The Supreme Court has ruled that Life Insurance Corporation cannot object to transfer or assignment of policies, which is a global practice. It upheld the judgment of the Bombay High Court which had stated that the insurance policies are “transferable and assignable in accordance with the provisions of the Insurance Act and in terms of the contract of life insurance”.
In this case, LIC vs Insure Policy Plus Services Ltd, the latter firm is engaged, among other things, in the business of accepting and dealing in assignment of LIC policies. It acquired policies from policy-holders by paying them consideration. The assigned policy is registered with LIC, and is then further assigned to third parties for consideration. LIC objected to this practice and issued circulars asking its branches not to register such assignments.
According to LIC, these firms are acquiring lapsed policies from the original policy-holders by paying them an attractive sum over and above the surrender value. The firm, then, becomes the assignee and is entitled to all the rights of the policy. If this practice becomes prevalent, “it would not only undermine the real purpose of life insurance but also allow third parties to make windfall gains by such wagering contracts.”
The firm asserted that it has the right to trade in the policies according to the Insurance Act. The high court allowed the petition of the firm, stating that the policies are the “personal, movable property of the policy-holder, and can be said to be an actionable claim.” This view was upheld by the Supreme Court after analysing the insurance law, including last year’s amendment.
Technicalities not to stall compensation
The Supreme Court last week criticised the Calcutta High Court for adopting a “hyper-technical approach” in a road accident compensation case and denying the insurance amount to the victim. The motor accident claims tribunal had awarded Rs 16 lakh for the death of a 26-year-old unmarried school teacher hit by a truck driven rashly. However, the insurance company appealed to the high court arguing that the accident took place in Hoogly and therefore the tribunal in Kolkota had no jurisdiction to award compensation.
The high court accepted the contention and set aside theKolkata tribunal’s award. The mother of the youth appealed to the Supreme Court. In this case, Malati Sardar vs National Insurance Company, the Supreme Court ruled that since the company had business in Kolkata, the tribunal there had jurisdiction, though the accident happened in Hoogly.
The judgment, while setting aside the high court judgment and reviving order of the tribunal, underlined that the approach of the court must be “consistent with the object of facilitating remedies for the victims of accidents.” The provision for compensation in the Motor Vehicles Act is a beneficial one and it must be applied according to that objective.
Directors relieved after 35 years
After 35 years of litigation, three directors were absolved from liabilities incurred by their company, apparently because of bad drafting of documents by the public sector bank. In this case, Central Bank of India vs Virudhunagar Steel Rolling Mills, the company took loans from the bank in the early 1970s’.
In 1974, the directors secured the debt facilities with promissory notes, letters of guarantee, letters of hypothecation and other documents. When the company defaulted, the bank filed a suit in 1980 not only against the company but also the directors who stood guarantee. The trial court and the Madras high court let off the directors because their guarantees were given in 1974, after the release of the loan.
The bank appealed to the Supreme Court unsuccessfully. The judgment stated that the documents did not show that the directors gave securities for debts prior to 1974. “Woefully for the bank, there is no acknowledgment or assumption of liability…It is the bank which drafted the guarantee deed, and in case of doubt, the document would be read against it.”
SC settles difference over Sarfaesi
The difference in views between the Delhi High Court and the Punjab & Haryana High Court on the question of the role of the company court or its liquidator in the sale of assets by the secured creditor has been settled by the Supreme Court in a batch of appeals led by Pegasus Assets Reconstruction Ltd vs Haryana Concast Ltd.
The Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act (SARFAESI) is a complete code and the company court cannot interfere while exercising power under the Act.
“The earlier judgments rendered in the context of State Financial Corporations Act or the Recovery of Debts due to Banks Act vis-à-vis the Companies Act, cannot be held applicable fully to the SARFAESI Act,” the judgment pointed out, adding that “there is nothing lacking in the SARFAESI Act so as to borrow anything from the Companies Act.”
Trustees not obliged to ban book on guru
Members of a trust cannot be held guilty for not exercising their wide discretionary powers in a particular way. There might be passionate disagreement about the trustees’ decision, but it does not necessarily lead to the conclusion of maladministration of the trust, the Supreme Court stated while allowing the appeal in the case, Sri Aurobindo Ashram Trust vs R Ramanathan.
Some residents of the Ashram in Puducherry were agitating against a book published by a foreign resident, Lives of Sri Aurobindo and published by Columbia University Press in 2008. They moved the court for removal of the trustees because they did not prevent the publication of the book allegedly disparaging the guru. The trust merely expressed its ‘displeasure’ at the book, which was not enough.
The Supreme Court stated that the trust had the discretion to ban the book or take other proactive steps. “Failure to take steps to ban a book that is critical of the philosophical and spiritual guru of a trust would not fall within the compass of administration of the trust. It might be an omission of the exercise of proper discretion on the part of the trustees, but certainly not an omission touching upon the administration of the trust,” the judgment said.
SC highlights landlord’s plight
It took 40 years for a landlord to evict his tenant who built a business complex on a vacant plot. The Supreme Court last week criticised the Rajasthan High Court for its “perverse” judgment favouring the tenant. Three courts below had found the tenant had made permanent changes on the leased land. But the high court, in its judgment, Damodar Lal vs Sohan Devi, ruled against the landlord. This was the “saddest part” of the story, the judgment said while ordering eviction.
