State Consumer Disputes Redressal Commission
Daggubati Raghava Rao S/O Papaiah vs Life Insurance Corporation Of India And ... on 27 November, 2012
BEFORE A.P STATE CONSUMER DISPUTES REDRESSAL COMMISSION AT HYDERABAD F.A.No.837 OF 2011 AGAINST C.C.NO.4 OF 2011 DISTRICT FORUM GUNTUR Between: Daggubati Raghava Rao S/o Papaiah R/o D.No.10-104, Godamula Bazar Karamchedu Village & Mandal Prakasam District Appellant/complainant A N D 1. The Branch Manager Life Insurance Corporation of India Offfice at Kothapet, Opp.Police Station Vinukonda, Guntur District. 2. The Manager (Claims) D.M. Divisional Office Jeevan Prakash Office at Kennedy Road, P.B.No.24 Batchupeta, Machilipatnam Krishna District Respondents/opposite parties Counsel for the Appellants M/s M.Chalapathi Rao Counsel for the Respondents M/s KRLSarma QUORUM: SRI R.LAKSHMINARASIMHA RAO, HONBLE MEMBER
AND SRI THOTA ASHOK KUMAR, HONBLE MEMBER TUESDAY THE TWENTY SEVENTH DAY OF NOVEMBER TWO THOUSAND TWELVE Oral Order (As per Sri R.Lakshminarasimha Rao, Honble Member) ***
1. The decision of the Life Insurance Corporation insisting on production of succession certificate in regard to the sum assured under the two insurance policies led to filing of the complaint before the District Forum.
2. The appellants younger brother Daggubati Venkata Krishna Rao during his life time obtained two life insurance policies bearing nos.671151508 for sum assured of `1,00,000/- and the insurance policy bearing No.671794757 for sum assured of `5 lakh. The insurance policy bearing No.671151508 commenced from 28 .10.1993 to be matured in the month of October 2013 and the insurance policy bearing No. 671794757 commenced on 20.12.1999 to be matured in the month of December 2014.
During his life time the insured applied for change of nomination for both the insurance policies nominating the appellant as his nominee.
3. The appellants brother died on 12.8.2010 and after his death the appellant submitted claim along with the death certificate of the insured on 10.9.2010. The respondent insurance corporation informed the appellant that succession certificate for settlement of the claim is necessary as form of change of nomination does not contain the signature of the insured as a result of which the title with regard to the claim is deemed as open title. The appellant submitted representation on 28.9.2010 along with change of nomination letter dated 13.7.2005 which show the acceptance of the respondent corporation of the change of nomination in respect of both insurance policies.
4. The appellant has contended that in view of acceptance of the respondent of the change of nomination as requested for, by his younger brother who is the insured for both the insurance policies and questioning the request for obtaining of succession certificate for settlement of the claim, he got issued notice through his advocate on 19.11.2010 for which the respondent replied assigning the same reason that the succession certificate is essential for settlement of the claim. It is contended that the insured during his life time obtained loan assigning the insurance policies and he voluntarily changed the nomination as per the procedure prescribed by the provisions of the Insurance Act.
5. The respondent insurance corporation has resisted the claim on the premise that the complaint is not maintainable and that the appellant was required to submit succession certificate for the respondent insurance corporation to proceed further with the claim settlement as the form of change of nomination submitted by the insured does not contain his signature and as such the claim was deemed to be open title. It is contended that the appellant failed to comply with the objection raised by the respondent insurance corporation and that though the appellants name was mentioned as nominee in the change of nomination form in the place of the wife of the insured, as the nomination was not signed by the insured, the change of nomination is not valid in the eye of law.
It is contended that the wife of the policy holder is alive and the appellant has to approach civil court for adjudication of the matter.
6. The District Forum has dismissed the complaint on the premise that though there was deficiency in service on the part of the respondent insurance corporation, the change of nomination form was not signed by the insured and the defective nomination was wrongly accepted by the respondent insurance corporation.
7. The point for consideration is whether the appellant is entitled to collect the sum assured under the two insurance policies?
8. The issuance of insurance policies bearing Nos.671151508 for `100,000/- and 671794757 for `5,00,000/-
by the respondent insurance corporation in favour of the appellants brother and the death of the insured on 12.8.2010 are not disputed. The claim of the appellant was kept on hold on the premise that the application for change of nomination submitted by the insured does not contain his signature. The respondent has accepted the request for change of nomination made by the insured and issued acknowledgement therefor. It is pertinent to note that the insured submitted application for change of nomination on 13.7.2005 and on the same day the respondent had issued acknowledgement therefor. Thereafter, about five years later the insured died and the sustainability of the objection as to the application not containing the signature of the insured is raised by the respondent for the first time after the death of the insured.
9. Section 39 of the Insurance Act provides for the procedure to be followed in the matter of change of nomination. The provision of law reads as under:
Section 39 in The Insurance Act, 1938
39.
Nomination by policy- holder.
(1) The holder of a policy of life insurance 3[ on his own life 4[ ] 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: 5[ 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.] (2) Any such nomination in order to be effectual shall, unless it is incorporated in the text of the policy itself, be made by an endorsement on the policy communicated to the insurer and registered by him in the records relating to the policy and any such nomination may at any time before the policy matures for payment be cancelled or changed by an endorsement or a further endorsement or a will, as the case may be, 3[ but unless notice in writing of any such cancellation or change has been delivered to the insurer, the insurer shall not be liable for any payment under the policy made bona fide by him to a nominee mentioned in the text of the policy or registered in records of the insurer].
(3) 1[ The insurer shall furnish to the policy- holder a written acknowledgment of having registered a nomination or a cancellation or change thereof, and may charge a fee not exceeding one rupee for registering such cancellation or change.] (5) Where the policy matures for payment during the 3[ lifetime of the person whose life is insured] or where the nominee or, if there are more nominees than one, all the nominees die before the policy matures for payment, the amount secured by the policy shall be payable to the policy- holder or his heirs or legal representatives or the holder of a succession certificate, as the case may be.
10. The insured had intimated his intention to change the nominee and in accordance with his request the respondent insurance corporation had effected the change of nomination by recording the name of the appellant in the relevant records. The change of nomination will be effective on endorsement communicated to the respondent and after being registered in the relevant records. The endorsement made by the insured was communicated to the respondent and the change of nomination was also recorded by the respondent in its records and it had issued acknowledgement therefor.
11. It is not the case of the respondent insurance corporation that the insured had nominated other person than the appellant or that the nominee appointed at the time of taking the insurance policy had claimed any amount under the insurance policies. The respondent insurance corporation ought to have paid the sum assured under the two insurance policies to the appellant on its inability to prove that the change of nomination in favour of the appellant is invalid and illegal that the change of nomination had its effect touching the basic and fundamental aspect of the matter that the amount could not be paid to the appellant.
12. The learned counsel for the appellant has relied upon the decision of the Honble National Commission in Oriental Insurance Company Limited Vs B.K.Sethi and another III (2004) CPJ, 11 wherein it was held that the mistake committed by the officers of the insurance company cannot be ground for repudiation of the claim and the insured cannot suffer for the mistake committed by the officers of the insurance company. In that case the insured had insured plant and machinery as well residential property under fire policy-C. The insurance company repudiated the claim on the premise that the residential property belongs to the relations of the insured and that the relations have no proprietary interest in the insured company. The National Commission held that the insurance company insured the residential property without raising any objection and received the premium paid on the residential portion.
13. The learned counsel for the respondent corporation has relied upon the decisions of this Commission in Smt A.Tirupathamma (died) per LRs Vs LIC of India in F.A.No.223 of 2011 dated 21.4.2011 and that of the Honble Supreme Court in Rukhsana (Smt) and Others Vs. Nazrunnisa (Smt) and Another (2000) 9 SCC 240 and the decision of the High Court of A.P. in Chitrapu Chinna Bapanaiah and Others Vs Union of India 2004(3) ALD 692 to contend that succession certificate is not required in the circumstances of the case where the amount to be received is compensation or the amount in any other case has already been deposited by the insurance company before the Tribunal or Court and the succession certificate is requested to be produced where the amount under the insurance policies is not deposited before the Tribunal or Court.
14. In Tirupathammas decision (supra) this Commission held that the amount due to the deceased Tirupathamma is not a debt and in the light of the Supreme Court decision in Rukhsana (supra) no succession certificate is required to be produced by the legal heirs or the deceased insured.
15. In Rukhsanas decision(supra), the Supreme Court had set aside the direction of the High Court to produce succession certificate to receive compensation sanctioned as compensation on account of death of Mohd Jalaluddin. The Supreme Court held that:
We cannot approve the said view of the High Court, for, Succession Certificate as envisaged in the Indian Succession Act can be granted only in respect of "debts" or "securities" to which a deceased was entitled. The amount involved in this case was not a debt or security to which the deceased was entitled. This was a compensation sanctioned on amount of the death of the deceased and is, therefore, not an asset belonging to the deceased but an amount which the legal representatives of the deceased can claim on their own account. The civil court will only decide as to who are the legal representatives and in what shares they are entitled to as per the Personal Law applicable to them. The Parties will move appropriate application before the court concerned for expediting the procedure regarding disbursement of the amount. With these observations we set aside the impugned order.
16. In China Bapanaiahs case, the High Court dealt with a situation where Railway Claims Tribunal directed the son and daughter of China Veeramma who died on account of her accidental fall from a train, to obtain succession certificate from a court of competent jurisdiction. The High Court referred to Rukhsanas decision and held that the Tribunal passed the order as a measure of precaution and to avoid any future litigation. It was held that:
Succession Certificate is issuable only in cases of debts or securities payable to a deceased individual. Section 370 of the Indian Succession Act makes it amply clear. Amount awarded as compensation to an individual is never treated as debt or security. Therefore, no succession certificate can be issued under the said Act, in relation to an amount awarded as compensation to a deceased-claimant. In Smt. Rukhsana v. Smt. Nazrunnisa,, the Supreme Court held that the amount awarded, as compensation, on account of death of an individual, cannot be treated as debt or security and that the legal heirs of the person who was awarded such compensation, cannot be required to obtain succession certificate.
17. The High Court has observed that the claim of the petitioners has to be considered keeping in view of absence of any other or superior claim. The High Court observed that :
It is not disputed that the Appellants 2 and 3 are the class-I heirs of deceased-1st appellant. Their right to succeed to the assets of their father can be defeated only when a superior claim is pressed into service. As on today no such claim is forthcoming. Even if there existed any claims of 3rd parties, in relation to that amount, the payment to Appellants 2 and 3 shall be subject to such claims. The rights of the Appellants 2 and 3, cannot be defeated or delayed in anticipation of any claim by 3rd parties.
18. Along with the appeal the complainant has filed the copy of the award passed by the Lok Adalat whereunder the wife of the deceased insured agreed to receive Rs.14 lakh covered under four deposit receipts and she has agreed not to claim right in the properties of her father-in-law. The respondent having accepted the change of nomination during the life time of the insured and having made endorsement in the relevant records as also having issued acknowledgement therefor, cannot take shelter under the plea that the change of nomination is invalid due to insured not signing the application for change of nomination in favour of the appellant.
19. The respondent insurance corporation had sent written acknowledgement showing that the change of nomination was registered as early as in the year 2005 and the insured died in the year 2010. The respondent is estopped from saying that the application submitted by the insured for change of nomination is defective. The respondent is estopped from taking such stand particularly after the death of the insured.
20. In B.L.Sreedhar and Ors. V. K.M.Munireddy (Dead) and Ors.,2003 SAR (Civil) 77, the Honble Supreme Court had considered the effect of estoppel as under:
Though estoppel is described as a mere rule of evidence, it may have the effect of creating substantive rights as against the person estopped. An estoppel, which enables a party as against another party to claim a right of property which in fact he does not possess is described as estoppel by negligence or by conduct or by representation or by holding out ostensible authority.
Estoppel, then, may itself be the foundation of a right as against the person estopped, and indeed, if it were not so, it is difficult to see what protection the principle of estoppel can afford to the person by whom it may be invoked or what disability it can create in the person against whom it operates in cases affecting rights. Where rights are involved estoppel may with equal justification be described both as a rule of evidence and as a rule creating or defeating rights. It would be useful to refer in this connection to the case of Depuru Veeraraghava Reddi v. Depuru Kamalamma, (AIR 1951 Madras 403) where Vishwanatha Sastri, J., observed:
"An estoppel though a branch of the law of evidence is also capable of being viewed as a substantive rule of law in so far as it helps to create or defeat rights which would not exist and be taken away but for that doctrine."
Of course, an estoppel cannot have the effect of conferring upon a person a legal status expressly denied to him by a statute. But where such is not the case a right may be claimed as having come into existence on the basis of estoppel and it is capable of being enforced or defended as against the person precluded from denying it.
21. The Supreme Court has considered the effect of principle of estoppel in the following words:
If a man either by words or by conduct has intimated that he consents to an act which has been done and that he will not offer any opposition to it, although it could not have been lawfully done without his consent, and he thereby induces others to do that which they otherwise might have abstained from, he cannot question legality of the act he had sanctioned to the prejudice of those who have so given faith to his words or to the fair inference to be drawn from his conduct.
22. It is pertinent to note that the appellant is only a nominee of the deceased insured and unless he is the legal heir or legal representative of the insured, he cannot claim title of the amount under the insurance policy better than that of the other legal heirs or legal representatives of the insured.
The Kerala High Court has held that the right of nominee is to collect the policy money from the insurance company and to give the insurer a good discharge. In Sarojini Amma v.Neelakanta Pillai ILR (1960) Kerala 1306, it was held that:
the object of section seems to be to clothe the nominee with the power to receive the money under the policy from the insurer without prejudice to the decision of any question of title therefor, as a nomination, as provided in this section, in respect of a policy of life insurance confers no right ton the nominee during the lifetime of the assured.
It confess on him a bare right to collect the policy money on the death of the assured and to give the insurer a good discharge. The nominee does not become the owner of the money payable under the policy and he is liable to make it over to the legal representatives of the assured.
23. Having concluded that the appellant is entitled to receive the policy proceeds from the respondent insurance corporation, we bestow our attention on the aspect as to whether the appellant has right or title to the policy proceeds.
Unless and until the appellant is the legal heir or legal representative of the deceased insured, he being a nominee can only receive the policy proceeds from the respondent insurance company so as to distribute it among the legal heirs of the insured. We clarify that the appellant can collect the policy proceeds from the respondents and the policy proceeds continue to be the estate of the deceased insured and the appellant holds the amount as trustee of the insured and he has to pay it to the legal heirs/legal representatives of the insured in accordance with the provisions of Hindu Succession Act.
24. In Saovasri Dalai vs Divisional Manager, Life Insurance Corporation CDJ 1999 Orissa HC 035, the High Court of Orissa has considered the rights and liabilities of nominee in respect of the policy proceeds. The High Court held that :
8. We are, therefore of the view that the liability of Rs. 1 lakh covered by the policy is to be discharged by the employer and the legal representatives of the deceased cannot be deprived of their legitimate dues. A stance is taken by opposite party No. 4 that being the nominee the entire amount should be paid to him, A mere nomination made under Section 39 of the Insurance Act, 1938 (for short, 'Act') 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 assured. 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,
9. The summary of the relevant provisions of Section 39 establishes clearly 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 lifetime of the policy holder. If that is so on the death of the policy holder 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. There is no warrant for the position that Section 39 of the Act operates as a third kind of succession which is styled as a statutory testament. The provision in Sub-section (6) of Section 39 which says that the amount shall be payable to the nominee or nominees does not mean that the amount shall belong to the nominee or nominees. The language of Section 39 is not capable of altering the course of succession under law (See Smt. Sarbati Devi v. Smt. Usha Devi) AIR 1984 SC 346. It was however, agreed to by learned counsel for petitioner and opposite party No. 4 that the amount is to be shared equally by them. We direct the State Government to make the deposit of Rs. 1 lakh in this Court within two months from today which shall be distributed to the petitioner and opposite party No. 4 in the aforesaid proportion on being identified by any of the learned counsel appearing for each of them in this Court.
25. For the foregoing reasons, we are inclined to hold that the District Forum had not considered in proper perspective the rights and liabilities of the appellant under the insurance policy issued by the respondent and as such the finding returned by the District Forum is liable to be set aside.
26. In the result, the appeal is allowed directing the respondents/opposite parties no.1 and 2 to pay the sum assured under insurance policy bearing No.671151508 and 671794757 issued in favour of the appellants brother.
The costs of the proceedings quantified at `5,000/-. The amount shall carry interest @ 9% per annum if the opposite parties failed to pay the amount within four weeks from the date of this order.
MEMBER MEMBER Dt.27.11.2012 KMK*