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Report No. 110

IV. Debts-need for Succession Certificate

34.19. Section 214-Phrase 'on succession'.-

This takes us to section 214, with reference to which a number of points require consideration. The first question is concerned with the significance of the phrase 'on succession.

Sub-section (1), clause (a) of the section prohibits the courts from passing a decree against a debtor of a deceased person for payment of his debt to a person claiming, 'on succession', to be entitled to the effects of the deceased person or to any part thereof, except on the production, by the person so claiming, of the requisite document covering the specified amount. The phrase did not occur in the earlier Act of 1865, but was added by the Joint Committee that considered the Bill which led to the present Act.

The significance of these words will be soon realised when we consider the cases where a claim is made against the 'debtor of a deceased person' on the basis not of succession, but on some other basis. The other basis could be survivorship-for example, in the case of Hindu coparcenary property or in the case of debts due to a partnership firm.

34.20. Claim on Insurance policy.-

More frequently, the claim could be, for money due on an insurance policy, the rights wherein have been transferred1 to the claimant, or in respect of which a nomination has been made. A claim for money so due is, in its essence, based not on succession on death, but on a demand which merely materialises on death. It can be stated that a person claiming insurance money under a policy assigned to him does not claim as a successor, but in his or her own right.

There seems to be a conflict of decisions on the question whether amount due under an insurance policy is a 'debt'. The need for a precise definition of the word 'debt' is obvious.

When the Succession Bill was discussed, the matter seems to have been raised. Sir Hari Singh Gour, in his speech of the 18th March, 1925 in the Legislative Assembly on the Bill, made a pointed reference to the nebulous state of judicial interpretation of 'debt' in the different High Courts, and pleaded for a statutory provision which could preclude the possibility of a further conflict of au thorities2. Apparently, his suggestion was not accepted. But the point is really of considerable practical importance. It appears to be desirable to provide that a succession certificate can be issued in respect of an amount due under an insurance policy.

1. Section 38, Insurance Act, 1938.

2. P.V. Subramania Is Insurance a Debt, AIR 1927 Journal 14.

34.21. Section 6, Married Women's Property Act.-

In particular, with reference to section 6(1) of the Married Women's Property Act, 1874, it may be of interest to note that a succession certificate is not required when a trust is created under that section1-2. The section constitutes a specific statutory provision which creates a trust. On such a trust coming into being, the policy of insurance ceases to form part of the estate of the deceased. The concluding words of section 6(1) of the above mentioned Act, in fact, so provide. Although the point does not necessitate any amendment of section 214 of the Succession Act, it is worth noting in the context of the subject under discussion.

1. Parmeshwari Bai v. Nihal Chand, AIR 1938 Sind 20.

2. See also Asha Lata Desai (in re:), AIR 1940 Cal 217.

34.22. Practical problem created by section 214.-

The most important problem created by section 214(1) is a practical one. The section has been resorted to by banks and other persons for refusing payment of a debt or a claim owed to a deceased person where a succession certificate is not produced. It was never intended that the section should, in this manner, come in the way of the heirs of the deceased person.

The object of the section is merely to make it clear that no debt due to a deceased person can be recovered through court except by a holder of a document of the category1. However, practical experience shows that a provision which was intended to have application mainly in relation to litigation has had the unintended effect of causing hardship to the heirs of deceased persons.

1. Kissen Lal v. Tilak Chandra, AIR 1940 Cal 24.

34.23. Hardship caused to widows and children.-

Presumably, it was not the intention to lay down a rule of law that a bank or other debtor can ever make a payment to the person who claims to be the heir unless he produces the succession certificate or other document specified in the section. Common experience, however, shows that banks and other institutions do take such a stand, causing immense hardship to the heirs, particularly to poor widows and children of deceased persons

34.24. Absence of nomination.-

Where the debt or claim is of such a nature that there is a statutory provision for nomination and that provision has been actually utilised by the deceased persons, then, in practice, the banks and other institutions make payment to the nominee. But in the absence of such a statutory nomination, great hardship is caused to the heirs.

34.25. Heir of owner or tenants.-

The position is anomalous in another respect also, inasmuch as the law imposes no such restriction in the case of title to immovable property. A person claiming to be the heir of a deceased owner of immovable property can continue as owner of the immovable property of the deceased, without producing a succession certificate, but he cannot withdraw moneys but by the deceased in a bank account-and this is so even where there is no doubt that he is the heir.

Same is the position regarding tenant. Of course, a tenant has also to bear the liability to pay rent, but the fact remains that he gets a valuable advantage without being required to produce a document establishing his right to succeed. It is understandable that a bank may like to have some evidence of death and of the claimant's right before it makes payment, but there could be other evidence-i.e. evidence other than a succession certificate.

It seems, therefore, desirable to recommend some reform that would solve the above problem. While it cannot be provided that the claim must in every case be paid without a succession certificate, it would be reasonable at least to provide that a payment without such certificate is not illegal.

34.25A. Recent amendments made in banking laws as to nomination.-

We note that by a recent amendment1 made in the Banking Regulation Act, 1949, it is now possible to make a nomination in respect of deposits in banks. Where such nominations are made, the hardship otherwise experienced by the relatives of a deceased depositor would be alleviated to some extent, since the bank would be protected and would get a full discharge on making payment to the nominee.

But, in cases where no such nomination has been made, the difficulties felt by virtue of the practice of banks to which reference has been already made2 will survive. An amendment of the Succession Act would, therefore, possess considerable utility, even after the amendment of the banking laws.

Effect of nomination.-Incidentally, it may be mentioned that a nomination does not affect the rights of the other heirs, and, as between the nominee and the rival heirs, the nominee does not get any higher or preferential status. The new sections inserted in banking laws provide so expressly.

1. The Banking laws Amendment Act, 1983.

2. Para. 34.22, supra.

34.25B. Section 214, and small claims.-

We may also note that in a Kerala case reported recently1, the widow of a person who had been killed in an accident caused by the driver of a truck, claimed compensation against the Kerala State Road Transport Corporation, which owned the truck. Presumably the claim was under the Fatal Accidents Act read with the Motor Vehicles Act. Resisting the claim, the State Road Transport Corporation insisted that the widow should produce a succession certificate before payment could be made to her.

The widow thereupon moved the High Court of Kerala by a letter, which was treated as a petition. The High Court pointed out that no succession certificate was required in this case, as the widow was claiming in her own right, and not as an heir. As regards the cases where the widow (or other relative) claims as an heir, the High Court made the following observations, which are relevant to the provisions of the Succession Act:-

"It is for the legislature to deal with the matter by enabling payments to be made, at least in respect of small sums of money without a succession certificate being required to give immunity to the debtor. We are not going into that question in this case, for, even, otherwise, we think we will be able to give relief to the petitioner herein."

1. Kocbupennu Lakshmi v. Chairman, K.S.R.T. Corporation, AIR 1984 Ker 97 (99), para. 4 (June).

34.26. Recommendation to add an Explanation to section 214 as to payment of debt.-

For these reasons, in our opinion, the appropriate course would be to add to section 214, an Explanation in suitable terms so as to ensure that the section will not-as is the practice at present-be utilised as a shelter in every case for deceased.

We recommend that the section should be amended accordingly1.

1. See para. 34.45, infra, for a suggested re-draft of the section.

The Indian Succession Act, 1925 Back

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