Report No. 82
IV. Earlier Position
2.16. Petition before 1938.-
Before we deal with the aspect of social justice, we may note that the statutory law before 1938 did not contain a general provision for nomination in regard to policies of insurance. The legislation in force did not specifically provide for nomination, though an assignment was legally valid1 (and was at that time governed by the Transfer of Property Act).2 Before 1938, the question whether the person mentioned in the policy (as one for whose benefit the policy was obtained) was beneficially entitled to the proceeds or whether the amount formed part of the estate of the deceased was approached by the Courts in India with reference to the question whether the person designated could sue the insurer. The latter question itself was determined on the basis of the still more general question pertaining to the law of contracts, namely, when can a person not party to a contract sue thereon?3
1. Aryan Life Association (in re:), AIR 1938 Born 182.
2. Section 130, Transfer of Property Act, 1882.
3. For case law as to third parties' rights, see AIR 1934 Cal 683 (reviews cases).
2.17. (a) Some High Courts (before 1938) took the view that the person so designated in the policy, not being a party to the contract, could not sue, apart from statutory provisions such as those contained in the Married Women's Property Act, 1874, and if there was no evidence of an intention to create a trust. If the person designated was entitled to sue the insurer, then there was no doubt that the money belonged to that person and formed no part of the estate of the deceased.1
In a Rangoon case,2 holding that the wife obtained no rights under the policy of insurance, on the death of her husband (by reason of the fact that her name was mentioned in the policy as the person to whom it should be paid), it was observed:
"The leading case on this subject is (1882) 1 QBD 147,3 in which it was held that, apart form the provisions of the Married Women's Property Act, the right to sum on such a policy would pass to the legal personal representatives of the deceased, and the debt would be a debt due to them as representatives of the deceased: that as between them and the insurers a nomination in the policy of a person to whom the amount should be payable would have no effect because such a person was not a party to the contract of insurance; and that the insurers would be bound to pay the legal representatives of the deceased and no one else.
Consequently, unless and until some person has established his title to represent the deceased, no debt becomes due from the insurers under the policy. To the same effect is an earlier Bombay case,4 where, in the case of policy of insurance effected by the assured upon his own life and expressed to be for the benefit of his wife, it was held that the policy on his death formed part of his estate, the right of action against the insurance company being in his executors or other representatives untrammelled by any trust in favour of his wife."
In a Calcutta case5 reported in 1928, it was observed:
"The question on whether the plaintiff was entitled to enforce her claim against the Insurance Society. If she was, then there could be no question that the money due under the policy belonged to her and did not form a part of the assets of the estate of the deceased.5 The plaintiff was, no doubt, the nominee of the deceased: but she was not party to the contract between the deceased and Insurance Society.6 Under the English law, if A contracts with B for a benefit to be given to C, although that was the object and purposes of the contract, C may not sue on that contract unless in certain excepted cases. The excepted cases are these:
"Where you can read on the whole of the deed or contract that the contracting party really was a trustee for a third person, then the third person may sue."
(b) At the same time, there were High Courts which reached a different conclusion, either because they considered that in such cases the nominee was really intended to be a beneficiary,7 or because they were of the view that a near relative had a right to sue and that the rule that a stranger to the contract cannot sue could not apply in such cases.8
1. AIR 1938 Cal 518 (see infra).
2. Dar Yu v. Sun Life Assurance Co., Canada, AIR 1935 Born 811 (812).
3. Cleaver v. Mutual Reserve Fund Life Association, (1892) 1 QBD 147.
4. Shankar Vishwanath v. Umabai Sadashiv, 1913 ILR 37 Born 471.
5. Krishna Lal v. Promila Bala Dasi (Mt.), AIR 1938 Cal 518 (519-530).
6. Emphasis added.
7. Matin v. Mahomed Matin, AIR 1923 Lah 145.
8. Balamba v. Krishnayya, 1913 ILR 37 Mad 483 (491, 498, 500).