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Report No. 66

8.38. Madras case.-

A Division Bench of the Madras High Court in Mohanavelu Mudaliar v. Indian Insurance and Banking Corporation Ltd., (1956) 1 MLJ 476: ILR 1957 Mad 326: AIR 1957 Mad 115 while noticing that disposition of life insurance can be classed as-(1) assignment, (2) nomination, and (3) creation of a trust by reason of the provisions of the Married Women's Property Act. 1874, observed as follows:-

"If, by nomination, a trust is created, then the nominee becomes the beneficiary, but the difficulty is to find out, from the exact words used, what the intention was because the terms 'nomination and 'nominee' are not, strictly speaking, terms of art. 'Nominate' means only to name and it is in every instance a question of mixed law and fact as to what the intention is. Thus, by the expressions used it has to be found out whether the nomination merely creates a payee or a beneficiary for whose protection a trust is thereby created.1

If the construction placed upon the declaration is that a trust has been created under the provisions of the Married Women's Property Act, the beneficiary would take the assured amount free of all the liabilities of the insured and if it is construed as a mere nomination, the nominee would have no more right than to receive the amount subject to all the liabilities as if the disposition was by means of a testamentary instrument."

"We may add that it is not every nomination that will have the effect of creating a trust and it is necessary to make a distinction, as has been made in Macgillivrays' Insurance Law, between the creation of a trust and a simple contract between two persons for the benefit of a third. Such a simple contract cannot, by itself, be interpreted as creating a trust."

"Though the dividing line between the two classes of cases is thin, it is nevertheless real."

The facts of the case are of interest.2 The deceased M had taken out two life insurance policies of Rs. 5000 each. He had also become indebted to the I.I. & B. Corporation. The deceased had nominated his wife as the person entitled to receive the moneys due under the policies. The Corporation had, in a suit against M, attached the policies. The wife had also died, and the daughters of the couple had filed a petition that the policy moneys had become the assets of their mother, and were not liable for the decree debt against M. It was held by the Madras High Court that the nomination could only be construed as a testament which would be subject to all the liabilities which the assured had to discharge and the claim of the daughter was dismissed.

1. Emphasis added.

2. Mudnliar v. I.I.&B. Corporation, AIR 1957 Mad 115 (118).

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