Andhra HC (Pre-Telangana)
Andhra Semi Conductors (P) Limited, ... vs United India Insurance Company Limited on 26 February, 2002
Equivalent citations: 2002(2)ALD582
ORDER S. Ananda Reddy, J.
1. By this application under Section 11(6) of the Arbitration and Conciliation Act, 1996 (hereinafter referred to 'the Act') the applicant is seeking to refer the dispute to an arbitrator nominated by this Court exercising the powers vested under Section 11 of the Act.
2. According to the petition on averments, the petitioner is a registered Company under the Companies Act, 1956 and engaged in the business of distribution and supply of components manufactured by M/s. Bharat Electronics Limited in the State of Andhra Pradesh as their distributor. For the said purpose, the applicant has obtained the premises bearing H.No. 4-4-3167 1-B, Giriraj Lane, Banks Street, Koti, Hyderabad, where it has stored its stocks supplied by M/s. Bharat Electronics Limited. The said stock was hypothecated to their bankers, namely "Dena Bank, Koti Branch, Hyderabad". The stocks were also insured with the respondent Corporation. Originally the applicant obtained a fire policy on 30-8-1999 for a sum of Rs. 40,00,000/- and the said policy was valid for a period of one year from 1-9-1999 to 31-8-2000 and paid a premium of Rs. 12,569/-. The applicant also obtained additional insurance for another ten lakhs under an endorsement of the original policy on 16th September, 1999 by paying the additional premium and thus the total value of the policy comes to Rs. 50 lakhs, valid for the same original period of one year. While so on 14-10-1999 at about 3-30 to 4.30 a.m., fire broke out in the premises of the applicant due to short circuit in the electrical installation and the entire stocks of the Electronic components in the premises were extinguished in the fire. Immediately the applicant lodged a Claim Form on 14-10-1999 for a sum of Rs. 50 lakhs with the respondent at their M.G. Road Branch from which the policy obtained. Copy of panchanama, FIR and the claim form are all dated 14-10-1999. Thereafter on 20-10-1999 a surveyor was appointed by the respondent, namely M/s. J.B. Boda Surveyors (P) Limited, to assess the damage to settle the claim of the applicant. On 2-4-2000 M/s. Moinuddin Mohammed and Company was appointed as a second surveyor by the respondent. There were exchange of correspondence between the surveyors and the applicant as well as the respondent and applicant. The correspondence filed shows that the applicant rejected the proposal for settlement of the claim at Rs. 12 lakhs. Subsequently, the Dena Bank with which the applicant had hypothecated the goods also requested the respondent to settle the claim under the policy. Later the respondent addressed a letter to the said bank enclosing a cheque for Rs. 10,17,700/- in their favour towards the policy claim of the applicant as full and final settlement. Later the applicant while denying the said payment as full and final settlement requested the respondent for appointment of an arbitrator to refer the rejected or disputed claim of Rs. 39,82,300/- under Clause (11) of the policy. The said notice was received by the respondent. Later, the respondent by a letter dated 4-10-2001 addressed to the applicant, informing that the respondent neither agree to refer the dispute for arbitration nor to appoint an arbitrator in terms of Clause (11) of the policy, as the claim was settled and an amount of Rs. 10,17,700/- was paid. Under the above circumstances, the applicant filed the present application.
3. A counter has been filed on behalf of the respondent-Corporation denying the allegations and also stating that the applicant had accepted the payment in full and final settlement and to the same effect he has issued an affidavit as well as letters through their banker and having accepted the amount already paid, there is no arbitral issue pending between the parties and it is open to the applicant to invoke the arbitration clause.
4. The learned Counsel for the applicant reiterating the contentions that are stated in the petition contended that the policy contains a clause to refer for arbitration in case of any dispute. Now according to the applicant, there is a dispute between the parties with reference to the same policy. Though it was contended by the respondent-Corporation that the claim of the applicant was settled in full by paying a part of the amount out of the claim made by the applicant, according to the applicant, he is disputing the said settlement. According to the learned Counsel, when there is a dispute as to the settlement even that dispute is required to be referred to an arbitrator, which could be adjudicated. It is contended by the learned Counsel that the powers exercised under Section 11(6) by the Chief Justice or his nominee are in the nature of administrative and therefore, it is not open to go into the contentious issues at this stage. It is also contended that Section 16 provides that the Arbitral Tribunal may rule on its own jurisdiction including ruling on any objections with respect to the existence or validity of an arbitration agreement. The learned Counsel also contended that as the jurisdiction that is being exercised by this Court under Section 11(6) is only an administrative function, even the preliminary issue, as held by the Apex Court in the case of Konkan Railway Corporation Limited v. Mehul Construction Company, , has to be decided by the Arbitral Tribunal. The above decision of the Apex Court was even confirmed by the larger Bench of the Apex Court in the case of Konkan Railway Corporation Limited v. Rani Construction Limited, 2002 (1) Comp LJ 393 (SC).
5. the learned Counsel also relied upon the following decisions of this Court in Union of India and Ors. v. Vungarala Constructions, Hyderabad, (DB); Sri Venkateswara Construction Company, Secunderabad v. Union of India, 2001 (2) ALD 387, and Ashok Engineering Company Engineers and Contractors v. GM SCR, Sec'bad, , where it was held that the Chief Justice or his designate cannot decide the contentious issues like the existence of an arbitration agreement, its validity or jurisdiction of the arbitrator since they are left to be decided only by the arbitrator under Section 16(1) of the Act.
6. On the other hand, the learned Counsel for the respondent-Corporation contended that as the matter was already settled between the parties, the arbitration clause is not available for the applicant to seek a reference.
7. In support of his contention the learned Counsel relied upon the following decisions of the Apex Court in the case of State of Maharashtra v. Nav Bharat Builders, 1994 Supp. (3) SCC 83; P.K. Ramaiah v. Chairman and MD., National Thermal Power Corporation, 1994 Supp (3) SCC 126; Nathani Steels Limited v. Associated Constructions, 1995 Supp. (3) SCC 324. The learned Counsel also relied upon a decision of the Apex Court in the case of New India Assurance Company Limited v. Sri Venkata Padmavathi R&B Rice Mill, , where the Apex Court set aside the order of the National Consumer Dispute Redressal Commission's order on the ground that there was a full and final settlement between the parties and therefore, the respondent was not justified in approaching the National Commission for being paid an amount of Rs. 23.5 lakhs in terms of report of the three surveyor and the commission was not justified in awarding that amount to the respondent.
8. From the above facts it is clear that the applicant has approached this Court seeking reference of the dispute under Section 11(6) for an arbitration by nominating an arbitrator in terms of Clause (11) of the Fire Insurance Policy issued by the respondent-Company. The grievance of the applicant is that though the said arbitration clause is there, the respondent-Company rejected the claim of the applicant for a reference to arbitration. The case of the respondent is that as there is a settlement between the parties, which is supported by the evidence, such as affidavit and a letter of the applicant, which were sent to the respondent-Company through its banker, there is no arbitral issue and it is not open to the applicant to invoke the arbitration clause in the policy. Though the decisions relied upon by the learned Counsel for the respondent supports that when there is a settlement between the parties, there is no arbitral issue, but all those decisions are rendered under the provisions of the old arbitration Act. In the decision of the Apex Court in the case of Konkan Railway Corporation Limited v. Rani Construction Limited (supra), which was rendered under the provisions of the new Arbitration and Conciliation Act, 1999, it was held that even the preliminary issues which are contentious are to be decided by the Arbitral Tribunal including on its own jurisdiction as well as the existence of an arbitral agreement or the existence of an arbitral dispute. Further, when the Apex Court held that the functions of the Chief Justice or his designate under Section 11 of the new Act is only an administrative, it would not be open to this Court to decide contentious issues like the one which was raised by the respondent-Corporation. As rightly held by a learned single Judge in the case of Sri Venkateswara Construction Company Secunderabad v. Union of India (supra); and Ashok Engineering Company Engineers and Contractors v. GM, SCR, Sec'bad (supra) such issues are left to be decided only by the arbitrator, nominated by the Chief Justice or his designate and not for this Court at the stage of exercising the powers under Section 11(6).
9. Under the above circumstances, the application is allowed and the matter is referred to an arbitrator, Sri Y.V. Narayana, a retried Judge of this Court, is appointed as the sole arbitrator for adjudicating the dispute between the parties including the preliminary issues, which are addressed before this Court and he is at liberty to fix up his fee.