LIC OF INDIAversusINSURE POLICY PLUS SERVICES PVT. LTD. & ORS.

                   [2015] 10 S.C.R. 1067


                        LICOF INDIA                              A
                              V.

  INSURE POLICY PLUS SERVICES PVT. LTD. & ORS.
              (Civil Appeal No. 8542 OF 2009)
                                                                 B
                   DECEMBER 29, 2015
    [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 the appellant who drafted the insurance E
policy and was therefore well-positioned to include
clauses making it specifically impermissible to assign
policies. In the, absence of any such covenant, the
appellant cannot be heard to say that such transfers or
assignments violate public policy. In any event, the F
general global practice is to permit assignments of
insurance policies. [Paras 15) [1085-F-H]

     UC of India vs. Consumer Education & Research
     Centre 1995 (1) Suppl. SCR 349: (1995) 5 SCC            G
     482; Avinder Singh v. State of Punjab 1979 (1)
     SCR 845: (1979) 1SCC137; Agricultural Market
     Committee v. Shalimar Chemical Works Ltd.1997
     (1) Suppl. SCR 164 : (1997) 5 sec 516 -
     referred to.                                            H
1070         SUPREME COURT REPORTS                 [2015] 10 S.C.R.


 A         Basil P Wamac vs George Davis 104 US 771; Grigsby
       vs Russell 222 US 149 - referred to

                            Case Law Reference

       1995 (1) Suppl. SCR 349          referred to.    Para 6
 B
       104 us 771                       referred to.    Para 6

       222 us 149                       referred to.    Para 6

       1979 (1) SCR 845                · referred to.   Para 14
 c
       1997 (1) Suppl. SCR164           referred to.    Para 14

          CIVIL APPELLATE JURISDICTION: Civil Appeal No.
       8542 of2009
 D.
           From the Judgment and Order dated 22.03.2007 of the
       High Court of Bombay at Mumbai in Writ Petition No. 2159 of
       2004

          Jaideep Gupta, Ashok Panigrahi, Santosh Kumar, Surajit
 E     Bhaduri, S. Seth, Kumar Chatterjee for the Appellant.

          Dushyant A. Dave, Shyam Divan, Parmanand Gaur,
       Puneet Singh Bindra, Aslam Ahmed, Pa rag Sawant, Nirman
       Sharma, Babit Singh Samuel, Sharad Kharra for the
 F     Respondents.

           The Judgment of the Court was delivered by

            VIRKAMAJIT SEN, J. 1.ThisAppeal assails the judgment
 G     of the learned Division Bench of the High Court of Judicature
       at Bombay dated 22.3.2007, which allowed the writ petitions
       of the First and Second Respondent herein. In this detailed
       and indeed lucid Judgment it has been clarified that the
       insurance policies issued by the Appellant "are transferable
 H     and assignable in accordance with the provisions of the
   LIC OF INDIA v. INSURE POLICY PLUS SERVICES PVT.                 1071
                       LTD. &ORS.

 Insurance Act, 1938 and in terms of the contract of life             A
 insurance."

       2. The First Respondent is a company which is engaged,
  inter alia, in the business of accepting and dealing in
  assignment of life insurance policies issued by the Appellant. B
  The Second Respondent is the Director and shareholder of
. the First Respondent. The Third Respondent is a statutory
  authority established. under Section 3 of the Insurance
  Regulatory & Development Authority Act, 1999, and is
  hereinafter referred to as IRDA. The business of the First C
  Respondent is to acquire life insurance policies from policy
  holders by paying them consideration. The assigned policy is
  registered and recorded in the books of the Appellant, and is
  then further assigned to a third party for consideration. Upon
  registration in the books of the Appellant, it could then be further D
· assigned.

     3. In January 2003, several branches of the Appellant
 refused to accept notices of assignment lodged by the First
 Respondent. A Circular was issued on 22.10.2003, the content         E
 of which is reproduced below for facility of reference:

       "There have been reports in the Press recently of the
       existence of firms that are in the business of buying of
       Insurance policies which are lapsed after acquiring paid- F
       up value, from the original policyholders 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 be it maturity claim/death claim,
       etc.                                                       <3

       The above practice if it becomes prevalent would not
       only undermine the real purpose of life insurance but also
       allow third parties to make windfall gains by such
       wagering contracts. Therefore, it is felt necessary to         H
1072       SUPREME COURT REPORTS                  (2015] 10 S.C.R.


 A        introduce measures to safeguard the principles of life
          insurance and the larger interest of our policyholders.
            •   If any Agent/employee is found to be involved in
                assisting such Companies in respect of data
                acquisition of lapsed policies for revival and
 B
                subsequent assignment, strict action may be
                initiated against him.
            • The Branch Offices would have to be more vigilant
               in case of revival of policies that have been lapsed
 c             for longer duration say over 3 years. In such cases,
               strict control on non-acceptance of third party
               cheques, strict adherence to medical requirements,
               quality of medical examination etc. would be
               required. Wherever it is clear that a TIP company
 D             is involved, the revival may be outrightly rejected.
            •   If there are a number of assignments in the same
                Branch Office/Divisional Office in favour of the same
                Financial Company, the nature of the business of
                the Company may be investigated.
 E
            •   If the Branch Office already has information that the
                nature of business interest of the Financial
                Company is trading in insurance policies only, the
                assignments in favour of such a Company may be
                declined.
 F
            •   Such policyholders may be educated through a
                specially designed communication on the
                implications of"absolute assignments". This may
                be done to safeguard the interest of those who may
 G              become innocent victims of third parties indulging
                in this business.
        The Branches may be instructed to start sending the data
   on absolute assignment to the controlling Divisions cause-wise
 H to keep a vigil on trading of policies.
 LIC OF INDIA v. INSURE POLICY PLUS SERVICES PVT.                 1073
          LTD. & ORS. [VIKRAMAJIT SEN, J.]

     4. The Appellant also stated in a letter !o the First A
Respondent that assignments in favour of companies who are
only trading in insurances would not be permissible. The
various complaints by the First Respondent elicited a response
by IRDA dated 3.3.3004, in which it opined that the Appellant
should register the assignments. The Appellant, however, B
refused to do so, and instead issued another Circular dated
2.3.2005 reiterating the contents of the previous circular, and
laying down a procedure for "uniform implementation by all
the offices of the Corporation". A portion of this Circular is
reproduced, as it lays down the rationale behind the refusal to C
register these policies:

           Life Insurance Policies, in general, are a measure
     of social security for the family members of the life
     assured and in the absence of adequate savings or D
     securities, these Policies are often the only finaneial
     security available to the family members of the deceased ·
     life assured. The Government of India has guaranteed
     the Sum Assured with Bonus in all LIC Policies under
     Section 37 of the Life Insurance Corporation Act, 1956 E
     to ensure the availability of financial security to the family
     of the deceased.

          In this connection, the Hon'ble Supreme Court of
     India in Life Insurance Corporation of India Vs. Consumer    F
     Education and Research Centre (repo~ed in AIR 1995
     SC 1811) has ruled that the LIC discharges important
     Constitutional runctions and the Policies issued by it are
     a measure of social security for the family of the life
     a~u~.                                                        G

          Between April 2002 to July 20.03, our Offices at
     various places received several Policies for registration
     of assignments in favour of some entities. Newspaper
                                                                  H
1074   SUPREME COURT REPORTS                   [2015] 10 S.C.R.


 A     articles also appeared in September 2003 about some
       Companies carrying on trading in insurance Policies.
       The Corporation had to take urgent notice of such a
       remarkable spurt in the registration of assignments in
       respect of such Policies and the Corporation then noticed
 8     that these Policies were being purchased and traded in
       like saleable securities of a stock market. It was also
       noticed by the Corporation that the only purpose for which
       such assignment was being obtained, was with a view
       to trading in them by further selling them, which could
 c     continue indefinitely without reference to the life assured.

             The Corporation had noticed that this process of
       trading, without any reference to the life assured, is in
       the nature of speculation and weighing in as much as
 D     none of the subsequent assignees would have either the
       means or the inclination to find out whether the life
       assured was still alive. This, in turn, would means that
       even if the life assured died a premature death, the
       Pclicies would continue in circulation by means of such
 E     trading until its date of maturity and the Corporation would
       then have to pay the final/ultimate assignee, the entire
       maturity amount/value instead of the family members of
       the life assured, benefiting there under and despite the
       fact that the death may have occurred several years prior
 F
       thereto.

          Such trading in the Corporation' .Policies offends the
       very essence of the Life insurance contract and leaves
       the family of the life assured totally unprotected in the
 G     event of death of the life assured. Hence, in order to
       prevent such· speculation and wagering which causes
       harm to millions of families all over India, the Corporation
       has taken a policy decision to refuse the registration of
       assignments which are in the nature of trading. For this
 H
 LIC OF INDIA v. INSURE POLICY PLUS SERVICES PVT.                  1075
          LTD. & ORS. [VIKRAMAJIT SEN, J.]

      purpose, the Corporation has evolved a procedure to A
      identify such transactions so as to preserve and protect
      the interests of genuine policyholders of the Corporation,
      and to leave untouched the genuine assignments by the·
      life assured.
                                                                  B
     5. The First and Second Respondent before µs filed a
writ petition before the High Court seeking a Declaration that
the insurance policies issued by the Appellant are freely
tradable and assignable in accordance with the provisions of
the Insurance Act, 1938, and that the Circulars dated C
22.10.2003 and 2.3.2005 and the actions of the Appellant in
refusing to register the assignment of life insurance policies in
favour of the First Respondent are illegal, null and void.

      6. The High Court, vide its impugned order, allowed the D
writ petition. It noted that life insurance policies are the personal,
movable property of the policy holder, and can be said to be
an actionable claim within the meaning of Section 3 of the
Transfer of Property Act. The High Court also recorded that
the business ot' assignment of such policies is prevalent the E
world over. While noting that this Court in LIC of India vs.
Consumer Education & Research Centre (1995) 5 SCC 482
has held that insurance is a social security measure, as was
also reflected in the Statement of Objects and Reasons of the
Life Insurance Corporation Act, 1956 (LICAct), the High Court F
held that consequent to private entry into the business of life
insurance it is no longer possible to contend that life insurance
remained a measure of social security. It then went on to discuss
the decision of the Supreme Court of the United States of
America in Basil P. Warnoc vs George Davis 104 US 771, G
wherein it was held that " ... in all cases there must be
reasonable ground, founded upon the relations of the parties
to each other, either pecuniary or of blood or affinity, to expect
some benefit or advantage from the continuance of the life of H
1076        SUPREME COURT REPORTS                   [2015] 10 S.C.R.


 A the assured. Otherwise the contract is a mere wager, by which
   the party taking the policy is directly interested in the early death
   of the assured. Such problems have a tendency to create a
   desire forthe event. They are, therefore, independently of any
   statute on the subject condemned as being against public
 B policy." T~is decision came up for consideration before the
   U.S. Supreme Court in Grigsby vs Russell 222 US 149.
   Grigsby did not agree with Warnoc, finding instead that life
   insurance is a form of investment and savings, and to deny the
   right to sell it would diminish its value. It was held that the rule
 C of public policy that forbids the taking out of insurance by one
   on the life of another in which he has no insurable interest does
   not apply to the assignment by the insured of a valid policy to
   one not having an insurable interest. In the impugned
   Judgment, the High Court noted that the law in the U.S.A. after
 0
   Grigsby is that though there has to be an insurable interest at
   the inception when the policy is taken out, subsequent thereto
   there is no·requirement of insurable interest at the time of
   transfer or assignment. The argument raised by the First and
 E Second Respondent was that Section 38 of the Insurance Act
   is a substantive right, whereas the Appellant contended that it
   is merely procedural. On an examination of the Section and
   the manner in which it operates, it was held that once the
   insured transfers or assigns the policy in favour of the
 F assignee, the assignment is complete between them. The
   insurer clearly has no choice or option in law but to accept the
   transfer or assignment, provided the procedure laid down by
   Section 38 is followed. The High Court therefore held that
   Section 38 is a substantive and not a procedural provision.
 G Section 38 makes it clear that the Legislature did not treat life
   insurance as a security for protection of the widow or children
   of the life assured, but as a form of investment and self-
   compelled saving. It is therefore desirable to impart to it all the
   common characteristics of property. The Appellant is the only
 H player in the market which is refusing to accept such
 LIC OF INDIA v. IN~ukL: ?OLICY PLUS SERVICES PVT.                   1077
          LTD. & ORS. [VIKRAMAJIT SEN, J.]

assignments. It was held that if the terms of the contract A
between the Appellant and the insured barred assignment, the
assignee would also remain bound by this covenant. However,
in the absence of any such contractual term the Appellant
cannot unilaterally vary the terms of the contract under the guise
of a policy decision, thereby endeavouring to disallow transfers B
that are legally valid under Section 38. As Section 38 is
mandatory, it is not open to the Appellant to issue any policy
decision that is contrary to it. The Circulars dated 22.10.2003
and 2.3.2005 were found to be illegal and it was held that
insurance policies are transferrable and assignable.               C

     7.The question for us to decide is whether insurance
policies are freely tradable and assignable. To this end, it would
be apposite to reproduce Section 38 of the Insurance Act as it
stood prior to. its amendment in 2015:                               D ·

     "38. Assignment and transfer of insurance
     policies.- (1) A transfer or assignment of a policy of
     life insurance, whether with or without consideration may
     be made only by an endorsement upon the policy itself E
     or by a separate instrument, signed in either case by the
     transferor or by the assignor, his duly authorised agent
     and attested by at least one witness, specifically setting
     forth the fact of transfer or assignment.
                                                                     F
     (2) The transfer or assignment shall be complete and
     effectual upon the execution of such endorsement or
     instrument duly attested but except where the transfer or
     assignment is in favour of the insurer shall not be operative
     as against an insurer and shall not confer upon the G
     transferee or assignee, or his legal representative, and
     right to sue for the amount of such policy or the moneys
     secured thereby until a notice in writing of the transfer or
     assignment and either the said endorsement or
     instrument itself or a copy thereof certified to be correct H
1078    SUPREME COURT REPORTS                    [2015] 10 S.C.R.


 A     by both transferor and transferee or their duly authorised
       agents have been delivered to the insurer: .

             Provided that where the insurer maintains one or
       more places of business in India, such notice shall be
 B     delivered only at the place in India mentioned in the policy
       for the purpose or at his principal place of business in
       India.

       (3) The date on which the notice referred to in sub section
 c     (2) is delivered to the insurer shall regulate the priority of
       all claims under a transfer or assignment as between
       persons interested in the policy; and where there is more
       than one instrument of transfer or assignment the priority
       of the claims under such instruments shall be governed
 D     by the order in which the notices referred to _in sub-section
       (2) are delivered.

       (4) Upon the receipt of the notice referred to in sub section
       (2), the insurer shall record the fact of such transfer or
 E     assignment together with the date thereof and the name
       of the transferee or the assignee and shall, on the request
       of the person by whom the notice was given, or of the
       transferee or assignee, on payment of a fee not
       exceeding one rupee, grant a written acknowledgement
 F     of the receipt of such notice; and any such
       acknowledgement shall be conclusive evidence against
       the insurer that he has duly received the notice to which
       such acknowledgement relates.

 G     (5) Subject to the terms and conditions of the transfer or
       assignment, the insurer shall, from the date of receipt of
       the notice referred to in sub section (2), recognise the
       transferee or assignee named in the notice as the only
       person entitled to benefit under the policy, and such
 H     person shall be subject to all liabilities and equities to
 UC OF INDIA v. INSURE POLICY PLUS SERVICES PVT.                      1079
         LTD. & ORS. [VIKRAMAJIT SEN, J.]

      which the transferor or assignor was subject at the date A
      of the transfer or assignment and may institute any
      proceedings in relation to the policy without obtaining
      the consent of the transferor or assignor or making him
      a party to such proceedings.
                                                               B
      (6)Any rights and remedies of an assignee or transferee
      of a policy of life insurance under an assignment or
      transfer effected prior to the commencement of this Act
      shall not be affected by the provisions of this section.
                                                                      c
      (7) Notwithstanding any law or custom having ihe force
      of law to the contrary, an assignment in favour of a person
      made with the condition that it shall be inoperative or
      that the interest shall pass to some other person on the
      happening of a specified event during the lifetime of the D.
      person whose life is insured, and an assignment in favour
      of the survivor or survivors of a number of persons, shall
      be valid."

    This section has subsequently been amended by The                 E
Insurance Laws (Amendment) Act, 2015, and Section 38(2)
now reads thus:

      (2) The insurer may accept the transfer or assignment, or
decline to act upon any endorsement made under sub-section            F
(1 ), where it has sufficient reason to believe that such transfer
or assignment is not bona fide or is not in the interest of the
policyholder or in public interest or is for the purpose of trading
of insurance policy.

     This, along with the other changes introduced in the G
Section, indicates that the law as it currently stands gives the
Appellant a discretion as to whether or not to accept an
assignment provided its decision is predicated on the transfer
or assignment being (a) mala fide or (b) contrary to the interest
                                                                      H
1080       SUPREME COURT REPORTS                     [2015] 10 S.C.R.


 A of the policy holder or (c) against public interest or (d) only for
   trading in the policy. The question before us, however, is limited
   to the law as it stood prior to this statutory amendment.
        8. The Appellant has contended that only certain first
 B assignments, in which the policy is a pledge or collateral for a
   loan, would be acceptable. Based on an undertaking to this
   effect, .we have disposed of Civil Appeal No. 8543 of 2009
   which'was being heard along with this Civil Appeal. The Order
   dated 10.12.2015 passed by us reads thus:
 c             "The Affidavit filed on behalf of the Respondent No.1
           is taken on record. Learned Senior Counsel appearing
           for the Appellant also submits that the Undertakings may
           be accepted by the Court. The Undertakings furnished
           in the said Affidavit are accepted by the Court. The affiant
 D         is cautioned that if any of the Undertakings are breached,
           apart from any other consequences, the Contempt of
           Courts would be attracted to the Respondent.
              In view of the above, the Interim Orders passed on
 E        4th April, 2008 are recalled. The provisional registration
          shall be accorded permanence and/or full registration. It
          is clarified that the Undertakings shall stand extended to
          any fresh Applications for registration that may now be
          moved by the Respondents for transactions, assignments
 F        and transfers effected prior to the Amendment of Section
          38, viz. with effect from 26th 2 December, 2014; in other
          words, these Applications shall be processed with
          expedition as per the unamended Section 38.
             It is further clarified that in view of the disposal of this
 G
          Appeal, in the circumstances mentioned above, the
          Appellant will be liable to pay interest at the prevailing
          Bank rate (without penal interest) as per Section 8 sub-
          section(5) of the Insurance Regulatory and Development
 H        Authority (Protection of Policy Holder Interest)
 UC OF INDIA v. INSURE POLICY PLUS SERVICES PVT.                   1081
         LTD. & ORS. [VIKRAMAJIT SEN, J.]

     Regulations, 2002. The disposal ofthisAppeal is without       A
     prejudice to other Appeals in which arguments have been
     closed.
          The Civil Appeal is disposed of with no Order as to
costs."
                                                                   B
     The Appellant has argued that if multiple assignments are
permitted the assignee will not know if the insured has died,
and trading iri the policy may continue even after he has.
Furthermore, allowing parties in the position of the First
Respondent to revive a lapsed policy would amount to C
wagering. Regarding the prevailing law in other jurisdictions,
it has been submitted that the law in the U.S. is not based on
Grigsby, as the U.S. legal system it is a federal one. Even if
Grigsby were taken as the prevailing interpretation of the law,
it does not state that all assignments must be accepted D
regard!ass that they are in bad faith. The fact that the
Government provides tax deductions under Section BOC of
the Income Tax Act, 1961, that Life Insurance is not liable to be
attached and sold in execution of a decree under Section 60
of the Civil Procedure Code, and that Life Insurance is E
guaranteed by the Central Government under Section 37 of
the UC Act indicates that it is a measure of social security, so
the power to refuse 'bad faith' assignments should be allowed
on the grounds of public policy. Finally, it has been argued once F
again that Section 38 is merely procedural, and the substantive
law is to be found and extrapolated from Common Law.
      9. The First and Second Respondent, on the other hand,
have contended that Section 38 recognises all assignments
that comply with the requirements stated therein. Insurance is     G
intrinsically a matter of contract, and the Appellant cannot, by
way of a Circular, amend a contract and interfere with
contractual rights and obligations. An insurable interest is a
precondition or essential element at the time of taking out the
scheme but not thereafter, including at the point of any           H
1082         SUPREME COURT REPORTS                 [2015] 10 S.C.R.


 A reassignment. Section 38 is substantive, not procedural, so
   there is no reason to advert to common law, as the Insurance
   Act was passed well after the two American Supreme Court
   decisions al!uded to above. Subsection (9) of the post-
   amendment Section 38 was relied upon, which reads as
 B follows:

            (9) Any rights and remedies of an assignee or transferee
            of a policy of life insurance under an assignment or
            transfer effected prior to the commencement of the
 c          Insurance Law (Amendment) Act, 2015 shall not be
            affected by the provisions of this section.

            Thus this sub-section protects the existing rights of the
       First Respondent. Even in the absence of this sub-section,
 0     Section 6 of the General Clauses Act, 1897 would have come
       to the aid of these Respondents. It has also been alleged that
       the only reason that the Appellant is averse to allowing re-
       assignment of policies is because it wants to protect its own
       interests and repudiate its contractual liability.
 E
         10. It would be apposite for us to begin our analysis by
   discussing the operation of Section 38 of the Insurance Act as
   it stood prior to its amendment. Section 38(1) prescribed the
   procedure by which assignment were to be effected, namely,
 F by way of an endorsement or by means of a separate
   instrument. Sub-section (2) stated that once a transfer or
   assignment was made in the manner prescribed by sub-
   section (1 ), it was complete and effectual. However, this
   transfer or assignment only became binding upon written
 G notice thereof being given by the transferor and transferee to
   the insurer. Sub-section (3) determined the priority of claims
   on the Insurance Policy by operation of law. Sub-s'ection (4)
   directed that upon receipt of the notice referred to in sub-section
   (2), the insurer became bound to record the transfer or
 H assignment together with the date thereof and the name of the
 UC OF INDIA v. INSURE POLICY PLUS SERVICES PVT.                    1083
         LTD. & ORS. [VIKRAMAJIT SEN, J.]

transfer8e and the assignee; and if so requested grant a written    A
acknowledgment of the receipt of such notice. Sub-section
(5) mandated the insurer to recognise the transferee or
assignee named in the notice as the only person entitled to
the benefit under the policy and such person would be subject
to all liabilities and equities. Sub-section (6) and (7) provided   B
for some other contingencies with which we are not immediately
concerned.

     11. It is thus clear that on transfer or assignment of a policy
and on the requisite procedure being complied with, the C
assignee alone has an absolute interest in the policy. The
insurer was bound by the provisions of Section 38 to accept
such a transfer or endorsement. The only limitations placed
on transferring a policy were in terms of the procedure laid out
in Section 38, and subject to the terms of policy itself. The D
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. The erstwhile Section 39(4) also
deserves reproduction in this vein, as it further indicated the
mandatory character of Section 38. It reads thus:                    E

     (4) A transfer or assignment of a policy made in
     accordance with section 38 shall automatically cancel a
     nomination:
        Provided that the assignment, of a policy to the insurer F
     who bea'rs the risk on the policy at the time. of the
     assignment, in consideration of a loan granted by that
     insurer on the security of the policy within its surrender
     value, or its reassignment on repayment of the loan shall G
     not cancel a nomination, but shall affect the rights of the
     nominee only to the extent of the insurer's interest in the
     policy.

     12.TheAppellant has argued that Section 38 could result
in scenarios where it was bound to accept fraudulent policies       H
                                              •


1084         SUPREME COURT REPORTS                    [2015] 10 S.C.R.


 A     since it had not been bestowed with discretionary powers. We
       do not find any content in this contention, forthe reason that in
       cases of fraud, the assignment could be challenged on that
       ground even after being recorded. Furthermore, when the
       Appellant encountered a fraud inter alia in reviving lapsed
 B     policies, such as in cases of reviving the policy of an insured
       who 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.

 C        13.The amendment to the Insurance Act by the Insurance
   Laws (Amendment) Act, 2015, is significant. As previously
   discussed, Section 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,
 D according to.its Statement of Objects and Reasons, is "An Act
   furthe~ to amend the Insurance Act, 1938 and the General
   Insurance Business (Nationalisation) Act, 1972 and to amend
   the Insurance Regulatory and DevelopmentAuthority Act, 1999."
   It is thus neitlier a declaratory or clarificatory piece of legislation.
 E The language of the extant Section 38 cannot be interpreted
   to mean that this is what Section 38 had meant all along.
   Furthermore, had the Legislature intended to amend Section
   38 retrospectively, it would have said so explicitly. Instead, it
 F has incorporated sub-section (9), which protects rights and
   remedies of assignees that arose prior to the commencement
   of theAmendmentAct. It is thus clear that Parliament intended
   to allow all previous assignments and transfers provided that
   they complied with the requirements laid out in Section 38. In
 G the face of this clear legislative intent, no other interpretation
   of Section 38 is possible. It is accordingly not incumbent for
   us to discuss whether insurarce policies partake of the nature
   of social security, or whether the transfer of such policies
   tantamount to wagering contracts.
 H
 LIC OF INDIA v. INSURE POLICY PLUS SERVICES PVT.                    1085
          LTD. & ORS. [VIKRAMAJIT SEN;J.]

        14. In our considered opinion it is not open to the A
Appellants to charter a course which is different to the
postulation in the Insurance Act, by means of its own Circulars.
We need not go beyond mentioning the decision of this Court
in Avinder Singh v. State of Punjab (1979) 1 SCC 137 .wherein
it has been held that the Legislature cannot efface itself by B
delegating its plenary powers unless the delegate functions
strictly under its supervision. If the delegate is allowed to
function independently it would tantamount to_ "usurpation of
legislative power itself." This view came to be reiterated to
decades later in Agricultural Market Committee v. Shalimar C
Chemical Works Ltd. (1997) 5 SCC 516. This Court held that
" ....... Power to make subsidiary legislation may be entrusted
by the legislature to another body of its choice but the legislature
should, before delegating, enunciate either expressly or by
                                                                     0
implication, the policy and the principles for the guidance of
the delegates". The position that obtains today is diametrically
opposite inasmuch as the statute permitted, at the relevant
time, the assignment and/or transfer of life insurance policies,
but the delegate, through its Circulars, has attempted to nullify E
that provision of law. We conclude, therefore, that the circulars
are ultra vires the Statute and must therefore be made
ineffectual.

      15. We also think that it is not appropriate to import the     F
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 the Appellant who has drafted the insurance policy and
was therefore well-positioned to include clauses making it           G
specifically impermissible to assign policies. In the absence
of any such covenant, the Appellant cannot be heard to say
that such transfers or assignments violate public policy. In any
event, as we have seen above, the general global practice is
to permit assignments of insurance policies.                         H
1086          SUPREME COURT REPORTS                [2015] 10 S.C.R.

 A          16. It is for these manifold reasons and in view of the
       analysis of the law prior to as well as post the amendments
       carried out in the Insurance Act that we find the Appeal to be
       devoid of merits. The impugned Judgment is well -reasoned
       and tak~s within its sweep all the relevant documents raised.
 B     The Appeal is accordingly dismissed.

       Nidhi Jain                                     Appeal dismissed.




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