RS 900CR CLAIM – Settle Essar dispute via arbitration: SC to New India

In a setback to New India Assurance, the Supreme Court directed the company to go for arbitration to settle its dispute over a Rs 900-crore terror insurance claim raised by Essar Steel after a Naxal bomb attack destroyed the steelmaker’s 267 km pipeline in Chhattisgarh in 2010.

Essar Steel had obtained a terrorism policy for Rs 19,000 crore in November 2009 and insured its property against direct physical damage or loss due to terror acts. On March 23, 2010, naxalites blew up the company’s slurry pipeline, interrupting business for eight months. The insurance company had, however, refused Essar’s claim alleging fraud and non-disclosure of an earlier attack.

The SC bench of Justices Anil Dave and A K Goel dismissed insurance company’s request to appeal against a 2013 Bombay high court order that had accepted Essar’s plea to appoint arbitrators and held that NIA has to prove its allegations. The SC said that the arbitrators would decide all issues, including allegation of fraud against Essar. Hemant Kumar, general counsel for Essar, when contacted, said the arbitration would now be pursued. Essar had refuted allegations of any fraud or nondisclosure. Justice Anoop Mohta of the HC had in May 2013 appointed former SC judges Justices B P Singh and Aftab Alam as arbitrators. The arbitration, though, never began, as New India Assurance moved the SC in 2013 for leave to appeal. The SC order now comes as a relief to Essar which had invoked the arbitration clause.

The insurance company had dishonoured the terror policy alleging fraud, despite accepting a premium of Rs 2 crore from Essar after verification of all particulars, the SC observed in court. The case, said observers, could be a glaring example of how public sector insurance company was refusing claims and persisting in litigation. The controversy before the SC was whether an insurance company could refuse a by alleging fraud which was not established before any legal or arbitral forum

Source: Times of India

Date: 09/09/2015

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