M/S Swastik Polytex Pvt Ltd vs Oriental Insurance Com on 27 January, 2009

[Cites 3, Cited by 1]

Rajasthan High Court - Jodhpur

M/S Swastik Polytex Pvt Ltd vs Oriental Insurance Com on 27 January, 2009

The applicant-company was running the business in the name and style of M/s. Swastik Polytex Pvt Ltd. It took loan from the State Bank of Bikaner and Jaipur of Udaipur Branch. The company took the policy from the non- applicant and according to the applicant, the applicant got the factory, building, plant, machinery, vehicle and other SB Civil Misc. Arbitration Appl. No.60/2006 M/s. Swastic Polytex Pvt. Ltd Vs. Oriental Insurance Co. -2- installations insured from the respondent-non-applicant for a sum of Rs.60,000/- vide fire policy bearing no.827/99 for a period from 8.11.1998 to 7.11.1999 and for the raw- material, finished goods, stock and process and packing material for a sum of Rs.15,00,000/- only for the period from 30.1.1999 to 29.1.2000 vide policy no.938/99. The premium was paid by the bank to the insurer by debiting the premium amount of the said two policies in the bank account of the applicant. The petitioner have placed on record the Photostat copies of the cover notes referred above.

On 24.10.1999 fire took place in the factory of the applicant as a result of which entire factory building, plant, machinery, installation, raw material and finished goods etc were reduced to ashes resulting into heavy losses to the applicant. It is stated that fire was seen by the Patrolling Police and the Managing Director of the petitioner company was called at the place of incident i.e., on factory premises and a report was lodged for the said fire to the police Station on 24.10.1999.

The applicant forthwith submitted a information to the SB Civil Misc. Arbitration Appl. No.60/2006 M/s. Swastic Polytex Pvt. Ltd Vs. Oriental Insurance Co. -3- non-applicant at its Udaipur Office and lodged his claim with respondent which was registered as claim no.2425/20/304/11/2000/00004. A surveyor was appointed to assess the losses incurred to the applicant because of the said fire. According to the applicant, he provided complete details and particulars in support of his claim for the purpose of getting the claim case decided by the respondent in time. According to the petitioner as per the report losses because of the fire were estimated to the tune of Rs.82,47,035/-. The applicant also got the premises inspected through private assessor namely Jaswant Singh who assessed the loss to the tune of Rs.82,63,924/-. The said report was also submitted to the respondent by the applicant. The applicant demanded the said claim amount from the respondent. The said claim was not settled by the respondent-company then after several correspondence, the respondent repudiated the applicants claim vide letter dated 18th Sept., 2001, copy of which has been placed on record as Annex.2. The claim was repudiated on the basis of the report submitted by Swadesh Kumar Dhamija and SB Civil Misc. Arbitration Appl. No.60/2006 M/s. Swastic Polytex Pvt. Ltd Vs. Oriental Insurance Co. -4- Associates with the plea that the applicant breached the policy condition no.1,6,7 & 8. The applicant in that situation, submitted a claim before the National Commission, Consumer Protection on 8th March, 2002, which was dismissed by the National Commission, Consumer Protection vide order dated 6.8.2002 with liberty to the applicant to approach either civil court or for arbitration. The applicant not satisfied with said order again filed a complaint before the State Commission Consumer Redressal Forum on 25th March, 2003, which too, was dismissed vide order dated 17th Nov., 2005.

In back droop of these facts, the petitioner served notice to the respondent for appointing the arbitrator in terms of clause 13 of the policy and when the matter was not referred to the arbitrator, the petitioner submitted this petition under Section 11 of the Arbitration and Conciliation Act, 1996.

The non-applicant-respondent submitted preliminary objection against the maintainability of the petitioner's application filed under Section 11 on the ground that the SB Civil Misc. Arbitration Appl. No.60/2006 M/s. Swastic Polytex Pvt. Ltd Vs. Oriental Insurance Co. -5- dispute raised by the petitioner is not referable to the arbitration under the arbitration clause.

According to learned counsel for the petitioner, the clause no.13 was considered by the Calcutta High Court in the judgment delivered in the case of National Fire & General Insurance Co. Ltd Vs. Union of India & Anr. reported in AIR 1956 Calcutta 11 and it has been held that other disputes which are not excluded by clause 13 itself can be referred to the arbitrator and as per the second proviso to clause no.13 of the policy, it is the condition precedent for filing a suit by any party to have arbitral adjudication for the dispute before he can file any suit for any relief in relation to any dispute between the contesting parties.

I considered the submissions of learned counsel for the parties and perused the order repudiating the claim of the applicant by the respondent dated 18th Sept., 2001 and the relevant clause no.13 in the light of the arguments advanced by learned counsel for the parties.

The clause no.13 of the policy is as under: -

SB Civil Misc. Arbitration Appl. No.60/2006 M/s. Swastic Polytex Pvt. Ltd Vs. Oriental Insurance Co.

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"13.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 to 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 persons as arbitrator 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 herein before provided, if the Company has disputed or not accepted liabilities under or in respect of this policy.

It is hereby expressly stipulated and declared that is shall be a 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."

The identical clause was under consideration before SB Civil Misc. Arbitration Appl. No.60/2006 M/s. Swastic Polytex Pvt. Ltd Vs. Oriental Insurance Co. -7- the Calcutta High Court in the case of National Fire & Genera' Insurance Co. Ltd Vs. Union of India & Anr reported in AIR 1956 Calcutta 11. The clause under consideration before the Calcutta High court is as under: -

"If any difference arises as to the amount of any loss or damage, such difference shall of any loss or damage, 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 persons as arbitrators."

While interpreting the said clause, the Calcutta High Court held as under : -

"An arbitrator clause is a fire insurance policy that if any difference arises as to the amount of any loss or damage such difference shall independently of all other questions be referred to the decision of arbitrators, no doubt invests the arbitrators with the jurisdiction only to decide the question of loss or damage and nothing more. But the words "independently of all other questions" in the Arbitration Clause indicate that although there was a special SB Civil Misc. Arbitration Appl. No.60/2006 M/s. Swastic Polytex Pvt. Ltd Vs. Oriental Insurance Co.

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stipulation in the insurance policy itself that the amount of loss of damage was alone to be the subject of arbitration, that does not deter the parties from submitting to the jurisdiction of the Arbitrators the other question of the liability to pay the amount and who should pay to whom. All that the Arbitration Clause framed in that language means is that independently of all other questions, the question of difference about the amount of loss or damage must be submitted to arbitration. It does not mean that this clause prohibits other questions from being submitted to the Arbitrators along with the question of quantum."

(emphasis supplied) A bare perusal of the clause 13, which governs both the parties provides that if any difference arises as to the quantum to be paid under policy, such difference "independently of all other question" be referred to the decision of an arbitrator. Therefore,it is unambiguously clear that if there are other differences and those differences can be separated from the dispute with respect to the difference in quantum of claim raised by the claimant SB Civil Misc. Arbitration Appl. No.60/2006 M/s. Swastic Polytex Pvt. Ltd Vs. Oriental Insurance Co. -9- and disputed by the insurer then such claim (obviously about quantum only) can be referred to the arbitrator. The clause nowhere provides that any other dispute other than the dispute with respect to the difference in quantum can be referred to the arbitrator. Not only this, the clause 13 clearly says that even those disputes which are about the quantum and are separable from other disputes alone can be referred to the arbitrator. Meaning thereby, if dispute of quantum is dependent upon other question of dispute between the parties then that type of dispute though evolving determination of question of quantum cannot be referred to the arbitrator. The clause is not only for settlement of dispute by arbitrator but also is contract to excludes the dispute from the period of arbitration. The clause 13 is not a clause generally used in commercial contracts for arbitration, which normally are of wide connotation and normally covers almost all disputes arising out of the contract and in relation to interpretation of the terms of the contracts. If parties agreed for arbitral adjudication for limited purpose, they can do so certainly SB Civil Misc. Arbitration Appl. No.60/2006 M/s. Swastic Polytex Pvt. Ltd Vs. Oriental Insurance Co. -10- and once the parties agreed to do so, then the matter can be referred within the framework of their agreement.

Learned counsel for the applicant tried to interpret second proviso to clause 13 before approaching for relief from civil court, the party is required to first approach the arbitrator and get declaration from him that the dispute is not covered under arbitration clause, is concerned, that appears to be not correct meaning of second proviso to the clause 13. If a matter is covered by the clause of arbitration then the arbitral award is final and can be challenged in accordance with law and where the dispute is not covered under the arbitration clause or has been excluded from the purview of that clause then for that purpose no one can be compelled or asked to go to the arbitrator and obtain the arbitrator's order that he has no jurisdiction to decide the dispute. The language of second proviso to clause 13 nowhere suggests so and it could not have been so because of the plain and simple reason that there cannot be a clause for futile actions.

In view of the above reasons, I do not inclined to SB Civil Misc. Arbitration Appl. No.60/2006 M/s. Swastic Polytex Pvt. Ltd Vs. Oriental Insurance Co. -11- subscribe the view advanced by learned counsel for the applicant with the help of judgment of the Calcutta High Court delivered in National Fire and Genera's Insruance Co. Ltd. (supra).

Since the applicant's claim has been rejected on account of breach of policy condition no.1,6,7 and 8 and it is not a case of dispute in relation to quantum claim only and other dispute raised to challenge the validity and legality of the order in question by the claimant-petitioner and such challenge is excluded by the arbitration clause itself, therefore, application for appointing the arbitrator is dismissed.

(PRAKASH TATIA), J.

c.p.goyal/-

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Rajasthan High Court - Jodhpur