Delhi High Court Imposes ₹5 Lakh Cost On Insurance Company For Non-Appearance In Mediation Proceedings, Calls For Effective Participation

The Delhi High Court has observed that effective participation of organisations which have a public character in pre-litigation mediation is essential.

Justice Prathiba M Singh said that if mediation has to be taken seriously and with a result oriented approach, institutions with a public character, including government departments, ought to participate through proper appearance of officials or duly authorised persons.

The court said any non-participation ought to invite consequences in law.

It made the observations while dealing with a suit filed by Maxwell Partnership Firm against National Insurance Company Limited. The firm sought recovery of over 24 crores including interest @ 15% per annum on the principal amount of claim from September 01, 2018, till date. 

The amount related to a claim against the insurance company wherein the partnership firm had availed the Standard Fire and Special Peril Policy. The firm claimed that despite timely notification, the insurance company delayed processing of the claim for over a year.

It was stated that denial of the claim was arbitrary and without legal basis, highlighting the insurance company's unreasonable conduct throughout the claim settlement process.

The court observed that the insurance company failed to appear in the pre-litigation mediation and such conduct on behalf of the Insurance Company was contrary to the spirit of Section 12A of the Commercial Courts Act.

“In the United Kingdom, failure to adequately consider ADR, including mediation, can lead to severe repercussions. The Courts are known to possess the authority to impose cost sanctions on parties unreasonably refusing mediation attempts. The same mechanism can be followed in the Indians Courts such that effective mediations can result in improved resolution,” the court said.

Issuing summons in the suit, the court directed the insurance company to deposit costs of Rs. 5 lakhs with the Registrar General of as a pre-condition to file the written statement.

The matter will now be heard on September 19.

Title: MAXWELL PARTNERSHIP FIRM REGD v. NATIONAL INSURANCE CO LTD AND ANR.

Citation: 2024 LiveLaw (Del) 562

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