Page 49 - Insurance Times August 2019

LEGAL

Vehicle Insurance

Delhi HC asks Air Chartered Services, Panel favours cryptocurrency ban in India

United India Insurance Co. to pay com- An inter-ministerial committee set up by the government
on virtual currencies has proposed banning of private
pensation of Rs 50 lakhs cryptocurrencies in India by enacting a law and imposing
A single-judge bench comprising Justice Suresh Kumar Kait fines and penalties for carrying on activities related to such
directed Air Chartered Services Pvt Ltd and United India cryptocurrencies.
Insurance Company to pay a compensation amounting Rs The committee headed by finance secretary Subhash
50 lakhs in a common judgment for three writ petitions.
Chandra Garg has proposed a draft bill “Banning of
The issue arose when an air ambulance which flew from Cryptocurrency & Regulation of Official Digital Currency Bill,
Patna to Delhi crashed in Faridabad due to bad weather 2019", which has been placed in the public domain.
leading to loss of eight lives. It was the fault of the Air Traf- The committee has, however, taken a lenient view on the
fic Controller (ATC) who allowed the single engine aircraft government launching an official digital currency, asking it
to fly in bad weather conditions even if it went against the to keep an open mind on the matter. “As virtual currencies
sub-rules 2.2 and 2.3 of Civil Aviation Rule under provisions and its underlying technology are still evolving, the group
of Rule 133A of the Aircraft Rules, 1937.
has proposed that the government may establish a stand-
The main contention of these petitions was regarding the ing committee to revisit the issues addressed in the report
compensation which according to the petitioners was to be as and when required," it said.
paid by the Air Chartered Services and the United India The committee which also had secretary MEITY, chairman
Insurance Company as well. The United India Insurance Sebi and RBI deputy governor as its members has suggested
Company, who was one of the respondents in this case the use of distributed-ledger technology (DLT) in India, es-
along with Air Chartered services, contended that the in- pecially in financial services. “The DLT-based systems can be
surance company is not entitled to pay any compensation used by banks and other financial firms for processes such
as there was no contract between the petitioners and the as loan-issuance tracking, collateral management, fraud
company. Thus they will not be entitled to the compensa- detection and claims management in insurance and recon-
tion of Rs 50 lakhs, but only Rs. 7.50 lakhs as per the Act ciliation systems in the securities market," the report said.
of 1972.
The committee, which had ministry of electronics and infor-
The court held that the liability of the carrier shall be de- mation technology secretary Ajay Prakash Sawhney, Securi-
termined by First, second and third schedules of the Act ties and Exchange Board of India chairman Ajay Tyagi and
and said that the payment made under the 1923 Act will RBI deputy governor B.P. Kanungo as its members, has sug-
have to be adjusted with the liability as determined under gested the use of distributed ledger technology (DLT) or
1972 Act which says that a carrier by a special contract may blockchain in India, especially in the field of financial services.
agree to a higher limit than its liability.
“The DLT-based systems can be used by banks and other
The HC thus directed the Air Chartered Services to pay Rs. financial firms for processes such as loan-issuance tracking,
7.50 lakh as per its statutory liability under the 1972 Act collateral management, fraud detection and claims man-
and Rs 42.5 lakh with interest to United India Insurance agement in insurance and reconciliation systems in the
Company as compensation to the petitioners. securities market," the report said.

The Insurance Times, August 2019 49