Bombay High Court
M/S. Dilip Kumar V. Lakhi vs The New India Assurance Co. Ltd on 31 July, 2014
Author: Roshan Dalvi
Bench: Roshan Dalvi
1 ARBP.424/2014-Judgment
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IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
ARBITRATION PETITION NO. 424 OF 2014
M/s. Dilip Kumar V. Lakhi ...Petitioner
Vs.
The New India Assurance Co. Ltd. ...Respondents
Mr. Uday Bobade i/b. Vinayak H. Kenjalkar,
Advocates for the Petitioner
Mr. yadunath Bhargavan i/b. Ratna Bhargavan,
Advocates for Respondents
CORAM : MRS. ROSHAN DALVI, J.
th
Date of reserving the Judgment: 30 June, 2014
Date of pronouncing the Judgment: 31st July, 2014
JUDGMENT:
1. The petitioner is an importer and exporter of diamonds and an insurer of the respondent in respect of certain consignment of diamonds. The petitioner has been issued an insurance policy by the respondent insuring the diamonds inter alia against the theft / robbery / loss for Rs.1.10 Crores. The policy sets out certain conditions precedent to the liability of the respondent therein.
2. The petitioner made a claim under the policy of Rs.1.16 Crores upon the theft / robbery / loss of diamonds in a particular consignment. The respondent carried out a certain survey and considered certain documents. The respondent offered Rs.52 lakhs ::: Downloaded on - 31/07/2014 23:50:00 ::: 2 ARBP.424/2014-Judgment to the petitioner if it was accepted in full and final settlement along with a deed of indemnity to be signed by the petitioner. Rs. 64 lakhs was not accepted.
3. The insurance policy contained an arbitration clause. The petitioner invoked arbitration. The petitioner lodged its claim. The arbitral tribunal consisting of three Arbitrators considered the case of the parties. An award by majority of two Arbitrators has been given. A descenting award by the third Arbitrator has been separately given. The petitioner has challenged the majority award in this petition filed under Section 34 of the Arbitration and Conciliation Act, 1996 (the Act). The essential case of the petitioner is that the learned Arbitrators have exceeded their jurisdiction and have dealt with the dispute beyond the scope of arbitration as per the terms of the policy in interpreting the terms of the policy and have consequently erred in dismissing the petitioner's claim.
4. Mr. Bobade on behalf of the petitioner made out a case of the access of jurisdiction of the majority Arbitrators under Clause 19 of the General Conditions of the Policy taken by the petitioner from the respondent. The relevant part of Clause 19 runs thus:
"If any difference shall arise as to the quantum to be paid under the policy (liability being otherwise admitted) such difference shall independently of all other questions be referred to the decision of an arbitrator, .....::: Downloaded on - 31/07/2014 23:50:00 :::
3 ARBP.424/2014-Judgment It is clearly understood that no difference or dispute shall be referable to arbitration as hereinbefore provided, if the company has disputed or not accepted liability under or in respect of this policy"
5. Mr. Bobade argued that the liability of the respondent has been accepted to the extent of Rs.52 lakhs. That much amount has to be unconditionally paid by the respondent to the petitioner. The adjudication in the arbitration must, therefore, be only with regard to the balance amount not accepted by the respondent. The learned Arbitrators must, therefore, only consider how much, if any, of the remainder of the amount of the petitioner's claim can be granted to the petitioner or not. Mr. Bobade argued that the learned Arbitrators misdirected themselves in considering the adjudication of the entire claim of Rs.1.16 Crores made by the petitioner under various heads and came to the erroneous conclusion that no part of the claim could be granted to the petitioner. This is upon the premise that the liability of the respondent company was not disputed by it and consequently the arbitration is not for the balance amount.
6. It is argued on behalf of the Insurance Company/respondent that once the claim is made the entire claim is to be adjudicated upon the evidence to be led for the whole claim and the part claim granted by the Insurance Company was not an admission of the liability, but a concession given to the petitioner in view of the ::: Downloaded on - 31/07/2014 23:50:00 ::: 4 ARBP.424/2014-Judgment petitioner's long standing relations with the respondent to be accepted only in full and final settlement. If, therefore, the petitioner did not accept the amount offered by the respondent in full and final settlement, the respondent would not make that payment and the entire claim would have to be adjudicated in arbitration under the aforesaid clause.
7. By way of an interim award the learned Arbitrators called upon the respondent to release Rs.52 lakhs with interest at 12% p.a thereon from January, 2000 until the date of the interim award being dated 24th November, 2008 after recording that the respondent/insurer had not admitted its liability to the claimant/insured. The learned Arbitrators provided adequate safeguard for the petitioner bringing back the said amount and reimbursing the same to the respondent along with interest as may be decided in arbitration subject to the final outcome of the reference. By way of the adequate safeguards the petitioner was required to file an affidavit before the tribunal communicating his acceptance of the amount along with an undertaking to return the amount if in the final arbitration award it was so directed. The petitioner also undertook to pay interest as would be awarded thereon. This acceptance and undertaking by the petitioner would itself show that the entire claim was open to arbitration.
8. Nevertheless the above arbitration clause No.19 in the policy of the petitioner must be considered in view of the main contention ::: Downloaded on - 31/07/2014 23:50:00 ::: 5 ARBP.424/2014-Judgment of the petitioner.
9. It contemplates a difference (which is a dispute) as would arise as to the payment of the quantum by the respondent to the petitioner. It would arise if the liability was "otherwise admitted". In case of admission of any part of the liability, the difference (which is a dispute) would be referred to arbitration.
10. Consequently this clause contemplates that the disputes between the parties as to the quantum to be paid under the policy was referable to arbitration. If there was an admission of liability for any part amount, the remainder of the claim amount which is not admitted would be referred to arbitration. If there is no admission of liability the entire claim would be referred to arbitration.
11. Mr. Bobade argued that the word "difference" is the difference in the amount claimed by the petitioner and the amount offered/accepted by the respondent. The clause cannot be so read. The word "difference" must be read as "dispute" because the differences and disputes of a party are referable to arbitration. It is only because part amount is accepted that it is argued on behalf of the petitioner that that part of the liability is admitted. There is nothing to show that the liability has been admitted by the respondent company to any extent. The admission of liability must be unconditional. The acceptance of the Insurance Company was ::: Downloaded on - 31/07/2014 23:50:00 ::: 6 ARBP.424/2014-Judgment for payment only if it was accepted in full and final settlement. That would not show admission of liability. That would in fact show no admission of liability. It would only be a concession. The concession is to pay a lesser amount than the amount claimed, if the entire claim is settled fully and finally. It is much like two parties in a litigation negotiating a settlement. Even if a Civil Suit is filed for a larger amount the parties may settle the dispute for a lesser amount. Such is an offer of settlement. Such an offer of settlement cannot constitute admission of liability. The civil lis would be settled only if the offered amount is accepted in full and final settlement. The acceptance by the respondent of a part of the claim of the petitioner based upon certain documents, which shall be referred to presently, is precisely of such nature. It would be an offer of settlement of the claim. It is, therefore, a concession as contended by the respondent.
12. The distinction between concession and a settlement must, therefore, be noted. Black's Law Dictionary 8th Edition at page 307 defines concession thus:
"The voluntary yielding to a demand for a sake of settlement"
13. The book of Words and Phrases by Justice R.P. Sethi 2nd Edition at page 260 explains concession and rebate as "a grant". It refers to the common dictionary meaning of the word concession as:
::: Downloaded on - 31/07/2014 23:50:00 :::7 ARBP.424/2014-Judgment "The act of yielding or conceding as to a demand or argument, something conceded; usually implying a demand, claim, or request, a thing yielded, a grant".
14. The offer of the respondent is, therefore, distinctly a concession and not an admission. The liability of the respondent is, therefore, not admitted. Clause 19 would, therefore, not apply for only the difference of the amount. Even if the expression "difference" would not include "dispute" and would be the difference between the claim made by the petitioner and the offer made by the respondent, the arbitration that is contemplated by the parties is, therefore, of the entire amount.
15. The remainder of the clause cited above would further make this interpretation clear.
16. It is important to notice that in the first part of the clause 19 aforesaid the expression is only "difference". In the last part of the clause the expression is "difference or dispute".
17. The difference would imply the dispute.
18. There would be no difference or dispute referable to arbitration if the respondent disputed and not accepted the liability under the policy. This would mean that when any claim is made, if the respondent disputed or did not accept the liability there would ::: Downloaded on - 31/07/2014 23:50:00 ::: 8 ARBP.424/2014-Judgment be no arbitration. If the respondent admitted and accepted liability in part then alone there would be arbitration for the amount not accepted or admitted and for which there was a difference or dispute.
19. The expression "difference" forms a part of other insurance policies. In the case of Stebbing Vs. Liverpool & London & Globe Insurance Company, Ltd. [1917] 2 King's Bench The Law Reports 433 "all differences arising out of this policy" was to be referred to arbitration. When a declaration made was seen to be false, it was held that the truth or untruth of the statements made by the insurer was a matter referred to the Arbitrator. That is a similar insurance against loss or damage in connection with burglary. Loss was alleged. The arbitration clause ran thus :
" All difference arising out of this policy shall be referred to the decision of an arbitrator to be appointed in writing by the parties in difference ....".
20. The insured/claimant contended that whether the assurance contained in the proposal was true or not was not a difference in arbitration and the Arbitrator had no power to determine that aspect. It was contended that one of the terms of the policy was that the truth of the answers forms the basis of the contract. Reference to the case of Gaw Vs. British Law Fire Insurance Company was made. In that case it was contended that when one side affirmed and the other side denied that certain ::: Downloaded on - 31/07/2014 23:50:00 ::: 9 ARBP.424/2014-Judgment answer was true, a difference had arisen out of the policy which could be referred to arbitration.
It was held that the question whether or not the statement is true was a question arising out of the policy and hence the truth or untruth of the answer was a matter referred to arbitration. Consequently the expression "difference" would include all "disputes" which would arise out of one side claiming any amounts or declaration and the other side refuting it. It would not be an arithmetical difference between the claim of the insured and the part of the claim accepted by the insurer conditionally.
21. Consequently if any difference (dispute) had arisen, but the liability was not admitted the entire claim would be referred to arbitration as a dispute between the parties. Consequently the entire claim is correctly made.
22. The learned Arbitrators have entered upon the entire reference for the entire claim. The claim made by the petitioner in arbitration is on various counts being for loss, cutting and polishing diamonds, labour charges, total value of lost goods, profit on the value totalling to the amount to be recovered. After giving credit for Rs.50,000/- to be referred from the Angadia a net claim of Rs.1.16 Crores is made. The claim under arbitration does not show reference to the unaccepted Rs.64 lakhs under the policy. The petitioner has claimed in arbitration what the petitioner has claimed from the Insurance Company under its claim bill annexed ::: Downloaded on - 31/07/2014 23:50:00 ::: 10 ARBP.424/2014-Judgment to the statement of claim. The petitioner has made further claim for interest, loss of business, cost of overheads and cost of arbitration also.
23. Upon seeing that the learned Arbitrators have not exceeded their jurisdiction it must be seen whether the petitioner's entire claim has been considered alongside the liability of the petitioner under the policy itself. This Court in a petition under Section 34 cannot go into the details of the evidence led by the parties. Mr. Bobade has fairly not even called upon the Court to do so.
24. The learned Arbitrators have raised 8 issues. The essential proof was in respect of the loss / robbery / theft of the diamonds worth Rs.1.10 Crores for which the policy was taken. The learned Arbitrators have also considered whether the petitioner complied with the policy conditions and proved that they had taken care of the lost goods upon entrustment in the contract. Upon consideration of these aspects the learned Arbitrators have framed issues as to whether the petitioner would be entitled to the reliefs under separate claims as aforesaid.
25. The learned Arbitrators have considered the specific conditions precedent to liability in the policy with regard to book keeping and entrustment under sub clauses 1 and 3 of the policy. The learned Arbitrators have further considered the general conditions in the policy specifically condition Nos. 2,7 & 13 (a, b & ::: Downloaded on - 31/07/2014 23:50:00 ::: 11 ARBP.424/2014-Judgment
c). Thereupon the learned Arbitrators have considered the salient features of the terms of the policy more specially the condition with regard to keeping the daily record when the property is entrusted to any person and producing such record as documentary evidence in support of the claim. The learned Arbitrators have seen that the petitioner has not maintained the record and has not produced the documentary evidence. The evidence of entrustment by the petitioner to the relevant Angadia at Bhavnagar where the demands were sent have been considered and found wanting. There has been a Surveyor's report as also a police report, which have been considered by the learned Arbitrators and which cannot be gone into by this Court.
26. This Court need not go into the evidence. The award is clear with regard to the liability as a condition precedent and the main evidence of entrustment is not shown by the petitioner.
27. Counsel on behalf of the respondent in fact drew Court's attention to the Angadias receipt in the compilation of documents produced by the petitioner. The receipt of the petitioner made out in the name of Angadia dated 2 nd November, 2001 showing the acknowledgment of entrustment is strangely only signed by the petitioner. It bears no signature of the Angadia or the party to whom the diamonds were entrusted. This would determine the claim of the petitioner. That has been fully considered.
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28. Consequently the petitioner's claim has been rejected. Since the respondent was directed to release Rs.52 lakhs to the petitioner by the interim award the amount of release would have to be returned which is so directed. The affidavit and giving the undertaking by the petitioner would bind the petitioner. This undertaking would be in the return of the amount of Rs.52 lakhs along with the interest as directed thereon. The entire award is seen to be in order. It does not require any interference by this Court.
29. Consequently the petition is dismissed.
(ROSHAN DALVI, J.) ::: Downloaded on - 31/07/2014 23:50:00 :::