Hindu Succession Act | Nominee is Merely a Trustee; Terminal Benefits Devolve Upon Legal Heirs, Not Absolute Property of Nominee: Orissa High Court

“Just because nomination is made during lifetime of deceased, that does not amount to divesting of title after death of deceased. After death of deceased, whatever the estate amount is there, it is devolved to the legal heirs of deceased as per governing law of inheritance.” — In a seminal ruling, the High Court of Orissa, comprising Justice Biraja Prasanna Satapathy, has reinforced the supremacy of succession laws over nomination rules, holding that a nominee receives death benefits only as a trustee for the legal heirs.

The Succession Battle: Wife vs. Mother’s Heirs

The Court was adjudicating a Writ Petition filed by Snigdha Patnaik, the legally wedded wife of a deceased employee of Canara Bank. The husband, Sri Subhransu Mohanty, passed away on 18.09.2023. During his employment, he had nominated his mother (Opposite Party No. 3) to receive his terminal benefits.

Following his death, the Bank credited the terminal benefits amounting to Rs. 40,74,577.26 (after loan adjustments) to the account of the nominee-mother. The mother subsequently passed away on 13.01.2024, after withdrawing approximately Rs. 6.70 Lakhs. The dispute arose when the legal heirs of the deceased mother (Opposite Party No. 3(a) to 3(c)) claimed the remaining balance, arguing that the money had become the mother's absolute property upon nomination and credit, and thus should devolve to them under Section 15 of the Hindu Succession Act.

The Petitioner-wife contended that as a Class-I heir under Section 8 of the Hindu Succession Act, she was the rightful owner of the estate, and the nomination was merely for the purpose of discharging the Bank's liability.

“Nomination is only for the benefit of the insurer so that he gets a valid discharge of its liability under the policy and is not embroiled in the litigations inter-se the legal heirs of the insured.”

The 'Beneficial Nominee' Argument Rejected

The Respondents (heirs of the mother) placed heavy reliance on the Insurance Laws (Amendment) Act, 2015, specifically the amended Section 39(7). They argued that the amendment created a category of "beneficial nominees" (parents, spouse, children) who acquire a beneficial interest in the policy proceeds, thereby overriding the general law of succession. They contended that since the mother was a beneficial nominee, the title vested in her absolutely.

The Court, however, rejected this interpretation. Relying on the Supreme Court’s recent dictum in Shakti Yezdani vs. Jayanand Jayant Salgaonkar (2023) and the classic ruling in Sarbati Devi vs. Usha Devi, the High Court held that nomination under various statutes (including the Insurance Act and Companies Act) does not create a third mode of succession.

Supremacy of Succession Law

Justice Satapathy clarified that the legislative intent behind nomination facilities is to protect the subject matter of the estate from protracted litigation and to grant a valid discharge to the holding institution. It does not, however, clothe the nominee with ownership rights to the exclusion of legal heirs.

The Court observed that the Petitioner, being the wife, is a Class-I heir. Her right to succession under Section 8 of the Hindu Succession Act crystallizes immediately upon the death of the husband. The Court noted that the deceased mother (nominee) could not have taken the benefit of the "wrong committed by the Bank" in crediting the entire amount to her account to the exclusion of the wife.

“A mere nomination effected under Section 39 does not deprive the heirs of their rights in the amount payable under a life insurance policy.”

The Court quashed the Bank's communication which had denied the wife's claim. It ruled that the remaining amount lying in the deceased mother's account (approx. Rs. 34 Lakhs) belongs to the Petitioner-wife.

While allowing the petition, the Court exercised equitable discretion regarding the amount already spent by the deceased mother. It directed that the Rs. 6,70,000/- already withdrawn by the mother prior to her death need not be recovered or claimed by the Petitioner. However, the Bank was directed to release the entire residue amount with accrued interest to the wife within four weeks.

Date of Decision: 20.01.2026