Jharkhand High Court
Aviva Life Insurance Company India Ltd vs Chitta Ranjan Das S/O Late Sh Jiban ... on 13 March, 2024
Author: Navneet Kumar
Bench: Navneet Kumar
IN THE HIGH COURT OF JHARKHAND AT RANCHI
(Commercial Appellate Jurisdiction)
Commercial Appeal No. 06 of 2023
1. Aviva Life Insurance Company India Ltd, presently having its corporate
office at 401-A, 4th Floor, Block A, DLF Cyber Park Sector 20, NH-8, PO &
PS DLF Phase II, Dist Gurgaon now Gurugram, State Haryana formerly at
Unit No. 401U Aviva Tower, Sector 43, Opposite DLF Golf Course, PO &
PS Sushant Lok, Dist Gurgaon now Gurugram, State Haryana
2. Aviva Life Insurance Company India Ltd, presently having its branch
office at Unit No. 401, 4th Floor, Mahavir Tower, Behind JD High Street
Mall, Main Road, PO & PS, District Ranchi, State of Jharkhand formerly at
City Centre, PO, PS & Dist Dhanbad
Both through their authorized representative Sri Prateek Narang aged
about 33 Years S/O Late S.K. Narang working as Manager Legal in Aviva
Life Insurance Company India Ltd 401-A, 4th Floor, Block A, DLF Cyber
Park Sector 20, NH-8, PO & PS DLF Phase II, Dist Gurgaon now
Gurugram, State Haryana ... Appellants
Versus
Chitta Ranjan Das S/O Late Sh Jiban Krishna Das R/O -17/ Vistipara, Kali
mandir Colony, H.E. School Road, PO, PS & Dist-Dhanbad
... Respondent
---------------
CORAM: HON'BLE THE ACTING CHIEF JUSTICE HON'BLE MR. JUSTICE NAVNEET KUMAR For the Appellants : Mr. Bharat Kumar, Advocate For the Respondent : Mr. P.K. Bhattacharya, Advocate Mr. Aditya Jha, Advocate
---------------
13th March 2024 Per, Shree Chandrashekhar, A.C.J. Aggrieved by the decision of the Commercial Court at Dhanbad in Arbitration Case No.1 of 2016, Aviva Life Insurance Company India Limited (in short, Insurance Company) has filed this Commercial Appeal under section 13(1-A) of the Commercial Courts Act, 2015.
2. The Arbitration Case No.1 of 2016 has been dismissed on the ground that a challenge to the arbitral Award cannot be laid beyond the period of limitation under section 34(3) of the Arbitration and Conciliation Act, 1996 (in short, AC Act).
3. The Presiding Officer of the Commercial Court has held as under:
2 Comm. Appeal No. 6/2023"7. Coming to the issue of Limitation, I find that the award was published on 24/03/2014 which was challenged by the petitioners before this Court on 18.01.2016. Meaning thereby this case was filed beyond the period of limitation as prescribed U/s 34 (3) of the Arbitration and Conciliation Act. A plain reading of Sub-section (3) along with proviso to the Section 34 of the 1996 Act, shows that the application for setting aside the award on the grounds mentioned in sub-section (2) of Section 34 could be made within three months and the period can only be extended for a further period of thirty days on showing sufficient cause and not thereafter. The use of the words "but not thereafter" in the proviso makes it clear that the extension cannot be beyond thirty days and I find that the sole objection of the Claimant at this stage is that the present case is barred by Limitation as contemplated U/s 34 (3) of the Arbitration and Conciliation Act and thus case is not maintainable.
8. From the perusal of the case record it appears that the award was passed by the sole arbitrator Sri Devi Sharan Sinha on 24.03.2014, which was challenged by the petitioners before this Court on 18.01.2016 after 659 days and the petitioners have admitted in para 7 of their plaint as "it is pertinent to mention here that prior to 21.01.2015, the petitioners were not aware of passing of any award dated 24.03.2014 passed by the Sole Arbitrator as no notice of making the award was ever served on the petitioners at any point of time" which shows that the said award had been come in the knowledge of the petitioners on 21.01.2015 and the said award was challenged before the court on 18.01.2016 after 362 days which is beyond the period of limitation as prescribed U/s 34 (3) of the Arbitration and Conciliation Act.
9. The Hon'ble Apex Court in Simplex Infrastructure Ltd. Vs. Union of India, reported in (2019) 2 SCC 455 has held that the period of limitation prescribed for preferring a petition to set aside an award U/s 34 of the Arbitration and Conciliation Act cannot be extended and if extended it will amount to breach of clear statutory mandate.
10. In view of the aforesaid facts and circumstances of the case and the discussions made in the foregoing paragraphs and considering the judicial pronouncement of the Hon'ble Apex Court, I find that the present case filed by the petitioner under Section 34 of the Arbitration and Conciliation Act is barred by limitation and not maintainable and therefore it is fit to be dismissed. Accordingly, the petition is dismissed being barred by Limitation as prescribed U/s 34 (3) of the Arbitration and Conciliation Act. O/c is directed to consign the record in the record room as per Rules."
4. This Commercial Appeal is premised on the ground that the limitation of three months shall start from the date a signed copy of the arbitral Award was delivered to the Insurance Company. Mr. Bharat Kumar, the learned counsel for the Insurance Company refers to sub-section (3) to section 34 of the AC Act to submit that the arbitral Award was never served upon the Insurance Company and while so, the petition under section 34 could not have been dismissed on the ground of limitation. The learned counsel further submits that an arbitral Award shall also fall within the sweep of the expression "in conflict with the public policy of India" and vitiated by "patent illegality" if the appointment of the Arbitrator is not in accordance with law and, as a consequence whereof, the arbitral 3 Comm. Appeal No. 6/2023 Award shall be rendered illegal.
5. Briefly stated, the respondent (hereinafter referred as "claimant") who was aggrieved by denial of the Insurance claim vide letter dated 31st January 2012 sent legal notices to the Claims Management Group, Aviva Life Insurance on 5th March 2012, 28th March 2012 and 9th May 2012 seeking documents pertaining to claim evaluation process for settlement of the dispute. The Insurance Company did not respond to his letters and therefore invoking clause 19 of the Policy No. BLA-0001666 the claimant appointed Mr. Debi Sharan Sinha, a practicing lawyer and General Secretary of the Bar Association at Dhanbad Civil Court, for settlement of his claim; provisionally assessed at Rs.20 lacs with 18% interest. On receiving this communication from the claimant, the Insurance Company appeared before the Arbitrator and filed an application under section 16(2) of the AC Act. In this application, the Insurance Company put forth its stand that there is no arbitration agreement between the parties as per section 7(2) of the AC Act. The Insurance Company referred to a decision in "Vijaya Lakshmi Builders and Developers (P) Ltd. v. A. Rajender & Ors." Decided on 8th February 2006, wherein the High Court of Andhra Pradesh held that only those disputes in respect to which the parties had specifically agreed to the Arbitrator could be the subject matter of arbitration and only in such an event the parties can be referred to arbitration. The Insurance Company also placed reliance on the decision in "Saran Agency v. Hindustan Petroleum Corporation Ltd." decided on 19th March 2010, wherein the High Court of Madras held that the aggrieved party can avail the dispute resolution mechanism through arbitration if the same is provided in an agreement for resolving the dispute.
6. According to the Insurance Company, no decision was rendered by the Arbitrator on the application under section 16(2) of the AC Act. Pursuant to order dated 12th January 2024, the original records pertaining to Arbitration Case No.1 of 2016 alongwith the proceedings before the Arbitrator have been forwarded to this Court. The learned counsels appearing for the parties have admitted in the Court that any order drawn on 29th November 2013 dismissing the application under section 16(2) of the AC Act is not in the records. Even the arbitral Award dated 24th March 2014 does not record that the application under section 16(2) was dismissed. In 4 Comm. Appeal No. 6/2023 fact, what is recorded in the arbitral Award is that the learned counsels for the parties advanced their arguments on the application under section 16(2) of the AC Act and an order was drawn as regards the proceeding of that date; and nothing more. However, Mr. P.K. Bhattacharya, the learned counsel for the claimant submits that this is too late in the day for the Insurance Company to raise such technical objections in a petition under section 34 of the AC Act. The learned counsel for the claimant has questioned maintainability of the present Commercial Appeal on the ground that at the time when the Award was made on 24th March 2014 the provisions of the Commercial Courts Act, 2015 were not enforced. The learned counsel for the claimant has contended that the Insurance Company which appeared before the Arbitrator but did not file its written reply must be held a party in default which knowingly forfeited its rights to raise any objection to the arbitral proceedings.
7. The AC Act which is a self-contained Code mandates that the question of jurisdiction must be raised before the Arbitrator soon after the initiation of arbitration proceedings and the jurisdictional question is required to be determined as a preliminary issue.
8. In "McDermott International Inc. v. Burn Standard Co. Ltd." (2006) 11 SCC 181 the Hon'ble Supreme Court held as under:
"51. After the 1996 Act came into force, under Section 16 of the Act the party questioning the jurisdiction of the arbitrator has an obligation to raise the said question before the arbitrator. Such a question of jurisdiction could be raised if it is beyond the scope of his authority. It was required to be raised during arbitration proceedings or soon after initiation thereof. The jurisdictional question is required to be determined as a preliminary ground. A decision taken thereupon by the arbitrator would be the subject-matter of challenge under Section 34 of the Act. In the event the arbitrator opined that he had no jurisdiction in relation thereto an appeal there against was provided for under Section 37 of the Act."
9. The provisions in sections 4, 16 and 31 of the AC Act which the learned counsel for the parties referred in course of the hearing are extracted below:
4. Waiver of right to object.--A party who knows that--
(a) any provision of this Part from which the parties may derogate, or
(b) any requirement under the arbitration agreement, has not been complied with and yet proceeds with the arbitration without stating his objection to such non-compliance without undue delay or, if a time-limit is provided for stating that objection, within that period of time, shall be deemed to have waived his right to so object.
16. Competence of arbitral tribunal to rule on its jurisdiction.--(1) The 5 Comm. Appeal No. 6/2023 arbitral tribunal may rule on its own jurisdiction, including ruling on any objections with respect to the existence or validity of the arbitration agreement, and for that purpose,--
(a) an arbitration clause which forms part of a contract shall be treated as an agreement independent of the other terms of the contract; and
(b) a decision by the arbitral tribunal that the contract is null and void shall not entail ipso jure the invalidity of the arbitration clause. (2) A plea that the arbitral tribunal does not have jurisdiction shall be raised not later than the submission of the statement of defence; however, a party shall not be precluded from raising such a plea merely because that he has appointed, or participated in the appointment of, an arbitrator. (3) A plea that the arbitral tribunal is exceeding the scope of its authority shall be raised as soon as the matter alleged to be beyond the scope of its authority is raised during the arbitral proceedings.
(4) The arbitral tribunal may, in either of the cases referred to in sub-section (2) or sub-section (3), admit a later plea if it considers the delay justified. (5) The arbitral tribunal shall decide on a plea referred to in sub-section (2) or sub-section (3) and, where the arbitral tribunal takes a decision rejecting the plea, continue with the arbitral proceedings and make an arbitral award. (6) A party aggrieved by such an arbitral award may make an application for setting aside such an arbitral award in accordance with Section 34.
31. Form and contents of arbitral award.--(1) An arbitral award shall be made in writing and shall be signed by the members of the arbitral tribunal. (2) For the purposes of sub-section (1), in arbitral proceedings with more than one arbitrator, the signatures of the majority of all the members of the arbitral tribunal shall be sufficient so long as the reason for any omitted signature is stated.
(3) The arbitral award shall state the reasons upon which it is based, unless--
(a) the parties have agreed that no reasons are to be given; or
(b) the award is an arbitral award on agreed terms under Section 30. (4) The arbitral award shall state its date and the place of arbitration as determined in accordance with Section 20 and the award shall be deemed to have been made at that place.
(5) After the arbitral award is made, a signed copy shall be delivered to each party.
(6) The arbitral tribunal may, at any time during the arbitral proceedings, make an interim arbitral award on any matter with respect to which it may make a final arbitral award.
(7)(a) Unless otherwise agreed by the parties, where and in so far as an arbitral award is for the payment of money, the arbitral tribunal may include in the sum for which the award is made interest, at such rate as it deems reasonable, on the whole or any part of the money, for the whole or any part of the period between the date on which the cause of action arose and the date on which the award is made.
(b) A sum directed to be paid by an arbitral award shall, unless the award otherwise directs, carry interest at the rate of two percent higher than the current rate of interest prevalent on the date of award, from the date of award to the date of payment.
Explanation.--The expression "current rate of interest" shall have the same meaning as assigned to it under clause (b) of Section 2 of the Interest Act, 1978 (14 of 1978).
(8) The costs of an arbitration shall be fixed by the arbitral tribunal in accordance with Section 31-A."
6 Comm. Appeal No. 6/202310. The submission made on behalf of the claimant that the Insurance Company which filed an application under section 16(2) and argued the said application cannot raise objection to appointment of the Arbitrator is bereft of substance. Sub-section (2)(a)(v) of section 34 of the AC Act specifically provides that an arbitral Award can be set aside by the Court if the constitution of the arbitral Tribunal is not in accordance with the agreement of the parties. In "Dharma Prathishthanam v. Madhok Construction (P) Ltd." (2005) 9 SCC 686, the Hon'ble Supreme Court observed that the choice of the arbitral Tribunal and the reference of dispute to the Arbitrator both should be based on consent given either at the time of choosing the Arbitrator and making the reference or at the time of entering into the contract between the parties. The Hon'ble Supreme Court further observed that if there is an arbitration clause but the parties did not agree for the appointment of the Arbitrator, in such cases also, one party cannot usurp the jurisdiction of the Court and proceed to unilaterally appoint the Arbitrator.
11. In "Dharma Prathishthanam" the Hon'ble Supreme Court held as under:
"12. On a plain reading of the several provisions referred to hereinabove, we are clearly of the opinion that the procedure followed and the methodology adopted by the respondent is wholly unknown to law and the appointment of the sole arbitrator Shri Swami Dayal, the reference of disputes to such arbitrator and the ex parte proceedings and award given by the arbitrator are all void ab initio and hence nullity, liable to be ignored. In case of arbitration without the intervention of the court, the parties must rigorously stick to the agreement entered into between the two. If the arbitration clause names an arbitrator as the one already agreed upon, the appointment of an arbitrator poses no difficulty. If the arbitration clause does not name an arbitrator but provides for the manner in which the arbitrator is to be chosen and appointed, then the parties are bound to act accordingly. If the parties do not agree then arises the complication which has to be resolved by reference to the provisions of the Act. One party cannot usurp the jurisdiction of the court and proceed to act unilaterally. A unilateral appointment and a unilateral reference -- both will be illegal. It may make a difference if in respect of a unilateral appointment and reference the other party submits to the jurisdiction of the arbitrator and waives its rights which it has under the agreement, then the arbitrator may proceed with the reference and the party submitting to his jurisdiction and participating in the proceedings before him may later on be precluded and estopped from raising any objection in that regard......"
12. Section 11 of the AC Act which lays down the procedure for appointment of Arbitrators provides that the parties are free to agree on a procedure for appointing the Arbitrator. The appointment or the procedure 7 Comm. Appeal No. 6/2023 for appointment of the Arbitrator under sub-section (2) necessarily requires an arbitration agreement between the parties. Sub-section (2) to section 7 provides that an arbitration agreement may be in the form of an arbitration clause in a contract or in the form of a separate agreement. Sub-section (3) mandates that an arbitration agreement shall be in writing. What is contended on behalf of the claimant is that the Insurance Policy if properly construed contains an arbitration clause; that is, clause 19. However, in our opinion, clause 19 only indicates what shall be the law governing the parties and nothing more. It provides that "any and all disputes or differences arising out of or under this policy shall be governed by and determined in accordance with Indian law and by the Indian Courts". While a dispute between the parties can be resolved through arbitration and the arbitral proceedings shall be governed under the AC Act but clause 19 of the Insurance Policy cannot be construed containing an arbitration clause. The letter dated 3rd December 2012 of the claimant demonstrates in no uncertain terms that appointment of the Arbitrator was a unilateral act and the Insurance Company was not even consulted much less consented for appointment of Mr. Debi Sharan Sinha to act as an Arbitrator.
13. The letter dated 3rd December 2012 reads as under:
To, The Claims Management Group, Aviva Life Insurance, 2nd Floor, Prakashdeep Building, 7, Tolstoy Marg, New Delhi-110001 Appointment of Arbitrator as per Dispute Redressal Agreement/Aviva General Terms and Condition No.19 Governing Law of Dispute (Insurance Act Arbitration Provision) against Policy Holder No.BLA-0001666 of Rs.20,00,000/- (Rupees twenty lakhs) Policy value.
Sir, My client Chitta Ranjan Das, Son of Late Jiban Krishna Das and husband of Late Sushmita Das, Resident of House No.17, Kali Mandir Colony, Hirapur, Via H.E.School Road, P.O. & P.S. Dhanbad, Dist. Dhanbad servers the Notice with instructions to me (his Advocate) as under :-
1. That, my client after the death of his wife, the Policy Holder Late Sushmita Das on 25.10.2011, immediately submitted the claims through your prescribed format.
2. That, in response to that said claim format (dated 26.12.2011) vide your 8 Comm. Appeal No. 6/2023 Letter dated 31.1.2012, UIN/122N081V01 denied the claim of my client. Thus dispute arose on and from 31.01.2012.
3. That, my client vide Legal Notices dated 5.3.2012, 28.3.2012, 9.5.2012 sought the relevant documents pertaining to your Claim-Evaluation process, but the same is not fulfilled up-till-now in order to settle the dispute.
4. That, Clause No. 19 (Governing Law) reads as under :-
(i) 'Any and all disputes or differences arising out of or under this Policy shall be Governed by and determined in accordance with Indian Law and by the Indian Court'.
(ii) Now Indian Law as to settle the disputes is presently the Arbitration and conciliation Act, 1996 which provides settlement of disputes through Arbitration/Arbitrator, the dispute is in existence on and from the denial of claim vide your Letter dated 31.1.2012.
5. My client hereby appoints Sri Debi Sharan Sinha, Advocate, Hon'ble General Secretary/Bar Association/Dhanbad to settle the disputes/claim of my provisionally Rs.20,00,000/- with 18% per interest (A copy of this Arbitrator's appointment Letter is also being enclosed/supplied to Sri Debi Sharan Sinha, General Secretary Bar Association, Dhanbad).
Thanking you THROUGH (P.K.BHATTACHARYA) ADVOCATE DHANBAD
14. The main theme running through the provisions of the AC Act is the primacy to party autonomy. Therefore, any arbitral proceeding must be based on a written arbitration agreement between the parties and the terms thereof shall bind the Arbitrator and the parties both. The AC Act explicitly embodies and recognizes party autonomy in several provisions contained thereunder. In "Bharat Aluminium Co. v. Kaiser Aluminium Technical Services Inc." (2016) 4 SCC 126, the Hon'ble Supreme Court observed that the party autonomy is the brooding and guiding spirit of the arbitration. Expressing a similar view, in "Centrotrade Minerals & Metals Inc. v. Hindustan Copper Ltd." (2017) 2 SCC 228 the Hon'ble Supreme Court observed that the backbone of Arbitration is the party autonomy. This is therefore essential that the agreed procedure which was accepted by the parties must be adhered to in appointment of the Arbitrator. Clause 19 of the Insurance Policy does not provide any mechanism for appointment of the Arbitrator and, in fact, this is not the arbitration clause with reference to which the claimant could have proposed the name of the Arbitrator.
15. This is the case set up by the Insurance Company that no notice 9 Comm. Appeal No. 6/2023 of making of the arbitral Award was given to it. The Insurance Company pleaded that it was for the first time on 21st January 2015 when a notice of execution was served upon it from the Court of Civil Judge, Senior Division-I at Dhanbad in Execution Case No.61 of 2014, that it could know after inspection of the records that an arbitral Award was made on 24 th March 2014. In the application under section 34 of the AC Act, the Insurance Company set up this plea specifically in paragraph nos.4 and 7. However, the claimant who appeared in Arbitration Case No.1 of 2016 did not file his response thereto and was debarred from filing the written statement by an order dated 7th December 2017. Even during the hearing of Arbitration Case No.1 of 2016, the claimant did not set up a plea that the Insurance Company had notice of the arbitral Award dated 24 th March 2014 and, that, the petition under section 34 of the AC Act filed on 18 th January 2016 was barred by limitation. The original records do not indicate that a signed copy of the arbitral Award was delivered to the Insurance Company. There is no answer to this plea which was specifically raised by the Insurance Company in its petition under section 34 of the AC Act. The Commercial Court also did not reflect on this aspect of the matter and dismissed Arbitration Case No.1 of 2016 as barred by limitation.
16. On a glance at the provisions under sub-section (3) to section 34 of the AC Act, this becomes abundantly clear that the period of limitation of three months shall start from the date a copy of the arbitral Award is received by the aggrieved party. Sub-section (3) incorporates two requirements viz. (i) making of an arbitral Award and (ii) receiving of the arbitral Award by the aggrieved party who intends to challenge the arbitral Award by filing a petition under section 34 of the AC Act. The claimant who did not file his objection in the proceeding under section 34 of the AC Act is unable to demonstrate that before 21st January 2015 a copy of the arbitral Award dated 24th March 2014 was received by the Insurance Company. This is quite a well-accepted proposition that limitation starts to run from the date of knowledge. In "Union of India v. Tecco Trichy Engineers & Contractors"
(2005) 4 SCC 239 the Hon'ble Supreme Court observed as under:
"6. Form and contents of the arbitral award are provided by Section 31 of the Act. The arbitral award drawn up in the manner prescribed by Section 31 of the Act has to be signed and dated. According to sub-section (5), "after the arbitral award is made, a signed copy shall be delivered to each party". The term "party" is defined by clause (h) of Section 2 of the Act as meaning "a 10 Comm. Appeal No. 6/2023 party to an arbitration agreement". The definition is to be read as given unless the context otherwise requires. Under sub-section (3) of Section 34 the limitation of 3 months commences from the date on which "the party making that application" had received the arbitral award. We have to see what is the meaning to be assigned to the term "party" and "party making the application" for setting aside the award in the context of the State or a department of the Government, more so a large organisation like the Railways."
17. In "State of Maharashtra v. ARK Builders (P) Ltd." (2011) 4 SCC 616 the Hon'ble Supreme Court elucidated the law on the subject, as under:
"15. The highlighted portion of the judgment extracted above, leaves no room for doubt that the period of limitation prescribed under Section 34(3) of the Act would start running only from the date a signed copy of the award is delivered to/received by the party making the application for setting it aside under Section 34(1) of the Act. The legal position on the issue may be stated thus. If the law prescribes that a copy of the order/award is to be communicated, delivered, dispatched, forwarded, rendered or sent to the parties concerned in a particular way and in case the law also sets a period of limitation for challenging the order/award in question by the aggrieved party, then the period of limitation can only commence from the date on which the order/award was received by the party concerned in the manner prescribed by the law."
18. The judgment in "Simplex Infrastructure Ltd. v. Union of India" (2019) 2 SCC 455 shall also not come in the way of the Insurance Company. "Simplex" is an authority to the proposition that a challenge to the arbitral Award cannot be laid after a period of three months and in some cases within a further period of 30 days where the Court is satisfied that the applicant was prevented by sufficient cause from making the application within a period of three months. Sub-section (3) of section 34 of the AC Act specifically contains the expression "the date on which the party making that application has received the arbitral Award or if the request has been made under section 33, from the date on which that request has been disposed of by the arbitral Tribunal". In "Simplex", there was no dispute that a copy of the arbitral Award was received by the aggrieved party and counting from that date the petition under section 34 of the AC Act was filed beyond the period of limitation. In "McDermott International Inc." the Hon'ble Supreme Court has held that the Arbitration and Conciliation Act, 1996 assigns supervisory role to the Courts to ensure fairness and intervention of the Court is envisaged in limited circumstances such as fraud or bias of the Arbitrator or violation of natural justice. This Commercial Appeal clearly brings the case set up by the Insurance Company within the limited circumstances envisaged in "McDermott International Inc.".
11 Comm. Appeal No. 6/202319. For the foregoing reasons, order dated 27th February 2023 passed in Arbitration Case No.1 of 2016 is set aside.
20. Arbitration Case No.1 of 2016 filed under section 34 of the AC Act succeeds and, consequently, the arbitral Award dated 24th March 2014 is set aside.
21. I.A. Nos.3190 of 2023 and 9222 of 2023 stand disposed of.
(Shree Chandrashekhar, A.C.J.) (Navneet Kumar, J.) R.K. AFR