The Insurance Board (IB) has claimed that the order of the Patan Appellate Court to stay the implementation of the payment of liability to United Insurance Company and the order to Agni Insurance Company to stop business was an interference in the jurisdiction of the regulatory bodies. A writ petition has also been filed at the Supreme Court on November 3 this year on behalf of the IB, demanding annulment of the order for reason of its failing to meet the processes. 
A single bench of Supreme Court Justice Devendra Gopal Shrestha issued a mandamus to the Appellate Court on Sunday (Nov 29) to present response stating reasons for issuing the interim order.

The judges of the Appellate Court of Patan Kumar Chudal  and Durga Dutta Bhatta  had served an interim order in the month of June to stay the payment of liability to the United Insurance Company  and to  stop the business of Agni Insurance Company pending final decision.  

The Appellate Court feels that it will be an irreparable loss not to implement the decision of the IB in the context that the insurance and re-insurance have been already done as per legal procedures and the insurance money has been already paid on the basis of evaluation of insurer and re-insurer. The appeal pleads for the payment of entire liability by taking bank guarantee or any other reliable security from the insured against the additional disputed amount if the later demands the payment of insurance money.

CG Electronics of Chaudhari Group had caught fire on October 14, 2012. The IB had decided to stop the payment of insurance and had imposed partial restriction on the company’s business saying that the insurance transactions on the loss caused by fire were against law. In the on-the-spot observation report, the IB has said that action was taken for failing to observe even ordinary rules to be followed on the rate of fire insurance and for failing to inform about the insurance transactions carried out with the management. The company had provided waiver on the insurance fees illegally for installing fire control system. The report of the survey, however, shows that upon inquiry it was discovered that no fire control system was ever installed and that the fire was extinguished with the use of fire brigade. 

 Based on the unsatisfactory clarification of the chief of the department of risk assessment and payment of claim, the IB has been stating that the order to stop fire insurance business of Agni Insurance and the fine imposed on the concerned employees is legal. The IB, however, is defending itself saying that to hold repeated hearings even after the details of on-the-spot observation, insurance policy report and the clarification of the company on the payment of claim is against natural law. 

The company is saying that floater insurance, declared insurance and the insurance of buildings and machineries while insuring the property of Chaudhari Group which is also a founder shareholder of Insurance Company. But the Committee has concluded that the insured amount of equipment have not been quoted,  Insurance fees have not been adjusted, proposal forms were not properly filled and insurance was done on credit by accepting risk without receiving insurance fees. The company has made it clear that it has directed to refund the paid insurance amount from the Chaudhari Group saying that it is against basic arrangement of insurance and also against law to get more payment than the cost of the actual stock of insured objects. 

The appeal says that the action of the court to order the payment of the insurance claim treading in areas where its responsibility is not established, is out of its jurisdiction and erroneous. The IB has been a systematic and advanced regulatory agency of the insurance business. It has the authority to register the insurer, renew policies, stop insurance business in course of regulation, order payment claim, carry out observation and supervision as well as take action. In such situation, the interim order issued before the final verdict from the Appellate Court risks ending the rationale of the regulatory agencies.

--by Gopal Saud