Nominee – Insurance claim – Nominee is only custodian of amount – Insurance Act, 1938 section 39(6):

The petitioner No. 1 got married to one Nimai Charan Barik on 10th March, 1996. Her husband died on 11th July, 2007 while in service of the Government. It was alleged that the petitioner No. 1’s husband during his life time had three different policies with opposite party No. 1 and opposite party No. 1 being Head of the Organisation was accountable for release of the amount involved in all the above three polices. The case of the petitioner No. 1 was that after the death of her husband she came to know that all the policies bore the name of the opposite party No. 4 as the nominee. Petitioner alleged that even though the opposite party No. 4 was a nominee, he was not entitled to the amount involved in the said policies. She alleged that even though opposite party No. 4 was not the successor to the policy holder, yet as a nominee, he was attempting to grab the amount involved in all the three above policies. The petitioner disclosed that the opposite party No. 4 happened to be the elder brother of petitioner No. 1’s husband.

After coming to know that opposite party No. 4 was attempting to usurp the proceeds of the policies, the petitioner No. 1 submitted a representation before the opposite party No. 1 on 24.09.2007. The opposite party No. 3 vide letter dated 29.09.2007 intimated her that the policy had a valid nomination in favour of opposite party No. 4 and as a consequence of which the amount involved in the policy following the conditions therein could not be released in their favour. The opposite parties relied on section 39(6) of the Insurance Act 1938. The Hon’ble Court observed that there was no doubt that the amount involved in the policies could be released in favour of the nominee. Question involved in the present case is whether nominee was entitled to the money involved in the policies? There was no denying the fact that the opposite party No. 4 was the nominee in all the policies and as nominee he would be the custodian of the amount involved. Question as to successors in interest would be entitled to such amount has been tested in the Hon’ble Apex Court and the Hon’ble Apex Court in deciding such a dispute in case of Smt. Sarbati Devi and another vs. Smt. Usha Devi, : A.I.R. 1984 Supreme Court 346. Wherein it was held that.

It is only successors of the deceased entitled to the amount involved in the Insurance Policy. The nominee is only the custodian of the amount and that does not mean the amount belonged to the nominee or nominees.

Thus, in view of the provision as contained in sub-section (6) of section 39 of The Insurance Act, 1938, and the decision of Hon’ble Apex Court, law is settled that the nominee is only the custodian of the amount involved in the Insurance Policies and the successors of the policy holder would be the persons entitled to the amount involved in the policies. The petitioners were directed to appear before the Insurance Company with their identification and the amount would be released by the Insurance Company in favour of the petitioners in the presence of the nominee.