IMPORTANT POINT
The rejection of claims based on non-transferable rights was not mala-fide, and the penalty under Clause 22(b) was quantified at Rs. 75,000.

JUDGMENT :

ALOK MATHUR, J.

1. Heard learned counsel for the petitioner and learned standing counsel for the State.

2. The present writ petition has been preferred by the petitioner for quashing of the order dated 31.08.2018 passed by the Permanent Lok Adalat, Lucknow in P.L.A. Case No. 178 of 2016 (Smt. Urmila and Others vs. Oriental Insurance Company Limited and Others) by which the Permanent Lok Adalat has awarded a sum of Rs. 2,50,000/- with 9% simple interest along with Rs. 5,000/- litigation expenses against the petitioner-insurance company.

3. Learned counsel for the petitioner-insurance company has submitted that the judgment passed by the Permanent Lok Adalat is against Clause 4 of the Agreement dated 19.11.2009 entered into between the Government of Uttar Pradesh and the petitioner-insurance company.

4. It is further submitted that as per Clause 4 of the Agreement, the documents mentioned in the said clause are required to be produced to the petitioner-insurance company for claim process. Learned counsel for the petitioner-Insurance Company has submitted that the claims of the respondents were repudiated as they had provided the Khatauni of category Class 2, under which the lessee has no right to transfer the land. The petitioner-insurance company was under impression that as per clause 4, the claim of those persons is to be given who have computerized khatauni with transferrable rights. The claim was not repudiated with any bad intention or just to deny the claim of the respondents.

5. The second submission raised by the learned counsel for the petitioner-Insurance Company is that imposition of maximum penalty as provided under Clause 22(b) of the Agreement is illegal and exorbitant as there was no fault on the part of petitioner-Insurance Company while rejecting claim of the claimants. It is further submitted that in almost identical matters wherein also the judgments of the Permanent Lok Adalat were under challenge pertaining to dispute for rejection of claims of the claimants under the Agreement dated 19.11.2009 have been decided by this Court in Writ Petition No. 20736 of (M/S) of 2018 (The Oriental Insurance Company Limited through Divisional Manager vs. Chote Singh and Others) and Writ Petition No. 5324 of (M/S) 2015 (Oriental Insurance Company Ltd. through its Divisional Manager vs. Smt. Ramkali @ Rajkumari and Others) wherein this Court has quantified and reduced the penalty from Rs. 1,50,000/- to Rs. 50,000/- and Rs. 75,000/ - respectively. The relevant portion of the judgment passed in the case of Chote Singh (supra) is reproduced hereunder for ready reference:

“Insofar as the quantum of penalty questioned in the present petition is concerned, it is true that the imposition of penalty in a situation of denial of claim is Rs. One Lakh Fifty Thousand but the present case in a situation of repudiation letter dated 7.4.2011 not being final, can only be treated to be a case of delayed payment, therefore, the quantification of penalty to the tune of Rs. One Lakh Fifty Thousand is clearly illegal and arbitrary and beyond the scope of clause 22(b) of the agreement. This Court would also note that every Permanent Lok Adalat is under a bounden duty to undertake the process of conciliation before advancing to adjudicate a claim on merit. This aspect of the matter has also not been dealt with by the Permanent Lok Adalat in a manner prescribed under law, therefore, the imposition of maximum penalty, in my humble view, is exorbitant.

This Court having regard to the facts and circumstances of the present case as well as the resultant delay would quantify the amount of penalty at Rs. Fifty Thousand and to this extent, the impugned award deserves to be modified.

The amount of penalty modified to the aforesaid extent is thus affirmed. The award is accordingly modified. The petitioner is directed to discharge the liability not later than a period of one month from today.”

6. The relevant part of the judgment passed in the case of Smt.