ORDER
Vikramajit Sen, J.
1. The plaintiffs have filed this suit under Order xxxvII of the Code of Civil Procedure for recovery of Rs. 14,88,300/- on the premise that they are legal heirs of late Shri Kailash Chand Garg who was entitled to the benefits of four insurance policies for a total sum of Rs. 13,17,654.20 Shri Kailash Chand Garg died on 24.6.1997 leaving behind his widow, plaintiff No. 1 and children, plaintiffs No. 2 to 4. The Defendant have preferred the present application under Order xxxvII Rule 3 (5) and Section 151 of the C.P.C. praying for unconditional leave to defend the suit. It is this application which falls for determination.
2. The plaintiffs had demanded the said sum from the Defendant Life Insurance Corporation of India in terms of their notice dated 7.4.1998, and the latter had declined to make payment on the ground that a ‘Succession Certificate’ should be obtained by the plaintiffs. The defendant relies on Sections 212 to 214 of the Indian Succession Act, 1925 as also Section 39(4) of the Insurance Act, 1938 which stipulate as under :
“39(4) A transfer or assignment of a policy made in accordance
with Section 38 shall automatically cancel a nomination:
Provided that the assignment of a policy to the insurer who bears the risk on the policy at the time of the assignment, in consideration of a loan granted by that insurer on the security of the policy within its surrender value, or its re-assignment on repay ment of the loan shall not cancel a nomination, but shall effect the rights of the nominee only to the extent of the insurer’s interest in the policy.”
3. In reply thereto, the plaintiffs have reiterated the stand taken by them in response to the defendant’s insistence for the obtainment of Succession Certificate, namely, that since the plaintiffs are Hindus, they
were exempted from the application of Section 212 of the Indian Succession Act, 1925. Reliance was also placed by the plaintiffs on Smt. Sarbati Devi
& Anr. Vs. Smt. Usha Devi, . Arumugam Chelliah Paul (since deceased by L.Rs) & Ors. Vs. Life Insurance Corporation of India, , Aqeela Kamal Vs. Oriental Fire and General Insurance Co. Ltd.,
Lucknow & Anr. and on Smt. Saraswati Devi Vs. Life Insurance Corporation of India, . It was further emphasised on behalf of the plaintiffs that the defendants have not disputed that the plaintiffs are in fact the legal heirs of late Shri Kailash Chand Garg and hence they would be needlessly compelled to obtain Succession
Certificate.
4. I may mention that at the time of arguments learned counsel for the defendant did not dispute that the plaintiffs were legal heirs of Shri Kailash Chand Garg but indicated that the defendant was not in a position to definitively determine whether there were no other legal heirs apart from the plaintiffs. He also emphasised that it would have been a cheaper and less tedious legal remedy for the plaintiffs to have obtained Succession Certificate, to which I tend to agree.
5. The question, therefore, which falls for determination is whether the plaintiffs were legally justified in straight away filing a suit for recovry of the aggregate of the insurance policies together with interest thereon.
6. Section 212 after to letters of administration only. It would not be appropriate to extend the application of this Section either to grant of probate or succession certificates and hence sub-section (2) would not come to their rescue. This is made clear by the succeeding sections. In fact a reading of Section 214 of the Indian Succession Act would fortify the contentions of the defendants since it prohibits a Court 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 any part thereof.
7. In the case of Vimla Nanda Vs. Govt. of NCT of Delhi & Ors., 1998 V AD (Delhi) 630. Manmohan Sarin, J. held, after consideration of prevailing precedents, that the insurance amount payable on account of the death of a
deceased would qualify for the grant of succession certificate. Hence, plaintiff’s reliance on Daya Narain Khatri & Ors. Vs. Suresh Kumar Gupta & Anr., is misplaced since this case specifically concerns an arbitration award and not a claim akin to the present one.
8. The position would have been altogether different had a valid nominations existed in favour of the plaintiffs. This was not so for the reason that there had been an assignment of the policies, and by virtue of Section
39(4) of the Insurance Act, all previous nominations thereupon stood cancelled. In that event I would have considered it unreasonable for defend-ant-Corporation to insist on obtainment of a succession certificate. It would not be sound to expect a Corporation such as the L.I.C. to automatically pay out every claim even where no valid nomination exists since such claims may be fraught with intrinsic disputes.
9. I fail to appreciate how the celebrated judgment of the Hon’ble Supreme Court in Smt. Sarbati Devi & Anr. Vs. Smt. Usha Devi, , would further the cause of the plaintiffs. What was held in that authority was that the nominee under an insurance policy would not, by virtue of the nominations, be the owners of the benefits thereof. It is now well established that the nominee would always be liable and responsible for the payment of the benefits of a policy to the legal hers of the
deceased. This is what was reiterated in Saraswati Devi’s case (supra). Arumugam Chelliah Paul’s case (supra) is distinguishable since the policy holder had himself initiated an action in the Bombay Courts. Subsequently
the plaintiffs reliance on the decision of a Division Bench of the High Court of Allahabad in Ageela kamal’s case (supra) is of scant succour since the widow of the holder of the policy was the nominee right from the inception of the policy. In conclusion, while there is a plethora of precedents to the effect that the nominee under an insurance policy need not obtain a succession certificate, there is no authority which would lead me to hold that claimants of an insurance policy can demand payment without presenting such certificates. The Defendant Company would not be able to claim a valid discharge in the event of a claim by some other persons claiming to be entitled to a share of the Estate.
10. In this view of the matter I hold that the Defendant has disclosed facts that indicate that it has a substantial defense which is obviously neither frivolous or vexatious. Keeping in perspective the fact that the
insurance company had clearly indicated its helplessness in making payments to the plaintiffs without obtainment of succession certificate I consider that it would have been appropriate for the counsel for the plaintiffs to concede at the threshold that leave to defend the suit should have been granted. In disposing of this application I would, therefore, have burdened the plaintiffs with costs. However, keeping in view that the bread winner of the family has died I have resisted from imposing costs. For the same reasons I feel it appropriate to direct the Defendant to deposit the amount
admittedly payable under the four policies in Court within six weeks from today. This amount shall thereupon be invested by the Registrar in the most advantageous fixed deposit, and would then be released to the plaintiffs as and when they furnish the Succession Certificate.
11. The application is disposed of accordingly.
Suit No. 1799/98
12. The Defendant has been permitted leave to defend the suit and shall accordingly file its written statement within eight weeks from today. Replication, if any, be filed within four weeks thereafter. Documents, if
any, be filed within this period.
13. List the matter before Joint Registrar for admission/denial of documents on 6.9.1999.
14. The case may be placed before this Court for framing of issues after the admission/denial is complete.
