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Business Standard
13-05-2025
- Business
- Business Standard
In nominee vs legal heir who gets the precedence? Court says inheritance
Where there is a Will there's a way. But what if there is no Will? The Allahabad High Court has, in one such a case, upheld the supremacy of succession laws over the Insurance Act. While hearing a petition filed by a woman from Unnao, the court held that a nominee cannot be considered the absolute beneficiary of the insurance money, emphasising that the nominee merely acts as a trustee for the legal heirs. Case background Kusum, the petitioner, had purchased 15 life insurance policies in the name of her daughter, Ranjeeta, before she got married. Later, Ranjeeta got married to Anand Kumar, before her sudden demise in 2021. She left behind an 11 months old child. On Ranjeeta's death, her mother Kusum – who had declared herself as nominee at the time of purchasing policies -- sought to claim the entire insurance amount. However, Ranjeeta's husband contested the claim, and the matter reached the Civil Court. It escalated to the Allahabad High Court. Court's findings and ruling The High Court ruled that while the petitioner was the nominee on the insurance policies, she did not have ownership of the policy amounts. The court upheld that a nominee's role is to act as a trustee for the rightful legal heirs, and the insurance money must be treated as part of the deceased's estate. The court directed that the life insurance amounts be excluded from the assets list, with further instructions for the amounts to be placed in Fixed Deposit Receipts under the minor granddaughter's name until she turns 18. Expert opinions on the ruling Alay Razvi, managing partner at Accord Juris, said, 'A nominee under a life insurance policy is not the ultimate beneficiary but merely a trustee for the legal heirs. Nominations alone cannot override succession laws, and families with multiple legal heirs or complex dynamics must take further steps to ensure the policy proceeds reach the intended beneficiaries.' Tushar Kumar, advocate at the Supreme Court, said, 'This ruling underscores that mere nomination is not enough. A well-structured estate plan, including a valid Will or trust, is essential to avoid legal disputes and ensure that the insurance payout reaches the rightful heirs.' Why is a Will important? Raadhika Chawla, advocate at the Delhi High Court, pointed out that the ruling makes it essential for individuals to revisit their estate planning. 'Section 39 of the Insurance Act does not override succession laws… Policyholders should revise their estate planning by making a clear Will alongside the nomination to ensure that the intended beneficiaries receive the insurance payout without legal disputes.' On practical steps for families with complex dynamics, she said, 'Individuals should create a clear, registered Will aligning with the insurance nomination. The nominee should ideally be the same person named in the Will to avoid disputes.'
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Business Standard
11-05-2025
- Business
- Business Standard
Consumer protection: Legal heir, not nominee, is beneficiary of policy
Kusum purchased 15 life insurance policies in the name of her unmarried daughter, Ranjeeta, and appointed herself as the nominee. Later, Ranjeeta married Anand Kumar and gave birth to a baby girl. Ranjeeta passed away when the child was just 11 months old. Following her daughter's death, Kusum claimed the insurance proceeds. However, before the claims could be settled, her son-in-law, Kumar, filed a civil suit under the Indian Succession Act, asserting that he and his minor daughter were entitled to the insurance benefits. Kusum was not even made a party to the suit. The matter was referred to the Lok Adalat, where it was decided that the policy claims would be paid to Anand Kumar. Upon learning of this decision, Kusum filed a writ petition challenging the order. The petition was dismissed on the ground that she had not first pursued the remedy of filing a civil revision before the Unnao court. Subsequently, Kusum filed a revision before the Unnao civil court, which directed her to deposit the claim amounts in fixed deposits in the name of her granddaughter until she attained majority at the age of 18 years. Unwilling to accept this, Kusum approached the Allahabad High Court, contending that she alone was entitled to the insurance proceeds by virtue of being the sole nominee. The court observed that there was no dispute over the fact that Ranjeeta had died intestate and that her daughter was one of the heirs entitled to her estate under the Indian Succession Act. The core issue was whether a nominee had a beneficial interest in the insurance claims or whether the legal heir, in this case, the granddaughter, was entitled to the proceeds. The court observed that, prior to the 2015 amendment to Section 39 of the Insurance Act, a nominee was considered merely a custodian of the insurance amount, responsible for distributing it to the legal heirs. This principle was laid down by the Supreme Court in Sarbati Devi vs Usha Devi. The 2015 amendment to Section 39 changed this position, granting the nominee a beneficial interest in the insurance claim. Emphasising that the rights of parties must be determined according to the legal provisions prevailing on the date the cause of action arises, the court acknowledged a conflict between the Insurance Act and the Succession Act. It distinguished between a 'beneficiary nominee' and a 'collector nominee', clarifying that only specific categories —namely, parents, spouse, children, or spouse and children — qualify as beneficial nominees. Siblings do not fall within this category. The court further held that an insurer is not competent to adjudicate disputes between legal heirs, nor is it responsible for ensuring that the rightful heirs under personal succession law ultimately receive the proceeds. The purpose of naming a nominee is to enable the insurer to discharge its obligations by making payment to the nominee. In its judgment dated April 30, 2025, delivered by Justice Pankaj Bhatia, .the high court concluded that the Insurance Act is a general law that governs insurance contracts, whereas the Succession Act is a special law that governs inheritance rights.
Hindustan Times
06-05-2025
- Business
- Hindustan Times
Nominee doesn't have ownership of insurance policy money: HC
: The Lucknow bench of the Allahabad high court has ruled that a beneficial nominee of an insurance policy does not have ownership of the policy's proceeds. The court said holding the beneficiary to be a 'beneficial nominee' -- to the exclusion of the legal heirs -- would lead to absurdity, which was never intended when Section 39(7) of the Insurance Act was amended in 2015. Section 39 (7) provides that a nominee shall beneficially be entitled to the amount payable by the insurer. Prior to the amendment, the nominee of a policy was entitled to hold the amount for the benefit of the successor. Justice Pankaj Bhatia pronounced the judgment recently on a petition filed by one Kusum of Unnao district of U.P, who was involved in a dispute with her son-in-law and daughter-in-law over the ownership of her daughter Ranjeeta's insurance policies. Kusum had taken out 15 life insurance policies in Ranjeeta's name when she was unmarried. Ranjeeta married later and a daughter was born to her. However, Ranjeeta died in 2011 when her daughter was 11 months' old. Since Kusum was a nominee of the insurance policies, she claimed ownership of the proceeds. This was challenged by her son-in-law and granddaughter, who moved the civil court and got a favourable decision. In revision, the Unnao district judge asked Kusum to deposit the amount of these insurance policies in the form of Fixed Deposit Receipt (FDR) in the name of her granddaughter till she attains age of 18 years. Kusum then moved the high court to contend that she is entitled to the amounts under the policies as a beneficial nominee. However, she also agreed that apart from the amounts under the policies, her granddaughter would be entitled to her estate as per succession laws. Considering its findings on the prevalence of succession law over the Insurance Act, the high court dismissed the petition. Due to the contradictory judgments of high courts on the issue, the court also said it would be fit to take the matter to the Supreme Court. Observing that the Insurance Act was never enacted by Parliament to govern the rights of succession in respect of the persons who are governed by their individual succession laws, the court said: 'Clearly, the issue of succession would be governed by a specific statute being The Hindu Succession Act and to that extent, the general law as flows from Section 39(7) under the Insurance Act has to give way.' MANOJ KUMAR SINGH
