Kirty Agarwal v. Chief Operating Officer and Ors.
Background
The appellant's husband took out a life insurance policy naming his father (the 6th respondent) as nominee, and died in 2024 before a divorce petition he had filed against the appellant could be resolved; the couple was estranged at the time. The High Court, applying the settled principle that a nominee holds insurance proceeds only in trust for those legally entitled to inherit, directed the insurer's payout to go to the father, who had filed the writ petition. Two competing succession cases were also pending between the appellant (wife) and her mother-in-law over the estate, and the appellant separately had an FIR pending against the in-laws under Sections 498A/506/34 IPC.
Decision Breakdown
Before the Supreme Court, the appellant's counsel fairly conceded that she was only entitled, along with her mother-in-law, as one of the two Class I legal heirs of the deceased, and offered to accept 50% of the proceeds rather than press her earlier claim to the whole amount or her claim to have paid all the premiums. After the respondent's side sought repeated adjournments and a last-minute change of counsel, the Court declined to permit further delay. Applying the same trust principle the High Court had relied on, it directed the father-in-law (as nominee) to pay half the insurance proceeds to the appellant within two months (with 12% annual interest on delay), directed the two pending succession cases to be closed once this order was placed before the relevant court (if no other assets remained to be divided), and recorded the appellant's undertaking not to pursue her pending FIR, with related police proceedings stayed for two months pending payment.
Lesson Learnt
Being named as the "nominee" on a life insurance policy does not make that person the legal owner of the payout: a nominee merely receives the money as a trustee for the deceased's actual legal heirs, who are determined by succession law, not by the nomination form.