Legal heirs have right over NSC after death of holder -- SC

Legal heirs have right over NSC after death of holder -- SC
PRESS TRUST OF INDIA

NEW DELHI, AUG 20: In an important ruling, the Supreme Court has held that if a person holding a National Savings Certificate (NSC) or an insurance policy dies, his legal heirs would have the sole right over the money on maturity rather than the nominee mentioned in the certificate.

The bench comprising Justice K T Thomas and Justice R P Sethi said the nomination only indicated the person who was authorised to receive the money from the insurer.

"Any amount paid to the nominee after valid deductions becomes the estate of the deceased. Such an estate devolves upon all persons who are entitled to succession under law, custom or testament of the deceased holder," Justice Sethi said writing the judgement for the Bench.

This ruling came in a case where a person, after borrowing money from his brothers, made them the nominees in his NSC. On his death, they claimed that they were entitled to the money due from the deceased, even though the deceased's wife and daughter claimed otherwise.

The Supreme Court held that the wife and daughter of the deceased were entitled to the money after the deductions made by the brothers, from whom the deceased had borrowed money.

However, Justice Sethi said a mere nomination under the Insurance Act did not have the effect of conferring on the nominee any beneficial interest in the amount payable under the insurance policy on the death of the assured.

The nomination only indicated the hand which was authorised to receive the amount on the payment of which the insurer got a valid discharge of its liability under the policy, he said.

"A nominee could not be treated as being equivalent to an heir. The amount of interest under the policy could, therefore, be claimed by the heirs of the assured in accordance with the law of succession governing them," Justice Sethi added.

The bench said the provision in the Insurance Act that only the nominee would be entitled to receive the money on maturity in the event of the holder's death, was to avoid delay in payment of the money due from the insurer.

"In other words, though the nominee of the NSC has a right to be paid the sum due on such savings certificates after the death of the holder, yet he retains the said amount for the benefit of the persons who were entitled to it under the law of succession," it said.