Determination of Attachment and Sale of Life Insurance Policy for Execution of Decree against Judgment-Debtor

Introduction

The Bombay High Court in Parasram H. Bhojwani v. Pravinchand Sehgal[1], has taken an interesting view on whether the money paid to the judgment-debtor during his lifetime under the life insurance policy on the life, can be attached under Section 60 of the Civil Procedure Code, 19082 for satisfying a decree pending against the said judgment-debtor.

Section 60 of the Civil Procedure Code, 1908

That in the year 1973 on the recommendation of the 54th Law Commission Report3, the Civil Procedure Code, 19084 (CPC) was amended wherein clause (kb) was inserted in Section 60(1) CPC “Property liable to attachment and sale in execution of decree”, which exempted “all money payable under a policy of insurance on the life of the judgment-debtor” from attachment in the proceedings for execution of the decree.

The Explanation provided under Section 60(1) CPC further clarifies that the monies payable in relation to the matters mentioned in clauses (g), (h), (i), (ia), (j), (l) and (o) are exempted from attachment or sale, whether before or after they are actually payable, and, in the case of salary, the attachable portion thereof is liable to attachment whether before or after it is actually payable.

That the said Explanation clarifies that in cases of pension paid to the government employee or political pensions, wages paid to labour and domestic servant, first one thousand rupee of the salary or two-third remainder part of the salary, allowance to army or air force persons, etc., which are covered under clauses (g), (h), (i), (ia), (l) of Section 60(1) CPC, irrespective of being payable or paid, are keep outside the list of properties, which can be attached by the court executing the decree against the judgment-debtor.

Federal Bank Ltd. v. Indiradevi Kunjamma5

That as early as in the year 1984, similar issue of Section 60 CPC, for attachment of money paid under the policy of life insurance to the legal heirs of the judgment-debtors was raised before the Bombay High Court in Federal Bank Ltd. v. Indiradevi Kunjamma6. In that case, the Bombay High Court referred to the decision of the Supreme Court in Sarbati Devi v. Usha Devi7, to say that it is no more possible to hold the view that monies payable under an insurance policy do not become a part of the estate of the deceased.

However, the Bombay High Court extended the protection provided under clause (kb) of Section 60(1) CPC and refused to attach the money payable or paid under the policy of life insurance in the hands of the legal heirs of the deceased judgment-debtor.

The Bombay High Court reasoned that the intent of the legislature for enacting clause (kb) of Section 60(1) CPC is to exempt from attachment the monies payable under a policy of insurance on the life of the judgment-debtor, to give some security to the heirs and legal representatives of the deceased judgment-debtor. This being the position, even though the said monies are becoming a part and parcel of the estate of the deceased, nevertheless the exemption laid down in clause (kb) of Section 60(1) CPC, follows the same monies. Therefore, monies payable under an insurance policy on the life of a judgment-debtor are entirely exempted from attachment and sale by virtue of the aforesaid clause (kb) of Section 60(1) CPC, irrespective of the circumstance as to whether the insurance policy matures during the lifetime of the assured or the monies become payable after his death.

Canara Bank v. N. Palani8

In this case, the parties approached the Madras High Court challenging the order of the lower court which allowed attachment of the fixed deposit receipt which contains the money received from the life insurance policy of the deceased judgment-debtor, on the ground that the same is protected under clause (kb) of Section 60 CPC as the money payable under the life insurance policy cannot be attached for execution of decree.

That vide interpreting the term “payable”, the Madras High Court held that till the time the money retains the character of being payable under the life insurance policy, it is subjected to applicability of clause (kb) of Section 60 CPC, however, once the policy matures and money is paid, protection under clause (kb) can no more be extent to it. The Madras High Court considered the decision in Federal Bank9, but held that the decision will not be applicable in this case, as the issue in Federal Bank10 concerned attachment of money payable under insurance policy, whereas in the present case the issue is related to attachment of fixed deposit receipt.

The Madras High Court held that the fixed deposit receipt cannot enjoy any exemption under clause (kb) of Section 60 CPC.

Pulugu Karnakar Reddy v. Shreya Financiers and Hire Purchase11

That the Andhra Pradesh High Court was approached by a party challenging the lower court order for attachment of the amount payable under the life insurance policy to the legal heirs of the deceased judgment-debtor.

That referring to the 54th Law Commission Report, the Court observed that the underlining reason for introducing clause (kb) of Section 60 is to promote thrift and encourage the habit of life insurance policy, and in need for having a liberal approach, an exemption of policies of life insurance in necessitated. Considering the judgment of the Bombay High Court in Federal Bank Ltd.12, the Andhra Pradesh High Court conceded that the legislative intent was to provide exemption to the insurance policy and therefore an exception is placed under clause (kb) of Section 60, for non-attachment of the money payable under the insurance policy.

Bomminayana Nirmala v. Rachapathu Krishnamurthy13

Again the Andhra Pradesh High Court was tasked to interpret the applicability of clause (kb) of Section 60 CPC, for attachment of money payable under the insurance policy. In this case, a creditor filed a recovery suit against the legal heirs as the judgment-debtor who expired before filing of the suit. Decree was passed against the legal heirs and the court executing the decree, ordered for attachment of the amount payable to the legal heirs under the life insurance policy of the deceased debtor.

The party filed a revision petition against the order of attachment of money payable under the insurance policy by the executing court. By referring to the judgment in Federal Bank14, the Court decided that the amount payable under insurance policy on the life of the deceased debtor is exempted from attachment for any amount due by the insured under clause (kb) of Section 60 CPC. Therefore, if the suit was filed against the legal heirs as the successors of the policy-holder, the policy amount is exempted from attachment before judgment by the executing court under Section 60 CPC.

Parasram H. Bhojwani v. Pravinchand Sehgal15

 That referring to the decision of the Bombay High Court in Federal Bank16 the Court considered that the said judgment was passed in reference to a dispute where the question was related to the attachment of the life insurance policy on life of the judgment-debtor after its lifetime. Where the Court said that the monies payable under an insurance policy on the life of a judgment-debtor are entirely exempted from attachment and sale by virtue of the aforesaid clause (kb) of Section 60(1) CPC, irrespective of the circumstance as to whether the insurance policy matures during the lifetime of the assured or the monies become payable after his death.

While distinguishing the facts of Federal Bank17 from Parasram H. Bhojwani18, the Bombay High Court said that in Parasram H. Bhojwani19 the fact is related to the payment of the money upon maturity of policy during the lifetime of the insured person, however, the issue in Federal Bank20 was restricted to the payment of life insurance policy upon the demise of the insured person. Therefore, the Court is inclined to examine the applicability of clause (kb) of Section 60 CPC, subjected to the facts of Parasram H. Bhojwani21.

Undoubtedly the Court accepted the decision in Federal Bank22, in a way to say that the intention always was that any amount that may become payable in future, including the policy of insurance, cannot be attached since upon demise of the insured person, it is the heirs who stand to benefit.

The Court referred to the Explanation provided under Section 60 CPC, which was not examined in Federal Bank23, which does not refer to clause (kb), when it says that the matters mentioned in clauses (g), (h), (i), (ia), (j), (l) and (o) are exempted from attachment irrespective of before or after it is actually payable.

Considering that this aspect was not considered in Federal Bank24 it is apposite to examine the same in Parasram H. Bhojwani25.  With that understanding, the Court said that the decision in Federal Bank26 does not today prevent them from proceeding to consider the effect of the Explanation and the consequence of monies, if paid under the policy during the lifetime of the assured.

That the judgment of Canara Bank27 was distinguished on the fact that in that monies were received and converted to a fixed deposit by the nominees of the deceased judgment-debtor, which is not a case here. In Parasram H. Bhojwani28 the monies were received by the judgment-debtor during his lifetime. Referring to Sebastian Jose v. Indian Overseas Bank Ltd.29, where the Kerala High Court held that when an amount is received by a policy-holder during his lifetime, it becomes his personal property but when received by his legal representative after his death, it becomes his estate and the money received by him would be liable for attachment into his hand and so long as the money retains the character as amounts payable under life insurance it is protected under clause (kb) of Section 60 (1) CPC.

That observing the judgments of the Supreme Court in Radhey Shyam Gupta v. Punjab National Bank30 and Union of India v. Wing Commander R.R. Hingorani31, where it was held that as long as the money remains in the character of pensionary benefit converted into a fixed deposit it is protected from attachment under Section 60 CPC and applying the same logic in case of insurance policy, the High Court observed that the exemption under clause (kb) will operate only till the amount is payable to the policy-holder during his lifetime or by his legal representatives after his demise. Once received, the amount would not retain its character of being “payable” so as to qualify for exemption.

That the policy matures during the lifetime of the insured, once the payment of the maturity value is made by the insurance company and the funds are paid out by the insurance company, the funds would lose protection under Section 60(1)(kb)  CPC. The safe confines of provident fund, pension and compulsory deposits accentuated in the Explanation to Section 60 CPC, do not encompass amounts paid on maturity of a policy of life insurance. To that extent the Explanation to Section 60(1) of the Code not having been considered in the judgment of Federal Bank32, the aforesaid decision stands distinguished.

Opinion 

The judgment in Parasram H. Bhojwani33 steers to a unique situation, where the common High Court have a diverging view on a same subject-matter and both equally stands to be good law confronting one another. That in Federal Bank34, the Court accepted that clause (kb) of Section 60(1) CPC was inserted to protect the interest of legal heirs of the judgment-debtor, who are benefited from the money they received from the life insurance policy of the deceased insured and hence not attachable, however on the other side, in Parasram H. Bhojwani35 the Court decides that if the same money is received by the judgment-debtor in its lifetime, it can be attached under Section 60 CPC.

Both in Federal Bank36 and Parasram H. Bhojwani37, the Court has consistently recognised the decision in Sarbati Devi38, that the amount receivable under the insurance policy of the insured becomes part of the estate of the insured person. Notedly a decree against the judgment-debtor can be executed against its legal heirs and be satisfied out the estate, which lies in the hands of its legal heirs. That the given differentia that the entire estate of a judgment-debtor is attachable under Section 60 CPC but not the insurance policy, which is no more payable, but already paid and becomes part and parcel of the estate of the deceased judgment-debtor, requires reconsideration by the courts in the coming time.


* Advocate, Delhi High Court and Supreme Court. Author can be reached at lovegupta9711@gmail.com.

[1] 2021 SCC OnLine Bom 3970.

2 http://www.scconline.com/DocumentLink/PtLr6OOv.

3 54th Law Commission Report on The Code Of Civil Procedure, 1908 (February 1973).

4 Civil Procedure Code, 1908.

5 1984 SCC OnLine Bom 246.

6 1984 SCC OnLine Bom 246.

7 (1984) 1 SCC 424.

8 1995 SCC OnLine Mad 4.

9 1984 SCC OnLine Bom 246.

10 1984 SCC OnLine Bom 246.

11 2006 SCC OnLine AP 908.

12 1984 SCC OnLine Bom 246.

13 2010 SCC OnLine AP 216.

14 1984 SCC OnLine Bom 246.

15 2021 SCC OnLine Bom 3970.

16 1984 SCC OnLine Bom 246.

17 1984 SCC OnLine Bom 246.

18 2021 SCC OnLine Bom 3970.

19 2021 SCC OnLine Bom 3970.

20 1984 SCC OnLine Bom 246.

21 2021 SCC OnLine Bom 3970.

22 1984 SCC OnLine Bom 246.

23 1984 SCC OnLine Bom 246.

24 1984 SCC OnLine Bom 246.

25 2021 SCC OnLine Bom 3970.

26 1984 SCC OnLine Bom 246.

27 1995 SCC OnLine Mad 4.

28 2021 SCC OnLine Bom 3970.

29 2009 SCC OnLine Ker 5431.

30 (2009) 1 SCC 376.

31 (1987) 1 SCC 551.

32 1984 SCC OnLine Bom 246.

33 2021 SCC OnLine Bom 3970.

34 1984 SCC OnLine Bom 246.

35 2021 SCC OnLine Bom 3970.

36 1984 SCC OnLine Bom 246.

37 1984 SCC OnLine Bom 246.

36 2021 SCC OnLine Bom 3970.

38 (1984) 1 SCC 424.

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