Orissa High Court
Chairman-Cum-Managing Director, New ... vs Rabi Narayan Chhotrai on 2 May, 1996
Equivalent citations: AIR 1997 ORISSA 40, (1996) 29 ARBILR 280
Bench: A. Pasayat, A. Deb
JUDGMENT Pasayat, J.
1. New India Assurance Company Limited (hereinafter referred to as 'the insurer') assails correctness of judgment and order dated 5-7-1988 passed by learned Subordinate Judge, Bhubaneswar (as the presiding office was then designated) allowing an application under Section 8(2) of the Indian Arbitration Act, 1940 (in short, 'the Act') filed by Rabinarayan Chhootrai (hereinafter referred to as 'the claimant'). Relying on Clause 12 of the policy of insurance issued by the insurer, claimant served notice on the insurer for appointment of an Arbitrator to settle his claim. It was his case that on 21-2-1985 dacoity was committed in his factory, and machineries and finished goods were looted away. The insurer was duly informed of the incident, but the claim lodged by the claimant was not settled. He invoked the arbitration clause contained in Clause 12 of the policy as the insurer failed and/or neglected to appoint an Arbitrator. Motion was made before learned Subordinate Judge, who by the impugned order allowed the application under Section 8(2) of the Act.
2. Stand of the insurer in support of the revision application is that it having denied its liability the claimant was not entitled to invoke the arbitration clause which is confined to any difference or dispute relating to the quantum to be paid under the Policey. When the matter was placed before our learned Brother Hon'ble P. Ray, J. he was of the view that certain questions need consideration by Division Bench and referred the matter to it. The matter has been placed before us for consideration of the following questions referred to Division Bench.
(i) Whether a bald, mechanical, routine denial of the liability is sufficient to oust the jurisdiction of the Court under Section 8 of the Arbitration Act.?
(ii) Whether the Court exercising jurisdiction under Section 8 of the Arbitration Act can make a prima facie determination whether the denial of liability has any basis or not?
3. According to Mr. Rajen Mohapatra, learned counsel appearing for the insurer-petitioner, Clause 12 itself makes it clear that arbitration is impermissible when the insurance company has disputed or not accepted the liability, under or in respect of a policy. According to him, there is no specific form of denial and even a bare denial by the insurer disputing or not accepting liability under or in respect of the policy is sufficient. In spite of notice the claimant has not appeared in this Court.
4. Since emphasis has been laid by the claimant and the insurer on Clause 12 of the policy, it needs to be extracted. Same reads as follows:
"12. If any difference shall arise as to the quantum to be paid under this Policy, (liability being otherwise admitted) such difference shall independently of all other questions be referred to the decision of an arbitrator to be appointed in writing by the parties. In difference or if they cannot agree upon a single arbitrator to the decision of two disinterested person as arbitrators of whom one shall be appointed in writing by each of the parties within two calendar months after having been required so to do in writing by the other party in accordance with the provisions of the Arbitration Act, 1940, as amended from time to time and for the time being in force. In case either party shall refuse or fail to appoint arbitrator within two calendar months after receipt of notice in writing requiring an Appointment, the other party shall be at liberty to appoint sole arbitrator and in case of disagreement between the arbitrators the difference shall be referred to the decision of an umpire who shall have been appointed by them in writing before entering on the reference and who shall sit with the arbitrators and preside at their meetings.
It is clearly agreed and understood that no difference or dispute shall be referable to arbitration as hereinbefore provided, if the Company has disputed or not accepted liability under pr in respect of this policy.
It is hereby expressly stipulated and declared that it shall be condition precedent to any right of action or suit upon this policy that the award by such arbitrator, arbitrators, or umpire of the amount of the loss or damage shall be first obtained.
It is also hereby further expressly agreed and declared that if the Company shall disclaim liability to the insured for any claim hereunder and such claim shall not, within 12 calendar months from the date of such disclaimer have been made the subject matter of a suit in a court of law, then the claim shall for all purposes be deemed to have been abandoned and shall not thereafter be recoverable hereunder."
Much would depend upon the import of the expression 'dispute or non-acceptance of liability' in resolving the dispute at hand. It is to be noted that the expression 'denial' has not been used in the concerned clause. It is to be examined whether denial of liability takes the dispute out of the umbrella of the arbitration clause in view of the language used. Liability under the policy may be denied on various grounds, like the vehicle being not the subject-matter of insurance, expiry of the period of coverage, and non-fulfilment of stipulation of any condition precedent to the claim.
5. As observed by Crabb, to deny respects matters of fact or knowledge, to refuse, matters of wish or request. We deny what immediately relates to ourselves, we refuse what relates to another, We deny as to the past we refuse as to the future, we deny our participation in that which has been; we refuse our participation in that which may be, to deny must always be expressly verbal; a refusal may sometimes be signified by actions or looks as well as words. A denial affects our veracity a refusal affects our good nature. 'Denial' is an assertion that an allegation or something considered true is false; refusal to believe a doctrine, theory, or the like; disbelief in the existence or reality of a thing; the refusal of or the refusal to satisfy a claim, request, desire etc., refusal to recognise or acknowledge; desowning or disavowal, refusal to acknowledge the validity of a claim, suit of the like, a plea that denies allegations of fact in an adversary's plea (as has been stated in Webster's Encyclopedic Unabridged Dictionary of the English Language, New Revised Edition) (in short, Webster's Dictionary). The expression 'deny' in the said Dictionary has been stated to mean state that (something declared or believed to be true) is not true; to refuse, to agree or accede to, to with hold something from, or refuse to grant a request of, to refuse to recognize or acknowledge, disown, disavow, repudiate; to withhold (someone) from accessibility to a visitors; to refuse to take or accept to dispute; controvert, oppose, gainsay, both deny and contradict imply objecting or to arguing against somethings to deny is to say that something is not true, or that it would not hold in practice.
6. 'Dispute' as a noun is a conflict or contest; sometimes used in the sense of controversy. There would be a dispute so long as a claim is asserted by one party and denied by the other, be the claim a false or a true one, or whether it ultimately turns out to be false or true. Dictionary meaning of 'dispute' given in the Webster's Dictionary is to engage in argument or debate; to argue vehemently, wrangle or quarrel; to argue or debate about, discuss, to argue against, call in question; to quarrel or fight about, contest, to strive against, oppose, a debate or controversy a wrangling argument, quarrel. 'Dispute' may perfectly well arises when only one disputant is articulate and the other stands mute when called upon to plead. What is required is that one party should affirm and the other deny, and conduct will do this as well as words. Claim asserted by one party and denied by the other, be the claim false or true.
7. At this juncture it would be profitable to take note of provisions of Order 8 of the Code of Civil Procedure, 1908 (in short, 'CPC'). Rules 3, 4 and 5 of the said Order threw beacon light on the controversy. Rule 3 provides that the denial has to be specific and it shall not be sufficient for a defendant in his written statement to deny generally the grounds alleged by the plaintiff, but the defendant must deal specifically with each allegation of fact of which he does not admit the truth except damages. Rule 4 deals with evasive denial. It is provided that where a defendant denies an allegation of fact in the plaint, he must not do so evasively, but answer the point of substance. Rule 5 speaks of. specific denial. When the denial of a fact is not specific but evasive, the said fact shall be taken to be admitted. The gist and meaning of the allegation traversed; as distinct from details which are comparatively immaterial must exist. The purport and effect of denial must be clear and distinct. Mere denial is not sufficient, but a specific denial which must be in express terms and definite and unambiguous is necessary. The principle underlying Rule 4 lays down that where a defendant denies an allegation of fact in the plaint, he must not do so evasively, but answer the point of substance, and the pleadings should be specific. Rule 5 further lays down that every allegation of fact in the plaint, if not denied specifically or by necessary implication or stated to be not admitted in the pleadings of the defendant, shall be deemed to be admitted. All these lead to non-traverse of allegations. If the interpretation put by the learned counsel for the insurer is accepted, it would include a vague, routine denial, a camouflege for avoiding reference to arbitration. In such a case, inclusion of the arbitration clause in the policy would be rendered meaningless, purposeless and redundant. There must be basis for denial. In order to take the claim out of purview of the arbitration clause, the insurence company is required to establish prima facie acceptable ground for denial of the liability. Court has to be satisfied about the dispute raised is covered by the arbitration clause in order to invoke jurisdiction under Section 8 of the Act. The Court at the threshold is competent to decide whether the fact upon which exercise of jurisdiction is dependant is in existence or not. It is not to mechanically accept or refuse the prayer for reference. It has to apply its judicial mind to cull out whether the foundational facts necessary for exercise of its jurisdiction exist or not.
8. Our answer to the questions raised by the learned single Judge are as follows:
(i) A bald, mechanical, routine denial of the liability is not sufficient to oust jurisdiction of the Court under Section 8 of the Arbitration Act. Some material or basis has to be indicated when denial is made or dispute is raised.
(ii) The Court exercising jurisdiction under Section 8 of the Act can at the threshold examine the question whether the denial of liability has any basis or not. The matter now be placed before the learned single Judge. Reference is accepted and disposed of.
A. Deb, J.
9. I agree.