1.       The present Revision Petition (RP) has been filed by the Petitioner against Respondents as detailed above, under section 21 (b) of Consumer Protection Act 1986, against the order dated 22.01.2020 of the State Consumer Disputes Redressal Commission, U.T.Chandigarh (hereinafter referred to as the ‘State Commission’), in First Appeal (FA) No. 05 of 2020 in which order dated 15.11.2019 of District Consumer Disputes Redressal  Forum-I,  U.T. Chandigarh (hereinafter referred to as District Forum) in Consumer Complaint (CC) no 580 of 2018 was challenged, inter alia praying for setting aside the order of the State Commission and District Forum.

2.       While the Revision Petitioner (hereinafter also referred to as Opposite Party) was Appellant and the Respondents (hereinafter also referred to as Complainants) were Respondents in the said FA 05 of 2020 before the State Commission, the Revision Petitioner was Respondent No.1 and Respondent herein No.1 and 2 were Complainant nos. 1 & 2 before the District Forum in the CC no 580  of 2018.  Respondent No.3 herein was Opposite Party No.2 in the CC.  For the sake of convenience, hereinafter the parties will also be referred to as they were arrayed in the CC before the District Forum.         Notice was issued to the Respondent on 29.06.2020.  Parties filed Written Arguments/Synopsis on 28.12.2021 ( Petitioner ) and 10.01.2022 ( Respondent No.1 and 2) respectively.

3.       Brief facts of the case, as emerged from the RP, Order of the State Commission, Order of the District Forum and other case records are that the    husband of the respondent no.1, Late Sh. Amardeep Singh, had taken three LIC Policies bearing no. 161564715, 165952234 and 165952235 before the marriage with respondent no.1. In the said policies the respondent no.3 was nominated as nominee to receive the amount in the event of his death. That after marriage the said nomination was not changed and unfortunately the husband of the respondent no.1 died on 04.01.2018. It is alleged by the Complainants in the Complaint that after the death of her husband she came to know about the said nomination of respondent no.3 as a nominee in the said polices, therefore the respondent no.1 wrote a letter dated 06.03.2018 to the petitioner, whereby she had requested not to disburse the sum assured in favour of the nominee i.e. respondent no.3 as respondent no.1 and 2 are the class I legal heirs of the deceased Amardeep Singh, being the wife and minor child, but the petitioner despite the said letter dated 06.03.2018 had disbursed the amount to the respondent no.3.

4.       Vide Order dated 15.11.2019 in the CC no. 580 of 2018 the District Forum has allowed the complaint filed by Respondent Nos. 1 and 2 herein wherein Petitioner herein and Respondent No. 3 herein were arrayed as Respondent No.1 and 2.  Opposite Parties were directed to :

(i)   Refund the amount of Rs.5,03,060/- each to complainant nos. 1 & 2 ( i.e. 1/3^rd share each of the total disbursed amount of Rs.15,09,180/-) along with interest @ 9% per annum from the date of disbursal i.e. 9.5.2018 till realization.

(ii)   To pay an amount of Rs.20,000/- to the complainants as compensation for causing mental agony and harassment to them.

(iii)  To pay Rs.10,000/- to the complainants as costs of litigation.

5.       Aggrieved by the said Order dated 15.11.2019 of District Forum, Petitioner appealed in State Commission and the State Commission vide order dated 22.01.2020 in FA No. 05  of  2020 has dismissed the Appeal in accordance with detailed order in FA No. 03 of 2020 which was filed by Respondent no.3 herein and in which Petitioner herein was the Respondent No.3.  Appeal No. 03 of 2020 was also dismissed by the State Commission.  Hence the Petitioner herein is before this Commission in Revision Petition.  Respondent No.3 herein had not challenged the said order of the State Commission. 

6.       Petitioner has challenged the said Order dated 22.01.2020 of the State Commission mainly on following grounds:

(i) Order dated 22.01.2020 of the State Commission and the Order dated 15.11.2019 of District Forum suffers from serious infirmities, raises substantial questions of law.

(ii)  Petitioner herein has acted in terms of the policy approved by the IRDA and as per the Insurance Act, 1939.  The State Commission and District Forum failed to appreciate the Section 39 of Insurance Act 1938, according to which the nominee shall be entitled to recover the claim of the policy.

(iii)  Below Foras committed material irregularity in holding that mere nomination made under Section 39 of the Insurance Act does not confer beneficial interest on the nominee under life insurance policy on the death of life assured. The concept of "beneficial nomination" has been introduced by Insurance Laws (Amended) Act, 2015 (effective from 26.12.2014) by amending Section 39 of the Insurance Act, 1936, Sub-section 7 has been inserted in Section 39 vide the aforesaid amendment which provides that if parents, wife, and children or any of them are nominated by the life assured, such nominee or nominees shall be beneficially entitled for the policy moneys which means such beneficial nominee shall be the owner of the policy money to the complete exclusion of all the other legal heirs. Further as per Sub-Section 10, the provision of Sub Section (7) and (8) shall apply to all policies of life insurance maturing for payment after the commencement of the Insurance Laws (Amendment) Act, 2015. Below Foras have utterly failed to consider the aforesaid legal provision and renders the same nugatory.

(iv)    Below Foras erred in comparing the benefits under insurance policy to family pension and other emoluments of a Government employee and holding, that the same are paid to his spouse on his death and not to the nominee.

(v)     The Forums below committed error in holding that complainants and respondent no.3 are the first class legal hers as per Hindu Succession Act, 1956 and the deceased died intestate and therefore the legal heirs are entitled to succeed to the 1/3^rd  share of the sum assured under the policy. This conclusion is based on erroneous appreciation of the law relating to nomination as amended by Insurance Laws (Amendment) Act, 2015.  The said Act amended Section 39 by inserting sub-section (7) which lays down for beneficial nomination. Without Prejudice, the beneficial nomination by itself is deemed to be the will and testament of the life assured in favour of his mother. Thus, the beneficial nomination being in the nature of will, overrides the law of succession.

(vi)    Below Foras failed to appreciate the fact that if a nomination is made under Section 39 (7) of the Insurance Act, 1938, the money payable to such beneficial nominee is to the total exclusion of the legal representatives and heirs or even creditors who may have a legitimate claim against the estate of the deceased of which the money payable on maturity of the life insurance policy forms part.

(vii)   Below Foras erroneously relied upon the Supreme Court judgment in Sarbati Devi vs. Usha Devi (AIR 1984 SC 346) for holding that the provisions of S.39 could not alter the position of succession under the law holding that a mere nomination made under S.39 does not have the effect of conferring on the nominee any beneficial interest in the amount payable under the policy on the death of the assured.   The aforesaid Judgment has no application to the facts and circumstances of the present case in as much as the law relating to nomination has undergone change since then. Subsequent to the aforesaid Judgment, sub-Section (7) was inserted in Section 39 by Insurance Laws amendment Act, 2015 to make a provision for beneficiary nominee and for making a clear distinction between collector nominee and beneficiary nominée. Section 39 (7) of Insurance Act, 1938 overrides the Succession Law as it provides testamentary transfer of the property vested in an insurance Policy.

(viii)  State Commission and District Forum erred, while interpreting Section 6 of the Married Women Property Act 1874, as in the present case, as the Insurance Policies were purchased before marriage of the insured, as such the said act is not applicable to the policies in dispute. 

7.       Heard counsels of both sides.  Contentions/pleas of the parties, on various issues raised in the RP, Written Arguments, and Oral Arguments advanced during the hearing, are summed up below.

7.1.    The Respondent Nos. 1 and 2 argued that Respondent No.3 by not challenging the order of State Commission has accepted the order of the State Commission but till date, has not complied with the order of State Commission / District Forum.

7.2     In the instant matter, four statutes (provisions) are referred to and are to be read harmoniously with each other for the ends of justice:

(a) Section 39, Insurance Act, 1938

(b) Section 6, Married Women Property Act, 1874

(c) Schedule, Hindu Succession Act, 1956

(d)  Rule 5 (5) proviso, General Provision Fund Rules

There is no bar on the Consumer Courts to import the provisions of other statutes for the ends of justice.

1. Petitioner has relied upon Section 39 of Insurance Act and has based its complete case on the same, according to which the insurer has to disburse the policy amount to the nominee(s) or any of them. However, the said provision is silent on the issue regarding the demarcation of the policies taken by the married person and unmarried person. It is pertinent to mention that even after the amendment, the said lacuna is not filled up and hence Sarbati Devi Judgment still holds good.

2. That it has been held time and again that section 39 of Insurance Act cannot be read in isolation to other related legislations. All the four statutes referred in the present matter are beneficial legislations and have to be read harmoniously and the courts below have done the same thing.

7.3     As per the Policy Guidelines of the Petitioner the nominee should be the person who should take care of the welfare of the family as the policy is for the benefit of the family and not for the benefit of some individual. This clearly shows that the Petitioner sells its policies in the name of the family welfare, but their act in the instant case has been completely opposite to their policy. The act of not changing the name of the nominee after the marriage of the deceased with the Respondent no. 1 clearly shows that he had full confidence on his mother that she will take care of the family after him and will use the insurance money for the welfare of the deceased's family. Respondent no. 3 was not dependent on her son as her husband was a police officer (SI) in Haryana. After marriage. the insurable interest of the wife and children generates which cannot be ignored by the Petitioner.

7.4.    That reading section 39 in the light of the policy guidelines and the observation of the RTI Appellate Authority of the Petitioner, it is clear that they are bound by the succession laws and also other beneficial legislations. It is an admitted position that the Respondents are the Class 1 heirs of the deceased and that the letter dated 06.03.2018 for the non- disbursal of funds was received by the Petitioner.

7.5     As per the condition mentioned in the policy document itself, when two category of persons are available ( nominee and the other legal representatives), then there is no compulsion on the Petitioner to make the payment only to the nominee, especially when other category person has already raised a dispute regarding the disbursement of amount.

7.6.    Courts below have not done anything against the Article 141 of the Constitution of India by following the Judgement passed by the Apex Court in Sarbati Devi Vs. Usha Devi, AIR 1984 SC 346 which is direct on the point. It is pertinent to mention that the said judgment has not been overruled by the Apex Court and has also been recently reiterated by Apex Court in Sherya Vidyarthi Vs. Ashok Vidyarthi, (2015) 16 SCC 46. Even this Hon'ble Commission has granted reliefs to the legal heirs over the nominee in Smt. Kanti Devi Vs. The Oriental Insurance Company, 2011 SCC Online NCDRC 243 by following the judgment passed by Apex Court in Sarbati Devi. Even Hon'ble High Court of Andhra Pradesh has granted relief to the legal heirs over the nominee using the principle laid down in Sarbati Devi Judgment, in LIC Hyderabad Vs. Nirmala Adi Reddy & Ors., AIR 1985 AP 58. Thus, the precedent laid down by Hon'ble Supreme Court in the Sarbati Devi's Case still holds good.

7.7.    As regards contentions of Petitioner, they repeated most of the points which are stated under para 6, grounds for challenging the order of the State Commission, hence the same are not being repeated here. 

8.       We have carefully gone through the entire facts and circumstances of the case, relevant records, rival contentions of the parties, provisions of Section 39 of Insurance Act 1938, as amended, Section 6 of Married Women Property Act 1874 and other relevant Acts  / Rules cited, and the judgments of Hon’ble Supreme Court cited by the parties.  We are in agreement with the contentions of the Petitioner herein ( LIC) that Sub-section 7 of Section 39 of the Insurance Act 1938, as inserted vide Insurance Laws ( Amendment ) Act 2015, and which came into effect w.e.f. 26.12.2014, clearly provides for that if parents, wife and children or any of them are nominated by the Life Assured (LA), such nominee or nominees shall be beneficially entitled for the policy moneys.  The relevant provision is reproduced below:

“7      Subject to the other provisions of this section, where the holder of a policy of insurance on his own life nominates his parents, or  his spouse, or his children, or his spouse and children, or any of them, the nominee or nominees shall be beneficially entitled to the amount payable by the insurer to him or them under sub-section ( 6) unless it is proved that the holder of the policy, having regard to the nature of his title to the policy, could not have conferred any such beneficial titled on the nominee.”

9.       Sub-section 10 further provides that provisions of Sub-section 7 shall apply to all policies maturing for payment after the commencement of 2015 amendment. The relevant provision is reproduced below:

“ 10   The provisions of sub-section ( 7) and ( 8) shall apply to all policies of life insurance maturing for payment after the commencement of  the  Insurance Laws ( Amendment Act ), 2015.”

10.     As regards Respondent’s reliance on judgment of Hon’ble Supreme Court in Sarbati Devi ( supra ) it is to be noted that this judgment is dated 06.12.1983 i.e. much prior to the 2015 Amendment, which came into force w.e.f. 26.12.2014.  In this case, Hon’ble Supreme Court held that :

“1.1.  A mere nomination made under Section 39 of the  Insurance     Act,  1938  does  not  have  the  effect  of conferring on  the nominee  any beneficial  interest in  the amount payable        under the life insurance policy on the death of the accused. The nomination only indicates the hand which is authorised to receive the amount, on the payment of which the insurer  gets a  valid discharge  of its liability under the  policy. The amount, however, can be claimed by the heirs of the assured in  accordance with  the law  of  succession governing them. 

1.2 An  analysis of the provisions of Section 39 of the Act clearly  established that the policy holder continues to hold interest  in the  policy during  his lifetime and the nominee acquires  no sort  of interest in the policy during the life  time of the holder. If that is so, on the death of the policyholder the amount payable under the policy becomes part  of  his  estate  which  is  governed  by the  law  of succession  applicable  to  him.  Such  succession  may  be testamentary or       intestate. The tenuous  character  of the right  of   a  nominee becomes more  pronounced  when  one contrasts the provisions of Section 39 with that of Section 38. Section 39 of the Act was not intended to act as a third

mode of  succession provided  by  the  stature and incorrectly styled as "statutory  testament" by  the  Delhi High Court. 

1.3 The language of Section 39 of the Act is neither capable of altering the course of succession under law  nor can be said have equated a nominee to an heir or legatee.”

In this case, the Hon’ble Supreme Court also observed that :

“Moreover there is one other strong circumstance in this case which dissuades us from taking a view contrary to the decisions of all other High Courts and accepting the view expressed by the Delhi High Court in two recent judgments delivered in the year 1978 and in the year 1982. The Act has been in force from the year 1938 and all along almost all the High Courts in India have taken the view that a mere nomination effected under section 39 does not deprive the heirs of their rights in the amount payable under a life insurance policy.  Yet Parliament has not chosen to make any amendment to the Act …………”

(emphasis supplied)

11.     It is contended by the Petitioner herein that subsequent to the above  judgment of Hon’ble Supreme Court, the Parliament in 2015 amended the Act by inserting Sub-section 7 vide Insurance Laws ( Amendment ) Act 2015, which came into force w.e.f. 26.12.2014, which provides for beneficial nomination as stated above.  Hence, the judgment of Hon’ble Supreme Court in Sarbati Devi ( supra ) will have no application to the present case. Respondent No.1 and 2 on the other hand have contended that the provisions of Section 39 on which Petitioner is relying are silent on the issue regarding the demarcation of the policies taken by married person and unmarried person and even after the amendment the said lacunae has not been filled  up and hence Sarbati Devi’s judgment still holds good, and has not been overruled by the Apex Court and has also been recently reiterated by Apex Court in Sherya Vidyarthi Vs. Ashok Vidyarthi ( 2015) 16 SCC 46.  To this, the Petitioner argued that dispute involved in Shrerya Vidyarthi case ( supra ) was not pertaining to an insurance issue,  hence this judgment is not a ratio decidendi.  After carefully considering the above, especially the fact that Parliament has amended the Act in 2015 i.e. after the judgment of Hon’ble Supreme Court in Sarbati Devi  (supra) case, we tend to agree with the contention of the Petitioner that this judgment will not apply in the present case. 

12.     We have also gone through  the provision of Section 6 ( 1) of the Married Women’s  Property Act 1874, relevant portion of which is reproduced below:

“1)  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 endure 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 interest so expressed, and shall not, so long 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…….”

13.     In the instant case, when the policy was issued, the policy holder was not married and even after the marriage, the nomination made by him in favour of his mother was  not changed. Hence it was contended by the petitioner that the section will also not apply in the present case.  We tend to agree with the Petitioner in this regard. 

14.     Keeping in view the above, we are of the view that both State Commission and District Forum erred in concluding that action of Petitioner in disbursing the full amount under the insurance policy to the nominee i.e. mother of the deceased policy holder, was wrong and ordering that sum assured under the three policies was to be  apportioned amongst complainant No. 1 and 2 ( Respondent No.1 and 2  herein ) and OP No.2 ( Respondent No.3 herein) proportionately in equal shares.  Hence we do not agree with the findings of District Forum and State Commission that OP No.1 ( Petitioner herein) has committed deficiency in service and that it amounts to unfair trade practice.  The Orders of State Commission and District Forum suffer from material irregularity and legal infirmity and are accordingly set aside. 

15.     For the reasons stated hereinabove, and after giving a thoughtful consideration to the entire facts and circumstances of the case, various pleas raised by the learned Counsel for the Parties, the Revision Petition is allowed and orders dated 22.01.2020 of State Commission and 15.11.2019 of District Forum are set aside, action of Petitioner  in disbursing the entire amount under the three policies to the nominee of the policies ( i.e. Respondent No.3 herein) is upheld. 

16.     Parties to bear their respective costs. 

17.     The pending IAs in the case, if any, also stand disposed off.