The Punjab and Haryana High Court has clarified that filing a claim before a Permanent Lok Adalat under Section 22C of the Legal Services Authorities Act, 1987 does not require prior notice to the insurer. This ruling reinforces the summary, accessible nature of Lok Adalat proceedings and removes a procedural barrier often misused to delay insurance claims.
Background & Facts
The Dispute
The dispute arose from a loan insurance policy issued by ICICI Lombard General Insurance Company to the deceased insured, whose husband, Respondent No.1, sought payment of the insured sum after her death. The policy covered the outstanding loan amount up to Rs. 13 lakhs in the event of the insured’s death. The insured passed away on 25.03.2017. Despite the occurrence of the insured event, the petitioner-insurer refused to settle the claim.
Key Facts
- The insured loan was extended by Indiabulls Housing Finance Limited
- The insurance policy was issued by ICICI Lombard General Insurance Company Ltd.
- The insured sum assured under the policy was Rs. 13,00,000
- The insured died on 25.03.2017
- Respondent No.1, the husband and legal heir, filed an application before the Permanent Lok Adalat on 20.08.2019 seeking payment of Rs. 13 lakhs, interest, compensation, and legal expenses
- No prior legal notice was served on the insurer before filing the application
- The insurer was served notice by the Permanent Lok Adalat and participated fully in the proceedings
Procedural History
- 20.08.2019: Application filed by Respondent No.1 before the Permanent Lok Adalat
- 2019 - December 2023: Multiple hearings conducted by the PLA to facilitate settlement
- 07.02.2024: PLA framed terms of proposed settlement under Section 22C(7) of the 1987 Act
- 06.05.2024: PLA passed award directing payment of Rs. 13 lakhs with 9% interest from 20.08.2019, plus Rs. 30,000 as compensation and legal expenses
- 17.04.2025: Petition filed under Articles 226/227 of the Constitution challenging the award
- 30.04.2026: Judgment delivered by the High Court
Relief Sought
The petitioner sought setting aside of the PLA’s award dated 06.05.2024, particularly challenging:
- The award of Rs. 13 lakhs
- Interest at 9% from 20.08.2019
- Compensation and legal expenses of Rs. 30,000
The petitioner contended that the PLA lacked jurisdiction due to non-service of prior notice and non-compliance with Canara Bank v. G.S. Jayarama.
The Legal Issue
The central question was whether Section 22C of the Legal Services Authorities Act, 1987 mandates the service of a prior legal notice upon the insurer before filing an application before the Permanent Lok Adalat, and whether failure to do so vitiates the entire proceeding.
Arguments Presented
For the Petitioner
The petitioner’s counsel argued that the Permanent Lok Adalat erred in proceeding without prior notice to the insurer, relying on the Supreme Court’s decision in Canara Bank v. G.S. Jayarama, which emphasized procedural compliance in similar statutory forums. It was contended that the absence of a pre-filing notice amounted to a denial of natural justice and rendered the award void. The petitioner further argued that since there was no default or delay attributable to it, the award of compensation and legal expenses was unjustified.
For the Respondent
The respondents countered that the Legal Services Authorities Act, 1987, specifically under Section 22C, does not prescribe any requirement of prior notice. They emphasized that the insurer was duly served with notice by the PLA, appeared before it, and participated in multiple hearings spanning over four years. The PLA had attempted conciliation from 2019 to December 2023, framed settlement terms on 07.02.2024, and only passed a final award after affording both parties full opportunity to be heard. The respondents argued that the petitioner’s challenge was a technical evasion of liability.
The Court's Analysis
The Court examined the statutory framework of Section 22C of the Legal Services Authorities Act, 1987, which empowers Permanent Lok Adalats to adjudicate disputes relating to public utility services, including insurance. The Court noted that unlike the Negotiable Instruments Act, 1881 or the Companies Act, 2013, which explicitly require prior notice before initiating legal proceedings, the 1987 Act contains no such condition.
"It is not a case of ex parte order whereas petitioner was duly served and it contested the matter before learned PLA, thus, service or receipt of notice prior to approaching the PLA has lost its significance."
The Court observed that the insurer was not only served with notice by the PLA but actively participated in proceedings over five years, including multiple hearings and settlement negotiations. The PLA, in compliance with Section 22C(7), framed terms of settlement and gave both parties an opportunity to respond before passing the final award. The Court held that the petitioner’s participation negated any claim of procedural prejudice.
The Court further distinguished Canara Bank v. G.S. Jayarama, noting that the Supreme Court’s observations in that case pertained to the interpretation of the Banking Regulation Act and the requirement of notice under a different statutory regime. The principles therein could not be mechanically extended to the 1987 Act, which is designed for expeditious dispute resolution.
Regarding compensation and legal expenses, the Court accepted the respondent’s concession that the insurer had not acted in bad faith. Consequently, the award of Rs. 30,000 was reduced to Rs. 0, with Rs. 25,000 for compensation and Rs. 5,000 for legal expenses being set aside.
On interest, the Court found no error in the PLA’s direction to award 9% interest from the date of application (20.08.2019), as the claim was not filed immediately after the insured’s death, and the insurer had not been put on notice until the PLA proceedings commenced.
The Verdict
The writ petition was disposed of in part. The Court upheld the Permanent Lok Adalat’s award of Rs. 13,00,000 with interest at 9% per annum from 20.08.2019 until realization. The awards of Rs. 25,000 as compensation and Rs. 5,000 as legal expenses were set aside. The petitioner is directed to pay the principal sum of Rs. 13,00,000 with interest within 8 weeks from the date of judgment. All pending applications are dismissed.
What This Means For Similar Cases
Prior Notice Is Not Mandatory in PLA Proceedings
- Practitioners need not serve pre-filing notices to insurers or service providers before approaching a Permanent Lok Adalat under Section 22C
- The absence of prior notice cannot be grounds to challenge the jurisdiction or validity of a PLA award
- This aligns with the legislative intent of the 1987 Act to provide accessible, non-technical dispute resolution
Participation Waives Procedural Objections
- If a party appears before the PLA and contests the claim, any objection to lack of prior notice is deemed waived
- Courts will not entertain technical challenges where the party had full opportunity to present its case
- This principle applies equally to banks, insurers, and public utility service providers
Compensation Requires Demonstrable Fault
- Awards of compensation and legal expenses under Section 22C require proof of mala fide conduct, delay, or harassment
- Mere refusal to settle a claim, without evidence of bad faith, does not justify such awards
- Practitioners should now focus on proving conduct, not just non-payment, to claim additional compensation
