Award of compensatory costs in certain cases
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Summary
If a Claims Tribunal finds that an insurance policy was obtained by a materially false representation, or that any party or insurer has put forward a false or vexatious claim or defence, it can order the guilty party to pay special costs as compensation to the insurer or to the party harmed. The Tribunal must record its reasons in writing and special costs cannot exceed one thousand rupees. Such an order does not remove any criminal liability and the amount awarded will be taken into account in any later suit about the same misrepresentation or claim.
Example
Priya states on a motor policy that her car has never been in an accident, but the insurer proves she lied to get cheaper cover. The Claims Tribunal records reasons in writing and orders Priya to pay special costs to the insurer, capped at Rs 1,000. Any criminal action can still proceed and the awarded amount will be counted in any later suit about the same misrepresentation.
Bare Act
Enacted text(1) Any Claims Tribunal adjudicating upon any claim for compensation under this Act, may in any case where it is satisfied for reasons to be recorded by it in writing that—
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(a) the policy of insurance is void on the ground that it was obtained by representation of fact which was false in any material particular, or
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(b) any party or insurer has put forward a false or vexatious claim or defence, such Tribunal may make an order for the payment, by the party who is guilty of misrepresentation or by whom such claim or defence has been put forward of special costs by way of compensation to the insurer or, as the case may be, to the party against whom such claim or defence has been put forward.
(2) No Claims Tribunal shall pass an order for special costs under sub-section (1) for any amount exceeding one thousand rupees.
(3) No person or insurer against whom an order has been made under this section shall, by reason thereof be exempted from any criminal liability in respect of such mis-representation, claim or defence as is referred to in sub-section (1).
(4) Any amount awarded by way of compensation under this section in respect of any misrepresentation, claim or defence, shall be taken into account in any subsequent suit for damages for compensation in respect of such misrepresentation, claim or defence.
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