The Award of the Claims Tribunal

• (a) there is collusion between the person making the claim and the person against whom it is made, or
• (b) the person against whom the claim is made has failed to contest the claim,

it may, for reasons to be recorded in writing, direct that the insurer who may be liable be impleaded as a party, and the insurer so impleaded then has, without prejudice to the limited statutory defences, the right to contest the claim on all or any of the grounds available to the person against whom the claim has been made.

The cross-reference in section 170 was changed from section 149 to section 150 with effect from 1 April 2022, because the substituted Chapter XI moved the insurer's duty to satisfy awards from one number to the other.

Three conditions, and all three are read strictly: one of the two situations must exist, the Tribunal must be satisfied of it, and the reasons must be recorded in writing. Without a section 170 order the insurer is confined to its own defences and cannot argue, for example, that the driver was not negligent at all.

The Tribunal may also decide insurer against insured

Facts. National Insurance Co. Ltd v. Swaran Singh, (2004) 3 SCC 297, decided on 5 January 2004. A group of appeals in which insurers sought to escape liability to third parties because the driver had no licence, or a fake or invalid one, or was disqualified.

Held, on the Tribunal's powers. The Tribunal's jurisdiction is not confined to the claim between the claimants on one side and the insured, insurer and driver on the other. In deciding whether a defence is available to the insurer, the Tribunal necessarily has the power to decide disputes between the insurer and the insured, and that decision is enforceable and executable in the same manner as an award under section 174. Where the insurer proves its defence, the Tribunal may direct that the insurer, having had to pay the third party, be reimbursed by the insured; if the insured does not deposit that amount within thirty days under section 168(3), it is recovered as an arrear of land revenue on a certificate under section 174.

Why it matters here. It is the authority for the familiar direction to "pay and recover", and it locates that direction in the Tribunal's own award rather than in a separate suit. The defences themselves are chapter [The Insurer: Duties, Defences and Pay and Recover].

Section 171: interest

Where a Tribunal allows a claim, it may direct that in addition to the amount of compensation, simple interest shall also be paid, at such rate and from such date not earlier than the date of making the claim as it may specify.

Three limits are on the face of the section: the interest is simple, the rate is left to the Tribunal, and the starting date cannot be earlier than the date of the claim. In Erudhaya Priya v. State Express Transport Corporation Ltd, decided on 27 July 2020, the Supreme Court allowed interest at nine per cent, and in Kaushnuma Begum v. New India Assurance Co. Ltd, (2001) 2 SCC 9, at the same rate.

Section 172: compensatory costs

The Tribunal may, for reasons recorded in writing, order special costs by way of compensation where it is satisfied that

• (a) the policy of insurance is void because it was obtained by representation of a fact which was false in any material particular, or
• (b) any party or insurer has put forward a false or vexatious claim or defence.

The costs are payable by the party guilty of the misrepresentation or by the party who put forward the claim or defence, to the insurer or to the party against whom it was put forward.

(2) No order for special costs may exceed one thousand rupees. (3) The order does not exempt anyone from criminal liability for the misrepresentation, claim or defence. (4) The amount awarded is taken into account in any subsequent suit for damages in respect of the same misrepresentation, claim or defence.

The cap of one thousand rupees has never been raised, and it is one of the small places where the Act shows its age. The 2019 amendments raised the appeal threshold in section 173(2) tenfold and left section 172(2) exactly where it was.

A worked example

A widow claims against an owner and his insurer. The owner does not appear at all, and the Tribunal notices that the claim petition and the owner's written statement use the same language.

What may the Tribunal do? Both limbs of section 170 are attracted, collusion and failure to contest. It may, recording its reasons in writing, direct the insurer to be impleaded, whereupon the insurer may contest the claim on every ground available to the owner, including that the driver was not negligent.

The award is announced on 1 March and the copy reaches the parties on 20 March. When must the amount be deposited? Within thirty days of 1 March, under section 168(3). The delay in delivery breaches section 168(2), which requires copies within fifteen days, but it does not extend the time to deposit.

From when may interest run? From a date not earlier than the date of making the claim, section 171, and it must be simple interest.

The insurer pleads that the policy was obtained on a false statement about the vehicle, and fails. If the Tribunal finds the defence false or vexatious it may award special costs under section 172, but not more than one thousand rupees.

The family had already received hit and run compensation. Section 168(1) is subject to section 163, so the Tribunal must verify that and direct a refund to the insurer of so much of the award as equals what was paid.

What it does NOT mean

An award is not a decree on pleadings. Section 168(1) requires an inquiry, and section 169(1) makes it summary but real.

Notice to the insurer is not a formality. The section requires notice of the application to the insurer and an opportunity of being heard to the parties including the insurer, before the inquiry.

Section 170 is not the insurer's right. It is a power of the Tribunal, exercisable only in the two situations and only with reasons recorded in writing.

Interest is not compound, and not from the date of the accident. Section 171 says simple, and not earlier than the date of making the claim.

Quick revision

1. Section 168(1): notice to the insurer, opportunity to be heard, inquiry, and an award that fixes just compensation, the persons to be paid and who must pay; subject to section 163 since 1 April 2022.
2. Section 168(2): copies within fifteen days. Section 168(3): deposit within thirty days of announcement.
3. Section 170: collusion or failure to contest, reasons in writing, and the insurer may then contest on all grounds available to the person against whom the claim is made; the internal reference is now to section 150.
4. National Insurance Co. Ltd v. Swaran Singh, (2004) 3 SCC 297: the Tribunal may decide the dispute between insurer and insured and direct reimbursement, recoverable under section 174.
5. Section 171: simple interest, at such rate and from a date not earlier than the date of making the claim.
6. Section 172: special costs for a policy obtained by material misrepresentation or a false or vexatious claim or defence, capped at one thousand rupees, with no exemption from criminal liability.

Test yourself

1. What must a Claims Tribunal do before and when making an award? Section 168(1) requires the Tribunal, on receipt of an application under section 166, to give notice of the application to the insurer and to give the parties, including the insurer, an opportunity of being heard, and then to hold an inquiry into the claim. Subject to section 163, which deals with the refund of hit and run compensation already paid under section 161, it may make an award determining the amount of compensation which appears to it to be just, specifying the person or persons to whom compensation is to be paid, and specifying the amount to be paid by the insurer or the owner or the driver of the vehicle involved, or by all or any of them. By section 168(2) copies of the award must be delivered to the parties expeditiously and in any case within fifteen days of the date of the award, and by section 168(3) the person required to pay must deposit the entire amount within thirty days of the date on which the award was announced, in the manner the Tribunal directs. The standard of a just award, and the identification of those to whom it is payable, were described in these terms by the Supreme Court in Gujarat State Road Transport Corporation v. Ramanbhai Prabhatbhai, AIR 1987 SC 1690.

2. When may an insurer be impleaded under section 170, and what follows? Section 170 applies where, in the course of an inquiry, the Tribunal is satisfied either that there is collusion between the person making the claim and the person against whom it is made, or that the person against whom the claim is made has failed to contest it. In either case the Tribunal may, for reasons to be recorded in writing, direct that the insurer who may be liable in respect of the claim be impleaded as a party; and the insurer so impleaded then has, without prejudice to the limited statutory defences now contained in section 150(2), the right to contest the claim on all or any of the grounds available to the person against whom the claim has been made. The provision matters because without such an order the insurer cannot dispute negligence or quantum at large. The Tribunal's powers in this area were considered in National Insurance Co. Ltd v. Swaran Singh, (2004) 3 SCC 297, where it was held that the Tribunal may also decide disputes between the insurer and the insured in the course of adjudicating the claim, and may direct that an insurer who has satisfied the award be reimbursed by the insured, that direction being enforceable through section 174.

3. What are the provisions as to interest and costs? Section 171 provides that where a Tribunal allows a claim it may direct that, in addition to the compensation, simple interest be paid at such rate and from such date, not earlier than the date of making the claim, as it may specify. The rate is a matter for the Tribunal; nine per cent was allowed by the Supreme Court in Kaushnuma Begum v. New India Assurance Co. Ltd, (2001) 2 SCC 9, and again in Erudhaya Priya v. State Express Transport Corporation Ltd, decided on 27 July 2020. Section 172 empowers the Tribunal, for reasons recorded in writing, to order special costs by way of compensation where the policy of insurance is void because it was obtained by representation of a fact false in a material particular, or where a party or insurer has put forward a false or vexatious claim or defence. Such costs may not exceed one thousand rupees, they do not exempt the person from criminal liability in respect of the same misrepresentation, claim or defence, and the amount is taken into account in any subsequent suit for damages on the same matter.