TMI Blog2018 (5) TMI 327X X X X Extracts X X X X X X X X Extracts X X X X ..... s the same was not raised by the insurer. The insurance-company has, on facts, repudiated the claim by denying to accept the liability on the basis of the aforesaid reasons. No inference can be drawn that there is some kind of dispute with regard to quantification. It is a denial to indemnify the loss as claimed by the respondent. Such a situation, according to us, falls on all fours within the concept of denial of disputes and non-acceptance of liability. It is not a situation where a stand is taken that certain claims pertain to excepted matters and are, hence, not arbitrable. The language used in the second part is absolutely categorical and unequivocal inasmuch as it stipulates that it is clearly agreed and understood that no difference or disputes shall be referable to arbitration if the company has disputed or not accepted the liability - the High Court has fallen into grave error by expressing the opinion that there is incongruity between Part II and Part III. Appeal allowed. - Civil Appeal No. 2268 of 2018 (@ S.L.P. (C) No. 33621 of 2017) - - - Dated:- 2-5-2018 - Mr. Dipak Misra, Mr. A.M. Khanwilkar And Dr. D.Y. Chandrachud For the Appellant(s) : Ms. Manjeet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... repudiated and the insurer had disputed or not accepted the liability under or in respect of the policy, no difference or dispute could have been referred to arbitration. It is his further submission that the High Court has adopted an erroneous approach in the interpretation of the said Clause by expressing the view that it suffers from ambiguity and it needs to be purposively read failing which the arbitration clause becomes meaningless. Reliance has been placed on the decisions in General Assurance Society Ltd. v. Chandumull Jain and another AIR 1966 SC 1644 , Oriental Insurance Co. Ltd. v. Samayanallur Primary Agricultural Co-op. Bank AIR 2000 SC 10 and United India Insurance Co. Ltd. v. Harchand Rai Chandan Lal (2004) 8 SCC 644 . 6. Learned senior counsel for the respondent, per contra, would contend that the order passed by the High Court is absolutely impregnable and in the obtaining factual matrix, the view expressed by the High Court cannot be found fault with. He would further urge that the letter of repudiation, when appositely understood, does not relate to disputation and non-acceptance of the liability under or in respect of the policy but, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction or suit upon the policy is taken recourse to, prior award of the arbitrator/arbitrators with regard to the amount of loss or damage is a condition precedent. The High Court, as the impugned order would show, has laid emphasis on the second part and, on that basis, opined that the second part and third part do not have harmony and, in fact, sound a discordant note, for the scheme cannot be split into two parts, one to be decided by the arbitration and the other in the suit. 9. Before we address the factum of repudiation and its impact on the Clause, we think it appropriate to discuss the authorities cited by the learned counsel for the parties. In General Assurance Society Ltd. (supra), the Constitution Bench, while dealing with the contract of insurance, has opined that such a contract is entered into on the basis of commercial transactions and while interpreting the documents relating to a contract of insurance, the duty of the court is to interpret the words in which the contract is expressed by the parties because it is not for the court to make a new contract, howsoever reasonable. 10. In Oriental Insurance Co. Ltd. (supra), a two-Judge Bench has opined that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... only during the pendency of the proceedings under Section 11(6). Such appointment by the Corporation after forfeiture of its right is of no consequence and has not disentitled the dealer to seek appointment of the arbitrator by the Chief Justice under Section 11(6). We answer the above questions accordingly. 14. In this regard, a reference to the authority in Newton Engineering and Chemicals Limited v. Indian Oil Corporation Limited and others (2013) 4 SCC 44 is fruitful. In the said case, there was an express, clear and unequivocal arbitration clause between the parties which provided that disputes shall be referred to the sole arbitration of the Executive Director (Northern Region) of the respondent Corporation and if the said authority was unable or unwilling to act as the sole arbitrator, the matters shall be referred to the person designated by such ED (NR) in his place who is willing to act as the sole arbitrator. The arbitration clause further provided that if none of them is able to act as an arbitrator, no other person should act as a sole arbitrator and if the office of the said authority ceases to exist in the Corporation and the parties are unable to ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... whatsoever and, therefore, the dispute raised by the appellant company was not covered by the arbitration clause. The Court scanned the anatomy of Clauses 13 and 18 and then referred to the decision in Scott v. Avery (1856) 25 LJ Ex 308 : 5 HLC 811 : 4 WR 746 naming the clause to be Scott v. Avery clause and quoted a passage from Russel on Arbitration which is to the following effect:- Even a clause of this type, however, is not absolute in effect: where the court orders that the arbitration agreement cease to have effect in relation to a particular dispute, it has a discretion to order further that the Scott v. Avery clause cease to have effect too. (Vide pp. 57, 58 of Russel on Arbitration, Eighteenth Edn.). In the said case, reliance was placed on Viney v. Bignold (1888) 20 QBD 171,172 wherein it had been held that the determination of the amount by arbitration was a condition precedent to the right to recover on the policy and if any action was brought without an award obtained in arbitration, it was not maintainable. The other decision that was pressed into service was Caledonian Insurance Company v. Andrew Gilmour 1893 AC 85 : 9 TLR 146 : 57 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Dominions Insurance Company v. Dinanath and Hemraj ILR 47 Bom 509 : AIR 1923 249 : 25 Bom LR 164 had interpreted identical Clause 13. The High Court had eventually ruled:- But in clause 13 there are various contingencies set out which if established entitle the insured to bring an action without an award having been made by arbitrators. One of these contingencies is if the claim be made and rejected‟ which if established gives a right of action, the period of limitation provided for the suit being fixed at three months from the date of the rejection. While it is also provided that where arbitration takes place in pursuance of Condition 18 of the policy, three months‟ time should be allowed for a suit to be brought after the award has been made. Therefore it is quite obvious that a right of action accrued after the company rejected the claim. Naturally that question would have first to be decided by suit as under clause 18 that question could never have been referred to arbitration. This Court in The Vulcan Insurance Co. Ltd (supra) approved the view of the Bombay High Court. 19. At this stage, we may state, in brief, the factual score in The Vulc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 20. We may presently refer to the decision of the Madras High Court in M/s. Jumbo Bags Ltd. (supra). In the said case, learned Chief Justice was interpreting Clause 13 of the policy conditions. Referring to The Vulcan Insurance Co. Ltd. (supra), he has held thus:- The dispute which is not referable to arbitration, being not covered by the clause cannot be over the subject matter of arbitration, and the remedy of the insured in this case is only to institute a suit. And again :- I am of the view that the remedy of arbitration is not available to the petitioner herein in view of the arbitration clause specifically excluding the mode of adjudication of disputes by arbitration, where a claim is repudiated in toto. The remedy would thus only be of a civil suit in accordance with law. We concur with the said view. 21. In Essar Steel India Limited (supra), the learned Single Judge of the Bombay High Court was dealing with a situation where the insurer had taken the stand that the policy was void ab initio. Repelling the said stand, the learned Single Judge held that the disputes could be referred to arbitration since the plea advanced by the owner coul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... use stipulates that under certain circumstances there can be no arbitration, and they are demonstrably clear then the controversy pertaining to the appointment of arbitrator has to be put to rest. 25. In the instant case, Clause 13 categorically lays the postulate that if the insurer has disputed or not accepted the liability, no difference or dispute shall be referred to arbitration. The thrust of the matter is whether the insurer has disputed or not accepted the liability under or in respect of the policy. The rejection of the claim of the respondent made vide letter dated 26.12.2014 ascribes the following reasons:- 1. Alleged loss of imported coal is clearly an inventory shortage. 2. There was no actual loss of stock in process. 3. The damage to the sponge iron is due to inherent vice. 4. The loss towards building/sheds etc. are exaggerated to cover insured maintenance. 5. As there is no material damage thus business interruption loss does not triggered. 26. The aforesaid communication, submits the learned senior counsel for the respondent, does not amount to denial of liability under or in respect of the policy. On a reading of the communication ..... 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