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D. Mohanavelu Mudaliar Alias D. Mohanam Mudaliar and anr. Vs. the Indian Insurance and Banking Corporation, Ltd., by Agent, C.P. Thomas Representing All the Creditors of the Deceased M. Dhanakoti Mudaliar and anr. - Court Judgment

LegalCrystal Citation
SubjectInsurance
CourtChennai High Court
Decided On
Reported in(1956)2MLJ476
AppellantD. Mohanavelu Mudaliar Alias D. Mohanam Mudaliar and anr.
RespondentThe Indian Insurance and Banking Corporation, Ltd., by Agent, C.P. Thomas Representing All the Credi
Cases ReferredGobindram v. Savitri A.I.R.
Excerpt:
- - 3. that a policy of life insurance is a security for money payable at a date uncertain, but calculable is well established for the sum insured is certain, the premium or consideration for its payment is also certain and the time when the money is payable is also certain where the date is fixed but uncertain on death. ordinarily love and affection are considered sufficient consideration for the assignment, of a policy. the only limitation so far as the assignee is concerned is that he cannot be in a better position than the person who effected the assignment. , said :it is true that by the use possibly of unguarded language a person may create a trust, as monsieur jourdian talked prose, without knowing it, but unless an intention to create a trust is clearly to be collected from the.....govinda menon, j.1. i have had the advantage of reading the judgment which my learned brother is about to deliver and in view of the importance of the question, of law raised i wish to add a few words of my own.2. what the scope and import of the dispositions of life insurance policies : - (a) by assignment and (b) by nomination are seem to be the chief points for consideration.3. that a policy of life insurance is a security for money payable at a date uncertain, but calculable is well established for the sum insured is certain, the premium or consideration for its payment is also certain and the time when the money is payable is also certain where the date is fixed but uncertain on death. as per porter's law of insurance (8th edn., page 305) a life insurance policy is nihil certius.....
Judgment:

Govinda Menon, J.

1. I have had the advantage of reading the judgment which my learned brother is about to deliver and in view of the importance of the question, of law raised I wish to add a few words of my own.

2. What the scope and import of the dispositions of life insurance policies : - (a) by assignment and (b) by nomination are seem to be the chief points for consideration.

3. That a policy of life insurance is a security for money payable at a date uncertain, but calculable is well established for the sum insured is certain, the premium or consideration for its payment is also certain and the time when the money is payable is also certain where the date is fixed but uncertain on death. As per Porter's Law of Insurance (8th edn., page 305) a life insurance policy is nihil certius morte, nihil incertius hora mortis.

4. Such being the case a life insurance policy has to be construed as a contract to pay a certain sum in a certain event depending on the duration of human life.. Such a policy always forms part of the estate of the assured and may be dealt with at his absolute discretion such as sale, charge, settlement or bequest or made the subject of donatio mortis causa.

5. Dispositions of life insurance policies can be classed under three heads: - (1) assignment, (2) nomination and (3) statutory creation of a trust by reason of the provisions of the Married Women's Property Act, 1882. So far as the English law is concerned legal title to the policy can be obtained by assignment as laid down in the Polices of Life Assurance Act, 1867 or Section 136 of the Law of Property Act, 1925 which replaced Section 25 sub Section (6) of the Judicature Act of 1873. In India such an assignment is payable by virtue of Section 38 of the Indian Insurance Act IV of 1938. Except adverting to the fact that in America also the law is practically the same no further discussion of the effect of an assignment is necessary in this connection.

6. Under the general law, an assignment is understood as a transfer by an individual of his right or interest in the property to another resting upon a contract between them. That being the case if a policy is assigned it operates so as to completely divest the assignor of any right under it, for the essence of assignment is complete divesting. The assignee, is therefore, clothed with all the rights and liabilities which the insured had before the transfer; that is, there is a substitution for the assured so far as the benefits are concerned by the assignee. Ordinarily love and affection are considered sufficient consideration for the assignment, of a policy. Therefore when the formalities which have to be observed in the case of a transfer or assignment coming under Section 38 of the Insurance Act, 1938, are complied with the insurer shall from the date of the receipt of the notice referred to in Sub-section (2) of Section 38 recognise the transferee or the assignee named in the notice as the only person entitled to the benefit named under the policy and such a person shall be subject to all the liabilities and equities to which the transferor or assignor was subject at the time of the transfer or assignment. The assignee may institute any proceedings in relation to the policy without obtaining the consent of the assignor or making him a party to the proceedings. The only limitation so far as the assignee is concerned is that he cannot be in a better position than the person who effected the assignment.

7. So far as nomination is concerned we do not see any appreciable difference between the English and American law on the one hand, and what obtains in our country. According to the English law the payee or the nominee is nothing more than an agent to receive the money, which money remains as the property of the assured and at his disposal during his lifetime and on his death forms part of the estate. The result is that the payee or the nominee takes no beneficial interest in it. In Cleaver v. Mutual Reserve Fund Life (1892) 1 Q.B. 147, Lord Esher, M.R. has laid down the law in the above form. The principle underlying that decision is that a nominee not being a party to the contract cannot sue on the policy but that the right to sue vested in her husband's legal representatives. This decision has been subsequently considered and commented upon in In re A Policy No. 6402 of the Scottish Equitable (1902) 1 Ch. 282; In re Burgess' Policy (1915) 113 L.T. 443; In re Engelbach's Estate (1924) 2 Ch. 348; In re Sinclair's Policy (1938) Ch. 799; In re Fester (1938) 54 T.L.R. 993; In re Gordon (1940) Ch. 769; In re Webb (1941) Ch. 225; In re Schebsman (1943) Ch. 366. The principle deducible from a consideration of the above cases is that if from the form of words used it could not be inferred that a statutory trust has been created under Section 10 of the Married Women's Property Act, 1870 and Section 11 of the Married Women's Property Act, 1882 or the Married Women's Policies of Assurance Scotland Act of 1880, the assured amount would be payable to the personal representatives of the assured. In short very much will depend upon the words used in the policy whether the language has to be construed as creating a trust or not within the meaning of the Married Women's Property Act. In Macgillivray's Insurance Law (3rd edition, pages 674-675) we find the following:

There is a distinction between the creation of a trust and a simple contract between two persons for the benefit of a third. This distinction was emphatically insisted on by the Judges in the Court of Appeal in the case of In re Schebsman (1943) Ch. 366, which will be considered in greater detail further on. Lord Greene, M.R., said : 'An Examination of decided cases does, it is true, show that the Courts have on occasions adopted what may be called a liberal view on questions of this character but in the present case I cannot find in the contract anything to justify the conclusion that a trust was intended. It is not legitimate to import into the contract the idea of a trust when the parties have given no indication that such was their intention. To interpret this contract as creating a trust would, in my judgment be to disregard the dividing line between the case of a trust and the simple case of a contract made between two persons for the benefit of a third. That dividing line exists although it may not always be easy to determine where it is to be drawn.' Du Parcq, L.J., said : 'It is true that by the use possibly of unguarded language a person may create a trust, as Monsieur Jourdian talked prose, without knowing it, but unless an intention to create a trust is clearly to be collected from the language used and the circumstances of the case, I think that the Court ought not to be astute to discover any indication of such an intention'.

8. In another decision, Modern Woodmen of America v. Headh 90 Atl. 892, the Court said as follows:

While the interest of the beneficiary designated in the original certificate is during the lifetime of the insured member, a contingent interest - a mere expectancy - liable at any time to be defeated by the designation of a new beneficiary, it does not follow that such beneficiary has no interest in the certificate. He has an expectancy in the nature of an inchoate interest, which, it is held in some jurisdiction, gives him the right to insist that change of beneficiary be made, if attempted, in substantial conformity with the stipulations of the contract.

9. The Indian law is practically on the same line as in England. The decision in Cleaver v. Mutual Reserve Fund Life Associated (1892) 1 Q.B. 147, was followed by Rankin, C.J. and C.G. Ghose, J., in Krishna Lal Sadhu v. Pramila Bala Dasi 32 C.W.N. 634, and the learned Judges considered that the Married Women's Property Act III of 1874 did not apply to the particular case in question and therefore, Section 6 of the Act was inapplicable. Holding that mere nomination of a wife as the payee under a policy of life insurance did not of itself create a trust in her favour the plaintiff was non-suited.

10. The same view has been taken by the Bombay High Court in Shankar v. Umabai I.L.R.(1913) 37 Bom. 471. The Madras High Court has adopted a similar line as is seen from the judgment of my learned brother. As pointed out by Barwell in his Law of Insurance (1940 edn., p. 439) the earlier decisions have now become academic because of the provisions of Section 39 of the Insurance Act of 1938.

11. If by nomination, a trust is created then the nominee becomes the beneficiary but the difficulty is to find out from the exact words used what the intention was, because the terms nomination and nominee are not strictly speaking terms of Article 'Nominated' means only to name and it is in every instance a question of mixed law and fact as to what the intention is. Thus by the expressions used it has to be found out whether the nomination merely creates a payee or a beneficiary for whose protection a trust is thereby created.

12. Barwell at page 440 observes:

It is part of the history of life insurance that husbands insuring their own lives often do so with the sincere intention that the policy moneys should be enjoyed by their wives but are seen to have failed in many instances to express that idea in unambiguous language on the face of the instrument or even in the proposal form.

13. Thus, difficulty arises not on account of the law on the subject which is clear, but only on account of the construction to be placed on the language of the declaration made in the face of the document by the assured. Declarations which at first sight might appear to be a nomination of no more than a payee or agent to receive may on a proper construction be found intended to create a trust. The case law in Madras has turned upon the interpretation to be placed on the words:

A policy of insurance effected by any married man on his own life and expressed on the face of it to be for the benefit of - shall enure and be deemed to be a trust for the benefit of....

14. Reference has been made in this connection to Balamba v. Krishnayya : AIR1914Mad595 , Parinam Rama Rao v. Parinam Kristnamma : AIR1929Mad825 , Abiramavalli Ammal v. Official Trustee Madras (1931) 62 M.L.J. 111, Lalithambal Ammal v. Guardian of India Insurance Co. (1937) Comp. Cases 157, Krishnan Chettiar v. Velayee Ammal (1938) Com. Cases 101, and Venkatasubramania Sarma v. United Planters' Association (1938) Comp. Cases 17, and Kannayalal v. Subbaraya Chetti (1938) Com. Cases 62. All these cases are concerned mainly with the construction of the words used.

15. The result of the above discussion seems to me to be this : - If the construction placed upon the declaration is that a trust has been created under the provisions of the Married Women's Property Act, the beneficiary would take the assured amount free of all the liabilities of the insured and if it is construed as a mere nomination, the nominee would have no more right than to receive the amount subject to all the liabilities as if the disposition was by means of a testamentary instrument.

16. In the case now in question I agree with my learned brother that nomination can only be construed as a testament which would be subject to all the liabilities which the assured has to discharge. That being the case the decision of the lower Court is correct and the appeal must be dismissed.

Ramaswami, J.

17. This is an appeal directed against the decree and judgment of the learned Subordinate Judge of Salem in O.S. No. 229 of 1949.

18. The facts are : - The deceased Dhanakoti Mudaliar had taken out two life insurance policies for Rs. 5,000 each in the National Insurance Company, Ltd., Calcutta. This Dhanakoti Mudaliar had become indebted to the Indian Insurance and Banking Corporation Ltd., Salem. The Bank instituted O.S. No. 131 of 1948 and obtained a decree on 8th November, 1948. This Dhanakoti Mudaliar died on 23rd July, 1949. The policies were attached before a judgment on nth September, 1948. This Dhanakoti Mudaliar had nominated his wife Siddalakshmi Ammal as the person entitled to receive the moneys due under the policies in the event of his death and Siddalakshmi Ammal surviving him. This Siddalakshmi Ammal died on 26th July, 1949. The daughters of this couple viz., the second defendant and a minor girl by name Saroja who had died after the filing of the suit, filed a claim petition that the moneys due under the policies had become the assets of Siddalakshmi Ammal on the death of Dhanakoti Mudaliar and they were not liable to satisfy the decree debt of Dhanakoti Mudaliar. This claim was allowed and the Indian Insurance and Banking Corporation has filed a suit for the setting aside of that claim order. The learned Subordinate Judge of Salem has negatived the contention of the claim petitioners and set aside the order in I.A. No. 779 of 1948. Hence this appeal.

19. The point for determination is the scope of a nomination under Section 39 of the Indian Insurance Act IV of 1938.

20. In order to understand the scope of the nomination by the policy-bolder under Section 39, we must also construe the assignment under Section 38 of the Indian Insurance Act of 1938.

21. The legal scope in regard to nominations and the assignment covered by Sections 38 and 39 of the Indian Insurance Act are the same under the English, American and Indian Law.

22. In England the old Common Law rule was that things in action, such as a debt due under a contract, could not be assigned to another without the assent of the debtor. A novation of the debt by the consent of all three parties was necessary. Assignments were always valid, however, in equity and Courts of equity enabled the assignee even of a legal thing in action to bring an action at law against the debtor in the assignor's name, by restraining the assignor from objecting to his use of it on being given a proper indemnity against costs : Row v. Dawson (1749) Wh. & T. E. Cas., 1 , Ashley v. Ashley (1821) 3 Sum. 149, Pearson v. Amicable Assurance (1859) 27 Beav 229 : 54 E.R. 81. This was altered by the Policies of Assurance Act, 1867, whereunder assignments of life policies were recognised at law. This Act provided that an assignee can sue in his own name if he had complied with the Act and had obtained an assignment either by endorsement on the policy or by separate instrument, in the words or to the effect set forth in the Schedule to the Act as follows:

I, A.B. of etc., in consideration of etc., do hereby assign unto C.D. of, etc., his executors, Administrators, and Assigns, the (within) Poicy of Assurance granted, etc. In Witness, etc.

23. Section 25(6) of the Judicature Act, 1873, made all debts and other things in action assignable. Section 136 of the Law of Property Act, 1925, now replaces this general provision and covers absolute assignments in writing of things in action. Thus policies of insurance which are legal things in action and the assured can grant a valid assignment of the right to recover under any policy of insurance without the assent of the insurers : See Jessal, M.R. in Re Moore (1878) 8 Ch. D. 519; Brett, L.J. in Castellan v. Preston (1883) 11 Q.B.D. 380 at 388. If it complies with the Act, the assignment will be valid in law, and the assignee may sue the company alone. But if it does not, it will only be effective in equity, and the assignee may only sue the company in his own name if the assignor has been joined in the action, as plaintiff if he consents, or otherwise as defendant : Performing Right Society v. London Theatre (1924) A.C. 1, Brandt's sons v. Dunlop (1905) A.C. 454. In addition to assignment, a person taking out a life policy on his own life and who is to be considered as the owner of the reversionary sum which will become payable, he cannot only assign but also sell, mortgage or settle it or even give it away as a gift. He may leave it by will or make it, without anything in writing, the subject of deathbed gift : Witt v. Amis (1861) 1 B. & S. 109 : 121 F.R. 685. If the insurance is upon his own life, the right to the same will devolve on his personal representatives on his death who will be bound to treat it as money owing to him and forming part of his estate which is as much as money due to him under a promissory note : Petty v. Wilson (1849) L.R. 4 Ch. 574 (Per Selwyn, 61 L.J.). Therefore, the assured's creditors would be entitled to take his life-policy like other property in execution : Stokeo v. Cowan (1861) 29 Beav. 637 : 54 E.R. 775. In addition to these ways of disposing of the ownership of the life-policy by the insured, there are other dispositions of life-policies under English Law. (For a lucid exposition see Preston and Colinvaux (1950 Edn.) 'The Law of Insurance' (Sweet & Maxwell) Chapter 80, page 183 and following : Honsaman 'The Law of Life Assurance' 4th Edn., (1954) (Butterworth's, Chapter VI, page 74 and following).

24. Equitable interests in the policy may arise under a trust declared by the assured either expressly or by virtue of Section 11 of the Married Women's Property Act, 1882, or by virtue of an equitable assignment or from the relationship of debtor and creditor. In the last case the creditor may have an equitable charge on the policy of his debtor or the debtor may have an equity of redemption on the policy of his creditor. In such cases on the death of the assured who has taken out a life-policy, the assets will devolve on the person in whose favour there has been a resultant trust and the assured's creditors may not be entitled to take his life-policy like other property in execution.

25. The reason is twofold, viz., either on account of the fact that the assignment with notice to the company means novation and the coming into existence of a new contract with a third party or as a result of trust created by statute as under Section 11 of the Married Women's Property Act, i832, which is amended by the Law Reform (Married Women and Tortfeasors) Act, 1935, which reads as follows:

A married woman may effect a policy upon her own life or the life of her husband for her own benefit; and the same and all benefit thereof shall enure accordingly.

A policy of assurance effected by any man on his own life, and expressed to be for the benefit of his wife, or of his children, or of his wife and children, or any of them, or by any woman on her own life, and expressed to be for the benefit of her husband, or of her children, or of her husband and children, or any of them, shall create a trust in favour of the objects therein named, and the moneys payable under any such policy shall not, so long as any object of the trust remains un-performed, form part of the estate of the insured, or be subject to his or her debts : Provided, that if it shall be proved that the policy was effected and the premiums paid with intent to defraud the creditors of the insured, they shall be entitled to receive, out of the moneys payable under the policy, a sum equal to the premiums so paid. The insured may by the policy or by any memorandum under his or her hand, appoint a trustee or trustees of the moneys payable under the policy, and from time to time appoint a new trustee or new trustees thereof, and may make provision for the appointment of a new trustee or new trustees thereof, and for the investment of the moneys payable under any such policy. In default of any such appointment of a trustee, such policy, immediately en its being effected, shall vest in the insured and his or her legal personal representative, in trust for the purposes aforesaid. If, at the time of the death of the insured, or at any time afterwards, there shall be no trustee, or it shall be expedient to appoint a new trustee or new trustees, a trustee or trustees or a new trustee or new trustees may be appointed by any Court having jurisdiction under the provisions of the Trustee Act, 1850, or the Acts amending and extending the same. The receipt of a trustee or trustees duly appointed, or, in default of any such appointment, or in default of notice to the insurance office, the receipt of the legal personal representative of the insured shall be a discharge to the office for the sum secured by the policy, or for the value thereof, in whole or in part.

26. This Section replaced Section 10 of the Married Women's Property Act, 1870, the terms of which were similar, though there are important differences which are not relevant for our purpose.

27. The corresponding Scottish Act is the Married Women's Policies of Assurance (Scotland) Act, 1880, which extended to Scotland facilities available in England under the English Act of 1870. Section 2 of the Scottish Act opens as follows:

A policy of assurance effected by any married man on his own life, and expressed upon the face of it to be for the benefit of his wife, or of his children, or of his wife and children, shall, together with all benefit thereof, be deemed a trust for the benefit of his wife for her separate use or for the benefit of his children, or for the benefit of his wife and children.

28. In addition to assignments and creation of trusts, in England also it is common in the case of insurances on the assured's own life, for the assured to nominate a beneficiary at the time of taking out a policy. Such a nomination does not, however, by itself, constitute the assured a trustee, nor, since the person nominated is a stranger to the contract, has he any remedy at law. The property in such a policy will therefore, pass notwithstanding the nomination, to the personal representatives of the assured on his death and the nominee has no rights whatsoever, unless:

(i) the nomination amounts to a declaration of trust, or the person taking out the policy is merely the agent of the nominee, or

(ii) the nomination is made under Section 11 of the Married Women's Property Act, 1882, or

(iii) it is made under Section 56 of the Friendly Societies Act, 1896.

29. This rule as has been pointed out in Preston and Calinvaux 'Law of Insurance' at page 338, sometimes works considerable injustice, as where a person took out an endowment policy expressly for the benefit of his godson, but died before the policy matured, and it was held that the policy formed part of his general estate and that the godson had no title to it : Re. Sinclair's Policy (1938) 1 Ch. 799 : (1938) All. E.R. 124, see also Re Clay's Policy (1937) 2 All E.R. 548. Since the policy-holder, in such a case, does not generally wish to create a trust binding upon himself during his lifetime, it is important that he should provide by will that the policy should pass on his death to the nominee. He may, on the other hand, create a trust subject to his keeping up the policy : Pedder v. Moseley (1862) 31 Beav. 159 : 54 E.R. 1099.

30. The Law Revision Committee (Sixth Interim Report, 32) has proposed that Section 11 of the Married Women's Property Act, 1882, should be extended to education policies, to which it does not at present apply. Such a reform would render a welcome amelioration of the rule that a nominee has no right in a Life Insurance Policy.

31. These principles are embodied in the oft-repeated decisions of the Court of Appeal in Cleaver v. Mutual Reserve Fund life Association (1892) 1 Q.B. 147, Re. Policy No. 6402 of the Scottish Equitable Life Assurance Society (1902) 1 Ch. 282, Burgess' Policy, In Re. (1916) L.J.R. 85 Ch. D. 273, Engelabach's Estate In Re. Tibbetts v. Engelbach (1924) 2 Ch. 348, Sinclairs' Life Policy (1938) 1 Ch. 799 : (1938) All. E.R. 124, Re. Foster, Hudson v. Foster (1938) 3 Ch. D. 357 Halsbury's Laws of England (Hailsham Edn.) Vol. 18, page 531, para. 842 and Digest, Vol. 29, p. 422, Nos. 3288, 3289.

32. The American Law on the subject which is practically identical with the English Law, will be found set out in May's 'Law of Insurance,' 4th Edition (Little Brown Co., Boston) (1900), Chapter 19, Assignment of Policies, (page 838 and following) 29 American Jurisprudence, Section 492 (page 401 and following) and Richards on the 'Law of Insurance,' 5th Edition (1952), Volume 1, Chapter 5 (page 406 and following).

33. The Indian Law as to assignment of life-policies before Act IV of 1938 was contained in Sections 130 to 132 and 135 of the Transfer of Property Act. The transfer of an actionable claim could be effected only by an instrument in writing signed by the transferor or by his duly authorised agents and thereupon all rights and remedies of the transferor vest in the transferee whether notice of transfer had been given or not. Every dealing with the debt by the debtor was valid as against such transfer unless the debtor was a party to the transfer or had received notice to it : see Section 130. Notice of transfer was prescribed by Section 131. Section 132 provided that the transferee of an actionable claim took it subject to equities available against the transferor. Then, in the case of life policies an assignee could not sue in his own name and if the assignor died, his personal representative would be a necessary party to a suit by the assignee : Rajnarain Bose v. Universal Life Assurance I.L.R.(1881) Cal. 594.

34. Now by Act IV of 1938, Section 38, an assignment of life-policy can be made either by endorsement upon the policy or by a separate instrument signed by the assignor and attested by at least one witness. The transferee cannot sue until notice of assignment is given to the insurer in writing together with the endorsement certified to be correct by the transferor and the transferee. Upon receipt of the notice the insurer has to record the fact of such transfer, etc., and the transferee takes subject to the equities to which the transferor was subject at the date of the transfer. Thus, the assignment of life-policies is now governed by Section 38 of the Insurance Act and not by Section 130 of the Transfer of Property Act.

35. Section 39 of the Insurance Act of 1938 confers upon the holder of the policy of life assurance issued upon his own life the right to nominate a person or persons to whom the policy moneys may be paid in the event of his death. We are not concerned here with proviso to Sub-section (1) dealing with minor nominees. Sub-section (2) prescribes that nominations may be effected in two ways, viz., (a) by incorporation in the text of the policy as issued by the insurer or (b) by endorsement by the policy-holder on the policy and notified to the insurer and registered in his books. There is no time-limit given for an endorsement on the policy constituting the nomination, to be got registered. If, therefore, a policy-holder endorses his policy to nominate a person, there is nothing in the section to bar its registration in the books of the company even after the death of the assured. A nomination may be cancelled or altered by endorsement or by a will. Nomination therefore effected by incorporation in the text of the policy or by endorsement may be cancelled, or changed by a subsequent endorsement. A will has the effect of abrogating a nomination altogether, but in order to have that effect, the will should purport to bequeath the policy. It would seem, however, that where a will bequeathing the policy is followed by nomination, the nomination will have the effect of making the will ineffectual to that extent. Besides as provided in Sub-section (2) a nomination will also be automatically cancelled by a subsequent transfer or assignment. On the nominee dying, the sum assured becomes, in accordance with the terms of the section, payable to the policy-holder or his heirs or legal representatives or the holder of a succession certificate as the case may be. Policies coming under the Married Women's Property Act are not affected by this section except as stated in the proviso.

36. There are thus important differences between a nomination and an assignment which can be summed up as follows : An assignment of a life-policy passes to the astignee the right to the insurance money, even though the assignor's interest in the life has ceased before the date of the 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 the 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 rights to alter the beneficiary. The latter is entitled to receive policy moneys only. There is no statutory trust created by the 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 of the assured, he can neither surrender the policy nor have it converted to be paid up. It has already been pointed out how a nomination will get automatically cancelled by a subsequent transfer or assignment, whereas an assignment when followed by a nomination will not be cancelled thereby. Similarly, whereas a will has the effect of abrogating the nomination altogether, an assignment cannot at the option of the assignor be cancelled by a will. On account of these fundamental differences between an assignment and a nomination whereunder vested rights accrue under the former, to the assignee, and only a mere right to receive moneys under the policy contingent on the nominee surviving the assured and the assured not changing his mind and altering his nomination, accrues in the latter case the liability of the assured amount to satisfy the liabilities of the assured is different in either case. In the former case it is not open to a creditor to treat the life policy as being the property of his debtor, viz., the assured. In the case of the latter the nominee receives the policy amount subject to the same liabilities as in the case of beneficiaries under a disposition by a will. (For discussion of the differences between assignment and nomination under Sections 38 and 39, we 'Dutt's Commentaries on the Insurance Act,' 3rd Edition, page 101 and following : P.A.S. Man's 'Life Assurance in India (1950) page 229 : K.B. Venkoba Rao's. 'The Law of Insurance in India (1950)' page 332 and following N.D. Basu 'Principles of Insurance in British India (1940)' page 725 and following : Bishan Nath's 'The Law of Insurance (1939)', page 52 and following.

37. Quite different would be the case if the nominations in favour of the wife and children are made as under Section 6 of Act III of 1874 which runs as follows:

A policy of insurance effected by any married man on his own life, and expressed on the face of it to be for the benefit of his wife, or of his wife and children, or any of them, shall enure and be deemed to be a trust for the benefit of his wife, or of his wife and children, or any of them, according to the interests so expressed, and shall not, so Ions as any object of the trust remains, be subject to the control of the husband or to his creditors, or form part of his estate.

38. The law in regard to nomination under Section 39 of the Insurance Act and under Section 6 of Act III of 1874, can be thus summed up : (i) where the nomination is purported to be made in favour of the wife, etc., under Section 39 of the Insurance Act, Section 6 of Act III of 1874 has no application and no trust in favour of the wife, etc., is created; (i) In other cases, Section 6 of Act III of 1874 is attracted provided the policy on the face of it is expressed to be for the benefit of the wife, etc. Even the proposal is a policy and can be taken into account in premising whether a trust in favour of the wife is created : Krishna Chettiar v. Velayee Ammal (1938) Comp. Cas. 101; (ii) No set form of words is necessary provided the intention of the assured can be inferred. The words 'payable to my wife' are enough and it is not necessary that it should be expressly stated that the policy is for the benefit of the wife and to reproduce the phraseology of Section 6 of Act III of 1874. The distinction is important, because, as pointed out before, in the case of a nomination, the nominee takes it as under a testamentary disposition as property bequeathed by the testator subject to the liabilities which that legacy has to satisfy of the testator, whereas in the case of a nomination under the Married Women's Property Act which results in the creation of a trust in the language of Kannayalal v. Subbaraya Chetty : AIR1938Mad413 . The benefit which accrues to the nominee though subject to the other conditions in the policy, gets impressed as a trust from the very moment of its birth and cannot be looked upon therefore as available to creditors regardless of the trust imposed on it. Kannayalalal v. Subbaraya Chetty : AIR1938Mad413 , was approved in Bharat Insurance Co. Ltd. v. Lakshmidevi (1947) 17 Comp. Cases 1, Abhiramavalli Ammal v. O.T. Madras (1947) 17 Comp. Cases 171, also is a decision taking the same view. The Madras view is in the line of English decisions on Section 11 of the English Married Women's Property Act, 1882 as In re. Fleetwood's Policy (1926) 1 Ch. D. 48, In re Webb (1941) 1 All E.R. 321, Re. Schebsman (1943) 2 All E.R. 768 though the Bombay High Court in Dinbai v. Ramanshaji I.L.R.(1933) 58 Bom. 513, Lalithambal v. Guardian of India (1937) 7 Comp. Cases 157, Shamdas v. Savitri (1937) 7 Comp. Cases 267, takes the view that no trust is created in favour of the wife until the death of the assured and the assured in his lifetime can freely assign the benefit of the policy.

39. These principles are clearly brought out in two decisions of the Calcutta High Court to which our attention has been invited by the learned advocate Mr. Nambiar. The first decision is Krishna Lal v. Mt. Promila : AIR1928Cal518 . In that case a Hindu assured directed an insurance company to pay money due under his policy effected in 191 o to his wife as the nominee of the assured. But the nomination could not be construed as one made under Section 6 of Act III of 1874. Therefore, the Calcutta High Court held that the wife was not entitled to the money as the Women's property Act did not apply and there was no trust in her favour by virtue of Section 6 and that a person who is nominated by an assured in his policy of life assurance for receiving money due under it upon his death is not entitled to enforce his claim against the company as he, though a nominee, is no party to the contract and no interest passes to him merely by reason of his being named in the policy and the money forms part of the assets of the deceased and is liable for his debts.

40. The second case which is the latest decision of the Calcutta High Court is Ramballay v. Gangadhar : AIR1928Cal518 , wherein it was held:

Where the nomination in the endowment insurance policy of the deceased judgment-debtor stated : 'I nominate my wife and my son-in-law, the survivor or survivors, as the persons to receive the moneys under the above policy in the event of my prior death', the nominee under there terms does not become the owner of the money payable to him under the policy. Such nomination only indicates the person who should receive the money should the owner die.

All that Sub-section (6) of Section 39, Insurance Act, does is to confer on the nominee the right to receive the insurance money as between such nominee and the insurance Company, but it does not provide for the title or ownership of that money in general.

The terms of nomination do not show that the policy was expressed on the face of it to be for the benefit of the wife within the meaning of Section 6 Married Women's Property Act. The terms of nomination make the nomination simpliciter which comes under Sub-section (6) of Section 39, Insurance Act.

The proviso to Section 39, Insurance Act, makes it quite clear that the policy holder can elect to come either under nomination under Sub-section (6) of Section 39 or under trust under Sub-section (7) of that section but if he does elect to nominate, then such nomination takes it out of the trust under Section 6, Married Women's Property Act.

In this view, attachment of the moneys payable under the Insurance policy by the decree-holder of the deceased judgment-debtor is not illegal.

41. See also Abdul Majid v. Matel A.I.R. 1922 Lah. 149, Gresham Life Assurance v. Collector of Etawah I.L.R.(1832) All. 1026 : A.I.R. 1933 Akk. 1, British Equitable Assurance Co. v. Great Western Ry. (1869) 38 L.J. Ch. 132, Mangles v. Dixon (1852) 3 H.L.C. 702, Kettilamma v. Vishnu Nambissan : AIR1939Mad411 , Gobindram v. Savitri A.I.R. 1937 Sind 181.

42. In the result, the findings of the learned Subordinate Judge are unassailable and we, therefore, confirm them and dismiss this appeal without costs.


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