his lifetime and upon his death, it shall form a part of his
estate as per the succession laws applicable to him.[2]
Recently,
in Vishin Khanchandani v. Vidya
LachmanDas Khanchandani & Others (2006) 6 SCC 724[3]
the Supreme Court held that courts should examine the possible conflict that
arises between the right of nominee and the laws of succession.
Section
45-za (2) of The Banking Regulation Act,
1949 states:
“Notwithstanding anything contained in any
other law for the time being in force or in any disposition, whether
testamentary or otherwise, in respect of such deposit, where a nomination made
in the prescribed manner purports to confer on any person the right to receive
the amount of deposit from the banking company, the nominee shall, on the death
of the sole depositor or, as the case may be, on the death of all the
depositors, become entitled to all the rights of the sole depositor or, as the
case may be, of the depositors, in relation to such deposit to the exclusion of
all other persons, unless the nomination is varied or cancelled in the
prescribed manner.”
Section
6(1) of the Government Savings Certificate
Act, 1959 states that:
“Notwithstanding anything contained in any law for
the time being in force, or in any disposition, testamentary or otherwise in
respect of any savings certificate, where a nomination made in the prescribed
manner purports to confer on any person the right to receive payment of the sum
for the time being due on the savings certificate on the death of the holder
thereof and before the maturity of the certificate, or before the certificate
having reached maturity has been discharged, the nominee shall, on the death of
the holder of the savings certificate, become entitled to the savings
certificate and to be paid the sum due thereon to the exclusion of all others.”
The
Supreme Court has rejected the logic that these provisions excluded the rights
of all persons, including legal heirs, of the deceased depositor to claim any
right over the subject amount. It has held such a theory as not only illogical
but totally imaginary.[4] These
sections should be read to mean that after the death of the depositor, the
nominee so appointed shall merely be transferred the exclusive right to receive
the money in the account, and not the ownership of the said sum. The Apex Court
has further held that the Banking Regulation Act, 1949 was enacted to facilitate
the laws related to banking. It does not override the succession laws in any
way. Hence, the deceased depositor’s moneys, that is received by the nominee,
shall form a part of the deceased’s estate and be devolved as per the
applicable succession laws.
Section
61(3) of the Employee Provident Fund
Scheme, 1952 states:
“If a member has a family at the time of making a
nomination, the nomination shall be in favour of one or more persons belonging
to his family. Any nomination made by such member in favour of a person not
belonging to his family shall be invalid. Provided that a fresh nomination
shall be made by the member on his marriage and any nomination made before such
marriage shall be deemed to be invalid.”
This
section clearly upholds the principles discussed above. While deciding on the abovementioned section,
the Bombay High Court, in Antonio Joao
Fernandes v. APFC Panji Goa 2010(4) LLJ 460, has upheld the principles laid
down in Sarabati Devi.[5]
Section
109-A of the Companies Act, 1956 states that:
“Every holder of shares in, or holder of debentures
of, a company may, at any time, nominate, in the prescribed manner, a person to
whom his shares in, or debentures of, the company shall vest in the event of
his death.”
Although
the Bombay High Court, in a very recent case[6],
has said that the rights of a nominee to the shres of a company overrides the
rights of heirs to whom property is bequeathed, such opinion may not hold
ground in the light of the Apex Court’s decision in the Sarbati Devi case.
The Apex
Court has laid down, through landmark judgments, that nominees should not be
entitled to receive the property of the deceased. They should be treated as
mere agents who collect the money of the deceased. The money so collected
should be disposed of as per the succession laws applicable to the deceased. And
correctly so. Laws, when interpreted by the judiciary, should be given a
practical and functional approach. More important than the words of the
statutes is the intent behind the usage and framing of such words. At the end
of the day, if jurisprudence takes a limited version of justice, the very
purpose of law is defeated.
[1] Kesaridevi v.
Dharmadevi AIR 1962 All 355; Fauza Singh v. Kuldeep Singh AIR 1978 Delhi 276;
Uma Sehgal v. Dwarka Das Sehgal AIR 1982 Del 36
[2]
Raballav
Dhandaria v. Gangadhar Nath AIR 1956 Cal 275; LIC v. UBI AIR 1970 Cal
513, Muralidhar v. IIBCL AIR 1957 Mad 115, Sarojini v. Pillai AIR 1961 Ker 126;
Mohanlal v. Gunvanti Ben AIR 1977 Guj 134
[3]
Ramachandra Talwar & Another v. Devendra Talwar & others (2010) 10 SCC
671
[4]
Ramachandra Talwar & Another v. Devendra Talwar & others (2010) 10 SCC
671
[5]
Nozer Gustad Commissariat v. Central Bank of India and Ors. 1993 MHLJ 228; Om
Wati v. Delhi Transport Corporation New Delhi and Ors. 1988 (1) CLR 596
[6]
Harsha Nitin Kokate v. Saraswat Co-Operative Bank (2010) 5 Taxman Com 43 (Bom)
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