LIC OF INDIA versus INSURE POLICY PLUS SERVICES PVT. LTD. & ORS.

Citation: [2015] 10 S.C.R. 1067 · Decided: 29-12-2015 · Supreme Court of India · Bench: VIKRAMAJIT SEN · Disposal: Dismissed

Judgment (excerpt)

[2015] 10 S.C.R. 1067 
LICOF INDIA 
V. 
INSURE POLICY PLUS SERVICES PVT. LTD. & ORS. 
(Civil Appeal No. 8542 OF 2009) 
DECEMBER 29, 2015 
A 
B 
[VIKRAMAJIT SEN AND SHIVA KIRTI SINGH, JJ.] 
Insurance Act, 1938- s. 38-Assignment and transfer of 
insurance policies -
Insurance policies issued by the c 
appellant-insurer- Whether freely tradable and assignable 
-
Held: Insurance policie~ issued by appellant "are 
transferable and assignable in accordance with the 
provisions of the Act and in terms of the contract of life 
insurance- On transfer or assignment of a policy and on the D 
requisite procedure being complied with, assignee alone has 
an absolute interest in the policy- Insurer was bound by the 
provisions of s. 38 to accept such a transfer or endorsement 
- s. 38 is mandatory and substantive - Limitations placed on 
transferring a policy is in terms of the procedure laid out in E 
s. 38, and subject to the terms of policy itself - Thus, the 
circular by appellant to the effect that they had taken a policy 
decision to refuse registration of assignment in the nature of 
trading, attempts to nullify the provision and is ultra vires the 
statute. 
F 
Dismissing the appeal, the Court 
HELD: 1.1 It is clear from the provision of s. 38 of the 
Insurance Act, 1938 that on transfer or assignment of a . G 
policy and on the requisite procedure being complied 
with, the assignee alone has an absolute interest in the 
policy. The insurer was bound by the provisions of s.38 
to accept such a transfer or endorsement. The only 
H 
1067 
1068 
SUPREME COURT REPORTS 
[2015] 10 S.C.R. 
A limitations placed on transferring a policy were in terms 
of the procedure laid out in s.38, and subject to the terms 
of policy itself. The Section left no scope for the insurer 
to dispute the right to transfer or assign the policy. 
Section 38 was thus, clearly mandatory and substantive. 
B [Para 11] [1083-C, D] 
1.2 There is no force in the submission that s.38 
could result in scenarios where it was bound to accept 
fraudulent policies since it had not been bestowed with 
C discretionary powers for the reason that in cases of fraud, 
the assignment could be challenged on that ground even 
after being recor.ded. Furthermore, when the appellant 
encountered a fraud inter a/ia in reviving lapsed policies, 
such as in cases of reviving the policy of an insured who 
D is already deceased, it could refuse to recognize the 
revival, which it is well within its rights to do as a 
contractual clause to this effect forms part of the policy. 
[Para 12] [1083-H; 1084-A-C] 
E 
1.3 The amendment to the Insurance Act by the 
Insurance Laws (Amendment) Act, 2015, is significant. 
s.38 as it now stands gives the insurer the discretion to 
decide whether or not to accept a transfer or assignment 
of an Insurance Policy. The Amendment Act, according 
F to its Statement of Objects and Reasons, is "an Act 
further to amend the Insurance Act, 1938 and the General 
Insurance Business (Nationalisation) Act, 1972 and to 
amend the Insurance Regulatory and Development 
Authority Act, 1999." It is thus, neither a declaratory or 
G clarificatory piece of legislation. The language of the 
extant s.38 cannot be interpreted to mean that this is what 
s.38 had meant all along. Furthermore, had the 
Legislature intended to amend 
Section 
38 
H retrospectively, it would have said so explicitly. Instead, 
LIC OF INDIA v. INSURE POLICY PLUS SERVICES PVT. 
1069 
· LTD.&ORS. 
it has. incorporated sub-sectic;>n (9), which protects rights A 
and remedies of assignees that arose prior to the 
commencement of the Amendment Act. It is thus, clear 
that Parliament intended to allow all previous 
assignments and transfers provided that they complied 
with the requirements laid out in s.38. In the face of this · B 
clear legislative intent, no other interpretation of s.38 is 
possible. [Para 13) [1084-C-G] 
1.4 It is not open to the appellants to charter a course 
which is different to the postulation in the Insurance Act, C 
by means of its own Circulars. UC through its Circulars 
attempted to nullify that provision of law. Thus, the 
circulars are ultra vires the Statute and must therefore 
be made ineffectual. [Para 14) [1085-A & E] 
D 
1.5 It is not appropriate to import the principles of 
public policy, which are always imprecise, difficult to 
define, and akin to an unruly horse, into contractual 
matters. The contra proferentem rule is extremely relevant 
inasmuch as it is t

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