Delhi High Court - Orders
M/S. United India Insurance Company Ltd vs Union Of India on 19 October, 2023
Author: Prateek Jalan
Bench: Prateek Jalan
$~19
* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ W.P.(C) 1263/2019 & CM APPL. 5676/2019
M/S. UNITED INDIA INSURANCE COMPANY
LTD. ..... Petitioner
Through: Mr. Amit Kumar Singh, Ms. K.
Enatoli Sema, Ms. Chang,
Advocates.
versus
UNION OF INDIA ..... Respondent
Through: Ms. Arunima Dwivedi, CGSC with
Ms. Pinky Pawar and Mr. Aakash
Pathak, Advocates.
CORAM:
HON'BLE MR. JUSTICE PRATEEK JALAN
ORDER
% 19.10.2023
1. The present dispute is between United India Insurance Co. Ltd. ["the Company"] - a public sector insurance company, wholly owned by the Government of India and the Ministry of Railways, Government of India ["the Railways"].
2. The Company has filed this petition under Article 226 of the Constitution seeking a writ setting aside an "Appellate Award/Order"
dated 11.09.2018 passed by the Appellate Authority under the Permanent Machinery of Arbitration ["PMA"] contemplated by the agreement between the parties, and a writ of mandamus directing the respondent to appoint a sole Arbitrator to adjudicate the disputes between the parties, under the provisions of the Arbitration and Conciliation Act, 1996 ["the W.P.(C) 1263/2019 Page 1 of 4 This is a digitally signed order.
The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 21/10/2023 at 00:03:05 Act"].
3. The facts giving rise to this petition are undisputed. During the period from 1994 to 2003, the Railways annually took out insurance policies with the Company, to cover any risk arising out of train accidents, under Section 123 and 124 of the Railways Act, 1989. The agreements between the parties contain dispute resolution clauses, which contemplate resolution of disputes by the PMA, applicable to inter- departmental disputes. The dispute resolution clause in each of the agreements were undisputedly identical. Clause 12 as included in the agreement dated 14.07.1994, is set out below:
"12. In the event of any dispute or difference between the parties hereto, such dispute or difference shall be resolved amicably by mutual consultation or through the good offices of empowered agencies of the Government. If such resolution is not possible, then, the unresolved dispute or differences shall be referred to arbitration of an Arbitrator to be nominated by the Secretary, Department of Legal Affairs "Law Secretary" in terms of the Office Memorandum No.55/3/1/75-CF dated 19th December, 1975 issued by the Cabinet Secretariat (Department of Cabinet Affairs), as modified from time to time. The Arbitration Act, 1940 (10 of 1940) shall not be applicable to the arbitration under this clause. The award of the Arbitrator shall be binding upon parties to the dispute. Provided however, any party aggrieved by such award may make a further award to Law Secretary whose decision shall bind the parties finally and conclusively. (Ministry of Law & Justice's O.M. No.F.25(1)/ 81-JUPL dated 17.8.84)"
4. The aforesaid clause provides for resolution of disputes, at the first instance, by an officer nominated by the Law Secretary, Ministry of Law and Justice, and a further reference to the Law Secretary in the event either party is aggrieved by the Award. Although the clause uses the terms, "arbitration", "arbitrator", "award", and contemplates that the "award" would be binding, curiously, it expressly excludes the applicability of the Arbitration Act, 1940, or the Arbitration and W.P.(C) 1263/2019 Page 2 of 4 This is a digitally signed order.
The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 21/10/2023 at 00:03:05 Conciliation Act, 1996.
5. A dispute arose between the parties with regard to the Railways' liability for premium, on account of which the Company withheld a sum of approximately ₹18.16 crores out of the claims lodged by the Railways. In the year 2012, the Railways invoked the PMA for recovery of this amount and the Company, in turn, made a counterclaim for approximately ₹ 12.61 crores.
6. The Joint Secretary, Ministry of Law and Justice, was appointed as the Arbitrator. She made an Award on 25.06.2014, rejecting the Railways' claims and awarding the counterclaims of the Company. The Railways referred the matter to the Law Secretary, Ministry of Law and Justice, which was disposed of by an Appellate Award dated 11.09.2018 rendered by the Additional Secretary, Ministry of Law and Justice. The Additional Secretary reversed the view taken by the Arbitrator at the first instance, both on the Railways' claim and on the Company's counter- claim.
7. The result, therefore, is that the Railways has succeeded in obtaining an "Award" under the PMA. The difficulty, however, is that the "Award" is not within the statutory scheme pertaining to the Act. The Supreme Court in Northern Coalfields Limited vs. Heavy Engineering Corporation Limited and Another, (2016) 8 SCC 685, has specifically held that an Award made under the PMA would not constitute an award under the Arbitration Act, 1940, and would neither be amenable to setting aside under the Act, nor to be made a rule of the Court enforceable as a decree. It has been held that the same position prevails under the Arbitration and Conciliation Act, 1996, also. In that case, the Supreme W.P.(C) 1263/2019 Page 3 of 4 This is a digitally signed order.
The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 21/10/2023 at 00:03:06 Court appointed an Arbitrator to adjudicate the disputes within the ambit of the Act, despite one of the parties resisting arbitration. The Court observed that the alternative of adjudication by ordinary civil proceedings would be long drawn, expensive and cumbersome. The Division Bench of this Court, in M/S Hindustan Steel Works Construction Limited vs. M/S NTPC Ltd Kahalgaon Super Thermal Power Station, 2017 SCC Online Del 8770, decided on 30.05.2017, has followed the same course while deciding an appeal between two public sector undertakings.
8. In these circumstances, it has been put to learned counsel for both the parties that it may be most appropriate, and in the interest of a final resolution of these disputes, which have already been pending for over 10 years, for them to appoint an Arbitrator to adjudicate the disputes within the scope of the Arbitration and Conciliation Act, 1996. Such a course would, in my prima-facie view, lend quietus to these long-standing disputes and would serve the interest of both the parties, including the Railways, which today holds only an unenforceable "Award".
9. Mr. Amit Kumar Singh, learned counsel for the Company has no difficulty with this course of action. Indeed, it is contemplated in the relief sought in the writ petition itself. Ms. Arunima Dwivedi, learned Central Government Standing Counsel, however, seeks some time to take instructions on this aspect.
10. List on 06.11.2023.
PRATEEK JALAN, J OCTOBER 19, 2023 SS/ W.P.(C) 1263/2019 Page 4 of 4 This is a digitally signed order.
The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 21/10/2023 at 00:03:06